(THE DISINI CASE) Jose Jesus M. Disini, JR., Rowena S. Disini, Lianne Ivy P. Medina, Janette Toral and Ernesto Sonido, JR., Petitioners vs. The Secretary of Justice, The Secretary of the Department of the Interior and Local Government, The Executive Director of the Information and Communications Technology Office, The Chief of the Philippine National Police, and The Director of the National Bureau of Investigation, Respondents

Jose Jesus M. Disini, JR., Rowena S. Disini, Lianne Ivy P. Medina, Janette Toral and Ernesto Sonido, JR., Petitioners

vs

The Secretary of Justice, The Secretary of the Department of the Interior and Local government, The Executive Director of the Information and Communications Technology Office, The Chief of the Philippine National Police, and The Director of the National Bureau of Investigation, Respondents.

(The Disini Case) GR No. 203335 11 February 2014


Facts:

These consolidated petitions seek to declare several provisions of Republic Act (RA) 10175, the Cybercrime Prevention Act of 2012, unconstitutional and void.

The cybercrime law aims to regulate access to and use of the cyberspace. The cyberspace is a boon to the need of a current generation for greater information and facility of communication. But all is not well with the system since it could not filter out a number of persons of ill will who would want to use cyberspace technology for mischiefs and crimes. One of them can, for instance, avail himself of the system to unjustly ruin the reputation of another or bully the latter by posting defamatory statements against him that people can read.

And because linking with the internet opens up a user to communication from others, the ill-motivated can use the cyberspace for committing theft by hacking into or surreptitiously accessing his bank account or credit card or defrauding him through false representations.

The wicked can use the cyberspace, too, for illicit trafficking in sex or for exposing to pornography guileless children who have access to the internet.

For these reasons, the government has a legitimate right to regulate the use of cyberspace and contain and punish wrongdoings. The government certainly has the duty and the right to prevent these tomfooleries from happening and punish their perpetrators, hence the Cybercrime Prevention Act.

But petitioners claim that the means adopted by the cybercrime law for regulating undesirable cyberspace activities violate certain of their constitutional rights.

Pending hearing and adjudication of the issues presented in these cases, on February 5, 2013, the Court extended the original 120-day temporary restraining order (TRO) that it earlier issued on October 9, 2012, enjoining respondent government agencies from implementing the cybercrime law until further orders.


ISSUES:

  1. The petitioners contend that Section 4(a)(1) fails to meet the strict scrutiny standard required of laws that interfere with the fundamental rights of the people. Is Section 4(a)(1) on Illegal Access unconstitutional?
  2.  Petitioners claim that Section 4(a)(3) suffers from overbreadth in that, while is seeks to discourage data interference, it intrudes into the area of protected speech and expression, creating a chilling and deterrent effect on these guaranteed freedoms.
  3. Petitioners claim that Section 4(a)(6) or cyber-squatting violates the equal protection clause in that, not being narrowly tailored, it will cause a user using his real name to suffer the same fate as those who use aliases or take the name of another in satire, parody, or any other literary device.
  4. Petitioners claim that Section 4(b)(3) violates the constitutional rights to due process and to privacy and correspondence, and transgresses the freedom of the press.
  5. Petitioners claim that cybersex violates the freedom of expression clause of the Constitution.
  6. Petitioners are wary that a person who merely doodles on paper and imagines a sexual abuse of a 16-year old is not criminally liable for producing child pornography but one who formulates the idea on his laptop would be.
  7. Is Section 4(c)(3) unconstitutional for penalizing the transmission of unsolicited commercial communications?
  8. Petitioners dispute the constitutionality of both the penal code provisions on libel as well as Section4(c)(4) of the Cybercrime Prevention Act on cyberlibel.
  9. Petitioners assail the constitutionality of Section 5 that renders criminally liable any person who wilfully abets or aids in the commission or attempts to commit any of the offenses enumerated as cybercrimes. It suffers from overbreadth, creating a chilling and deterrent effect on protected expression.
  10. Is Section 6 on the penalty of one degree higher constitutional?
  11. Is Section 7 on the prosecution under both the Revised Penal Code (RPC) and RA 10175 constitutional?
  12. Is Section 8 valid and constitutional?
  13. Is Section 12 on Real-Time collection of traffic data valid and constitutional?
  14. Is Section 13 on preservation of computer data valid and constitutional?
  15. Is Section 14 on disclosure of computer data valid and constitutional?
  16. Is Section 15 on search, seizure and examination of computer data valid and constitutional?
  17. Is Section 17 on destruction of computer data valid and constitutional?
  18. Is Section 19 on restricting or blocking access to computer data valid and constitutional?
  19. Is Section 20 on obstruction of justice valid and constitutional?
  20. Is Section 24 on Cybercrime Investigation and Coordinating Center (CICC) valid and constitutional?
  21. Is Section 26(a) on CICC’s power and functions valid and constitutional?

Ruling:

  1. No. The strict scrutiny standard, an American constitutional construct, is useful in determining the constitutionality of laws that tend to target a class of things or persons. According to this standard, a legislative classification that impermissibly interferes with the exercise of fundamental right or operates to the peculiar class disadvantage of a suspect class is presumed unconstitutional. The Court finds nothing in Section 4(a)(1) that calls for the application of the strict scrutiny standard since no fundamental freedom, like speech, is involved in punishing what is essentially a condemnable act – accessing the computer system of another without right. It is a universally condemnable act.
  2. Under the overbreadth doctrine, a proper governmental purpose, constitutionally subject to state regulation, may not be achieved by means that unnecessarily sweep its subject broadly, thereby invading the area of protected speech. Section 4(a)(3) does not encroach on these freedoms at all. It simply punishes what essentially is a form of vandalism, the act of wilfully destroying without right the things that belong to others, in this case their computer data, electronic document, or electronic data message. Such act has no connection to guaranteed freedoms. Ergo, there is no freedom to destroy other people’s computer systems and private documents. All penal laws, like the cybercrime law, have of course an inherent chilling effect, an in terrorem effect, or the fear of possible prosecution that hangs on the heads of citizens who are minded to step beyond the boundaries of what is proper. But to prevent the State from legislating criminal laws because they instil such kind of fear is to render the state powerless in addressing and penalizing socially harmful conduct.
  3. No, the challenge to the constitutionality of Section 4(a)(6) is baseless. The law is reasonable in penalizing the act of acquiring the domain name in bad faith to profit, mislead, destroy reputation, or deprive others who are not ill-motivated of the rightful opportunity of registering the same. It is the evil purpose for which one uses the name that the law condemns.
  4. No. In assessing the challenge that the State has impermissibly intruded into these zones of privacy, a court must determine whether a person has exhibited a reasonable expectation of privacy and, if so, whether that expectation has been violated by unreasonable government intrusion. The law punishes those who acquire or use identifying information without right, implicitly to cause damage. Petitioners fail to show how government effort to curb computer-related identity theft violates the right to privacy and correspondence as well as the right to due process. There is no fundamental right to acquire another’s personal right. The Court has defined intent to gain as an internal act which can be established through overt acts of the offender, and it may be presumed from the furtive taking of useful property pertaining to another, unless special circumstances reveal a different intent on the part of the perpetrator. As such, the press, whether in the quest of news reporting or social investigation, has nothing to fear since a special circumstance is present to negate intent to gain which is required by this Section.
  5. The Court will not declare Section 4(c)(1) unconstitutional where it stands a construction that makes it apply only to persons engaged in the business of maintaining, controlling, or operating, directly or indirectly, the lascivious exhibition of sexual organs or sexual activity with the aid of a computer system as Congress has intended.
  6. The constitutionality of Section 4(c)(3) is not successfully challenged. The law makes the penalty higher by one degree when the crime is committed in cyberspace. But no one can complain since the intensity or duration of penalty is a legislative prerogative and there is a rational basis for such higher penalty.
  7. Yes, because to prohibit the transmission of unsolicited ads would deny a person the right to read his emails, even unsolicited commercial ads addressed to him. Commercial speech is a separate category of speech which us not accorded the same level of protection as that given to other constitutionally guaranteed forms of expression but is nonetheless entitled to protection. The State cannot rob him of this right without violating the constitutionally guaranteed freedom of expression. Thus, unsolicited advertisements are legitimate forms of expression.
  8. Since the penal code and implicitly, the cybercrime law, mainly target libel against private persons, the Court recognizes that these laws imply a stricter standard of malice to convict the author of a defamatory statement where the offended party is a public figure. The elements of libel are: (a) the allegation of a discreditable act or condition concerning another; (b) publication of the charge; (c) identity of the person defamed; and (d) existence of malice.There is actual malice or malice in fact when the offender makes the defamatory statement with the knowledge that it is false or with reckless disregard of whether it was false or not. The reckless disregard standard used here required a high degree of awareness of probable falsity. There must be sufficient evidence to permit the conclusion that the accused in fact entertained serious doubts as to the truth of the statement he published. Gross or even extreme negligence is not sufficient to establish actual malice. The defense of absence of actual malice, even when the statement turns out to be false, is available where the offended party is a public official or a public figure. But, where the offended party is a private individual, the prosecution need not prove the presence of actual malice. For his defense, the accused must show that he has a justifiable reason for the defamatory statement even if it was in fact true.
  9. A governmental purpose, which seeks to regulate the use of cyberspace communication technology to protect a person’s reputation and peace of mind, cannot adopt means that will unnecessarily and broadly sweep, invading the area of protected freedoms. If such means are adopted, self-inhibition borne of fear of what sinister predicaments await internet users will suppress otherwise robust discussion of public issues. Democracy will be threatened and with it, all liberties. Penal laws should provide reasonably clear guidelines for law enforcement officials and triers of facts to prevent arbitrary and discriminatory enforcement. The terms “aiding or abetting” constitute broad sweep that generates chilling effect on those who express themselves through cyberspace posts, comments, and other messages. Hence, Section 5 of the cybercrime law that punishes “aiding or abetting” libel on the cyberspace is a nullity.
  10. Yes, because there exists a substantial distinction between crimes committed through the use of information and communication technology and similar crimes committed using other means. In using the technology in question, the offender often evades identification and is able to reach far more victims or cause greater harm.
  11. The Court resolves to leave the determination of the correct application of Section 7 that authorizes prosecution of the offender under both the Revised Penal Code and Republic Act 10175 to actual cases, with the exception of the crimes of:
      1. Online libel as to which, charging the offender under both Section 4(c)(4) of Republic Act 10175 and Article 353 of the Revised Penal Code constitutes a violation of the proscription against double jeopardy; as well as
      2. Child pornography committed online as to which, charging the offender under both Section 4(c)(2) of Republic Act 10175 and Republic Act 9775 or the Anti-Child Pornography Act of 2009 also constitutes a violation of the same proscription, and, in respect to these, is void and unconstitutional.
  12. Valid and constitutional, because the matter of fixing penalties for the commission of crimes is as a rule a legislative prerogative.
  13. Void and unconstitutional, because Section 12 does not permit law enforcement authorities to look into the contents of the messages and uncover the identities of the sender and the recipient. Thus, the authority that Section 12 gives law enforcement agencies is too sweeping and lacks restraint.
  14. Valid and constitutional, because the user ought to have kept a copy of that data when it crossed his computer if he was so minded. There was no undue deprivation of property since the data that service providers preserve on orders of law enforcement authorities are not made accessible to users by reasons of the issuance of such orders.
  15. Valid and constitutional, because what Section 14 envisions is merely the enforcement of a duly issued court warrant. Disclosure can be made only after judicial intervention.
  16. Valid and constitutional, because Section 15 merely enumerates the duties of law enforcement authorities that would ensure proper collection, preservation, and use of computer system or data that have been seized by virtue of a court warrant.
  17. Valid and constitutional, because it is unclear that the user has a demandable right to require the service provider to have that copy of data saved indefinitely for him in its storage system.
  18. Void and unconstitutional, because Section 19 not only precludes any judicial intervention but it also disregards jurisprudential guidelines established to determine the validity of restrictions on speech.
  19. Valid and constitutional insofar as it applies to the provisions of Chapter IV which are not struck down by the Court.
  20. and 21. Valid and constitutional, because cybercrime law is complete in itself when it directed the CICC to formulate and implement a national cybersecurity plan. The law gave sufficient standards for the CICC to follow when it provided a definition of cybersecurity.

 

PHILIPPINE STEEL COATING, CORP., VS. EDUARD QUINONES

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Philippine Steel Coating, Corp. vs. Eduard Quinones (G.R. No. 194533) April 19, 2017

Facts: A complaint for damages was filed by respondent Quinones (owner of Amianan Motors) against petitioner PhilSteel. Richard Lopez, a sales engineer of PhilSteel, offered Quinones their new product: primer-coated, long-span, rolled galvanized iron (G.I.) sheets. The latter showed interest but asked if the primer-coated sheets were compatible with the Guilder acrylic paint process used by Amianan Motors in the finishing of its assembled buses. Uncertain, Lopez referred the query to his immediate superior, Ferdinand Angbengco, PhilSteel’s sales manager.

Angbengco assured Quinones that the quality of their new product was superior to that of the non-primer coated G.I. sheets being used by the latter in his business. He further guaranteed that a laboratory test had in fact been conducted by PhilSteel, and that the results proved that the two products were compatible.

However, Quinones received several complaints from customers who had bought bus units, claiming that the paint or finish used on the purchased vehicles was breaking and peeling off. Quinones sent a letter-complaint to PhilSteel claiming that the damage to the vehicles was attributable to the hidden defects of the primer-coated sheets and/or their incompatibility with the Guilder acrylic paint process used by the Amianan Motors. Because of the barrage of complaints, Quinones was forced to repair the damaged buses.

PhilSteel counters that that the breaking and peeling off of the paint was caused by the erroneous painting application done by Quinones.

The RTC rendered a Decision in favor of Quinones and ordered PhilSteel to pay damages. The trial court concluded that the paint blistering and peeling off were due to the incompatibility of the painting process with the primer-coated G.I. sheets. It also found out that the assurance made by Angbengco constituted an express warranty under Article 1546.

The CA affirmed the ruling of the RTC in toto.

Issues:

  1. Were the oral statements made by Angbengco a case of express warranty under Article 1546 of the Civil Code that may be invoked to warrant payment of damages?
  2. Is non-payment of price justified on allegations of breach of warranty?

Ruling:

  1. Yes. Article 1546 of the Civil Code provides that any affirmation of fact or any promise by the seller relating to the thing is an express warranty if the natural tendency of such affirmation or promise if to induce the buyer to purchase the same, and if the buyer purchases the thing relying thereon. As held in Carrascoso, Jr. vs. CA, the following requisites must be established in order to prove that there is an express warranty in a contract of sale: (1) the express warranty must be an affirmation of fact or any promise by the seller relating to the subject matter of the sale; (2) the natural effect of the affirmation or promise is to induce the buyer to purchase the thing; and (3) the buyer purchases the thing relying on that affirmation or promise. Here, the oral statements of Angbengco created an express warranty. hey were positive affirmations of fact that the buyer relied on, and that induced him to buy petitioner’s primer-coated G.I. sheets. Seller is expert in the eyes of the buyer.
  2. Yes, the non-payment of the unpaid purchase price was justified since a breach of warranty was proven. Quinones has opted for a reduction in price or non-payment of the unpaid balance of the purchase price. According to Article 1599, Civil Code, recoupment refers to the reduction of extinction of the price of the same item, unit, transaction or contract upon which a plaintiff’s claim is founded.

MEDICARD PHILIPPINES, INC VS. CIR

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MEDICARD PHILIPPINES, INC VS. Commissioner of Internal Revenue (GR NO. 222743) April 5, 2017

FACTS: MEDICARD is a health maintenance organization (HMO) that provides prepaid health and medical insurance coverage to its clients. Individuals enrolled in its health care programs pay an annual membership fee and are entitled to various preventive, diagnostic and curative medical services provided by duly licensed physicians, specialists, and other professional technical staff participating in the group practice health delivery system at a hospital or clinic owned, operated or accredited by it.

MEDICARD filed it first, second, and third quarterly VAT Returns through Electronic Filing and Payment System (EFPS) on April 20, July 25, and October 25, 2006, respectively, and its fourth quarterly VAT Return on January 25, 2007.

Upon finding some discrepancies between MEDICARD’s Income Tax Returns (ITR) and VAT Returns, the CIR issued a Letter Notice (LN) dated September 20, 2007. Subsequently, the CIR also issued a Preliminary Assessment Notice (PAN) against MEDICARD for deficiency VAT. MEDICARD received CIR’s FAN dated December 10, 2007 for allegedly deficiency VAT for taxable year 2006 including penalties.

MEDICARD filed a protest arguing, among others, that that the services it render is not limited merely to arranging for the provision of medical and/or hospitalization services but include actual and direct rendition of medical and laboratory services. On June 19, 2009, MEDICARD received CIR’s Final Decision denying its protest. The petitioner MEDICARD proceeded to file a petition for review before the CTA.

The CTA Division held that the determination of deficiency VAT is not limited to the issuance of Letter of Authority (LOA) alone and that in lieu of an LOA, an LN was issued to MEDICARD informing it if the discrepancies between its ITRs and VAT Returns and this procedure is authorized under Revenue Memorandum Order (RMO) No. 30-2003 and 42-2003. Also, the amounts that MEDICARD earmarked and eventually paid to doctors, hospitals and clinics cannot be excluded from the computation of its gross receipts because the act of earmarking or allocation is by itself an act of ownership and management over the funds by MEDICARD which is beyond the contemplation of RR No. 4-2007. Furthermore, MEDICARD’s earnings from its clinics and laboratory facilities cannot be excluded from its gross receipts because the operation of these clinics and laboratory is merely an incident to MEDICARD’s line of business as an HMO.

MEDICARD filed a Motion for Reconsideration but it was denied. Petitioner elevated the matter to the CTA en banc.

CTA en banc partially granted the petition only insofar as 10% VAT rate for January 2006 is concerned but sustained the findings of the CTA Division.

ISSUES:

  1. Is the absence of the Letter of Authority fatal?
  2. Should the amounts that MEDICARD earmarked and eventually paid to the medical service providers still form part of its gross receipts for VAT purposes?

RULING:

  1. Yes. The absence of the LOA violated MEDICARD’s right to due process. An LOA is the authority given to the appropriate revenue officer assigned to perform assessment functions. Under the NLRC, unless authorized by the CIR himself or by his duly authorized representative, through an LOA, an examination of the taxpayer cannot ordinarily be undertaken. An LOA is premised on the fact that the examination of a taxpayer who has already filed his tax returns is a power that statutorily belongs only to the CIR himself or his duly authorized representatives. In this case, there is no dispute that no LOA was issued prior to the issuance of a PAN and FAN against MEDICARD. Therefore, no LOA was also served on MEDICARD.
  2. No. The VAT is a tax on the value added by the performance of the service by the taxpayer. It is, thus, this service and the value charged thereof by the taxpayer that is taxable under the NLRC.

 

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