PDIC vs. BIR

A tax clearance certificate under Section 52(C) of the Tax Code of 1997 is not a prerequisite to the approval of a project of distribution of assets of a bank ordered closed and placed under liquidation by the Monetary Board pursuant to Section 30 of the New Central Bank Act, because the tax clearance requirement governs only corporate dissolutions supervised by the SEC, not BSP-ordered bank liquidations, and extending it to the latter would constitute judicial legislation.

The Philippine Deposit Insurance Corporation (PDIC) is the statutory receiver and liquidator of banks ordered closed by the Monetary Board of the Bangko Sentral ng Pilipinas (BSP) under the New Central Bank Act (R.A. No. 7653). The Bureau of Internal Revenue (BIR) is the National Government's tax collection agency. The Rural Bank of Bokod (Benguet), Inc. (RBBI) was a rural bank under BSP supervision. Two legal regimes intersect in this case: the New Central Bank Act, which specially governs the receivership and liquidation of banks, and the Tax Code of 1997 (R.A. No. 8424), which contains Section 52(C) requiring dissolving corporations to secure a tax clearance from the BIR before the SEC issues a certificate of dissolution.

In 1986, the Supervision and Examination Sector (SES) Department III of the Bangko Sentral ng Pilipinas (BSP) conducted a special examination of the Rural Bank of Bokod (Benguet), Inc. (RBBI) and uncovered various loan irregularities. On May 20, 1986, the SES Department III required RBBI's management to infuse fresh capital within 30 days and to correct all exceptions noted. No concrete action was taken by RBBI management up to the termination of a subsequent general examination. On August 4, 1986, the RBBI Board of Directors was called to a conference at the BSP; only one director, a certain Mr. Wakit, attended. The SES Department III warned that unless substantial remedial measures were taken, it would recommend placing the bank under receivership. A follow-up letter dated November 17, 1986, sent to every board member via registered mail, reiterated the warning that closure would be recommended unless fresh capital was immediately infused. Despite these notices, the SES Department III received no response from RBBI or any of its directors as of November 28, 1986.

On January 9, 1987, the Monetary Board found RBBI insolvent and decided to forbid it from doing business in the Philippines, place its assets and affairs under receivership pursuant to Section 29 of R.A. No. 265, and designate the SES Department III head as receiver. A memorandum and report dated August 28, 1990, concluded that RBBI remained insolvent and could no longer safely resume business. On September 7, 1990, the Monetary Board ordered the liquidation of the bank and designated the SES Department III director as liquidator. On April 10, 1991, the BSP liquidator filed a Petition for Assistance in the Liquidation of RBBI with the RTC of La Trinidad, Benguet, docketed as Spec. Proc. No. 91-SP-0060. On June 2, 1992, the Monetary Board transferred the receivership and liquidation of RBBI to the Philippine Deposit Insurance Corporation (PDIC).

On September 11, 2002, PDIC filed a Motion for Approval of Project of Distribution of the assets of RBBI, in accordance with Section 31, in relation to Section 30, of R.A. No. 7653 (the New Central Bank Act). During the hearing on January 17, 2003, the Bureau of Internal Revenue (BIR), through Atty. Justo Reginaldo, manifested that PDIC should first secure a tax clearance certificate from the appropriate BIR Regional Office pursuant to Section 52(C) of R.A. No. 8424 (the Tax Code of 1997) before proceeding with the dissolution of RBBI. On that same date, the RTC issued an order directing PDIC to comply with Section 52(C) within 30 days and held in abeyance the Motion for Approval of Project of Distribution. PDIC filed a motion for reconsideration, arguing that Section 52(C) does not cover closed banking institutions because the liquidation of closed banks is governed by Section 30 of the New Central Bank Act. The BIR countered that the tax clearance was necessary to determine how much taxes, if any, were due the government, noting that PDIC's own motion mentioned unremitted withholding taxes of ₱8,767.32. On May 13, 2003, the RTC denied the motion for reconsideration, holding that regardless of which law governs liquidation of closed banks, such banks remain subject to payment of taxes mandated by law and must therefore secure a tax clearance. PDIC then elevated the matter to the Supreme Court via a Petition for Review on Certiorari under Rule 45, raising a lone assignment of error that the RTC erred in applying Section 52(C) of the Tax Code to a bank ordered closed and placed under liquidation by the Monetary Board under Section 30 of the New Central Bank Act.

• Summary Nature of Bank Closure: PDIC argued that the closure of banks under Section 30 of the New Central Bank Act is summary in nature and that procurement of a tax clearance under Section 52(C) of the Tax Code of 1997 is not a condition precedent thereto.
• Approval Requirement: PDIC maintained that under Section 30, in relation to Section 31, of the New Central Bank Act, asset distribution of a closed bank requires only the approval of the liquidation court, not a tax clearance from the BIR.
• BIR's Recourse: PDIC contended that the BIR is not without recourse, since it may assess the closed RBBI for tax liabilities, if any, subject to the applicable provisions of the Tax Code of 1997.
• Finality of RTC Orders: PDIC averred that the RTC Orders are final because, per Pacific Banking Corporation Employees' Organization (PaBCEO) vs. Court of Appeals, an order of the liquidation court allowing or disallowing a claim is a final order and may be subject to appeal. It characterized the legal issue of whether RBBI should secure a tax clearance as a "disputed claim" already allowed by the RTC.

• Improper Remedy: The BIR countered that a Petition for Review on Certiorari under Rule 45 is not the proper remedy to question the RTC Order dated January 17, 2003, because said order is interlocutory and cannot be the subject of an appeal.
• Applicability of Tax Code: The BIR argued that Section 52(C) of the Tax Code of 1997 applies to all corporations, including banks ordered closed by the Monetary Board pursuant to Section 30 of the New Central Bank Act.
• RTC Authority: The BIR maintained that the RTC may order PDIC to obtain a tax clearance before ruling on the Motion for Approval of Project of Distribution of the assets of RBBI.
• Administrative Settlement: The BIR argued that the controversy should not have been elevated to the Court since both parties are government agencies who should have administratively settled the dispute.

• Propriety of Remedy: Whether the Petition for Review on Certiorari under Rule 45 of the Rules of Court is the proper remedy to question the interlocutory orders of the RTC.
• Tax Clearance Requirement: Whether a bank ordered closed and placed under receivership and liquidation by the Monetary Board pursuant to Section 30 of the New Central Bank Act needs to secure a tax clearance certificate from the BIR before the liquidation court approves the project of distribution of the bank's assets.

• Propriety of Remedy: No. The assailed RTC Orders are interlocutory in nature and are not proper subjects of an appeal by certiorari under Rule 45, as they did not dispose of the case or adjudicate definitively the rights of the parties. The Court nonetheless treated the petition as an original action for certiorari under Rule 65, adopting a pragmatic approach given the crucial issues presented.
• Tax Clearance Requirement: No. Section 52(C) of the Tax Code of 1997 and BIR-SEC Regulations No. 1 apply only to corporate dissolutions supervised by the SEC, not to bank liquidations ordered by the BSP under the New Central Bank Act, which is a special law prevailing over the general Corporation Code. The RTC committed grave abuse of discretion in requiring the tax clearance.

• Propriety of Remedy: The RTC Orders dated January 17, 2003 and May 13, 2003 merely held in abeyance the approval of the Project of Distribution until PDIC secured a tax clearance; they did not dispose of the case or definitively adjudicate the rights of the parties. Substantial proceedings remained to be had after PDIC presented the tax clearance, since the Project of Distribution still had to be finalized and approved. The requirement to secure a tax clearance is not the BIR's claim itself but merely a means to ascertain such claim; the actual adjudication of the BIR's claim — as to existence or computation of tax liabilities — would constitute a final order. PDIC's reliance on PaBCEO vs. Court of Appeals was rejected because not all legal issues resolved during liquidation proceedings amount to an allowance or disallowance of a disputed claim. As a general rule, interlocutory orders are not appealable until rendition of judgment on the merits; however, an original action for certiorari under Rule 65 is appropriate when the tribunal acted without or in excess of jurisdiction or with grave abuse of discretion, and appeal would not afford adequate and expeditious relief. The Court adopted a positive and pragmatic approach, treating the Rule 45 petition as a Rule 65 petition rather than dismissing it outright.

• Tax Clearance Requirement: Three grounds supported the ruling. First, Section 52(C) of the Tax Code of 1997 and BIR-SEC Regulations No. 1 regulate only the relations between the SEC and the BIR, making a tax clearance a prerequisite before the SEC approves dissolution. RBBI was placed under receivership and liquidated by the BSP, not the SEC, and the SEC was not even a party to the proceedings. The New Central Bank Act is a special law governing banks, while the Corporation Code is a general law; pursuant to the principle generalia specialibus non derogant, the special law prevails. Section 30 of the New Central Bank Act is silent on any tax clearance requirement, and the Court cannot substitute "BSP" for "SEC" in the statute, as that would amount to judicial legislation. The procedures also differ substantially: under the Corporation Code, the SEC dissolves a corporation upon a verified complaint and after notice and hearing, whereas under the New Central Bank Act, the Monetary Board may summarily and without prior hearing forbid a bank from doing business and appoint PDIC as receiver, who files ex parte a petition for assistance in liquidation with the RTC. Second, what the BIR should have requested was the final tax return of RBBI, not a tax clearance. Section 54 of the Tax Code of 1997 imposes on all receivers, trustees in bankruptcy, and assignees the duty to file returns on behalf of the corporation under their care. Requiring a tax clearance creates a chicken-and-egg dilemma: the BIR issues a tax clearance only after all tax liabilities are fully paid, but PDIC cannot pay tax liabilities without an approved Project of Distribution, and the RTC will not approve the Project without a tax clearance. The BIR's proper recourse is to present its claim before the liquidation court like any other creditor, proving and substantiating its claim, with payment governed by the Civil Code rules on concurrence and preference of credit. The Government cannot claim general preference of credit for taxes except those attaching to specific movable or immovable property under Articles 2241(1) and 2242(1) of the Civil Code; other taxes due the National Government rank ninth in the order of preference. Third, the evident void in current statutes regarding the relations among the BIR, BSP, and PDIC is for the legislature to address through appropriate legislation, not for the Court to fill. Although the Court ruled in favor of PDIC on the tax clearance issue, it rejected PDIC's argument that the liquidation proceedings are summary in nature: only the Monetary Board's power to forbid a bank from doing business is summary; once liquidation proceedings are instituted before the trial court, they take on a different character requiring hearings, presentation of evidence, and allowing multiple appeals.

• Generalia specialibus non derogant — A general law does not derogate from a special law. As between the Corporation Code, which is a general law applying to all types of corporations, and the New Central Bank Act, which specially regulates banks and financial institutions including their dissolution and liquidation, the latter prevails. The Court applied this principle to hold that the tax clearance requirement under Section 52(C) of the Tax Code, which is tied to SEC-supervised corporate dissolution, cannot be imposed on BSP-ordered bank liquidations governed by the special provisions of the New Central Bank Act.

• Final vs. Interlocutory Orders — A judgment or order is final when it completely disposes of the case, definitively adjudicates the respective rights of the parties, and leaves no substantial proceedings except execution. An interlocutory order does not decide the action with finality and leaves substantial proceedings still to be had. Interlocutory orders are generally not appealable until rendition of judgment on the merits, but may be assailed via certiorari under Rule 65 when the tribunal acted without or in excess of jurisdiction or with grave abuse of discretion, and appeal would not afford adequate and expeditious relief. The Court found the RTC Orders interlocutory because they merely held in abeyance approval of the Project of Distribution and did not adjudicate the BIR's claim.

• Nature of Liquidation Proceedings — A liquidation proceeding resembles the settlement of the estate of deceased persons, with the common purpose of determining all assets and paying all debts and liabilities. It is a single, two-phased proceeding: the first phase concerns the approval or disapproval of claims (each order allowing or disallowing a particular claim is a final order and may be appealed), and the second phase involves the approval by the court of the distribution plan prepared by the liquidator. Liquidation proceedings are not summary in nature; they require hearings, presentation of evidence, and allow multiple appeals. Only the Monetary Board's power to forbid a bank from doing business under Section 30 of the New Central Bank Act is summary in nature.

• "This Court cannot simply replace any reference by Section 52(C) of the Tax Code of 1997 and the provisions of the BIR-SEC Regulations No. 1 to the 'SEC' with the 'BSP.' To do so would be to read into the law and the regulations something that is simply not there, and would be tantamount to judicial legislation." — This passage articulates the ratio decidendi on why the tax clearance requirement cannot be extended to BSP-ordered bank liquidations, grounding the holding in the separation of legislative and judicial functions.

• "Should the BIR find that RBBI still had outstanding tax liabilities, PDIC will not be able to pay the same because the Project of Distribution of the assets of RBBI remains unapproved by the RTC; and, if RBBI still had outstanding tax liabilities, the BIR will not issue a tax clearance; but, without the tax clearance, the Project of Distribution of assets, which allocates the payment for the tax liabilities, will not be approved by the RTC. It will be a chicken-and-egg dilemma." — This passage illustrates the practical impossibility of requiring a tax clearance as a precondition to asset distribution, reinforcing the Court's conclusion that the BIR must instead file its claim before the liquidation court.

• "It is up to the legislature to address the matter through appropriate legislation, and to the executive to provide the regulations for its implementation." — This statement defines the boundaries of judicial power, declining to fill the statutory gap regarding the inter-agency relations among the BIR, BSP, and PDIC, and leaving that task to the political branches.

• Paa vs. Court of Appeals, 347 Phil. 122 (1997) — Followed for the distinctions between an appeal by certiorari under Rule 45 and an original action for certiorari under Rule 65, which the Court used to determine the propriety of PDIC's chosen remedy.
• People vs. Doriquez, 133 Phil. 295 (1968) — Followed for the definition of final versus interlocutory orders and the rule that interlocutory orders are not appealable until judgment on the merits.
• Pacific Banking Corporation Employees' Organization (PaBCEO) vs. Court of Appeals, 312 Phil. 578 (1995) — Followed for the detailed description of the nature and phases of liquidation proceedings; distinguished insofar as PDIC invoked it to argue that the RTC Orders were final orders allowing a disputed claim, which the Court rejected.
• Laureano vs. Court of Appeals, 381 Phil. 403 (2000) — Followed for the principle generalia specialibus non derogant, applied to hold that the New Central Bank Act, as a special law, prevails over the Corporation Code and the Tax Code provisions on corporate dissolution.
• J.L. Bernardo Construction vs. Court of Appeals, 381 Phil. 25 (2000) — Followed for the exception allowing certiorari under Rule 65 to assail interlocutory orders when the tribunal acted with grave abuse of discretion and appeal would not afford adequate relief.
• Republic vs. Peralta, 150 SCRA 37 (1987) — Followed for the rules on preference of credit, establishing that taxes due the National Government rank ninth in the order of preference with respect to the debtor's "free property," and that the Government cannot claim general preference except for taxes attaching to specific property under Articles 2241(1) and 2242(1) of the Civil Code.

• Section 30, R.A. No. 7653 (New Central Bank Act) — Governs proceedings in receivership and liquidation of banks. The Monetary Board may summarily and without prior hearing forbid a bank from doing business and designate PDIC as receiver. PDIC, as receiver, shall file ex parte with the proper RTC a petition for assistance in liquidation. The provision is silent on any tax clearance requirement. The Court held this special law prevails over the Tax Code's general corporate dissolution provisions.
• Section 52(C), R.A. No. 8424 (Tax Code of 1997) — Requires every corporation contemplating dissolution or reorganization to render a return to the Commissioner of Internal Revenue and to secure a certificate of tax clearance from the BIR prior to issuance by the SEC of a Certificate of Dissolution. The Court held this provision applies only to SEC-supervised corporate dissolutions, not to BSP-ordered bank liquidations.
• Section 54, R.A. No. 8424 (Tax Code of 1997) — Imposes on receivers, trustees in bankruptcy, and assignees operating the property or business of a corporation the duty to make returns of net income on behalf of the corporation. The Court held that PDIC, as liquidator of RBBI, is duty-bound to file the final tax return of RBBI under this provision, and that such filing suffices to enable the BIR to determine outstanding tax liabilities.
• Section 121, B.P. Blg. 68 (Corporation Code) — Authorizes the SEC to dissolve a corporation upon filing of a verified complaint and after proper notice and hearing. The Court contrasted this with the summary, no-hearing procedure under Section 30 of the New Central Bank Act to demonstrate that the two regimes are substantially different and their requirements cannot be interchanged.
• Articles 2241(1) and 2242(1), Civil Code of the Philippines — Grant preference to duties, taxes, and fees due the Government with reference to specific movable and immovable property, respectively. The Court held that the Government cannot claim general preference for taxes not falling under these articles, which rank only ninth in the order of preference against the debtor's free property.

Ynares-Santiago (Working Chairperson), Austria-Martinez, and Callejo, Sr., JJ., concurred. Panganiban, C.J., retired as of December 7, 2006.