PART IV – Law on Taxation

CIR vs. ALGUE INC.

G.R No. L-28896

FACTS
Algue Inc. is a domestic corporation engaged in
engineering, construction and other allied activities. On Jan.
14, 1965, the corporation received a letter from the CIR
regarding its delinquency income taxes from 1958-1959,
amounting to P83,183.85. A letter of protest or reconsideration
was filed by Algue Inc. on January 18. On March 12, a warrant
of distraint and levy was presented to Algue Inc. thru its
counsel, Atty. Guevara, who refused to receive it on the
ground of the pending protest. Since the protest was not found
on the records, a file copy from the corporation was produced
and given to BIR Agent Reyes, who deferred service of the
warrant. On April 7, Atty. Guevara was informed that the BIR
was not taking any action on the protest and it was only then
that he accepted the warrant of distraint and levy earlier
sought to be served. On April 23, Algue filed a petition for
review of the decision of the CIR with the Court of Tax Appeals.
On the other hand, the CIR contends that a.) The claimed
deduction of P75,000.00 was properly disallowed because it
was not an ordinary reasonable or necessary business expense
b.)Payments are fictitious because most of the payees are
members of the same family in control of Algue and that there
is not enough substantiation of such payments
Court of Tax Appleals ruled in favor of Algue Inc. stating
that 75K had been legitimately paid by Algue Inc. for actual
services rendered in the form of promotional fees. These were
collected by the Payees for their work in the creation of the
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Vegetable Oil Investment Corporation of the Philippines and its
subsequent purchase of the properties of the Philippine Sugar
Estate Development Company.

ISSUE
Whether or not the the BIR correctly disallowed the
deduction

RULING
The burden is on the taxpayer to prove the validity of the
claimed deduction. Here, the onus has been discharged
satisfactorily. Here, the onus has been discharged satisfactorily.
The promotional fees were necessary and reasonable in the
light of the efforts exerted by the payees in the inducement of
investors to venture in an experimental enterprise. Thus, the
payees should be sufficiently recompensed.

PART V – JUDICIAL REVIEW

JAVELLANA vs. EXECUTIVE SECRETARY

FACTS
On January 20, 1973, just two days before the Supreme Court
decided the sequel of plebiscite cases, Jose Javellana filed this
suit against the respondents to restrain them from implementing
any of the provisions of the proposed Constitution not found in
the present 1935 Constitution. This is a petition filed by him as a
Filipino citizen and a qualified and registered voter and as a
class suit, for himself and in behalf of all citizens and voters

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similarly situated. Javellana also alleged that the President had
announced the immediate implementation of the new
constitution, thru his Cabinet, respondents including.

Respondents are acting without or in excess of jurisdiction

in implementing the said proposed constitution upon ground
the that the President as Commander-in-Chief of the AFP is
without authority to create the Citizens Assemblies; without
power to approve proposed constitution; without power to
proclaim the ratification by the Filipino people of the proposed
constitution; and the election held to ratify the proposed
constitution was not a free election, hence null and void.

Following that, petitioners prayed for the nullification of

Proclamation No. 1102 and any order, decree, and
proclamation which have the same import and objective.

ISSUE
1. Is the validity of Proclamation No. 1102 justiciable?
2. Was the constitution proposed by the 1971 Constitutional
Convention ratified validly in compliance to applicable
laws?
3. Was the proposed Constitution acquiesced by the
people?
4. Are the petitioners entitled relief?
5. Is the proposed Constitution in force?

RULING

1. To determine whether or not the new constitution is in

force depends upon whether or not the said new

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 constitution has been ratified in accordance with the
requirements of the 1935 Constitution. It is well settled that
the matter of ratification of an amendment to the
constitution should be settled applying the provisions of
the constitution in force at the time of the alleged
ratification of the old constitution.
The issue whether the new constitution proposed has
been ratified in accordance with the provisions of Article
XV of the 1935 Constitution is justiciable as jurisprudence
here and in the US (from whom we patterned our 1935
Constitution) shall show.

2. The Constitution does not allow Congress or anybody else

to vest in those lacking the qualifications and having the
disqualifications mentioned in the Constitution the right of
suffrage.

The votes of persons less than 21 years of age render the

proceedings in the Citizen’s assemblies void. Proceedings
held in such Citizen’s Assemblies were fundamentally
irregular, in that persons lacking the qualifications
prescribed in Article V Section 1 of the 1935 Constitution
were allowed to vote in said Assemblies. And, since there
is no means by which the invalid votes of those less than
21 years of age can be separated or segregated from
those of the qualified voters, the proceedings in the
Citizen’s Assemblies must be considered null and void.

Viva voce voting for the ratification of the constitution is

void. Article XV of the 1935 Constitution envisages with the
term "votes cast" choices made on ballots – not orally or
by raising hands – by the persons taking part in plebiscites.
This is but natural and logical, for, since the early years of
the American regime, we had adopted the Australian
Ballot System, with its major characteristics, namely,
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uniform official ballots prepared and furnished by the
Government and secrecy in the voting, with the
advantage of keeping records that permit judicial inquiry,
when necessary, into the accuracy of the election returns.

The plebiscite on the constitution not having been

conducted under the supervision of COMELEC is void. The
point is that, such of the Barrio Assemblies as were held
took place without the intervention of the COMELEC and
without complying with the provisions of the Election
Code of 1971 or even of those of Presidential Decree No.
73. The procedure therein mostly followed is such that
there is no reasonable means of checking the accuracy
of the returns filed by the officers who conducted said
plebiscites. This is another patent violation of Article X of
the 1935 Constitution which form part of the fundamental
scheme set forth in the 1935 Constitution, as amended, to
insure the "free, orderly, and honest" expression of the
people's will. For this, the alleged plebiscite in the Citizen’s
Assemblies is null and void, insofar as the same are
claimed to have ratified the revised Constitution.

3. Proclamation No. 1102 is not an evidence of ratification.

Article X of the 1935 Constitution places COMELEC the
"exclusive" charge to the "the enforcement and
administration of all laws relative to the conduct of
elections," independently of the Executive. But there is not
even a certification by the COMELEC in support of the
alleged results of the citizen’s assemblies relied upon in
Proclamation No. 1102. Also, on January 17, 1973 neither
the alleged president of the Federation of Provincial or
City Barangays nor the Department of Local Governments
had certified to the President the alleged result of the
citizens' assemblies all over the Philippines. The citizen’s
assemblies did not adopt the proposed constitution. It is to
my mind a matter of judicial knowledge that there have

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been no such citizen’s assemblies in many parts of Manila
and suburbs, not to say, also, in other parts of the
Philippines.

4. The Court is not prepared to concede that the acts the

officers and offices of the Executive Department, in line
with Proclamation No. 1102, connote recognition of or
acquiescence to the proposed Constitution.

A department of the Government cannot “recognize” its

own acts. Recognition normally connotes the
acknowledgment by a party of the acts of another.
Individual acts of recognition by members of Congress do
not constitute congressional recognition, unless the
members have performed said acts in session duly
assembled. This is a well-established principle of
Administrative Law and of the Law of Public Officers. The
compliance by the people with the orders of martial law
government does not constitute acquiescence to the
proposed Constitution. Neither does the Court prepared
to declare that the people's inaction as regards
Proclamation No. 1102, and their compliance with a
number of Presidential orders, decrees and/or instructions,
some or many of which have admittedly had salutary
effects, issued subsequently thereto, amounts to a
ratification, adoption or approval of said Proclamation
No. 1102. The intimidation is there, and inaction or
obedience of the people, under these conditions, is not
necessarily an act of conformity or acquiescence.

As regards the applicability to these cases of the "enrolled

bill" rule, it is well to remember that the same refers to a
document certified to the President for his action under
the Constitution by the Senate President and the Speaker
of the House of Reps, and attested to by the respective
Secretaries of both Houses, concerning legislative

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measures approved by said Houses. Whereas,
Proclamation No. 1102 is an act of the President declaring
the results of a plebiscite on the proposed Constitution, an
act which Article X of the 1935 Constitution denies the
executive department of the Government.

In all other respects and with regard to the other

respondent in said case, petitions therein should be given
due course, there being more than prima facie showing
that the proposed Constitution has not been ratified in
accordance with Article XV of the 1935 Constitution,
either strictly, substantially, or has been acquiesced in by
the people or majority thereof; that said proposed
Constitution is not in force and effect; and that the 1935
Constitution is still the Fundamental Law of the Land,
without prejudice to the submission of said proposed
Constitution to the people at a plebiscite for its ratification
or rejection in accordance with Articles V, X and XV of the
1935 Constitution and the provisions of the Revised
Election Code in force at the time of such plebiscite.

5.Four (4) members of the Court, namely, Justices Barredo,

Makasiar, Antonio and Esguerra hold that it is in force by
virtue of the people's acceptance thereof; 4 members of
the Court, namely, Justices Makalintal, Castro, Fernando
and Teehankee cast no vote thereon on the premise
stated in their votes on the third question that they could
not state with judicial certainty whether the people have
accepted or not accepted the Constitution; and 2
members of the Court, namely, Justice Zaldivar and
myself voted that the Constitution proposed by the 1971
Constitutional Convention is not in force; with the result,
there are not enough votes to declare that the new
Constitution is not in force.

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Part VI

CALTEX vs. PALOMAR

G.R No. L-19650

FACTS
In 1960, the petitioner, Caltex (Philippines) Inc., launched a
promotional scheme called "Caltex Hooded Pump Contest"
which calls for participants to estimate the actual number of
liters a hooded gas pump of each Caltex Station will dispense
within a specific period. Such contest is open to all motor
vehicle owners and/or licensed drivers. There is no required fee
or consideration, and there is no need for the contestants to
purchase the products of Caltex. The forms are available upon
request at each Caltex Station and there is a sealed can where
accomplished entry stubs may be deposited. Foreseeing the
extensive use of mails for publicizing and transmission of
communication purposes, Caltex sent representatives to the
postal authorities for advance clearing for the use of mails for
the contest. But then, the Postmaster General, Enrico Palomar,
denied the request of Caltex in view of Sections 1954 (a), 1982
and 1983 of the Revised Administrative Code. The aforesaid
sections prohibits the use of mail conveying any information
concerning non-mailable schemes, such as lottery, gift
enterprise, or similar scheme. Consequently, Caltex invoked a
judicial intervention by filing a petition of declaratory relief
against the Postmaster General, ordering the Postmaster
General to allow the petitioner to use the mails to bring the
contest to the attention of the public and that the aforesaid
contest is not violative of the Postal Law.

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ISSUE
1. Whether or not construction should be employed in this
case

2. Whether or not the contest violates the provisions of the

Postal Law

RULING
Yes. Construction of a law is in order if what is in issue is an
inquiry into the intended meaning of the words used in a
certain law. As defined in Black's Law Dictionary: Construction is
the art or process of discovering and expounding the meaning
and intention of the author's of the law with respect 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 therein. This is as much as
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 prize
by chance. The three essential elements of a lottery are: (1)
consideration, (2) prize, and (3) chance. Gift enterprise 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. Gratuitous
distribution of property by lot or chance does not constitute
lottery. In the present case, the element of consideration is not
observed. No payment or purchase of merchandise was
required for the privilege to participate.

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SPS. GAUVAIN BENZONAN vs. COURT OF APPEALS
G.R. No. 97973

FACTS
In this case, petitioners Gauvain and Bernadita Benzonan want
a review on the decision made by herein respondent Court of
Appeals – sustaining the right of private respondent Pe to
repurchase a parcel of land sold to petitioners. It started when
respondent Pe was granted parcel of lands acquired through
free patent, however, Pe then mortgaged the lot to DPB;
developed it into commercial complex. Failed to pay the
mortgaged, DBP foreclosed the lot; Pe leased it to DBP; the
former failed to redeem such property within one year period;
DBP sold it to petitioners Benzonan. Then Pe filed a complaint to
repurchase. The RTC and CA affirmed and granted the claim
to repurchase. Petitioners filed a complaint against CA,
alledging, among other issues, that the latter erred in its
decision re. the five-year period in foreclosure sale by not
relying on the doctrine in Monge v. Angeles and instead relied
on the ruling in Belisario v. Intermediate Appellate Court which
was applied retroactively. Hence, the issue.

ISSUE
Whether or not respondent Court of Appeals erred in its
decision regarding the foreclosure sale by not applying the
doctrinal law ruled in Monge v. Angeles and instead applied
retroactively the ruling in the case Belisario v. IAC?

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RULING
Yes.
At the time of the foreclosure sale issue, the prevailing
jurisprudence was still the Monge case, hence, it is the doctrine
that should be applied in the case at bar. However, the
respondent court applied the rulings in Belisario case in 1988
thereby rendering a decision in favor of the private respondent.
But the Supreme Court sustained the claims of the petitioners.
The Court said that though they are bound by decisions
pursuant to Article 8 of the Civil Code, the Court also stressed
that: “while our decisions form part of the law of the land, they
are also subject to Article 4 of the Civil Code which states that
“laws shall have no retroactive effect unless the contrary is
provided””. Moreover, the Court emphasized that “when a
doctrine of this Court is overruled and a different view is
adopted, the new doctrine should be applied prospectively
xxx.” Therefore, respondents cannot rely on the Belisario ruling
because it should be applied prospectively and not the
contrary. CA erred in its decision regarding this case.
Wherefore, such decision was reversed and set aside.

BARRERA vs. BARRERA

G.R. No. L-31589

FACTS
This case involved the contempt of Judge Alfredo Catolico of
the Court of First Instance of Cavite for having been issued a
disciplinary action for the refusal to apply the law as interpreted
by the highest tribunal, the Supreme Court. It started when this
case was pending trial in CFI Cavite, the counsel for petitioner
requested Judge Catolico to continue with the hearing,
invoking Section 3, Rule 22 of the Rules of Court. However, the
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case remains pending when at the time of the supposed
continuance, the new Presiding Judge did not arrive due to
bad weather. Such case was referred to the Justice
Department; the Undersecretary of the latter referred it to
respondent judge who, in his comments, said that such case
cannot be continued because it has already lapsed, pursuant
to the three-month limit in the Rules of Court. Moreover,
notwithstanding his awareness to a doctrine the Court rule in
Barrueco v. Abeto, the respondent judge predicated his own
opinion and rather, questioned the decisions of the Hon. Court
in its ruling in Barrueco case. Hence, a disciplinary action
against respondent. Hence, the issue.

ISSUE
Whether or not the refusal by respondent Judge to apply the
law as interpreted by the Highest Tribunal lead him to his
contempt?
RULINGS
Yes.
The Court ruled that what the highest judicial organ says should
be definitive and authoritative, hence, binding to those
occupying the lower ranks of judicial hierarchy. More so,
reiterating an opinion by Justice J.B.L Reyes, “…the Supreme
Court, by tradition and in our system of judicial administration,
has the last word on what the law is…there is only one Supreme
Court from whose decisions all other courts should take their
bearings.” The Court emphasized that a Judge of a lower court
may state his opinion if he finds a doctrine of the SC against his
principles, however, he cannot dispose of the case, for he
always has to render judgement whether or not it is against his
conscience.

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Villena vs Spouses Chavez
G.R. No. 148126
FACTS
This is a petitioned case that was already decided by the
Court of Appeals (CA), this case was said to be stare decisis
which mean”…that a judgment reached in one case should
be applied to successive ones in which the facts are
substantially identical, even though the parties may be
different. Like cases ought to be decided alike.”
According to the facts of the CA the respondents owned
four parcels of land subdivided into several blocks. By mere
permission of the respondents the petitioners have occupied
and erected their homes, the respondent allowed it but they
should, in consideration pay in certain amount as equity The
petitioners failed to pay the equity from the respondent so the
respondent in return wrote them a letter that they need to
vacate the premises in a span of 30 days, but in regards to that
the petitioners refused to vacate and remove their houses. The
petitioners said that the respondent does not have power to
institute such orders from the conflicted properties because the
equities that they must pay is in accordance of National Home
Mortgage Finance Corp.(NHMFC) They also claim that they
paid already the said equity however they were not given any
receipts and copy of their contract The petitioners also claim
that they are qualified beneficiaries under the RA no. 7279
known as the Urban Development and Housing Act and
adding that they were builder of good faith CA ruled that the
petitioners entered with an agreement of equity with the

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respondent , so in return they must pay amortization or they will
face eviction.
ISSUE
Whether or not, the decision of the CA needed to be redefine
by the SC
RULINGS
It is ruled that in the findings they the petitioners were in
binding contract with the respondent in regarding with paying
their equity and by not paying it they has lost their right to
occupy. The CA ruling in this case is informative and straight to
the point.
The petition to review was granted, the decision of the CA
was overturned and the decision of the RTC and MTC was
reinstated

OLAGUER vs. MILITARY COMMISSION

G.R. No. L-54558

FACTS
Petitioners, as civilians, have been charged the crime of
subversion. Consequently, the Chief-of-Staff of the AFP created
a military tribunal, named Military Commission No. 34, to try
criminal case against petitioners. Petitioners were then
convicted and have been imposed a penalty of death
penalty. Thereafter, petitioners filed a petition to enjoin the
military tribunal from taking further action on their case for the
tribunal should be considered null and void. Respondents
invoked that the creation of Military Commission is
constitutional as ruled upon in a previous case – Aquino v.
Military Commission No. 2.- as decided upon by the Supreme

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Court. However, petitioners contend that such ruling must be
overturned because the ruling is now inapplicable since Martial
Law has already been lifted.

ISSUE
Whether or not the ruling in Aquino v. Military Commission
be abandoned and/or modified in so far as the case at bar is
concerned?

RULING
Yes.
First, the Court considered that since the martial law has
been lifted during the case is still pending, military tribunals,
which were created for the purpose of martial law, shall be
held void already since the law itself is lifted. Second, the Court
relied on the dissenting views of some justices in AQUINO V.
MILCOMM, stating that “Civilians like the petitioner placed on
trial for civil offenses under general law are entitled of trial by
judicial process, not by executive or military process……..
Judicial power exists only in courts”.
Moreover, the Court emphasized that “Reverence for
precedent, simply as precedent, cannot prevail when
constitutionalism and the public interest demand otherwise.
Thus, a doctrine which should be abandoned or modified
should be abandoned or modified accordingly. After all, more
important than anything else is that this Court should be right.

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SPS SY VS. YOUNG
G.R No. 169214

FACTS
The petition originated from a Complaint for Nullification
of Second Supplemental Extrajudicial Settlement, Mortgage,
Foreclosure Sale and Tax Declaration4 filed by respondent
Genalyn D. Young. Genalyn alleged that she is the legitimate
daughter of spouses George Young and Lilia Dy. When George
died, he left an unregistered parcel of land. The property was
adjudicated solely in Lilia’s favor in the partition. Lilia
represented Genalyn, who was then a minor, in the execution
of the document.
Lilia obtained a loan from the spouses Sy with the property
as security. Lilia failed to pay the loan, so the property was
foreclosed and sold to the spouses Sy. Thereafter, the spouses
Sy registered the certificate of sale9with the Office of the
Register .
Genalyn argued that: the partition was unenforceable
since she was only a minor at the time of its execution; the
partition was contrary to the Rules of Court because it was
without the court’s approval; the spouses Sy entered into the
contract of mortgage with the knowledge that Lilia was
unauthorized to mortgage the property of Deeds and obtained
a tax declaration in their name.
In the supplemental complaint, she invoked her right to
exercise legal redemption as a co-owner of the disputed
property. However, the RTC denied the motion in its Order
dated December 28, 2000. Subsequently, she filed a petition for
certiorari and mandamus under Rule 65 of the Rules of Court
with the CA. The CA denied the petition. Tirelessly, Genalyn
filled different petition assessing her rights as a co-owner of the

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land. Until the RTC issued an Order dated August 30, 2001
which dismissed the complaint on the ground of non-suit.
Genalyn then filed a petition for review under Rule 45 of the
Rules of Court before this Court, docketed as G.R. NO. 157745
which was consolidated with G.R. NO. 157955. The Court
promulgated a decision on the consolidated cases entitled
"Young v. Spouses Sy." They granted the petition in G.R. NO.
157955 but denied the petition in G.R. NO. 157745 for lack of
merit.

ISSUES
1. Whether or not the CA erred in setting aside the RTC Orders
dated August 30, 2001, January 4, 2002 and January 16, 2002
which dismissed the case for non-suit;
2. Whether or not the CA erred in not holding Genalyn guilty of
forum shopping in the CA’s Decision dated March 30, 2005 and
Resolution dated August 8, 2005.

RULINGS
1. NO. Law of the case has been defined as the opinion
delivered on a former appeal. It means that whatever is once
irrevocably established the controlling legal rule of decision
between the same parties in the same case continues to be
the law of the case whether correct on general principles or
not, so long as the facts on which such decision was
predicated continue to be the facts of the case before the
court.
2. The court ruled that they unequivocally settled that
Genalyn committed forum shopping when she filed an appeal
and a petition for certiorari successively. This ruling we uphold
as the ruling that should apply.

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Thus, petition denied.

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