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ARTURO M. TOLENTINO VS. THE SECRETARY OF FINANCE and THE COMMISSIONER OF INTERNAL REVENUE 1994 Aug 25 G.R. No.

115455 235 SCRA 630 FACTS: The valued-added tax (VAT) is levied on the sale, barter or exchange of goods and properties as well as on the sale or exchange of services. It is equivalent to 10% of the gross selling price or gross value in money of goods or properties sold, bartered or exchanged or of the gross receipts from the sale or exchange of services. Republic Act No. 7716 seeks to widen the tax base of the existing VAT system and enhance its administration by amending the National Internal Revenue Code. The Chamber of Real Estate and Builders Association (CREBA) contends that the imposition of VAT on sales and leases by virtue of contracts entered into prior to the effectivity of the law would violate the constitutional provision of non-impairment of contracts. ISSUE: Whether R.A. No. 7716 is unconstitutional on ground that it violates the contract clause under Art. III, sec 10 of the Bill of Rights. RULING: No. The Supreme Court the contention of CREBA, that the imposition of the VAT on the sales and leases of real estate by virtue of contracts entered into prior to the effectivity of the law would violate the constitutional provision of non-impairment of contracts, is only slightly less abstract but nonetheless hypothetical. It is enough to say that the parties to a contract cannot, through the exercise of prophetic discernment, fetter the exercise of the taxing power of the State. For not only are existing laws read into contracts in order to fix obligations as between parties, but the reservation of essential attributes of sovereign power is also read into contracts as a basic postulate of the legal order. The policy of protecting contracts against impairment presupposes the maintenance of a government which retains adequate authority to secure the peace and good order of society. In truth, the Contract Clause has never been thought as a limitation on the exercise of the State's power of taxation save only where a tax exemption has been granted for a valid consideration. Such is not the case of PAL in G.R. No. 115852, and the Court does not understand it to make this claim. Rather, its position, as discussed above, is that the removal of its tax exemption cannot be made by a general, but only by a specific, law. Further, the Supreme Court held the validity of Republic Act No. 7716 in its formal and substantive aspects as this has been raised in the various cases before it. To sum up, the Court holds: (1) That the procedural requirements of the Constitution have been complied with by Congress in the enactment of the statute; (2) That judicial inquiry whether the formal requirements for the enactment of statutes - beyond those prescribed by the Constitution - have been observed is precluded by the principle of separation of powers; (3) That the law does not abridge freedom of speech, expression or the press, nor interfere with the free exercise of religion, nor deny to any of the parties the right to an education; and (4) That, in view of the absence of a factual foundation of record, claims that the law is regressive, oppressive and confiscatory and that it violates vested rights protected under the Contract Clause are prematurely raised and do not justify the grant of prospective relief by writ of prohibition. WHEREFORE, the petitions are DISMISSED.

PHILIPPINE HEALTH CARE PROVIDERS, INC., vs. COMMISSIONER OF INTERNAL REVENUEFACTS: Petitioner is the Philippine Health Care Providers Incorporated, a domestic corporation primarily engaged in the business of providing prepaid group practice health care deliverysystem. On the other hand, Respondent is the Commissioner of Internal Revenue, demanding payment of deficiency taxes including surcharges and interests, for taxable years during 1996 and1997, against the herein petitioner. The deficiency is composed mostly of unpaid documentarystamp tax (DST) imposed on the petitioners agreement within its members. The deficiencydocumentary stamp tax assessment was imposed on petitioners health care agreement pursuant toSection 185 of the 1997 Tax Code.Petitioner protested before the CIR, but due to the latters inaction; it filed a petition for review before the Court of Tax Appeals. The CTA rendered a decision partially granting the petition for review. The petition was ordered to pay P53 M instead of the original 225 M.Furthermore, The CIR was ordered to desist from collecting DST.Respondent CIR appealed the decision before the Court of Appeals. According to him,the petitioners healthcare agreement is a contract of insurance and as such is subject to DSTunder 1997 Tax Code. The CA rendered a decision reversing the earlier decision of the CTA. Itordered the petitioner to pay 123M in DST.Petitioner appealed the decision before the Supreme Court which affirmed CAs decision.The SC held that the pertinent period was in the nature of non-life insurance which is a contractof indemnity. The Court further ruled that contract between company like petitioner and its beneficiaries under their plans are treated as insurance contract. Hence, petitioner filed a motionfor Reconsideration and asserts the following arguments:a. Under NIRC of 1997 DST is imposed only on an insurance company. Petitioner is an HMOand not an insurance company. b. Petitioner cites the Courts minute resolution of August 29, 2001 dismissing the appeal in Philippine National Bank (G.R. No. 148680). The petitioner contends that the dismissal of saidcase by minute resolution was a judgment on the merits and should apply the CAs ruling that ahealth care agreement is not an insurance contract. ISSUES: A. Whether or not the petitioner is a Health maintenance organization or an insurance companyand whether or not it is liable for Documentary stamp tax? B. Constitutional Issues1. Whether or not taxing the PHCRI will impair the right of the people to healthdevelopment guaranteed by sec 11 Article XIII and Sec 15 Art II of the presentConstitution?2. Whether or not this court is bound by a minute resolution in the case of CIR v.Philippine National Bank ruling that a healthcare agreement is not an insurancecontract and is thereby exempt from the payment of the DST? C. Statutory Construction Issues1. Whether or not it is within the intent of the legislature to impose DST on healthcareagreements of HMDS?2.Whether or not Section 185 of the NIRC 1997 which provides that DST..imposedon all parties of insurance or obligations..or obligations of the nature of indemnity for loss, damage, or liability.. should be liberally construed? RULING: A. Whether or not the petitioner is a Health maintenance organization or aninsurance company and whether or not it is liable for Documentary stamp tax? Under RA 7875 Petitioner is admittedly an HMO and thus not covered by theDocumentary stamp tax under Section 185 of National Internal Revenue Code of 1997. It is acardinal rule in statutory construction that no word, clause, sentence, provision or part of astatute shall be considered surplusage or superfluous, meaningless, void, insignificant. To thisend, a construction which renders every word operative is preferred over that which makessome words idle and nugatory. This principle is expressed in the maxim Ut magis valeatquam pereat, that is, the interpretation which gives effect to the whole of the statute- its everyword. From the language of Section 185, it is evident that two requisites must concur beforethe DST can apply, namely: (1) the document must be a policy of insurance or an obligation in the nature of indemnity and (2) the maker should be transacting the business of accident,fidelity, employers liability, plate, glass, steam boiler, burglar, elevator, automatic sprinkler or other branch of insurance.

B. CONSTITUTIONAL ISSUES 1. Right to Health and DevelopmentArt. II Sec. 15 states that, The State shall protect and promote the right to health of the people and instill health consciousness among them. On the other hand, Art. XIII Sec. 11states that, the State shall adopt an integrated and comprehensive approach to healthdevelopment which shall endeavor to make essential goods, health and other social servicesavailable to all the people at affordable cost. There shall be priority for the needs of theunderprivileged sick, elderly, disabled, women and children. The State shall endeavour to provide free medical care to paupers.It is a matter of common knowledge that there is a great social need for adequate medicalservices at a cost which the average wage earner can afford. HMOs arrange, organize andmanage health care treatment in the furtherance of providing a more efficient and inexpensivehealth care system made possible by quantity purchasing of services and economies of scale.They offer advantages over the pay-for-service system (wherein individuals are charged a feeeach time they receive medical services), including the ability to control costs. They protecttheir members from exposure to the high cost of hospitalization and other medical expenses brought about by fluctuating economy. Accordingly, they play an important role in society as partners of the State in achieving its constitutional mandate of providing its citizens withaffordable health services.The rate of DST under Section 185 is equivalent to 12.5% of the premium charged. Itsimposition will elevate the cost of health care services. This will in turn necessitate anincrease in the membership fees, resulting in either placing health services beyond the reachof the ordinary wage earner or driving the industry to the ground. At the end of the day,neither side wins, considering the indispensability of the services offered by the HMOs.2. Are Minute Resolutions are binding?The minute resolution is not a binding precedent. A decision and a minute resolutiondiffer significantly from one another. The Constitution expressly states in Section 14, ArticleVIII that, No decision shall be rendered by any court without expressing therein clearly anddistinctly the facts and the law on which it is based. This applies to decisions and not tominute resolutions. The latter is only signed by the clerk of court by authority of the justicesunlike in decisions. Minute resolutions do not require the certification of the Chief Justice andare not published in the Philippine Reports.Furthermore, the proviso of Section 4(3) of Article VIII refers to decisions and as a rule,the Court establishes doctrines or principles of law which constitute binding precedents in adecision duly signed by members of the Court and certified by the Chief Justice.Since petitioner was not a party in G.R. No. 148680 and that the petitioners liability for DST on its health care agreement was not the issue of G.R. No. 148680, the petitioner cannoteffectively invoke the minute resolution in that case in its favor. Nevertheless, this does notdiminish the fact that petitioners health care agreements are not subject to DST. C. STATUTORY CONSTRUCTION 1.Legislative IntentThere was no legislative intent to impose DST on health care agreements of HMOS, thiscan be inferred in the provisions legislative history. If it had been the intent of the legislatureto impose DST on health care agreements, it could be done so in clear and categorical terms.Considering that Section 185 did not change since 1904(except for the rate of tax) , it would be safe to say that healthcare agreements were never, at anytime, recognized as insurancecontracts or deemed engaged in the business of insurance within the context of the provision. 2.Construction of Sec. 185The Court held that Section 185 of the NIRC 1997 should be construed within its clear intent and not liberally.In construing this provision, the Court is guided by the elementary principle in statutoryconstruction that tax statutes should be strictly construed against the taxing authority. This is because taxation is a destructive power which interferes with the personal and property rightsof the people and takes from them a portion of their property for the support of thegovernment. Thus, tax law should not be extended by implication beyond its clear intent.The motion for reconsideration is granted.