Digests Law School

LaborRel-d: Nestle Phils. Inc. v.
NLRC, 195 SCRA 340

[1991]
Posted by Berne Guerrero under (a) oas , digests
No Comments
Nestle Phils. Inc. v. NLRC, 195 SCRA 340 [1991]
Facts: Eugenia Nunez, Liza Villanueva, Emmanuel Villena, Rudolph Armas, Rodolfo Kua and
Rodolfo Solidum were either employed as sales or medical representatives of Nestle Philippines.
Said employees availed availed of the companys car loan policy. Nunez, Villena, Villanueva and
Armas were dismissed for having participated in an illegal strike. Kua and Solidum were
dismissed for certain irregularities. Said employees filed complaints for illegal dismissal in the
Arbitration Branch of the NLRC. The Labor Arbiter dismissed their complaints and upheld their
dismissal. They appealed to the NRLC where their appeals are pending. Meanwhile, the
company filed a civil suit to recover possession of the cars subject of the car loan policy, after the
dismissed employees failed and refused to either settle the remaining balance of the cost of their
respective cars, or to return them to the company for proper disposition. The dismissed
employees sought a temporary restraining order in the NLRC to stop the company from
cancelling their car loans and collecting their monthly amortication pending the final resolution
of their appeals in the illegal dismissal case. The NLRC en banc granted the petition for
injunction. The company filed a petition for certiorari, alleging that the NLRC does not have
jurisdiction over the issue in the absence of any labor dispute related to the same. The petition
was granted by the Supreme Court, annulling the NLRC resolution in the petition for injunction.
Issue: Whether there is labor dispute arising or related to the issue involving the car loan policy
so as to provide the NLRC jurisdiction over the petition for injunction.
Topic: Labor Dispute; Definition
Held: [N] Labor dispute includes any controversy or matter concerning terms and conditions
of employment or the association or representation of persons in negotiating, fixing, maintaining,
changing or arranging the terms and conditions of employment, regardless of whether the
disputants stand in the proximate relation of employer and employee. The power of the NLRC to
issue writs of injunction, as found in Article 218 of the Labor Code, can only be exercised in a
labor dispute. Nestls demand for payment of the employees amortizations on their car loans, or,
in the alternative, the return of the cars to the company, is not a labor, but a civil, dispute. It
involves debtor-creditor relations, rather than employee-employer relations. Although the illegal
dismissal case is still pending resolution before the NLRC, the terms of the car loan agreements
are not in issue in the labor case. The rights and obligations of the parties under those contracts
may be enforced by a separate civil action in the regular courts, not in the NLRC.
Sun 26 Dec 2004
LaborRel-d: San Miguel Corp. Employees Union v.

Bersamira, 186 SCRA 496 [1990]
No Comments
San Miguel Corp. Employees Union v. Bersamira, 186 SCRA 496 [1990]
Facts: Contracts for merchandising service were entered into by San Miguel corp. (SMC) with
independent contractors duly licensed by the DOLE namely Lipercon and DRite. The two
contractors and SMC agreed that the workers employed by the contractors were to be paid by the
contractors and that none of them were to be deemed employees or agents of SMC. However,
SMC was advised by SMC Employees Union on November 20, 1988 that Lipercon and DRite
workers signed up for union membership. It was the unions argument that the said group of
employees, while appearing to be contracted workers of independent contractors, they
continuously worked for SMC for 6 months to 15 years and that their work was neither casual
nor seasonal as they performed work or activities necessary or desirable in the usual business or
trade of SMC. The Union further argued that the labor only contracting situation and that the
employment status of these workers shall be regularized. Upon petition for injunction and
damage filed by SMC, the RTC issued an order enjoining the union from representing the
Lipercon and DRite workers for the purpose of collective bargaining. The union sought to
nullify the said writ on the ground that the controversy involved a labor dispute which was
beyond the lower courts jurisdiction.
Issue: Whether or not there exists a labor dispute between SMC and the union which makes the
case under the jurisdiction of the labor tribunal.
Topic: Labor Dispute; Definition
Held:While it is San Miguels submission that no employer-employee relationship exists
between itself, on one hand, and the contractual workers of Lipercon and DRite, on the other
hand, a labor dispute can nevertheless exist regardless of whether the disputants stand in the
proximate relationship of employer and employee (Article 212(i), Labor Code), provided the
controversy concerns, among others, the terms and conditions of employment or a change or
arrangement thereof. The existence of a labor dispute is not negated by the fact that the
plaintiffs and the defendants do not stand in the proximate relationship of employee. A labor
dispute, as defined by law, does exists herein, and is evident. What the union seeks is to
regularize the status of the employees contracted by the Lipercon and DRite, was in effect that
they be absorbed into the working unit of SMC. This matter definitely dwells on the working
relationship between said employees vis--vis SMC. Terms, tenure and conditions of the
employment and the arrangement of those terms are involved, bringing the matter within the
purview of labor dispute.
Sun 26 Dec 2004
LaborRel-d: Lopez Sugar Corp. v. Sec. of Labor, 247 SCRA

1 [1995]
No Comments
Lopez Sugar Corp. v. Sec. of Labor, 247 SCRA 1 [1995]
Facts: The National Congress of Unions in the Sugar Industry of the Philippines-TUCP
(NACUSIP-TUCP) filed with the Department of Labor and Employment (DOLE, Regional
Office No. 6, Bacolod City) a petition for direct certification or for certification election to
determine the sole and exclusive bargaining representative of the supervisory employees of
Lopez Sugar Corporation (LSC) at its sugar central in Sagay, Negros Occidental. NACUSIPTUCP averred that it was a legitimate national labor organization, that LSC was employing 55
supervisory employees, that majority of which were members of the union, that no other labor
organization was claiming membership over the supervisory employees, that there was no
existing collective bargaining agreement (CBA) covering said employees, and that there was no
legal impediment for the direct certification or to the holding of the certification election. LSC
opposed claiming that such petition is bereft of factual basis, that it is intended to harass the
company, and that the supervisory employees are not even aware of the petition. The
Commercial and Agro-Industrial Labor Organization (CAILO), a registered labor organization
also cliaming to count substantial membership among the LSC supervisory employees, moved to
intervene. The motion was granted. Although the NACUSIP-TUCP and CAILO failed to appear
in the hearings, the Med-Arbiter issued an order granting the petition inasmuch as it interpreted
Article 257 of the Labor Code as mandatory. The order of Med-Arbiter was sustained by the
Secretary of Labor. LSC filed a petition for certiorari, which was granted by the Supreme Court,
annulling and setting aside the order of the Med-Arbiter and the decision of the Secretary.
Issue: Whether the federations bona fide status alone would suffice for a petition for
certification to be granted.
Topic: Definitions; Labor Organization - Legitimate Labor Organization
Held: [N] NACUSIP-TUCP, a national labor organization duly registered with the DOLE, is a
mere agent for the labor organizaztion (NACUSIP-TUCP Lopez Sugar Central Supervisory
Chapter), the federations bona fide status alone would not suffice. The local chapter, as its
principal, should also be a legitimate labor organization in good standing. Since the procedure
governing the reportining independently registered union refers to the certification and
attestation requirements contained in Article 235, paragraph 2 of the Labor Code, it follows that
the Constitution and by-laws, set of officers and books of accounts submitted by the local chapter
must likewise comply with these requirements. The same rationale for requiring the submission
of duly subscribed documents upon union registration exists in the case of union affiliation.
Herein, the only document extant on record to establish the legitimacy of the NACUSIP-TUCP
Lopez Sugar Central Supervisory Chapter is a chapter certificate and nothing else.
Sun 26 Dec 2004
LaborRel-d: Airline Pilots Assn., et al. v. CIR, 76 SCRA 274

[1977]
No Comments
Airline Pilots Assn., et al. v. CIR, 76 SCRA 274 [1977]
Facts: On 2 January 1971, Gomez, who claimed to be the President of the Air Line Pilots
Association of the Philippines (ALPAP) filed a petition with the Court of Industrial Relations
(CIR) praying for certification as sole and exclusive bargaining representative of all pilots under
employment of Philippine Airlines and are on active flights or operational assignments. ALPAP
led by Gaston, who also claimed to be its President, opposed said petition on the ground that the
CIR had no jurisdiction over the subject matter thereof. However, prior to the filing of the said
certification petitition, an ALPAP meeting was held on 30 October 1970 where 221 out of 270
members adapted a section which amended ALPAPs constitution and by-laws, it provided that
any member who shall be forced to retire or to resign or otherwise terminated for union activities
may either continue his membership, or resign from the association. During this time, PAL and
ALPAP where locked in a labor dispute as certified to the CIR. A return-to-work order was then
issued by the CIR to all participants of the strike while PAL was ordered not to dismiss or
terminate any employee. On 12 December 1970, despite of a no-work-stoppage order of the CIR,
a majority of ALPAP members filed resignation / retirement letters. PAL accepted the said letters
with the caveat that the pilots will not be entitled to any of the benefits / privileges since their
acts constituted violation of the order of the CIR. Thereafter, Gaston was elected as President of
ALPAP on the election held on 18-22 December 1970 by 181 votes. Meanwhile, 45 pilots who
did not resign / retire from PAL elected Gomez as President on 23 December 1970. The CIR
granted the certification petition filed by Gomez and thus, he was declared as President of
ALPAP and entitled ALPAP to all the rights and privileges of a legitimate labor organization.
Among the grounds cited by the CIR that justified said decision were (1) the PAL pilots
belonging to the Gaston Group retired / resigned en masse from PAL and accompanied this with
actual acts of not reporting, (2) that the pilots associtated with the Gaston group tried to relieve
their deposits from the ALPAP Credit Union on the ground that they had resigned /retired from
PAL.
Issue: Whether Gomez is the duly elected President of the labor organization ALPAP, as
declared by the CIR.
(BGs issue: Whether membership in the labor organization ALPAP is necessarily limited to
employees of the particular employer PAL)
Topic: Definitions; Labor Organization - Legitimate Labor Organization
Held: The Supreme Court cannot subscribed to the restrictive interpretation made by the CIR of
the term labor organization which is defined as any union or association of employees which
exists in whole or in part for the purpose of collective bargaining or of dealing with employers
concerning terms and conditions of employment. The absence of the condition which the court
below would attach to the statutory conscept of a labor organization, as being limited to the
employees of a particular employer, is quite evident from law. The emphasis of the Industrial
Peace Act is clearly on the purpose for which a union or association of employees is established
rather than that membership therein should be limited only to the employees of a particular
employer. Trite to say, under section 2 (h) of RA 875, representative is defined as including a
legitimate labor organization or any officer or agent of such organization, whether or not
employed by the employer or employee whom he represents. Moreover, the election of Gomez
as ALPAP President is not valid. He was elected at a meeting of only 45 members called just one
day after Gastons election who received a majority of 180 votes out of 270 members. A labor
union, however, may authorize a segment thereof to bargain collectively with the employer and
in the exercise of such authority to have custody of the unions funds, office and name. Having
given Gomez the authority to enter and conclude bargaining contrafcts with PAL, it would be
unreasonable to disallow Gomez a certain use of the office, funds and name of ALPAP when
such use is necessary or would be required to enable ALPAP to exercise, in a proper manner, its
delegated authority to bargain collectively with PAL.
Sun 26 Dec 2004
LaborRel-d: Feati University v. Bautista, 18 SCRA 1191

[1966]
No Comments
Feati University v. Bautista, 18 SCRA 1191 [1966]
Facts: FEATI University Faculty Club held a strike against FEATI University upon the latters
failure to comply with its demands. Since they were not able to settle, the case was brought to the
Court of Industrial Relations (CIR) which ordered the faculty members to return to work. FEATI
filed a motion to dismiss maintaining that the CIR Did not have jurisdiction over the case
because (1) the Industrial Peace Act is not applicable to the University, it being an educational
institution, nor to the members of the Faculty Club, they being independent contractors; (2) the
presidential certification is violative of Section 10 of the Industrial Peace Act, as the University
is not an industrial establishment, and there was no industrial dispute which could be certified to
the CIR; and (3) that since it is not an industrial establishment, hence, it is not an employer in
contemplation of the Industrial Peace Act.
Issue: Whether FEATI University, an educational institution, is not an employer and the
members of the Faculty Club, are not employers within the purview of the Industrial Peace
Act.
Topic: Definitions; Employer and Employee
Held: [N] The Court of Industrial Relations has jurisdiction over unfair labor practice charges
against educational institutions that are organized, operated and maintained for profit. Industrial
Peace Act is applicable to any organization or entity whatever may its purpose when it was
created that is operated for profit or gain. Congress, in the Industrial Peace Act, did not intend
to give a complete definition of employer, but rather that the definition in Section 2 (c) of the
law to be complementary to what is commonly understood as employer.
Educational institutions, that are operated for profit, are included within the term employer as
contemplated in the Industrial Peace Act, since they are not among the seceptions metioned in
Section 2 (c) of the law. An employer is one who employs the services of others; one for whom
employees work and who pays their wages or salaries. A University that engaged the services of
the professors, provided them work, and paid them compensation or salary for their services,
even if it considers itself as a mere lessee of services under a contract between it and the
members of said professors. For the purposes of the Industrial Peace Act the University is an
industrial establishment because it is operated for profit and it employs persons who work to earn
a living. The term industry, for the purposes of the application of our labor laws should be
given a broad meaning so as to cover all enterprises which are operated for profit and which
engage the services of persons who work to earn a living. Professors and instructors, who are
under contract to teach particular courses and are paid for their services, are employees under the
Industrial Peace Act. Striking professors and/or instructors of the University are employees
because striking employees retain their status as employees. Professors and instructors are not
independent contractors. The Court takes judicial notice that a university controls the work of the
members of its faculty; that a university prescribes the courses or subjects that professors teach,
and when and where to teach; that the professors work is characterized by regularity and
continuity for a fixed duration; that professors are compensated for their services by wages and
salaries, rather than by profits; that the professors and/or instructors cannot substitute others to
do their work without the consent of the university; and that the professors can be laid off if their
work is found not satisfactory. All these indicate that the university has control over their work;
and professors are, therefore, employees and not independent contractors.
Sun 26 Dec 2004
LaborRel-d: BF Goodrich Confidential and Salaried

Employees Union vs. BF Goodrich Phils. Inc., 49 SCR 532
[1973]
No Comments
BF Goodrich Confidential and Salaried Employees Union vs. BF Goodrich Phils. Inc., 49
SCR 532 [1973]
Facts: The BF Goodrich (Makati Office) Confidential and Salaried Employees-NATU sought
recognition as the bargaining agent of such employees so that thereafter there could be
negotiations for a collective contract. The BF Goodrich (Marikina Factory) Confidential and
Salaired Employees-NATU sought the same. BF Goodrich filed two petitions for certification
election with the Court of Industrial Relations (CIR). Two strike notices by both unions with the
Bureau of Labor Relations (BLR), demanding union recognition. Days after the CIR commenced
the hearings of the petitions for certification election, the union staged a strike for two days.
Subsequently, after preliminary investigation, on the finding of a prima facie case of illegal strike
and unfair labor practice committed by member of the two unions, the company filed a case for
unfair labor practice against the unions. The company filed motions int he hearings for
certification electin to hold such hearings in abeyance pending determination of the unfair labor
practice case. The motions were denied by the CIR. The company filed a petition for certiorari,
which the Supreme Court dismissed.
Issue: Whether the certification election may be held in abeyance pending the resolution of the
unfair labor pracicee case, inasmuch as there is a possibility that some employees could lose
employment status as a result of the latter case.
Topic: Labor Relations Policy: Statutory Source and Interpretation
Held: [N] An unfair labor practice caase should not be allowed to lend itself as a means to
prevent a truly free expression of the will of the labor group as to the organization that will
represent it. It is not only the loss of time involved but also the fear engendered in the mind of an
ordinary employee that management has many weapons in its arsenal to bring the full force of its
undeniable power against those of its employees dissatisfied with things as they are. There is no
valid reason for the postponement sought. There is neither a contravention of what is expressly
set forth in the Industrial Peace Act, which speaks of the labor organizations designated or
selected for the purpose of collective baragaining by the majority of the employees in an
appropriate bargaining unit [be the exclusive] representative of all the employees in such unit for
the purpose of collective bargaining. The law clearly contemplates all the employees, not only
some of them. As much as possible them, there is to be no unwarranted reduction in the number
of those taking part in a certification election, even under the guise that in the meantime, which
may take some time, some of those who are employees could possibly lose such status, by virtue
of a pending unfair labor practice case.
Sun 26 Dec 2004
LaborRel-d: PLDT vs. NLRC, 164 SCRA 671

No Comments
PLDT vs. NLRC, 164 SCRA 671
Facts: Marilyn Abucay, a traffic operator of the Philippine Long Distance Telephone Company
(PLDT), was accused by two (2) complainants of javomg demanded and received from the the
total amount of P3,800 in consideration of her promise to facilitate approval of their applications
for telephone installation. Investigated and heard, she was found guilty as charged and
accordingly separated from the service. She went tot he Ministry of Labor and Employment
claiming she had been illegally removed. After the evidence and arguments of the parties were
considered, the company was sustained and the complaint was dismissed for lack of merit. The
Labor Arbiters decision, however, awarded financial assistance to Abucay equivalent to one
month of pay for every year of service. Both Abucay and PLDT appealed to the National Labor
Relations Borad, which upheld the decision in toto. PLDT filed a petition for certiorari before the
Supreme Court. The Supreme Court granted the petition, affirming the decision of the Board
except for the grant of separtation pay in the form of financial assistance, which was disallowed.
Issue: Whether Abucay is entitled to financial assistance / separation pay even if she was
removed from employment for just case, on the basis of equity and compassion and due to
previous decisions of the Supreme Court.
Topic: Labor Relations Policy: Formulation and Historical Development; Labor Code
Held: [N] The rule embodied in the Labor Code is that a person dismissed for cause (as defined
therein) is not entitled to separation pay. The case of Firestone Tire vs. Lariosa, Soco vs.
Mercantile Corporation of Davao, Filipino Inc. vs. NLRC, and others, constitute the exception,
based upon considertations of equity. Equity has been defined as justice outside law, being
ethical rather than jural and belonging to the sphere of morals than of law. Hence, it cannot
prevail against the expressed provision of the labor laws allowing dismissal of employees for
cause and without any provision for separation pay. Still, where the exception has been applied,
the justification for the grant of separation pay and the amount or rate of such award. has not
been consistent. The Court, thus, made distinctions. Where it comes to such valid but not
iniquitous causes as failure to comply with work standards, the grant of separation pay to the
dismissed employee may be both just and compassionate, particularly if he has worked for some
time with the company. Under such circumstances, the award to the employee of separation pay
would be sustainable under the social justice policy even if the separation is for cause. Separation
pay shall be allowed as a measure of social justice only in those instances where the employee is
validly dismissed for causes other than serious misconduct or those reflecting on his moral
character. A contrary rule would have the effect of rewarding rather than punishing the erring
employee for his offense. The policy of social justice is not intended to countenance wrongdoing
simply because it is committed by the underprivileged.
Sun 26 Dec 2004
LaborRel-d: National Service Corp. vs. NLRC, 168 SCRA

122
No Comments
National Service Corp. vs. NLRC, 168 SCRA 122
Facts: The National Service Corporation (NASECO) hired Eugenia Credo as a lady guard on 18
July 1975. Later, she was administratively charged by NASECOs Manager of Finanace
stemming from her non-compliance with the latters memorandum. When she was called to
explain her side, she showed resentment in a scandalous manner and uttering remarks of
disrespect in the presence of her co-employees. Thereafter, Credo was placed on forced leave
status for 15 days and while on leave, NASECOs Committee on Personnel Affairs
recommended Credos termination. On 25 November 1983, due to her failure to explain her side
on the charges, Credo was handed a notice of termination effective 1 December 1983. Credo then
filed a complaint for illegal dismissal on 6 December 1983 with the Ministry of Labor and
Employment. Credp contended that there was absence of just or authorized cause for the
dismissal and there was a lack of opportunity to be heard.
Issue: Whether Credo was legally dismissed according to the Constitutional and Labor Code
provisions on protection to labor.
Held: [N] NASECO did not comply with the guidelines in effecting Credos dismissal. Credo
was not given ample opportunity to be heard and to defend herself. Rule XIV, Book V of the
Implementing Rules and Regulations of the Labor Code mandates that the employer must furnish
an employee sought to be dismissed two (2) written notices of dismissal before a termination of
employment can be legally effected. These are the notice which apprises the employee of the
particular acts or omissions for which his dismissal is sought and the subsequent notice which
informs the employee of the employers decision to dismiss him. The said guidelines are in
consonance with the express provisions of law on protection to labor 18 (which encompasses
the right to security of tenure) and the broader dictates of procedural due process necessarily
mandate that notice of the employers decision to dismiss an employee, with reasons therefor,
can only be issued after the employer has afforded the employee concerned ample opportunity to
be heard and to defend himself.
Sun 26 Dec 2004
LaborRel-d: PAL vs. PALESA, 57 SCRA 489

No Comments
PAL vs. PALESA, 57 SCRA 489
Facts: Fidel Gotangco was apprehended at one of the gates of the Philippine Airlines (PAL)
Airfield compound where a piece of lead material was confiscated from his person. Gotangco,
being guilty of breach of trust and in violation of PALs rules and regulations, was dismissed.
The Court of Industrial Relations (CIR), however, ordered Gotangco to be reinstated, without
backwages; holding that dismissal is too severe a penalty to impose on Gotongco inasmuch as
(1) it was Gotangcos first time to commit the charge question of r the duration of his 17 years of
service with PAL; (2) the cost of the lead material, considerting its size (8 x 10 x 1/2), is
negligible; (3) PAL did not lose anything after all as the lead material was retrieved in time; (4)
the ignominy and mental torture undergone by Gotangco is pracically punishment in itself; and
(5) that Gotangco has been under preventive suspension to date. PAL appealed by certiorari to
the Supreme Court, relying mainly on the holding in Manila Trading & Supply Co. vs. Zulueta
(30 January 1940). The Supreme Court affirmed the decision of the CIR.
Issue: Whether the Court of Industrial Relations has the right to order the readmission of a
laborer who, it is admitted had been found derelict in the performance of his duties towards his
employer.
Held: [Y] The right of an employer, to freely select or discharge his employees, is subject tot the
regulation by the State in the exercise of itss paramount police power. Although the employer
cannot be compelled to continue the employment of a person who admittedly was guilty of
misfeasance or malfeasance towards his employer; still, where the result would neither be
oppressive nor self-destructive, it cannot be asserted dogmativcally that an outright termination
of employer is justified. The doctrine in the Manila Trading & Supply Co. vs. Zulueta case did
not call for automatic application. The Manila Trading case should not lend itself as a
justification for outright dismissal independently of the circumstances of each case. A host of
decisions to the acceptance by this Court of the conclusion reached by the Court of Industrial
Relations in the discharge of the task assigned to it to protect the rights of labor. Herein, a lead
material of negligible size, not shown to be of any use to the company, hardly of any pecuniary
worth, was picked up by Gotangco, but thereafter taken from him by a security guard. It would
be too harsh an appraisal to view it as constituting theft.
Sun 26 Dec 2004
LaborRel-d: Association de Agricultores vs.Talisay Silay

Milling Co., 88 SCRA 294
No Comments
Association de Agricultores vs.Talisay Silay Milling Co., 88 SCRA 294
Facts: On 22 June 1952, Republic Act 809 was enacted for the purpose of addressing the
necessity to increase the sahre of planters and laborers in the income derived from the sugar
industry. Said act was to regulate the relations among the persons engaged in the sugar industry.
Under Section 1 thereof, it was provided that in the absence of written milling agreements
between the majority of planters and the millers of sugarcane in any milling district in the
Philippines, the unrefined sugar produced in that district from the milling by any sugar central of
the sugar cane of any sugarcane planter or planter-owner, as well as all by-products and
derivative thereof, shall be divided between them aas follows: 60% for the planter and 40% for
the central in any district the maximum actual production of which is not more than 400,000
piculs.. The Association de Agricultores de Talisay-Silay Inc. and six sugarcane planters filed a
petition to the Secretary of Labor, praying that the latter (1) declare the applicability to the
Talisay-Silay Mill District of the sharing participation prescribed by RA 809 for every crop year
statrting from 1952-1953; (2) adjudicated in favor of the planters and their laborers in the
account entitled In trust for Talisay-Silay Milling Co. Inc., and Department of Labor; (3) order
the Central to account for any unsold quedans or the proceeds thereof which have been deposited
with the PNB in the trust account; (4) order the Central to account for and pay jointly and
severally to the planters and their laborers the proceeds of the sugar representing the increased
particiapation for the 1954-1955 crop year plus legal interest in facor of the planters computed
on the basis of the average market price during the month within which the sugar was sold. On
the other hand, the Talisay-Silay Milling Co. Inc. alleged that (1) RA 809 was invalid and
unconstitutional; (2) that even if it was valid, the planters had written milling contracts witht the
Central at the time the said act went into effect, and (3) the planters who entered into said
contracts did so voluntarily and those voluntary contracts may not be altered or modified without
infringing the constitutional guarantee on freedom of contracts and non-impairment clause of the
Constitution.
Issue: Whether RA 809 would violate the non-impairment clause of the Constitution and
infringe the Constitutional guarantee on freedom of contracts if applied to teh Talisay-Silay Mill
District.
Held: [N] RA 809 is a social justice and police power measure for the promotion of labor
conditions in sugar plantations; hence, whatever rational degree of constraint it exerts on
freedom of contract and existing contractual obligationas is constitutionally permissible. The said
act was concerned and enacted as a social legislation designed primarily to ameliorate the
condition of the laborers in the sugar plantation. Having in view its primary objective, to
promote the interests of the labor, it can never be possible that the State would be bereft of
constitutional authority to enact legislations of its kind. the imperious mandate of the social
justice ideal consecrated in our fundamental laws, asserts its majesty, calling upon the courts to
accord utmost consideration to the spirit animating the act assailed, not just for the sake of
enforcing the explicit social justice provisions of the article on Declaration of Principles and
State Policies, but more fundamentally, to serve the sacred cause of human dignity, which is
actually what lies at the core of those constitutional precepts as it is also the decisive element
always in the determination of any controversy between capital and labor. RA 809, which
provides for bigger shares to the planters in the big milling districts than those in the small
milling districts, does not violate the equal protection clause considering that the more a central
produces, the bigger could be its margin of profit which can be correspondingly cut for the
purpose of enlarging the share of the planters.
Sun 3 Oct 2004
Telecom-d: Smart Communications vs. NTC (GR 151908, 12

August 2003)
No Comments
Smart Communications vs. NTC
GR 151908, 12 August 2003; First Division, Ynares-Santiago (J)
Facts: On 16 June 2000, the NTC issued Memorandum Circular 13-6-2000, promulgating rules
and regulations on the billing of telecommunications services; which includes provisions
pertaining to the use and sale of pre-paid cards and unit of billing for cellular mobile telephone
service (CMTS). On 30 August 2000, the NTC issued a memorandum to all CMTS operators
which contained measures to minimize if not totally eliminate the incidence of stealing of
cellular phone units. Another memorandum dated 6 October 2000 addressed to all
telecommunications entities reminding them that the validity of all prepaid cards and SIM packs
sold and used on 7 October 2000 and beyond shall be valid for at least 2 years from the date of
first use. On 20 October 2000, Islacom and Piltel questioned the validity of the memoranda, and
prayed for the issuance of a writ of preliminary injunction. The lower court granted the issuance
of the injunction. NTC moved for reconsideration, but was denied. NTC thereafter filed a special
civil action for certiorari and probation before the Court of Appeals. The appellate court granted
the petition and dismissed the companies complaint without prejudice to the referral of their
grievances with the NTC. Hence, the petition for review with the Supreme Court.
Issue: Whether a party should have exhausted administrative remedies before it filed the case in
court.
Held: A party need not exhaust administrative remedies before going to Court, when questioning
the validity or constitutionality of a rule or regulation issued by an administrative agency. The
principle only applies when the act of the agency was performed pursuant to its quasi-judicial
function, and not when the assailed and pertained to its rule-making or quasi-legislative power.
Issue: Whether the court or NTC has jurisdiction over the issues pertaining to the memoranda.
Held: The issues raised in the complaint do not entail highly technical matters, and thus are
within the competence of a judge in the lower court. What is required of the judge who will
resolve the issue is a basic familiarity with the workings of the cellular telephone service,
including pre-paid SIM and call cards (which is within the knowledge of a good percentage of
the Philippine population) and expertise in fundamental principles of civil law and the
Constitution.
Sun 3 Oct 2004
Telecom-d: GMCR vs. Bell Telecommunication Philippines

(GR 126496, 30 April 1997)
No Comments
GMCR vs. Bell Telecommunication Philippines (BellTel)
GR 126496, 30 April 1997; First Division, Hermosisima Jr. (J)
Facts: On 19 October 1993, BellTel filed with the NTC an application for a certificate of public
convenience with a further request for the issuance of a provisional authority (NTC Case 93481). On 25 March 1994, RA 7692 was enacted granting BellTel a legislative franchise to
operate business of providing telecommunication services. In 12 July 1994, BellTel a legislative
franchise to operate business of providing telecommunication services. On 12 July 1994, BellTel
filed a second application for a certificate of public convenience, proposing to install 2.6 million
telephone lines in 10 years and to provide a 100% digital local exchange network (NTC Case 94229). It also moved for the withdrawal of the first application, without prejudice, which was
granted by the NTC. BellTels application (2nd ) was opposed by various telecommunication
companies. BellTels application was referred to the Common Carriers Authorization Department
(CCAD), which found BellTels proposal technically feasible and BellTel to be financially
capable. The two deputy commissioners of the NTC signified their approval of the CCAD
recommendation. The working draft was prepared by the legal department, was initialed by the
two deputy commissioners, but was not signed by NTC Commissioner Simeon Kintanar. BellTel
filed a motion to promulgate, after previously filing two urgent ex-parte motion to resolve
application which were not acted upon by the NTC. On 4 July 1995, the NTC denied the motion
in an order signed solely by Commissioner Kintanar. On 17 July 1995, BellTel filed a petition for
certiorari, mandamus and prohibition against NTC before the Supreme Court. The Court referred
the case to the Court of Appeals pursuant to Paragraph 1, Section 9 of BP 129. The Court of
Appeals granted BellTels position. Hence, the petitions for review by the opposing
telecommunication companies and Commissioner Kintanar.
Issue: Whether the vote of the Chairman of the Commission is sufficient to legally render an
NTC order, resolution or decision.
Held: Having been organized under Executive Order 146 as a three-man commission, the NTC
is a collegial body and was a collegial body even during the time it was acting as a one-man
regime. NTC is a collegial body requiring a majority vote out of three members of the
commission in order to validly decide a case or any incident therein. The vote alone of the
chairman of the Commission, absent the required concurring vote coming from the rest of the
membership of the commission to at least arrive at a majority decision, is not sufficient to legally
render an NTC order, resolution or decision. NTC Circulars 1-1-93, 3-1-93 and the Order of
Kintanar, declaring the NTC as a single entity or non-collegial entity, are contrary to law and
thus are null and void.
Sun 3 Oct 2004
Telecom-d: Republic vs. Meralco (GR 141314, 15 November

2002)
No Comments
Republic vs. Meralco
GR 141314, 15 November 2002; Third Divsiion, Puno (J)
Facts: On 23 December 1993, Meralco filed with the Energy Regulatory Board (ERB) an
application for the revision of its rate schedules. On 28 January 1994, the ERB issued an order
granting a provisional increase of P0.184/kwh subject to the condition that in event that the board
finds that Meralco is entitled to a lesser increase in rates, all excess amounts collected shall be
refunded or credited to its customers. Subsequently, ERB rendered its decision adopting the audit
of the Commission on Audit (COA) and authorized Meralco to implement a rate adjustment of
P0.017/kwh, but ordered the refund of the excess amount of P0.167/kwh collected from the
billing cycles of February 1994 to February 1997, holding that income tax should not be treated
as operating expense, and applying the net average investment method in the computation of the
rate base. On appeal, the Court of Appeals set aside the ERB decision insofar as it directed the
reduction of the rates by P0.167/kwh and the refund to Meralcos customers. Motions for
reconsideration were denied. Hence, the petition before the Supreme Court.
Issue: Whether the rates are just and reasonable.
Held: The ERB has the power to fix rates to be charged by public utilities involved in the
distribution of electricity, under Executive Order 172. What is just, reasonable rate is a question
of fact calling for the exercise of discretion, good sense, and a fair, enlightened and independent
judgment. In determining the just and reasonable rates to be charged by a public utility, the
regulating agency must consider the rate of return, the rate base, and the return itself or the
computed revenue to be earned by the public utility based on the rate of return and rate base.
Aside from the financial condition of the public utility, particular reasons involved for the
request of the rate increase, the quality of the services rendered by the public utility, the existence
of competition, the element of risk or hazard involved in the investment, the capacity of
consumers, etc. should be considered for the purpose of rate regulation. Herein, the factual
findings of the administrative body should be accorded great respect, even finality, if supported
by substantial evidence. To the extent that the agency has not been arbitrary or capricious in the
exercise of its powers, the courts should not interfere.
Issue: Whether income tax may be shifted to the public utilitys customer.
Held: Income tax should be borne by the taxpayer alone as they are payments made in exchange
for benefits received by the taxpayer from the State. No benefit is derived by the customers of a
public utility for such entity and no direct contribution is made by the payment of income tax to
the operation of a public utility for purposes of generating revenue or profit. Thus, the burden of
paying income tax should be Meralcos alone and should not be shifted to the customers by
including the same in the computation of its operating expenses.
Issue: Whether the net average investment method or the trending method should be used in
determining the tax base.
Held: The administrative agency is not bound to apply any one particular formula or method
simply because the same method has been previously used and applied. What constitutes a
reasonable return for the public utility is necessarily determined and controlled by its peculiar
environmental milieu. The reasonableness of the net average investment method is borne by the
records of the case. By using the said method, the ERB and COA considered for determination of
the rate base the value of the properties and equipment used by Meralco in proportion to the
period that the same were actually used during the period in question. If the trending method is
to be applied, the public utility may easily manipulate the valuation of its property entitled to a
return (tax base) by simply including a highly capitalized asset in the computation of the rate
base even if the same was used for a limited period if time during the test year.
Sun 3 Oct 2004
Telecom-d: PLDT vs. NTC (GR 88404, 18 October 1990)

No Comments
PLDT vs. NTC

GR 88404, 18 October 1990; En Banc, Melencio-Herrera (J)
Facts: On 22 June 1958, RA 2090 was enacted granting Felix Alberto & Co. (later ETCI) a
franchise to establish radio stations for domestic and transoceanic telecommunications. On 13
May 1987, ETCI filed an application with the NTC for the issuance of a certificate of public
convenience and necessity to operate, etc. a Cellular Mobile Telephone System and an alpha
numeric paging system in Metro Manila and in the Southern Luzon regions, with a prayer for
provisional authority to operate within Metro Manila. PLDT filed an opposition with a motion to
dismiss. On 12 November 1987, NTC overruled PLDTs opposition and declared RA 2090
should be liberally construed so as to include the operation of a cellular mobile telephone service
as part of services of the franchise. On 12 December 1988, NTC granted ETCI provisional
authority to install, operate, and maintain a cellular mobile telephone service initially in Metro
Manila subject to the terms and conditions set forth in its order, including an interconnection
agreement to be entered with PLDT. PLDT filed a motion to set aside order which was denied by
the NTC on 8 May 1989. PLDT challenged the 12 December 1988 and 8 May 1989 NTC orders
before the Supreme Court through a special civil action for certiorari and prohibition.
Issue: Whether the provisional authority was properly granted.
Held: The provisional authority granted by the NTC (which is the regulatory agency of the
National Government over all telecommunications entities) has a definite expiry period of 18
months unless sooner renewed; may be revoked, amended or revised by the NTC; covers one of
four phases; limited to Metro Manila only; and does not authorize the installation and operation
of an alphanumeric paging system. It was further issued after due hearing, with PLDT attending
and granted after a prima facie showing that ETCI had the necessary legal, financial and
technical capabilities; and that public interest, convenience and necessity so demanded.
Provisional authority would be meaningless if the grantee were not allowed to operate, as its
lifetime is limited and may be revoked by the NTC at any time in accordance with law.
Issue: Whether ETCIs franchise includes operation of cellular mobile telephone system (CMTS)
Held: The NTC construed the technical term radiotelephony liberally as to include the
operation of a cellular mobile telephone system. The construction given by an administrative
agency possessed of the necessary special knowledge, expertise and experience and deserves
great weight and respect. It can only be set aside by judicial intervention on proof of gross abuse
of discretion, fraud or error of law.
Issue: Whether PLDT can refuse interconnection with ETCI.
Held: The NTC merely exercised its delegated authority to regulate the use of telecommunication
networks when it decreed interconnection. PLDT cannot refuse interconnection as such is
mandated under RA 6949 or the Municipal Telephone Act of 1989. What interconnection seeks
to accomplish is to enable the system to reach out to the greatest number of people possible in
line with governmental policies. With the broader reach, public interest and convenience will be
better served. Public need, public interest, and the common good are the decisive, if not the
ultimate, considerations. To these public and national interests, public utility companies must
yield.
The NTC order does not deprive PLDT due process as it allows the parties themselves to discuss
and agree upon the specific terms and conditions of the interconnection agreement instead of the
NTC itself laying down the standards of interconnection which it can very well impose.
Sat 4 Sep 2004
IPL-d: Pearl & Dean v. Shoemart (GR 148222, 15 August

2003)
No Comments
Pearl & Dean v. Shoemart
GR 148222, 15 August 2003; Third division, Corona (J)
Facts: Pearl & Dean is a corporation engaged in the manufacture of advertising display units
(Poster Ads) referred as light boxes. It acquired a Certificate of Copyright Registration over the
illuminated display units, and acquired trademark for Poster Ads. Pearl & Dean negotiated
with Shoemart for the lease and installation of the light boxes in Shoemart Malls. After Pearl &
Beans contract was rescinded, exact copies of its light b oxes were installed in various SM malls
(fabricated by Metro Industrial Services, and later EYD Rainbow Advertising Corp.) Pearl &
Dean sent a letter to Shoemart and it sister company. North EDSA Marketing, to cease using the
light boxes and to remove them from the malls, and demanded the discontinued use of the trade
mark Poster Ads. Unsatisfied with the compliance of its demands, Pearl & Dean sued. The
trial court ruled in favor of Pearl & Dean, while the appellate court reversed the decision of the
trial court.
Issue: Whether pearl & Deans copyright registration for its light boxes and the trademark
registration of Poster Ads preclude Shoemart and North Edsa Marketing from using the same.
Held: No. Pearl & Dean secured its copyright under the classification class o work. This
being so, its protection extended only to the technical drawings and not to the light box itself.
Pearl & Dean cannot exclude others from the manufacture, sale and/or commercial use over the
light boxes on the sole basis of its copyright, certificate over the technical drawings. It cannot be
the intention of the law that the right of exclusivity would be granted for a longer time (so years
in copyright, and 17 years in patent) through the simplified procedure of copyright registration
with the National Library, without the rigor of defending the patentability of its invention
before the IPO and the public.
On the other hand, there has been no evidence that Pearl & Deans use of Poster Ads was
distinctive or well known. Poster Ads was too generic a name to identify it to a specific
company or entity. Poster Ads was generic and incapable of being used as a trademark
because it was used in the field of poster advertising, the very business engaged by earl & Dean.
Furthermore, Pearl & Deans exclusive right to the use of Poster Ads is limited to what is
written in its certificate of registration. Shoemart, et. al. cannot be held liable for the
infringement of the trademark.
Sat 4 Sep 2004
IPL-d: 246 Corporation v. Daway (GR 157216, 20 November

2003)
No Comments
246 Corporation v. Daway
GR 157 216, 20 November 2003; First division, Ynares-Santiago
Facts: In 1998, Montres Rolex SA and Rolex Centre Phil. Ltd., owners and proprietors of Rolex
and Crown Device filed against 246 Corporation, doing business as Rolex Music Lounge, a suit
for trademark infringement and damages. In 2000, 246 Corp. filed a motion for preliminary
hearing on its affirmative defense; which the court thereafter issued a subpoena ad testificandum
to Atty. Atienza. Montres Rolex opposed, and the trial court quashed the subpoena. 246 corp.
filed a petition for certiorari before the Court of Appeals, which was dismissed. Hence, the
petition for review on certiorari.
Issue: Whether the junior use of a registered mark on entirely different goods subsists.
Held: The rule, that there is no infringement in the use of a junior user of the registered mark
on the entirely different goods, has been modified b Section 123.1 (f) of RA 8293 (Intellectual
Property code). Hs use is precluded when that the mark is well known internationally and in the
Philippines, the use of the mark would indicate a connection or relationship between the user and
the registrant, and that the interests of the well-known mark are likely to be damaged. The court
however cannot resolve the merits considering the facts as to the existence/absence of the
requisites should be addressed in a full- blown hearing and not on a mere preliminary hearing.
Sat 4 Sep 2004
IPL-d: Del Monte vs. CA (GR 783, 23 January 1990)

No Comments
Del Monte vs. CA
GR 783, 23 January 1990; First Division, Cruz (J)
Facts: Del Monte granted Philippine Packing corp. the right to manufacture, distribute and sell
in the Philippine various products under the Del Monte trademark and logo. Del Monte was able
to acquire certificate of registration for its marks del monte and its logo; besides the Del Monte
catsup battle configuration. Years later, Sunshine Sauce Manufacturing acquired certificate of
registration for the logo of its Sunshine Fruit Catsup. Sunshines product is contained in various
bottles, including Del Monte bottles. Having received reports tha Sunshine was using its
exclusively designed bottles and a logo confusingly similar to Del Montes PhilPack warned
sunshine to desist from doing so. Ignored, PhilPack and Del Monte sued. The trial court ruled in
favor of sunshine. The Court of Appeals affirmed the decision. Hence, the petition for certiorari.
Issue: Whether the Sunshine label is a colorable imitation of the Del Monte trademark.
Held: Yes. The predominant colors used in both labels are green and red orange. The word
catsup in both bottles is printed in white and the print/letter style is the same. Although the
logo of sunshine is not a tomato, it approximates that of a tomato. The person who infringes a
trademark does not normally copy out but only makes colorable changes, employing enough
points of similarity to confuse the public and enough points of differences to confuse the courts.
When a manufacturer prepares to package his product, he has before him a boundless choice of
words, phrases, color and symbols sufficient to distinguish his product from others. When
sunshine chose, without reasonable explanation, to use the same colors and letters as used by
Del Monte, when the field of selection is so broad, the inevitable conclusion is that it was done
deliberately to deceive. Further, despite the many choices available to it, Sunshine opted to use
Del Montes bottle to market a product which PhilPack also produces, notwithstanding the
caution Del Monte Corporation, not to be refilled. This shows Sunshines bad faith and its
intention to capitalize3 on the reputation of Del Monte, and pass off its product as that of the
latter.
Sat 4 Sep 2004
IPL-d: Fruit of the Loom vs. CA (GR L-32747, 29 November

1984)
No Comments
Fruit of the Loom vs. CA
GR L-32747, 29 November 1984; Second division, Makasiar (J)
Facts: Fruit of the Loom is the registrant of the trademark Fruit of the Loom, while General
Garments corp. is the registrant of the trademark Fruit for Eve. Both trademarks cover
clothing. In 1976,k Fruit of the Loom filed with the trial court a complaint for infringement and
unfair competition against General Garments. The trial court ruled in favor of Fruit of the
Loom. General Garments appealed. The appellate court reversed the trial courts decision.
Hence, the petition for review on certiorari.
Issue: Whether there was an infringement of the trademark of Fruit of the Loom.
Held: No. The trademarks Fruit of the Loom and Fruit for Eve do not resemble each other
as to confuse or deceive an ordinary purchaser. No confusion would arise in the pronunciation of
the two marks. Further, the similarities of the competing trademarks are completely lost in the
substantial difference in the design and general appearance of their respective hang tags. For one
to be confusingly similar to another, the discerning eye of the observer must focus not only on
the predominant words but also on the other features appearing in the labels.
Sat 4 Sep 2004
IPL-d: La Chemise Lacoste vs. Fernandez (GR 63796-97, 21

May 1984)
No Comments
La Chemise Lacoste vs. Fernandez
GR 63796-97, 21 May 1984; First Division, Gutierrez Jr. (J)
Facts: La chemise Lacoste is a French corporation and the actual owner of the trademarks
Lacoste, Chemise Lacoste, Crocodile Device and a composite mark consisting of the word
Lacoste and a representation of a crocodile/alligator, used on clothings and other goods sold in
many parts of the world and which has been marketed in the Philippines (notably by Rustans)
since 1964. In 1975 and 1977, Hemandas Q. Co. was issued certificate of registration for the
trademark Chemise Lacoste and Q Crocodile Device both in the supplemental and Principal
Registry. In 1980, La Chemise Lacoste SA filed for the registration of the Crocodile device
and Lacoste. Games and Garments (Gobindram Hemandas, assignee of Hemandas Q.Co.)
opposed the registration of Lacoste.
In 1983, La Chemise Lacoste filed with the NBI a letter-complaint alleging acts of unfair
competition committed by Hemandas and requesting the agencys assistance. A search warrant
was issued by the trial court. Various goods and articles were seized upon the execution of the
warrants. Hemandas filed motion to quash the warrants, which the court granted. The search
warrants were recalled, and the goods ordered to be returned. La Chemise Lacoste filed a
petition for certiorari.
Issue: Whether the proceedings before the patent office is a prejudicial question that need to be
resolved before the criminal action for unfair competition may be pursued.
Held: No. The proceedings pending before the Patent Office do not partake of the nature of a
prejudicial question which must first be definitely resolved. The case which suspends the
criminal action must be a civil case, not a mere administrative case, which is determinative of the
innocence or guilt of the accused. The issue whether a trademark used is different from
anothers trademark is a matter of defense and will be better resolved in the criminal proceedings
before a court of justice instead of raising it as a preliminary matter in an administrative
proceeding.
Inasmuch as the goodwill and reputation of La Chemise Lacoste products date back even before
1964, Hemandas cannot be allowed to continue the trademark Lacoste for the reason that he
was the first registrant in the Supplemental Register of a trademark used in international
commerce. Registration in the Supplemental Register cannot be given a posture as if the
registration is in the Principal Register. It must be noted that one may be declared an unfair
competitor even if his competing trademark is registered. La Chemise Lacoste is world
renowned mark, and by virtue of the 20 November 1980 Memorandum of the Minister of Trade
to the director of patents in compliance with the Paris Convention for the protection of industrial
property, effectively cancels the registration of contrary claimants to the enumerated marks,
which include Lacoste.
Sat 4 Sep 2004
IPL-d: Pagasa Industrial vs. CA (GR L-54158, 31 August

1984)
No Comments
Pagasa Industrial vs. CA
GR L-54158, 31 August 1984; En Banc, Aquino (J)
Facts: Yoshida Kogyo Kabushiki Kaisha was issued a certificate of Registration in 1961 for the
trademark YKK for slide fastener and zippers. The trademark is claimed to have been used since
1950. Notwithstanding the prior registration, a certificate of registration was issued to Pagasa
Industrial for the same trademark for zippers in 1966. In 1975, Yoshida asked the Director of
Patents to cancel the registration of Pagasa, which it did. Pagasa appealed. The appellate court
affirmed the cancellation. Pagasa appealed to the Supreme Court.
Issue: Whether Pagasa is entitled to the trademark YKK.
Held: No. Pagasa has not shown any semblance of justification for usurping the trademark
YKK. In fact, Pagasa knew prior to 1968 that Yoshida was the registered owner and user of the
YKK trademark, which is an acronym of its corporate name. The registration of Pagasa was
admittedly a mistake. Pag-asas application should have been denied outright. Further, Pagasas knowledge of the trademarks prior use precludes the application of the equitable principle
of laches, estoppel and acquiescence. He who comes into equity must come with clean hands.
Sat 4 Sep 2004
IPL-d: Converse Rubber vs. Universal Rubber (GR L-27906,

8 January 1986)
No Comments
Converse Rubber vs. Universal Rubber
GR L-27906, 8 January 1986; Second Division, Fernan (J):
Facts: Universal Rubber Products filed an application with the Patents office for the registration
of the trademark Universal Converse and Device used on rubber shoes and rubber slippers.
Converse Rubber Corp. filed its opposition on the ground that the trademark is confusingly
similar to the word converse which was part of its corporate name, and which would result in
injury to its business reputation and goodwill. The director of Patents dismissed converse
Rubbers opposition. With its motion for reconsideration denied, it filed a petition for review
with the Supreme Court.
Issue: Whether Universal Rubber can appropriate Converse.
Held: No. Converse Rubber has earned a business reputation and goodwill in the Philippines.
The word converse has been associated with its products, converse chuck Taylor, Converse
all Star, All Star Converse Chuck Taylor, or Converse Shoes Chuck and Taylor.
Converse has grown to be identified with Converse rubber products and has acquired a second
meaning within the context of trademark and tradename laws. There is confusing similarity
between Universal converse and Device and Converse chuck Taylor and All Star Device
which would confuse the public to the prejudice of Converse Rubber inasmuch as Universal
Converse and Device is imprinted in a circular manner on the side of its rubber shoes, similar to
that of Converse Chuck Taylor.
Sat 4 Sep 2004
IPL-d: Emerald Garment v CA (GR 100098, 29 December

1995)

No Comments
Emerald Garment v CA
GR 100098, 29 December 1995; First Division, Kapunan (J):
Facts: HD Lee Co. owns the trademarks Lee, Lee Riders and Lee sures in both the
supplementary and principal registers, as early as 1969 to 1973. In 1981, it filed for the
cancellation for the registration of the trademark stylistic Mr. Lee, applied/owned by Emerald
Garment Manufacturing Corp. In 1988, the Director of Patents ruled in favor of HD Lee. In
1990, the Court of Appeals affirmed the decision of the Director of Patents. Hence, the petition
for review on certiorari.
Issue: Whether the trademark stylistic Mr. Lee is confusingly similar to HD Lees trademarks
to warrant its cancellation in the supplemental Registry.
Held: No. Stylistic Mr. Lee is not a variation of the Lee mark. HD Lees variation follows the
format lee riders, leesure, and leeleens and thus does not allow the conclusion that Stylistic
Mr. Lee is another variation under HD Lees mark. Although on stylistic Mr. Lees label, the
word lee is prominent, the trademark should be considered as a whole and not piecemeal.
Further, Lee is a surname. Personal names nor surnames cannot be monopolized as trademarks
or tradenames as against others of the same name or surname. Furthermore, inasmuch as
Emerald Garment has shown the use of stylistic Mr. Lee since 1975 through sales invoice from
stores and retailers; and that HD Lee was not able for transactions period to 1981; the Supreme
Court allowed the use of stylistic Mr. Lee by Emerald Garment.
Sat 4 Sep 2004
IPL-d: Kabushi Kaisha Isetan vs. lAC (GR 75420, 15

November 1991)
No Comments
Kabushi Kaisha Isetan vs. lAC
GR 75420, 15 November 1991; Second Division, Gutierrez Jr., (J)
Facts: Kabushi Kaisha Isetan is a Japanese corporation, and owner of the trademark Isetan
and the Young leave design. Isetann Department Store, on the other hand, is a domestic
corporation, and owner fo the trademark Isetann and flover design. In 1980, Kabushi Kaisha
Isetan field petitions for the cancellation of the supplemental registration of Isetann with the
Philippine Patent Office. It also filed for the cancellation of the mark Isetan from the corporate
name of Isetann Department Store with the SEC. Both the SEC and the Director of Patents,
eventually, ruled against Kabushi Kaisha Isetan. It appealed to the intermediate Appellate
Court, which denied the petition for being filed out of time.
Issue: Whether Kabushi Kaisha Isetan has the right to seek for the cancellation of the word
Isetan from the corporate name of Isetann Department Store.
Held: No. A Fundamental principle in Trademark Law is that the actual use in commerce in the
Philippines is a pre-requisite to the acquisition of ownership over a trademark or a tradename.
Kabushi Kaisha Isetan has never conducted any business in the Philippines. It has never
promoted its trademark or tradename in the Philippines. It has absolutely no business goodwill
in the Philippines. It is unknown to Filipinos except the very few who may have noticed it while
traveling abroad. It has never paid a single centavo of tax to the Philippine Government. Under
the law, it has no right to the remedy it seeks. Isetann Department Store is entitled to use its
trademark in the Philippines.
Sat 4 Sep 2004
IPL-d: Sterling Products Vs. Farbenfabriken Bayer (GR L19906, 30 April 1969)
No Comments
Sterling Products Vs. Farbenfabriken Bayer
GR L-19906, 30 April 1969; En Banc, Sanchez (J).
Facts: The Bayer Cross in circle trademark was registered in Germany in 1904 to
Farbenfabriken vorm. Friedr. Bayer (FFB), successor to the original Friedr. Bauyer et. Comp.,
and predecessor to Farbenfabriken Bayer aktiengessel craft (FB2). The Bayer, and Bayer
Cross in circle trademarks were acquired by sterling Drug Inc. when it acquired FFBs
subsidiary Bayer Co. of New York as a result of the sequestration of its assets by the US Alien
Property Custodian during World War I. Bayer products have been known in Philippines by the
close of the 19th century. Sterling Drugs, Inc., however, owns the trademarks Bayer in relation
to medicine. FBA attempted to register its chemical products with the Bayer Cross in circle
trademarks. Sterling Products International and FBA seek to exclude each other from use of the
trademarks in the Philippines. The trial court sustained SPIs right to use the Bayer trademark
for medicines and directed FBA to add distinctive word(s) in their mark to indicate their products
come from Germany. Both appealed.
Issue: Whether SPIs ownership of the trademarks extends to products not related to medicine.
Held: No. SPIs certificates of registration as to the Bayer trademarks registered in the
Philippines cover medicines only. Nothing in the certificates include chemicals or insecticides.
SPI thus may not claim first use of the trademarks prior to the registrations thereof on any
product other than medicines. For if otherwise held, a situation may arise whereby an applicant
may be tempte3d to register a trademark on any and all goods which his mind may conceive
even if he had never intended to use the trademark for the said goods. Omnibus registration is
not contemplated by the Trademark Law. The net result of the decision is that SPI may hold on
its Bayer trademark for medicines and FBA may continue using the same trademarks for
insecticide and other chemicals, not medicine.
The formula fashioned by the lower court avoids the mischief of confusion of origin, and does
not visit FBA with reprobation and condemnation. A statement that its product came from
Germany anyhow is but a statement of fact.
Sat 4 Sep 2004
IPL-d: Asari Yoko v. Kee Boc (GR L-14086, 20 January

1961)
No Comments
Asari Yoko v. Kee Boc
GR L-14086, 20 January 1961; En Banc, Labrador (J)
Facts: In 1953, Kee Boc filed a petition for the registration of the trademark Race to be used
in shirt and undershirts manufactured by him. Opposition was interposed by Asari Yoko Co. Ltd.
of Japan on the ground that it was the owner of such trademark both in Japan and in the
Philippines. The director of Patents dismissed Asari Yokos opposition. Hence, the petition for
review.
Issue: Whether Asari Yoko was the rightful owner of the Race Brand trademark.
Held: The trademark RaceBrand applied for is exactly the same as the trademark
RaceBrand applied for is exactly the same as the trademark RaceBrand registered in 1937 in
Tokyo, Japan. Paper sheets pasted in Kee Bocs boxes covered the words registered Trademark
by the oppositor, thus, is proven conclusively by evidence. No evidence was found whether the
trademark was registered by a Japanese in the Philippines before the war to warrant its
confiscation under the Trading with the enemy Act. As commercial relations with Japan had
existed and continued, and that the goods bearing the trademark entered the Philippines legally,
the owner of the trademark is entitled to the right to use the same to the exclusion of others.
Existence of formal commercial agreement between the countries is unnecessary for the
recognition of trademarks as such is inconsistent with the freedom of trade recognized in modern
times.
Sat 4 Sep 2004
IPL-d: Philips Export BV vs. CA (GR 96161, 21 February

1992)
No Comments
Philips Export BV vs. CA
Gr 96161, 21 February 1992; Second Division , Melencio-Herrera (J)
Facts: Philips Export BV is a foreign corporation organized in Netherlands and not engaged in
business in the Philippines. It is the registered owner of the trademark Phillips and Phillips
Shield Emblem. Philips Electrical Lamp, Inc. and Philips Industrial Development Inc. besides
PEBV, are corporations belonging to the Philips Group of Companies. In 1984, PEVB filed a
letter-complaint with the SEC for the cancellation of the word Phillips from Standard Philips
corporate name. The SEC en banc affirmed the dismissal of PEBUs complaint by one of its
hearing officers. The Court of Appeals dismissed PEVBs petition for review certiorari, as
referred by the Supreme Court.
Issue: Whether there is confusing similarity between the corporate names to warrant the removal
of Philips in Standard Philips corporate name.
Held: Yes. The right to exclusive use of a corporate name with freedom from infringement by
similarity is determined by priority of adoption. PEBV, et al. have priority in adoption, as
Standard Philips was issued a Certificate of Registration 26 years after Philips Electrical and
Philips Industrial acquired theirs. A reading from said corporate names, it is obvious that
Philips is the dominant word in all companies affiliated with the principal corporation, PEVB.
Given that standard Philips primary purpose does not prevent it from dealing in the same line of
business of electrical devices, products or supplies, as that of Philips Electrical, it can only be
said that the subsequent appropriator of the name or one confusingly similar thereto usually
seeks an unfair advantage, a free ride on anothers goodwill. Inasmuch as Standard Philips has
submitted an undertaking to the SEC manifesting its willingness to change its corporate name in
the event another person, firm or entity has acquired a prior right to the use of the said firm name
or one deceptively or confusingly similar to it. Standard Philips must now be held in its
undertaking.
Sat 4 Sep 2004
IPL-d: Western Equipment vs. Reyes (GR 27897, 2

December 1927)
No Comments
Western Equipment vs. Reyes
GR 27897, 2 December 1927; En Banc, Johns (J)
Facts: In 1925, Western Equipment and Supply Co. applied for the issuance of a license to
engage in business in the Philippines. On the other hand, Western Electric Co. has never been
licensed to engage in business, nor has it ever engaged in business in the Philippines. Western
Equipment, since the issuance of its license, engaged in the importation and sale of electrical and
telephone apparatus and supplies manufactured by Western Electric. A local corporation, Electric
Supply Co. Inc. has been importing the same products in the Philippines. In 1926, Electric
Supplys president, Henry Herman, along with other persons sought to organize a corporation to
be known as Western Electric Co. Inc. Western Equipment, et al. filed against Herman to prevent
them from organizing said corporation. The trial court ruled in favor of Western Equipment,
holding that the purpose of the incorporation of the proposed corporation is illegal or void.
Issue: Whether the foreign corporation Western Electric Co. Inc. has right of action to prevent an
officer of the government from issuing a certificate of incorporation to Philippine residents who
attempt to pirate the corporate name of the foreign corporation and engage in the same business.
Held: Yes. A trademark acknowledges no territorial boundaries of municipalities, states or
nations, but extends to every market where the traders goods have become known and identified
by the use of the mark. Rights to the use of its corporate name or trade name is a property right, a
right in rem, which it may assert and protect against the whole world, in any of the courts in the
world even in jurisdictions where it does not transact business just the same as it may protect
its tangible property, real or personal, against trespass or conversion.
The trial court was correct in holding that the purpose of the proposed corporation by Herman,
et. al. as fraudulent and contrary to law, as it attempts to unjustly compete with the real Western
Electric Co. Inc. and deceive Filipinos into thinking that the goods they propose to sell are goods
of manufacture of the real Western Electric Co.
Sat 4 Sep 2004
IPL-d: Asia Brewery vs. CA (GR 103543, 5 July 1993)

No Comments
Asia Brewery vs. CA

GR 103543, 5 July 1993; En Banc, Grino-Aquino (J)
Facts: In 1988, san Miguel Corporation filed a complaint against Asia Brewery Inc. for
infringement of trademark and unfair competition on account of the latters Beer Pale Pilsen or
Beer na Beer product which has been competing with the formers San Miguel Pale Pilsen for a
share of the local beer market. The trial court ruled in favor of Asia Brewery. The appellate court,
however, over turned the trial courts ruling. Asia Brewery appealed.
Issue: Whether Asia Brewery is guilty of unfair competition, arising from the allegedly
confusing similarity in the general appearance of ABIs Beer Pale Pilsen against SMCs San
Miguel Pale Pilsen.
Held: No. The dominant feature of SMCs trademark is San Miguel Pale Pilsen while ABIs is
Beer Pale Pilsen. The word Beer does not appear in SMCs product, nor the words San
Miguel appear in ABIs product. Neither the sound, spelling or appearance can Beer Pale Pilsen
be said to be confusingly similar to San Miguel Pale Pilsen. San Miguel does not have exclusive
rights to the generic or descriptive words pale and pilsen. Neither does it have the exclusive
right to use 320 ml. steinie bottle with white rectangular label. The amber color is a functional
feature of the beer bottle as the color prevents the transmission of light and provides the
maximum protection to beer. The bottle capacity is the standard prescribed by the Metric System
Board of the Department of Trade. The white label is the most economical to use and presents
the strongest contrast to the bottle. San Miguel cannot claim monopoly to such features as the
protection provided by law is confined to non-functional features. Further, Beer Pale Pilsen is not
being passed off as San Miguel Beer Pale Pilsen. It does not result to confusion inasmuch as beer
is ordered by brand, and is not taken freely from supermarket shelves. The points of dissimilarity
of the products outnumber their points of similarity.
The appellate court is correct in its finding that Asia Brewery does not infringe upon SMCs
trademark nor does it commit unfair competition.
Sun 4 Apr 2004
Sales-d: Philippine Trust Co. v. Roldan (GR L 8477, 31 May

1956)
No Comments
Philippine Trust Co. v. Roldan
99 Phil 392
Facts: 17 parcels of land (Guiguinto, Bulacan) were inherited by Mariano L. Bernardo from his
father. Socorro Roldan, his stepmother, was appointed by the court as his guardian. Roldan was
able to secure permission later on to sell his wards property for the alleged purpose of investing
the proceeds thereof in a residential house in Manila, to which Mariano allegedly desired. Roldan
sold the parcels of land to his brother-in-law Dr. Fidel C. Ramos, to which a judicial
confirmation of the sale was obtained. The next day, Ramos executed a deed of conveyance
covering the same parcels for the sum of P15,000. Two months later, Roldan sold 4 parcels to
Emilio Cruz for P3,000, reserving to herself the right to purchase. The Philippine Trust Company
replaced Roldan as guardian a year later, and thereafter, filed a complaint in the lower court to
annul the contracts regarding the parcel of land pursuant to the prohibitions provided in Article
1459. The trial court upheld the validity of the contracts but allowing the minor to repurchase the
land for P15,000 within one year.
Issue: Whether the contracts of sale involving the 17 parcels of land are valid.
Held: The three contracts of sale are void; the first two for violation of article 1459 of the Civil
Code; and the third because Roldan could pass no title to Emilio Cruz. The annulment carries
with is (Article 1303 Civil Code) the obligation of Roldan to return the 17 parcels together with
their fruits and the duty of the minor, through his guardian to repay P14,700 with legal interest.
Guardianship is a trust of the highest order, and the trustee cannot be allowed to have any
inducement to neglect his wards interest and in line with the courts suspicion whenever the
guardian acquires the wards property, the Court has no hesitation to declare that, in the eyes of
the law, the guardian (Roldan) took by purchase her wards parcels (thru Dr. Ramos), and that
Article 1459 of the Civil Code applies. The reconveyance of the property to Roldan after being
sold to her brother-in-law within a week of each other, or a day after the judicial confirmation of
sale was obtained, raises suspicions. Even if arguendo she acted without malice, the temptation
which naturally besets a guardian so circumstanced, necessitates the annulment of the
transaction, even if no actual collusion is proved (so hard to prove) between such guardian and
the intermediate purchaser. This would uphold a sound principle of equity and justice.
Sun 4 Apr 2004
Sales-d: Rubias v. Batiller (GR L 35702, 29 May 1973)

No Comments
Rubias v. Batiller
51 SCRA 120
Facts: Francisco Militante claimed ownership over land in Iloilo (Bo. Gen. Luna, Barotac Viejo),
to which he filed an application for registration of title with the CFI Iloilo. The application was
opposed by the Director of Lands. The CFI dismissed the registration. Pending disposal of the
appeal in the Court of Appeals, Militante sold the land to Domingo Rubias, his son-in-law and a
lawyer by profession. Rubias declared the land for taxation purposes under various tax
declarations and land taxes. The CA likewise dismissed Militantes application. Meanwhile,
other claimants declared the same land for taxation purposes (tax declaration and land tax), one
of whom is Isaias Batiller. In 1960, Rubias filed a forcible entry case against Batiller before the
municipal court, which the latter ruled in favor of Batiller. Rubias appealed to the CFI, which
affirmed the judgment in favor of Batiller. In 1964, Rubias filed a suit to recover ownership and
possession of land to claim portions of lot, bought from Militante, which were occupied by
Batiller. The lower court (CFI) dismissed the case. Rubias appealed to the Court of appeals
which certified the appeal to the Supreme Court for involving purely legal questions.
Issue: Whether the sale of the lot by Francisco Militante to his son-in-law Domingo Rubias is
valid for the latter to claim ownership over said lot
Held: The purchase by a lawyer of the property in litigation from his client is categorically
prohibited by Article 1491, paragraph (5) of the Civil Code, and that consequently, Rubias
purchase of the property in litigation from his father-in-law was void and could produce no legal
effect (Article 1409 [7] of the Civil Code). It is void and not voidable (as the 1929 case of
Director of Lands v. Abagat which declared such purchase void superceded the 1911 case of
Wolfson v. Estate of Martinez which declared such purchase mere voidable). The nullity of
prohibited contracts is definite and permanent and cannot be cured by ratification. The public
interest and public policy remain paramount and do not permit of compromise or ratification.
However, when the causes of nullity which have ceased to exist, a second contract may be
executed and would then be valid from its execution; however, it does not retroact to the date of
the first contract.
Still, Rubias complaint, to be declared absolute owner of the land and to be restored to
possession thereof with damages, was bereft of any factual or legal basis. The CAs final
judgment affirming the dismissal of Militantes application of registration made it conclusive that
Militante lack rightful claim or title to the land. There was no right or title to the land that could
be transferred or sold by Militantes purported sale in favor of Rubias in 1956.
Sun 4 Apr 2004
Sales-d: Guiang v. CA (GR 125172, 26 June 1998)

1 Comment
Guiang v. CA
291 SCRA 372
Facts: Judie and Gilda Corpuz were married in 1968 in Bacolod City. In 1983, the spouses
bought a lot in South Cotabato (Brgy. Gen. Paulino Santos, Koronadal) from Manuel Callejo
through a conditional deed of sale, the consideration payable in installment. In 1988, the spouses
sold half of the land to Antonio and Luzviminda Guiang. The latter build their house on their half
of the lot. In 1989, Gilda went to Manila, with the consent of her husband, to look for work
abroad. She became a victim of an unscrupulous illegal recruiter. While she was in Manila, her
husband sold the remaining half of the property to the Guiangs, even if the latter held the letter of
Gildas protestations over said sale. To cure the defect in the husbands title over the land,
Luzviminda Guiang executed another agreement over the lot with the widow of Manuel Callejo
(Manuela Jimenez). A week after, Gilda returned to Koronodal and gathered her children, living
in different households, and stayed at their house. The Guiangs filed a complaint against Gilda
with the barangay authorities for trespassing. An amicable settlement was signed before the
barangay captain, requiring Gilda and her family to vacate the premises free of charge. Gilda,
alleging coercion and misrepresentation, sought to annul said document, to no avail. Gilda, then,
filed an amended complaint against her husband and the Guiangs, seeking that the court declare
the deed of sale involving the conjugal property null and void. The lower court (RTC) ruled in
favor of Gilda Corpuz but ordered her to pay the amounts paid as unpaid balance for the lot and
the realty taxes incurred by the Guiangs. The appellate court affirmed said ruling.
Issue: Whether the sale made by Judie Corpuz to Antonio and Luzviminda Guiang is valid.
Held: The contract of sale of the conjugal property is void because the written consent of one
spouse is absent or totally inexistent; pursuant to the amendatory effect made by the Family Code
(Article 124), which was made effective 3 August 1988 and which covers the encumbrance or
the alienation of the conjugal property in the present case. Encumbrance or alienation of conjugal
property by one spouse without the consent of the other spouse is no longer voidable (as it was
under Article 166 in relation to Article 173 of the Civil Code).
Under the Family Code, the transaction shall be construed as a continuing offer on the part of the
consenting spouse and the third person, and may be perfected as a binding contract upon the
acceptance by the other spouse or authorization by the court before the offer is withdrawn by
either or both offerors. The amicable settlement agreed by the parties merely states that Gilda
and family are to vacate the property, and does not state an acceptance of the continuing offer.
Sun 4 Apr 2004
Sales-d: Calimlim-Canullas v. Fortun (GR 57499, 22 June

1984)
No Comments
Calimlim-Canullas v. Fortun
128 SCRA 675
Facts: Fernando Canullas and Mercedes Calimlim were married in 1962. They lived in a small
house on a 891 sq.m. residential land in Pangasinan (Bagabac, Bugallon). When Canullas father
died in 1965, he inherited the land. In 1978, he abandoned the family and lived with Corazon
Daguines. In 1980, he sold the property to Daguines for P2,000. Daguines filed a complaint for
quieting of title and damages against Mercedes, after the former was unable to take possession of
the house and lot. The trial court (CFI) ruled in favor of Daguines, ruling that she is the owner of
of the land as well as of the house erected on said land. Upon reconsideration, the judgment
was modified wherein Daguines is the owner of the land and 10 coconut trees thereon, and the
sale of the conjugal house including 3 coconuts and other crops planted during the conjugal
relation of the spouses is null and void.
Issue: Whether the sale made by Fernando Canullas to Corazon Daguines was valid.
Held: The contract of sale was null and void for being contrary to morals and public policy,
pursuant to Article 1409 of the Civil Code. The sale was made by a husband in favor of a
concubine after he had abandoned his family and left the conjugal home where his wife and
children lived and from whence they derived their support. That sale was subversive of the
stability of the family, a basic social institution which public policy cherishes and protects.
Sun 4 Apr 2004
Sales-d: Medina v. CIR (GR L-15113, 28 January 1961)

No Comments
Medina v. CIR
1 SCRA 302
Facts: Antonio Medina is married to Antonia Rodriguez (since 1944), both not having property
or business of their own at that time of marriage. Antonio in 1946 acquire forest concessions in
Isabela (Sn. Mariano and Palanan). Logs cut and removed by Antonio from his concessions were
initially sold to different persons in Manila through his agent Mariano Osorio. The wife later
engaged in business as lumber dealer and sold all logs produced in the Sn. Mariano concession to
persons in Manila through the same agent. The Collector of Internal Revenue imposed a tax
assessment on Antonio Medina considering the sales of the wife as that of Antonios original
sales taxable under Section 186 NIRC. Antonio appealed, contending that the spouses had a
premarital agreement of absolute separation of property, the records of which was allegedly
destroyed during World War II. The Collector modified the assessment, reducing the amount to
be paid. Antonio requested for consideration, but which was denied. Antonio appealed to the
CTA, which upheld the assessment of the collector except for so-called compromise penalties.
Antonio filed present petition.
Issue: Whether the sale made by Antonio to his wife were valid so as to exempt the sales made
by Antonia from being considered as part of Antonios original sales taxable under Section 186
of the NIRC.
Held: As there is no evidence of a pre-marital agreement of absolute separation between the

spouses, the sales made by Antonio (as forest concessionaire) to his wife (as lumber dealer) are
null and void as these are contracts violative of Article 1490 of the Civil Code. Being void
transactions, the sales made by Antonio to his wife were correctly disregarded by the Collector in
his tax assessments that considered as the taxable sales those made by the wife through the
spouses common agent, Osorio.
Sun 4 Apr 2004
Sales-d: Puyat & Sons v. Arco Amusement (GR 47538, 20

June 1941)
No Comments
Puyat & Sons v. Arco Amusement
72 Phil 402
Facts: Gonzalo Puyat & Sons is the exclusive agent of Starr Piano Company of Richmond,
Indiana USA, in the Philippines. Teatro Arco, or Arco Amusement Company, desiring to equip
its cinematograph with sound reproducing devices, approached Puyat. It was agreed by the
parties that Puyat would in behalf of Arco order equipment from Starr Piano and that Arco would
pay Puyat in addition to price of the equipment, 10% commission plus all expenses such as
freight, insurance, banking charges, cables, etc. Puyat informed Arco that the price of the
equipment was $1,700, to which Arco agreed. Later, a similar arrangement was made by Arco for
the purchase of similar equipment for $1,600 with 10% commission, with Puyat charging an
additional flat charge of $160 for all expenses and charges. 3 years later, Arco learned that the
price quoted by Puyat on the 2 orders were not the net price but the list price for the equipment.
Arco filed a complaint with the trial court (CFI) demanding reimbursement from said
overpriced sales. The trial court ruled in favor of Puyat, but the Court of Appeals reversed such
decision and declared Puyat an agent of Arco Amusement in the purchase of said equipment.
Issue: Whether the agreement made between Puyat and Arco Amusement is that of purchase and
sale or that of agency.
Held: Gonzalo Puyat & Sons cannot be the agent of Arco Amusement in the purchase of
equipment from Starr Piano Company as Puyat & Sons is already the exclusive agent of Starr
Piano in the Philippines. Puyat cannot be the agent of both vendor and purchaser. The fact that a
commission was offered to the other does not necessarily mean that the latter has become the
agent of the former, as this was only an additional price which Arco bound itself to pay and
which is not incompatible with the contract of purchase and sale. Puyat is not bound to reimburse
the profit acquired in the transaction, as this is the very essence of commerce involving
middlemen and merchants. The contract is the law between the parties. What does not appear on
the face of the contract should be regarded as dealers or traders talk which cannot bind either
party. Not every concealment is fraud, short of fraud, and such as that in this case, is considered
as business acumen.
Sun 4 Apr 2004
Sales-d: Quiroga v. CA (GR 11491, 23 August 1918)

No Comments
Quiroga v. CA
38 Phil 501
Facts: A contract was entered between Quiroga and Parsons for the exclusive sale of Quiroga
beds in the Visayas Islands, specifically Iloilo. Quiroga furnishes the beds to Parson, who in turn
pay the price in the manner stipulated. Quiroga provided a discount of 20 to 25% for the beds,
depending on their class. Later, Quiroga filed a case against Parsons for violation of its
obligation not to sell the beds at higher price than those of the invoices, etc. (which are not
expressly stipulated in the contract, except for the manner the beds are ordered by the dozen).
Quiroga maintains that Parson is his agent for the sale of his beds in Iloilo, and that the contract
is that of commercial agency.
Issue: Whether the contact is that of sale or of commercial agency.
Held: The contract between the parties is a contract of purchase and sale as Parson, by receiving
the bed, was necessarily obliged to pay their price within the term fixed, without any other
consideration and regardless as to whether he had or had not sold the bed. The words
commission on sales in the contract is nothing else than a mere discount on the invoice price.
Further, the word agency used thereon only expresses that Parson was the sole seller of
Quiroga beds in the Visayas. None of the other clauses of the contract are not incompatible with
the contract of purchase and sale.
Sun 4 Apr 2004
Sales-d: Romero v. CA (GR 107207, 23 November 1995)

No Comments
Romero v. CA
250 SCRA 15
Facts: Virgilio Romero and his foreign partners decided to put up a central warehouse in Metro
Manila. Alfonso Flores, in behalf of Enriqueta Chua vda. De Ongsiong, proposed the latters lot
to Romero as the site for the said warehouse. A contract denominated as Deed of Conditional
Sale was executed between Romero and Ongsiong where the amount of P50,000 was received
from Romero for the purpose of taking up am ejectment case against the squatters found therein.
Ongsiong sought to return the amount she received from Romero as she claimed she is unable to
rid the land of squatters, notwithstanding the favorable judgment already promulgated by the
court in the ejectment case. Romeros counsel refused the tender and expressed willingness to
underwrite the expense of executing the judgment chargeable to the purchase price of the land.
Ongsiong filed a case with the trial court for the rescission of the deed of conditional sale, and
for the consignation of the amount of P50,000. The trial court rendered a decision in favor of
Romero, which was reversed by the Court of Appeals.
Issue: Whether the Deed of Conditional Sale is a perfected contract of sale
Held: The deed of sale, even if denominated as a deed of conditional sale, may be treated as
absolute in nature, especially if title to the property sold is not reserved in the vendor or if the
vendor is not granted the right to unilaterally rescind the contract predicated on the fulfillment or
non-fulfillment of the prescribed condition. In determining the real character of contract, the
substance and not the title given by the party is more significant. Upon perfection, i.e. where the
seller obligates himself, for a price certain, to deliver and to transfer ownership of a specific
thing or right to the buyer over which the latter agrees, the parties are bound not only to the
fulfillment of what was expressly stipulated but also the consequences which may be in keeping
with good faith, usage and law. Being a perfected contract of sale, no rescission can be had. The
proper action is an action for damages. Arguendo that rescission is available as a remedy, as
provide by Article 1191 in reciprocal obligations, it may only be availed of by the injured party.
Sun 4 Apr 2004
Sales-d: Coronel v. CA (GR 103577, 7 October 1996)

No Comments
Coronel v. CA
263 SCRA 15
Facts: Romulo Coronel executed a document entitled Receipt of Downpayment in favor of
Ramona Patricia Alcaraz for P50,000 downpayment of the amount of P1.24M as purchase price
for an inherited house and lot, without reservation to withhold the transfer of such property until
full payment. The purpose of such downpayment was for the heirs to transfer the title to their
name. Upon the registration of the property to name of the heirs, the Coronels sold the same
property to Catalina B. Mabanag for P1.58M. The Coronels rescinded the contract with Alcaraz
by depositing the downpayment amount in a bank account in favor of Alcaraz. Alcaraz filed a
complaint for specific performance, which the trial and the appellate court ruled in her favor.
Issue: Whether the receipt of downpayment serves a contract to sell or a conditional contract
of sale.
Held: The agreement is a contract of sale as there was no express reservation of ownership or
title to the subject parcel of land. Petitioners did not merely promise to sell the property to
private respondent upon the fulfillment of the suspensive condition but on the contrary, having
already agreed to sell the subject property, they undertook to have the certificate of title changed
to their names and immediately thereafter, to execute the written deed of absolute sale. The
suspensive condition was fulfilled on 6 February 1985 and thus, the conditional contract of sale
between the parties became obligatory, the only act required for the consummation thereof being
the delivery of the property by means of the execution of the deed of absolute sale in a public
instrument, which petitioners unequivocally committed themselves to do as evidenced by the
Receipt of Down Payment.
Thu 25 Mar 2004
Nego-d: Uy vs. CA (GR 119000, 28 June 1997)

No Comments
Uy vs. CA
GR 119000, 28 June 1997
First Division, Bellosillo (J)
Facts: Rosa Uy and Consolacion Leong, who are friends, formed a partnership; with
Consolacion contributing additional capital for the expansion of Rosas lumber business. The
friendship between the two soured when the partnership documents were never processed.
Consolacion asked for the return of her investments. Rosa issued check which were dishonored
for insufficiency of funds. Uy was charged for estafa and violation of BP 22.
Issue: Whether knowledge of insufficiency of funds is transitory or simultaneous with the
issuance of the instrument.
Held: Even if it is true that BP 22 is a transitory or continuing offense and as such a person
indicted with a transitory offense may be validly tried in any jurisdiction where the offense was
in part committed, knowledge by the maker or drawer of the fact that he has no sufficient funds
to cover the check or of having sufficient funds is simultaneous to the issuance of the instrument.
None of the essential ingredients of BP 22 was committed in the City of Manila; i.e. Consolacion
was a resident of Makati while Uy was a resident of Caloocan City; the place of business of the
alleged partnership is in Malabon; the drawee bank was located in Malabon; and the checks were
all deposited for collection in Makati.
Thu 25 Mar 2004
Nego-d: Travel On vs. CA (GR 56169, 26 June 1992)

No Comments
Travel On vs. CA
GR 56169, 26 June 1992
Third Division, Feliciano (J)
Facts: Travel-On Inc. is a travel agency selling airline tickets on commission basis for and in
behalf of different airline companies. Arturo S. Miranda had a revolving credit line with TravelOn. He procured tickets on behalf of airline passengers and derived commissions therefrom.
Miranda apparently owed Travel-On the amount of P278,201.57 (the value of airline tickets sold
to the former), to which Miranda paid various amounts in cash and in kind. He thereafter issued
6 post-dated checks amounting to P115,000 which were all dishonored by the drawee bank.
Travel-On filed suit to recover the value of the checks. Miranda countered that he instead
overpaid his obligations, and that he merely issued the checks for purposes of accommodation as
he allegedly had in the past accorded Travel-On.
Issue: Whether Miranda is indebted to Travel-On, or whether he is an accommodation party.
Held: A check which is regular on its face is deemed prima facie to have been issued for a
valuable consideration and every person whose signature appears thereon is deemed to have
become a party thereto for value. Thus, the mere introduction of the instrument sued on, in
evidence prima facie, entitles the plaintiff to recovery. Such presumption subsists unless
otherwise contradicted by other competent evidence. The checks, being presented for payment,
were thus intended for encashment. There is nothing in the checks (nor in other documents) that
stated otherwise. Travel-On was a payee, not an accommodated party for the checks, as it
realized no value on the checks which bounced. Travel-On, thus, is entitled to the benefit of the
presumption that it is a holder in due course.
Thu 25 Mar 2004
Nego-d: Tibajia vs. CA (GR 100290, 4 June 1993)

No Comments
Tibajia vs. CA
GR 100290, 4 June 1993
Second Division, Padilla (J)
Facts: A suit for collection of sum of money was ruled in favor of Eden Tan and against the
spouses Norberto Jr. and Carmen Tibajia. After the decision was made final, Tan filed a motion
for execution and levied upon the garnished funds which were deposited by the spouses with the
cashier of the Regional Trial Court of Pasig. The spouses, however, delivered to the deputy
sheriff the total money judgment in the form of Cashiers Check (P262,750) and Cash
(P135,733.70). Tan refused the payment and insisted upon the garnished funds to satisfy the
judgment obligation. The spouses filed a motion to lift the writ of execution on the ground that
the judgment debt had already been paid. The motion was denied.
Issue: Whether the spouses have satisfied the judgment obligation after the delivery of the
cashiers check and cash to the deputy sheriff.
Held: A check, whether a managers check or ordinary check, is not legal tender, and an offer of
a check in payment of a debt is not a valid tender of payment and may be refused receipt by the
obligee or creditor (Philippine Airlines vs. Court of Appeals; Roman Catholic Bishop of Malolos
vs. Intermediate Appellate Court). The court is not, by decision, sanctioning the use of a check
for the payment of obligations over the objection of the creditor (Fortunado vs. Court of
Appeals).
Thu 25 Mar 2004
Nego-d: Tan vs. CA (GR 108555, 20 December 1994)

No Comments
Tan vs. CA
GR 108555, 20 December 1994
First Division, Kapunan (J)
Facts: Ramon Tan, a businessman from Puerto Princesa, secured a Cashiers Check from
Philippine Commercial Industrial Bank (PCIBank) to P30,000 payable to his order to avoid
carrying cash while enroute to Manila. He deposited the check in his account in Rizal
Commercial Banking Corporation (RCBC) in its Binondo Branch. RCBC sent the check for
clearing to the Central Bank which was returned for having been missent or misrouted.
RCBC debited Tans account without informing him. Relying on common knowledge that a
cashiers check was as good as cash, and a month after depositing the check, he issued two
personal checks in the name of Go Lak and MS Development Trading Corporation. Both checks
bounced due to insufficiency of funds. Tan filed a suit for damages against RCBC.
Issue: Whether a cashiers check is as good as cash, so as to have funded the two checks
subsequently drawn.
Held: An ordinary check is not a mere undertaking to pay an amount of money. There is an
element of certainty or assurance that it will be paid upon presentation; that is why it is perceived
as a convenient substitute for currency in commercial and financial transactions. Herein, what is
involved is more than an ordinary check, but a cashiers check. A cashiers check is a primary
obligation of the issuing bank and accepted in advance by its mere issuance. By its very nature, a
cashiers check is a banks order to pay what is drawn upon itself, committing in effect its total
resources, integrity and honor beyond the check. Herein, PCIB by issuing the check created an
unconditional credit in favor any collecting bank. Reliance on the laymans perception that a
cashiers check is as good as cash is not entirely misplaced, as it is rooted in practice, tradition
and principle.
Thu 25 Mar 2004
Nego-d: Stelco Marketing vs. CA (GR 96160, 17 June 1992)

No Comments
Stelco Marketing vs. CA
GR 96160, 17 June 1992
Second Division, Narvasa (J)
Facts: Stelco Marketing Corporation sold steel bars and GI wires to RYL Construction Inc.
worth P126,859.61. RYL gave Stelcos sister corporation, Armstrong Industries, a MetroBank
check from Steelweld Corporation (The check was issued apparently by Steelwelds President
Peter Rafael Limson to Romeo Lim, President of RYL and Limson friend, by way of
accommodation, as a guaranty and not in payment of an obligation). When Armstrong deposited
the check at its bank, it was dishonored because it was drawn against insufficient funds. When so
deposited, the check bore 2 indorsements, i.e. RYL and Armstrong. A criminal case was
instituted against Limson, etc. for violation of BP 22, Subsequently, Stelco filed a civil case
against RYL and Steelweld to recover the value of the steel products.
Issue: Whether Stelco was a holder in due course of the check issued by Steelweld.
Held: The records do not show any intervention or participation by Stelco in any manner or form
whatsoever in the transaction involving the check, or any communication of any sort between
Steelweld and Stelco, or between either of them and Armstrong Industries, at any time before the
dishonor of the check. The record does show that after the check was deposited and dishonored,
Stelco came into possession of it in some way. Stelco cannot thus be deemed a holder of the
check for value as it does not meet two essential requisites prescribed by the statute, i.e. that it
did not become the holder of it before it was overdue, and without notice that it had been
previously dishonored, and that it did not take the check in good faith and for value.
Thu 25 Mar 2004
Nego-d: State Investment House vs. IAC (GR 72764, 13 July

1989)
No Comments
State Investment House vs. IAC
GR 72764, 13 July 1989
Third Division, Fernan (J)
Facts: New Sikatuna Wood Industries Inc. (NSWI) requested for a loan from Harris Chua, who
issued 3 crossed checks. Subsequently, NSWI entered in an agreement with the State Investment
House Inc. (SIHI), under a deed of sale, where the former assigned and discounted 11 postdated
checks including the 3 issued by Chua. When the 3 checks were allegedly deposited by SIHI, the
checks were dishonored by reason of insufficient funds, stop payment and account closed.
SIHI made demands upon Chua to make good said checks, Chua failed to do so.
Issue: Whether SIHI is a holder in due course so as to recover the amounts in the checks from
Chua, the drawer.
Held: The Negotiable Instruments Law does not mention crossed checks but the Court has
recognized the practice that crossing the check (by two parallel lines in the upper left portion of
the check) means that the check may only be deposited in the bank and that the check may be
negotiated only once (to one who has an account with a bank). The act of crossing a check serves
as a warning to the holder that the check has been issued for a definite purpose so that he must
inquire if he has received the check pursuant to that purpose, otherwise he is not a holder in due
course. Herein, SIHI rediscounted the check knowing that it was a crossed check. His failure to
inquire from the holder (NSWI) the purpose for which the checks were crossed prevents him
from being considered in good faith, and thus, as a holder in due course. SIHI, therefor is subject
to personal defenses, such as the lack of consideration between the NSWI and Chua, i.e.
resulting from the non-consummation of the loan.
Thu 25 Mar 2004
Nego-d: State Investment House vs. CA (GR 101163, 11

January 1993)
No Comments
State Investment House vs. CA
GR 101163, 11 January 1993
Facts: Nora B. Moulic issued to Corazon Victoriano checks, as security for pieces of jewelry
sold on commission. Victoriano negotiated the checks to the State Investment House Inc. (SIHI).
Moulic failed to sell the pieces of jewelry, so he returned them to the payee before the maturity
of the checks. The checks, however, could not be retrieved as they had already been negotiated.
Before the checks maturity dates, Moulic withdrew her funds from the drawee bank. Upon
presentment of the checks for payment, they were dishonored for insufficiency of funds. SIHI
sued to recover the value of the checks.
Issue: Whether the personal defense of failure or absence of consideration is available, or
conversely, whether SIHI is a holder in due course.
Held: On their faces, the post-dated checks were complete and regular; SIHI bought the checks
from the payee (Victoriano) before their due dates; SIHI took the checks in good faith and for
value, albeit at a discounted price; and SIHI was never informed not made aware that the checks
were merely issued to payee as security and not for value. Complying with the requisites of
Section 52 of the Negotiable Instruments Law, SIHI is a holder in due course. As such, it holds
the instruments free from any defect of title of prior parties, and from defenses available to prior
parties among themselves. SIHI may enforce full payment of the checks. The defense of failure
or absence of consideration is not available as SIHI was not privy to the purpose for which the
checks were issued.
That the post-dated checks were merely issued as security is not a ground for the discharge of the
instrument as against a holder in due course. It is not one of the grounds outlined in Section 119
of the Negotiable Instrument Law, for the instrument to be discharged.
It must be noted that the drawing and negotiation of a check have certain effects aside from the
transfer of title or the incurring of liability in regard to the instrument by the transferor. The
holder who takes the negotiated paper makes a contract with the parties on the face of the
instrument. There is an implied representation that funds or credit are available for the payment
of the instrument in the bank upon which it is drawn. Consequently, the withdrawal of the money
from the drawee bank to avoid liability on the checks cannot prejudice the rights of holders in
due course.
The drawer, Moulic, is liable to the holder in due course, SIHI.
Thu 25 Mar 2004
Nego-d: Sesbreno vs. CA (GR 89252, 24 May 1993)

No Comments
Sesbreno vs. CA
GR 89252, 24 May 1993
Third Division, Feliciano (J)
Facts: On 9 February 1981, Raul Sesbreno made a money market placement in the amount of
P300,000 with the Philippine Underwriters Finance Corporation (PhilFinance), with a term of 32
days. PhilFinance issued to Sesbreno the Certificate of Confirmation of Sale of a Delta Motor
Corporation Promissory Note (2731), the Certificate of Securities Delivery Receipt indicating the
sale of the note with notation that said security was in the custody of Pilipinas Bank, and
postdated checks drawn against the Insular Bank of Asia and America for P304,533.33 payable
on 13 March 1981. The checks were dishonored for having been drawn against insufficient
funds. Pilipinas Bank never released the note, nor any instrument related thereto, to Sesbreno;
but Sesbreno learned that the security was issued 10 April 1980, maturing on 6 April 1981, has a
face value of P2,300,833.33 with PhilFinance as payee and Delta Motors as maker; and was
stamped non-negotiable on its face. As Sesbreno was unable to collect his investment and
interest thereon, he filed an action for damages against Delta Motors and Pilipinas Bank.
Issue: Whether non-negotiability of a promissory note prevents its assignment.
Held: Only an instrument qualifying as a negotiable instrument under the relevant statute may be
negotiated either by indorsement thereof coupled with delivery, or by delivery alone if it is in
bearer form. A negotiable instrument, instead of being negotiated, may also be assigned or
transferred. The legal consequences of negotiation and assignment of the instrument are
different. A negotiable instrument may not be negotiated but may be assigned or transferred,
absent an express prohibition against assignment or transfer written in the face of the instrument.
herein, there was no prohibition stipulated.
Thu 25 Mar 2004
Nego-d: San Carlos Milling vs. BPI (GR 37467, 11 December

1933)
No Comments
San Carlos Milling vs. BPI

GR 37467, 11 December 1933
Second Division, Hull (J)
Facts: Joseph Wilson, the principal employee of San Carlos Milling Co. Ltd. in the Manila
Office, conspired with one Alfredo Dolores, a messenger-clerk in the same office, in sending a
cablegram in code to the company in Honolulu requesting a telegraphic transfer of $100,000 to
China Bank of Manila. Upon receipt of the money, China Bank sent an exchange contract to San
Carlos Milling offering the sum of P201,000, which was then the current rate of exchange. On
this contract was forged the name of Newland Baldwin. A managers check on China Bank
payable to San Carlos Milling or order was receipt for by Dolores. The check was deposited with
BPI indorsed by a spurious signature of Baldwin. After clearing, BPI received a letter,
purportedly signed by Baldwin, directing the shipment and delivery of P201,000. Dolores
witnessed the packing of the money and returned with the check for P201,000 purportedly signed
by Baldwin. Dolores turned the money over to Wilson and received as his share P10,000. When
the crime was discovered, BPI refused to credit San Carlos Millings account with the amount
withdrawn by the forged checks.
Issue: Who shall be liable for the value of the forged check.
Held: A bank that cashes a check must know to whom it pays. It is an elementary principle both
in banking and of the Negotiable Instruments Law that a bank is bound to know the signatures of
its customers; and if it pays a forged check, it must be considered as making the payment out of
its own funds, and cannot ordinarily charge the amount so paid to the account of the depositor
whose name was forged. As the proximate cause of loss was due to the negligence of BPI in
honoring and cashing the forged checks, it is liable for the amount of P201,000 with legal
interest thereon from 23 December 1928, until payment.
Thu 25 Mar 2004
Nego-d: Republic Planters Bank vs. CA (GR 93073, 21

December 1992)
No Comments
Republic Planters Bank vs. CA
GR 93073, 21 December 1992
Second Division, Campos Jr. (J)
Facts: Republic Planters Bank issued 9 promissory notes signed by Shozo Yamaguchi
(President) and Fermin Canlas (Treasurer) of Worldwide Garment Manufacturing Inc.
Yamaguchi and Canlas were authorized by the corporation to apply for credit facilities with the
bank in form of export advances and letters of credit or trust receipts accommodations. Three
years after, the bank filed an action to recover the sums of money covered by the promissory
notes. Worldwide Garment Manufacturing changed its name to Pinch Manufacturing Corp.
Canlas alleged he was not liable personally for the corporate acts that he performed, and that the
notes were still blank when he signed them.
Issue: Whether the corporate treasurer is liable for the amounts in the promissory notes.
Held: Canlas is a co-maker of the promissory notes, under the law, and cannot escape liability
arising therefrom. Inasmuch as the instrument contained the words I promise to pay and is
signed by two or more persons, said persons are deemed to be jointly and severally liable
thereon. As the promissory notes are stereotype ones issued by the bank in printed form with
blank spaces filled up as per agreed terms of the loan, following customary procedures, leaving
the debtors to do nothing but read the terms and conditions therein and to sign as makers or comakers. Section 14 of the Negotiable Instruments Law, therefore, does not apply. Canlas is
solidarily liable with the corporation for the amount of the 9 promissory notes.
Thu 25 Mar 2004
Nego-d: Republic Bank vs. Ebrada (GR L-40796, 31 July

1975)
No Comments
Republic Bank vs. Ebrada
GR L-40796, 31 July 1975
First Division, Martin (J)
Facts: Mauricia Ebrada encashed a back pay check for P1246.08 at Republic Bank (Escolta
Branch). The Bureau of Treasury, which issued the check advised the bank that the alleged
indorsement of the check by one Martin Lorenzo was a forgery as the latter has been dead
since 14 July 1952; and requested that it be refunded he sum deducted from its account. The
bank refunded the amount to the Bureau and demanded upon Ebrada the sum in question, who
refused. Hence, the present action.
Issue: Whether the bank can recover from the last indorser.
Held: According to Section 23 of the Negotiable Instruments Law, where the signature on a
negotiable instrument is forged, the negotiation of the check is without force or effect. However,
following the ruling in Beam vs. Farrel (US case), where a check has several indorsements on it,
only the negotiation based on the forged or unauthorized signature which is inoperative. The last
indorser, Ebrada, was duty-bound to ascertain whether the check was genuine before presenting
it to the bank for payment. Her failure to do so makes her liable for the loss and the Bank may
recover from her the money she received for the check. Had she performed her duty, the forgery
would have been detected and fraud defeated. Even if she turned over the amount to Dominguez
immediately after receiving the cash proceeds of the check, she is liable as an accommodation
party under Section 29 of the Negotiable Instruments Law.
Thu 25 Mar 2004
Nego-d: Republic Bank vs. CA (GR 42725, 22 April 1991)

No Comments
Republic Bank vs. CA
GR 42725, 22 April 1991
First Division, Grino Aquino (J)
Facts: San Miguel Corporation issued a dividend check for P240 in favor of J. Roberto Delgado,
a stockholder. Delgado altered the amount of the check to P9,240. The check was indorsed and
deposited by Delgado with Republic Bank. Republic Bank endorsed the check to First National
City Bank (FNCB), the drawee bank, by stamping on the back of the check all prior and / or
lack of indorsements guaranteed. Relying on the endorsement, FNCB paid the amount to
Republic Bank. Later on, San Miguel informed FNCB of the material alteration of the amount.
FNCB recredited the amount to San Miguels account, and demanded refund from Republic
Bank. Republic Bank refused. Hence, the present action.
Issue: Who shall bear the loss resulting from the altered check.
Held: When an indorsement is forged, the collecting bank or last indorser, as a general rule,
bears the loss. But the unqualified indorsement of the collecting bank on the check should be
read together with the 24-hour regulation on clearing house operation. Thus, when the drawee
bank fails to return a forged or altered check to the collecting bank within the 24-hour clearing
period (as provided by Section 4c of Central Bank Circular 9, as amended), the collecting bank is
absolved from liability. The drawee bank, FNCB, should bear the loss for the payment of the
altered check for its failure to detect and warn Republic Bank of the fraudulent character of the
check within the 24-hour clearing house rule.
Thu 25 Mar 2004
Nego-d: Que vs. People (GR 75217-18, 21 September 1987)

No Comments
Que vs. People
GR 75217-18, 21 September 1987
Resolution of the Second Division, Paras (J)
Facts: The Regional Trial Court convicted Victor Que of the crime of violation of BP 22. Said
judgment was affirmed by the Court of Appeals and the Supreme Court. In its motion for
consideration, Que alleged that the RTC Quezon City does not have jurisdiction as the element of
the place of the issuance of the check was absent.
Issue [1]: Whether the place of issuance or the place or the place of deposit determines
jurisdiction / venue of BP 22 cases.
Held [1]: The findings of the trial court reveal that the checks were issued in Quezon City (as
admitted by Que himself in his answer). It is of no moment whether the checks were deposited
by the complainant in a bank outside of Quezon City. The determinative factor is the place of
issuance.
Issue [2]: Whether BP 22 applies to dishonored checks issued as guarantee.
Held [2]: BP 22 applies even in cases where dishonored checks are issued merely in the form of
a deposit or guarantee. The enactment does not make any distinction as to whether the checks
within its contemplation are issued in payment of an obligation or merely to guarantee the said
obligation. The history of the enactment evinces the definite legislative intent to make the
prohibition all-embracing without making any exception from the operation thereof in favor of a
guarantee.
Nego-d: Prudencio vs. CA (GR L-34539, 14 July 1986)

No Comments
Prudencio vs. CA
GR L-34539, 14 July 1986
Second Division, Gutierrez Jr. (J)
Facts: Eulalio and Elisa Prudencio are the registered owners of a parcel of land located in
Sampaloc, Manila. The property was mortgaged to PNB to guarantee a loan of P1,000 extended
to one Domingo Prudencio. Sometime in 1955, Concepcion & Tamayo Construction Co.,
through Jose Toribio (Prudencios relative), persuaded the Prudencios to mortgage their property
to secure the loan of P10,000 which the company was negotiating with the PNB. The Prudencios
signed the Amendment of Real Estate Mortgage. The promissory note covering the P10,000
loan was signed by Toribio. The Prudencios also signed the portion of the note indicating that
they are requesting the PNB to issue the check covering the loan to the Company. Jose Toribio
executed the Deed of Assignment assigning all payments made by the Bureau to the company
on account of the Puerto Princesa building project in favor of PNB. The Bureau, however,
conditioned that the payment should be for labor and materials. The Prudencios wrote PNB that
since PNB authorized payments to the Company where there were changes in the conditions of
the contract without their knowledge, they seek to cancel the mortgage contract. Failing to cancel
the mortgage, they filed suit to cancel the same.
Issue: Whether the Prudencios were solidary co-debtors or sureties as a result of being
accommodation makers.
Held: In lending his name to the accommodated party, the accommodation party is in effect a
surety. However, unlike in a contract of suretyship, the liability of the accommodation party
remains not only primary but also unconditional to a holder for value such that even if the
accommodated party receives an extension of the period of payment without the consent of the
accommodation party, the latter is still liable for the whole obligation and such extension does
not release him because as far as the holder for value is concerned, he is a solidary co-debtor.
Consequently, the Prudencios cannot claim to have been released from their obligation simply
because the time of payment of such obligation was temporarily deferred by PNB without their
knowledge and consent. To be freed of obligation, it is thus necessary to determine if PNB, the
payee of the promissory note, is a holder in due course. Herein, PNB was an immediate party or
in privy to the note, besides that it dealt directly with the Prudencios knowing fully well that they
are accommodation makers. The general rule that a payee may be considered a holder in due
course does not apply to PNB.
Thu 25 Mar 2004
Nego-d: Ponce vs. CA (GR L-49444, 31 May 1979)

No Comments
Ponce vs. CA
GR L-49444, 31 May 1979
First Division, Melencio-Herrera (J)
Facts: On 3 June 1969, Jesus Afable, together with Feliza Mendoza and Ma. Aurora Dino
executed a promissory note in favor of Nelia Ponce in the sum of P814,868.42 payable without
interest on or before 31 July 1969, subject to an interest of 12% per annum if not paid at
maturity, and an additional sum equivalent to 10% of total amount due as attorneys fees in case
it is necessary to bring suit, and the execution of a first mortgage on their properties or the
Carmen Planas Memorial Inc. in the event of failure to pay the indebtedness in accordance with
the terms. Upon failure of the debtors to pay, a complaint was filed against them for the recovery
of the principal sum, plus interest and damages. The trial court rendered judgment in favor of
Ponce. The Court of Appeals affirmed the decision of the trial court. On the second motion for
reconsideration, however, the appellate court reversed the judgment and opined that the intent of
the parties was that the note was payable in US dollars which is illegal, with neither party
entitled to recover under the in pari delicto rule.
Issue: Whether an agreement to pay in dollars defeat a creditors claim for payment.
Held: If there is an agreement to pay an obligation in a currency other than Philippine legal
tender, the same is illegal / null and void as contrary to public policy, pursuant to RA 529, and
the most that can be demanded is to pay the said obligation in Philippine currency. It cannot
defeat a creditors claim for payment, for such will allow a person to enrich himself inequitably
at anothers expense. What RA 529 prohibits is the payment of an obligation in dollars. A
creditor cannot oblige the debtor to pay in dollars, even if the loan was given in said currency. In
such case, the indemnity is expressed in Philippine currency on the basis of the current rate of
exchange at the time of payment.
Thu 25 Mar 2004
Nego-d: PNB vs. Quimpo (GR L-53194, 14 March 1988)

No Comments
PNB vs. Quimpo
GR L-53194, 14 March 1988
First Division, Gancayco (J)
Facts: Francisco Gozon was a depositor of the Philippine National Bank (PNB Caloocan City
branch). Ernesto Santos, Gozons friend, took a check from the latters checkbook which was left
in the car, filled it up for the amount of P5,000, forged Gozons signature, and encashed it.
Gozon learned about the transaction upon receipt of the banks statement of account, and
requested the bank to recredit the amount to his account. The bank refused. Hence, the present
action.
Issue: Who shall bear the loss resulting from the forged check.
Held: The prime duty of a bank is to ascertain the genuineness of the signature of the drawer or
the depositor on the check being encashed. It is expected to use reasonable business prudence in
accepting and cashing a check being encashed or presented to it. Payment in neglect of duty
places upon him the result of such negligence. Still, Gozons act in leaving his checkbook in the
car, where his trusted friend remained in, cannot be considered negligence sufficient to excuse
the bank from its own negligence. The bank bears the loss.
Thu 25 Mar 2004
Nego-d: PNB vs. National City Bank (GR 43596, 31 October

1936)
No Comments
PNB vs. National City Bank
GR 43596, 31 October 1936
En Banc, Recto (J)
Facts: An unknown person or persons negotiated with Motor Service Co. checks purportedly
issued by the Pangasinan Transportation Co. by JL Klar, Manager and Treasurer, against PNB
and in favor of International Auto Repair Shop for P144.50 and P215.75. Said checks were
indorsed by said unknown persons in the manner indicated at the back thereof. The checks were
indorsed fro deposit at the National City Bank of New York (NCBNY) and Motor Service Co.
was credited with the amounts thereof. Said checks were cleared at the clearing house and PNB
credited NCBNY for the amounts thereof, believing that the signatures of the drawer are
genuine, etc. PNB found that the signature were forged when so informed by the Pangasinan
Transportation Co. It demanded reimbursement from NCBNY and Motor Service Co. Both
refused. Pangasinan Transportation objected to its deduction of its deposit.
Issue [1]: Whether the payment of the checks made by the drawee bank constitutes an
acceptance.
Held [1]: A check is a bill of exchange payable on demand and only the rules governing bills of
exchange payable on demand are applicable to it (Section 185). The fact that acceptance is a step
unnecessary insofar as bills of exchange payable on demand are concerned, it follows that the
provisions relative to acceptance are without application to checks. There is nothing in law,
however, against the presentation of checks for acceptance before they are paid. Certification is
equivalent to acceptance (Section 187). When certified, the drawer will perform his promise by
any other means than the payment of money (Section 132). When certified, the drawer and all
indorsers are discharged from liability thereon (Section 188), and then the check operates as an
assignment of a part of the funds to the credit of the drawer with the bank (Section 189).
Acceptance has a technical meaning in the Negotiable Instruments Law. With few exceptions,
payment neither includes or implies payment. Payment of the check, cashing it on
presentment is not acceptance.
Issue [2]: Whether the drawee bank is liable for the amount in a forged check for its failure to
detect the forgery.
Held [2]: In determining the relative rights of a drawee who, under a mistake of fact, has paid,
and a holder who has received such payment, upon a check to which the name of the drawer is
forged, it is only fair to consider the question of diligence or negligence contributed to the
success of the fraud or to mislead the drawee. To entitle the holder of a forged check to retain the
money obtained thereon, there must be a showing that the duty to ascertain the genuineness of
the signature rested entirely upon the drawee, and that the constructive negligence of such
drawee in failing to detect the forgery was not affected by any disregard of duty on the part of the
holder, or by failure of any precaution which, from his implied assertion in presenting the check
as a sufficient voucher, the drawee had the right to believe he had taken. Under the circumstance
of the case, if the PNB is allowed to recover, there will be no change of position as to the injury
or prejudice of the Motor Service Co.
Thu 25 Mar 2004
Nego-d: PNB vs. CA (GR L-26001, 29 October 1968)

No Comments
PNB vs. CA
GR L-26001, 29 October 1968
En Banc, Concepcion (J)
Facts: One Augusto Lim deposited in his current account with PCI Bank (Padre Faura Branch) a
GSIS check drawn against PNB. The signatures of the General Manager and Auditor of GSIS
were forged. PCIBank stamped at the back of the check All prior indorsements or lack of
indorsements guaranteed, PCI Bank. PCIBank sent the check to PNB through the Central Bank.
PNB did not return the check to PCIBank; and thus PCIBank credited Lims account. As GSIS
has informed PNB that the check was lost two months before said transaction, its account was
recredited by PNB upon its demand (due to the forged check). PNB requested for refund with
PCI Bank. The latter refused.
Issue: Who shall bear the loss resulting from the forged check.
Held: The collecting bank is not liable as the forgery existing are those of the drawers and not
of the indorsers. The indorsement of the intermediate bank does not guarantee the signature of
the drawer. PNBs failure to return the check to the collecting bank implied that the check was
good. In fact, PNB even honored the check even if GSIS has reported two months earlier that the
check was stolen and the bank thus should stop payment. PNBs negligence was the main and
proximate cause for the corresponding loss. PNB thus should bear such loss. Upon payment by
PNB, as drawee, the check ceased to be a negotiable instrument, and became a mere voucher or
proof of payment.
Thu 25 Mar 2004
Nego-d: Pineda vs. dela Rama (GR L-31831, 28 April 1983)

No Comments
Pineda vs. dela Rama
GR L-31831, 28 April 1983
First Division, Gutierrez (J)
Facts: Jose V. dela Rama is a lawyer whose services were retained by Jesus Pineda for the
purpose of making representations with the chairman and general manager of the National Rice
and Corn Administration to stop and delay the institution of criminal charges against Pineda who
allegedly misappropriated 11,000 cavans of palay deposited at his ricemill in Concepcion, Tarlac.
Subsequently, Dela Rama filed suit to collect a P9,300 loan, evidenced by the matured
promissory note, and P5,000 as attorneys fees. The Court of First Instance ruled in favor of
Pineda, which was reversed by the Court of Appeals.
Issue: Whether the promissory note is void for lack of consideration.
Held: The presumption that a negotiable instrument is issued for a valuable consideration
(Section 24, Negotiable Instruments Law) is only prima facie. It can be rebutted by proof to the
contrary. The term of the note sustains the version of Pineda that he signed the promissory note
because he believed dela Ramas story that these amounts had already been advanced by dela
Rama and given as gifts for NARIC officials. The promissory note was thus executed for an
illegal consideration; and thus is void like any other contract as per Article 1409 of the Civil
Code. The consideration for the promissory note to influence public officers in the
performance of their duties is contrary to law and public policy. The promissory note is void
ab initio and no cause of action for the collection cases can arise from it.
Thu 25 Mar 2004
Nego-d: Philippine Education Co. vs. Soriano (GR L-22405,

30 June 1971)
No Comments
Philippine Education Co. vs. Soriano
GR L-22405, 30 June 1971
En Banc, Dizon (J)
Facts: Enrique Montinola sought to purchase from the Manila Post Office 10 money orders
(P200 each), offering to pay for them with a private check. Montinola was able to leave the
building with his check and the 10 money orders without the knowledge of the teller. Upon
discovery, message was sent to all postmasters and banks involving the unpaid money orders.
One of the money orders was received by the Philippine Education Co. as part of its sales
receipt. It was deposited by the company with the Bank of America, which cleared it with the
Bureau of Post. The Postmaster, through the Chief of the Money Order Division of the Manila
Post Office informed the bank of the irregular issuance of the money order. The bank debited the
account of the company. The company moved for reconsideration.
Issue: Whether postal money orders are negotiable instruments.
Held: Philippine postal statutes are patterned from those of the United States, and the weight of
authority in said country is that Postal money orders are not negotiable instruments inasmuch as
the establishment of a postal money order is an exercise of governmental power for the publics
benefit. Furthermore, some of the restrictions imposed upon money order by postal laws and
regulations are inconsistent with the character of negotiable instruments. For instance, postal
money orders may be withheld under a variety of circumstances, and which are restricted to not
more than one indorsement.
Thu 25 Mar 2004
Nego-d: Philippine Commercial Industrial Bank vs. CA (GR

121413, 29 January 2001)
No Comments
Philippine Commercial Industrial Bank vs. CA
GR 121413, 29 January 2001
Second Division, Quisumbing (J)
Facts: Ford issued Citibank checks in favor of the Commissioner of Internal Revenue as
payments of its taxes, through the depository bank Insular Bank of Asia and America (later
PCIBank). Proceeds of the checks were never received by the Commissioner, but were encashed
and diverted to the accounts of members of a syndicate, to which Fords General Ledger
Accountant Godofredo Rivera belongs. Upon demand of the Commissioner anew, Ford was
forced to make second payment of its taxes. Thus, Ford instituted actions to recover the amounts
from the collecting (depository) and drawee banks.
Issue: Whether Ford has the right to recover from the collecting bank (PCI Bank) and/or the
drawee bank (Citibank) the value of the checks.
Held: The mere fact that forgery was committed by a drawer-payors confidential employee or
agent, who by virtue of his position had unusual facilities to perpetrate the fraud and imposing
the forged paper upon the bank, does not entitle the bank to shift the loss to the drawer-payor, in
the absence of some circumstance raising estoppel against the drawer. The rule applies to checks
fraudulently negotiated or diverted by the confidential employees who hold them in their
possession.
In GRs 121413 and 121479, PCIBank failed to verify the authority of Mr. Rivera to negotiate the
checks. Furthermore, PCIBanks clearing stamp which guarantees prior or lack of indorsements
render PCIBank liable as it allowed Citibank without any other option but to pay the checks.
PCIBank, being a depository / collecting bank of the BIR, had the responsibility to make sure
that the crossed checks were deposited in Payees account only as found in the instrument.
In GR 128604, on the other hand, the switching operation involving the checks, while in transit
for clearing, were the clandestine or hidden actuations performed by the members of the
syndicate in their own personal, covert and private capacity; without the knowledge nor official
or conscious participation of PCIBank in the process of embezzlement. Central Bank Circular
580 (1977), however, provide d that any theft affecting items in transit for clearing are for the
account of the sending bank (herein PCIBank). Still, Citibank was likewise negligent in the
performance of its duties as it failed to establish its payment of Fords checks were made in due
course and legally in order. The fact that drawee bank did not discover the irregularity
seasonably constitutes negligence in carrying out the banks duty to its depositors.
Thu 25 Mar 2004
Nego-d: Philippine Bank of Commerce vs. Aruego (GR L25836-37, 31 January 1981)
No Comments
Philippine Bank of Commerce vs. Aruego
GR L-25836-37, 31 January 1981
First Division, Fernandez (J)
Facts: Jose Aruego publishes a periodical called World Current Events. To facilitate payment
of the printing, Aruego obtained a credit accommodation from the Philippine Bank of
Commerce. For every printing of the periodical, the printer (Encal Press and Photo-Engraving)
collected the cost of printing by drawing a draft against the bank, said draft being sent later to
Aruego for acceptance. As an added security for the payment of the amounts advanced to the
printer, the bank also required Aruego to execute a trust receipt in favor of the bank wherein
Aruego undertook to hold in trust for the bank the periodicals and to sell the same with the
promise to turn over to the bank the proceeds of the sale to answer for the payment of all
obligations arising from the draft. The bank instituted an action against Aruego to recover the
cost of printing of the latters periodical for the period of 28 August 1950 to 14 March 1951.
Issue [1]: Whether the drafts were bills of exchange or mere pieces of evidence of indebtedness.
Held [1]: Under the Negotiable Instruments Law, a bill of exchange is an unconditional order in
writing addressed by one person to another, signed by the person giving it, requiring the person
to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain
in money to order or to bearer. As long as a commercial paper conforms with the definition of a
bill of exchange, that paper is considered a bill of exchange. The nature of acceptance is
important only in the determination of the kind of liabilities of the parties involved, but not in the
determination of whether a commercial paper is a bill of exchange or not.
Issue [2]: Whether Aruego is an agent of Philippine Education Foundation Company when he
signed the supposed bills of exchange.
Held [2]: Nowhere in the drafts accepted by Aruego that he disclosed that he was signing as
representative of the Philippine Education Foundation Company. For failure to disclose his
principal, Aruego is personally liable for the drafts he accepted, pursuant to Section 20 of the
Negotiable Instruments Law.
Issue [3]: Whether Aruego is primarily liable.
Held [3]: An accommodation party is one who has signed the instrument as maker, drawer,
acceptor, indorser, without receiving value therefor and for the purpose of lending his name to
some other person. Herein, Aruego signed as a drawee / acceptor. Under the Negotiable
Instruments Law, a drawee is primarily liable. If Aruego intended to be secondarily liable only,
he should not have signed as an acceptor / drawee. In doing so, he became primarily and
personally liable for the drafts.
Thu 25 Mar 2004
Nego-d: People vs. Tuanda (AC 3360, 30 January 1990)

No Comments
People vs. Tuanda
AC 3360, 30 January 1990
Resolution En Banc, Per Curiam
Facts: In 1983, Atty. Fe Tuanda received from one Herminia A. Marquez several pieces of
jewelry with a total value of P36,000 for sale on commission bases. In 1984, instead of returning
the unsold pieces of jewelry worth P26,250, she issued 3 checks. These checks were dishonored
by the drawee bank, Traders Royal Bank, for insufficiency of funds. Notwithstanding receipt of
the notice of dishonor, Tuanda made no effort to settle her obligation. Criminal cases were filed,
wherein she was acquitted of estafa but was found guilty of violation of BP 22. The appellate
court affirmed the decision of the trial court and imposed further suspension against Tuanda in
the practice of law, on the ground that the offense involves moral turpitude.
Issue: Whether violation of BP 22 involves moral turpitude to allow the suspension of a member
of the bar from the practice of law.
Held: Conviction of a crime involving moral turpitude relates to and affects the good moral
character of a person convicted of such offense. Herein, BP 22 violation is a serious criminal
offense which deleteriously affects public interest and public order. The effects of the issuance of
a worthless check transcends the private interest of parties directly involved in the transaction
and touches the interest of the community at large. Putting valueless commercial papers in
circulation, multiplied a thousand fold, can very well pollute the channels of trade and
commerce, injure the banking system and eventually hurt the welfare of society and the public
interest. The Court affirmed the suspension of Tuanda from the practice of law.
Thu 25 Mar 2004
Nego-d: People vs. Reyes (GR 101127-31, 18 November 1993)

No Comments
People vs. Reyes
GR 101127-31, 18 November 1993
First Division, Cruz (J)
Facts: Lorie Garcia delivered rice to Cresencia Reyes, as accommodation to her friend Manny
Cabrera who had no more stock to sell. Reyes issued 6 checks for 6 orders delivered in different
dates. Only 3 of the 6 checks were made good, the other 3 were returned by the bank due to
insufficient funds. Garcia notified Reyes of the dishonor and the latter promised to pay her
their total value. Despite demands, Reyes failed to make good the checks or replace them with
cash. 3 criminal cases for violation of BP 22 and 2 criminal cases for estafa were filed against
Reyes.
Issue: Whether a single act of issuing a check may entail criminal liability of both violation of
BP 22 and Article 315 of the Revised Penal Code (Estafa).
Held: A single criminal act may give rise to a multiplicity of offenses and where there is a
variance or differences between the elements of an offense in one law and another law. The
gravamen of the offense punished by BP 22 is the act of making and issuing a worthless check or
a check that is dishonored upon its presentment for payment; and act deemed pernicious and
inimical to public welfare. BP 22 applies even where the dishonored checks were issued merely
in the form of a deposit or a guaranty and not as actual payment, as the law does not make any
distinction. On the other hand, the checks were not payment for a pre-existing obligation nut as
consideration for each shipment of rice. The checks were issued as an inducement for the
surrender by the party deceived of her property. Reyes made good 3 of the checks, giving
assurance to Garcia that the remaining checks were fully funded. Her failure to make good the
checks raised the prima facie inference of deceit.
Thu 25 Mar 2004
Nego-d: People vs. Maniego (GR L-30910, 27 February

1987)
No Comments
People vs. Maniego
GR L-30910, 27 February 1987
First Division, Narvasa (J)
Facts: Julia Maniego was an indorser of several checks drawn by her sister, Milagros Pamintuan,
which were dishonored after they had been exchange with cash belonging to the Government,
then in the official custody of Lt. Rizalino Ubay. Ubay, Pamintuan and Maniego were indicted
for the crime of malversation. Ubay and Maniego were arraigned, while Pamintuan fled to the
United States. Ubay was found guilty while Maniego was acquitted. Both, however, were
ordered to pay in solidum the amount of P57,434.50 to the government. Maniego appealed.
Issue: Whether Maniego is liable even if she is a mere indorser.
Held: Under the law, the holder or last indorsee of a negotiable instrument has the right to
enforce payment of the instrument for the full amount thereof against all parties liable thereon.
Among the parties liable thereon is an indorser of the instrument. Such an indorser who indorses
without qualification, inter alia, engaged that on due presentment, the instrument shall be
accepted or paid, or both, according to its tenor, and that if it be dishonored, and the necessary
proceedings on dishonor be duly taken, he will pay the amount thereof to the holder, or to any
subsequent indorser who may be compelled to pay it. Maniego may also be deemed an
accommodation party in the light of the facts (i.e. without receiving value for the same). As
such, she is liable on the instrument to a holder for value, notwithstanding such holder at the time
of taking the instrument knew her to be only an accommodation party, although she has the right,
after paying the holder, to obtain reimbursement from the party accommodated.
Thu 25 Mar 2004
Nego-d: People vs. Grospe (GR L-74053-54, 20 January

1988)
No Comments
People vs. Grospe
GR L-74053-54, 20 January 1988
Second Division, Melencio-Herrera (J)
Facts: Manuel Parulan issued a check to the San Miguel Corporation, which was received by the
latters finance officer in Guiguinto, Bulacan, and which was forwarded and deposited in SMCs
BPI account in San Fernando, Pampanga. Another check was issued by Parulan as direct
payment for the spot sale of beer, which was similarly received, forwarded and deposited as
above. Both were dishonored for insufficiency of funds. Parulan was charged with violation of
Batas Pambansa Bilang 22 and for estafa under Article 315, paragraph 2 (d) of the Revised Penal
Code. Tried jointly, the court dismissed the cases for lack of jurisdiction.
Issue: Whether the checks were issued in Bulacan or Pampanga.
Held: While the subject check was issued in Bulacan, it was not completely drawn thereat, but in
San Fernando, Pampanga, where it was uttered and delivered. The place where the bills were
written, signed or dated does not fix or determine the place where they were executed. What is of
decisive importance is the delivery thereof, as it is the final act essential to its consummation as
an obligation. The issuance and the delivery of the check must be to a person who takes it as a
holder, i.e. the payee or indorsee of a bill or note, who is in possession of it or the bearer thereof.
Both estafa by postdating or issuing a bad check a transitory or continuing offense. Thus, as
jurisdiction or venue is determined by the allegations in the information, i.e. San Fernando,
Pampanga, the venue was properly laid. Case is remanded to the trial court for proper
disposition.
Thu 25 Mar 2004
Nego-d: Navarro vs. CA (GR 112389, 1 August 1994)

No Comments
Navarro vs. CA
GR 112389, 1 August 1994
Facts: Mercedes D. Navarro was convicted of violating Batas Pambansa Bilang 22 (BP 22) in
the Regional Trial Court of Pangasinan. She failed to file her brief on appeal. She claimed to
have made payment to the original complainants saleslady when she filed a motion for new trial
on the ground of newly discovered evidence. Such motion was denied.
Issue: Whether Navarro is indeed guilty of violating the bouncing check law.
Held: Payment of the value of the check either by the drawer or by the drawee bank within 5
banking days from notice of dishonor given to the drawer is a complete defense. The prima facie
presumption that the drawer had knowledge of the insufficiency of funds or credit at the time of
the issuance and on its presented for payment would be rebutted by such payment. This defense
lies regardless of the strength of the evidence offered by the prosecution to prove the elements
of the offense (i.e. violation of BP 22). Herein, Navarro failed to overcome the presumption by
substantiating her allegation of payment. There is no proof that the payment, if it was really
made at all, was done within 5 days from the notice of dishonor.
Thu 25 Mar 2004
Nego-d: MWSS vs. CA (GR L-62943, 14 July 1986)

No Comments
MWSS vs. CA
GR L-62943, 14 July 1986
Second Division, Gutierrez Jr. (J)
Facts: By special arrangement with PNB, MWSS used personalized checks in drawing from its
account. The checks were printed by its printer, F. Mesina Enterprises. 23 checks were paid and
cleared by PNB, and debited against MWSS account from March to May 1969. The checks were
deposited by payees Raul Dizon, Arturo Sison, and Antonio Mendoza in their account with
PCIBank. Said persons were later found to be fictitious. MWSS requested PNB to restore the
amount debited due to the 23 checks, allegedly forged, to its account. The bank refused. Hence,
the present action.
Issue: Who shall bear the loss resulting from the alleged forged checks.
Held: There was no express and categorical finding that the 23 checks were forged or signed by
persons other than the authorized MWSS signatories. Forgery is not presumed but should be
established by clear, positive and convincing evidence. MWSS is barred from setting up defense
of forgery under Section 23 of the Negotiable Instruments Law as MWSS committed gross
negligence in the printing of its personalized checks, failed to reconcile its bank statements with
its own records, and failed to provide appropriate security measures over its own record. PNB,
the drawee bank, had taken necessary measures in the detection of forged checks and the
prevention of their fraudulent encashment through constant reminders to all its current account
bookkeepers informing them of the activities of forgery syndicates. MWSS gross negligence
was the proximate cause of the loss (P3 million), and should bear the loss.
Thu 25 Mar 2004
Nego-d: Moran vs. CA (GR 105836, 7 March 1994)

No Comments
Moran vs. CA
GR 105836, 7 March 1994
Second Division, Regalado (J)
Facts: George and Librada Moran maintained 3 joint accounts with CityTrust Banking
Corporation. The Morans issued checks in favor of Petrophil Corporation, which were
dishonored for insufficiency of funds. Moran deposited the amount that would cover the checks
the day after the checks clearing. Petrophil did not deliver the Morans fuel orders for their
Wack-Wack Petron Gasoline station, prompting the latter to temporarily stop business
operations. The Morans sued the bank for damages.
Issue: Whether a bank is liable for its refusal to pay a check on account of insufficient funds,
notwithstanding the fact the fact that a deposit was made later in the day.
Held: A check is a bill of exchange drawn on a bank payable on demand. Where the bank
possesses funds of a depositor, it is bound to honor his checks to the extent of the amount of the
deposits. Failure to do so, when deposit is sufficient, entitles the drawer to substantial damages
without proof of actual damages. Herein, however, the balance of the account maintained in the
bank was not enough to cover either of the two checks when they were dishonored. A check, as
distinguished from an ordinary bill of exchange, is supposed to be drawn against a previous
deposit of funds. As such, a drawer must remember his responsibilities every time he issues a
check. He must personally keep track of his available balance in the bank and not rely on the
bank to notify him of the necessity to fund the checks he previously issued. A bank is under no
obligation to make part payment on a check, up to only the amount of the drawers funds, where
the check is drawn for an amount larger than what the drawer has on deposit. A check is intended
not only to transfer a right to the amount named in it, but to serve the further purpose of
affording evidence for the bank of the payment of such amount when the check is taken up.
Clearly, a bank is not liable for its refusal to pay a check on account of insufficient funds,
notwithstanding the fact that a deposit may be made later in the day. Before a bank depositor
may maintain a suit to recover a specific amount from his bank, he must first show that he had on
deposit sufficient funds to meet his demand.
Thu 25 Mar 2004
Nego-d: Manila Lighter Transportation vs. CA (GR L-50373,

15 February 1990)
No Comments
Manila Lighter Transportation vs. CA
GR L-50373, 15 February 1990
First Division, Grino-Aquino (J)
Facts: 49 checks were issued by Manila Lighter Transportations customers in payment of
brokerage / lighterage services and were all delivered to its collector, Augusto Perez. Upon
forged indorsements of the companys General Manager, Luis Gaskell, the checks found their
way to the accounts of third persons and were later withdrawn. A complaint to recover the value
of the checks were filed against China Bank. Bank denied liability.
Issue: Whether the bank is negligent as to bear the loss resulting from the checks with forged
indorsements.
Held: Since Manila Lighter Transportation was not a client of the bank, the latter had no way of
ascertaining the authenticity of its indorsements on the checks which were deposited in the
accounts of third persons (Ko Lit and Cao Pek) in said bank. The bank was not negligent
because, in accordance with banking practice, it caused the checks to pass through the clearing
house before it allowed their proceeds to be withdrawn by the depositors.
Thu 25 Mar 2004
Nego-d: Magno vs. CA (GR 96132, 26 June 1992)

No Comments
Magno vs. CA
GR 96132, 26 June 1992
Second Division, Paras (J)
Facts: Oriel Magno lacked funds to purchase necessary equipment to make his car repair shop
business operational. He approached Corazon Teng, who in turn referred LS Finance and
Management Corporation, who could accommodate him and provide him credit facilities. LS
Finance required a warranty deposit (30% of the total value of the pieces of equipment to be
purchased), which Teng advanced, unknown to Magno. When the equipment were delivered to
Magno, he issued a postdated check to LS Finance, which delivered it to Teng. When the check
matured, Magno requested that the check not to be deposited as he no longer banks with Pacific
Bank. To replace the check, Magno issued 6 postdated checks, 2 of which were deposited and
cleared, the other 4 were held momentarily by Teng, on the request of Magno for they are not
covered with sufficient funds. As Magno cannot pay the monthly rentals fro the equipment, the
same were pulled out. Only then did Magno learned that Teng was the one who advanced the
deposit. Magno promised to pay her but payment never came. When the checks were deposited,
they were dishonored. Magno was found guilty of violation of BP22 when the cases were
adjudicated.
Issue: Whether there was a violation of BP 22.
Held: The crux of the matter rest upon the reason for the drawing of the postdated checks by
Magno, i.e. whether they were drawn or issued to apply on account or for value, as required
under Section 1 of BP 22. When viewed against the definitions of warranty and deposit, for
which the postdated checks were issued or drawn, the alleged crime could not have been
committed by Magno. Furthermore, the element of knowing at the time of issue that he does not
have sufficient funds in or credit with the drawee bank.: is inversely applied in the case. From
the beginning, Magno never hid the fact that he had no funds. Magno, thus, was acquitted of the
crime charged.
Thu 25 Mar 2004
Nego-d: Lozano vs. Martinez (GR L-63419, 18 December

1986)
No Comments
Lozano vs. Martinez
GR L-63419, 18 December 1986
En Banc, Yap (J)
Facts: Lozano vs. Martinez (GR L-63419), Lobaton vs. Cruz (GR L-66839-42), Datuin vs. Pano
(GR 71654), Violago vs. Pano (GR 74524-25), Abad vs. Gerochi (GR 75122-49), Aguiliz vs.
Presiding Judge of Branch 154 (GR 75812-13), Hojas vs. Penaranda (GR 75765-67) and People
vs. Nitafan (GR 75789) are cases involving prosecution of offenses under BP 22 which were
consolidated herein as the parties (defendants) thereto question the constitutionality of the
statute, BP 22.
Issue: Whether BP 22 is constitutional.
Held: The language of BP22 is broad enough to cover all kinds of checks, whether present dated
or post dated, whether issued in payment of pre-existing obligations or given in mutual or
simultaneous exchange for something of value. BP 22 is aimed to put a stop or to curb the
practice of issuing worthless checks, which is proscribed by the State because of the injury it
causes to public interests. The gravamen of the offense punished by BP 22 is the act of making or
issuing a worthless check or a check which is dishonored upon its presentation for payment. it is
not the non-payment of an obligation which the law punishes. The law publishes the act not as
an offense against property but an offense against public order. The enactment of BP 22 is a valid
exercise of police power and is not repugnant to the constitutional inhibition against
imprisonment for debt. The statute is not unconstitutional.
Thu 25 Mar 2004
Nego-d: Llamado vs. CA (GR 99032, 26 March 1997)

No Comments
Llamado vs. CA
GR 99032, 26 March 1997
Second Division, Torres Jr. (J)
Facts: Ricardo Llamado and Jacinto Pascual were Treasurer and President of Pan Asia Finance
Corporation. Leon Gaw delivered P180,000 to Llamado with assurance that the amount would be
repaid on 4 November 1983 with 12% interest and a share of the profits of the corporation. On
said date, Gaw deposited the check but it was dishonored. Informing Llamado of the dishonor,
Llamado offered in writing to pay Gaw a portion of the amount equivalent to 10% thereof on 14
or 15 November and the balance rolled over for a period of 90 days. Llamado failed to do so.
Gaw filed a complaint against Llamado and Pascual for violation of BP 22. Pascual remains at
large. Llamado contends he signed the check in blank.
Issue: Whether Llamado is personally liable for the bounced check.
Held: Llamados claim that he signed the check in blank is hardly a defense. By signing the
check, he made himself prone to being charged with violation of BP 22. It became incumbent
upon him to prove his defenses. As treasurer of the corporation who signed the check in his
capacity as corporate officer, lack of involvement in the negotiation for the transaction is not a
defense. Llamado is personally liable even if the check was in the name of the corporation. Third
paragraph of Section 1, BP 22, states that where the check is drawn by a corporation, company
or entity, the person(s) who actually signed the check in behalf of such drawer shall be liable
under this Act.
It must be noted that the check was issued for a valuable consideration (P180,000). Had the
money been intended to be returned when the investment was successful, the check need not be
issued. A receipt and their written agreement would have sufficed.
Thu 25 Mar 2004
Nego-d: Lim vs. Rodrigo (GR 76974, 18 November 1988)

No Comments
Lim vs. Rodrigo
GR 76974, 18 November 1988
Third Division, Fernan (J)
Facts: Ko Hu issued 5 post dated checks amounting to P200,000 allegedly in payment of a
certain obligation to Benito Lim. Said checks were handed to Lims brother, Vicente, at Ko Hus
office in Nueva Street, Manila for delivery to Benito Lim in Baguio City. When presented at
Lims depository bank in Baguio City, the checks were dishonored for having been drawn
against a closed account. Lim filed a suit against Ko Hu for violation of BP 22 in Baguio City.
Issue: Whether the delivery of the checks to Benito Lims brother is the delivery contemplated
by law (prelude to juridictional issue)
Held: The venue of the offense lies at the place where the check was executed and delivered to
the payee and that the place where a check was written, signed or dated does not fix the place
where it was executed, as what is of decisive importance is the delivery thereof which is the final
act essential to its consummation as an obligation. The delivery contemplated by law must be
to a person who takes the check as a holder, i.e. the payee or indorsee of a bill or note, who is
in possession of it, or the bearer thereof. Vicente Lim, Benitos brother, cannot be said to have
taken the checks in the concept of a holder for he is neither the payee or indorsee thereof. Neither
could he be deemed to be Benitos agent with respect thereto, for he was purposely sent to Ko
Hu to get certain stock certificates and not the checks in question (This is similar to the People
vs. Yabut case).
Thu 25 Mar 2004
Nego-d: Lim vs. People (GR 130038, 18 September 2000)

No Comments
Lim vs. People
GR 130038, 18 September 2000
En Banc, Pardo (J)
Facts: Rosa Lim bought various kinds of jewelry worth P300,000 from the store of Maria
Antonia Seguan, by issuing a check payable to cash drawn against MetroBank. The next day,
Lim again purchased jewelry valued at P241,668 by issuing another check payable to cash
likewise drawn against MetroBank. Seguan deposited the checks with her bank. The checks were
returned with a notice of dishonor as Lims accounts in said bank were already closed. Upon
demand, Lim promised to pay Seguan the amounts of the two dishonored checks. She never did.
Rosa Lim was charge for two counts of violation of BP 22, where she was found guilty, and
sentenced to 1 year imprisonment with fine (P200,000).
Issue: Whether Lim has knowledge of the insufficiency of funds when issuing the checks.
Held: The elements of BP22 are (1) the making, drawing and issuance of any check to apply for
account or for value, (2) the knowledge of the maker, drawer or issuer that at the time of issue he
does not have sufficient funds in or credit with the drawee bank for the payment of such check in
full upon its presentment, and (3) the subsequent dishonor of the check by the drawee bank for
insufficiency of funds or credit or dishonor for the same reason had not the drawer, without any
valid cause, ordered the bank to stop payment. Lim never denied issuing the check. Section 2 of
BP 22 creates a presumption juris tantum that the second element prima facie exists when the
first and third elements are present. If not rebutted, it suffices to sustain a conviction.
It must be noted that similar to the Vaca case, the Court deleted the prison sentences imposed
upon Lim, holding that the two fines imposed for each of the violation (P200,000 each ) are
appropriate and sufficient. Subsidiary imprisonment not exceeding 6 months is provided in case
of insolvency or non-payment of the fines as decreed.
Thu 25 Mar 2004
Nego-d: Lim vs. CA (GR 107898, 19 December 1995)

No Comments
Lim vs. CA
GR 107898, 19 December 1995
Facts: Spouses Manuel and Rosita Lim are the president and treasurer, respectively, of RIGI
Built Industries Inc. RIGI had been transacting business with Linton Commercial Company for
years, the latter supplying the former with steel plates, steel bars, flat bars and purlin sticks
which the company uses in the fabrication, installation and building of steel structures. The Lims
ordered steel plates from Linton Commercial, delivering checks to the latters collector as
payment. The checks were dishonored for insufficiency of funds with the additional notation
payment stopped (The Lims claimed that the supplies delivered by Linton Commercial were
not in accordance with the specifications of purchase orders). Despite demands, the Lims refused
to make good the checks or to pay value of the deliveries.
Issue: Whether the receipt of the checks by the collector of Linton is the issuance and delivery to
the payee within the contemplation of the law (as prelude to jurisdiction issue).
Held: Issue means the first delivery of the instrument complete in form to a person who takes
it as a holder. Holder refers to the payee or indorsee of a note or who is in possession of it or
the bearer thereof. The issuance as well as the delivery of the check must be to a person who
takes it as a holder. Delivery of the checks signifies transfer of possession (actual or constructive)
from one person to another with intent to transfer title thereto; the delivery being the final act
essential to its consummation as an obligation. The collector was not the person who could take
the checks as a holder. Neither could the collector be deemed an agent of Linton Commercial
with respect to the checks because he was a mere employee.
Thu 25 Mar 2004
Nego-d: Lazaro vs. CA (GR 105461, 11 November 1993)

No Comments
Lazaro vs. CA
GR 105461, 11 November 1993
Second Division, Padilla (J)
Facts: Marlyn Lazaro received from Rudy Chua the amount of P90,000 as advanced payment
for deliveries of sugar, etc. Lazaro was only able to deliver partial delivery. To refund the
undelivered goods, she issued a check for P72,000. When deposited, the check was dishonored
and stamped account closed. To make up for the dishonor, Lazaro indorsed a check issued by
one Lolita Soriano, payable to Cash. It was likewise dishonored and marked account closed.
Chua sent a demand letter asking for the payment of the amount covered by the first check
within days from receipt of letter. For failure of the accused to pay the amount, Chua filed cases
for estafa and violation of BP 22.
Issue: Whether damage or prejudice is an element of BP 22 violation.
Held: The clear intention of the framers of BP 22 is to make the mere act of issuing a check that
is worthless malum prohibitum. The law does not require that there be damage or prejudice to the
individual complainant by reason of the issuance of the check. The fine provided for in BP 22
was intended as an additional penalty for the act of issuing a worthless check. BP 22 provides
that a fine of not less than but not more than double the amount of the dishonored check may be
imposed by the court.
Thu 25 Mar 2004
Nego-d: Lao vs. CA (GR 119178, 20 June 1997)

No Comments
Lao vs. CA
GR 119178, 20 June 1997
Third Division, Panganiban (J)
Facts: Lim Lim Lao was a junior officer of Premier Investment House in its Binondo branch.
She was authorized to sign checks for and in behalf of the corporation. In the course of business,
she met Fr. Artelijo Palijo, provincial treasurer of the Society of the Divine Word. Fr. Palijo was
authorized to invest donations of the society and had been investing the societys money with
Premiere. Fr. Palijo was issued checks in payment of interest for the societys investments. The
checks were dishonored for insufficiency of funds. Fr. Palijo was only able to acquire P5,000
for his efforts in demanding the payment of the checks. Premiere, subsequently, was placed
under receivership. Fr. Palijo filed a suit against Lim Lao and his co-signatory, Teodulo Asprec,
head of operations for violation of BP 22.
Issue: Whether an employee who, as part of her regular duties, signs blank corporate check, be
held for violation of BP22.
Held: The checks co-signed by Lim Lao were signed in advance and in blank, delivered to the
head of operations, who subsequently filled in the name of he payee, the amounts and
corresponding dates of maturity; this procedure followed in keeping with her duties as a junior
officer. Though BP 22 provides the presumption that a drawer is knowledgeable of the fact of
insufficiency of funds, such presumption may be debunked by contrary evidence. Herein, Lim
Lao does not have the power, duty or responsibility to monitor and assess the balances against
the issuance, nor to make sure that the checks were funded. Such responsibility devolved upon
the corporations Treasury Department in Cubao, Quezon City. Furthermore, no notice of
dishonor was actually sent or received by Lim Lao to support the prima facie evidence of
knowledge of insufficient funds. She was thus acquitted.
Thu 25 Mar 2004
Nego-d: Kalalo vs. Luz (GR L-27782, 31 July 1970)

No Comments
Kalalo vs. Luz
GR L-27782, 31 July 1970
En Banc, Zaldivar (J)
Facts: On 17 November 1959, Octavio Kalalo entered into an agreement with Alfredo Luz
where he was to render engineering design services for a fee. On 11 December 1961, Kalalo sent
Luz a statement of account where the balance due for services rendered was P59,505. On 18 May
1962, Luz sent Kalalo a resume of fees due to the latter, and a check for P10,861.08. Kalalo
refused to accept the check as full payment of the balance of the fees due him. On 10 August
1962, Kalalo filed a complaint containing 4 causes of action, i.e. $28,000 (representing 20% of
the amount paid to Luz in the International Research Institute project) and the balance of
P30,881.25 as fees; P17,0000 as consequential and moral damages; P55,000 as moral damages,
attorneys fees and litigation expenses; and P25,000 as actual damages, attorneys fees and
litigation expenses). The trial court ruled in favor of Kalalo. Luz filed an appeal directly with the
Supreme Court raising only questions of law.
Issue: Whether the rate of exchange of dollar to peso are those at the time of the payment of the
judgment or at the time when the research institute project became due and demandable.
Held: Luz obligation to pay Kalalo the sum of US$28,000 accrued on 25 August 1961, or after
the enactment of RA 529 (16 June 1950). Thus, the provision of the statute which requires
payment at the prevailing rate of exchange when the obligation was incurred cannot be applied.
RA 529 does not provide for the rate of exchange for the payment of obligation incurred after the
enactment of the Act, and thus the rate of exchange should be that prevailing at the time of
payment. The view finds support in the ruling of the Court in Engel vs. Velasco & Co. The trial
court did not err in holding the rate of exchange is that at the time of payment.
Thu 25 Mar 2004
Nego-d: Jimenez vs. Bucoy (GR L-10221, 28 February 1958)

No Comments
Jimenez vs. Bucoy

GR L-10221, 28 February 1958
En Banc, Bengzon (J)
Facts: In the proceedings in the intestate of Luther Young and Pacita Young who died in 1954
and 1952, respectively, Pacifica Jimenez presented for payment 4 promissory notes signed by
Pacita for different amounts totalling P21,000. Acknowledging receipt by Pacita during the
Japanese occupation, in the currency then prevailing, the Administrator manifested willingness to
pay provided adjustment of the sums be made in line with the Ballantyne schedule. The claimant
objected to the adjustment insisting on full payment in accordance with the notes. The court held
that the notes should be paid in the currency prevailing after the war, and thus entitling Jimemez
to recover P21,000 plus P2,000 as attorneys fees. Hence, the appeal.
Issue: Whether the amounts should be paid, peso for peso; or whether a reduction should be
made in accordance with the Ballantyne schedule.
Held: If the loan was expressly agreed to be payable only after the war, or after liberation, or
became payable after those dates, no reduction could be effected, and peso-for-peso payment
shall be ordered in Philippine currency. The Ballantyne Conversion Table does not apply where
the monetary obligation, under the contract, was not payable during the Japanese occupation.
Herein, the debtor undertook to pay six months after the war, peso for peso payment is
indicated.
Thu 25 Mar 2004
Nego-d: Ibasco vs. CA (GR 117488, 5 September 1996)

No Comments
Ibasco vs. CA
GR 117488, 5 September 1996
Third Division, Davide Jr. (J)
Facts: The Ibasco spouses requested credit accommodation fro the supply of ingredients in the
manufacture of animal feeds from the Trivinio spouses. Ibasco issued 3 checks for 3 deliveries of
darak. The checks bounced and the Ibasco spouses were notified of the dishonor. Ibasco instead
offered a property in Daet. The property, being across the sea, the Trivinio spouses did not
inspect the property. For the failure of the Ibasco spouses to settle their account, the Trivinio
spouses filed criminal cases against the former for violation of BP22.
Issue: Whether the checks were for accommodation or guarantee to acquire the benefits of the
interpretation of Ministry Circular 4 of the Department of Justice in relation to BP 22.
Held: Ministry Circular 4, issued 1 December 1981 by the Department of Justice, provides that
where a check is issued as part of an arrangement to guarantee or secure the payment of the
obligation, pre-existing or not, the drawer is not criminally liable for either estafa or violation of
BP 22. Incidents however indicate that the checks were issued as payment and for value, and not
for accommodation (i.e. pertaining to an arrangement made a favor to another, not upon a
consideration received). as the checks failed to bear any statement for accommodation and for
guarantee to show Ibascos intent. ( It must be noted, however, that BP22 does not distinguish
and applies even in cases where dishonored checks were issued as a guarantee or for deposit
only. The erroneous interpretation of Ministry Circular 4 was rectified by the repealing Ministry
Circular 12, issued on 8 August 1984).
Thu 25 Mar 2004
Nego-d: Hongkong & Shanghai Bank vs. Peoples Bank and

Trust (GR L-28226, 30 September 1970)
No Comments
Hongkong & Shanghai Bank vs. Peoples Bank and Trust
GR L-28226, 30 September 1970
First Division, Fernando (J)
Facts: The Philippine Long Distance Telephone Company (PLDT) drew a check on the
Hongkong & Shanghai Banking Corporation (HSBC) in the latters favor for P14,608.05, and
sent it through mail. The check fell into the hands of Florentino Changco, who was able to erase
the name of the payee and substituted his own, and deposited the altered check in his current
account with the Peoples Bank and Trust Co. (PBTC). The check was cleared by HSBC, and
PBTC credited Changco the amount. The alteration was known when the cancelled check was
returned to PLDT. HSBC requested PBTC to refund the amount, but the latter refused.
Issue: Whether HSBC can claim reimbursement from PBTC.
Held: A person who presents fro payment checks guarantees the genuineness of the check, and
the drawee bank need to concern itself with nothing but the genuineness of the signature, and the
state of the account with it of the drawee. If at all, whatever remedy, whatever remedy HSBC has
would lie not against PBTC but as against the party responsible for changing the name of the
payee (i.e. Changco). Its failure to call the attention of PBTC as to such alteration until after the
lapse of 27 days would, in the light of Central Bank Circular 9 (24-hour clearing house rule),
negate whatever right it might have had against PBTC.
Thu 25 Mar 2004
Nego-d: Gempesaw vs. CA (GR 92244, 9 February 1993)

No Comments
Gempesaw vs. CA
GR 92244, 9 February 1993
Second Division, Campos Jr. (J)
Facts: Natividad Gempesaw issued checks, prepared by her bookkeeper, a total of 82 checks in
favor of several supplies. Most of the checks for amounts in excess of actual obligations as
shown in their corresponding invoices. It was only after the lapse of more than 2 years did she
discovered the fraudulent manipulations of her bookkeeper. It was also learned that the
indorsements of the payee were forged, and the checks were brought to the chief accountant of
Philippine Bank of Commerce (the Drawee Bank, Buendia Branch) who deposited them in the
accounts of Alfredo Romero and Benito Lam. Gempesaw made demand upon the bank to credit
the amount charged due the checks. The bank refused. Hence, the present action.
Issue: Who shall bear the loss resulting from the forged indorsements.
Held: As a rule, a drawee bank who has paid a check on which an indorsement has been forged
cannot charge the drawers account for the amount of said check. An exception to the rule is
where the drawer is guilty of such negligence which causes the bank to honor such checks.
Gempesaw did not exercise prudence in taking steps that a careful and prudent businessman
would take in circumstances to discover discrepancies in her account. Her negligence was the
proximate cause of her loss, and under Section 23 of the Negotiable Instruments Law, is
precluded from using forgery as a defense. On the other hand, the banking rule banning
acceptance of checks for deposit or cash payment with more than one indorsement unless
cleared by some bank officials does not invalidate the instrument; neither does it invalidate the
negotiation or transfer of said checks. The only kind of indorsement which stops the further
negotiation of an instrument is a restrictive indorsement which prohibits the further negotiation
thereof, pursuant to Section 36 of the Negotiable Instruments Law. In light of any case not
provided for in the Act that is to be governed by the provisions of existing legislation, pursuant to
Section 196 of the Negotiable Instruments Law, the bank may be held liable for damages in
accordance with Article 1170 of the Civil Code. The drawee bank, in its failure to discover the
fraud committed by its employee and in contravention banking rules in allowing a chief
accountant to deposit the checks bearing second indorsements, was adjudged liable to share the
loss with Gempesaw on a 50:50 ratio.
Thu 25 Mar 2004
Nego-d: Firestone Tire and Rubber vs. Ines Chaves & Co.
(GR L-17106, 19 October 1966)
No Comments
Firestone Tire and Rubber vs. Ines Chaves & Co.
GR L-17106, 19 October 1966
En Banc, Regala (J)
Facts: The check was intended as part of the payment of Ines Chaves debt. When presented to
the Security Bank and Trust Co. by Firestone, the check was returned for insufficiency of funds.
Despite repeated demands, Ines Chaves failed to settle its account; hence, the suit.
Issue: Whether good faith is required in the issuance of a check.
Held: Everyone must in the performance of his duties, observe honesty and good faith. Where a
person issues a postdated check without funds to cover it and informs the payee of this fact, he
cannot be held guilty of estafa because there is no deceit. Herein, there is nothing in the record to
show that Firestone knew that there were no funds when it accepted the check, much less that
Firestone agreed to take the check with knowledge of the lack of funds. As Ines Chavez is guilty
of fraud (bad faith) in the performance of its obligation, it is liable for damages. Its conduct
wanting in good faith, the award of attorneys fees was warranted.
Thu 25 Mar 2004
Nego-d: Dela Victoria vs. Burgos (GR 111190, 27 June 1995)

No Comments
Dela Victoria vs. Burgos
GR 111190, 27 June 1995
Facts: Raul Sesbreno filed a complaint for damages against Assistant City Fiscal Bienvenido
Mabanto before the RTC of Cebu City. After trial, judgment was rendered ordering Mabanto to
pay Sesbreno P11,000. The decision having become final and executory, the trial court ordered
its execution upon Sesbrenos motion. The writ of execution was issued despite Mabantos
objection. A notice of garnishment was served upon Loreto de la Victoria as City Fiscal of
Mandaue City where Mabanto was then detailed. De la Victoria moved to quash the notice of
garnishment claiming that he was not in possession of any money, funds, etc. belonging to
Mabanto until delivered to him, and as such are still public funds which could not be subject of
garnishment..
Issue: Whether the checks subject of garnishment belong to Mabanto or whether they still
belong to the government.
Held: Under Section 16 of the Negotiable Instruments Law, every contract on a negotiable
instrument is incomplete and revocable until delivery of the instrument for the purpose of giving
effect thereto. As ordinarily understood, delivery means the transfer of the possession of the
instrument by the maker or drawer with the intent to transfer title to the payee and recognize him
as the holder thereof. Herein, the salary check of a government officer or employee does not
belong to him before it is physically delivered to him. Inasmuch as said checks had not yet been
delivered to Mabanto, they did not belong to him and still had the character of public funds. As a
necessary consequence of being public fund, the checks may not be garnished to satisfy the
judgment.
Thu 25 Mar 2004
Nego-d: Vaca vs. CA (GR 43596, 31 October 1936)

No Comments
Vaca vs. CA
GR 43596, 31 October 1936
En Banc, Recto (J)
Facts: Eduardo Vaca is the president and owner of Ervine International while Fernando Nieto,
Vacas son-in-law, is the firms purchasing manager. They issued a check for P10,000 to the
General Agency for Reconnaissance, Detection and Security (GARDS) and drawn against China
Bank. When deposited with PCIBank, the check was dishonored for insufficiency of funds.
GARDS sent a demand letter but the drawers failed to pay within the time given (7 days from
notice). A few days later, however, Vaca issued a check to GARDS for P19,866.16, drawn
against Associated Bank, replacing the dishonored check. GARDS did not return the dishonored
check. Later on, GARDS Acting Operations Manager filed a criminal suit against Vaca and Nieto
for violation of BP 22. The trial court sentenced each to 1 year imprisonment and to pay a fine of
P10,000 and costs.
Issue [1]: Whether the drawers had knowledge of insufficient funds in issuing the check.
Held [1]: Section 2 of BP 22 provides a presumption of knowledge of insufficiency of funds if
the drawer fails to maintain sufficient funds within 90 days after the date of the check, or to make
arrangement for payment in full by the drawee of such check within 5 days after receiving notice
that such check has not been paid by the drawee. Herein, the second check supposedly replacing
the dishonored check is actually the payment of two separate bills, and was issued 15 days after
notice. Such replacement cannot negate the presumption that the drawers knew of the
insufficiency of funds.
Issue [2]: Whether the absence of damages incurred by the payee absolves the drawers from
liability.
Held [2]: The claim that the case was simply a result of a misunderstanding between GARDS
and the drawers and that the security agency did not suffer any damage from the dishonor of the
check is flimsy. Even if the payee suffered no damage as a result of the issuance of the
bouncing check, the damage to the integrity of the banking system cannot be denied. Damage to
the payee is not an element of the crime punished in BP 22.
Note: In this case, the Court recognized the contribution of Filipino entrepreneurs to the national
economy; and that to serve the ends of criminal justice, instead of the 1 year imprisonment, a
fine of double the amount of the check involved was imposed as penalty. This was made to
redeem valuable human material and prevent unnecessary deprivation of personal liberty and
economic usefulness with due regard to the protection of the social order.
Thu 25 Mar 2004
Nego-d: Vda. de Eduque vs. Ocampo (GR L-222, 26 April

1950)
No Comments
Vda. de Eduque vs. Ocampo
GR L-222, 26 April 1950
Second Division, Moran (CJ)
Facts: On 16 February 1935, Dr. Jose Eduque secured two loans from Mariano Ocampo de
Leon, Dona Escolastica delos Reyes and Don Jose M. Ocampo, with amount s of P40,000 and
P15,000, both payable within 20 years with interest of 5% per annum. Payment of the loans was
guaranteed by mortgage on real property. On 6 December 1943, Salvacion F. Vda de Eduque, as
administratrix of the estate of Dr. Jose Eduque, tendered payment by means of a cashiers check
representing Japanese War notes to Jose M. Ocampo, who refused payment. By reason of such
refusal, an action was brought and the cashiers check was deposited in court. After trial,
judgment was rendered against Ocampo compelling him to accept the amount, to pay the
expenses of consignation, etc. Ocampo accepted the judgment as to the second loan but appealed
as to the first loan.
Issue: Whether there is a tender of payment by means of a cashiers check representing war
notes.
Held: Japanese military notes were legal tender during the Japanese occupation; and Ocampo
impliedly accepted the consignation of the cashiers check when he asked the court that he be
paid the amount of the second loan (P15,000). It is a rule that a cashiers check may constitute a
sufficient tender where no objection is made on this ground.
Thu 25 Mar 2004
Nego-d: Crystal vs. CA (GR L-35767, 18 June 1976)

No Comments
Crystal vs. CA
GR L-35767, 18 June 1976
Resolution of the Second Division, Barredo (J)
Facts: The Supreme Court, in its decision of 25 February 1975, affirmed the decision of the
Court of Appeals, holding that Raymundo Crystals redemption of the property acquired by
Pelagia Ocang, Pacita, Teodulo, Felicisimo, Pablo, Lydia, Dioscoro and Rodrigo, all surnamed de
Garcia, was invalid as the check which Crystal used in paying the redemption price has been
either dishonored or had become stale (Ergo, the value of the check was never realized). Crystal
filed a motion for reconsideration.
Issue: Whether the conflicting circumstances of the check being dishonored and becoming stale
affect the validity of the redemption sale.
Held: For a check to be dishonored upon presentment and to be stale for not being presented at
all in time are incompatible developments that have variant legal consequences. If indeed the
questioned check was dishonored, the redemption was null and void. If it had only become state,
it becomes imperative that the circumstances that caused its non-presentment be determined, for
if it was not due to the fault of the drawer, it would be unfair to deprive him of the rights he had
acquired as redemptioner. Herein, it appears that there is a strong showing that the check was not
dishonored, although it became stale, and that Pelagia Ocang had actually been paid the full
value thereof. The Supreme Court, thus, reconsidered its decision and remanded the case to the
trial court for further proceedings.
Thu 25 Mar 2004
Nego-d: Cruz vs. CA (GR 108738, 17 June 1994)

No Comments
Cruz vs. CA
GR 108738, 17 June 1994
First Division, Kapunan (J)
Facts: Andrea Mayor is engaged in the business of granting interest-bearing loans and in
rediscounting checks. Roberto Cruz, on the other hand, is engaged in selling ready to wear
clothes at the Pasay Commercial Center. Cruz frequently borrows money from Mayor. In 1989,
Cruz borrowed P176,000 from mayor, which Mayor delivered. In turn, Cruz issued a Premiere
Bank check for the same amount. When the check matured, Mayor presented it to the bank but
was dishonored and marked account closed. When notified of the dishonor, Cruz promised to
pay in cash. No payment was made, and thus the criminal action for violation of BP 22 was
instituted.
Issue: Whether Cruz is liable for violating BP 22, even upon the claim that the check was issued
to serve a mere evidence of indebtedness, and not for circulation or negotiation.
Held: A check issued as an evidence of debt, though not intended to be presented for payment
has the same effect of an ordinary check, hence, it falls within the ambit of BP 22. When a check
is presented for payment, the drawee bank will generally accept the same regardless of whether it
was issued in payment of an obligation or merely to guarantee the said obligation. What the law
punishes is the issuance of a bouncing check, not the purpose for which it was issued nor the
term and conditions relating to its issuance. The mere act of issuing a worthless check is malum
prohibitum.
Thu 25 Mar 2004
Nego-d: Co vs. PNB (GR L-51767, 29 June 1982)

No Comments
Co vs. PNB
GR L-51767, 29 June 1982
Second Division, Barredo (J)
Facts: Standard Parts Manufacturing Corporation mortgaged properties to PNB. When Standard
failed to pay its obligation (P4,296,803,56 secured by said properties), PNB extra-judicially
foreclosed the mortgages. Standard, meanwhile, transferred its rights in the mortgages to Citadel
Insurance and Surety Co., which wrote PNB its interest to redeem the Makati property (one of
the property mortgaged) for P1,621,970. PNB rejected the offer. Citadel filed suit against PNB,
where the complaint was accompanied by an RCBC managers check and which was deposited
under a savings bank account with RCBC by order of the trial court.
Issue: Whether there was a valid and effective tender of payment.
Held: The unequivocal tender of redemption was made, through a managers check of RCBC (a
well-known, big and reputable banking institution) for the amount it believed it should pay as
redemption price. PNB rejected it on the sole and only ground that it considered the amount
insufficient. Redemption was made on time, i.e. 1 year from the date appearing as the date of the
registration of the certificate of sale. Tender by managers check was not inefficacious as the
Court has already sanctioned redemption by check (See Javellana vs. Mirasol).
Thu 25 Mar 2004
Nego-d: Clark vs. Sellner (GR 16477, 22 November 1921)

No Comments
Clark vs. Sellner
GR 16477, 22 November 1921
First Division, Romualdez (J)
Facts: George Sellner, with WH Clarke and John Mave, signed a note in favor of RN Clark
dated 1 July 1914 in Manila for the amount of P12,000. The note matured, but its amount was
not paid. Action was filed in court. Sellners counsel allege that Sellner did not receive anything
of value for the transaction, that the instrumnet was not presented to sellner for payment, and that
Sellner, being an accommodation party is not liable unless the note is negotiated, which was
allegedly not done.
Issue: Whether Sellner is an accommodation party liable for the note.
Held: Sellner, as one of the signers of the note, is one of the joint and several debtors on the
note, and as such he is liable under Section 60 of the Negotiable Instruments Law/ Sellner lent
his name, not to the creditor, but to those who signed with him placing himself with respect to
the creditor in the same position and with the same liability as the said signers; and thus is a joint
surety rather than an accommodation party. As to the presentment for payment, such action is not
necessary in order to charge the person primarily liable, as is Sellner (Section 70, Negotiable
Instruments Law).
Thu 25 Mar 2004
Nego-d: City Trust Banking vs. CA (GR 92591, 30 April

1991)
No Comments
City Trust Banking vs. CA
GR 92591, 30 April 1991
Third Division, Gutierrez Jr. (J)
Facts: William Samara purchased from Citytrust Bank Draft 23681 for US$ 40,000 the payee
being Thai International Airways and the corresponding drawee bank in the United States is
Marine Midland. Samara executed a stop-payment order of the bank draft instructing Citytrust to
inform Marine Midland about the order through telex. Marine Midland noted the order, and thus
Citytrust credited Samaras account. Seven months later, Citytrust re-debited Samaras account
upon discovery that Marine Midland had already debited Citytrusts account.
Issue: Who shall be liable for the amount.
Held: Citytrust and Marine Midland were not in privity with each other in a transaction
involving payment through a bank draft. A bank draft is a bill of exchange drawn by a bank upon
its correspondent bank issued at the solicitation of a stranger who purchases and pays therefor. It
is an order for payment of money. Citytrust was the drawer of the draft through which it ordered
Marine Midland, the drawee bank, to pay Thai Airways. The drawee bank acting as payor bank is
solely liable for acts not done in accordance with the instructions of the drawer bank or the
purchaser of the draft. The drawee bank has the burden of proof that it did not so violate.
Meanwhile, the drawer, if sued by the purchaser of the draft, is liable for the act of debiting the
customers account despite an instruction to stop payment. The drawer has the duty to prove that
he complied with the order to inform the drawee.
Thu 25 Mar 2004
Nego-d: Caram Resources vs. Contreras (AM MTJ0830849,

26 October 1994)
No Comments
Caram Resources vs. Contreras

AM MTJ0830849, 26 October 1994
First Division, Davide Jr. (J)
Facts: Teresita Dizon obtained a loan from Caram Resources payable in installments. She issued
a promissory note and postdated BPI checks, four of which were dishonored when presented to
the bank as the account against which they were drawn had been closed. Caram charged Dizon
for violation of BP22, but where Judge Contreras acquitted Dizon on the ground of reasonable
doubt. Subsequently, Caram charged Judge Maximo Contreras with gross ignorance of the law
and gross misconduct committed in Dizons criminal case.
Issue: Whether malice is an essential element in BP 22.
Held: In the 4 criminal cases before Judge Contreras, Dizon as accused admitted that a loan was
granted to her and in connection therewith she executed a promissory note wherein she bound
herself to pay the loan in 12 installments. She issued the postdated checks to cover the
installments as they fall due. The checks were drawn against her BPI current account, which she
closed in the same months she obtained the loan, so that when the checks were presented for
payment they were dishonored. Malice and intent in issuing a worthless check are immaterial.
The offense is committed by the very fact of its performance, i.e. the mere act of issuing a
worthless check. The offense is malum prohibitum. An act may not be considered by society as
inherently wrong, hence, not malum in se, but because of the harm that it inflicts on the
community, it can be outlawed and criminally punished as malum prohibitum, pursuant to the
States exercise of police power.
Wed 24 Mar 2004
Nego-d: Caltex (Philippines) Inc. vs. CA (GR 97753, 10

August 1992)
No Comments
Caltex (Philippines) Inc. vs. CA
GR 97753, 10 August 1992
Second Division, Regalado (J)
Facts: On various dates, Security Bank and Trust Co. (SEBTC), through its Sucat branch, issued
280 certificates of time deposit (CTD) in favor of one Angel dela Cruz who deposited with the
bank the aggregate amount of P1.12 million. Anger de la Cruz delivered the CTDs to Caltex in
connection with his purchase of fuel products from the latter. Subsequently, dela Cruz informed
the bank that he lost all the CTDs, and thus executed an affidavit of loss to facilitate the issuance
of the replacement CTDs. De la Cruz was able to obtain a loan of P875,000 from the bank, and
in turn, he executed a notarized Deed of Assignment of Time Deposit in favor of the bank.
Thereafter, Caltex presented for verification the CTDs (which were declared lost by de la Cruz)
with the bank. Caltex formally informed the bank of its possession of the CTDs and its decision
to preterminate the same. The bank rejected Caltex claim and demand, after Caltex failed to
furnish copy of the requested documents evidencing the guarantee agreement, etc. In 1983, de la
Cruz loan matured and the bank set-off and applied the time deposits as payment for the loan.
Caltex filed the complaint, but which was dismissed.
Issue [1]: Whether the Certificates of Time Deposit (CTDs) are negotiable instruments.
Held [1]: The CTDs in question meet the requirements of the law for negotiability. Contrary to
the lower courts findings, the CTDs are negotiable instruments (Section 1). Negotiability or
non-negotiability of an instrument is determined from the writing, i.e. from the face of the
instrument itself. The documents provided that the amounts deposited shall be repayable to the
depositor. The amounts are to be repayable to the bearer of the documents, i.e. whosoever may
be the bearer at the time of presentment.
Issue [2]: Whether the CTDs negotiation require delivery only.
Held [2]: Although the CTDs are bearer instruments, a valid negotiation thereof for the true
purpose and agreement between it (Caltex) and de la Cruz requires both delivery and
indorsement; as the CTDs were delivered to it as security for dela Cruz purchases of its fuel
products, and not for payment. Herein, there was no negotiation in the sense of a transfer of title,
or legal title, to the CTDs in which situation mere delivery of the bearer CTDs would have
sufficed. The delivery thereof as security for the fuel purchases at most constitutes Caltex as a
holder for value by reason of his lien. Accordingly, a negotiation for such purpose cannot be
effected by mere delivery of the instrument since the terms thereof and the subsequent
disposition of such security, in the event of non-payment of the principal obligation, must be
contractually provided for.
Wed 24 Mar 2004
Nego-d: Bataan Cigar and Cigarette Factory vs. CA (GR

93048, 3 March 1994)
No Comments
Bataan Cigar and Cigarette Factory vs. CA
GR 93048, 3 March 1994
Second Division, Nocon (J)
Facts: Bataan Cigar and Cigarette Factory Inc. (BCCFI) engaged one of its suppliers, Kim Tim
Pua George (George King), to deliver bales of tobacco leaf. In consideration thereof, BCCFI
issued postdated cross checks to King. King sold the checks, at a discount, to the State
Investment House Inc. (SIHI). As King failed to deliver the bales of tobacco leaf despite demand,
BCCFI issued stop payment orders on the checks. Efforts by SIHI to collect from BCCFI failed.
SIHI filed suit.
Issue: Whether SIHI can recover the value of the checks, premised on the issue whether SIHI is
a holder in due course.
Held: The facts of the case are on all fours to the case of SIHI vs. Intermediate Appellate Court.
The crossing of the checks should put the holder on inquiry and upon him devolves the duty to
ascertain the indorsers title to the check or the nature of his possession. Failing in this respect,
the holder is declared guilty of gross negligence amounting to legal absence of good faith,
contrary to Section 52 (c) of the Negotiable Instruments Law, and as such the consensus of
authority is to the effect that the holder of the check is not a holder in due course. BCCFI cannot
be obliged to pay the checks as there is a failure of consideration (King being unable to supply
the bales of tobacco leaf, for which the checks were intended for). Still, SIHI a holder not in
due course can collect from the immediate indorser, George King. Such is the disadvantage of
a holder not in due course, i.e. the instrument is subject to defenses as if it were non-negotiable.
Wed 24 Mar 2004
Nego-d: Associated Bank vs. CA (GR 107382, 31 January

1996)
No Comments
Associated Bank vs. CA
GR 107382, 31 January 1996
Second Division, Romero (J)
Facts: The Province of Tarlac maintains a current account with the Philippine National Bank
(PNB Tarlac Branch) where the provincial funds are deposited. Portions of the funds were
allocated to the Concepcion Emergency Hospital. Checks were issued to it and were received by
the hospitals administrative officer and cashier (Fausto Pangilinan). Pangilinan, through the help
of Associated Bank but after forging the signature of the hospitals chief (Adena Canlas), was
able to deposit the checks in his personal account. All the checks bore the stamp All prior
endorsement guaranteed Associated Bank. Through post-audit, the province discovered that the
hospital did not receive several allotted checks, and sought the restoration of the debited amounts
from PNB. In turn, PNB demanded reimbursement from Associated Bank. Both banks resisted
payment. Hence, the present action.
Issue: Who shall bear the loss resulting from the forged checks.
Held: PNB is not negligent as it is not required to return the check to the collecting bank within
24 hours as the banks involved are covered by Central Bank Circular 580 and not the rules of the
Philippine Clearing House. Associated Bank, and not PNB, is the one duty-bound to warrant the
instrument as genuine, valid and subsisting at the time of indorsement pursuant to Section 66 of
the Negotiable Instruments Law. The stamp guaranteeing prior indorsement is not an empty
rubric; the collecting bank is held accountable for checks deposited by its customers. However,
due to the fact that the Province of Tarlac is equally negligent in permitting Pangilinan to collect
the checks when he was no longer connected with the hospital, it shares the burden of loss from
the checks bearing a forged indorsement. Therefore, the Province can only recover 50% of the
amount from the drawee bank (PNB), and the collecting bank (Associated Bank) is liable to PNB
for 50% of the same amount.
Wed 24 Mar 2004
Nego-d: Associated Bank vs. CA (GR 89802, 7 May 1992)

No Comments
Associated Bank vs. CA
GR 89802, 7 May 1992
Facts: Melissas RTWs customers issued cross checks payable to Melissas RTW, which its
proprietor Merle Reyes did not receive. It was learned that the checks had been deposited with
the Associated Bank by one Rafael Sayson. Sayson was not authorized by Reyes to deposit and
encash said checks. Reyes filed an action for the recovery of the total value of the checks plus
damages.
Issue: Whether the bank was negligent for the loss.
Held: Crossing a check means that the drawee bank should not encash the check but merely
accept it for deposit, that the check may be negotiated only once by one who has an account in a
bank, and that the check serves as warning that it was issued for a definite purpose so that he
must inquire if he has received the check pursuant to that purpose. The effect, thus, relate to the
mode of its presentment for payment, in accordance with Section 72 of the Negotiable
Instruments Law. The bank paid the checks notwithstanding that title had not passed to the
indorser, as the checks had been crossed and issued for payees account only. It does did so in
its own peril and became liable to the payee for the value of the checks. The failure of the bank
to make an inquiry as to Saysons authority was a breach of its duty. The bank is negligent and is
thus liable to Reyes.
Wed 24 Mar 2004
Nego-d: Arrieta vs. National Rice & Corn Corporation (GR

L-15645, 31 January 1964)
No Comments
Arrieta vs. National Rice & Corn Corporation (NARIC)
GR L-15645, 31 January 1964
En Banc, Regala (J)
Facts: On 19 May 1952, Paz and Vitaliado Arrieta participated in the public bidding called by
NARIC for the supply of 20,000 metric tons of Burmese rice. Ad her bid of $203 per metric ton
was the lowest, she was awarded the contract for the same. As a result of the delay in the opening
of the letter of credit by NARIC, the allocation of Arrietas supplier in Rangoon was cancelled
and the 5% deposit amounting to an equivalent of P200,000 was forfeited. Arrieta endeavored
but failed to restore the cancelled Burmese rice allocation, and thus offered Thailand rice instead.
Such offer was rejected by NARIC. Subsequently, Arrieta sent a letter to NARIC, demanding
compensation for the damages caused her in the sum of US$286,000 representing unrealized
profit. The demand having been rejected, she instituted the case.
Issue: Whether the rate of exchange to be applied in the conversion is that prevailing at the time
of breach, or at the time the obligation was incurred, or on the promulgation of the decision.
Held: As pronounced in Eastboard Navigation vs. Ismael, if there is any agreement to pay an
obligation in the currency other than Philippine legal tender, the same is null and void as contrary
to public policy (RA 529), and the most that could be demanded is to pay said obligation in
Philippine currency to be measured in the prevailing rate of exchange at the time the obligation
was incurred. Herein, the rate of exchange to be applied is that of 1 July 1952, when the contract
was executed.
Wed 24 Mar 2004
Nego-d: Ang Tiong vs. Ting (GR L-26767, 22 February 1968)

No Comments
Ang Tiong vs. Ting

GR L-26767, 22 February 1968
En Banc, Castro (J)
Facts: Lorenzo Ting issued a check for P4,000 payable to cash or bearer. With Felipe Angs
signature (indorsement in blank) at the back thereof, the instrument was received by Ang Tiong
who thereafter presented it to the bank for payment. The drawee bank dishonored it. Ang Tiong
made written demands on both Ting and Ang to make good the amount represented by the check.
These demands unheeded. Ang Tiong filed suit for collection. The trial court adjudged for Ang
Tiong. Only Ang appealed, maintaining that he is only an accommodation party.
Issue: Whether Felipe Ang is an accommodation party.
Held: Felipe Ang is a general indorser (Section 63, Negotiable Instruments Law), in the absence
of any indication by appropriate words his intention to be bound in some other capacity. Even on
the assumption that Ang is a mere accommodation party, he is liable on the instrument to a
holder for value notwithstanding that such holder at the time of taking the instrument knew him
to be only an accommodation party (Section 29, Negotiable Instruments Law). Assuming further
that Ang is an accommodation indorser, the fact that Ang may obtain security from the maker to
protect himself against the danger of insolvency of the latter cannot in any manner affect his
liability to Ang Tiong, as the said remedy is a matter of concern exclusively between an
accommodation indorser and an accommodated party. The liability of Felipe Ang remains
primary and unconditional.
Wed 24 Mar 2004
Nego-d: Abubakar vs. Auditor General (GR L-1405, 31 July

1948)
No Comments
Abubakar vs. Auditor General
GR L-1405, 31 July 1948
First Division, Bengzon (J)
Facts: Treasury Warrant A-2867376 was issued in favor of Placide S. Urbanes on 10 December
1941 for P1,000, but is now in the hands of Benjamin Abubakar. The Auditor refused to
authorize the payment of the treasury warrant. Abubakar contends he is a holder in good faith
and for value and thus, entitled to the rights and privileges of a holder in due course.
Issue: Whether Abubakar is a holder in due course.
Held: A treasury warrant is not a negotiable instrument; it being an order for payment out of a
particular fund, and is not unconditional and does not fulfill one of the essential requirements
of a negotiable instrument. Therefore, a holder of a treasury warrant cannot argue that he is a
holder in good faith and for value of a negotiable instrument and thus entitled to the rights and
privileges of a holder in due course, free from defenses.
Sun 7 Mar 2004
Digest: Grego vs. Comelec (GR 125955. June 19, 1997)

No Comments
Grego vs. Comelec
(EN BANC, G.R. No. 125955. June 19, 1997)
Facts: On 31 October 1981, Humberto Basco was removed from his position as Deputy Sheriff
by no less than this Court upon a finding of serious misconduct in an administrative complaint
lodged by a certain Nena Tordesillas. Subsequently, Basco ran as a candidate for Councilor in the
Second District of the City of Manila during the 18 January 1988 local elections. He won and,
accordingly, assumed office. After his term, Basco sought re-election in the 11 May 1992
synchronized national elections. Again, he succeeded in his bid and he was elected as one of the
6 City Councilors. However, his victory this time did not remain unchallenged. In the midst of
his successful re-election, he found himself besieged by lawsuits of his opponents in the polls
who wanted to dislodge him from his position. All the challenges (by one Cenon Ronquillo and
another by one by Honorio Lopez II, were, however, dismissed, thus, paving the way for Bascos
continued stay in office. Despite the odds previously encountered, Basco remained undaunted
and ran again for councilor in the May 8, 1995, local elections seeking a third and final term.
Once again, he beat the odds by emerging sixth in a battle for six councilor seats. As in the past,
however, his right to office was again contested. Wilmer Grego filed a disqualification case
against Basco before the COMELEC. The COMELEC conducted a hearing of the case on 14
May 1995, where it ordered the parties to submit simultaneously their respective memoranda.
Before the parties could comply with this directive, however, the Manila City BOC proclaimed
Basco on 17 May 1995, as a duly elected councilor for the Second District of Manila, placing
sixth among several candidates who vied for the seats. Basco immediately took his oath of office
before the Honorable Ma. Ruby Bithao-Camarista, Presiding Judge, Metropolitan Trial Court,
Branch I, Manila. In view of such proclamation, Grego lost no time in filing an Urgent Motion
seeking to annul what he considered to be an illegal and hasty proclamation made on 17 May
1995, by the Manila City BOC. After the parties respective memoranda had been filed, the
COMELECs First Division resolved to dismiss the petition for disqualification on 6 October
1995, ruling that the administrative penalty imposed by the Supreme Court on Basco on 31
October 1981 was wiped away and condoned by the electorate which elected him and that on
account of Bascos proclamation on 17 May 1995.
Issue: Whether Section 40 (b) of RA 7160 apply retroactively to those removed from office
before it took effect on 1 January 1992.
Held: Section 40 (b) of the Local Government Code provides that those removed from office as
a result of an administrative case are disqualified from running for any elective local position.
while the Legislature has the power to pass retroactive laws which do not impair the obligation
of contracts, or affect injuriously vested rights, it is equally true that statutes are not to be
construed as intended to have a retroactive effect so as to affect pending proceedings, unless such
intent is expressly declared or clearly and necessarily implied from the language of the
enactment.There is no provision in the statute which would clearly indicate that the same
operates retroactively. That the provision of the Code in question does not qualify the date of a
candidates removal from office and that it is couched in the past tense should not deter the Court
from applying the law prospectively. The basic tenet in legal hermeneutics that laws operate only
prospectively and not retroactively provides the qualification sought by petitioner. A statute,
despite the generality in its language, must not be so construed as to overreach acts, events or
matters which transpired before its passage. Lex prospicit, non respicit. The law looks forward,
not backward. Section 40 (b) of the Local Government Code is thus not applicable to the present
case.
Sun 7 Mar 2004
Digest: Dela Torre vs. Comelec (GR 121592. July 5, 1996)

No Comments
Dela Torre vs. Comelec
(EN BANC, G.R. No. 121592. July 5, 1996.)
Facts: Rolando P. Dela Torre filed an instant petition for certiorari seeks the nullification of
resolutions issued by the Commission on Elections (COMELEC) allegedly with grave abuse of
discretion amounting to lack of jurisdiction in a case for disqualification filed against him before
the COMELEC. The first assailed resolution dated 6 May 1995 declared dela Torre disqualified
from running for the position of Mayor of Cavinti, Laguna in the 8 May 1995 elections, citing as
the ground therefor, Section 40(a) of RA 7160 (i.e. Those sentenced by final judgment for an
offense involving moral turpitude or for an offense punishable by 1 year or more of
imprisonment within 2 years after serving sentence); the other is the denial of the motion for
reconsideration.
Issue: Whether the crime of fencing involves moral turpitude
Held: A crime involving moral turpitude is one which is an act of baseness, vileness, or
depravity in the private duties which a man owes his fellow men, or to society in general,
contrary to the accepted and customary rule of right and duty between man and woman or
conduct contrary to justice, honesty, modesty, or good morals. The elements of the crime of
fencing (as gleaned from the definition of fencing in Section 2 of PD 1612, Anti-fencing Law)
are: (1) A crime of robbery or theft has been committed; (2) The accused who is not a principal
or accomplice in the crime of robbery or theft, buys, receives, possesses, keeps, acquires,
conceals, sells or disposes, or buys and sells, or in any manner deals in any article, item, object
or anything of value, which have been deprived from the proceeds of the said crime; (3) The
accused knows or should have known that the said article, item, object or anything of value has
been derived from the proceeds of the crime of robbery or theft; and (4) There is, on the part of
the accused, intent to gain for himself or for another. Moral turpitude is deducible from the third
element. Actual knowledge by the fence of the fact that property received is stolen displays the
same degree of malicious deprivation of ones rightful property as that which animated the
robbery or theft which, by their very nature, are crimes of moral turpitude. Thus, the COMELEC
did not err in disqualifying the petitioner on the ground that the offense of fencing of which he
had been previously convicted by final judgment was one involving moral turpitude.
Sun 7 Mar 2004
Digest: Caasi vs. Comelec (GR 88831 November 8, 1990)

No Comments
Caasi vs. Comelec
(EN BANC, G.R. No. 88831 November 8, 1990)
Facts: Merito Miguel was sought to be disqualified for the position of municipal mayor of
Bolinao, Pangasinan, to which he was elected in the local elections of 18 January 1988, under
Section 68 of the Omnibus Election Code, and on the ground that he is a green card holder,
hence, a permanent resident of the United States of America, not of Bolinao. Miguel admitted
that he holds a green card issued to him by the US Immigration Service, but he denied that he is
a permanent resident of the United States. He allegedly obtained the green card for convenience
in order that he may freely enter the United States for his periodic medical examination and to
visit his children there. He alleged that he is a permanent resident of Bolinao, Pangasinan, that he
voted in all previous elections, including the plebiscite on 2 February 1987 for the ratification of
the 1987 Constitution, and the congressional elections on 18 May 1987. The COMELEC with
the exception of Commissioner Anacleto Badoy, Jr. held that the possession of a green card by
Miguel does not sufficiently establish that he has abandoned his residence in the Philippines.
Issue: Whether a green card is proof that the holder is a permanent resident of the United States
Held: Miguels immigration to the United States in 1984 constituted an abandonment of his
domicile and residence in the Philippines. For he did not go to the United States merely to visit
his children or his doctor there; he entered the limited States with the intention to have there
permanently as evidenced by his application for an immigrants (not a visitors or tourists) visa.
Based on that application of his, he was issued by the U.S. Government the requisite green card
or authority to reside there permanently (See Question 21 of Miguels application). To be
qualified to run for elective office in the Philippines, the law requires that the candidate who is
a green card holder must have waived his status as a permanent resident or immigrant of a
foreign country. Therefore, his act of filing a certificate of candidacy for elective office in the
Philippines, did not of itself constitute a waiver of his status as a permanent resident or
immigrant of the United States. The waiver of his green card should be manifested by some act
or acts independent of and done prior to filing his candidacy for elective office in this country.
Without such prior waiver, he was disqualified to run for any elective office. Absent clear
evidence that he made an irrevocable waiver of that status or that he surrendered his green card
to the appropriate U.S. authorities before he ran for mayor of Bolinao in the local elections on 18
January 1988, he was disqualified to run for said public office, hence, his election thereto was
null and void.
Sun 7 Mar 2004
Digest: Villaber vs. Comelec (GR 148326. November 15,

2001)
No Comments
Villaber vs. Comelec
(EN BANC, G.R. No. 148326. November 15, 2001.)
Facts: Pablo C. Villaber and Douglas R. Cagas were rival candidates for a congressional seat in
the First District of Davao del Sur during the 14 May 2001 elections. Villaber filed his certificate
of candidacy for Congressman on 19 February 2001, while Cagas filed his on 28 February 2001.
On 4 March 2001, Cagas filed with the Office of the Provincial Election Supervisor, Commission
On Elections (COMELEC), Davao del Sur, a consolidated petition to disqualify Villaber and to
cancel the latters certificate of candidacy, on the ground that Villaber has been convicted by the
Trial Court to imprisonment of 1 year for violation of BP 22. The Comelecs second division
disqualified him as a candidate for the position of Congressman in the First District of the
Province of Davao del Sur in the elections, and cancelled his certificate of candidacy. The
Comelec en banc denied his motion for reconsideration. Villaber filed a petition for certitiorari
before the Supreme Court.
Issue: Whether violation of BP 22 involves moral turpitude.
Held: The elements of the offense under Section 1, BP 22 are: (1) The accused makes, draws or
issues any check to apply to account or for value; (2) The accused knows at the time of the
issuance that he or she does not have sufficient funds in, or credit with, drawee bank for the
payment of the check in full upon its presentment; and (3) The check is subsequently dishonored
by the drawee bank for insufficiency of funds or credit, or it would have been dishonored for the
same reason had not the drawer, without any valid reason, ordered the bank to stop payment. The
presence of the second element manifests moral turpitude. There was no distinction whether the
offender is a lawyer or a non-lawyer in the case of People vs. Tuanda, where a similar violation
of BP 22 was likewise determined to be a crime against moral turpitude. There was neither any
declaration in that case that such offense constitutes moral turpitude when committed by a
member of the Bar but is not so when committed by a non-member. The Court found no grave
abuse of discretion committed by in issuing the assailed Resolutions.
Sun 7 Mar 2004
Digest: Labo vs. Comelec (GR 86564. August 1, 1989)

No Comments
Labo vs. Comelec
(EN BANC, G.R. No. 86564. August 1, 1989.)
Facts: Ramon Labo asked the Court to restrain the Commission on Elections from looking into
the question of his citizenship as a qualification for his office as Mayor of Baguio City. The
allegation that he is a foreigner, he says, is not the issue. The issue is whether or not the public
respondent has jurisdiction to conduct any inquiry into this matter, considering that the petition
for quo warranto against him was not filed on time.
Issue: Whether Ramon Labo was a citizen of the Philippines at the time of his election on 18
January 1988, as mayor of Baguio City.
Held: The sole issue originally raised is the timeliness of the quo warranto proceedings against
him. However, as his citizenship is the subject of that proceeding, and considering the necessity
for an early resolution of that more important question clearly and urgently affecting the public
interest, the Court directly address it in the same action. Two administrative decisions on the
question of Ramon Labos citizenship. The first was rendered by the Commission on Elections
on 12 May 1982, and found him to be a citizen of the Philippines. The second was rendered by
the Commission on Immigration and Deportation on 13 September 1988, and held that he was
not a citizen of the Philippines. The proceeding before the COMELEC, there was no direct proof
that Labo had been formally naturalized as a citizen of Australia. This conjecture was merely
inferred from the fact that he had married an Australian citizen, obtained an Australian passport,
and registered as en alien with the CID upon his return to this country in 1980. On the other
hand, the decision of the CID took into account the official statement of the Australian
Government dated 12 August 1984, through its Consul in the Philippines, that Labo was still an
Australian citizen as of that date by reason of his naturalization in 1976. Labo is not, nor was he
on the day of the local elections on 18 January 1988, a citizen of the Philippines. In fact, he was
not even a qualified voter under the Constitution itself because of his alienage. He was therefore
ineligible as a candidate for mayor of Baguio City under Section 42 of the Local Government
Code. The electorate had no power to permit a foreigner owing no allegiance to the Republic of
the Philippines, to preside over them as mayor of their city. Only citizens of the Philippines have
that privilege over their countrymen. The people of that locality could not have, even
unanimously, changed the requirements of the Local Government Code and the Constitution.
Sun 7 Mar 2004
Digest: Frivaldo vs. Comelec (GR 87193. June 23, 1989)

No Comments
Frivaldo vs. Comelec
(EN BANC, G.R. No. 87193. June 23, 1989.)
Facts: Juan G. Frivaldo was proclaimed governor-elect of the province of Sorsogon on 22
January 1988, and assumed office in due time. On 27 October 1988, the league of Municipalities,
Sorsogon Chapter represented by its President, Salvador Estuye, who was also suing in his
personal capacity, filed with the Comelec a petition for the annulment of Frivaldos election and
proclamation on the ground that he was not a Filipino citizen, having been naturalized in the
United States on 20 January 1983. Frivaldo admitted that he was naturalized in the United States
as alleged but pleaded the special and affirmative defenses that he had sought American
citizenship only to protect himself against President Marcos. His naturalization, he said, was
merely forced upon himself as a means of survival against the unrelenting persecution by the
Martial Law Dictators agents abroad. He also argued that the challenge to his title should be
dismissed, being in reality a quo warranto petition that should have been filed within 10 days
from his proclamation, in accordance with Section 253 of the Omhibus Election Code.
Issue: Whether Juan G. Frivaldo was a citizen of the Philippines at the time of his election on 18
January 1988, as provincial governor of Sorsogon.
Held: The Commission on Elections has the primary jurisdiction over the question as the sole
judge of all contests relating to the election, returns and qualifications of the members of the
Congress and elective provincial and city officials. However, the decision on Frivaldos
citizenship has already been made by the COMELEC through its counsel, the Solicitor General,
who categorically claims that Frivaldo is a foreigner. The Solicitors stance is assumed to have
bben taken by him after consultation with COMELEC and with its approval. It therefore
represents the decision of the COMELEC itself that the Supreme Court may review. In the
certificate of candidacy filed on 19 November 1987, Frivaldo described himself as a naturalborn citizen of the Philippines, omitting mention of any subsequent loss of such status. The
evidence shows, however, that he was naturalized as a citizen of the United States in 1983 per
the certification from the United States District Court, Northern District of California, as duly
authenticated by Vice Consul Amado P. Cortez of the Philippine Consulate General in San
Francisco, California, U.S.A. There were many other Filipinos in the United States similarly
situated as Frivaldo, and some of them subject to greater risk than he, who did not find it
necessary nor do they claim to have been coerced to abandon their cherished status as
Filipinos. Still, if he really wanted to disavow his American citizenship and reacquire Philippine
citizenship, Frivaldo should have done so in accordance with the laws of our country. Under CA
No. 63 as amended by CA No. 473 and PD No. 725, Philippine citizenship may be reacquired by
direct act of Congress, by naturalization, or by repatriation. He failed to take such categorical
acts. Rhe anomaly of a person sitting as provincial governor in this country while owing
exclusive allegiance to another country cannot be permitted. The fact that he was elected by the
people of Sorsogon does not excuse this patent violation of the salutary rule limiting public
office and employment only to the citizens of this country. The will of the people as expressed
through the ballot cannot cure the vice of ineligibilityQualifications for public office are
continuing requirements and must be possessed not only at the time of appointment or election or
assumption of office but during the officers entire tenure. Once any of the required
qualifications is lost, his title may be seasonably challenged. Frivaldo is disqualified from
serving as governor of Sorsogon.
Sun 7 Mar 2004
Digest: Ututalum vs. Comelec (GR 84843-44 January 22,

1990)
No Comments
Ututalum vs. Comelec
(EN BANC, G.R. No. 84843-44 January 22, 1990)
Facts: Nurhussein A. Ututalum and Arden S. Anni, were among the candidates in the 30 May
1987 Congressional elections for the Second District of Sulu. 30 May was the date reset by the
COMELEC from the 11 May 1987 elections.The election returns from Siasi showed that
Ututalum obtained 482 votes while Anni received 35,581 votes out of the 39,801 registered
voters. On 4 June 1987, during the canvass of votes, Ututalum, without availing of verbal
objections, filed written objections to the returns from Siasi on the ground that they appear to be
tampered with or falsified owing to the great excess of votes appearing in said returns. The
Provincial Board of Canvassers of Sulu dismissed Ututalums objections for having filed out of
time. On 11 June l987, in Case SPC 87-180, the COMELEC resolved that there was no failure of
elections in the 1st and 2nd Districts of Sulu except in specified precincts in the 1st District. On
14 June 1987, the Sulu Provincial Board of Canvassers proclaimed respondent Anni as the
winner. He subsequently took his oath of office and entered upon the discharge of its functions in
July 1987. On the other hand, one Lupay Loong, a candidate for Governor of Sulu, filed a
verified Petition with the COMELEC to annul the List of Voters of Siasi, for purposes of the
election of local government officials. This Petition was opposed by Anni. Ututalum was not a
party to this proceeding. On 16 January 1988, the COMELEC issued, in said SPC 87-624, a
Resolution annulling the Siasi List of Voters on the ground of massive irregularities committed
in the preparation thereof and being statistically improbable, and ordering a new registration of
voters for the local elections of 15 February 1988. Said Resolution was affirmed by the Court in
Anni vs. COMELEC, G.R. No. 81398, 26 January 1988. A new Registry List was subsequently
prepared yielding only 12,555 names. Ututalums pending petitions in the Comelec were
dismissed. He assailed the Comelecs resolutions before the Supreme Court.
Issue: Whether the annulment of the list of votes constitute a ground for a pre-proclamation
contest.
Held: Padded voters list, massive fraud and terrorism is clearly not among the issues that may
be raised in a pre-proclamation controversy. They are proper grounds for an election protest. The
subsequent annulment of the voting list in a separate proceeding initiated motu proprio by the
Commission and in which the protagonists here were not parties, cannot retroactively and
without due process result in nullifying accepted election returns in a previous election simply
because such returns came from municipalities where the precinct books of voters were ordered
annulled due to irregularities in their preparation. The preparation of a voters list is not a
proceeding before the Board of Canvassers. A pre-proclamation controversy is limited to
challenges directed against the Board of Canvassers, not the Board of Election Inspectors, and
such challenges should relate to specified election returns against which petitioner should have
made specific verbal objections. Furthermore, where the winning candidates have been
proclaimed, the pre-proclamation controversies cease. A pre-proclamation controversy is no
longer viable at this point in time and should be dismissed. The proper remedy thereafter is an
election protest before the proper forum.
Sun 7 Mar 2004
Digest: Akbayan-Youth vs. Comelec (GR 147066. March 26,

2001)
No Comments
Akbayan-Youth, et. al. vs. Comelec
(EN BANC, G.R. No. 147066. March 26, 2001.)
Facts: Petitioners (representing the youth sector) seek to direct the Commission on Elections
(COMELEC) to conduct a special registration before the 14 May 2001 General Elections, of new
voters ages 18 to 21. According to petitioners, around four million youth failed to register on or
before the 27 December 2000 deadline set by the COMELEC under RA 8189. Acting on the
clamor of the students and civic leaders, Senator Raul Roco, Chairman of the Committee on
Electoral Reforms, Suffrage, and Peoples Participation, through a Letter dated 25 January 2001,
invited the COMELEC to a public hearing for the purpose of discussing the extension of the
registration of voters to accommodate those who were not able to register before the COMELEC
deadline. Subsequent to a public hearing and on 29 January 2001, Commissioners Tancangco and
Lantion submitted Memorandum 2001-027 on the Report on the Request for a Two-day
Additional Registration of New Voters Only. On 8 February 2001, the COMELEC issued
Resolution 3584, which denied the request to conduct a two-day additional registration of new
voters on February 17-18, 2001. Aggrieved by the denial, petitioners AKBAYAN-Youth, SCAP,
UCSC, MASP, KOMPIL II (YOUTH) et al. filed before this Court the instant Petition for
Certiorari and Mandamus, which seeks to set aside and nullify respondent COMELECs
Resolution and/or to declare Section 8 of RA 8189 unconstitutional insofar as said provision
effectively causes the disenfranchisement of petitioners and others similarly situated. Likewise,
petitioners pray for the issuance of a writ of mandamus directing COMELEC to conduct a
special registration of new voters and to admit for registration petitioners and other similarly
situated young Filipinos to qualify them to vote in the 14 May 2001 General Elections.
Issue: Whether Comelec may be directed, through mandamus, to hold a registration of new
voters for the 14 May 2001 General Elections on 17-18 February 2001.
Held: In a representative democracy, the right of suffrage, although accorded a prime niche in
the hierarchy of rights embodied in the fundamental law, ought to be exercised within the proper
bounds and framework of the Constitution and must properly yield to pertinent laws skillfully
enacted by the Legislature, which statutes for all intents and purposes, are crafted to effectively
insulate such so cherished right from ravishment and preserve the democratic institutions our
people have, for so long, guarded against the spoils of opportunism, debauchery and abuse. The
right of suffrage is not at all absolute. The exercise of the right of suffrage, as in the enjoyment of
all other rights, is subject to existing substantive and procedural requirements embodied in our
Constitution, statute books and other repositories of law. As to the procedural limitation, the right
of a citizen to vote is necessarily conditioned upon certain procedural requirements he must
undergo: among others, the process of registration. Since Section 8 of RA 8189 explicitly
provides that no registration shall be conducted during the period starting 120 days before a
regular election, the assailed COMELEC Resolution should be upheld. Truly, it is an accepted
doctrine in administrative law that the determination of administrative agency as to the operation,
implementation and application of a law would be accorded great weight considering that these
specialized government bodies are, by their nature and functions, in the best position to know
what they can possibly do or not do, under prevailing circumstances.
Sun 7 Mar 2004
Digest: Yra vs. Abano (GR 30187. November 15, 1928)

1 Comment
Yra vs. Abano
(EN BANC, G.R. No. 30187. November 15, 1928)
Facts: Maximo Abao is a native of the municipality of Meycauayan, Bulacan. At the proper
age, he transferred to Manila to complete his education. While temporarily residing in Manila,
Abao registered as a voter there. Shortly after qualifying as a member of the bar and after the
death of his father, Abao returned to Meycauayan to live. From 10 May 1927, until the present,
Abao has considered himself a resident of Meycauayan. When the 1928 elections were
approaching, he made an application for cancellation of registration in Manila which was dated
April 3, 1928, but this application was rejected by the city officials for the reason that it was not
deposited in the mails on or before 4 April 1928. Nevertheless Abao presented himself as a
candidate for municipal president of Meycauayan in the 1928 elections and was elected by
popular vote to that office. Marcos Yra, the vice-president elect of Meycauayan, Bulacan, who
challenges the right of Maximo Abao, the municipal president elect of Meycauayan, through a
quo warranto proceeding to the position to which elected on the ground that Abao is ineligible.
The CFI Bulacan (through Judge Anastasio R. Teodoro) ruled in favor of Abao, declaring the
complaint as without merit.
Issue: Whether Abao is not eligible to hold a municipal office for the reason that he was not a
qualified voter in his municipality (being a registered voter in Manila) not a qualified elector
therein.
Held: The term qualified when applied to a voter does not necessarily mean that a person
must be a registered voter. To become a qualified candidate a person does not need to register as
an elector. It is sufficient that he possesses all the qualifications prescribed in section 431 and
none of the disqualifications prescribed in section 432. The fact that a candidate failed to register
as an elector in the municipality does not deprive him of the right to become a candidate and to
be voted for (Jose P. Laurel, Law of Elections of the Philippine Islands, pages 32, 33. See also
Meffert vs. Brown ([1909], 132 Ky., 201)
Fri 27 Feb 2004
CivPro-d: Vda. de Borromeo vs. Pogoy (GR L-63277, 29

November 1983)
No Comments
Vda. de Borromeo vs. Pogoy
GR L-63277, 29 November 1983
Second Division
Escolin (J)
Facts: The intestate estate of the late Vito Borromeo is the owner of a building bearing the
deceaseds name. Said building has been leased and occupied by Petra Vda. de Borromeo. On 28
August 1982, Atty. Ricardo Reyes, administrator of the estate and a resident of Cebu City, served
upon Vda. de Borromeo a letter demanding that she pay the overdue rentals corresponding to the
period from March to September 1982, and thereafter to vacate the premises.
As Vda. de Borromeo failed to do so, Atty. Reyes instituted on 16 September 1982 an ejectment
case against the former in the Municipal Trial Court of Cebu City (Civil Case R-23915, assigned
to the sala of Judge Julian B. Pogoy). On 12 November 1982, Vda. de Borromeo moved to
dismiss the case, advancing, among others, the want of jurisdiction of the trial court on the
ground of Atty. Reyes failure to refer the dispute to the Barangay Court, as required by PD 1508
(Katarungang Pambarangay Law). The judge denied the motion to dismiss. Unable to secure a
reconsideration of said order, Vda. de Borromeo brought the case to the Supreme Court through
a petition for certiorari.
Issue: Whether Barangay Conciliation is required in the present case before the lower court can
exercise jurisdiction over the case.
Held: With certain exceptions, PD 1508 makes the conciliation process at the Barangay level a
condition precedent for filing of actions in those instances where said law applies. Under Section
4(a) of PD 1508, referral of a dispute to the Barangay Lupon is required only where the parties
thereto are individuals. The law applies only to cases involving natural persons, and not where
any of the parties is a juridical person such as a corporation, partnership, corporation sole, testate
or intestate, estate, etc. Herein, Atty. Ricardo Reyes is a mere nominal party who is suing in
behalf of the Intestate Estate of Vito Borromeo, as the the real party in interest in the case is the
intestate estate under administration. Since the said estate is a juridical person, the administrator
may file the complaint directly in court, without the same being coursed to the Barangay Lupon
for arbitration.
Comments (required in assignment): PD 1508 has been superceded by pertinent provisions of
the Local Government Code of 1991 (RA 7160). Section 410 of said Code provides that Upon
payment of the appropriate filing fee, any individual who has a cause of action against another
individual involving any matter within the authority of the lupon may complain, orally or in
writing, to the lupon chairman of the barangay. The doctrine enunciated in the case (as to
individuals) appears to apply even with the enactment of RA 7160.
To note, similar to defenses raised in the case using PD 1508, Section 412 of RA 7160 provides
that No complaint, petition, action, or proceeding involving any matter within the authority of
the lupon shall be filed or instituted directly in court or any other government office for
adjudication, unless there has been a confrontation between the parties before the lupon chairman
or the pangkat, and that no conciliation or settlement has been reached as certified by the lupon
secretary or pangkat secretary as attested to by the lupon or pangkat chairman or unless the
settlement has been repudiated by the parties thereto. The parties may go directly to court in the
following instances: (1) Where the accused is under detention; (2) Where a person has otherwise
been deprived of personal liberty calling for habeas corpus proceedings; (3) Where actions are
coupled with provisional remedies such as preliminary injunction, attachment, delivery of
personal property and support pendente lite; and (4) Where the action may otherwise be barred
by the statute of limitations.
Fri 27 Feb 2004
CivPro-d: Liam Law vs. Olympic Sawmill (GR L-30771, 28

May 1984)
No Comments
Liam Law vs. Olympic Sawmill
GR L-30771, 28 May 1984
First Division
Melencio-Herrera (J)
Facts: On 7 September 1957, Liam Law (plaintiff) loaned P10,000.00, without interest, to
Olympic Sawmill Co. and Elino Lee Chi, as the latters managing partner (defendants). The loan
became ultimately due on 31 January 1960, but was not paid on that date, with the debtors asking
for an extension of 3 months, or up to 30 April 1960. On 17 March 1960, the parties executed
another loan document. Payment of the P10,000.00 was extended to 30 April 1960, but the
obligation was increased by P6,000 which formed part of the principal obligation to answer for
attorneys fees, legal interest, and other cost incident thereto to be paid unto the creditor and his
successors in interest upon the termination of this agreement. The defendants again failed to pay
their obligation.
On 23 September 1960, the plaintiff instituted the collection case before the Court of First
Instance of Bulacan. The defendants admitted the P10,000.00 principal obligation, but claimed
that the additional P6,000.00 constituted usurious interest. Upon the plaintiffs application, the
Trial Court issued a writ of Attachment on real and personal properties of defendants. After the
Writ of Attachment was implemented, proceedings before the Trial Court versed principally in
regards to the attachment. On 18 January 1961, an Order was issued by the Trial Court allowing
both parties to simultaneously submit a Motion for Summary Judgment. On 26 June 1961, the
Trial Court rendered decision ordering defendants to pay the plaintiff the amount of P10,000.00
plus the further sum of P6,000.00. The defendants appealed before the then court of Appeals,
which endorsed it to the Supreme Court stating that the issue involved was one of law.
Issue [1]: Whether the allegation of usury should be made in writing and under oath, pursuant to
Section 9 of the Usury Law.
Held [1]: Section 9 of the Usury Law provides that the person or corporation sued shall file its
answer in writing under oath to any complaint brought or filed against said person or corporation
before a competent court to recover the money or other personal or real property, seeds or
agricultural products, charged or received in violation of the provisions of this Act. The lack of
taking an oath to an answer to a complaint will mean the admission of the facts contained in the
latter. It envisages a complaint filed against an entity which has committed usury, for the
recovery of the usurious interest paid. In that case, if the entity sued shall not file its answer
under oath denying the allegation of usury, the defendant shall be deemed to have admitted the
usury. The provision does not apply to a case where it is the defendant, not the plaintiff, who is
alleging usury.
Issue [2]: Whether the repeal of Rules of Court or any procedural law is with retroactive effect.
Held [2]: The Court opined that the Rules of Court in regards to allegations of usury, procedural
in nature, should be considered repealed with retroactive effect. It has been previously held
(People vs. Sumilang, and De Lopez, et al. vs. Vda. de Fajardo, et al.) that statutes regulating the
procedure of the courts will be construed as applicable to actions pending and undetermined at
the time of their passage. Procedural laws are retrospective in that sense and to that extent.
Comments (required in assignment): The last sentence of Section 11, Rule 9, of the 1997
Rules of Civil Procedure provides that Allegation of usury in a complaint to recover usurious
interest are deemed admitted if not denied under oath, and is similar in context to Section 9 of
Usury Law, which was raised in this 1984 case (although improperly applied). The reiteration of
matters pertaining to usury in the 1997 rules is perplexing as the 1984 decision itself admits that
usury has been legally non-existent; as interest can now be charged as lender and borrower may
agree upon, and that the Rules of Court in regards to allegations of usury, procedural in nature,
should be considered repealed with retroactive effect. These incongruent realities, however, are
secondary only to the fact that a mere Central Bank circular or memorandum effectively
suspended the application of the Usury Law to a degree tantamount to its repeal.
Fri 27 Feb 2004
CivPro-d: Ginete vs. CA (GR 127596, 24 September 1998)

No Comments
Ginete vs. CA
GR 127596, 24 September 1998
Resolution Third Division
Romero (J)
Michael Vernon Guerrero
Facts: Arnold Ginete, Flor Ginete assisted by Jose Bontigao, and Nora Ginete assisted by
Ricardo Sabayle [petitioners] filed a Complaint for Annulment of Sale and for Partition against
Josefina Ribaya-Ginete, Victor and Alex, both surnamed Ginete, Eudarlio B. Valencia and Mirafe
Bellen-Valencia [private respondents]. The petitioners and the private respondents have
conflicting versions of the facts as to the ownership of the lots located in Bulan, Sorsogon, which
have a total area of 59 hectares. The trial court, on 29 June 1992, ruled in favor of private
respondents and declared them owners of the entire 59 hectares of subject lots. Petitioners were
ordered to pay the former P50,000.00 as moral damages; and P15,000.00 as attorneys fees and
necessary litigation expenses. In addition, petitioners were ordered to pay actual damages of
P183,600.00 representing the value of the coconuts and/or proceeds of the fruits from the parcels
(or portions) they have been occupying since 1975 up to 1992, specifically parcels 2, 3 (portion),
4, 5 and 6 plus P10,200.00 per annum effective 1993 until they finally vacate and turn over the
possession thereof to private respondents and to the pay the costs.
Having received the decision on 22 September 1992, petitioners eventually filed a notice of
appeal on 5 October 1992. Said notice was acted upon and given due course by Presiding Judge
Ireneo B. Escandor on 8 October 1992 on 30 June 1992. However, Judge Escandor inhibited
himself and withdrew his 8 October 1992 order giving due course to the appeal for an
unspecified reason. Instead, Judge Simon S. Encinas acted upon and gave due course to the
appeal on 26 January 1993. The Court of Appeals, however, dismissed the appeal in a 16 June
1995 Resolution for failure of petitioners to file appellants brief. Petitioners counsel received
the resolution on 3 July 1995. On 1 August 1995, petitioners filed their Appellants Brief. A
Motion for Reconsideration dated 18 July 1995 was allegedly filed together with the Appellants
Brief but received by the Court of Appeals only on 29 December 1995. On 8 December 1995, the
Court of Appeals ordered entry of judgment and expunction of Appellants Brief. On 18
December 1996, the Court of Appeals denied petitioners motion for leave to file and admit
incorporated omnibus motion for reconsideration and reiterated its order to release entry of
judgment. Petitioners filed a Petition for Review before the Supreme Court.
Issue [1]: Whether the appeal was seasonably filed.
Held [1]: Records show that the notice of appeal was filed within the reglementary period. As
such, it was seasonably filed. A distinction should be made between failure to file a notice of
appeal within the reglementary period and failure to file brief within the period granted by the
appellate court. The former would result in the failure of the appellate court to obtain jurisdiction
of the appealed decision resulting in its becoming final and executory upon failure to move for
reconsideration. The latter would simply result in the abandonment of the appeal which could
lead to its dismissal upon failure to move for its reconsideration. Consequently, the appealed
decision would become final and executory but prior thereto, the appellate court shall have
obtained jurisdiction of the appealed decision. Herein, petitioners simply failed to file the
Appellants Brief within the extended period accorded to them after the appellate court had
obtained jurisdiction of the case.
Issue [2]: Whether the negligence of the counsel to file the Appellants Brief binds the clients.
Held [2]: Ordinarily, a negligent act or omission on the part of counsel would, as a rule, have
bound his clients. Under the prevailing circumstances and in the interest of justice and equity, the
Court cannot strictly apply the same rule in the case before it. Herein, petitioners stand to lose
their alleged rightful share in the inheritance consisting of fifty-nine hectares of land just because
their former counsel failed to file the Appellants Brief within the reglementary period. To
deprive petitioners of their share in the inheritance due to the negligence of their counsel coupled
with their submissions of the trial courts failure to appreciate and consider some of their
evidence, documentary at that, are sufficient demonstrations of the merits of their case.
Issue [3]: Whether the Supreme Court can relax its own rules.
Held [3]: Technicality should not be relied upon to subject and defeat substantive rights of the
other party. The rules of procedure should be viewed as mere tools designed to facilitate the
attainment of justice. Their strict and rigid application, which would result in technicalities that
tend to frustrate rather than promote substantial justice, must always be eschewed. The principal
considerations in giving due course to an appeal by suspending the enforcement of statutory and
mandatory rules are substantial justice and equity considerations. The following elements should
likewise be considered for the appeal to be reinstated and given due course: (1) the existence of
special or compelling circumstances, (2) the merits of the case, (3) a cause not entirely
attributable to the fault or negligence of the party favored by the suspension of the rules, (4) a
lack of any showing that the review sought is merely frivolous and dilatory, (5) the other party
will not be unjustly prejudiced thereby.
Issue [4]: Whether the Supreme Court should review the factual findings of the lower court
considering the length of time the case has been pending.
Held [4]: Due to the circumstances, it is imperative for the Court of Appeals to review the
findings of fact made by the trial court. For while the Court may review factual findings of the
lower court, it will not preempt the Court of Appeals in reviewing the same and reappreciating
the evidence presented by petitioners to resolve factual questions. Prior resolution of the issues is
necessary in order to determine the question of original ownership over the subject parcels of
land which in turn would resolve the question of succession. Said questions pertain to factual
matters that could best be resolved by the Court of Appeals which is mandated to examine and
review the findings of fact made by the lower court.
Comments (required in assignment): Rule 1, Section 6 of the 1997 Rules of Court provides
that These Rules shall be liberally construed in order to promote their objective of securing a
just, speedy and inexpensive disposition of every action and proceeding. Although the section
provides only for the construction of the rules (thus the application of the rules) and not for the
suspension of the Rules itself, as in this case, the purpose remains the same, i.e. to secure a just,
speedy and inexpensive disposition of every action and proceeding. It would be absurd for the
rules to provide for its own suspension, the same way that it would be absurd for statutes to
provide for their own repeal. Time and again, the Supreme Court has relaxed, or suspended, its
Rules in the light of compelling public interest or concern (especially in Political Law cases) and
to prevent a manifestly prejudicial situation or outcome against a person, as in this case.
Although the remand of the case to the Court of Appeals may have prevented injustice to the
parties, as it should be; dispelling from the minds from the public the image of the partiality of
the Courts may take more than a decision to rectify. Herein, the Court recognized that the
reason they (the petitioners) kept on changing their lawyers was because their lawyers were
intimidated by private respondents who were judges, or that the lawyers themselves refused to
accept their case, are bereft of concrete proof, still they may not entirely be without merit. The
interplay between the pursuit of justice, the exercise of power, and the achievement of a purpose,
provides for the dynamics of a peculiar Philippine legal culture; the evils of which cannot be
expunged in a single stroke. The delicate task of a lawyer not to antagonize judges is equivalent
to the delicate task of a law student not to antagonize a law professor. One inquiry leads to the
question whether is it right? while the other leads to the question whether can you blame
them?
Fri 27 Feb 2004
CivPro-d: Eastern Assurance vs. Cui (GR 54452, 20 July

1981)
No Comments
Eastern Assurance vs. Cui
GR 54452, 20 July 1981
Second Division
Abad Santos (J)
Facts: In 1977, Transunion Corporation and Rey M. Pan (doing business as Pan Phil Trading)
entered into a dealership agreement for the sale of merchandise. Pursuant thereto Pan Phil
Trading had to file a P20,000 surety bond and it complied by presenting a surety bond of Eastern
Assurance & Surety Corporation. On the other hand, an Indemnity Agreement was executed by
the Pan spouses in favor of the surety company.
In 1978, Transunion filed a complaint before the Court of First Instance (Manila) against Rey
Pan, Pan Phil Trading and the surety company for the full payment of merchandise delivered
(P10,841.54). After the surety company had filed its Answer with Crossclaim, it filed a motion to
file a third-party complaint against Loreta B. Pan, wife of Rey M. Pan, in light of Paragraph 7 of
the Indemnity Agreement reads We [meaning Rey M. Pan and Loreta B. Pan] hereby agree that
any question which may arise between the Company and the undersigned by reason of this
document and which has to be submitted to the court of justice, shall be brought before the court
of competent jurisdiction of Quezon City, waiving for this purpose any other proper venue. On
24 July 1978, the Judge granted the motion and admitted the third-party complaint.
Notwithstanding the opposition of the surety company to the motion of Loreta Pan to dismiss the
third-party complaint, the judge in his 30 October 1978 order peremptorily dismissed the thirdparty complaint on the ground that the motion to dismiss was well-taken, without elaboration.
A motion to reconsider the order of dismissal was denied in a similar fashion. Hence, the petition
to review on certiorari.
Issue: Whether the Court in Manila has jurisdiction in dismissing the third-party complaint, in
light of the stipulation in Paragraph 7 of the Indemnity Agreement between Loreta Pan and the
surety company, which requires that issues should be submitted before the competent court in
Quezon City.
Held: Paragraph 7 of the Indemnity Agreement was imposed on the Pan spouses by the surety
company for its benefit and convenience and therefore the latter could waive the provision by
filing its complaint, not in Quezon City, but in Manila. A third-party complaint is but ancillary to
the main action and is a procedural device to avoid multiplicity of suits. Because of its nature the
prescriptions on jurisdiction and venue applicable to ordinary suits may not apply. Thus a thirdparty complaint has to yield to the jurisdiction and venue of the main action; since jurisdiction
over the main case embraces all incidental matters arising therefrom and connected therewith. A
contrary rule would result in split jurisdiction which is not favored, and in multiplicity of suits,
a situation obnoxious to the orderly administration of justice.
Comments (required in assignment): The prevailing law on family relations during the
promulgation of this case (1981) was the New Civil Code (not the Family Code, which was
enacted 1987), and the presumed property regime during that time, in the absence of any proof to
the contrary, was a conjugal partnership of gains (not yet the Absolute Community in the Family
Code). The spouse herein is not sued jointly with the husband but is made the respondent in a
third-party complaint by the surety company; recognizing that the single proprietorship belongs
to the husband and not necessarily to the conjugal partnership. Under the present rules (Rule 3,
Section 4), the husband and wide shall sue or be sued jointly, except as provided by law,
reflecting the paradigm shift.
Although the present rules (Rule 4, Section 4 [b]) provide that the Rule on Venue does not apply
where the parties have validly agreed in writing before the filing of the action on the
exclusive venue thereof, the same principle as enunciated in the case as to third-party
complaints would remain to apply as a third-party complaint is ancillary to the main action. The
implication that the third party complaint cannot be initiated in another venue pursuant to
stipulation to a contract between the defendant and a third person may be inferred from the
requirement of a certification against forum shopping in Rule 7, Section 5 of the 1997 Rules on
Civil Procedure, as such requirement does not only apply to complaints but other initiatory
pleadings.
Sat 13 Dec 2003
Digest: Interprovincial Autobus Co. vs. Collector of Internal

Revenue (GR L-6741, 31 January 1956)
No Comments
Interprovincial Autobus Co. vs. Collector of Internal Revenue
GR L-6741, 31 January 1956
First Division, Labrador (J): 8 concur
Facts: Interprovincial Autobus Co. is a common carrier engaged in transporting passengers and
freight by means of TPU buses in Misamis Occidental and Northern Zamboanga. The company
was not able to preserve the receipt stubs from 1936 to 1938 but was able to preserve those for
1939 and 1940. The provincial revenue agent for Misamis Occidental ascertained the number of
receipts by referring to the conductors daily report for the said period 1936 to 1938. From there,
the tax assessed amounted to P7,776.24, which was collected from the companys deposit in
Philippine National Bank. The company demanded the refund of the said amount, but which was
denied.
Issue: Whether the freight receipts were actually issued for more than P5 each, to warrant the
assessed tax of P7,776.24.
Held: Receipts must have been issued for valuable cargo to insure against the loss of which,
unlike cargo handcarried by townfolks and farmers where the latter avoid to secure receipts
thereto. Such finding by the revenue agent was not controverted. In actions fro the recovery of
taxes assessed and collected, the taxpayer has the burden of proving that the assessment is illegal
as all presumptions are in favor of the correctness of tax assessments. The good faith of tax
assessors and the validity of their actions are presumed. As such rule, on the burden of proof, has
not been complied with, the action for recovery must be denied.
Sat 13 Dec 2003
Digest: Republic vs. Limaco and De Guzman Commercial

Co. (GR L-13081, 31 August 1962)
No Comments
Republic vs. Limaco and De Guzman Commercial Co.
GR L-13081, 31 August 1962
En Banc, Paredes (J): 8 concur, 2 took no part
Facts: In 1946, Limaco & De Guzman Co. was engaged in the importation of cigarettes. To
guarantee payment of revenue taxes, the company and the Visayan Surety and Insurance Corp..
as surety, executed 2 importer bonds. On 27 June 1946, the company filed with the Bureau of
Customs entry papers covering shipment of 2 million Spud cigarettes it had imported from
New York. the specific tax due thereon amounted to P6,000. The company, through its
agent/broker J. O. Hiponia, paid the Bureau of Customs the tax with P1000 in cash and P5,000 in
a PNB Check on 15 July 1946. The cigarettes were released to the company but the check
bounced. On 17 June 1948, the Collector of Internal Revenue demanded the payment of the
deficiency specific tax. The amount remained unpaid. On 15 April 1951, the company requested
that action be deferred as it intends to settle the matter amicably with the BIR. The Republic filed
a complaint for the forfeiture of the bonds, and the payment of the sum of P5,000 plus interest.
The company invoked the defense of estoppel and prescription.
Issue: Whether the action has prescribed.
Held: Under Section 332 (c) of the Tax Code, the collection of the tax by summary method or by
judicial action shall be effected within 5 years after the assessment of the tax. To assess means to
impose a tax; to charge with a tax; to declare a tax to be payable; to apportion a tax to be paid or
contributed; to fix a rate, to fix or settle a sum to be paid by way of tax; to set, fix or charge a
certain sum to each taxpayer; to settle, determine or fix the amount of tax to be paid. Herein, the
assessment was made on 17 June 1948 (when a letter of demand for the amount of the rubber
check was sent to the company) and not on 15 Jne 1946 (the date of payment). Even assuming
that the latter date is the date of assessment, the action is still not barred by the statute of
limitations as teh statute was suspended when the company acknowledged the debt in writing in
April 1951, and requested the deferment of the judicial action to be taken by the Government
towards the collection of the obligation, so that the company could make representations with the
COllector to settle the matter amicably. Prescription has not set in.
Sat 13 Dec 2003
Digest: # Guagua Electric Light Plant Co. vs. Collector (GR

L-23611, 24 April 1967)
No Comments
Guagua Electric Light Plant Co. vs. Collector
GR L-23611, 24 April 1967
En Banc, Bengzon JP (J): 8 concur
Facts: Guagua Electric Light Plant Co. is a grantee of municipal franchises by the municpal
councils of Guagua and Sexmoan, Pampanga. It reported a gross income of P1,133,003.44 for
1947 go 1956 and paid thereon a franchise tax of P56,664.97 computed at 5% in accordance with
Section 259 of the Tax Code. Believing that it should pay a lower franchise tax as provided by its
franchises, it filed a claim for refund on 25 March 1957 for overpayment. The Commissioner
denied the refund of franchise tax for the period prior to the 4th quarter of 1951 on the ground
that the right to refund has prescribed. The Commissioner allowed the refund of P16,593.87.
Later however, due to the holding in Hoa Hin Co. vs. David, the Commissioner assessed against
the company deficiency franchise tax subject to a 25% surcharge, and thereby including the
amount previously allowed by the Commissioner to be refunded.
Issue: Whether the tax refunded erroneously should be imposed against the company, or if the
right to recover has prescribed.
Held: Guagua Electric would be paying the same deficiency tax for the period of 1 January to 30
November 1956 if it is required to pay P16,593.87 in addition to the sum of P19,938.12, the
difference between the tax computed at 5% pursuant to Section 259 of the Tax Code and the
franchise tax paid at 1% and 2% under the franchise. Further, by insisting on the payment of
P16,593.87 (September 1951 to November 1956), the Commissioner is trying to collect the same
deficiency tax where the right to assess the same, according to him, has been lost by prescription.
The demand on the taxpayer to pay the sum of P16,593.87 is in effecct an assessment of
deficiency franchise tax. The right to assess, thus, and to collect is governed by Section 331 of
the Tax Code rather than by Article 1145 of the Civil Code, as a special law prevails over a
general law. Guagua Electric is absolved from the payment of P16,593.87.
Sat 13 Dec 2003
Digest: Meralco Securities Corp. vs. Savellano (GR L-36181,

23 October 1982)
No Comments
Meralco Securities Corp. vs. Savellano
GR L-36181, 23 October 1982
First Division, Teehankee (J): 4 concur, 1 took no part
Facts: In 1967, the late Juan G. Maniago submitted to the Commissioner confidential
denunciation against the Meralco Securities Corp. for tax evasion for not having paid income tax
on 25% of the dividends it received from the Manila Electric Co. for years 1962 to 1966. The
Commissioner caused the investigation of the denunciation and found that no deficiency
corporate tax was due from Meralco Securities. Maniago was informed of the findings. The
Secretary of Finance sustained the Commissioners action. Maniago filed a petition for
mandamus against the Commissioner so as to compel it to impose the alleged deficiency tax
assessment against Meralco Securities and to award him the corresponding informers award.
Issue: Whether the Commissioner may be compelled to impose the alleged deficiency tax
assessment.
Held: Mandamus only lies to enforce the performance of a ministerial act or duty and not to
control the performance of discretionary power. Mandamus may not be made against teh
Commissioner to compel him to impose a tax assessment not found by him to be due or proper,
for that would be tantamount to a usurpation of executive functions. Purely administrative and
discretionary functions may not be interfered with by the Courts. The discretionary power vested
in the proper executive official, in the absence of arbitrariness or grave abuse so as to go beyonf
the statutory authority, is not subject tot he contrary judgment or control of others.
Sat 13 Dec 2003
Digest: Collector vs. Benipayo (GR L-13656, 31 January

1962)
No Comments
Collector vs. Benipayo
GR L-13656, 31 January 1962
En Banc, Dizon (J): 8 concur, 1 took no part
Facts: Alberto Benipayo is the owner of the Lucena Theater in Lucena, Quezon. In 1953, the
internal revenue agent investigated Benipayos tax liability for the period of August 1952 to
September 1953. The examiner recommended a deficiency tax assessment in the sum of
P11,193.45 inclusive of 25% surcharge plus a suggested compromise penalty of P900.00 based
on the conclusion that Benipayo sold 2 tax-free 20c ticlets fraudulently in order to avoid payment
of amusement tax prescribed by Section 260 of the Tax Code (based on a reverse ratio of adult to
children; 3:1 in 1949 to 1951, and 1:3 for period in question; and average attendance for the past
years). Benipayo protested, claiming that the findings of the examiners are mrere presumptions
and conclusions, devoid of findings of fact of alleged fraudulent practices by him.
Issue: Whether there is evidence in the record to show Benipayo committed the alleged act to
cheat or defraud the Government.
Held: An assessment fixes and determines the tax liability of a taxpayer. In order to stand the test
of judicial scrutiny, the assessment must be based on actual facts. The presumption of correctness
of assessment, being a mere presumption, cannot be made to rest on another presumption, no
matter how reasonable or logical such may be; i.e. that the circumstances in 1952 and 1953 are
presumed to be the same as those existing in 1949 to 1951, and July 1955. There are no
substantial facts to support the assessment in question. Neither was there any proof of the fraud
allegedly committed. Fraud is a serious charge, and to be sustained, it must also be supported by
clear and convincing proof.
Sat 13 Dec 2003
Digest: Dayrit vs. Cruz (GR L-39910, 26 September 1988)

No Comments
Dayrit vs. Cruz
First Division, Gancayco (J): 3 concur, 1 took no part
Facts: Cecilia Teodoro Dayrit, Toribia Teodoro Castaneda, Prudencio Teodor, Francisco Teodoro
and Josefina Teodoro Tiongson are legitimate children and heirs of the deceased spouses Marta
and Toribio Teodoro who died intestate on 1 July 1965 and 30 August 1965. The heirs separately
filed estate and inheritance tax returns for the estates of the spouses with the BIR. In 1972, the
BIR issued deficiency estate and inheritance tax assessments for P1,662,072,34 and
P1,747,790.94 respectively for the Estate of Dona Marta and P1,542,293.01 amd P518,458.72,
respectively for the Estate of Don Toribio. The heirs asked for reconsideration as the assessment
was allegedly contrary to law and not supported by sufficient evidence. In a tax return dated 31
March 1973, Dayrit declared an additional amount of P3,655,595.78 as part of the estates of the
Teodoro spouses. The BIR issued tax payment acceptance orders, as the heirs and estate have
paid a total of P285,046.88. In 1974, the Commissioner filed a motion for allowance of claim
against the estates, and for an order of payment of taxes before the trial court, praying that Dayrit
be ordered to pay the BIR the sum of P6,470,391.91 plus surcharges and interest. Dayrit filed
oppositions contending that the taxes have been settled according to the provisions of PD 23, as
amended by PD 67.
Issue: Whether the assessment is final, executory, and demandable.
Held: The act of the Commissioner, in filing an action for allowance of the claim for estate and
inheritance taxes, may be construed as a denial of the taxpayers request for reconsideration.
From the date of receipt of the copy of the Commissioners letter for collection of taxes, the
taxpayers must contest and dispute the same, and upon denial thereof, they have a period of 30
days to appeal the case to the Court of Tax Appeals. Tax assessment made by tax examiners are
presumed correct and made in good faith. A taxpayer has to prove otherwise. Failure of the
taxpayers to appeal to the Court of Tax Appeals in due time made the assessments fina, executory
and demandable.
Sat 13 Dec 2003
Digest: Villamin vs. Court of Tax Appeals (GR L-11536, 31

October 1960)
No Comments
Villamin vs. Court of Tax Appeals
GR L-11536, 31 October 1960
Second Division, Bautista Angelo (J):
7 concur, 1 concur in result
Facts: An assessment was issued by the Provincial Revenue agent of Oriental Mindoro against
Tomas B. Villamin. In 1955, Villamin requested reconsideration of the assessment, but which
was denied by the Collector of Internal Revenue, through the Acting Chief of the Assessment
Department on 7 June 1955.
Issue: Whether the letter signed by the Acting Chief of the Assessment Department is the
decision contemplated by law.
Held: The issue is of no moment considering that Memorandum Order V-603 (15 March 1956)
of the Bureau of Internal Revenue, which authorizes said official (Acting Chief of Assessment
Department) to sign letters of demand involving assessment in behald of the Collector of Internal
Revenue. Moreover, the subsequent letters signed by the Collector affirming and upholding the
correctness of the assessment made by his Assessment Department constitutes evident proof that
the official who signed the letter of 7 June 1955 was duly authorized to do so.
Sat 13 Dec 2003
Digest: City Lumber vs. Domingo (GR L-18611, 30 January

1964)
No Comments
City Lumber vs. Domingo
GR L-18611, 30 January 1964
En Banc, Labrador (J): 8 concur, 2 took no part
Facts: The Commissioner assessed on an additional income against City Lunber Inc.,
representing minor deductions from alleged expenses on undisclosed sales of plywood, nails, and
GI sheets amounting to P7,902.07 and on a cash credit balance of P7,896.80. The company
claims that the plywood and the GI sheets were actually lost in a fire occuring in the city and
thatthe credit cash balance is a loan secured by it. It appears that the regional director reviewing
the case reduced the assessment from P5,028.00 to P176. Still, the company alleged that the
assessment is violative of Memorandum Order V-634 (of 3 July 1956), issued by the
Commissioner, granting Regional Directors authority to close tax cases involving deficiency
assessments not exceeding P10,000 in taxes and penalties.
Issue: Whether the assessment violates Memorandum Order V-634.
Held: The order in question was applicable only to subordinace officers of the BIR and could not
bind the Commissioner himself, who has been entrusted by law to make final assessments. The
Commissioner cannot delegate this power to make a final assessment to his subordinate.
Delegatus nor potest delegare; i.e. the peroson to whom an office or duty is delegated cannot
lawfully devolve the duty on another.
Sat 13 Dec 2003
Digest: Commissioner vs. Procter & Gamble Philippines

(GR L-66838, 15 April 1988)
No Comments
Commissioner vs. Procter & Gamble Philippines
GR L-66838, 15 April 1988
Second Division, Paras (J)
Facts: Procter and Gamble Philippines is a wholly owned subsidiary of Procter and Gamble
USA (PMC-USA), a non-resident foreign corporation in the Philippines, not engaged in trade
and business therein. PMC-USA is the sole shareholder of PMC Philippines and is entitled to
receive income from PMC Philippines in the form of dividends, if not rents or royalties. For the
taxable years 1974 and 1975, PMC Philippines filed its income tax return and also declared
dividends in favor of PMC-USA. In 1977, PMC Philippines, invoking the tax-sparing provision
of Section 24 (b) as the withholding agent of the Philippine Government with respect to dividend
taxes paid by PMC-USA, filed a claim for the refund of 20 percentage point portion of the 35
percentage whole tax paid with the Commissioner of Internal Revenue.
Issue: Whether PMC Philippines is entitled to the 15% preferential tax rate on dividends
declared and remitted to its parent corporation.
Held: The issue raised is one made for the first time before the Supreme Court. Under the same
underlying principle of prior exhaustion of administrative remedies, on the judicial level, issues
not raised in the lower court cannot be generally raised for the first time on appeal. Nonetheless,
it is axiomatic that the state can never be allowed to jeopardize the governments financial
position. The submission of the Commissioner that PMC Philippines is but a withholding agent
of the government and therefore cannot claim reimbursement of alleged overpaid taxes, is
completely meritorious. The real party in interest is PMC-USA, which should prove that it is
entitled under the US Tax Code to a US Foreign Tax Credit equivalent to at least 20 percentage
points spared or waived as otherwise considered or deemed paid by the Government. Herein, the
claimant failed to show or justify the tax return of the disputed 15% as it failed to show the
actual amount credited by the US Government against the income tax due from PMC-USA on
the dividends received from PMC Philippines; to present the income tax return of PMC-USA for
1975 when the dividends were received; and to submit duly authenticated document showing
that the US government credited teh 20% tax deemed paid in the Philippines.
Sat 13 Dec 2003
Digest: Commissioner vs. Abad (GR L-19627, 27 June 1968)

No Comments
Commissioner vs. Abad
GR L-19627, 27 June 1968
En Banc, Castro (J): 8 concur
Facts: Armando Abad (Republic Alcohol Distillery) is a manufacturer and seller of denatured
alcohol. On 14 August 1958, he applied for the denaturation of 33,000 gauge liters of rectified
alcohol. On 21 August 1958, a denaturing committee from the BIR supervised the denaturation
of the alcohol in Abads warehouse in Caloocan, Rizal .The alcohol was certified to be denatured
by the Committee. Domestic alcohol, when denatured and used for industrial purposes, is exempt
from payment of specific tax. In a surprise inspection on 25 August 1958, however, the BIR
inspectors found that the alcohol has not been completely denatured and still may be used for
compounding liquors. The team also discovered that only 10,480 gauge liters were left. Abad
was made liable for specific tax.
Issue: Whether the government is estopped by mistakes of its agents.
Held: The BIR denaturing committed remissed in its performance of its duties as it certified the
alcohol to be denatured, where it was found in a subsequent examination that it is not completely
denatured. It is a settled rule in the performance of its governmental functions, the State cannot
be estopped by the neglect or omission of its agents. For if otherwise held, it would be easy for
manufacturers to evade liability on the pretext that some government official has certified to the
quality of their products (and possibly the tax exemption resulting therefrom) and that they have
every right to rely on this certificate. Abad was ordered to pay P19,402.20 as specific tax, with
interest thereon from the date of last sale.
Sat 13 Dec 2003
Digest: Tan Guan vs. Court of Tax Appeals (GR L-23676, 27

April 1967)
No Comments
Tan Guan vs. Court of Tax Appeals
GR L-23676, 27 April 1967
Facts: In 1947, Tan Guan and Sia Lin, Chinamen, organized and registered the Philippine
Surplus Company, a general partnership. A general partnership is exempt from income tax
although it is required to file an income tax return. Profits, whether distributed or not, are
considered income of the partners. Acting upon a confidential report, however, that the company
posted fictitious expesnes in its books to avoid taxes, the BIR investigated in 1954 the books of
the partnership and discovered that the expenses were not covered by receipts, that the names of
payees were erased, and that the payees did not report the sums in question in their income tax.
The BIR disallowed expense deductions for the year 1948 amounting to P206,380 for being
fictitious. Said sum was treated as income of the individual partners, and thus, the BIR assessed
P50,956.57 as deficiency income tax against Tan Guan. Tan Guan appealed.
Issue: Whether the deduction claimed by the company as business income should be allowed,
and thus absolve Tan Guan of the assessed tax liability.
Held: The Commissioners finding on the facts constituting fraud, proven, and found established
by the Court of Tax Appeals, was not rebutted by the taxpayer. Tan Guan did not present any
evidence to disprove the findings that the expenses are fictitious; considering that the
investigation on Tan Guans liability was made prior to the expiration of the 5-year period to
preserve and keep receipts as set fgorth in Section 337 of the Tax Code. As the determination of
the Commissioner is presumed correct, it behooves the taxpayers to rebut such presumption. For
failure to overcome the burden, Tan Guan or the company cannot claim the expenses as
deduction from gross income.
Sat 13 Dec 2003
Digest: Esso Standard Eastern vs. Commissioner (GR 285089, 7 July 1989)
No Comments
Esso Standard Eastern vs. Commissioner
GR 28508-9, 7 July 1989
First Division, Cruz (J): 4 concur
Facts: ESSO deducted from its gross income for 1959, as part of its ordinary and necessary
business expenses, the amount it had spent for drilling and exploration of its petroleum
conscessions. The Commissioner disallowed the claim on the ground that the expenses should be
capitalized and might be written off as a loss only when a dry hole should result. Hence, ESSO
filed an amended return where it asked for the refund of P323,270 by reason of its abandonment,
as dry holes, of several of its oil wells. It also claimed as ordinary and necessary expenses in the
same return amount representing margin fees it had paid to the Central Bank on its profit
remittances to its New York Office.
Issue: Whether the margin fees may be considered ordinary and necessary expenses when paid.
Held: For an item to be deductible as a business expense, the expense must ebe ordinary and
necessary; it must be paid or incurred within the taxable year; and it must be paid or incurred in
carrying on a trade or business. In addition, the taxpayrer must substantially prove by evidence
or records teh deductions claimed under law, otherwise, the same will be disallowed. There has
been no attempt to define ordinary and necessary with precision. However, as guiding
principle in the proper adjudication of conflicting claims, an expenses is considered necessary
where the expenditure is appropriate and helpdul in the development of the taxpayers business.
It is ordinary when it connotes a payment which is normal in relation to the business of the
taxpayer and the surrounding circumstances. Assuming that the expenditure is ordinary and
necessary in the operation of the taxpayers business; the expenditure, to be an allowable
deduction as a business expense, must be determined from the nature of the expenditure itself,
and on the extent and permanency of the work accomplished by the expenditure. Herein, ESSO
has not shown that the remittance to the head office of part of its profits was made in furtherance
of its own trade or business. The petitioner merely presumed that all corporate expenses are
necessary and appropriate in the absence of a showing that they are illegal or ultra vires; which is
erroneous. Claims for deductions are a matter of legislative grace and do not turn on mere
equitable considerations.
Sat 13 Dec 2003
Digest: Borromeo vs. Civil Service Commission (GR 96032,

31 July 1991)
No Comments
Borromeo vs. Civil Service Commission
GR 96032, 31 July 1991
En Banc, Gutierrez Jr. (J): 15 concur
Facts: Jesus N. Borromeo was the Chairman of the Civil Service Commission until his
retirement on 1 April 1986. In 1988, he wrote the Commission on Audit requesting an opinion
whether the money value of the terminal leave of retired Constitutional Commission members
should include the allowances received at the time of retirement. Borromeo requested for the
payment ofterminal leave differential representing the unpaid Cost of Living Allowance (COLA)
and Representation and Transportation Allownace (RATA) amounting to P111,229.04. The
Department of Budget and Management denied the request.
Issue: Whether the terminal leave pay of the former CSC Chairman should be computed on the
basis of the highest monthly salary plus COLA and RATA, or solely on the basis of highest
monthly salary without said allowances.
Held: An application for terminal leave is an application for a commutation of leave credits
and not a commutation of salary as the officer or employee has already severed his
conncection with his employer and is no longer working. The cash value of his accumulated
leave credits should not be treated as compensation for services rendered at that time. Inasmuch
as terminal leave payments are given not only at teh same time but also for the same policy
considerations governing retirement benefits, the payments therefore should include COLA and
RATA. Section 286 of the Revised Administrative Code is not applicable. It cannot be construed
as limiting the basis of the computation of terminal leave pay to monthly salary only.
Sat 13 Dec 2003
Digest: Commissioner vs. Court of Appeals (GR 96016, 17

October 1991)
No Comments
Commissioner vs. Court of Appeals
GR 96016, 17 October 1991
Second Division, Padilla (J): 2 concur, 1 on leave
Facts: Efren Castaneda retired from government service as Revenue Atrtache in the Philippine
Embassy in London, England on 10 December 1982 under the provisiions of Section 12 (c) of
Commonwealth Act 186, as amended. Upon retirement, he received, among other benefits,
terminal leave pay from which the Commissioner withheld P12,557.13, allegedly representing
income tax thereon. Castaneda claimed for a refund.
Issue: Whether terminal leave pay is subject to withholding income tax.
Held: Terminal Leave Pay received by a government official or employee is not subject to
withholding income tax. In the exercise of sound personnel policy, the Government encourages
unused leaves to be accumulated. The Government recognizes that retirement pay for public
servants is less than generous, if not meager or scrimpy. Terminal leave payments are given thus
not only at the same time but also foor the same policy considerations governing retirement
benefits. Not being part of the gross salary or income of a government official or employee but a
retirement benefit, terminal leave pay is not subject to income tax.
Sat 13 Dec 2003
Digest: Sy Po vs. Court of Tax Appeals (GR L-81446, 18

August 1988)
No Comments
Sy Po vs. Court of Tax Appeals
GR L-81446, 18 August 1988
Second Division, Sarmiento (J): 3 concur
Facts: Bonifacio Sy Po is the widow of the late Po Bien Sing, (who died on 7 September 1980).
In the taxable years 1964 to 1972, the deceased Po Bien Sing was the sole proprietor of Silver
Cup Wine Factory (Talisay, Cebu), and was engaged in the business of manufacture and sale of
compounded liquors, using alcohol and other ingredients as raw materials. On the basis of a
denunciation against Silver Cup, the Secretary of Finance directed the Finance-BIR-NBI team to
investigate. Silver Cup was required to produce accounting records and other related documents
for the examination of the team. Po Bien Sing failed to do so. This prompted the team to enter
the factory bodega of Silver Cup and seize different brands, consisting of 1,555 cases of alcohol
products. On the basis of the teams report of investigation, the Commissioner assessed Po Bien
Sing deficiency income tax for 1966 to 1970 in thhe amount of P7,154,685.16 and for deficiency
specific tax for 2 January 1964 to 19 January 1972 in the amount of P5,595,003.68. Po Bien Sing
protested the assessment.
Issue: Whether the assessment have valid and legal bases.
Held: Section 16 (b) of the National Internal Revenue Code of 1977 is specific and clear. The
rule on the best evidence obtainable applies when a tax report required by law for the purpose
of assessment is not available or when the tax report is incomplete or fraudulent. Herein, the
persistent failure of Po Bien Sing and Bonifacia Sy Po to present their books of accounts for
examination for the taxable years involved left the Commissioner no other legal option except to
resort to the power conferred upon him under Section 16 of the Tax Code.
Sat 13 Dec 2003
Digest: In RE Zialcita (AM 90-6-015-SC, 18 October 1990)

No Comments
In RE Zialcita
AM 90-6-015-SC, 18 October 1990
En Banc, Gutierrez Jr. (J): 13 concur, 1 on leave
Facts: Amounts were claimed by Atty. Bernardo F. Zialcity on the occasion of his retirement. On
23 August 1990, a resolution was issued by the Court En Banc stating that the terminal leave pay
of Atty. Zialcita received by virtue of his compulsory retirement can never be considered a part
of his salary subject to the payment of income tax but falls under the phrase other benefits
received by retiring employees and workers, within the meaning of Section 1 of PD 220 and is
thus exempt from the payment of income tax. That the money value of his accrued leave credits
is not part of his salary is buttessed by Section 3 of PD 985, which it makes it clear that the
actual service is the period of time for which pay has been received, excluding the period
covered by terminal leave. The Commissioner filed a motion for reconsideration.
Issue: Whether terminal leave pay is exempt from tax; as well as other amounts claimed herein.
Held: Applying Section 12 (c) of Commonwealth Act 186, as incorporated into RA 660, and
Section 28 (c) of the former law, the amount received by Atty. Zialcita as a result of the
converson of unused leave credits, commonly known as terminal leave, is applied for by an
officer or employee who retires, resigns, or is separated from the service through no fault of his
own. Since the terminal leave is applied for after the severance of the employment, terminal pay
is no longer compensation for services rendered. It cannot be viewed as salary. Further, the
terminal leave pay may also be considered as a retirement gratuity, which is also another
exclusion from gross income as provided for in Section 28 (b), 7 (f) of the Tax Code.
The 23 August Resolution (AM 90-6-015-SC), however, specifically applies only to employees
of the Judiciary who retire, resign or are separated through no fault of their own. The resolution
cannot be made to apply to otehr government employees, absent an actual case or controversy, as
that would be in principle an advisory opinion.
Sat 13 Dec 2003
Digest: Commissioner vs. Court of Appeals (GR 119761, 29

August 1996)
No Comments
Commissioner vs. Court of Appeals
GR 119761, 29 August 1996
First Division, Vitug (J): 2 concur
Facts: Fortune Tobacco is engaged in the manufacture of different brands of cigarettes,
specifically Champion, Hope4, and More (which are foreign brands listed in the World
Tobacco Directory as belonging to foreign companies. Fortune Tobacco, however, changed
names of Hope to Luxury and More to Premium More thereby removing said brands
from the foreign brand category. Proof was also made/ submitted to the BIR that Champion
was an original Fortune Tobacco Corp. register and thus a local brand. RA 7654 was enacted on
10 June 1993, levying a P5 minimum tax on locally manufactured cigarettes taxed at 55% or
exportation of which is not authorized by contract, and P2 minimum tax per pack on other
locally manufactured cigarette. The BIR sent the Company a month later a copy Revenue
Memorandum Circular 37-93 declaring Hope, More and Champion as foreign brands, and
thus subjecting them to 55% as valorem tax, a review of RMC 37-93 was denied.
Issue: Whether the brands may be placed within the scope of the amendatory law (RA 7654)
and subject then to an increased, through RMC 37-93.
Held: Prior to the issuance of RMC 37-93, the brands were in the category of locally
manufactured cigarettes not bearing foreign brands, subject to 45% ad valorem tax. Without
RMC 37-93, the enactment of RA7654 would not have new tax rate consequences on the
companys products. In issuing RMC 37-93, the BIR legislated under its quasi-legislative
authority and not simply interpreted the law. When an administrative rule goes beyond merely
providing for the means that can facilitate or render least cumbersome the implementation of the
law but substantially adds to or increases the burden of those governed. It behooves the agency
to accord at least to those directly affected a chance to be heard, and thereby be duly informed,
before that new issuance is given the force and effect of law.
Sat 13 Dec 2003
Digest: Maceda vs. Macaraig (GR 88291, 31 May 1991)

No Comments
Maceda vs. Macaraig
GR 88291, 31 May 1991
En Banc, Gancayco (J): 6 concur, 2 took no part, 1 dissents
Facts: Commonwealth Act 120 created NAPOCOR as a public corporation to undertake the
development of hydraulic power and the production of power from other sources. RA 358
(1949) granted NAPOCOR tax and duty exemption privileges. RA 6395 (1971) revised the
charter of the NAPOCOR, tasking it to carry out the policy of the national electrification, and
provided in detail NAPOCORs tax exceptions. PD 380 (1974) specified that NAPOCORs
exemption includes all taxes, etc. imposed directly or indirectly. PD 938 integrated the
exemptions in favor of GOCCs including their subsidiaries; however, empowering the President
or the Minister of Finance, upon recommendation of the Fiscal Incentives Review Board (FIRB)
to restore, partially or completely, the exemptions withdrawn or revised. The FIRB issued
Resolution 10-85 (7 February 1985) restoring the duty and tax exemptions privileges of
NAPOCOR for period 11 June 1984- 30 June 1985. Resolution 1-86 (1January 1986) restored
such exemption indefinitely effective 1 July 1985. EO 93 (1987) again withdrew the exemption.
FIRB issued Resolution 17-87 (24 June 1987) restoring NAPOCORs exemption, which was
approved by the President on 5 October 1987.
Since 1976, oil firms never paid excise or specific and ad valorem taxes for petroleum products
sold and delivered to NAPOCOR. Oil companies started to pay specific and ad valorem taxes on
their sales of oil products to NAPOCOR only in 1984. NAPOCOR claimed for a refund
(P468.58 million). Only portion thereof, corresponding to Caltex, was approved and released by
way of a tax credit memo. The claim for refund of taxes paid by PetroPhil, Shell and Caltex
amounting to P410.58 million was denied. NAPOCOR moved for reconsideration, starting that
all deliveries of petroleum products to NAPOCOR are tax exempt, regardless of the period of
delivery.
Issue: Whether NAPOCOR cease to enjoy exemption from indirect tax when PD 938 stated the
exemption in general terms.
Held: NAPOCOR is a non-profit public corporation created for the general good and welfare,
and wholly owned by the government of the Republic of the Philippines. From the very
beginning of the corporations existence, NAPOCOR enjoyed preferential tax treatment to
enable the corporation to pay the indebtness and obligation and effective implementation of the
policy enunciated in Section 1 of RA 6395. From the preamble of PD 938, it is evident that the
provisions of PD 938 were not intended to be strictly construed against NAPOCOR. On the
contrary, the law mandates that it should be interpreted liberally so as to enhance the tax exempt
status of NAPOCOR. It is recognized principle that the rule on strict interpretation does not
apply in the case of exemptions in favor of government political subdivision or instrumentality.
In the case of property owned by the state or a city or other public corporations, the express
exception should not be construed with the same degree of strictness that applies to exemptions
contrary to the policy of the state, since as to such property exception is the rule and taxation
the exception.
Sat 13 Dec 2003
Digest: # Commissioner vs. Court of Tax Appeals (GR 44007,

20 March 1991)
No Comments
Commissioner vs. Court of Tax Appeals
GR 44007, 20 March 1991
First Division, Medialdea (J): 3 concur, 1 on leave
Facts: Eastern Extension Australasia and China Telegraph Co. ( a foreign corporation) was given
a concession for the construction, operation and maintenance of submarine telegraph cable from
Hong Kong to Manila on 30 March 1898 by a Royal Decree of the Spanish Government. When
the concession expired in 1952, RA 808 was approved, giving the company a legislative
franchise to land, construct, maintain and operate a submarine telegraph cable connecting
Manila to Hong Kong, and a tax exception from the payment of all taxes except a franchise tax
of 5% of the gross earnings and the tax on its real property. The Commissioner, however,
assessed deficiency income tax (inclusive of surcharges, interests and penalties thereon for years
1965-1970) against the company on the belief that the franchise is inoperative for failure to
conform with the constitutional requirement that franchise holders should be organized under
Philippine Laws and that 80% of its capital owned by Filipinos
Issue: Whether the franchise is inoperative, rendering the company liable for deficiency income
tax.
Held: A law is presumed constitutional as it is supposed to have been carefully studied and
determined to constitutional before it was finally enacted by Congress and approved by the Chief
Executive. No constitutional question would be resolved unless the requisites of a judicial
inquiry are present; i.e. the existence of an appropriate case, an interest personal and substantial
by the party raising the constitutional question, the plea that the function be exercised at the
earliest opportunity, and the necessity that the constitutional question be passed in order to
decide the case. Herein, the last criterion is missing; and accordingly, the Court gives high
respect for the acts of the other departments of the government and, as much as possible, avoids
deciding the constitutional question.
The company duly complied with the conditions set forth in the legislative franchise. It has also
complied with the tax requirement by paying to the Republic a tax of 5% of the gross earnings
from Philippines operations regularly since its creation. As a legislative franchise partakes of the
nature of a contract; the franchise is the law between the parties and they are bound by the terms
thereof. The government agency cannot declare the franchise as ineffective and unenforceable
merely by stating that the company failed to comply with the requirements of the general statutes
(e.g. Public Service Act and the Corporation law) which are not mentioned in RA 808. Still, a
remand of the case to the Court of Tax Appeals is necessary to determine the income tax liability
of the company corresponding to its income beyond the scope of RA 808.
Sat 13 Dec 2003
Digest: Meralco vs. Vera (GR L-29987, 22 October 1975)

No Comments
Meralco vs. Vera
GR L-29987, 22 October 1975
First Division, Munoz Palma (J): 4 concur, 1 took no part
Facts: Meralco is the holder of a franchise to construct, maintain, and operate an electric light,
heat , and power system in the City of Manila and its suburbs. In 1962 and 1963, Meralco
imported and received from abroad copper wires, transformers, and insulators for use in the
operation of its business. The Collector of Customs, as deputy of the Commissioner of Internal
Revenue, levied and collected a compensating tax. Meralco claimed for refund for the said
yeares, but such claims were either not acted upon or denied by the Commissioner.
Issue: Whether Meralco is exempt from payment of a compensating tax on poles, wires,
transformers and insulators imported by it for use in the operation of its electric light, heat, and
power system.
Held: Meralco is not exempt from paying the compensationg tax provided for in Section 190 of
the Tax Code, the prupose of which is to place casual importers, who are not merchants on
equal forring with established merchants who pay sales tax on articles imported by them.
Meralcos claim for exemption from payment of the compensating tax is not clear or expressed,
contrary to the rule that exemptions from taxation are highly disfavored in law, and he who
claims exemption must be able to justify his claim by the clearest grant of organic or statute
law. Tax exemptiion are strictly construed against the taxpayer, they being highly disfavored
and may almost be said to be odious to the law. When exemption is claimed, it must be shown
indubitably to exist, for every presumption is against it, and a well-founded doubt is fatal to the
claim.
Sat 13 Dec 2003
Digest: Commissioner vs. Javier (GR 78953, 31 July 1991)

No Comments
Commissioner vs. Javier
GR 78953, 31 July 1991
Second Division, Sarmiento (J): 3 concur, 1took no part
Facts: In 1977, Victoria Javier (wife of Melchor), received from the Prudential Bank and Trust
Co. US$999,973.70 remitted by her sister, Dolores Ventosa, through some banks in the United
States, among them Mellon Bank NA. Mellon Bank filed suit to recover the excess amount of
US$9999,000 as the remittance of US$ 1 million was a clerical error and should have been US
$1,000 only (Compare facts in Mellon Bank vs. Magsino, GR 71479, 18 October 1990). In 1978,
Melchor Javier filed his income tax return for 1977showing a gross income of P53,053.38 and a
net income of P48,053.38 and stating in the footnote of the return that taxpayer was recepient of
some money received from abroad which he presumed to be a gift but turned out to be an error
and is now subject of litigation.
In 1980, the Commissioner assessed and demanded from Javier deficiency assessment of
P9,287,297.51 for 1977. Javier protested such assessment, where the Commissioner in turn
imposed a 50% fraud penalty against Javier.
Issue: Whether Javier is liable for the 50% fraud penalty.

Held: Under the then Section 72 of the Tax Code, a taxpayer who files a false return is liable to
pay the fraud penalty of 50% of the tax due from him or of the deficiency tax in case payment
has been made on the basis of the return filed before the discovery of the falsity or fraud. The
fraud contemplated by law is actual and not constructive. It must be intentional fraud, consisting
of deception willfully and deliberately done or resorted to in order to induce another to give up
some legal right. Fraud is never imputed and the courts never sustain findings of fraud upon
circumstances which, at most created only suspicion. A fraudulent return is always an attempt to
evade a tax, but a merely false return may not be. Herein, there was no actual and intentional
fraud through willful and deliberate misleading of the government agency concerned (BIR)
committed by Javire. Javier did not conceal anything to induce the government to give some
legal right and place itself at a disadvantage. Error or mistake of law is not fraud. As ruled by the
Court of Tax Appeals, the 50% surcharge imposed as fraud penalty in the deficiency assessment
should be deleted.
Sat 13 Dec 2003
Digest: Procter and Gamble vs. Jagna (GR L-24265, 28

December 1979)
No Comments
Procter and Gamble vs. Jagna
GR L-24265, 28 December 1979
First Division, Melencio Herrera (J): 8 concur
Facts: Procter and Gamble Philippines Manufacturing Corp. is a consolidated corporation of
Procter and Gamble Trading Company. It is engaged in the manufacture of soap, edible oil,
margarine and otehr similar products; and maintains a bodega in the municipality of Jagna,
where it stores copra purchased in the municipality and therefrom ships the same for its
manufacturing and other operations. In 1954, the Municipal Council enacted Ordinance 4,
imposing storage fees of all exportable copra deposite in the bodega within the jurisdiction of the
municipality of Jagna, Bohol. From 1958 to 1963, the company paid the municipality, allegedly
under protest, storage fees. In 1964, it filed suit, wherein it prayed that the Ordinance be declared
inapplicable to it, and if not, that it be declared ultra vires and void.
Issue: Whether the Ordinance i s void, as it amounts to double taxation.
Held: The validity of the Ordinance must be upheld pursuant to the broad authority conferred
upon municipalites by Commonwealth Act 472 (promulgated 1939), which was the prevailing
law when the Ordinance is actually a municipal license tax or fee on persons, firms and
corporations exercising the privilege of storing copra within the municipalitys territorial
jurisdiction. Such fees imposed do not amount to double taxation. For double taxation to exist,
the same property must be taxed twice, when it should be taxed but once. A tax on the companys
producs is different from the tax on the privilege of storing copra in a bodega situated within the
territorial boundary of the municipality.
Sat 13 Dec 2003
Digest: Herrera vs. Quezon City Board of Assessment

Appeals (GR L-15270, 30 September 1961)
No Comments
Herrera vs. Quezon City Board of Assessment Appeals
First Division, Concepcion (J): 6 concur
Facts: In 1952, the Director of the Bureau of Hospitals authorized Jose V. Herrera and Ester
Ochangco Herrera to establish and operate the St. Catherines Hospital. In 1953, the Herreras
sent a letter to the Quezon City Assessor requesting exemption from payment of real estate tax
on the hospital, stating that the same was established for charitable and humanitarian purposes
and not for commercial gain. The exemption was granted effective years 1953 to 1955. In 1955,
however, the Assessor reclassified the properties from exempt to taxable effective 1956, as it
was ascertained that out 32 beds in the hospital, 12 of which are for pay-patients. A school of
midwifery is also operated within the premises of the hospital.
Issue: Whether St. Catherines Hospital is exempt from reallty tax.
Held: The admission of pay-patients does not detract from the charitable character of a hospital,
if all its funds are devoted exclusively to the maintenance of the institution as a public charity.
The exemption in favor of property used exclusively for charitable or educational purpose is not
limited to property actually indispensable therefore, but extends to facilities which are incidental
to and reasonably necessary for the accomplishment of said purpose, such as in the case of
hospitals a school for training nurses; a nurses home; property used to provide housing
facilities for interns, resident doctors, superintendents and other members of the hospital staff;
and recreational facilities for student nurses, interns and residents. Within the purview of the
Constitution, St. Catherines Hospital is a charitable institution exempt from taxation.
Sat 13 Dec 2003
Digest: Reyes vs. Almanzor (GR 49839-46, 26 April 1991)

No Comments
Reyes vs. Almanzor
GR 49839-46, 26 April 1991
En Banc, Paras (J): 15 concur
Facts: JBL, Edmundo and Milagros Reyes are owners of parcels of land in Manila which are
leased and occupied as dwelling sites by tenants. In 1971, RA 6359 was passed prohibiting an
increase of monthly rentals of dwelling units or of land on which another dwelling is located for
one year after effectivity for rentals not exceeding P300 but allowing an increase of rent
thereafter by not more than 10%. The Act also suspended the operation of Article 1673 of the
Civil Code (ejectment of lessess). PD 20 amended RA 6359 by absolutely prohibiting the
increase and indefinitely suspending Article 1673. The Reyeses, thus, were precluded from
raising the rentals and from ejecting the tenants. In 1973, the City Assessor of Manila reclassified
and reassessed the value of the properties based on the schedule of market values duly reviewed
by the Secretary of Finance. As it entailed an increase of the corresponding tax rates, the Reyeses
filed a memorandum of disagreement with the Board of Tax Assessment Appeals and averring
therein that the reassessments were excessive, unwarranted, unequitable, confiscatory and
unconstitutional inasmuch as the taxes imposed exceeded the annual income derived from their
properties; and that the income approach should have been used in determining land values
instead of the comparative sales approach which the assessor adopted.
Issue: Whether the reassessment is unequitable.
Held: Taxation is equitable when its burden falls on those better able to pay. Taxation is
progressive when its rate goes up depenfing on the resources of the person affected. Taxes are
uniform when all taxable articles or kinds of property of the same class are taxed at the same
rate. The taxing power has the authority to make reasonable and natural classification for
purposes of taxation. Laws should operate equally and uniformly, however, on all persons under
similar circumstances or that all persons mus t be treated in the same manner, the conditiions not
being different both in the privileges conferred and liabilities imposed. Finally, under the Real
Property Tax Code (PD 464), property must be appraised at its cuurent and fair market value.
The market value of the properties covered by PD 20, thus cannot be equated with the market
value of properties not so covered. Shcu property covered by PD 20 has naturally a much lesser
market value in view of the rental restrictions. Although taxes are the lifeblood of hte
government and should be collected without unnecessary hindrance, such collection should be
made in accordance with law as any arbitrariness will negate the very reason for government
itself. As teh Reyeses are burdened by the Rent Freeze Laws (RA 6359 and PD 20), they should
not be penalized by the same government by the imposition of excessive taxes they cancan ill
afford and would eventually result in the forfeiture of their properties, under the principle of
social justice.
Sat 13 Dec 2003
Digest: Eastern Theatrical Co. vs. Alfonso (GR L-1104, 31

May 1944)
No Comments
Eastern Theatrical Co. vs. Alfonso
GR L-1104, 31 May 1944
Second Division, Perfecto (J): 5 concur
Facts: The municipal board of Manila enacted Ordinance 2958 (series of 1946) imposing a fee
on the price of every admission ticket sold by cinematograph theaters, vaudeville companies,
theatrical shows and boxing exhibitions, in addition to fees imposed under Sections 633 and 778
of Ordinance 1600. Eastern Theatrical Co., among others, question the validity of ordinance, on
the ground that it is unconstitutional for being contrary to the provisions on uniformity and
equality of taxation and the equal protection of the laws inasmuch as the ordinance does not tax
other kinds of amusement, such as race tracks, cockpits, cabarets, concert halls, circuses, and
other places of amusement.
Issue: Whether the ordinance violates the rule on uniformity and equality of taxation.
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; and the theater companies cannot
point out what places of amusement taxed by the ordinance do not constitute a class by
themselves and which can be confused with those not included in the ordinance. The fact that
somew places of amusement are not taxed while others, like the ones herein, are taxed is no
argument at all against the equality and uniformity of the tax imposition.
Sat 13 Dec 2003
Digest: Villanueva vs. Iloilo City (GR L-26521, 28 December

1968)
No Comments
Villanueva vs. Iloilo City
GR L-26521, 28 December 1968
En Banc, Castro (J): 8 concur
Facts: On 30 September 1946, the Municipal Board of Iloilo City enacted Ordinance 86
imposing license tax fees upon tenement house (P25); tenemen house partly engaged or wholly
engaged in and dedicated to business in Baza, Iznart, and Aldeguer Streets (P24 per apartment);
and tenement house, padtly or wholly engaged in business in other streets (P12 per apartment).
The validity of such ordinance was challenged by Eusebio and Remedios Villanueva, owners of
four tenement houses containing 34 apartments. The Supreme Court held the ordinance to be
ultra vires. On 15 January 1960, however, the municipal board, believing that it acquired
authority to enact an ordinance of the same nature pursuant to the Local Autonomy Act, enacted
Ordinance 11 (series of 1960), Eusebio and Remedios Villaniueva assailed the ordinance anew.
Issue: Whether Ordinance 11 violate the rule of uniformity of taxation.
Held: The Court has ruled that tenement houses constitute a distinct class of property; and that
taxes are uniform and equal when imposed upon all property of the same class or character
within the taxing authority. The fact that the owners of the other classes of buildings in Iloilo are
not imposed upon by the ordinance, or that tenement taxes are imposed in other cities do not
violate the rule of equality and uniformity. The rule does not require that taxes for the same
purpose should be imposed in different territorial subdivisions at the same time. So long as the
burden of tax falls equally and impartially on all owners or operators of tenement houses
similarly classified or situated, equality and uniformity is accomplished. The presumption that
tax statutes are intended to operate uniformly and equally was not overthrown herein.
Sat 13 Dec 2003
Digest: Churchill vs. Concepcion (GR 11572, 22 September

1916)
No Comments
Churchill vs. Concepcion
Second Division, Trent (J): 4 concur
Facts: Section 100 of Act 2339 (promulgated 1914) imposed an annual tax of P4 per square
meter upon electric signs, billboards, and spaces used for posting or displaying temporary signs,
and all signs displayed on premises not occupied by buildings. The section was amended by Act
2432, reducing the tax to P2 per square meter. The taxes imposed by Act 2432 were ratified by
the US Congress on 4 March 1915. Francis A. Churchill and Stewart Tait, co-partners in
Mercantile Advertising Agency, owed a billboard to which they were taxed at P104. The tax was
paid under protest. Churchill and Tait instituted the action to recover the amount.
Issue: Whether the statute or tax is void for lack of uniformity.
Held: Uniformity in taxation means that all taxable articles or kinds of property, of the same
class, shall be taxed at the same rate. It does not mean that lands, chattels, securities, incomes,
occupations, franchises, privileges, necessities, and luxuries shall all be assessed at the same rate.
Different articles may be taxed at different amounts provided the rate is uniform on the same
class everywhere, with all people, at all times. Herein, the Act imposes a tax of P2 per square
meter or a fraction thereof upon every electric sign, billboard, etc., wherever found in the
Philippine Islands. The rule of taxation upon such signs is uniform throughout the islands. The
rule does not require taxes to be graded according to the value of the subject(s) upon which they
are imposed, especially those levied as privilege or occupation taxes.
Sat 13 Dec 2003
Digest: Casanovas vs. Hord (GR L-3473, 22 March 1907)

No Comments
Casanovas vs. Hord
GR L-3473, 22 March 1907
First Division, Willard (J): 4 concur, 1 dissents
Facts: In 1897, the Spanish Government, in accordance with the provisions of the royal decree
of 14 may 1867, granted J. Casanovas certain mines in the province of Ambos Camarines, of
which mines the latter is now the owner. That these were validly perfected mining concessions
granted to prior to 11 April 1899 is conceded. They were so considered by the Collector of
Internal Revenue and were by him said to fall within the provisions of Section 134 of Act 1189
(Internal Revenue Act). The Commissioner, JNO S. Hord, imposed upon these properties the tax
mentioned in Section 134, which Casanovas paid under protest.
Issue: Whether Section 134 of Act 1189 is valid.
Held: The deed constituted a contract between the Spanish Government and Casanovas. The
obligation in the contract was impaired by the enactment of Section 134 ofthe Internal Revenue
La, thereby infringing the provisions of Section 5 of the Act of Congress of 1 July 1902.
Furthermore, the section conflicts with Section 60 of the Act of Congress of 1 July 1902, which
indicate that concessions can be cancelled only by reason of illegality in the procedure by which
they wer obtained, or for failure to comply with the conditions prescribed as requisites for their
retention in the laws under which they wer granted. The grounds were not shown or claimed in
the case. As to the allegation that the section violates uniformity of taxation, the Court found it
unnecessary to consider the claim in view of the result at which the Court has arrived.
Sat 13 Dec 2003
Digest: Vera vs. Cuevas (GR L-33693-94, 31 May 1979)

No Comments
Vera vs. Cuevas
GR L-33693-94, 31 May 1979
First Division, De Castro (J): 4 concur, 1 took no part
Facts: Consolidated Philippines Inc., General Milk Co. (Phil.) Inc., and Milk Industries Inc. are
engaged in the manufacture, sale and distribution of filled milk products throughout the
Philippines. The Institute of Evaporated Fulled Milk Manufacturers of the Philippines is a
corporation organized to uphold and maintain the highest standards of local filled milk
industries, of which the companies are members. The Commissioner required the companies to
withdraw from the market all of their filled milk products which do not bear the inscription
required by Section 169 (Inscription to be placed on skimmed milk) of the Tax Code within 15
days from receipt of order with explicit warning of prosection for non-compliance. The
companies filed an action for prohibition and injunction.
Issue: Whether Section 169 of theTax Code can be enforced against the companies.
Held: With Section 141 (specific tax imposed on skimmed milk) and Section 177 (penalty on
sale of skimmed milk without payment of specific tax and legend required in Section 169)
repealed by RA 344 and RA 463, respectively; Section 169 has lost its tax purpose, and thus the
Commissioner necessary lost his authority to enforce the same. Further, Section 169 applies to
skimmed milk, which is different to filled milk. Furthermore, Section 169 is only being enforced
against the respondent companies nad not against manufacturers, distributors or sellers of
condensed skimmed milk such as SIMILAC, SMA, BREMIL, ENFAMIL, and OLAC. Such
kind of enforcement amounts to an unconstitutional denial of the equal protection of the laws, for
the law, if not equally enforced to persons similarly situated, would offend against the
Constitution.
Sat 13 Dec 2003
Digest: Pepsi-Cola Bottling Co. vs. City of Butuan (GR L22814, 28 August 1968)
No Comments
Pepsi-Cola Bottling Co. vs. City of Butuan
GR L-22814, 28 August 1968
En Banc, Concepcion (J): 5 concur
Facts: Ordinance 110 was enacted by the City of Butuan imposing a tax of P0.10 per case of 24
bottles of softdrinks or carbonated drinks. The tax was imposed upon dealers engeged in selling
softdrinks or carbonated drinks. When Ordinance 110, the tax was imposed upon an agent or
consignee of any person, association, partnership, company or corporation engaged in selling
softdrinks or carbonated drinks, with agent or consignee being particularly defined on the
inserted provision Section 3-A. In effect, merchants engaged in the sale of softdrinks, etc. are not
subject to the tax unless they are agents or consignees of another dealer who must be one
engaged in business outside the City. Pepsi-Cola Bottling Co. filed suit to recover sums paid by
it to the city pursuant to the Ordinance, which it claims to be null and void.
Issue: Whether the Ordinance is discriminatory.
Held: The Ordinance, as amended, is discriminatory since only sales by agents or consignees
of outside dealers would be subject to the tax. Sales by local dealers, not acting for or on behalf
of other merchants, regardless of the volume of their sales , and even if the same exceeded those
made by said agents or consignees of producers or merchants established outside the city, would
be exempt from the tax. The classification made in the exercise of the authority to tax, to be valid
must be reasonable, which would be satisfied if the classification is based upon substantial
distinctions which makes real differences; these are germane to the purpose of legislation or
ordinance; the classification applies not only to present conditions but also to future conditions
substantially identical to those of the present; and the classification applies equally to all those
who belong to the same class. These conditions are not fully met by the ordinance in question.
Sat 13 Dec 2003
Digest: Victorias Milling Co. vs. Municipality of Victorias

(GR L-21183, 27 September 1968)
No Comments
Victorias Milling Co. vs. Municipality of Victorias
En Banc, Sanchez (J): 9 concur
Facts: Ordinance 1 (1956) was approved by the municipal council of Victorias by way of an
amendment to 2 municipal ordinances separately imposing license taxes on operators of sugar
centrals and sugar refineries. The changes were: (1) with respect to sugar centrals, by increasing
the rates of license taxes; and (2) as to sugar refineries, by increasing the rates of license taxes as
well as teh range of graduated schedule of annual output capacity. Victorias Milling questioned
the validity of Ordinance 1 as it, among others, allegedly singled out Victorias Milling Co. since
it is the only operator of a sugar central and a sugar refinery within the jurisdiction of the
municipality.
Issue: Whether Ordinance 1 is discriminatory.

Held: The ordinance does not single out Victorias as the only object of the ordinance but is
made to apply to any sugar central or sugar refinery which may happen to operate in the
municipality. The fact that Victorias Milling is actually the sole operator of a sugar central and a
sugar refinery does not make the ordinance discriminatory. The ordinance is unlike that in Ormoc
Sugar Company vs. Municipal Board of Ormoc City, which specifically spelled out Ormoc Sugar
as the subject of the taxation, the name of the company herein was never mentioned in the
ordinance.
Sat 13 Dec 2003
Digest: Shell Co. vs. Vano (GR L-6093, 24 February 1954)

No Comments
Shell Co. vs. Vano
GR L-6093, 24 February 1954
En Banc, Padilla (J): 10 concur
Facts: The municipal council of Cordova, Cebu adopted Ordinance 10 (1946) imposing an
annual tax of P150 on occupation or the exercise of the privilege of installation manager;
Ordinance 9 (1947) imposing an annual tax of P40 for local deposits in drums of combustible
and inflammable materials and an annual tax of P200 for tin can factories; and Ordinance 11
(1948) imposing an annual tax of P150 on tin can factories having a maximum annual output
capacity of 30,000 tin cans. Shell Co., a foreign corporation, filed suit for the refund of the taxes
paid by it, on the ground that the ordinances imposing such taxes are ultra vires.
Issue: Whether Ordinance 10 is discriminatory and hostile because there is no other person in the
locality who exercise such designation or occupation.
Held: The fact that there is no other person in the locality who exercises such a designation or
calling does not make the ordinance discriminatory and hostile, inasmuch as it is and will be
applicable to any person or firm who exercises such calling or occupation named or designated
as installation manager.
Sat 13 Dec 2003
Digest: Juan Luna Subdivision vs. Sarmiento (GR L-3538,

28 May 1952)

No Comments
Juan Luna Subdivision vs. Sarmiento
GR L-3538, 28 May 1952
En Banc, Tuason (J): 7 concur
Facts: Juan Luna Subdivision is a local corporation which issued a check to the City Treasurer of
Manila for amount to be applied to its land tax for the second semester of 1941. The records of
the City Treasurer do not show what was done with the check (It appears that it was deposited
with the Philippine National Bank [PNB]). After liberation (WWII), the City Treasurer refused to
refund the corporations deposit or apply it to such future taxes as might be found due, while the
Philippine Trust Co (to which the check was presented) was unwilling to reverse its debit entry
against Juan Luna Subd. Said amount is also subject of another disagreement between the
corporation and the City Treasure, with the corporation claiming that the wholeamount of the
check for the taxes for the last semester of 1941 have been remitted by Commonwealth Act 703
(1945).
Issue: Whether the provision allowing the remission covers taxes paid before the enactment of
Commonwealth Act 703, or taxes which were still unpaid.
Held: The law is clear that it applies to taxes and penalties due and payable, i.e. taxes owed or
owing. The remission of taxes due and payable to the exclusion og taxes already collected does
not constitute unfair discrimination. Each set of taxes is a class by itself, and the law would be
open to attack as class legislation only if all taxpayers belonging to one class were not treated
alike. Herein, they are not. The taxpayers who paid their taxes before liberation and those who
had not were not on the same footing on the need of material relief. Taxpayers who had been in
arrears in their obligation whould have to satisfy their liability with genuine currency, while the
taxes paid during the occupation had been satisfied in Japanese War Notes, many of them at a
time when those notes were well-nigh worthless. To refund those taxes with restored currency
would be unduly enrich many of the payers at a greater expense to the people at large.
Sat 13 Dec 2003
Digest: Commissioner vs. Air India (GR L-72443, 29

January 1988)
No Comments
Commissioner vs. Air India
GR L-72443, 29 January 1988
First Division, Gancayco (J): 4 concur
Facts: Air India is a foreign corporation and an off-line international carrier not engaged in the
business of air transporation in the Philippines. Air India sells airplane tickets in the Philippines
trhough its general sales agent, Philippine Airlines. Said tickets are serviced by Air India outside
the Philippines. The Commissioner of Internal Revenue assessed against Air India the amount of
P142,471.68 representing 2.55 income tax on its gross Philippine billngs pursuant to Section 24
(b) (2) of the Tax Code, as amended, inclusive of th e50% surcharge and interest for willful
neglect to file a return as provided under Section 72 of the same Code. Air India appealed to the
Court of Tax Appeals.
Issue: Whether the revenue derived by an international air carrier from sles of tickets in the
Philippines for air transportation, while having no landing rights in the country, constitutes
income of said carrier from Philippine sources, and thus taxable under Section 24 (b) (2) of the
Tax Code.
Held: Based on the doctrine enunciated in British Overseas Airways Corp., the revenue derived
by Air India from the sales of airplane tickets, through its agent in the Philippines, must be
considered taxable income. As correctly assessed by the Commissioner, such income is subject to
a 2.5% tax pursuant to PD 1355, amending section 24 (b) (2) of the Tax Code.
Sat 13 Dec 2003
Digest: Commissioner vs. British Overseas Airways Corp.

(GR L-65773-74, 30 April 1987)
No Comments
Commissioner vs. British Overseas Airways Corp.
GR L-65773-74, 30 April 1987
En Banc, Melencio-Herrera (J): 7 concur, 1 took no part
Facts: British Overseas Airways Corp. (BOAC) is a 100% Britis Government-owned
corporation engaged in international airline business and is a member of the Interline Air
Transport Association, and thus, it operates air transportation service and sells transportation
tickets over the routes of the other airline members. From 1959 to 1972, BOAC had no landing
rights for traffic purposes in the Philippines and thus did not carry passengers and/or cargo to or
from the Philippines but maintained a general sales agent in the Philippines Warner Barnes &
Co. Ltd., and later, Qantas Airwayus which was responsible for selling BOAC tickets
covering passengers and cargoes. The Commissioner of Internal Revenue assessed deficiency
income taxes against BOAC.
Issue: Whether the revenue derived by BOAC from ticket sales in the Philippines for air
transportation, while having no landing rights in the Philippines, constitute income of BOAC
from Philippine sources, and accordingly, taxable.
Held: The source of an income is the property, activity or service that produced the income. For
the source of income to be considered as coming from the Philippines, it is sufficient that the
income is derived from activity within the Philippines. Herein, the sale of tickets in the
Philippines is the activity that produced the income. The tickets exchanged hands here and
payments for fares were also made here in Philippine currency. The situs of the source of
payments is the Philippines. The flow of wealth proceeded from, and occured within, Philippine
territory, enjoying the protection accorded by the Philippine Government. In consideration of
such protection, the flow of wealth should share the burden of supporting the government. PD
68, in relation to PD 1355, ensures that international airlines are taxed on their income from
Philippine sources. The 2 1/2 %tax on gross billings is an income tax. If it had been intended as
an excise or percentage tax, it would have been placed under Title V of the Tax Code covering
taxes on business.
Sat 13 Dec 2003
Digest: # Philippine Match Co. Ltd. vs. Cebu City (GR L30745, 18 January 1978)
No Comments
Philippine Match Co. Ltd. vs. Cebu City
GR L-30745, 18 January 1978
Second Division, Aquino (J): 3 concur, 1 on leave
Facts: Cebu City imposed a quarterly tax (sales tax of 1%) on gross sales or receipts of
merchants, dealers, importers and manufacturers or any commodity doing business in Cebu City,
through Ordinance 279. Section 9 of the Ordinance provided that, for the purpose of the tax, all
deliveries of goods or commodities stored in Cebu City, or if not stored are solld in that city sahll
be considered as sales in the city and shall be taxable. Philippine Match Co. Ltd., with principal
office in Manila, questioned the legality of the tax collected by the City of Cebu on sales of
matches stored by the company in Cebu City but delivered to customers outside the city.
Issue: Whether the City of Cebu can tax sales of matches which were perfected and paid for in
Cebu City but where the matches were delivered to customers outside the city.
Held: The city can validly tax the sales of matches to customers outside of the city as long as the
orders were booked and paid for in the companys branch office in the city. Those matches can
be regarded as sold in the city, as contemplated in the ordinance, because the matches were
delvered to the carrier in Cebu City. Generally, delivery to the carrier is delivery to the buyer
(Article 1523, Civil Code). A different interpretation would defeat the tax ordinance in question
or encourage tax evasion through the simple expedient of arranging for the delivery of the
matches at the outskirts of the city though the purchases were effected and paid for in the
companys branch office in the city. The municipal board of the city is empowered to provide for
the levy and collection of taxes for general and special purposes in accordance with law.
Sat 13 Dec 2003
Digest: Wells Fargo vs. Collector of Internal Revenue (GR

46720, 28 June 1940)
No Comments
Wells Fargo vs. Collector of Internal Revenue
GR 46720, 28 June 1940
First Division, Moran (J): 4 concur, 1 concur in result
Facts: Birdie Lillian Eye died on 16 September 1932, at Los Angeles, California, the place of
her alleged last residence and domicile. Among the properties she left was her 1/2 conjugal
shares of stock in the Benguet Consolidated Mining Co., an anonymous partnership (sociedad
anonima), organized under the laws of the Philippines. She left a will duly admitted to probate in
California where her estate was administered and settled. Wells Fargo bank and Union Trust Co.
was duly appointed trustee of the trust by the said will. The Federal and California States
inheritance taxes due thereon have been duly paid. The Collector of Internal Revenue in the
Philippines, however, sought to subject the shares of stock to inheritance tax, to which Wells
Fargo objected.
Issue: Whether the shares of stock are subject to Philippine inheritance tax considering that the
decedent was domiciled in California.
Held: Originally, the settled law in the United States is that intangibles have only one situs for
the purpose of inheritance tax, and such situs is in the domicile of the decedent at the time of his
or her death. But the rule has been relaxed. The maxim mobila sequuntur personam, upon
which the rule rests, has been decried as a mere fiction of law having its origin in considerations
of general convenience and public policy, and cannot be applied to limit or control teh right of
the State to tax property within its jurisdiction and must yield to established fact of legal
ownership, actual presence and control elsewhere, and cannot be applied if to do so whould
result in inescapable and patent injustice. The relaxation of the original rule rests on either of
two fundamental considerations: (1) upon the recognition of the inherent power of each
government to tax persons, properties, and rights within its jurisdiction and enjoying, thus, the
protection of its laws; and (2) upon the principle that as to intangibles, a single location in space
is hardly possible, considering the multiple, distinct relationships which may be entered into with
respect thereto.
Herein, the actual situs of the shares of stock is in the Philippines, the corporation being
domiciled therein. The certificates of stock remained in the Philippines up to the time when the
deceased died in California, and they were in possession of one Syrena McKee, secretary of the
corporation, to whom they have been delivered and indorsed in blank. McKee had the legal title
to the certificates of stock held in trust for the true owner thereof. The owner residing in
California has extended here her activities with respect to her intangibles so as to avail hereself
of the protection and benefit of Philippine laws. Accordingly, the jurisdiction of the Philippine
Government to tax must be upheld.
Sat 13 Dec 2003
Digest: 31st Infantry Post Exchange vs. Posadas (GR 33403,

4 September 1930)
No Comments
31st Infantry Post Exchange vs. Posadas
En Banc, Malcolm (J): 5 concur
Facts: The 31st Infantry Post Exchange is a post exchange constituted in accordance with Army
regulations and the laws of the United States. in the course of its duly authorized business
transactions, the Exchange made many purchases of various and diverse commodities, goods,
wares and merchandise from various merchants in the Philippines. The Commissioner collected a
sales tax of 1 1/2 % ofthe gross value of the commodities, etc. from the merchants who sold said
commodities to the Exchange. A formal protest was lodged by the Exchange.
Issue: Whether the Exchange is exempt from the sales tax imposed against its suppliers.
Held: Taxes have been collected from merchants who made sales to Army Post Exchanges since
1904 (Act 1189, Section 139). Similar taxes are paid by those who sell merchandise to the
Philippine Government, and by those who do business with the US Army and Navy in the
Philippines. Herein, the merchants who effected the sales to the Post Exchange are the ones who
paid the tax; and it is the officers, soldiers, and civilian employees and their familites who are
benefited by the post exchange to whom the tax is ultimately shifted. The tax laid upon the
merchants who sell to the Army Post Exchanges does not interfere with the supremacy of the US
Government, nor with the operations of its instrumentalities, such as the US Army, to such extent
or in such a manner as to render the tax illegal. The tax does not deprive the Army of the power
to serve the Government as it was intended to serve it, or hinder the efficient exercise of its
power.
An Army Post Exchange, although an agency within the US Army, cannot secure exemption
from taxation for merchants who make sales to the Post Exchange.
Sat 13 Dec 2003
Digest: Republic vs. Bacolod-Murcia Milling Co. (GR L19824-26, 9 July 1999)
No Comments
Republic vs. Bacolod-Murcia Milling Co.
GR L-19824-26, 9 July 1999
En Banc, Regala (J): 7 concur, 1 took no part
Facts: RA 632 created the Philippine Sugar Institute, a semi-public corporation. In 1951, the
Institute acquired the Insular Sugar Refinery for P3.07 million payable in installments from the
proceeds of the sugar tax to be collected under RA 632. The operation of the refinery for 1954 to
1957 was disastrous as the Institute suffered tremendous losses. Contending that the purchase of
the refinery with money from the Institutes fund was not authorized under RA 632, and that the
continued operation of the refinery is inimical to their interest, Bacolod-Murcia Milling Co., Maao Sugar Central, Talisay-Silay Milling Co. and the Central Azucarera del Danao refused to
continue with their contribution to said fund. The trial court found them liable under RA 632.
Issue: Whether the taxpayers may refuse to pay the special assessment, allegedly distinct from
an ordinary tax which no one can refuse to pay.
Held: The nature of a special assessment similar to the case has been discussed and explained
in Lutz vs. Araneta. The special assessment or levy for the Philippine Sugar Institute (Philsugin)
Fund is not so much an exercise of the power of taxation, nor the imposition of a special
assessment, but the exercise of police power for the general welfare of the entire country. It is,
therefore, an exercise of a sovereign power which no private citizen may lawfully resist. Section
2a of the Charter authorizing Philsugin to conduct research work for the sugar industry in all its
phases, either agricultural or industrial, for the purpose of introducing into the sugar industry
such practices or processes that will reduce the cost of production and achieve greater efficiency
in the industry, justifies the acquisition of the refinery in question. The financial loss resulting
from the operation thereof is no means an index that the industry did not profit therefrom, as
other gains of a different nature (such as experience) may have been realized.
Sat 13 Dec 2003
Digest: Pascual vs. Secretary of Public Works and

Communications (GR L-10405, 29 December 1960)
No Comments
Pascual vs. Secretary of Public Works and Communications
GR L-10405, 29 December 1960
En Banc, Concepcion (J): 10 concur
Facts: RA 920 (Act appropriating funds for public works) was enacted in 1953 containing an
item (Section 1 c[a]) for the construction, reconstruction, repair, extension and improvement of
Pasig feeder road terminals (the projected and planned subdivision roads, which were not yet
constructed, within Antonio Subdivision owned by Senator Jose C. Zulueta). Zulueta donated
said parcels of land to the Government 5 months after the enactment of RA 920, on the condition
that if the Government violates such condition the lands would revert to Zulueta. The provincial
governor of Rizal, Wenceslao Pascual, questioned the validity of the donation and the
Constitutionality of the item in RA 920, it being not for a public purpose.
Issue: Whether the item in the appropriation is valid.
Held: The right of the legislature to appropriate funds is correlative with its right to tax, under
constitutional provisions against taxation except for public purposes and prohibiting the
collection of a tax for one purpose and the devotion thereof to another purpose, no appropriation
of state funds can be made for other than a public purpose. The validity of a statute depends upon
the powers of Congress at the time of its passage or approval, not upon events occupying, or acts
performed, subsequently thereto, unless the latter consist of an amendment of the organic law,
removing, with retrospective operation, the constitutional limitation infringed by said statute.
Herein, inasmuch as the land on which the projected feeder roads were to be constructed
belonged to Senator Zulueta at the time RA 920 was passed by Congress, or approved by the
President, and the disbursement of said sum became effective on 20 June 1953 pursuant to
Section 13 of the Act, the result is that the appropriating sough a private purpose and hence, null
and void.
Sat 13 Dec 2003
Digest: Tanada vs. Tuvera (GR L-63915, 24 April 1985)

No Comments
Tanada vs. Tuvera

GR L-63915, 24 April 1985
En Banc, Escolin (J): 1 concur, 2 concur with reservation, 1 on leave, 1 took no part
Facts: Invoking the peoples right to be informed on matters of public concern as well as the
principle that laws to be valid and enforceable must be published in the Official Gazette or
otherwise effectively promulgated, Taada, et.al. seek a writ of mandamus to compel public
officials to publish presidential decrees, letters of instructions, general orders, proclamation,
executive orders, letter of implementation and administrative orders.
Issue: Whether the unpublished laws have binding force and effect.
Held: The publication in the Official Gazette is required to give the general public adequate
notice of the various laws which are to regulate their actins and conduct as citizens. Publication
is necessary to apprise the public of the contents of regulations and make penalties binding on
the person affected thereby. The publication of all presidential issuances of a public nature or
of general applicability is a mandated by law, and is a requirement of due process. Presidential
decrees that provide for fines, forfeitures or penalties for their violation or otherwise impose a
burden on the people, such as tax and revenue measures fall within this category. Before a
person may be bound by law, he must be first be officially and specifically informed of its
contents. When not published, such shall have no force and effect. However, the
implementation/enforcement of the presidential decrees prior to their publication in the Gazette
is an operative facts, which may have consequences which cannot be justly ignored.
(Note: The aspect of operative facts was dropped in subsequent resolution.)
Sat 13 Dec 2003
Digest: Nitafan vs. Commissioner (GR L-78780, 23 July

1987)
1 Comment
Nitafan vs. Commissioner
GR L-78780, 23 July 1987
Resolution
En Banc, Melencio-Herrera (J): 12 concur, 1 on leave
Facts: The Chief Justice has previously issued a directive to the Fiscal Management and Budget
Office to continue to deduct withholding taxes from the salaries of the Justices of the Supreme
Court and other members of the judiciary. This was affirmed by the Supreme Court En Banc on 4
December 1987. RTC judges seek to prohibit or enjoin the Commissioner of the Internal
Revenue and the Financial Officer of the Supreme Court from making any deduction of
withholding taxes from their salaries.
Issue: Whether the salaries of judges are subject to tax.
Held: The salaries of members of the Judiciary are subject to the general income tax applied to
all taxpayers. Although such intent was somehoe and inadvertently not clearly set forth in the
final text of the 1987 Constitution, the deliberations of the 1986 Constitutional Commission
negate the contention that the intent of the framers is to revert to the original concept of nondiminution of salaries of judicial officers. Hence, the doctrine in Perfecto v. Meere and
Endencia vs. David do not apply anymore. Justices and judges are not only the citizens whose
income have been reduced in accepting service in government and yet subjecte to income tax.
Such is true also of Cabinet members and all other employees.
Sat 13 Dec 2003
Digest: Apostolic Prefect of Mountain Province vs. City

Treasurer of Baguio City (GR 47252, 18 April 1941)
No Comments
Apostolic Prefect of Mountain Province vs. City Treasurer of Baguio City
GR 47252, 18 April 1941
En Banc, Imperial (J): 4 concur
Facts: The Apostolic Prefect is a corporation sole, of religious character, organized under the
Philippine laws, and with residence in Baguio, The City imposed a special assessment against
properties within its territorial jurisdiction, including those of the Apostolic Prefect, which
benefits from its drainage and sewerage system. The Apostolic Prefect contends that its
properties should be free of tax.
Issue: Whether the Apostolic Prefect, as a religious entity, is exempt from the payment of the
special assessment.
Held: In its broad meaning, tax includes both general taxes and special assessment. Yet actually,
there is a recognized distinction between them in that assessment is confined to local impositions
upon property for the payment of the cost of public improvements in its immediate vicinity and
levied with reference to special benefits to the property assessed. A special assessment is not,
strictly speaking, a tax; and neither the decree nor the Constitution exempt the Apostolic Prefect
from payment of said special assessment. Furthermore, arguendo that exemption may encompass
such assessmen, the Apostolic Prefect cannot claim exemption as it has not proven the property
in question is used exclusively for religious purposes; but that it appearsthat the same is being
used to other non-religious purposes. Thus, the Apostolic Prefect is required to pay the special
assessment.
Sat 13 Dec 2003
Digest: Cu Unjieng vs. Patstone (GR 16254, 21 February

1922)
No Comments
Cu Unjieng vs. Patstone
GR 16254, 21 February 1922
First Division, Ostrand (J): 4 concur, 1 took no part
Facts: G. A. Cu Unjieng desired to erect a warehouse in Azcarraga street was denied a building
permit until he shall have made provision for the construction of an arcade over the sidewalk in
front of the building, and until he shall have further complied with Section 1 of Ordinance 301 of
the City of Manila, i.e. payment of 1/2 of the assessed value of the city land. Cuunjieng filed a
petition for a writ of mandamus to compel the city engineer to issue the permit.
Issue: Whether the fee was validly imposed.
Held: The allowable amount of license fee or tax depends so much on the special circumstances
of each particular case. Adjudications, however, appear to recognize 3 classes of licenses (license
forregulation of useful occupations or enterprises; licenses for the regulation of non-useful
occupations or enterprises; and licenses for revenue only), which should be taken into
consideration in determining the reasonableness of the license fee. Herein, in imposing a fee
equal to 1/2 of the assessed value of the portion of the sidewalk covered by the arcade, the
municipal board exceeded its powers. The construction of buildings is a useful enterprise and
the amount of the license fee should therefore be limited to the cost of licensing, regulating, and
surveillance. As it does not appear such cost would materially increase through the construction
of the arcade, the excess fee is clearly imposed for the purpose of revenue. There is nothing in
the charter of the City indicating legislative intent to confer tot the municipal board to impose a
license tax for revenue on the construction of buildings. Although the city can require the
construction of arcades in certain circumstances, the license fee prescribed by Ordinance 301 is
illegal.
Sat 13 Dec 2003
Digest: Caltex Philippines vs. Commission on Audit (GR

92585, 8 May 1992)
No Comments
Caltex Philippines vs. Commission on Audit (COA)
GR 92585, 8 May 1992
En Banc, Davide (J): 12 concur, 2 took no part
Facts: In 1989, COA sent a letter to Caltex, directing it to remit its collection to the Oil Price
Stabilization Fund (OPSF), excluding that unremitted for 1986 and 188 of the additional tax on
petroleum products authorized under Section 8 of PD 1956; and that pending such remittance, all
its claims for reimbursement from the OPSF shall be held in abeyance. Caltex requested COA,
notwithstanding an early release of its reimbursement certificates from the OPSF, which COA
denied. On 31 May 1989, Caltex submitted a proposal to COA for the payment and the recovery
of claims. COA approved the proposal but prohibited Caltex from further offseting remittances
and reimbursements for the current and ensuing years. Caltex moved for reconsideration.
Issue: Whether the amounts due from Caltex to the OPSF may be offsetted against Caltex
outstanding claims from said funds.
Held: Taxation is no longer envisioned as a measure merely to raise revenue to support the
existence of government; taxes may be levied with a regulatory purpose to provide means for the
rehabilitation and stabilization of a threatened industry which is affected with public interest as
to be within the police power of the state. PD 1956, as amended by EO 137, explicitly provides
that the source of OPSF is taxation. A taxpayer may not offset taxes due from the claims that he
may have against the government. Taxes cannot be the subject of compensation because the
government and taxpayer are not mutually creditors and debtors of each other and a claim for
taxes is not such a debt, demand, contract or judgment as is allowed to be set-off.
Sat 13 Dec 2003
Digest: Panhandle Oil vs. State of Mississippi (277 US 218

[1928])
No Comments
Panhandle Oil vs. State of Mississippi
277 US 218 (1928), Butler (J)
Facts: The laws of Mississippi provided that any person engaged in the business of distributor
of gasoline, or retail dealer in gasoline, shall pay an excise tax for the privilege of engaging in
such business, except that sold in interstate commerce or puchased outside the state and brought
in by the consumer for his own use. Since 1925, Panhandle Oil Co. has been engaged in such
business. Subsequently, the State sued to recover taxes claimed on account of sales made by the
company to the United States for the use of its Coast Guard fleet in service in the Gulf of Mexico
and its Veterans Hospital at Gulfport. The company defended on the ground that Mississippi
statutes relevant to the case, if construed to impose taxes on such sales, are repugnant to the
federal constitution.
Issue: Whether Panhandle Oil Co. is liable for the excise tax imposed by the State of
Mississippi.
Held: The United States is empowered by the Constitution to maintain and operate the fleet and
the hospital. Authorization and laws enacted pursuant to the Constitution are supreme, and in
case of conflict, control state enactments. The States may not burden or interfere with the
exertion of national power, or make it a source of revenue or take the funds raised or tax the
means for for the performance of federal functions. While the State of Mississippi may impose
charges upon the company for the privilege of carrying trade that is subject to the power of the
State, it may not lay any tax upon transactions by which the United States secures the things
desired for its governmental purposes. The necessary operation of the statutes when so construed
is directly to retard, impede, and burden the exertion by the United States of its constitutional
powers to operate the fleet and the hospital. The exactions demanded infringe upon the right to
have the Constitutional independence of the United States, in respect to such purchases, remain
untrammeled.
Panhandle Oil Co. is, thus, not liable for the taxes claimed.
[ Note: It is not in the main body or decision, but in the dissenting opinion of Justice Holmes
that the following doctrine was enunciated:
(The Court), so often has defeated the attempt to tax in certain ways, can defeat an attempt to
discriminate or otherwise go too far without wholly abolishing the power to tax. The power to
tax is not the power to destroy while this Court sits. The power to fix rates is the power to
destroy if unlimited, but this Court while it endeavors to prevent confiscation does not prevent
the fixing of rates. A tax is not an unconstitutional regulation in every case where an absolute
prohibition of sales would be one. ]
Sat 13 Dec 2003
Digest: McCollough vs. Maryland (17 US 316 [1819])

No Comments
McCollough vs. Maryland

17 US 316 (1819), Marshall (CJ)
Facts: The United States Congress incorporated a bank, the Bank of the United States; and
established a branch in the State of Maryland. The State of Maryland, in turn, through its
legislature, imposed a tax upon the bank.
Issue: Whether the State of Maryland can tax a federal bank.
Held: The Government of the United States, though limited in its powers, is supreme. Its laws,
when made in pursuance of the Constitution, form the supreme law of the land, anything in the
Constitution or laws of any State, to the contrary, not withstanding. Among the enumerated
powers of the government are to lay and collect taxes; to regulate commerce; to declare and
conduct a war; and to raise and support armies and navies. Still, the power of taxation is retained
by the States. It is not abridged by the grant of a similar power to the Government of the Union.
It is to be concurrently exercised by the two governments. Consistently with a fair construction
of the Constitutions: the power to tax involves the power to destroy; the power to destroy may
defeat and render useless the power to create; and there is a plain repugnance in conferring on
one government a power to control the constitutional measures of another, which other, with
respect to those very measures, is declared to be supreme over that whcih exerts the control.
Taxation does not necessarily and unavoidably destroy. To carry it to the excess of destruction
would be an abuse, and would banish that confidence which is essential to all government.
Hence, the States have no power to retard, impede, burden, or in any manner control, the
operations of the constitutional laws enacted by Congress to carry into execution the powers
vested in the general government. The law passed by the legislature of Maryland, imposing a tax
on the Bank of the United States, is unconstitutional and void.
Fri 12 Dec 2003
Digest: Hodges vs. Iloilo City (GR L-18129, 31 January

1963)
No Comments
Hodges vs. Iloilo City
GR L-18129, 31 January 1963
En Banc, Bautista Angelo (J): 7 concur, 2 affirm, 1 took no part
Facts: In 1960, the Municipal Board of Iloilo enacted Ordinance 33 requiring the payment of a
sales tax of 1/2 of 1% of the selling price of any motor vehicle and prohibiting the registration of
the sale involving said vehicle in the Motors Vehicle Office of Iloilo unless the tas has been paid.
It also expressly required that the payment of the municipal tax shall be a requirement for
registration and transfer of ownership. CN Hodges, engaged in buying-and-selling of second

hand motor vehicles in the city, assailed the ordinance as invalid for being passed in excessof the
authority conferred by law upon the municipal board.
Issue: Whether the City of Iloilo is empowered to impose the tax.
Held: The City of Iloilo is empowered to impose municipal licenses, taxes or fees upon any
person engaged in any occupation or business, or exercising any privilege in the City; to regulate
and impose reasonable fees for services rendered conducted within the city, and to levy for
public purposes just and uniform taxes, licenses, or fees. The tax in question is in the form of
percentage tax on the proceeds of the sale of a motor vehicle. The prohibition against such tax
refer only to municipalities and municipal districts and does not comprehend chartered cities as
the City of Iloilo.
Fri 12 Dec 2003
Digest: Commissioner vs. Bishop of Missionary District of

the Philippine Islands (GR L-19445, 31 August 1965)
No Comments
Commisioner vs. Bishop of Missionary District of the Philippine Islands
GR L-19445, 31 August 1965
En Banc, Regala (J): 7 concur, 1 took no part
Facts: The Missionary District of the Philippine Islands, of the Protestant Episcopal Church in
the United States, owns and operates the St. Lukes Hospital in Quezon City, the Brent Hospital
in Zamboanga City, and the St. Stephens High School in Manila. In 1957 to 1959, the
Missionary District received various shipments of materials, supplies, equipment and other
articles intended for use in the construction and operation of the new St. Lukes Hospital. On
these shipments, the Commissioner collected compensation tax. The Missionary District filed
claims for refund, but which was denied by the Commissioner on the ground that St. Lukes
Hospital was not a charitable institution and therefore was not exempt from taxes.
Issue: Whether the shipments for St. Lukes Hospital are tax-exempt.
Held: Under RA 1916, which covers taxes on donations in any form and all articles imported
into the Philippines, requires that the imported articles ush have been donated, the donee must be
a duly incorporated or established international civic organization, religious or charitable society
or institution for civic, religious or charitable purposes; and the articles must have been donated
for the use of the organization, society or institution; or for free distribution and not for sale,
barter or hire. As the law does not distinguish or qualify the enjoyment or the exemption (as the
Secretary of Finance did in Departent Order 18, series of 1958), the admission of pay patients
does not detract from the charitable character of a hospital, if its funds are devoted exclusively to
the maintenance of the institution. Thus, the shipments are tax exempt.
Fri 12 Dec 2003
Digest: Allied Thread vs. City of Manila (GR L-40296, 21

November 1984)
No Comments
Allied Thread vs. City of Manila
GR L-40296, 21 November 1984
En Banc, Abad Santos (J): 10 concur, 2 took no part
Facts: Allied Thread Co. Inc. is engaged in the business of manufacturing sewing thread and
yarn. It operates its factory and maintains an office in Pasig, Rizal. In order to sell its products in
Manila and in other parts of the Philippines, it engaged the services of a sales broker, Ker & Co.
Ltd., the latter deriving commissions from every sale made for its principal. The City of Manila
enacted Ordinance 7516 imposing business taxes based on gross sales on a graduated basis on
manufacturers, importers or producers doing business in Manila. Allied Thread and Ker & Co.
alleged that said ordinance is invalid for being contrary to Section 54 of PD 426.
Issue: Whether Alleid Thread is properly taxed in Manila.
Held: Ordinance 7516, as amended, imposes a business tax on manufacturers, importers or
producers doing business in Manila. The tax imposition is upon the performance of an act,
enjoyment of a privilege, or the engaging in an occupation, and hence is in the nature of an
excise tax. The power to levy an excise upon the perforance of an act or the engaging in an
occupation does not depend upon the domicile of the person subject tot he excise, nor upon the
physical location of the property and in connection with the act or occupation taxed, but depends
upon the place in which the act is performed or occupation engaged in. Thus, since Allied Thread
sells its products in the City of Manila through its broker, Ker & Co., it cannot escapte the tax
liability imposed by Ordinance 7516, as amended.
Thu 11 Dec 2003
Digest: Reagan vs. Commissioner (GR L-26379, 27

December 1969)

No Comments
Reagan vs. Commissioner
GR L-26379, 27 December 1969
En Banc, Fernando (J):
7 concur, 1 concur in result, 1 took no part
Facts: William Reagan imported a tax-free 1960 Cadillac car with accessories valued at US $
6,443.83, including freight, insurance and other charges. After acquiring a permit to sell the car
from the base commander of Clark Air Base, Reagan sold the car to a certain Willie Johnson Jr.
of the US Marine Corps stationed in Sangley Point, Cavite for US$ 6,600. Johnson sold the
same, on the same day to Fred Meneses, a Filipino. As a result of the transaction, the
Commissioner rendered Reagan liable for income tax in the sum of P2,970. Reagan claimed that
he was exempt as the transaction occurred in Clark Air Base, a base outside the Philippines.
Issue: Whether Reagan was tax-exempt.
Held: The Philippines, as an independent and sovereign country, exercises its authority over its
entire domain. Any state may, however, by its consent, express or implied, submit to a restriction
of its sovereign rights. It may allow another power to participate in the exercise of jurisdictional
right over certain portions of its territory. By doing so, it by no means follows that such areas
become impressed with an alien character. The areas retain their status as native soil. Clark Air
Base is within Philippine territorial jurisdiction to tax, and thus, Reagan was liable for the
income tax arising from the sale of his automobile in Clark. The law does not look with favor on
tax exemptions and that he who would seek to be thus privileged must justify it by words too
plain to be mistaken and too categorical to be misinterpreted. Reagan has not done so, and cannot
do so.
Thu 11 Dec 2003
Digest: Sison vs. Ancheta (GR L-59431, 25 July 1984)

No Comments
Sison vs. Ancheta
GR L-59431, 25 July 1984
En Banc, Fernando (J): 9 concur, 2 concur in result, 1 concur in separate opinion, 1 took no part
Facts: Batas Pambansa 135 was enacted. Sison, as taxpayer, alleged that its provision (Section 1)
unduly discriminated against him by the imposition of higher rates upon his income as a
professional, that it amounts to class legislation, and that it transgresses against the equal
protection and due process clauses of the Constitution as well as the rule requiring uniformity in
taxation.
Issue: Whether BP 135 violates the due process and equal protection clauses, and the rule on
uniformity in taxation.
Held: There is a need for proof of such persuasive character as would lead to a conclusion that
there was a violation of the due process and equal protection clauses. Absent such showing, the
presumption of validity must prevail. 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. Where
the differentitation conforms to the practical dictates of justice and equity, similar to the
standards of equal protection, it is not discriminatory within the meaning of the clause and is
therefore uniform. Taxpayers may be classified into different categories, such as recipients of
compensation income as against professionals. Recipients of compensation income are not
entitled to make deductions for income tax purposes as there is no practically no overhead
expense, while professionals and businessmen have no uniform costs or expenses necessaryh to
produce their income. There is ample justification to adopt the gross system of income taxation
to compensation income, while continuing the system of net income taxation as regards
professional and business income.
Thu 11 Dec 2003
Digest: Association of Custom Brokers vs. Manila (GR L4376, 22 May 1953)
No Comments
Association of Custom Brokers vs. Manila
GR L-4376, 22 May 1953
En Banc, Bautista-Angelo (J): 3 concur, 4 concur in result
Facts: The Association of Customs Brokers, which is composed of all brokers and public service
operators of motor vehicles in the City of Manila, challenges the validity of Ordinance 3379 on
the grounds (1) that while it levies a so-called property tax, it is in reality a license tax which is
beyond the power of the Manila Municipal Board; (2) that said ordinance offends against the rule
on uniformity of taxes; and (3) that it constitutes double taxation.
Issue: Whether the ordinance infringes on the rule on uniformity of taxes as ordained by the
Constitution.
Held: While the tax in the Ordinance refers to property tax and it is fixed ad valorem, it is
merely levied on all motor vehicles operating within Manila with the main purpose of raising
funds to be expended exclusively for the repair, maintenance and improvement of the streets and
bridges in said city. The ordinance imposes a license fee although under the cloak of an ad
valorem tax to circumvent the prohibition in the Motor Vehicle Law. Further, it does not
distinguish between a motor vehicle for hire and one which is purely for private use. Neither
does it distinguish between a motor vehicle registered in Manila and one registered in another
place but occasionally comes to Manila and uses its streets and public highways. The distinction
is necessary if he ordinance intends to burden with tax only those registered in Manila as may be
inferred from the word operating used therein. There is an inequality in the ordinance which
renders it offensive to the Constitution.
Wed 10 Dec 2003
Digest: ABS-CBN Broadcating vs. Court of Tax Appeals (GR

L-52306, 12 October 1981)
No Comments
ABS-CBN Broadcating vs. Court of Tax Appeals
GR L-52306, 12 October 1981
First Division, Melencio Herrrera (J): 4 concur
Facts: In implementing Section 4(b) of the Tax Code, the Commissioner issued General Circular
V-334. Pursuant thereto, ABS-CBN Broadcasting Corp. dutifully withheld and turned over to
the BIR 30% of of the film rentals paid by it to foreign corporations not engaged in trade or
business in the Philippines. The last year that the company withheld taxes pursuant to the
Circular was in 1968. On 27 June 1908, RA 5431 amended Section 24 (b) of the Tax Code
increasing the tax rate from 30% to 35% and revising the tax basis from such amount referring
to rents, etc. to gross income. In 1971, the Commissioner issued a letter of assessment and
demand for deficiency withholding income tax for years 1965 to 1968. The company requested
for reconsideration; where the Commissioner did not act upon.
Issue: Whether Revenue Memorandum Circular 4-71, revoking General Circular V-334, may be
retroactively applied.
Held: Rulings or circulars promulgated by the Commissioner have no retroactive application
where to so apply them would be prejudicial to taxpayers. Herein ,the prejudice the company of
the retroactive application of Memorandum Circular 4-71 is beyond question. The company was
no longer in a position to withhold taxes due from foreign corporations because it had already
remitted all film rentals and had no longer control over them when the new circular was issued.
Insofar as the enumerated exceptions are concerned, the company does not fall under any of
them.
Wed 10 Dec 2003
Digest: Commissioner vs. Court of Tax Appeals (GR 108358,

20 January 1995)
No Comments
Commissioner vs. Court of Tax Appeals
GR 108358, 20 January 1995
Third Division, Vitug (J): 4 concur
Facts: On 22 August 1986, Executive Order 41 was promulgated declaring a one-time tax
amnesty on unpaid income taxes, later amended to include estate and donors taxes and taxes on
business for the taxable years 1981 to 19985. Availing itself of the amnesty, ROH Autoparts
Philippines Inc. filed its Tax Amnesty Return and paid the corresponding amnesty taxes due.
The Company requested that the deficiency tax notice (13 August 1986) be cancelled and
withdrawn as it has availed of the tax amnesty. The Commissioner denied the request,
construing that the amnesty coverage include only assessments issued by the BIR after the
promulgation of EO41 and not to assessments theretofore made.
Issue: Whether the assessment can withstand effects of tax amnesty.
Held: A tax amnesty, being a general pardon or intentional overlooking by the state its authority
to impose penalties on persons otherwise guilty of evasion or violation of a revenue or tax law,
partakes of an absolute forgiveness or waiver by the government itself of its right to collect what
otherwise would be due it, and in this sense, prejudicial thereto, to give tax evaders, who wish to
relent and are willing to reform a chance to for so and thereby become a part of the new society
with a clean slate. Section 4 of EO 41 enumerated, in no uncertain terms, taxpayers who may
not avail to the amnesty granted. The company does not fall under any of the exceptions. The
added exception urged by the Commissioner based on Revenue Memorandum Order 4-87,
further restricting the scope of the amnesty, work against the raison detre of EO 41 and clearly
amounts to an alt of administrative legislation contrary to the mandate of the law which the
regulation ought to implement. The rule in the order that only assessments issued after 21
August 1986 shall be abated is beyond the contemplation of the law.
Wed 10 Dec 2003
Digest: Commissioner vs. Mega General Merchandise (GR

L-69136, 30 September 1988)
No Comments
Commissioner vs. Mega General Merchandise
Facts: Prior to the promulgation of PD 392, all importations of paraffin wax, irrespective of kind
and nature, were subject to 7% advance sales tax on landed costs plus 25% markup (Section
183[b] in relation to Section 186 of the Tax Code. With the promulgation of PD 392, effective
18 February 1974, all importation of paraffin wax were subject to the specific tax imposed under
Section 142 (i) of the Tax Code, instead of the former 7% sales tax. When the issue whether
imported crude paraffin wax was subject to the specific tax was brought to the BIR for
clarification, then Commissioner Vera ruled that only wax used as high pressure lubricant and
micro-crystalline is subject to specific tax, while the rest are subject to the sales tax. Thus, Mega
General Merchandise filed claims for tax refund or tax credit. Acting Commissioner Plana
denied the claims in 28 January 1977. On 11 January 1978, however, Plana granted the
corporations claim for refund or credit pertaining to the importation made 18 April 1975. The
Corporation protested the tax assessment of 8 May 1978, which was denied by the
Commissioner.
Issue: Whether the 11 January 1978 grant (letter) revoked the ruling dated 28 January 1977.
Held: The letter dated 11 January 1978 did not in any way revoke the ruling dated 28 January
1977, which ruling applied the specific tax to was without distinction. The reason Plana
removed in 1978 the companys liability for specific tax was because he wanted to revoke his
ruling of 28 January 1977 but because the tax referred to an importation made before 28 January
1977 (i.e. 18 April 1975), which was still covered by the ruling of Commissioner Vera (ruling of
14 May 1975).
Wed 10 Dec 2003
Digest: Bagatsing vs. Ramirez (GR L-41631, 17 December

1976)
No Comments
Bagatsing vs. Ramirez

GR L-41631, 17 December 1976
En Banc, Martin (J): 7 concur, 1 concur with qualification, 1 reserved vote
Facts: In 1974, the Municipal Board of Manila enacted Ordinance 7522, regulating the operation
of public markets and prescribing fees for the rentals of stalls and providing penalties for
violation thereof. The Federation of Manila Market Vendors Inc. assailed the validity of the
ordinance, alleging among others the non-compliance to the publication requirement under the
Revised Charter of the City of Manila.
Issue: Whether the publication requirement was complied with.
Held: The Revised Charter of the City of Manila is a special act since it relates only to the City
of Manila, whereas the Local Tax Code id a general law because it applies universally to all local
governments. Section 17 of the Charter speaks of ordinance in general. Whereas, Section 43
of the Local Tax Code relates to ordinances levying or imposing taxes, fees or other charges in
particular. While the Charter requires publication, before the enactment of the ordinance and
after approval thereof, in two daily newspapers of the general circulation in the city, the Local
Tax Code only prescribes for publication widely circulated within the jurisdiction of the local
government or by posting the ordinance in the local legislative hall or premises and in two other
conspicuous places within the territorial jurisdiction of the local government. Being a general
law with a special provision applicable in the case, the Local Tax Code prevails.
Wed 10 Dec 2003
Digest: Commissioner vs. Cebu Portland Cement (GR L29059, 15 December 1987)
No Comments
Commissioner vs. Cebu Portland Cement
GR L-29059, 15 December 1987
First Division, Cruz (J): 4 concur
Facts: By virtue of a decision of the Court of Tax Appeals, modified by the Supreme Court, the
Commissioner was ordered to refund overpayments of ad valorem taxes on cement produced and
sold by the company after October 1957. The company moved for a writ of execution, which
was opposed by the Commissioner on the ground that the company had an outstanding sales tax
liability to which the judgment debt had already been credited. The Court of Tax Appeals held
that the alleged sales tax liability was still being questioned and therefore cannot be set-off
against the refund.
Issue: Whether the assessment of sales tax liability may be enforced, i.e. to set off against the
refund.
Held: The argument, that the assessment cannot as yet be enforced because it is still being
contested, loss sight of the urgency of the need to collect taxes as the life blood of the
government. If the payment of taxes could be postponed by simply questioning their validity,
the machinery of the state would grind to a halt and all government functions would be
paralyzed. To require the Commissioner to actually refund to the company the amount of the
judgment debt. Which he will later have the right to distrait for payment of its sales tax liability,
is an idle ritual.
Wed 10 Dec 2003
Digest: Commissioner vs. Firemans Fund Insurance (GR L30644, 9 March 1987)
No Comments
Commissioner vs. Firemans Fund Insurance
GR L-30644, 9 March 1987
Second Division, Paras (J): 5 concur, 1 on leave
Facts: Firemans Funds Insurance is a resident foreign insurance corporation organized under the
laws of the United States, authorized and duly licensed to do business in the Philippines. From
1952-1958, the company entered into various insurance contracts involving causality, fire and
marine risks, for which the corresponding insurance policies were issued. From 1952-1956,
documentary stamps were bought and affixed to the corresponding pages of the policy register,
instead of on the insurance policies issued. The Commissioner assessed and demanded from the
company the payment of documentary stamps for the years 1952-1958, plus compromise
penalties.
Issue: Whether the affixture of documentary stamp on pages other than those authorized by law
is tantamount to failure to pay the same.
Held: Although the documentary stamps were affixed to papers other than those authorized by
law, it is not tantamount to failure to pay the same as the company purchased and paid the
documentary stamps corresponding to the various insurance policies. Sections 210, 232, 221,
237 and 239 of the Tax Code have the overriding purpose to collect taxes, and the steps
involving documentary taxes (purchase, affixture, and cancellation) are but a means to that end.
Although the insurance policies with the corresponding documentary stamps affixed are the best
evidence to prove payment of said documentary stamp tax, it does not preclude the admissibility
of other proofs which are uncontradicted and considerable weight. Still, whenever the
interpretation of statute levying taxes or duties are in doubt, such statutes are to be construed
most strongly against the government and in favor of the subjects or citizens, because burdens
are not to be imposed, nor presumed to be imposed beyond what statutes expressly and clearly
import. There is no justification for the government which has already realized the revenue,
which is the object of the imposition of the subject stamp tax, to require payment of the same tax
for the same documents.
Wed 10 Dec 2003
Digest: Commissioner vs. Connel Bros. Co. (GR L-27752-53,

30 August 1971)
No Comments
Commissioner vs. Connel Bros. Co.
GR L-27752-53, 30 August 1971; En Banc, Reyes, Jr.(J).: 10 concur
Facts: The Commissioner disallowed the deductions for bad debts, depreciation, and excess in
valuation of leasehold improvements by Connel Bros. Co. in its income tax return for taxable
year 1954 and 1955. The Commissioner thus assessed against the company deficiency taxes or
assessments for said years. The Court of Tax Appeals modified the assessment by including the
corresponding interest and surcharges pursuant to Section 51 of the Tax Code.
Issue: Whether the interest and surcharges on delinquents tax payments are chargeable.
Held: Delinquency indicates non-payment of the correct and collectible tax, and such state of
delinquency exists not from the assessment of the deficiency but from the very time the taxpayer
failed to pay the correct amount due from him. Herein, the delinquency taxes became due and
the assessment therefore were made before the amendment of Section 51 on 2 June 1959; and
thus, the companys liability should be determined pursuant to the old Section (e) of the Tax
code. Under the old Section, a delinquent tax payer would have to pay, in addition to the unpaid
tax, a 5% surcharge thereon computed from the time the tax became due, plus interest on the
whole unpaid amount at the rate of 1% a month. Under RA 2343, the delinquent taxpayer shall
pay at the rate of 6% per annum computed from the date prescribed for payment of the income
tax up to the assessment of the delinquency tax, but which shall not exceed the amount
corresponding to a period of 3 years. Section 13 of the amendatory act shoes that there is no
intent to make RA 2343 retroactive.
Wed 10 Dec 2003
Digest: # Commissioner vs. Phoenix Assurance (GR L-19727,

20 May 1965)
No Comments
Commissioner vs. Phoenix Assurance
GR L-19727, 20 May 1965
Facts: Phoenix assurance is a foreign insurance corporation organized under the laws of Great
Britain, licensed to do business in the Philippines. Through its head office in London, it entered
into worldwide reinsurance treaties with various foreign insurance companies. It agreed to cede
a portion of premiums received on original insurances underwritten by its head office,
subsidiaries, and branch offices around the world, in consideration for assumption by the foreign
insurance companies of n equivalent portion of the liability form such original insurances.
Pursuant to such treaties, the company ceded portions of its premiums it earned from its
underwriting business in the Philippines, upon which assessed withholding tax. The company
thereafter amended its tax returns (1950-1954) excluding reinsurance premium and items of
deduction attributable to such premium. The Commissioner assessed deficiency income tax
against the company.
Issue: Whether the Commissioner is justified in the assessment of deficiency tax.
Held: The changes and alteration embodied in the amended tax return consisted of the exclusion
of reinsurance premium received from domestic insurance companies by the companys head
office, reinsurance premium ceded to foreign insurers not doing business in the Philippines and
various items of deductions attributable to such excluded reinsurance premiums, thereby
substantially modifying the original return. As amended return is substantially different from the
original return, the period of limitation of the right to issue the same should be counted from the
filing of the amended income tax return. The right of the Commissioner to assess the deficiency
tax on the amended return has not prescribed. To hold otherwise would pave the way for
taxpayer to evade the payment of taxes simply reporting in their original return heavy losses and
amending the same more than 5 years later when the Commissioner has lost his authority to
assess the proper tax there under. The object of the tax code is to impose taxes for the needs of
the government, not to enhance tax avoidance to its prejudice.
Wed 10 Dec 2003
Digest: Misamis Oriental vs. Cagayan Electric (GR 45355,

12 January 1990)

No Comments
Misamis Oriental vs. Cagayan Electric
GR 45355, 12 January 1990
First Division, Grino Aquino (J): 4 concur
Facts: Cagayan Electric Power and light Co, Inc. (CEPALCO) was granted a franchise in 1961
under RA 3247 to install, operate and maintain an electric light, heat and power system in
Cagayan de Oro and its suburbs. In 1973, the Local Tax Code (PD 231) was promulgated, where
Section 9 thereof providing for a franchise tax. Pursuant thereto, the province of Misamis
Oriental enacted Provincial Revenue Ordinance 19, whose Section 12 also provides for a
franchise tax. The Provincial Treasurer demanded payment of the provincial franchise tax from
CEPALCO. CEPALCO paid under protest.
Issue: Whether CEPALCO is exempt from the provincial franchise tax.
Held: Local Tax Regulation 3-75 issued by the Secretary of Finance in 1976 made it clear that
the franchise tax provided in the Local Tax Code may only be imposed on companies with
franchise that do not contain the exempting clause, i.e. in-lieu-of-all-taxes-proviso.
CEPALCOs franchise i.e. RA 3247, 3571 and 6020 (Section 3 thereof), uniformly provides that
in consideration of the franchise and rights hereby granted, the grantee shall pay a franchise tax
equal to 3% of the gross earnings for electric current sold under the franchise, of which 2% goes
to the national Treasury and 1% goes into the treasury of the municipalities of Tagoloan, Opol,
Villanueva, Jasaan, and Cagayan de Oro, as the case may be: Provided, that the said franchise tax
of 3% of the gross earnings shall be in lieu of all taxes and assessments of whatever authority
upon privileges, earnings, income, franchise and poles, wires, transformers, and insulators of the
grantee from which taxes and assessments the grantee is hereby expressly exempted.
Wed 10 Dec 2003
Digest: Wonder Mechanical Engineering vs. Court of Tax

Appeals (GR L-22805 and L-27858, 30 June 1975)
No Comments
Wonder Mechanical Engineering vs. Court of Tax Appeals
GR L-22805 and L-27858, 30 June 1975
First Division, Esguerra (J): 4 concur
Facts: Wonder Mechanical Engineering Corp. was granted tax exemption privilege under RA 35
in respect to the manufacture of machines for making cigarette papers, pails, washers, rivets,
nails, candies, chairs, etc. The tax exemption expired on 30 May 1951. In 1953, the company
applied with the secretary of Finance for the reinstatement of the exemption privilege under the
provisions of RA 901, the reinstatement to commence on the date RA 901 took effect. The
company was given a Certificate of Tax Exemption on 7 July 1954, exemption it similarly as in
RA 35 until 31 December 1958, with diminishing exemption until 20 June 1955. The
Commissioner assessed sales tax on gross sales of articles manufactured by it, including steel
chairs. The company appealed to the Court of Tax Appeals.
Issue: Whether the company is exempted from the tax imposed on the manufacture and sale of
articles, such as steel chairs.
Held: The company was granted tax exemption in the manufacture and sale of machines for
making cigarette paper, pails, etc. but not for the manufacture and sale of articles produced by
those machines. The manufacture of steel chairs, jeep parts, and other articles not constituting
machines for making certain products would not fall under the classification of new and
necessary industries envisioned in RA 35 and 901 as to entitle the company to tax exemption.
Exemptions are highly disfavored in law and he who claims tax exemption must be able to
justify his claim or right thereto by the clearest grant of organic or statute law. Tax exemption
must be clearly expressed and cannot be established by implication.
Wed 10 Dec 2003
Digest: Surigao Consolidated Mining vs. Collector (GR L14878, 26 December 1963)
No Comments
Surigao Consolidated Mining vs. Collector
GR L-14878, 26 December 1963
En Banc, Ragala (J): 10 concur
Facts: Before the outbreak of the War, the Surigao Consolidated Mining Co. was operating its
mining concessions in Mainit, Surigao. Due to the interruption of communications at the
outbreak of the war, the company lost contact with its mines and never received the production
reports for the 4th quarter of 1941. To avoid incurring any tax liability or penalty, it deposited of
check payable to and indorsed in favor of the City Treasurer, in payment of ad valorem taxes for
the said period. After the war, the company filed its ad valorem tax for the said period pursuant
to Commonwealth Act 772. Its return was revised, until eventually the company claimed a refund
of P17,158.01. The collector of Internal Revenue denied the request for refund.
Issue: Whether Surigao Consolidated may recover its tax payment in light of the condonation
made under a subsequent law, RA 81.
Held: RA 81, Section 1(d) provided that all unpaid royalties, ad valorem or specific taxes on all
minerals mined from mining claims or concessions existing an din force on 1 January 1942, and
which minerals were lost by reason of war, of circumstance arising therefrom are condoned
The provision refers to the condonation of unpaid taxes only. The condonation of a tax liability is
equivalent and is in the nature of tax exemption. Being so, it should be sustained only when
expressed in explicit terms, and it cannot be extended beyond the plain meaning of those terms.
He who claims an exemption from his share of the common burden of taxation must justify his
claim by showing t hat the Legislature intended to exempt him. The company failed to show any
portion of the law that explicitly provided for a refund of those taxpayers who had paid their
taxes on the items.
Wed 10 Dec 2003
Digest: Davao Light and Power vs. Commissioner of

Customs (GR L-28739 and L-28902, 29 March 1972)
No Comments
Davao Light and Power vs. Commissioner of Customs
GR L-28739 and L-28902
First Division, Reyes JBL (J): 9 concur
Facts: Davao Light is a grantee of a legislative franchise to install, operate and maintain an
electric light, heat and power plant in the city of Davao, for 50 years. On two occasions, it
imported electrical supplies, materials and equipment for installation in its power plant. The
importations arrived in the port of Cebu City, where the Collector imposed custom duties and
taxes amounting to P9,928. Davao Light paid under protest, claiming it is similarly tax-exempted
as the National Power Corporation, which is allegedly posing as competition to Davao Light in
its business.
Issue: Whether Davao Light is similarly tax-exempt as Napocor.
Held: Davao Lights purpose in securing a franchise to establish and operate an electric plant
and power stations was to engage in a business or profit-making venture, while Napocor was
specifically created to undertake the development of hydraulic power nationwide and the
production of power from other sources, for use of the government and the general public. In
isolated sale of electric power to one government-owned plant (National Development Co., in
Davao) would not be enough to classify the Napocor as a competing concern to Davao Lights
enterprise. Napocors tax exemption (RA 358) was granted in order to facilitate the liquidation
by said corporation of its liabilities, and the consequential release by the government itself from
its obligation in the transactions entered into by the President on behalf of Napocor. Davao Light
is not entitled to the same exemption privileges enjoyed by another operator without an express
provision of the law to that effect. Exemption from taxation is never presumed. For tax
exemption to be recognized, the grant must be clear and express. It cannot be made to rest on
vague implications.
Wed 10 Dec 2003
Digest: Commissioner vs. Robertson (GR L-70116-19, 12

August 1986)
No Comments
Commissioner vs. Robertson
GR L-70116-19, 12 August 1986
Second Division, Paras (J): 4 concur
Facts: Frank and James Robertson, Robert Cathey, and John Garrison are citizens of the United
States, holders of American passports, and admitted as Special Termporary Visitors under
Section 9 (a) visa of the Philippine Immigration Act of 1940, and are civilian employees in a US
Military Base in the Philippines in connection with its construction, maintenance, operation and
defense (The Roberstons and Garrison were born in the Philippines). Their incomes are solely
derived from salaries from the US Government by reason of their employment in the US Bases
in the Philippines. The Commissioner of Internal Revenue assessed deficiency income tax
against them from taxable years 1969 to 1972.
Issue: Whether Robertson, et. al., are exempted from tax.
Held: In order to avail oneself of the tax exemption under the RP-US Military Bases Agreement
(Article XIII, Paragraph a), one must be a national of the United States employed in connection
with the construction, maintenance, operation or defense, of the bases, residing in the Philippines
by reason of such employment, and the income derived is from the US Government. Said
circumstances are all present in the present case. The basic intendment is to exempt all US
citizens working in the military bases from the burden of paying Philippine Income Tax without
distinction as to those born locally or born in their country of origin. Where the law does not
distinguish, one must not distinguish. Ubi lex non ditinguit nec nos tinguere debemos.
Wed 10 Dec 2003
Digest: # Commissioner vs. Manila Jockey Club (GR L-8755,

23 March 1956)

No Comments
Commissioner vs. Manila Jockey Club
GR L-8755, 23 March 1956
First Division, Bautista Angelo (J): 9 concur
Facts: The Manila Jockey Club is the owner of the San Lazaro Hippodrome, which is used for
holding horse races either by the club itself or by the Philippine Charity Sweepstakes Office
(PCSO) or other charitable institutions authorized by law to hold horse races. On 1951 and 1952,
the PCSO held benefit races for charitable, relief and civic purposes in which the Club was paid
in the form of rentals, which was included in its declared income taxes in its return for said years.
The Club claimed for refund of the sum collected by the Commissioner as to the rentals,
contending that it is exempt under Section 3 of RA 79.
Issue: Whether the Club is exempt from income derived from the PCSO races.
Held: The exemption does not refer to any income tax that may be imposed on the rentals that
may be paid for the use of racing tracks and other paraphernalia. The income earned by the Club
herein did not come from the horse races held by said club but it came to it as rentals paid for the
use of its property. The tax paid for such income cannot be considered as one connected with
those races within the purview of the exemption clause in RA 79. By its very nature, the law that
exempts one from tax must be clearly expressed because the exemption must be able to justify
his claim by the clearest grant of organic or statute law.
Wed 10 Dec 2003
Digest: Commissioner vs. Lednicky (GR L-18169, L-18286,

L-21434; 31 July 1964)
No Comments
Commissioner vs. Lednicky
GR L-18169, L-18286, L-21434; 31 July 1964
En Banc, Reyes JBL (J): 8 concur
Facts: Spouses VE and Maria Valero Lednicky are American citizens residing in the Philippines,
and have derived all their income from Philippine sources since 1947. In 1955, the spouses filed
with the US Internal Revenue agent in Manila their Federal income tax return for 1947, 1951 to
1954 on income from Philippine sources. From 1956 to 1958, they filed their domesic income
tax returns in compliance with local laws. They amended their tax returns in 1959 to include their
taxes paid to the US Federal Government, interests, and exchange and bank charges. They filed
their claims for refund.
Issue: Whether income tax paid to foreign governments can be deducted from the gross income
or as a tax credit.
Held: The laws intent is that the right to deduct income taxes paid to foreign government from
the taxpayers gross income is given only as an alternative or substitute to his right to claim a tax
credit for sich foreign income taxes; so that unless the alien resident has a right to claim such tax
credit if he so chooses, he is precluded from deducting the foreign income taxes from his gross
income. The prupose of the law is to prevent the taxpayer from claiming twice the benefits of his
payment of foreign taxes, by deduction from gross income and by tax credit. To allow an alien
resident to deduct from his gross income whatever taxes he pays to his own government amounts
to confer on the latter power to reduce the tax income of the Philippine Government. Such result
is incompatible with the status of the Philippines as an independent and sovereign state. Any
relief from the alleged double taxation should come from the United States, since its right to
burden the taxpayer is solely predicated on the taxpayers citizenship, without contributing to the
production of the wealth that is being taxed.
Wed 10 Dec 2003
Digest: Commissioner vs. Lingayen Gulf Electric (GR L23771, 4 August 1988)
No Comments
Commissioner vs. Lingayen Gulf Electric
GR L-23771, 4 August 1988
En Banc, Sarmiento (J): 13 concur
Facts: Lingayen Gulf Electric Power operates an electric power plant serving the municipalities
of Lingayen and Binmaley, Pangaisnan, pursuant to municipal franchise granted it by the
respective municipal councils. The franchises provided that the grantee shall pay quarterly to the
Provincial Treasury of Pangasinan 1% of the gross earnings obtained through the privilege for
the first 20 years (from 1946), and 2% during the remaining 15 years of the life of the franchise.
In 1948, the Philippine President approved the franchise (RA 3843). In 1955, the BIR assessed
and demanded against the company deficiency franchise taxes and surcharges fro the years 1946
to 1954 applying the franchise tax rate of 5% on gross receipts from 1948 to 1954. The company
asked for a reinvestigation, which was denied.
Issue [1]: Whether the Court can inquire into the wisdom of the Act.
Held [1]: The Court does not have the authority to inquire into the wisdom of the Act. Charters
or special laws granted and enacted by the Legislatur are in the nature of private contracts. They
do not contitute a part of the machinery of the general government. They are usually adopted
after careful consideration of the private rights in relation with the resultant benefits of the State.
In passing a special charter, the attention of the Legislature is directed to the facts and
circumstances which the act or charter is intended to meet. The Legislature considers and makes
provision for all the circumstance of the particular case. The Court ought not to disturb the ruling
of the Court of Tax Appeals on the constitutionality of the law in question.
Issue [2]: Whether a rate below 5% on gross income violate the uniformity of tax clause in the
Constitution.
Held [2]: A tax is uniform when it operates with the same force and effect in every place where
the subject of it is found. Uniformity means that all property belonging to the same class shall be
taxed alike. The legislature has the inherent power not only to select the subjects of taxation but
to grant exemptions. Tax exemptions have never been deemed violateve of the equal protection
clause. Herein, the 5% franchise tax rate provided in Section 259 of the Tax Code was never
intended to have a universal application. Section 259 expressly allows the payment of taxes at
rates lower than 5% when the charter granting the franchise precludes the imposition of a higher
tax. RA 3843 did not only fix and specify a franchise tax of 2% on its gross receipts, but made it
in lieu of any and all taxes, all laws to the contrary notwithstanding.
The company, hence, is not liable for deficiency taxes.
Tue 9 Dec 2003
Digest: Commissioner vs. Burroughs Ltd. (GR L-6653, 19

June 1986)
No Comments
Commissioner vs. Burroughs Ltd.
GR L-6653, 19 June 1986
Facts: Burroughs Ltd is a foreign corporation authorized to engage in business in the
Philippines. Its branch office in Makati applied with the Central Bank for authority to remit to
its parent company abroad, branch profits. It paid 15% branch profit remittance tax. The branch,
however, later claimed for a refund or credit contending that the branch profit remittance tax
pursuant to a BIR ruling of 21 January 1980. The Court of Tax Appeals granted the companys
petition. The Commissioner filed a petition for certiorari, claiming Memorandum Circular 8-82
(17 March 1982) should apply.
Issue: Whether the Memorandum Circular 8-82 should be retroactively applied.

Held: Revenue Ruling of 21 January 1980 remains to apply in the case as the company paid the
tax on 14 March 1979. Memorandum Circular 8-82 cannot be given retroactive effect in the
light of Section 327 (non-retroactively of rulings) of the tax code. The retroactive application of
the Circular would deprive the company the substantial amount of P172,058.90. The misstates
or omits material facts from his return or I any document required of him by the BIR, or where
the facts subsequently gathered by the BIR are materially different from the facts on which the
ruling is based, or where the taxpayer acted in bad faith to allow the retroactive application of the
circular.
Tue 9 Dec 2003
Digest: Republic vs. Vda. de Fernandez (GR L-9141, 25

September 1956)
No Comments
Republic vs. Vda. de Fernandez
En Banc, Labrador (J): 7 concur
Facts: Olimpio Fernandez and his wife Angelina Oasan had a net worth of P8, 000 on 8
December 1941. During the Japanese occupation, the spouses acquired several real properties.
At the time of the husbands death in 1945, he had a net worth of P31,489. The Collector of
Internal Revenue assessed a war profits tax (RA 55) on the estate of the deceased at P7, 614.00,
which was administrative refused to pay. The validity of RA 55 was questioned, as well as the
validity and the legality of the assessment.
Issue: Whether the War Profits tax Law may be retroactively applied without violating the
Constitution (especially the provision on ex-post facto laws).
Held: The prohibition against the ex facto laws applies only to criminal or penal matters, and
not to laws which concern civil matters or proceedings generally, or which affect or regulate civil
or private right. Ex post facto is confined to laws respecting criminal punishments, and had no
relation whatever to retrospective legislation of any other description. Retrospective laws, when
not of a criminal nature, do not come in conflict with the Constitution, unless obnoxious to its
provisions on other grounds than their respective character. The law may not be considered
harsh and oppressive because of the force of its impact fell on those who had amassed wealth or
increased their wealth during the war, but did not touch the less fortunate. The policy followed is
the same as that which underlies the Income Tax Law, imposing the burden upon those who have
and relieving those who have not.
Tue 9 Dec 2003
Digest: Hilado vs. Collector (GR L-9408, 31 October 1956)

No Comments
Hilado vs. Collector
GR L-9408, 31 October 1956
En Banc, Bautista Angelo (J): 8 concur
Facts: Emilio Hilado filed his income tax return for 1951 with the treasurer of Bacolod City,
claiming a deductible item of P12,837.65 from his gross income pursuant to General Circular V123 issued by the Collector of Internal Revenue. The Secretary of Finance, through the
Collector, issued General Circular V-139 which revoked and declared void Circular V-123; and
laid down the rule[s] that losses of property which occurred in World War II from fires, storms,
shipwreck or other casualty, or from robbery, theft, or embezzlement are deductible in the year of
actual loss or destruction of said property. The deductions were disallowed.
Issue: Whether Internal Revenue Laws were enforced during the war and whether Hilado can
claim compensation for destruction of his property during the war.
Held: Philippines Internal Revenue Laws are not political in nature and as such were continued
in force during the period of enemy occupation and in effect were actually enforced by the
occupation government. Such tax laws are deemed to be laws of the occupied territory and not
of the occupying enemy. As of the end of 1945, there was no law which Hilado could claim for
the destruction of his properties during the battle for the liberation of the Philippines. Under the
Philippine Rehabilitation Act of 1948, the payment of claims by the War Damage Commission
depended upon its discretions non-payment of which does not give rise to any enforceable right.
Assuming that the loss (deductible item) represents a portion of the 75% of his war damage
claim, the amount would be at most a proper deduction of his 1950 gross income (not on his
1951 gross income) as the last installment and notice of discontinuation of payment by the War
Damage Commission was made in 1950.
Tue 9 Dec 2003
Digest: Lealda Electric vs. Commissioner (GR L-16428, 30

April 1963)
No Comments
Lealda Electric vs. Commissioner

GR L-16428, 30 April 1963
Facts: In 1915, Julian Locsin Anson was granted a franchise to operate an electric light and
power plant in Legaspi and Daraga, in Albay province. He sold the franchise, the certificate of
public convenience, and electric plant to Saturnino Benito; who in turn sold the same to Lealda
Electric (a partnership formed by the Benitos and other parties in 1951). Since 1915, the original
grantee and its successors-in-interest paid a franchise tax of 2% on the gross earnings or receipts
from the business under the franchise, until 1946 when RA 39 amended Section 259 of the Tax
Code, increasingly the franchise tax to 5%. Lealda Electric maintains it is only liable to 2%
franchise tax, and not 5%.
Issue: Whether Lealda Electric is exempted from the tax increase in light of its franchise.
Held: Lealda Electrics franchise does not specifically state that the rate of the franchise tax to
be paid shall be 2% of its gross earnings or receipts. The intent of the legislature was to impose
upon the grantee (and its successors), the obligation to pay the same franchise tax imposed upon
other grantee or franchise holders at the time its franchise (Act2475) was enacted. Lealdas
charter contains an express provision to the effect that the same may be altered or repealed by
Congress, and does not contain any provision providing that the franchise tax were required to
pay was to be in lieu of all taxes of any kind levied, established, or collected by any authority
whatsoever, now or in the future or in lieu of all taxes of every name and naturemunicipal,
provincial or central,,, Tax exemptions are not to be presumed.
Tue 9 Dec 2003
Digest: Visayas Cebu Terminal vs. Commissioner (GR L19530 and L-19444, 27 February 1965)
No Comments
Visayas Cebu Terminal vs. Commissioner
GR L-19530 and L-19444, 27 February 1965
Facts: Visayan CebuTerminal Co. was appointed the sole manager of the Irrastre Service at the
Port of Cebu, after a public bidding in 1957, covering import cargoes, including transit import
cargoes. In 1958, the Bureau of Internal Revenue (Manila) demanded the payment of percentage
taxes and penalties due to the Government. Subsequently, however, BIR examiners stated that
the company was not subjected of the 3% percentage tax, it has been paying 28% of the gross
receipts to the Bureau of Customs.
Issue: Whether Visayas Cebu Terminal Co. In c. is exempted from the percentage tax.
Held: The company is an arrastre contractor and is covered by Section 191 of the Tax Code.
Section 191 of the Tax Code does not establish any distinction between an arrastre operator who
handles only imported cargo in its arrastre operations , pursuant to RA 140, and those handling
interisland cargo, so as to exempt the company from the percentage tax. It is a well settled rule
that he who claim s exemption should prove by convincing proofs that he is exempted. The
company failed to present such proofs. Further, the recommendation of the examiners are subject
to the review of their superiors, who may countermand or affirm them. The government is never
estopped to collect legitimate taxes because of the error committed by its agents.
However, as the company pays 28% of the total monthly gross receipts derived from the arrastre
service to the Bureau of Customs, to hold the company liable for the payment of percentage tax
is unjust and not contemplated by Section 191 of the Tax Code.
Tue 9 Dec 2003
Digest: SSS vs. Bacolod City (GR L-35726, 21 July 1982)

No Comments
SSS vs. Bacolod City
GR L-35726, 21 July 1982
Second Division, Escolin (J): 5 concur
Facts: The Social Security System (SSS) is a government agency created under RA 1161. In
pursuance of its operations, SSS maintains a number of regional offices, one of which is a 5storey building occupying 4 parcels of land in Bacolod City. Said building and lands were
assessed for taxation. For failure to pay the realty taxes thereon, the city levid upon said
properties. SSS sought reconsideration on the ground that SSS is a government-owned and
-controlled corporation and is exempt from payment of real estate taxes.
Issue: Whether SSS property in Bacolod City is tax-exempt.
Held: The distinction whether the government-owned or controlled corporation exercises
ministrant or proprietory function is of no relevance as the exemption does not relate to legal fees
but on realty taxes. The Charter of Bacolod City does not contain any qualification whatsoever in
providing fro the exemption from real estate taxes of lands and building owned by the
Government/ It is axiomatic that when public property is involved, exemption is the rule and
taxation is the exception. PD 24, amending the Social Security Act of 1954, has already removed
all doubts as to the exemption of the SS from taxation (Section 16).
Wed 3 Dec 2003
Digest: Bishop of Nueva Segovia vs. Provincial Board of

Ilocos Norte (GR 27588, 31 December 1927)
No Comments
Bishop of Nueva Segovia vs. Provincial Board of Ilocos Norte
GR 27588, 31 December 1927
En Banc, Avancena (J): 5 concur
Facts: The Roman Catholic Apostolic Church is the owner of a parcel of land in San Nicolas,
Ilocos Norte. On the south side is a part of the Church yard, the convent and an adjacent lost
used for a vegetable garden in which there is a stable and a well for the use of the convent. In the
center is the remainder of the churchyard and the Church. On the north side is an old cemetery
with its two walls still standing, and a portion where formerly stood a tower. The provincial
board assessed land tax on lots comprising the north and south side, which the church paid under
protest. It filed suit to recover the amount.
Issue: Whether the lots are covered by the Churchs tax exemption.
Held: The exemption in favor of the convent in the payment of land tax refers to the home of the
priest who presides over the church and who has to take care of himself in order to discharge his
duties. The exemption includes not only the land actually occupied by the Church but also the
adjacent ground destined to the ordinary incidental uses of man. A vegetable garden, thus, which
belongs to a convent, where its use is limited to the necessity of the priest, comes under the
exemption. Further, land used as a lodging house by the people who participate in religious
festivities, which constitutes an incidental use in religious functions, likewise comes within the
exemption. It cannot be taxed according to its former use, i.e. a cemetery.
Wed 3 Dec 2003
Digest: Lladoc vs. Commissioner (GR L-19201, 16 June

1965)
No Comments
Lladoc vs. Commissioner
GR L-19201, 16 June 1965
Facts: In 1957, the MB Estate Inc. of Bacolod City donated P10,000 in cash to the parish priest
of Victorias, Negros Occidental; the amount spent for the construction of a new Catholic Church
in the locality,m as intended. In1958, MB Estate filed the donors gift tax return. In 1960, the
Commissioner issued an assessment for donees gift tax against the parish. The priest lodged a
protest to the assessment and requested the withdrawal thereof.
Issue: Whether the Catholic Parish is tax exempt.
Held: The phrase exempt from taxation should not be interpreted to mean exemption from all
kinds of taxes. The exemption is only from the payment of taxes assessed on such properties as
property taxes as contradistinguished from excise taxes. A donees gift tax is not a property tax
but an excise tax imposed on the transfer of property by way of gift inter vivos. It does not rest
upon general ownership, but an excise upon the use made of the properties, upon the exercise of
the privilege of receiving the properties. The imposition of such excise tax on property used for
religious purpose do not constitute an impairment of the Constitution.
The tax exemption of the parish, thus, does not extend to excise taxes.
Wed 3 Dec 2003
Digest: Abra Valley College vs. Aquino (GR L-39086, 15

June 1988)
No Comments
Abra Valley College vs. Aquino
GR L-39086, 15 June 1988
Facts: Abra Valley College rents out the ground floor of its college building to Northern
Marketing Corporation while the second floor thereof is used by the Director of the College for
residential purposes. The municipal and provincial treasurers served upon the College a notice
of seizure and later a notice of sale due to the alleged failure of the College to pay real estate
taxes and penalties thereon. The school filed suit to annul said notices, claiming that it is taxexempt.
Issue: Whether the College is exempt from taxes.
Held: While the Court allows a more liberal and non-restrictive interpretation of the phrase
exclusively ised for educational purposes, reasonable emphasis has always been made that
exemption extends to facilities which are incidental to and reasonably necessary for the
accomplishment of the main purposes. While the second floors use, as residence of the director,
is incidental to education; the lease of the first floor cannot by any stretch of imagination be
considered incidental to the purposes of education. The test of exemption from taxation is the use
of the property for purposes mentioned in the Constititution.
Wed 3 Dec 2003
Digest: Cagayan Electric Power & Light Co. vs.

Commissioner (GR L-60126, 25 September 1985)
No Comments
Cagayan Electric Power & Light Co. vs. Commissioner
Second Division, Aquino (J): 5 concur
Facts: Cagayan Electric is a holder of a legislative franchise under Republic Act 3247 where
payment of 3% tax on gross earnings is in lieu of all taxes and assessments upon privileges, etc.
In 1968, RA 5431 amended the franchise by making all corporate taxpayers liable for income tax
except those indicated in paragraph (c) (1) of Section 24 of the Tax Code. In 1969, through RA
6020, its franchise was extended to two other towns and the tax exemption was reenacted. In
1973, the Commissioner required the company to pay deficiency income taxes for 1968 to 1971.
Issue: Whether the withdrawal of the franchises tax exemption violates the non-impairment
clause of the Constitution.
Held: Congress could impair the companys legislative franchise by making it liable for income
tax. The Constitution provides that a franchise is subject to amendment, alteration or repeal by
the Congress when the public interest so requires. RA 3247 itself provides that the franchise is
subject to amendment, etc. by Congress. The enactment of RA 5431 had the effect of
withdrawing the companys exemption from income tax. The exemption was restored by the
enactment of RA 6020. The company is liable only for the income tax fpr the period of 1 January
to 3 August 1969.
Wed 3 Dec 2003
Digest: American Bible Society vs. Manila (GR L-9637, 30

April 1957)

No Comments
American Bible Society vs. Manila
GR L-9637, 30 April 1957
Second Division, Felix (J): 7 concur, 1 concur in result
Facts: In the course of its ministry, the Philippine agency of the American Bible Society has
been distributing and selling bibles and/or gospel portions thereof throughout the Philippines and
translating the same into several Philippine dialets. The acting City Treasurer of Manila required
the society to secure the corresponding Mayors permit and municipal license fees, together with
compromise covering the period from the 4th quarter of 1945 to the 2nd quarter of 1953. The
society paid such under protest, and filed suit questioning the legality of the ordinances under
which the fees are being collected.
Issue: Whether the municipal ordinances violate the freedom of religious profession and
worship.
Held: A tax on the income of one who engages in religious activities is different from a tax on
property used or employed in connection with those activities. It is one thing to impose a tax on
the income or property of a preacher, and another to exact a tax for him for the privilege of
delivering a sermon. The power to tax the exercise of a privilege is the power to control or
suppress its enjoyment. Even if religious groups and the press are not altogether free from the
burdens of the government, the act of distributing and selling bibles is purely religious and does
not fall under Section 27 (e) of the Tax Code (CA 466). The fact that the price of bibles, etc. are a
little higher than actual cost of the same does not necessarily mean it is already engaged in
business for profit. Ordinance 2529 and 3000 are not applicable to the Society.
Wed 3 Dec 2003
Digest: Punsalan vs. Manila (GR L-4817, 26 May 1954)

No Comments
Punsalan vs. Manila
GR L-4817, 26 May 1954
En Banc, Reyes (J): 7 concur
Facts: Ordinance 3398 was enacted pursuant to paragraph 1 of Section 18 ofthe Revised Charter
of the City of Manila, imposing a municipal occupation tax on persons exercising various
professions in the city. Various professionals filed suit to annul the ordinance and the provision
of law authorizing the enactment of the ordinance, and to call for the refund collected taxes
under the ordinance.
Issue: Whether the Ordinance violates the equal protection clause.
Held: The legislature may, in its discretion, select what occupation shall be taxed, and in the
exercise of that discretion it may tax all, or it may select for taxation certain classes and leave the
other untaxed. Manila, as the seat of the National Government and with a population and volume
of trade many times that of any other Philippine city or municipality, offers a more lucrative field
for the practice of the professions, so that it is but fair that the professionals in Manila be made to
pay a higher occupation tax than their brethen in the provinces. The ordinance imposes the tax
upon every person exercising or pursuing any of the occupation named in the ordinance, and
does not make any distinction between professional having offices in Manila and outsiders who
practice their profession therein. What constitutes exercise or pursuit of a profession in the city is
a matter of judicial determination.
The Ordinance does not violate the equal protection clause.
Wed 3 Dec 2003
Digest: Abra vs. Hernando (GR L-49336, 31 August 1981)

No Comments
Abra vs. Hernando
GR L-49336, 31 August 1981
Second Division, Fernando (J):
3 concur, 1 concur in result, 1 on leave
Facts: The provincial assessor made a tax assessment on the properties of the Roman Catholic
Bishop of Bangued. The bishop claims tax exemption from real estate tax, through an action for
declaratory relief. A summary judgment was made granting the exemption without hearing the
side of the Province of Abra.
Issue: Whether the properties of the Bishop of Bangued are tax-exempt.
Held: The 1935 and the 1973 Constitutions differ in language as to the exemption of religious
property from taxes as tehy should not only be exclusively but also actually and directly
used for religious purposes. Herein, the judge accepted at its face the allegation of the Bishop
instead of demonstrating that there is compliance with the constitutional provision that allows an
exemption. There was an allegation of lack of jurisdiction and of lack of cause of action, which
should have compelled the judge to accord a hearing to the province rather than deciding the case
immediately in favor of the Bishop. Exemption from taxation is not favored and is never
presumed, so that if granted, it must be strictly construed against the taxpayer. There must be
proof of the actual and direct use of the lands, buildings, and improvements for religious (or
charitable) purposes to be exempted from taxation.
The case was remanded to teh lower court for a trial on merits.
Wed 3 Dec 2003
Digest: Commissioner vs. Gotamco (GR L-31092, 27

February 1987)
No Comments
Commissioner vs. Gotamco
GR L-31092, 27 February 1987
First Division, Yap (J)L 6 concur
Facts: The World Trade Organization (WHO) decided to construct a building to house its offices,
as well as the other United Nations Offices in Manila. In inviting bids for the construction of the
building, the WHO informed the bidders of its tax exemptions. The contract was awarded to John
Gotamco and Sons. The Commissioner opined that a 3% contractors tax should be due from the
contractor. The WHO issued a certification that Gotamco should be exempted, but the
Commissioner insisted on the tax. Raised in the Court of Tax Appeals, the court ruled in favor of
Gotamco.
Issue: Whether Gotamco is likewise from the contractors tax in lieu of WHOs exemption from
indirect taxes.
Held: Direct taxes are those that are demanded from the very person who, it is intended or
desired, should pay them; while indirect taxes are those that are demanded in the first instance
from one person in the expectation and intention that he can shift the burden to someone else.
Herein, the contractors tax is payable by the contractor but it is the owner of the building that
shoulders the burden of the tax because the same is shifted by the contractor to the owner as a
matter of self-preservation. Such tax is an indirect tax on the organization, as the payment
thereof or its inclusion in the bid price would have meant an increase in the construction cost of
the building.
Hence, the Contractees (WHO) exemption from indirect taxes implies that contractor
(Gotamco) is exempt from contractors tax.
Wed 3 Dec 2003
Digest: Commissioner vs. American Rubber (GR L-19667,

29 November 1966)

No Comments
Commissioner vs. American Rubber
GR L-19667, 29 November 1966
En Banc, Reyes JBL (J): 8 concur
Facts: American Rubber Company sold its rubber products locally and as prescribed by the
Commissioners regulation, the company declared the same for tax purposes in which the
Commissioner accordingly assessed. The company paid under protest the corresponding sales
taxes thereon, claiming exemption under Section 188 (b) of the Tax Code, and subsequently
claimed refund. With the Commissioner refusing to do so, the case was brought before the Court
of Tax Appeals, which upheld the Commissioners stand that the company is not entitled to
recover the sales tax that had been separately billed to its customers, and paid by the latter.
Issue: Whether the company can recover the sales tax paid.
Held: The sales tax is by law imposed directly, not on the thing sold, but on the act (sale) of the
manufacturer, producer, or importer, who is exclusively made liable for its timely payment.
Where the tax money paid by the company came from is really no concern of the Government,
but solely a matter between the company and its customers. Once recovered, the company must
hold the refunded taxes in trust for hte individual purchasers who advanced payment thereof, and
whose names must appear in company records. Herein, the company sales between 24 August
1956 (approval of RA 1612) to 22 June 1957 (when RA 1856 restored the exemption of
agricultural products whether in their original form or not) were properly taxed. Such amount
corresponding to the period are not recoverable.
Wed 3 Dec 2003
Digest: # Philippine Acetylene Co. Inc. vs. Commissioner

(GR L-19707, 17 August 1967)
No Comments
Philippine Acetylene Co. Inc. vs. Commissioner
GR L-19707, 17 August 1967
En Banc, Castro (J): 7 concur, 2 took no part
Facts: Philippine Acetylene Co. Inc. is engaged in the manufacture and sale of oxygen and
acetylene gases. It sold its products to the National Power Corporation (Napocor), an agency of
the Philippine Government, and the Voice of America (VOA), an agency of the United States
Government. The Commissioner assessed deficiency sales tax and surcharges against the
company. The company denied liability for the payment of tax on the ground that both Napocor
and VOA are exempt from taxes.
Issue: Whether Philippine Acetylene Co. is exempt from the tax.
Held: Sales tax are paid by the manufacturer or producer who must make a true and complete
return of the amount of his, her or its gross monthly sales, receipts or earnings or gross value of
output actually removed from the factory or mill, warehouse and to pay the tax due thereon. The
tax imposed by Section 186 of the Tax Code is a tax on the manufacturer or producer and not a
tax on the purchaser except probably in a very remote and inconsequential sense. Accordingly, its
levy on the sales made to tax-exempt entities like the Napocor is permissible. On the other hand,
there is nothing in the language of the Military Bases Agreement to warrant the general
exemption granted by General Circular V-41 (1947). Thus, the expansive construction of the tax
exemption is void; and the sales to the VOA are subject to the payment of percentage taxes under
Section 186 of the Tax Code. Therefore, tax exemption is strictly construed and exemption will
nbot be held to be conferred unless the terms under which it is granted clearly and distinctly
show that such was the intention.
Wed 3 Dec 2003
Digest: Saldana vs. Iloilo (GR L-10470, 26 June 1958)

No Comments
Saldana vs. Iloilo
GR L-10470, 26 June 1958
En Banc, Montemayor (J): 8 concur
Facts: In 1946, the City of Iloilo promulgated Ordinance 28, which strictly prohibits the
transport of food supply and labor animals outside Iloilo without first obtaining the necessary
license permit from the mayor. Under the ordinance, Serafin Saldana had been paying, under
protest, so-called fees on fish bought in Iloilo and sent to Manila from 16 September to 6
December 1946.
Issue: Whether the license fee was validly imposed.
Held: A license fee represents the permission conceded to do an act is in the main purpose of
police power, and is not supposed to be imposed for revenue. A property tax, on the other hand,
is a tax in the ordinary sense, assessing according to the value of property. Judging from the
amount of fees fixed in the ordinance, the so-called fees were in reality taxes for city revenue. As
such, they are unauthorized by the law or the City Charter, and are alson in contravention of
Sections 2287 and 2629 of the Revised Administrative Code. The prohibition against taking
animals and articles outside Iloilo without mayors permit is in restraint of trade and a
curtailment of the rights of the owners of said animals and articles to freely sell and of
prospective purchasers to buy and dispose of them without the city limits in the ordinary course
of commerce and trade. The ordinance is ultra vires and, thus, is null and void.
Wed 3 Dec 2003
Digest: Progressive Development Corporation vs. Quezon

City (GR 36081, 24 April 1989)
No Comments
Progressive Development Corporation vs. Quezon City
GR 36081, 24 April 1989
Third Division, Feliciano (J): 4 concur
Facts: The City Council of Quezon City adopted Ordinance 7997 (1969) where privately owned
and operated public markets to pay 10% of the gross receipts from stall rentals to the City, as
supervision fee. Such ordinance was amended by Ordinance 9236 (1972), which imposed a 5%
tax on gross receipts on rentals or lease of space in privately-owned public markets in Quezon
City. Progressive Development Corp., owned and operator of Farmers Market and Shopping
Center, filed a petition for prohibition against the city on the ground that the supervision fee or
license tax imposed is in reality a tax on income the city cannot impose.
Issue: Whether the supervision fee / license tax is a tax on income.
Held: The 5% tax imposed in Ordinance 9236 does not constitute a tax on income, nor a city
income tax (distinguished from the national income tax by the Tax Code) within the meaning of
Section 2 (g) of the Local Autonomy Act, but rather a license tax or fee for the regulation of
business in which the company is engaged. To be considered a license fee, the imposition must
relate to an occupation or activity that so engages the public interest in health, morals, safety and
development as to require regulations for the protection and promotion of such public interest;
the imposition must also bear a reasonable relation to the probable expenses of the regulation,
taking into account not only the costs of direct regulation but also its incidental consequences as
well. The gross receipts from stall rentals have been used only as a basis for computing the fees
or taxes due to the city to cover the latters administrative expenses. The use of the gross amount
of stall rentals, as basis for the determination of the collectible amount of license tax, does not by
itself convert or render the license tax into a prohibited city tax on income. For ordinarily, the
higher the amount of stall rentals, the higher the aggregate volume of foodstuffs and related
items sold in the privately owned market; and the higher the volume of goods sold in such
market, the greater extent and frequency of inspection and supervision that may be reasonably
required in the interest of the buying public.
Wed 3 Dec 2003
Digest: Philippine Airlines vs. Edu (GR L-41383, 15 August

1988)
No Comments
Philippine Airlines vs. Edu
GR L-41383, 15 August 1988
En Banc, Gutierrez Jr. (J): 13 concur
Facts: The Philippine Airlines (PAL) is engaged in the air transportation business under a
legislative franchise, Act 4271, wherein it is exempt from the payment of taxes. On the strength
of an opinion of the Secretary of Justice (Opinion 307 of 1956),
PAL was determined to have not been paying motor vehicle registration fees since 1956. The
Land Transportation Commissioner required all tax exempt entities, including PAL, to pay motor
vehicle registration fees. PAL protested.
Issue: Whether registration fees as to motor vehicles are taxes to which Philippine Airlines is
exempt.
Held: Taxes are for revenue, whereas fees are exactions for purposes of regulation and
inspection, and are for that reason limited in amount to what is necessary to cover the cost of the
services rendered in that connection. It is the object of the charge, and not the name, that
determines whether a charge is a tax or a fee. The money collected under the Motor Vehicle Law
is not intended for the expenditures of the Motor Vehicle Office but accrues to the funds for the
construction and maintenance of public roads, streets and bridges. As the fees are not collected
for regulatory purposes as an incident to the enforcement of regulations governing the operation
of motor vehicles on public highways, but to provide revenue with which the Government is to
construct and maintain public highways for everyones use, they are veritable taxes, not merely
fees. PAL is, thus, exempt from paying such fees, except for the period between 27 June 1968 to
9 April 1979, where its tax exeption in the franchise was repealed.
Wed 3 Dec 2003
Digest: Francia vs. Intermediate Appellate Court (GR L67649, 28 June 1988)

No Comments
Francia vs. Intermediate Appellate Court
GR L-67649, 28 June 1988
Third Division, Gutierrez Jr. (J): 4 concur
Facts: Engracio Francia was the registered owner of a house and lot located in Pasay City. A
portion of such property was expropriated by the Republic of the Philippines in 1977. It appeared
that Francia did not pay his real estate taxes from 1963 to 1977. Thus, his property was sold in a
public auction by the City Treasurer of Pasay City.
Issue: Whether the expropriation payment may compensate for the real estate taxes due.
Held: There can be no off-setting of taxes against the claims that the taxpayer may have against
the government. A person canot refuse to pay a tax on the ground that the government owes him
an amount equal to or greater than the tax being collected. The collection of a tax annot await the
results of a lawsuit agianst the government. Internal revenue taxes cannot be the subject of
compensation. The Government and the taxpayer are not mutually creditors and debtors of each
other under Article 1278 of the Civil Code and a claim of taxes is not such a debt, demand,
contract or judgment as is allowed to be set-off.
[ Note: See Republic vs. Mambulao, and Cordero vs. Gonda, as doctrine in said cases were
merely reiterated. ]
Wed 3 Dec 2003
Digest: Republic vs. Mambulao Lumber (GR L-17725, 28

February 1962)
No Comments
Republic vs. Mambulao Lumber
GR L-17725, 28 February 1962
En Banc, Barrera (J): 10 concur
Facts: Mambulao Lumber Company paid the Government a total of P9,127.50 as reforestation
charges. Having found liable for an aggregate amount of P4,802.37 for forest charges, it
contended that since the Republic (Government) has not made use of the reforestation charges
for reforesting the denuded area of the land covered by the companys license, the Republic
should refund said amount or, if it cannot be refunded, at least the company should be
compensated with what it owed the Republic for reforestation charges.
Issue: Whether taxes may be subject of set-off or compensation.

Held: Internal revenue taxes, such as forest charges, cannot be the subject of set-off or
compensation. A claim for taxes is not such a debt, demand, contract or judgment as is allowed to
be set-off under the statutes of set-off, which are construed uniformly, in the light of public
policy, to exclude the remedy in an action or any indebtedness of the State or municipality to one
who is liable to the State or municipality for taxes. Neither are they subject of recoupment since
they do not arise out of the contract or transaction sued on.
Taxes are not in the nature of contracts between the parties but grow out of a duty to, and are the
positive acts of the government, to the making and enforcing of which, the personal consent of
individual taxpayers is not required.
Wed 3 Dec 2003
Digest: National Development Co. vs. Commissioner (GR L53961, 30 June 1987)
No Comments
National Development Co. vs. Commissioner
GR L-53961, 30 June 1987
En Banc, Cruz (J): 14 concur
Facts: The National Development Co. (NDC) entered into contracts in Tokyo with several
Japanese shipbuilding companies for the construction of 12 ocean-going vessels. Initial payments
were made in cash and through irrevocable letters of credit. When the vessels were completed
and delivered to the NDC in Tokyo, the latter remitted to the shipbilders the amount of US$
4,066,580.70 as interest on the balance of the purchase price. No tax was withheld. The
Commissioner then held NDC liable on such tax in the total amount of P5,115,234.74. The
Bureau of Internal Revenue served upon the NDC a warrant of distraint and levy after
negotiations failed.
Issue: Whether the NDC is liable for deficiency tax.
Held: The Japanese shipbuilders were liable on the interest remitted to them under Section 37 of
the Tax Code. The NDC is not the one taxed. The imposition of the deficiency taxes on the NDS
is a penalty for its failure to withhold the same from the Japanese shipbuilders. Such liability is
imposed by Section 53(c) of the Tax Code. NDC was remiss in the discharge of its obligation of
its obligation as the withholding agent of the government and so should be liable for its
omission.
Wed 3 Dec 2003
Digest: Lutz vs. Araneta (GR L-7859, 22 December 1955)

[3] Comments
Lutz vs. Araneta
GR L-7859, 22 December 1955
First Division, Reyes JBL (J): 8 concur
Facts: AWalter Lutz, as Judicial Administrator of the Intestate Estate of Antonio Jayme
Ledesma, sought to recover the sum of P14,6666.40 paid by the estate as taxes from the
Commissioner under Section e of Commonwealth Act 567 (the Sugar Adjustment Act), alleging
that such tax is unconstitutional as it levied for the aid and support of the sugar industry
exclusively, which is in his opinion not a public purpose.
Issue: Whether the tax is valid in supporting an industry.
Held: The tax is levied with a regulatory prupose, i.e. to provide means for the rehabilitation and
stabilization of the threatened sugar industry. The act is primarily an exercise of police power,
and is not a pure exercise of taxing power. As sugar production is one of the great industries of
the Philippines; and that its promotion, protection and advancement redounds greatly to the
general welfare, the legislature found that the general welfare demanded that the industry should
be stabilized, and provided that the distribution of benefits therefrom be readjusted among its
component to enable it to resist the added strain of the increase in tax that it had to sustain.
Further, it cannot be said that the devotion of tax money to experimental stations to seek increase
of efficiency in sugar production, utilization of by-products, etc., as well as to the improvement
of living and working conditions in sugar mills and plantations, without any part of such money
being channeled diectly to private persons, constitute expenditure of tax money for private
purposes.
The tax is valid.
Tue 2 Dec 2003
Digest: Compania General de Tobacos de Filipinas vs.

Manila (GR L-16619, 29 June 1963)
No Comments
Compania General de Tobacos de Filipinas vs. Manila

GR L-16619, 29 June 1963
Facts: Compania General de Tabacos de Filipinas (Tabacalera) paid the City of Manila the fixed
license fees prescribed by Ordinance 3358 for the years 1954 to 1957. In 1954, City Ordinance
3634 and 3816 were passed; where the term general merchandise found therein included all
articles in Sections 123 to 148 of the Tax Code (thus, also liquor under Sedctions 133 to 135).
The Tabacalera paid its wholesalers and retailers taxes. In 1954, the City Treasurer addressed a
letter to an accounting firm, expressing the view that liquor dealers paying the annual wholesale
and retail fixed tax under Ordinance 3358 are not subject to the wholesale aand retail deaklers
taxes prescribed by City Ordinances 3634, 3301, and 3816. The Tabacalera, upon learning of said
stopped including quarterly sworn declaratons required by the latter ordinances, and in 1957,
demanded refunde of the alleged overpayment. The claim was disallowed.
Issue: Whether there is a distinction between Ordinance 3358 and Ordinances 3634, 3301 and
3816, to prevent refund to the company.
Held: Generally, the term tax applies to all kinds of exactions which become public funds.
Legally, however, a license fee is a legal concept quite distinct from tax: the former is imposed in
the exercise of police power for purposes of regulation, while the latter is imposed under the
taxing power for the purpose of raising revenues. Ordinance 3358 prescribes municipal license
fees for the privilege to engage in the business of selling liquor or alcohol beverages; considering
that the sale of intoxicating liquor is (potentially) harmful to public health and morals, and must
be subject to supervision or regulation by the State and by cities and municipalities authorized to
act in the premises. On the other hand, Ordinances 3634 , 3301 and 3816 imposed taxes on the
sales of general merchandise, wholesale or retail, and are revenue measures enacted by the
Municipal Board of Manila.
Both a license fee and a tax may be imposed on the same business or occupation, or for selling
the same article, without it being in violation of the rule against double taxation. The contrary
view of the Treasurer in its letter is of no consequence as the government is not bound by the
errors or mistakes committed by its officers, specially on matters of law.
The company, thus, is not entitled to refund.
Tue 2 Dec 2003
Digest: American Mail Line vs. Basilan (GR L-12647, 31

May 1961)
No Comments
American Mail Line vs. Basilan

GR L-12647, 31 May 1961
Facts: The City Council of Basilan City enacted Ordinance 180 (1955) imposing upon a foreign
vessel engaged in coastwise trade which may anchor within the territorial waters of Basilan City
to pay an anchorage fee of half centavo per registered gross ton of the vessle for the first 24
hours, provided that the maximum charge shall not exceed P75 per day. As the city treasurer
assessed and attempted to collect from American Mail Line the anchorage fees, the company
filed an action for declaratory relief to have the courts determine the validity of the ordinance.
Issue: Whether the anchorage fees were for regulatory or revenue purposes.
Held: The fees required are intended for revenue purposes. The fees have no proper or
reasonable relation to the cost of issuing the permits and the cost of inspection or surveillance;
being based upon the tonnage of the vessels. The fees imposed on the vessels exceed even the
harbor fees imposed by the National Government to raise revenues for the Port Works Fund. The
City of Basilan was not granted a blanket authority or power of taxation, but merely given the
powers to levy and collect taxes for general and special purposes in accordance with or as
provided by law. The power to regulate as an exercise of police power does not include the
power to impose fees for review purposes.
The ordinance was invalid.
Tue 2 Dec 2003
Digest: Villegas vs. Hiu Chiong Tsai Pao Ho (GR L-29646, 10

November 1978)
No Comments
Villegas vs, Hiu Chiong Tsai Pao Ho
GR L-29646, 10 November 1978
En Banc, Fernandez (J):
4 concur, 3 concur in result, 1 took no part
Facts: The Municipal Board of Manila enacted Ordinance 6537 requiring aliens (except those
employed in the diplomatic and consular missions of foreign countries, in technical assistance
programs of the government and another country, and members of religious orders or
congregations) to procure the requisite mayors permit so as to be employed or engage in trade in
the City of Manila. The permit fee is P50, and the penalty for the violation of the ordinance is 3
to 6 months imprisonment or a fine of P100 to P200, or both.
Issue: Whether the ordinance imposes a regulatory fee or a tax.

Held: The ordinances purpose is clearly to raise money under the guise of regulation by
exacting P50 from aliens who have been cleared for employment. The amount is unreasonable
and excessive because it fails to consider difference in situation among aliens required to pay it,
i.e. being casual, permanent, part-time, rank-and-file or executive.
[ The Ordinance was declared invalid as it is arbitrary, oppressive and unreasonable, being
applied only to aliens who are thus deprived of their rights to life, liberty and property and
therefore violates the due process and equal protection clauses of the Constitution. Further, the
ordinance does not lay down any criterion or standard to guide the Mayor in the exercise of his
discretion, thus conferring upon the mayor arbitrary and unrestricted powers. ]
Tue 2 Dec 2003
Digest: Commissioner vs. Itogon-Suyoc Mines (GR L-25299,

29 July 1969)
No Comments
Commissioner vs. Itogon-Suyoc Mines
GR L-25299, 29 July 1969
En Banc, Fernando (J): 9 concur, 1 took no part
Facts: Itogon-Suyoc Mines filed its income tax return for the fiscal year 1959 to 1960. Four
months later, it filed an amended income tax return, reporting a loss. It thus sought a refund from
the Commissioner. When it filed its income tax return on the next year, it deducted an amount
representing alleged tax credit for overpayment for the preceding fiscal year. The Commissioner
imposed an amount P1,512.83 as 1% monthly interest on the amount of P13,155.20 from January
to December 1962. The basis for such assessment was allegedly the absence of a legal right to
deduct said amount before the tax credit or refund is approved by the Commissioner.
Issue: Whether the assessment on interest was justified.
Held: The Tax Code provides that interest upon the amount determined as a deficiency shall be
assessed and shall be paid upon notice and demand from the Commissioner at the rate therein
specified. It made clear, however, in an earlier provision found in the same section that if in any
preceding year, the taxpayer was entitled to a refund of any amount due as tax, such amount, if
not refunded, may be deducted from the tax to be paid. Although the imposition of monthly
interest does not constitute penalty but a just compensation to the State for the delay in paying
the tax and for the concomitant use by the taxpayer of funds that rightfully should be in
governments hands; in light of the overpayment for 1959 and 1960, it cannot be said that the
taxpayer was guilty of delay enabling it to utilize the money.
The company is entitled to refund.
Tue 2 Dec 2003
Digest: Domingo vs. Garlitos (GR L-18993, 29 June 1963)

No Comments
Domingo vs. Garlitos
GR L-18993, 29 June 1963
En Banc, Labrador (J): 8 concur,
1 concur in result, 1 took no part
Facts: InDomingo vs. Moscoso (106 PHIL 1138), the Supreme Court declared as final and
executory the order of the Court of First Instance of Leyte for the payment of estate and
inheritance taxes, charges and penalties amounting to P40,058.55 by the Estate of the late Walter
Scott Price. The petition for execution filed by the fiscal, however, was denied by the lower
court. The Court held that the execution is unjustified as the Government itself is indebted to the
Estate for 262,200; and ordered the amount of inheritance taxes be deducted from the
Governments indebtedness to the Estate.
Issue: Whether a tax and a debt may be compensated.
Held: The court having jurisdiction of the Estate had found that the claim of the Estate against
the Government has been recognized and an amount of P262,200 has already been appropriated
by a corresponding law (RA 2700). Under the circumstances, both the claim of the Government
for inheritance taxes and the claim of the intestate for services rendered have already become
overdue and demandable as well as fully liquidated. Compensation, therefore, takes place by
operation of law, in accordance with Article 1279 and 1290 of the Civil Code, and both debts are
extinguished to the concurrent amount.
Tue 2 Dec 2003
Digest: Luzon Stevedoring Corp. vs. Court of Tax Appeals

(GR L-30232, 29 July 1988)

No Comments
Luzon Stevedoring Corp. vs. Court of Tax Appeals
GR L-30232, 29 July 1988
Facts: Luzon Stevedoring Corp. imported various engine parts and other equipment for tugboat
repair and maintenance in 1961 and 1962. It paid the assessed compensation tax under protest.
Unable to secure a tax refund from the Commissioner (for the amount of P33,442.13), it filed a
petition for review with the Court of Tax Appeals (CTA). The CTA denied the petition, as well as
the motion for reconsideration filed thereafter.
Issue: Whether the corporation is exempt from the compensation tax.
Held: As the power of taxation is a high prerogative of sovereignty, the relinquishment of such is
never presumed and any reduction or dimunition thereof with respect to its mode or its rate, must
be strictly construed, and the same must be couched in dear and unmistakable terms in order that
it may be applied. The corporations tugboats do not fall under the categories of passenger or
cargo vessels to avail of the exemption from compensation tax in Section 190 of the Tax Code. It
may be further noted that the amendment of Section 190 of Republic Act 3176 was intended to
provide incentives and inducements to bolster the shipping industry and not the business of
stevedoring, in which the corporation is engaged in.
Luzon Stevedoring Corp. is not exempt from compensating tax under Section 190, and is thus
not entitled to refund.
Tue 2 Dec 2003
Digest: Commissioner vs. Algue (GR L-28890, 17 February

1988)
No Comments
Commissioner vs. Algue
GRL-28890, 17 February 1988
First Division, Cruz (J); 4 concur
Facts: The Philippine Sugar Estate Development Company (PSEDC) appointed Algue Inc. as its
agent, authorizing it to sell its land, factories, and oil manufacturing process. The Vegetable Oil
Investment Corporation (VOICP) purchased PSEDC properties. For the sale, Algue received a
commission of P125,000 and it was from this commission that it paid Guevara, et. al. organizers
of the VOICP, P75,000 in promotional fees. In 1965, Algue received an assessment from the
Commissioner of Internal Revenue in the amount of P83,183.85 as delinquency income tax for
years 1958 amd 1959. Algue filed a protest or request for reconsideration which was not acted
upon by the Bureau of Internal Revenue (BIR). The counsel for Algue had to accept the warrant
of distrant and levy. Algue, however, filed a petition for review with the Coourt of Tax Appeals.
Issue: Whether the assessment was reasonable.
Held: Taxes are the lifeblood of the government and so should be collected without unnecessary
hindrance. Every person who is able to pay must contribute his share in the running of the
government. The Government, for his part, is expected to respond in the form of tangible and
intangible benefits intended to improve the lives of the people and enhance their moral and
material values. This symbiotic relationship is the rationale of taxation and should dispel the
erroneous notion that is an arbitrary method of exaction by those in the seat of power.
Tax collection, however, should be made in accordance with law as any arbitrariness will negate
the very reason for government itself. For all the awesome power of the tax collector, he may
still be stopped in his tracks if the taxpayer can demonstrate that the law has not been observed.
Herein, the claimed deduction (pursuant to Section 30 [a] [1] of the Tax Code and Section 70 [1]
of Revenue Regulation 2: as to compensation for personal services) had been legitimately by
Algue Inc. It has further proven that the payment of fees was reasonable and necessary in light of
the efforts exerted by the payees in inducing investors (in VOICP) to involve themselves in an
experimental enterprise or a business requiring millions of pesos.
The assessment was not reasonable.
Mon 24 Mar 2003
Digest: Del Rosario & Sons v. NLRC (GR L-64204, 31 May

1985)
No Comments
Del Rosario & Sons v. NLRC
GR L-64204, 31 May 1985 (135 SCRA 669)
First Division, Melencio-Herrera (p): 5 concurring, 1 on leave
Facts: On 1 February 1978, Del Rosario and Sons Logging Enterprises, Inc. entered into a
Contract of Services with Calmar Security Agency whereby the latter undertook to supply the
former with security guards at the rate of P300.00 per month for each guard. Thereafter, Paulino
Mabuti, Napoleo Borata and Silvino Tudio filed a Complaint against the Security Agency and
petitioner, for underpayment of salary, non-payment of living allowance, and 13th month pay.
Thereafter, five other guards filed their complaint for the same causes of action. Petitioner
contended that complainants have no cause of action against it due to absence of employeremployee relationship between them. They also denied liability alleging that due to the
inadequacy of the amounts paid to it under the Contract of Services, it could not possibly comply
with the payments required by labor laws.
Assigned for compulsory arbitration, the Labor Arbiter rendered a decision dismissing the
complaint for want of employer-employee relationship. When the case was appealed to the
NLRC, the decision was modified by holding that petitioner is liable to pay complainants, jointly
and severally, with the Security Agency on the ground that the petitioner is an indirect employer
pursuant to Articles 106 and 107. Hence, the appeal. The petitioner contended that NLRC erred
in giving due course to the appeal despite the fact that it was not under oath and the required
appeal fee was not paid; in holding it jointly and severally liable with the Security Agency; and
in refusing to give due course to its Motion for Reconsideration.
Issue(s):
Whether the formal defects of the appeal of the security agency invalidate the appeal.
Whether the security guards from the agency are entitled to benefits claimed from the
company
Held: The formal defects in the appeal of the Security Agency were not fatal defects. The lack of
verification could have been easily corrected by requiring an oath. The appeal fee had been paid
although it was delayed. Failure to pay the docketing fees does not automatically result in the
dismissal of the appeal. Dismissal is discretionary with the Appellate Court and discretion must
be exercised wisely and prudently, never capriciously, with a view to substantial justice. Failure
to pay the appeal docketing fee confers a directory and not a mandatory power to dismiss an
appeal and such power must be exercised with sound discretion and with a great deal of
circumspection, considering all attendant circumstances. Moreover, as provided for by Article
221 of the Labor Code in any proceeding before the Commission or any of the Labor Arbiters,
the rules of evidence prevailing in Courts of law or equity shall not be controlling and it is the
spirit and intention of this Code that the Commission and its members and the Labor Arbiters
shall use every and all reasonable means to ascertain the facts in each case speedily and
objectively and without regard to technicalities of law or procedure, all in the interest of due
process.
Further, Articles 106 of the Labor Code provides that in the event that the contractor or
subcontractor fails to pay the wages of his employees in accordance with this Code, the employer
shall be jointly and severally liable with his contractor or subcontractor to such employees to the
extent of the work performed under the contract, in the same manner and extent that he is liable
to employees directly employed by him, and Article 107 provides that the provisions of the
immediately preceding Article shall likewise apply to any person, partnership, association or
corporation which, not being an employer, contracts with an independent contractor for the
performance of any work, task, job or project. In the case at bar, petitioner became an indirect
employer of respondents-complainants when petitioner entered into a Contract of Services with

the Security Agency and the latter hired the complainants to work as guards for the former.
However, the petitioners liability should be without prejudice to a claim for reimbursement
against the Security Agency for such amounts as petitioner may have to pay to complainants. The
Security Agency may not seek exculpation by claiming that petitioners payments to it were
inadequate. As an employer, it is charged with knowledge of labor laws and the adequacy of the
compensation that it demands for contractual services is its principal concern and not any others.
The Supreme Court affirmed the judgment under review, without prejudice to petitioners right to
seek reimbursement from Calmar Security Agency for such amounts as petitioner may have to
pay to complainants. Costs against the private respondent.
Mon 24 Mar 2003
Digest: Villavert v. ECC (GR L-48605, 14 December 1981)

No Comments
Villavert v. ECC
GR L-48605, 14 December 1981 (110 SCRA 233)
First Division, Fernandez (p): 4 concurring
Facts: Domina N. Villavert, the petitioner, is the mother of the late Marcelino N. Villavert who
died of acute hemorrhagic pancreatitis on 12 December 1975 employed as a Code Verifier in the
Philippine Constabulary. The deceased also performed the duties of a computer operator and
clerk typist. On 11 December 1975, the deceased reported as usual to the Constabulary Computer
Center in Camp Crame. He performed his duties not only as Code Verifier but also handled
administrative functions, computer operation and typing jobs due to shortage of civilian
personnel. Although he was complaining of chest pain and headache late in the afternoon of said
day, he was required to render overtime service until late in the day, typing voluminous classified
communications, computing allowances and preparing checks for the salary of PC-INP personnel
throughout the country for distribution on or before 15 December 1975. Gasping for breath,
perspiring profusely, and mumbling incoherent words while asleep, and when he was not able to
regain consciousness, he was rushed to the University of the East-Ramon Magsaysay (UERM)
Memorial Hospital where he died at 5:30 am. The NBI stated that the exact cause of acute
hemorrhagic pancreatitis is still unknown, although most research data agree that physical and
mental stresses are strong causal factors in the development of the disease.
On 18 March 1976, she filed a claim for income benefits for the death of her son under PD 626,
as amended, with the Government Service Insurance System (GSIS). GSIS denied the claim on
the ground that acute hemorrhagic pancreatitis is not an occupational disease and that the
petitioner had failed to show that there was a causal connection between the fatal ailment of
Marcelino N. Villavert and the nature of his employment. The petitioner appealed to the
Employees Compensation Commission (ECC). On 31 May 1978, the ECC affirmed the
decision of GSIS denying the claim. Hence, the petition.
Issue: Whether the petitioner is entitled to her sons death benefits.

Held: The Medico Legal Officer of the NBI stated that the exact cause of acute hemorrhagic
pancreatitis (acute inflammation with hemorrhagic necrosis of the pancreas) is still unknown
despite extensive researches in this field, although most research data are agreed that physical
and mental stresses are strong causal factors in the development of the disease. There is no
evidence at all that Marcelino N. Villavert had a bout of alcoholic intoxication shortly before
he died, neither is there a showing that he used drugs; negating the association provided by
Principles of Internal Medicine (by Harrison 7th Edition, p. 1571). From the foregoing facts of
record, it is clear that Marcelino N. Villavert died of acute hemorrhagic pancreatitis which was
directly caused or at least aggravated by the duties he performed as code verifier, computer
operator and clerk typist of the Philippine Constabulary. Further, Article 4 of the Labor Code of
the Philippines, as amended, provides that all doubts in the implementation and interpretation of
this Code, including its implementing rules and regulations shall be resolved in favor of labor.
The Supreme Court set aside the decision of the ECC and ordered the GSIS to pay the petitioner
death benefits in the amount of P6,000.00.
Mon 24 Mar 2003
Digest: Ty v. First National Surety (GR L-16138, 29 April

1961)
No Comments
Ty v. First National Surety
GR L-16138, 29 April 1961 (1 SCRA 1324)
En Banc, Labrador (p): 8 concurring
Facts: At different times within a period of two months prior to 24 December 1953, Diosdado C.
Ty, employed as operator mechanic foreman in the Broadway Cotton Factory insured himself in
18 local insurance companies, among which being the 8 above-named defendants, which issued
to him personal accident policies. Plaintiffs beneficiary was his employer, Broadway Cotton
Factory, which paid the insurance premiums. On 24 December 1953, a fire broke out which
totally destroyed the Broadway Cotton Factory. Fighting his way out of the factory, plaintiff was
injured on the left hand by a heavy object. He was brought to the Manila Central University
hospital, and after receiving first-aid, he went to the National Orthopedic Hospital for treatment
of his injuries (fractures in index, middle, fourth, and fifth fingers of left hand). From 26
December 1953 to 8 February 1954, he underwent medical treatment in the hospital. The abovedescribed physical injuries have caused temporary total disability of plaintiffs left hand. Plaintiff
filed the corresponding notice of accident and notice of claim with all of the above-named
defendants to recover indemnity. Defendants rejected plaintiffs claim for indemnity for the
reason that there being no severance of amputation of the left hand, the disability suffered by him
was not covered by his policy.
Plaintiff sued the defendants in the Municipality Court of this City, which dismissed his
complaints. Thereafter, the plaintiff appealed to the Court of First Instance Manila, presided by
Judge Gregorio S. Narvasa, which absolved the defendants from the complaints. Hence, the
appeal.
Issue: Whether Diosdado Ty is entitled to indemnity under the insurance policy for the disability
of his left hand.
Held: The agreement contained in the insurance policies is the law between the parties. As the
terms of the policies are clear, express and specific that only amputation of the left hand should
be considered as a loss thereof, an interpretation that would include the mere fracture or other
temporary disability not covered by the policies would certainly be unwarranted. In the case at
bar, due to the clarity of the stipulation, distinction between temporary disability and total
disability need not be made in relation to ones occupation means that the condition of the
insurance is such that common prudence requires him to desist from transacting his business or
renders him incapable of working. While the Court sympathizes with the plaintiff or his
employer, for whose benefit the policies were issued, it can not go beyond the clear and express
conditions of the insurance policies, all of which define partial disability as loss of either hand by
a amputation through the bones of the wrist. There was no such amputation in the case at bar.
The Supreme Court affirmed the appealed decision, with costs against the plaintiff-appellant.
Mon 24 Mar 2003
Digest: Home Insurance v. Eastern Shipping Lines (GR L34382, 20 July 1983)
No Comments
Home Insurance v. Eastern Shipping Lines
GR L-34382, 20 July 1983 (123 SCRA 425)
First division, Gutierrez (p): 4 concurring, 2 on leave.
Facts: On 13 January 1967, S. Kajita & Co., on behalf of Atlas Consolidated Mining &
Development Corporation, shipped on board the SS Eastern Jupiter from Osaka, Japan, 2,361
coils of Black Hot Rolled Copper Wire Rods. The vessel is owned and operated by Eastern
Shipping Lines. The shipment was insured with Home Insurance against all risks in the amount
of P1,580,105.06. 53 of the 2361 coils discharged from the vessel were in bad order. The
Consignee ultimately received the 2,361 coils with 73 coils loose and partly cut, and 28 coils and
partly cut, which had to be considered as scrap. The weight also had a net loss/shortage of 593.15
kgs, or 1,209.56 lbs. For the loss/damage suffered by the cargo, Home Insurance paid the
consignee under its insurance policy the amount of P3,260.44, by virtue of which Home
Insurance became subrogated to the rights and actions of the Phelps Dodge. Home Insurance
made demands for payment against Eastern Shipping and the transportation company for
reimbursement of the aforesaid amount but each refused to pay the same. (A case Home
insurance v. NV Nedlloyd Lijnen consolidated with this case is of the same nature).
Filing its cases in court, Home Insurance avers that it is a foreign insurance company authorized
to do business in the Philippines through its agent, Victor Bello (who holds office at Makati) in
both cases. In L-34382, Eastern Shipping Lines denies the allegation of plaintiffs capacity to sue
for lack of knowledge or information sufficient to form a belief as to the truth thereof, while
Angel Jose Transportation admits the allegation. In L-34383, NV Nedlloyd Lijnen, Columbian
Philippines, and Guacods denied plaintiffs capacity to sue. The court dismissed the complaints
in the two cases on the same ground, that the plaintiff failed to prove its capacity to sue, even if
the petitioner had already secured the necessary license to conduct its insurance business in the
Philippines during the filing of the case. Hence, the petition.
Issue: Whether a foreign corporation doing business in the Philippines initially without a license
can claim indemnity through Philippine Courts.
Held: The objective of the law was to subject the foreign corporation to the jurisdiction of our
courts. The Corporation Law must be given a reasonable, not an unduly harsh, interpretation
which does not hamper the development of trade relations and which fosters friendly commercial
intercourse among countries. A harsh interpretation would disastrously embarrass trade, unlike if
the law is given a reasonable interpretation, it would markedly help in the development of trade.
The law simply means that no foreign corporation shall be permitted to transact business in the
Philippine Islands, as this phrase is known in corporation law, unless it shall have the license
required by law, and, until it complies with the law, shall not be permitted to maintain any suit in
the local courts. A contrary holding would bring the law to the verge of unconstitutionality, a
result which should be and can be easily avoided. In the present case, the lack of capacity at the
time of the execution of the contracts was cured by the subsequent registration. Such is also
strengthened by the procedural aspects of these cases.The petitioner sufficiently alleged its
capacity to sue when it averred in its complaints that it is a foreign insurance company, that it is
authorized to do business in the Philippines, that its agent is Mr. Victor H. Bello, and that its
office address is the Oledan Building at Ayala Avenue, Makati; as required by Section 4, Rule 8
of the Rules of Court. General denials inadequate to attack the foreign corporations lack of
capacity to sue in the light of its positive averment that it is authorized to do so. Nevertheless,
even if the plaintiffs lack of capacity to sue was not properly raised as an issue by the answers,
the petitioner introduced documentary evidence that it had the authority to engage in the
insurance business at the time it filed the complaints.
The Supreme Court consolidated and granted the petitions, reversed and set aside the CFI
decisions. In L-34382 (Civil Case 71923), Eastern Shipping Lines and Angel Jose Transportation
Inc. are ordered to pay the Home Insurance Company the sum of P1,630.22 each with interest at
the legal rate from 5 January 1968 until fully paid. Each shall also pay one-half of the costs. The
Court dismissed the counterclaim of Angel Jose Transportation Inc. In L-34383, N. V. Nedlloyd
Lijnen or its agent Columbian Phil. Inc. was ordered to pay the petitioner the sum of P2,426.98
with interest at the legal rate from 1 February 1968 until fully paid, the sum of P500.00
attorneys fees, and costs. The Court dismissed the complaint against Guacods, Inc.
Mon 24 Mar 2003
Digest: Qua Chee Gan v. Law Union and Rock Insurance

(GR L-4611, 17 December 1955)
No Comments
Qua Chee Gan v. Law Union and Rock Insurance
GR L-4611, 17 December 1955 (52 OG 1982)
First Division, Reyes JBL (p): 7 concurring.
Facts: Before WWII, Qua Chee Gan, a merchant of Albay, owned 4 warehouses in Tabaco,
Albay used for the storage of stocks of copra and of hemp in which he dealt extensively. They
had been, with their contents, insured with the Insurance Company since 1937, and the lose made
payable to the Philippine National Bank as mortgage of the hemp and copra, to the extent of its
interest. On 21 July 1940, fire of undetermined origin that broke out and lasted almost one week,
gutted and completely destroyed Bodegas Nos. 1, 3 and 4, with the merchandise stored therein.
Plaintiff-appellee informed the insurer by telegram on the same date. The insurance Company
resisted payment, claiming violation of warranties and conditions, filing of fraudulent claims,
and that the fire had been deliberately caused by the insured or by other persons in connivance
with him. Qua Chee Gan, his brother Qua Chee Pao, and some employees of his were indicted
and tried in 1940 for the crime of arson but were acquitted by the trial court in a final decision on
9 July 1941.
With the civil case, Qua Chee Gan instituted the action in 1940 with the Court of First Instance
of Albay, seeking to recover the proceeds of certain fire insurance policies totalling P370,000,
issued by the Law Union & Rock Insurance Co., Ltd., through its agent, Warner, Barnes & Co.,
Ltd., upon certain bodegas and merchandise of the insured that were burned on 21 June 1940.
The records of the original case were destroyed during the liberation of the region, and were
reconstituted in 1946. After a trial that lasted several years, the CFI rendered a decision in favor
of the plaintiff, ordering the insurance company to pay Qua Chee Gan the sum of P146,394.48
(1st cause of action), P150,000 (2nd), P5,000 (3rd), P15,000 (4th) , and P40,000 (5th), each
bearing 80% interest per annum in accordance with Section 91 (b) of the Insurance Act from 26
September 1940, until each is paid, with costs against the defendant. It also dismissed the
complaint in intervention of PNB without costs. The Insurance Company appealed directly to the
Supreme Court. It contends that a warranty in a fire insurance policy prohibited the storage in the
premises of oils (animal and/or vegetable and/or mineral and their liquid products having a flash
point below 300 degrees Fahrenheit. Gasoline, which has a flash point below 300 degrees
Fahrenheit was stored therein.
Issue: Whether gasoline may be construed as oil to warrant the forfeiture of claims under the
insurance policy.
Held: The Hemp Warranty provisions relied upon by the insurer speaks of oils (animal and/or
vegetable and/or mineral and/or their liquid products having a flash point below 300
Fahrenheit, and is decidedly ambiguous and uncertain; for in ordinary parlance, Oils mean
lubricants and not gasoline or kerosene. By reason of the exclusive control of the insurance
company over the terms and phraseology of the contract, the ambiguity must be held strictly
against the insurer and liberally in favor of the insured, specially to avoid a forfeiture. There is no
reason why the prohibition of keeping gasoline in the premises could not be expressed clearly
and unmistakably, in the language and terms that the general public can readily understand,
without resort to obscure esoteric expression. If the company intended to rely upon a condition of
that character, it ought to have been plainly expressed in the policy. Still, it is well settled that the
keeping of inflammable oils on the premises, though prohibited by the policy, does not void it if
such keeping is incidental to the business and according to the weight of authority, even though
there are printed prohibitions against keeping certain articles on the insured premises the policy
will not be avoided by a violation of these prohibitions, if the prohibited articles are necessary or
in customary use in carrying on the trade or business conducted on the premises. In the present
case, no gasoline was stored in the burned bodegas, and that Bodega No. 2 which was not
burned and where the gasoline was found, stood isolated from the other insured bodegas.
The Supreme Court found no reversible error in the judgment appealed from, thus affirming it;
with costs against the appellant.
Mon 24 Mar 2003
Digest: De la Cruz v. Capital Insurance (GR L-21574, 30

June 1966)
No Comments
De la Cruz v. Capital Insurance
GR L-21574, 30 June 1966 (17 SCRA 559)
En Banc, Barrera (p): 8 concurring
Facts: Eduardo de la Cruz was the holder of an accident insurance policy. In connection with the
celebration of the New Year, the insured, a non-professional boxer, participated in a boxing
contest. In the course of his bout with another person, likewise a non-professional, of the same
height, weight and size, Eduardo slipped and was hit by his opponent on the left part of the back
of the head, causing Eduardo to fall, with his head hitting the rope of the ring. The insured died
with the cause of death reported as hemorrhage intracranial, left. The insurer refused to pay the
proceeds of the policy on the ground that the death of the insured in a boxing contest, was not
accidental and, therefore, not covered by the insurance.
Simon de la Cruz, the father of the insured and beneficiary under the policy, filed a claim with
the insurance company for payment of indemnity under the insurance policy. Denied, De la Cruz
instituted the action in the CFI Pangasinan (Civ. Case No. U-265)) for specific performance.
Defendant insurer set up the defense that the death of the insured, caused by his participation in a
boxing contest, was not accidental and, therefore, not covered by insurance. After due hearing,
the court rendered the decision in favor of the plaintiff; ordering the insurance company to
indemnify plaintiff for the death of the latters son, to pay the burial expenses, and attorneys
fees. Hence, the appeal.
Issue: Whether the death of the insured is covered by the policy.
Held: The terms accident and accidental have not acquired any technical meaning, and are
construed by the courts in their ordinary and common acceptation. The terms mean that which
happen by chance or fortuitously, without intention and design, and which is unexpected,
unusual, and unforeseen. An accident is an event that takes place without ones foresight or
expectation: an event that proceeds from an unknown cause, or is an unusual effect of a known
cause and, therefore, not expected. There is no accident when a deliberate act is performed unless
some additional, unexpected, independent, and unforeseen happening occurs which produces or
brings about the result of injury or death. Where the death or injury is not the natural or probable
result of the insureds voluntary act, which produces the injury, the resulting death is within the
protection of policies insuring against the death or injury from accident. In the present case,
while the participation of the insured in the boxing contest is voluntary, if without the
unintentional slipping of the deceased, perhaps he could not have received that blow in the head
and would not have died. Further, death or disablement resulting from engagement in boxing
contests was not declared outside of the protection of the insurance contract (What was included
was death or disablement consequent upon the Insured engaging in football, hunting, pigsticking,
steeplechasing, polo-playing, racing of any kind, mountaineering, or motorcycling). Failure of
the defendant insurance company to include death resulting from a boxing match or other sports
among the prohibitive risks leads inevitably to the conclusion that it did not intend to limit or
exempt itself from liability for such death.
The Supreme Court affirmed the appealed decision, with costs against appellant.
Mon 24 Mar 2003
Digest: Guerrero v. CA (GR L-44570, 30 May 1986)

No Comments
Guerrero v. CA
GR L-44570, 30 May 1986 (142 SCRA 136)
Second Division, Gutierrez (p): 4 concurring, 1 taking no part.
Facts: On 8 August 1963, RA 3844 abolished and outlawed share tenancy and put in its stead the
agricultural leasehold system. In 1969, Apolinario Benitez was taken by Manuel and Maria
Guerrero to take care of their 60 heads of cows which were grazing within their 21-hectare
coconut plantation situated at the Subprovince of Aurora, Quezon. Benitez was allowed for that
purpose to put up a hut within the plantation where he and his family stayed. In addition to
attending to the cows, he was made to clean the already fruitbearing coconut trees, burn dried
leaves and grass and to do such other similar chores. Harvest time which usually comes every 3
months. For his work related to the coconuts, he shared 1/3 of the proceeds from the copra he
processed and sold in the market. For attending to the cows he was paid P500 a year.
On 10 September 1971, RA 6389 amending RA 3844 declared share tenancy relationships as
contrary to public policy. Sometime in the early part of 1973, Benitez was refrained from
gathering nuts from the 10-hectare portion of the 16-hectare part of the plantation from where he
used to gather nuts. He felt aggrieved by the acts of defendants and he brought the matter to the
attention of the Office of Special Unit in the Office of the President in Malacaang, Manila. This
led to an execution of an agreement whereby defendants agreed to let plaintiff work on the 16hectare portion of the plantation as tenant thereon and that their relationship will be guided by
the provisions of RA 1199 (Agricultural Tenancy Act of the Philippines).
In July 1973, he was again refrained from gathering nuts from the 10-hectare portion of the
plantation with threats of bodily harm if he persists to gather fruits therefrom. The Guerreros
assigned Rogelio and Paulino Latigay to do the gathering of the nuts and the processing thereof
into copra. Defendants Guerreros also caused to be demolished a part of the cottage where
Benitez and his family lived, thus, making the Benitez feel that they meant business. Hence, the
case for reinstatement with damages.
Issue: Whether Benitez is a tenant within the meaning of the tenancy law to warrant
reinstatement to the plantation
Held: Longstanding possession is an essential distinction between a mere agricultural laborer
and a real tenant within the meaning of the tenancy law, a tenant being one who has the
temporary use and occupation of land or tenements belonging to another for the purpose of
production. A hired laborer who built his own house at his expense at the risk of losing the same
upon his dismissal or termination any time, is more consistent with that of an agricultural tenant
who enjoys security of tenure under the law. Cultivation is another important factor in
determining the existence of tenancy relationships. Cultivation is not limited merely to the
tilling, plowing or harrowing of the land but also includes the promotion of growth and the care
of the plants, or husbanding the ground to forward the products of the earth by general industry.
Agreement to share the produce or harvest on a tercio basis that is, a 1/3 to 2/3 sharing in favor
of the landowners bolsters the tenancy claim. The agricultural laborer works for the employer,
and for his labor he receives a salary or wage, regardless of whether the employer makes a profit.
On the other hand, the share tenant participates in the agricultural produce. His share is
necessarily dependent on the amount of harvest. Once a tenancy relationship is established, the
tenant has the right to continue working until such relationship is extinguished according to law.
In the present case, besides these indications, the agreement made on 2 May 1973 is clear and
categorical term that the Benitez is a tenant. Arguing that the intent was different, being that of a
hired farmhand, the law existing at that time the agreement was made militate against the claim.
Benitez did not commit any of the causes that would warrant his ejectment, and thus, was
unlawfully deprived of his right to security of tenure and the Court of Agrarian Reforms did not
err in ordering the reinstatement of respondent as tenant and granting him damages therefor.
The Supreme Court dismissed the petition for lack of merit, and affirmed the CA decision. No
costs.
Mon 24 Mar 2003
Digest: Lee Cho (@ Sem Lee) v. Republic (GR L-12408, 28

December 1959)
No Comments
Lee Cho (@ Sem Lee) v. Republic
GR L-12408, 28 December 1959 (106 Phil 775)
En Banc, Bautista Angelo (p): 9 concurring
Facts: On 22 September 1907, petitioner was born in Amoy, China, of Chinese parents. He
came to the Philippines sometime in February 1921 and was given the corresponding alien
certificate of residence and registration. He settled in Cebu City (where he as continuously
resided up to the present time). Petitioner studied 1st to 7th grade in Cebu Chinese High School,
a private institution recognized by the government. He speaks and writes English and the Cebu
dialect. He, having associated with some Filipinos, engaged in the corn business in Cebu City
(1921-WWII) and in the lumber business (1946-present). He invested P5,000.00 capital in the
business and at present the actual worth of his share is about P20,000.00. Petitioner is receiving
a monthly salary of P400.00 and realizes a profit share worth P10,000.00 every year. He has no
tax liability to the government. He possesses all the qualifications and none of the
disqualifications prescribed by law. As to his family, he married one Sy Siok Bin on 8 December
1929 with whom he had 13 children, all born in the Cebu City. All these children had been
issued the corresponding alien certificate of registration, with the exception of Lourdes Lee who
married a naturalized Filipino citizen named Lim Kee Guan. With the exception of William Lee
who is not of school age, Angelita who reached 5th grade and Lourdes who stopped in 3rd year
high school, the other children are at present studying in private schools and colleges recognized
by the government.
Lee Cho filed a petitioner for naturalization before the Court of First Iinstance of Cebu. On 30
August 1956, the court rendered decision finding petitioner qualified to be a Filipino citizen. On
2 October 1957, however, the government filed a motion for new trial on the ground of newly
discovered evidence which if presented may affect the qualification of petitioner, and finding the
same well founded, the court entertained the motion. After hearing, the court again rendered
decision reaffirming its holding that petitioner is qualified to become a Filipino citizen. The
government interposed an appeal.
Issue: Whether petitioner was able to comply with the requirements for naturalization.
Held: The provisions of the Naturalization Law should be strictly construed in order that its
laudable and nationalistic purpose may be fully fulfilled. In the present case, the petitioner has
not filed any declaration of intention to become a Filipino citizen because, as he claims, he has
resided continuously in the Philippines for a period of more than 30 years and has given primary
and secondary education to all his children in private schools recognized by the government.
Angelita Lee has only reached grade five and no explanation was given why no secondary
education was afforded her. Lourdes Lee has studied only as far as 3rd year high school and then
allegedly stopped allegedly because of poor health. Lourdes admitted in open court, however,
that she continued her studies in a Chinese school, which employs strictly Chinese curriculum,
despite her illness. This circumstance betrays the sincerity of petitioner to become a Filipino
citizen for if his motive were proper he should not have tolerated such deviation from the
educational requirement of the law. The petitioner, thus, has failed to qualify to become a
Filipino citizen.
The Supreme Court ruled that appealed decision is reversed, with costs against petitioner.
Mon 24 Mar 2003
Digest: Co v. Republic (GR L-12150, 26 May 1960)

No Comments
Co v. Republic
GR L-12150, 26 May 1960 (108 Phil 775)
First Dvision, Bautista Angelo (p): 6 concurring
Facts: Petitioner was born in Abra and his parents are both Chinese. He owes his allegiance to
the Nationalist Government of China. He is married to Leonor Go, the marriage having been
celebrated in the Catholic church of Bangued. He speaks and writes English as well as the
Ilocano and Tagalog dialects. He graduated from the Abra Valley College, and finished his
primary studies in the Colegio in Bangued, both schools being recognized by the government.
He has a child two months old. He has never been accused of any crime involving moral
turpitude. He is not opposed to organized government, nor is he a member of any subversive
organization. He does not believe in, nor practice, polygamy. Since his birth, he has never gone
abroad. He mingles with the Filipinos. He prefers a democratic form of government and stated
that if his petition is granted he would serve the government either in the military or civil
department. He is a merchant dealing in the buy and sell of tobacco. He also is part owner of a
store in Bangued. In his tobacco business, he has a working capital of P10,000.00 which he
claims to have been accumulated thru savings. He contributes to civic and charitable
organizations like the Jaycees, Rotary, Red Cross and to town fiestas. He likes the customs of the
Filipinos because he has resided in the Philippines for a long time. During the year 1956, he
claims to have earned P1,000.00 in his tobacco business. With respect to the store of which he
claims to be a part owner, he stated that his father gave him a sum of less than P3,000.00
representing one-fourth of the sales. Aside from being a co-owner of said store, he receives a
monthly salary of P120,00 as a salesman therein. He took a course in radio mechanics and
completed the same in 1955. He has no vice of any kind. He claims that he has never been
delinquent in the payment of taxes. But he admitted that he did not file his income tax return
when he allegedly received an amount of not less than P3,000 from his father which he claims to
have invested in his tobacco business.
Petitioner filed his petition for naturalization in the trial court. After hearing, the court ordered
that a certificate of naturalization be issued to petitioner after the lapse of two years from the date
the decision becomes final and all the requisites provided for in RA 503. The government
appealed the decision of the trial court, raising the facts that did not state what principles of the
Constitution he knew, although when asked what laws of the Philippines he believes in, he
answered democracy.; that he stated that his father had already filed his income tax return, when
asked why he did not file his income tax returns; and that he presented his alien certificate of
registration, but not the alien certificates of registration of his wife and child.
Issue: Whether petitioner failed to comply with the requirements prescribed by law in order to
qualify him to become a Filipino citizen.
Held: The scope of the word law in ordinary legal parlance does not necessarily include the
constitution, which is the fundamental law of the land, nor does it cover all the principles
underlying our constitution. Further, Philippine law requires that an alien to conducted himself in
a proper and irreproachable manner during the entire period of his residence in the Philippines in
his relation with the constituted government as well as with the community in which he is living.
In the present case, in so stating that he believes merely in our laws, he did not necessarily refer
to those principles embodied in our constitution which are referred to in the law; the belief in
democracy or in a democratic form of government is not sufficient to comply with the
requirement of the law that one must believe in the principles underlying our constitution.
Further, petitioner failed to show that he has complied with his obligation to register his wife and
child with the Bureau of Immigration as required by the Alien Registration Actl; and further
failed to file his income tax return despite his fixed salary of P1,440.00 a year and his profit of
P1,000.00 in his tobacco business, and received an amount less than P3,000 from his father as
one-fourth of the proceeds of the sale of the store, the total of which is more than what is
required by law for one to file an income tax return.
The Supreme Court reversed the appealed decision, hold that the trial court erred in granting the
petition for naturalization, without pronouncement as to costs.
Mon 24 Mar 2003
Digest: Manahan v. ECC (GR L-44899, 22 April 1981)

No Comments
Manahan v. ECC
GR L-44899, 22 April 1981 (104 SCRA 198)
First Division, Fernandez (p): 4 concurring.
Facts: Maria E. Manahan, the petitioner, is the widow of Nazario Manahan, Jr., who died of
Enteric Fever while employed as classroom teacher in Las Pias Municipal High School, Las
Pias, Rizal, on 8 May, 1975. The deceased was in perfect health when he entered government
service on 20 July 1969, and that in the course of his employment in 1974, he was treated for
epigastric pain. He succumbed to enteric fever on May 8, 1975. Thus, the petitioner filed a claim
with the Government Service Insurance System (GSIS) for death benefit under Presidential
Decree 626. In a letter dated 19 June 1975, the GSIS denied the claim on a finding that the
ailment of Nazario Manahan, Jr., typhoid fever, is not an occupational disease, and that enteric
fever or paratyphoid is similar in effect to typhoid fever, in the sense that both are produced by
Salmonella organisms.
The petitioner appealed to the Employees Compensation Commission (ECC), which affirmed the
decision of the GSIS on a finding that the ailment of the deceased, enteric fever, was not induced
by or aggravated by the nature of the duties of Nazario Manahan, Jr. as a teacher. Thus, the
appeal.
Issue: Whether the Workmens Compensation should be resolved in favor of the worker
Held: The Transitory and Final Provisions of the New Labor Code provides that all actions and
claims accruing prior to the effectivity of this Code shall be determined in accordance with the
laws in force at the time of their accrual and under the third paragraph of Article 292, Title II
(Prescription of Offenses and Claims), workmens compensation claims accruing prior to the
effectivity of this Code and during the period from 1 November 1974 up to 31 December 1974
shall be processed and adjudicated in accordance with the laws and rules at the time their causes
of action accrued Hence, this Court applied the provisions of the Workmens Compensation Act,
as amended, on passing upon petitioners claim.. The illness that claimed the life of the deceased
may had its onset before 10 December 1974, thus, his action accrued before 10 December 1974.
Still, In any case, and case of doubt, the same should be resolved in favor of the worker, and that
social legislations like the Workmens Compensation Act and the Labor Code should be
liberally construed to attain their laudable objective, i.e., to give relief to the workman and/or his
dependents in the event that the former should die or sustain an injury. Pursuant to such doctrine
and applying now the provisions of the Workmens Compensation Act in this case, the
presumption of compensability subsists in favor of the claimant.
The Supreme Court set aside the decision of the ECC and ordered the GSIS to pay the petitioner
the amount of P6,000.00 as death compensation benefit and P600.00 as attorneys fees, to
reimburse the petitioners expenses incurred for medical services, hospitalization and medicines
of the deceased Nazario Manahan, Jr., duly supported by proper receipts, and to pay
administrative fees.
Mon 24 Mar 2003
Digest: People v. Manantan (GR L-14129, 31 July 1962)

1 Comment
People v. Manantan
GR L-14129, 31 July 1962 (5 SCRA 684)
En Banc, Regala (p): 7 concur, 1 took no part, 1 on leave
Facts: In an information filed by the Provincial Fiscal of Pangasinan in the Court of First
Instance (CFI) of that Province, Guillermo Manantan was charged with a violation of Section 54
of the Revised Election Code. A preliminary investigation conducted by said court resulted in the
finding of a probable cause that the crime charged was committed by the defendant. Thereafter,
the trial started upon defendants plea of not guilty, the defense moved to dismiss the information
on the ground that as justice of the peace, the defendant is not one of the officers enumerated in
Section 54 of the Revised Election Code. The lower court denied the motion to dismiss, holding
that a justice of the peace is within the purview of Section 54. A second motion was filed by
defense counsel who cited in support thereof the decision of the Court of Appeals (CA) in People
vs. Macaraeg, where it was held that a justice of the peace is excluded from the prohibition of
Section 54 of the Revised Election Code. Acting on various motions and pleadings, the lower
court dismissed the information against the accused upon the authority of the ruling in the case
cited by the defense. Hence, the appeal by the Solicitor General.
Issue: Whether the justice of the peace was excluded from the coverage of Section 54 of the
Revised Election Code
Held: Under the rule of Casus omisus pro omisso habendus est, a person, object or thing omitted
from an enumeration must be held to have been omitted intentionally. The maxim casus
omisus can operate and apply only if and when the omission has been clearly established. The
application of the rule of casus omisus does not proceed from the mere fact that a case is
criminal in nature, but rather from a reasonable certainty that a particular person, object or thing
has been omitted from a legislative enumeration. Substitution of terms is not omission. For in its
most extensive sense the term judge includes all officers appointed to decide litigated
questions while acting in that capacity, including justice of the peace, and even jurors, it is said,
who are judges of facts. The intention of the Legislature did not exclude the justice of the peace
from its operation. In Section 54, there is no necessity to include the justice of peace in the
enumeration, as previously made in Section 449 of the Revised Administrative Code, as the
legislature has availed itself of the more generic and broader term judge, including therein all
kinds of judges, like judges of the courts of First Instance, judges of the courts of Agrarian
Relations, judges of the courts of Industrial Relations, and justices of the peace.
The Supreme Court set aside the dismissal order entered by the trial court and remanded the case
for trial on the merits.
Mon 24 Mar 2003
Digest: Mutuc v. Comelec (GR L-32717, 26 November 1970)

[5] Comments
Mutuc v. Comelec
GR L-32717, 26 November 1970 (36 SCRA 228)
First Division, Fernando (p): 7 concur, 2 on leave, 1 concur in separate opinion
Facts: The Commission on Elections (COMELEC) prohibited petitioner Amelito Mutuc, a
candidate for the position of a delegate to the Constitutional Convention, from using jingles in
his mobile units equipped with sound systems and loud speakers on 22 October 1970.
Petitioner impugned the act of respondent as violative of his right to free speech. Respondent
however contended that the prohibition was premised on a provision of the Constitutional
Convention Act, which made it unlawful for candidates to purchase, produce, request or
distribute sample ballots, or electoral propaganda gadgets such as pens, lighters, fans (of
whatever nature), flashlights, athletic goods or materials, wallets, bandanas, shirts, hats, matches,
cigarettes, and the like, whether of domestic or foreign origin. It was its contention that the
jingle proposed to be used by petitioner is the recorded or taped voice of a singer and therefore a
tangible propaganda material, under the phrase and the like.
Issue: Whether the taped jingles fall under the phrase and the like.
Held: Under the well-known principle of ejusdem generis, the general words following any
enumeration are applicable only to things of the same kind or class as those specifically referred
to. It is quite apparent that what was contemplated in the Act was the distribution of gadgets of
the kind referred to as a means of inducement to obtain a favorable vote for the candidate
responsible for its distribution. The Constitutional Convention Act contemplated the prohibition
on the distribution of gadgets of the kind referred to as a means of inducement to obtain a
favorable vote for the candidate responsible for its distribution (distribution of electoral
propaganda gadgets, mention being made of pens, lighters, fans, flashlights, athletic goods or
materials, wallets, bandanas, shirts, hats, matches, and cigarettes, and concluding with the words
and the like.). Taped jingles therefore were not prohibited.
The Supreme Court decision was made to expound on the reasons behind the minute resolution
of 3 November 1970. The Supreme Court permanently restrained and prohibited the Comelec
from enforcing or implementing or demanding compliance with its order banning the use of
political taped jingle, pursuant to the SC resolution of 3 November 1970; without pronouncement
as to costs.
Mon 24 Mar 2003
Digest: People v. Estenzo (GR L-35376, 11 September 1980)

No Comments
People v. Estenzo
GR L-35376, 11 September 1980 (99 SCRA 651)
First Division, de Castro (p): 5 concur
Facts: In a decision dated 28 September 1940 by the Cadastral Court, Lot 4273 of the Ormoc
Cadastre was declared public land. Respondent Aotes filed on23 February 1972 a petition to
reopen the decision of the Cadastral Court under Repuplic Act 931 as amended by Republic Act
6236. Aotes claim that since the time limit for filing applications for free patents and applications
for judicial confirmation of incomplete and imperfect titles have been extended up to 31
December 1980, the reopening of cadastral cases is also extended until 31 December 1980. The
judge denied the opposition for lack of sufficient merit on 9 May 1972, and rendered decision on
22 July 1972 after due hearing, declaring Lot 4273 public land and adjudicating said lot in favor
of the Aoetes in undivided interest in equal share of each. Dissatisfied with the decision of the
lower court, petitioners filed the instant petition.
Issue: Whether the extension provided for under RA 6263 also applies to Re-opening of
Cadastral Proceedings.
Held: Under the legal maxim of statutory construction, expressio unius est exclusio alterius
(Express Mention is Implied Exclusion), the express mention of one thing in a law, as a general
rule, means the exclusion of others not expressly mentioned. This rule, as a guide to probable
legislative intent, is based upon the rules of logic and the natural workings of the human mind. If
RA 6236 had intended that the extension it provided for applies also to reopening of cadastral
cases, it would have so provided in the same way that it provided the extension of time to file
applications for free patent and for judicial confirmation of imperfect or incomplete title. The
intention to exclude the reopening of cadastral proceedings or certain lands which were declared
public land in RA 6236 is made clearer by reference to RA2061 which includes the reopening of
cadastral cases, but not so included in RA 6236. Thus, RA 6236, the very law on which Aotes
bases his petition to reopen the cadastral proceedings fails to supply any basis for respondents
contention. It will be noted that while RA 2061 fixed the time to reopen cadastral cases which
shall not extend beyond 31 December 1968, no similar provision is found in RA 6236 expressly
extending the time limit for the reopening of cadastral proceedings on parcels of land declared
public land. As correctly pointed out by petitioners, the extension as provided for by the RA 6236
makes no reference to reopening of cadastral cases as the earlier law, RA2061, expressly did.
Truly, the extension provided for by RA 6236 applies only to the filing of applications for free
patent and for judicial confirmation of imperfect or incomplete titles and not to reopening of
cadastral proceedings like the instant case, a proceeding entirely different from filing an
application for a free patent or for judicial confirmation of imperfect or incomplete titles.
The Supreme Court set aside the 22 July 1972 decision of the respondent Judge and reiterating
the 28 September 1940 decision of the Cadastral Court; without pronouncement as to costs.
Mon 24 Mar 2003
Digest: People v. Santayana (GR L-22291, 15 November

1976)
No Comments
People v. Santayana
GR L-22291, 15 November 1976 (74 Phil 25)
Second Division, Concepcion Jr. (p): 4 concur, 1 took no part, 1 designated to sit in 2nd division
Facts: On 19 February 1962, Jesus Santayana y Escudero, was appointed as Special Agent by
then Colonel Jose C. Maristela, Chief of the CIS. On 9 March 1962, Col. Maristela issued an
undated certification to the effect that the accused was an accredited member of the CIS and the
pistol described in the said Memorandum Receipt was given to him by virtue of his appointment
as special agent and that he was authorized to carry and possess the same in the performance of
his official duty and for his personal protection. On 29 October 1962, the accused was found in
Plaza Miranda in possession of the firearms and ammunition without a license to possess them.
An investigation was conducted and thereupon, a corresponding complaint was filed against the
accused. The case underwent trial after which the accused was convicted of the crime charged.
Hence, the case was appealed to Supreme Court.
Issue: Whether Santayana, a secret agent, was liable for illegal possession of firearms
Held: The appointment of a civilian as secret agent to assist in the maintenance of peace and
order campaigns and detection of crimes sufficiently puts him within the category of a peace
officer equivalent even to a member of the municipal police expressly covered by Section 879
(People v. Macarandang). In the present case, Santayana was appointed as CIS secret agent with
the authority to carry and possess firearms. He was issued a firearm in the performance of his
official duties and for his personal protection. Application of license was unnecessary, according
to Col. Maristela, as the firearm is government property. No permit was issued, according to
Capt. Adolfo Bringas as he was already appointed as a CIS agent. Even if the case of People vs.
Mapa revoked the doctrine in the Macarandang case, this was made only on 30 August 1967,
years after the accused was charged. Under the Macarandang rule therefore obtaining at the time
of appellants appointment as secret agent, he incurred no criminal liability for possession of the
pistol in question.
The Supreme Court reversed the appealed decision, conformably with the recommendation of
the Solicitor General, and acquitted Jesus Santayana, canceling the bond for his provisional
release; with costs de oficio.
Mon 24 Mar 2003
Digest: Matabuena v. Cervantes (GR L-28771, 31 March

1971)
No Comments
Matabuena v. Cervantes
GR L-28771, 31 March 1971 (38 SCRA ___)
En Banc, Fernando (p): 9 concur, 1 took no part
Facts: On 20 February 1956, Felix Matabuena executed a Deed of Donation inter vivos in favor
of Petronila Cervantes during the time they were living as husband and wife in a common law
relationship. They were later married on 28 March 1962. Felix died intestate on 13 September
1962. Cornelia Matabuena, being the sole sister and nearest and nearest relative to Felix,
questioned the validity of the donation claiming that the ban on donation between spouses during
a marriage applies to a common-law relationship. She had the land declared on her name and
paid the estate and inheritance taxes thereon on virtue of an affidavit of self-adjudication
executed by her in 1962. On 23 November 1965, the lower court upheld the validity of the
donation as it was made before Cervantes marriage to the donor. Hence, the appeal.
Issue: Whether the Article 133 of the civil code apply to donations between live-in partners.
Held: While Article 133 of the Civil Code considers as void a donation between the spouses
during the marriage, policy considerations of the most exigent character as well as the dictates
of morality require that the same prohibition should apply to a common-law relationship, as it is
contrary to public policy. The law prohibits donations in favor of the other consort and his
descendants because of fear of undue and improper pressure and influence upon the donor, a
prejudice deeply rooted in ancient law. Whatever omission may be apparent in an interpretation
purely literal of the language used must be remedied by an adherence to its avowed objective. It
is a principle of statutory construction that what is within the spirit of the law is as much a part of
it as what is written. Otherwise the basic purpose discernible in such codal provision would not
be attained.
The Supreme Court (1) reversed the 23 November 1965 decision of the lower court; (2) declared
the questioned donation void and recognized the rights of plaintiff and defendant as pro indiviso
heirs to the property; and (3) remanded the case to the lower court for its appropriate disposition
in accordance with the current decision; without pronouncement as to costs.
Mon 24 Mar 2003
Digest: In RE Tampoy (GR L-14322, 25 February 1960)

No Comments
In RE Tampoy: Diosdada Alberastine, petitioner
GR L-14322, 25 February 1960 (107 Phil 100)
En Banc, Bautista Angelo (p): 10 concurring
Facts: On 19 November 1939, Petronila Tampoy, a widow and without children, requested with
Bonifacio Minoza to read a testament and explain its contents to her in her house in San Miguel
street, municipality of Argao, province of Cebu in 19 November 1939, which he did in the
presence of tree instrumental witnesses, Rosario K. Chan, Mauricio de la Pena, and Simeona
Omboy. After confirming the contents of the testament, she requested Bonifacio Minoza to write
her name at the foot of the testament in the second page, which he did, and after which she
stamped her thumbmark between her name and surname in the presence of all three instrumental
witnesses. Bonifacio Minoza also signed at the foot of the testament, in the second page, in the
presence of the testator and all three abovenamed witnesses. However, the testator, just like
Bonifacio Minoza, did not sign on the left margin or any part of the first page of the testament,
composed of two pages. All the three instrumental witnesses signed at the foot of the
acknowledgment written in the second page of the testament, and the left margin of the first and
second page, in the presence of the testator, Bonifacio Minoza, Atty. Kintanar, and the others.
The testament was executed freely and spontaneously, without having been threatened, forced
and intimidated, and not having exercised on her (the testator) undue influence, being the same
in full use of her mental faculties and enjoying good health. On 22 February 1957, the testator
died in here house in Argao.
On 7 March 1957, or two weeks after, the heir found in the testament, Carman Aberastine died,
leaving her mother, the petitioner Diosdada Alberastine. After trial on the probate o a document
purportedly to be the last and testament of Petronila Rampoy, the trial court denied the petition
on the ground that the left hand margin of the first page of the will does not bear the thumbmark
of the testatrix. Petitioner appealed from this ruling. The Court of Appeals certified the case to
the Supreme Court because it involves purely a question of law.
Issue: Whether the absence of the testators thumbmark in the first page is fatal to render the will
void
Held: Statutes prescribing the formalities to be observed in the execution of wills are very
strictly construed. A will must be executed in accordance with the statutory requirements;
otherwise it is entirely void. In the present case, the contention that the petition for probate is
unopposed, and that the three testimonial witnesses testified and manifested to the court that the
document expresses the true and voluntary will of the deceased, cannot be sustained as it runs
counter to the express provision of the law. Since the will suffers the fatal defect, as it does not
bear the thumbmark of the testatrix on its first page even if it bears the signature of the three
instrumental witnesses, the same fails to comply with the law and therefore cannot be admitted to
probate.
The Supreme Court affirmed the appealed order, without pronouncement as to costs.
Mon 24 Mar 2003
Digest: Villanueva v. Comelec (GR L-54718, 4 December

1985)
No Comments
Villanueva v. Comelec (Resolution)
GR L-54718, 4 December 1985
En Bank, Teehankee (p): 9 concurring, 2 on leave
Facts: On 4 January 1980, the last day for filing of certificates of candidacy, one Narciso
Mendoza, Jr. filed his sworn certificate of candidacy as independent for the office of vice-mayor
of Dolores, Quezon in the 30 January 1980 local elections. Later that day, however, Mendoza
filed an unsworn letter in his own handwriting withdrawing his said certificate of candidacy for
personal reasons. His unsworn withdrawal had been accepted by the election registrar without
protest nor objection. Later on 25 January 1980, petitioner Crisologo Villanueva, upon learning
of his companion Mendozas withdrawal, filed his own sworn Certificate of Candidacy in
substitution of Mendozas for the said office of vice mayor as a one-man independent ticket.
The results showed petitioner to be the clear winner over respondent with a margin of 452 votes.
The Municipal Board of Canvassers, however, disregarded all votes cast in favor of petitioner as
stray votes on the basis of the Provincial Election Officers opinion that petitioners name does
not appear in the certified list of candidates. The canvassers accordingly proclaimed respondent
Vivencio G. Lirio as the only unopposed candidate and as the duly elected vice mayor of
Dolores.
On 21 February 1980, Comelec denied the petition of Villanueva, stating that Mendozas
withdrawal was not under oath as required by Section 27 of the 1978 Election Code, and that his
withdrawal was not made after the last day for filing of certificate of candidacy, as contemplated
by Section 28, but on the same day.
Issue: Whether the informal withdrawal of Mendoza invalidates the election of Villanueva as
vice mayor.
Held: Section 28 of the 1978 Election Code provides for such substitute candidates in case of
death, withdrawal or disqualification up to mid-day of the very day of the elections. Mendozas
withdrawal was filed on the last hour of the last day for regular filing of candidacies, which he
had filed earlier that same day. For all intents and purposes, such withdrawal should therefore be
considered as having been made substantially and in truth after the last day, even going by the
literal reading of the provision by the Comelec. Further, the will of the electorate should be
respected, it should not be defeated through the invocation of formal or technical defects. The
will of the people cannot be frustrated by a technicality that the certificate of candidacy had not
been properly sworn to. This legal provision is mandatory and non-compliance therewith before
the election would be fatal to the status of the candidate before the electorate, but after the people
have expressed their will, the result of the election cannot be defeated by the fact that the
candidate has not sworn to his certificate or candidacy. The legal requirement that a withdrawal
be under oath will be held to be merely directory and Mendozas failure to observe the
requirement should be considered a harmless irregularity. The bona fides of petitioner Villanueva
as a substitute candidate cannot be successfully assailed. The votes cast in his favor must be
counted.
The Supreme Court resolved to reconsider and sets aside the questioned Resolutions of Comelec
and annuls the proclamation of Lirio as elected vice-mayor of Dolores, Quezon and instead
declares petitioner as the duly elected vice-mayor of said municipality and entitled forthwith to
assume said office, take the oath of office and discharge its functions. The resolution is made
immediately executory.
Mon 24 Mar 2003
Digest: City of Manila v. Chinese Community of Manila (GR

14355, 31 October 1919)
[3] Comments
City of Manila v. Chinese Community of Manila

GR 14355, 31 October 1919 (40 Phil
First Division, Johnson (p): 4 concurring.
Facts: On the 11th day of December, 1916, the city of Manila presented a petition in the Court of
First Instance of said city, praying that certain lands, therein particularly described, be
expropriated for the purpose of constructing a public improvement, specifically for the purpose
of extending Rizal Avenue. The Chinese Community opposed the said expropriation, contending
that there was no necessity of taking, that it already had public character and that it would it
would disturb the resting places of the dead.
The trial court decided that there was no necessity for the expropriation of the strip of land and
absolved each and all of the defendants from all liability under the complaint, without any
finding as to costs. From the judgment, the City of Manila appealed.
Issue: Whether the Chinese cemetery may be validly expropriated by the City of Manila
Held: The exercise of the right of eminent domain, whether directly by the State, or by its
authorized agents, is necessarily in derogation of private rights, and the rule in that case is that
the authority must be strictly construed. No species of property is held by individuals with
greater tenacity, and none is guarded by the constitution and laws more sedulously, than the right
to the freehold of inhabitants. When the legislature interferes with that right, and, for greater
public purposes, appropriates the land of an individual without his consent, the plain meaning of
the law should not be enlarged by doubtly interpretation.
The right of expropriation is not an inherent power in a municipal corporation, and before it can
exercise the right some law must exist conferring the power upon it. When the courts come to
determine the question, they must not only find (a) that a law or authority exists for the exercise
of the right of eminent domain, but (b) also that the right or authority is being exercised in
accordance with the law. In the present case there are two conditions imposed upon the authority
conceded to the City of Manila: First, the land must be private; and, second, the purpose must be
public. If the court, upon trial, finds that neither of these conditions exists or that either one of
them fails, certainly it cannot be contended that the right is being exercised in accordance with
law. It is a well known fact that cemeteries may be public or private. The former is a cemetery
used by the general community, or neighborhood, or church, while only a family, or a small
portion of the community or neighborhood uses the latter. Where a emetery is open to the public,
it is a public use and no part of the ground can be taken for other public uses under a general
authority. And this immunity extends to the unimproved and unoccupied parts, which are held in
good faith for future use. It is alleged, and not denied, that the cemetery in question may be used
by the general community of Chinese, which fact, in the general acceptation of the definition of a
public cemetery, would make the cemetery in question public property. If that is true, then, of
course, the petition of the plaintiff must be denied, for the reason that the city of Manila has no
authority or right under the law to expropriate public property. But, whether or not the cemetery
is public or private property, its appropriation for the uses of a public street, especially during the
lifetime of those specially interested in its maintenance as a cemetery, should be a question of
great concern, and its appropriation should not be made for such purposes until it is fully
established that the greatest necessity exists therefor. In this case there is no necessity of taking
since there are other ways by which Rizal Avenue may be expanded to ease the traffic situation.
The Supreme Court held that there is no proof of the necessity of opening the street through the
cemetery from the record. But that adjoining and adjacent lands have been offered to the city free
of charge, which answers every purpose of the City. The Supreme Court, thus, affirmed the
judgment of the lower court, with costs against the appellant.
Mon 24 Mar 2003
Digest: Bello v. CA (GR L-38161, 29 March 1974)

No Comments
Bello v. CA
GR L-38161, 29 March 1974 (56 SCRA 509)
En Banc, Teehankee (p): 10 concurring.
Facts: On 25 August 1970, spouses Juan and Filomena Bello were charged for estafa before the
City Court of Pasay for allegedly having misappropriated a ladys ring with a value of P1,000.00
received by them from Atty. Prudencio de Guzman for sale on commission basis. After trial, they
were convicted. Petitioners filed their notice of appeal of the adverse judgment to the Court of
First Instance (CFI) of Pasay City, but the prosecution filed a petition to dismiss appeal on the
ground that since the case was within the concurrent jurisdiction of the city court and the CFI
and the trial in the city court had been duly recorded, the appeal should have been taken directly
to the Court of Appeals as provided by section 87 of the Judiciary Act, Republic Act 296, as
amended. The CFI per its order of 29 October 1971 did find that the appeal should have been
taken directly to the Court of Appeals but ordered the dismissal of the appeal and remand of the
records to the city court for execution of judgment. Thereafter, the City court denied
petitioners motion for having been erroneously addressed to this court instead of to the CFI
ignoring petitioners predicament that the CFI had already turned them down and ordered the
dismissal of their appeal without notice to them and that as a consequence it was poised to
execute its judgment of conviction against them.
Petitioners spouses then filed on 14 January 1972 their petition for prohibition and mandamus
with the Court of Appeals against the People and City Court. The Solicitor General did not
interpose any objection whichever viewpoint is adopted by the Honorable Court in resolving the
two apparently conflicting or clashing principles of law, i.e.. finality of judicial decision or
equity in judicial decision. The Court of Appeals, however, dismissed the petition on 17
December 1973, after finding that the city courts judgment was directly appealable to it.
Although recognizing that the CFI instead of dismissing appeal, could have in the exercise of its
inherent powers directed appeal to be endorsed to the Court of Appeals, it held that since
petitioners did not implead the CFI as principal party respondent it could not grant any relief at
all even on the assumption that petitioners can be said to deserve some equities. With their
motion for reconsideration denied, petitioners filed the petition for review.
Issue: Whether the formal impleading of the Court of First Instance is indispensable and the
procedural infirmity of misdirecting the appeal to Court of First Instance are fatal to the
appellees cause
Held: The construction of statutes is always cautioned against narrowly interpreting a statute as
to defeat the purpose of the legislator and it is of the essence of judicial duty to construe statutes
so as to avoid such a deplorable result (of injustice or absurdity and therefore a literal
interpretation is to be rejected if it would be unjust or lead to absurd results. Thus, in the
construction of its own Rules of Court, the Court is all the more so bound to liberally construe
them to avoid injustice, discrimination and unfairness and to supply the void by holding that
Courts of First Instance are equally bound as the higher courts not to dismiss misdirected appeals
timely made but to certify them to the proper appellate court.
The formal impleading of the CFI which issued the challenged order of dismissal was not
indispensable and could be overlooked in the interest of speedy adjudication. The Court of
Appeals act of dismissing the petition and denying the relief sought of endorsing the appeal to
the proper court simply because of the non-impleader of the CFI as a nominal party was
tantamount to sacrificing substance to form and to subordinating substantial justice to a mere
matter of procedural technicality. The procedural infirmity of petitioners misdirecting their
appeal to the CFI rather than to the Court of Appeals, which they had timely sought to correct in
the CFI itself by asking that court to certify the appeal to the Court of Appeals as the proper
court, should not be over-magnified as to totally deprive them of their substantial right of appeal
and leave them without any remedy.
The Supreme Court set aside the CA decision dismissing the petition and in lieu thereof,
judgment was rendered granting the petition for prohibition against City court, enjoining it from
executing its judgment of conviction against petitioners-accused and further commanding said
city court to elevate petitioners appeal from its judgment to the CA for the latters disposition on
the merits; without costs.
Mon 24 Mar 2003
Digest: Serfino v. CA (GR L-40858, 15 September 1987)

No Comments
Serfino v. CA
Second Division, Paras (p): 4 concurring.
Facts: On 25 August 1937, a parcel of land was patented in the name of Pacifico Casamayor
(OCT 1839). On 14 December 1945, he sold said land in favor of Nemesia D. Balatazar (TCT
No. 57-N, 18 January 1946). OCT 1839 was lost during the war and upon petition of Nemesia
Baltazar, the Court of First Instance of Negros Occidental ordered the reconstitution thereof.
Pursuant thereto, OCT 14-R (1839) was issued on 18 January 1946 in the name of Pacifico
Casamayor. On that same day, TCT 57-N was issued in the name of Nemesia Baltazar but after
the cancellation of OCT 14-R (1839). On 15 August 1951, Nemesia Baltazar, sold said property
to Lopez Sugar Central Mill Co., and the latter did not present the documents for registration
until 17 December 1964 to the Office of the Registry of Deeds. Said office refused registration
upon its discovery that the same property was covered by another certificate of title, TCT 38985,
in the name of Federico Serfino. On 19 November 1964, the spouses Serfinos mortgaged the
land to the Philippine National Bank (PNB) to secure a loan in the amount of P5,000.00; which
was inscribed in TCT No. 38985.
The Lopez Sugar Central instituted an action to recover said land; and the lower court rendered a
decision ordering the cancellation of TCT No. 38985; issuance of a new TCT in the name of
plaintiff; and the payment of the plaintiff PNB the loan of spouses Serfinos secured by said land.
Both parties appealed from this decision of the trial court. Ruling on the assignment of errors,
the appellate court affirmed the judgment of the trial court with modification in its decision
setting aside the decision of the trial court declaring plaintiff liable to PNB for payment,
however, ordering the plaintiff to reimburse the Serfino spouses of the sum P1,839.49,
representing the unpaid taxes and penalties paid by the latter when they repurchased the property.
Hence, the appeal by the spouses Serfino and PNB to the Supreme Court.
Issue: Whether the auction sale of the disputed property was null and void.
Held: The assailed decision of the appellate court declares that the prescribed procedure in
auction sales of property for tax delinquency being in derogation of property rights should be
followed punctiliously. Strict adherence to the statutes governing tax sales is imperative not only
for the protection of the tax payers, but also to allay any possible suspicion of collusion between
the buyer and the public officials called upon to enforce such laws. Notice of sale to the
delinquent land owners and to the public in general is an essential and indispensable requirement
of law, the non-fulfillment of which vitiates the sale. In the present case, Lopez Sugar Central
was not entirely negligent in its payment of land taxes. The record shows that taxes were paid for
the years 1950 to 1953 and a receipt therefor was obtained in its name. The sale therefore by the
Province of Negros Occidental of the land in dispute to the spouses Serfinos was void since the
Province of Negros Occidental was not the real owner of the property thus sold. In turn, the
spouses Serfinos title which has been derived from that of the Province of Negros Occidental is
likewise void. However, the fact that the public auction sale of the disputed property was not
valid cannot in any way be attributed to the mortgagees fault. The inability of the Register of
Deeds to notify the actual owner or Lopez Sugar Central of the scheduled public auction sale was
partly due to the failure of Lopez Sugar Central to declare the land in its name for a number of
years and to pay the complete taxes thereon. PNB is therefore entitled to the payment of the
mortgage loan as ruled by the trial court and exempted from the payment of costs.
The Supreme Court affirmed the assailed decision, with modification that PNB mortgage credit
must be paid by Lopez Sugar Central.
Mon 24 Mar 2003
Digest: Mactan Cebu (MCIAA) v. Marcos (GR 120082, 11

September 1996)
No Comments
Mactan Cebu (MCIAA) v. Marcos
GR 120082, 11 September 1996 (261 SCRA 667)
Third Division, Davide Jr. (p): 4 concurring.
Facts: Mactan Cebu International Airport Authority (MCIAA) was created by virtue of Republic
Act 6958. Since the time of its creation, MCIAA enjoyed the privilege of exemption from
payment of realty taxes in accordance with Section 14 of its Charter. However on 11 October
1994, the Office of the Treasurer of Cebu, demanded for the payment of realty taxes on several
parcels of land belonging to the petitioner. Petitioner objected to such demand for payment as
baseless and unjustified. It also asserted that it is an instrumentality of the government
performing a governmental functions, which puts limitations on the taxing powers of local
government units. It nonetheless stands in the same footing as an agency or instrumentality of the
national government by the very nature of its powers and functions. The City refused to cancel
and set aside petitioners realty tax account, insisting that the MCIAA is a government controlled
corporation whose tax exemption privilege has been withdrawn by virtue of Sections 193 and
234 of the Local Government Code (LGC), and not an instrumentality of the government but
merely a government owned corporation performing proprietary functions. MCIAA paid its tax
account under protest when City is about to issue a warrant of levy against the MCIAAs
properties.
On 29 December 1994, MCIAA filed a Petition of Declaratory Relief with the Cebu Regional
Trial Court contending that the taxing power of local government units do not extend to the levy
of taxes or fees on an instrumentality of the national government. It contends that by the nature
of its powers and functions, it has the footing of an agency or instrumentality of the national
government; which claim the City rejects. On 22 March 1995, the trial court dismissed the
petition, citing that close reading of the LGC provides the express cancellation and withdrawal of
tax exemptions of Government Owned and Controlled Corporations. MCIAAs motion for
reconsideration having been denied by the trial court in its 4 May 1995 order, the petitioner filed
the instant petition.
Issue: Whether the MCIAA is exempted from realty taxes.
Held: Tax statutes are construed strictly against the government and liberally in favor of the
taxpayer. But since taxes are paid for civilized society, or are the lifeblood of the nation, the law
frowns against exemptions from taxation and statutes granting tax exemptions are thus construed
strictissimi juris against the taxpayer and liberally in favor of the taxing authority. A claim of
exemption from tax payments must be clearly shown and based on language in the law too plain
to be mistaken. Elsewise stated, taxation is the rule, exemption therefrom is the exception.
However, if the grantee of the exemption is a political subdivision or instrumentality, the rigid
rule of construction does not apply because the practical effect of the exemption is merely to
reduce the amount of money that has to be handled by the government in the course of its
operations. Further, since taxation is the rule and exemption therefrom the exception, the
exemption may be withdrawn at the pleasure of the taxing authority. The only exception to this
rule is where the exemption was granted to private parties based on material consideration of a
mutual nature, which then becomes contractual and is thus covered by the non-impairment clause
of the Constitution.
Mactan Cebu International Airport Authority (MCIAA) is a taxable person under its Charter
(RA 6958), and was only exempted from the payment of real property taxes. The grant of the
privilege only in respect of this tax is conclusive proof of the legislative intent to make it a
taxable person subject to all taxes, except real property tax. Since Republic Act 7160 or the Local
Government Code (LGC) expressly provides that All general and special laws, acts, city
charters, decrees [sic], executive orders, proclamations and administrative regulations, or part of
parts thereof which are inconsistent with any of the provisions of this Code are hereby repealed
or modified accordingly. With that repealing clause in the LGC, the tax exemption provided for
in RA 6958 had been expressly repealed by the provisions of the LGC. Therefore, MCIAA has to
pay the assessed realty tax of its properties effective after January 1, 1992 until the present.
The Supreme Court denied the petition, and affirmed the challenged decision and order of the
RTC Cebu; without pronouncement as to costs.
Mon 24 Mar 2003
Digest: CIR v. CA (GR 115349, 18 April 1997)

No Comments
CIR v. CA
GR 115349, 18 April 1997 (271 SCRA 605)
Third Division, Panganiban (p): 4 concurring
Facts: Private respondent, the Ateneo de Manila University, is a non-stock, non-profit
educational institution with auxiliary units and branches all over the Philippines. One auxiliary
unit is the Institute of Philippine Culture (IPC), which has no legal personality separate and
distinct from that of private respondent. The IPC is a Philippine unit engaged in social science
studies of Philippine society and culture. Occasionally, it accepts sponsorships for its research
activities from international organizations, private foundations and government agencies. On 8
July 1983, private respondent received from Commissioner of Internal Revenue (CIR) a demand
letter dated 3 June 1983, assessing private respondent the sum of P174,043.97 for alleged
deficiency contractors tax, and an assessment dated 27 June 1983 in the sum of P1,141,837 for
alleged deficiency income tax, both for the fiscal year ended 31 March 1978. Denying said tax
liabilities, private respondent sent petitioner a letter-protest and subsequently filed with the latter
a memorandum contesting the validity of the assessments. On 17 March 988, petitioner rendered
a letter-decision canceling the assessment for deficiency income tax but modifying the
assessment for deficiency contractors tax by increasing the amount due to P193,475.55.
Unsatisfied, private respondent requested for a reconsideration or reinvestigation of the modified
assessment.
At the same time, it filed in the respondent court a petition for review of the said letter-decision
of the petitioner. While the petition was pending before the respondent court, petitioner issued a
final decision dated 3 August 1988 reducing the assessment for deficiency contractors tax from
P193,475.55 to P46,516.41, exclusive of surcharge and interest. On 12 July 1993, the respondent
court set aside respondents decision, and canceling the deficiency contractors tax assessment in
the amount of P46,516.41 exclusive of surcharge and interest for the fiscal year ended 31 March
1978. No pronouncement as to cost. On 27 April 1994, Court of Appeals, in CA-GR SP 31790,
affirmed the decision of the Court of Tax Appeals. Not in accord with said decision, petitioner
came to Supreme Court via a petition for review.
Issues:
Whether the private respondent has the burden of proof in the tax case.
Whether the private respondent is taxable as an independent contractor.
Held: The Commissioner erred in applying the principles of tax exemption without first applying
the well-settled doctrine of strict interpretation in the imposition of taxes. It is obviously both
illogical and impractical to determine who are exempted without first determining who are
covered by the aforesaid provision. The Commissioner should have determined first if private
respondent was covered by Section 205, applying the rule of strict interpretation of laws
imposing taxes and other burdens on the populace, before asking Ateneo to prove its exemption
therefrom, following the rule of construction where the tax exemptions are to be strictly
construed against the taxpayer.
The doctrine in the interpretation of tax laws is that a statute will not be construed as imposing a
tax unless it does so clearly, expressly, and unambiguously. Tax cannot be imposed without clear
and express words for that purpose. Accordingly, the general rule of requiring adherence to the
letter in construing statutes applies with peculiar strictness to tax laws and the provisions of a
taxing act are not to be extended by implication. In case of doubt, such statutes are to be
construed most strongly against the government and in favor of the subjects or citizens because
burdens are not to be imposed nor presumed to be imposed beyond what statutes expressly and
clearly import. In the present case, Ateneos Institute of Philippine Culture never sold its services
for a fee to anyone or was ever engaged in a business apart from and independently of the
academic purposes of the university. Funds received by the Ateneo de Manila University are
technically not a fee. They may however fall as gifts or donations which are tax-exempt as
shown by private respondents compliance with the requirement of Section 123 of the National
Internal Revenue Code providing for the exemption of such gifts to an educational institution.
The Supreme Court denied the petition and affirmed the assailed Decision of the Court of
Appeals. The Court ruled that the private respondent is not a contractor selling its services for a
fee but an academic institution conducting these researches pursuant to its commitments to
education and, ultimately, to public service. For the institute to have tenaciously continued
operating for so long despite its accumulation of significant losses, we can only agree with both
the Court of Tax Appeals and the Court of Appeals that education and not profit is motive for
undertaking the research projects.
Mon 24 Mar 2003
Digest: La Carlota Sugar Central v. Jimenez (GR L-12436,

31 May 1961)
No Comments
La Carlota Sugar Central v. Jimenez
GR L-12436, 31 May 1961 (2 SCRA 295)
En Banc, Dizon (p): 10 concurring, 1 took no part.
Facts: Sometime in September, 1955 La Carlota Sugar Central, which was under the
administration of Elizalde, imported 500 short tons of ammonium sulphate and 350 short tons of
ammonium phosphate. When the fertilizers arrived in the Philippines, the Central Bank imposed
17% exchange tax from the Central in accordance with the provisions of Republic Act 601. On
18 November 1955 the Central filed, through the Hongkong & Shanghai Banking Corporation, a
petition for the refund of the P20,872.09 paid (the 17% tax), claiming that it had imported the
fertilizers mentioned heretofore upon request and for the exclusive use of 5 haciendas owned and
managed by Elizalde, and therefore the importation was exempt from the 17% exchange tax in
accordance with Section 2, RA 601, as amended by RA 1375.
On 2 July 1956, the Auditor of the Central Bank denied the petition. The Central requested the
Auditor to reconsider his ruling, but after a re-examination of all pertinent papers the
reconsideration was denied. The Central then appealed to the Auditor General of the Philippines.
On 18 January 1957, the Auditor General affirmed the ruling of the Auditor of the Central Bank
upon the ground that the importation of the fertilizers does not fall within the scope of the
exempting provisions of Section 2 of RA 601, as amended by RA 1375; and thus affirming the
decision of the Auditor, Central Bank of the Philippines. The Central and Elizalde filed the
petition for review in the Supreme Court.
Issue: Whether upon the importation of the fertilizers are covered by the exemption (provided by
Section 1 and 2 of Republic Act No. 601, as amended by Republic Acts 1175, 1197 and 1375).
Held: The law is, therefore, clear that imported fertilizers are exempt from the payment of the
17% tax only if the same were imported by planters or farmers directly or through their
cooperatives. The exemption covers exclusively fertilizers imported by planters or farmers
directly or through their cooperatives. The word directly has been interpreted to mean without
anything intervening. Consequently, an importation of fertilizers made by a farmer or planter
through an agent, other than his cooperative, is not imported directly as required by the
exemption.
When the issue is whether or not the exemption from a tax imposed by law is applicable, the rule
is that the exempting provision is to be construed liberally in favor of the taxing authority and
strictly against exemption from tax liability, the result being that statutory provisions for the
refund of taxes are strictly construed in favor of the State and against the taxpayer. Exempting
from the 17% tax all fertilizers imported by planters or farmers through any agent other than
their cooperatives, this would be rendering useless the only exception expressly established in
the case of fertilizers imported by planters or farmers through their cooperatives.
Mon 24 Mar 2003
Digest: Primicias v. Urdaneta (GR L-26702, 18 October

1979)
No Comments
Primicias v. Urdaneta
GR L-26702, 18 October 1979 (93 SCRA 462)
First Division, de Castro (p): 8 concurring, 1 on leave, 1 did not take part.
Facts: On 13 March 1964, Ordinance 3 (Series of 1964) was enacted by the Municipal Council
of Urdaneta, Pangasinan. Ordinance is patterned after and based on Section 53, 5 paragraph 4 of
Act 3992, as amended (Revised Motor Vehicle Law). On 20 June 1964, RA 4136 (Land
Transportation and Traffic Code) became effective. Section 63 explicitly repealed Act 3992.
On 8 February 1965, Juan Augusto B. Primicias was driving his car within Urdaneta when a
member of Urdanetas Municipal Police asked him to stop. He was told, upon stopping, that he
had violated Municipal Ordinance 3 (S. 1964), for overtaking a truck. The policeman then asked
for plaintiffs license which he surrendered, and a temporary operators permit was issued to
him. This incident took place about 200 meters away from a school building, at Barrio
Nancamaliran, Urdaneta. Thereafter, a criminal complaint was filed in the Municipal Court of
Urdaneta against Primicias for violation of Ordinance 3 (S. 1964).
Due to the institution of the criminal case, Primicias initiated an action for the annulment of said
ordinance with prayer for the issuance of preliminary injunction for the purpose of restraining
defendants Municipality of Urdaneta, Mayor Perez, Police Chief Suyat, Judge Soriano and
Patrolman Andrada from enforcing the ordinance. The writ was issued and Judge Soriano was
enjoined from further proceeding in the criminal case. On 29 June 1966, the Court of First
Instance Lingayen held in its decision that the ordinance was null and void and had been
repealed by RA 4136. The writ of preliminary injunction against Judge Soriano definite and
permanent. It also restrained Perez, Suyat, and Andrada from enforcing said ordinace throughout
Urdaneta, ordering them to return the plaintiffs drivers license, and to pay the cost of the suit.
The public officials appealed to the Supreme Court.
Issue: Whether the ordinance is valid.
Held: The general rule is that a later law prevails over an earlier law. The ordinances validity
should be determined vis-a-vis RA 4136, the mother statute (not Act 3992), which was in force
at the time the criminal case was brought against Primicias. Further, when the Municipal Council
of Urdaneta used the phrase vehicular traffic (Section 1, Ordinance) it did not distinguish
between passenger cars and motor vehicles and motor trucks and buses. Considering that this is a
regulatory ordinance, its clearness, definiteness and certainty are all the more important so that
an average man should be able with due care, after reading it, to understand and ascertain
whether he will incur a penalty for particular acts or courses of conduct. Thus, as the Municipal
Council of Urdaneta did not make any classification of its thoroughfares, contrary to the explicit
requirement laid down by Section 38, RA 4136. The Ordinance refers to only one of the four
classifications mentioned in paragraph (b), Section 35. The classifications which must be based
on Section 35 are necessary in view of Section 36 which states that no provincial, city or
municipal authority shall enact or enforce any ordinance or resolution specifying maximum
allowable speeds other than those provided in this Act. The ordinance, therefore in view of the
foregoing, is void.
The Supreme Court affirmed the appealed decision.
Mon 24 Mar 2003
Digest: Tanada v. Tuvera (GR L-63915, 29 December 1986)

[6] Comments
Tanada v. Tuvera (Resolution)
GR L-63915, 29 December 1986 (146 SCRA 446)
En Banc, Cruz (p) : 8 concurring
Facts: On 24 April 1985, the Court affirmed the necessity for the publication to the Official
Gazette all unpublished presidential issuances which are of general application, and unless so
published, they shall have no binding force and effect. Decision was concurred only by 3 judges.
Petitioners move for reconsideration / clarification of the decision on various questions. Solicitor
General avers that the motion is a request for advisory opinion. February Revolution took place,
which subsequently required the new Solicitor General to file a rejoinder on the issue (under
Rule 3, Section 18 of the Rules of Court).
Issue: Whether publication is still required in light of the clause unless otherwise provided.
Held: The clause unless it is otherwise provided, in Article 2 of the Civil Code, refers to the
date of effectivity and not to the requirement of publication itself, which cannot in any event be
omitted. This clause does not mean that the legislature may make the law effective immediately
upon approval, or on any other date, without its previous publication. The legislature may in its
discretion provide that the usual fifteen-day period shall be shortened or extended. Publication
requirements applies to (1) all statutes, including those of local application and private laws; (2)
presidential decrees and executive orders promulgated by the President in the exercise of
legislative powers whenever the same are validly delegated by the legislature or directly
conferred by the Constitution; (3) Administrative rules and regulations for the purpose of
enforcing or implementing existing law pursuant also to a valid delegation; (4) Charter of a city
notwithstanding that it applies to only a portion of the national territory and directly affects only
the inhabitants of that place; (5) Monetary Board circulars to fill in the details of the Central
Bank Act which that body is supposed to enforce. Further, publication must be in full or it is no
publication at all since its purpose is to inform the public of the contents of the laws.
The Supreme Court declared that all laws as above defined shall immediately upon their
approval, or as soon thereafter as possible, be published in full in the Official Gazette, to become
effective only after 15 days from their publication, or on another date specified by the legislature,
in accordance with Article 2 of the Civil Code.
Mon 24 Mar 2003
Digest: Lopez v. CTA (GR L-9274, 1 February 1957)

No Comments
Lopez vs. CTA
En Banc, Montemayor (p): 10 concur
Facts: Lopez & Sons imported hexagonal wire netting from Hamburg, Germany. The Manila
Collector of Customs assessed the corresponding customs duties on the importation on the basis
of consular and supplier invoices. Said customs duties were paid and the shipments were
released. Subsequently, however, the Collector reassessed the dollar value of the cost and freight
of said wire netting and as a result of the reassessment, additional customs duties in the amount
of P1,966.59 were levied and imposed upon petitioner. Failing to secure a reconsideration of the
reassessment and levy of additional customs duties, Lopez & Sons appealed to the Court of Tax
Appeals. Acting upon a motion to dismiss the appeal, filed by the Solicitor General on the
ground of lack of jurisdiction, the Tax Court, by its resolution of 23 May 1955, dismissed the
appeal on the ground hat it had no jurisdiction to review decisions of the Collector of Customs of
Manila, citing section 7 of RA 1125, creating said tax court. From said resolution of dismissal,
Lopez & Sons appealed to the Supreme Court, seeking reversal of said resolution of dismissal.
Issue: Whether the decision of the Collector of Customs is directly appealable to the Court of
Tax Appeal.
Held: Section 7 of Republic Act 1125 specifically provides that the Court of Tax Appeals (CTA)
has appellate jurisdiction to review decisions of the Commissioner of Customs. On the other
hand, section 11 of the same Act in lifting the enumerating the persons and entities who may
appeal mentions among others, those affected by a decision or ruling of the Collector of
Customs, and fails to mention the Commissioner of Customs. While there is really a discrepancy
between the two sections, it is more reasonable and logical to hold that in section 11 of the Act,
the Legislature meant and intended to say, the Commissioner of Customs, instead of Collector of
Customs. If persons affected by a decision of the Collector of Customs may appeal directly to
the Court of Tax Appeals, then the supervision and control of the Commissioner of Customs over
his Collector of Customs, under the Customs Law found in sections 1137 to 1419 of the Revised
Administrative Code, and his right to review their decisions upon appeal to him by the persons
affected by said decision would, not only be gravely affected but even destroyed. The Courts are
not exactly indulging in judicial legislation but merely endeavoring to rectify and correct a
clearly clerical error in the wording of a statute, in order to give due course and carry out the
evident intention of the legislature.
The Supreme Court affirmed the appealed order, holding that under the Customs Law and RA
1125, the CTA has no jurisdiction to review by appeal decision of the Collector of Customs; with
costs.
Mon 24 Mar 2003
Digest: Sanciangco v. Rono (GR L-68709, 19 July 1985)

No Comments
Sanciangco v. Rono
GR L-68709, 19 July 1985 (137 SCRA ___)
En Banc, Melencio-Herrera (p): 10 concur, 1 dissents in separate opinion, 1 took no part
Facts: Petitioner was elected Barangay Captain of Barangay Sta. Cruz, Ozamiz City, in the 17
May 1982 Barangay elections. Later, he was elected President of the Association of Barangay
Councils (ABC) of Ozamiz City by the Board of Directors of the said Association. As the
President of the Association, petitioner was appointed by the President of the Philippines as a
member of the Citys Sangguniang Panlungsod. On 27 March 1984, petitioner filed his
Certificate of Candidacy for the 14 May 1984 Batasan Pambansa elections for Misamis
Occidental under the banner of the Mindanao Alliance. He was not successful in the said
election. Invoking Section 13(2), Article 5 of BP 697, petitioner informed Vice-Mayor Benjamin
A. Fuentes, Presiding Officer of the Sangguniang Panlungsod, that he was resuming his duties as
member of that body. The matter was elevated to the Minister of Local Government Jose A.
Roo, who ruled that since petitioner is an appointive official, he is deemed to have resigned
from his appointive position upon the filing of his Certificate of Candidacy.
Issue: Whether the accused is considered resigned from the latters filing of a certificate of
candidacy for the Batasan.
Held: Although it may be that Section 13(2), Batas Pambansa 697, admits of more than one
construction, taking into sconsideration the nature of the positions of the officials enumerated
therein, namely, governors, mayors, members of the various sanggunians or barangay officials,
the legislative intent to distinguish between elective positions in section 13(2), as contrasted to
appointive positions in section 13(l) under the all-encompassing clause reading any person
holding public appointive office or position, is clear. It is a rule of statutory construction that
when the language of a particular section of a statute admits of more than one construction, that
construction which gives effect to the evident purpose and object sought to be attained by the
enactment of the statute as a whole, must be followed. A statutes clauses and phrases should not
be taken as detached and isolated expressions, but the whole and every part thereof must be
considered in fixing the meaning of any of its parts. The legislative intent to cover public
appointive officials in subsection (1), and officials mentioned in subsection (2) which should be
construed to refer to local elective officials, can be gleaned from the proceedings of the Batasan
Pambansa. Since petitioner is unquestionably an appointive member of the Sangguniang
Panlungsod of Ozamiz City, as he was appointed by the President as a member of the Citys
Sangguniang Panlungsod by virtue of his having been elected President of the Association of
Barangay Councils, he is deemed to have ipso facto ceased to be such member when he filed his
certificate of candidacy for the 14 May 1984 Batasan elections.
The Supreme Court dismissed the petition and denied the writs prayed for, holding that there was
no grave abuse of discretion on the part of the officials; without costs.
Mon 24 Mar 2003
Digest: Tanada v. Tuvera (GR L-63915, 24 April 1985)

[2] Comments
Tanada v. Tuvera
GR L-63915, 24 April 1985 (136 SCRA 27)
En Banc, Escolin (p): 1 concur, 2 concur with reservation, 1 took no part, 1 on leave
Facts: Invoking the peoples right to be informed on matters of public concern (Section 6,
Article IV of the 1973 Philippine Constitution) as well as the principle that laws to be valid and
enforceable must be published in the Official Gazette or otherwise effectively promulgated,
petitioners seek a writ of mandamus to compel respondent public officials to publish, and or
cause the publication in the Official Gazette of various presidential decrees, letters of
instructions, general orders, proclamations, executive orders, letter of implementation and
administrative orders. They maintain that since the subject of the petition concerns a public right
and its object is to compel the performance of a public duty, they are proper parties for the
petition. The respondents alleged, however through the Solicitor-General, that petitioners have
no legal personality or standing to bring the instant petition. They further contend that
publication in the Official Gazette is not a sine qua non requirement for the effectiveness of laws
where the laws provide for their own effectivity dates. Thus publication is not indispensable.
Issue: Whether publication is an indispensable requirement for the effectivity of laws
Held: Publication in the Official Gazette is necessary in those cases where the legislation itself
does not provide for its effectivity date for then the date of publication is material for
determining its date of effectivity, which is the fifteenth day following its publication but not
when the law itself provides for the date when it goes into effect. This is correct insofar as it
equates the effectivity of laws with the fact of publication. Article 2 however, considered in the
light of other statutes applicable to the issue does not preclude the requirement of publication in
the Official Gazette, even if the law itself provides for the date of its effectivity. The clear object
of the such provision is to give the general public adequate notice of the various laws which are
to regulate their actions and conduct as citizens. Without such notice and publication, there
would be no basis for the application of the maxim ignorantia legis non excusat. It would be
the height of injustice to punish or otherwise burden a citizen for the transgression of a law of
which he had no notice whatsoever, not even a constructive one. Further, publication is necessary
to apprise the public of the contents of regulations and make the said penalties binding on the
persons affected thereby. In the present case, Presidential issuances of general application, which
have not been published, shall have no force and effect. The implementation/enforcement of
presidential decrees prior to their publication in the Official Gazette is an operative fact, which
may have consequences which cannot be justly ignored. The past cannot always be erased by a
new judicial declaration that an all-inclusive statement of a principle of absolute retroactive
invalidity cannot be justified.
The Supreme Court ordered the respondents to publish in the Official Gazette all unpublished
presidential issuances which are of general application, and that unless so published, they shall
have no binding force and effect.
Mon 24 Mar 2003
Digest: Manila Prince Hotel v. GSIS (GR 122156, 3

February 1997)
[3] Comments
Manila Prince Hotel v. GSIS
GR 122156, 3 February 1997
En banc, Bellosillo (p): 6 concur, others dissent
Facts: The Government Service Insurance System (GSIS), pursuant to the privatization program
of the Philippine Government under Proclamation 50 dated 8 December 1986, decided to sell
through public bidding 30% to 51% of the issued and outstanding shares of the Manila Hotel
(MHC). In a close bidding held on 18 September 1995 only two bidders participated: Manila
Prince Hotel Corporation, a Filipino corporation, which offered to buy 51% of the MHC or
15,300,000 shares at P41.58 per share, and Renong Berhad, a Malaysian firm, with ITT-Sheraton
as its hotel operator, which bid for the same number of shares at P44.00 per share, or P2.42 more
than the bid of petitioner. Pending the declaration of Renong Berhard as the winning
bidder/strategic partner and the execution of the necessary contracts, the Manila Prince Hotel
matched the bid price of P44.00 per share tendered by Renong Berhad in a letter to GSIS dated
28 September 1995. Manila Prince Hotel sent a managers check to the GSIS in a subsequent
letter, but which GSIS refused to accept. On 17 October 1995, perhaps apprehensive that GSIS
has disregarded the tender of the matching bid and that the sale of 51% of the MHC may be
hastened by GSIS and consummated with Renong Berhad, Manila Prince Hotel came to the
Court on prohibition and mandamus.
Issue(s):
Whether the provisions of the Constitution, particularly Article XII Section 10, are selfexecuting.
Whether the 51% share is part of the national patrimony.
Held: A provision which lays down a general principle, such as those found in Article II of the
1987 Constitution, is usually not self-executing. But a provision which is complete in itself and
becomes operative without the aid of supplementary or enabling legislation, or that which
supplies sufficient rule by means of which the right it grants may be enjoyed or protected, is selfexecuting. Thus a constitutional provision is self-executing if the nature and extent of the right
conferred and the liability imposed are fixed by the constitution itself, so that they can be
determined by an examination and construction of its terms, and there is no language indicating
that the subject is referred to the legislature for action. In self-executing constitutional
provisions, the legislature may still enact legislation to facilitate the exercise of powers directly
granted by the constitution, further the operation of such a provision, prescribe a practice to be
used for its enforcement, provide a convenient remedy for the protection of the rights secured or
the determination thereof, or place reasonable safeguards around the exercise of the right. The
mere fact that legislation may supplement and add to or prescribe a penalty for the violation of a
self-executing constitutional provision does not render such a provision ineffective in the
absence of such legislation. The omission from a constitution of any express provision for a
remedy for enforcing a right or liability is not necessarily an indication that it was not intended to
be self-executing. The rule is that a self-executing provision of the constitution does not
necessarily exhaust legislative power on the subject, but any legislation must be in harmony with
the constitution, further the exercise of constitutional right and make it more available.
Subsequent legislation however does not necessarily mean that the subject constitutional
provision is not, by itself, fully enforceable. As against constitutions of the past, modern
constitutions have been generally drafted upon a different principle and have often become in
effect extensive codes of laws intended to operate directly upon the people in a manner similar to
that of statutory enactments, and the function of constitutional conventions has evolved into one
more like that of a legislative body. Hence, unless it is expressly provided that a legislative act is
necessary to enforce a constitutional mandate, the presumption now is that all provisions of the
constitution are self-executing. If the constitutional provisions are treated as requiring legislation
instead of self-executing, the legislature would have the power to ignore and practically nullify
the mandate of the fundamental law. In fine, Section 10, second paragraph, Art. XII of the 1987
Constitution is a mandatory, positive command which is complete in itself and which needs no
further guidelines or implementing laws or rules for its enforcement. From its very words the
provision does not require any legislation to put it in operation.
In its plain and ordinary meaning, the term patrimony pertains to heritage. When the Constitution
speaks of national patrimony, it refers not only to the natural resources of the Philippines, as the
Constitution could have very well used the term natural resources, but also to the cultural
heritage of the Filipinos. It also refers to Filipinos intelligence in arts, sciences and letters. In the
present case, Manila Hotel has become a landmark, a living testimonial of Philippine heritage.
While it was restrictively an American hotel when it first opened in 1912, a concourse for the
elite, it has since then become the venue of various significant events which have shaped
Philippine history. In the granting of economic rights, privileges, and concessions, especially on
matters involving national patrimony, when a choice has to be made between a qualified
foreigner and a qualified Filipino, the latter shall be chosen over the former.
The Supreme Court directed the GSIS, the Manila Hotel Corporation, the Committee on
Privatization and the Office of the Government Corporate Counsel to cease and desist from
selling 51% of the Share of the MHC to Renong Berhad, and to accept the matching bid of
Manila Prince Hotel at P44 per shere and thereafter execute the necessary agreements and
document to effect the sale, to issue the necessary clearances and to do such other acts and deeds
as may be necessary for the purpose.
Mon 24 Mar 2003
Digest: Aglipay v. Ruiz (GR 45459, 13 March 1937)

No Comments
Aglipay v. Ruiz
GR 45459, 13 March 1937 (64 Phil 201)
First Division, Laurel (p): 5 concur.
Facts: In May 1936, the Director of Posts announced in the dailies of Manila that he would order
the issuance of postage stamps commemorating the celebration in the City of Manila of the 33rd
International Eucharistic Congress, organized by the Roman Catholic Church. The petitioner,
Mons. Gregorio Aglipay, Supreme Head of the Philippine Independent Church, in the fulfillment
of what he considers to be a civic duty, requested Vicente Sotto, Esq., member of the Philippine
Bar, to denounce the matter to the President of the Philippines. In spite of the protest of the
petitioners attorney, the Director of Posts publicly announced having sent to the United States
the designs of the postage for printing. The said stamps were actually issued and sold though the
greater part thereof remained unsold. The further sale of the stamps was sought to be prevented
by the petitioner.
Issue: Whether the issuance of the postage stamps was in violation of the Constitution.
Held: Religious freedom as a constitutional mandate is not inhibition of profound reverence for
religion and is not a denial of its influence in human affairs. Religion as a profession of faith to
an active power that binds and elevates man to his Creator is recognized. And, in so far as it
instills into the minds the purest principles of morality, its influence is deeply felt and highly
appreciated. When the Filipino people, in the preamble of their Constitution, implored the aid of
Divine Providence, in order to establish a government that shall embody their ideals, conserve
and develop the patrimony of the nation, promote the general welfare, and secure to themselves
and their posterity the blessings of independence under a regime of justice, liberty and
democracy, they thereby manifested their intense religious nature and placed unfaltering
reliance upon Him who guides the destinies of men and nations. The elevating influence of
religion in human society is recognized here as elsewhere.
Act 4052 contemplates no religious purpose in view. What it gives the Director of Posts is the
discretionary power to determine when the issuance of special postage stamps would be
advantageous to the Government. Of course, the phrase advantageous to the Government
does not authorize the violation of the Constitution; i.e. to appropriate, use or apply of public
money or property for the use, benefit or support of a particular sect or church. In the case at bar,
the issuance of the postage stamps was not inspired by any sectarian feeling to favor a particular
church or religious denominations. The stamps were not issued and sold for the benefit of the
Roman Catholic Church, nor were money derived from the sale of the stamps given to that
church. The purpose of the issuing of the stamps was to take advantage of an event considered of
international importance to give publicity to the Philippines and its people and attract more
tourists to the country. Thus, instead of showing a Catholic chalice, the stamp contained a map of
the Philippines, the location of the City of Manila, and an inscription that reads Seat XXXIII
International Eucharistic Congress, Feb. 3-7, 1937.
The Supreme Court denied the petition for a writ of prohibition, without pronouncement as to
costs.
Mon 24 Mar 2003
Digest: Nitafan v. Commissioner of Internal Revenue (GR L78780, 23 July 1987)

No Comments
Nitafan v. Commissioner of Internal Revenue (Resolution)
GR L-78780, 23 July 1987
En Banc, Melencio-Herrera (p): 12 concur, 1 on leave
Facts: The Chief Justice has previously issued a directive to the Fiscal Management and Budget
Office to continue the deduction of withholding taxes from salaries of the Justices of the
Supreme Court and other members of the judiciary. This was affirmed by the Supreme Court en
banc on 4 December 1987.
Petitioners are the duly appointed and qualified Judges presiding over Branches 52, 19 and 53,
respectively, of the RTC, National Capital Judicial Region, all with stations in Manila. They seek
to prohibit and/or perpetually enjoin the Commissioner of Internal Revenue and the Financial
Officer of the Supreme Court, from making any deduction of withholding taxes from their
salaries. With the filing of the petition, the Court deemed it best to settle the issue through
judicial pronouncement, even if it had dealt with the matter administratively.
Issue: Whether the intention of the framers of the 1987 Constitution is to exempt justices and
judges from taxes as it was in the 1935 Constitution.
Held: The ascertainment of the intent is but in keeping with the fundamental principle of
constitutional construction that the intent of the framers of the organic law and of the people
adopting it should be given effect. The primary task in constitutional construction is to ascertain
and thereafter assure the realization of the purpose of the framers and of the people in the
adoption of the Constitution. It may also be safely assumed that the people in ratifying the
Constitution were guided mainly by the explanation offered by the framers. In the present case,
Section 10, Article VIII is plain that the Constitution authorizes Congress to pass a law fixing
another rate of compensation of Justices and Judges but such rate must be higher than that which
they are receiving at the time of enactment, or if lower, it would be applicable only to those
appointed after its approval. It would be a strained construction to read into the provision an
exemption from taxation in the light of the discussion in the Constitutional Commission. Thus,
the debates, interpolations and opinions expressed regarding the constitutional provision in
question until it was finally approved by the Commission disclosed that the true intent of the
framers of the 1987 Constitution, in adopting it, was to make the salaries of members of the
Judiciary taxable.
The Supreme Court dismissed the petition for prohibition.
Mon 24 Mar 2003
Digest: Endencia v. David (GR L-6355-56, 31 August 1953)

1 Comment
Endencia v. David
GR L-6355-56, 31 August 1953 (93 Phil 696)
En Banc, Montemayor (p): 6 concur
Facts: Saturnino David, as a Collector of Internal Revenue collected income taxes from Justices
Endencia and Jugo, as Presiding Justice of the Court of Appeals and Associate Justice of the
Supreme Court respectively. The lower court held that under the doctrine laid down in the case
of Perfecto vs. Meer, 85 Phil., 552, the collection of income taxes from the salaries of Justice
Jugo and Justice Endencia was a diminution of their compensation and therefore was in violation
of the Constitution of the Philippines, and so ordered the refund of said taxes. Respondent,
through the Solicitor General contended that the collection was done pursuant to Section 13 of
Republic Act 590 which Congress enacted to authorize and legalize the collection of income tax
on the salaries of judicial officers, if not to counteract the ruling on the Perfecto Case.
Issue: Whether the Legislature may lawfully declare the collection of income tax on the salary
of a public official, specially a judicial officer, not a decrease of his salary, after the Supreme
Court has found and decided otherwise.
Held: The Legislature cannot lawfully declare the collection of income tax on the salary of a
public official, specially a judicial officer, not a decrease of his salary, after the Supreme Court
has found and decided otherwise. The interpretation and application of the Constitution and of
statutes is within the exclusive province and jurisdiction of the judicial department, and that in
enacting a law, the Legislature may not legally provide therein that it be interpreted in such a
way that it may not violate a Constitutional prohibition, thereby tying the hands of the courts in
their task of later interpreting said statute, specially when the interpretation sought and provided
in said statute runs counter to a previous interpretation already given in a case by the highest
court of the land. In the case at bar, Section 13 of Republic Act 590 interpreted or ascertained the
meaning of the phrase which shall not be diminished during their continuance in office, found
in section 9, Article VIII of the Constitution, referring to the salaries of judicial officers. This act
of interpreting the Constitution or any part thereof by the Legislature is an invasion of the welldefined and established province and jurisdiction of the Judiciary. The Legislature under our
form of government is assigned the task and the power to make and enact laws, but not to
interpret them. This is more true with regard to the interpretation of the basic law, the
Constitution, which is not within the sphere of the Legislative department. Allowing the
legislature to interpret the law would bring confusion and instability in judicial processes and
court decisions.
Further, under the Philippine system of constitutional government, the Legislative department is
assigned the power to make and enact laws. The Executive department is charged with the
execution or carrying out of the provisions of said laws. But the interpretation and application of
said laws belong exclusively to the Judicial department. And this authority to interpret and apply
the laws extends to the Constitution. Before the courts can determine whether a law is
constitutional or not, it will have to interpret and ascertain the meaning not only of said law, but
also of the pertinent portion of the Constitution in order to decide whether there is a conflict
between the two, because if there is, then the law will have to give way and has to be declared
invalid and unconstitutional. Therefore, the doctrine laid down in the case of Perfecto vs. Meer to
the effect that the collection of income tax on the salary of a judicial officer is a diminution
thereof and so violates the Constitution, is reiterated.
The Supreme Court affirmed the decision, affirming the ruling in Perferto v. Meer and holding
the interpretation and application of laws belong to the Judiciary.
Mon 24 Mar 2003
Digest: Perfecto v. Meer (GR L-2348, 27 February 1950)

No Comments
Perfecto v. Meer
First Division, Bengzon (p): 8 concur.
Facts: The 1935 Constitution provides in its Article VIII, Section 9, that the members of the
Supreme Court and all judges of inferior courts shall receive such compensation as may be
fixed by law, which shall not be diminished during their continuance in office. It also provides
that until Congress shall provide otherwise, the Chief Justice of the Supreme Court shall receive
an annual compensation of sixteen thousand pesos, and each Associate Justice, fifteen thousand
pesos. When Justice Perfecto assumed office, Congress had not provided otherwise, by fixing
a different salary for associate justices. He received salary at the rate provided by the
Constitution, i.e., fifteen thousand pesos a year.
The Collector of Internal Revenue required Justice Gregorio Perfecto to pay income tax upon his
salary as member of the judiciary. The latter paid the amount under protest. He contended that
the assessment was illegal, his salary not being taxable for the reason that imposition of taxes
thereon would reduce it in violation of the Constitution.
Issue: Whether the imposition of an income tax upon the salary of a member of the Judiciary
amount to a diminution thereof., and thus violate the Constitution.
Held: The imposition of an income tax upon the salary of a member of the judiciary amounts to
a diminution thereof. If said imposition would not be considered as a diminution, it would
appear that, in the matter of compensation and power and need of security, the judiciary is on a
par with the Executive. Such assumption certainly ignores the prevailing state of affairs. Further,
the Constitution provides that judges shall hold their offices during good behavior, and shall at
stated times receive for their services a compensation which shall not be diminished during their
continuance in office. Thus, next to permanency in office, nothing can contribute more to the
independence of the judges than a fixed provision for their support. In the general course of
human nature, a power over a mans subsistence amounts to a power over his will. The
independence of the judges as of far greater importance than any revenue that could come from
taxing their salaries.
Exemption of the judicial salary from reduction by taxation is not really a gratuity or privilege.
It is essentially and primarily compensation based upon valuable consideration. The covenant on
the part of the government is a guaranty whose fulfillment is as much as part of the consideration
agreed as is the money salary. The undertaking has its own particular value to the citizens in
securing the independence of the judiciary in crises; and in the establishment of the
compensation upon a permanent foundation whereby judicial preferment may be prudently
accepted by those who are qualified by talent, knowledge, integrity and capacity, but are not
possessed of such a private fortune as to make an assured salary an object of personal concern.
On the other hand, the members of the judiciary relinquish their position at the bar, with all its
professional emoluments, sever their connection with their clients, and dedicate themselves
exclusively to the discharge of the onerous duties of their high office. So, it is irrefutable that the
guaranty against a reduction of salary by the imposition of a tax is not an exemption from
taxation in the sense of freedom from a burden or service to which others are liable. The
exemption for a public purpose or a valid consideration is merely a nominal exemption, since the
valid and full consideration or the public purpose promoted is received in the place of the tax.
The Supreme Court affirmed the judgment.
Mon 24 Mar 2003
Digest: Victorias Milling v. Social Security Commission (GR

L-16704, 17 March 1962)
No Comments
Victorias Milling v. Social Security Commission

GR L-16704, 17 March 1962 (4 SCRA 627)
En Banc, Barrera (p): 9 concurring
Facts: On 15 October 1958, the Social Security Commission (SSC) issued its Circular 22
providing that effective 1 November 1958, all employers in computing the premiums due the
System, will take into consideration and include in the Employees remuneration all bonuses and
overtime pay, as well as the cash value of other media of remuneration. All these will comprise
the Employees remuneration or earnings, upon which the 3-1/2% and 2- 1/2% contributions will
be based, up to a maximum of P500 for any one month. Upon receipt of a copy thereof,
Victorias Milling Company, Inc., wrote the SSC in effect protesting against the circular as
contradictory to a previous Circular 7 (7 October 1957) , and further questioned the validity of
the circular for lack of authority on the part of the SSC to promulgate it without the approval of
the President and for lack of publication in the Official Gazette. Overruling these objections, the
SSC ruled that Circular 22 is not a rule or regulation that needed the approval of the President
and publication in the Official Gazette to be effective, but a mere administrative interpretation of
the statute, a mere statement of general policy or opinion as to how the law should be construed.
Not satisfied with this ruling, petitioner comes to the Supreme Court on appeal.
Issue: Whether Circular 22 is a rule or regulation.
Held: There is a distinction between an administrative rule or regulation and an administrative
interpretation of a law whose enforcement is entrusted to an administrative body. When an
administrative agency promulgates rules and regulations, it makes a new law with the force
and effect of a valid law, while when it renders an opinion or gives a statement of policy, it
merely interprets a pre-existing law Rules and regulations when promulgated in pursuance of the
procedure or authority conferred upon the administrative agency by law, partake of the nature of
a statute, and compliance therewith may be enforced by a penal sanction provided in the law.
This is so because statutes are usually couched in general terms, after expressing the policy,
purposes, objectives, remedies and sanctions intended by the legislature. The details and the
manner of carrying out the law are often times left to the administrative agency entrusted with its
enforcement. In this sense, it has been said that rules and regulations are the product of a
delegated power to create new or additional legal provisions that have the effect of law. A rule is
binding on the courts so long as the procedure fixed for its promulgation is followed and its
scope is within the statutory authority granted by the legislature, even if the courts are not in
agreement with the policy stated therein or its innate wisdom On the other hand, administrative
interpretation of the law is at best merely advisory, for it is the courts that finally determine what
the law means.
While it is true that terms or words are to be interpreted in accordance with their well-accepted
meaning in law, nevertheless, when such term or word is specifically defined in a particular law,
such interpretation must be adopted in enforcing that particular law, for it can not be gainsaid
that a particular phrase or term may have one meaning for one purpose and another meaning for
some other purpose. RA 1161 specifically defined what compensation should mean For the
purposes of this Act. RA1792 amended such definition by deleting some exceptions authorized
in the original Act. By virtue of this express substantial change in the phraseology of the law,
whatever prior executive or judicial construction may have been given to the phrase in question
should give way to the clear mandate of the new law.
The Supreme Court affirmed the appealed resolution, with costs against appellant.
Mon 24 Mar 2003
Digest: # Chartered Bank Employees Association v. Ople

(GR L-44717, 28 August 1985)
No Comments
Chartered Bank Employees Association v. Ople
GR L-44717, 28 August 1985 (138 SCRA 273)
En Banc, Gutierrez, Jr. (p): 10 concur, 1 concur in result, 1 took no part, 1 on leave
Facts: On 20 May 1975, the Chartered Bank Employees Association, in representation of its
monthly paid employees/members, instituted a complaint with the Regional Office IV,
Department of Labor, now Ministry of Labor and Employment (MOLE) against Chartered Bank,
for the payment of 10 unworked legal holidays, as well as for premium and overtime differentials
for worked legal holidays from 1 November 1974.
Both the arbitrator and the National Labor Relations Commission (NLRC) ruled in favor of the
petitioners ordering the bank to pay its monthly paid employees the holiday pay and the premium
or overtime pay differentials to all employees who rendered work during said legal holidays.
On appeal, the Minister of Labor set aside the decision of the NLRC and dismissed the
petitioners claim for lack of merit basing its decision on Section 2, Rule IV, Book III of the
Integrated Rules and Policy Instruction 9, claiming the rule that If the monthly paid employee is
receiving not less than P240, the maximum monthly minimum wage, and his monthly pay is
uniform from January to December, he is presumed to be already paid the 10 paid legal holidays.
However, if deductions are made from his monthly salary on account of holidays in months
where they occur, then he is still entitled to the 10 paid legal holidays.
Issue: Whether the Ministry of Labor is correct in maintaining that monthly paid employees are
not entitled to the holiday pay nor all employees who rendered work during said legal holidays
are entitled to the premium or overtime pay differentials.
Held: When the language of the law is clear and unequivocal the law must be taken to mean
exactly what it says. An administrative interpretation, which diminishes the benefits of labor
more than what the statute delimits or withholds, is obviously ultra vires. In the present case, the
provisions of the Labor Code on the entitlement to the benefits of holiday pay are clear and
explicit, it provides for both the coverage of and exclusion from the benefit. In Policy Instruction
9, the Secretary of Labor went as far as to categorically state that the benefit is principally
intended for daily paid employees, when the law clearly states that every worker shall be paid
their regular holiday pay.
While it is true that the contemporaneous construction placed upon a statute by executive officers
whose duty is to enforce it should be given great weight by the courts, still if such construction is
so erroneous, the same must be declared as null and void. It is the role of the Judiciary to refine
and, when necessary, correct constitutional (and/or statutory) interpretation, in the context of the
interactions of the three branches of the government, almost always in situations where some
agency of the State has engaged in action that stems ultimately from some legitimate area of
governmental power. Section 2, Rule IV, Book III of the Rules to implement the Labor Code and
Policy Instruction was declared null and void in IBAAEU v. Inciong, and thus applies in the case
at bar. Since the private respondent premises its action on the invalidated rule and policy
instruction, it is clear that the employees belonging to the petitioner association are entitled to the
payment of 10 legal holidays under Articles 82 and 94 of the Labor Code, aside from their
monthly salary. They are not among those excluded by law from the benefits of such holiday pay
The Supreme Court reversed and set aside the Labor Ministers 7 September 1976 order, and
reinstated with modification (deleting the interest payments) the 24 March 1976 decision of the
NLRC affirming the 30 October 1975 resolution of the Labor Arbiter.
Mon 24 Mar 2003
Digest: IBAA Employees Union v. Inciong (GR L52415, 23

October 1984)
No Comments
IBAA Employees Union v. Inciong
GR L52415, 23 October 1984 (132 SCRA 663)
Second Division, Makasiar (p): 3 concur, 2 concur in result, 1 took no part
Facts: On June 20, 1975, the Union filed a complaint against the bank for the payment of
holiday pay before the then Department of Labor, National Labor Relations Commission,
Regional Office IV in Manila. Conciliation having failed, and upon the request of both parties,
the case was certified for arbitration on 7 July 1975. On 25 August 1975, Labor Arbiter Ricarte
T. Soriano rendered a decision in the above-entitled case, granting petitioners complaint for
payment of holiday pay. Respondent bank did not appeal from the said decision. Instead, it
complied with the order of the Labor Arbiter by paying their holiday pay up to and including
January 1976.
On 16 December 1975, Presidential Decree 850 was promulgated amending, among others, the
provisions of the Labor Code on the right to holiday pay. Accordingly, on 16 February 1976, by
authority of Article 5 of the same Code, the Department of Labor (now Ministry of Labor)
promulgated the rules and regulations for the implementation of holidays with pay. The
controversial section thereof reads as Status of employees paid by the month. Employees
who are uniformly paid by the month, irrespective of the number of working days therein, with a
salary of not less than the statutory or established minimum wage shall be presumed to be paid
for all days in the month whether worked or not. On 23 April 1976, Policy Instruction 9 was
issued by the then Secretary of Labor (now Minister) interpreting the above-quoted rule. The
bank, by reason of the ruling laid down by the rule implementing Article 94 of the Labor Code
and by Policy Instruction 9, stopped the payment of holiday pay to an its employees.
On 30 August 1976, the Union filed a motion for a writ of execution to enforce the arbiters
decision of 25 August 1975, which the bank opposed. On 18 October 1976, the Labor Arbiter,
instead of issuing a writ of execution, issued an order enjoining the bank to continue paying its
employees their regular holiday pay. On 17 November 1976, the bank appealed from the order
of the Labor Arbiter to the NLRC. On 20 June 1978, the NLRC promulgated its resolution en
banc dismissing the banks appeal, and ordering the issuance of the proper writ of execution. On
21 February 1979, the bank filed with the Office of the Minister of Labor a motion for
reconsideration/appeal with urgent prayer to stay execution. On 13 August 1979,s the NLRC
issued an order directing the Chief of Research and Information of the Commission to compute
the holiday pay of the IBAA employees from April 1976 to the present in accordance with the
Labor Arbiter dated 25 August 1975. On 10 November 1979, the Office of the Minister of Labor,
through Deputy Minister Amado G. Inciong, issued an order setting aside the resolution en banc
of the NLRC dated 20 June 1978, and dismissing the case for lack of merit. Hence, the petition
for certiorari charging Inciong with abuse of discretion amounting to lack or excess of
jurisdiction.
Issue: Whether the Ministry of Labor is correct in determining that monthly paid employees are
excluded from the benefits of holiday pay.
Held: From Article 92 of the Labor Code, as amended by Presidential Decree 850, and Article 82
of the same Code, it is clear that monthly paid employees are not excluded from the benefits of
holiday pay. However, the implementing rules on holiday pay promulgated by the then Secretary
of Labor excludes monthly paid employees from the said benefits by inserting, under Rule IV,
Book Ill of the implementing rules, Section 2, which provides that: employees who are
uniformly paid by the month, irrespective of the number of working days therein, with a salary of
not less than the statutory or established minimum wage shall be presumed to be paid for all days
in the month whether worked or not. Even if contemporaneous construction placed upon a
statute by executive officers whose duty is to enforce it is given great weight by the courts, still if
such construction is so erroneous, the same must be declared as null and void. So long, as the
regulations relate solely to carrying into effect the provisions of the law, they are valid. Where an
administrative order betrays inconsistency or repugnancy to the provisions of the Act, the
mandate of the Act must prevail and must be followed. A rule is binding on the Courts so long as
the procedure fixed for its promulgation is followed and its scope is within the statutory authority
granted by the legislature, even if the courts are not in agreement with the policy stated therein or
its innate wisdom. Further, administrative interpretation of the law is at best merely advisory, for
it is the courts that finally determine what the law means.
The Supreme Court granted the petition, set aside the order of the Deputy Minister of Labor, and
reinstated the 25 August 1975 decision of the Labor Arbiter Ricarte T. Soriano.
Mon 24 Mar 2003
Digest: Philippine Apparel Workers Union v. NLRC (GR L50320, 31 July 1981)
No Comments
Philippine Apparel Workers Union v. NLRC
GR L-50320, 31 July 1981 (105 SCRA 444)
First Division, Makasiar (p): 3 concurring
Facts: In anticipation of the expiration of their 1973-1976 collective bargaining agreement, the
Union submitted a set of bargaining proposals to the company. Negotiations were held thereafter,
but due to the impasse, the Union filed a complaint with the Department of Labor praying that
the parties be assisted in concluding a collective agreement. Notwithstanding the complaint, the
parties continued with negotiations. Finally, on 3 September 1977, the parties signed the
agreement providing for a three-stage wage increase for all rank and file employees, retroactive
to 1April 1977. Meanwhile, on 21 April 1977, Presidential Decree 1123 was enacted to take
effect on 1 May 1977 providing for an increase by P60.00 in the living allowance ordained by
Presidential Decree 525. This increase was implemented effective 1 May 1977 by the company.
The controversy arose when the petitioner union sought the implementation of the negotiated
wage increase of P0.80 as provided for in the collective bargaining agreement. The company
alleges that it has opted to consider the P0.80 daily wage increase (roughly P22 per month) as
partial compliance with the requirements of PD 1123, so that it is obliged to pay only the balance
of P38 per month, contending that that since there was already a meeting of the minds between
the parties as early as 2 April 1977 about the wage increases which were made retroactive to 1
April 1977, it fell well within the exemption provided for in the Rules Implementing PD 1123.
The Union, on the other hand, maintains that the living allowance under PD 1123 (originally PD
525) is distinct from the negotiated daily wage increase of P0.80.
On 13 February 1978, the Union filed a complaint for unfair labor practice and violation of the
CBA against the company. On 30 May 1978, an Order was issued by the Labor Arbiter
dismissing the complaint and referred the case to the parties to resolve their disputes in
accordance with the machinery established in the Collective Bargaining Agreement. From this
order, both parties appealed to the Commission. On 1 September 1978, the Commission (Second
Division) promulgated its decision, setting aside the order appealed from and entering a new one
dismissing the case for obvious lack of merit, relying on a letter of the Undersecretary of Labor
that agreement between the parties was made 2 April 1977 granting P27 per month retroactive to
1 April 1977 which was squarely under the exceptions provided for in paragraph k of the rules
implementing PD 1123. The union filed for reconsideration, but the Commission en banc
dismissed the same on 8 February 1979. Hence, the petition.
Issue: Whether the Commission was correct in determining the agreement falls under the
exceptions.
Held: The collective bargaining agreement was entered into on 3 September1977, when PD 1123
was already in force and effect, although the increase on the first year was retroactive to 1 April
1977. There is nothing in the records that the negotiated wage increases were granted or paid
before May 1977, to allow the company to fall within the exceptions provided for in paragraph k
of the rules implementing PD 1123. There was neither a perfected contract nor an actual payment
of said increase. There was no grant of said increases yet, despite the contrary opinion expressed
in the letter of the Undersecretary of Labor. It must be noted that the letter was based on a wrong
premise or representation on the part of the company. The company had declared that the parties
have agreed on 2 April 1977 in recognition of the imperative need for employees to cope up with
inflation brought about by, among others, another increase in oil price, but omitting the fact that
negotiations were still being held on other unresolved economic and non-economic bargaining
items (which were only agreed upon on 3 September 1977).
The Department of Labor had the right to construe the word grant as used in its rules
implementing PD 1123, and its explanation regarding the exemptions to PD 1123 should be
given weight; but, when it is based on misrepresentations as to the existence of an agreement
between the parties, the same cannot be applied. There is no distinction between interpretation
and explaining the extent and scope of the law; because where one explains the intent and scope
of a statute, he is interpreting it. Thus, the construction or explanation of Labor Undersecretary is
not only wrong as it was purely based on a misapprehension of facts, but also unlawful because it
goes beyond the scope of the law.
The writ of certiorari was granted. The Supreme Court set aside the decision of the commission,
and ordered the company to pay, in addition to the increased allowance provided for in PD 1123,
the negotiated wage increase of P0.80 daily effective 1 April 1977 as well as all other wage
increases embodied in the Collective Bargaining Agreement, to all covered employees; with
costs against the company.
Mon 24 Mar 2003
Digest: PAFLU v. Bureau of Labor Relations (GR L-43760,

21 August 1976)

No Comments
PAFLU v. Bureau of Labor Relations
GR L-43760, 21 August 1976 (72 SCRA 396)
Second Division, Fernando (p): 4 concurring
Facts: In the certification election held on February 27, 1976, respondent Union obtained 429
votes as against 414 of petitioner Union. Again, admittedly, under the Rules and Regulations
implementing the present Labor Code, a majority of the valid votes cast suffices for certification
of the victorious labor union as the sole and exclusive bargaining agent. There were four votes
cast by employees who did not want any union. On its face therefore, respondent Union ought to
have been certified in accordance with the above applicable rule. Petitioner, undeterred, would
seize upon the doctrine announced in the case of Allied Workers Association of the Philippines v.
Court of Industrial Relations that spoiled ballots should be counted in determining the valid votes
cast. Considering there were seventeen spoiled ballots, it is the submission that there was a grave
abuse of discretion on the part of respondent Director.
Issue: Whether Director Noriel acted with grave abuse of discretion in granting NAFLU as the
exclusive bargaining agent of all the employees in the Philippine Blooming Mills
Held: Director Noriel did not act with grave abuse of discretion. Certiorari does not lie. The
conclusion reached by the Court derives support from the deservedly high repute attached to the
construction placed by the executive officials entrusted with the responsibility of applying a
statute. The Rules and Regulations implementing the present Labor Code were issued by
Secretary Blas Ople of the Department of Labor and took effect on 3 February 1975, the present
Labor Code having been made known to the public as far back as 1 May 1974, although its date
of effectivity was postponed to 1 November 1974,. It would appear then that there was more than
enough time for a really serious and careful study of such suppletory rules and regulations to
avoid any inconsistency with the Code. This Court certainly cannot ignore the interpretation
thereafter embodied in the Rules. As far back as In re Allen, a 1903 decision, Justice
McDonough, as ponente, cited this excerpt from the leading American case of Pennoyer v.
McConnaughy, decided in 1891: The principle that the contemporaneous construction of a
statute by the executive officers of the government, whose duty it is to execute it, is entitled to
great respect, and should ordinarily control the construction of the statute by the courts, is so
firmly embedded in our jurisprudence that no authorities need be cited to support it. There was a
paraphrase by Justice Malcolm of such a pronouncement in Molina v. Rafferty, a 1918 decision:
Courts will and should respect the contemporaneous construction placed upon a statute by the
executive officers whose duty it is to enforce it, and unless such interpretation is clearly
erroneous will ordinarily be controlled thereby. Since then, such a doctrine has been reiterated
in numerous decisions. As was emphasized by Chief Justice Castro, the construction placed by
the office charged with implementing and enforcing the provisions of a Code should he given
controlling weight.
The Supreme Court dismissed the petition, with costs against petitioner PAFLU.
Mon 24 Mar 2003
Digest: Abellana v. Marave (GR L-27760, 29 May 1974)

No Comments
Abellana v. Marave
GR L-27760, 29 May 1974 (57 SCRA 106)
Second Division, Fernando (p): 4 concur, 1 concurs with qualifications
Facts: Francisco Abellana was charged with the City Court of Ozamis City with the crime of
physical injuries through reckless imprudence in driving his cargo truck, hitting a motorized
pedicab resulting in injuries to its passengers. Abellana was found guilty as charged, with
liability for damages in favor of the offended parties.
Abellana appealed the decision to the Court of First Instance (CFI). At this stage, the respondents
filed with another branch of the CFI Misamis Occidental a separate and independent civil action
for damages allegedly suffered by them from the reckless driving of Abellana. In the latter
complaint, Crispin Abellana, the alleged employer, was included as defendant. Both of them then
sought the dismissal of such action principally on the ground that there was no reservation for the
filing thereof in the City Court of Ozamis. It was argued by them that it was not allowable at the
stage where the criminal case was already on appeal. The judge in the latter CFI ordered on 28
April 1967 that the City Court judgment is vacated and a trail de novo be conducted. He noted
that the offended parties failed to expressly waive the civil action or reserved their right to
institute it separately in the City Court; but which they filed in the CFI. The motion to dismiss
and the motion for reconsideration were denied. Hence, the petition.
Issue: Whether the respondents are barred from instituting a separate civil action for failure to
reserve the right to file the same in the criminal proceedings.
Held: A court is to avoid construing a statute or legal norm in such a manner as would give rise
to a constitutional doubt. Substantive right cannot to be frittered away by a construction that
could render it nugatory, if through oversight, the offended parties failed at the initial stage to
seek recovery for damages in a civil suit. Article 33 of the Civil Code is quite clear when it
provides that in cases of physical injuries, a civil action for damages, entirely separate and
distinct from the criminal action, may be brought by the injured party. Further, the rule in the
jurisdiction of the Court is that upon appeal by the defendant from a judgment of conviction by
the municipal court, the appealed decision is vacated and the appealed case shall be tried in all
respects anew in the Court of First Instance as if it had been originally instituted in that court. An
interpretation that an independent civil action is barred absent a reservation under Section 1 of
Rule 111 is a non-sequitur, as the inference does not per se arise from the wordings of the rule
and ignores what is explicitly provided in Section 7, Rule 123. The basic purpose of a litigation,
which is to assure parties justice according to law, must not be ignored. No counsel should fall
prey to the vice of literalness.
The Supreme Court dismissed the petition with costs against petitioners.
Mon 24 Mar 2003
Digest: Kapisanan ng mga Manggagawa v. Manila Railroad

Company (GR L-25316, 28 February 1979)
No Comments
Kapisanan ng mga Manggagawa v. Manila Railroad Company
GR L-25316, 28 February 1979 (88 SCRA 616)
Second Division, Fernando (p): 5 concur, 1 took no part
Facts: There are no antecedent facts available for this case.
The union seeks reversal of decision of the lower court dismissing its petition for mandamus.
The court determined Republic Act 2023 was enacted only to compel the employer to make the
deduction of the employees debt from the latters salary and turn this over to the employees
credit union; but which does not convert the credit unions credit into a first priority credit.
Issue: Whether, indeed, the law does not give first priority in the matter of payments to the
obligations of employees in favor of their credit unions.
Held: Where the statutory norm speaks unequivocally, there is nothing for the courts to do
except to apply it. The law, leaving no doubt as to the scope of its operation, must be obeyed.
The express provisions of the New Civil Code, Articles 2241, 2242 and 2244 show the
legislative intent on preference of credits. In the present case, the applicable provision of
Republic Act 2023 speaks for itself; there being no ambiguity, it is to be applied. If the legislative
intent in enacting paragraphs 1 and 2 of Section 62 of RA 2023 were to give first priority in the
matter of payments to the obligations of employees in favor of their credit unions, then, the law
would have so expressly declared. There is nothing in the provision of Republic Act 2023 which
provides that obligation of laborers and employees payable to credit unions shall enjoy first
priority in the deduction from the employees wages and salaries.
The Supreme Court affirmed the appealed decision, without pronouncement as to costs.
Mon 24 Mar 2003
Digest: Salvatierra v. CA (GR 107797, 26 August 1996)

No Comments
Salvatierra v. CA
GR 107797, 26 August 1996 (261 SCRA 45)
First Division, Hermosisima (p): 3 concur, 1 on leave
Facts: In 1930, Enrique Salvatierra died intestate and without any issue. He was survived by his
legitimate brothers: Tomas, Bartolome, Venancio and Macario, and sister Marcela, all surnamed
Salvatierra. His estate consisted of three parcels of land (Cadastral Lot 25, covered by Tax
Declaration 11950, Cadastral Lot 26, covered by Tax Declaration 11951, and Cadastral Lot 27,
covered by Tax Declaration 11949). On 4 May 1966, Macario Salvatierra sold Lot 26 to his son,
Anselmo Salvatierra by means of a deed of sale, and in consideration of P1,000.00. Meanwhile,
Marcela sold her share to Venancio. Bartolomes share was sold by his heirs to Tomas. On 24
September 1968, an Extrajudicial Partition with Confirmation of Sale was executed by and
among the surviving legal heirs and descendants of Enrique Salvatierra. After the partition,
Venancio owned 1041 square meters consisting of Lot 27 and portion of Lot 26 (which is
approximately 749 square meters), Anselmo owned 405 square meters of Lot 26, while the heirs
of Tomas owned 1,116 square meters, the whole of Lot 25. Thereafter on 15 June 1970, Venancio
sold the whole of Lot 27 and a 149 square meter portion of Lot 26 to spouses Lino Longalong
and Paciencia Mariano. It was discovered in 1982 through a relocation survey that the 149 square
meter portion of Lot 26 was outside Longalongs fence as Anselmo Salvatierra was able to obtain
a title in his name (Original Certificate of Title 0-4221) covering the whole of Lot 26). Efforts to
settle the matter at the barangay level proved futile because Purita Salvatierra (widow of
Anselmo) refused to yield to the demand of Lino Longalong to return to the latter the 149 square
meter portion of Lot 26.
Longalong filed a case with the Regional Trial Court for the reconveyance of the said portion of
Lot 26. The court a quo dismissed the case on the grounds that Longalong failed to establish
ownership of the portion of the land in question, and that the prescriptive period of four years
from discovery of the alleged fraud committed by defendants predecessor Anselmo Salvatierra
within which plaintiffs should have filed their action had already elapsed. On appeal, the Court
of Appeals reversed the decision, ruling that a vendor can sell only what he owns or what he is
authorized to sell; and as to the co-owner of a piece of land, he can of course sell his pro indiviso
share therein to, but he cannot sell more than his share therein. Hence, the appeal.
Issue: Whether Longalong is entitled to reconveyance of the 149 square meters in Lot 26
Held: When the terms of the agreement are clear and unequivocal, the literal and plain meaning
thereof should be observed, pursuant to Article 1370 of the Civil Code (If the terms of a
contract are clear and leave no doubt upon the intention of the contracting parties, the literal
meaning of its stipulation shall control.) Contracts which are the private laws of the contracting
parties, should be fulfilled according to the literal sense of their stipulations, if their terms are
clear and leave no room for doubt as to the intention of the contracting parties, for contracts are
obligatory, no matter what their forms maybe, whenever the essential requisites for their validity
are present. In the present case, there is no ambiguity in the terms and stipulations of the
extrajudicial partition (Extrajudicial Partition with Confirmation of Sale). Since Macarios share
(later Anselmos) is only 405 of the 749 square meters comprising Lot 26, Venancio was entitled
to the remaining 344 square meters of Lot 26, 149 square meters of which was sold to
Longalong. Supplemented by the holding that the prescriptive period on reconveyance is ten
years and not four years, as held in Caro v. CA, Longalong is entitled to reconveyance as his
complaint was filed five years after the constitution of Anselmos fraudulent Original Certificate
of title.
The Supreme Court denied the petition for want of merit, with costs against petitioners.
Mon 24 Mar 2003
Digest: Board of Administrators of the PVA v. Bautista (GR

L-37867, 22 February 1982)
Posted by Berne Guerrero under digests
No Comments
Board of Administrators of the PVA v. Bautista
GR L-37867, 22 February 1982 (112 SRCA 59)
First Division, Guerrero (p): 5 concurring
Facts: Calixto Gasilao was a veteran in good standing during the last World War that took active
participation in the liberation drive against the enemy, and due to his military service, he was
rendered disabled. The Philippine Veterans Administration, formerly the Philippine Veterans
Board, (now Philippine Veterans Affairs Office) is an agency of the Government charged with
the administration of different laws giving various benefits in favor of veterans and their
orphans/or widows and parents. On July 23, 1955, Gasilao filed a claim for disability pension
under Section 9 of Republic Act 65, with the Philippine Veterans Board, alleging that he was
suffering from Pulmonary Tuberculosis (PTB), which he incurred in line of duty. Due to
Gasilaos failure to complete his supporting papers and submit evidence to establish his serviceconnected illness, his claim was disapproved by the Board on 18 December 1955. On 8 August
1968, Gasilao was able to complete his supporting papers and, after due investigation and
processing, the Board of Administrators found out that his disability was 100% thus he was
awarded the full benefits of section 9 of Republic Act 65.
Later on, Republic Act 5753 was approved on 22 June 1969, providing for an increase in the
basic pension and additional pension for the wife and each of the unmarried minor children.
Gasilaos monthly pension was, however, increased only on 15 January 1971, and by 25% of the
increases provided by law, due to the fact that it was only on said date that funds were released
for the purpose, and the amount so released was only sufficient to pay only 25% of the increase.
On 15 January 1972, more funds were released to implement fully Republic Act 5753 and allow
payment in full of the benefits thereunder from said date.
In 1973, Gasilao filed an action against the Board to recover the pension, which he claims he is
entitled to, from July 1955, when he first filed his application for pension, up to 1968 when his
pension was finally approved. The Board contends, however, based on Section 15 of Republic
Act 65, that since the section impliedly requires that the application filed should first be
approved by the Board of Administrators before the claimant could receive his pension,
therefore, an award of pension benefits should commence from the date of approval of the
application.
Issue: Whether Gasilao is entitled to the pension from 1955 instead of from 1968.
Held: As it is generally known, the purpose of Congress in granting veteran pensions is to
compensate a class of men who suffered in the service for the hardships they endured and the
dangers they encountered, and more particularly, those who have become incapacitated for work
owing to sickness, disease or injuries sustained while in line of duty. A veteran pension law is,
therefore, a governmental expression of gratitude to and recognition of those who rendered
service for the country, especially during times of war or revolution, by extending to them
regular monetary aid. For this reason, it is the general rule that a liberal construction is given to
pension statutes in favor of those entitled to pension. Courts tend to favor the pensioner, but such
constructional preference is to be considered with other guides to interpretation, and a
construction of pension laws must depend on its own particular language. In the present case,
Republic Act 65 is a veteran pension law which must be accorded a liberal construction and
interpretation in order to favor those entitled to rights, privileges, and benefits granted
thereunder, among which are the right to resume old positions in government, educational
benefits, the privilege to take promotion examinations, a life pension for the incapacited, pension
for widow and children, and hospitalization and medical benefits. Upholding the Board that the
pension awards are made effective only upon approval of the application, this would be
dependent upon the discretion of the Board which had been abused in this case through inaction
extending for 12 years. Such stand, therefore does not appear to be, or simply is not, in
consonance with the spirit and intent of the law. Gasilaos claim was sustained.
The Supreme Court modified the judgment of the court a quo, ordering the Board of
Administrators of the Philippine Veterans Administration (now the Philippine Veterans Affairs
Office) to make Gasilaos pension effective 18 December 1955 at the rate of P50.00 per month
plus P10.00 per month for each of his then unmarried minor children below 18, and the former
amount increased to P100.00 from 22 June 1957 to 7 August 1968; and declaring the differentials
in pension to which said Gasilao, his wife and his unmarried minor children below 18 are
entitled for the period from 22 June 1969 to 14 January 1972 by virtue of Republic Act 5753
subject to the availability of Government funds appropriated for the purpose.
Mon 24 Mar 2003
Digest: China Bank v. Ortega (GR L-34964, 31 January

1973)

No Comments
China Bank v. Ortega (J)
GR L-34964, 31 January 1973 (49 SCRA 355)
Second Division, Makalintal (p): 7 concur, 2 took no part
Facts: On 17 December 1968, Vicente Acaban filed a complaint against B & B Forest
Development Corporation and Mariano Bautista for the collection of sum of money. The trial
court declared the defendants in default for failure to answer within the reglementary period, and
rendered its decision on 20 January 1970.
To satisfy the judgment, Acaban sought the garnishment of the bank deposit of B & B Forest
Development Corporation with the China Bank. However, Tan Kim Liong, the banks cashier,
disallowed the same invoking the provisions of Republic Act 1405, which prohibit the disclosure
of any information relative to bank deposits. On 4 March 1972, Tan Kim Lion was ordered to
inform the Court if there is a deposit by B & B Forest Development in the China Bank, and if
there is, to hold the same intact and not allow any withdrawal until further order from the Court.
Tan Kim Liong moved to reconsider but was turned down. In the same order he was directed to
comply with the order of the Court, otherwise his arrest and confinement will be ordered.
Resisting the 2 orders, the China Bank and Tan Kim Liong instituted the petition. Petitioners
argue that the disclosure of the information required by the court does not fall within any of the
four (4) exceptions enumerated in Section 2 ([1] upon written permission of the depositor, [2] or
in cases of impeachment, [3] or upon order of a competent court in cases of bribery or dereliction
of duty of public officials, [4] or in cases where the money deposited or invested is the subject
matter of the litigation), and that if the questioned orders are complied with Tan Kim Liong may
be criminally liable under Section 5 and the bank exposed to a possible damage suit by B & B
Forest Development Corporation. Specifically referring to the case, the position of the petitioners
is that bank deposit of judgment debtor B and B Forest Development Corporation cannot be
subject to garnishment to satisfy a final judgment against it in view of the aforementioned
provisions of law.
Issue: Whether or not a banking institution may validly refuse to comply with a court process
garnishing the bank deposit of a judgment debtor, by invoking the provisions of Republic Act
1405.
Held: From the discussion of the conference committee report of the two houses of Congress
that the prohibition against examination of or inquiry into a bank deposit under Republic Act
1405 does not preclude its being garnished to insure satisfaction of a judgment. Indeed, there is
no real inquiry in such a case, and if the existence of the deposit is disclosed, the disclosure is
purely incidental to the execution process. Importantly, it was not the intention of the lawmakers
to place bank deposits beyond the reach of execution to satisfy a judgment. In the present case,
the lower court did not order an examination of or inquiry into the deposit of B & B Forest
Development Corporation, as contemplated in the law. It merely required Tan Kim Liong to
inform the court whether B & B Forest Development Corporation had a deposit in the China
Banking Corporation only for purposes of the garnishment issued by it, so that the bank would
hold the same intact and not allow any withdrawal until further order.
The Supreme Court affirmed the orders of the lower court dated 4 and 27 March 1972, with
costs against the petitioners.
Mon 24 Mar 2003
Digest: Aisporna v. CA (GR L-39419, 12 April 1982)

No Comments
Aisporna v. CA
GR L-39419, 12 April 1982 (113 SCRA 459)
First Division, de Castro (p): 5 concur, 1 took no part
Facts: Since 7 March and on 21 June 1969, a Personal Accident Policy was issued by Perla
Compania de Seguros, through its authorized agent Rodolfo Aisporna, for a period of 12 months
with the beneficiary designated as Ana M. Isidro. The insured died by violence during lifetime of
policy. Mapalad Aisporna participated actively with the aforementioned policy.
For reason unexplained, an information was filed against Mapalad Aisporna, Rodolfos wife,
with the City Court of Cabanatuan for violation of Section 189 of the Insurance Act on 21
November 1970, or acting as an agent in the soliciting insurance without securing the certificate
of authority from the office of the Insurance Commissioner. Mapalad contends that being the
wife of true agent, Rodolfo, she naturally helped him in his work, as clerk, and that policy was
merely a renewal and was issued because Isidro had called by telephone to renew, and at that
time, her husband, Rodolfo, was absent and so she left a note on top of her husbands desk to
renew. On 2 August 1971, the trial court found Mapalad guilty and sentenced here to pay a fine
of P500.00 with subsidiary imprisonment in case of insolvency and to pay the costs. On appeal
and on 14 August 1974, the trial courts decision was affirmed by the appellate court (CA-GR
13243-CR). Hence, the present recourse was filed on 22 October 1974. On 20 December 1974,
the Office of the Solicitor General, representing the Court of Appeals, submitted that Aisporna
may not be considered as having violated Section 189 of the Insurance Act.
Issue: Whether Mapalad Aisporna is an insurance agent within the scope or intent of the
Insurance Act
Held: Legislative intent must be ascertained from a consideration of the statute as a whole. The
particular words, clauses and phrases should not be studied as detached and isolated expressions,
but the whole and every part of the statute must be considered in fixing the meaning of any of its
parts and in order to produce harmonious whole. In the present case, the first paragraph of
Section 189 prohibits a person from acting as agent, subagent or broker in the solicitation or
procurement of applications for insurance without first procuring a certificate of authority so to

act from the Insurance Commissioner; while the second paragraph defines who is an insurance
agent within the intent of the section; while the third paragraph prescribes the penalty to be
imposed for its violation. The appellate courts ruling that the petitioner is prosecuted not under
the second paragraph of Section 189 but under its first paragraph is a reversible error, as the
definition of insurance agent in paragraph 2 applies to the paragraph 1 and 2 of Section 189,
which is any person who for compensation shall be an insurance agent within the intent of this
section. Without proof of compensation, directly or indirectly, received from the insurance
policy or contract, Mapalad Aisporna may not be held to have violated Section 189 of the
Insurance Act.
The Supreme Court reversed the appealed judgment and acquitted the accused of the crime
charged, with costs de oficio.
Mon 24 Mar 2003
Digest: Republic v. CA and Molina (GR 108763, 13 February

1997)
No Comments
Republic v. CA and Molina
GR 108763, 13 February 1997
En Banc, Panganiban (p): 8 concur, 3 concur in result
Facts: Roridel Olaviano was married to Reynaldo Molina on 14 April 1985 in Manila, and gave
birth to a son a year after. Reynaldo showed signs of immaturity and irresponsibility on the
early stages of the marriage, observed from his tendency to spend time with his friends and
squandering his money with them, from his dependency from his parents, and his dishonesty on
matters involving his finances. Reynaldo was relieved of his job in 1986, Roridel became the
sole breadwinner thereafter. In March 1987, Roridel resigned from her job in Manila and
proceeded to Baguio City. Reynaldo left her and their child a week later. The couple are
separated-in-fact for more than three years.
On 16 August 1990, Roridel filed a verified petition for declaration of nullity of her marriage to
Reynaldo Molina. Evidence for Roridel consisted of her own testimony, that of two of her
friends, a social worker, and a psychiatrist of the Baguio General Hospital and Medical Center.
Reynaldo did not present any evidence as he appeared only during the pre-trial conference. On
14 May 1991, the trial court rendered judgment declaring the marriage void. The Solicitor
General appealed to the Court of Appeals. The Court of Appeals denied the appeals and affirmed
in toto the RTCs decision. Hence, the present recourse.
Issue: Whether opposing or conflicting personalities should be construed as psychological

incapacity
Held: The Court of Appeals erred in its opinion the Civil Code Revision Committee intended to
liberalize the application of Philippine civil laws on personal and family rights, and holding
psychological incapacity as a broad range of mental and behavioral conduct on the part of one
spouse indicative of how he or she regards the marital union, his or her personal relationship
with the other spouse, as well as his or her conduct in the long haul for the attainment of the
principal objectives of marriage; where said conduct, observed and considered as a whole, tends
to cause the union to self-destruct because it defeats the very objectives of marriage, warrants the
dissolution of the marriage.
The Court reiterated its ruling in Santos v. Court of Appeals, where psychological incapacity
should refer to no less than a mental (not physical) incapacity, existing at the time the marriage is
celebrated, and that there is hardly any doubt that the intendment of the law has been to confine
the meaning of psychological incapacity to the most serious cases of personality disorders
clearly demonstrative of an utter insensitivity or inability to give meaning and significance to the
marriage. Psychological incapacity must be characterized by gravity, juridical antecedence, and
incurability. In the present case, there is no clear showing to us that the psychological defect
spoken of is an incapacity; but appears to be more of a difficulty, if not outright refusal or
neglect in the performance of some marital obligations. Mere showing of irreconcilable
differences and conflicting personalities in no wise constitutes psychological incapacity.
The Court, in this case, promulgated the guidelines in the interpretation and application of Article
36 of the Family Code, removing any visages of it being the most liberal divorce procedure in
the world: (1) The burden of proof belongs to the plaintiff; (2) the root cause of psychological
incapacity must be medically or clinically identified, alleged in the complaint, sufficiently
proven by expert, and clearly explained in the decision; (3) The incapacity must be proven
existing at the time of the celebration of marriage; (4) the incapacity must be clinically or
medically permanent or incurable; (5) such illness must be grave enough; (6) the essential
marital obligation must be embraced by Articles 68 to 71 of the Family Code as regards husband
and wife, and Articles 220 to 225 of the same code as regards parents and their children; (7)
interpretation made by the National Appellate Matrimonial Tribunal of the Catholic Church, and
(8) the trial must order the fiscal and the Solicitor-General to appeal as counsels for the State.
The Supreme Court granted the petition, and reversed and set aside the assailed decision;
concluding that the marriage of Roridel Olaviano to Reynaldo Molina subsists and remains valid.
Mon 24 Mar 2003
Digest: Floresca v. Philex Mining (GR L-30642, 30 April

1985)

No Comments
Floresca v. Philex Mining
GR L-30642., 30 April 1985 (136 SCRA 142)
En Banc, Makasiar (p): 7 concurring, 1 on leave, 2 took no part, others dissenting
Facts: Several miners were killed in a cave-in at one of Philex Mining Corporations mine sites.
The heirs of the miners were able to recover under the Workmans Compensation Act (WCA).
Thereafter, a special committee report indicated that the company failed to provide the miners
with adequate safety protection. The heirs decided to file a complaint for damages before the
Court of First Instance (CFI) of Manila. Philex filed a Motion to Dismiss on the ground that the
action was based on an industrial accident which is covered under the WCA and, therefore, the
CFI has no jurisdiction over the case. Philex argues that the work connected injuries are
compensable exclusively under Sections 5 and 46 of the WCA; and that the WCA covers workconnected accidents even if the employer was negligent as the WCA under Section 4-A imposes
a 50% additional compensation in the event that the employer is negligent. The heirs, however,
contend that the CFI has jurisdiction, as their complaint is not based on the WCA but on the Civil
Code provisions on damages arising out of negligence. The CFI dismissed the complaint for lack
of jurisdiction. The heirs questioned the dismissal before the Supreme Court.
Amici curiae submitted their respective memoranda, pursuant to the resolution of 26 November
1976, involving the issue whether the action of an injured employee or worker or that of his heirs
in case of his death under the Workmens Compensation Act is exclusive, selective or
cumulative; i.e. (1: Exclusive) whether an injured employee or his heirs action is exclusively
restricted to seeking the limited compensation provided under the Workmens Compensation Act,
(2: Selective) whether an injured employee or his heirs have a right of selection or choice of
action between availing of the workers right under the Workmens Compensation Act and suing
in the regular courts under the Civil Code for higher damages (actual, moral and/or exemplary)
from the employer by virtue of negligence (or fault) of the employer or of his other employees,
or (3: Cumulative) whether an injured employee or his heirs may avail cumulatively of both
actions, i.e., collect the limited compensation under the Workmens Compensation Act and sue in
addition for damages in the regular courts. The opinions of the amici curiae are diverse.
The Court in this same decision agreed with the argument that the action is selective, i.e. that the
injured worker or his heirs have the choice of remedies, but that they cannot pursue both courses
of action simultaneously and balance the relative advantage of recourse under the Workmens
Compensation Act as against an ordinary action. It further held that the petitioners who had
received the benefits under the Workmens Compensation Act, such may not preclude them from
bringing an action before the regular court, as the choice of the first remedy was based on
ignorance or a mistake of fact, which nullifies the choice as it was not an intelligent choice, but
that upon the success of such bids before the lower court, the payments made under the
Workmens Compensation Act should be deducted from the damages that may be decreed in
their favor.
Issue: Whether the Supreme Court, in determining the action to be selective, is guilty of judicial
legislation.
Held: The Court, through its majority, defended itself by holding that the Court does not
legislate but merely applies and gives effect to the constitutional guarantees of social justice then
secured by Section 5 of Article II and Section 6 of Article XIV of the 1935 Constitution, and later
by Sections 6, 7, and 9 of Article II of the Declaration of Principles and State Policies of the
1973 Constitution, as amended, and as implemented by Articles 2176, 2177, 2178, 1173, 2201,
2216, 2231 and 2232 of the New Civil Code of 1950. Further, it reiterated its ruling in People vs.
Licera: that judicial decisions of the Supreme Court assume the same authority as the statute
itself, pursuant to Article 8 of the Civil Code of the Philippines which decrees that judicial
decisions applying or interpreting the laws or the Constitution form part of this jurisdictions
legal system. It argues that the application or interpretation placed by the Court upon a law is
part of the law as of the date of the enactment of the said law since the Courts application or
interpretation merely establishes the contemporaneous legislative intent that the construed law
purports to carry into effect. Yet, the Court argues that the Court can legislate, pursuant to Article
9 of the New Civil Code, which provides that No judge or court shall decline to render
judgment by reason of the silence, obscurity or insufficiency of the laws. Thus, even the
legislator himself recognizes that in certain instances, the court do and must legislate to fill in
the gaps in the law; because the mind of the legislator, like all human beings, is finite and
therefore cannot envisage all possible cases to which the law may apply.
Mon 24 Mar 2003
Digest: Paras v. Comelec (GR 123169, 4 November 1996)

No Comments
Paras v. Comelec (Resolution)
GR 123169, 4 November 1996 (264 SCRA 49)
En Banc, Francisco (p): 14 concurring
Facts: Danilo E. Paras is the incumbent Punong Barangay of Pula, Cabanatuan City who won
during the 1994 barangay election. A petition for his recall as Punong Barangay was filed by the
registered voters of the barangay, which was approved by the Comelec. Petition signing was
scheduled on 14 October 1995, where at least 29.30% of the registered voters signed the petition,
well above the 25% requirement provided by law. The Comelec also set the recall election on 13
November 1995, but which was deferred to 16 December 1995 due to the petitioners opposition.
To prevent the holding of the recall election, petitioner filed before the RTC Cabanatuan City a
petition for injunction (Special Proceeding Civil Action 2254-AF), with the trial court issuing a
restraining order. After conducting a summary hearing, the trial court lifted the restraining order,
dismissed the petition and required petitioner and his counsel to explain why they should not be
cited for contempt for misrepresenting that the barangay recall election was without Comelec
approval.
In a resolution dated 5 January 1996, the Comelec, for the third time, re-scheduled the recall
election on 13 January 1996; hence, the instant petition for certiorari with urgent prayer for
injunction. The petitioner contends that no recall can take place within one year preceding a
regular local election, the Sangguniang Kabataan elections slated on the first Monday of May
1996. He cited Associated Labor Union v. Letrondo-Montejo to support the argument, the Court
in which case considered the SK election as a regular local election.
Issue: Whether the Sangguniang Kabataan election is to be construed as a regular local election
in a recall proceeding
Held: It is a rule in statutory construction that every part of the statute must be interpreted with
reference to the context, i.e., that every part of the statute must be considered together with the
other parts, and kept subservient to the general intent of the whole enactment. Further, the spirit,
rather than the letter of a law determines its construction; hence, a statute must be read according
to its spirit and intent. The too literal interpretation of the law leads to absurdity which the Court
cannot countenance. A too-literal reading of the law constrict rather than fulfill its purpose and
defeat the intention of its authors. That intention is usually found not in the letter that killeth but
in the spirit that vivifieth. In the present case, Paragraph (b) of Section 74 construed together
with paragraph (a) merely designates the period when such elective local official may be subject
of a recall election. The Sangguniang Kabataan elections cannot be considered a regular election,
as this would render inutile the recall provision of the Local Government Code. It would be more
in keeping with the intent of the recall provision of the Code to construe regular local election as
one referring to an election where the office held by the local elective official sought to be
recalled will be contested and be filled by the electorate.
The Supreme Court, however, has to dismiss the petition for having become moot and academic,
as the next regular elections involving the barangay office concerned were seven months away.
Thus, the Temporary Restraining Order issued on 12 January 1996, enjoining the recall election,
was made permanent.
Mon 24 Mar 2003
Digest: # Daoang v. Municipal Judge of San Nicolas (GR L34568, 28 March 1988)
No Comments
Daoang v. Municipal Judge of San Nicolas

GR L-34568, 28 March 1988 (159 SCRA 369)
Second Division, Padilla (p): 4 concurring
Facts: On 23 March 1971, spouses Antero and Amanda Agonoy filed a petition with the
Municipal Court of San Nicolas, Ilocos Norte seeking the adoption of minors Quirino Bonilla
and Wilson Marcos. However, minors Roderick and Rommel Daoang, assisted by their father
and guardian ad litem, the petitioners herein filed an opposition to the said adoption. They
contended that the spouses Antero and Amanda Agonoy had a legitimate daughter named Estrella
Agonoy, oppositors mother, who died on 1 March 1971, and therefore said spouses were
disqualified to adopt under Article 335 of the Civil Code, which provides that those who have
legitimate, legitimated, acknowledged natural children or children by legal fiction cannot adopt.
Issue: Whether the spouses Antero Agonoy and Amanda Ramos are disqualified to adopt under
paragraph 1 of Article 335 of the Civil Code.
Held: The words used in paragraph (1) of Article 335 of the Civil Code, in enumerating the
persons who cannot adopt, are clear and unambiguous. When the New Civil Code was adopted,
it changed the word descendant, found in the Spanish Civil Code to which the New Civil Code
was patterned, to children. The children thus mentioned have a clearly defined meaning in law
and do not include grandchildren. Well known is the rule of statutory construction to the effect
that a statute clear and unambiguous on its face need not be interpreted. The rule is that only
statutes with an ambiguous or doubtful meaning may be the subjects of statutory construction. In
the present case, Roderick and Rommel Daoang, the grandchildren of Antero Agonoy and
Amanda Ramos-Agonoy, cannot assail the adoption of Quirino Bonilla and Wilson Marcos by
the Agonoys.
The Supreme Court denied the petition, and affirmed the judgment of the Municipal Court of San
Nicolas, Ilocos Norte (Special Proceedings 37), wthout pronouncement as to costs.
Mon 24 Mar 2003
Digest: People v. Mapa (GR L-22301, 30 August 1967)

No Comments
People v. Mapa
GR L-22301, 30 August 1967 (20 SCRA 1164)
En Banc, Fernando (p): 9 concur
Facts: Mario M. Mapa was charged for illegal possession of firearm and ammunition in an
information dated 14 August 1962 in violation of Section 878 of the Revise Administrative Code
in connection with Section 2692 of the Revised Administrative Code, as amended by CA 56 and
as further amended by RA 4. Accused admits to possession of firearm on ground of being a

secret agent of Governor Feliciano Leviste of Batangas. On 27 November 1963, the lower court
rendered a decision convicting the accused of the crime and sentenced him to imprisonment for
one year and one day to two years. As the appeal involves a question of law, it was elevated to
the Supreme Court.
Issue: Whether or not a secret agent duly appointed and qualified as such of the governor is
exempt from the requirement of having a license of firearm
Held: The law is explicit that it is unlawful for any person to possess any firearm, detached parts
of firearms or ammunition therefor, or any instrument or implement used or intended to be used
in the manufacture of firearms, parts of firearms, or ammunition except when such firearms are
in possession of such public officials and public servants for use in the performance of their
official duties; as those firearms and ammunitions which are regularly and lawfully issued to
officers, soldiers, sailors or marines, the Philippines Constabulary, guards in the employment of
the Bureau of Prisons, municipal police, provincial governors, lieutenant governors, provincial
treasurers, municipal treasurers, municipal mayors, and guards of provincial prisoners and jails.
It is the first and fundamental duty of courts to apply the law; Construction and interpretation
come only after it has been demonstrated that application is impossible or inadequate without
them. The law cannot be any clearer, there being no provision made for a secret agent.
Reliance in the decision in People v. Macarandang is misplaced, and the case no longer speaks
with authority to the extent that the present decision conflicts with. It may be note that in People
v. Macarandang, a secret agent was acquitted on appeal on the assumption that the appointment
of the accused as a secret agent to assist in the maintenance of peace and order campaigns and
detection of crimes sufficiently put him within the category of a peace officer equivalent even
to a member of the municipal police expressly covered by section 879, Thus, in the present case,
therefore, the conviction must stand.
The Supreme Court affirmed the appealed judgment.
Mon 24 Mar 2003
Digest: Paat v. CA (GR 111107, 10 January 1997)

No Comments
Paat v. CA
GR 111107, 10 January 1997 (266 SCRA 167)
Second Division, Torres Jr. (p): 4 concurring
Facts: On 19 May 1989, Victoria de Guzmans truck was seized by Department of Environment
and Natural Resources personnel in Aritao, Nueva Vizcaya while on its ways to Bulacan from
San Jose, Baggao, Cagayan because the driver could not produce the required documents for the
forest products found concealed in the truck. On 23 May 1989, Aritao CENROs Jovito Layugan
issued an order of confiscation of the truck. Its owner, De Guzman, failed to submit the required
explanation within the reglementary period set by Layugan. On 22 June 1989, DENR Regional
Executive Director Rogelio Baggayan sustained the Alitao CENROs action of confiscation and
ordered the forfeiture of the truck invoking Section 68-A of Presidential Decree 705, as amended
by Executive Order 277. De Guzman filed for reconsideration but was denied.
The case was appealed to the Secretary of DENR. Pending resolution, however, a suit for
replevin (Civil Case 4031), was filed by De Guzman and company against Layugan and
Baggayan with the RTC Cagayan (Branch 2), contending that the only the court is authorized to
confiscate and forfeit conveyances used in the transporting illegal forest products, pursuant to the
second paragraph of Section 68. De Guzman further contended that the seizure is illegal, as she
did not use the truck in the commission of the crime (of qualified theft under Article 309 and 310
of the Revised Penal Code, punishable under Section 68), as allegedly admitted by the Regional
Executive Director, releasing her from criminal liability. The trial court thereafter issued a writ
ordering the return of the truck to De Guzman. The petitioners filed a petition for certiorari with
the Court of Appeals. The appellate court sustained the trial courts order ruling that the question
involved is purely a legal one. Hence, the petition.
Issues:
Whether construction admits that the authority to confiscate or to forfeit conveyances

belongs to the courts
Whether the truck was used in the commission of an offense under Section 68 of
Presidential Decree 705, as amended by Executive Order 277
Held: The construction that conveyances are subject of confiscation by the courts exclusively
(pursuant to Section 28, paragraph 2) unduly restricts the clear intention of the law and inevitably
reduces the other provision of Section 68-A, aside to the fact that conveyances are not mentioned
nor included in the former provision. In the construction of statutes, it must be read in such a way
as to give effect to the purpose projected in the statute. Statutes should be construed in the light
of the object to be achieved and the evil or mischief to be suppressed, and they should be given
such construction as will advance the object, suppress the mischief, and secure the benefits
intended. In the case at bar, the phrase to dispose of the same is broad enough to cover the act
of forfeiting conveyances in favor of the government. The only limitation is that it should be
made in accordance with pertinent laws, regulations or policies on the matter.
Further, when the statute is clear and explicit, there is hardly room for any extended court
ratiocination or rationalization of the law. The language of the amendatory executive order, when
it eliminated the phrase shall be guilty of qualified theft as defined and punished under Articles
309 and 310 of the Revised Penal Code and inserted the words shall be punished with the
penalties imposed under Article 309 and 310 of the Revised Penal Code, meant that the act of
cutting, gathering, collecting, removing, or possessing forest products without authority
constitutes a distinct offense independent now from the crime of theft under Articles 309 and 310
of the Revised Penal Code, but the penalty to be imposed is that provided for under Article 309
and 310 of the Revised Penal Code.
The Supreme Court granted the petition, reversed and set aside the 16 October decision and 14
July 1992 resolution of the CA, made permanent the restraining order promulgated on 27
September 1993, and directed the DENR secretary to resolve the controversy with utmost
dispatch.
Mon 24 Mar 2003
Digest: National Federation of Labor (NFL) v. Eisma (GR L61236, 31 January 1984)
No Comments
National Federation of Labor (NFL) v. Eisma
GR L-61236, 31 January 1984 (127 SCRA 419)
En Banc, Fernando (p): 9 concur, 1 concur with comments, 1 took no part, 1 on leave
Facts: On 5 March 1982, the National Federation of Labor filed with the Ministry of Labor and
Employment (Labor Relations Division, Zamboanga City), a petition for direct certification as
the sole exclusive collective bargaining representative of the monthly paid employees at the
Lumbayao manufacturing plant of the Zamboanga Wood Products, Inc. (Zambowood). On 17
April 1982, such employees charged the firm before the same office for underpayment of
monthly living allowances. On 3 May 1982, the union issued a notice of strike against the firm,
alleging illegal termination of Dionisio Estioca, president of the said local union; unfair labor
practice; nonpayment of living allowances; and employment of oppressive alien management
personnel without proper permit. The strike began on 23 May 1982.
On 9 July 1982, Zambowood filed a complaint with the trial court against the officers and
members of the union, for damages for obstruction of private property with prayer for
preliminary injunction and/or restraining order. The union filed a motion for the dismissal and
for the dissolution of the restraining order, and opposition to the issuance of the writ of
preliminary injunction, contending that the incidents of picketing are within the exclusive
jurisdiction of the Labor Arbiter pursuant to Batas Pambansa 227 (Labor Code, Article 217) and
not to the Court of First Instance. The motion was denied. Hence, the petition for certiorari.
Issue: Whether construction of the law is required to determine jurisdiction.
Held: The first and fundamental duty of courts is to apply the law. Construction and
interpretation come only after it has been demonstrated that application is impossible or
inadequate without them.
Jurisdiction over the subject matter in a judicial proceeding is conferred by the sovereign
authority which organizes the court; and it is given only by law. Jurisdiction is never presumed; it
must be conferred by law in words that do not admit of doubt. Since the jurisdiction of courts
and judicial tribunals is derived exclusively from the statutes of the forum, the issue should be
resolved on the basis of the law or statute in force. Therefore, since (1) the original wording of
Article 217 vested the labor arbiters with jurisdiction; since (2) Presidential Decree 1691
reverted the jurisdiction with respect to money claims of workers or claims for damages arising
from employer-employee relations to the labor arbiters after Presidential Decree 1367 transferred
such jurisdiction to the ordinary courts, and since (3) Batas Pambansa 130 made no change with
respect to the original and exclusive jurisdiction of Labor Arbiters with respect to money claims
of workers or claims for damages arising from employer-employee relations; Article 217 is to be
applied the way it is worded. The exclusive original jurisdiction of a labor arbiter is therein
provided for explicitly. It means, it can only mean, that a court of first instance judge then, a
regional trial court judge now, certainly acts beyond the scope of the authority conferred on him
by law when he entertained the suit for damages, arising from picketing that accompanied a
strike.
The Supreme Court, thus, granted the writ of certiorari, and nullified and set aside the 20 July
1982 order issued by the court a quo. It granted the writ of prohibition, and enjoined the Judge of
said court, or whoever acts in his behalf in the RTC to which this case is assigned, from taking
any further action on the civil case (Civil Case 716 [2751]), except for the purpose of dismissing
it. It also made permanent the restraining order issued on 5 August 1982.
Mon 24 Mar 2003
Digest: Caltex v. Palomar (GR L-19650, 29 September 1966)

[2] Comments
Caltex v. Palomar
GR L-19650, 29 September 1966 (18 SCRA 247)
En Banc, Castro (p): 9 concurring
Facts: In 1960, Caltex (Phils) Inc. conceived a promotional scheme Caltex Hooded Pump
Contest calculated to drum up patronage for its products, calling for participants therein to
estimate the actual number of liters a hooded gas pump at each Caltex station will dispense
during a specified period. For the privilege to participate, no fee or consideration is required to
be paid. Neither a purchase of Caltex products is required. Entry forms were available upon
request at each Caltex station where a sealed can was provided for the deposit of accomplished
entry stubs. Foreseeing the extensive use of the mails, not only as amongst the mediator
publicizing the contest but also for the transmission of communications relative thereto,
representations were made by Caltex with the postal authorities for the contest to be cleared in
advance for mailing, in view of sections 1954(a), 1982 and 1983 of the Revised Administrative
Code. Such overtures were formalized in a letter to the Postmaster General, dated 31 October
1960, in which the Caltex, thru counsel, enclosed a copy of the contest rules and endeavored to
justify its position that the contest does not violate the anti-lottery provisions of the Postal Law.
Unimpressed, the then Acting Postmaster General Enrico Palomar opined that the scheme falls
within the purview of the provisions aforesaid and declined to grant the requested clearance.
Caltex thereupon invoked judicial intervention by filing a petition for declaratory relief against
the Postmaster General, praying that judgment be rendered declaring its Caltex Hooded Pump
Contest not to be violative of the Postal Law, and ordering respondent to allow petitioner the use
of the mails to bring the contest to the attention of the public. The trial court ruled that the
contest does not violate the Postal Code and that the Postmaster General has no right to bar the
public distribution of the contest rules by the mails. The Postmaster General appealed to the
Supreme Court.
Issue(s):
Whether construction should be employed in the case.
Whether the contest is a lottery or a gift enterprise that violates the provisions of the
Postal Law.
Held:
Construction is the art or process of discovering and expounding the meaning and intention of
the authors of the law with respect to its application to a given case, where that intention is
rendered doubtful, amongst others, by reason of the fact that the given case is not explicitly
provided for in the law. In the present case, the prohibitive provisions of the Postal Law
inescapably require an inquiry into the intended meaning of the words used therein. This is as
much a question of construction or interpretation as any other. The Court is tasked to look
beyond the fair exterior, to the substance, in order to unmask the real element and pernicious
tendencies that the law is seeking to prevent.
Lottery extends to all schemes for the distribution of prizes by chance, such as policy playing,
gift exhibitions, prize concerts, raffles at fairs, etc., and various forms of gambling. The three
essential elements of a lottery are: (1) consideration, (2) prize, and (3) chance. Gift enterprise,
on the other hand, is commonly applied to a sporting artifice under which goods are sold for their
market value but by way of inducement each purchaser is given a chance to win a prize. Further,
consonant to the well-known principle of legal hermeneutics noscitur a sociis, the term under
construction should be accorded no other meaning than that which is consistent with the nature
of the word associated therewith. Hence, if lottery is prohibited only if it involves a
consideration, so also must the term gift enterprise be so construed. Significantly, there is not
in the law the slightest indicium of any intent to eliminate that element of consideration from the
gift enterprise therein included. Gratuitous distribution of property by lot or chance does not
constitute lottery, if it is not resorted to as a device to evade the law and no consideration is
derived, directly or indirectly, from the party receiving the chance, gambling spirit not being
cultivated or stimulated thereby. Thus, gift enterprises and similar schemes therein contemplated
are condemnable only if, like lotteries, they involve the element of consideration. In the present
case, there is no requirement in the rules that any fee be paid, any merchandise be bought, any
service be rendered, or any value whatsoever be given for the privilege to participate; for the
scheme to be deemed a lottery. Neither is there is a sale of anything to which the chance offered
is attached as an inducement to the purchaser for the scheme to be deemed a gift enterprise. The
scheme is merely a gratuitous distribution of property by chance.
The Supreme Court affirmed the appealed judgment, without costs.
Thu 13 Mar 2003
Digest: Kapatiran ng mga Naglilingkod sa Pamahalaan vs.

Tan (GR L-81311, 30 June 1988)
No Comments
Kapatiran ng mga Naglilingkod sa Pamahalaan vs. Tan
GR L-81311, 30 June 1988
En Banc, Padilla (J): 12 concur, 2 on leave
Facts: EO 273 was issued by the President of the Philippines which amended the Revenue Code,
adopting the value-added tax (VAT) effective 1 January 1988. Four petitions assailed the validity
of the VAT Law fro being beyond the President to enact; for being oppressive, discriminatory,
regressive, and violative of the due process and equal protection clauses, among others, of the
Constitution. The Integrated Customs Brokers Association particularly contend that it unduly
discriminate against customs brokers (Section 103 [r]) as the amended provision of the Tax Code
provides that service performed in the exercise of profession or calling (except custom brokers)
subject to occupational tax under the Local Tax Code, and professional services performed by
registered general professional partnerships are exempt from VAT.
Issue: Whether the E-VAT law discriminates against customs brokers.
Held: The phrase except custom brokers is not meant to discriminate against custom brokers
but to avert a potential conflict between Sections 102 and 103 of the Tax Code, as amended. The
distinction of the customs brokers from the other professionals who are subject to occupation tax
under the Local Tax Code is based upon material differences, in that the activities of customs
brokers partake more of a business, rather than a profession and were thus subjected to the
percentage tax under Section 174 of the Tax Code prior to its amendment by EO 273. EO 273
abolished the percentage tax and replaced it with the VAT. If the Association did not protest the
classification of customs brokers then, there is no reason why it should protest now.

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LaborRel-d: Nestle Phils. Inc. v.

NLRC, 195 SCRA 340

Sun 26 Dec 2004

LaborRel-d: San Miguel Corp. Employees Union v.

Sun 26 Dec 2004

LaborRel-d: Lopez Sugar Corp. v. Sec. of Labor, 247 SCRA

Sun 26 Dec 2004

LaborRel-d: Airline Pilots Assn., et al. v. CIR, 76 SCRA 274

Sun 26 Dec 2004

LaborRel-d: Feati University v. Bautista, 18 SCRA 1191

Sun 26 Dec 2004

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Sun 26 Dec 2004

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Sun 26 Dec 2004

LaborRel-d: National Service Corp. vs. NLRC, 168 SCRA

Sun 26 Dec 2004

LaborRel-d: PAL vs. PALESA, 57 SCRA 489

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Telecom-d: GMCR vs. Bell Telecommunication Philippines

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Telecom-d: PLDT vs. NTC (GR 88404, 18 October 1990)

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Sat 4 Sep 2004

IPL-d: Pearl & Dean v. Shoemart (GR 148222, 15 August

Sat 4 Sep 2004

IPL-d: 246 Corporation v. Daway (GR 157216, 20 November

Sat 4 Sep 2004

IPL-d: Del Monte vs. CA (GR 783, 23 January 1990)

Posted by Berne Guerrero under (a) oas , digests

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IPL-d: Fruit of the Loom vs. CA (GR L-32747, 29 November

Sat 4 Sep 2004

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Sat 4 Sep 2004

IPL-d: Pagasa Industrial vs. CA (GR L-54158, 31 August

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Sat 4 Sep 2004

IPL-d: Emerald Garment v CA (GR 100098, 29 December

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Sat 4 Sep 2004

Sat 4 Sep 2004

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Sat 4 Sep 2004

IPL-d: Philips Export BV vs. CA (GR 96161, 21 February

Sat 4 Sep 2004

IPL-d: Western Equipment vs. Reyes (GR 27897, 2

Sat 4 Sep 2004

IPL-d: Asia Brewery vs. CA (GR 103543, 5 July 1993)

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Sun 4 Apr 2004

Sales-d: Philippine Trust Co. v. Roldan (GR L 8477, 31 May

Sun 4 Apr 2004

Sales-d: Rubias v. Batiller (GR L 35702, 29 May 1973)

Sales-d: Guiang v. CA (GR 125172, 26 June 1998)

Sun 4 Apr 2004