A.M. No.

93-7-696-0 February 21, 1995

In Re JOAQUIN T. BORROMEO, Ex Rel. Cebu City Chapter of the Integrated Bar of the
Philippines.

FACTS:
Joaquin T. Borromeo, from Mabolo, Cebu, was someone who had some knowledge on the law, its
legal principles, and procedural rules. He was able to possess these from reading some law books
which eventually led him to represent himself in his several cases and proceedings. From 1978 to
1995, respondent Joaquin Borromeo was instituting and prosecuting legal proceedings in various
courts, dogmatically pontificating on errors supposedly committed by the courts, including the
Supreme Court. Wherein in the process, he had produced and circulated scurrilous statements
against courts, judges and their employees, as well as his adversaries.

Respondent’s ventures into lawyering were started from his transactions with 3 banks namely:
Traders Royal Bank (TRB), United Coconut Planters Bank (UCPB), and Security Bank & Trust
Co. (SBTC). His failure to comply with his contractual commitments not to mention his stubborn
insistence on imposing his own terms and conditions for their fulfillment and what’s right and
wrong led to disastrous consequences for him. He obtained loans or credit accommodation from
the said banks in order to secure mortgages over immovables belonging to him, or members of his
family, or third persons. However, he was unable to pay and fulfill his obligations and when he
was demanded to do so, he laid down his own terms which were quite inconsistent with those
agreed upon with his obligees or prescribed by law. Unsurprisingly, the banks did not agree with
what the respondent wanted, thus Borromeo sued the banks, its officers, and the lawyers who
represented the banks. Other than that he also sued the public prosecutors, the Judges of the Trial
Courts, the Justices of the Court of Appeals and the Supreme Court as well as the Clerks of Court
and other Court employees signing the notices. In total, for 16 years, he had initiated no less-than
fifty (50) original or review civil, criminal, and administrative proceedings.

ISSUE:

RULING:
WHEREFORE, Joaquin T. Borromeo is found and declared GUILTY of constructive contempt
repeatedly committed over time, despite warnings and instructions given to him, and to the end
that he may ponder his serious errors and grave misconduct and learn due respect for the Courts
and their authority, he is hereby sentenced to serve a term of imprisonment of TEN (10) DAYS in
the City Jail of Cebu City and to pay a fine of ONE THOUSAND PESOS (P1,000.00). He is
warned that a repetition of any of the offenses of which he is herein found guilty, or any similar or

Jagolino (3LM2)
other offense against courts, judges or court employees, will merit further and more serious
sanctions.

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G.R. No. 89572 December 21, 1989

DEPARTMENT OF EDUCATION, CULTURE AND SPORTS (DECS) and DIRECTOR

OF CENTER FOR EDUCATIONAL MEASUREMENT, petitioners,
vs.
ROBERTO REY C. SAN DIEGO and JUDGE TERESITA DIZON-CAPULONG, in her
capacity as Presiding Judge of the Regional Trial Court of Valenzuela, Metro Manila,
Branch 172, respondents.

FACTS:
Private respondent, Roberto Rey C. San Diego is a graduate of the University of the East with a
degree of Bachelor of Science in Zoology. He took and flunked the National Medical Admission
Test (NMAT) 3 times. He applied to take the NMAT again but was denied by the petitioner based
on MECS Order No. 12, Series of 1972 which states that “A student shall be allowed only three
(3) chances to take the NMAT. After three (3) successive failures, a student shall not be allowed
to take the NMAT for the fourth time”. Thereafter, private respondent filed a petition compelling
his admission to the test, invoking his constitutional rights to academic freedom and quality
education, challenging the said rule, and raising additional grounds of due process and equal
protection.

On July 4, 1989, respondent Judge Teresita Dizon-Capulong declared MECS Order No. 12, Series
of 1972 invalid. She granted the petition and held that the petitioner had been deprived of his right
to pursue a medical education through an arbitrary exercise of the police power.

ISSUE:
Whether or not a person who has thrice failed the National Medical Admission Test (NMAT) is
entitled to take it again.

RULING:
Respondent judge’s decision must be reversed. MECS Order No. 12, Series of 1972 is valid and
the subject of the challenged regulation is certainly within the ambit of the police power. In the
case of Tablarin v. Gutierrez, the Court upheld the constitutionality of the NMAT as a measure
intended to limit the admission to medical schools only to those who have initially proved their
competence and preparation for a medical education. Legislation and administrative regulations
requiring those who wish to practice medicine first to take and pass medical board examinations
have long ago been recognized as valid exercises of governmental power. The government is
entitled to prescribe an admission test like the NMAT as a means of achieving its stated objective
of "upgrading the selection of applicants into [our] medical schools" and of "improv[ing] the
quality of medical education in the country."

Jagolino (3LM2)
In regard to the respondent judge’s claim that petitioner had been deprived of his right to pursue a
medical education through an arbitrary exercise of the police power, the proper exercise of the
police power requires the concurrence of a lawful subject and a lawful method. It is the right and
indeed the responsibility of the State to insure that the medical profession is not infiltrated by
incompetents to whom patients may unwarily entrust their lives and health. The method employed
by the challenged regulation is not irrelevant to the purpose of the law nor is it arbitrary or
oppressive. The three- flunk rule is intended to insulate the medical schools and ultimately the
medical profession from the intrusion of those not qualified to be doctors.

WHEREFORE, the petition is GRANTED. The decision of the respondent court dated January 13,
1989, is REVERSED, with costs against the private respondent. It is so ordered.

*Important quotes/lines*
• While every person is entitled to aspire to be a doctor, he does not have a constitutional
right to be a doctor.
• A person cannot insist on being a physician if he will be a menace to his patients. If one
who wants to be a lawyer may prove better as a plumber, he should be so advised and
adviced.
• The right to quality education invoked by the private respondent is not absolute. The
Constitution also provides that "every citizen has the right to choose a profession or course
of study, subject to fair, reasonable and equitable admission and academic requirements.
• The medical profession directly affects the very lives of the people, unlike other careers
which, for this reason, do not require more vigilant regulation.
• There would be unequal protection if some applicants who have passed the tests are
admitted and others who have also qualified are denied entrance. In other words, what the
equal protection requires is equality among equals.
• The private respondent has failed the NMAT five times. While his persistence is
noteworthy, to say the least, it is certainly misplaced, like a hopeless love.
• The only inference is that he is a probably better, not for the medical profession, but for
another calling that has not excited his interest.
• We cannot have a society of square pegs in round holes, of dentists who should never have
left the farm and engineers who should have studied banking and teachers who could be
better as merchants.

Jagolino (3LM2)
G.R. No. L-20387 January 31, 1968

JESUS P. MORFE, plaintiff-appellee,

vs.
AMELITO R. MUTUC, as Executive Secretary, ET AL., defendants-appellants.

FACTS:
• Congress in 1960 enacted the Anti-Graft and Corrupt Practices Act to deter public officials
and employees from committing acts of dishonesty and improve the tone of morality in
public service
• Section 7 of Republic Act No. 3019 is regarding the “statement of assets and liabilities”,
which indicates that every public officer, either within thirty (30) days after its approval or
after his assumption of office "and within the month of January of every other year
thereafter", as well as upon the termination of his position, shall prepare and file with the
head of the office to which he belongs, "a true detailed and sworn statement of assets and
liabilities, including a statement of the amounts and sources of his income, the amounts of
his personal and family expenses and the amount of income taxes paid for the next
preceding calendar
• On January 31, 1962, plaintiff filed an action for declaratory relief with the Court of First
Instance of Pangasinan, assailing that the provision on the "periodical filing of sworn
statement of financial condition, assets, income and liabilities after an officer or employee
had once bared his financial condition, upon assumption of office, is oppressive and
unconstitutional."
• On February 14, 1962, defendants (which was the Executive Secretary and the then
Secretary of Justice) denied that there was a violation of his constitutional rights against
self-incrimination as well as unreasonable search and seizure and maintained that "the
provision of law in question cannot be attacked on the ground that it impairs plaintiff's
normal and legitimate enjoyment of his life and liberty because said provision merely seeks
to adopt a reasonable measure of insuring the interest or general welfare in honest and clean
public service and is therefore a legitimate exercise of the police power."
• On July 19, 1962, the lower court declared Section 7, Republic Act No. 3019
"unconstitutional, null and void, insofar as it required periodical submittal of sworn
statements of financial conditions, assets and liabilities of an official or employee of the
government after he had once submitted such a sworn statement upon assuming office

ISSUE:
Whether or not there is a legitimate exercise of police power in Section 7 of R.A. No. 3019

Jagolino (3LM2)
RULING:
Police power as put forth by Justice Malcolm is “that inherent and plenary power in the state which
enables it to prohibit all things hurtful to the comfort, safety and welfare of society.” As currently
in use both in Philippine and American decisions then, police power legislation usually has
reference to regulatory measures restraining either the rights to property or liberty of private
individuals. However, if the police power extends to regulatory action affecting persons in public
or private life, then anyone with an alleged grievance can invoke the protection of due process
which permits deprivation of property or liberty as long as such requirement is observed.

Due process may be relied upon by a public official to protect the security of tenure which in that
limited sense is analogous to property. He could likewise avail himself of such constitutional
guarantee to strike down what he considers to be an infringement of his liberty, given that due
process mandate is not disregarded.

In the case at bar, the provision for a periodical submission of sworn statement of assets and
liabilities after he had filed one upon assumption of office indeed affects one’s liberty considering
that there is a compulsion to act in a certain way. However, such restriction is allowable as long
as due process is observed. Wherein to satisfy the due process requirement, official action, must
not outrun the bounds of reason and result in sheer oppression.

Hence, it would be to dwell in the realm of abstractions and to ignore the harsh and compelling
realities of public service with its ever-present temptation to heed the call of greed and avarice to
condemn as arbitrary and oppressive a requirement as that imposed on public officials and
employees to file such sworn statement of assets and liabilities every two years after having done
so upon assuming office. The due process clause is not susceptible to such a reproach. There was
therefore no unconstitutional exercise of police power.

WHEREFORE, the decision of the lower court of July 19, 1962 "declaring unconstitutional, null
and void Section 7, Republic Act No. 3019, insofar as it requires periodical submittal of sworn
statements of financial conditions, assets and liabilities of an official or employee of the
government after he had once submitted such a sworn statement . . . is reversed." Without costs.

Jagolino (3LM2)
G.R. No. 122846 January 20, 2009

WHITE LIGHT CORPORATION, TITANIUM CORPORATION and STA. MESA

TOURIST & DEVELOPMENT CORPORATION, Petitioners,
vs.
CITY OF MANILA, represented by DE CASTRO, MAYOR ALFREDO S. LIM,
Respondent.

FACTS:
• On December 3, 1992, City Mayor Alfredo S. Lim (Mayor Lim) signed into law Manila
City Ordinance No. 7774 entitled, "An Ordinance Prohibiting Short-Time Admission,
Short-Time Admission Rates, and Wash-Up Rate Schemes in Hotels, Motels, Inns,
Lodging Houses, Pension Houses, and Similar Establishments in the City of Manila"
• On December 15, 1992, the Malate Tourist and Development Corporation (MTDC) filed a
complaint for declaratory relief with prayer for a writ of preliminary injunction and/or
temporary restraining order ( TRO) with the Regional Trial Court (RTC) of Manila. MTDC
prayed that the Ordinance, insofar as it includes motels and inns as among its prohibited
establishments, be declared invalid and unconstitutional. However MTDC would
eventually withdraw as plaintiff
• On December 21, 1992, petitioners White Light Corporation (WLC), Titanium
Corporation (TC) and Sta. Mesa Tourist and Development Corporation (STDC) filed a
motion to intervene
• The RTC issued a TRO on January 14, 1993, directing the City to cease and desist from
enforcing the Ordinance. The City filed an Answer dated January 22, 1993 alleging that
the Ordinance is a legitimate exercise of police power.
• On February 8, 1993, the RTC issued a writ of preliminary injunction ordering the city to
desist from the enforcement of the Ordinance
• On October 20, 1993, the RTC rendered a decision declaring the Ordinance null and void.
The City later filed a petition for review on certiorari with the Supreme Court, but the
Court treated the petition as a petition for certiorari and referred the petition to the Court
of Appeals
• The Court of Appeals reversed the decision of the RTC and affirmed the constitutionality
of the Ordinance
• TC, WLC and STDC come to the Court via petition for review on certiorari. They contend
that the assailed Ordinance is an invalid exercise of police power

ISSUE:
Whether or not Manila City Ordinance No. 7774 is a valid exercise of police power

Jagolino (3LM2)
RULING:
Police power is based upon the concept of necessity of the State and its corresponding right to
protect itself and its people. It cannot be denied that the primary animus behind the ordinance is
the curtailment of sexual behavior. The City asserts before this Court that the subject
establishments "have gained notoriety as venue of ‘prostitution, adultery and fornications’ in
Manila since they ‘provide the necessary atmosphere for clandestine entry, presence and exit and
thus became the ‘ideal haven for prostitutes and thrill-seekers." However, other legitimate
activities which the Ordinance would proscribe or impair cannot be disregarded. There are
numerous legitimate uses for a wash rate or renting the room out for more than twice a day.

The apparent goal of the Ordinance is to minimize if not eliminate the use of the covered
establishments for illicit sex, prostitution, drug use and alike. These goals, by themselves, are
unimpeachable and certainly fall within the ambit of the police power of the State. Yet the
desirability of these ends do not sanctify any and all means for their achievement. Those means
must align with the Constitution. It must appear that the interests of the public generally, as
distinguished from those of a particular class, require an interference with private rights and the
means must be reasonably necessary for the accomplishment of the purpose and not unduly
oppressive of private rights. It must also be evident that no other alternative for the accomplishment
of the purpose less intrusive of private rights can work. More importantly, a reasonable relation
must exist between the purposes of the measure and the means employed for its accomplishment,
for even under the guise of protecting the public interest, personal rights and those pertaining to
private property will not be permitted to be arbitrarily invaded. Lacking a concurrence of these
requisites, the police measure shall be struck down as an arbitrary intrusion into private rights.

Individual rights may be adversely affected only to the extent that may fairly be required by the
legitimate demands of public interest or public welfare. The State is a leviathan that must be
restrained from needlessly intruding into the lives of its citizens. However well-intentioned the
Ordinance may be, it is in effect an arbitrary and whimsical intrusion into the rights of the
establishments as well as their patrons. The Ordinance needlessly restrains the operation of the
businesses of the petitioners as well as restricting the rights of their patrons without sufficient
justification. The Ordinance rashly equates wash rates and renting out a room more than twice a
day with immorality without accommodating innocuous intentions.

WHEREFORE, the Petition is GRANTED. The Decision of the Court of Appeals is REVERSED,
and the Decision of the Regional Trial Court of Manila, Branch 9, is REINSTATED. Ordinance
No. 7774 is hereby declared UNCONSTITUTIONAL. No pronouncement as to costs.

Jagolino (3LM2)
G.R. No. 238467

MARK ANTHONY V. ZABAL, THITING ESTOSO JACOSALEM, AND ODON S.

BANDIOLA, Petitioners
vs.
RODRIGO R. DUTERTE, President of the Republic of the Philippines; SALVADOR C.
MEDIALDEA, Executive Secretary; and EDUARDO M. ANO, [Secretary] of the
Department of Interior and Local Government, Respondents

FACTS:
• President Duterte signed Proclamation No. 475 on April 26, 2018, which ordered the
temporary closure of the Boracay Island as a tourist destination for six (6) months starting
26 April 2018, or until 25 October 2018
• Even before the proclamation was signed, Duterte had already made public his plan to shut
down the Island
• Petitioners claim that ever since the news of Boracay's closure came about, fewer tourists
had been engaging the services of Zabal and Jacosalem such that their earnings were barely
enough to feed their families. They fear that if the closure pushes through, they would
suffer grave and irreparable damage. Hence, despite the fact that the government was then
yet to release a formal issuance on the matter, petitioners filed the petition on April 25,
2018
• Petitioners argue that the closure of Boracay could not be anchored on police power. For
one, police power must be exercised not by the executive but by legislative bodies through
the creation of statutes and ordinances that aim to promote the health, moral, peace,
education, safety, and general welfare of the people. For another, the measure is
unreasonably unnecessary and unduly oppressive.
• Respondents contend that the issuance of Proclamation No. 475 is a valid exercise of
delegated legislative power, it being anchored on Section 16 of Republic Act (RA) No.
10121, otherwise known as the Philippine Disaster Risk Reduction and Management Act
of 2010

ISSUE:
Whether or not Proclamation No. 475 is a valid exercise of police power.

RULING:
Police powers is the 'state authority to enact legislation that may interfere with personal liberty or
property in order to promote general welfare. "Expansive and extensive as its reach may be, police
power is not a force without limits." "It has to be exercised within bounds - lawful ends through

Jagolino (3LM2)
lawful means, and that the means employed are reasonably necessary for the accomplishment of
the purpose while not being unduly oppressive upon individuals."

The assailed governmental measure in this case is within the scope of police power. The temporary
closure of Boracay as a tourist destination for six months reasonably necessary under the
circumstances. One of the root causes of the problems that beset Boracay was tourist influx. Tourist
arrivals in the island were clearly far more than Boracay could handle. The closure of Boracay,
albeit temporarily, gave the island its much needed breather, and likewise afforded the government
the necessary leeway in its rehabilitation program. Note that apart from review, evaluation and
amendment of relevant policies, the bulk of the rehabilitation activities involved inspection,
testing, demolition, relocation, and construction. These works could not have easily been done
with tourists present.

The rehabilitation works in the first place were not simple, superficial or mere cosmetic but rather
quite complicated, major, and permanent in character as they were intended to serve as long-term
solutions to the problem. Also, time is of the essence. Every precious moment lost is to the
detriment of Boracay's environment and of the health and well-being of the people thereat. Hence,
any unnecessary distraction or disruption is most unwelcome.

The closure, to emphasize, was only for a definite period of six months, i.e., from April 26, 2018
to October 25, 2018. To the mind of the Court, this period constitutes a reasonable time frame, if
not to complete, but to at least put in place the necessary rehabilitation works to be done in the
island. Indeed, the temporary closure of Boracay, although unprecedented and radical as it may
seem, was reasonably necessary and not unduly oppressive under the circumstances. It was the
most practical and realistic means of ensuring that rehabilitation works in the island are started and
carried out in the most efficacious and expeditious way.

Hence, Proclamation No. 475 is a valid police power measure.

All told, the Court sustains the constitutionality and validity of Proclamation No. 475.

WHEREFORE, the Petition for Prohibition and Mandamus is DISMISSED.

Jagolino (3LM2)
G.R. No. 176625

MACTAN-CEBU INTERNATIONAL AIRPORT AUTHORITY and AIR

TRANSPORTATION OFFICE, Petitioners,
vs.
BERNARDO L. LOZADA, SR., and the HEIRS OF ROSARIO MERCADO, namely,
VICENTE LOZADA, MARIO M. LOZADA, MARCIA L. GODINEZ, VIRGINIA L.
FLORES, BERNARDO LOZADA, JR., DOLORES GACASAN, SOCORRO CAFARO and
ROSARIO LOZADA, represented by MARCIA LOZADA GODINEZ, Respondents.

FACTS:

Lot No. 88-SWO-25042 (Lot No. 88), with an area of 1,017 square meters, more or less, located
in Lahug, Cebu City was originally owned by Anastacio Deiparine when the lot was subject to
expropriation proceedings, initiated by the Republic of the Philippines (Republic), represented by
the then Civil Aeronautics Administration (CAA), for the expansion and improvement of the
Lahug Airport. However, during the pendency of the expropriation proceedings, respondent
Bernardo L. Lozada, Sr. acquired Lot No. 88 from Deiparine.

On December 29, 1961, the trial court rendered judgment in favor of the Republic and ordered the
latter to pay Lozada the fair market value of Lot No. 88, adjudged at ₱3.00 per square meter, with
consequential damages by way of legal interest computed from November 16, 1947—the time
when the lot was first occupied by the airport. Affected landowners appealed and the Air
Transportation Office (ATO), formerly CAA, proposed a compromise settlement whereby the
owners of the lots affected by the expropriation proceedings would either not appeal or withdraw
their respective appeals in consideration of a commitment that the expropriated lots would be
resold at the price they were expropriated in the event that the ATO would abandon the Lahug
Airport, pursuant to an established policy involving similar cases. Thereafter, Lot No. 88 was
transferred and registered in the name of the Republic under TCT No. 25057.

However, from the date of the institution of the expropriation proceedings up to the present case,
the public purpose of the said expropriation (expansion of the airport) was never actually initiated,
realized, or implemented. Instead, the old airport was converted into a commercial complex. Lot
No. 88 became the site of a jail known as Bagong Buhay Rehabilitation Complex, while a portion
thereof was occupied by squatters. Thus, on June 4, 1996, respondents initiated a complaint for
the recovery of possession and reconveyance of ownership of Lot No. 88

Wherein the RTC ruled in favor of respondents. Thereafter, petitioners assailed the decision of the
RTC.

Jagolino (3LM2)
ISSUE:

Whether or not respondents can reacquire the expropriated property

RULING:

Yes.

The acquisition by the Republic of the expropriated lots was subject to the condition that the Lahug
Airport would continue its operation. The condition not having materialized because the airport
had been abandoned, the former owner should then be allowed to reacquire the expropriated
property.

It is well settled that the taking of private property by the Government’s power of eminent domain
is subject to two mandatory requirements: (1) that it is for a particular public purpose; and (2) that
just compensation be paid to the property owner. These requirements partake of the nature of
implied conditions that should be complied with to enable the condemnor to keep the property
expropriated.

With respect to the element of public use, the expropriator should commit to use the property
pursuant to the purpose stated in the petition for expropriation filed, failing which, it should file
another petition for the new purpose. If not, it is then incumbent upon the expropriator to return
the said property to its private owner, if the latter desires to reacquire the same. Otherwise, the
judgment of expropriation suffers an intrinsic flaw, as it would lack one indispensable element for
the proper exercise of the power of eminent domain, namely, the particular public purpose for
which the property will be devoted. Accordingly, the private property owner would be denied due
process of law, and the judgment would violate the property owner’s right to justice, fairness, and
equity.

The Court expressly hold that the taking of private property, consequent to the Government’s
exercise of its power of eminent domain, is always subject to the condition that the property be
devoted to the specific public purpose for which it was taken. Corollarily, if this particular purpose
or intent is not initiated or not at all pursued, and is peremptorily abandoned, then the former
owners, if they so desire, may seek the reversion of the property, subject to the return of the amount
of just compensation received.

WHEREFORE, the petition is DENIED. The February 28, 2006 Decision of the Court of Appeals,
affirming the October 22, 1999 Decision of the Regional Trial Court, Branch 87, Cebu City, and
its February 7, 2007 Resolution are AFFIRMED with MODIFICATION

Jagolino (3LM2)
G.R. No. L-28896 February 17, 1988

COMMISSIONER OF INTERNAL REVENUE, petitioner,

vs.
ALGUE, INC., and THE COURT OF TAX APPEALS, respondents.

FACTS:
The record shows that on January 14, 1965, the private respondent, a domestic corporation engaged
in engineering, construction and other allied activities, received a letter from the petitioner
assessing it in the total amount of P83,183.85 as delinquency income taxes for the years 1958 and
1959. On January 18, 1965, Algue flied a letter of protest or request for reconsideration, which
letter was stamp received on the same day in the office of the petitioner. On March 12, 1965, a
warrant of distraint and levy was presented to the private respondent, through its counsel, Atty.
Alberto Guevara, Jr., who refused to receive it on the ground of the pending protest. A search of
the protest in the dockets of the case proved fruitless. Atty. Guevara produced his file copy and
gave a photostat to BIR agent Ramon Reyes, who deferred service of the warrant. On April 7,
1965, Atty. Guevara was finally 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.
Sixteen days later, on April 23, 1965, Algue filed a petition for review of the decision of the
Commissioner of Internal Revenue with the Court of Tax Appeals

The petitioner contends that the claimed deduction of P75,000.00 was properly disallowed because
it was not an ordinary reasonable or necessary business expense. Parenthetically, it may be
observed that the petitioner had Originally claimed these promotional fees to be personal holding
company income but later conformed to the decision of the respondent court rejecting this
assertion. In fact, as the said court found, the amount was earned through the joint efforts of the
persons among whom it was distributed It has been established that the Philippine Sugar Estate
Development Company had earlier appointed Algue as its agent, authorizing it to sell its land,
factories and oil manufacturing process. Pursuant to such authority, Alberto Guevara, Jr., Eduardo
Guevara, Isabel Guevara, Edith, O'Farell, and Pablo Sanchez, worked for the formation of the
Vegetable Oil Investment Corporation, inducing other persons to invest in it. Ultimately, after its
incorporation largely through the promotion of the said persons, this new corporation purchased
the PSEDC properties. For this sale, Algue received as agent a commission of P126,000.00, and it
was from this commission that the P75,000.00 promotional fees were paid to the aforenamed
individuals.

ISSUE:
Whether or not the Collector of Internal Revenue correctly disallowed the P75,000.00 deduction
claimed by private respondent Algue as legitimate business expenses in its income tax returns.

Jagolino (3LM2)
RULING:
The Court agree with the respondent court that the amount of the promotional fees was not
excessive. The total commission paid by the Philippine Sugar Estate Development Co. to the
private respondent was P125,000.00. After deducting the said fees, Algue still had a balance of
P50,000.00 as clear profit from the transaction. The amount of P75,000.00 was 60% of the total
commission. This was a reasonable proportion, considering that it was the payees who did
practically everything, from the formation of the Vegetable Oil Investment Corporation to the
actual purchase by it of the Sugar Estate properties. This finding of the respondent court is in
accord with the following provision of the Tax Code. There is no dispute that the payees duly
reported their respective shares of the fees in their income tax returns and paid the corresponding
taxes thereon. The Court of Tax Appeals also found, after examining the evidence, that no
distribution of dividends was involved.

The Solicitor General is correct when he says that the burden is on the taxpayer to prove the validity
of the claimed deduction. In the present case, however, we find that the onus has been discharged
satisfactorily. The private respondent has proved that the payment of the fees was necessary and
reasonable in the light of the efforts exerted by the payees in inducing investors and prominent
businessmen to venture in an experimental enterprise and involve themselves in a new business
requiring millions of pesos. This was no mean feat and should be, as it was, sufficiently
recompensed

Thus, the claimed deduction by the private respondent was permitted under the Internal Revenue
Code and should therefore not have been disallowed by the petitioner.

Jagolino (3LM2)