[ G.R. No. 20780. November 09, 1923 ] 45 Phil. 384
[ G.R. No. 20780. November 09, 1923 ]
BANK OF THE PHILIPPINE ISLANDS, PLAINTIFF AND APPELLANT, VS. WENCESLAO TRINIDAD, AS COLLECTOR OF INTERNAL REVENUE, DEFENDANT AND APPELLEE. D E C I S I O N
STATEMENT
The plaintiff is a domestic banking corporation, with its principal office and place of business in the City of Manila, operating under a special charter granted by the Philippine Legislature, known as Act No. 1790.
The defendant is the duly appointed, qualified, and acting Collector of Internal Revenue of the Philippine Islands.
For cause of action, plaintiff alleges that article 26 of its Charter provides:
“The bank shall be held to renounce all claim to the exclusive privilege of issuing notes in the Philippine Islands, or to any other exclusive privilege not set forth in this Act; but no laws or regulations shall be made or enforced affecting the bank, or imposing charges or taxation upon it, which shall not apply equally to other banks of a similar type operating under similar conditions, and no bank shall be authorized to issue circulating notes in the Philippine Islands with a paid-up capital less than two million pesos; but this provision shall not preclude the Government from granting special privileges to agricultural banks, savings banks, mortgage banks, or other institutions of special types whose principal business is not commercial banking.”
That after it was granted by Act No. 2612 on February 4, 1916, the Legislature of the Philippine Islands granted a charter to the Philippine National Bank, by section 18 of which authority is given the bank to issue circulating notes, and that in such section it was provided that:
“* * * Said circulating notes shall be exempt from any and all taxes levied or assessed by the Philippine Government, or any department, division or subdivision thereof.”
That, through the Collector of Internal Revenue, the Government has always claimed and exercised the right to collect from the plaintiff internal revenue taxes upon its circulating notes issued by the plaintiff under the authority of its charter for one-twelfth of one per cent upon the average amount of its circulation, and compelled the plaintiff to pay such taxes, and that it has paid such taxes; that the enactment of the provisions of article 26 above quoted was in violation of the contract entered into between the plaintiff and the Philippine Government; that the defendant has not collected taxes upon the circulation of the Philippine National Bank, and that, by reason of the fact above stated, the plaintiff was and is entitled to the same exemptions and privileges as the Philippine National Bank, it being a bank of similar type and operating under similar conditions; that the defendant wrongfully and unlawfully demanded and collected from the plaintiff upon its circulation the following sums upon the following dates, to wit:
“On October 27, 1919, the sum of P15,170.72 On April 30, 1920, the sum of 20,884.75 On October 30, 1920, the sum of 22,415.58 On April 30, 1921, the sum of 22,460.00 On October 31, 1921, the sum of 22,458.56 _________ 103,389.61 "
That the interest upon such taxes from the time of the filing of the complaint amounts to P5,728.32; that each year the plaintiff paid the taxes under protest, and that demand therefor has been made and payment refused.
Wherefore, the plaintiff prays judgment against the defendant for the sum of P109,117.93, with interest from November 1, 1921, with costs.
December 21, 1921, the defendant filed a demurrer to the complaint upon the ground that it did not state facts sufficient to constitute a cause of action.
After arguments, the lower court sustained the demurrer, from which the plaintiff appealed to this Court.
In an opinion written by Mr. Justice Johnson, to which three members dissented, the judgment of the lower court was reversed,[1] and remanded with leave to the defendant to answer.
The defendant, without waiving the legal point raised in his demurrer, then filed an answer, admitting the formal part of the complaint, and alleging the collection of the taxes as alleged, and specifically denies all of the other material allegations of the complaint, and, as a special defense, alleges: (a) That the plaintiff is a private corporation organized for private purposes, and is exclusively owned and managed by private interest; and that the Philippine National Bank is a Government institution established to promote the public interests and welfare of the Government, which owned more than one-half of the capital stock, and which has supervision and control over the bank; (b) that the plaintiff is not a bank of similar type operating under similar conditions to the National Bank, nor is it entitled to the same exemptions and privileges as the National Bank; (c) that at the time the taxes mentioned in the first paragraph were paid by the plaintiff, Act No. 2612 of the Philippine Legislature was no longer in force, and that it was amended and superseded by Acts Nos. 2747 and 2938; that under the provisions of section 14 of Act No. 2747 and section 15 of Act No. 2938, the circulating notes of the Philippine National Bank, with the exception of those issued against gold coin of the United States, are not exempt from taxes, and the defendant has heretofore levied and collected the taxes due on the circulating notes of the National Bank; that the plaintiff has no note circulation issued against gold coin of the United States, and the circulating notes upon which the taxes were paid were of the same kind and type on which the National Bank was paying taxes; that Acts Nos. 2747 and 2938 are not laws or regulations affecting the plaintiff bank or imposing charges or taxation upon it; (d) that the plaintiff paid the taxes voluntarily without any compulsion or demand by the defendant; (e) that the charter of the plaintiff bank has not in any way been violated, and that the taxes paid by the plaintiff were legally due the Government.
It is then alleged that the action to recover the taxes paid on October 27, 1919, is barred by the statute of limitations.
Upon such issues, the parties entered into the following stipulation of facts:
“It is hereby stipulated and agreed by and between the parties hereto that the following facts are true and that the same may be used upon trial with the same force and effect as though given as evidence before the court:
“That the plaintiff is a domestic corporation, as alleged in the complaint, organized for a private end and benefit and operating under Act No. 1790 of the Philippine Commission with its outstanding capital stock owned by private individuals and corporations;
“That the activities of the plaintiff and the business done by it is such as permitted and set forth in said Act No. 1790;
“That the Philippine National Bank is a banking corporation organized under Acts Nos. 2612, 2747, and 2938 of said Legislature;
“That 92 per cent of its outstanding capital stock is owned by the Government of the Philippine Islands and 8 per cent by individuals and corporations;
“That the activities and business of said Philippine National Bank are such as are permitted and set forth in said last above-mentioned acts;
“That the payment of taxes upon its circulation made by the plaintiff, alleged by the complaint and admitted by the defendant in his answer, were made under due and timely protest, but without any compulsion or previous demand from the defendant, and such payments were made to avoid payment of penalties in case of non-payment;
“That heretofore and on the 9th day of March, 1922, and after the beginning of this action, the defendant made demand upon the Philippine National Bank for the payment of taxes under its circulation;
“That the amount of said circulation issued under Act No. 2924 from October 7, 1919, to October 31, 1921, was P10,926,300, as is more fully shown by Exhibit A attached hereto and made a part hereof;
“That the amount of circulation issued against its capital stock by said Philippine National Bank from October 7, 1919, to October 31, 1921, was P19,299,500, as is more fully shown by Exhibit B attached hereto and made a part hereof;
“That heretofore and on the 15th day of July, 1922, the said Philippine National Bank paid the defendant as taxes upon its circulations shown in Exhibit B, the sum of P519,043.03; and on the 2d day of August, 1922, said bank paid the defendant further the sum of P129,760.77, being 25 per cent surcharge upon the taxes paid as last above-mentioned ; that the Philippine National Bank has not since its organization issued any circulating notes against gold coin of the United States held in the bank’s own vault or to its order in the Treasury of the Philippine Islands or of the United States or in solvent National Banks of the United States or in any Federal Reserve Bank thereof;
“That both of said payments were made under due and timely protest and that the Board of Directors of the said Philippine National Bank has resolved to bring an action against the defendant for the recovery of said sums if the Secretary of Justice, to whom the matter has been referred for advice, should, in his capacity as ex-officio attorney for the Bank, approve of such action;
“That the payments made by the Philippine National Bank of taxes on its circulation are more fully shown in Exhibit C which is attached hereto and made a part hereof;
“That plaintiff’s action was filed in Court on November 1, 1921;
“That on January 28, 1922, the Attorney-General of the Philippine Islands rendered an opinion on the taxability of the circulating notes of the Philippine National Bank, a copy of which will be submitted to the Court by defendant.”
The plaintiff also offered the oral testimony of two witnesses as experts in the knowledge of banking, for the purpose of showing that the two banks were of similar type and operating under similar conditions, to which offer the defendant objected, and the objection was sustained.
Upon such issues and the stipulated facts, the lower court rendered judgment for the defendant, from which the plaintiff appeals, contending that the court erred in rejecting the testimony of the two witnesses as to the similarity of the banks; “in finding that the statement of agreed facts submitted by the parties admitted that ‘on the other hand, the Philippine National Bank was created to promote the general interests of the country, etc.;’ in finding that said agreed statement of facts admitted ‘That, in accordance with the law, the Philippine National Bank pays the corresponding tax upon notes put in circulation, etc.’ and omitting the facts as set forth in said statement in that regard; in finding that section 18 of Act No. 2612 contains a provision that does not affect plaintiff but refers exclusively to the Philippine National Bank;” in finding the law to be as stated in the dissenting opinion upon the demurrer in the former appeal; in finding that because the Philippine National Bank paid taxes upon its circulating notes, plaintiff’s cause of action was not proven; and in rendering judgment for the defendant.