Suarez vs. People of the Philippines

An Executive Vice-President of a corporation is not per se a "responsible officer" under Section 253(d) of the NIRC for the corporation's failure to pay taxes unless the prosecution proves that such officer actively participated in the violation or had the power to prevent it; a single letter requesting extension of payment and expressing willingness to compromise does not suffice to establish such responsibility beyond reasonable doubt.

Genoveva S. Suarez was the Executive Vice-President of 21st Century Entertainment, Inc., a corporation with a business address in Sta. Cruz, Manila. The NIRC imposes criminal liability for failure to pay taxes under Section 255, and under Section 253(d), such penalty is imposed on specified corporate officers — partner, president, general manager, branch manager, treasurer, officer-in-charge, and employees responsible for the violation. Section 256 separately addresses the penal liability of corporations themselves. The BIR conducted an assessment of 21st Century's tax obligations for taxable year 2000, leading to the criminal prosecution of petitioner as the corporation's responsible officer.

21st Century Entertainment, Inc. was a corporation with a registered business address at Room 207, Tiaoqui Bldg., Sta. Cruz, Manila. Genoveva S. Suarez served as its Executive Vice-President. On January 23, 2004, the Commissioner of Internal Revenue issued Final Assessment Notices and Final Letters of Demand to 21st Century, demanding payment for deficiency income tax, improperly accumulated earnings tax, minimum corporate income tax, expanded withholding tax, value-added tax, and compromise penalty, all in the aggregate amount of ₱747,964.49 for taxable year 2000.

On February 26, 2004, 21st Century, represented by its Vice-President John S. Suarez, filed a Protest against the FLDs and requested the BIR for reinvestigation of the assessment. However, because 21st Century failed to submit within 60 days from the date of protest any supporting documents to refute the assessment, the case docket was forwarded on December 5, 2005 to the Chief Collection Division for collection of the deficiency taxes. Thereafter, the Revenue District Officer issued a First Notice of Delinquent Account on December 19, 2005, warning that the case would be referred to the BIR Legal Division if the obligations remained unsettled, followed by a Second Notice of Delinquent Account on January 3, 2006, reiterating the demand and warning of a Warrant of Distraint and/or Levy or Garnishment. Despite these notices, 21st Century still failed to settle its obligations, prompting the BIR to issue a Final Notice before Seizure on March 17, 2006, addressed to Richard Suarez.

On August 24, 2006, in a bid to prevent the seizure of 21st Century's properties, petitioner sent a letter to the RDO requesting additional time to secure the services of an external accountant to assist 21st Century in organizing its accounting records so that it could provide the BIR evidence supporting its financial statements and income tax returns. Petitioner also expressed her willingness to settle 21st Century's tax liabilities through compromise. Notwithstanding this letter, the CIR issued a Warrant of Distraint and Levy against 21st Century on November 28, 2006. On March 7, 2007, the BIR issued a Warrant of Garnishment to Equitable-PCI Bank against the account of 21st Century, to no avail. On May 28, 2007, the RDO issued a Memorandum recommending the filing of a proper case against 21st Century for failure to pay its delinquent tax liabilities.

On August 21, 2008, the Office of the City Prosecutor of Manila filed an Information against petitioner for violation of Section 255 in relation to Sections 253(d) and 256 of the NIRC. The Information charged petitioner as the President of 21st Century and therefore the responsible officer of the corporation, although during pre-trial, the prosecution and defense stipulated that petitioner was in fact the Executive Vice-President of 21st Century at the time of the assessment. On February 4, 2009, petitioner pleaded not guilty. The prosecution presented three witnesses — revenue officer Ma. Paz Arcilla, mailing custodian Armando Macatangay, and revenue officer-seizure agent Dionisio Singson — who testified to the issuance, mailing, and service of the assessment notices and demand letters, and to 21st Century's failure to respond. After the prosecution rested its case, petitioner filed a Motion for Leave of Court to File Demurrer to Evidence on April 7, 2016, which was denied on April 14, 2016 for having been filed out of time. On the same date, petitioner waived the presentation of evidence for her defense.

• Civil Liability of 21st Century: Petitioner argued that the CTA should not have ordered 21st Century civilly liable for the tax liabilities, as the latter was already dropped from the case as early as the trial before the RTC.
• Unproven Tax Deficiencies: Petitioner claimed that the alleged tax deficiencies of 21st Century were not proven because no Preliminary Assessment Notice (PAN) was ever issued to the corporation.
• Not a Responsible Officer: Petitioner insisted that she is not a responsible officer of 21st Century who may be held criminally liable for failure to pay taxes, her position as Executive Vice-President not being among those enumerated under Section 253(d) of the NIRC.

• Criminal and Civil Liabilities Proven: Respondent, through the Office of the Solicitor General, reiterated that petitioner's criminal and civil liabilities were duly proven by the prosecution.

• Responsible Officer: Whether petitioner, as the Executive Vice-President of 21st Century, may be held criminally liable as a "responsible officer" under Section 253(d) of the NIRC for the corporation's failure to pay its tax liabilities.
• Implied Admission of Guilt: Whether petitioner's letter to the BIR expressing willingness to compromise may be received in evidence as an implied admission of guilt.

• Responsible Officer: No. The position of Executive Vice-President is not among the corporate officers expressly enumerated under Section 253(d) of the NIRC, and the prosecution failed to prove that petitioner actively participated in or had the power to prevent the corporation's failure to pay its taxes.
• Implied Admission of Guilt: No. An offer of compromise in criminal cases allowed by law to be compromised cannot be received in evidence as an implied admission of guilt; the NIRC itself allows compromise of criminal violations, and petitioner's offer was made before any criminal case was filed.

• Responsible Officer: Section 253(d) of the NIRC expressly identifies the corporate officers who may be held liable for violations committed by the corporation: partner, president, general manager, branch manager, treasurer, officer-in-charge, and employees responsible for the violation. An Executive Vice-President is not among those expressly enumerated. While the RTC and CTA concluded that petitioner fell under the catch-all category of "employees responsible for the violation" based on her letter to the BIR requesting extension of payment and expressing willingness to compromise, this single act was insufficient. Citing Ching vs. Secretary of Justice and ABS-CBN vs. Gozon, the Court reiterated that corporate officers may be held criminally liable only if they actively participated in the commission of the wrongful act or had the power to prevent it. Mere position or a single communicative act does not establish such participation or power. The prosecution bore the burden of proving beyond reasonable doubt that petitioner's duties and responsibilities as Executive Vice-President allowed her to participate in or prevent 21st Century's failure to pay its tax liabilities, but the records were bereft of any such evidence. Absent proof of direct and active participation in the non-payment, conviction could not stand.

• Implied Admission of Guilt: Under Section 28, Rule 130 of the 2019 Amendments to the Revised Rules on Evidence, an offer of compromise in criminal cases may be received as an implied admission of guilt, except for those involving quasi-offenses and those allowed by law to be compromised. Section 204 of the NIRC explicitly authorizes the CIR to compromise criminal violations of the NIRC, except those already filed in court or those involving fraud. Since the NIRC itself allows compromise of its penal violations, petitioner's offer fell within the exception. Moreover, citing San Miguel Corporation vs. Kalalo, the offer was made on August 24, 2006 — before the RDO's Memorandum recommending the filing of the case on May 28, 2007 and the filing of the Information on August 21, 2008 — and thus was not made in the context of a criminal proceeding. The offer could not therefore be received as an implied admission of guilt.

• Criminal Liability of Corporate Officers — Corporate officers may be held criminally liable for acts committed by the corporation only if they actively participated in the commission of the wrongful act or had the power to prevent it. Mere membership on the board or holding a corporate position per se does not mean knowledge, approval, and participation in the act alleged as criminal. There must be a showing of active participation, not simply a constructive one. The Court applied this doctrine to hold that petitioner's position as Executive Vice-President, without more, did not make her a "responsible officer" under Section 253(d) of the NIRC.

• Offer of Compromise as Implied Admission of Guilt — In criminal cases, an offer of compromise by the accused may be received in evidence as an implied admission of guilt, except those involving quasi-offenses (criminal negligence) and those allowed by law to be compromised. Because the NIRC itself allows compromise of criminal violations (except those already filed in court or involving fraud), an offer to compromise tax liabilities under the NIRC cannot be received as an implied admission of guilt.

• "Mere membership of the Board or being President per se does not mean knowledge, approval, and participation in the act alleged as criminal. There must be a showing of active participation, not simply a constructive one." — This passage, quoted from ABS-CBN vs. Gozon, articulates the controlling standard for corporate officer criminal liability and forms the analytical basis for the Court's acquittal of petitioner.

• "Absent proof that petitioner had any direct and active participation in the non-payment of 21st Century's tax liabilities, the Court cannot convict her of violation of the provisions of the NIRC." — This statement encapsulates the ratio decidendi: the prosecution's failure to establish the third element of the offense — that petitioner was an employee responsible for the violation — necessitates acquittal.

• "All criminal violations may be compromised except: (a) those already filed in court, or (b) those involving fraud." — This quotation of Section 204 of the NIRC establishes the statutory basis for the ruling that an offer to compromise tax liabilities cannot be used as an implied admission of guilt.

• People vs. Tan Boon Kong, 54 Phil. 607 (1930) — Early authority establishing that for crimes committed by a corporation, the responsible officers personally bear criminal liability, because a corporation can act only through its officers and agents. Followed as foundational doctrine.
• Ching vs. Secretary of Justice, 511 Phil. 151 (2006) — Discussed the liability of corporate officers for acts committed by the corporation, holding that corporate officers or employees through whose act, default, or omission the corporation commits a crime are themselves individually guilty, and that liability attaches to those who, by virtue of their managerial positions, could be deemed responsible for the commission if they had the power to prevent the act. Followed and applied to the facts.
• ABS-CBN vs. Gozon, 755 Phil. 709 (2015) — Held that mere membership on the board or being president per se does not mean knowledge, approval, and participation in the criminal act; active participation must be shown. Followed as the controlling standard.
• SEC vs. Price Richardson Corporation, 814 Phil. 589 (2017) — Reiterated that to be criminally liable for acts of a corporation, there must be a showing that officers, directors, and shareholders actively participated in or had the power to prevent the wrongful act. Followed.
• San Miguel Corporation vs. Kalalo, 687 Phil. 376 (2012) — Held that an offer of compromise made prior to the filing of a criminal complaint was not made in the context of a criminal proceeding and could not be considered an implied admission of guilt. Applied to the facts of this case.

• Section 255, NIRC — Penalizes any person required to pay any tax who willfully fails to pay such tax at the time required by law, with imprisonment of not less than one year but not more than ten years and a fine of not less than ₱10,000. Applied as the substantive offense charged against petitioner.
• Section 253(d), NIRC — Provides that in the case of corporations, the penalty shall be imposed on the partner, president, general manager, branch manager, treasurer, officer-in-charge, and the employees responsible for the violation. Applied as the provision defining who may be held criminally liable; the Court held that Executive Vice-President is not among the enumerated positions.
• Section 256, NIRC — Provides for the penal liability of corporations, imposing a fine of not less than ₱50,000 but not more than ₱100,000 upon conviction, in addition to penalties imposed upon responsible corporate officers. Cited as the provision governing the corporation's own liability.
• Section 204, NIRC — Authorizes the CIR to compromise the payment of internal revenue taxes and provides that all criminal violations may be compromised except those already filed in court or those involving fraud. Applied to establish that an offer to compromise tax liabilities cannot be used as an implied admission of guilt.
• Section 28, Rule 130, 2019 Amendments to the Revised Rules on Evidence — Provides that in criminal cases, an offer of compromise by the accused may be received as an implied admission of guilt, except those involving quasi-offenses or those allowed by law to be compromised. Applied in conjunction with Section 204 of the NIRC to exclude petitioner's offer of compromise as an implied admission.

Leonen (Chairperson), Zalameda, Rosario, and Dimaampao, JJ., concurred.