EN BANC

[G.R. No. L-5949. November 19, 1955.]

TANG HO, WILLIAM LEE, HENRI LEE, SOFIA LEE TEEHANKEE,

THOMAS LEE, ANTHONY LEE, JULIA LEE KAW, CHARLES LEE,
VALERIANA LEE YU, VICTOR LEE, SILVINO LEE, MARY LEE,
JOHN LEE, and PETER LEE, for themselves and as heirs of LI
SENG GIAP, deceased , petitioners, vs. THE BOARD OF TAX
APPEALS and THE COLLECTOR OF INTERNAL REVENUE,
respondent.

Ozaeta, Roxas, Lichauco & Picazo for petitioners.

Solicitor General Juan R. Liwag and Solicitor Jose P. Alejandro for
respondent.

SYLLABUS

1. BOARD OF TAX APPEALS; PROCEEDINGS THEREIN ARE

ADMINISTRATIVE IN CHARACTERS. — The proceedings before the Board of
Tax Appeals are administrative in character and are not governed by the
Rules of Court (see Sec. 10, E.O. 401-A).
2. ID.; ID.; FINDINGS SUPPORTED BY EVIDENCE CANNOT BE REVISED BY
THE SUPREME COURT. — The findings of the defunct Board of Tax Appeals
supported by adequate evidence, cannot be revised by the Supreme Court
(Comm. of Internal Revenue vs. Court Holding Co., 89 L. Ed. 981; Comm.
Internal Revenue vs. Scittish American Investment Co., 89 L. 113; Comm. of
Internal Revenue vs. Tower, 90 L. Ed. 670; Helvering vs. Tax Penn. Oil Co.,
81 L. Ed. 765).
3. DONATIONS; DONATION OF CONJUGAL PROPERTY BY THE HUSBAND;
RULE UNDER CIVIL CODE OF 1889. — Under the Civil Code of 1889, a
donation by the husband, alone does not become in law a donation by both
spouses merely because it involves property of the conjugal partnership.
4. ID.; ID.; ID.; DONATION TAXABLE AGAINST HUSBAND EXCLUSIVELY.
— A donation of property belonging to the conjugal partnership, made during
its existence by the husband alone in favor of the common children, is
taxable to him exclusively as sole donor.

DECISION

REYES, J.B.L., J : p

This is a petition for the review of the decision of the defunct Board of
Tax Appeals holding petitioners Li Seng Giap, et al. liable for gift taxes in
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 accordance with the assessments made by the respondent Collector of
Internal Revenue.
Petitioners Li Seng Giap (who died during the pendency of this appeal)
and his wife Tang Ho and their thirteen children appear to be the
stockholders of two close family corporations named Li Seng Giap & Sons,
Inc. and Li Seng Giap & Co. On or about May, 1951, examiners of the Bureau
of Internal Revenue, then detailed to the Allas Committee of the Congress of
the Philippines, made an examination of the books of the two corporations
aforementioned and found that each of Li Seng Giap's 13 children had a total
investment therein of approximately P63,195.00, in shares issued to them
by their father Li Seng Giap (who was the manager and controlling
stockholder of the two corporations) in the years 1940, 1942, 1948, 1949,
and 1950 in the following amounts:
Donees 1940 1942 1948 1949 1950

William Lee 7,500 12,500 6,750 27,940 7,500

Henry Lee 7,500 12,500 6,750 27,940 7,500
Sofia Lee 7,500 12,500 16,500 26,690
Thomas Lee 7,500 12,500 7,500 28,190 7,500
Anthony Lee 18,000 7,500 28,190 7,500
Julia Lee 2,000 15,000 25,690 2,500
Charles Lee 20,000 7,500 28,190 7,500
Valeriana Lee 60,690 2,500
Victor Lee 63,190
Silvino Lee 63,190
Mary Lee 63,190
John Lee 63,190
Peter Lee 63,190

The Collector of Internal Revenue regarded these transfers as

undeclared gifts made in the respective years, and assessed against Li Seng
Giap and his children donor's and donee's taxes in the total amount of
P76,995.31, including penalties, surcharges, interests, and compromise fee
due to the delayed payment of the taxes. The petitioners paid the sum of
P53,434.50, representing the amount of the basic taxes, and put up a surety
bond to guarantee payment of the balance demanded. And on June 25,
1951, they requested the Collector of Internal Revenue for a revision of their
tax assessments, and submitted donor's and donee's gift tax returns
showing that each child received by way of gift inter vivos, every year from
1939 to 1950 (except in 1947 and 1948) P4,000 in cash; that each of the
eight children who married during the period aforesaid, were given an
additional P20,000 as dowry or gift propter nuptias; that the unmarried
children received roughly equivalent amounts in 1949, also by way of gifts
inter vivos, so that the total donations made to each and every child, as of
1950, stood at P63,190. Appellants admit that these gifts were not reported;
but contend that as the cash donated came from the conjugal funds, they
constituted individual donations by each of the spouses Li Seng Giap and
Tang Ho, of one-half of the amount received by the donees in each instance,
up to a total of P31,505 to each of the thirteen children from each parent.
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 They further alleged that the children's stockholdings in the two family
corporations were purchased by them with savings from the aforesaid cash
donations received from their parents.
Claiming the benefit of gift tax exemptions (under sections 110 and
112 of the Internal Revenue Code) at the rate of P2,000 a year for each
donation, plus P10,000 for each gift propter nuptias made by either parent,
the appellants' aggregate tax liability, according to their returns, would only
be P4,599.94 for the year 1949, and P228.28 for the year 1950, or a total of
P4,838.22, computed as follows:
DONORS 1939-44 1945-46 1949 1950 TOTAL

Li Seng Giap Exempt Exempt P1,110.72 P74.14P1,184.86

Tan Ho Exempt Exempt 1,110.72 74.14 1,184.86
_______ _____ _______
Total None None P2,221.44 P148.28P2,369.72

William Lee Exempt Exempt P253.80 P30.00 P283.80

Henry Lee Exempt Exempt Exempt 15.00 15.00
Sofia Lee Exempt Exempt P51.90 None 51.90
Thomas Lee Exempt Exempt Exempt 15.00 15.00
Anthony Lee Exempt Exempt Exempt 15.00 15.00
Julia Lee Exempt Exempt 26.90 Exempt 26.90
Charles Lee Exempt Exempt Exempt 15.00 15.00
Valeriana Lee Exempt Exempt 26.90 Exempt 26.90
Victor Lee Exempt Exempt 403.80 None 403.80
Silvino Lee Exempt Exempt 403.80 None 403.80
Mary Lee Exempt Exempt 403.80 None 403.80
John Lee Exempt Exempt 403.80 None 403.30
Peter Lee Exempt Exempt 403.80 None 403.80
______ _____ ______
Total None None P2,378.50 P90.00P2,468.50
Grand total liability of Donors
and Donees P4,599.94 P238.28P4,838.22

The Collector refused to revise his original assessments; and the

petitioners appealed to the then Board of Tax Appeals (created by Executive
Order 401-A, in 1951) insisting that the entries in the books of the
corporation do not prove donations; that the true amount and date of the
donation were those appearing in their tax returns; and that the donees
merely bought stocks in the corporation out of savings made from the
money received from their parents. The Board of Tax Appeals upheld the
decision of the respondent Collector of Internal Revenue; hence, this petition
for review.
The questions in this appeal may be summarized as follows:
(1) Whether or not the dates and amounts of the donations taxable
against petitioners were as found by the Collector of Internal Revenue from
the books of the corporations Li Seng Giap & Sons, Inc. and Li Seng Giap &
Co., or as set forth in petitioners' gift tax returns;
(2) Whether or not the donations made by petitioner Li Seng Giap to his
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 children from the conjugal property should be taxed against the husband
alone, or against husband and wife; and
(3) Whether or not petitioners should be allowed the tax deductions
claimed by them.
On the first question, which is of fact, the appellants take the
preliminary stand that because the Collector failed to specifically deny the
allegations of their petition in the Tax Board, he must be deemed to have
admitted the annual and propter propter nuptias donations alleged by them,
and that he is estopped from denying their existence. As the proceedings
before the Tax Board were administrative in character, not governed by the
Rules of Court (see Sec. 10, Executive Order 401-A), and as the Collector
actually submitted his own version of the transactions, we do not consider
that the Collector's failure to make specific denials should be given the same
binding effect as in strict court pleadings.
Going now to the merits of the issue. The appealed findings of the
Board of Tax Appeals and of the Collector of Internal Revenue (that the stock
transfers from Li Seng Giap to his children were donations) appear supported
by the following circumstances:
(1) That the transferor Li Seng Giap (now deceased) had in fact
conveyed shares of stock to his 13 children on the dates and in the amounts
shown in the table on page 2 of this decision.
(2) That none of the transferees appeared to possess adequate
independent means to buy the shares, so much so that they claim now to
have purchased the shares with the cash donations made to them from time
to time.
(3) That the total of the alleged cash donations to each child is
practically identical to the value of the shares supposedly purchased by each
donee.
(4) That there is no evidence other than the belated sworn gift tax
returns of the spouses Li Seng Giap and Ang Tang Ho, and their children,
appellants herein, to support their contention that the shares were acquired
by purchase. No contracts of sale or other documents were presented, nor
any witnesses introduced; not even the claimants themselves have testified.
(5) The claim that the shares were acquired by the children by
purchase was first advanced only after the assessment of gift taxes and
penalties due thereon (in the sum of P76,995.31) had been made, and after
the appellants had paid P53,434.50 on account, and had filed a bond to
guarantee the balance.
(6) That for a parent to donate cash to enable the donee to buy from
him shares of equivalent value is, for all intents and purposes, a donation of
such shares to the purchaser donee.
We cannot say, under the circumstances, that there is no sufficient
evidence on record to support the findings of the Tax Board that the stock
transfers above indicated were made by way of donation, as would entitle us
to disregard or reverse the Board's findings.
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 The filing of the gift tax returns only after assessment and part
payment of the taxes demanded by the Collector, and the lack of
corroboration of the alleged donations in cash, amply justify the Tax Board's
distrust of the veracity of the appellants' belated tax returns. The Internal
Revenue Code (C. A. 466 as amended) requires donors and donees to file gift
tax returns "on or before the first of March following the close of the
calendar year" when the gifts were made (Sec. 115, par. [ c]; and besides the
return a written notice to the Collector of each donation of P10,000 or more,
must be given within thirty days after the donation, Sec. 114). These yearly
returns and notices are evidently designed to enable the Collector to verify
promptly their truth and correctness, while the gifts are still recent and proof
of the circumstances surrounding the making thereof is still fresh and
accessible. On their own admission, appellants failed to file for ten
successive years, the corresponding returns for the alleged yearly gifts of
P4,000 to each child, and likewise failed to give the notices for the P20,000
marriage gifts to each married child. Hence, they are now scarcely in a
position to complain if their contentions are not accepted as truthful without
satisfactory corroboration. Any other view would leave the collection of taxes
at the mercy of explanations concocted ex post facto by evading taxpayers,
drafted to suit any facts disclosed upon investigation, and safe from
contradiction because the passing years have erased all trace of the truth.
The second and third issues in this appeal revolve around appellants'
thesis that inasmuch as the property donated was community property
(gananciales), and such property is jointly owned by their parents, the total
amount of the gifts made in each year should be divided between the father
and the mother, as separate donors, and should be taxed separately to each
one of them.
In assessing the worth of this contention, it must be ever borne in mind
that appellants have not only failed to prove that the donations were actually
made by both spouses, Li Seng Giap and Tang Ho, but that precisely the
contrary appears from their own evidence. In the original claim for tax
refund, filed with the Collector of Internal Revenue, under date of June 25,
1951 (copied in pages 6 and 7 of the appellants' petition for review
addressed to the Board of Tax Appeals), the father, Li Seng Giap, describes
himself as "the undersigned donor" (par. 1) and speaks of "cash donations
made by the undersigned" (par. 3), without in any way mentioning his wife
as a co-participant in the donation. The issue is thus reduced to the
following: Is a donation of community property by the father alone
equivalent in law to a donation of one-half of its value by the father and one-
half by the mother? Appellants submit that all such donations of community
property are to be regarded, for tax purposes, as donations by both spouses,
for which two separate exemptions may be claimed in each instance, one for
each spouse.
This pretension should be viewed in the light of the provisions of the
Spanish Civil Code of 1889, which was the governing law in the years herein
involved, 1939 to 1950. The determinative rule is that of Arts. 1409 and
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 1415, reading as follows:
"ART. 1409. The conjugal partnership shall also be chargeable
with anything which may have been given or promised by the husband
to the children born of the marriage solely in order to obtain
employment for them or give them a profession, or by both spouses by
common consent, should they not have stipulated that such
expenditures should be borne in whole or in part by the separate
property of one of them."
"ART. 1415, p. 1. — The husband may dispose of the property of
the conjugal partnership for the purposes mentioned in Art. 1409."
In effect, these Articles clearly refute the appellants' theory that
because the property donated is community property, the donations should
be viewed as made by both spouses. First, because the law clearly
differentiates the donations of such property "by the husband" from the
"donations by both spouses by common consent" ("por el marido . . . o por
ambos conyuges de común acuerdo," in the Spanish text).
Next, the wording of Arts. 1409 and 1415 indicates that the lawful
donations by the husband to the common children are valid and are
chargeable to the community property, irrespective of whether the wife
agrees or objects thereto. Obviously, should the wife object to the donation,
she can not be regarded as a donor at all.
Even more: Suppose that the husband should make a donation of some
community property to a concubine or paramour. Undeniably, the wife
cannot be regarded as joining in any such donation. Yet under the old Civil
Code, the donation would stand, with the only limitation that the wife should
not be prejudiced in the division of the profits after the conjugal partnership
affairs are liquidated. So that if the value of the donation should be found to
fit within the limits of the husband's ultimate share in the conjugal
partnership profits, the donation by the husband would remain unassailable,
over and against the nonparticipation of the wife therein. This Court has so
ruled in Baello vs. Villanueva (54 Phil. 213, 214):
"According to article 1413 of the Civil Code, any transfer or
agreement upon conjugal property made by the husband in
contravention of its provisions, shall not prejudice his wife or her heirs.
As the conjugal property belongs equally to husband and wife, the
donation of this property made by the husband prejudices the wife in
so far as it includes a part or the whole of the wife's half, and is to that
extent invalid. Hence article 1419, in providing for the liquidation of the
conjugal partnership, directs that all illegal donations made by the
husband be charged against his estates and deducted from his capital.
But it is only then, when the conjugal partnership is in the process of
liquidation, that it can be discovered whether or not an illegal donation
made by the husband prejudices the wife. And inasmuch as these gifts
are only to be held invalid in so far as they prejudice the wife, their
nullity cannot be decided until after the liquidation of the conjugal
partnership and it is found that they encroach upon the wife's portion."
Appellants herein are therefore in error when they contend that it is
enough that the property donated should belong to the conjugal partnership
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 in order that the donation be considered and taxed as a donation of both
husband and wife, even if the husband should appear as the sole donor.
There is no blinking the fact that, under the old Civil Code, to be a donation
by both spouses, taxable to both, the wife must expressly join the husband
in making the gift; her participation therein cannot be implied.
It is true, as appellants stress, that in Gibbs vs. Government of the
Philippines, 59 Phil., 293, this Court ruled that "the wife, upon acquisition of
any conjugal property, becomes immediately vested with an interest and
title equal to that of the husband"; but this Court was careful to immediately
add, "subject to the power of management and disposition which the law
vests on the husband." As has been shown, this power of disposition may,
within the legal limits, override the objections of the wife and render the
donation of the husband fully effective without need of the wife's joining
therein. (Civil Code of 1889, Arts 1409, 1415.)
It becomes unnecessary to discuss the nature of a conjugal
partnership, there being specific rules on donations of property belonging to
it. The consequence of the husband's legal power to donate community
property is that, where made by the husband alone, the donation is taxable
as his own exclusive act. Hence, only one exemption or deduction can be
claimed for every such gift, and not two, as claimed by appellants herein. In
thus holding, the Board of Tax Appeals committed no error.
Premises considered, we are of the opinion and so declare:
(a) That the finding of the defunct Board of Tax Appeals to the effect
that shares transferred from Li Seng Giap to his children were conveyed to
them by way of donation inter vivos is supported by adequate evidence, and
therefore cannot be reviewed by this Court (Comm. of Internal Revenue vs.
Court Holding Co., L. Ed. 981; Comm, of Internal Revenue vs. Scottish
American Investment Co., 89 L. Ed. 113; Comm. of Internal Revenue vs.
Tower, 90 L. Ed. 670; Helvering vs. Tax Penn. Oil Co., 81 L. Ed. 755).
(b) That under the old Civil Code, a donation by the husband alone
does not become in law a donation by both spouses merely because it
involves property of the conjugal partnership;
(c) That such a donation of property belonging to the conjugal
partnership, made during its existence, by the husband alone in favor of the
common children, is taxable to him exclusively as sole donor.
Wherefore, the decision appealed from is affirmed with costs to the
appellants. So ordered.
Paras, C.J., Bengzon, Padilla, Montemayor, Reyes, A., Bautista Angelo,
Jugo, Labrador and Concepcion, JJ., concur.

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