G.R. No. L-5081 February 24, 1954
MARVEL BUILDING CORPORATION, ET AL., plaintiffs-appellees, vs. SATURNINO DAVID, in his capacity as Collector, Bureau of Internal Revenue, defendant-appellant.

FACTS

The Collector of Internal Revenue seized and distrained properties (three parcels of land with buildings known as the Aguinaldo Building, Wise Building, and Dewey Boulevard-Padre Faura Mansion) registered in the name of Marvel Building Corporation to collect war profits taxes assessed against Maria B. Castro. Plaintiffs, as stockholders of the corporation, sought to enjoin the sale, alleging the properties belong to the corporation, not to Castro. The defendant claimed Castro is the true and sole owner of all the corporation’s subscribed stock, including those appearing under other incorporators’ names, and thus the exclusive owner of the properties. The trial court held the evidence failed to satisfactorily prove Castro’s ownership of all stock, as it was circumstantial and susceptible to two interpretations, and an interpretation depriving one of property without due process should not be made. The corporation was incorporated with a capital stock of P2,000,000, with P1,025,000 initially subscribed and paid by several incorporators, including Castro and her relatives. Key properties were purchased in the names of other individuals before the corporation’s formal organization. Evidence showed most incorporators had minimal or no taxable income prior to 1946 and filed no war profits tax returns, while Castro had substantial profits. Internal revenue agents discovered stock certificates, endorsed in blank by all incorporators except Castro, bound together in the corporation’s possession. The corporation’s operations lacked formalities: no business meetings, minutes, by-laws, or reports were presented. Castro made large cash advances to the corporation, and its books were kept as if she were the sole owner.

ISSUE

Is Maria B. Castro the sole and exclusive owner of all shares of stock of Marvel Building Corporation, rendering the other stockholders mere dummies?

RULING

Yes. The Supreme Court reversed the trial court’s judgment and dismissed the plaintiffs’ action. The Court found the circumstantial evidence conclusive. The existence of blank-endorsed stock certificates in Castro’s possession, the issuance of two sets of certificates, Castro’s motive to hide enormous profits to evade taxes, the other subscribers’ insufficient income to justify their large subscriptions, the lack of receipts or corporate accounting for subscription funds, the absence of stockholder or director meetings, Castro’s substantial unaccounted advances to the corporation, and the maintenance of corporate books as if she were the sole owner—all pointed to the inescapable conclusion that Castro was the true and exclusive owner of all shares, and the other incorporators were her dummies. The evidence proved this beyond reasonable doubt.