“Case Digest”

Submitted by:
Glydel G. Mercado

November 20, 2017

 TEODORO ACAP v COURT OF APPEALS and EDY DE LOS REYES
G.R. No. 118114, December 7, 1995
PADILLA, J.:
Facts:
Teodoro Acap, the petitioner, had been the tenant of a portion of the said land, covering an area
of nine thousand five hundred (9,500) meters. Acap continued to be the registered tenant thereof
and religiously paid his leasehold rentals to Pido and thereafter, upon Pido's death, to his widow
Laurenciana. The controversy began when Pido died intestate and his surviving heirs executed a
notarized document denominated as "Declaration of Heirship and Waiver of Rights of Lot No.
1130 in favor of Edy Delos Reyes, the respondent. Upon obtaining the document, the respondent
filed the same with the Registry of Deeds as part of a notice of an adverse claim against the
original certificate of title.
Thereafter, private respondent sought for petitioner (Acap) to personally inform him that he had
become the new owner of the land and that the lease rentals thereon should be paid to him and
further alleged that they had entered into an oral lease agreement wherein petitioner agreed to
pay 10 cavans of palay per annum as lease rental. Acap allegedly complied with said obligation,
however, later refused to pay any further lease rentals on the land, prompting private respondent
to seek the assistance of the then Ministry of Agrarian Reform (MAR). The MAR invited
petitioner to a conference but did not attend and sent his wife instead. When Acap's wife was
informed about private respondent's ownership of the said land but she stated that she and her
husband did not recognize private respondent's claim of ownership over the land.
After the lapse of four (4) years, private respondent filed a complaint for recovery of possession
and damages against petitioner, alleging in the main that as his leasehold tenant, petitioner
refused and failed to pay the agreed annual rental despite repeated demands. Acap averred that
he continues to recognize Cosme Pido as the owner of the said land. He also denied having
entered into a verbal lease tenancy contract with private respondent.
The lower court rendered a decision in favor of private respondent. Aggrieved, petitioner
appealed to the Court of Appeals, imputing error to the lower court and the decision as not in
accord with the law and evidence when it ruled that private respondent acquired ownership of
Lot No. 1130 through the aforementioned Declaration of Heirship and Waiver of Rights.
Issue/s:
Whether or not the subject Declaration of heirship and waiver of rights is recognized as mode of
acquiring ownership?
Whether or not the said document can be considered a deed of sale?
Rulings:
No. Under Article 712 of the Civil Code, a declaration of heirship and waiver of rights is not
recognized as one of the modes of acquiring ownership and neither can the same be considered a
deed of sale. Private respondent, being then a stranger to the succession of Cosme Pido, cannot
conclusively claim ownership over the subject lot on the sole basis of the waiver document
which neither recites the elements of either a sale, or a donation, or any other derivative mode of
acquiring ownership.
Decision:
WHEREFORE, premises considered, the Court hereby GRANTS the petition and the decision of
the Court of Appeals dated 1 May 1994 which affirmed the decision of the RTC of Himamaylan,
Negros Occidental dated 20 August 1991 is hereby SET ASIDE. The private respondent's
complaint for recovery of possession and damages against petitioner Acap is hereby
DISMISSED for failure to properly state a cause of action, without prejudice to private
respondent taking the proper legal steps to establish the legal mode by which he claims to have
acquired ownership of the land in question.
SO ORDERED.
 CELESTINO CO & COMPANY v COLLECTOR OF INTERNAL REVENUE
G.R. No. L-8506, August 31, 1956
BENGZON, J.:
Office of the Solicitor General Ambrosio Padilla, First Assistant Solicitor General Guillermo E.
Torres and Solicitor Federico V. Sian for respondent.

Facts:
Celestino Co & Company is a duly registered general co-partnership doing business under the
trade name of "Oriental Sash Factory". Its paid percentage taxes of 7 percent on the gross
receipts of its sash, door and window factory, in accordance with section one hundred eighty-six
of the National Revenue Code imposing taxes on sale of manufactured articles. However in 1952
it began to claim liability only to the contractor's 3 percent tax and having failed to convince the
Bureau of Internal Revenue, it brought the matter to the Court of Tax Appeals, where it also
failed.
Petitioner claimed that it does not manufacture ready-made sash, doors and windows for the
public and that it makes these articles only special order of its customers that does not make it a
contractor within the purview of section 191 of the national Internal Revenue Code. Appellant
also invokes Article 1467 of the New Civil Code to bolster its contention that in filing orders for
windows and doors according to specifications, it did not sell, but merely contracted for
particular pieces of work or "merely sold its services".
It is at once apparent that the Oriental Sash Factory did not merely sell its services to Don
Toribio Teodoro & Co. (To take one instance) because it also sold the materials. The truth of the
matter is that it sold materials ordinarily manufactured by it — sash, panels, mouldings — to
Teodoro & Co., although in such form or combination as suited the fancy of the purchaser. Such
new form does not divest the Oriental Sash Factory of its character as manufacturer. Neither does
it take the transaction out of the category of sales under Article 1467 above quoted, because
although the Factory does not, in the ordinary course of its business, manufacture and keep on
stock doors of the kind sold to Teodoro, it could stock and/or probably had in stock the sash,
mouldings and panels it used therefor (some of them at least).
Issue:
Whether or not the petitioner is engaged in manufacturing?
Ruling:
Yes. The Oriental Sash Factory does nothing more than sell the goods that it mass-produces or
habitually makes; sash, panels, mouldings, frames, cutting them to such sizes and combining
them in such forms as its customers may desire. Accepting customers’ orders before making the
windows and doors rather than making it ready-made would not alter its nature. Thus, as the
doors and windows had been admittedly "manufactured" by the Oriental Sash Factory, such
transactions could be, and should be taxed as "transfers" thereof under section 186 of the
National Revenue Code.
Decision:
The appealed decision is consequently affirmed. So ordered.
 THE COMMISSIONER OF INTERNAL REVENUE v ENGINEERING EQUIPMENT
AND SUPPLY COMPANY AND THE COURT OF TAX
G.R. No. L-27044, June 30, 1975
ESGUERRA, J.:
Office of the Solicitor General Antonio P. Barredo, Assistant Solicitor General Felicisimo R.
Rosete, Solicitor Lolita O. Gal-lang, and Special Attorney Gemaliel H. Montalino for
Commissioner of Internal Revenue, etc.
Melquides C. Gutierrez, Jose U. Ong, Juan G. Collas, Jr., Luis Ma. Guerrero and J.R. Balonkita
for Engineering and Supply Company.
Facts:
Engineering Equipment and Supply Co. (Engineering for short), a domestic corporation, is an
engineering and machinery firm. As operator of an integrated engineering shop, it is engaged,
among others, in the design and installation of central type air conditioning system, pumping
plants and steel fabrications. Commissioner of Internal Revenue denounced Engineering for tax
evasion by misdeclaring its imported articles and failing to pay the correct percentage taxes due
thereon in connivance with its foreign suppliers. Engineering appealed the case to the Court of
Tax Appeals with the decision of respondent appealed from is hereby modified, and petitioner, as
a contractor, is declared exempt from the deficiency manufacturer’s sales tax. However,
petitioner is ordered to pay respondent, or his duly authorized collection agent, the sum of
P174,141.62 as compensating tax and 25% surcharge for the period from 1953 to September
1956. With costs against petitioner. The Commissioner, not satisfied with the decision of the
Court of Tax Appeals, appealed to this. On the other hand, Engineering filed with the Court of
Tax Appeals a motion for reconsideration of the decision abovementioned. This was denied. The
Commissioner contends that Engineering is a manufacturer and seller of air conditioning units
and parts or accessories thereof and, therefore, it is subject to the 30% advance sales tax
prescribed by Section 185(m) of the Tax Code, in relation to Section 194 of the same
In answer to the above contention, Engineering claims that it is not a manufacturer and setter of
air-conditioning units and spare parts or accessories thereof subject to tax under Section 185(m)
of the Tax Code, but a contractor engaged in the design, supply and installation of the central
type of air-conditioning system subject to the 3% tax imposed by Section 191 of the same Code,
which is essentially a tax on the sale of services or labor of a contractor rather than on the sale of
articles subject to the tax referred to in Sections 184, 185 and 186 of the Code.
Issue/s:
Whether or not Engineering is a manufacturer?
Ruling:
No. Engineering definitely did not and was not engaged in the manufacture of air conditioning
units but had its services contracted for the installation of a central system. We see that the
supply of air conditioning units to Engineer's various customers, whether the said machineries
were in hand or not, was especially made for each customer and installed in his building upon his
special order. The air conditioning units installed in a central type of air conditioning system
would not have existed but for the order of the party desiring to acquire it and if it existed
without the special order of Engineering's customer, the said air conditioning units were not
intended for sale to the general public. Therefore, we have but to affirm the conclusion of the
Court of Tax Appeals that Engineering is a contractor rather than a manufacturer, subject to the
contractors’ tax prescribed by Section 191 of the Code and not to the advance sales tax imposed
by Section 185(m) in relation to Section 194 of the same Code.
Decision:
WHEREFORE, the decision appealed from is affirmed with the modification that Engineering is
hereby also made liable to pay the 50% fraud surcharge.
SO ORDERED.
 IDA LABAGALA v COURT OF APPEALS AND NICOLASA AND AMANDA
SANTIAGO
G.R. No. 132305, December 4, 2001
QUISUMBING, J.:

Facts:
Jose T. Santiago owned a parcel of land. Alleging that Jose had fraudulently registered it in his
name alone, his sisters Nicolasa and Amanda (now respondents herein), sued Jose for recovery
of 2/3 share of the property. The trial court in that case decided in favor of the sisters,
recognizing their right of ownership over portions of the property. Jose died intestate.
Respondents filed a complaint for recovery of title, ownership, and possession against herein
petitioner, Ida C. Labagala, who claimed to be as Ida Santiago, daughter of Jose. Yet respondents
persisted and resorted to the present action.
The trial court ruled in favor of Labagala and accord that the said deed constitutes a valid
donation and that even if it were not, petitioner would still be entitled to Jose’s share in the
property as his daughter.
When respondents appealed, the Court of Appeals took into account that Labagala was born of
different parents, as indicated in her birth certificate, thus, CA reversed the decision of the trial
court.
Issue/s:
Whether or not petitioner is entitled to Jose’s 1/3 share of the property he co-owned with the
respondents, through succession, sale, or donation?
Ruling/s:
No. The Court ruled that there is no valid sale in this case. Due to the reason that Jose did not
have the right to transfer ownership of the entire property to petitioner. Also, Petitioner being a
minor at the time, rendered the contract of sale void. Neither may the purported deed of sale be a
valid deed of donation since the price is not simulated, because the petitioner is a minor. Thus,
acceptance of the donation should have been made her father or mother or her legal
representative pursuant to Article 741. No one of those mentioned in the law accepted the
donation for Ida.
Decision:
WHEREFORE, the petition is DENIED, and the decision of the Court of Appeals in CA-G.R.
CV No. 32817 is AFFIRMED.
Costs against petitioner.
SO ORDERED.
 ANTONIO MEDINA v COLLECTOR OF INTERNAL REVENUE AND THE COURT
OF TAX APPEALS
G.R. No. L-15113, January 28, 1961
REYES, J.B.L. J.:
Eusebio D. Morales for petitioner.
Office of the Solicitor General for respondents.

Facts:
Medina acquired forest, concessions in the municipalities of San Mariano and Palanan in the
Province of Isabela. 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, 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. 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.
Petitioner protested the assessment; however, respondent Collector insisted on his demand which
led Medina to 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
Petitioner again requested for reconsideration, but respondent Collector, 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 premarital
agreement of absolute separation of property between the Medina spouse; 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.
Issue:
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?
Ruling:
Yes. 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.
Decision:
WHEREFORE, the decision appealed from is affirmed, with costs against the petitioner.
MERCEDES CALIMLIM- CANULLAS v HON. WILLELMO FORTUN, Judge, Court of
First instance of Pangasinan, Branch I, and CORAZON DAGUINES
G.R. No. L-57499, June 22, 1984
MELENCIO-HERRERA, J.:
Fernandez Law Offices for petitioner.
Francisco Pulido for respondents.

Facts:
Petitioner MERCEDES Calimlim-Canullas and FERNANDO Canullas were married on
December 19, 1962. They begot five children. They lived in a small house on the residential land
in question. After FERNANDO's father died in 1965, FERNANDO inherited the land. In 1978,
FERNANDO abandoned his family and was living with private respondent Corazon
DAGUINES. During the pendency of this appeal, they were convicted of concubinage in a
judgment rendered which judgment has become final. On April 15, 1980, FERNANDO sold the
subject property with the house thereon to DAGUINES for the sum of P2,000.00. In the
document of sale, FERNANDO described the house as "also inherited by me from my deceased
parents."
Unable to take possession of the lot and house, DAGUINES initiated a complaint on June 19,
1980 for quieting of title and damages against MERCEDES. The latter resisted and claimed that
the house in dispute where she and her children were residing, including the coconut trees on the
land, were built and planted with conjugal funds and through her industry; that the sale of the
land together with the house and improvements to DAGUINES was null and void because they
are conjugal properties and she had not given her consent to the sale. In its original judgment,
respondent Court principally declared DAGUINES "as the lawful owner of the land in question
as well as the one-half of the house erected on said land." Upon reconsideration prayed for by
MERCEDES, however, respondent Court resolved: (1) Declaring plaintiff as the true and lawful
owner of the land in question and the 10 coconut trees; (2) Declaring as null and void the sale of
the conjugal house to plaintiff on April 15, 1980 (Exhibit A) including the 3 coconut trees and
other crops planted during the conjugal relation between Fernando Canullas (vendor) and his
legitimate wife, herein defendant Mercedes Calimlim- Canullas;
Issue:
Whether or not the sale of the lot together with the house and improvements thereon was valid
under the circumstances surrounding the transaction?
Ruling:
No. We find that the contract of sale was null and void for being contrary to morals and public
policy. The sale was made by a husband in favor of a concubine after he had abandoned his
family and left the conjugal home where his wife and children lived and from whence they
derived their support. That sale was subversive of the stability of the family, a basic social
institution which public policy cherishes and protects. Article 1409 of the Civil Code states inter
alia that: contracts whose cause, object, or purpose is contrary to law, morals, good customs,
public order, or public policy are void and inexistent from the very beginning. Article 1352 also
provides that: "Contracts without cause, or with unlawful cause, produce no effect
whatsoever. The cause is unlawful if it is contrary to law, morals, good customs, public order, or
public policy."
Decision:
WHEREFORE, the Decision of respondent Judge, dated October 6, 1980, and his Resolution of
November 27, 1980 on petitioner's Motion for Reconsideration, are hereby set aside and the sale
of the lot, house and improvements in question, is hereby declared null and void. No costs.
SO ORDERED.