Oquiñena v. Muertegui
REITERATIONFacts
The Antecedents: Oquiñena & Company (plaintiff) and Muertegui & Aboitiz (defendants) maintained commercial relations from September 1908 to March 1910. Muertegui & Aboitiz shipped hemp and other commodities to Oquiñena & Company for sale on commission. A balance of accounts struck on March 16, 1910, showed the defendants owing P3,120.81. Oquiñena & Company alleged non-payment despite demands. Procedural History: The Court of First Instance of Cebu rendered a judgment ordering the defendants to pay the plaintiff P3,120.81, with legal interest and costs. The defendants appealed, arguing that the sum claimed was not a balance from account settlement but an internal revenue tax paid by the plaintiff, which was never authorized by the defendants. The Petition: The defendants appealed the judgment, asserting that the P3,120.81 represented an internal revenue tax paid by the plaintiff as a commission merchant, which they were not obligated to reimburse.
Issue(s)
Whether the sum of P3,120.81, representing internal revenue tax paid by the plaintiff as a commission merchant, is chargeable to the defendants as principals. Whether the defendants' prior approval of accounts containing such charges constitutes a valid consent to pay the tax.
Ruling
The Supreme Court reversed the judgment of the Court of First Instance, absolving the defendants from the complaint. The Court held that the plaintiff, as a commission merchant, was solely liable for the internal revenue tax on its business, and there was no proof of an agreement obligating the defendants to reimburse this tax. The prior approval of accounts by the defendants was deemed to be based on error and thus voidable.
Ratio Decidendi
On whether the sum of P3,120.81 is chargeable to the defendants: The Court held that the P3,120.81 represented the internal revenue tax paid by Oquiñena & Company in its capacity as a commission merchant, as explicitly prescribed by Section 140 of Act No. 1189. The defendants, Muertegui & Aboitiz, had paid their own tax as merchants on the goods sold, as evidenced by Exhibits 108 and 109. There was no satisfactory proof that the contracting parties stipulated that the principals should also pay the tax levied upon the commission agents for their business or occupation. Therefore, the plaintiff had no right to collect this tax from the defendants. On whether the defendants' prior approval of accounts constitutes valid consent: The Court found that the defendants had erroneously approved and accepted the deductions for internal revenue taxes in previous accounts rendered by Oquiñena & Company. This error stemmed from the plaintiff's failure to specify that the tax charged was the one imposed on commission merchants for their occupation, rather than the tax on the selling price of the goods. The defendants only became aware of this distinction when they were subsequently assessed the tax themselves by the municipal treasurer. According to Article 1265 of the Civil Code, consent given by error is voidable. Article 1266 further clarifies that the error must pertain to the substance of the contract or its principal cause. In this case, the error regarding the nature of the tax was substantial and detrimental to the defendants' interests, rendering their consent to the deduction voidable. Consequently, they were not obligated to pay the sum claimed, as it represented an undue payment under Article 1895 of the Civil Code, which mandates the restoration of what has been unduly delivered through error.
Main Doctrine
A commission merchant is liable for the internal revenue tax on their business or occupation, and this tax cannot be charged to the principal unless there is a clear and express agreement to that effect. Consent given by the principal to such a charge, based on error regarding the nature of the tax, is voidable.