G.R. No.

L-26862 March 30, 1970 chanrobles virtual law library

REPUBLIC OF THE PHILIPPINES, Plaintiff-

Appellant, v. PHILIPPINE RABBIT BUS LINES, INC., Defendant-
Appellee.

Office of the Solicitor General Antonio P. Barredo, Assistant Solicitor

General Pacifico P. de Castro and Solicitor Enrique M. Reyes for
plaintiff-appellant. chanroblesvirtualawlibrarychanrobles virtual law library

Angel A. Sison for defendant-appellee.

FERNANDO, J.:

The right of a holder of a backpay certificate to use the same in the

payment of his taxes has been recognized by law.1Necessarily, this
Court, in Tirona v. Cudiamat,2yielding obedience to such statutory
prescription, saw nothing objectionable in a taxpayer taking
advantage of such a provision. That much is clear; it is settled
beyond doubt. What is involved in this appeal from a lower court
decision of November 24, 1965, dismissing a complaint by plaintiff-
appellant Republic of the Philippines, seeking the invalidation of the
payment by defendant-appellee Philippine Rabbit Bus Lines, Inc. for
the registration fees3of its motor vehicles in the sum of P78,636.17,
in the form of such negotiable backpay certificates of indebtedness,
is the applicability of such a provision to such a situation. The lower
court held that it did. The Republic of the Philippines appealed.
While originally the matter was elevated to the Court of Appeals, it
was certified to us, the decisive issue being one of law. The statute
having restricted the privilege to the satisfaction of a tax, a liability
for fees under the police power being thus excluded from its
benefits, we cannot uphold the decision appealed from. We
reverse.chanroblesvirtualawlibrarychanrobles virtual law library

The complaint of plaintiff-appellant Republic of the Philippines was

filed on January 17, 1963 alleging that defendant-appellee, as the
registered owner of two hundred thirty eight (238) motor vehicles,
paid to the Motor Vehicles Office in Baguio the amount of
P78,636.17, corresponding to the second installment of registration
fees for 1959, not in cash but in the form of negotiable certificate of
indebtedness, the defendant being merely an assignee and not the
backpay holder itself. The complaint sought the payment of such
amount with surcharges plus the legal rate of interest from the filing
thereof and a declaration of the nullity of the use of such negotiable
certificate of indebtedness to satisfy its obligation. The answer by
defendant-appellee, filed on February 18, 1963, alleged that what it
did was in accordance with law, both the Treasurer of the
Philippines and the General Auditing Office having signified their
conformity to such a mode of payment. It sought the dismissal of
the complaint.chanroblesvirtualawlibrarychanrobles virtual law library

After noting the respective theories of both parties in its pleadings,

the lower court, in its decision, stated that the issue before it "is
whether or not the acceptance of the negotiable certificates of
indebtedness tendered by defendant bus firms to and accepted by
the Motor Vehicles Office of Baguio City and the corresponding
issuance of official receipts therefor acknowledging such payment by
said office is valid and binding on plaintiff Republic."4 chanrobles virtual law library

In the decision now on appeal, the lower court, after referring to a

documentary evidence introduced by plaintiff-appellant continued:
"From the evidence adduced by defendant bus firm, it appears that
as early as August 28, 1958, the National Treasurer upon whom
devolves the function of administering the Back Pay Law (Republic
Act 304 as amended by Republic Act Nos. 800 and 897), in his letter
to the Chief of the Motor Vehicles Office who in turn quoted and
circularized same in his Circular No. 5 dated September 1, 1958, to
draw the attention thereto of all Motor Vehicle Supervisors,
Registrars and employees ..., had approved the acceptance of
negotiable certificates of indebtedness in payment of registration
fees of motor vehicles with the view that such certificates 'should be
accorded with the same confidence by other governmental
instrumentalities as other evidences of public debt, such as bonds
and treasury certificates'. Significantly, the Auditor General
concurred in the said view of the National Treasurer."5 chanrobles virtual law library

The argument of plaintiff-appellant that only the holders of the

backpay certificates themselves could apply the same to the
payment of motor vehicle registration fees did not find favor with
the lower court. Thus, "[Plaintiff] Republic urges that defendant bus
firm being merely an assignee of the negotiable certificates of
indebtedness in question, it could not use the same in payment of
taxes. Such contention, this Court believes, runs counter to the
recitals appearing on the said certificates which states that 'the
Republic of the Philippines hereby acknowledges to (name) or
assigns ...', legally allowing the assignment of backpay rights."6 chanrobles virtual law library

It therefore, as above noted, rendered judgment in favor of

defendant-appellee "upholding the validity and efficacy" of such
payment made and dismissing the complaint. Hence this appeal
which, on the decisive legal issue already set forth at the outset, we
find meritorious. chanroblesvirtualawlibrarychanrobles virtual law library

1. If a registration fee were a tax, then what was done by

defendant-appellee was strictly in accordance with law and its
nullity, as sought by plaintiff-appellant Republic of the Philippines,
cannot be decreed. But is it? The answer to that question is decisive
of this controversy. A tax refers to a financial obligation imposed by
a state on persons, whether natural or juridical, within its
jurisdiction, for property owned, income earned, business or
profession engaged in, or any such activity analogous in character
for raising the necessary revenues to take care of the
responsibilities of government.7An often-quoted definition is that of
Cooley: "Taxes are the enforced proportional contributions from
persons and property levied by the state by virtue of its sovereignty
for the support of government and for all public needs."8 chanrobles virtual law library

As distinguished from other pecuniary burdens, the differentiating

factor is that the purpose to be subserved is the raising of revenue.
A tax then is neither a penalty that must be satisfied or a liability
arising from contract.9Much less can it be confused or identified with
a license or a fee as a manifestation of an exercise of the police
power. It has been settled law in this jurisdiction as far back as Cu
Unjieng v. Potstone, decided in 1962, 10 that this broad and all-
encompassing governmental competence to restrict rights of liberty
and property carries with it the undeniable power to collect a
regulatory fee. Unlike a tax, it has not for its object the raising of
revenue but looks rather to the enactment of specific measures that
govern the relations not only as between individuals but also as
between private parties and the political society. To quote from
Cooley anew: "Legislation for these purposes it would seem proper
to look upon as being made in the exercise of that authority ...
spoken of as the police power." 11

The registration fee which defendant-appellee had to pay was

imposed by Section 8 of the Revised Motor Vehicle Law. 12 Its
heading speaks of "registration fees." The term is repeated four
times in the body thereof. Equally so, mention is made of the "fee
for registration." 13 A subsection starts with a categorical
statement "No fees shall be charged." 14 The conclusion is difficult
to resist therefore that the Motor Vehicle Act requires the payment
not of a tax but of a registration fee under the police power. Hence
the inapplicability of the section relied upon by defendant-appellee
under the Back Pay Law. It is not held liable for a tax but for a
registration fee. It therefore cannot make use of a backpay
certificate to meet such an obligation.chanroblesvirtualawlibrarychanrobles virtual law library

Any vestige of any doubt as to the correctness of the above

conclusion should be dissipated by Republic Act No. 5448. 15 A
special science fund was thereby created and its title expressly sets
forth that a tax on privately-owned passenger automobiles,
motorcycles and scooters was imposed. The rates thereof were
provided for in its Section 3 which clearly specifies that "additional
tax" was to be paid as distinguished from the registration fee under
the Motor Vehicle Act. There cannot be any clearer expression
therefore of the legislative will, even on the assumption that the
earlier legislation could be stretching the point be susceptible of the
interpretation that a tax rather than a fee was levied. What is thus
most apparent is that where the legislative body relies on its
authority to tax it expressly so states, and where it is enacting a
regulatory measure, it is equally explicit. chanroblesvirtualawlibrarychanrobles virtual law library

It may further be stated that a statute is meaningful not only by

what it includes but also by what it omits. What is left out is not
devoid of significance. As observed by Frankfurter: "An omission at
the time of enactment, whether careless or calculated, cannot be
judicially supplied however much later wisdom may recommend the
inclusion. 16 In the light of this consideration, the reversal of the
appealed judgment is unavoidable. chanroblesvirtualawlibrarychanrobles virtual law library

2. In the brief for plaintiff-appellant Republic of the Philippines, filed

by the then Solicitor General, now Justice Antonio P. Barredo, the
principal error imputed to the trial court is its failure to hold that the
Back Pay Law prohibits an assignee, as is defendant-appellee, from
using certificates of indebtedness to pay their taxes. In view of the
conclusion reached by us that the liability of defendant-appellee
under the Motor Vehicle Act does not arise under the taxing power
of the state, there is no need to pass upon this particular
question.chanroblesvirtualawlibrarychanrobles virtual law library

3. The Republic of the Philippines, in its brief, likewise assigned as

error the failure of the lower court to hold that estoppel does not lie
against the government for mistakes committed by its agents. As
could be discerned from an excerpt of the decision earlier referred
to, the lower court was impressed by the fact that the national
treasurer to whom it correctly referred as being vested with the
function of administering the backpay law did in a communication to
the Motor Vehicles Office approve the acceptance of negotiable
certificate of indebtedness in payment of registration fees, a view
with which the Auditor General was in concurrence. The appealed
decision likewise noted: "By the testimonies of Pedro Flores, the
then Registrar of the Motor Vehicles Office of Baguio City and
Casiano Catbagan, the Cashier of the Bureau of Public Highways in
the same city, defendant bus firm has undisputedly shown that,
after the said certificates of indebtedness were properly indorsed in
favor of the Motor Vehicles Office of Baguio City and accepted by
the Bureau of Public Highways on May 29, 1959, it was duly and
properly issued official receipts ... acknowledging full payment of its
registration fees for the second installment of 1959 of its 238
vehicles, and that the Bureau of Public Highways, thru its collecting
and disbursing officer, was validly and regularly authorized to
receive such payment." 17
Thus did the lower court, as pointed out by the then Solicitor
General, conclude that the government was bound by the mistaken
interpretation arrived at by the national treasurer and the auditor
general. It would consider estoppel as applicable. That is not the
law. Estoppel does not lie. Such a principle dates back to Aguinaldo
de Romero v. Director of Lands, 18 a 1919 decision. Insofar as the
taxing power is concerned, Pineda v. Court of First Instance, a 1929
decision, speaks categorically: "The Government is never estopped
by mistake or error on the part of its agents. It follows that, in so
far as this record shows, the petitioners have not made it appear
that the additional tax claimed by the Collector is not in fact due
and collectible. The assessment of the tax by the Collector creates,
it must be remembered, a charge that is at least prima facie
valid." 19 That principle has since been subsequently
followed. 20While the question here is one of the collection of a
regulatory fee under the police power, reliance on the above course
of decisions is not inappropriate. There is nothing to stand in the
way, therefore, of the collection of the registration fees from
defendant-appellee. chanroblesvirtualawlibrarychanrobles virtual law library

WHEREFORE, the decision of November 24, 1965 is reversed and

defendant-appellee ordered to pay the sum of P78,636.17. With
costs against defendant-appellee.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar,

Teehankee and Villamor, JJ., concur. chanroblesvirtualawlibrarychanrobles virtual law library

Castro, J., concurs in the result. chanroblesvirtualawlibrarychanrobles virtual law library

Barredo, J., took no part.

Endnotes:

1 Sec. 2 of Republic Act No. 304 (1948) as amended by Republic

Act Nos. 800 (1952) and 897 (1953). chanroblesvirtualawlibrarychanrobles virtual law library

2 L-21235, May 31, 1965, 14 SCRA 264. chanroblesvirtualawlibrarychanrobles virtual law library

3 Sec. 8, Republic Act No. 587 (1950) amending Act No. 3992
provides for the schedule of such fees. chanroblesvirtualawlibrarychanrobles virtual law library

4 Amended Record on Appeal, pp. 85-86. chanroblesvirtualawlibrarychanrobles virtual law library

5 Ibid., p. 86. chanroblesvirtualawlibrarychanrobles virtual law library

6 Ibid., p. 89. chanroblesvirtualawlibrarychanrobles virtual law library

7 Cf. Manila Electric Co. v. Auditor General, 73 Phil. 128 (1941).
Also: United States v. Baltimore and O. R. Co., 17 Wall 322 (1873);
Florida C.P.R. Co. v. Reynolds, 183 US 471 (1902); New Jersey v.
Anderson, 203 US 483 (1906); Houck v. Little River Drainage
District, 239 US 254 (1915); United States v. La Franca, 282 US
568 (1931). chanroblesvirtualawlibrarychanrobles virtual law library

8 1 Cooley, Taxation, 4th ed., p. 61 (1924). chanroblesvirtualawlibrarychanrobles virtual law library

9 Cf. Welch v. Henry, 305 US 134 (1938). chanroblesvirtualawlibrarychanrobles virtual law library

10 42 Phil. 818. Cf. Ermita-Malate Hotel and Motel Operators Asso.

v. City Mayor, L-24693, July 31, 1967, 20 SCRA 849. chanroblesvirtualawlibrarychanrobles virtual law library

11 Cooley, op. cit., p. 94. chanroblesvirtualawlibrarychanrobles virtual law library

12 Republic Act No. 587 (1950). chanroblesvirtualawlibrarychanrobles virtual law library

13 Ibid., Subsection G. chanroblesvirtualawlibrarychanrobles virtual law library

14 Ibid., Subsection H. chanroblesvirtualawlibrarychanrobles virtual law library

15 (1968). Section 3 thereof as to the imposition of addition tax on

privately-owned passenger automobiles, motorcycles and scooters
was amended by Republic Act No. 5470 which is approved on May
30, 1969. chanroblesvirtualawlibrarychanrobles virtual law library

16 Frankfurter, Of Law and Men, p. 54 (1956). chanroblesvirtualawlibrarychanrobles virtual law library

17 Amended Record on Appeal, pp. 88-89. chanroblesvirtualawlibrarychanrobles virtual law library

18 39 Phil. 814. See also Bachrach Motor Co. v. Unson, 50 Phil. 981
(1926).chanroblesvirtualawlibrarychanrobles virtual law library

19 52 Phil. 803, 807 (1929). chanroblesvirtualawlibrarychanrobles virtual law library

20 Visayan Cebu Terminal Company, Inc. v. Commissioner of

Internal Revenue, L-19530 &
L-19444, February 27, 1965, 13 SCRA 357; Pacific Oxygen &
Acetylene Company, Inc. v. Commissioner of Internal Revenue, L-
17708, April 30, 1965, 13 SCRA 622; British Traders' Insurance
Company, Ltd. v. Commissioner of Internal Revenue, L-20501, April
30, 1965, 13 SCRA 719; Luzon Stevedoring Corp. v. Court of Tax
Appeals, L-21005, October 22, 1966, 18 SCRA 436. Cf. Republic v.
Go Ben Lee, L-11499, April 29, 1961, 1 SCRA 1167; People v.
Ventura, L-15079, Jan. 31, 1962, 4 SCRA 208; Go Tian An v.
Republic, L-19833, Aug. 31, 1966, 17 SCRA 1053; Republic v.
Philippine Long Distance Tel. Co., L-18841, Jan. 27, 1969, 26 SCRA
620.