MARVEL BUILDING CORPORATION, ET AL. vs.

SATURNINO DAVID, in his

capacity as Collector, Bureau of Internal Revenue
G.R. No. L-5081. February 24, 1954
FACTS
 Maria Castro was Elected as President and Maximo Cristobal as Secretary-
Treasurer. The Wise building was purchased in the name of Dolores and the
Aguinaldo building was in the name of Segundo. Both building were purchased
for P1,800,000, but as the corporation had only P1,025,000, the balance of the
purchase price was obtained as loans from the Insular Life Assurance Co.
 Secretary of Finance, upon consideration of the report of a special committee
assigned to study the war profits tax case of Mrs. Maria B. Castro, recommended
the collection of war profits taxes for the latter.
 Various properties, including the Aguinaldo Building, Wise Building and Dewey
Mansion, were seized by the Collector of Internal Revenue. Afterwards, the
original complaint in this case was filed
 An action was brought by plaintiffs as stockholders of the Marvel Building
Corporation to enjoin the defendant Collector of Internal Revenue from selling at
public auction. Plaintiffs allege that the said three properties (lands and buildings)
belong to the Marvel Building corporation and not to Maria B. Castro.
 Defendant claims that Maria B. Castro is the true and sole owner of all the
subscribed stock of the Marvel Building Corporation, including those appearing to
have been subscribed and paid for by the other members, and consequently said
Maria B. Castro is also the true and exclusive owner of the properties seized.
 CFI ruled to order the release of the aforementioned properties and enjoined the
Collector from selling the same
MARVEL BUILDING CORPORATON NOTES
 Has a capital stock of 2,000,000 but the computation of the stock of all the
incorporators has only 1,025,000
 Incorporator are related with other incorporators such as; Maximo Cristobal
(whom is the half brother of Castro), Maria Cristobal (Half sister of Castro)
Segundo (Husband of Maria Cirstobal)
 Stockholders did not hold any meeting
 No books or minutes mentioned except advances made by Castro
 Its bylaws were not presented during trial
 No other transactions or accounts
ISSUE
Whether or not Maria B. Castro is the owner of all the shares of stock of the
Marvel Building Corporation and the other stockholders were mere dummies of her
RULING
EVIDENCE THAT MARIA IS THE OWNER OF ALL SHARES OF STOCK AND THE
OTHERS ARE DUMMIES
For the first piece of evidence, the existence of said endorsed certificates was testified
to by the internal revenue examiners. The said examiners came across books and
papers of the Marvel Building Corporation at its place of business which was furnished
by Maximo Cristobal. In such documents it contains 11 stock certificates which
corresponded in the number and in the amount on their face to the subscritpions of the
stockholders that all the certificates, except Maria Castro’s name, were endorsed in
blank by subscribers.
Moreover, the bookkeeper (Julio Llmado) testified that he was the one who had
prepared the original certificates which was given to him by Castro for comparison with
the articles of incorporation. Such certificates were not yet signed by the President not
the treasurer.
However, the plaintiffs, countered and denied that there was no investigation by the
examiners and attacked Llamados for a doubtful conduct in not divulging the existence
of the certificates to the Chief Examiner.
The SC, however, finds that such denial and attack on the agents and Llmados worsens
their case. They did not deny the existence of such certificates nor deny that the
examiners did not made the examination. For their attack on Llmado, it does not appear
that there was enmity of Llmados towards Castro because Llmado could not have been
induced to lie or fabricate evidence against her because they were close friends. When
the older Llamado kept secret the existence of the endorsed certificates, the friendship
between the two families was yet intact; hence, the existence of the endorsed
certificates must have been kept to himself by the older Llamado. All the above
circumstances shows that the Llamados had personal knowledge of the facts they
testified to, and the existence of this knowledge in turn renders improbable plaintiffs'
claim that their testimonies were biased.
EVIDENCE THAT MARIA IS THE SOLE OWER OF SHARES OF STOCK
This fact is proved by their income tax returns, or the absence thereof. For example.
Amado A. Yatco, before 1945, his returns were exempt from the tax, in 1945 he had
P12,600 and in 1946, P23,000. He has four children. How could he have paid P100,000
in 1945 and 1946?
Maria B. Castro had been found to have made enormous gains or profits in her
business such that the taxes thereon were assessed at around P3,000,000. There was,
therefore, a prima facie case made out by the defendant collector that Maria B. Castro
had furnished all the money that the Marvel Building Corporation had.
ARE THE SUBSCRIBERS DUMMIES?
It is significant that the plaintiffs, the supposed subscribers, who should have come to
court to assert that they actually paid for their subscriptions, and are not mere dummies,
did not do so. They could not have afforded such a costly indifference, valued at from
P70,000 to P100,000 each, if they were not actual dummies. This failure on 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
them to come to court and show their receipts and testify on the payments they have
made on their subscriptions? This they, however, refused to do. They had it in their
power to rebut the charges, but they chose to keep silent. The non-production of
evidence that would naturally have been produced by an honest and therefore fearless
claimant permits the inference that its tenor is unfavorable to the party's cause.
CONCLUSION – IN OTHER WORDS, TLDR SECTION ETO
In general the evidence offered by the plaintiffs is testimonial and direct evidence, easy
of fabrication
the existence of endorsed certificates discovered by internal revenue agents between
1948 and 1949 in the possession of the Secretary-Treasurer of a supposed corporation;
 the fact that twenty-five certificates were signed by its president for no justifiable
reason; the fact that its principal stockholder 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 no incomes of sufficient magnitude to
justify their big subscriptions; the fact that the treasurer in the name of the
alleged corporation but were kept by the principal stockholder herself;
 the fact that the stockholders or the directors never appeared to have ever met to
discuss the business of the corporation; the fact that she advanced big sums of
money to the corporation without any previous arrangement or accounting; and
 the fact that the books of accounts were kept as if they belonged to her alone
-are circumstantial evidence which are not only convincing but conclusive that she is the
sole and exclusive owner of all the shares of stock of the corporation and that the other
partners are her dummies.
NOTES:
 As stated in the syllabus, the main topic of the case is CIRCUMSTANTIAL
EVIDENCE SHOWING ONE-MAN CORPORATION
 As stated in a digest, the PIERICING THE CORPORATE VEIL; CONTRARY TO
LAW; EVASION OF LIABILITY TO GOVERNMENT – the corporate fiction in this
case was disregarded as the corporation was used to evade taxes – thus the
stockholders become personally liable and not the corporation.