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Prof. Joselito Guianan Chan's The Labor Code of the Philippines, Annotated Labor Standards & Social Legislation Volume I of a 3-Volume Series 2019 Edition (3rd Revised Edition)
 

 
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UNITED STATES SUPREME COURT JURISPRUDENCE
 

 
PHILIPPINE SUPREME COURT JURISPRUDENCE
 

   
May-1949 Jurisprudence                 

  • G.R. No. L-1674 May 9, 1949 - PEOPLE OF THE PHIL. v. PABLO SOMERA

    083 Phil 548

  • G.R. No. L-1765 May 9, 1949 - PEOPLE OF THE PHIL. v. MARIO TANDUG

    083 Phil 551

  • G.R. No. L-1881 May 9, 1949 - MANILA TERMINAL COMPANY v. LA CORTE DE RELACIONES INDUSTRIALES

    083 Phil 559

  • G.R. No. L-1512 May 12, 1949 - EL PUEBLO DE FILIPINAS v. FEDERICO

    083 Phil 569

  • G.R. No. L-1900 May 12, 1949 - PEOPLE OF THE PHIL. v. ALFREDO LACSON

    083 Phil 574

  • G.R. No. L-2064 May 12, 1949 - PEOPLE OF THE PHIL. v. ELIGIO TORRES

    083 Phil 595

  • G.R. No. L-1769 May 13, 1949 - PURITA PANAGUITON v. FLORENTINO PATUBO

    083 Phil 605

  • G.R. No. L-1833 May 13, 1949 - MEDARDO MUÑOZ v. EMILIO RILLORAZA

    083 Phil 609

  • G.R. No. L-792 May 14, 1949 - PEOPLE OF THE PHIL. v. E.C. CAÑADA

    083 Phil 612

  • G.R. No. L-1429 May 16, 1949 - PEOPLE OF THE PHIL. v. RICARDO AQUINO Y ABALOS

    083 Phil 614

  • G.R. No. L-1950 May 16, 1949 - LAO SENG HIAN v. NATIVIDAD ALMEDA LOPEZ

    083 Phil 617

  • G.R. No. L-2014 May 16, 1949 - PEOPLE OF THE PHIL. v. BENJAMIN Z. YELO

    083 Phil 618

  • G.R. No. L-1212 May 18, 1949 - EL PUEBLO DE FILIPINAS v. CELESTINO BASA Y OTROS

    083 Phil 622

  • G.R. No. L-1918 May 18, 1949 - PEDRO L. FLORES v. PERFECTO R. PALACIO

    083 Phil 626

  • G.R. No. L-2484 May 18, 1949 - LEE KO v. DIONISIO DE LEON

    083 Phil 628

  • G.R. No. L-2117 May 19, 1949 - PEOPLE OF THE PHIL. v. APOLONIO SOMBILON

    083 Phil 631

  • G.R. No. L-1471 May 20, 1949 - PEOPLE OF THE PHIL. v. JULIAN ORAZA

    083 Phil 633

  • G.R. No. L-1917 May 20, 1949 - CATALINO MAGLASANG v. CIRILO C. MACEREN

    083 Phil 637

  • G.R. No. L-2245 May 20, 1949 - AMBROSIO CARBUNGCO v. RAFAEL AMPARO

    083 Phil 638

  • G.R. No. L-2831 May 20, 1949 - BERNARDO TORRES v. MAMERTO S. RIBO

    083 Phil 642

  • G.R. No. L-432 May 23, 1949 - PEOPLE OF THE PHIL. v. IGNACIO CALINAWAN

    083 Phil 647

  • G.R. No. L-1795-6 May 23, 1949 - PEOPLE OF THE PHIL. v. PEDRO VALDEZ

    083 Phil 650

  • G.R. No. L-1989 May 23, 1949 - JOSE REYES y RAMIREZ v. EL TRIBUNAL DE APELACION

    083 Phil 658

  • G.R. No. L-2203 May 23, 1949 - SAN MIGUEL BREWERY v. LA CORTE DE RELACIONES INDUSTRIALES

    083 Phil 663

  • G.R. No. L-2431 May 23, 1949 - CEFERINO TAVORA v. PEDRO OFIANA

    083 Phil 672

  • G.R. No. 213 May 24, 1949 - GENEROSA A. DIA v. FINANCE & MINING INVESTMENT CORP.

    083 Phil 675

  • G.R. No. L-1700 May 24, 1949 - PEOPLE OF THE PHIL. v. LORENZO MINTU

    083 Phil 678

  • G.R. No. L-2004 May 24, 1949 - PABLO COTAOCO v. RAFAEL DINGLASAN

    083 Phil 681

  • G.R. No. L-2251 May 24, 1949 - EL PUEBLO DE FILIPINAS v. ELISA TANDAG

    083 Phil 683

  • G.R. No. L-1980 May 25, 1949 - CIPRIANO SEVILLA v. CEFERINO DE LOS SANTOS

    083 Phil 686

  • G.R. No. L-944 May 26, 1949 - PEOPLE OF THE PHIL. v. FAUSTO AVILA

    083 Phil 687

  • G.R. No. L-1823 May 26, 1949 - GERONIMO DE LOS REYES v. ARTEMIO ELEPAÑO

    083 Phil 691

  • G.R. No. L-1825 May 26, 1949 - EL PUEBLO DE FILIPINAS v. EUGENIO BERSIDA

    083 Phil 696

  • G.R. No. L-2022 May 26, 1949 - GUIA S. J0SE DE BAYER v. ERNESTO OPPEN

    083 Phil 700

  • G.R. No. L-2161 May 26, 1949 - PEOPLE OF THE PHIL. v. JAMES YOUNG

    083 Phil 702

  • G.R. No. L-2323 May 26, 1949 - M. A. ZARCAL v. S. HERRERO

    083 Phil 711

  • G.R. Nos. L-675 & L-676 May 27, 1949 - PEOPLE OF THE PHIL. v. NEMESIO LASTIMOSO

    083 Phil 714

  • G.R. No. L-1274 May 27, 1949 - PHIL. TRANSIT ASSN. v. TREASURER OF MANILA

    083 Phil 722

  • G.R. No. L-1394 May 27, 1949 - RAFAEL ROA YROSTORZA v. REPUBLIC OF THE PHIL.

    083 Phil 727

  • G.R. No. L-1861 May 27, 1949 - RIZAL SURETY AND INSURANCE CO. v. BIENVENIDO A. TAN

    083 Phil 732

  • G.R. No. L-1869 May 27, 1949 - JOSE PIO BARRETTO v. N. ALMEDA LOPEZ

    083 Phil 734

  • G.R. No. L-2300 May 27, 1949 - PEOPLE OF THE PHIL. v. MARCELINO TUMAOB

    083 Phil 738

  • G.R. No. L-2382 May 27, 1949 - PABLO S. RIVERA v. FRANCISCO ARELLANO

    083 Phil 744

  • G.R. No. L-1606 May 28, 1949 - IN RE: YEE BO MANN v. REPUBLIC OF THE PHIL.

    083 Phil 749

  • G.R. No. L-2309 May 28, 1949 - LOPE SARREAL v. SOTERO RODAS

    083 Phil 751

  • G.R. No. L-2518 May 28, 1949 - DONATA OLIVEROS DE TAN v. ENGRACIO FABRE

    083 Phil 755

  • G.R. No. L-2539 May 28, 1949 - JOSE P. MONSALE v. PAULINO M. NICO

    083 Phil 758

  • G.R. No. L-1511 May 30, 1949 - MIGUEL OJO v. JOSE V. JAMITO

    083 Phil 764

  • G.R. No. L-1550 May 30, 1949 - IN RE: FREDERICK EDWARD GILBERT ZUELLIG v. REPUBLIC OF THE PHIL.

    083 Phil 768

  • G.R. No. L-1609 May 30, 1949 - REMIGIO M. PEÑA v. FRANCISCO ARELLANO

    083 Phil 773

  • G.R. No. L-1686 May 30, 1949 - EL PUEBLO DE FILIPINAS v. SANTOS TOLEDO

    083 Phil 777

  • G.R. No. L-1723 May 30, 1949 - LUZ MARQUEZ DE SANDOVAL v. VICENTE SANTIAGO

    083 Phil 784

  • G.R. No. L-1978 May 30, 1949 - EL PUEBLO DE FILIPINAS v. ANTONIO ORCULLO Y OTROS

    083 Phil 787

  • G.R. No. L-1996 May 30, 1949 - PEOPLE OF THE PHIL. v. SALIP JULMAIN

    083 Phil 793

  • G.R. No. L-2031 May 30, 1949 - HERMOGENES C. LIM v. RESTITUTO L. CALAGUAS

    083 Phil 796

  • G.R. No. L-2069 May 30, 1949 - LUZON BROKERAGE CO. v. LUZON LABOR UNION

    083 Phil 801

  • G.R. No. L-2083 May 30, 1949 - PEOPLE OF THE PHIL. v. SALVADOR MALIG

    083 Phil 804

  • G.R. No. L-2098 May 30, 1949 - PIO MARQUEZ v. ARSENIO PRODIGALIDAD

    083 Phil 813

  • G.R. No. L-2099 May 30, 1949 - JOSE ONG v. BIENVENIDO A. TAN

    083 Phil 834

  • G.R. No. L-2130 May 30, 1949 - FRANCISCO SANCHEZ v. PEDRO SERRANO

    083 Phil 838

  • G.R. No. L-2132 May 30, 1949 - JUAN SAVINADA v. J. M. TUASON & CO.

    083 Phil 840

  • G.R. No. 49102 May 30, 1949 - W.C. OGAN v. BIBIANO L. MEER

    083 Phil 844

  • G.R. No. L-1104 May 31, 1949 - EASTERN THEATRICAL CO. v. VICTOR ALFONSO

    083 Phil 852

  • G.R. Nos. L-1264 & L-1265 May 31, 1949 - PEOPLE OF THE PHIL. v. TIMOTEO SAGARIO

    083 Phil 862

  • G.R. No. L-1271 May 31, 1949 - BENIGNO DEL RIO v. CARLOS PALANCA TANGUINLAY

    083 Phil 867

  • G.R. No. L-1281 May 31, 1949 - JOSEPH E. ICARD v. CITY COUNCIL OF BAGUIO

    083 Phil 870

  • G.R. No. L-1298 May 31, 1949 - PEOPLE OF THE PHIL. v. PEDRO SANTOS BALINGIT

    083 Phil 877

  • G.R. No. L-1299 May 31, 1949 - PEOPLE OF THE PHIL. v. JACOB J. LOEWINSOHN

    083 Phil 882

  • G.R. No. L-1827 May 31, 1949 - ALFREDO CATOLICO v. IRINEO RANJO

    083 Phil 885

  • G.R. No. L-1927 May 31, 1949 - CRISTOBAL ROÑO v. JOSE L. GOMEZ

    083 Phil 890

  • G.R. No. L-1952 May 31, 1949 - FRANCISCO R. VlLLAROMAN v. FLORENTINO J. TECHICO

    083 Phil 901

  • G.R. No. L-2108 May 31, 1949 - PAMPANGA BUS CO. v. LUIS G. ABLAZA

    083 Phil 905

  • G.R. No. L-2252 May 31, 1949 - PEOPLE OF THE PHIL. v. BARTOLOME BEDIA

    083 Phil 909

  • G.R. No. L-2253 May 31, 1949 - PEOPLE OF THE PHIL. v. SERVANDO MANIEGO

    083 Phil 916

  • G.R. No. L-2283 May 31, 1949 - MARINA TAYZON and FLORDELIZA G. ANGELES v. RAMON YCASIANO

    083 Phil 921

  • G.R. No. L-2326 May 31, 1949 - FERNANDO ALEJO v. MARIANO GARCHITORENA

    083 Phil 924

  • G.R. No. L-2351 May 31, 1949 - FRANCISCO ARGOS v. DOMINADOR VELOSO

    083 Phil 929

  • G.R. No. L-2377 May 31, 1949 - REPUBLIC OF THE PHIL. v. JUSTA G. VDA. DE GUIDO

    083 Phil 934

  • G.R. No. L-2450 May 31, 1949 - VERONICA RUPERTO v. CEFERINO FERNANDO

    083 Phil 943

  •  





     
     

    G.R. No. 49102   May 30, 1949 - W.C. OGAN v. BIBIANO L. MEER<br /><br />083 Phil 844

     
    PHILIPPINE SUPREME COURT DECISIONS

    SECOND DIVISION

    [G.R. No. 49102. May 30, 1949.]

    W.C. OGAN and BOHOL LAND TRANSPORTATION CO., Plaintiffs-Appellants, v. BIBIANO L. MEER, Collector of Internal Revenue, Defendant-Appellee.

    Alvear & Agrava and Delfin L. Gonzalez for Appellants.

    First Assistant Solicitor General Jose B. L. Reyes and Solicitor Vicente A. Arguelles for Appellee.

    SYLLABUS


    1. INCOME TAX; CORPORATIONS; SHARES OF STOCK; MARKET VALUE; PROFITS OBTAINED FROM EXCHANGE OF SHARES AS TAXABLE INCOME. — There can be no question that with the exchange of shares made on May 5, 1936, plaintiffs earned as profits the difference of P66.66 per share — the difference between the market value per share of the Motor Service Company, Inc., and the value per share of the Central Motor Supply Company, Inc., to its stockholders. The exchange falls within the purview of the above quoted provision of section 2 (c), paragraph 3, of Act No. 2833 as amended by Act No. 2926, because plaintiffs exchange their property (shares of stock of the Central Motor Supply Company, Inc., valued at P100 per share) of another property (the shares of stock of the Motor Service Co., Inc.) which property thus received should be "considered as equivalent of money in a sum equal to its market value on the date of which the exchange was made," that is, at the rate of P166.66 per share.

    2. ID.; ID.; TWO CORPORATIONS AND THEIR RESPECTIVE STOCKHOLDERS POSSES DISTINCT LEGAL PERSONALITIES; EACH HAVING DIFFERENT RIGHTS AND RESPONSIBILITIES UNDER THE LAW. — Appellant’s arguments in support of the contention that there was no exchange of properties, are all based on subtleties that cannot stand the realities involved in this case. Aside the fact stated in the appealed decision to the effect that there is no allegation or evidence on record to show that the Motor Service Co., Inc. was and is a subsidiary of the Central Motor Supply Co., Inc. — a fact that, for the purpose of the controversy, has no importance. — there is no dispute that the two corporations are different from each other, each having distinct legal personalities, and one cannot be identified with the other, both having different rights and responsibilities under the law, and the stockholders in the Central Motor Co., Inc. (the so-called parent company) by the mere fact of being stockholders thereof, do not become stockholders of the Motor Service Co. Inc., (the so-called subsidiary company) nor enjoy the rights and privileges of the same. When the stockholders of one corporation become the stockholders of the other, as a result of a transaction of exchange, they earn positive benefits and advantages, such as the right to vote their stocks at the stockholders’ meetings of the second corporation, and, in the present case, they profited by the difference of share values at the rate of P66. 66 per share. There cannot be any question that there was in the transaction of May 5, 1936, an exchange of one property with another.


    D E C I S I O N


    PERFECTO, J.:


    On May 5, 1936, W. C. Ogan and the Bohol Land Transportation Company owned, respectively, 100 and 200 shares of stock of the Central Motor Supply Company, Inc., which had a capital stock of P300,000 divided into 3,000 shares with par value of P100 each, and had no other assets except the shares of stock it acquired from the Motor Service Company, Inc., another corporation capitalized at P300,000 divided into 3,000 shares at P100 each.

    On December 31, 1935, the Central Motor Supply Co., Inc., owned 1,763 shares of stock of the Motor Service Co., Inc., valued at P304,600, and in February, 1936, purchased 232 shares for P58,000.

    On May 5, 1936, the Motor Service Co., Inc., declared a stock dividend of 50 per cent in favor of its stockholders, of which 1,000 shares were issued to the Central Motor Supply Co., Inc., so that on said date this corporation owned 2,995 shares of stock of the other.

    The five directors of the Central Motor Supply Co., Inc., owned one share each of the five remaining shares of the Motor Service Co., Inc., of which they were at the same time directors.

    On May 5, 1936, it was resolved at the stockholders’ meeting of the Central Motor Supply Co., Inc., that the 2,995 shares of stock which it acquired from the Motor Service Co., Inc., should be transferred to the stockholders of the Central Motor Supply Co., Inc., in exchange for an equivalent number of shares of the stock of this corporation, while the remaining five shares of the Central Motor Company, Inc., would be retained and held by its directors.

    Pursuant to this resolution, the 2,995 shares of stock of the Central Motor Supply., Inc., were withdrawn from its stockholders, were converted into treasury stock and were correspondingly replaced share for share with the stock of the Motor Service Co., Inc., and the stockholders of the Central Motor Supply Co., Inc., were then registered as the stockholders of the Motor Service Co., Inc., for an equal number of shares which they previously owned in the Central Motor Supply Co., Inc. As a result of the transaction, W. C. Ogan and the Bohol Land Transportation Company acquired, respectively, 100 and 200 shares of stock of the Motor Service Company.

    The par value of each share of the Central Motor Supply Co., Inc., was P100 while the market value of each share of the Motor Service Co., Inc., on May 5, 1936, was P166.66. The stockholders of the Central Motor Co., Inc., invested the sum of P100 for each share of this corporation and, as the market value of each share of the Motor Supply Co., Inc., on May 5, 1936 was P166.66, the difference of P66.66 in the value of each share in the two corporations was reckoned by defendant as the profit realized per share out of the transaction and collected upon it the corresponding income tax, now the subject of this litigation.

    The above recital of facts is based on the findings made by the trial court in its decision rendered on July 31, 1941.

    Plaintiffs-appellants made the following assignments of error:chanrob1es virtual 1aw library

    "I


    "The lower Court erred in not holding that appellants did not realize any income by virtue of the transaction of May 5, 1936.

    "II


    "The lower Court erred in not holding that the transaction of May 5, 1936, was not an ’Exchange of one piece of property for another" within the meaning of section 2(c), paragraph (3), of Act No. 2833, as amended.

    "III


    "The lower Court erred in not holding that the transaction of May 5, 1936, was merely a simplification of intercorporate relations between a parent corporation and a subsidiary company which could not entail the realization of either loss or gain to the stockholders."cralaw virtua1aw library

    Interpretation and application of the provisions of section 2 (c), paragraph 3 of Act No. 2833 as amended by Act No. 2926, referring to taxable income in relation with section 2 (a) of said Act, are involved in this litigation. Said pertinent provisions of law read as follows:jgc:chanrobles.com.ph

    "Sec. 2(c) The gain or loss sustained from the sale or other disposition of property, real or personal or mixed, shall be determined in accordance with the following schedule:chanrob1es virtual 1aw library

    x       x       x


    (3) In the case of the exchange of one piece of property for another, the property received in exchange shall be considered as equivalent of money in a sum equal to its fair market value on the date of which the exchange was made."cralaw virtua1aw library

    "SEC. 2(a). Subject only to such exemptions and deductions as are hereinafter allowed, the taxable net income of a person shall include gains, profits, and income derived from salaries and wages, or compensation for personal service of whatever kind and in whatever form paid, or from professions, vocations, business, trade, commerce, sales or dealings in property, whether real or personal, growing out of the ownership or use of or interest in real or personal property, also from interest, rent, dividends, securities, or the transaction of any business carried on for gain or profits, or gains, profits and income derived from any source whatever."cralaw virtua1aw library

    The controversy centers on whether plaintiffs realized taxable income as stockholders of the Central Motor Supply Co., upon their acquisition of the shares of stock of the Motor Service Co., Inc., through exchange share for share with the stock of the Central Motor Supply Co., Inc., on March 5, 1936. Defendants’ contention is to the effect that as the stockholders of the Central Motor Supply Co., Inc., acquired their shares at a cost of P100 per share, the difference between the market value of P166.66 per share of the Motor Service Co., Inc., and the cost per share of the Central Motor Supply Co., Inc., is taxable income for which the plaintiffs-appellants should pay the sum of P599.94 and P799.92, respectively, in accordance with section 2 (c), paragraph 3 of Act No. 2333 as amended by Act No. 2926.

    Appellants contend in their brief that they did not realize any income by virtue of the transaction of May 6, 1946, alleging that on that day, the value of their holdings in the Central Motor Supply Co., Inc., the alleged parent corporation, was P166.66 a share. They argue that on May 5, 1936, the Motor Service Co., Inc., the subsidiary company, was worth P499,980 net. Inasmuch as this company had 3,000 shares outstanding, it was, therefore, worth the quantity of P499,980 divided by 3,000, or P166.66 each share. The parent corporation possessed on May 5, 1946, no assets other than the 3,000 shares of stock of the subsidiary company and, consequently, the assets of the parent corporation were also worth P499,980 net on that date. Since the parent corporation had 3,000 shares outstanding, each of these must have been worth on May 5, 1936, the amount of P499,980 divided by P3,000, or P166.66 each share, and, therefore, appellants could not have possibly realized any income from a transaction where their shares in the subsidiary company, valued likewise at P166.66 per share on the date of the exchange.

    The whole structure of appellant’s argument is premised on the assumption that on May 5, 1936, the value of their holdings in the Central Motor Supply Co., Inc., the parent corporation, was P166.66 a share, when, as a matter of fact, it appears that the shares of the Central Motor Supply Co., Inc., cost its stockholders only P100 a share. According to the findings made by the trial court, the Central Motor Supply Co., Inc., had a capital stock of 300,000 shares with par value of P100 each.

    Vicente O. Jose, examiner of the Bureau of Internal Revenue, testified that he examined the books of the Central Motor Co., Inc., and of the Motor Service Co., Inc., in February, 1938, and he found out that on May 5, 1936, the value of each share of stock of the Motor Service Co., Inc., for the Central Motor Supply Co., Inc., was P100 each and this testimony was fully accepted and agreed upon by Appellant.

    "R. Segun este report, el valor de la accion de la Motor Service Company para la Central Motor Supply Company es P100 cada accion.

    "P. Sobre que hechos ha basado usted para sentar esa conclusion?

    Sr. Agrava:chanrob1es virtual 1aw library

    Nosotros aceptamos como cierta la alegacion en la ultima contestacion del testigo, y, por tanto, el compañero no puede repreguntar al mismo sobre el particular.

    "Juzgado:jgc:chanrobles.com.ph

    "Hage constar." (11)

    "R. El valor de cada accion de la Motor Service Company a la Central Motor Supply Company, es P100.

    "P. Diga usted, sobre que ha basado usted para sentar esa opinion?

    "Sr. Agrava:jgc:chanrobles.com.ph

    "Admitimos que es cierto, por lo que pueda valer, el testimonio del testigo en relacion a la ultima pregunta.

    "Juzgado: Ha gase constar." (12)

    On the other hand, the parties entered into the following agreement at the trial:chanrob1es virtual 1aw library

    CONVENIO

    "Las partes convienen en que el precio en el mercado de las acciones de la Motor Service Company, en 5 de May de 1936, era a P166.66."cralaw virtua1aw library

    There can be no question, therefore, that with the exchange of shares made on May 5, 1936, plaintiffs earned as profits the difference of P66.66 per share — the difference between the market value per share of the Motor Service Company, Inc., and the value per share of the Central Motor Supply Company, Inc. to its stockholders. The exchange falls within the purview of the above quoted provision of section 2 (c), paragraph 3, of Act No. 2833 as amended by Act No. 2926, because plaintiffs exchanged their property (shares of stock of the Central Motor Supply Company, Inc., valued at P100 per share) for another property (the shares of stock of the Motor Service Co., Inc.) which property thus received should be "considered as equivalent of money in a sum equal to its fair market value on the date of which the exchange was made," that is, at the rate of P166.676 per share.

    Appellant contend that the transaction of May 5, 1936, was not an exchange of one piece of property for another, because the Motor Service Co., Inc., is owned 100 per cent by the Central Motor Supply Co., and the stockholders of the latter are the beneficial and real owners of the share of stock and of the property of both entities, and that the two concerns should be viewed as forming a single unit, the transaction of May 5, 1936 being merely a simplification of corporate relations between a parent corporation and a subsidiary company. They contend that a singleness in business propositions exits and the separate identities of the two corporations should be disregarded, and that we should look through the forms to see the realities and consider as if the subsidiary company did not exist, and that the fiction of corporate entity may be disregarded where one corporation is organized and controlled and its affairs are so conducted that it is, in fact, a mere instrumentality or adjunct of another corporation. They also alleged that the identities of both parent corporation and subsidiary company should be looked upon as if merged into one company. It is further contended that the replacement of shares of stock of the former with shares of stock of the latter did not involve a taxable exchange and that what was accomplished really in the transaction of May 5, 1936, was a formal, not a substantial, exchange of what were merely the evidences of the same property, because the shares of stock of the parent corporation represented exactly the same physical assets represented by the shares of stock of the subsidiary company and, after the exchange, a stockholder of the Central Motor Co., Inc., owned exactly the same thing that he already owned before his aliquot part of the physical assets of the Motor Service Co., Inc., became his, and, therefore, no exchange of two distinct pieces of property took place; in other words, there was an exchange of certificates but not of interest.

    Appellant’s arguments are all based on subtleties that cannot stand the realities involved in this case. Aside from the fact as stated in the appealed decision to the effect that there is no allegation or evidence on record to show that the Motor Service Co., Inc., was is a subsidiary of the Central Motor Supply Co., Inc., — a fact that, for the purposes of the controversy, has no importance — there is no dispute that the two corporations are different from each other, each having distinct legal personalities, and one cannot be identified with the other, both having different rights and responsibilities under the law, and the stockholders in the Central Motor Co., Inc. (the so-called parent company), by the mere fact of being stockholders thereof, do not become stockholders of the Motor Service Co., Inc. (the so-called subsidiary company), nor enjoy the rights and privileges of the same, When the stockholders of one corporation become the stockholders of the other, as a result of a transaction of exchange, they earn positive benefits and advantages, such as the right to vote their stocks at the stockholders’ meetings of the second corporation, and, in the present case, they profited by the difference of share values at the rate of P66.66 per share. There cannot be any question that there was in the transaction of May 5, 1936, an exchange of one property with another.

    Plaintiffs have no cause of action for the recovery of the sums they paid under protest as income tax for the year 1936 in connection with those transfers, and the trial court did not err in dismissing the complaint. The appealed decision is affirmed with costs against appellants.

    Paras, Pablo, and Bengzon, JJ., concur.

    Feria, Tuazon, and Reyes, JJ., concur in the result.

    Separate Opinions


    PARAS, J.:


    I certify that the Chief Justice voted for the affirmance.

    G.R. No. 49102   May 30, 1949 - W.C. OGAN v. BIBIANO L. MEER<br /><br />083 Phil 844


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