G.R. No. L-9141. September 25, 1956

Appeal from  a decision of the Court of Tax Appeals sustaining  the validity of a  tax amounting to  P7,614.60 against the estate  of Olimpio Fernandez under the War Profits Tax Law (Republic Act No.  55).

Olimpio  Fernandez and his wife  Angelina  Oasan had a net worth  of P8,600 on December  8, 1941.   During the Japanese occupation the spouses acquired several real  properties, and at the time of his death  on February 11, 1945 he had a net worth of P31,489.  The Collector of Internal Revenue assessed a war profits tax  on the estate of the deceased at  P7,614.60,  which his administratirx refused to pay.  The case  was brought to the Court of Tax Appeals which sustained the validity and legality of the assessment.  The administratrix has appealed this decision to, this Court.

The most  important  questions raised by the  appellant are:  (a) the unconstitutionally  of the war  profits tax law  for  the  reason that it is retroactive; (b) the  inapplicability of said law to the  estate  of the deceased Olimpio  Fernandez,  because the  law  taxes  individuals; and (c) the separate  taxation of  the  estate of the deceased Olimpio  Fernandez from that of his wife’s, because Olimpio Fernandez died before the law was passed.

Appellant’s contention that the law is invalid or unconstitutional because  it acts retroactively, thus violating the due  process of law clause, is not  supported by reason or authority.  The  tax, insofar as applicable to the estate of the  deceased Olimpio  Fernandez,  is both a  property tax and a  tax on  income.  It is a property tax  in  relation to the properties that Fernandez had in  December, 1941; and it is an income tax in relation to the properties which he  purchased during  the Japanese  occupation.  In  both cases, however, the war profits tax may not be considered as unconstitutional.

The doctrine of unconstitutionally raised by appellant is based on  the  prohibition  against ex  post facto laws. But this prohibition  applies  only  to  criminal or penal matters, and not to laws which concern civil  matters or proceedings generally, or which affect or  regulate  civil or private  rights (Ex parte Garland, 18 Law Ed.,  366; 16 C. J. S., 889-891). 

“At an early day it was settled by  authoritative  decisions, in opposition to what might  seem the more natural and obvious meaning of  the  term  ex post facto, that in their  scope  and  purpose these provisions were confined, to laws  respecting criminal punishments,  and had no relation whatever  to retrospective legislation of any other description.  And it has,  therefore,  been repeatedly held, that retrospective laws, when not of a criminal nature, do not come in conflict with the  national  Constitution,  unless  obnoxious to its provisions on other grounds  than their respective character.”   (1  Cooley,  Constitutional Limitations, 544-545.)

We  have applied the above principle in the  cases  of Mekin  vs.  Wolf, 2  Phil. 74 and  Ongsiako  vs. Gamboa,  47 Off.  Gaz,,  No. 11, 5613, 5616.

It has also been held that property taxes and  benefit assessments on real estate, retroactively  applied,  are not open to the objection that they infringe upon the due process  of law clause of  the  Constitution (Wagner vs.  Baltimore, 239 U.  S. 207, 60 L.  Ed. 230); that taxes on income are not  subject to the constitutional objection because of their retroactivity.   The  universal  practice has  been to increase taxes  on incomes already earned; yet notwithstanding  this retroactive operation,  income  taxes have not  been successfully  assailed  as  invalid.   The  uniform ruling of the courts in the United  States has been to reject  the  contention that  the retroactive  application  of revenue acts is a denial of the due process guaranteed by the Fifth Amendment (Welch  vs. Henry,  305 U. S, 134, 83 L. Ed. 87).

It has also been held that in order to declare a tax as transgressing the  constitutional limitation, it must be so harsh and oppressive in its retroactive application (Idem.) But we hold that far from being unjust or harsh and oppressive our war profits tax is both wise and just The last Pacific war and the Japanese occupation of the Islands have  wrought divergent effects upon the different sectors of the population The quiet  and  the  timid, who were afraid to go out of their homes or who refused  to have any dealings with the enemy, stopped from exercising their callings or professions, losing their incomes; and. they  supported  themselves  with properties  they already owned,  selling these from time to  time  to raise  funds with  which  to purchase  their daily needs.   These were reduced  to penury  and  want  But the bold  and  the daring,  as well as those who were callous to the criticism of being collaborators, engaged in trading in all forms or sorts of commodities, from  foodstuffs  to  war materials, earning fabulous incomes  and acquiring properties with their earnings.  Those who were able to retain their properties found themselves possessed of increased wealth because inflation set in, the  currency  dropped in value and properties  soared in prices.  It would  have been unrealistic for the legislature to have ignored all these facts and circumstances.   After the  war it could not, with  justice to all concerned, apportion  the expenses  of government equally  on all the people irrespective of the vicissitudes of war, equally on those who had  their properties decimated as on those who had become fabulously rich after the war.   Those who were fortunate to increase their wealth  during the  troubulous period  of  the war were made to  contribute  a portion of  their  newly-acquired wealth for the maintenance of the government and defray its  expenses.  Those who in turn were reduced to penury or whose incomes suffered reductions could not be compelled to share  in  the expenses  to the same extent as those who grew rich.   This in effect is what the legislature did when it enacted the War Profits Tax Law,   The law may not be  considered harsh and oppressive because the force of its impact fell on  those  who had amassed wealth or increased their wealth during the war, but did not touch the  less fortunate,   The policy followed is the same as that which underlies the Income  Tax  Law, imposing the  burden  upon those who have and  relieving those who have  not.  No one can dare  challenge the law as harsh and  oppressive.  We declare it to be just and sound and overrule the  objection thereto on  the  ground of unconstitutionality.

The contention that the deceased Olimpio Fernandez or his estate  should not  be responsible because  he died in 1945  and was no longer living when the law was enacted at a later date, in 1946, is absolutely without merit  Fernandez  died immediately before  the  liberation and the actual cessation  of  hostilities. He profited by  the  war; there is  no reason why the incident of his death should relieve his estate from the tax.  On this matter  we agree with the Court of Tax Appeals that the provisions of section 18 of the Internal Revenue Code have been incorporated in Republic Act No. 55 by virtue of Section 9 thereof, which provides: 

Sec. 9.  Administrative remedies.—All administrative, special and general provisions  of law, including the  laws in relation to  the assessment, remission,  collection and  refund  of national  internal revenue taxes, not  inconsistent with the provisions of the  Act, are hereby extended and made applicable to all the provisions of this law, and to the tax herein imposed.”

Under section  84 of the National Internal Revenue Code, the term “person”  means an individual, a trust,  estate, corporation, or  a  duly registered general co-parnership. If the individual is already dead, property or estate left by him should be subject to the  tax in  the same manner as if he were  alive.

The last contention is also without merit.  The property which Olimpio Fernandez  was  possessed of  in December 1941 is presumed to be conjugal property and so are  the  properties which were acquired  by  him  during the  war, because at that  time he was married.   There is no claim or  evidence to  support the claim that any of the  properties  were paraphernal  properties  of the. wife; so the presumption stands  that they were conjugal properties of  the  husband  and  wife.   Under  these  circumstances they cannot be considered  as properties belonging  to two individuals, each of which shall be subject to the tax independently of the other.

For the foregoing considerations, the judgment appealed from is  hereby affirmed, with costs against the appellants.

Paras, C.  J.,  Padilla, Montemayor,  Bautista  Angelo, Concepcion, Reyes,  J.  B.  L., Endencia,  and Felix, JJ., concur.