COMMISSIONER OF INTERNAL REVENUE vs.
includes every person who by physical or
ENGINEERING EQUIPMENT AND
SUPPLY COMPANY
FACTS:
Engineering Equipment & Supply
(EES) was engaged in the business of
designing and
installing central air-conditioning systems. It
was assessed by the Commissioner of Internal
Revenue for 30% advanced sales tax, among
other penalties pursuant to an anonymous
complaint filed before the BIR. EES
vehemently objected and argued that they are
contractors and not manufacturers and should
be liable only for the 3% tax on sales of
services or pieces of work. The commissioner
demanded upon Engineering the payment of
the assessed tax and suggested that EES pay P1
0k as compromise for its penal liability for
violation of the Tax Code. Engineering
appealed the case to the Court of Tax Appeal,
which
rendered the decision of exempting them from
the deficiency manufacturers sales tax
covering the period from June 1 , 1 948. to
September 2, 1 956. However, petitioner is
ordered
to pay respondent, or his duly authorized
collection agent, the sum of P1 74,1 41 .62 as
compensating tax and 25% surcharge for the
period from 1 953 to September 1 956.
Commissioner unsatisfied of this decision
appealed the same to this court contending
that EES 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 pursuant to the Tax Code.
ISSUE: W/N EES is a contractor for a piece of
work thus only liable for 3% tax
HELD:
Ma nufacturer –
chemical process alters the exterior texture or
form
or inner substance of any raw material or
manufactured or partially manufactured
products in
such manner as to prepare it for a special use
or uses to which it could not have been put in
its original condition, or who by any such
process alters the quality of any such material
or
manufactured or partially manufactured
product so as to reduce it to marketable shape,
or
prepare it for any of the uses of industry.
Contractor –
a person who, in the pursuit of the
independent business, undertakes to do a
specific job or
piece of work for other persons, using his own
means and methods without submitting
himself to control as to the petty details.
Our New Civil Code, likewise distinguishes a
contract of sale from a contract for a piece of
work thus: Art. 1 467. A contract for the
delivery at a certain price of an article which
the vendor in the ordinary course of his
business manufactures or procures for the
general market, whether the same is on hand
at the time or not, is a contract of sale, but if the
goods are to be manufactured specially for the
customer and upon his special order and not
for the general market, it is a contract for a
piece of work.
True test of contractor – he renders service in
the course of an independent occupation
representing the will of his employer only as
to the result of his work, and not as to the
means by which it is accomplished.
The SC found that EES was NOT a
manufacturer of air-conditioning units. While
it imported such items, they were not for sale
to the general public and were used as mere
components for the design of the centralized
air-conditioning system, the designs and
specifications of w/c are different for every
client. Various technical factors must be
considered and it can be argued that no two
plants are the same; all are engineered
separately and distinctly. Each project
requires careful planning and meticulous
layout. Such central air-conditioning systems
and their designs would not have existed were
it not for the special order of the party desiring
to acquire it. EES is thus not liable for the sales
tax.
In comparison with Celestino case:
Engineering advertised itself as Engineering
Equipment and Supply Company, Machinery
Mechanical Supplies, Engineers, Contractors
while Oriental used
“Oriental Sash Factory”. It also paid the
contractors tax on all the contracts for design
and construction of central system unlike
Oriental who did not pay contractors tax.
Engineering did not have ready-made air
conditioning units for sale unlike oriental
whose bulk of their sale came from ready-
made doors and windows As for their liability
for violation of Tax Code, they should pay the
whole amount not the one suggested by the
commissioner.
MERCEDES CALIMLIM- CANULLAS v HON.
WILLELMO FORTUN
FACTS:
Petitioner Mercedes Calimlim-
Canullas was married to Fernando Canullas.
They have children and lived in the residential
land in question which Fernando inherited the
land after his father died. Years after,
Fernando abandoned his family and was living
with private respondent Corazon. (Both were
convicted of concubinage in a judgment
rendered the Court of First Instance
which has become final during the pendency of
this petition.) Fernado sold the said inherited
land with the house thereon to Corazon.
Unable to take possession of the said property,
Corazon filed a complaint for quieting of title
and damages against Mercedes. However,
Mercedes claimed that the sale of the land,
with the house and improvements, was null
and void because they are conjugal properties
and she had not given her consent.
Respondent Court (Fortun as judge)
principally declared Corazon as the lawful
owner of the land in question and 1 /2 of the
house erected on said land. Upon
reconsideration prayed for by Mercedes,
respondent Court amended its decision and
resolved that indeed Corazon was the true and
lawful owner of the land but declared the sale
of the conjugal house and improvements null
and void.
ISSUE: WON the sale of the lot together with
the house and improvements thereon was
valid.
RULING:
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 hence, 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 1 409 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 1 352 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. While Art. 1 33 of the Civil Code
considers as void a donation between the
spouses during the marriage, policy
considerations of the most exigent character
as wen as the dictates of morality require that
the same prohibition should apply to a
common-law relationship.
Justice J.B.L. Reyes of that Court, 'to
prohibit donations in favor of the other
consort and his descendants because of fear of
undue influence and improper pressure upon
the donor, a prejudice deeply rooted in our
ancient law, then there is every reason to
apply the same prohibitive policy to persons
living together as husband and wife without
benefit of nuptials. So long as marriage
remains the cornerstone of our family law,
reason and morality alike demand that the
disabilities attached to marriage should
likewise attach to concubinage.
MELLIZA v. CITY OF ILOILO
FACTS:
Juliana Melliza during her lifetime
owned, among other properties, three parcels
of residential land of about 29, 073 sqm in
Iloilo City registered in her name. Said parcels
of land was known as Lots Nos. 2, 5 and 1214.
She donated about 9,000 sqm of Lot 1214 to
the Municipality of Iloilo to serve as site for the
municipal hall. The donation was however
revoked by the parties for the reason that the
area donated was found inadequate to meet
the requirements of the development plan of
the municipality, the so-called "Arellano Plan”.
Subsequently, Lot No. 1214 was divided by
Certeza Surveying Co., Inc. to 1214-A and
1214-B. 1214-B was thereafter subdivided
into 3: 1214 B-1, 1214 B-2, and 1214 B-3. As
approved by the Bureau of Lands, Lt 1214 B-1
became known as Lt 1214-B, Lt. 1214 B-2 into
Lt. 1214-C, and 1214 B-3 into 1214-D. Few
days before the donation, Juliana executed an
instrument describing 1214-C and D and that
they were needed for the construction of the
city hall according to the Arellano Plan. Juliana
Melliza later on sold her remaining interest in
Lot 1214 to Remedios Sian Villanueva who
thereafter and later transferred her rights to
said portion of land to Pio Sian Melliza, who
obtained Transfer Certificate of Title
thereover in his name. City of Iloilo later
acquired B, C and D through a sale and donated
them to University of the Philippines Iloilo
which later enclosed the site with a wire fence.
When Pio discovered this, he filed a money
claim for the value of lot “B” because only lots
“C” and “D” were donated. He was not paid
because the City allegedly did not have funds.
Meanwhile, UP obtained TCTs for B, C, and D.
Again, Pio filed and action in the CFI against
City of Iloilo and UP for the recovery of lot “B”
or its value which the CFI dismissed because
according to the second paragraph of the
instrument Juliana executed, lots “C” and “D”
were NOT THE ONLY ONES she donated. Other
portions of 1214 were also included as was
necessary for the municipal hall site, such as
lot “B.” The CA affirmed the CFI’s
interpretation saying that what was donated
was not limited to those two lots but included
whatever was needed for the construction of
avenues, parks, city hall site. It ordered the
remand of the case to determine the actual
area taken by Iloilo City. Pio appealed saying
that the second paragraph was only to
identified which lots were subject of the
instrument. He argued that following the CFI
and CA’s interpretation of the phrasing
“whatever was needed” was invalid because
the law requires as an essential element of
sale, a determinate object. The appellees
argued that it was the parties’ intent to include
lot “B” which was further strengthened by the
vendor’s silence after Iloilo had occupied and
exercised ownership over the lots. They also
argued that that it was absurd not to include
“B” since it was contiguous to “C” and “D.” 928. The area was already needed was already
Finally, they averred that the sale’s determined so when the sale was executed, the
object was determinate because it could be specific mention of the lots fixed the
gleaned from the contract that the lots were corresponding location of the city hall site.
needed by Iloilo City for various projects based One should match the lots sold according to
on the Arellano Plan. the area needed for development to determine
which and how much of the land was needed.
There is no question that lot B is contiguous to
ISSUE:
lots C and D which sits at the heart of the
1) W/N the conveyance by Juliana Melliza to
municipality. Furthermore, Pio actually
Iloilo municipality included lot B
notarized the instrument himself which was
2) W/N the description of the lots in the
registered with the R of Deeds Pio knew of the
document was insufficient so that they are not
terms of the instrument so he should have
determinate as required by law
examined it in relation to the Arellano Plan
and realized that the municipality had already
HELD: taken possession of those lots. He should have
raised proper objections from the very
beginning but remained silent for 20 years.
(1 ) Yes. The sale to Remedios Villanueva did The principles of laches, estoppels and equity
not specifically designate lot B but only demand that lot B is deemed included in the
portions that were not included in the sale to conveyance in favor of Iloilo City.
City of Iloilo. Therefore, it was excluded from
the sale to Villanueva and later to Pio. Held Decision appealed from affirmed
The paramount intention of the parties was to
provide lots to the municipality for the
construction of the city hall. The public
instrument executed by Juliana described the
lots sold to the city. They were specifically
described according to their lot numbers and
area and stated that they were ones needed for
the construction. If the parties had intended to
specify C and D there would not be any need to
describe the lot number and LAND AREA. (3)
It is therefore reasonable to view it in
reference to the Arellano plan which
development area needed more space than
lots C and D combined. (2) No. The specific
description of the lots plus the statement that
they were the ones needed for the city hall site,
avenues and parks should be read in relation
to how much space was needed to execute the
Arellano plan. This sufficiently provides a
basis for making determinate said lots without
the need for a new agreement. Although the
Arellano plan was only finalized a few years
after the sale, it already existed as early as 1