G. R. No. L-17725. February 28, 1962
REPUBLIC OF THE PHILIPPINES, PLAINTIFF AND APPELLEE, VS. MAMBULAO LUMBER COMPANY, ET AL., DEFENDANTS AND APPELLANTS.
BARRERA, J.:
Case No. 34100) ordering it to pay to plaintiff Republic of the
Philippines the sum of P4,802.37 with 6% interest thereon from the date
of the filing of the complaint until fully paid, plus costs, defendant
Mambuiao Lumber Company interposed the present appeal.[1]
The facts of the case are briefly stated in the decision of the trial court, to wit:
“The facts of this case are not contested and may be
briefly summarized as follows: (a) under the first cause of action, for
forest charges covering the period from September 10, 1952 to May 24,
1953, defendants admitted that they have a liability of P587.37, which
liability is covered by a bond executed by defendant General Insurance
& Surety Corporation for Mambulao Lumber Company, jointly and
severally in character, on July 29, 1953, in favor of herein plaintiff;
(b) under the second cause of action, both defendants admitted a joint
and several liability in favor of plaintiff in the sum of P286.70, also
covered by a bond dated November 27, 1953; and (c) under the third
cause of action, both defendants admitted a joint and several liability
in favor of plaintiff for P3,928.30, also covered by a bond dated July
20, 1954. These three liabilities aggregate to P4,802.37. If the
liability of defendants in favor of plaintiff in the amount already
mentioned is admitted, then what is the defense interposed by the
defendants? The defense presented by the defendants is quite unusual in
more ways than one. It appears from Exh. 3 that from July 21, 1948 to
December 29, 1956, defendant Mambulao Lumber Company paid to the
Republic of the Philippines P8,200.52 for ‘reforestation charges’ and
for the period commencing from April 30, 1947 to June 24, 1948, said
defendant paid P927.08 to the Republic of the Philippines for
‘reforestation charges’. These reforestation charges were paid to the
plaintiff in pursuance of Section 1 of Republic Act 115 which provides
that there shall be collected, in addition to the regular
forest charges provided under Section 264 of Commonwealth Act 466 known
as the National Internal Revenue Code, the amouift of P0.50 on each
cubic meter of timber * * * cut out and removed from any public forest
for commercial purposes. The amount collected shall be expended by the
director of forestry, with the approval of the secretary of agriculture
and commerce, for reforestation and afforestation of
water sheds, denuded areas * * * and other public forest lands, which
upon investigation, are found needing reforestation or afforestation *
* *. The total amount of the reforestation charges paid by Mambulao
Lumber Company is P9,127.50, and it is the contention of defendant
Mambulao Lumber Company that since the Republic of the Philippines has
not made use of those reforestation charges collected from it for
reforestating the denuded area of the land covered’ by its license, the
Republic of the Philippines, should refund said amount, or, if it
cannot be refunded, at least it should be compensated with what
Mambulao Lumber Company owed the Republic of the Philippines for
reforestation charges. In line with these thought, defendant Mambulao
Lumber Company wrote the director of forestry, on February 21, 1957
letter Exh. 1, in paragraph 4 of which said defendant requested ‘that
our account with your bureau be credited with all the reforestation
charges that you have imposed on us from July 1, 1947 to June 14, 1956,
amounting to around P2.988.62. * * *”. This letter of defendant
Mambulao Lumber Company was answered by the director of forestry on
March 12, 1957, marked Exh. 2, in which the director of forestry quoted
an opinion of the secretary of justice, to the effect that he has no
discretion to extend the time for paying the reforestation charges and
also explained why not all denuded areas are being reforested.”
The only issue to be resolved in this appeal is whether the sum of
P9,127.50 paid by defendant-appellant company to plaintiff-appellee as
reforestation charges from 1947 to 1956 may be set off or applied to
the payment of the sum of P4,802.37 as forest charges due and owing
from appellant to appellee. It is appellant’s contention that said sum
of P9,127.50, not having been used in the reforestation of the area
covered by its license, the same is refundable to it or may be applied
in compensation of said sum of P4,802.37 due from it as forest charges.
We find appellant’s claim devoid of any merit. Section 1 of Republic Act No. 115, provides:
“SECTION 1. There shall be collected, in addition to
the regular forest charges provided for under section two hundred and
sixty-four of Commonwealth Act Numbered Four Hundred sixty-six, known
as the National Internal Revenue Code, the amount of fifty centavos on
each cubic meter of timber for the first and second groups and forty
centavos for the third and fourth groups cut out and removed from any
public forest for commercial purposes. The amount collected shall be expended by the Director of Forestry, with the approval of the Secretary of Agriculture and Natural Resources (Commerce), for reforestation and afforestation of watersheds, denuded areas
and cogon and open lands within forest reserves, communal forest,
national parks, timber lands, sand dunes, and other public forest
lands, which, upon investigation, are found needing reforestation or
afforestation, or needing to be under forest cover for the growing of
economic trees for timber, tannin, oils, gums, and other minor forest
products or medicinal plants, or for watersheds protection, or for
prevention of erosion and floods and preparation of necessary plans and
estimate of costs and for reconnaissance survey of public forest lands
and for such other expenses as may be deemed necessary for the proper
carrying out of the purposes of this Act.“All revenues collected, by virtue of, and pursuant to, the provisions of the preceding paragraph and from the sale of barks, medicinal plants and other products derived from plantations as herein provided shall constitute a fund to be known as Reforestation Fund,
to be expended exclusively in carrying out the purposes provided for
under this Act. All provincial or city treasurers and their deputies
shall act as agents of the Director of Forestry for the collection of
the revenues or incomes derived from the provisions of this Act.”
(Italics supplied.)
Under this provision, it seems quite clear that the amount collected
as reforestation charges from a timber licensee or concessionaire shall
constitute a fund to be known as the Reforestation Fund, and that the
same shall be expended by the Director of Forestry, with the approval
of the Secretary of Agriculture and Natural Resources for the
reforestation or afforestation, among others, of denuded areas which,
upon investigation, are found to be needing reforestation or
afforestation. Note that there is nothing in the law which requires
that the amount collected as reforestation charges should be used
exclusively for the reforestation of the area covered by the license of
a licensee or concessionaire, and that if not so used, the same should
be refunded to him. Observe too, that the licensee’s area may or may
not be reforested at all, depending on whether the investigation
thereof by the Director of Forestry shows that said area needs
reforestation. The conclusion seems to be that the amount paid by a
licensee as reforestation charges is in the nature of a tax which forms
a part of the Reforestation Fund, payable by him irrespective of
whether the area covered by his license is reforested or not. Said
fund, as the law expressly provides, shall be expended in carrying out
the purposes provided for thereunder, namely, the reforestation or
afforestation, among others, of denuded areas needing reforestation or
afforestation.
Appellant maintains that the principle of compensation in Article 1278 of the new Civil Code[2]
is applicable, such that the sum of P9,127.50 paid by it as
reforestation charges may compensate its indebtedness to appellee in
the sum of P4,802,37 as forest charges. But in the view we take of this
case, appellant and appellee are not mutually creditors and debtors of
each other. Consequently, the law on compensation is inapplicable. On
this point, the trial court correctly observed:
“Under Article 1278, NCC, compensation should take
place when two persons in their own right are creditors and debtors of
each other. With respect to the forest charges which the defendant
Mambulao Lumber Company has paid to the government, they are in the
coffers of the government as taxes collected, and the government does
not owe anything to defendant Mambulao Lumber Company. So, it is
crystal clear that the Republic of the Philippines and the Mambulao
Lumber Company are not creditors and debtors of each other, because
compensation refers to mutual debts. * * *.”
And the weight of authority is to the effect that internal revenue
taxes, such as the. forest charges in question, can not be the subject
of set-off or compensation.
“A claim for taxes is not such a debt, demand,
contract or judgment as is allowed to be set-off under the statutes of
set-off, which are construed uniformly, in the light of public policy,
to exclude the remedy in an action or any indebtedness of the state or
municipality to one who is liable to the state or municipality for
taxes. Neither are they a proper subject of recoupment since they do
not arise out of the contract or transaction sued on. * * *.” (80
C.J.S. 73-74.)“The general rule, based on grounds of public
policy is well-settled that no set-off is admissible against demands
for taxes levied for general or local governmental purposes. The reason
on which the general rule is based, is that taxes are not in the nature
of contracts between the party and party but grow out of a duty to, and
are the positive acts of the government, to the making and enforcing of
which, the personal consent of individual taxpayers is not required. *
* * If the taxpayer can properly refuse to pay his tax when called upon
by the Collector, because he has a claim against the governmental body
which is not included in the tax levy, it is plain that some legitimate
and necessary expenditure must be curtailed. If the taxpayer’s claim is
disputed, the collection of the tax must await and abide the result of
a lawsuit, and meanwhile the financial affairs of the government will
be thrown into great confusion.” (47 Am. Jur. 766-767.)
Wherefore, the judgment of the trial court appealed from is hereby
affirmed in all respects, with costs against the defendant-appellant.
So ordered.
Bengzon, C. J., Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J. B. L., Paredes, Dizon, and De Leon, JJ., concur.
[1] Originally appealed
to the Court of Appeals, but later certified to us by said court, on
the ground that it involves questions of law only.
[2] ART. 1278. Compensation shall take place when two persons, in their own right, are creditors and debtors of each other.”