COLLECTOR OF INTERNAL REVENUE vs.

ANGLO CALIFORNIA NATIONAL BANK

(CROCKER-ANGLO NATIONAL BANK), as Treasurer for CALAMBA SUGAR ESTATE, INC.
G.R. No. L-12476             January 29, 1960

FACTS:
Respondent Calamba Sugar Estate, Inc., herein represented by its trustee, the Anglo California
National Bank, is a foreign corporation organized and existing under the laws of the State of
California, U.S.A., duly licensed (on May 8, 1946) to do business in the Philippines. It has
consistently filed its income tax returns here through its resident attorney-in-fact. On May 14,
1956, the petitioners Collector of Internal Revenue the corporation of an assessment for alleged
deficiency income taxes for the years 1953, 1954 and 1955 in the respective amounts of
P138,855.00, P131,759.00 and P393,459.00, supposedly based upon capital again derived
from the respondent's sale to the Pasumil Planters, Inc., of P250,000 shares of the capital stock
of the Pampanga Sugar Mills (a domestic corporation) and of a promissory note, dated January
1, 1950, executed by the Pampanga Sugar Mills in the sum of $500,000.00. In an appeal by the
respondent from the ruling of the Collector, the Court of Tax Appeals reversed said ruling and
absolved the respondent form liability.

ISSUE:
The sole issue is whether the capital gains obtained from the sale constituted income from
sources within or without the Philippines.

HELD:

It is hardly disputable that although shares of stock of a corporation represent equities may
consist of real as well as personal properties therein, they are considered under applicable law
and jurisprudence as intangible personal properties (see Art. 417 [2], Civil Code of the
Philippines; Sec. 35, Act No. 1459). Section 24 of the National Internal Revenue Codes levies
income taxes on foreign corporations only on income derived from sources within the
Philippines; and with respect to capital gains on the sale of personal properties, section 37 (e) of
the same Tax Code deems the place of sale as also that place or source of the capital gain:

... Gains, profit, and income derived from the purchase of personal within and its sale
without the Philippines or from the purchase or personal property without and its sale
within the Philippines, shall be treated as derived entirely from sources within the
country in which sold.

Construing the same provision of law (which is section 119 (e) of the 1934 Act, U.S.I.R.C.),
Unites States courts are in accord in disallowing the imposition of income taxes by its
government on capital gains where the sale takes place outside its territorial jurisdiction. It is
likewise the prevailing view that in ascertaining the place of sale, the determination of when and
where title to the goods passes from the seller to the buyer is decisive.

In this case, it is admitted that the negotiation, perfection and consummation of the contract of
sale were all done in California, U.S.A. It follows that title to the shares of stock passed from the
vendor to the vendee at said place, from which time the incidents of ownership vested on the
buyer.
 Tayag vs. Benguet Consolidated

G.R. No. L-23145      November 29, 1968

FACTS:

March 27, 1960: Idonah Slade Perkins died in New York City. August 12, 1960: Prospero
Sanidad instituted ancillary administration proceedings appointing ancillary administrator Lazaro
A. Marquez later on substituted by Renato D. Tayag.

On January 27, 1964, CFI ordered domiciliary administrator County Trust Company of New

York to surrender to the ancillary administrator in the Philippines 33,002 shares of stock
certificates owned by her in a Philippine corporation, Benguet Consolidated, Inc., to satisfy the
legitimate claims of local creditors.

When County Trust Company of New York  refused the court ordered  Benguet Consolidated,
Inc. to declare the stocks lost and required it to issue new certificates in lieu thereof.
Appeal was taken by Benguet Consolidated, Inc. alleging the failure to comply with its by-laws
setting forth the procedure to be followed in case of a lost, stolen or destroyed so it cannot issue
new stock certs.

ISSUE:

W/N Benguet Consolidated, Inc. can ignore a court order because of its by-laws.

HELD:

NO. CFI Affirmed.

Fear of contigent liability - obedience to a lawful order = valid defense. Benguet Consolidated,
Inc. is a Philippine corporation owing full allegiance and subject to the unrestricted jurisdiction of
local courts. Assuming that a contrariety exists between the above by-law and the command of
a court decree, the latter is to be followed. Corporation is an artificial being created by operation
of law. It owes its life to the state, its birth being purely dependent on its will. Cannot ignore the
source of its very existence.
 TESTATE ESTATE OF JOSE EUGENIO RAMIREZ, MARIA LUISA PALACIOS,
ADMINISTRATRIX VS. MARCELLE D. VDA. DE RAMIREZ, ET AL., OPPOSITORS, JORGE
AND ROBERTO RAMIREZ, LEGATEES
G.R. No. L-27952, February 15, 1982

FACTS: 

Jose Eugenio Ramirez, a Filipino national, died in Spain with only his widow as compulsory heir.
His will was admitted to probate in Manila. The administratrix submitted a project of partition as
follows: the property of the deceased is to be divided into two parts. One part shall go to the in
satisfaction of her legitime; the other part or "free portion" shall go to Jorge and Roberto
Ramirez. Furthermore, one third (1/3) of the free portion is charged with the widow's usufruct
and the remaining two-third (2/3) with a usufruct in favor of Wanda.

Jorge and Roberto opposed the project of partition on the ground that the provisions for
fideicommissary substitutions are invalid because the first heirs are not related to the second
heirs or substitutes within the first degree.

ISSUE: 
Whether the proposed partition is in accordance with law.

HELD:
 NO. It may be useful to recall that Substitution is the appointment of another heir so that he
may enter into the inheritance in default of the heir originally instituted. As regards the
substitution in its fideicommissary aspect, the appellants are correct in their claim that it is void
for the reason that the substitutes (Juan Pablo Jankowski and Horace V. Ramirez) are not
related to Wanda, the heir originally instituted. Art. 863 of the Civil Code validates a
fideicommissary substitution "provided such substitution does not go beyond one degree from
the heir originally instituted."

From this, it follows that the fideicommissary can only be either a child or a parent of the first
heir. These are the only relatives who are one generation or degree from the fiduciary. There is
no absolute duty imposed on Wanda to transmit the usufruct to the substitutes as required by
Arts. 865 and 867 of the Civil Code. In fact, the appellee admits "that the testator contradicts the
establishment of a fideicommissary substitution when he permits the properties subject of the
usufruct to be sold upon mutual agreement of the usufructuaries and the naked owners.