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  Today is Thursday, March 02, 2017 Custom SearchRepublic of the Philippines SUPREME COURT ManilaEN BANC G.R. No. L-5081 February 24, 1954MARVEL BUILDING CORPORATION, ET AL.,  plaintiffs-appellees, vs. SATURNINO DAVID, in his capacity as Collector, Bureau of Internal Revenue,  defendant-appellant.  Assistant Solicitor General Francisco Carreon for appellant. Antonio Quirino and Rosendo J. Tansinsin for appellees. LABRADOR, J. : This action was brought by plaintiffs as stockholders of the Marvel Building Corporation to enjoin the defendantCollector of Internal Revenue from selling at public auction various properties described in the complaint,including three parcels of land, with the buildings situated thereon, known as the Aguinaldo Building, the WiseBuilding, and the Dewey Boulevard-Padre Faura Mansion, all registered in the name of the said corporation. Saidproperties were seized and distrained by defendant to collect war profits taxes assessed against plaintiff Maria B.Castro (Exhibit B). Plaintiffs allege that the said three properties (lands and buildings) belong to Marvel BuildingCorporation and not to Maria B. Castro, while the defendant claims that Maria B. Castro is the true and soleowner of all the subscribed stock of the Marvel Building Corporation, including those appearing to have beensubscribed and paid for by the other members, and consequently said Maria B. Castro is also the true andexclusive owner of the properties seized. The trial court held that the evidence, which is mostly circumstantial,fails to show to its satisfaction that Maria B. Castro is the true owner of all the stock certificates of the corporation,because the evidence is susceptible of two interpretations and an interpretation may not be made which woulddeprive one of the property without due process of law.It appears that on September 15, 1950, the Secretary of Finance, upon consideration of the report of a specialcommittee assigned to study the war profits tax case of Mrs. Maria B. Castro, recommended the collection of P3,593,950.78 as war profits taxes for the latter, and on September 22, 1953 the President instructed theCollector that steps be taken to collect the same (Exhibits 114, 114-A to 114-D). Pursuant thereto variousproperties, including the three above mentioned, were seized by the Collector of Internal Revenue on October 31,1950. On November 13, 1950, the srcinal complaint in this case was filed. After trial, the Court of First Instance of Manila rendered judgment ordering the release of the properties mentioned, and enjoined the Collector of InternalRevenue from selling the same. The Collector of Internal Revenue has appealed to this Court against the judgment.The following facts are not disputed, or are satisfactorily proved by the evidence:The Articles of Incorporation of the Marvel Building Corporation is dated February 12, 1947 and according to it thecapital stock is P2,000,000, of which P1,025,000 was (at the time of incorporation) subscribed and paid for by thefollowing incorporators:Maria B. Castro 250 shares P 250,000.00 Amado A. Yatco 100 100,000.00Santiago Tan 100 100,000.00Jose T. Lopez 90 90,000.00Benita Lamagna 90 90,000.00C.S. Gonzales 80 80,000.00Maria Cristobal 70 70,000.00Segundo Esguerra, Sr. 75 75,000.00Ramon Sangalang 70 70,000.00   Maximo Cristobal 55 55,000.00 Antonio Cristobal 45 45,000.00P1,025,000.00Maria B Castro was elected President and Maximo Cristobal, Secretary-Treasurer (Exhibit A).The Wise Building was purchased on September 4, 1946, the purchase being made in the name of DoloresTrinidad, wife of Amado A. Yatco (Exhibit V), and the Aguinaldo Building, on January 17, 1947, in the name of Segundo Esguerra, Sr. (Exhibit M). Both building were purchased for P1,800,000, but as the corporation had onlyP1,025,000, the balance of the purchase price was obtained as loans from the Insular Life Assurance Co., Ltd.and the Philippine Guaranty Co., Inc. (Exhibit C).Of the incorporators of the Marvel Building Corporation, Maximo Cristobal and Antonio Cristobal are half-brothersof Maria B. Castro, Maria Cristobal is a half-sister, and Segundo Esguerra, Sr. a brother-in-law, husband of MariaCristobal, Maria B. Castro's half-sister. Maximo B. Cristobal did not file any income tax returns before the year 1946, except for three years 1939 and 1940, but in these years he was exempted from the tax. He has not filedany war profits tax return (Exhibit 54). Antonio Cristobal, Segundo Esguerra, Sr. and Jose T. Lopez did not file anyincome tax returns for the years prior to 1946, and neither did they file any war profits tax returns (Exhibit 52).Maria Cristobal filed income tax returns for the year 1929 to 1942, but they were exempt from the tax (Exhibit 53).Benita A. Lamagna did not file any income tax returns prior to 1945, except for 1942 which was exempt. She didnot file any was profits tax (Exhibit 55). Ramon M. Sangalang did not file income tax returns up to 1945 except for the years 1936, 1937, 1938, 1939 and 1940. He has not filed any war profits tax return (Exhibit 57). Amada A.Yatco did not file income tax returns prior to 1945, except for the years 1937, 1938, 1939, 1941 and 1942, butthese were exempt. He did not file any war profits tax return (Exhibit 58). Antonio Cristobal's income in 1946 is P15,630, and in 1947, P4,550 (Exhibits 59-60); Maximo B. Cristobal'sincome in 1946 is P19,759.10, in 1947, P9,773.47 (Exhibits 61-62); Segundo Esquerra's income in 1946 isP5,500, in 1947, P7,754.32 (Exhibits 63-64); Jose T. Lopez's income in 1946 is P20,785, in 1947, P14,302.77(Exhibits 69-70); Benita A. Lamagna's income in 1945 is P1,559, in 1946, P6,463.36, in 1947, P6,189.79 and her husband's income in 1947 is P10,825.53 (Exhibits 65-68); Ramon M. Sangalang's income in 1945 is P5,500, in1946, P18,300.00 (Exhibits 71-72); Santiago Tan's income in 1945 is P456, in 1947 is P9,167.95, and in 1947,P7,620.11 (Exhibits 73-75); and Amado Yatco's income in 1945 is P12,600, in 1946, P23,960, and in 1947,P11,160 (Exhibits 76-78).In October, 1945 Maria B. Castro, Nicasio Yatco, Maxima Cristobal de Esquerra, Maria Cristobal Lopez andMaximo Cristobal organized the Maria B. Castro, Inc. with capital stock of P100,000, of which Maria B. Castrosubscribed for P99,600 and all others for P100 each. This was increased in 1950 to P500,000 and Maria B.Castro subscribed P76,000 and the others P1,000 each (Exhibit 126).It does not appear that the stockholders or the board of directors of the Marvel Building Corporation have ever held a business meeting, for no books thereof or minutes meeting were ever mentioned by the officers thereof or presented by them at the trial. The by-laws of the corporation, if any had ever been approved, has not beenpresented. Neither does it appear that any report of the affairs of the corporation has been made, either of itstransactions or accounts.From the book of accounts of the corporation, advances to the Marvel Building Corporation of P125,000 weremade by Maria B. Castro in 1947, P102,916.05 in 1948 and P102,916.05 in 1948, and P160,910.96 in 1949(Exhibit 118).The main issue involved in these proceedings is: Is Maria B. Castro the owner of all the shares of stocks of MarvelBuilding Corporation and the other stockholders mere dummies of hers?The most important evidence presented by the Collector of Internal Revenue to prove his claim that Maria B.Castro is the sole and exclusive owner of the shares of stock of the Marvel Building Corporation is supposedendorsement in blank of the shares of stock issued in the name of the other incorporators, and the possessionthereof by Maria B. Castro. The existence of said endorsed certificates was testified to by witnesses Felipe Aquino, internal revenue examiner, Antonio Mariano, examiner, and Crispin Llamado, Under Secretary of Finance, who declared as follows: Towards the end of the year 1948 and about the beginning of the year 1949,while Aquino and Mariano were examining the books and papers were furnished by its secretary, MaximoCristobal, they came across an envelope containing eleven stock certificates, bound together by an Accofastener, which (certificates) corresponded in number and in amount on their face to the subscriptions of thestockholders that all the certificates, except that in the name of Maria B. Castro, were endorsed in the bank by thesubscribers; that as the two revenue agents could not agree what to do with the certificates, Aquino brought themto Under-Secretary of Finance Llamado, who thereupon suggested that photostatic copies thereof be taken; thatthis was done, and the photostatic copies taken are (Exhibits 4, 5, 6, 7, 8, 9, 10, 11, 12 and 13; and in that July,1950, copy-cat copies of the above photostats were taken, and said copy-cat copies are Exhibits 40-49.  Julio Llamado, bookkeeper of the Marvel Building Corporation from 1947 to May, 1948, also testified that he wasthe one who had prepared the srcinal certificates, putting therein the number of shares in words in handprint;that the srcinals were given to him by Maria B. Castro for comparison with the articles of incorporation; that theywere not yet signed by the President and by the Secretary-Treasurer when he had the certificates; and that after the checking he returned all of them to Mrs. Castro. He recognized the photostats, Exhibit 4 to 13 as photostats of the said srcinals. He also declared that he also prepared a set of stock certificates, similar to the certificateswhich were copied in the photostats, the number of shares, and the date issue, and that the certificates he hadprepared are Exhibits H, H-1 to H-7 and J (Exhibits 30-38). This set of certificates was made by him first and theset of which photostats were taken, a few days later.The plaintiffs offered a half-hearted denial of the existence of the endorsed blank certificates, Maximo Cristobal,secretary of the corporation, saying that no investigation was ever made by Aquino and Mariano in which saidcertificates were discovered by the latter. They, however, vigorously attack the credibility of the witnesses for thedefendant, imputing to the Llamados, enmity against Maria B. Castro, and to Aquino and Mariano, a very doubtfulconduct in not divulging the existence of the certificates either Lobrin, Chief Income Tax Examiner, or to theCollector of Internal Revenue, both their immediate chiefs. Reliance is also placed on a certificate, Exhibit W,wherein Aquino and others declare that the certificates (Exhibits 30 to 38, or H, H-1 to H-7 and J) were regular and were not endorsed when the same were examined. In connection with this certificate, Exhibit W, we note thatit states that the certificates examined were Exhibits 30 to 38, the existence or character of which are notdisputed. But the statement contains nothing to the effect that the above certificates were the only one existence,according to their knowledge. Again the certificate was issued for an examination on September 1949, not by Aquino and Mariano at the end of 1948 or the beginning of 1949. The certificate, therefore, neither denies theexistence of the endorsed certificates, nor that Aquino and Mariano had made an examination of the papers of the corporation at the end of the year 1948. It ca not, therefore, discredit the testimonies of the defendant'switnesses. As to the supposed enmity of the Llamados towards the plaintiff Maria B. Castro, we note that, supposing thatthere really was such enmity, it does not appear that it was of such magnitude or force as could have induced theLlamados and Maria B. Castro were close friends way back in 1947 and up to 1949; but that at the time of the trialthe friendship had been marred by misunderstandings. We believe that in 1948 and 1949 the Llamados weretrusted friends of Maria B. Castro, and this explains why they had knowledge of her secret transactions. Theyounger Llamado even made advances for the hand of Maria B. Castro's daughter, and this at the time when as abookkeeper he was entrusted with checking up the certificates of stock. When the older Llamado kept secret theexistence of the endorsed certificates, the friendship between the two families was yet intact; hence, the existenceof the endorsed certificates must have been kept to himself by the older Llamado. All the above circumstancesreinforce our belief that the Llamados had personal knowledge of the facts they testify to, and the existence of thisknowledge in turn renders improbable plaintiffs' claim that their testimonies were biased. Attempt was also made by the plaintiffs to show by expert evidence that the endorsement could have beensuperimposed, i.e., that the signatures made on other papers and these were pasted and thereafter thedocuments photographed. Judicial experience is to the effect that the expert witnesses can always be obtainedfor both sides of an issue, most likely because expert witnesses are no longer impermeable to the influence of fees (II Wigmore, Sec. 563(2), p. 646). And if parties are capable of paying fees, expert opinion should bereceived with caution. In the case at bar, the opinion on the supposed superimposition was merely a  possibility  ,and we note various circumstances which proved that the signatures were not superimposed and corroboratedefendant's claim that they were genuine. In the first place,, the printed endorsement contains a very heavy lineat the bottom for the signature of the endorsee. This line in almost all the endorsements is as clear as the printedletters above it, and at the points where the letters of the signature extend down and transversed it (the line),there is no indication that the line is covered by a superimposed paper. Again in these places both the signaturesand the lines are clear and distinct where they cross one another. Had there been superimpositions the abovefeatures could not have been possible. In the second place, Maria B. Castro admitted having signed 25 stockcertificates, but only eleven were issued (t. s. n., p. 662). No explanation is given by her why she had to sign asmany as 25 forms when there were only eleven subscribers and eleven forms to be filed. This circumstancescorroborate the young Llamado's declaration that two sets of certificates had been prepared. The nineteen issuemust be Exhibits H, H-1 to H-7 and J, or Nos. 30 to 38, and the stock certificates endorsed whose photostaticcopies are Exhibits 4 to 13. It is to be remembered also, that it is a common practice among unscrupulousmerchants to carry two sets of books, one set for themselves and another to be shown to tax collectors. Thispractice could not have been unknown to Maria B. Castro, who apparently had been able to evade the paymentof her war profits taxes. These circumstances, coupled with the testimony of Julio Llamado that two sets of certificates were given to him for checking, show to an impartial mind the existence of the set of certificatesendorsed in blank, thus confirming the testimonies of the defendant's witnesses, Aquino, Mariano and CrispinLlamado, and thus discrediting the obviously partial testimony of the expert presented by plaintiffs. Thegenuineness of the signatures on the endorsements is not disputed. How could the defendant have securedthese genuine signatures? Plaintiffs offer no explanation for this, although they do not question them. It followsthat the genuine signatures must have been made on the stock certificates themselves.  Next in importance among the evidence submitted by the defendant collector to prove his contention that Maria B.Castro is the sole owner of the shares of stock of the Marvel Building Corporation, is the fact that the other stockholders did not have incomes in such amounts, during the time of the organization of the corporation in1947, or immediately thereto, as to enable them to pay in full for their supposed subscriptions. This fact is provedby their income tax returns, or the absence thereof. Let us take Amado A. Yatco as an example. Before 1945 hisreturns were exempt from the tax, in 1945 he had P12,600 and in 1946, P23,000. He has four children. Howcould he have paid P100,000 in 1945 and 1946? Santiago Tan who also contributed P100,000 had noappreciable income before 1946, and this year an income of only P9,167.95. Jose T. Lopez also did not file anyincome tax returns before 1940 and 1946 he had an income of only P20,785, whereas he is supposed to havesubscribed P90,000 worth of stock early in 1947. Benita Lamagna had no returns either up to 1945, except in1942, which was exempt and in 1945 she had an income of P1,550 and in 1946, P6,463.36. In the same situationare all the others, and besides, brothers and sisters and brother-in-law of Maria B. Castro. On the other hand,Maria B. Castro had been found to have made enormous gains or profits in her business such that the taxesthereon were assessed at around P3,000,000. There was, therefore, a  prima facie  case out by the defendantcollector that Maria B. Castro had furnished (& all the money that the Marvel Building Corporation had.In order the meet the above evidence only three of the plaintiffs testified, namely, Maximo Cristobal, thecorporation's secretary, who made the general assertion on the witness stand that the other stockholders paid for their shares in full, Maria B. Castro, who stated that payments for the subscription were made to her, and C.S.Gonzales, who admitted that Maria B. Castro, paid for his subscription. After a careful study of the abovetestimonies, however, we find them subject to various objections. Maximo Cristobal declared that he issuedprovincial receipts for the subscriptions supposedly paid to him in 1946; but none of the supposed receipts werepresented. If the subscriptions were really received by him, big as the amounts were, he would have been able totell specifically, by dates and in fix amounts, when and how the payments were made. The general assertion of alleged payments, without the concrete days and amounts of payments, are, according to our experience,positive identifications of untruthfulness, for when a witness testified to a fact that actually occurs, the act isconcretely stated and no generalization is made.With respect to Maria B. Castro's testimony, we find it to be as untruthful as that of Cristobal. She declared thatpayments of the subscriptions took place between July and December, 1946, and that first payments were firstdeposited by her in the National City Bank of New York. A study of her account in said bank (Exhibit 82), however,fails to show the alleged deposit of the subscriptions during the year 1946 (See Exhibits 83-112). This factcompletely belies her assertion. As to the testimony of C.S. Gonzales that Maria B. Castro advanced hissubscription, there is nothing in the evidence to corroborate it, and the circumstances show otherwise. If he hadreally been a stockholder and Maria B. Castro advanced his subscription, the agreement between him and Castroshould have been put in writing, the amount advanced being quite considerable (P80,000), and it appearingfurther that Gonzales is no close relative or confidant of Castro.Lastly, it is significant that the plaintiffs, the supposed subscribers, who should have come to court to assert thatthey actually paid for their subscriptions, and are not mere dummies, did not do so. They could not have affordedsuch a costly indifference, valued at from P70,000 to P100,000 each, if they were not actual dummies. This failureon their part to take the witness stand to deny or refute the charge that they were mere dummies is to us of utmost significance. What could have been easier to disprove the charge that they were dummies, than for themto come to court and show their receipts and testify on the payments they have paid on their subscriptions? Thisthey, however refused to do so. They had it in their power to rebut the charges, but they chose to keep silent. Thenon-production of evidence that would naturally have been produced by an honest and therefore fearlessclaimant permits the inference that its tenor is unfavorable to the party's cause (II Wigmore, Sec. 285, p.162). Aparty's silence to adverse testimony is equivalent to an admission of its truth ( Ibid  , Sec. 289, p. 175).Our consideration of the evidence submitted on both sides leads us to a conclusion exactly opposite that arrivedat by the trial court. In general the evidence offered by the plaintiffs is testimonial and direct evidence, easy of fabrication; that offered by defendant, documentary and circumstantial, not only difficult of fabrication but in mostcases found in the possession of plaintiffs. There is very little room for choice as between the two. Thecircumstantial evidence is not only convincing; it is conclusive. The existence of endorsed certificates, discoveredby the internal revenue agents between 1948 and 1949 in the possession of the Secretary-Treasurer, the fact thattwenty-five certificates were signed by the president of the corporation, for no justifiable reason, the fact that twosets of certificates were issued, the undisputed fact that Maria B. Castro had made enormous profits and,therefore, had a motive to hide them to evade the payment of taxes, the fact that the other subscribers had noincomes of sufficient magnitude to justify their big subscriptions, the fact that the subscriptions were not receiptedfor and deposited by the treasurer in the name of the corporation but were kept by Maria B. Castro herself, thefact that the stockholders or the directors never appeared to have ever met to discuss the business of thecorporation, the fact that Maria B. Castro advanced big sums of money to the corporation without any previousarrangement or accounting, and the fact that the books of accounts were kept as if they belonged to Maria B.Castro alone — these facts are of patent and potent significance. What are their necessary implications? Maria B.Castro would not have asked them to endorse their stock certificates, or be keeping these in her possession, if they were really the owners. They never would have consented that Maria B. Castro keep the funds without
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