Corpo by Estoppel

8/20/2019 Corpo by Estoppel

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[G.R. No. 125221. June 19, 1997]

REYNALDO M. LOZANO, petitioner, vs. HON. ELIEZER R. DE LOS SANTOS,

Pe!"#"n$ Ju#$e, RT%, &. 5', An$e(e! %")*+ n# ANTONIO

ANDA, respondents.

D E % I S I O N

P-NO, J .

This petition for certiorari seeks to annul and set aside the decision of the Regional

Trial Court, Branch 58, Angeles City which ordered the Municipal Circuit Trial Court,

Mabalacat and Magalang, Papanga to disiss Ci!il Case "o# $%$& for lack of 'urisdiction#

The facts are undisputed# (n )eceber $*, $**5, petitioner Reynaldo M# +oano

filed Ci!il Case "o# $%$& for daages against respondent Antonio Anda beforethe Municipal Circuit Trial Court -MCTC., Mabalacat and Magalang,

Papanga# Petitioner alleged that he was the president of the /apatirang Mabalacat0

Angeles 1eepney )ri!ers2 Association, 3nc# -/AMA1)A. while respondent Anda was the

president of the 4aahang Angeles0Mabalacat 1eepney (perators2 and )ri!ers2Association, 3nc# -4AMA1()A. in August $**5, upon the re6uest of the 4angguniang

Bayan of Mabalacat, Papanga, petitioner and pri!ate respondent agreed to consolidate

their respecti!e associations and for the 7nified Mabalacat0Angeles 1eepney (perators2

and )ri!ers2 Association, 3nc# -7MA1()A. petitioner and pri!ate respondent alsoagreed to elect one set of officers who shall be gi!en the sole authority to collect the daily

dues fro the ebers of the consolidated association elections were held on (ctober %*, $**5 and both petitioner and pri!ate respondent ran for president petitioner

won pri!ate respondent protested and, alleging fraud, refused to recognie the results of

the election pri!ate respondent also refused to abide by their agreeent and continued

collecting the dues fro the ebers of his association despite se!eral deands todesist#Petitioner was thus constrained to file the coplaint to restrain pri!ate respondent

fro collecting the dues and to order hi to pay daages in the aount of P%5,#

and attorney2s fees of P5##9$:

Pri!ate respondent o!ed to disiss the coplaint for lack of 'urisdiction, claiing

that 'urisdiction was lodged with the 4ecurities and ;#9%: 3t denied reconsideration on March 8,$**>#9?:

Pri!ate respondent filed a petition for certiorari before the Regional Trial Court,

Branch 58, Angeles City#9&: The trial court found the dispute to be intracorporate, hence,

sub'ect to the 'urisdiction of the 4;C, and ordered the MCTC to disiss Ci!il Case "o#$%$& accordingly#95: 3t denied reconsideration on May ?$, $**>#9>:

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@ence this petition# Petitioner clais that

T@; R;4P(");"T 17); ACT;) D3T@ RAE; AB74; (= )34CR;T3("

AM(7"T3" T( +AC/ (R ;FC;44 (= 17R34)3CT3(" A") 4;R3(74 ;RR(R(= +AD 3" C("C+7)3" T@AT T@; 4;C7R3T3;4 A") ;FC@A";

C(MM3443(" @A4 17R34)3CT3(" (E;R A CA4; (= )AMA;4 B;TD;;"@;A)4GPR;43);"T4 (= TD( -%. A44(C3AT3("4 D@( 3"T;");) T(

C("4(+3)AT;GM;R; T@;3R A44(C3AT3("4 B7T "(T H;T 943C: APPR(E;)A") R;34T;R;) D3T@ T@; 4;C7R3T3;4 A") ;FC@A"; C(MM3443("#9I:

The 'urisdiction of the 4ecurities and ;


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partnership or association and the 4tate in so far as it concerns their indi!idual franchises#9$: The second eleent re6uires that the dispute aong the parties be intrinsically

connected with the regulation of the corporation, partnership or association or deal withthe internal affairs of the corporation, partnership or association#9$$: After all, the principal

function of the 4;C is the super!ision and control of corporations, partnerships and

associations with the end in !iew that in!estents in these entities ay be encouragedand protected, and their acti!ities pursued for the prootion of econoic de!elopent#9$%:

There is no intracorporate nor partnership relation between petitioner and pri!ate

respondent# The contro!ersy between the arose out of their plan to consolidate their

respecti!e 'eepney dri!ers2 and operators2 associations into a single coonassociation# This unified association was, howe!er, still a proposal# 3t had not been

appro!ed by the 4;C, neither had its officers and ebers subitted their articles of

consolidation in accordance with 4ections I8 and I* of the CorporationCode# Consolidation becoes effecti!e not upon ere agreeent of the ebers but

only upon issuance of the certificate of consolidation by the 4;C# 9$?: Dhen the 4;C, upon

processing and e of the Regional Trial Court, Branch 58, Angeles Cityare set aside# The Municipal Circuit Trial Court of Mabalacat and Magalang, Papanga is

ordered to proceed with dispatch in resol!ing Ci!il Case "o# $%$ "o costs#

SO ORDERED.

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[G.R. No. 1171. A3"( 1', 1997]

PEOPLE O THE PHILIPPINES, plaintiff-appellee, vs. ENGR. %ARLOS GAR%IA

* PINEDA, PATRI%IO &OTERO * /ALES, L-ISA MIRAPLES 4)

($e, accused , PATRI%IO &OTERO * /ALES, accused-appellant .

D E % I S I O N

P-NO, J .

Before us is an appeal fro the decision of the Regional Trial Court in Criinal Case

"o# *?8I$ con!icting accused0appellant Patricio Botero of illegal recruitent in largescale and sentencing hi to suffer the penalty of life iprisonent#9$:

3n an 3nforation dated 1uly %$, $**%, accused0appellant Patricio Botero together

with Carlos P# arcia and +uisa Miraples were charged with the crie of illegalrecruitent in large scale defined by Article ?8 -b. and penalied under Article ?* -a. of

the +abor Code, as aended by Presidential )ecree "os# $*% and %$8, coitted as

follows

That on or before March %, $**%, and subse6uently thereafter, in theMunicipality of Mandaluyong, Metro Manila, Philippines, a place within the

'urisdiction of this @onorable Court, the abo!e0naed accused, conspiring and

confederating together and utually helping and aiding each other, representingthesel!es to ha!e authority, license andGor perit to contract, enlist and recruit

workers for o!erseas eployent, did then and there willfully, unlawfully and

feloniously for a fee, recruit and proise 'ob placeentGeployent abroad to

the following indi!iduals, to wit

$# loria 4ilaras y Barbero

%# Rolando Consigna y (gana

?# Ma# Caren )aluaidao Josio +a Puebla, 1r#

5# Mario ;spada y Melodia

># Arnel 4antilla y Eillalos

I# ;lsa )elubio8# Abener 4iriban y Abatuan

*# =ranklin Cabingan y Casalla

$# 1ose ;rwin ;stinoso$$# ;dgardo Belen y 1uanillo

$%# Ariel Ri!ada y Pascual

$?# 4unny Pinco y Pascua$ Rolando 4antiago y Magno

$5# Alfredo ;stinoso y ;strada

$># +uisito Eargas y Kuion

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without first securing the re6uired license or authority fro the )epartent of

+abor and ;ployent#

Contrary to law#9%: -;phasis supplied#.

Accused arcia and Botero pleaded not guilty upon arraignent on 1anuary $*, $**?

and March ?$, $**?, respecti!ely# Miraples reained at large as the warrant of arrestagainst her was returned unser!ed# A 'oint trial was conducted against the two -%. accusedconsidering that their cases in!ol!e the sae parties and issues#9?:

4i< ->. out of the si. coplainants testified as prosecution witnesses#9&: These coplainants were ;dgardo Belen, loria 4ilaras, Alfredo ;stinoso, 1ose ;rwin

;sclada, ;lsa )elubio and Ariel Ri!ada# They testified that on !arious dates in March$**%, they went to Ricorn Philippine 3nternational 4hipping +ines, 3nc# -hereinafter

Ricorn., an entity which recruits workers for o!erseas eployent, with office at R#

&$, 1o!an Building, > 4haw Bl!d#, Mandaluyong, Metro Manila# They applied asseaen, cook, waiter, chaberaid or laundrywoan o!erseas#95: ;sclada applied to

accused Botero# All the other coplainants coursed their application to accused arcia

who represented hiself as president of Ricorn# 9>: Coplainants were re6uired to subittheir "B3 and police clearance, birth certificate, passport, seaan2s book and 4ur!i!al of

+ife at 4ea -4(+A4.#9I: As they did not ha!e the last three -?. docuents, they were

asked to pay fi!e thousand pesos -P5,#. as processing fee# They paid to Ricorn2s

treasurer, +uisa Miraples#98: They were issued receipts signed by Miraples# The receiptswere under Ricorn2s heading#9*:

arcia and Botero assured coplainants of eployent after the May $$, $**%

election# Accused Botero, as the !ice0president of Ricorn, followed0up their passports,seaan2s book and 4(+A4# @e told soe applicants to wait for their papers and

infored the others that their papers were in order#

After the election, coplainants went back to Ricorn to check on their applications# They disco!ered that Ricorn had abandoned its office at 1o!an Building for non0payent of rentals#9$: @oping against hope, they went back to the building se!eral

ties to reco!er their oney# Their persistence was to no a!ail for arcia and Botero

were nowhere to be found# They then went to the Mandaluyong Police 4tation and filedtheir coplaints#9$$: They also checked with the 4ecurities and ;


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-P%,#.# @e declined the offer# Allegedly, he already knew that Ricorn was not

licensed by the Philippine (!erseas ;ployent Agency -P(;A. or registered as a

corporation with the 4ecurities and ;. coplainants the aount of P5,## Both

accused are also ordered to pay the cost of suit#

4( (R);R;)#9$8:

The case against accused Miraples was archi!ed by the court#9$*: 4he has reained at

large#

(nly accused Botero, thru counsel, filed a "otice of Appeal# 3n his Brief, he raises

the following assignents of error, to wit9%:

I

T@; +(D;R C(7RT ;RR;) 3" @(+)3" T@AT T@; ;E3);"C;

PR;4;"T;) BH T@; PR(4;C7T3(" AA3"4T ACC74;)0APP;++A"TPATR3C3( B(T;R( 34 47==3C3;"T =(R C("E3CT3("

II

T@; +(D;R C(7RT ;RR;) 3" "(T @(+)3" T@AT 3" TR7T@ A")3" =ACT T@; ACC74;)0APP;++A"T PATR3C3( B(T;R( )3) "(T

C("4P3R; D3T@ C(0ACC74;) CAR+(4 P# ARC3A#

III

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T@; +(D;R C(7RT ;RR;) 3" "(T @(+)3" T@AT ACC74;)0

APP;++A"T PATR3C3( B(T;R( 34 "(T R;4P("43B+; =(R 3++;A+

R;CR73TM;"T ACT3E3T3;4 (= C(0ACC74;) CAR+(4 P# ARC3A#

I/

T@; +(D;R C(7RT ;RR;) 3" 3E3" CR;);"C; T( T@;T;4T3M("H (= 1(4; ;RD3" ;4C+A)A D@3C@ 34 "(T A)M3443B+;=(R B;3" 3"C("434T;"T, @3@+H 3MPR(BAB+; A")

;FA;RAT;) A") 3" "(T 3E3" D;3@T T( T@; ACC74;)0

APP;++A"T PATR3C3( B(T;R(24 ;E3);"C;#

De sustain appellant2s con!iction#

Appellant Botero predicates his appeal on the alleged insufficiency of e!idence to

support his con!iction# More particularly, he assails the credibility of witness ;sclada#

;sclada initially testified that he dealt with accused arcia when he filed his

application with Ricorn as a seaan# (n cross0e


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selection of workers to be eployed abroad#9%&: These subissions are at war with the

e!idence on record# @is co0accused arcia introduced hi to the coplainants as the

!ice0president of Ricorn# @e used a table with a naeplate confiring he was the !ice0 president of Ricorn#9%5: @e procured the passports, seaan2s books and 4(+A4 for the

applicants# 3t was fro hi that the coplainants in6uired about the status of their

applications#9%>:

@e also aditted he ga!e oney to accused arcia for Ricorn2sincorporation#

Beyond any reasonable doubt, appellant Botero engaged in recruitent and

placeent acti!ities in that he, through Ricorn, proised the coplainants eployent

abroad# 7nder the +abor Code, e6u")


9/28

incurred or arising as a result thereof Pro!ided, howe!er, That when any such ostensible

corporation is sued on any transaction entered by it as a corporation or on any tort

coitted by it as such, it shall not be allowed to use as a defense its lack of corporate personality#

Appellant Botero is guilty of the crie of illegal recruitent in a large scale

considering it was pro!en that he, together with his cohorts, were able to defraud the si<coplainant0witnesses in this case# 7nder Article ?8 -b. of the +abor Code, illegal

recruitent in large scale is perpetrated if coitted against three -?. or ore persons

indi!idually or as a group# And under Article ?* -a. of the sae Code, accused0

appellant2s crie is punishable by life iprisonent and a fine of one hundred thousand pesos -P$,#.#

=inally, it is fruitless for appellant to deny he conspired with his co0accused to

coit the crie at bar# The fact that all the accused were co0conspirators in defraudingthe coplainants could be inferred fro their acts# They played different roles in

defrauding coplainants accused arcia was the president, appellant Botero was the

!ice0president and accused0at0large Miraples was the treasurer of Ricorn#

9?%:

;ach one played a part in the recruitent of coplainants# They were indispensable to each other#

IN /IE0 0HEREO, the decision of the Regional Trial Court con!icting accused0

appellant Patricio Botero of the crie of illegal recruitent in large scale is affired in

all respects# Costs against accused0appellant#

SO ORDERED.

G.R. No!. L=>'195 n# >'19? M* 1, 19>2

SORONIO T. &AYLA, ET AL., petitioners,

!s#SILANG TRAI% %O., IN%., respondent#

SILANG TRAI% %O., 3e)")"one, @!. SORONIO &AYLA, ET AL., respondents#

E. A. Beltran for petitioners.

Conrado V. Sanchez, Melchor C. Benitez, and Enriue M. !ernando for respondent.

OZAETA, J.:

Petitioners in #R# "o# &8$*5 instituted this action in the Court of =irst 3nstance of Ca!ite

against the respondent 4ilang Traffic Co#, 3nc# -cross0petitioner in #R# "o# &8$*>., to

reco!er certain sus of oney which they had paid se!erally to the corporation onaccount of shares of stock they indi!idually agreed to take and pay for under certainspecified ters and conditions, of which the following referring to the petitioner 1osefa

"a!al, is typical

AR;;M;"T =(R 3"4TA++M;"T 4A+; (= 4@AR;4 3" T@; 43+A" TRA==3CC(MPA"H, 3"C#,

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4ilang, Ca!ite, P# 3#

T@34 AR;;M;"T, ade and entered into between Mrs# 1osefa "a!al, of legal age,arried and resident of the Municipality of 4ilang, Pro!ince of Ca!ite, Philippine 3slands,

party of the =irst Part, hereinafter called the subscriber, and the 4ilang Traffic Copany,

3nc#, a corporation duly organied and e


11/28

The agreeents signed by the other petitioners were of the sae date -March ?, $*?5.

and in identical ters as the foregoing e

Eenancio

Toledo########

8 shares ?I5

1osefa

"a!al##############

$5 shares >I5

Pa

Toledo################

$5 shares >I5

Petitioners2 action for the reco!ery of the sus abo!e entioned is based on a resolution

by the board of directors of the respondent corporation on August $, $*?I, of thefollowing tenor

A ocion sel 4r# Marcos Caparas y secundado por el 4r# Ale'andro Bayla, 6ue para el

bien de la corporacion y la pronta terinacion del asunto ci!il "o# ?$%5 titulado Eicente

=# Eillanue!a et al# !s# +ino oe et al#, en el 1ugado de Priera 3nstancia de Ca!ite,donde se gasto y se gastara no poca cantidad de la Corporacion, se resol!io y se aprobo

por la 1unta )irecti!a los siguientes

-a. Kue se de'ara sin efecto lo aprobado por la 1unta )irecti!a el ? de aro, $*?5, art#

$$, sec# $>%, sobre las cobranas 6ue se haran por el 4ecretario Tesorero de laCorporacion a los accionistas 6ue habian toado o suscrito nue!as acciones y 6ue se

peritia a estos pagar % del !alor de las acciones suscritas en un aNo, con interes de

> y el pago o 'ornal 6ue se hara por triestre#

-b. 4e de'ara sin efecto, en !ista de 6ue aun no esta pagado todo el !alor de las $%?

acciones, toadas de las acciones no e


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Eenancio

Toledo#############

8 Acciones

Melchor P#Benite########

$I Acciones

3saias

EideNa#################

$& Acciones

;steban

Eelasco############

$ Acciones

"ueriano 4#Aldaba####

$5 Acciones

3nocencio

Cru#################

8 Acciones

1osefa

"a!al ##################

$5 Acciones

4ofronio

Bayla#################

8 Acciones

)ionisio

)ungca#############

? Acciones

y de!ol!er a las personas arriba descritas toda la cantidad 6ue estas habian pagado por las

$%? acciones#

-c. Kue se de'ara sin efecto lo aprobado por la 1unta )irecti!a el ? aro, $*?5, art# E#

sec# $>5, sobre el cabio o true6ue de las ?$ acciones del Treasury 4tock, contra las ?%

acciones del 4r# "ueriano Aldaba, en la corporacion "orthern +uon Transportation Co#y 6ue se de!uel!a al 4r# "ueriano Aldaba las ?% acciones encionadas despues 6ue el

haya de!uelto el certificado de las ?$ acciones de la 4ilang Traffic Co#, 3nc#

-d. Peritir al Tesorero de la Corporacion para 6ue de!uel!a a las personas arriba

indicadas, las cantidades pagadas por las $%? acciones# -;


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The respondent corporation set up the following defenses -$. That the abo!e06uoted

resolution is not applicable to the petitioners 4ofronio T# Bayla, 1osefa "a!al, and Pa

Toledo because on the date thereof their subscribed shares of stock had alreadyautoatically re!erted to the defendant, and the installents paid by the had already

been forfeited and -%. that said resolution of August $, $*?I, was re!oked and cancelled

by a subse6uent resolution of the board of directors of the defendant corporation datedAugust %%, $*?I#

The trial court absol!ed the defendant fro the coplaint and declared canceled

-forfeited. in fa!or of the defendant the shares of stock in 6uestion# 3t held that the

resolution of August $, $*?I, was null and !oid, citing Velasco vs. "oizat -?I Phil#, 8%.,wherein this Court held that a corporation has no legal capacity to release an original

subscriber to its capital stock fro the obligation to pay for shares and any agreeent to

this effect is in!alid Plaintiffs below appealed to the Court of Appeals, which odifiedof the trial court as follows

That part of the 'udgent disissing plaintiff2s coplaint is affired, but that part thereof declaring their subscription canceled is re!ersed# )efendant is directed to grant plaintiffs

? days after final 'udgent within which to pay the arrears on their subscription#Dithout pronounceent as to costs#

Both parties appealed to this Court by petition and cross0petition

for certiorari. Petitioners insist that they ha!e the right to reco!er the aounts in!ol!ed

under the resolution of August $, $*?I, while the respondent and cross0petitioner on its part contends that said aounts ha!e been autoatically forfeited and the shares of stock

ha!e re!erted to the corporation under the agreeent hereinabo!e 6uoted#

The parties litigant, the trial court, and the Court of Appeals ha!e interpreted or considered the said agreeent as a contract of subscription to the capital stock of therespondent corporation# 3t should be noted, howe!er, that said agreeent is entitled

Agreeent for 3nstallent 4ale of 4hares in the 4ilang Traffic Copany, 3nc#, that

while the purchaser is designated as subscriber, the corporation is described as sellerthat the agreeent was entered into on March ?, $*?5, long after the incorporation and

organiation of the corporation, which took place in $*%I and that the price of the stock

was payable in 6uarterly installents spread o!er a period of fi!e years# 3t also appearsthat in ci!il case "o# ?$%5 of the Court of =irst 3nstance of Ca!ite entioned in the

resolution of August $, $*?I, the right of the corporation to sell the shares of stock to the

person naed in said resolution -including herein petitioners. was ipugned by the

plaintiffs in said case, who claied a preferred right to buy said shares#

Dhether a particular contract is a subscription or a sale of stock is a atter of

construction and depends upon its ters and the intention of the parties -& =letcher,

Cyclopedia of Corporation 9peranent edition:, %*, cited in 4alon, )e&*, >5%.# 3n the 7nson case 'ust cited, this Court held that a

subscription to stock in an e


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3t sees clear fro the ters of the contracts in 6uestion that they are contracts of sale

and not of subscription# The lower courts erred in o!erlooking the distinction between

subscription and purchase A subscription, properly speaking, is the utual agreeent of the subscribers to take and pay for the stock of a corporation, while a purchase is an

independent agreeent between the indi!idual and the corporation to buy shares of stock

fro it at stipulated price# -$8 C# 1# 4#, I>#. 3n soe particulars the rules go!erningsubscriptions and sales of shares are different# =or instance, the pro!isions of our

Corporation +aw regarding calls for unpaid subscription and assessent of stock

-sections ?I05. do not apply to a purchase of stock# +ikewise the rule that corporationhas no legal capacity to release an original subscriber to its capital stock fro the

obligation to pay for his shares, is inapplicable to a contract of purchase of shares#

The ne


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said resolution were able to benefit by said resolution# 3t would be an un'ust

discriination to deny the sae benefit to the herein petitioners#

De ay add that there is no intiation in this case that the corporation was insol!ent, or that the right of any creditor of the sae was in any way pre'udiced by the rescission#

The attepted re!ocation of said rescission by the resolution of August %%, $*?I, was

in!alid, it not ha!ing been agreed to by the petitioners#

Dherefore, the 'udgent of the court of appeals is hereby re!ersed and another 'udgent

will be entered against the defendant 4ilang Traffic Co#, 3nc#, ordering it to pay to the plaintiffs 4ofronio T# Bayla, Eenancio Toledo, 1osefa "a!al, and Pa Toledo, the sus of

P?>, P?I5, P>I5, and P>I5, respecti!ely, with legal interest on each of said sus fro

May %8, $*?8, the date of the filing of the coplaint, until the date of payent, and withcosts in the three instances# 4o ordered#

#ulo, C.$., Moran, "aras and Bocobo, $$., concur#

Republic of the Philippines

S-PREME %O-RT

Manila

=3R4T )3E343("

G.R. No. 1'57? 1anuary %, $***

%OMMISSIONER O INTERNAL RE/EN-E, petitioner,

!s#

THE %O-RT O APPEALS, %O-RT O TA APPEALS n# A. SORIANO

%ORP., respondents.

D E % I S I O N

MA%&'(E), $.:

Petitioner Coissioner of 3nternal Re!enue -C3R. seeks the re!ersal of the decision of

the Court of Appeals -CA.1 which affired the ruling of the Court of Ta< Appeals

-CTA. 2 that pri!ate respondent A# 4oriano Corporations -hereinafter A"4C(R.

redeption and e


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4oetie in the $*?s, )on Andres 4oriano, a citien and resident of the 7nited 4tates,

fored the corporation QA# 4oriano H Cia, predecessor of A"4C(R, with a

P$,,# capitaliation di!ided into $, coon shares at a par !alue of

P$Gshare# A"4C(R is wholly owned and controlled by the faily of )on Andres, who

are all non0resident aliens# > 3n $*?I, )on Andres subscribed to &,*>? shares of the 5,shares originally issued# 5

(n 4epteber $%, $*&5, A"4C(Rs authoried capital stock was increased to

P%,5,# di!ided into %5, coon shares with the sae par !alue, of the

additional $5, shares, only $, was issued which were all subscribed by )on

Andres, after the other stockholders wai!ed in fa!or of the forer their pre0epti!e

rights to subscribe to the new issues# ? This increased his subscription to $&,*>? coon

shares# 7 A onth later, ' )on Andres transferred $,%5 shares each to his two sons, 1ose

and Andres, 1r#, as their initial in!estents in A"4C(R# 9 Both sons are foreigners# 1

By $*&I, A"4C(R declared stock di!idends# (ther stock di!idend declarations were

ade between $*&* and )eceber %, $*>?# 11 (n )eceber ?, $*>& )on Andres

died# As of that date, the records re!ealed that he has a total shareholdings of $85,$5&

shares 12 S 5,&*5 of which are original issues and the balance of $?&,>5* shares as

stock di!idend declarations# 1B Correspondingly, one0half of that shareholdings or

*%,5II 1> shares were transferred to his wife, )oNa Caren 4oriano, as her con'ugal

share# The other half fored part of his estate# 15

A day after )on Andres died, A"4C(R increased its capital stock to P%M 1? and in

$*>> further increased it to P?M# 17 3n the sae year -)eceber $*>>., stock di!idends

worth &>,%* and &>,%8I shares were respecti!ely recei!ed by the )on Andres

estate 1' and )oNa Caren fro A"4C(R# @ence, increasing their accuulated

shareholdings to $?8,8>I and $?8,8>& 19 coon shares each# 2

(n )eceber %8, $*>I, )oNa Caren re6uested a ruling fro the 7nited 4tates 3nternal

Re!enue 4er!ice -3R4., in6uiring if an eI of the $*5& 7#4# Re!enue

Act# 22 By 1anuary %, $*>8, A"4C(R reclassified its e8, the 3R4 opined that the e Conse6uently, 25 on March ?$, $*>8

)oNa Caren e& coon shares for $?8,8> of the newly

reclassified preferred shares# The estate of )on Andres in turn, e


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(n 1une ?, $*>8, pursuant to a Board Resolution, A"4C(R redeeed %8, coon

shares fro the )on Andres estate# By "o!eber $*>8, the Board further increased

A"4C(Rs capital stock to PI5M di!ided into $5, preferred shares and >,

coon shares# 27 About a year later, A"4C(R again redeeed 8, coon shares

fro the )on Andres estate, 2' further reducing the latters coon shareholdings to$*,I%I# As stated in the Board Resolutions, A"4C(Rs business purpose for both

redeptions of stocks is to partially retire said stocks as treasury shares in order to reduce

the copanys foreign e* based on the transactions of e A"4C(Rs subse6uent

protest on the assessents was denied in $*8? by petitioner# B5

4ubse6uently, A"4C(R filed a petition for re!iew with the CTA assailing the ta<

assessents on the redeptions and e


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e6ui!alent to the distribution of ta1 3t likewise in!oked the anesty pro!isions of P#)# >I#

De ust ephasie that the application of 4ec# 8?-b. depends on the special factual

circustances of each case#>2 The findings of facts of a special court -CTA. e


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The decree condones Qthe collection of all internal re!enue ta


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on strictissimi 0uris e6ually applies# 5' 4o that, any doubt in the application of an

anesty lawGdecree should be resol!ed in fa!or of the ta as they are nothing but an Qenrichent through increase in !alue

of capital

in!estent# ?5 As capital, the stock di!idends postpone the realiation of profits because

the Qfund represented by the new stock has been transferred fro surplus to capital and

no longer a!ailable for actual distribution# ?? 3ncoe in ta< law is Qan aount of oneycoing to a person within a specified tie, whether as payent for ser!ices, interest, or

profit fro in!estent# ?7 3t eans cash or its e6ui!alent# ?' 3t is gain deri!ed and

se!ered fro capital, ?9 fro labor or fro both cobined 7 S so that to ta< a stock

di!idend would be to ta< a capital increase rather than the incoe# 71 3n a loose sense,

stock di!idends issued by the corporation, are considered unrealied gain, and cannot be

sub'ected to incoe ta< until that gain has been realied# Before the realiation, stock


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di!idends are nothing but a representation of an interest in the corporate properties# 72 As

capital, it is not yet sub'ect to incoe ta

The ;


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of cash di!idends, which when paid becoes the absolute property of the stockholder#

Thereafter, the latter becoes the e


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is the original capital subscriptions upon establishent of the corporation or fro initial

capital in!estent in an e


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9A:n operation with no business or corporate purpose S is a ere de!ise which put on

the for of a corporate reorganiation as a disguise for concealing its real character, and

the sole ob'ect and accoplishent of which was the consuation of a preconcei!ed

plan, not to reorganie a business or any part of a business, but to transfer a parcel of

corporate shares to a stockholder# 12

)epending on each case, the e


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conse6uently, the stockholders separate property# 11 Profits deri!ed fro the capital

in!ested cannot escape incoe ta


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reittances in case cash di!idends are declared# "ot e!en this purpose can be gi!en

credence# Records show that despite the e


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by the corporation are presued e6ual with the sae pri!ileges and liabilities, pro!ided

that the Articles of 3ncorporation is silent on such differences# 129

3n this case, the e

Corpo by Estoppel

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