With Annotations-Nat'l Coal vs Collector of Internal Revenue.pdf

7/1/2015 PHILIPPINEREPORTSANNOTATEDVOLUME046

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[No. 22619. December 2, 1924]

NATIONAL COAL COMPANY, plaintiff and appellee, vs.THE COLLECTOR OF INTERNAL REVENUE, defendantand appellant.

THE NATIONAL COAL COMPANY, A PRIVATECORPORATION SUBJECT TO THE PAYMENT OFINTERNAL REVENUE UNDER THE PROVISIONS OFSECTION 1496 OF THE ADMINISTRATIVE CODE.TheNational

584

584 PHILIPPINE REPORTS ANNOTATED

National Coal Co. vs. Collector of Internal Revenue

Coal Company is a private corporation. The fact that theGovernment happens to be a stockholder therein does not make ita public corporation. It is subject to all the provisions of theCorporation Law in so far as they are not inconsistent with ActNo. 2705. As a private corporation, it has no greater rights,powers, or privileges than any other corporation which might beorganized for the same purpose under the Corporation Law. Itwas not the intention of the legislature to give it a preference, orright, or privilege over other legitimate private corporations in themining of coal. The law made no provision for its occupation andoperation of coalbearing lands, to the exclusion of other personsor corporations, under proper permission. The National CoalCompany being a private corporation, neither the lessee nor theowner of the lands upon which it mined coal for the year inquestion, is subject to the payment of the internal revenue dutyprovided for in section 1496 of the Administrative Code.

APPEAL from a judgment of the Court of First Instance ofManila. Concepcion, J.



The facts are stated in the opinion of the court.AttorneyGeneral VillaReal for appellant.Perfecto J. Salas Rodriguez for appellee.

JOHNSON, J.:

This action was brought in the Court of First Instance ofthe City of Manila on the 17th day of July, 1923, for thepurpose of recovering the sum of P12,044.68, alleged tohave been paid under protest by the plaintiff company tothe defendant, as specific tax on 24,089.3 tons of coal. Saidcompany is a corporation created by Act No. 2705 of thePhilippine Legislature for the purpose of developing thecoal industry in the Philippine Islands and is actuallyengaged in coal mining on reserved lands belonging to theGovernment. It claimed exemption from taxes under theprovisions of sections 14 and 15 of Act No. 2719, andprayed for a judgment ordering the defendant to refund tothe plaintiff said sum of P12,044.68, with legal interest from the date of the presentation of the complaint, and costsagainst the defendant.

585

VOL. 46, DECEMBER 2, 1924 585National Coal Co. vs. Collector of Internal Revenue

The defendant answered denying generally and specificallyall the material allegations of the complaint, except thelegal existence and personality of the plaintiff. As a specialdefense, the defendant alleged (a) that the sum ofP12,044.68 was paid by the plaintiff without protest, and(b) that said sum was due and owing from the plaintiff tothe Government of the Philippine Islands under theprovisions of section 1496 of the Administrative Code, andprayed that the complaint be dismissed, with costs againstthe plaintiff.

Upon the issue thus presented, the case was brought onfor trial. After a consideration of the evidence adduced byboth parties, the Honorable Pedro Concepcion, judge, heldthat the words "lands owned by any person, etc.," in section15 of Act No. 2719 should be understood to mean "landsheld in lease or usufruct," in harmony with the otherprovisions of said Act that the coal lands possessed by theplaintiff, belonging to the Government, fell within the



I.

II.

provisions of section 15 of Act No. 2719 and that a tax ofP0.04 per ton of 1,016 kilos on each ton of coal extractedtherefrom, as provided in said section, was the only taxwhich should be collected from the plaintiff and sentencedthe defendant to refund to the plaintiff the sum ofP11,081.11 which is the difference between the amountcollected under section 1496 of the Administrative Codeand the amount which should have been collected underthe provisions of said section 15 of Act No. 2719. From thatsentence the defendant appealed, and now makes thefollowing assignments of error:

The court below erred in holding that section 15 ofAct No. 2719 does not refer to coal lands owned bypersons and corporations.The court below erred in holding that the plaintiffwas not subject to the tax prescribed in section 1496of the Administrative Code.

The question confronting us in this appeal is whether theplaintiff is subject to the taxes under section 15 of

586

586 PHILIPPINE REPORTS ANNOTATEDNational Coal Co. vs. Collector of Internal Revenue

Act No. 2719, or to the specific taxes under section 1496 ofthe Administrative Code.

The plaintiff corporation was created on the 10th day ofMarch, 1917, by Act No. 2705, for the purpose of developingthe coal industry in the Philippine Islands, in harmonywith the general plan of the Government to encourage thedevelopment of the natural resources of the country, and toprovide facilities therefor. By said Act, the company wasgranted the general powers of a corporation "and suchother powers as may be necessary to enable it to prosecutethe business of developing coal deposits in the PhilippineIslands, and of mining, extracting, transporting and sellingthe coal contained in said deposits." (Sec. 2, Act No. 2705.)By the same law (Act No. 2705) the Government of thePhilippine Islands is made the majority stockholder,evidently in order to insure proper governmentalsupervision and control, and thus to place the Governmentin a position to render all possible encouragement,



assistance and help in the prosecution and furtherance ofthe company's business.

On May 14, 1917, two months after the passage of ActNo. 2705, creating the National Coal Company, thePhilippine Legislature passed Act No. 2719 "to provide forthe leasing and development of coal lands in the PhilippineIslands." On October 18, 1917, upon petition of theNational Coal Company, the GovernorGeneral, byProclamation No. 39, withdrew "from settlement, entry,sale or other disposition, all coalbearing public landswithin the Province of Zamboanga, Department ofMindanao and Sulu, and the Island of Polillo, Province ofTayabas." Almost immediately after the issuance of saidproclamation the National Coal Company took possessionof the coal lands within the said reservation, with an areaof about 400 hectares, without any further formality,contract or lease. Of the 30,000 shares of stock issued bythe company, the Government of the Philippine Islands isthe owner of 29,809 shares, that is, of 99 1/3 per centum ofthe whole capital stock.

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If we understand the theory of the plaintiffappellee, it is,that it claims to be the owner of the land from which it hasmined the coal in question and is therefore subject to theprovisions of section 15 of Act No. 2719 and not to theprovisions of section 1496 of the Administrative Code. Thatcontention of the plaintiff leads us to an examination of theevidence upon the question of the ownership of the landfrom which the coal in question was mined. Was theplaintiff the owner of the land from which the coal inquestion was mined ? If the evidence shows the affirmative,then the judgment should be affirmed. If the evidenceshows that the land does not belong to the plaintiff, thenthe judgment should be reversed, unless the plaintiff'srights f all under section 3 of said Act.

The only witness presented by the plaintiff upon thequestion of the ownership of the land in question Was Mr.Dalmacio Costas, who stated that he was a member of theboard of directors of the plaintiff corporation that theplaintiff corporation took possession of the land in question



by virtue of the proclamation of the GovernorGeneral,known as Proclamation No. 39 of the year 1917 that nodocument had been issued in favor of the plaintiffcorporation that said corporation had received nopermission from the Secretary of Agriculture and NaturalResources that it took possession of said lands covering anarea of about 400 hectares, from which the coal in questionwas mined, solely, by virtue of said proclamation (ExhibitB, No. 39).

Said proclamation (Exhibit B) was issued by FrancisBurton Harrison, then GovernorGeneral, on the 18th dayof October, 1917, and provided: "Pursuant to the provisionof section 71 of Act No. 926, I hereby withdraw fromsettlement, entry, sale, or other disposition, all coalbearingpublic lands within the Province of Zamboanga,Department of Mindanao and Sulu, and the Island ofPolillo, Province of Tayabas." It will be noted that saidproclamation only provided that all coalbearing publiclands within said province and island should be withdrawnfrom settlement, entry, sale, or other disposition. There isnothing

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in said proclamation which authorizes the plaintiff or anyother person to enter upon said reservations and to minecoal, and no provision of law has been called to ourattention, by virtue of which the plaintiff was entitled toenter upon any of the lands so reserved by saidproclamation without first obtaining permission therefor.

The plaintiff is. a private corporation. The mere fact thatthe Government happens to be a majority stockholder doesnot make it a public corporation. Act No. 2705, as amendedby Act No. 2822, makes it subject to all of the provisions ofthe Corporation Law, in so far as they are not inconsistentwith said Act (No. 2705). No provisions of Act No. 2705 arefound to be inconsistent with the provisions of theCorporation Law. As a private corporation, it has nogreater rights, powers or privileges than any othercorporation which might be organized for the same purposeunder the Corporation Law, and certainly it was not theintention of the Legislature to give it a preference or right



(1)

(2)

(3)

or privilege over other legitimate private corporations inthe mining of coal. While it is true that said proclamationNo. 39 withdrew "from settlement, entry, sale, or otherdisposition of coalbearing public lands within the Provinceof Zamboanga * * * and the Island of Polillo," it made noprovision for the occupation and operation by the plaintiff,to the exclusion of other persons or corporations who might,under proper permission, enter upon and operate coalmines.

On the 14th day of May, 1917, and before the issuance ofsaid proclamation, the Legislature of the Philippine Islandsin "an Act for the leasing and development of coal lands inthe Philippine Islands" (Act No. 2719), made liberalprovisions for the encouragement of the coal miningindustry. Section 1 of said Act provides: "Coalbearinglands of the public domain in the Philippine Islands shallnot be disposed of in any manner except as provided in thisAct," thereby giving a clear indication that no "coalbearinglands of the public domain" had been disposed of by virtueof said proclamation.

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Neither is there any provision in Act No. 2705 creating theNational Coal Company, nor in the amendments thereoffound in Act No. 2822, which authorizes the National CoalCompany to enter upon any of the reserved coal landswithout first having obtained permission from theSecretary of Agriculture and Natural Resources.

The following propositions are fully sustained by thefacts and the law:

The National Coal Company is an ordinary privatecorporation organized under Act No. 2705, and hasno greater powers nor privileges than the ordinaryprivate corporation, except those mentioned,perhaps, in section 10 of Act No. 2719, and they donot change the situation here.It mined on public lands between the month of July,1920, and the month of March, 1922, 24,089.3 tonsof coal.Upon demand of the Collector of Internal Revenue



(4)

(5)

(6)

it paid a tax of P0.50 a ton, as taxes under theprovisions of article 1496 of the AdministrativeCode on the 15th day of December, 1922.It is admitted that it is neither the owner nor thelessee of the lands upon which said coal was mined.The proclamation of Francis Burton Harrison,GovernorGeneral, of the 18th day of October, 1917,by authority of section 1 of Act No. 926,withdrawing from settlement, entry, sale, or otherdisposition all coalbearing public lands within theProvince of Zamboanga and the Island of Polillo,was not a reservation for the benefit of the NationalCoal Company, but for any person or corporation ofthe Philippine Islands or of the United States.That the National Coal Company entered upon saidland and mined said coal, so far as the recordshows, without any lease or other authority f romeither. the Secretary of Agriculture and NaturalResources or any person having the power to granta leave or authority.

From all of the foregoing facts we find that the issue is welldefined between the plaintiff and the defendant. Theplaintiff contends that it was liable only to pay the internal

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revenue and other fees and taxes provided for undersection 15 of Act No. 2719 while the defendant contends,under the f acts of record, that the plaintiff is obliged to paythe internal revenue duty provided for in section 1496 ofthe Administrative Code. That being the issue, anexamination of the provisions of Act No. 2719 becomesnecessary.

An examination of said Act (No. 2719) discloses thefollowing facts important for consideration here: First. All"coalbearing lands of the public domain in the PhilippineIslands shall not be disposed of in any manner except asprovided in this Act."

Second. Provisions for leasing by the Secretary ofAgriculture and Natural Resources of "unreserved,



unappropriated coalbearing public lands," and theobligation to the Government which shall be imposed bysaid Secretary upon the lessee.

Third. The internal revenue duty and tax which must bepaid upon coalbearing lands owned by any person, firm,association or corporation.

To repeat, it will be noted, first, that Act No. 2719provides an internal revenue duty and tax uponunreserved, unappropriated coalbearing public landswhich may be leased by the Secretary of Agriculture andNatural Resources and, second, that said Act (No. 2719)provides an internal revenue duty and tax imposed uponany person, firm, association or corporation, who may bethe owner of "coalbearing lands." A reading of said Actclearly shows that the tax imposed thereby is imposed upontwo classes of persons onlylessees and owners.

The lower court had some trouble in determining whatwas the correct interpretation of section 15 of said Act, byreason of what he believed to be some difference in theinterpretation of the language used in Spanish andEnglish. While there is some ground for confusion in theuse of the language in Spanish and English, we arepersuaded, considering all the provisions of said Act, thatsaid section 15 has reference only to persons, firms,associations or corporations which had already, prior to theexistence of said

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Act, become the owners of coal lands. Section 15 cannotcertainly refer to "holders or lessees of coal lands" for thereason that practically all of the other provisions of saidAct has reference to lessees or holders. If section 15 meansthat the persons, firms, associations, or corporationsmentioned therein are holders or lessees of coal lands only,it is difficult to understand why the internal revenue dutyand tax in said section was made different from theobligations mentioned in section 3 of said Act, imposedupon lessees or holders.

From all of the foregoing, it seems to be made plain thatthe plaintiff is neither a lessee nor an owner of coalbearinglands, and is, therefore, not subject to any other provisions



of Act No. 2719. But, is the plaintiff subject to theprovisions of section 1496 of the Administrative Code?

Section 1496 of the Administrative Code provides that"on all coal and coke there shall be collected, per metricton, fifty centavos." Said section (1496) is a part of article 6,which provides for specific taxes. Said article provides for aspecific internal revenue tax upon all things manufacturedor produced in the Philippine Islands for domestic sale orconsumption, and upon things imported from the UnitedStates or foreign countries. It having been demonstratedthat the plaintiff has produced coal in the PhilippineIslands and is not a lessee or owner of the land from whichthe coal was produced, we are clearly of the opinion, and sohold, that it is subject to pay the internal revenue taxunder the provisions of section 1496 of the AdministrativeCode, and is not subject to the payment of the internalrevenue tax under section 15 of Act No. 2719, nor to anyother provisions of said Act.

Therefore, the judgment appealed from is herebyrevoked, and the defendant is hereby relieved from allresponsibility under the complaint. And, without anyfinding as to costs, it is so ordered.

Street, Malcolm, Avancea, Villamor, Ostrand, andRomualdez, JJ., concur.

Judgment reversed.

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592 PHILIPPINE REPORTS ANNOTATEDOng Guan Can and Bank of the P. I. vs. Century Ins. Co.

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With Annotations-Nat'l Coal vs Collector of Internal Revenue.pdf