G.R. No. 168771; July 25, 2012
Roberto Dipad and Sandra Dipad, Petitioners, vs. Spouses Rolando Olivan and Brigida Olivan, and Rubio Guijon Madrigallo, Respondents.

FACTS

Petitioners Roberto and Sandra Dipad filed a civil action for damages against respondents following a vehicular collision. During trial before the Municipal Trial Court (MTC), Roberto Dipad testified that he suffered lost income of P40,000 for three months due to the unavailability of his vehicle for his buy-and-sell business. On cross-examination, respondents’ counsel required him to produce his personal copies of his Income Tax Returns (ITRs) for 2001 to 2003. Dipad objected, invoking confidentiality under the National Internal Revenue Code (NIRC) and claiming the demand was a fishing expedition and incriminatory.
The MTC, through Judge Marvel C. Clavecilla, ordered the production of the ITRs. The Dipads filed a Petition for Certiorari and Prohibition under Rule 65 before the Regional Trial Court (RTC), arguing the MTC order constituted grave abuse of discretion for violating the confidentiality of tax returns. The RTC dismissed the petition, ruling that any error committed by the MTC was an error of judgment correctible by ordinary appeal, not by certiorari. The Dipads elevated the case to the Supreme Court.

ISSUE

Whether the RTC erred in dismissing the Rule 65 petition, and whether the MTC committed grave abuse of discretion in ordering the production of the petitioner’s personal copies of his ITRs.

RULING

The Supreme Court denied the petition, affirming the RTC. The Court held that the RTC correctly dismissed the certiorari petition as an improper remedy. For a writ of certiorari to issue, the tribunal must have acted without or in excess of jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction. Grave abuse of discretion implies a capricious and whimsical exercise of judgment equivalent to lack of jurisdiction. Here, the MTC’s directive to produce the ITRs was a discretionary act incident to its authority to control the trial and ascertain the truth. Any error in its appreciation of the applicability of confidentiality laws was, at most, an error of judgment correctible by appeal, not certiorari.
On the substantive claim of confidentiality, the Court found the petitioners’ reliance on Section 71 of the NIRC and related commentaries misplaced. The provision cited pertains to the inspection of returns on file with the Bureau of Internal Revenue (BIR) and the prohibition on BIR officers from divulging trade secrets under Section 270. It does not establish an absolute privilege for a taxpayer’s personal copies of ITRs from discovery in a judicial proceeding where he himself has put his income in issue. By claiming lost income as an element of damages, the petitioner opened the door for the adverse party to test the veracity of that claim through relevant evidence, which includes his ITRs. The order for their production was thus a valid exercise of the court’s discretion to allow discovery of evidence pertinent to the matter in litigation.