Wells Fargo Banks & Union Trust Company vs Collector of Internal Revenue

70 Phil. 325 – Mercantile Law – Corporation Code – Shares of Stock – Situs of Shares of Stock

In September 1932, Birdie Lillian Eye died in Los Angeles, California, USA which was also her place of
domicile. She left various properties. Among those properties include some intangibles consisting of
70,000 shares in the Benguet Consolidated Mining Company, a corporation organized and existing under
Philippine laws.

The Collector of Internal Revenue sought to assess and collect estate tax on the said shares. Wells Fargo
Banks & Union Trust Company, the trustee of the estate of the decedent Eye, objected to said
assessment. Wells Fargo averred that said shares were already subjected to inheritance tax in California
and hence cannot be taxed again in the Philippines (note at that time the Philippines was still under the
Commonwealth and were not yet totally independent from the US).

ISSUE: Whether or not the shares are subject to estate tax in the Philippines.

HELD: Yes. The Supreme Court ruled that even though the Philippines was considered a US territory at
that time, it is still a separate jurisdiction from the US in several aspects particularly taxation. Hence, the
Philippines has the power to tax said shares. The situs of taxation is here in the Philippines because the
situs of the shares of stock concerned is here in the Philippines because of the fact that the said shares
were issued here by a corporation organized and existing under the laws of the Philippines which is also
domiciled here. Further, (and this is the deeper reason), when Eye was alive, she actually delivered the
title to said shares to the resident secretary of the corporation here in the Philippines hence the shares
never left the Philippines.

Note: As a rule, intangibles follow the person (mobilia sequuntur personam). Hence, intangibles are
taxable in the place where their owner may be domiciled. However, Section 104 of the NIRC provides
that if the shares have attained business situs here in the Philippines, then said shares are taxable here
even if the owner of said shares are domiciled abroad.

CIR vs. Domingo de Lara, ancillary administrator

of the estate Hugo Miller Deceased and CTA
respondent

Facts:
Hugo Miller, an America citizen, was born in Sta Cruz, California, USA in 1883 In 1905, he came to the
Phil. From 1906 to 1917, he was connected with the public school system, first as a teacher and later as
a division superintendent in schools, later retiring under Osmena Retirement Act. After his retirement,
Miller accepted an executive position on the local branch of Ginn & Co., book publisher with principal
offices in N.Y. & Boston, USA. From 1922 up to December of 1941, he was stationed in the Phil. As well
as China and Japan s
Oriental representative, he lived in Manila Hotel and used to visit his wife in California. He never lived in
any residential house in the Phil. After the death of his wife in 1931, he transferred from Manila Hotel to
the Army Navy Club
where he was staying during the outbreak of Pacific war and Ginn & Co. was closed. January 17, 1941,
he executed his last will and testament in Sta Cruz, California and declared he was “of Sta. Cruz,
California. He then joined the Board of Censors of the US Navy. During the war he was taken as prisoner
by the Japanese forces in Leyte. In January 1944, he was transferred in Catbalogan, Samar where he was
executed by the said forces on March 11, 1944 at the time of his death in 1944 Testate proceedings
were instituted in court of California and admitted to probate on May 10, 1946, and said court order and
decree of settlement of final account and distribution and found that he is a resident of California, at the
time of his death. Thereafter, ancillary proceedings were filed by the executors of the will before the FI
in
Manila. On July 1949, The Bank of America, Trust and Savings Asso. of, California, co -executor named in
Miller’s will, filed an estate and inheritance tax return with the collector, covering only the stock issued
by the Phil corps . reporting a liability of P269.43 for estate taxes and P230.27 for inheritance taxes and
it was protested. The collector assessment for the liability for estate and inheritance taxes, including
penalties and other increments at P77,300.92 as of January 16, 1954.
Issue:
2.
Whether the decedent was exempted from estate and inheritance taxes.
Ruling CTA:
2.
The decedent, being a non –resident of the Phil. The only property subject to estate and inheritance
taxes are those shares of stock issued by Phil. Corps. Under the Tax Code section 122, the decedent is
entitled to tax exemption granted to non0 residents under the provision ofmultiple taxation, which
otherwise subject the decedent’s intangible property to the inheritance tax, on in his place of residence
and domicile and the place where those properties are found.paid.

Villanueva V City Of Iloilo

(26 SCRA 578)
FACTS:
Relying on the passage of RA 2264 or the Local Autonomy Act, Iloilo enacted Ordinance 11
Series of 1960, imposing a municipal license tax on tenement houses in accordance with the
schedule of payment provided by therein. Villanueva and the other appellees are apartment
owners from whom the city collected license taxes by virtue of Ordinance 11. Appellees aver
that the said ordinance is unconstitutional for RA 2264 does not empower cities to impose
apartment taxes; that the same is oppressive and unreasonable for it penalizes those who fail to
pay the apartment taxes; that it constitutes not only double taxation but treble taxation; and, that
it violates uniformity of taxation.

Issues:
1. Does the ordinance impose double taxation?
2. Is Iloilo city empowered by RA 2264 to impose tenement taxes?
Held:
While it is true that appellees are taxable under the NIRC as real estate dealers, and
taxable under Ordinance 11, double taxation may not be invoked. This is because the same tax
may be imposed by the national government as well as by the local government. The contention
that appellees are doubly taxed because they are paying real estate taxes and the tenement tax
is also devoid of merit. A license tax may be levied upon a business or occupation although the
land or property used in connection therewith is subject to property tax. In order to constitute
double taxation, both taxes must be the same kind or character. Real estate taxes and
tenement taxes are not of the same character.
RA 2264 confers local governments broad taxing powers. The imposition of the
tenement taxes does not fall within the exceptions mentioned by the same law. It is argued
however that the said taxes are real estate taxes and thus, the imposition of more the 1 per
centum real estate tax which is the limit provided by CA 158, makes the said ordinance ultra
vires. The court ruled that the tax in question is not a real estate tax. It does not have the
attributes of a real estate tax. By the title and the terms of the ordinance, the tax is a municipal
tax which means an imposition or exaction on the right to use or dispose of property, to pursue
a business, occupation or calling, or to exercise a privilege. Tenement houses being offered for
rent or lease constitute a distinct form of business or calling and as such, the imposition of
municipal tax finds support in Section 2 of RA 2264.