G.R. No. L-4288 November 20, 1952
THE PEOPLE OF THE PHILIPPINES, plaintiff-appellee, vs. JEAN ARNAULT, defendant-appellant.

FACTS

Jean L. Arnault was charged in the Court of First Instance of Manila with violating Section 55 of the National Internal Revenue Code, as amplified by Section 206 of Revenue Regulations No. 2, in relation to Section 121 of the same Code. The information alleged that on or about May 29, 1950, Arnault, as Vice-President of the North Manila Development Company, Inc. and the Associated Estates, Inc., and as attorney-in-fact for non-resident alien Ernest H. Burt, received for Burt a net profit of P1,480,000 from the resale of two haciendas to the Rural Progress Administration. Arnault, having receipt, custody, control, or disposal of this profit, willfully failed to pay the corresponding income tax of P1,089,270 despite repeated demands. After five prosecution witnesses testified, Arnault, with the prosecution’s consent, withdrew his not guilty plea, and upon re-arraignment, pleaded guilty. The trial court sentenced him to pay a fine of P1,000 with subsidiary imprisonment in case of insolvency, to indemnify the government P1,089,270 with subsidiary imprisonment in case of insolvency, and to pay costs. Arnault appealed, contesting the indemnity and subsidiary imprisonment, and also attacking the information’s sufficiency and the applicability of the cited legal provisions.

ISSUE

1. Whether the information was fatally defective for citing an inapplicable provision of law (Section 121 on gift taxes instead of Section 73 on income tax) and for allegedly lacking details on the date the profit was earned.
2. Whether Section 55 of the National Internal Revenue Code was applicable to Arnault.
3. Whether holding Arnault criminally liable, as an agent in receipt of the profit, constituted an unconstitutional delegation of legislative power to the Collector of Internal Revenue.
4. Whether the trial court could validly impose civil indemnity for the unpaid tax as part of the criminal sentence.

RULING

1. The information was not fatally defective. The real nature of the crime is determined by the facts alleged, not by the title or the specific provision cited. The information clearly alleged the profit from the sale, the income tax due, and the failure to pay it, sufficiently apprising Arnault of the charge, which he admitted by pleading guilty. The objection regarding the lack of a specific date when the profit was earned was too technical; from the allegations, it could be inferred the sale and receipt occurred before May 29, 1950, and the demand for payment was made before that date, which was sufficient.
2. Section 55 of the National Internal Revenue Code was applicable. A careful examination of the section shows its intent is that all gains, profits, or income of a taxable class shall be assessed with the corresponding tax, and the tax may be paid by the owner or the person having receipt, custody, control, or disposal of the same. Arnault personally received the profit for Burt and had such control, making him liable under the law.
3. There was no unconstitutional delegation of legislative power. The Legislature declared who is responsible for payment (the owner or the agent in receipt of the income). The Collector of Internal Revenue merely executes the law by determining, based on the circumstances, which of the two should and could have paid the tax. In this case, Burt was a non-resident not in the Philippines, while Arnault had the profit in his hands. Selecting Arnault for prosecution was an enforcement of the law, not an exercise of legislative power.
4. The trial court erred in imposing civil indemnity for the unpaid tax as part of the criminal sentence. Unless expressly provided by law, a conviction for failure to pay a tax does not include payment of indemnity to the State for the tax not paid. The civil obligation to pay the tax precedes criminal liability, and the government must avail itself of separate civil remedies under the Internal Revenue Code to collect the tax. Therefore, that portion of the decision ordering indemnity of P1,089,270 and subsidiary imprisonment for its non-payment was deleted.
MODIFIED DECISION:
Considering the large amount of tax delinquency, the penalty was increased. In addition to the fine of P1,000 with subsidiary imprisonment in case of insolvency, Arnault was sentenced to three (3) months imprisonment, with the accessories of the law. The portion of the trial court’s decision regarding payment of indemnity and subsidiary imprisonment for its non-payment was suppressed. The decision was affirmed in all other respects, with costs.