Wells Fargo Bank & Union Trust Company vs Collector of Internal Revenue

G.R. No. L-46720 – 70 Phil. 325 – Mercantile Law – Corporation Law – Shares of Stock – Situs of Shares of Stock

In September 1932, Birdie Lillian Eye died in Los Angeles, California, USA which was also her place of domicile. She left various properties. Among those properties include some intangibles consisting of 70,000 shares in the Benguet Consolidated Mining Company, a corporation organized and existing under Philippine laws.

The Collector of Internal Revenue sought to assess and collect estate tax on the said shares. Wells Fargo Banks & Union Trust Company, the trustee of the estate of the decedent Eye, objected to said assessment. Wells Fargo averred that said shares were already subjected to inheritance tax in California and hence cannot be taxed again in the Philippines (note at that time the Philippines was still under the Commonwealth and were not yet totally independent from the US).

ISSUE: Whether or not the shares are subject to estate tax in the Philippines.

HELD: Yes. The Supreme Court ruled that even though the Philippines was considered a US territory at that time, it is still a separate jurisdiction from the US in several aspects particularly taxation. Hence, the Philippines has the power to tax said shares. The situs of taxation is here in the Philippines because the situs of the shares of stock concerned is here in the Philippines because of the fact that the said shares were issued here by a corporation organized and existing under the laws of the Philippines which is also domiciled here. Further, (and this is the deeper reason), when Eye was alive, she actually delivered the title to said shares to the resident secretary of the corporation here in the Philippines hence the shares never left the Philippines.

Note: As a rule, intangibles follow the person (mobilia sequuntur personam). Hence, intangibles are taxable in the place where their owner may be domiciled. However, Section 104 of the NIRC provides that if the shares have attained business situs here in the Philippines, then said shares are taxable here even if the owner of said shares are domiciled abroad.

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