G.R. No. L-15778; April 23, 1962
TAN TIONG BIO, ET AL., petitioners, vs. COMMISSIONER OF INTERNAL REVENUE, respondent.

FACTS

The Central Syndicate purchased surplus properties from Dee Hong Lue, who had originally acquired them from the Foreign Liquidation Commission. The syndicate assumed Dee Hong Lue’s obligation to pay the sales tax and made a deposit with the Collector of Internal Revenue. Following an investigation, the Collector determined the Central Syndicate was the actual importer and original seller of the goods, making it liable for sales tax. Consequently, a deficiency tax assessment was issued against the syndicate. The syndicate contested this assessment before the Court of Tax Appeals.
During the proceedings, the corporate existence of the Central Syndicate expired. The Court of Tax Appeals initially dismissed the appeal for lack of personality to sue, but the Supreme Court reversed, ordering the substitution of the corporation’s officers and directors as petitioners. The Supreme Court reasoned these individuals could be held personally liable for the unpaid taxes of the defunct corporation. After trial, the Court of Tax Appeals affirmed the tax assessment and held the substituted petitioners jointly and severally liable for the deficiency tax.

ISSUE

The primary issues were: (1) whether the deficiency sales tax assessment had prescribed; (2) whether the petitioners, as stockholders and officers of the dissolved corporation, could be held liable for its unpaid taxes; and (3) if liable, whether their liability should be joint and several or merely proportional.

RULING

The Supreme Court affirmed the tax liability but modified the nature of the petitioners’ liability. On prescription, the Court ruled the right to collect had not prescribed. The tax assessment was made within the statutory period, and the filing of the appeal by the syndicate, later substituted by the petitioners, suspended the running of the prescriptive period for collection.
On the liability of the stockholders, the Court held that the dissolution of a corporation does not extinguish its tax obligations. Citing American jurisprudence, which is persuasive given the American origin of Philippine corporation law, the Court ruled that the government retains the right to collect taxes from persons holding the corporation’s assets. The evidence showed the syndicate’s sole transaction yielded a net profit, which was distributed to the stockholders upon liquidation. Therefore, the petitioners, as beneficiaries who received the corporate assets, could be held accountable for the unpaid tax.
However, the Court modified the lower court’s decision regarding the extent of liability. It found no legal basis for imposing solidary liability on the stockholders for the corporate debt in the absence of an express statutory provision. Consequently, the petitioners’ liability should only be proportional to their respective shares in the distributed assets of the dissolved corporation. The decision was affirmed with this modification.