Republic of the Philippines vs. William Li Yao

A certificate of naturalization may be cancelled under Section 18(a) of Commonwealth Act No. 473 if it was obtained fraudulently or illegally, and concealment of income to evade lawful taxes is a sufficient ground because it shows a lack of good moral character and irreproachable conduct; a tax amnesty under Presidential Decree No. 68 does not erase that ground for denaturalization.

William Li Yao, a Chinese national, sought Philippine citizenship under the Revised Naturalization Act, Commonwealth Act No. 473, a statute that conditions naturalization on, among other things, good moral character and irreproachable conduct in relations with the constituted government. The naturalization process then included a probationary period under Republic Act No. 530 before the decision could become final and the oath taken. The case later implicated Presidential Decree No. 68, which granted tax amnesty and provided that full settlement of tax accounts freed a taxpayer from civil, criminal, or administrative liability insofar as the tax case was concerned.

William Li Yao, a Chinese national, filed a petition for naturalization on June 3, 1949 with the then Court of First Instance of Manila, docketed as Case No. 8225. After several hearings at which the Office of the Solicitor General appeared for the Republic, the lower court rendered a decision dated October 25, 1950 declaring Li Yao, for all intents and purposes, a naturalized Filipino citizen. The decision was made subject to Republic Act No. 530, under which it would not become final and executory until two years from promulgation and until the court, after proper hearing with the Solicitor General or his representative, was satisfied that Li Yao had not left the Philippines, had dedicated himself continuously to a lawful calling or profession, had not been convicted of any offense or violation of government rules, and had not committed any act prejudicial to the nation or contrary to announced government policies. Only after such finding could the decision be registered, the oath taken, and the certificate of naturalization issued.

On November 20, 1952, acting on Li Yao’s petition for execution of the decision and for leave to take his oath of allegiance, the lower court issued an order finding that he had complied with Republic Act No. 530 within the two-year probation period. He was allowed to take his oath as a Filipino citizen, and the Clerk of Court was directed to issue the corresponding certificate of naturalization. Certificate of Naturalization No. 1139 was thereafter dated November 20, 1952.

About fifteen years later, on January 5, 1968, the Republic of the Philippines, through the Solicitor General, filed a motion to cancel Li Yao’s certificate of naturalization on the ground that it had been fraudulently and illegally obtained. The motion alleged that at the time of the filing of his petition, Li Yao was not qualified to acquire Filipino citizenship by naturalization because he was not a person of good moral character, having had illicit amorous relationships with several women other than his lawfully wedded wife and fathering illegitimate children. It further alleged that he had not conducted himself in an irreproachable manner in his dealings with duly constituted authorities: he used the name Fransisco Li Yao in contracting marriage without prior judicial authority, the name not appearing to be his baptismal name; he was known and had used the name or alias LI CHAY TOO, JR. before the last war, under which name a trust fund was created for him; he evaded payment of lawful taxes by underdeclaration of income in his income tax returns for 1946-1951; he committed violations of the Constitution and Anti-Dummy laws prohibiting aliens from acquiring real properties by employing dummies in the formation of a private domestic corporation that acquired real properties; and he falsely made it appear in the baptismal certificate of an illegitimate son, William Jose Antonio, that the child’s mother was Juanita Tan Ho Ti while his law-mother was another woman. Li Yao opposed the motion on July 22, 1971.

The lower court did not touch on all the grounds upon which the motion was based. It relied solely on the ground that Li Yao had evaded the payment of lawful taxes due the government by underdeclaration of income as reflected in his income tax returns for the years 1946-1951. That finding of underdeclaration and underpayment of income tax for those years was the factual basis on which the cancellation of his certificate of naturalization rested.

• Tax Amnesty: Petitioner-appellant alleged that he had fully paid or settled his tax liability under Presidential Decree No. 68, which granted a tax amnesty.

• Fraudulent and Illegal Procurement: The Republic, through the Solicitor General, moved to cancel Li Yao’s certificate of naturalization on the ground that it was fraudulently and illegally obtained, invoking Section 18(a) of Commonwealth Act No. 473.
• Lack of Good Moral Character: The Republic alleged that Li Yao was not a person of good moral character because he had illicit amorous relationships with several women other than his lawful wife and fathered illegitimate children.
• Irreproachable Conduct — Use of Names: The Republic alleged that Li Yao used the name Fransisco Li Yao in contracting marriage without prior judicial authority and was known or had used the alias LI CHAY TOO, JR. before the last war, under which name a trust fund was created for him.
• Tax Evasion: The Republic alleged that Li Yao evaded payment of lawful taxes by underdeclaring income in his income tax returns for 1946-1951.
• Anti-Dummy Violations: The Republic alleged that Li Yao violated the Constitution and Anti-Dummy laws by employing dummies in the formation of a private domestic corporation that acquired real properties.
• False Baptismal Certificate: The Republic alleged that Li Yao falsely made it appear in the baptismal certificate of his illegitimate son, William Jose Antonio, that the child’s mother was Juanita Tan Ho Ti while his law-mother was another woman.

• Validity of Cancellation: Whether the cancellation of the certificate of naturalization of William Li Yao by the government through the Office of the Solicitor General is valid.
• Tax Evasion as Ground: Whether concealment or underdeclaration of income to evade payment of lawful taxes is a sufficient ground for cancelling a certificate of naturalization.
• Effect of Tax Amnesty: Whether full payment or settlement of tax liability under Presidential Decree No. 68 removes the ground for cancellation based on lack of good moral character and irreproachable conduct.
• Mootness: Whether the death of petitioner-appellant William Li Yao renders the case moot and academic.

• Validity of Cancellation: Yes. The cancellation was valid under Section 18(a) of Commonwealth Act No. 473, which permits cancellation if the certificate was obtained fraudulently or illegally, and the tax-evasion finding supported it.
• Tax Evasion as Ground: Yes. Concealment of income to evade lawful taxes shows that the applicant’s moral character is not irreproachable and disqualifies him for naturalization.
• Effect of Tax Amnesty: No. Payment under Presidential Decree No. 68 removes only civil, criminal, or administrative liability insofar as the tax case is concerned; it does not obliterate lack of good moral character and irreproachable conduct.
• Mootness: No. The case did not become moot despite Li Yao’s death because its disposition would have grave implications for his wife and children.

• Validity of Cancellation: The Solicitor General sought cancellation under Section 18(a) of Commonwealth Act No. 473, which provides that a naturalization certificate may be cancelled if it is shown that it was obtained fraudulently and illegally. The Court stated that it is indisputable that a certificate of naturalization may be cancelled if it is subsequently discovered that the applicant obtained it by misleading the court upon any material fact. Law and jurisprudence also authorize cancellation upon grounds or conditions arising subsequent to the granting of the certificate. A naturalization proceeding is not a judicial adversary proceeding, and the decision rendered therein does not constitute res judicata as to any matter that would support a judgment cancelling the certificate on the ground of illegal or fraudulent procurement. Because the lower court found that Li Yao had underdeclared income and underpaid income tax, that finding was a sufficient basis for cancellation.
• Tax Evasion as Ground: The lower court sustained the government’s motion on the sole finding that Li Yao had committed underdeclaration of income and underpayment of income tax. In Lim Eng Yu vs. Republic, it was held that concealment of an applicant’s income to evade payment of lawful taxes shows that his moral character is not irreproachable, thus disqualifying him for naturalization. Section 2 of the Revised Naturalization Law requires an applicant to conduct himself in a proper and irreproachable manner during the entire period of his residence in the Philippines in his relation with the constituted government as well as with the community in which he is living. The tax-evasion finding therefore sufficed to strip him of citizenship without going into the other grounds for cancellation presented by the Solicitor General.
• Effect of Tax Amnesty: Even assuming that Li Yao had fully paid or settled his tax liability under Presidential Decree No. 68, which granted a tax amnesty, such payment was not a sufficient ground for lifting the order cancelling his certificate of naturalization. The legal effect of payment under the decree is merely the removal of any civil, criminal, or administrative liability on the part of the taxpayer, only insofar as his tax case is concerned. Paragraph 4 of the decree provides that after full settlement of the accounts, the taxpayer shall be free of any civil, criminal, or administrative liability insofar as his tax case is involved. The tax amnesty does not have the effect of obliterating his lack of good moral character and irreproachable conduct, which are grounds for denaturalization.
• Mootness: Although Li Yao died after the parties had filed their briefs, the case had not become moot and academic. Its disposition, either way, would have grave implications for the late petitioner-appellant’s wife and children. The Court therefore proceeded to resolve the appeal.

• Cancellation of Certificate of Naturalization for Fraud or Illegal Procurement — Under Section 18(a) of Commonwealth Act No. 473, a certificate of naturalization may be cancelled if it is shown that it was obtained fraudulently or illegally. This includes misleading the court upon any material fact. Cancellation may also be authorized upon grounds or conditions arising subsequent to the granting of the certificate. A naturalization proceeding is not a judicial adversary proceeding, and the decision rendered therein does not constitute res judicata as to any matter that would support a judgment cancelling the certificate on the ground of illegal or fraudulent procurement.
• Tax Evasion as Lack of Good Moral Character and Irreproachable Conduct — Concealment of an applicant’s income to evade payment of lawful taxes shows that his moral character is not irreproachable and disqualifies him for naturalization. This is so because Section 2 of the Revised Naturalization Law requires an applicant to conduct himself in a proper and irreproachable manner during the entire period of his residence in the Philippines in his relation with the constituted government as well as with the community in which he is living.
• Effect of Tax Amnesty on Denaturalization — A tax amnesty under Presidential Decree No. 68 removes only civil, criminal, or administrative liability on the part of the taxpayer insofar as his tax case is concerned. It does not obliterate the lack of good moral character and irreproachable conduct that may constitute grounds for denaturalization.
• Strict Enforcement of Naturalization Laws — Naturalization laws should be rigidly enforced in favor of the Government and against the applicant. Where the applicant fails to meet the qualifications required for naturalization, he is not entitled to Filipino citizenship. Admission to citizenship is one of the highest privileges that the Republic may confer upon an alien and should not be conferred except upon persons fully qualified for it and upon strict compliance with the law.
• Mootness Exception for Citizenship Cases — The death of a petitioner in a naturalization cancellation case does not necessarily render the case moot and academic where its disposition, either way, will have grave implications for the petitioner’s wife and children.

• "It is indisputable that a certificate of naturalization may be cancelled if it is subsequently discovered that the applicant therefore obtained it by misleading the court upon any material fact." — States the core rule allowing cancellation of a naturalization certificate for misleading the court on a material fact.
• "It was held that the concealment of applicant's income to evade payment of lawful taxes shows that his moral character is not irreproachable, thus disqualifying him for naturalization." — Articulates the controlling rule that tax evasion through income concealment disqualifies an applicant for naturalization.
• "In other words, the tax amnesty does not have the effect of obliterating his lack of good moral character and irreproachable conduct which are grounds for denaturalization." — States the ratio on why payment under the tax amnesty does not remove the ground for cancelling the certificate.
• "Philippine citizenship is a pearl of great price which should be cherished and not taken for granted. Once acquired, its sheen must be burnished and not stained by any wrongdoing which could constitute ample ground for divesting one of said citizenship." — Expresses the Court’s strict policy on citizenship and the need for continued compliance with naturalization requirements.

• Lim Eng Yu vs. Republic, L-20809, August 21, 1966, 17 SCRA 1058 — Controlling precedent for the holding that concealment of income to evade payment of lawful taxes shows a moral character that is not irreproachable and disqualifies an applicant for naturalization.
• Republic vs. Lee Bon Ui, G.R. No. L-33504, September 28, 1984, 132 SCRA 181 — Cited for the rule that a certificate of naturalization may be cancelled if it was obtained by misleading the court upon a material fact, and that a naturalization proceeding is not a judicial adversary proceeding whose decision is res judicata on matters supporting cancellation.
• Bell vs. Attorney-General, 56 Phil. 667 (1932) — Cited together with Republic vs. Lee Bon Ui for the same rule on cancellation for misleading the court upon a material fact.
• Republic vs. Go Bon Lee, G.R. No. L-11499, April 29, 1961, 1 SCRA 1166 — Cited for the rule that cancellation may be authorized upon grounds or conditions arising subsequent to the granting of the certificate, and that a naturalization decision is not res judicata as to matters supporting cancellation.
• Lim Cho Kuan vs. Republic, L-21198, January 22, 1966, 16 SCRA 25 — Cited for the requirement under Section 2 of the Revised Naturalization Law that the applicant conduct himself in a proper and irreproachable manner in his relation with the constituted government.
• Yap vs. Republic, L-19832, August 23, 1966, 17 SCRA 956 — Cited for the principle that admission to citizenship is one of the highest privileges the Republic may confer and should be granted only upon strict compliance with the law.
• Chua Eng Hok vs. Republic, L-20479, October 29, 1965, 15 SCRA 170 — Cited for the principle that Philippine citizenship is a pearl of great price and that compliance with all naturalization requirements must be proved to the satisfaction of the Court.

• Section 18(a), Commonwealth Act No. 473 (Revised Naturalization Act) — Provides that a naturalization certificate may be cancelled if it is shown that it was obtained fraudulently and illegally. The Court relied on this provision as the statutory basis for cancelling Li Yao’s certificate.
• Section 2, Commonwealth Act No. 473 (Revised Naturalization Act) — Requires an applicant for naturalization to conduct himself in a proper and irreproachable manner during the entire period of his residence in the Philippines in his relation with the constituted government as well as with the community in which he is living. The Court held that Li Yao’s tax evasion violated this requirement and supported denaturalization.
• Paragraph 4, Presidential Decree No. 68 — Provides that after full settlement of the accounts mentioned therein, the taxpayer shall be free of any civil, criminal, or administrative liability insofar as his tax case is involved. The Court held that this did not erase the lack of good moral character and irreproachable conduct that are grounds for denaturalization.
• Republic Act No. 530 — Required that the naturalization decision not become final and executory until after two years from promulgation and after the court, on proper hearing with the Solicitor General or his representative, was satisfied that the applicant had complied with the statutory conditions. The lower court found Li Yao had complied with this probationary requirement and allowed him to take his oath.

Gutierrez, Jr., Bidin, Davide, Jr. and Melo, JJ., concur.