[G.R. NO. 162775 : October 27, 2006]
INTERCONTINENTAL BROADCASTING CORPORATION (IBC), represented by ATTY. RENATOQ. BELLO, in his capacity as CEO and President, Petitioner, v. NOEMI B. AMARILLA, CORSINI R. LAGAHIT, ANATOLIO G. OTADOY, and CANDIDO C. QUIÑONES, JR., Respondents.
D E C I S I O N
CALLEJO, SR., J.:
Before us is a Petition for Review on Certiorari filed by petitioner Intercontinental Broadcasting Corporation (IBC) assailing the Decision1 of the Court of Appeals in CA-G.R. SP No. 72414, which in turn affirmed the Decision2 of the National Labor Relations Commission (NLRC) in NLRC Case No. V-000660-2000.
On various dates, petitioner employed the following persons at its Cebu station: Candido C. Quiñones, Jr.; on February 1, 1975;3 Corsini R. Lagahit, as Studio Technician, also on February 1, 1975;4 Anatolio G. Otadoy, as Collector, on April 1, 1975;5 and Noemi Amarilla, as Traffic Clerk, on July 1, 1975.6 On March 1, 1986, the government sequestered the station, including its properties, funds and other assets, and took over its management and operations from its owner, Roberto Benedicto.7 However, in December 1986, the government and Benedicto entered into a temporary agreement under which the latter would retain its management and operation. On November 3, 1990, the Presidential Commission on Good Government (PCGG) and Benedicto executed a Compromise Agreement,8 where Benedicto transferred and assigned all his rights, shares and interests in petitioner station to the government. The PCGG submitted the Agreement to the Sandiganbayan in Civil Case No. 0034 entitled "Republic of the Philippines v. Roberto S. Benedicto, et al."9
In the meantime, the four (4) employees retired from the company and received, on staggered basis, their retirement benefits under the 1993 Collective Bargaining Agreement (CBA) between petitioner and the bargaining unit of its employees.
In the meantime, a
The four (4) retirees filed separate complaints13 against IBC TV-13 Cebu and Station Manager Louella F. Cabañero for unfair labor practice and non-payment of backwages before the NLRC, Regional Arbitration Branch VII. As all of the complainants had the same causes of action, their complaints were docketed as NLRC RAB-VII Case No. 10-1625-99.
The complainants averred that their retirement benefits are exempt from income tax under Article 32 of the NIRC. Sections 28 and 72 of the NIRC, which petitioner relied upon in withholding their differentials, do not apply to them since these provisions deal with the applicable income tax rates on foreign corporations and suits to recover taxes based on false or fraudulent returns. They pointed out that, under Article VIII of the CBA, only those employees who reached the age of 60 were considered retired, and those under 60 had the option to retire, like Quiñones and Otadoy who retired at ages 58 and 51, respectively. They prayed that they be paid their salary differentials, as follows:
For its part, petitioner averred that under Section 21 of the NIRC, the retirement benefits received by employees from their employers constitute taxable income. While retirement benefits are exempt from taxes under Section 28(b) of said Code, the law requires that such benefits received should be in accord with a reasonable retirement plan duly registered with the Bureau of Internal Revenue (BIR) after compliance with the requirements therein enumerated. Since its retirement plan in the 1993 CBA was not approved by the BIR, complainants were liable for income tax on their retirement benefits. Petitioner claimed that it was mandated to withhold the income tax due from the retirement benefits of said complainants. It was not estopped from correcting the mistakes of its former officers. Under the law, complainants are obliged to return what had been mistakenly delivered to them.15
In reply, complainants averred that the claims for the retirement salary differentials of Quiñones and Otadoy had not prescribed because the said CBA was implemented only in 1997. They pointed out that they filed their claims with petitioner on April 3, 1999. They maintained that they availed of the optional retirement because of petitioner's inducement that there would be no tax deductions. Petitioner IBC did not commit any mistake in not withholding the taxes due on their retirement benefits as shown by the fact that the PCCG, the Commission on Audit (COA) and the Bureau of Internal Revenue (BIR) did not even require them to explain such mistake. They pointed out that petitioner paid their retirement benefits on a staggered basis, and nonetheless failed to deduct any amount as taxes.16
Petitioner countered that the retirement benefits received by the complainants were based on the CBA between it and its bargaining units. Under Sections 72 and 73 of the NIRC, it is obliged to deduct and withhold taxes determined in accordance with the rules and regulations to be prepared by the Secretary of Finance. It was its duty to withhold the taxes on complainants' retirement benefits, otherwise, it would be held civilly and criminally liable under Sections 251, 254 and 255 of the NIRC.
On February 14, 2000, the Labor Arbiter rendered judgment in favor of the retirees. The fallo of the decision reads:
The Labor Arbiter ruled that the claims of Quiñones and Otadoy had prescribed. The retirement benefits of complainants Lagahit and Amarilla, on the other hand, were exempt from income tax under Section 28(b) of the NIRC. However, the differentials due to the two complainants were computed three years backwards due to the law on prescription.
Petitioner appealed the decision of the Labor Arbiter to the NLRC, arguing that the retirement benefits of Amarilla and Lagahit are not tax exempt. It insisted that the Labor Arbiter erred in declaring as unlawful the act of withholding the employees' salary differentials as payment for the latter's tax liabilities.
Otadoy and Quiñones no longer appealed the decision.
On May 21, 2002, the NLRC rendered its decision dismissing the appeal and affirming that of the Labor Arbiter. The fallo of the decision reads:
The NLRC held that the benefits of the retirement plan under the CBAs between petitioner and its union members were subject to tax as the scheme was not approved by the BIR. However, it had also been the practice of petitioner to give retiring employees their retirement pay without tax deductions and there was no justifiable reason for the respondent to deviate from such practice. The NLRC concluded that petitioner was deemed to have assumed the tax liabilities of the complainants on their retirement benefits, hence, had no right to deduct taxes from their salary differentials. The NLRC thus ratiocinated:
Aggrieved, petitioner elevated the decision before the CA on the following grounds:
Petitioner insists that respondents are liable for taxes on their retirement benefits because the retirement plan under the CBA was not approved by the BIR. It insisted that it failed to comply with the requisites of Section 32 of the NIRC and Rule II, Section 6 of the Rules Implementing the New Retirement Law which provides that retirement pay shall be tax exempt upon compliance with the requirements under Section 2(b) of Revenue Regulation No. 12-86 dated August 1, 1986.
Petitioner maintains that respondents failed to present any document as proof that petitioner bound and obliged itself to pay the withholding taxes on their retirement benefits. In fact, the Labor Arbiter did not make any finding that petitioner had obliged itself to pay the withholding taxes on respondents' retirement benefits. The NLRC's reliance on the statements in its Position Paper that it undertook to pay for respondents' withholding taxes is misplaced.
While petitioner admits that its "previous directors" had paid the withholding taxes on the retirement benefits of respondents, it explains that this practice was stopped when the new management took over. The new management could not be expected to enforce and follow through the illegal policy of the old management which is adverse to the interests of the petitioner; hence, the decisions of the NLRC and the CA affirming such undertaking should be reversed. It points out that it is a government corporation, and as such, its officials and employees may be held liable for violation of Section 3(a) of Republic Act Nos. 3019, and 6713.22 Moreover, its officers and employees are mandated to preserve the company's assets, and may, likewise be held liable for failure to do so under Section 31 of the Corporation Code.
The issues are (1) whether the retirement benefits of respondents are part of their gross income; and (2) whether petitioner is estopped from reneging on its agreement with respondent to pay for the taxes on said retirement benefits.
We agree with petitioner's contention that, under the CBA, it is not obliged to pay for the taxes on the respondents' retirement benefits. We have carefully reviewed the CBA and find no provision where petitioner obliged itself to pay the taxes on the retirement benefits of its employees.
We also agree with petitioner's contention that, under the NIRC, the retirement benefits of respondents are part of their gross income subject to taxes. Section 28 (b) (7) (A) of the NIRC of 198623 provides:
Revenue Regulation No. 12-86, the implementing rules of the foregoing provisions, provides:
Thus, for the retirement benefits to be exempt from the withholding tax, the taxpayer is burdened to prove the concurrence of the following elements: (1) a reasonable private benefit plan is maintained by the employer; (2) the retiring official or employee has been in the service of the same employer for at least 10 years; (3) the retiring official or employee is not less than 50 years of age at the time of his retirement; and (4) the benefit had been availed of only once.
Article VIII of the 1993 CBA provides for two kinds of retirement plans - compulsory and optional. Thus:
Section 1: Compulsory Retirement - Any employee who has reached the age of Fifty Five (55) years shall be retired from the COMPANY and shall be paid a retirement pay in accordance with the following schedule:
A supervisor who reached the age of Fifty (50) may at his/her option retire with the same retirement benefits provided above.
Section 2: Optional Retirement - Any covered employee, regardless of age, who has rendered at least five (5) years of service to the COMPANY may voluntarily retire and the COMPANY agrees to pay Long Service Pay to said covered employee in accordance with the following schedule:
Section 3: Fraction of a Year - In computing the retirement under Section 1 and 2 of this Article, a fraction of at least six (6) months shall be considered as one whole year. Moreover, the COMPANY may exercise the option of extending the employment of an employee.
Section 4: Severance of Employment Due to Illness - When a supervisor suffers from disease and/or permanent disability and her/his continued employment is prohibited by law or prejudicial to her/his health of the health of his co-employees, the COMPANY shall not terminate the employment of the subject supervisor unless there is a certification by a competent public health authority that the disease is of such a nature or at such stage that it can not be cured within a period of six (6) months even with proper medical treatment. The supervisor may be separated upon payment by the COMPANY of separation pay pursuant to law, unless the supervisor falls within the purview of either Sections 1 or 2 hereof. In which case, the retirement benefits indicated therein shall apply, whichever is higher.
Section 5: Loyalty Recognition - The COMPANY shall recognize the services of the supervisor/director who have reached the following number of years upon retirement by granting him/her a plaque of appreciation and any lasting gift:
Respondents were qualified to retire optionally from their employment with petitioner. However, there is no evidence on record that the 1993 CBA had been approved or was ever presented to the BIR; hence, the retirement benefits of respondents are taxable.
Under Section 80 of the NIRC, petitioner, as employer, was obliged to withhold the taxes on said benefits and remit the same to the BIR.
However, we agree with respondents' contention that petitioner did not withhold the taxes due on their retirement benefits because it had obliged itself to pay the taxes due thereon. This was done to induce respondents to agree to avail of the optional retirement scheme. Thus, in its petition in this case, petitioner averred that:
Respondents received their retirement benefits from the petitioner in three staggered installments without any tax deduction for the simple reason that petitioner had remitted the same to the BIR with the use of its own funds conformably with its agreement with the retirees. It was only when respondents demanded the payment of their salary differentials that petitioner alleged, for the first time, that it had failed to present the 1993 CBA to the BIR for approval, rendering such retirement benefits not exempt from taxes; consequently, they were obliged to refund to it the amounts it had remitted to the BIR in payment of their taxes. Petitioner used this "failure" as an afterthought, as an excuse for its refusal to remit to the respondents their salary differentials. Patently, petitioner is estopped from doing so. It cannot renege on its commitment to pay the taxes on respondents' retirement benefits on the pretext that the "new management" had found the policy disadvantageous.
It must be stressed that the parties are free to enter into any contract stipulation provided it is not illegal or contrary to public morals. When such agreement freely and voluntarily entered into turns out to be advantageous to a party, the courts cannot "rescue" the other party without violating the constitutional right to contract. Courts are not authorized to extricate the parties from the consequences of their acts. Thus, the fact that the contract stipulations of the parties may turn out to be financially disadvantageous to them will not relieve them of their obligation under the agreement.25
An agreement to pay the taxes on the retirement benefits as an incentive to prospective retirees and for them to avail of the optional retirement scheme is not contrary to law or to public morals. Petitioner had agreed to shoulder such taxes to entice them to voluntarily retire early, on its belief that this would prove advantageous to it. Respondents agreed and relied on the commitment of petitioner. For petitioner to renege on its contract with respondents simply because its new management had found the same disadvantageous would amount to a breach of contract. There is even no evidence that any "new management" was ever installed by petitioner after respondents' retirement; nor is there evidence that the Board of Directors of petitioner resolved to renege on its contract with respondents and demand the reimbursement for the amounts remitted by it to the BIR.
The well-entrenched rule is that estoppel may arise from a making of a promise if it was intended that the promise should be relied upon and, in fact, was relied upon, and if a refusal to sanction the perpetration of fraud would result to injustice. The mere omission by the promisor to do whatever he promises to do is sufficient forbearance to give rise to a promissory estoppel.26
Petitioner cannot hide behind the fact that, under the compromise agreement between the PCGG and Benedicto, the latter had assigned and conveyed to the Republic of the Philippines his shares, interests and rights in petitioner. Respondents retired only after the Court affirmed the validity of the Compromise Agreement27 and the execution by petitioner and the union of their 1993 CBA while Civil Case No. 0034 was still pending in the Sandiganbayan. There is no showing that before respondents demanded the payment of their salary differentials, petitioner had rejected its commitment to shoulder the taxes on respondents' retirement benefits and sought its nullification before the court; nor is there any showing that petitioner's "new management" filed any criminal or administrative charges against the former officers/board of directors comprising the "old management" relative to the payment of the taxes on respondents' retirement benefits.
IN VIEW OF ALL THE FOREGOING, the petition is DENIED for lack of merit. The Decision of the Court of Appeals in CA-G.R. SP No. 72414 is AFFIRMED. Costs against the petitioner.
Panganiban, C.J. (Chairperson), Ynares-Santiago, Austria-Martinez, and Chico-Nazario, JJ., concur.
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