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G.R. No. L-23174 September 18, 1967
CONCEPCION MACABINGKIL, petitioner, vs. HON. NICASIO YATCO,
Judge of the Court First Instance of Rizal, Quezon City Branch,
PROVINCIAL SHERIFF OF RIZAL and SHERIFF OF QUEZON CITY, IRENE DE
LEON and her husband, VICENTE LLANES,respondents.
Teofilo V. Ogsime for petitioner. Lea T. Castelo for
respondents.
FERNANDO, J.:
The principal legal question posed by this original petition for
a writ of certiorari and prohibition with preliminary injunction is
one of procedural due process. It arose from the applicability of
an order for demolition of April 18, 1964 to the house of
petitioner, such order arising from the finality of a judgment in
Civil Case No. Q-5866 of the Court of First Instance of Quezon
City, thereafter affirmed by the Court of Appeals in CA-G.R. No.
31169-R, petitioner contending that she has not a party to such a
case and was denied a chance to intervene therein.
The petition for certiorari and prohibition with preliminary
injunction was filed with this Court on June 13, 1964, petitioner
stating that she was a resident of and with postal address at
Block-E-148, East Avenue Subdivision, Pinahan Area, Diliman, Quezon
City, Philippines. As respondents, she named the then acting Judge
of Court of First Instance of Rizal, Quezon City Branch, the Hon.
Nicasio Yatco; the then Provincial Sheriff of Rizal and the Sheriff
of Quezon City; and respondent spouses Irene de Leon and Vicente
Llanes.1
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It was then alleged that on February 26, 1964 when the Deputy
Sheriff of Quezon City served upon petitioner copy of an alias writ
of execution, she learned for the first time that a decision was
rendered in a certain Civil Case No. Q-5866 with respondent
spouses, plaintiffs therein, being the prevailing parties against
the People's Homesite and Housing Corporation (herein referred to
as the PHHC), a copy of which writ of execution as well as the
final decision of the Court of Appeals affirming the lower court
decision being included as annexes.2 Then on April 15, 1964,
respondent spouses as plaintiffs in the above Civil Case No. Q-5866
filed an ex-parte motion for a special order of demolition, which
motion was set for hearing on April 18, 1964, on which very day,
the order of the court granting the same was issued addressed to
the Sheriff of Quezon City "to demolish the houses existing in the
premises of the land in question, which have been erected or
occupied by squatters, and thereafter deliver the same to the
spouses."3
Upon being served with such order of demolition on June 13,
1964, petitioner the next day immediately filed an urgent petition
to lift the alias writ of execution and order of demolition with
preliminary injunction alleging that she "is not a squatter on the
Lot in question, she having acquired her rights and interest over
the said Lot by virtue of Resolution No. 370 dated December 18,
1959, and again by virtue of Resolution No. 550, dated May 16,
1961, and that all of said Resolutions were duly passed upon by the
Board of Directors of defendant PHHC, and her house having been
improved by virtue of the authority of the General Manager of the
PHHC to secure for herself a building permit from the authorities
concerned, and that her rights over the said Lot in question were
acquired after due investigation of her qualification to acquire
the same with priority over any other person or persons who are not
occupants of the subject Lot," more so as to persons who are
disqualified in accordance with law and that granting arguendo that
plaintiff spouses did have a conditional contract to sell executed
by defendant PHHC, the same was obtained through fraud and
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misrepresentation or in connivance with some well placed
employees of the PHHC and that such contract "is against the law,"
referring to the PHHC Charter as amended, and the many established
policies of the said Government Corporation, "which facts could
have been duly proved by petitioner if, only, she was impleaded in
the complaint, or given a chance to intervene . . . ."4
It was then asserted that although "a decision was rendered in
the instant case, the same should not bind petitioner because, as
already stated, your petitioner had not been impleaded in the
plaintiff's complaint, or at least, given a chance to intervene . .
. ." Petitioner, in the said urgent petition, likewise invoked the
principle that respondent spouses did not exhaust the
administrative remedies before filing the action and that the court
was in error in declaring null and void Resolution No. 550 of the
PHHC in her favor as shown by an Executive Directive of February
20, 1964 upholding her rights and interest on the lot in question,
and ordering the cancellation of the conditional contract to sell
in favor of respondent Irene de Leon. She then reiterated that the
decision in Civil Case No. Q-5866 could not in any way bind her for
not being a party in such a case and that to allow respondent
spouses to take possession of the lot in question and remove
petitioner's house and other improvements legally constructed
thereon by virtue of such order of demolition dated April 18, 1964,
would not only cause great and irreparable injury, but would also
cause injustice to her by depriving her of her property without due
process of law. On the date originally set for the hearing of such
urgent petition on June 20, 1954, respondent spouses through
counsel requested deferment as well as permission to file a written
opposition, which was granted by the court, the hearing being reset
on June 27, 1964, but on such subsequent date, without petitioner
having as yet been furnished with such written opposition, a fact
being made known to the court, respondent Judge "without hearing
the matter as alleged in said petition and consequently without any
evidence received, denied her
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petition to lift alias writ of execution and order of demolition
with preliminary injunction."5
Under the above circumstances, it is petitioner's contention
that she could not be bound by the judgment and that the refusal to
lift the alias writ of execution and the order of demolition,
without hearing the matter as alleged in said petition and without
receiving any evidence and her ejectment from the lot in question
of which she was in actual possession "would constitute a
deprivation of property rights without due process of law."6 The
Provincial Sheriff of Rizal and the Sheriff of Quezon City were
made respondents for they "threatened to enforce said writ of
execution and order of demolition," as a matter of fact advising
petitioner that unless a restraining order from a competent court
could be secured, her house would be demolished.7 She then alleged
that to enforce the writ of execution and order of demolition would
be "to work unwarranted hardship and irreparable damage and
injustice upon her without having been accorded her day in court,"
reiterating that thereby she would be deprived of her property
rights without due process of law as she was a stranger to such a
case never having been made a party to it.8 She then filed this
petition for a writ of certiorari and prohibition with preliminary
injunction, there being no appeal.9 She likewise expressed her
willingness "to post a bond sufficient in amount as may be
determined by this Honorable Court conditioned for the payment of
damages that may be awarded in case the writ for preliminary
injunction prayed for be found unmeritorious."10
On July 15, 1964, a resolution giving due course to the above
petition for a writ of certiorari and prohibition, likewise
granting the prayer for preliminary injunction upon posting a bond
of P1,000.00, was issued by this Court.
In the answer to the petition filed on August 7, 1964,
respondents sought to meet the due process question squarely by the
allegation
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that in the aforesaid Case No. Q-5866, upon the finality of
which both the writ of execution and the order of demolition were
issued "petitioner could have appealed the order . . . denying the
motion for leave to intervene . . . ." Moreover, respondents
deferred to another civil case, Q-5411, wherein respondent spouses
as plaintiffs filed a complaint against the PHHC to compel it to
execute the conditional contract to sell covering the disputed lot
and restraining it from awarding or selling the same to one of the
defendants, petitioner herein, alleging further that after they
sought to have the said case dismissed without prejudice, the
defendant PHHC having executed a conditional contract to sell in
favor of the wife, respondent Irene de Leon, which motion was
granted in an order of respondent Judge Nicasio Yatco on May 27,
1961, petitioner as defendant could have opposed such motion or
could have thereafter appealed. Accordingly, respondents after
mentioning that petitioner failed to perfect an appeal in both
instances added: "It is therefore wrong to say now that in ejecting
the petitioner from this lot, she is unjustly deprived of her
property without due process of law."11
For further clarification of the inter-relationship between
petitioner and the PHHC on the one hand and the respondent spouses
and the PHHC on the other, with reference to the disputed lot, the
facts as found by the Court of Appeals in its decision of August
31, 1963, affirming the decision in Civil Case No. Q-5866, should
prove illuminating. Thus:
The basic facts are not seriously disputed.1awphl.nt
On January 30, 1957, Plaintiff Irene de Leon filed with the
People's Homesite & Housing Corporation, PHHC for convenience,
an application to purchase the latter's lot 27, Block E-148 of the
East Avenue Subdivision, Quezon City. The application was approved
by defendant corporation on February 1, 1957, and accordingly
plaintiff was issued an order of payment requiring her to pay in
advance 10% or the sum of P1,053.00, of the total value of the
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property. The advance payment required of her was made and
plaintiff was issued a passbook, after which several installments
were made.
On December 18, 1959, the PHHC Board of Directors passed and
approved Resolution No. 370 cancelling the award thus made in favor
of plaintiff De Leon and, instead, awarding the same property to
one Concepcion Makabingkil who, as a squatter on the lot, claims to
have a preferential right in the matter of awards. But before this
Resolution No. 370 could be implemented and the property formally
awarded to Makabingkil, Plaintiff De Leon filed with the Court of
First Instance of Quezon City a complaint for injunction docketed
as Civil Case No. Q-5411 against the PHHC, Makabingkil and three
others. Upon application, a Writ of preliminary injunction was
issued by that Court temporarily enjoining the PHHC from
implementing said resolution.
At a pre-trial conference in said Civil Case Q-5411, the PHHC,
duly represented by its authorized officers and representatives,
agreed to reconsider Res. 370 and to respect the award previously
made in favor of De Leon, and, pursuant thereto, passed and
approved Resolution No. 430 which authorizes the award of the lot
in dispute to plaintiff De Leon. Making good its commitment, the
PHHC on March 27, 1961, executed a Conditional Contract to Sell the
property to plaintiff Irene de Leon, who, on the basis of that
pre-trial agreement and the Contract to Sell thus executed in her
favor by the PHHC, moved to dismiss Civil Case Q-5411 without
prejudice and fulfilled partly her obligation under the Contract by
paying several installment more. Without objection on the part of
either of the defendants therein, the case, as prayed for, was
ordered dismissed without prejudice.
Shortly after the dismissal of Civil Case No. Q-5411, or on May
16, 1961, the Board again passed and approved Resolution No.
550
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reconsidering altogether its commitments to plaintiff De Leon,
totally disregarding the Conditional Contract to Sell previously
executed, and reawarding the subject-property to Makabingkil.
It was precisely at that stage that the above decision of the
Court of Appeals noted that respondent spouses as plaintiffs
instituted Civil Case Q-5866 for injunction with damages "against
the PHHC seeking, among others, to enjoin the latter, its officers,
representatives, agents or persons acting for and in its behalf
from implementing PHHC Board Resolution No. 550 dated May 16, 1961,
or from awarding or selling the lot in question to Concepcion
Makabingkil or any other person or persons." What is even more
noteworthy is that, as shown in the petition, petitioner
Makabingkil was at no time named a party and could not therefore be
heard on a matter wherein her vital rights were undoubtedly
involved.
From the above recital of undisputed facts, the picture clearly
emerges. Petitioner was indeed denied due process. This petition
for certiorari and prohibition possesses merit.
As far back as 1908, U.S. v. Ling Su Fan,12 this Court affixed
the imprimatur of its approval on Webster's definition of
procedural due process. Thus: "By the law of the land is more
clearly intended the general law, a law which hears before it
condemns, which proceeds upon inquiry and renders judgment only
after trial."13 This Court in a 1924 decision, Lopez v. Director of
Lands, after quoting the above added that due process "contemplates
notice and opportunity to be heard before judgment is rendered,
affecting one's person or property." It is satisfied according to
another leading decision: "If the following conditions are present,
namely: (1) There must be a court or tribunal clothed with judicial
power to hear and determine the matter before it; (2) jurisdiction
must be lawfully acquired over the person of the defendant or over
the property which is the subject of the
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proceeding; (3) the defendant must be given an opportunity to be
heard; and (4) judgment must be rendered upon lawful
hearing."14
The due process concept is thus a vital living force in our
jurisprudence. It was so announced in an impressive number of
decisions, not all of which need be recounted here. Fidelity to
such a view has been reinforced by time. Thus in Cuaycong v.
Sengbengco,15 decided in 1960, this Court through the then Justice,
now Chief Justice, Concepcion declared that "acts of Congress, as
well as those of the Executive, can deny due process only under
pain of nullity, and judicial proceedings suffering from the same
flaw are subject to the same sanction, any statutory provision to
the contrary notwithstanding." Only lately, this Court through
Justice Bengzon reiterated that the due process clause "is designed
to secure justice as a living reality; not to sacrifice it by
paying undue homage to formality."16
A 1957 decision, Cruzcosa v. Concepcion,17 is even more
illuminating in so far as the availability of the remedy sought is
concerned. In the language of this Court, speaking through Justice
J.B.L. Reyes: "The petition is clearly meritorious. Petitioners
were conclusively found by the Court of Appeals to be co-owners of
the building in question. Having an interest therein, they should
have been made parties to the ejectment proceedings to give them a
chance to protect their rights; and not having been made parties
thereto, they are not bound and can not be affected by the judgment
rendered therein against their co-owner Catalino Cruzcosa, Jr. . .
. ." Two due process cases deal specifically with a writ of
execution that could not validly be enforced against a party who
was not given his day in court, Sicat v. Reyes,18 and Hamoy vs.
Batingolo.19 According to the former: "The above agreement, which
served as basis for the ejectment of Alipio Sicat, cannot be
binding and conclusive upon the latter, who is not a party to the
case. Indeed, that order, as well as the writ for execution, cannot
legally be enforced against Alipio Sicat for the simple reason
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that he was not given his day in court." From the latter: "The
issue raised in the motion to Rangar is not involved in the appeal
for it concerns a right which he claims over the property which has
not so far been litigated for the reason that he was not made a
party to the case either as plaintiff or as defendant. He only came
to know of the litigation when it was forced out of the property by
the sheriff, and so he filed the present motion to be heard and
prove his title to the property. This he has the right to do as the
most expeditious manner to protect his interest instead of filing a
separate action which generally is long, tedious and
protracted."
Petitioner was therefore right in assertion that "the separate
and collective effect of the Writ of Execution and Order of
Demolition . . . and the respondent Provincial Sheriff's threat to
enforce [the same] is to work unwarranted hardship and irreparable
damage and injustice upon the Petitioner who have not been accorded
her day in court." It would as claimed be tantamount to a
deprivation of her property rights without due process of law. She
is entitled to redress. This petition for certiorari and
prohibition must be granted.
Petitioner's right to due process must be respected. This Court
could go even further. This petition for certiorariand prohibition
could be utilized to determine who has the right to the disputed
lot. This approach of resolving the issue is not without precedent.
Francisco v. City of Davao,20 decided by the then Justice, now
Chief Justice, Concepcion, points the way: ". . . The ends of
justice would not be served, if we now dismiss the case over nine
(9) years after it has been initiated and bade the plaintiff to
start all over again, following the procedure that the defendants
had asked the lower court, but which the latter refused, to
require. At any rate, since the legal question raised in the
pleadings has reached this Court, and the assessment complained of
is manifestly violative of the clear and express provision of the
law, it is best that we decide said question, instead of further
deferring its resolution." The
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records of the case however show that another litigation
involving petitioner, the PHHC, and the respondent spouses is still
pending adjudication. For that reason, any further pronouncement
from this Court would be inappropriate.
WHEREFORE, this petition for certiorari and prohibition is
granted and the preliminary injunction issued made permanent. With
costs against respondent spouses, Irene de Leon and Vicente
Llanes.
G.R. No. L-77194 March 15, 1988
VIRGILIO GASTON, HORTENCIA STARKE, ROMEO GUANZON, OSCAR
VILLANUEVA, JOSE ABELLO, REMO RAMOS, CAROLINA LOPEZ, JESUS ISASI,
MANUEL LACSON, JAVIER LACSON, TITO TAGARAO, EDUARDO SUATENGCO,
AUGUSTO LLAMAS, RODOLFO SIASON, PACIFICO MAGHARI, JR., JOSE
JAMANDRE, AURELIO GAMBOA, ET AL., petitioners, vs. REPUBLIC
PLANTERS BANK, PHILIPPINE SUGAR COMMISSION, and SUGAR REGULATORY
ADMINISTRATION, respondents, ANGEL H. SEVERINO, JR., GLICERIO
JAVELLANA, GLORIA P. DE LA PAZ, JOEY P. DE LA PAZ, ET AL., and
NATIONAL FEDERATION OF SUGARCANE PLANTERS, intervenors.
MELENCIO-HERRERA, J.:
Petitioners are sugar producers, sugarcane planters and millers,
who have come to this Court in their individual capacities and in
representation of other sugar producers, planters and millers, said
to be so numerous that it is impracticable to bring them all before
the Court although the subject matter of the present controversy is
of
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common interest to all sugar producers, whether parties in this
action or not.
Respondent Philippine Sugar Commission (PHILSUCOM, for short)
was formerly the government office tasked with the function of
regulating and supervising the sugar industry until it was
superseded by its co-respondent Sugar Regulatory Administration
(SRA, for brevity) under Executive Order No. 18 on May 28, 1986.
Although said Executive Order abolished the PHILSUCOM, its
existence as a juridical entity was mandated to continue for three
(3) more years "for the purpose of prosecuting and defending suits
by or against it and enables it to settle and close its affairs, to
dispose of and convey its property and to distribute its
assets."
Respondent Republic Planters Bank (briefly, the Bank) is a
commercial banking corporation.
Angel H. Severino, Jr., et al., who are sugarcane planters
planting and milling their sugarcane in different mill districts of
Negros Occidental, were allowed to intervene by the Court, since
they have common cause with petitioners and respondents having
interposed no objection to their intervention. Subsequently, on
January 14,1988, the National Federation of Sugar Planters (NFSP)
also moved to intervene, which the Court allowed on February
16,1988.
Petitioners and Intervenors have come to this Court praying for
a Writ of mandamus commanding respondents:
TO IMPLEMENT AND ACCOMPLISH THE PRIVATIZATION OF REPUBLIC
PLANTERS BANK BY THE TRANSFER AND DISTRIBUTION OF THE SHARES OF
STOCK IN THE SAID BANK; NOW HELD BY AND STILL CARRIED IN THE NAME
OF THE PHILIPPINE SUGAR COMMISSION, TO THE SUGAR PRODUCERS,
PLANTERS AND MILLERS, WHO ARE THE TRUE
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BENEFICIAL OWNERS OF THE 761,416 COMMON SHARES VALUED AT
P36,548.000.00, AND 53,005,045 PREFERRED SHARES (A, B & C) WITH
A TOTAL PAR VALUE OF P254,424,224.72, OR A TOTAL INVESTMENT OF
P290,972,224.72, THE SAID INVESTMENT HAVING BEEN FUNDED BY THE
DEDUCTION OF Pl.00 PER PICUL FROM SUGAR PROCEEDS OF THE SUGAR
PRODUCERS COMMENCING THE YEAR 1978-79 UNTIL THE PRESENT AS
STABILIZATION FUND PURSUANT TO P.D. # 388.
Respondent Bank does not take issue with either petitioners or
its correspondents as it has no beneficial or equitable interest
that may be affected by the ruling in this Petition, but welcomes
the filing of the Petition since it will settle finally the issue
of legal ownership of the questioned shares of stock.
Respondents PHILSUCOM and SRA, for their part, squarely traverse
the petition arguing that no trust results from Section 7 of P.D.
No. 388; that the stabilization fees collected are considered
government funds under the Government Auditing Code; that the
transfer of shares of stock from PHILSUCOM to the sugar producers
would be irregular, if not illegal; and that this suit is barred by
laches.
The Solicitor General aptly summarizes the basic issues thus:
(1) whether the stabilization fees collected from sugar planters
and millers pursuant to Section 7 of P.D. No. 388 are funds in
trust for them, or public funds; and (2) whether shares of stock in
respondent Bank paid for with said stabilization fees belong to the
PHILSUCOM or to the different sugar planters and millers from whom
the fees were collected or levied.
P. D. No. 388, promulgated on February 2,1974, which created the
PHILSUCOM, provided for the collection of a Stabilization Fund as
follows:
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SEC. 7. Capitalization, Special Fund of the Commission,
Development and Stabilization Fund. There is hereby established a
fund for the commission for the purpose of financing the growth and
development of the sugar industry and all its components,
stabilization of the domestic market including the foreign market
to be administered in trust by the Commission and deposited in the
Philippine National Bank derived in the manner herein below cited
from the following sources:
a. Stabilization fund shall be collected as provided for in the
various provisions of this Decree.
b. Stabilization fees shall be collected from planters and
millers in the amount of Two (P2.00) Pesos for every picul produced
and milled for a period of five years from the approval of this
Decree and One (Pl.00) Peso for every picul produced and milled
every year thereafter.
Provided: That fifty (P0.50) centavos per picul of the amount
levied on planters, millers and traders under Section 4(c) of this
Decree will be used for the payment of salaries and wages of
personnel, fringe benefits and allowances of officers and employees
for the purpose of accomplishing and employees for the purpose of
accomplishing the efficient performance of the duties of the
Commission.
Provided, further: That said amount shall constitute a lien on
the sugar quedan and/or warehouse receipts and shall be paid
immediately by the planters and mill companies, sugar centrals and
refineries to the Commission. (paragraphing and bold supplied).
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Section 7 of P.D. No. 388 does provide that the stabilization
fees collected "shall be administered in trust by the Commission."
However, while the element of an intent to create a trust is
present, a resulting trust in favor of the sugar producers, millers
and planters cannot be said to have ensued because the presumptive
intention of the parties is not reasonably ascertainable from the
language of the statute itself.
The doctrine of resulting trusts is founded on the presumed
intention of the parties; and as a general rule, it arises where,
and only where such may be reasonably presumed to be the intention
of the parties, as determined from the facts and circumstances
existing at the time of the transaction out of which it is sought
to be established (89 C.J.S. 947).
No implied trust in favor of the sugar producers either can be
deduced from the imposition of the levy. "The essential Idea of an
implied trust involves a certain antagonism between the cestui que
trust and the trustee even when the trust has not arisen out of
fraud nor out of any transaction of a fraudulent or immoral
character (65 CJ 222). It is not clearly shown from the statute
itself that the PHILSUCOM imposed on itself the obligation of
holding the stabilization fund for the benefit of the sugar
producers. It must be categorically demonstrated that the very
administrative agency which is the source of such regulation would
place a burden on itself (Batchelder v. Central Bank of the
Philippines, L-25071, July 29,1972,46 SCRA 102, citing People v.
Que Po Lay, 94 Phil. 640 [1954]).
Neither can petitioners place reliance on the history of
respondents Bank. They recite that at the beginning, the Bank was
owned by the Roman-Rojas Group. Because it underwent difficulties
early in the year 1978, Mr. Roberto S. Benedicto, then Chairman of
the PHILSUCOM, submitted a proposal to the Central Bank for the
rehabilitation of the Bank. The Central Bank acted favorably on the
proposal at the meeting
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of the Monetary Board on March 31, 1978 subject to the infusion
of fresh capital by the Benedicto Group. Petitioners maintain that
this infusion of fresh capital was accomplished, not by any capital
investment by Mr. Benedicto, but by PHILSUCOM, which set aside the
proceeds of the P1.00 per picul stabilization fund to pay for its
subscription in shares of stock of respondent Bank. It is
petitioners' submission that all shares were placed in PHILSUCOM's
name only out of convenience and necessity and that they are the
true and beneficial owners thereof.
In point of fact, we cannot see our way clear to upholding
petitioners' position that the investment of the proceeds from the
stabilization fund in subscriptions to the capital stock of the
Bank were being made for and on their behalf. That could have been
clarified by the Trust Agreement, dated May 28, 1986, entered into
between PHILSUCOM, as "Trustor" acting through Mr. Fred J. Elizalde
as Officer-in-Charge, and respondent RPB- Trust Department' as
"Trustee," acknowledging that PHILSUCOM holds said shares for and
in behalf of the sugar producers," the latter "being the true and
beneficial owners thereof." The Agreement, however, did not get off
the ground because it failed to receive the approval of the
PHILSUCOM Board of Commissioners as required in the Agreement
itself.
The SRA, which succeeded PHILSUCOM, neither approved the
Agreement because of the adverse opinion of the SRA, Resident
Auditor, dated June 25,1986, which was aimed by the Chairman of the
Commission on Audit, on January 26,1987.
On February 19, 1987, the SRA, resolved to revoke the Trust
Agreement "in the light of the ruling of the Commission on Audit
that the aforementioned Agreement is of doubtful validity."
From the legal standpoint, we find basis for the opinion of the
Commission on Audit reading:
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That the government, PHILSUCOM or its successor-in-interest,
Sugar Regulatory Administration, in particular, owns and stocks.
While it is true that the collected stabilization fees were set
aside by PHILSUCOM to pay its subscription to RPB, it did not
collect said fees for the account of the sugar producers. That
stabilization fees are charges/levies on sugar produced and milled
which accrued to PHILSUCOM under PD 338, as amended. ...
The stabilization fees collected are in the nature of a tax,
which is within the power of the State to impose for the promotion
of the sugar industry (Lutz vs. Araneta, 98 Phil. 148). They
constitute sugar liens (Sec. 7[b], P.D. No. 388). The collections
made accrue to a "Special Fund," a "Development and Stabilization
Fund," almost Identical to the "Sugar Adjustment and Stabilization
Fund" created under Section 6 of Commonwealth Act 567. 1 The tax
collected is not in a pure exercise of the taxing power. It is
levied with a regulatory purpose, to provide means for the
stabilization of the sugar industry. The levy is primarily in the
exercise of the police power of the State (Lutz vs. Araneta,
supra.).
The protection of a large industry constituting one of the great
sources of the state's wealth and therefore directly or indirectly
affecting the welfare of so great a portion of the population of
the State is affected to such an extent by public interests as to
be within the police power of the sovereign. (Johnson vs. State ex
rel. Marey, 128 So. 857, cited in Lutz vs. Araneta, supra).
The stabilization fees in question are levied by the State upon
sugar millers, planters and producers for a special purpose that of
"financing the growth and development of the sugar industry and all
its components, stabilization of the domestic market including the
foreign market the fact that the State has taken possession of
moneys pursuant to law is sufficient to constitute them state
funds, even though they are
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held for a special purpose (Lawrence vs. American Surety Co.,
263 Mich 586, 249 ALR 535, cited in 42 Am. Jur. Sec. 2, p. 718).
Having been levied for a special purpose, the revenues collected
are to be treated as a special fund, to be, in the language of the
statute, "administered in trust' for the purpose intended. Once the
purpose has been fulfilled or abandoned, the balance, if any, is to
be transferred to the general funds of the Government. That is the
essence of the trust intended (See 1987 Constitution, Article VI,
Sec. 29(3), lifted from the 1935 Constitution, Article VI, Sec.
23(l]). 2
The character of the Stabilization Fund as a special fund is
emphasized by the fact that the funds are deposited in the
Philippine National Bank and not in the Philippine Treasury, moneys
from which may be paid out only in pursuance of an appropriation
made by law (1987) Constitution, Article VI, Sec. 29[1],1973
Constitution, Article VIII, Sec. 18[l]).
That the fees were collected from sugar producers, planters and
millers, and that the funds were channeled to the purchase of
shares of stock in respondent Bank do not convert the funds into a
trust fired for their benefit nor make them the beneficial owners
of the shares so purchased. It is but rational that the fees be
collected from them since it is also they who are to be benefited
from the expenditure of the funds derived from it. The investment
in shares of respondent Bank is not alien to the purpose intended
because of the Bank's character as a commodity bank for sugar
conceived for the industry's growth and development. Furthermore,
of note is the fact that one-half, (1/2) or PO.50 per picul, of the
amount levied under P.D. No. 388 is to be utilized for the "payment
of salaries and wages of personnel, fringe benefits and allowances
of officers and employees of PHILSUCOM" thereby immediately
negating the claim that the entire amount levied is in trust for
sugar, producers, planters and millers.
To rule in petitioners' favor would contravene the general
principle that revenues derived from taxes cannot be used for
purely private
-
purposes or for the exclusive benefit of private persons. The
Stabilization Fund is to be utilized for the benefit of the entire
sugar industry, "and all its components, stabilization of the
domestic market," including the foreign market the industry being
of vital importance to the country's economy and to national
interest.
WHEREFORE, the Writ of mandamus is denied and the Petition
hereby dismissed. No costs.
This Decision is immediately executory.
SO ORDERED.
G.R. No. 87479 June 4, 1990
NATIONAL POWER CORPORATION, petitioner, vs. THE PROVINCE OF
ALBAY, ALBAY GOVERNOR ROMEO R. SALALIMA, and ALBAY PROVINCIAL
TREASURER ABUNDIO M. NUEZ, respondents.
Romulo L. Ricafort and Jesus R. Cornago for respondents.
SARMIENTO, J.:
The National Power Corporation (NAPOCOR) questions the power of
the provincial government of Albay to collect real property taxes
on its properties located at Tiwi, Albay, amassed between June 11,
1984 up to March 10, 1987.
It appears that on March 14 and 15, 1989, the respondents caused
the publication of a notice of auction sale involving the
properties of NAPOCOR and the Philippine Geothermal Inc. consisting
of buildings, machines, and similar improvements standing on their
offices at Tiwi,
-
Albay. The amounts to be realized from this advertised auction
sale are supposed to be applied to the tax delinquencies claimed,
as and for, as we said, real property taxes. The back taxes NAPOCOR
has supposedly accumulated were computed at P214,845,184.76.
NAPOCOR opposed the sale, interposing in support of its
non-liability Resolution No. 17-87, of the Fiscal Incentives Review
Board (FIRB), which provides as follows:
BE IT RESOLVED, AS IT IS HEREBY RESOLVED, That the tax and duty
exemption privileges of the National Power Corporation, including
those pertaining to its domestic purchases of petroleum and
petroleum products, granted under the terms and conditions of
Commonwealth Act No. 120 (Creating the National Power Corporation,
defining its powers, objectives and functions, and for other
purposes), as amended, are restored effective March 10, 1987,
subject to the following conditions: 1
as well as the Memorandum of Executive Secretary Catalino
Macaraig, which also states thus:
Pursuant to Sections 1 (f) and 2 (e) of Executive Order No. 93,
series of 1986, FIRB Resolution No. 17-87, series of 1987,
restoring, subject to certain conditions prescribed therein, the
tax and duty exemption privileges of NPC as provided under
Commonwealth Act No. 120, as amended, effective March 10, 1987, is
hereby confirmed and approved. 2
On March 10, 1989, the Court resolved to issue a temporary
restraining order directing the Albay provincial government "to
CEASE AND DESIST from selling and disposing of the NAPOCOR
properties subject matter of this petition. 3 It appears, however,
that "the temporary restraining order failed to reach respondents
before the scheduled bidding at
-
10:00 a.m. on March 30, 1989 ... [h]ence, the respondents
proceeded with the bidding wherein the Province of Albay was the
highest bidder. 4
The Court gathers from the records that:
(1) Under Section 13, of Republic Act No. 6395, amending
Commonwealth Act No. 120 (charter of NAPOCOR):
Section 13. Non-profit Character of the Corporation; Exemption
from All Taxes, Duties, Fees, Imposts and Other Charges by the
Government and Government Instrumentalities. The Corporation shall
be non-profit and shall devote all its returns from its capital
investment as well as excess revenues from its operation, for
expansion, To enable the Corporation to pay its indebtedness and
obligations and in furtherance and effective implementation of the
policy enunciated in Section One of this Act, the Corporation,
including its subsidiaries, is hereby declared exempt from the
payment of all forms of taxes, duties, fees, imposts as well as
costs and service fees including filing fees, appeal bonds,
supersedeas bonds, in any court or administrative proceedings.
5
(2) On August 24, 1975, Presidential Decree No. 776 was
promulgated, creating the Fiscal Incentives Review Board (FIRB).
Among other things, the Board was tasked as follows:
Section 2. A Fiscal Incentives Review Board is hereby created
for the purpose of determining what subsidies and tax exemptions
should be modified, withdrawn, revoked or suspended, which shall be
composed of the following officials:
-
Chairman - Secretary of Finance Members - Secretary of Industry
- Director General of the National Economic and Development
Authority - Commissioner of Internal Revenue - Commissioner of
Customs
The Board may recommend to the President of the Philippines and
for reasons of compatibility with the declared economic policy, the
withdrawal, modification, revocation or suspension of the
enforceability of any of the abovestated statutory subsidies or tax
exemption grants, except those granted by the Constitution. To
attain its objectives, the Board may require the assistance of any
appropriate government agency or entity. The Board shall meet once
a month, or oftener at the call of the Secretary of Finance. 6
(3) On June 11, 1984, Presidential Decree No. 1931 was
promulgated, prescribing, among other things, that:
Section 1. The provisions of special or general law to the
contrary notwithstanding, all exemptions from the payment of
duties, taxes, fees, impost and other charges heretofore granted in
favor of government-owned or controlled corporations including
their subsidiaries are hereby withdrawn. 7
(4) Meanwhile, FIRB Resolution No. 10-85 was issued, "restoring"
NAPOCOR's tax exemption effective June 11, 1984 to June 30,
1985;
(5) Thereafter, FIRB Resolution No. 1-86 was issued, granting
tax exemption privileges to NAPOCOR from July 1, 1985 and
indefinitely thereafter;
-
(6) Likewise, FIRB Resolution No. 17-87 was promulgated, giving
NAPOCOR tax exemption privileges effective until March 10, 1987;
8
(7) On December 17, 1986, Executive Order No. 93 was promulgated
by President Corazon Aquino, providing, among other things, as
follows:
SECTION 1. The provisions of any general or special law to the
contrary notwithstanding, all tax and duty incentives granted to
government and private entities are hereby withdrawn, except. 9
and
SECTION 2. The Fiscal Incentives Review Board created under
Presidential Decree No. 776, as amended, is hereby authorized
to:
a) restore tax and/or duty exemptions withdrawn hereunder in
whole or in part;
b) revise the scope and coverage of tax and/or duty exemption
that may be restored;
c) impose conditions for the restoration of tax and/or duty
exemption;
d) prescribe the date or period of effectivity of the
restoration of tax and/or duty exemption;
e) formulate and submit to the President for approval, a
complete system for the grant of subsidies to deserving
beneficiaries, in lieu of or in combination with the restoration of
tax and duty exemptions or preferential treatment in taxation,
indicating the source of funding therefor, eligible beneficiaries
and the terms and conditions
-
for the grant thereof taking into consideration the
international commitments of the Philippines and the necessary
precautions such that the grant of subsidies does not become the
basis for countervailing action. 10
(8) On October 5, 1987, the Office of the President issued the
Memorandum, confirming NAPOCOR's tax exemption aforesaid. 11
The provincial government of Albay now defends the auction sale
in question on the theory that the various FIRB issuances
constitute an undue delegation of the taxing Power and hence, null
and void, under the Constitution. It is also contended that,
insofar as Executive Order No. 93 authorizes the FIRB to grant tax
exemptions, the same is of no force and effect under the
constitutional provision allowing the legislature alone to accord
tax exemption privileges.
It is to be pointed out that under Presidential Decree No. 776,
the power of the FIRB was merely to "recommend to the President of
the Philippines and for reasons of compatibility with the declared
economic policy, the withdrawal, modification, revocation or
suspension of the enforceability of any of the above-cited
statutory subsidies or tax exemption grants, except those granted
by the Constitution." It has no authority to impose taxes or revoke
existing ones, which, after all, under the Constitution, only the
legislature may accomplish. 12 The question therefore is whether or
not the various tax exemptions granted by virtue of FIRB
Resolutions Nos. 10-85, 1-86, and 17-87 are valid and
constitutional.
We shall deal with FIRB No. 17-87 later, but with respect to
FIRB Resolutions Nos. 10- 85 and 1-86, we sustain the provincial
government of Albay.
As we said, the FIRB, under its charter, Presidential Decree No.
776, had been empowered merely to "recommend" tax exemptions. By
itself, it
-
could not have validly prescribed exemptions or restore
taxability. Hence, as of June 11, 1984 (promulgation of
Presidential Decree No. 1931), NAPOCOR had ceased to enjoy tax
exemption privileges.
The fact that under Executive Order No. 93, the FIRB has been
given the prerogative to "restore tax and/or duty exemptions
withdrawn hereunder in whole or in part," 13 and "impose conditions
for ... tax and/or duty exemption" 14 is of no moment. These
provisions are prospective in character and can not affect the
Board's past acts.
The Court is aware that in its preamble, Executive Order No. 93
states:
WHEREAS, a number of affected entities, government and private
were able to get back their tax and duty exemption privileges
through the review mechanism implemented by the Fiscal Incentives
Review Board (FIRB); 15but by no means can we say that it has
"ratified" the acts of FIRB. It is to misinterpret the scope of
FIRB's powers under Presidential Decree No. 776 to say that it has.
Apart from that, Section 2 of the Executive Order was clearly
intended to amend Presidential Decree No. 776, which means, mutatis
mutandis, that FIRB did not have the right, in the first place, to
grant tax exemptions or withdraw existing ones.
Does Executive Order No. 93 constitute an unlawful delegation of
legislative power? It is to be stressed that the provincial
government of Albay admits that as of March 10, 1987 (the date
Resolution No. 17-87 was affirmed by the Memorandum of the Office
of the President, dated October 5, 1987), NAPOCOR's exemption had
been validly restored. What it questions is NAPOCOR's liability in
the interregnum between June 11, 1984, the date its tax privileges
were withdrawn, and March 10, 1987, the date they were purportedly
restored. To be sure, it objects to Executive Order No. 93 as
alledgedly a delegation of legislative power, but only insofar as
its (NAPOCOR's) June 11, 1984 to March 10, 1987 tax accumulation is
concerned. We therefore leave the issue of "delegation" to the
future and its constitutionality when the
-
proper case arises. For the nonce, we leave Executive Order No.
93 alone, and so also, its validity as far as it grants tax
exemptions (through the FIRB) beginning December 17, 1986, the date
of its promulgation.
NAPOCOR must then be held liable for the intervening years
aforesaid. So it has been held:
xxx xxx xxx
The last issue to be resolved is whether or not the
private-respondent is liable for the fixed and deficiency
percentage taxes in the amount of P3,025.96 (i.e. for the period
from January 1, 1946 to February 29, 1948) before the approval of
its municipal franchises. As aforestated, the franchises were
approved by the President only on February 24,1948. Therefore,
before the said date, the private respondent was liable for the
payment of percentage and fixed taxes as seller of light, heat, and
power which, as the petitioner claims, amounted to P3,025.96. The
legislative franchise (R.A. No. 3843) exempted the grantee from all
kinds of taxes other than the 2% tax from the date the original
franchise was granted. The exemption, therefore, did not cover the
period before the franchise was granted, i.e. before February 24,
1948. ... 16
Actually, the State has no reason to decry the taxation of
NAPOCOR's properties, as and by way of real property taxes. Real
property taxes, after all, form part and parcel of the financing
apparatus of the Government in development and nation-building,
particularly in the local government level, Thus:
SEC. 86. Distribution of proceeds. (a) The proceeds of the real
property tax, except as otherwise provided in this Code, shall
accrue to the province, city or municipality where the
-
property subject to the tax is situated and shall be applied by
the respective local government unit for its own use and
benefit.
(b) Barrio shares in real property tax collections. The annual
shares of the barrios in real property tax collections shall be as
follows:
(1) Five per cent of the real property tax collections of the
province and another five percent of the collections of the
municipality shall accrue to the barrio where the property subject
to the tax is situated.
(2) In the case of the city, ten per cent of the collections of
the tax shag likewise accrue to the barrio where the property is
situated.
Thirty per cent of the barrio shares herein referred to may be
spent for salaries or per diems of the barrio officials and other
administrative expenses, while the remaining seventy per cent shall
be utilized for development projects approved by the Secretary of
Local Government and Community Development or by such committee
created, or representatives designated, by him.
SEC. 87. Application of proceeds. (a) The proceeds of the real
property tax pertaining to the city and to the municipality shall
accrue entirely to their respective general funds. In the case of
the province, one-fourth thereof shall accrue to its road and
bridge fund and the remaining three-fourths, to its general
fund.
(b) The entire proceeds of the additional one per cent real
property tax levied for the Special Education Fund created under
R.A. No. 5447 collected in the province or city on real
-
property situated in their respective territorial jurisdictions
shall be distributed as follows:
(1) Collections in the provinces: Fifty per cent shall accrue to
the municipality where the property subject to the tax is situated;
twenty per cent shall accrue to the province; and thirty per cent
shall be remitted to the Treasurer of the Philippines to be
expended exclusively for stabilizing the Special Education Fund in
municipalities, cities and provinces in accordance with the
provisions of Section seven of R.A. No. 5447.
(2) Collections in the cities: Sixty per cent shall be retained
by the city; and forty per cent shall be remitted to the Treasurer
of the Philippines to be expended exclusively for stabilizing the
special education fund in municipalities, cities and provinces as
provided under Section 7 of R.A. No. 5447.
However, any increase in the shares of provinces, cities and
municipalities from said additional tax accruing to their
respective local school boards commencing with fiscal year 1973-74
over what has been actually realized during the fiscal year 1971-72
which, for purposes of this Code, shall remain as the based year,
shall be divided equally between the general fund and the special
education fund of the local government units concerned. The
Secretary of Finance may, however, at his discretion, increase to
not more than seventy-five per cent the amount that shall accrue
annually to the local general fund.
(c) The proceeds of all delinquent taxes and penalties, as well
as the income realized from the use, lease or other
-
disposition of real property acquired by the province or city at
a public auction in accordance with the provisions of this Code,
and the proceeds of the sale of the delinquent real property or, of
the redemption thereof shall accrue to the province, city or
municipality in the same manner and proportion as if the tax or
taxes had been paid in regular course.
(d) The proceeds of the additional real property tax on Idle
private lands shall accrue to the respective general funds of the
province, city and municipality where the land subject to the tax
is situated. 17
To all intents and purposes, real property taxes are funds taken
by the State with one hand and given to the other. In no measure
can the Government be said to have lost anything.
As a rule finally, claims of tax exemption are construed
strongly against the claimant. 18 They must also be shown to exist
clearly and categorically, and supported by clear legal provisions.
19
Taxes are the lifeblood of the nation. 20 Their primary purpose
is to generate funds for the State to finance the needs of the
citizenry and to advance the common weal.
WHEREFORE, the petition is DENIED. No costs. The auction sale of
the petitioner's properties to answer for real estate taxes
accumulated between June 11, 1984 through March 10, 1987 is hereby
declared valid.
SO ORDERED.
G.R. No. L-58897 December 3, 1987
-
LUZON STEVEDORING CORPORATION, petitioner, vs. COURT OF APPEALS,
HIJOS DE F. ESCANO, INC., and DOMESTIC INSURANCE COMPANY OF THE
PHILIPPINES, respondents.
GANCAYCO, J.:
On May 30, 1968 at past 6:00 in the morning a maritime collision
occurred within the vicinity of the entrance to the North Harbor,
Manila between the tanker LSCO "Cavite" owned by Luzon Stevedoring
Corporation and MV "Fernando Escano" a passenger ship owned by
Hijos de F. Escano, Inc. as a result of which said passenger ship
sunk. An action in admiralty was filed by Hijos de F. Escano, Inc.
and Domestic Insurance Company of the Philippines against the Luzon
Stevedoring Company (LSC) in the Court of First Instance of Cebu.
In the course of the trial, the trial court appointed two
commissioners representing the plaintiffs and defendant to
determine the value of the LSCO "CAVITE." Said commissioners found
the value thereof to be P180,000.00.
After trial on the merits, a decision was rendered on January
24, 1974 finding that LSCO "Cavite" was solely to blame for the
collision, thus its dispositive portion reads as follows:
WHEREFORE, based on all the foregoing considerations, the Court
renders judgment in favor of the plaintiffs and against the
defendant ordering the latter to pay to the plaintiff Domestic
Insurance Company of the Philippines the sum of P514,000.00, and to
the plaintiff Hijos de F. Escano, Inc. the sum of P68,819.00, with
interest on both sums at the legal rate, from the date the
complaint was filed and the further sum of P252,346.70, with
interest at the legal rate from August 7, 1972 and the sum of
P163,721.91, without
-
interest in trust for, and with direction that it pay the same
to, the claimants concerned.
With costs against the defendant. 1
In the penultimate paragraph of the decision the trial court
held:
With respect to the defense that defendant's liability is
limited to the value of the LSCO "Cavite" and freight earned,
invoking Art. 837 of the Code of Commerce, the Court believes and
so holds that the defense has not been established. Moreover, the
evidence is such that in principle Art. 837 does not apply here.
The counterclaim of the defendant is likewise ordered dismissed for
lack of merit. 2
Not satisfied therewith the defendant interposed an appeal
therefrom to the Court of Appeals wherein in due course a decision
was rendered on June 30, 1981 affirming the decision of the court a
quo in toto with costs against appellant. The motion for
reconsideration filed by the defendant of the decision was denied
in a resolution of the Court of Appeals of November 7, 1981. Hence
said defendant filed a petition for certiorari in this Court based
on the following grounds:
I
THE LOWER COURT ERRED IN FINDING THAT THE LSCO "CAVITE" WAS THE
VESSEL AT FAULT IN THE COLLISION.
II
THE LOWER COURT ERRED IN NOT FINDING THAT THE COLLISION BETWEEN
THE M/V "FERNANDO ESCANO" AND THE LSCO "CAVITE" WAS DUE SOLELY AND
EXCLUSIVELY TO THE FAULT, NEGLIGENCE AND LACK OF SKILL OF THE
MASTER OF THE FORMER VESSEL.
-
III
THE LOWER COURT ERRED IN NOT RULING THAT THE CIVIL LIABILITY OF
THE PETITIONER, IF ANY THERE BE, SHOULD BE LIMITED TO THE VALUE OF
THE LSCO "CAVITE" WITH ALL ITS APPURTENANCES AND FREIGHT- AGE WHEN
THE COLLISION TOOK PLACE. 3
In a resolution of February 26, 1982 this Court denied the
petition for lack of merit.
A motion for reconsideration of said resolution was filed by
petitioner limiting the issue to the legal question of whether
under Art. 837 of the Code of Commerce abandonment of vessel at
fault is necessary in order that the liability of owner of said
vessel shall be limited only to the extent of the value thereof,
its appurtenances and freightage earned in the voyage. After
respondents submitted their comment to the motion as required, on
September 29, 1982 this Court denied the motion for reconsideration
for lack of merit.
With leave of court petitioner filed a second motion for
reconsideration of said resolution raising the following
issues:
1. Whether abandonment is required under Article 837 of the Code
of Commerce. The decisions of this Honorable Court cited by the
parties in support of their respective positions only imply the
answer to the question, and the implied answers are
contradictory.
2. If abandonment is required under Article 837 of the Code of
Commerce, when should it be made? The Code of Commerce is silent on
the matter. The decision of this Honorable Court in Yangco v.
Laserna, 13 Phil. 330, left the
-
question open and no other decision, as far as petitioner can
ascertain, has resolved the question.
3. Is the decision of this Honorable Court in Manila Steamship
Co., Inc. v. Abdulhama,n 100 Phil. 32, wherein it was held that
"(t)he international rule to the effect that the right of
abandonment of vessels, as a legal station of a shipowner's own
fault," invoked by private respondents and apparently a major
consideration in the denial of the motion for reconsideration,
applicable to petitioner under the circumstances of the case at
bar? 4
The respondents were required to comment thereto and after said
comment was submitted petitioners submitted a reply thereto to
which the respondents filed a rejoinder.
On November 28, 1983, the Court gave due course to the petition
for review and considered the respondents' comment thereto as the
Answer. The parties were required to file their briefs. Both
parties having filed their briefs the case is now submitted for
decision.
Articles 587, 590, and 837 of the Code of Commerce provide as
follows:
ART. 587. The ship agent shall also be civilly liable for the
indemnities in favor of third persons which arise from the conduct
of the captain in the vigilance over the goods which the vessel
carried; but he may exempt himself therefrom by abandoning the
vessel with all her equipment and the freight he may have earned
during the voyage.
xxx xxx xxx
ART. 590. The co-owners of the vessel shall be civilly liable in
the proportion of their contribution to the common fund for
-
the results of the acts of the captain, referred to in Article
587.
Each co-owner may exempt himself from this liability by the
abandonment, before a notary, of that part of the vessel belonging
to him.
xxx xxx xxx
ART. 837. The civil liability incurred by the shipowners in the
cases prescribed in this section, shall be understood as limited to
the value of the vessel with all her appurtenances and freight
earned during the voyage. 5
In the case of Philippine Shipping Company vs. Garcia, 6 which
is an action for damages instituted by the Philippine Shipping
Company for the loss of Steamship "Ntra. Sra. de Lourdes" as a
result of the collision with the Steamship "Navarra" of Garcia, it
was found that the "Navarra" was responsible for the collision. The
claim of the Philippine Shipping is that the defendant should pay
P18,000.00, the value of the "Navarro" at the time of its loss, in
accordance with the provision of Article 837 of the Code of
Commerce, and that it was immaterial that the "Navarro" had been
entirely lost provided the value could be ascertained since the
extent of liability of the owner of the colliding vessel resulting
from the collision is to be determined by its value.
This Court speaking through the then Chief Justice Arellano
held:
Article 837 of the Code of Commerce provides: "The civil
liability contracted by the shipowners in the cases prescribed in
this section shall be understood as limited to the value of the
vessel with all her equipment and all the freight money earned
during the voyage "
-
"This section is a necessary consequence of the right to abandon
the vessel given to the shipowner in article 587 of the code, and
it is one of the many superfluities contained in the code."
(Lorenzo Benito, "Lecciones," 352.)
ART. 587. The agent shall also be civilly liable for the
indemnities in favor of third persons which arise from the conduct
of the captain in the care of the goods which the vessel carried
but he may exempt himself therefrom by abandoning the vessel with
all her equipments and the freight he may have earned during the
trip.
ART. 590. The part owners of a vessel shall be civilly liable,
in the proportion of their contribution to the common fund, for the
results of the acts of the captain referred to in Article 587. Each
part owner may exempt himself from this liability by the
abandonment, before a notary, of the part of the vessel belonging
to him.
The "Exposicion de motivos" of the Code of Commerce contains the
following: "The present code (1829) does not determine the
juridical status of the agent where such agent is not himself the
owner of the vessel. This omission is supplied by the proposed
code, which provides in accordance with the principles of maritime
law that by agent it is to be understood the person intrusted with
the provisioning of the vessel, or the one who represents her in
the port in which she happens to be. This person is the only one
who represents the vessel that is to say, the only one who
represents the interests of the owner of the vessel. This provision
has therefore cleared the doubt which existed as to the extent of
the liability, both of the agent and of the owner of the vessel.
Such liability is limited by the proposed
-
code to the value of the vessel and other things appertaining
thereto."
There is no doubt that if the Navarro had not been entirely
lost, the agent, having been held liable for the negligence of the
captain of the vessel could have abandoned her with all her
equipment and the freight money earned during the voyage, thus
bringing himself within the provisions of article 837 in so far as
the subsidiary civil liability is concerned This abandonment which
would have amounted to an offer of the value of the vessel, of her
equipment, and freight money earned could not have been refused,
and the agent could not have been personally compelled, under such
circumstances, to pay the 18,000 pesos, the estimated value of the
vessel at the time of the collision.
This is the difference which exists between the lawful acts and
lawful obligations of the captain and the liability which he incurs
on account of any unlawful act committed by him. In the first case,
the lawful acts and obligations of the captain beneficial to the
vessel may be enforced as against the agent for the reason that
such obligations arise from the contract of agency (provided,
however, that the captain does not exceed his authority), while as
to any liability incurred by the captain through his unlawful acts,
the ship agent is simply subsidiarily civilly liable. This
liability of the agent is limited to the vessel and it does not
extend further. For this reason the Code of Commerce makes the
agent liable to the extent of the value of the vessel, as the codes
of the principal maritime nations provide, with the vessel, and not
individually. Such is also the spirit of our code.
-
The spirit of our code is accurately set forth in a treatise on
maritime law, from which we deem proper to quote the following as
the basis of this decision:
That which distinguishes the maritime from the civil law and
even from the mercantile law in general is the real and hypothecary
nature of the former, and the many securities of a real nature that
maritime customs from time immemorial the laws, the codes, and the
later jurisprudence, have provided for the protection of the
various and conflicting interests which are ventured and risked in
maritime expeditions, such as the interests of the vessel and of
the agent, those of the owners of the cargo and consignees, those
who salvage the ship, those who make loans upon the cargo, those of
the sailors and members of the crew as to their wages, and those of
a constructor as to repairs made to the vessel.
As evidence of this "real" nature of the maritime law we have
(1) the limitation of the liability of the agents to the actual
value of the vessel and the freight money, and (2) the right to
retain the cargo and the embargo and detention of the vessel even
in cases where the ordinary civil law would not allow more than a
personal action against the debtor or person liable. It will be
observed that these rights are correlative, and naturally so,
because if the agent can exempt himself from liability by
abandoning the vessel and freight money, thus avoiding the
possibility of risking his whole fortune in the business, it is
also just that his maritime creditor may for any reason attach the
vessel itself to secure his claim without waiting for a settlement
of his rights by a final judgment, even to the prejudice of a third
person.
-
This repeals the civil law to such an extent that, in certain
cases, where the mortgaged property is lost no personal action lies
against the owner or agent of the vessel. For instance, where the'
vessel is lost the sailors and members of the crew can not recover
their wages; in case of collision, the liability of the agent is
limited as aforesaid, and in case of shipwreck, those who loan
their money on the vessel and cargo lose all their rights and can
not claim reimbursement under the law.
There are two reasons why it is impossible to do away with these
privileges, to wit: (1) The risk to which the thing is exposed, and
(2) the "real" nature of the maritime law, exclusively "real,"
according to which the liability of the parties is limited to a
thing which is at the mercy of the waves. If the agent is only
liable with the vessel and freight money and both may be lost
through the accidents of navigation it is only just that the
maritime creditor have some means of obviating this precarious
nature of his rights by detaining the ship, his only security,
before it is lost.
The liens tacit or legal, which may exist upon the vessel and
which a purchaser of the same would be obliged to respect and
recognize are in addition to those existing in favor of the State
by virtue of the privileges which are granted to it by all the laws
pilot, tonnage, and port dues and other similar charges, the wages
of the crew earned during the last voyage as provided in article
646 of the Code of Commerce, salvage dues under article 842, the
indemnification due to the captain of the vessel in case his
contract is terminated on account of the voluntary sale of the ship
and the insolvency of the owner as provided in article 608, and
all
-
other liabilities arising from collisions under Articles 837 and
838.' (Madariaga pp. 60, 62, 63, 85.
We accordingly hold that the defendant is liable for the
indemnification to which the plaintiff is entitled by reason of the
collision but he is not required to pay such indemnification for
the reason that the obligation thus incurred has been extinguished
on account of the loss of the thing bound for the payment thereof
and in this respect the judgment of the court below is affirmed
except in so far as it requires the plaintiff to pay the costs of
this action, which is not exactly proper. No special order is made
as to costs of this appeal. After the expiration of twenty days let
judgment be entered in accordance herewith and ten days thereafter
the record be remanded to the Court of First Instance for
execution. So ordered. 7
From the foregoing the rule is that in the case of collision,
abandonment of the vessel is necessary in order to limit the
liability of the shipowner or the agent to the value of the vessel,
its appurtenances and freightage earned in the voyage in accordance
with Article 837 of the Code of Commerce. The only instance where
such abandonment is dispensed with is when the vessel was entirely
lost. In such case, the obligation is thereby extinguished.
In the case of Government of the Philippines vs. Maritime this
Court citing Philippine Shipping stated the exception thereto in
that while "the total destruction of the vessel extinguishes a
maritime lien, as there is no longer any risk to which it can
attach, but the total destruction of the vessel does not affect the
liability of the owner for repairs of the vessel completed before
its loss, 8 interpreting the provision of Article 591 of the Code
of Commerce in relation with the other Articles of the same
Code.
-
In Ohta Development Company vs. Steamship "Pompey" 9 it appears
that at the pier sunk and the merchandise was lost due to the fault
of the steamship "Pompey" that was then docked at said pier. This
Court ruled that the liability of the owner of "Pompey" may not be
limited to its value under Article 587 of the Code of Commerce as
there was no abandonment of the ship. We also held that Article 837
cannot apply as it refers to collisions which is not the case here.
10
In the case of Guison vs. Philippine Shipping Company 11
involving the collision at the mouth of the Pasig river between the
motor launches Martha and Manila H in which the latter was found to
be at fault, this Court, applying Article 837 of the Code of
Commerce limited the liability of the agent to its value.
In the case of Yangco vs. Laserna 12 which involved the steamers
SS "Negros" belonging to Yangco which after two hours of sailing
from Romblon to Manila encountered rough seas as a result of which
it capsized such that many of its passengers died in the mishap,
several actions for damages were filed against Yangco, by a
verified pleading, he sought to abandon the vessel to the
plaintiffs in the three cases together with all the equipment
without prejudice to the right to appeal. This Court in resolving
the issue held as follows:
Brushing aside the incidental issues, the fundamental question
here raised is: May the shipowner or agent, notwithstanding the
total loss of the vessel as a result of the negligence of its
captain, be properly held liable in damages for the consequent
death of its passengers? We are of the opinion and so hold that
this question is controlled by the provision of article 587 of the
Code of Commerce. Said article reads:
The agent shall also be civilly liable for the indemnities in
favor of third persons which arise from the conduct of the
-
captain in the. care of the goods which the vessel carried; but
he may exempt himself therefrom by abandoning the vessel with all
her equipments and the freight he may have earned during the
voyage.
The provision accords a shipowner or agent the right of
abandonment; and by necessary implication, his liability is
confined to that which he is entitled as of right to -abandon "the
vessel with all her equipments and the freight it may have earned
during the voyage." It is true that the article apears to deal only
with the limited liability of shipowners or agents for damages
arising from the misconduct of the captain in the care of the goods
which the vessel carries, but this is a mere deficiency of language
and in no way indicates the true extent of such liability. The
consensus of authorities is to the effect that notwithstanding the
language of the afore-quoted provision, the benefit of limited
liability therein provided for, applies in all cases wherein the
shipowner or agent may properly be held liable for the negligent or
illicit acts of the captain. Dr. Jose Ma. Gonzalez de Echavarri y
Vivanco commenting on said article, said:
La letra del Codigo, en el articulo 587, presenta una gravisima
cuestion. El derecho de abandono, si se atiende a lo escrito, solo
se refiere a las indemnizaciones a que diere lugar la conducta del
Capitan en la custodia de los efectos que cargo en el buque.
Es ese el espiritu del legislador? No; habra derecho de abandono
en las responsabilidades nacidas de obligaciones contraidas por el
Capitan y de otros actos de este? Lo reputamos evidente y, para
fortalecer nuestra opinion, basta copiar el siguiente parrafo de la
Exposicion de motivos:
-
El proyecto, al aplicar estos principios, se inspira tambien en
los intereses del comercio maritimo que quedaran mas asegurados
ofreciendo a todo el que contrata con el naviero o Capitan del
buque, la garantia real del mismo, cualesquiera que sean las
facultades o atribuciones de que se hallen investidos; (Echavarri,
Codigo de Comercio, Tomo 4, 2. ed., pags. 483- 484.)
A cursory examination will disclose that the principle of
limited liability of a shipowner or agent is provided for in but
three articles of the Code of Commerce Article 587 aforequoted and
articles 590 and 837. Article 590 merely reiterates the principle
embodied in article 587, where the vessel is owned by several
person Article 837 applies the same principle in cases of collision
and it has been observed that said article is but 'a necessary
consequence of the right to abandon the vessel given to the
shipowner in Article 587 to the Code, and it is one of the many
superfluities contained in the Code. (Lorenzo Benito, Lecciones
352, quoted in Philippine Shipping Co. vs. Garcia, 6 Phil. 281,
282.) In effect therefore, only Articles 587 and 590 are the
provisions contained in our Code of Commerce on the matter, and the
framers of said code had intended those provisions to embody the
universal principle of limited liability in all cases. ... . 13
In the said case We invoked our ruling in Philippine Shipping
and concluded as follows:
In the light of all the foregoing, we therefore hold that if the
shipowner or agent may in any way be held civilly liable at all for
injury to or death of passengers arising from the negligence of the
captain in cases of collisions or shipwrecks, his liability is
merely coextensive with his interest in the
-
vessel such that a total loss thereof results in its extinction.
In arriving at this conclusion, we have not been unmindful of the
fact that the ill-fated steamship Negros, as a vessel engaged in
interisland trade, is a common carrier (De Villata v. Stanely 32
Phil. 541), and that the relationship between the petitioner and
the passengers who died in the mishap rests on a contract of
carriage. But assuming that petitioner is liable for a breach of
contract of carriage, the exclusively "real and hypothecary nature"
of maritime law operates to limit such liability to the value of
the vessel, or to the insurance thereon, if any. In the instant
case it does not appear that the vessel was insured.
Whether the abandonment of the vessel sought by the petitioner
in the instant case was in accordance with law or not, is
immaterial The vessel having totally perished any act of
abandonment would be an Idle ceremony. 14
In the case of Abueg vs. San Diego,15 which involves a claim of
compensation under the Workmen's Compensation Act for the deceased
members of the crew of the MS "San Diego II" and MS "Bartolome"
which were caught by a typhoon in the vicinity of Mindoro Island
and as a consequence of which they were sunk and totally lost, this
Court held as follows:
Counsel for the appellant cite article 7837 of the Code of
Commerce which provides that if the vessel together with all her
tackle and freight money earned during the voyage are abandoned,
the agent's liability to third persons for tortious acts of the
captain in the care of the goods which the ship carried is
extinguished (Yangco vs. Laserna, 73 Phil. 330) Article 937 of the
same Code which provides that in cases of collision, the
shipowners' liability is limited to the value of the vessel with
all her equipment and freight earned during
-
the voyage (Philippine Shipping Company vs. Garcia, 6 Phil.
281); and Article 643 of the same Code which provides that if the
vessel and freight are totally lost, the agent's liability for
wages of the crew is extinguished. From these premises counsel draw
the conclusion that appellant's liability, as owner of the two
motor ships lost or sunk as a result of the typhoon that lashed the
island of Mindoro on October 1, 1941, was extinguished.
The real and hypothecary nature of the liability of the
shipowner or agent embodied in the provisions of the Maritime Law,
Book III, Code of Commerce, had its origin in the prevailing
conditions of the maritime trade and sea voyages during the
medieval ages, attended by innumerable hazards and perils. To
offset against these adverse conditions and to encourage
shipbuilding and maritime commerce, it was deemed necessary to
confine the liability of the owner or agent arising from the
operation of a ship to the vessel equipment, and freight, or
insurance, if any, so that if the shipowner or agent abandoned the
ship, equipment, and freight, his liability was extinguished
But the provisions of the Code of Commerce invoked by appellant
have no room in the application of the Workmen's Compensation Act
which seeks to improve, and aims at the amelioration of, the
condition of laborers and employees. It is not the liability for
the damage or loss of the cargo or injury to, or death of, a
passenger by or through the misconduct of the captain or master of
the ship; nor the liability for the loss of the ship as a result of
collision; nor the responsibility for wages of the crew, but a
liability created by a statute to compensate employees and laborers
in cases of injury received by or inflicted upon them, while
engaged in
-
the performance of their work or employment, or the heirs and
dependents of such laborers and employees in the event of death
caused by their employment.Such compensation has nothing to do with
the provisions of the Code of Commerce regarding maritime commerce.
It is an item in the cost of production which must be included in
the budget of any well managed industry.
Appellant's assertion that in the case of Enciso vs. Dy-Liaco
(57 Phil. 446), and Murillo vs. Mendoza (66 Phil. 689), the
question of the extinction of the shipowner's liability due to
abandonment of the ship by him was not fully discussed, as in the
case of Yangco vs. Laserna, supra, is not entirely correct. In the
last mentioned case, the limitation of the shipowner's liability to
the value of the ship, equipment, freight, and insurance, if any,
was the lis mota In the case of Enciso vs. Dy-Liaco, supra, the
application of the Workmen's Compensation Act to a master or patron
who perished as a result of the sinking of the motorboat of which
he was the master, was the controversy submitted to the court for
decision. This Court held in that case that .It has been repeatedly
stated that the Workmen's Compensation Act was enacted to abrogate
the common law and our Civil Code upon culpable acts and omissions,
and that the employer need not be guilty of neglect or fault in
order that responsibility may attach to him' (pp. 449-450); and
that the shipowner was liable to pay compensation provided for in
the Workmen's Compensation Act, notwithstanding the fact that the
motorboat was totally lost. In the case of Murillo vs. Mendoza,
supra, this Court held that 'The rights and responsibilities
defined in said Act must be governed by its own peculiar provisions
in complete disregard of other similar provisions of the Civil as
well as the mercantile law. If
-
an accident is compensable under the Workmen's Compensation Act,
it must be compensated even when the workman's right is not
recognized by or is in conflict with other provisions of the Civil
Code or of the Code of Commerce. The reason behind this principle
is that the Workmen's Compensation Act was enacted by the
Legislature in abrogation of the other existing laws.' This quoted
part of the decision is in answer to the contention that it was not
the intention of the Legislature to repeal Articles 643 and 837 of
the Code of Commerce with the enactment of the Workmen's
Compensation Act. 16
In said case the Court reiterated that the liability of the
shipowner or agent under the provision of Articles 587 and 837 of
the Code of Commerce is limited to the value of the vessel with all
her equivalent and freight earned during the voyage if the
shipowner or agent abandoned the ship with all the equipment and
freight. However, it does not apply to the liability under the
Workmen's Compensation Act where even as in said case the vessel
was lost the liability thereunder is still enforceable against the
employer or shipowner.
The case of Manila Steamship Company, Inc. vs. Insa Abdulhaman
and Lim Hong To 17 is a case of collision of the ML "Consuelo V"
and MS "Bowline Knot" as a result of which the ML "Consuelo V"
capsized and was lost where nine (9) passengers died or were
missing and all its cargoes were lost. In the action for damages
arising from the collision, applying Article 837 of the Code of
Commerce, this Court held that in such case where the collision was
imputable to both of them, each vessel shall suffer her own damages
and both shall be solidarily liable for the damages occasioned to
their cargoes.18 Thus, We held:
In fact, it is a general principle, well established maritime
law and custom, that shipowners and ship agents are civilly liable
for the acts of the captain (Code of Commerce, Article
-
586) and for the indemnities due the third persons (Article
587); so that injured parties may immediately look for
reimbursement to the owner of the ship, it being universally
recognized that the ship master or captain is primarily the
representative of the owner (Standard Oil Co. vs. Lopez Castelo, 42
Phil. 256, 260).This direct liability, moderated and limited by the
owner's right of abandonment of the vessel and earned freight
(Article 587) has been declared to exist not only in case of
breached contracts, but also in cases of tortious negligence (Yu
Biao Sontua vs. Osorio, 43 Phil. 511; 515):
xxx xxx xxx
It is easy to see that to admit the defense of due diligence of
a bonus paterfamilias (in the selection and vigilance of the
officers and crew) as exempting the shipowner from any liability
for their faults, would render nugatory the solidary liability
established by Article 827 of the Code of Commerce for the greater
protection of injured parties. Shipowners would be able to escape
liability in practically every case, considering that the
qualifications and licensing of ship masters and officers are
determined by the State, and that vigilance is practically
impossible to exercise over officers and crew of vessels at sea. To
compel the parties prejudiced to look to the crew for indemnity and
redress would be an illusory remedy for almost always its members.
are, from captains down, mere wage earners.
We, therefore, find no reversible error in the refusal of the
Court of Appeals to consider the defense of the Manila Steamship
Co., that it is exempt from liability for the collision with the M
L "Consuelo V " due to the absence of
-
negligence on its part in the selection and supervision of the
officers and crew of the M/S "Bowline Knot. 19
However, insofar as respondent Lim Hong To, owner of M L
"Consuelo V" who admittedly employed an unlicensed master and
engineer and who in his application for permission to operate
expressly assumed full risk and responsibility thereby (Exh. 2)
this Court held that the liability of Lim Hong To cannot be limited
to the value of his motor launch by abandonment of the vessel as
invoked in Article 587 of the Code of Commerce, We said:
The international rule is to the effect that the right of
abandonment of vessels, as a legal limitation of a shipowner's
liability, does not apply to cases where the injury or the average
is due to shipowner's own fault. Farina (Derecho Commercial
Maritima Vol. 1, pp. 122-123), on the authority of judicial
precedents from various nations, sets the rule to be as
follows:
xxx xxx xxx 20
From the foregoing, it is clear that in case of collision of
vessels, in order to avail of the benefits of Article 837 of the
Code of Commerce the shipowner or agent must abandon the vessel. In
such case the civil liability shall be limited to the value of the
vessel with all the appurtenances and freight earned during the
voyage. However, where the injury or average is due to the
ship-owner's fault as in said case, the shipowner may not avail of
his right to limited liability by abandoning the vessel.
We reiterate what We said in previous decisions that the real
and hypothecary nature of the liability of the shipowner or agent
is embodied in the provisions of the Maritime Law, Book III, Code
of Commerce. 21 Articles 587, 590 and 837 of the same code are
precisely
-
intended to limit the liability of the shipowner or agent to the
value of the vessel, its appurtenances and freightage earned in the
voyage, provided that owner or agent abandons the vessel. Although
it is not specifically provided for in Article 837 of the same code
that in case of collision there should be such abandonment to enjoy
such limited liability, said article on collision of vessels is a
mere amplification of the provisions of Articles 587 and 590 of
same code where abandonment of the vessel is a pre-condition. Even
without said article, the parties may avail of the provisions of
Articles 587 and 590 of same code in case of collision. This is the
reason why Article 837 of the same code is considered a
superfluity. 22
Hence the rule is that in case of collision there should be
abandonment of the vessel by the shipowner or agent in order to
enjoy the limited liability provided for under said Article
837.
The exception to this rule is when the vessel is totally lost in
which case there is no vessel to abandon so abandonment is not
required. Because of such total loss the liability of the shipowner
or agent for damages is extinguished. Nevertheless, the shipowner
or agent is personally liable for claims under the Workmen's
Compensation Act and for repairs of the vessel before its loss.
23
In case of illegal or tortious acts of the captain the liability
of the shipowner and agent is subsidiary. In such instance the
shipowner or agent may avail of the provisions of Article 837 of
the Code by abandoning the vessel.24
However, if the injury or damage is caused by the shipowner's
fault as where he engages the services of an inexperienced and
unlicensed captain or engineer, he cannot avail of the provisions
of Article 837 of the Code by abandoning the vessel. 25 He is
personally liable for the damages arising thereby.
-
In the case now before the Court there is no question that the
action arose from a collision and the fault is laid at the doorstep
of LSCO "Cavite" of petitioner. Undeniably petitioner has not
abandoned the vessel. Hence petitioner can not invoke the benefit
of the provisions of Article 837 of the Code of Commerce to limit
its liability to the value of the vessel, all the appurtenances and
freightage earned during the voyage.
In the light of the foregoing conclusion, the issue as to when
abandonment should be made need not be resolved.
WHEREFORE, the petition is DENIED with costs against
petitioner.
SO ORDERED.
G.R. No. L-30232 July 29, 1988
LUZON STEVEDORING CORPORATION, petitioner-appellant, vs. COURT
OF TAX APPEALS and the HONORABLE COMMISSIONER OF INTERNAL REVENUE,
respondents-appellees.
H. San Luis & V.L. Simbulan for petitioner-appellant.
PARAS, J.:
This is a petition for review of the October 21, 1968 Decision *
of the Court of Tax Appeals in CTA Case No. 1484, "Luzon
Stevedoring Corporation v. Hon. Ramon Oben, Commissioner, Bureau of
Internal Revenue", denying the various claims for tax refund; and
the February 20, 1969 Resolution of the same court denying the
motion for reconsideration.
-
Herein petitioner-appellant, in 1961 and 1962, for the repair
and maintenance of its tugboats, imported various engine parts and
other equipment for which it paid, under protest, the assessed
compensating tax. Unable to secure a tax refund from the
Commissioner of Internal Revenue, on January 2, 1964, it filed a
Petition for Review (Rollo, pp. 14-18) with the Court of Tax
Appeals, docketed therein as CTA Case No. 1484, praying among
others, that it be granted the refund of the amount of P33,442.13.
The Court of Tax Appeals, however, in a Decision dated October 21,
1969 (Ibid., pp. 22-27), denied the various claims for tax refund.
The decretal portion of the said decision reads:
WHEREFORE, finding petitioner's various claims for refund
amounting to P33,442.13 without sufficient legal justification, the
said claims have to be, as they are hereby, denied. With costs
against petitioner.
On January 24, 1969, petitioner-appellant filed a Motion for
Reconsideration (Ibid., pp. 28-34), but the same was denied in a
Resolution dated February 20, 1969 (Ibid., p. 35). Hence, the
instant petition.
This Court, in a Resolution dated March 13, 1969, gave due
course to the petition (Ibid., p. 40). Petitioner-appellant raised
three (3) assignments of error, to wit:
I
The lower court erred in holding that the petitioner-appellant
is engaged in business as stevedore, the work of unloading and
loading of a vessel in port, contrary to the evidence on
record.
II
-
The lower court erred in not holding that the business in which
petitioner-appellant is engaged, is part and parcel of the shipping
industry.
III
The lower court erred in not allowing the refund sought by
petitioner-appellant.
The instant petition is without merit.
The pivotal issue in this case is whether or not petitioner's
tugboats" can be interpreted to be included in the term "cargo
vessels" for purposes of the tax exemption provided for in Section
190 of the National Internal Revenue Code, as amended by Republic
Act No. 3176.
Said law provides:
Sec. 190. Compensating tax. ... And Provided further, That the
tax imposed in this section shall not apply to articles to be used
by the importer himself in the manufacture or preparation of
articles subject to specific tax or those for consignment abroad
and are to form part thereof or to articles to be used by the
importer himself as passenger and/or cargo vessel, whether
coastwise or oceangoing, including engines and spare parts of said
vessel. ....
Petitioner contends that tugboats are embraced and included in
the term cargo vessel under the tax exemption provisions of Section
190 of the Revenue Code, as amended by Republic Act. No. 3176. He
argues that in legal contemplation, the tugboat and a barge loaded
with cargoes with the former towing the latter for loading and
unloading of a vessel in part, constitute a single vessel.
Accordingly, it concludes that the engines, spare parts and
equipment imported by it and used in the
-
repair and maintenance of its tugboats are exempt from
compensating tax (Rollo, p. 23).
On the other hand, respondents-appellees counter that
petitioner-appellant's "tugboats" are not "Cargo vessel" because
they are neither designed nor used for carrying and/or transporting
persons or goods by themselves but are mainly employed for towing
and pulling purposes. As such, it cannot be