SECOND DIVISION

[G.R. No. L-22619. December 2, 1924. ]

NATIONAL COAL COMPANY, Plaintiff-Appellee, v. THE COLLECTOR OF
INTERNAL REVENUE,Defendant-Appellant.
Attorney-General Villa-Real for Appellant.
Perfecto J. Salas Rodriguez for Appellee.
SYLLABUS
1. THE NATIONAL COAL COMPANY, A PRIVATE CORPORATION; SUBJECT TO
THE PAYMENT OF INTERNAL REVENUE UNDER THE PROVISIONS OF SECTION
1496 OF THE ADMINISTRATIVE CODE. The National Coal Company is a
private corporation. The fact that the Government happens to be a stockholder
therein does not make it a public corporation. It is subject to all the provisions
of the Corporation Law in so far as they are not inconsistent with Act No. 2705.
As a private corporation, it has no greater rights, powers, or privileges than
any other corporation which might be organized for the same purpose under
the Corporation Law. It was not the intention of the legislature to give it a
preference, or right, or privilege over other legitimate private corporations in
the mining of coal. The law made no provision for its occupation and operation
of coal-bearing lands, to the exclusion of other persons or corporations, under
proper permission. The National Coal Company being a private corporation,
neither the lessee nor the owner of the lands upon which it mined coal for the
year in question, is subject to the payment of the internal revenue duty
provided for in section 1496 of the Administrative Code.

DECISION

JOHNSON, J. :

This action was brought in the Court of First Instance of the city of Manila on
the 17th day of July, 1923, for the purpose of recovering the sum of
P12,044.68, alleged to have been paid under protest by the plaintiff company
to the defendant, as specific tax on 24,089.3 tons of coal. Said company is a
corporation created by Act No. 2705 of the Philippine Legislature for the
purpose of developing the coal industry in the Philippine Islands and is actually
engaged in coal mining on reserved lands belonging to the Government. It
claimed exemption from taxes under the provisions of sections 14 and 15 of
Act No. 2719, and prayed for a judgment ordering the defendant to refund to
the plaintiff said sum of P12,044.68 with legal interest from the date of the
presentation of the complaint, and costs against the defendant.
The defendant answered denying generally and specifically all the material
allegations of the complaint, except the legal existence and personality of the

plaintiff. As a special defense, the defendant alleged (a) that the sum of
P12,044.68 was paid by the plaintiff without protest, and (b) that said sum was
due and owing from the plaintiff to the Government of the Philippine Islands
under the provisions of section 1496 of the Administrative Code, and prayed
that the complaint be dismissed, with costs against the plaintiff.
Upon the issue thus presented, the case was brought on for trial. After a
consideration of the evidence adduced by both parties, the Honorable Pedro
Concepcion, judge, held that the words "lands owned by any person, etc.," in
section 15 of Act No. 2719 should be understood to mean "lands held in lease
or usufruct," in harmony with the other provisions of said Act; that the coal
lands possessed by the plaintiff, belonging to the Government, fell within the
provisions of section 15 of Act No. 2719; and that a tax of P0.04 per ton of
1,016 kilos on each ton of coal extracted therefrom, as provided in said
section, was the only tax which should be collected from the plaintiff; and
sentenced the defendant to refund to the plaintiff the sum of P11,081.11 which
is the difference between the amount collected under section 1496 of the
Administrative Code and the amount which should have been collected under
the provisions of said section 15 of Act No. 2719. From that sentence the
defendant appealed, and now makes the following assignments of error:
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I. The court below erred in holding that section 15 of Act No. 2719 does not
refer to coal lands owned by persons and corporations.
II. The court below erred in holding that the plaintiff was not subject to the tax
prescribed in section 1496 of the Administrative Code.
The question confronting us in this appeal is whether the plaintiff is subject to
the taxes under section 15 of Act No. 2719, or to the specific taxes under
section 1496 of the Administrative Code.
The plaintiff corporation was created on the 10th day of March, 1917, by Act
no. 2705, for the purpose of developing the coal industry in the Philippine
Islands, in harmony with the general plan of the Government to encourage the
development of the natural resources of the country, and to provide facilities
therefor. By said Act, the company was granted the general powers of a
corporation "and such other powers as may be necessary to enable it to
prosecute the business of developing coal deposits in the Philippine Islands,
and of mining, extracting, transporting and selling the coal contained in said
deposits." (Sec. 2, Act No. 2705.) By the same law (Act No. 2705) the
Government of the Philippine Islands is made the majority stockholder,
evidently in order to insure proper governmental supervision and control, and
thus to place the Government in a position to render all possible
encouragement, assistance and help in the prosecution and furtherance of the
companys business.
On May 14, 1917, two months after the passage of Act No. 2705, creating the
National Coal Company, the Philippine Legislature passed Act No. 2719 "to
provide for the leasing and development of coal lands in the Philippine Islands."
On October 18, 1917, upon petition of the National Coal Company, the
Governor-General, by Proclamation No. 39, withdrew "from settlement, entry,
sale or other disposition, all coal-bearing public lands within the Province of

Zamboanga, Department of Mindanao and Sulu, and the Island of Polillo,

Province of Tayabas." Almost immediately after the issuance of said
proclamation the National Coal Company took possession of the coal lands
within the said reservation, with an area of about 400 hectares, without any
further formality, contract or lease. Of the 30,000 shares of stock issued by the
company, the Government of the Philippine Islands is the owner of 29,809
shares, that is, of 99 1/2 per centum of the whole capital stock.
If we understand the theory of the plaintiff-appellee, it is, that it claims to be
the owner of the land from which it has mined the coal in question and is
therefore subject to the provisions of section 15 of Act No. 2719 and not to the
provisions of section 1496 of the Administrative Code. That contention of the
plaintiff leads us to an examination of the evidence upon the question of the
ownership of the land from which the coal in question was mined. Was the
plaintiff the owner of the land from which the coal in question was mine? If the
evidence shows the affirmative, then the judgment should be affirmed. If the
evidence shows that the land does not belong to the plaintiff, then the
judgment should be reversed, unless the plaintiffs rights fall under section 3 of
said Act.
The only witness presented by the plaintiff upon the question of the ownership
of the land in question was Mr. Dalmacio Costas, who stated that he was a
member of the board of directors of the plaintiff corporation; that the plaintiff
corporation took possession of the land in question by virtue of the
proclamation of the Governor-General, known as Proclamation No. 39 of the
year 1917; that no document had been issued in favor of the plaintiff
corporation; that said corporation had received no permission from the
Secretary of Agriculture and Natural Resources; that it took possession of said
lands covering an area of about 400 hectares, from which the coal in question
was mined, solely, by virtue of said proclamation (Exhibit B, No. 39).
Said proclamation (Exhibit B) was issued by Francis Burton Harrison, then
Governor-General, on the 18th day of October, 1917, and provided; "Pursuant
to the provision of section 71 of Act No. 926, I hereby withdraw from
settlement, entry sale, or other disposition, all coal-bearing public lands within
the Province of Zamboanga, Department of Mindanao and Sulu, and the Island
of Polillo, Province of Tayabas,." It will be noted that said proclamation only
provided that all coal-bearing public lands within said province and island
should be withdrawn from settlement, entry, sale, or other disposition. There is
nothing is said proclamation which authorizes the plaintiff or any other person
to enter upon said reservations and to mine coal, and no provision of law has
been called to our attention, by virtue of which the plaintiff was entitled to
enter upon any of the lands so reserved by said proclamation without first
obtaining permission therefor.
The plaintiff is a private corporation. The mere fact that the Government
happens to be a majority stockholder does not make it a public corporation. Act
No. 2705, as amended by Act No. 2822, makes it subject to all of the
provisions of the Corporation Law, in so far as they are not inconsistent with
said Act (No. 2705). No provisions of Act No. 2705 are found to be inconsistent
with the provisions of the Corporation Law. As a private corporation, it has no
greater rights, powers or privileges than any other corporation which might be

organized for the same purpose under the Corporation Law, and certainly it
was not the intention of the Legislature to give it a preference or right or
privilege over other legitimate private corporations in the mining of coal. While
it is true that said proclamation No. 39 withdrew "from settlement, entry, sale,
or other disposition of coal-bearing public lands within the Province of
Zamboanga . . . and the Island of Polillo," it made no provision for the
occupation and operation by the plaintiff, to the exclusion of other persons or
corporations who might, under proper permission, enter upon and operate coal
mines.
On the 14th day of May, 1917, and before the issuance of said proclamation,
the Legislature of the Philippine Islands in "an Act for the leasing and
development of coal lands in the Philippine Islands" (Act No. 2719), made
liberal provisions for the encouragement of the coal mining industry. Section 1
of said Act provides: "Coal-bearing lands of the public domain in the Philippine
Islands shall not be disposed of in any manner except as provided in this Act,"
thereby giving a clear indication that no "coal-bearing lands of the public
domain" had been disposed of by virtue of said proclamation.
Neither is there any provision in Act No. 2705 creating the National Coal
Company, nor in the amendments thereof found in Act No. 2822, which
authorizes the National Coal Company to enter upon any of the reserved coal
lands without first having obtained permission from the Secretary of
Agriculture and Natural Resources.
The following propositions are fully sustained by the facts and the law:

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(1) The National Coal Company is an ordinary private corporation organized

under Act No. 2705, and has no greater powers nor privileges than the
ordinary private corporation, except those mentioned, perhaps, in section 10 of
Act No. 2719, and they do not change the situation here.
(2) It mined on public lands between the month of July, 1920, and the month
of March, 1922, 24,089.3 tons of coal.
(3) Upon demand of the Collector of Internal Revenue it paid a tax of P0.50 a
ton, as taxes under the provisions of article 1496 of the Administrative Code on
the 15th day of December, 1922.
(4) It is admitted that it is neither the owner nor the lessee of the lands upon
which said coal was mined.
(5) The proclamation of Francis Burton Harrison, Governor-General, of the 18th
day of October, 1917, by authority of section 1 of Act No. 926, withdrawing
from settlement, entry, sale, or other disposition all coal-bearing public lands
within the Province of Zamboanga and the Island of Polillo, was not a
reservation for the benefit of the National Coal Company, bur for any person or
corporation of the Philippine Islands or of the United States.
(6) That the National Coal Company entered upon said land and mined said
coal, so far as the record shows, without any lease or other authority from
either the Secretary of Agriculture and Natural Resources or any person having

the power to grant a leave or authority.

From all of the foregoing facts we find that the issue is well defined between
the plaintiff and the defendant. The plaintiff contends that it was liable only to
pay the internal revenue and other fees and taxes provided for under section
15 of Act No. 2719; while the defendant contends, under the facts of record,
that the plaintiff if obliged to pay the internal revenue duty provided for in
section 1496 of the Administrative Code. That being the issue, an examination
of the provisions of Act No. 2719 becomes necessary.
An examination of said Act (No. 2719) discloses the following facts important
for consideration here:
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First. All "coal-bearing lands of the public domain in the Philippine Islands shall
not be disposed of in any manner except as provided in this Act."
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Second. Provisions for leasing by the Secretary of Agriculture and Natural

Resources of "unreserved, unappropriated coal-bearing public lands," and the
obligation to the Government which shall be imposed by said Secretary upon
the lessee.
Third. The internal revenue duty and tax which must be paid upon coal-bearing
lands owned by any person, firm, association or corporation.
To repeat, it will be noted, first, that Act No. 2719 provides an internal revenue
duty and tax upon unreserved, unappropriated coal-bearing public lands which
may be leased by the Secretary of Agriculture and Natural Resources; and,
second, that said Act (No. 2719) provides an internal revenue duty and tax
imposed upon any person, firm, association or corporation, who may be the
owner of "coal-bearing lands." A reading of said Act clearly shows that the tax
imposed thereby is imposed upon two classes of persons only lessees and
owners.
The lower court had some trouble in determining what was the correct
interpretation of section 15 of said Act, by reason of what he believed to be
some difference in the interpretation of the language used in Spanish and
English. While there is some ground for confusion in the use of the language in
Spanish and English, we are persuaded, considering all the provisions of said
Act, that said section 15 has reference only to persons, firms, associations or
corporations which had already, prior to the existence of said Act, become the
owners of coal lands. Section 15 cannot certainly refer to "holders or lessees of
coal lands" for the reason that practically all of the other provisions of said Act
has reference to lessees or holders. If section 15 means that the persons,
firms, associations, or corporations mentioned therein are holders or lessees of
coal lands only, it is difficult to understand why the internal revenue duty and
tax in said section was made different from the obligations mentioned in
section 3 of said Act, imposed upon lessees or holders.
From all of the foregoing, it seems to be made plain that the plaintiff is neither
a lessee nor an owner of coal-bearing lands, and is, therefore, not subject to
any other provisions of Act No. 2719. But, is the plaintiff subject to the
provisions of sections 1496 of the Administrative Code?

Section 1496 of the Administrative Code provides that "on all coal and coke
here there shall be collected, per metric ton, fifty centavos." Said section
(1496) is a part of article 6, which provides for specific tax upon all things
manufactured or produced in the Philippine Islands for domestic sale or
consumption, and upon the things imported from the United States or foreign
countries. It having been demonstrated that the plaintiff has produced coal in
the Philippine Islands and is not a lessee or owner of the land from which the
coal was produced, we are clearly of the opinion, and so hold, that it subject to
pay the internal revenue tax under the provisions of section 1496 of the
Administrative Code, and is not subject to the payment of the internal revenue
tax under section 15 of Act No. 2719, nor to any other provisions of said Act.
Therefore, the judgment appealed from is hereby revoked, and the defendant
is hereby relieved from all responsibility under the complaint. And, without any
finding as to costs, it so ordered.
Street, Malcolm, Avancea, Villamor, Ostrand, and Romualdez, JJ., concur.