1

G.R. No. L-59431 July 25, 1984

ANTERO M. SISON, JR., petitioner,
vs.
RUBEN B. ANCHETA, Acting Commissioner, Bureau of Internal Revenue; ROMULO VILLA, Deputy Commissioner,
Bureau of Internal Revenue; TOMAS TOLEDO Deputy Commissioner, Bureau of Internal Revenue; MANUEL ALBA,
Minister of Budget, FRANCISCO TANTUICO, Chairman, Commissioner on Audit, and CESAR E. A. VIRATA, Minister of
Finance, respondents.
The success of the challenge posed in this suit for declaratory relief or prohibition proceeding on the validity of
Section I of Batas Pambansa Blg. 135 depends upon a showing of its constitutional infirmity. The assailed provision
further amends Section 21 of the National Internal Revenue Code of 1977, which provides for rates of tax on citizens or
residents on (a) taxable compensation income, (b) taxable net income, (c) royalties, prizes, and other winnings, (d)
interest from bank deposits and yield or any other monetary benefit from deposit substitutes and from trust fund and
similar arrangements, (e) dividends and share of individual partner in the net profits of taxable partnership, (f) adjusted
gross income. Petitioner as taxpayer alleges that by virtue thereof, "he would be unduly discriminated against by the
imposition of higher rates of tax upon his income arising from the exercise of his profession vis-a-vis those which are
imposed upon fixed income or salaried individual taxpayers. He characterizes the above sction as arbitrary amounting
to class legislation, oppressive and capricious in character For petitioner, therefore, there is a transgression of both the
equal protection and due process clauses

of the Constitution as well as of the rule requiring uniformity in taxation.
The Court, in a resolution of January 26, 1982, required respondents to file an answer within 10 days from notice. Such
an answer, after two extensions were granted the Office of the Solicitor General, was filed on May 28, 1982. The facts
as alleged were admitted but not the allegations which to their mind are "mere arguments, opinions or conclusions on
the part of the petitioner, the truth [for them] being those stated [in their] Special and Affirmative Defenses."
9
The
answer then affirmed: "Batas Pambansa Big. 135 is a valid exercise of the State's power to tax. The authorities and
cases cited while correctly quoted or paraghraph do not support petitioner's stand." The prayer is for the dismissal of
the petition for lack of merit.
This Court finds such a plea more than justified. The petition must be dismissed.
1. It is manifest that the field of state activity has assumed a much wider scope, The reason was so clearly set forth by
retired Chief Justice Makalintal thus: "The areas which used to be left to private enterprise and initiative and which the
government was called upon to enter optionally, and only 'because it was better equipped to administer for the public
welfare than is any private individual or group of individuals,' continue to lose their well-defined boundaries and to be
absorbed within activities that the government must undertake in its sovereign capacity if it is to meet the increasing
social challenges of the times." Hence the need for more revenues. The power to tax, an inherent prerogative, has to be
availed of to assure the performance of vital state functions. It is the source of the bulk of public funds. To praphrase a
recent decision, taxes being the lifeblood of the government, their prompt and certain availability is of the essence.
2. The power to tax moreover, to borrow from Justice Malcolm, "is an attribute of sovereignty. It is the strongest of all
the powers of of government." It is, of course, to be admitted that for all its plenitude 'the power to tax is not
unconfined. There are restrictions. The Constitution sets forth such limits . Adversely affecting as it does properly rights,
both the due process and equal protection clauses inay properly be invoked, all petitioner does, to invalidate in
appropriate cases a revenue measure. if it were otherwise, there would -be truth to the 1803 dictum of Chief Justice
Marshall that "the power to tax involves the power to destroy." In a separate opinion in Graves v. New York, Justice
Frankfurter, after referring to it as an 1, unfortunate remark characterized it as "a flourish of rhetoric [attributable to]
the intellectual fashion of the times following] a free use of absolutes." This is merely to emphasize that it is riot and
there cannot be such a constitutional mandate. Justice Frankfurter could rightfully conclude: "The web of unreality
spun from Marshall's famous dictum was brushed away by one stroke of Mr. Justice Holmess pen: 'The power to tax is
not the power to destroy while this Court sits." So it is in the Philippines.
3. This Court then is left with no choice. The Constitution as the fundamental law overrides any legislative or executive,
act that runs counter to it. In any case therefore where it can be demonstrated that the challenged statutory provision
as petitioner here alleges fails to abide by its command, then this Court must so declare and adjudge it null. The
injury thus is centered on the question of whether the imposition of a higher tax rate on taxable net income derived
from business or profession than on compensation is constitutionally infirm.
4, The difficulty confronting petitioner is thus apparent. He alleges arbitrariness. A mere allegation, as here. does not
suffice. There must be a factual foundation of such unconstitutional taint. Considering that petitioner here would
2

condemn such a provision as void or its face, he has not made out a case. This is merely to adhere to the authoritative
doctrine that were the due process and equal protection clauses are invoked, considering that they arc not fixed rules
but rather broad standards, there is a need for of such persuasive character as would lead to such a conclusion. Absent
such a showing, the presumption of validity must prevail.
5. It is undoubted that the due process clause may be invoked where a taxing statute is so arbitrary that it finds no
support in the Constitution. An obvious example is where it can be shown to amount to the confiscation of property.
That would be a clear abuse of power. It then becomes the duty of this Court to say that such an arbitrary act
amounted to the exercise of an authority not conferred. That properly calls for the application of the Holmes dictum. It
has also been held that where the assailed tax measure is beyond the jurisdiction of the state, or is not for a public
purpose, or, in case of a retroactive statute is so harsh and unreasonable, it is subject to attack on due process grounds.
6. Now for equal protection. The applicable standard to avoid the charge that there is a denial of this constitutional
mandate whether the assailed act is in the exercise of the lice power or the power of eminent domain is to
demonstrated that the governmental act assailed, far from being inspired by the attainment of the common weal was
prompted by the spirit of hostility, or at the very least, discrimination that finds no support in reason. It suffices then
that the laws operate equally and uniformly on all persons under similar circumstances or that all persons must be
treated in the same manner, the conditions not being different, both in the privileges conferred and the liabilities
imposed. Favoritism and undue preference cannot be allowed. For the principle is that equal protection and security
shall be given to every person under circumtances which if not Identical are analogous. If law be looked upon in terms
of burden or charges, those that fall within a class should be treated in the same fashion, whatever restrictions cast on
some in the group equally binding on the rest."
20
That same formulation applies as well to taxation measures. The
equal protection clause is, of course, inspired by the noble concept of approximating the Ideal of the laws benefits
being available to all and the affairs of men being governed by that serene and impartial uniformity, which is of the very
essence of the Idea of law. There is, however, wisdom, as well as realism in these words of Justice Frankfurter: "The
equality at which the 'equal protection' clause aims is not a disembodied equality. The Fourteenth Amendment enjoins
'the equal protection of the laws,' and laws are not abstract propositions. They do not relate to abstract units A, B and
C, but are expressions of policy arising out of specific difficulties, address to the attainment of specific ends by the use
of specific remedies. The Constitution does not require things which are different in fact or opinion to be treated in law
as though they were the same."
21
Hence the constant reiteration of the view that classification if rational in character is
allowable. As a matter of fact, in a leading case of Lutz V. Araneta, this Court, through Justice J.B.L. Reyes, went so far as
to hold "at any rate, it is inherent in the power to tax that a state be free to select the subjects of taxation, and it has
been repeatedly held that 'inequalities which result from a singling out of one particular class for taxation, or
exemption infringe no constitutional limitation.'"
7. Petitioner likewise invoked the kindred concept of uniformity. According to the Constitution: "The rule of taxation
shag be uniform and equitable." This requirement is met according to Justice Laurel in Philippine Trust Company v.
Yatco,

decided in 1940, when the tax "operates with the same force and effect in every place where the subject may be
found." He likewise added: "The rule of uniformity does not call for perfect uniformity or perfect equality, because this
is hardly attainable."
27
The problem of classification did not present itself in that case. It did not arise until nine years
later, when the Supreme Court held: "Equality and uniformity in taxation means that all taxable articles or kinds of
property of the same class shall be taxed at the same rate. The taxing power has the authority to make reasonable and
natural classifications for purposes of taxation, ... . As clarified by Justice Tuason, where "the differentiation"
complained of "conforms to the practical dictates of justice and equity" it "is not discriminatory within the meaning of
this clause and is therefore uniform." There is quite a similarity then to the standard of equal protection for all that is
required is that the tax "applies equally to all persons, firms and corporations placed in similar situation."
8. Further on this point. Apparently, what misled petitioner is his failure to take into consideration the distinction
between a tax rate and a tax base. There is no legal objection to a broader tax base or taxable income by eliminating all
deductible items and at the same time reducing the applicable tax rate. Taxpayers may be classified into different
categories. To repeat, it. is enough that the classification must rest upon substantial distinctions that make real
differences. In the case of the gross income taxation embodied in Batas Pambansa Blg. 135, the, discernible basis of
classification is the susceptibility of the income to the application of generalized rules removing all deductible items for
all taxpayers within the class and fixing a set of reduced tax rates to be applied to all of them. Taxpayers who are
recipients of compensation income are set apart as a class. As there is practically no overhead expense, these taxpayers
are e not entitled to make deductions for income tax purposes because they are in the same situation more or less. On
the other hand, in the case of professionals in the practice of their calling and businessmen, there is no uniformity in
the costs or expenses necessary to produce their income. It would not be just then to disregard the disparities by giving
all of them zero deduction and indiscriminately impose on all alike the same tax rates on the basis of gross income.
There is ample justification then for the Batasang Pambansa to adopt the gross system of income taxation to
3

compensation income, while continuing the system of net income taxation as regards professional and business
income.
9. Nothing can be clearer, therefore, than that the petition is without merit, considering the (1) lack of factual
foundation to show the arbitrary character of the assailed provision; (2) the force of controlling doctrines on due
process, equal protection, and uniformity in taxation and (3) the reasonableness of the distinction between
compensation and taxable net income of professionals and businessman certainly not a suspect classification,
WHEREFORE, the petition is dismissed. Costs against petitioner.










G.R. No. L-31156 February 27, 1976
PEPSI-COLA BOTTLING COMPANY OF THE PHILIPPINES, INC., plaintiff-appellant,
vs.
MUNICIPALITY OF TANAUAN, LEYTE, THE MUNICIPAL MAYOR, ET AL., defendant appellees.
This is an appeal from the decision of the Court of First Instance of Leyte in its Civil Case No. 3294, which was certified
to Us by the Court of Appeals on October 6, 1969, as involving only pure questions of law, challenging the power of
taxation delegated to municipalities under the Local Autonomy Act (Republic Act No. 2264, as amended, June 19,
1959).
On February 14, 1963, the plaintiff-appellant, Pepsi-Cola Bottling Company of the Philippines, Inc., commenced a
complaint with preliminary injunction before the Court of First Instance of Leyte for that court to declare Section 2 of
Republic Act No. 2264.
1
otherwise known as the Local Autonomy Act, unconstitutional as an undue delegation of taxing
authority as well as to declare Ordinances Nos. 23 and 27, series of 1962, of the municipality of Tanauan, Leyte, null
and void.
On July 23, 1963, the parties entered into a Stipulation of Facts, the material portions of which state that, first, both
Ordinances Nos. 23 and 27 embrace or cover the same subject matter and the production tax rates imposed therein are
practically the same, and second, that on January 17, 1963, the acting Municipal Treasurer of Tanauan, Leyte, as per his
letter addressed to the Manager of the Pepsi-Cola Bottling Plant in said municipality, sought to enforce compliance by
the latter of the provisions of said Ordinance No. 27, series of 1962.
Municipal Ordinance No. 23, of Tanauan, Leyte, which was approved on September 25, 1962, levies and collects "from
soft drinks producers and manufacturers a tai of one-sixteenth (1/16) of a centavo for every bottle of soft drink
corked." For the purpose of computing the taxes due, the person, firm, company or corporation producing soft drinks
shall submit to the Municipal Treasurer a monthly report, of the total number of bottles produced and corked during
the month.
On the other hand, Municipal Ordinance No. 27, which was approved on October 28, 1962, levies and collects "on soft
drinks produced or manufactured within the territorial jurisdiction of this municipality a tax of ONE CENTAVO (P0.01)
4

on each gallon (128 fluid ounces, U.S.) of volume capacity." For the purpose of computing the taxes due, the person,
fun company, partnership, corporation or plant producing soft drinks shall submit to the Municipal Treasurer a monthly
report of the total number of gallons produced or manufactured during the month.
The tax imposed in both Ordinances Nos. 23 and 27 is denominated as "municipal production tax.'
On October 7, 1963, the Court of First Instance of Leyte rendered judgment "dismissing the complaint and upholding
the constitutionality of [Section 2, Republic Act No. 2264] declaring Ordinance Nos. 23 and 27 legal and constitutional;
ordering the plaintiff to pay the taxes due under the oft the said Ordinances; and to pay the costs."
From this judgment, the plaintiff Pepsi-Cola Bottling Company appealed to the Court of Appeals, which, in turn,
elevated the case to Us pursuant to Section 31 of the Judiciary Act of 1948, as amended.
There are three capital questions raised in this appeal:
1. Is Section 2, Republic Act No. 2264 an undue delegation of power, confiscatory and oppressive?
2. Do Ordinances Nos. 23 and 27 constitute double taxation and impose percentage or specific taxes?
3. Are Ordinances Nos. 23 and 27 unjust and unfair?
1. The power of taxation is an essential and inherent attribute of sovereignty, belonging as a matter of right to every
independent government, without being expressly conferred by the people. It is a power that is purely legislative and
which the central legislative body cannot delegate either to the executive or judicial department of the government
without infringing upon the theory of separation of powers. The exception, however, lies in the case of municipal
corporations, to which, said theory does not apply. Legislative powers may be delegated to local governments in
respect of matters of local concern.
7
This is sanctioned by immemorial practice. By necessary implication, the
legislative power to create political corporations for purposes of local self-government carries with it the power to
confer on such local governmental agencies the power to tax. Under the New Constitution, local governments are
granted the autonomous authority to create their own sources of revenue and to levy taxes. Section 5, Article XI
provides: "Each local government unit shall have the power to create its sources of revenue and to levy taxes, subject
to such limitations as may be provided by law." Withal, it cannot be said that Section 2 of Republic Act No. 2264
emanated from beyond the sphere of the legislative power to enact and vest in local governments the power of local
taxation.
The plenary nature of the taxing power thus delegated, contrary to plaintiff-appellant's pretense, would not suffice to
invalidate the said law as confiscatory and oppressive. In delegating the authority, the State is not limited 6 the exact
measure of that which is exercised by itself. When it is said that the taxing power may be delegated to municipalities
and the like, it is meant that there may be delegated such measure of power to impose and collect taxes as the
legislature may deem expedient. Thus, municipalities may be permitted to tax subjects which for reasons of public
policy the State has not deemed wise to tax for more general purposes.
10
This is not to say though that the
constitutional injunction against deprivation of property without due process of law may be passed over under the
guise of the taxing power, except when the taking of the property is in the lawful exercise of the taxing power, as when
(1) the tax is for a public purpose; (2) the rule on uniformity of taxation is observed; (3) either the person or property
taxed is within the jurisdiction of the government levying the tax; and (4) in the assessment and collection of certain
kinds of taxes notice and opportunity for hearing are provided. Due process is usually violated where the tax imposed is
for a private as distinguished from a public purpose; a tax is imposed on property outside the State, i.e., extraterritorial
taxation; and arbitrary or oppressive methods are used in assessing and collecting taxes. But, a tax does not violate the
due process clause, as applied to a particular taxpayer, although the purpose of the tax will result in an injury rather
than a benefit to such taxpayer. Due process does not require that the property subject to the tax or the amount of tax
to be raised should be determined by judicial inquiry, and a notice and hearing as to the amount of the tax and the
manner in which it shall be apportioned are generally not necessary to due process of law.
There is no validity to the assertion that the delegated authority can be declared unconstitutional on the theory of
double taxation. It must be observed that the delegating authority specifies the limitations and enumerates the taxes
over which local taxation may not be exercised. The reason is that the State has exclusively reserved the same for its
own prerogative. Moreover, double taxation, in general, is not forbidden by our fundamental law, since We have not
adopted as part thereof the injunction against double taxation found in the Constitution of the United States and some
states of the Union. Double taxation becomes obnoxious only where the taxpayer is taxed twice for the benefit of the
same governmental entity or by the same jurisdiction for the same purpose,
16
but not in a case where one tax is
imposed by the State and the other by the city or municipality.
5

2. The plaintiff-appellant submits that Ordinance No. 23 and 27 constitute double taxation, because these two
ordinances cover the same subject matter and impose practically the same tax rate. The thesis proceeds from its
assumption that both ordinances are valid and legally enforceable. This is not so. As earlier quoted, Ordinance No. 23,
which was approved on September 25, 1962, levies or collects from soft drinks producers or manufacturers a tax of
one-sixteen (1/16) of a centavo for .every bottle corked, irrespective of the volume contents of the bottle used. When it
was discovered that the producer or manufacturer could increase the volume contents of the bottle and still pay the
same tax rate, the Municipality of Tanauan enacted Ordinance No. 27, approved on October 28, 1962, imposing a tax of
one centavo (P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity. The difference between the two
ordinances clearly lies in the tax rate of the soft drinks produced: in Ordinance No. 23, it was 1/16 of a centavo for
every bottle corked; in Ordinance No. 27, it is one centavo (P0.01) on each gallon (128 fluid ounces, U.S.) of volume
capacity. The intention of the Municipal Council of Tanauan in enacting Ordinance No. 27 is thus clear: it was intended
as a plain substitute for the prior Ordinance No. 23, and operates as a repeal of the latter, even without words to that
effect. Plaintiff-appellant in its brief admitted that defendants-appellees are only seeking to enforce Ordinance No. 27,
series of 1962. Even the stipulation of facts confirms the fact that the Acting Municipal Treasurer of Tanauan, Leyte
sought t6 compel compliance by the plaintiff-appellant of the provisions of said Ordinance No. 27, series of 1962. The
aforementioned admission shows that only Ordinance No. 27, series of 1962 is being enforced by defendants-
appellees. Even the Provincial Fiscal, counsel for defendants-appellees admits in his brief "that Section 7 of Ordinance
No. 27, series of 1962 clearly repeals Ordinance No. 23 as the provisions of the latter are inconsistent with the
provisions of the former."
That brings Us to the question of whether the remaining Ordinance No. 27 imposes a percentage or a specific tax.
Undoubtedly, the taxing authority conferred on local governments under Section 2, Republic Act No. 2264, is broad
enough as to extend to almost "everything, accepting those which are mentioned therein." As long as the text levied
under the authority of a city or municipal ordinance is not within the exceptions and limitations in the law, the same
comes within the ambit of the general rule, pursuant to the rules of exclucion attehus and exceptio firmat regulum in
cabisus non excepti The limitation applies, particularly, to the prohibition against municipalities and municipal districts
to impose "any percentage tax or other taxes in any form based thereon nor impose taxes on articles subject to specific
tax except gasoline, under the provisions of the National Internal Revenue Code." For purposes of this particular
limitation, a municipal ordinance which prescribes a set ratio between the amount of the tax and the volume of sale of
the taxpayer imposes a sales tax and is null and void for being outside the power of the municipality to enact. But, the
imposition of "a tax of one centavo (P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity" on all soft drinks
produced or manufactured under Ordinance No. 27 does not partake of the nature of a percentage tax on sales, or
other taxes in any form based thereon. The tax is levied on the produce (whether sold or not) and not on the sales. The
volume capacity of the taxpayer's production of soft drinks is considered solely for purposes of determining the tax rate
on the products, but there is not set ratio between the volume of sales and the amount of the tax.
Nor can the tax levied be treated as a specific tax. Specific taxes are those imposed on specified articles, such as distilled spirits,
wines, fermented liquors, products of tobacco other than cigars and cigarettes, matches firecrackers, manufactured oils and other
fuels, coal, bunker fuel oil, diesel fuel oil, cinematographic films, playing cards, saccharine, opium and other habit-forming drugs.
Soft drink is not one of those specified.
3. The tax of one (P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity on all softdrinks, produced or manufactured, or
an equivalent of 1- centavos per case, cannot be considered unjust and unfair. an increase in the tax alone would not support the
claim that the tax is oppressive, unjust and confiscatory. Municipal corporations are allowed much discretion in determining the
reates of imposable taxes. This is in line with the constutional policy of according the widest possible autonomy to local
governments in matters of local taxation, an aspect that is given expression in the Local Tax Code (PD No. 231, July 1, 1973). Unless
the amount is so excessive as to be prohibitive, courts will go slow in writing off an ordinance as unreasonable. Reluctance should
not deter compliance with an ordinance such as Ordinance No. 27 if the purpose of the law to further strengthen local autonomy
were to be realized.
Finally, the municipal license tax of P1,000.00 per corking machine with five but not more than ten crowners or P2,000.00 with ten
but not more than twenty crowners imposed on manufacturers, producers, importers and dealers of soft drinks and/or mineral
waters under Ordinance No. 54, series of 1964, as amended by Ordinance No. 41, series of 1968, of defendant Municipality,
appears not to affect the resolution of the validity of Ordinance No. 27. Municipalities are empowered to impose, not only
municipal license taxes upon persons engaged in any business or occupation but also to levy for public purposes, just and uniform
taxes. The ordinance in question (Ordinance No. 27) comes within the second power of a municipality.
ACCORDINGLY, the constitutionality of Section 2 of Republic Act No. 2264, otherwise known as the Local Autonomy Act, as
amended, is hereby upheld and Municipal Ordinance No. 27 of the Municipality of Tanauan, Leyte, series of 1962, re-pealing
Municipal Ordinance No. 23, same series, is hereby declared of valid and legal effect. Costs against petitioner-appellant. SO
ORDERED.
G.R. No. 102967 February 10, 2000
6

BIBIANO V. BAAS, JR., petitioner,
vs.
COURT OF APPEALS, AQUILINO T. LARIN, RODOLFO TUAZON AND PROCOPIO TALON, respondents.
For review is the Decision of the Court of Appeals in CA-C.R. CV No. 17251 promulgated on November 29, 1991. It
affirmed in toto the judgment of the Regional Trial Court (RTC), Branch 39, Manila, in Civil Case No. 82-12107. Said
judgment disposed as follows:
FOR ALL THE FOREGOING CONSIDERATIONS, this Court hereby renders judgment DISMISSING the complaint
against all the defendants and ordering plaintiff [herein petitioner] to pay defendant Larin the amount of
P200,000.00 (Two Hundred Thousand Pesos) as actual and compensatory damages; P200,000.00 as moral
damages; and P50,000.00 as exemplary damages and attorneys fees of P100,000.00.
1

The facts, which we find supported by the records, have been summarized by the Court of Appeals as follows:
On February 20, 1976, petitioner, Bibiano V. Baas Jr. sold to Ayala Investment Corporation (AYALA), 128,265 square
meters of land located at Bayanan, Muntinlupa, for two million, three hundred eight thousand, seven hundred seventy
(P2,308,770.00) pesos. The Deed of Sale provided that upon the signing of the contract AYALA shall pay four hundred
sixty-one thousand, seven hundred fifty-four (P461,754.00) pesos. The balance of one million, eight hundred forty-
seven thousand and sixteen (P1,847,016.00) pesos was to be paid in four equal consecutive annual installments, with
twelve (12%) percent interest per annum on the outstanding balance. AYALA issued one promissory note covering four
equal annual installments. Each periodic payment of P461,754.00 pesos shall be payable starting on February 20,
1977, and every year thereafter, or until February 20, 1980.
The same day, petitioner discounted the promissory note with AYALA, for its face value of P1,847,016.00, evidenced
by a Deed of Assignment signed by the petitioner and AYALA. AYALA issued nine (9) checks to petitioner, all dated
February 20, 1976, drawn against Bank of the Philippine Islands with the uniform amount of two hundred five
thousand, two hundred twenty-four (P205,224.00) pesos.
In his 1976 Income Tax Return, petitioner reported the P461,754 initial payment as income from disposition of capital
asset.
2

Selling Price of Land P2,308,770.00
Less Initial Payment 461,754.00
3

Unrealized Gain

P1,847,016.00


1976 Declaration of Income on Disposition of Capital Asset subject to Tax:
Initial Payment P461,754.00

Less: Cost of land and other incidental Expenses ( 76,547.90)

Income

P385,206.10
Income subject to tax (P385,206. 10 x 50%)

P192,603.65


In the succeeding years, until 1979, petitioner reported a uniform income of two hundred thirty thousand, eight
hundred seventy-seven (P230,877.00) pesos
4
as gain from sale of capital asset. In his 1980 income tax amnesty return,
petitioner also reported the same amount of P230,877.00 as the realized gain on disposition of capital asset for the
year.
On April 11, 1978, then Revenue Director Mauro Calaguio authorized tax examiners, Rodolfo Tuazon and Procopio
Talon to examine the books and records of petitioner for the year 1976. They discovered that petitioner had no
outstanding receivable from the 1976 land sale to AYALA and concluded that the sale was cash and the entire profit
should have been taxable in 1976 since the income was wholly derived in 1976.
7

Tuazon and Talon filed their audit report and declared a discrepancy of two million, ninety-five thousand, nine
hundred fifteen (P2,095,915.00) pesos in petitioner's 1976 net income. They recommended deficiency tax assessment
for two million, four hundred seventy-three thousand, six hundred seventy-three (P2,473,673.00) pesos.
Meantime, Aquilino Larin succeeded Calaguio as Regional Director of Manila Region IV-A. After reviewing the
examiners' report, Larin directed the revision of the audit report, with instruction to consider the land as capital asset.
The tax due was only fifty (50%) percent of the total gain from sale of the property held by the taxpayer beyond twelve
months pursuant to Section 34
5
of the 1977 National Internal Revenue Code (NIRC). The deficiency tax assessment was
reduced to nine hundred thirty six thousand, five hundred ninety-eight pesos and fifty centavos (P936,598.50),
inclusive of surcharges and penalties for the year 1976.
On June 27, 1980, respondent Larin sent a letter to petitioner informing of the income tax deficiency that must be
settled him immediately.
On September 26, 1980, petitioner acknowledged receipt of the letter but insisted that the sale of his land to AYALA
was on installment.
On June 8, 1981, the matter was endorsed to the Acting Chief of the Legal Branch of the National Office of the BIR. The
Chief of the Tax Fraud Unit recommended the prosecution of a criminal case for conspiring to file false and fraudulent
returns, in violation of Section 51 of the Tax Code against petitioner and his accountants, Andres P. Alejandre and
Conrado Baas.
On June 17, 1981, Larin filed a criminal complaint for tax evasion against the petitioner.
On July 1, 1981, news items appeared in the now defunct Evening Express with the headline: "BIR Charges Realtor"
and another in the defunct Evening Post with a news item: "BIR raps Realtor, 2 accountants." Another news item also
appeared in the July 2, 1981, issue of the Bulletin Today entitled: "3-face P1-M tax evasion raps." All news items
mentioned petitioner's false income tax return concerning the sale of land to AYALA.
On July 2, 1981, petitioner filed an Amnesty Tax Return under P.D. 1740 and paid the amount of forty-one thousand,
seven hundred twenty-nine pesos and eighty-one centavos (P41,729.81). On November 2, 1981, petitioner again filed
an Amnesty Tax Return under P.D. 1840 and paid an additional amount of one thousand, five hundred twenty-five
pesos and sixty-two centavos (P1,525.62). In both, petitioner did not recognize that his sale of land to AYALA was on
cash basis.
Reacting to the complaint for tax evasion and the news reports, petitioner filed with the RTC of Manila an action
6
for
damages against respondents Larin, Tuazon and Talon for extortion and malicious publication of the BIR's tax audit
report. He claimed that the filing of criminal complaints against him for violation of tax laws were improper because
he had already availed of two tax amnesty decrees, Presidential Decree Nos. 1740 and 1840.
The trial court decided in favor of the respondents and awarded Larin damages, as already stated. Petitioner
seasonably appealed to the Court of Appeals. In its decision of November 29, 1991, the respondent court affirmed the
trial court's decision, thus:
The finding of the court a quo that plaintiff-appellant's actions against defendant-appellee Larin were
unwarranted and baseless and as a result thereof, defendant-appellee Larin was subjected to unnecessary
anxiety and humiliation is therefore supported by the evidence on record.1wphi1.nt
Defendant-appellee Larin acted only in pursuance of the authority granted to him. In fact, the criminal charges
filed against him in the Tanodbayan and in the City Fiscal's Office were all dismissed.
WHEREFORE, the appealed judgment is hereby AFFIRMED in toto.
Hence this petition, wherein petitioner raises before us the following queries:
I. WHETHER THE COURT OF APPEALS ERRED IN ITS INTERPRETATION OF PERTINENT TAX LAWS, THUS IT FAILED
TO APPRECIATE THE CORRECTNESS AND ACCURACY OF PETITIONER'S RETURN OF THE INCOME DERIVED FROM
THE SALE OF THE LAND TO AYALA.
8

II. WHETHER THE RESPONDENT COURT ERRED IN NOT FINDING THAT THERE WAS AN ALLEGED ATTEMPT TO
EXTORT [MONEY FROM] PETITIONER BY PRIVATE RESPONDENTS.
III. WHETHER THE RESPONDENT COURT ERRED IN ITS INTERPRETATION OF PRESIDENTIAL DECREE NOS. 1740
AND 1840, AMONG OTHERS, PETITIONER'S IMMUNITY FROM CRIMINAL PROSECUTION.
IV. WHETHER THE RESPONDENT COURT ERRED IN ITS INTERPRETATION OF WELL-ESTABLISHED DOCTRINES OF
THIS HONORABLE COURT AS REGARDS THE AWARD OF ACTUAL, MORAL AND EXEMPLARY DAMAGES IN
FAVOR OF RESPONDENT LARIN.
In essence, petitioner asks the Court to resolve seriatim the following issues:
1. Whether respondent court erred in ruling that there was no extortion attempt by BIR officials;
2. Whether respondent court erred in holding that P.D. 1740 and 1840 granting tax amnesties did not grant
immunity from tax suits;
3. Whether respondent court erred in finding that petitioner's income from the sale of land in 1976 should be
declared as a cash transaction in his tax return for the same year (because the buyer discounted the
promissory note issued to the seller on future installment payments of the sale, on the same day of the sale);
4. Whether respondent court erred and committed grave abuse of discretion in awarding damages to
respondent Larin.
The first issue, on whether the Court of Appeals erred in finding that there was no extortion, involves a determination
of fact. The Court of Appeals observed,
The only evidence to establish the alleged extortion attempt by defendants-appellees is the plaintiff-
appellant's self serving declarations.
As found by the court a quo, "said attempt was known to plaintiff-appellant's son-in-law and counsel on
record, yet, said counsel did not take the witness stand to corroborate the testimony of plaintiff."
8

As repeatedly held, findings of fact by the Court of Appeals especially if they affirm factual findings of the trial court
will not be disturbed by this Court, unless these findings are not supported by evidence.
9
Similarly, neither should we
disturb a finding of the trial court and appellate court that an allegation is not supported by evidence on record. Thus,
we agree with the conclusion of respondent court that herein private respondents, on the basis of evidence, could not
be held liable for extortion.
On the second issue of whether P.D. Nos. 1740 and 1840 which granted tax amnesties also granted immunity from
criminal prosecution against tax offenses, the pertinent sections of these laws state:
P.D. No. 1740. CONDONING PENALTIES FOR CERTAIN VIOLATIONS OF THE INCOME TAX LAW UPON
VOLUNTARY DISCLOSURE OF UNDECLARED INCOME FOR INCOME TAX PURPOSES AND REQUIRING
PERIODIC SUBMISSION OF NET WORTH STATEMENT.
x x x x x x x x x
Sec. 1. Voluntary Disclosure of Correct Taxable Income. Any individual who, for any or all of the taxable
years 1974 to 1979, had failed to file a return is hereby, allowed to file a return for each of the aforesaid
taxable years and accurately declare therein the true and correct income, deductions and exemptions and pay
the income tax due per return. Likewise, any individual who filed a false or fraudulent return for any taxable
year in the period mentioned above may amend his return and pay the correct amount of tax due after
deducting the taxes already paid, if any, in the original declaration. (emphasis ours)
x x x x x x x x x
Sec. 5. Immunity from Penalties. Any individual who voluntarily files a return under this Decree and pays the
income tax due thereon shall be immune from the penalties, civil or criminal, under the National Internal
Revenue Code arising from failure to pay the correct income tax with respect to the taxable years from which
9

an amended return was filed or for which an original return was filed in cases where no return has been filed
for any of the taxable years 1974 to 1979: Provided, however, That these immunities shall not apply in cases
where the amount of net taxable income declared under this Decree is understated to the extent of 25% or
more of the correct net taxable income. (emphasis ours)
P.D. NO. 1840 GRANTING A TAX AMNESTY ON UNTAXED INCOME AND/OR WEALTH EARNED OR
ACQUIRED DURING THE TAXABLE YEARS 1974 TO 1980 AND REQUIRING THE FILING OF THE
STATEMENT OF ASSETS, LIABILITIES, AND NET WORTH.
Sec. 1. Coverage. In case of voluntary disclosure of previously untaxed income and/or wealth such as
earnings, receipts, gifts, bequests or any other acquisition from any source whatsoever, realized here or
abroad, by any individual taxpayer, which are taxable under the National Internal Revenue Code, as amended,
the assessment and collection of all internal revenue taxes, including the increments or penalties on account
of non-payment, as well as all civil, criminal or administrative liabilities arising from or incident thereto under
the National Internal Revenue Code, are hereby condoned provided that the individual taxpayer shall pay.
(emphasis ours) . . .
Sec. 2. Conditions for Immunity. The immunity granted under Section one of this Decree shall apply only
under the following conditions:
a) Such previously untaxed income and/or wealth must have been earned or realized in any of the
years 1974 to 1980;
b) The taxpayer must file an amnesty return on or before November 30, 1981, and fully pay the tax
due thereon;
c) The amnesty tax paid by the taxpayer under this Decree shall not be less than P1,000.00 per taxable
year; and
d) The taxpayer must file a statement of assets, liabilities and net worth as of December 31, 1980, as
required under Section 6 hereof. (emphasis ours)
It will be recalled that petitioner entered into a deed of sale purportedly on installment. On the same day, he
discounted the promissory note covering the future installments. The discounting seems questionable because
ordinarily, when a bill is discounted, the lender (e.g. banks, financial institution) charges or deducts a certain
percentage from the principal value as its compensation. Here, the discounting was done by the buyer. On July 2,
1981, two weeks after the filing of the tax evasion complaint against him by respondent Larin on June 17, 1981,
petitioner availed of the tax amnesty under P.D. No. 1740. His amended tax return for the years 1974 - 1979 was filed
with the BIR office of Valenzuela, Bulacan, instead of Manila where the petitioner's principal office was located. He
again availed of the tax amnesty under P.D. No. 1840. His disclosure, however, did not include the income from his
sale of land to AYALA on cash basis. Instead he insisted that such sale was on installment. He did not amend his
income tax return. He did not pay the tax which was considerably increased by the income derived from the
discounting. He did not meet the twin requirements of P.D. 1740 and 1840, declaration of his untaxed income and full
payment of tax due thereon. Clearly, the petitioner is not entitled to the benefits of P.D. Nos. 1740 and 1840. The
mere filing of tax amnesty return under P.D. 1740 and 1840 does not ipso facto shield him from immunity against
prosecution. Tax amnesty is a general pardon to taxpayers who want to start a clean tax slate. It also gives the
government a chance to collect uncollected tax from tax evaders without having to go through the tedious process of
a tax case. To avail of a tax amnesty granted by the government, and to be immune from suit on its delinquencies, the
tax payer must have voluntarily disclosed his previously untaxed income and must have paid the corresponding tax on
such previously untaxed income.
10

It also bears noting that a tax amnesty, much like a tax exemption, is never favored nor presumed in law and if granted
by statute, the terms of the amnesty like that of a tax exemption must be construed strictly against the taxpayer and
liberally in favor of the taxing authority.
11
Hence, on this matter, it is our view that petitioner's claim of immunity from
prosecution under the shield of availing tax amnesty is untenable.
On the third issue, petitioner asserts that his sale of the land to AYALA was not on cash basis but on installment as
clearly specified in the Deed of Sale which states:
10

That for and in consideration of the sum of TWO MILLION THREE HUNDRED EIGHT THOUSAND SEVEN
HUNDRED SEVENTY (P2,308,770.00) PESOS Philippine Currency, to be paid as follows:
1. P461,754.00, upon the signing of the Deed of Sale; and,
2. The balance of P1,847,016.00, to be paid in four (4) equal, consecutive, annual installments with
interest thereon at the rate of twelve percent (12%) per annum, beginning on February 20, 1976, said
installments to be evidenced by four (4) negotiable promissory notes.
12

Petitioner resorts to Section 43 of the NIRC and Sec. 175 of Revenue Regulation No. 2 to support his claim.
Sec. 43 of the 1977 NIRC states,
Installment basis. (a) Dealers in personal property. . . .
(b) Sales of realty and casual sales of personalty In the case (1) of a casual sale or other casual disposition of
personal property (other than property of a kind which would properly be included in the inventory of the
taxpayer if on hand at the close of the taxable year), for a price exceeding one thousand pesos, or (2) of a sale
or other disposition of real property if in either case the initial payments do not exceed twenty-five percentum
of the selling price, the income may, under regulations prescribed by the Minister of Finance, be returned on
the basis and in the manner above prescribed in this section. As used in this section the term "initial payment"
means the payments received in cash or property other than evidences of indebtedness of the purchaser
during the taxable period in which the sale or other disposition is made. . . . (emphasis ours)
Revenue Regulation No. 2, Section 175 provides,
Sale of real property involving deferred payments. Under section 43 deferred-payment sales of real
property include (1) agreements of purchase and sale which contemplate that a conveyance is not to be made
at the outset, but only after all or a substantial portion of the selling price has been paid, and (b) sales in which
there is an immediate transfer of title, the vendor being protected by a mortgage or other lien as to deferred
payments. Such sales either under (a) or (b), fall into two classes when considered with respect to the terms of
sale, as follows:
(1) Sales of property on the installment plan, that is, sales in which the payments received in cash or
property other than evidences of indebtedness of the purchaser during the taxable year in which the
sale is made do not exceed 25 per cent of the selling price;
(2) Deferred-payment sales not on the installment plan, that is sales in which the payments received in
cash or property other than evidences of indebtedness of the purchaser during the taxable year in
which the sale is made exceed 25 per cent of the selling price;
In the sale of mortgaged property the amount of the mortgage, whether the property is merely taken subject
to the mortgage or whether the mortgage is assumed by the purchaser, shall be included as a part of the
"selling price" but the amount of the mortgage, to the extent it does not exceed the basis to the vendor of the
property sold, shall not be considered as a part of the "initial payments" or of the "total contract price," as
those terms are used in section 43 of the Code, in sections 174 and 176 of these regulations, and in this
section. The term "initial payments" does not include amounts received by the vendor in the year of sale from
the disposition to a third person of notes given by the vendee as part of the purchase price which are due and
payable in subsequent years. Commissions and other selling expenses paid or incurred by the vendor are not
to be deducted or taken into account in determining the amount of the "initial payments," the "total contract
price," or the "selling price." The term "initial payments" contemplates at least one other payment in addition
to the initial payment. If the entire purchase price is to be paid in a lump sum in a later year, there being no
payment during the year, the income may not be returned on the installment basis. Income may not be
returned on the installment basis where no payment in cash or property, other than evidences of
indebtedness of the purchaser, is received during the first year, the purchaser having promised to make two or
more payments, in later years.
Petitioner asserts that Sec. 43 allows him to return as income in the taxable years involved, the respective installments
as provided by the deed of sale between him and AYALA. Consequently, he religiously reported his yearly income from
sale of capital asset, subject to tax, as follows:
11

Year 1977 (50% of P461,754) P230,877.00
1978 230,877.00
1979 230,877.00
1980 230,877.00
Petitioner says that his tax declarations are acceptable modes of payment under Section 175 of the Revenue
Regulations (RR) No. 2. The term "initial payment", he argues, does not include amounts received by the vendor which
are part of the complete purchase price, still due and payable in subsequent years. Thus, the proceeds of the
promissory notes, not yet due which he discounted to AYALA should not be included as income realized in 1976.
Petitioner states that the original agreement in the Deed of Sale should not be affected by the subsequent discounting
of the bill.
On the other hand, respondents assert that taxation is a matter of substance and not of form. Returns are scrutinized
to determine if transactions are what they are and not declared to evade taxes. Considering the progressive nature of
our income taxation, when income is spread over several installment payments through the years, the taxable income
goes down and the tax due correspondingly decreases. When payment is in lump sum the tax for the year
proportionately increases. Ultimately, a declaration that a sale is on installment diminishes government taxes for the
year of initial installment as against a declaration of cash sale where taxes to the government is larger.
As a general rule, the whole profit accruing from a sale of property is taxable as income in the year the sale is made.
But, if not all of the sale price is received during such year, and a statute provides that income shall be taxable in the
year in which it is "received," the profit from an installment sale is to be apportioned between or among the years in
which such installments are paid and received.
13

Sec. 43 and Sec. 175 says that among the entities who may use the above-mentioned installment method is a seller of
real property who disposes his property on installment, provided that the initial payment does not exceed 25% of the
selling price. They also state what may be regarded as installment payment and what constitutes initial payment.
Initial payment means the payment received in cash or property excluding evidences of indebtedness due and payable
in subsequent years, like promissory notes or mortgages, given of the purchaser during the taxable year of sale. Initial
payment does not include amounts received by the vendor in the year of sale from the disposition to a third person of
notes given by the vendee as part of the purchase price which are due and payable in subsequent years.
14
Such
disposition or discounting of receivable is material only as to the computation of the initial payment. If the initial
payment is within 25% of total contract price, exclusive of the proceeds of discounted notes, the sale qualifies as an
installment sale, otherwise it is a deferred sale.
Although the proceed of a discounted promissory note is not considered part of the initial payment, it is still taxable
income for the year it was converted into cash. The subsequent payments or liquidation of certificates of indebtedness
is reported using the installment method in computing the proportionate income
16
to be returned, during the
respective year it was realized. Non-dealer sales of real or personal property may be reported as income under the
installment method provided that the obligation is still outstanding at the close of that year. If the seller disposes the
entire installment obligation by discounting the bill or the promissory note, he necessarily must report the balance of
the income from the discounting not only income from the initial installment payment.
Where an installment obligation is discounted at a bank or finance company, a taxable disposition results, even if the
seller guarantees its payment, continues to collect on the installment obligation, or handles repossession of
merchandise in case of default. This rule prevails in the United States.
18
Since our income tax laws are of American
origin,
19
interpretations by American courts an our parallel tax laws have persuasive effect on the interpretation of
these laws.
20
Thus, by analogy, all the more would a taxable disposition result when the discounting of the promissory
note is done by the seller himself. Clearly, the indebtedness of the buyer is discharged, while the seller acquires money
for the settlement of his receivables. Logically then, the income should be reported at the time of the actual gain. For
income tax purposes, income is an actual gain or an actual increase of wealth.
21
Although the proceeds of a discounted
promissory note is not considered initial payment, still it must be included as taxable income on the year it was
converted to cash. When petitioner had the promissory notes covering the succeeding installment payments of the
land issued by AYALA, discounted by AYALA itself, on the same day of the sale, he lost entitlement to report the sale as
a sale on installment since, a taxable disposition resulted and petitioner was required by law to report in his returns
the income derived from the discounting. What petitioner did is tantamount to an attempt to circumvent the rule on
payment of income taxes gained from the sale of the land to AYALA for the year 1976.
Lastly, petitioner questions the damages awarded to respondent Larin.
12

Any person who seeks to be awarded actual or compensatory damages due to acts of another has the
burden of proving said damages as well as the amount thereof.
22
Larin says the extortion cases filed against
him hampered his immediate promotion, caused him strong anxiety and social humiliation. The trial court
awarded him two hundred thousand (P200,000,00) pesos as actual damages. However, the appellate court
stated that, despite pendency of this case, Larin was given a promotion at the BIR. Said respondent court:
We find nothing on record, aside from defendant-appellee Larin's statements (TSN, pp. 6-7, 11 December
1985), to show that he suffered loss of seniority that allegedly barred his promotion. In fact, he was promoted
to his present position despite the pendency of the instant case (TSN, pp. 35-39, 04 November 1985).
23

Moreover, the records of the case contain no statement whatsoever of the amount of the actual damages sustained
by the respondents. Actual damages cannot be allowed unless supported by evidence on the record.
24
The court
cannot rely on speculation, conjectures or guesswork as to the fact and amount of damages.
25
To justify a grant of
actual or compensatory damages, it is necessary to prove with a reasonable degree of certainty, the actual amount of
loss.
26
Since we have no basis with which to assess, with certainty, the actual or compensatory damages counter-
claimed by respondent Larin, the award of such damages should be deleted.
Moral damages may be recovered in cases involving acts referred to in Article 21

of the Civil Code. As a rule, a public
official may not recover damages for charges of falsehood related to his official conduct unless he proves that the
statement was made with actual malice. In Babst, et. al. vs. National Intelligence Board, et. al., 132 SCRA 316, 330
(1984), we reiterated the test for actual malice as set forth in the landmark American case of New York Times vs.
Sullivan,
29
which we have long adopted, in defamation and libel cases, viz.:
. . . with knowledge that it was false or with reckless disregard of whether it was false or not.
We appreciate petitioner's claim that he filed his 1976 return in good faith and that he had honestly believed
that the law allowed him to declare the sale of the land, in installment. We can further grant that the
pertinent tax laws needed construction, as we have earlier done. That petitioner was offended by the
headlines alluding to him as tax evader is also fully understandable. All these, however, do not justify what
amounted to a baseless prosecution of respondent Larin. Petitioner presented no evidence to prove Larin
extorted money from him. He even admitted that he never met nor talked to respondent Larin. When the
tax investigation against the petitioner started, Larin was not yet the Regional Director of BIR Region IV-A,
Manila. On respondent Larin's instruction, petitioner's tax assessment was considered one involving a sale of
capital asset, the income from which was subjected to only fifty percent (50%) assessment, thus reducing
the original tax assessment by half. These circumstances may be taken to show that Larin's involvement in
extortion was not indubitable. Yet, petitioner went on to file the extortion cases against Larin in different
fora. This is where actual malice could attach on petitioner's part. Significantly, the trial court did not err in
dismissing petitioner's complaints, a ruling affirmed by the Court of Appeals.
Keeping all these in mind, we are constrained to agree that there is sufficient basis for the award of moral
and exemplary damages in favor of respondent Larin. The appellate court believed respondent Larin when
he said he suffered anxiety and humiliation because of the unfounded charges against him. Petitioner's
actions against Larin were found "unwarranted and baseless," and the criminal charges filed against him in
the Tanodbayan and City Fiscal's Office were all dismissed. Hence, there is adequate support for respondent
court's conclusion that moral damages have been proved.
Now, however, what would be a fair amount to be paid as compensation for moral damages also requires
determination. Each case must be governed by its own peculiar circumstances.
31
On this score, Del Rosario
vs. Court of Appeals, cites several cases where no actual damages were adjudicated, and where moral and
exemplary damages were reduced for being "too excessive," thus:
In the case of PNB v. C.A., [256 SCRA 309 (1996)], this Court quoted with approval the following
observation from RCPI v. Rodriguez, viz:
** **. Nevertheless, we find the award of P100,000.00 as moral damages in favor of
respondent Rodriguez excessive and unconscionable. In the case of Prudenciado v. Alliance
Transport System, Inc. (148 SCRA 440 [1987]) we said: . . . [I]t is undisputed that the trial
13

courts are given discretion to determine the amount of moral damages (Alcantara v. Surro, 93
Phil. 472) and that the Court of Appeals can only modify or change the amount awarded when
they are palpably and scandalously excessive "so as to indicate that it was the result of
passion, prejudice or corruption on the part of the trial court" (Gellada v. Warner Barnes &
Co., Inc., 57 O.G. [4] 7347, 7358; Sadie v. Bacharach Motors Co., Inc., 57 O.G. [4] 636 and
Adone v. Bacharach Motor Co., Inc., 57 O.G. 656). But in more recent cases where the awards
of moral and exemplary damages are far too excessive compared to the actual loses sustained
by the aggrieved party, this Court ruled that they should be reduced to more reasonable
amounts. . . . . (Emphasis ours.)
In other words, the moral damages awarded must be commensurate with the loss or injury
suffered.
In the same case (PNB v. CA), this Court found the amount of exemplary damages required to be paid
(P1,000,000,00) "too excessive" and reduced it to an "equitable level" (P25,000.00).
It will be noted that in above cases, the parties who were awarded moral damages were not public officials.
Considering that here, the award is in favor of a government official in connection with his official function, it
is with caution that we affirm granting moral damages, for it might open the floodgates for government
officials counter-claiming damages in suits filed against them in connection with their functions. Moreover,
we must be careful lest the amounts awarded make citizens hesitate to expose corruption in the
government, for fear of lawsuits from vindictive government officials. Thus, conformably with our
declaration that moral damages are not intended to enrich anyone,
33
we hereby reduce the moral damages
award in this case from two hundred thousand (P200,000.00) pesos to seventy five thousand (P75,000.00)
pesos, while the exemplary damage is set at P25,000.00 only.
The law allows the award of attorney's fees when exemplary damages are awarded, and when the party to a
suit was compelled to incur expenses to protect his interest.
34
Though government officers are usually
represented by the Solicitor General in cases connected with the performance of official functions,
considering the nature of the charges, herein respondent Larin was compelled to hire a private lawyer for
the conduct of his defense as well as the successful pursuit of his counterclaims. In our view, given the
circumstances of this case, there is ample ground to award in his favor P50,000,00 as reasonable attorney's
fees.
WHEREFORE, the assailed decision of the Court of Appeals dated November 29, 1991, is hereby AFFIRMED
with MODIFICATION so that the award of actual damages are deleted; and that petitioner is hereby
ORDERED to pay to respondent Larin moral damages in the amount of P75,000.00, exemplary damages in
the amount of P25,000.00, and attorney's fees in the amount of P50,000.00 only.
No pronouncement as to costs. SO ORDERED.