BANK OF THE PHILIPPINE ISLANDS, PLAINTIFF AND APPELLEE, VS. WENCESLAO TRINIDAD, AS COLLECTOR OF INTERNAL REVENUE FOR THE PHILIPPINE ISLANDS, DEFENDANT AND APPELLANT.

After
the formal pleas, plaintiff alleges that prior to the filing of the
complaint the defendant, as Collector of Internal Revenue, made a
ruling which required that the plaintiff should place documentary
stamps to the amount of 4 centavos for each P200 or fraction thereof on
each check, draft or telegraphic order of money drawn by it upon each
and all of its foreign correspondents. That the plaintiff protested
such ruling, and thereafter and in pursuance therewith, placed the
corresponding stamps upon ail of its foreign checks or drafts. That the
ruling was not authorized by any statute. That a summary of the amounts
which the plaintiff paid for such stamps is annexed to, marked Exhibit
A, and made a part of, the complaint. That by reason thereof, there is
now due and owing from the defendant to this plaintiff the sum of
P2,567.52, for which plaintiff prays a corresponding judgment, with
interest from January 14, 1924, and costs.

For answer the defendant makes a general and specific denial of all the material allegations of the complaint.

The case was tried upon the following “agreed statement of facts:”

“Come now the parties hereto, by their respective attorneys, and submit the following facts for the decision of the court:

“1. That the allegations in paragraph numbered 1 of the complaint are true.

“2.
That during the period covered by the complaint, the plaintiff has been
drawing orders for the payment of money upon its foreign correspondents
and delivering such orders to its clients for value received. That such
orders are in the form substantially as set forth in Exhibit A hereto
annexed.

“3. That during such period, the defendant, as
Collector of Internal Revenue, required the plaintiff to affix to such
orders documentary stamps to the amount of, and as required by
subsection (t) of section 1449 of the Administrative Code as amended.

“4. That the plaintiff from time to time made due protest against this
requirement and from time to time made demands for the refund of the
value of the stamps so affixed, and that the defendant overruled each
and all of said protests and refused each and all of said requests for
refunds.

“5. It is further stipulated that in case the
court shall decide that refunds are due as demanded by the complaint,
opportunity will be afforded by the plaintiff to the agents of the
defendant to verify by the books of the plaintiff and its branches the
amounts that have been actually expended for such stamps as have been
paid under protests and not barred under section 1679 [1579] of Act No.
2711 at the time of filing of the complaint herein and that judgment
may be rendered accordingly.”

The lower
court rendered judgment to the effect that the ruling was unauthorized,
and that the plaintiff was entitled to recover the amount which it had
paid for such stamps, allowing the defendant thirty days in which to
make an accounting.

After his motion for a new trial was
overruled, the defendant appealed, contending that the lower court
erred in holding that “the negotiable instrument in question (Exhibit
A) is not subject to the tax imposed in subsection (i) of section 14491 of Act No. 2711, but to subsection (f) of the same section,” and “in rendering judgment for the plaintiff and against the defendant.”

JOHNS, J.:

The question presented is the legal construction which should be placed upon subsections (f) and (i) of section 1449 of the Administrative Code which read as follows:

” (f)
On each bank check, draft, or certificate of deposit, not drawing
interest, or order for the payment of any sum of money drawn upon or
issued by any bank, trust company, or any person or persons, companies,
or corporations, at sight or on demand, two centavos.

” (i)
On all foreign bills of exchange and letters of credit (including
orders, by telegraph or otherwise, for the payment of money issued by
express or steamship companies or by any person or persons) drawn in
but payable out of the Philippine Islands, in a set of three or more
according to the custom of merchants and bankers, on each two hundred
pesos, or fractional part thereof, of the face value of any such bill
of exchange or letter of credit, or the Philippine equivalent of such
face value, if expressed in foreign currency, four centavos.”

It is admitted that the checks or orders on its foreign correspondents
were drawn in duplicate only, and that one of them is known and stamped
as the original and the other as the duplicate, and it is stipulated
that during the period covered by the complaint, the plaintiff has been
drawing orders for the payment of money upon its foreign correspondents
and delivering them to its clients, and that they are substantially in
the form as set forth in Exhibit A.

Sections 126 and 185 of Act No. 2031, the Negotiable Instruments Law, read as follows:

“Sec. 126. Bill of exchange defined.—A
bill of exchange is an unconditional order in writing addressed by one
person to another, signed by the person giving it, requiring the person
to whom it is addressed to pay on demand or at a fixed or determinable
future time a sum certain in money to order or to bearer.”

“Sec. 185. Check defined.—A
check is a bill of exchange drawn on a bank payable on demand. Except
as herein otherwise provided, the provisions of this Act applicable to
a bill of exchange payable on demand apply to a check.”

The checks in question which plaintiff drew on its foreign
correspondents were orders for the payment of money and clearly come
within the definitions of a bill of exchange under section 126 and a
check as defined in section 185, and, as such, are foreign bills of
exchange within the meaning of subsection (i) of section 1449 of the Administrative Code of 1917.

It is agreed that they were drawn in sets of twos, one as the original
and the other as the duplicate, and that they were not drawn “in a set
of three or more,” and for such reason, it is vigorously contended that
the plaintiff should not pay 4 centavos “on each P200 or fractional
part thereof.” In other words, that the provisions of subsection (i) only apply to “foreign bills of exchange and letters of credit,” which are drawn “in set of three or more.”

It will be noted that the word “foreign” is used in subsection (i), and that it is not used in subsection (f). The purpose and intent of the law is apparent. Subsection (f) applies only to interisland bank checks, drafts or certificates of deposits as therein defined, and subsection (f) applies to “foreign bills of exchange and letters of credit drawn in but payable out of the Philippine Islands.” Subsection (f) applies to domestic transactions and subsection (i) applies to foreign transactions.

It is clear that the legislature intended that upon all of such
domestic transactions, there should be a revenue of 2 centavos on each
bank check, draft or certificate of deposit. That upon all transactions
defined in subsection (i) there should be a revenue of 4
centavos on “each P200 or fractional part thereof.” It will also be
noted that no amount is specified on domestic transactions, and that on
foreign transactions it is 4 centavos on each P200 or a fraction. It
will also be noted that subsection (i) says:

“In
a set of three or more according to the custom of merchants and
bankers,” and that there is no such or a similar provision in
subsection (f). The words “according to the custom of
merchants and bankers” have a well-denned meaning and are descriptive
of the transaction itself.

Plaintiff’s
contention would nullify the legal force and effect of subsection (i).
Under its construction a bank which drew an order for the payment of
money on a foreign correspondent in a set of three or more would have
to pay 4 centavos on each P200 or a fraction, and a bank which drew its
orders in duplicate only would be exempt from payment. That was never
the purpose and intent of the legislature.

It may be true that subsection (i)
is awkwardly worded, but the purpose and intent of the law is apparent
to the effect that the Government should have a revenue of 4 centavos
for every P200 or fraction on each foreign bill of exchange and letter
of credit, which is drawn in but payable out of the Philippine Islands,
that is issued in accord with the customs and methods adopted and in
use by merchants and bankers, regardless of the fact of whether they
were drawn “in a set of three or more.”

There is no merit in plaintiff’s contention that the higher tax provided for in subsection (i) for foreign bills of exchange is in effect “a tax on exports.”

The case was tried on stipulated facts, and there is nothing in the
record showing the purpose for which the checks in question were drawn.

The judgment of the lower court is reversed, and one will be entered here in favor of the defendant, with costs. So ordered.

Malcolm, Villamor, Ostrand, and Romualdez, JJ., concur.

Johnson, J.,
dissenting: In my opinion the judgment of the lower court should have
been affirmed. It is in accordance with the facts and the law.