35. Medina vs.

CIR
110 Phil. 912
G. R. No. L-15113. January 28, 1961

Facts: The spouses, Antonio Medina and Antonia Rodriguez, married in 1944 and had acquired
forest concession in the province of Isabela during their marriage. From 1946 to 1948, the
logs cut and removed by the petitioner from his concessions were sold to different
persons in Manila through his agent, Mariano Osorio. From 1949-1952, petitioner’s wife,
Antonia, started to engage as a lumber dealer. The petitioner, Antonio, sold to his wife
almost all the logs produced from the forest concession. Then, Antonia sold the same the
logs to the same agent, Mario Osorio. The proceeds were then deposited to the bank
account of the Antonio.

According to the Civil Code, sales between husband and wife are considered void. CIR
considered the sales made by Antonia as the Antonio’s original sales taxable under the
NIRC and therefore, imposed a tax assessment on Antonio, calling for the payment of the
deficiency sales taxes and surcharges from 1949-1952.

Petitioner protested the assessment; however, respondent, CIR insisted on his demand.
On July 9, 1954, petitioner filed a petition for reconsideration, revealing for the first time
the existence of an alleged premarital agreement of complete separation of properties
between him and his wife, and contending that the assessment for the years 1946 to 1952
had already prescribed. After one hearing, BIR eliminated the 50% fraud penalty and held
that the taxes assessed before 1948 had prescribed.

Petitioner appealed to the CTA but the latter uphold the decision of CIR as to the tax
assessment.

Issue: 1. whether or not the sales between husband and wife void?
2. whether or not the sales made by the wife to third person deemed original and taxable?

Ruling: Contracts violative of the provisions of Article 1490 of the Civil Code are null and void (Uy
Sui Pin vs. Cantollas, 70 Phil. 55; Uy Coque vs. Sioca, 45 Phil., 43), and the sales made by
the petitioner to his wife being void, the sales made by the latter are deemed the original
sales subject to tax. Wherefore, the decision appealed from is affirmed with costs against
the petitioner.