[No. 22619.

December 2, 1924]

NATIONAL COAL COMPANY, plaintiff and appellee, vs. THE

COLLECTOR OF INTERNAL REVENUE, defendant and
appellant.

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

584

584 PHILIPPINE REPORTS ANNOTATED

National Coal Co. vs. Collector of Internal Revenue

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.

APPEAL from a judgment of the Court of First Instance of Manila.

Concepcion, J.
The facts are stated in the opinion of the court.
Attorney-General Villa-Real for appellant.
Perfecto J. Salas Rodriguez for appellee.

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 f
rom the date of the presentation of the complaint, and costs against
the defendant.

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VOL. 46, DECEMBER 2, 1924 585

National Coal Co. vs. Collector of Internal Revenue

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:

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

586

586 PHILIPPINE REPORTS ANNOTATED

National Coal Co. vs. Collector of Internal Revenue

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 company's 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
1/3 per centum of the whole capital stock.

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VOL. 46, DECEMBER 2, 1924 587

 National Coal Co. vs. Collector of Internal Revenue

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
mined ? 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 plaintiff's rights f all 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

588

588 PHILIPPINE REPORTS ANNOTATED

National Coal Co. vs. Collector of Internal Revenue

in 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 "coalbearing lands of the
public domain" had been disposed of by virtue of said proclamation.

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VOL. 46, DECEMBER 2, 1924 589

National Coal Co. vs. Collector of Internal Revenue

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:

(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, but 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 f rom 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

590

590 PHILIPPINE REPORTS ANNOTATED

National Coal Co. vs. Collector of Internal Revenue

revenue and other fees and taxes provided for under section 15 of
Act No. 2719; while the defendant contends, under the f acts of
record, that the plaintiff is 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: 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."
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

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VOL. 46, DECEMBER 2, 1924 591

National Coal Co. vs. Collector of Internal Revenue

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 section 1496 of the
Administrative Code?
Section 1496 of the Administrative Code provides that "on all
coal and coke there shall be collected, per metric ton, fifty
centavos." Said section (1496) is a part of article 6, which provides
for specific taxes. Said article provides for a specific internal
revenue tax upon all things manufactured or produced in the
Philippine Islands for domestic sale or consumption, and upon
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 is 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 is so ordered.

Street, Malcolm, Avanceña, Villamor, Ostrand, and Romualdez,

JJ., concur.

Judgment reversed.

592

592 PHILIPPINE REPORTS ANNOTATED

Ong Guan Can and Bank of the P. I. vs. Century Ins. Co.

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