8/17/2020 G.R. No.

L-26862

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Republic of the Philippines

EN BANC

G.R. No. L-26862 March 30, 1970

REPUBLIC OF THE PHILIPPINES, plaintiff-appellant,

Office of the Solicitor General Antonio P. Barredo, Assistant Solicitor General Pacifico P. de Castro and Solicitor
Enrique M. Reyes for plaintiff-appellant.

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.1 Necessarily, this Court, in Tirona v. Cudiamat,2 yielding 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 fees3 of 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.

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.

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

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

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as bonds and treasury certificates'. Significantly, the Auditor General concurred in the said view of the National
Treasurer."5

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

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.

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.7 An 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

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.9 Much 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.

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.

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.

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.

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

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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
20 While the question here is one of
remembered, a charge that is at least prima facie valid." 19 That principle has since been subsequently followed.
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.

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.

Castro, J., concurs in the result.

Barredo, J., took no part.

Footnotes

1 Sec. 2 of Republic Act No. 304 (1948) as amended by Republic Act Nos. 800 (1952) and 897 (1953).

2 L-21235, May 31, 1965, 14 SCRA 264.

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

4 Amended Record on Appeal, pp. 85-86.

5 Ibid., p. 86.

6 Ibid., p. 89.

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).

8 1 Cooley, Taxation, 4th ed., p. 61 (1924).

9 Cf. Welch v. Henry, 305 US 134 (1938).

10 42 Phil. 818. Cf. Ermita-Malate Hotel and Motel Operators Asso. v. City Mayor, L-24693, July 31, 1967, 20
SCRA 849.

11 Cooley, op. cit., p. 94.

12 Republic Act No. 587 (1950).

13 Ibid., Subsection G.

14 Ibid., Subsection H.

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.

16 Frankfurter, Of Law and Men, p. 54 (1956).

17 Amended Record on Appeal, pp. 88-89.

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

19 52 Phil. 803, 807 (1929).

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.

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