Gatchalian vs. Collector of Internal Revenue [G.R. No.

L-45425, April 29, 1939]

Facts:
Before December 15, 1934 plaintiffs, in order to enable them to purchase one sweepstakes ticket
valued at two pesos (P2), subscribed and paid individually until it totaled to P2. Immediately thereafter but
prior to December 15, 1934, plaintiffs purchased, in the ordinary course of business, from one of the duly
authorized agents of the National Charity Sweepstakes Office one ticket for the sum of two pesos (P2) and
that the said ticket was registered in the name of Jose Gatchalian and Company. The ticket won one of the
third-prizes in the amount of P50,000.
Jose Gatchalian was required to file the corresponding income tax return covering the prize won.
Defendant-Collector made an assessment against Jose Gatchalian and Company requesting the payment of
the sum of P1,499.94 to the deputy provincial treasurer of Pulilan, Bulacan. Plaintiffs, however through
counsel made a request for exemption but was denied.
Plaintiffs failed to pay the amount due, hence a warrant of distraint and levy was issued. To avoid
embarrassment from the embargo of the property of the plaintiffs, said plaintiffs paid under protest a part of
the tax and penalties and requested defendant that plaintiffs be allowed to pay under protest the balance of
the tax and penalties by monthly installments. This was granted on the condition that plaintiffs filed the usual
bond secured by two solvent persons to guarantee prompt payment of each installments as it becomes due.
However, plaintiffs failed to pay the balance on installment payments. Hence a request for execution
of the warrant of distraint and levy was made. In order to avoid annoyance and embarrassment arising from
the levy of their property, the plaintiffs paid under protest to the municipal treasurer of Pulilan, Bulacan the
sum of P1,260.93 representing the unpaid balance of the income tax and penalties demanded and that on
September 3, 1936, the plaintiffs formally protested to the defendant against the payment of said amount
and requested the refund thereof, but on September 4, 1936, the defendant overruled the protest and
denied the refund thereof.
Now, plaintiffs demanded upon defendant the refund of the total sum of one thousand eight hundred
and sixty three pesos and forty-four centavos (P1,863.44) paid under protest by them but that defendant
refused and still refuses to refund the said amount notwithstanding the plaintiffs' demands. Hence, this
appeal.
Issue: Whether the plaintiffs formed a partnership hence liable for income tax.

Held:
Yes. Plaintiffs organized a partnership of a civil nature. If the plaintiffs merely formed a community of
property the latter is exempt from the payment of income tax under the law. But according to the stipulation
facts the plaintiffs organized a partnership of a civil nature because each of them put up money to buy a
sweepstakes ticket for the sole purpose of dividing equally the prize which they may win, as they did in fact in
the amount of P50,000. The partnership was not only formed, but upon the organization thereof and the
winning of the prize, Jose Gatchalian personally appeared in the office of the Philippines Charity Sweepstakes,
in his capacity as co-partner, as such collection the prize, the office issued the check for P50,000 in favor of
Jose Gatchalian and company, and the said partner, in the same capacity, collected the said check. All these
circumstances repel the idea that the plaintiffs organized and formed a community of property only.
JOSE P. OBILLOS, JR., SARAH P. OBILLOS, ROMEO P. OBILLOS and REMEDIOS P. OBILLOS, brothers and
sisters
vs.
COMMISSIONER OF INTERNAL REVENUE and COURT OF TAX APPEALS
FACTS:
This case is about the income tax liability of four brothers and sisters who sold two parcels of land
which they had acquired from their father.
On March 2, 1973 Jose Obillos, Sr. completed payment to Ortigas & Co., Ltd. on two lots with areas
located at Greenhills, San Juan, Rizal. The next day he transferred his rights to his four children, the
petitioners, to enable them to build their residences. The company sold the two lots to petitioners for
P178,708.12 on March 13. Presumably, the Torrens titles issued to them would show that they were co-
owners of the two lots.
After a year, the petitioners resold them to the Walled City Securities Corporation and Olga Cruz
Canda for the total sum of P313,050. They derived from the sale a total profit of P134,341.88 or P33,584 for
each of them. They treated the profit as a capital gain and paid an income tax on one-half thereof.
One day before the expiration of the five-year prescriptive period, the Commissioner of Internal
Revenue required the four petitioners to pay corporate income tax on the total profit of P134,336 in addition
to individual income tax on their shares thereof. He assessed P37,018 as corporate income tax, P18,509 as
50% fraud surcharge and P15,547.56 as 42% accumulated interest, or a total of P71,074.56.
Not only that. He considered the share of the profits of each petitioner in the sum of P33,584 as a
taxable in full (not a mere capital gain of which is taxable) and required them to pay deficiency income
taxes including the 50% fraud surcharge and the accumulated interest. The Commissioner acted on the
theory that the four petitioners had formed an unregistered partnership or joint venture within the meaning
of sections 24(a) and 84(b) of the Tax Code.
The petitioners contested the assessments. Two Judges of the Tax Court sustained the same. Judge
Roaquin dissented. Hence, the instant appeal.
ISSUE: WON the petitioners form an unregistered partnership.
HELD:
No. The SC hold that it is error to consider the petitioners as having formed a partnership under article
1767 of the Civil Code simply because they allegedly contributed P178,708.12 to buy the two lots, resold the
same and divided the profit among themselves. Art. 1767 provides that "the sharing of gross returns does not
of itself establish a partnership, whether or not the persons sharing them have a joint or common right or
interest in any property from which the returns are derived". There must be an unmistakable intention to
form a partnership or joint venture.
They were co-owners pure and simple. To consider them as partners would obliterate the distinction
between a co-ownership and a partnership. The petitioners were not engaged in any joint venture by reason
of that isolated transaction. Their original purpose was to divide the lots for residential purposes. If later on
they found it not feasible to build their residences on the lots because of the high cost of construction, then
they had no choice but to resell the same to dissolve the co-ownership. The division of the profit was merely
incidental to the dissolution of the co-ownership which was in the nature of things a temporary state.


G.R. No. L-52361 April 27, 1981
SUNSET VIEW CONDOMINIUM CORPORATION, petitioner,
vs.
THE HON. JOSE C. CAMPOS, JR. OF THE COURT OF FIRST INSTANCE, BRANCH XXX, PASAY CITY and
AGUILAR-BERNARES REALTY, respondents.
G.R. No. L-52524 April 27, 1981
SUNSET VIEW CONDOMINIUM CORPORATION, petitioner,
vs.
THE HON. JOSE C. CAMPOS, JR., PRESIDING JUDGE OF THE COURT OF FIRST INSTANCE, BRANCH XXX, PASAY
CITY, and LIM SIU LENG, respondents.
G.R. NO. 52361
FACTS:
Private respondent, Aguilar-Bernares Realty, is a sole proprietorship with business name registered
with the Bureau of Commerce, owned and operated by the spouses Emmanuel G. Aguilar and Zenaida B.
Aguilar which is the assignee of a unit, "Solana", in the Sunset View Condominium Project with La Perla
Comm., Incorporated, as assignor. The La Perla Commercial, Incorporated bought the "Solana" unit on
installment from the Tower Builders, Inc.
On June 22, 1979 petitioner, Sunset View Condominium Corporation, filed a complaint in the CFI of
Pasay City for the collection of assessments levied on the unit against Aguilar-Bernares Realty. The private
respondent filed a Motion to Dismiss the complaint on the grounds (1) that the complaint does not state a
cause of action: (2) that the court has no jurisdiction over the subject or nature other action; and (3) that
there is another action pending between the same parties for the same cause. The petitioner filed its
opposition thereto. However, the motion to dismiss was granted by the respondent Judge who opined that
the private respondent is, pursuant to Section 2 of Republic Act No. 4726, a "holder of a separate interest"
and consequently, a shareholder of the plaintiff condominium corporation; and that "the case should be
properly filed with the Securities & Exchange Commission which has exclusive original jurisdiction on
controversies arising between shareholders of the corporation."
Petitioner filed a motion for reconsideration but was denied and thus the petitioner filed the instant
petition for certiorari alleging grave abuse of discretion on the part of respondent judge and praying that the
said orders be set aside.


G.R. NO. 52524
Petitioner in this case filed its amended complaint dated July 16, 1979 of Branch I of the City Court of Pasay
City for the collection of overdue accounts on assessments and insurance premiums and the interest thereon
amounting to P6,168 06 as of March 31, 1979 against the private respondent Lim Siu Leng. Lim Siu Leng was
assigned a unit called "Alegria" of the Sunset View Condominium Project by Alfonso Uy

who had entered into
a "Contract to Buy and Sell" with Tower Builders, Inc. over the said unit on installment basis.
The private respondent filed a motion to dismiss on the ground of lack of jurisdiction, alleging that the
amount sought to be collected is an assessment. That she has automatically become, as a purchaser of the
condominium unit, a stockholder of the petitioner pursuant to Section 2 of the Condominium Act, Republic
Act No. 4726; that the dispute is intra-corporate and is consequently under the exclusive jurisdiction of the
Securities & Exchange Commission as provided in Section 5 of P.D. No. 902-A.
The petitioner filed its opposition thereto, alleging that the private respondent who had not fully paid for the
unit was not the owner thereof, consequently was not the holder of a separate interest which would make
her a stockholder, and that hence the case was not an intra-corporate dispute.
Thereafter, the trial court issued an order denying the motion to dismiss. The private respondents
motion for reconsideration thereof was denied.
The private respondent then appealed to the Court of First Instance. The petitioner filed its "Motion
to Dismiss Appeal" on the ground that the order of the trial court appealed from is interlocutory.
The motion to dismiss the appeal was denied and the parties were ordered to submit their respective
memorandum on the issue raised before the trial court and on the disputed order of the trial judge. After the
parties had submitted their respective memoranda on the matter, the respondent Judge issued an order
dated December 14, 1979 in which he directed that "the appeal is hereby dismissed and the judgment of the
lower court is reversed. The case is dismissed and the parties are directed to ventilate their controversy with
the Securities & Exchange Commission.
15
The petitioner's motion for reconsideration thereof was denied in
an order dated January 14, 1980.
16
Hence this petition for certiorari, alleging grave abuse of discretion on the
part of the respondent Judge.
The private respondents in both cases argue that every purchaser of a condominium unit, regardless
of whether or not he has fully paid the purchase price, is a "holder of a separate interest" mentioned in
Section 2 of Republic Act No. 4726, otherwise known as "The Condominium Act" and is automatically a
shareholder of the condominium corporation. Also it is admitted that the private respondents in both cases
have not yet fully paid the purchase price of their units.
ISSUE:
(1) WON a purchaser of a condominium unit in the condominium project managed by the petitioner,
who has not yet fully paid the purchase price thereof, automaticaly a stockholder of the petitioner
Condominium Corporation.
(2) Whether the regular court or the Securities & Exchange Commission has jurisdiction over cases for
collection of assessments assessed by the Condominium Corporation on condominium units the full purchase
price of which has not been paid?

HELD:
(1) No. Section 5 of the Condominium Act expressly provides that the shareholding in the
Condominium Corporation will be conveyed only in a proper case. Not every purchaser of a condominium
unit is a shareholder of the condominium corporation. The Condominium Act leaves to the Master Deed the
determination of when the shareholding will be transferred to the purchaser of a unit. The provisions of the
Master Deeds clearly expressed that the shareholding in the Condominium Corporation is inseparable from
the unit to which it is only an appurtenant and that only the owner of a unit is a shareholder in the
Condominium Corporation.
In both deeds of conveyance in both cases, it is provided that upon full payment by the BUYER of the
total purchase price and full compliance by the BUYER of an its obligations herein, the SELLER will convey
unto the BUYER, as soon as practicable after completion of the construction, full and absolute title in and to
the subject unit, to the shares of stock pertaining thereto and to an rights and interests in connection
therewith.
The share of stock appurtenant to the unit will be transferred accordingly to the purchaser of the unit
only upon full payment of the purchase price at which time he will also become the owner of the unit.
Consequently, even under the contract, it is only the owner of a unit who is a shareholder of the
Condominium Corporation. Inasmuch as owners is conveyed only upon full payment of the purchase price, it
necessarily follows that a purchaser of a unit who has not paid the full purchase price thereof is not the
owner of the unit and consequently is not a shareholder of the Condominium Corporation.
That only the owner of a unit is a stockholder of the Condominium Corporation is inferred from Section 10 of
the Condominium Act which reads that membership in a condominium corporation, regardless of whether it
is a stock or non-stock corporation, shall not be transferable separately from the condominium unit of which
it is an appurtenance when a member or stockholder ceases is to own a unit in the project in which the
condominium corporation owns or holds the common areas, he shall automatically cease to be a member or
stockholder of the condominium corporation. Pursuant to this statutory provision, ownership of a unit is a
condition sine qua non to being a shareholder in the condominium corporation. It follows that a purchaser of
a unit who is not yet the owner thereof for not having fully paid the full purchase price, is not a shareholder
by necessary implication, the "separate interest" in a condominium, which entitles the holder to become
automatically a share holder in the condominium corporation, as provided in Section 2 of the Condominium
Act, can be no other than ownership of a unit. This is so because nobody can be a shareholder unless he is the
owner of a unit and when he ceases to be the owner, he also ceases automatically to be a shareholder.