Title
Sotoyama vs. Court of Tax Appeals
Case
G.R. No. 52221
Decision Date
Jan 30, 1987
Japanese tourists attempted to export large sums of foreign currency without authorization; forfeiture upheld as they failed to prove lawful importation.
foreign currencies
government forfeiture
circulars
A

Case Summary (G.R. No. 52221)

Factual Background: Seizure of Foreign Currencies

On January 11, 1976, confidential information reached the Bureau of Customs through Atty. Severino L. Dayao, Acting Chief, Administrative Services Division, which indicated that five or six Japanese departing via Flight CX900 would be bringing out a huge amount of foreign currencies. Mr. Edgardo O. Bautista, Officer-in-Charge of the MIA Flight Departure Area, acted immediately by instructing Customs Examiners Josefina Tolentino and Antonio Versoza to conduct a rigid and thorough search of the passengers checking in for that flight.

When petitioners checked their luggage, Examiner Josefina Tolentino, through Masayoshi Iwama who could understand and speak English, asked if they were carrying dollars. All answered in the negative. After inspection, the luggage produced the following foreign currencies: in the suitcase of Masayoshi Iwama, US$ 22,000.00; in the suitcase of Kaneo Sotoyama, US$ 6,000.00; in the suitcase of Fujico Nawa, US$ 2,000.00; and inside the pockets of a pair of trousers in Sotoyama’s suitcase, US$ 40,000.00.

A body search by customs police and special investigator Rodolfo Bautista yielded additional foreign currencies: in the hip pocket of Sotoyama’s coat, US$ 9,500.00 and HK 35.00; in Sotoyama’s shoes, US$ 20,000.00; in the hip pocket of Iwama’s coat, US$ 2,515.00 and 95,000.00; and in the coat of Mikio Nawa, US$ 2,600.00 and 71,500.00.

Petitioners were questioned as to the source of the currencies by Major Amistoso, Chief of Operations and Control, Intelligence Division, Philippine Air Force. Petitioners answered that the source was “Japan.” They were asked whether they had any permit or authorization from the Central Bank of the Philippines to bring out the foreign currencies. They could not produce any such permit or authorization.

Administrative Forfeiture Proceedings

Because petitioners could not produce Central Bank authorization, the foreign currencies were seized for violation of Section 3 of Central Bank Circular No. 265, in relation to Section 2530(f) of the Revised Tariff and Customs Code. Seizure Identification No. MIA-1350-76 was instituted against the seized monies. Petitioners were eventually allowed to leave the country because no criminal charges were filed. The record stated the reasons as: (one) the government had insufficient evidence on how the foreign currencies were obtained locally, and (two) for want of a legal basis, because Section 6 of CB Circular No. 265 (penal sanction) referred only to resident persons.

While criminal proceedings were not pursued, forfeiture proceedings continued. Several hearings were conducted in Seizure Identification No. MIA-1350-76, and petitioners were duly represented by counsel as claimants.

On March 16, 1976, the Collector of Customs, Airport Customshouse rendered a decision declaring the seized foreign currencies forfeited in favor of the government. Petitioners appealed to the Commissioner of Customs, who affirmed the decision. After their motion for reconsideration was denied, petitioners elevated the matter to the Court of Tax Appeals, docketed as CTA Case No. 2902. The Court of Tax Appeals affirmed the forfeiture on April 23, 1979. Petitioners then filed a motion for reconsideration on June 8, 1979, and a supplemental motion for reconsideration and/or new trial on June 27, 1979. Both were denied by resolution dated November 20, 1979.

Proceedings Before the Court of Tax Appeals and Procedural Issues Raised

The Court of Tax Appeals decision was affirmed against petitioners in CTA Case No. 2902. Petitioners subsequently sought reconsideration and/or new trial, asserting grounds that the Court of Tax Appeals rejected. The petition before the Supreme Court challenged the denial of these motions and the underlying forfeiture.

A decision penned by then Chairman of the Second Division, retired Associate Justice Antonio P. Barredo, was promulgated on October 30, 1981, but before it could attain finality the Second Division issued a resolution on November 11, 1981 recalling and resubmitting the decision for further deliberation. After multiple filings and resolutions during the pendency, the Second Division resolved, shortly before the 1986 Christmas recess, to refer the case to the Court en banc.

The Parties’ Contentions Before the Supreme Court

Petitioners contested the forfeiture on two primary grounds. First, they argued that the forfeiture basis—paragraph 3 of CB Circular No. 265—had allegedly been repealed by CB Circular Nos. 270 and 534. Second, they contended that the government failed to show by competent proof that the source of the foreign currencies was the Philippines, in light of petitioners’ claim that the currencies had been brought in by them from Japan.

Petitioners further alleged grave abuse of discretion on the part of the Court of Tax Appeals in denying their motion for reconsideration and/or new trial.

Applicable Central Bank Circulars and Their Effect

The Court reviewed the sequence of Central Bank circulars and rejected petitioners’ contention of repeal. CB Circular No. 265 was issued on November 20, 1968. Under paragraph 3, it provided that “No person shall take out or export from the Philippines foreign currency or any foreign exchange except as otherwise authorized by law.” Paragraph 6 subjected violations to penal sanctions under the Central Bank Law, referring to resident persons. Its implementing rules were embodied in CB Circular No. 266, issued on November 26, 1968, which required departing residents and temporary visitors to accomplish and exhibit a Currency Declaration on CB Form No. 303 and to surrender the declaration upon departure.

The Court emphasized that under CB Circular No. 266, temporary visitors were allowed to carry foreign exchange declared in their currency declaration, but they were prohibited from taking out foreign exchange in excess of that amount and were required to submit the declaration upon departure. The circular’s rules also allowed Central Bank agents to secure assistance of customs authorities for searching a suspect’s person and luggage when there were reasonable grounds to believe foreign currency or exchange was being brought into or out of the Philippines in violation of Central Bank regulations.

The Court then addressed CB Circular No. 270, issued on April 16, 1969, which revoked CB Circular No. 266 “in toto” and directed that “henceforth, no currency declaration of any kind shall be required either from outgoing or incoming passengers.” The Court held that this did not repeal CB Circular No. 265. Instead, it eliminated the currency declaration requirement while leaving intact the prohibition in paragraph 3 against taking out or exporting foreign currency except as otherwise authorized by law.

The Court also discussed CB Circular No. 534, issued on July 19, 1976, which reaffirmed a general prohibition against taking or transmitting foreign exchange out of the Philippines unless specifically authorized by the Central Bank or allowed under existing international agreement or Central Bank regulations. It further stated that the prohibition did not apply to tourist and non-resident temporary visitors who were taking out their own foreign exchange brought in by them. The Court, however, stressed that the incident occurred on January 11, 1976, when CB Circular No. 265 was still in full force, and CB Circular No. 534 was issued only later, after the incident.

Even assuming CB Circular No. 534 could apply, the Court held the result would not change. It explained that the exception for tourists and non-resident temporary visitors did not remove the need for competent proof that the foreign exchange being taken out was the tourist’s own and was brought into the country. On the facts, petitioners could not show they had Central Bank authorization.

Forfeiture Under CB Circular No. 265 and Section 2530(f)

The Court treated petitioners’ inability to present any permit or authorization from the Central Bank as creating a prima facie basis for seizure and confiscation under Section 3 of CB Circular No. 265, in relation to Section 2530(f) of the Revised Tariff and Customs Code. That provision subjected to forfeiture any article the exportation of which was effected or attempted contrary to law, among other objects.

Thus, the Court held petitioners could not successfully rely on CB Circular No. 534, either because it was issued after the incident or because, in any event, the exception still required proof regarding the nature and origin of the foreign exchange being taken out.

Petitioners’ Claim of Source from Japan and the Evidentiary Issue

On the second contention, the Court assessed whether petitioners had discharged their evidentiary burden to support their claim that the currencies were brought in from Japan. It underscored that petitioners were not physically present at the proceedings but were represented by counsel at all stages of the seizure proceedings. The Court concluded that petitioners therefore had ample opportunity to present evidence substantiating their claim. Petitioners, however, relied solely on the statement given to Major Amistoso that the currencies came from Japan.

The Court held that such information could not be accorded evidentiary value because the testimony of Major Amistoso regarding that statement was hearsay. Consequently, petitioners failed to discharge the statutory burden of proof placed on the claimant in forfeiture proceedings. The Court cited Section 2535 of the Revised Tariff and Customs Code, which provides that in seizure and/or forfeiture proceedings under customs laws, the burden of proof lies upon the claimant, subject to the requirement that probable cause must first be shown for institution of the proceedings and that the seizure was made under the circumstances and manner described in the preceding sections.

The Court concluded that, up to the time the case was pending before the Cou

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