OQUIENA & COMPANY v.

JOSE MUERTEGUI FACTS: Plaintiff and defendant maintained business relations from April or May, 1908, to March, 1910, and although there was no written contract between them there was however a verbal agreement to the effect that the defendant firm, Muertegui & Aboiti , should ship hemp and copra to the plaintiff firm at !ebu" that the latter, in turn, bound itself to sell the same on commission and that it was to receive for services rendered in effecting such sales a commission of one per cent of the price of the articles sold# $he defendant firm agreed to pay all the e%penses incurred by the shipment and sale of the articles sent by it to &'ui(ena & !o# About the end of March, 1910, the relations between the two firms came to an end and, on stri)ing the proper balance of accounts between the contracting parties, the results showed a balance due of P*,1+0#81, the payment of which was duly demanded by the plaintiff company# $he defendant company refused to pay it, alleging that the amount claimed did not constitute a balance due from any settlement whatever, but that it represented the amounts paid by the plaintiff, as commission merchants, for internal revenue ta%es the payment of which was neither approved, either in whole or in part, nor authori ed by the defendant company# $he sum which is the sub,ect matter of the is the amount of the ta% which it had paid at the rate of one-third of one per cent on the prices of the goods it sold as commission merchants, by the order and for the account of Muertegui & Aboiti . a ta% which the plaintiff was obliged to pay, by reason of the occupation or business, upon effecting the said sales by order and on account of its principals, Muertegui & Aboiti # /00123 /s the defendant liable to pay the internal revenue ta% on commission4 52673 8o# 9hen it is verbally stipulated between two commercial firms that the shipping company shall be liable for all the e%penses incurred by the shipment, storage and sale of the goods it forwards to the commission-agent company to sell, the amount of the business and occupation ta% the latter pays, at the rate of one-third of one per cent on the value of the articles it sells by the order and on account of the shipping company, is not included among the said e%penses# $he said ta% must be paid by the commission-agent company as such, pursuant to the provisions of section 1:0 of Act 8o# 1189, it not being shown that it was e%pressly agreed between both contracting parties that the shipping company, which also paid a li)e ta% of onethird of one per cent on the value of the goods sold by the commission-agent, was obliged to pay the business and occupation ta% which the commission-agent company is bound to pay as commission-merchant# $hey are two different ta%es, the amounts of which are calculated upon the value of the commercial articles which the commission-agent company reali es and sells on account and by the order of its principal#

[G.R. No. 9976. Novembe !!" #9#$. % OQUIENA & COMPANY" Plaintiff-Appellee" v. JOSE MUERTEGUI" ET A&." Defendants-Appellants. Jo'e M( )*+e, S(+ A-.')*+ /o Appellants. No (00e( (+1e /o Appellee. SY&&A2US 1# P;/8!/PA6 A87 A<28$" 2=P28020 &> A<28$" ?10/8200 A87 &!!1PA$/&8 $A=20# . 9hen it is verbally stipulated between two commercial firms that the shipping company shall be liable for all the e%penses incurred by the shipment, storage and sale of the goods it forwards to the commission-agent company to sell, the amount of the business and occupation ta% the latter pays, at the rate of one-third of one per cent on the value of the articles it sells by the order and on account of the shipping company, is not included among the said e%penses# $he said ta% must be paid by the commission-agent company as such, pursuant to the provisions of section 1:0 of Act 8o# 1189, it not being shown that it was e%pressly agreed between both contracting parties that the shipping company, which also paid a li)e ta% of onethird of one per cent on the value of the goods sold by the commission-agent, was obliged to pay the business and occupation ta% which the commission-agent company is bound to pay as commission-merchant# $hey are two different ta%es, the amounts of which are calculated upon the value of the commercial articles which the commission-agent company reali es and sells on account and by the order of its principal# +# /7#" /7#" /7#" A!!2P$A8!2 &> A!!&18$ ?@ 2;;&;# . $he acceptance of an erroneous account and the consent given by one of the parties to certain transactions in which entries were made of amounts paid as internal revenue ta%es, the payment of which devolves upon the commission-agent company which rendered the account, and not upon the party to whom the erroneous account was rendered, are null and void, because such acceptance and consent were given through an error which was unnoticed at the time the said accounts were approved as the reasons for the payment of the said amounts were not stated therein# 3ECISION TORRES" J. : $his is an appeal, by bill of e%ceptions filed by counsel for the defendants from the ,udgment of 7ecember 1+, 191*, in which the latter were ordered ,ointly and severally to pay to the plaintiff company the sum of P*,1+0#81, with legal interest thereon from March A, 1910, and the costs of the trial#

?y a written complaint of Bune 18, 1910, subse'uently amended by another of Buly ++, 191*, counsel for &'ui(ena & !o# commenced proceedings in the !ourt of >irst /nstance of !ebu, alleging therein that from 0eptember, 1908, until March, 1910, the general mercantile partnership of Muertegui & Aboiti , domiciled in the municipality of Palompon, /sland of 6eyte, had maintained commercial relations with the plaintiff firm" that during this period Muertegui & Aboiti shipped various large amounts of hemp and other commodities to the plaintiff, &'ui(ena & !o#, at !ebu, for the latter to sell on commission" that on March 1A, 1910, a balance of accounts was struc) and it was found that the defendant company was owing the plaintiff the sum of P*,1+0#81" and that, in spite of repeated demands, the defendant firm had not yet paid the said sum to &'ui(ena & !o# !ounsel for plaintiff therefore prayed that ,udgment be rendered ordering the firm of Muertegui & Aboiti to pay to the plaintiff the said sum of P*,1+0#81, with costs# After counsel for the firm of Muertegui & Aboiti had been summoned and had entered an appearance, in &ctober, 191+, Paulino Aboiti , one of the partners of the defendant firm, died, and for this reason ;amon Aboiti was appointed administrator of the estate of the deceased# $his administrator and Bose Muertegui are now managing and conducting the business of the defendant firm of Muertegui & Aboiti # >or this reason the plaintiff as)ed for permission to amend its complaint and include therein, as one of the defendants, ;amon Aboiti , as administrator of the estate of the deceased partner Paulino Aboiti # $his permission being granted, the plaintiff filed the said amended complaint of Buly ++, 191*# $he demurrer to the complaint was overruled, whereupon counsel for each of the defendants entered a separate answer denying each and all of the paragraphs contained in the complaint, and as a special defense alleged that the sum claimed by the plaintiff was not a balance resulting from any settlement of accounts, but was the amount paid by the plaintiff as internal revenue ta%, a payment which was never authori ed by the defendants# $he latter therefore moved to dismiss the complaint# After a hearing of the case and an e%amination of the evidence adduced by both parties, the court rendered the ,udgment aforementioned to which the defendants e%cepted and, in writing, moved for a reopening of the case and a new trial# $his motion was denied, the appellants e%cepted, and, the proper bill of e%ceptions having been filed, the same was approved and forwarded to the cler) of this court# $he 'uestion to be resolved in this litigation consists solely in determining which of the two parties, the plaintiff or the defendants, is liable for the one-third of one per cent internal revenue ta% which the commission agents &'ui(ena & !o# must pay on the sales of commercial articles made by order and on account of their principals, Muertegui & Aboiti # $hese two mercantile partnerships Cdomiciled, the former in the city of !ebu and the latter in Palompon, 6eyteD maintained business relations from April or May, 1908, to March, 1910, and although there was no written contract between them there was however a verbal agreement to the effect that the defendant firm, Muertegui & Aboiti , should ship hemp and copra to the plaintiff firm at !ebu" that the latter, in turn, bound itself to sell the same on commission and that

it was to receive for services rendered in effecting such sales a commission of one per cent of the price of the articles sold# $he defendant firm agreed to pay all the e%penses incurred by the shipment and sale of the articles sent by it to &'ui(ena & !o# About the end of March, 1910, the relations between the two firms came to an end and, on stri)ing the proper balance of accounts between the contracting parties, the results showed a balance due of P*,1+0#81, the payment of which was duly demanded by the plaintiff company# $he defendant company refused to pay it, alleging that the amount claimed did not constitute a balance due from any settlement whatever, but that it represented the amounts paid by the plaintiff, as commission merchants, for internal revenue ta%es the payment of which was neither approved, either in whole or in part, nor authori ed by the defendant company# /t is a fact fully proven at trial that the said sum was the amount of the one-third of one per cent ta%, calculated on the prices of merchandise sold by the plaintiff company by order and on account of Muertegui & Aboiti , and that it was an internal revenue ta% paid by the plaintiff company in its capacity of commission merchants# $he record also shows that the plaintiff party charged that sum to the defendant, as being responsible for its payment, in the account it transmitted to the latter, and, because the defendants would not pay it, brought this suit for its recovery# 5owever, at the trial Anastacio Aldecoa, manager of the plaintiff company, testified that if the said sum, the sub,ect of his claim, were stric)en out of and not charged in the account, his debits and credits would balance Cp# +1:, stenographic notesD# >rom this statement it is concluded that the balance shown in the account is only the amount of the ta% paid by the plaintiff# 0o then the sum which is the sub,ect matter of the complaint filed by &'ui(ena & !o# is the amount of the ta% which it had paid at the rate of one-third of one per cent on the prices of the goods it sold as commission merchants, by the order and for the account of Muertegui & Aboiti . a ta% which the plaintiff was obliged to pay, by reason of the occupation or business in which it was engaged in !ebu, upon effecting the said sales by order and on account of its principals, Muertegui & Aboiti # /s the amount of this ta%, paid by the plaintiff as commission merchants, comprised in the e%penses incurred by the shipment, storage and sale of the hemp and other articles handled by the defendant and sold by the plaintiff4 9e thin) not inasmuch as Muertegui & Aboiti , as principals, were on their part obliged to pay the ta% on the sales of hemp and other articles shipped to !ebu, and the amount at which this ta% was fi%ed was the only one included as e%penses in the agreement stipulating that all the e%penses occasioned by the said transactions of commission sales of hemp and copra should be chargeable to the defendant company# 9ith this understanding Muertegui & Aboiti accepted and approved the accounts rendered by &'ui(ena & !o# $he sum of P*,1+0#81, paid by &'ui(ena & !o# as commission merchants and not by reason of the one-third of one per cent on the value of the goods sold by them, is undoubtedly not comprised in the item of the e%penses which, according to the agreement, should be chargeable to Muertegui & Aboiti , because the plaintiffEs contention appears to be denied by the defendants, and because the record does not disclose satisfactory proof that the contracting parties stipulated that the owners of the hemp and copra should be obliged to pay, in addition to the ta% on the price of the goods sold by their commission agents, the ta% which the latter had to

pay on their business or occupation as commission merchants# 0ection 1*9 of Act 8o# 1189, the /nternal ;evenue 6aw contains, among other provisions, the following3
,gc3chanrobles#com#ph

F$here shall be paid by each merchant and manufacturer a ta% at the rate of one-third of one per centum on the gross value in money of all goods, wares, and merchandise sold, bartered, or e%changed for domestic consumption in the Philippine /slands, etc#F
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Muertegui & Aboiti , convinced that they were obliged to pay this ta%, diverse from that levied upon commission merchants, had no ob,ection to approving the previous accounts presented by &'ui(ena & !o#, for they believed that the ta% therein charged against them was the one specified in the said section 1*9 and was comprised, according to the agreement between them, in the item of e%penses incurred during the course of their business transactions" but when a demand was made upon them by the ?ureau of /nternal ;evenue for the payment of this ta%, in their home town, they then learned that the amount of P*,1+0#81, charged in the plaintiffEs last account and demanded by it, was the total of the sums paid by it as the internal revenue ta% which the plaintiff company was obliged to pay as commission merchants# $he obligation to pay this ta% is e%plicitly prescribed in section 1:0 of the said Act, which is as follows3
,gc3chanrobles#com#ph

F2very person who on his own account, or on commission for another, is engaged in the sale, barter, or e%change of foreign or domestic goods, wares, or merchandise of any and all )inds for domestic consumption, and whether such goods, wares, or merchandise consists of raw materials or of manufactured or partially manufactured products, shall be considered as a merchant within the meaning of this article#F
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/f &'uine(a & !o#, as merchants, were engaged in the sale on commission of goods which were sent to them by Muertegui & Aboiti , it is un'uestionable that as commission merchants they were obliged to pay the said ta% of one-third of one per cent on the total value of the hemp and copra which they sold by the order and on account of Muertegui & Aboiti , inasmuch as these latter, in turn, paid the ta% due by them, as evidenced by the documents 2%hibits 108 and 109, the last of which is a certificate by the municipal treasurer of Palompon, deputy of the provincial treasurer of 6eyte, which sets forth the amounts paid by Muertegui & Aboiti as the one-third of a one per cent ta% on the value of the hemp and copra sold by &'ui(ena & !o# $he plaintiff firm has put forward no good reason why Muertegui & Aboiti should be obliged to pay the ta% assessed on commission merchants# /n the decision of the case of <il 5ermanos v# 5ord C10 Phil# ;ep#, +18D it was held that3
,gc3chanrobles#com#ph

F$he fact that the plaintiff, a mercantile partnership, consigned a certain 'uantity of merchandise to another firm for sale upon commission, and paid the percentage ta% imposed upon its business by the /nternal ;evenue 6aw, does not relieve the commission merchant from the payment of an occupation ta%, nor does the payment by the latter constitute a double ta%ation against the plaintiff#F
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/n the reason stated in the decision aforecited, the following appears3

,gc3chanrobles#com#ph

F/t is very apparent that the ta% under discussion is not a ta% upon property# /t is rather a ta% upon the occupation or industry in which a person is engaged#F
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>urther on, in another paragraph of the same decision, we find3

,gc3chanrobles#com#ph

FAs has been said above, this is in no sense a ta% upon the property sold" it is merely a method of deciding how much the person who ma)es the sale shall pay as a ta% upon the business in which he is engaged#F
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Although Muertegui & Aboiti paid the ta% on their goods which were sold in !ebu by &'ui(ena & !o#, this latter firm, by engaging in the business of commission merchants, is, in turn, obliged to pay to the <overnment the ta% specified in the foregoing section 1:0 of Act 8o# 1189" and as it was not proven that there was even a verbal agreement that Muertegui & Aboiti should pay or reimburse &'ui(ena & !o# for the said internal revenue ta% on commission merchants, the claim made by the plaintiff party is therefore manifestly improper# 0tarting from the hypothesis that the ta% of one-third of one per cent which a commission merchant must pay as is contribution to the public revenues is not included among the e%penses which, according to the mutual agreement, Muertegui & Aboiti should have paid as the owners of the goods sold in !ebu by &'ui(ena & !o#, Gfor, as we have already said, the record discloses no proof of such an obligationH the evidence shows that &'ui(ena & !o#, in furnishing partial accounts to Muertegui & Aboiti of the results of the sales of the goods which it had received on commission, included in the letters it addressed to the latter e%planatory notes of the amount of the e%penses incurred in ma)ing the commission sales, among which e%penses was included the amount of the said ta% of one-third of one per cent, but without e%plaining what )ind of ta%, whether it was the ta% on the selling price of the goods sold, by the commission agents, or whether it was the internal revenue ta% which this latter concern had to pay for the pursuit of its business or occupation of commission merchants# ?y reason of this lac) of detail with respect to the )ind of ta% paid by &'ui(ena & !o#, the owners of the goods sold, as principals, continued to consent to and approve the acts of their agents in charging them with the amount of the internal revenue ta%es paid by &'ui(ena & !o# in their capacity of commission merchants, and accepted the deductions of the amounts of such ta%es from the value of the merchandise and the items of such amounts in the accounts rendered, as if the principals were responsible for the payment of these ta%es to the ?ureau of /nternal ;evenue# Muertegui & Aboiti accepted as legal the deductions made by &'ui(ena & !o#, under the erroneous belief that the ta% the payment of which they accepted, was that fi%ed on the price of the goods sold by &'ui(ena & !o#, inasmuch as the plaintiff in its letters merely referred to the payment of the internal revenue ta%, without specifying which ta%, and the defendants did not notice this error, so important and e%tremely detrimental to their rights and interests until, in the first part of &ctober, 1909, a demand was made upon them by the municipal treasurer of Palompon for the payment of the one-third of one per cent on the sales of the hemp and copra sold in !ebu by &'ui(ena & !o# by order and on account of the defendants, from the 1st of &ctober to the *1st of 7ecember, 1909# ?y reason of this demand the latter had to pay to the

<overnment the sum of P+,A19#I0, as proven by 2%hibit 109, found on page 1:+ of the record# 0ince then C&ctober, 1909D the defendants have been aware of the fact that &'ui(ena & !o# had charged to their account the business and occupation ta% which the plaintiff company, as commission merchants, were obliged to pay to the <overnment, and that Muertegui & Aboiti were not obliged to pay the ta% levied upon their said commission agents# $he defendants, therefore, refused to pay the balance of the account C2%hibit JI, pp# 1+1-1*+ of the recordD amounting to P*,1+0#81, which is the amount demanded of them in the complaint and the e%act sum of the amounts which, as ta%es, developed upon &'ui(ena & !o# to pay as commission merchants, and this fact is recogni ed by the manager of &'ui(ena & !o#, Anastacio Aldecoa, as disclosed by his affidavit, found on page +1: of the record# /f in their letters written prior to the said account of &ctober, 1909, Muertegui & Aboiti erroneously accepted and approved the reduction from the value of their merchandise of the amounts which &'ui(ena & !o# had paid as the internal revenue ta% on commission merchants, and consented to these amounts being charged against them in their previous accounts, which certainly were not presented, e%cepting the &ctober account above mentioned, it is then very apparent that the collection made by the commission-agentEs firm was illegal, and li)ewise that the payment made with a part of the value of the merchandise belonging to its principals was notoriously improper, since the consent and acceptance which the principals had given in respect to the deductions and accounting made by &'ui(ena & !o# to the detriment of the interests of Muertegui & Aboiti were null and void# Article 1+AJ of the !ivil !ode provides3 F!onsent given by error, under violence, by intimidation, or deceit shall be void#F
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$he article following, numbered 1+AA, prescribes that, in order that the error invalidate the consent, it must refer to the substance of the thing which is the ob,ect of the contract, or to those conditions of the same thereof which were chiefly the cause of its e%ecution# 0o then Muertegui & Aboiti erroneously allowed the collection which their commission agents, &'ui(ena & !o#, unduly made by deducting from the value of the merchandise shipped to the latter for sale, the amount of the ta% which the principals were not obliged to pay, but which it was solely incumbent upon the commission agents to pay# $herefore, if in the accounts presented by &'ui(ena & !o# certain amounts for internal revenue ta%es charged against the commission agents were given as paid by Muertegui & Aboiti , the payment or the entry was erroneously accepted by the defendants, and for this reason they were not obliged to pay them# Article 189J of the !ivil !ode prescribes3 F/f a thing is received when there was no right to claim it and which, through an error, has been unduly delivered, there arises an obligation to restore the same#F
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&'ui(ena & !o# credited itself with various sums which as commission merchants it had paid for ta%es, and on this account received and paid to itself the said sums which from time to time it had deducted from the value of the merchandise belonging to Muertegui & Aboiti , without having any right whatever to collect them and notwithstanding that its principals had, from May 1908 to

0eptember 1909, erroneously approved and accepted the said deductions# As soon as it is shown that an error occurred which affected Muertegui & Aboiti to the pre,udice of their interests and benefitted their commission agents, &'ui(ena & !o#, who through such error succeeded in relieving themselves from the payment of a lawful ta% and in charging it to Muertegui & Aboiti , the obligation of course arises to restore what was unduly paid# As Muertegui & Aboiti , instead of claiming what they unduly paid, the e%act amount of which is not satisfactorily shown in the record, confine themselves to ob,ecting to the payment of the sum that is he sub,ect matter of the complaint and which is apparently a part of the amount of the ta%es credited to itself by &'ui(ena & !o# in the accounts rendered by it to its principals, the amount of which appears in the last account as a balance owing by the said principals, there is no good and sufficient reason by which this court can hold Muertegui & Aboiti liable for the payment of the sum claimed, because, according to law and the terms of the verbal contract entered into between the parties, they are not obliged to pay the said ta% on commission merchants# >or the foregoing reasons, the ,udgment appealed from must be reversed and Muertegui & Aboiti absolved from the complaint filed by &'ui(ena & !o#, as they are hereby absolved, without special findings as to the costs of both instances# 0o ordered# Arellano, C.J., Bohnson and Araullo, JJ., concur#