G.R. No. 15113. January 28, 1961
ANTONIO MEDINA, PETITIONER VS. COLLECTOR OF INTERNAL REVENUE AND THE COURT OF TAX APPEALS, RESPONDENTS.
REYES, J.B.L., J.:
tax assessment of the Collector of Internal Revenue except with respect
to the imposition of so-called compromise penalties, which were set
aside.
The records show that on or about May 20, 1944,
petitioning taxpayer Antonio Medina married Antonia Rodriguez. Before
1946, the spouses had neither property nor business of their own.
Later, however, petitioner, acquired forest concessions in the
municipalities of San Mariano and Palanan in the Province of Isabela.
From 1946 to 1948, the logs cut and removed by the petitioner from his
concessions were sold to different persons in Manila through his agent,
Mariano Osorio.
Some time in 1949, Antonia R. Medina,
petitioner’s wife, started to engage in business as a lumber dealer,
and up to around 1952, petitioner sold to her almost all the logs
produced in his San Mariano concession. Mrs. Medina, in turn, sold in
Manila the logs bought from her husband through the same agent, Mariano
Osorio. The proceeds were, upon instructions from petitioner, either
received by Osorio for petitioner or deposited by said agent in
petitioner’s current account with the Philippine National Bank.
On the thesis that the sales made by petitioner to his wife were null
and void pursuant to the provisions of Article 1490 of the Civil Code
of the Philippines (formerly, Art. 1458, Civil Code 1889), the
Collector considered the sales made by Mrs. Medina as the petitioner’s
original sales taxable under Section 186 of the National Internal
Revenue Code and, therefore, imposed a tax assessment on petitioner,
calling for the payment of P4,553.54 as deficiency sales taxes and
surcharges from 1949 to 1952. This same assessment of September 26,
1953 sought also the collection of another sum of P643.94 as deficiency
sales tax and surcharge based on petitioner’s quarterly returns from
1946 to 1952.
On November 30, 1953, petitioner protested the
assessment; however, respondent Collector insisted on his demand. On
July 9, 1954, petitioner filed a petition for reconsideration,
revealing for the first time the existence of an alleged premarital
agreement of complete separation of properties between him and his
wife, and contending that the assessment for the years 1946 to 1952 had
already prescribed. After one hearing, the Conference Staff of the
Bureau of Internal Revenue eliminated the 50% fraud penalty and held
that the taxes assessed against him before 1948 had already prescribed.
Based on these findings, the Collector issued a modified assessment,
demanding the payment of only P3,325.68, computed as follows:
5% tax due on P7,209.83—1949 5% tax due on 16,945.55—11950 5% tax due on 16,874.52—11951 5% tax due on 11,009.94—11952
TOTAL sales tax due
25% Surcharge thereon Short taxes per quarterly return, 3rd quarter, 1950 25% Surcharge thereon
TOTAL AMOUNT due & collectible
Petitioner again requested for reconsideration, but respondent Collector, in his letter of April 4, 1955, denied the same.
Petitioner appealed to the Court of Tax Appeals, which rendered
judgment as aforesaid. The court’s decision was based on two main
findings, namely, (a) that there was no pre-marital agreement of
absolute separation of property between the Medina spouses; and (b)
assuming that there was such an agreement, the sales in question made
by petitioner to his wife were fictitious, simulated, and not bona fide.
In his petition for review to this Court, petitioner raises several
assignments of error revolving around the central issue of whether or
not the sales made by the petitioner to his wife could be considered as
his original taxable sales under the provisions of Section 186 of the
National Internal Revenue Code.
Relying mainly on
testimonial evidence that before their marriage, he and his wife
executed and recorded a pre-nuptial agreement for a regime of complete
separation of property, and that all trace of the document was lost on
account of the war, petitioner imputes lack of basis for the tax
court’s factual findings that no agreement of complete separation of
property was ever executed by and between the spouses before their
marriage. We do not think so. Aside from the material inconsistencies
in the testimony of petitioner’s witnesses pointed out by the trial
court, the circumstantial evidence is against petitioner’s claim. Thus,
it appears that at the time of the marriage between the petitioner and
his wife, they neither had any property nor business of their own, as
to have really urged them to enter into the supposed property
agreement. Secondly, the testimony that the separation of property
agreement was recorded in the Registry of Property three months before
the marriage, is patently absurd, since such a pre-nuptial agreement
could not be effective before marriage is celebrated, and would
automatically be cancelled if the union was called of. How then could
it be accepted for recording prior to the marriage? In the third place,
despite their insistence on the existence of the ante-nuptial contract,
the couple, strangely enough, did not act in accordance with its
alleged covenants. Quite the contrary, it was proved that even during
their taxable years, the ownership, usufruct, and administration of
their properties and business were in the husband. And even when the
wife was engaged in lumber dealing, and she and her husband contracted
sales with each other as aforestated, the proceeds she derived from her
alleged subsequent disposition of the logs—incidentally, by and through
the same agent of her husband, Mariano Osorio—were either received by
Osorio for the petitioner or deposited by said agent in petitioner’s
current account with the Philippine National Bank. Fourth, although
petitioner, a lawyer by profession, already knew, after he was informed
by the Collector on or about September of 1953, that the primary reason
why the sales of logs to his wife could not be considered as the
original taxable sales was because of the express prohibition found in
Article 1490 of the Civil Code of sales between spouses married under a
community system; yet it was not until July of 1954 that he alleged,
for the first time, the existence of the supposed property separation
agreement. Finally, the Day Book of the Register of Deeds on which the
agreement would have been entered, had it really been registered as
petitioner insists, and which book was among those saved from the
ravages of the war, did not show that the document in question was
among those recorded therein.
We have already ruled that
when the credibility of witnesses is the one at issue, the trial
court’s judgment as to their degree of credence deserves serious
consideration by this Court (Collector vs. Bautista, et al., G.
R. Nos. L-12250, L-12259, May 27, 1959). This is all the more true in
this case because not every copy of the supposed agreement,
particularly the one that was said to have been filed with the Clerk of
Court of Isabela, was accounted for as lost; so that, applying the
“best evidence rule”, the court did right in giving little or no
credence to the secondary evidence to prove the due execution and
contents of the alleged document (see Comments on the Rules of Court,
Moran, 1957 Ed., Vol. 3, pp. 10-12).
The foregoing findings
notwithstanding, the petitioner argues that the prohibition to sell
expressed under Article 1490 of the Civil Code has no application to
the sales made by said petitioner to his wife, because said
transactions are contemplated and allowed by the provisions of Articles
7 and 10 of the Code of Commerce, But said provisions merely state,
under certain conditions, a presumption that the wife is authorized to
engage in business and for the incidents that flew therefrom when she
so engages therein. But the transactions permitted are those entered
into with strangers, and do not constitute exceptions to the
prohibitory provisions of Article 1490 against sales between spouses.
Petitioner’s contention that the respondent Collector cannot assail the
questioned sales, he being a stranger to said transactions, is likewise
untenable. The government, as correctly pointed out by the Tax Court,
is always an interested party to all matters involving taxable
transactions and, needless to say, qualified to question their validity
or legitimacy whenever necessary to block tax evasion.
Contracts violative of the provisions of Article 1490 of the Civil Code are null and void (Uy Sui Pin vs. Cantollas, 70 Phil. 55; Uy Coque vs.
Sioca, 45 Phil. 43). Being void transactions, the sales made by the
petitioner 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, Mariano Osorio. In
upholding that stand, the Court below committed no error.
It
is also the petitioner’s’ contention that the lower court erred in
using illegally seized documentary evidence against him. But even
assuming arguendo the truth of petitioner’s charge regarding
the seizure, it is now settled in this jurisdiction that illegally
obtained documents and papers are admissible in evidence, if they are
found to be competent and relevant to the case (see Wong & Lee vs.
Collector of Internal Revenue, 104 Phil, 469). In fairness to the
Collector, however, it should be stated that petitioner’s imputation is
vehemently denied by him, and relying on Sections 3, 9, 337 and 338 of
the Tax Code and the pertinent portions of Revenue Regulations No. V-1
and citing this Court’s ruling in U.S. vs. Aviado 38 Phil., 10,
the Collector maintains that he and other internal revenue officers and
agents could require the production of books of accounts and other
records from a taxpayer.
Having arrived at the foregoing
conclusion, it becomes unnecessary to discuss the other issues raised,
which are but premised on the assumption that a pre-marital agreement
of total separation of property existed between the petitioner and his
wife.
Wherefore, the decision appealed from is affirmed with costs against the petitioner.
Padilla, Bautista Angelo, Labrador, Barrera, Gutierrez David, and Dizon, JJ., concur.
CONCEPCION, J.: concurring in the result:
I
concur in the result. I do not share the view that documents and papers
illegally obtained are admissible in evidence, if competent and
relevant to the case. In this connection, I believe in the soundness of
the following observations of the Supreme Court of the United States in
Weeks vs. United States (232 U.S. 383, 58 L. ed. 652, 34 S. Ct. 341)[1]:
“The
effect of the Fourth Amendment is to put the courts of the United
States and Federal officials in the exercise of their power and
authority, under limitations and restraints as to the exercise of such
power and authority, and to forever secure the people, their persons,
houses, papers and effects against all unreasonable searches and
seizures under the guise of law. This protection reaches all alike,
whether accused of crime or not, and the duty of giving to it force and
effect is obligatory upon all entrusted under our Federal system with
the enforcement of the laws. The tendency of those who execute the
criminal laws of the country to obtain conviction by means of unlawful
seizures and enforced confessions, the latter often obtained after
subjecting accused persons to unwarranted practices destructive of
rights secured by the Federal Constitution, should find no sanction in
the judgments of the courts which are charged at all times with the
support of the Constitution and to which people of all conditions have
a right to appeal for the maintenance of such fundamental rights.“*
* * If letters and private documents can thus be seized and held and
used in evidence against a citizen accused of an offense, the
protection of the Fourth Amendment declaring his right to be secure
against such searches and seizures is of no value, and, so far as those
thus placed are concerned, might as well be stricken from the
constitution. The efforts of the courts and their officials to bring
the guilty to punishment, praiseworthy as they are, are not to be aided
by the sacrifice of those great principles established by years of
endeavor and suffering which have resulted in their embodiment in the
fundamental law of the land.”
as applied and amplified in Elkins vs. United States (June 27, 1960), 4 L. ed. 1669.
[1] See also Silverthorne Lumber Co. vs. United States, 251 US 385, 64 L. ed. 319, 40 S. Ct. 182, 24 ALR 1426; Gouled vs. United States, 255 US 298, 65 L. ed. 647, 41 S. Ct. 261; Amos vs. United States, 255 US 313, 65 L. ed. 654, 41 S. Ct. 266; Agnello vs. United States, 269 US 20, 70 L. ed. 145, 46 S. Ct. 4, 51 ALR 409; Go Bart Importing Co. vs. United States, 282 US 344, 75 L. ed. 374, 51 S. Ct. 153; Grau vs. United States, 287 US 124, 77 L. ed. 212, 53 S. Ct. 38; McDonald vs. United States, 335 US 451, 93 L. ed. 153, 69 S. Ct. 191; United States vs. Jeffers, 342 US 48, 96 L. ed. 59, 72 S. Ct. 93.