C.

CONTEMPORARY CONSTRUCTION
1. Generally
2. Executive construction, generally; kinds of
3. Weight accorded to contemporaneous construction

Case:
59. Nestle Philippines, Inc. v. Court of Appeals, G.R. No. 86738, November 13, 1991 (Narag)
Doctrine: ​The rationale for this rule relates not only to the emergence of the multifarious needs of a modern or
modernizing society and the establishment of diverse administrative agencies for addressing and satisfying those needs; it
also relates to accumulation of experience and growth of specialized capabilities by the administrative agency charged
with implementing a particular statute.

Facts: ​Sometime in February 1983, the authorized capital stock of petitioner Nestle Philippines Inc. ("Nestle") was
increased from P300 million divided into 3 million shares with a par value of P100.00 per share, to P600 million divided
into 6 million shares with a par value of P100.00 per share. Nestle underwent the necessary procedures involving Board
and stockholders approvals and effected the necessary filings to secure the approval of the increase of authorized capital
stock by respondent Securities and Exchange Commission ("SEC"), which approval was in fact granted. Nestle also paid
to the SEC the amount of P50,000.00 as filing fee in accordance with the Schedule of Fees and Charges being
implemented by the SEC under the Corporation Code.

Nestle has only two (2) principal stockholders: San Miguel Corporation and Nestle S.A. The other stockholders, who are
individual natural persons, own only one (1) share each, for qualifying purposes, i.e., to qualify them as members of the
Board of Directors being elected thereto on the strength of the votes of one or the other principal shareholder.

On 16 December 1983, the Board of Directors and stockholders of Nestle approved resolutions authorizing the issuance of
344,500 shares out of the previously authorized but unissued capital stock of Nestle, exclusively to San Miguel
Corporation and to Nestle S.A. San Miguel Corporation subscribed to and completely paid up 168,800 shares, while
Nestle S.A. subscribed to and paid up the balance of 175,700 shares of stock.

On 28 March 1985, petitioner Nestle filed a letter signed by its Corporate Secretary, M.L. Antonio, with the SEC seeking
exemption of its proposed issuance of additional shares to its existing principal shareholders, from the registration
requirement of Section 4 of the Revised Securities Act and from payment of the fee referred to in Section 6(c) thereof. In
that letter, Nestle requested confirmation of the correctness of two (2) propositions submitted by it:
"1. That there is no need to file a petition for exemption under Section 6(b) of the Revised Securities Act with respect to
the issuance of the said 344,500 additional shares to our existing stockholders out of our unissued capital stock; and
2. That the fee provided in Section 6(c) is not applicable to the said issuance of additional shares."
The principal, indeed the only, argument presented by Nestle was that Section 6(a)(4) of the Revised Securities Act which
provides as follows:
Sec. 6. Exempt transactions. -- (a) The requirement of registration under subsection (a) of Section four of this Act shall not
apply to the sale of any security in any of the following transactions: x x x xxx xxx

(4) The distribution by a corporation, actively engaged in the business authorized by its articles of incorporation, of
securities to its stockholders or other security holders as a stock dividend or other distribution out of surplus; or the
issuance of securities to the security holder or other creditors of a corporation in the process of a bona fide reorganization
of such corporation made in good faith and not for the purpose of avoiding the provisions of this Act, either in exchange
for the securities of such security holders or claims of such creditors or partly for cash and partly in exchange for the
securities or claims of such security holders or creditors;

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or the issuance of additional capital stock of a corporation sold or distributed by it among its own stockholders
exclusively, where no commission or other remuneration is paid or given directly or indirectly in connection with the sale
or distribution of such increased capital stock." embraces "not only an increase in the authorized capital stock but also the
issuance of additional shares to existing stockholders of the unissued portion of the unissued capital stock". Nestle urged
that interpretation upon the following argument:
"The use of the term 'increased capital stock' should be interpreted to refer to additional capital stock or equity
participation of the existing stockholders as a consequence of either an increase of the authorized capital stock or the
issuance of unissued capital stock. If the intention of the pertinent legal provision [were] to limit the exemption to
subscription to proposed increases in the authorized capital stock of a corporation, we see no reason why the law should
not have been more specific or accurate about it. It certainly should have mentioned 'increase in the authorized capital
stock of the corporation' rather than merely the expression 'the issuance of additional capital stock'.

Nestle expressly represented in the same letter that all the additional shares proposed to be issued would be issued only to
San Miguel Corporation and Nestle S.A. and that no commission or other form of remuneration had been given, directly
or indirectly, in connection with the issuance or distribution of such additional shares of stock.

In respect of its claimed exemption from the fee provided for in Section 6(c) of the Revised Securities Act, Nestle
contended that since Section 6(a)(4) of the statute declares (in Nestle's view) the proposed issuance of 344,500 previously
authorized but unissued shares of Nestle's capital stock to its existing shareholders as an exempt transaction, the SEC
could not collect fees for "the same transaction" twice. Nestle adverted to its payment back in 21 February 1983 of the
amount of P50,000.00 as filing fees to the SEC when it applied for and eventually received approval of the increase of its
authorized capital stock effected by Board and shareholder action last 16 December 1983.

In a letter dated 26 June 1986, the SEC through its then Chairman Julio A. Sulit, Jr. responded adversely to petitioner's
requests and ruled that the proposed issuance of shares did not fall under Section 6(a)(4) of the Revised Securities Act,
since Section 6(a)(4) is applicable only where there is an increase in the authorized capital stock of a corporation.
Chairman Sulit held, however, that the proposed transaction could be considered by the Commission under the provisions
of Section 6(b) of the Revised Securities Act which reads as follows:
"(b) The Commission may, from time to time and subject to such terms and conditions as it may prescribe, exempt
transactions other than those provided in the preceding paragraph, if it finds that the enforcement of the requirements of
registration under this Act with respect to such transactions is not necessary in the public interest and for the protection of
the investors by reason of the small amount involved or the limited character of the public offering."

The Commission then advised petitioner to file the appropriate request for exemption and to pay the fee required under
Section 6(c) of the statute, which provides: "(c) A fee equivalent to one-tenth of one per centum of the maximum
aggregate price or issued value of the securities shall be collected by the Commission for granting a general or particular
exemption from the registration requirements of this Act."

Petitioner moved for reconsideration of the SEC ruling, without success.

On 3 July 1987, petitioner sought review of the SEC ruling before this Court which, however, referred the petition to the
Court of Appeals. In a Decision dated 13 January 1989, the Court of Appeals sustained the ruling of the SEC.
Dissatisfied with the Decision of the Court of Appeals, Nestle is now before this Court on a Petition for Review, raising
the very same issues that it had raised before the SEC and the Court of Appeals.

Examining the words actually used in Section 6(a)(4) of the Revised Securities Act, and bearing in mind common
corporate usage in this jurisdiction, it will be seen that the statutory phrase "issuance of additional capital stock" is indeed
infected with a certain degree of ambiguity.

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This phrase may refer either to: a) the issuance of capital stock as part of and in the course of increasing the authorized
capital stock of a corporation; or (b) issuance of already authorized but still unissued capital stock. By the same token, the
phrase "increased capital stock" found at the end of Section 6(a)(4), may refer either: 1) to newly or contemporaneously
authorized capital stock issued in the course of increasing the authorized capital stock of a corporation; or 2) to previously
authorized but unissued capital stock.

Under Section 38 of the Corporation Code, a corporation engaged in increasing its authorized capital stock, with the
required vote of its Board of Directors and of its stockholders, must file a sworn statement of the treasurer of the
corporation showing that at least twenty-five percent (25%) of "such increased capital stock" has been subscribed and that
at least twenty-five percent (25%) of the amount subscribed has been paid either in actual cash or in property transferred
to the corporation. In other words, the corporation must issue at least twenty-five percent (25%) of the newly or
contemporaneously authorized capital stock in the course of complying with the requirements of the Corporation Code for
increasing its authorized capital stock.

In contrast, after approval by the SEC of the increase of its authorized capital stock, and from time to time after, the
corporation, by a vote of its Board, and without need of either stockholder or SEC approval, may issue and sell shares of
its already authorized but still unissued capital stock to existing shareholders or to members of the general public.

Both the SEC and the Court of Appeals resolved the ambiguity by construing Section 6(a)(4) as referring only to the
issuance of shares of stock as part of and in the course of increasing the authorized capital stock of Nestle. In the case at
bar, since the 344,500 shares of Nestle capital stock are proposed to be issued from already authorized but still unissued
capital stock and since the present authorized capital stock of 6,000,000 shares with a par value of P100.00 per share is not
proposed to be further increased, the SEC and the Court of Appeals rejected Nestle's petition. We believe and so hold that
the construction thus given by the SEC and the Court of Appeals to Section 6(a)(4) of the Revised Securities Act must be
upheld.

Issue: Does the phrase “increased capital stock” refer to issuance of capital stock as part of and in the course of increasing
capital stock, or does it refer to capital stock issued from already authorized but unissued capital stock?

Ruling: ​Issuance of capital stock as part of and in the course of increasing capital stock.

Both the SEC and the Court of Appeals resolved the ambiguity by construing Section 6 (a) (4) as referring only to the
issuance of shares of stock as part of and in the course of increasing the authorized capital stock of Nestlé. In the case at
bar, since the 344,500 shares of Nestlé capital stock are proposed to be issued from already authorized but still unissued
capital stock and since the present authorized capital stock of 6,000,000 shares with a par value of P100.00 per share is not
proposed to be further increased, the SEC and the Court of Appeals rejected Nestlé’s petition.

In the first place, it is a principle too well established to require extensive documentation that the construction given to a
statute by an administrative agency charged with the interpretation and application of that statute is entitled to great
respect and should be accorded great weight by the courts, unless such construction is clearly shown to be in sharp conflict
with the governing statute or the Constitution and other laws.

The rationale for this rule relates not only to the emergence of the multifarious needs of a modern or modernizing society
and the establishment of diverse administrative agencies for addressing and satisfying those needs; it also relates to
accumulation of experience and growth of specialized capabilities by the administrative agency charged with
implementing a particular statute.

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4. Weight accorded to usage and practice

60. Manila Jockey Club, Inc. v. Games and Amusements Board, G.R. No. L-12727, February 29, 1960 (Repeated)

5. Construction of rules and regulations

6. Reasons why contemporaneous construction is given much weight
7. When contemporaneous construction disregarded

Case:
61. Koppel (Philippines), Inc. v. Yatco, G.R. No. L-47673, October 10, 1946 (Delocario)
Doctrine: ​When contemporaneous construction disregarded - ​Contemporaneous construction of a statute is neither
controlling or binding upon the courts. The court disregards contemporaneous construction when there is no ambiguity in
the law, when the construction is clearly erroneous, where strong reason to the contrary exists, and where the court has
previously given the statute a different interpretation.

Facts: ​This is an appeal by Koppel Philippines from the judgment of the Court of First Instance of Manila, dismissing
Koppel’s complaint for recovery of the sum of P64,122.51, which was paid under the protest to the Collector of Internal
Revenue on October 30, 1936 as merchant sales tax.
Koppel is a corporation duly organized and existing under Philippine laws. The capital stock is divided into 1,000 shares
of P100.00 each. Koppel Industrial Car and Equipment Company is a corporation under the laws of the State of
Pennsylvania and not licensed to do business in the Philippines, owned 995 shares of the total capital stock of Koppel
Philippines from 1928 until 1936, and the remaining 5 shares were owned by the officers of Koppel Philippines.Koppel
Philippines is duly licensed to engage in business as a merchant and commercial broker in the Philippines, and is the
holder of the corresponding merchant’s and commercial broker’s privilege tax receipts. When a local buyer was interested
in the purchase of railway materials, machinery, and supplies, Koppel Philippines provides the buyer with price quotations
and Kopperl Industrial Car and Equipment Co. will send the cable quoting cost price. Koppel Philippines quoted the buyer
a selling price above the figures quoted by Koppel Industrial Car and Equipment Co.

The total gross sales from January 1, 1929, up to and including December 31, 1932, effected in the foregoing manner and
under the above specified conditions, amount to P3,596,438.84.
When a local sugar central was interested in the purchase of railway materials, machinery and supplies, the value of the
sales carried out in the manner mentioned in this paragraph is P133,964.98.
In February 1929, Miguel Ossario placed an option with Koppel Industrial Car and Equipment Company through Koppel
Philippines to purchase within 3 months a pair of Atlas-Diesel Marine Engines. Koppel Industrial Car and Equipment
Company purchased the Diesel engines in Sweden for $16,508.32. Ossorio called the deal off, and Koppel Industrial
asked Koppel Philippines to cover the same amount in six months, with the understanding that Koppel Industrial Car will
reimburse Koppel Philippines, when the engines would be disposed of. Koppel Philippines honored the draft and debited
the sum of $16,508.32 to merchandise account. In April 1, 1930, a new local bbuyer purchased the withheld engines for
$21,000.00 (P42,000). and shipped it to Hong Kong. Koppel Industrial reimbursed Koppel philippines the $16,508.32
with a credit of $1,152.95 as its share of profit for the transaction.

That plaintiff's share in the profits realized out of these transaction ascribed in paragraphs IV, V and VI hereof totaling
P3,772,403.82, amounts to P132,201.30; and that plaintiff within the time provided by law returned the aforesaid amount
of P132,201.30 for the purpose of the commercial broker's 4 per cent tax and paid thereon the sum of P5,288.05 as such
tax.

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The Commissioner of Internal Revenue the sum of P664,122.51 as the merchants' sales tax of 1 1/2 per cent on the
amount of P3,772,403.82, representing the total gross value of the sales of Koppel Philippines. Koppel Philippines on
October 30, 1936, paid under protest said sum in order to avoid further penalties, levy and distraint proceedings
The CIR, on November 10, 1936, overruled plaintiff's protest, and defendant has failed and refused and still fails and
refuses, notwithstanding demands by plaintiff, to return to the plaintiff said sun of P64,122.51 or any part thereof. Koppel
Philippines contended that in their sales transactions, they were only acting as a representative of Koppel Industrial Car
and Engine Corporation.

Issue: ​Whether or not Koppel Philippines is a distinct domestic corporation, and separate from Kopperl Industrial Car and
Equipment Company, existing under the laws of Pennsylvania, United States.

Ruling:
The Court established that Koppel Philippines is a branch of Koppel Industrial Car and Engine Corporation. In so far as
the sales involved herein are concerned, Koppel (Philippines), Inc., and Koppel Industrial Car and Equipment Company
are to all intents and purposes one and the same. The amount of the so-called "share in the profit” of Koppel (Philippines)
Inc, was ultimately left to the sole, underlined control of Koppel Industrial Car and Equipment Company. Evidently,
Koppel Industrial Car and Equipment Company made use of its ownership of the overwhelming majority — 99.5% — of
the capital stock of the local corporation to control the operations of the latter to such an extent that it had the final say
even as to how much should be allotted to said local entity in the so-called sharing in the profit.
The ruling of the Secretary of Finance, was not binding upon the trial court, much less upon this tribunal the duty and
power of interpreting the laws is primarily a function of the judiciary.

Koppel Philippines cannot be excused from abiding by this legal principle, nor it properly be heard to say that it relied on
the Secretary's ruling and that, therefore, the courts should not now apply an interpretation at variance therewith. The rule
of stare decisis is undoubtedly entitled to more respect in the construction of statutes than the interpretations given by
officers of the administrative branches of the government, even those entrusted with the administration of particular laws.
The rule of stare decisis is entitled to respect. Stability in the law, particularly in the business field, is desirable.​ But
idolatrous reverence for precedent, simply as precedent, no longer rules. More important than anything else is that the
court should be right.

8. Erroneous contemporaneous construction does not preclude correction nor create rights; exceptions

Case:
62. Hilado v. Collector of Internal Revenue, G.R. No, L-9408, October 31, 1956 (Tan)

DOCTRINE: ​“It seems too clear for serious argument that an administrative officer cannot change a law enacted by
Congress. A regulation that is merely an interpretation of the statute when once determined to have been erroneous
becomes nullity. An erroneous construction of the law by the Treasury Department or the collector of internal revenue
does not preclude or estop the government from collecting a tax which is legally due.” (Ben Stocker)

FACTS:​ On March 31, 1952, Petitioner filed his income tax return for 1951 with the treasurer of Bacolod City wherein he
claimed the amount of P12,837.65 as a deductible item from his gross income pursuant to General Circular No. V-123
issued by the Collector of Internal Revenue. This circular was issued pursuant to certain rules laid down by the Secretary
of Finance. He claimed the deduction as a loss consisting in a portion of his war damage claim which had been duly
approved by the Philippine War Damage Commission under the Philippine Rehabilitation Act of 1946.

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But this was not paid and never been paid pursuant to a notice served upon him by said Commission that said part of his
claim will not be paid until the United States Congress should make further appropriation. He claims that said amount of
P12,837.65 represents a “business asset” within the meaning of said Act which he is entitled to deduct as a loss in his
return for 1951.

An assessment notice demanding the payment of P9,419 was made, and petitioner paid the taxes. However, on August 30,
1952, the Secretary of Finance, through the Collector of Internal Revenue, issued General Circular No. V-139, which not
only revoked and declared void his general Circular No. V- 123 but laid down the rule that losses of property which
occurred during the period of World War II from fires, storms, shipwreck or other casualty, or from robbery, theft, or
embezzlement are deductible in the year of actual loss or destruction of said property. The amount of P12,837.65 was thus
disallowed as a deduction from the gross income of Petitioner for 1951 and the Collector of Internal Revenue demanded
from him the payment of the sum of P3,546 as deficiency income tax for said year.
When the petition for reconsideration filed by Petitioner was denied, he filed a petition for review with the Court of Tax
Appeals. In due time, this court rendered decision affirming the assessment made by Respondent Collector of Internal
Revenue. This is an appeal from the said decision.

ISSUE #1: May the claim for losses of property during the war period for 1950 be deducted from the income tax of
petitioner, as declared in the circular issued by the Secretary of Finance?
HELD. NO. First, assuming that said amount represents a portion of the 75% of his war damage claim which was not
paid, the same would not be deductible as a loss in 1951 because the last installment he received from the War Damage
Commission, together with the notice that no further payment would be made on his claim, was in 1950. In the
circumstance, said amount would at most be a proper deduction from his 1950 gross income.
Said amount cannot be considered as a “business asset” which can be deducted as a loss in contemplation of law because
its collection is not enforceable as a matter of right, but is dependent merely upon the generosity and magnanimity of the
U. S. government. There was absolutely no law under which Petitioner could claim compensation for the destruction of
his properties during the battle for the liberation of the Philippines. The payments of claims by the War Damage
Commission merely depended upon its discretion to be exercised in the manner it may see fit, but the non-payment of
which cannot give rise to any enforceable right.
The Philippine Rehabilitation Act which authorized the payment by the US Government of war losses suffered by
property owners in the Philippines was passed only in 1946, long after the losses were sustained. It cannot be said
therefore, that the property owners had any conclusive assurance during the years said losses were sustained, that the
compensation was to be paid therefor. As diligent property owners, they should adopt the safest alternative by considering
such losses deductible during the year when they were sustained
Petitioner’s contention that during the last war and as a consequence of enemy occupation in the Philippines “there was no
taxable year” under our internal revenue laws because during that period they were unenforceable, is without merit. It is
well known that our internal revenue laws are not political in nature and as such were continued in force during the period
of enemy occupation and in effect were actually enforced by the occupation government. As a matter of fact, income tax
returns were filed during that period and income tax payment were effected and considered valid and legal. Such tax laws
are deemed to be the laws of the occupied territory and not of the occupying enemy.
‘Law once established continues, until changed by some competent legislative power.​ ​It is not changed merely by change
of sovereignty. ‘There can be no break or interregnun in law. From the time the law comes into existence with the first-felt
corporateness of a primitive people it must last until the final disappearance of human society. Once created, it persists
until a change takes place, and when changed it continues in such changed condition until the next change and so forever.
Conquest or colonization is impotent to bring law to an end; inspite of change of constitution, the law continues
unchanged until the new sovereign by legislative act creates a change.”

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ISSUE #2: Does the Secretary of Finance have the authority to issue the new circular (139)?
HELD: YES. The Secretary of Finance is vested with authority to revoke, repeal or abrogate the acts or previous rulings
of his predecessor in office because the construction of a statute by those administering it is not binding on their
successors if thereafter the latter become satisfied that a different construction should be given. It is true that under the
authority of Section 338 of the NIRC the Secretary of Finance, in the exercise of his administrative powers, caused the
issuance of General Circular No. V-123 as an implementation or interpretative regulation of section 30 of the same Code,
under which the amount of P12,837.65 was allowed to be deducted “in the year the last installment was received with
notice that no further payment would be made until the United States Congress makes further appropriation therefor”, but
such circular was found later to be wrong and was revoked. Thus, when doubts arose as to the soundness or validity of
such circular, the Secretary of Finance sought the advice of the Secretary of Justice.

(​STATCON​) ISSUE #3: Should General Circular No. V-139 ​not​ be given retroactive effect because it would affect and
obliterate the vested right acquired by Petitioner under the previous circular?
HELD: NO. General Circular No. V-123, having been issued on a wrong construction of the law, cannot give rise to a
vested right that can be invoked by a taxpayer. A vested right cannot spring from a wrong interpretation. This is too clear
to require elaboration.​ ​See DOCTRINE.​ Under Art. 2254 of the Civil Code, no vested or acquired right can arise from
acts or omissions which are against the law or which infringe upon the rights of others.”

9. Legislative interpretation
10. Legislative approval
11. Reenactment
12. Stare decisis

Cases: ​63. Koppel (Philippines), Inc. v. Yatco, G.R. No. L-47673, October 10, 1946 (Repeated)

64. Commissioner of Internal Revenue v. The Insular Life Assurance Co. Ltd., GR. 197192, June 4, 2014 (Tan)
Doctrine:​ “Time and again, the Court has held that it is a very desirable and necessary judicial practice that when a court
has laid down a principle of law as applicable to a certain state of facts, it will adhere to that principle and apply it to all
future cases in which the facts are substantially the same. Stare decisis et non quieta movere. Stand by the decisions and
disturb not what is settled. Stare decisis simply means that for the sake of certainty, a conclusion reached in one case
should be applied to those that follow if the facts are substantially the same, even though the parties may be different. It
proceeds from the first principle of justice that, absent any powerful countervailing considerations, like cases ought to be
decided alike. Thus, where the same questions relating to the same event have been put forward by the parties similarly
situated as in a previous case litigated and decided by a competent court, the rule of stare decisisis a bar to any attempt to
relitigate the same issue."

Facts: ​Respondent Insular Life is a corporation duly organized and existing under the laws of the Republic of the
Philippines. It is registered as a non-stock mutual life insurer with the Securities and Exchange Commission. On October
7, 2004, respondent received an Assessment Notice with Formal Letter of Demand both dated July 29, 2004, assessing
respondent for deficiency Documentary Stamp Tax (DST) on its premiums on direct business/sums assured for calendar
year 2002.

Thereafter, respondent filed its Protest Letter, which was subsequently denied by petitioner for lack of factual and legal
bases. Thus, respondent filed a Petition for Review before the CTA (2nd Division), which held, among others, that
respondent sufficiently established that it is a cooperative company and therefore, it is exempt from the DST on the
insurance policies it grants to its members.

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Petitioner filed a Motion for Reconsideration, which was denied, also holding, among others, that the Supreme Court in
Republic of the Philippines vs. Sunlife Assurance Company of Canada already laid down the rule that registration with the
Cooperative Development Authority is not essential before respondent may avail of the exemptions granted under the
NIRC. Hence, this petition.

Issue:​ DID THE CTA EN BANC ERR IN RULING THAT RESPONDENT IS A COOPERATIVE AND THUS
EXEMPT FROM DOCUMENTARY STAMP TAX?

Ruling:​ The Court has pronounced in Republic of the Philippines v. Sunlife Assurance Company of Canada that “Under
the Tax Code (NIRC) although respondent is a cooperative, registration with the CDA is not necessary in order for it to be
exempt from the payment of both percentage taxes on insurance premiums, under Section 121; and documentary stamp
taxes on policies of insurance or annuities it grants, under Section 199.

As regards the applicability of Sunlife to the case at bar, the CTA, through records, has established the following
similarities between the two which call for the application of the doctrine of stare decisis:
1. Sunlife Assurance Co. of Canada and respondent are both engaged in mutual life insurance business in the Phil.;
2. The structures of both corporations were converted from stock life insurance corporation to non-stock mutual life insurance for the
benefit of its policyholders pursuant to the Insurance Code of 1978 and they were made prior to effectivity of the Cooperative Code
3. Both corporations claim to be a purely cooperative corps. duly licensed to engage in mutual life insurance business;
4. Both corporations claim exemption from payment of DST; and
5. Petitioner CIR requires registration with the CDA before it grants tax exemptions;
The CTA observed that the factual circumstances obtaining in Sunlife and the present case are substantially the same. Hence, the CTA
based its assailed decision on that case. On the other hand, the petitioner submitted that the doctrine in Sunlife should be reconsidered
and not be applied because it failed to consider Section 3(e) of R.A No. 6939, which states that registration with the CDA is necessary
for an association to be deemed as a cooperative and to enjoy the tax privileges appurtenant thereto.

However, a perusal of Section 3(e) of R.A. No. 6939 evidently shows that it is merely a statement of one of the powers
exercised by CDA. Neither Section 3(e) of R.A. No. 6939 nor any other provision in the aforementioned statute imposes
registration with the CDA as a condition precedent to claiming DST exemption.

Furthermore, the absence of a registration requirement under Section 199 clearly manifests the intent of Legislature to do
away with registration before the CDA for a cooperative to benefit from the DST exemption. Second, the Cooperative
Code does not apply, since its history was amply discussed in Sunlife where it was noted that only cooperatives under the
old law, Presidential Decree (P.D.) No. 175 were the only ones required to be registered, and respondent is not one of
them, as it was incorporated only after the passage of its amendment, RA 6939.

There being no cogent reason for the Court to deviate from its ruling in Sunlife, the Court holds that the respondent, being
a cooperative company not mandated by law to be registered with the CDA, cannot be required under RMC No. 48-91, a
mere circular, to be registered prior to availing of DST exemption.

"While administrative agencies, such as the Bureau of Internal Revenue, may issue regulations to implement statutes, they
are without authority to limit the scope of the statute to less than what it provides, or extend or expand the statute beyond
its terms, or in any way modify explicit provisions of the law. Indeed, a quasi-judicial body or an administrative agency
for that matter cannot amend an act of Congress. Hence, in case of a discrepancy between the basic law and an
interpretative or administrative ruling, the basic law prevails.

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65. Tung Chin Hui v. Rodriguez, G.R. No. 137571, September 21, 2000 (Labrador)
Doctrine:​ ​Stare decisis, et non quieta movere. ​"When the court has once laid down a principle of law as applicable to a
certain state of facts, it will adhere to such and apply it to all future cases where the facts are substantially the same."

Facts: ​After obtaining a visa at the Philippine Embassy in Singapore, petitioner, a "Taiwanese citizen," arrived in this
country. He was arrested by several policemen, who subsequently turned him over to the Bureau of Immigration and
Deportation (BID). Thereafter, the BID Board of Commissioners, after finding him guilty of possessing a tampered
passport earlier canceled by Taiwanese authorities, ordered his summary deportation. Petitioner filed before the RTC of
Manila a Petition for Habeas Corpus on the ground that his detention was illegal. RTC ordered his release from custody.
Respondents filed a​ Motion for Reconsideration but it was denied. ​Respondents then filed a "Notice of Appeal from the
judgment of the Honorable Court dated on dated January 29, 1999​. ​Petitioner filed an "Opposition," claiming that the
Notice had been filed beyond the 48-hour reglementary period for filing appeals in ​habeas corpus​ cases as prescribed by
the pre-1997 Rules of Court. Although respondents alleged that they had received the said Order on February 15, 1999,
petitioner contended that they had in fact received it on February 11, 1999, "as evidenced by the receipt of the service
thereof and by the Sheriff’s Return.

Issue:​ ​Was the Notice of Appeal filed within the reglementary period?

Ruling:​ Yes. Petitioner contends that the Notice of Appeal was late because respondents filed it only on February 16,
1999, five days after they had received the Order denying the Motion for Reconsideration on February 11, 1999. He
argues that the reglementary period for filing an appeal is 48 hours, as prescribed in Section 18 of Rule 41 of the pre-1997
Rules of Court:
"SEC. 18. ​Appeal in habeas corpus cases, how taken.​ - An appeal in habeas corpus cases shall be perfected by
filing with the clerk of court or the judge who rendered the judgment, within ​forty-eight (48) hours​ from notice of
such judgment, a statement that the person making it appeals therefrom.

The argument is devoid of merit, because the foregoing provision was omitted from and thereby repealed by the 1997
Revised Rules of Court, which completely replaced Rules 1 to 71. The well-settled rule of statutory construction is that
provisions of an old law that were not reproduced in the revision thereof covering the same subject are deemed repealed
and discarded.​ Clearly then, the reglementary period for filing an appeal in a ​habeas corpus​ case is now governed by
Section 3, Rule 41 of the 1997 Rules of Court:
SEC. 3. ​Period of ordinary appeal.​ -- The appeal shall be taken within ​fifteen (15) days​ from notice of the
judgment or final order appealed from. Where a record on appeal is required, the appellant shall file a notice of
appeal and a record on appeal within thirty (30) days from notice of the judgment or final order.

Petitioner insists, however, that the "application of Section 18, Rule 41 under the Revised Rules of Court must be
maintained under the doctrine of ​stare decisis​.", Thus he urges the Court to apply precedents that held that the 48-hour
period for perfecting an appeal was mandatory and jurisdictional. He specifically cites ​Saulo v. Cruz​,​ Garcia v. Echiverri,​
and ​Elepante v. Madayag​. ​It should be stressed that ​stare decisis​ presupposes that the facts of the precedent and the case
to which it is applied are substantially the same. In this case, there is one crucial difference. All the incidents of the present
controversy occurred when the 1997 Revised Rules of Court was already in effect. On the other hand, all the cited
precedents had been resolved under the pre-1997 Rules. Accordingly, ​stare decisis c​ annot compel this Court to apply to
the present case the alleged precedents decided during the regime of the pre-1997 Rules. The cited cases applied a specific
provision of the Rules in effect at the time. But because that provision had already been repealed when the facts under
present consideration occurred, the Court can no longer rely on those cases.

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CHAPTER IV: ADHERENCE TO, OR DEPARTURE FROM, LANGUAGE OF STATUTE
A. LITERAL INTERPRETATION
1. Literal meaning or plain-meaning rule

Case: 66. Bustamante v. NLRC, G.R. No. 111651, November 28, 1996 (Alejaga)
Doctrine: ​When the provision is clear, plain, and free from ambiguity, it must be applied without attempted or strained
interpretation. ​Index animi sermo est​ (speech is the index of intention).

Facts: ​On May 3, 1993, the Supreme Court rendered a decision ordering the Evergreen Farms, Inc. that back wages shall
be paid to its illegally dismissed employees Bustamante, et al.

Evergreen now moves to reconsider the decision on grounds that “salary earned elsewhere” (during the period of illegal
dismissal) should be deducted from the award of such back wages for ​this Court had ruled in the case of ​Pines City
Educational Center vs. NLRC that "in ascertaining the total amount of back wages payable to them (employees),… the
total amount derived from employment elsewhere by the employee from the date of dismissal up to the date of
reinstatement, if any, should be deducted therefrom."

Thus, the Court here clarified the computation of back wages due an employee on account of his illegal dismissal from
employment.

Issue​: Whether or not “salary earned elsewhere” (during the period of illegal dismissal) should be deducted from the
award of backwages to the illegally dismissed employees

Ruling​: No. RA 6715 has been passed by the legislature, amending the Labor Code. It states that ​an illegally dismissed
employee is entitled to ​his ​full back wages from the time his compensation was withheld from him (from the time of his
illegal dismissal) up to the time of his actual reinstatement.

The Court, thus, reconsider the earlier ruling on the computation of backwages as enunciated in said ​Pines City
Educational Center case, by now holding that conformably with the evident legislative intent as expressed in ​Rep. Act
No. 6715​, back wages to be awarded to an illegally dismissed employee, should not, as a general rule, be diminished or
reduced by the earnings derived by him elsewhere during the period of his illegal dismissal. The clear legislative intent of
the amendment in ​Rep. Act No. 6715 is to give more benefits to workers than was previously given them or the
"deduction of earnings elsewhere" rule.

Definitely, the provision of RA 6715 calling for "full backwages" to illegally dismissed employees is clear, plain and free
from ambiguity and, therefore, must be applied without attempted or strained interpretation. ​Index animi sermo est​.

Henceforth, the illegally dismissed employees are entitled to “full backwages” and the “salary earned elsewhere” (during
the period of illegal dismissal) should not be deducted from the award of such back wages.

2. Dura lex sed lex

Cases: 67. People v. Amigo, G.R. No. 116719, January 18, 1996 (Tagle)

Doctrine: ​The duty of the court is to apply the law, disregarding their feeling of sympathy or pity for an accused. ​Dura
lex sed lex​. ​The law may be harsh but it is still the law.

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Facts: ​On December 29, 1989 at around 1:00 Pm, Davao City, Benito Ng Suy wasvdriving their Ford Fiera back home,
with his daughters, Jocelyn Ng Suy and avyounger one together with his two year old son. Suddenly, a car (Tamaraw)
driven by Virgilio Abogada made a left turn without noticing Benito’s car coming in the opposite direction. Due to the
unexpected veer by Virgilio, an accidental collision occurred, causing slight damage to the Tamaraw’s right bumper.

While Abogado and Benito were having a verbal confrontation, Patricio Amigo ( the accused who was riding with
Virgilio Abogado) approached Benito asking the latter to leave the incident as it was only a minor incident. However,
Benito said that Patricio should not interfere, which made Patricio irritated and caused the latter to stab Benito, rendering
the victim into a critical condition which later caused his death.

Patricio Amigo was charged initially with frustrated murder, but was modified. He was convicted, beyond reasonable
doubt, of the crime of murder punishable under Art 248 of the Revised Penal Code, with no modifying circumstance
present, was sentenced to the penalty of reclusion perpetua, which is the medium period of the penalty of reclusion
temporal in its maximum to death. Amigo claims that the penalty of reclusion perpetua is too cruel or harsh as a penalty
and pleads for sympathy. (he was sentenced to the penalty of ​reclusion perpetua, ​and pay the cost; to indemnify the
offended party.

Amigo contends that under the 1987 Constitution and prior to the promulgation of Republic Act No. 7659, the death
penalty had been abolished and hence, the penalty that should have been imposed for the crime of murder committed by
accused-appellant without the attendance of any modifying circumstances, should be reclusion temporal in its medium
period or 17 years, 4 months and 1 day, to 20 years of reclusion temporal.

Issue: Whether or Not the penalty imposed upon the accused "Reclusion Perpetua" be modified or reduced by virtue of
Section 19 (1) of Article III of the Constitution which prohibits the imposition of death penalty. Or ​Whether or not that the
penalty or reclusion perpetua is too cruel and harsh

Ruling: No. A reading of Section 19(1) of Article III will readily show that there is really nothing therein which
expressly declared the abolition of the death penalty. The provision merely says that the death penalty shall not be
imposed unless for compelling reasons involving heinous crimes the Congress hereafter provides for it and, if already
imposed, shall be reduced to reclusion perpetua. The language, while rather awkward, is still plain enough. And it is a
settled rule of legal hermeneutics that if the language under consideration is plain, it is neither necessary nor permissible
to resort to extrinsic aids for its interpretation.

Citing precedents that shows the modified penalty that may be imposed for murder. The Court has reconsidered such
precedent cases and, after an extended discussion, come to the conclusion that the doctrine therein does not reflect the
intention of the framers as embodied in Article III, Section 19(1) of the Revised Penal Code.

The Court has reconsidered the above cases and, after an extended discussion, come to the conclusion that the doctrine
announced therein does not reflect the intention of the framers as embodied in Article III, Section 19(1) of the
Constitution. The majority of the Court is of the belief that the original interpretation should be restored as the more
acceptable reading of the constitutional provision in question.

68. Aguila v. Court of First Instance of Batangas, G.R. No. L-48335, April 15, 1988 (Ruzol)

Doctrine: ​Dura lex sed lex: The law is harsh but it is the law

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Facts: ​Juliana Matienzo had 2 husbands in succession, Escolatico Alabastro and Daniel Aguila. Petitioner Juan Aguila is
claiming the disputed property as the only surviving child in the 2​nd​ marriage while private respondents resist the claim as
the children of Maria Alabastro, the sole offspring of the 1​st​ marriage. In the CFI of Batangas, the children of Alabastro
sued for partition and damages against Aguila and his wife for allegedly possessing property acquired during the 1​st
marriage and not the 2​nd​. CFI rendered judgment in favor of children as the Aguila’s counsel failed to appear during the
hearings thus were not able to present evidence.

A motion for reconsideration and a 2​nd motion for reconsideration was filed and were denied by the trial court. On
September 5, 1974, the Aguilas were given an extension of 20 days to file their record on appeal and was extended 15
days but the trial court denied the record on appeal as the court's decision had been final and executory. On December 2,
1974, the trial court issued a writ of execution to which the properties held by the Aguilas were levied upon and sold at
public auction to the children as the highest bidders. The Aguilas filed with the CA for certiorari and mandamus with
preliminary injunction as well as a motion for consideration, all of which were denied. The Aguilas filed with SC for
certiorari and an “amended” petition considered as a motion for consideration, all of which were denied as well. On Aug
16, 1976, a last motion for reconsideration was denied. On June 8, 1977, a complaint of reconveyance of properties were
filed in the CFI of Batangas by the Aguilas. The petitioners alleged res judicata as the complaint was already barred by the
previous civil case. The trial court dismissed the case, hence this petition.

Issue:
Whether or not Aguila may rightfully allege res judicata? - NO
Whether or not the court should allow the reconveyance of the properties in the exercise of its equity jurisdiction? - NO

Ruling:
Aguila does not seriously dispute the requisites of res judicata which are present:

● Presence of a final former judgment

● Court must have jurisdiction over subject matter
● Former judgment must have merit
● Between the 2 cases, there must be identity of the parties
Aguila contends that he agrees with res judicata and is merely proposes to undo a grave and serious wrong perpetrated in
the name of justice. Res judicata should not prevail over his right to substantial justice and due process which was denied
to him when the defendants were deprived of the opportunity to submit evidence and to appeal to the trial court. The court
rules that he was not denied due process as he had the opportunity to be heard and have a decision reviewed and it was his
counsel’s gross ineptitude that precluded him from presenting evidence.

The law on reconveyance is clear and jurisprudence is well-settled in this case. The remedy is available in cases where, as
a result of mistake or fraud, property is registered in the name of a person not its owner. However, it cannot be employed
to negate the effects of a valid decision of a court of justice determining the conflicting claims of ownership of the parties.
The decision in that civil case was a valid resolution of the question of ownership over the disputed properties and cannot
be reversed now through reconveyance.

Equity is described as justice outside legality, which simply means that it cannot supplant although it may, as often
happens, supplement the law. All abstract arguments based only on equity should yield to positive rules, which pre-empt
and prevail over such persuasions. Emotional appeals for justice, while they may wring the heart of the court, cannot
justify disregard of the mandate of the law as long as it remains in force. The applicable maxim is “aequetas nunquam
contravenit legis” or equity / fairness never contradicts the law.

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B. DEPARTURE FROM LITERAL INTERPRETATION
1. Statute must be capable of interpretation, otherwise inoperative

Cases: 69. Regalado v. Yulo, G.R. No. 42935, February 15, 1935 (Jimenea)
Doctrine: ​The intent of the legislature to be ascertained and enforced is the intent expressed in the words of the statute. If
the legislative intent is not expressed in some appropriate manner, the courts cannot by interpretation speculate as to an
intent and supply a meaning not found in the phraseology of the law. In other words, the courts cannot assume some
purposed in no way expressed and then construe the statute to accomplish this supposed intention.

Sec. 203 of Act 3899 states that, “​Appointment and distribution of justices of the peace​. — One justice of the peace and
one auxiliary justice of the peace shall be appointed by the Governor-General, with the advise and consent of the
Philippine Senate, for the City of Baguio, and for each municipality, township, and municipal district in the Philippine
Islands, and if the public interests shall so require, for any other minor political division or unorganized territory in said
Islands: ​Provided​, That justices and auxiliary justices of the peace shall be appointed to serve until they have reached the
age of sixty-five years: ​Provided, further​, That the present justices and auxiliary justices of the peace who shall, at the
time this Act takes effect, have completed sixty-five years of age, shall automatically cease to hold office on January first,
nineteen hundred and thirty-three; and the Governor-General, with the advise and consent of the Philippine Senate, shall
make new appointments to cover the vacancies occurring by operation of this Act.”

Facts:
Felipe Regalado qualified for the Office of Justice of Peace of Malinao, Albay on April 12, 1906. When he turned 65
years old on September 13, 1934, the Judge of First Instance of Albay gave his position to Esteban T. Villar, justice of
peace of Tabaco, Albay to act as Justice of Peace of Malinao, Albay. Regalado surrendered office to Villar under protest
and questioned the interpretation of the Court of first instance on Sec. 203, of the Administrative Code, as amended by
Act 3899.

Felipe Regalado insists that the law is clear and thus needs no more interpretation. According to him, sec. 203 only applies
to those justices of peace and auxiliary justices ceased to hold office who had become 65 years on or before November 16,
1931 when the said Act took effect and since he became 65 years on September 13, 1934, this provision does not include
him.

However, the solicitor general says the opposite. According to him, the second proviso that was added to sec. 203 are not
very specific and the real intention of the law that could be placed on said proviso is that all justices of peace and auxiliary
justices whether appointed prior to the approval of the Act or subsequent thereto, who had completed the age of 65 years
of age at the time of the approval of the Act, and those who shall complete that age thereafter, shall cease to hold office,
the former on January 1, 1933 and the latter at the time they complete 65 years of age.

Issue:
Whether or not Felipe Regalado, who was appointed as Justice of Peace in Malinao, Albay prior to the approval of Act
3899 and reached 65 years shall cease to hold office under Sec. 203 of Act No. 3899? = NO

Ruling:
No, Felipe Regalado’s appointment shall not cease to be the Justice of Peace in Malinao, Albay.
As a general rule in statutory construction, the language which should prevail in the interpretation of Act No. 3899 is
Spanish, but the English text may also be consulted to explain the Spanish.

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It is also a cardinal rule that practical construction of a statute by the department whose duty it is to carry it into execution
is entitled to great weight. Nevertheless, the court is not bound by such construction and the rule does not apply in cases
where the construction is not doubtful. The fundamental purpose in enacting Act No. 3899 was to correct the phraseology
of the first proviso to section 203 of the Administrative Code added thereto by Act. No. 3107, and to place justices of
peace and auxiliary justices of the peace on the same footing as regards to their cessation from office by reason of age.

The intent of the legislature to be ascertained and enforced is the intent expressed in the words of the statute. If the
legislative intent is not expressed in some appropriate manner, the courts cannot by interpretation speculate as to an intent
and supply a meaning not found in the phraseology of the law. In other words, the courts cannot assume some purposed in
no way expressed and then construe the statute to accomplish this supposed intention.

Since Felipe Regalado turned 65 on September 13, 1934, he cannot be included under a law which requires justices of
peace to be 65 years of age to cease to hold office on January 1, 1933. The natural and reasonable meaning of the
language used in Act No. 3899 leaves room for no other deduction that a justice of peace appointed prior to the approval
of the Act and who is 65 years subsequent to the approval of the Act which was on November 16, 1931, and who by the
law was required to cease hold of office on January 1, 1933 is not affected by said Act. Thus, Esteban Villar shall be
ousted from the office of justice of peace of Malinao, Albay and Felipe Regalado be placed in possession.

70. Santiago v. Commission on Elections, G.R. No. 127325, March 19, 1997 (Dimen)

Doctrine: ​If no judicial certainty can be had as to its meaning, the court is not at liberty to supply and make one.

Facts: On December 6, 1996, private respondent Atty. Jesus S. Delfin filed with public respondent Commission on
Elections a "Petition to Amend the Constitution, to Lift Term Limits of Elective Officials, by People's Initiative".

Delfin alleged in his petition that he is a founding member of the Movement for People's Initiative, a group of citizens
desirous to avail of the system intended to institutionalize people power; that he and the members of the Movement and
other volunteers intend to exercise the power to directly propose amendments to the Constitution granted under ​Section 2,
Article XVII of the Constitution​. The Delfin Petition further alleged that the provisions sought to be amended are ​Sections
4 and 7 of Article VI, Section 4 of Article VII, and Section 8 of Article X of the Constitution​. The proposed amendments
sought to remove the term limits of the Senators, Representatives, President and Vice-President, and of local officials.

According to Delfin, the said Petition for Initiative will first be submitted to the people, and after it is signed by at least
twelve percent of the total number of registered voters in the country it will be formally filed with the COMELEC.
On January 16, 1991, COMELEC passed and adopted ​Resolution No. 2300 to govern the conduct of initiative on the
Constitution and initiative and referendum on national and local laws.

Thus, petitioners Santiago et. al. filed a special civil action for prohibition alleging that there is no implementing
legislation regarding the constitutional provision on people's initiative to amend the Constitution. The said provision can
only be implemented by law to be passed by Congress. No such law has yet been passed. RA 6735 provides for three
systems of initiative, namely, (1) initiative on the Constitution, (2) on statutes, and (3) on local legislation. However, it
failed to provide a subtitle about initiative on the Constitution unlike in the other modes of initiative. This deliberate
omission indicates that the matter of people's initiative to amend the Constitution was left to some future law. RA 6735
provides for the effectivity of the law after publication in print media.

14
This indicates that the Act covers only laws and not constitutional amendments because the latter take effect only upon
ratification and not after publication. COMELEC Resolution No. 2300 is ultra vires insofar as initiative on amendments to
the Constitution is concerned, since the COMELEC has no power to provide rules and regulations for the exercise of the
right of initiative to amend the Constitution. Only Congress is authorized by the Constitution to pass the implementing
law. The people’s initiative is limited to amendments to the Constitution, not to revision thereof.

Issue: ​Is RA 6735 inadequate to implement the power of the people to make amendments to the Constitution?

Ruling: ​Yes, Republic Act 6735 is inadequate to implement or cover the power of the people to amend the Constitution.
Republic Act 6375, intended to cover initiative to propose amendments to the Constitution. However, as it is worded, ​it is
not a full compliance with the power and duty of Congress to “provide for the implementation of the exercise of the
right.”

Also, Republic Act 6735 does not provide for the contents of a petition for initiative on the Constitution. Sec. 5 (c)
requires, inter alia, statement of the proposed law sought to be enacted, approved or rejected, amended or repealed. It does
not include, as among the contents of the petition, the provisions of the Constitution sought to be amended, in the case of
initiative on the Constitution. The use of the clause “proposed laws sought to be enacted, approved, or rejected, amended
or repealed” only strengthens the conclusion that it excludes initiative on amendments to the constitution. While RA 6735
provides subtitles for National Initiative and Referendum (Subtitle II) and for Local Initiative and Referendum (Subtitle
III), no subtitle is provided at all for initiative on the Constitution. The silence as to the latter simply means that ​the main
objective of RA 6375 is initiative and referendum on national and local laws.

Furthermore, Sec. 28 of RA 6735 does not suggest an initiative to amendments to the Constitution: the inclusion of the
word “Constitution” therein was a delayed afterthought and the same is neither germane nor relevant to the said section,
which exclusively relates to initiative and referendum on national and local laws, ordinances, and resolutions. Sec. 28
silent as to the amendments in the Constitution. The people are not accorded the power to “directly propose, enact,
approve or reject, in whole or in part, the Constitution” through the system of initiative. They can only do so with respect
to “laws, ordinances, or resolutions”.

While RA 6735 exerted utmost diligence and care in providing for the details in the implementation of initiative and
referendum on national and local legislation thereby giving them special attention, it failed, intentionally, to do so on the
system of initiative on amendments to the Constitution.

Since the Delfin Petition is not the initiatory petition under R.A. No. 6735 and COMELEC Resolution No. 2300, it cannot
be entertained or given cognizance of by the COMELEC. The respondent Commission must have known that the petition
does not fall under any of the actions or proceedings under the COMELEC Rules of Procedure or under Resolution No.
2300, for which reason it did not assign to the petition a docket number. Hence, the said petition was merely entered as
UND, meaning, undocketed.

Therefore, the said petition is granted, and the COMELEC should be permanently enjoined from entertaining or taking
cognizance of any petition for initiative on amendments to the Constitution until a sufficient law shall have been validly
enacted to provide for the implementation of the system.

2. What is within the spirit is within the law

3. Literal import must yield to intent

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Case: 71. Ty Sue v. Hord, G.R. No.4495, January 14, 1909 (Cerrero)

Doctrine: ​Crude opium in the possession of importers at the time the Opium Law, Act No. 1461, went into effect, and
upon which had been paid a tax of P 2.50 per kilo, on being withdrawn for cooking or preparation, is subject to a further
tax of P5 a kilo. This interpretation of the law is consistent with its literal reading and with its purpose to apply to prepared
opium a tax higher than that imposed upon the crude product.

Facts: ​The Court of First Instance of Manila grant an appeal in favor of the Plaintiffs for the recovery of P4,485.88, paid
by them to the Collector of Internal Revenue under protest as an internal-revenue tax upon opium which the plaintiffs, as
importers, had in their possession on April 1, 1906, when the opium Law, No. 1461, went into effect, and which was
thereafter withdrawn to be prepared for commercial use. The tax at the rate of P2.50 a kilo laid upon the crude drug had
already been paid and the sum sued for is the amount of the additional withdrawal tax at the rate of P5 per kilo. The court
below held that crude opium in the hands of dealers at the time the Act went into effect was not subject to this additional
duty when withdrawn for the purpose of preparation for use. The matter is regulated by section 20 of Act No. 1461, which
reads in part as follows:

"'SEC. 20. (a) Before imported crude opium or imported prepared opium in any of its forms shall be released from the
custom-house, there shall be paid thereon an internal- revenue tax as follows: On crude opium, two pesos and fifty
centavos a kilo, net weight; and on prepared opium seven pesos and fifty centavos a kilo, net weight. This tax shall be
paid to the Collector of Customs, under regulations prescribed by the Collector of Internal Revenue, with the approval of
the head of the proper department.

ISSUE:Whether or not the Plaintiff as importer can recover the amount they paid to the Collector of Internal
revenue when the Opium Law went into effect?

RULING: ​No. It is further urged that the inequality resulting from this construction is much less than that which would
follow from subjecting cooked opium imported as such, to a tax of P7.50 and the similar article, imported in the crude
state and afterwards cooked to only the original tax of P2.50 without the additional P5, there existing no reason for such a
wide difference in the duty upon the two classes of cooked opium which is of the same quality is destined to the same use
and is of equal commercial value. In the interpretation of this as well as of some other sections of the opium law it is
impossible to satisfactorily harmonize its complicated and sometimes perplexing provisions so that it becomes the duty of
the courts to choose between convicting theories that which best accords with the letter of the law and with its purpose. In
the construction of the paragraph of section 20 under discussion, the weight of argument both as to the natural
interpretation of the words of the law and as to its reasonable effect lies with the Government, and, therefore, the decision
of the Court of First Instance is hereby reversed, judgment to be entered in favor of the defendant-appellant, without costs
of this instance.

The construction of the Act contended for by the Government, which is to the effect that the other provisions of the Act
reach all classes of opium whether crime or prepared, and whether in the hands of wholesale or retail dealers, except
cooked opium in the hands of wholesalers prepared either before or after the law went into effect, that it is reasonable,
therefore, to infer that this section was designed to reach both of these classes otherwise untouched rather that only one of
them and that this purpose is fully met by the natural construction of the words of the section without the interpolation of
any understood phrase, inasmuch as the words "opium cooked or prepared in the Philippine Islands for sale or for human
consumption or use" naturally apply to the cooking or preparation without respect to a particular date.

16
It is further urged that the inequality resulting from this construction is much less than that which would follow from
subjecting cooked opium imported as such, to a tax of P7.50 and the similar article, imported in the crude state and
afterwards cooked to only the original tax of P2.50 without the additional P5, there existing no reason for such a wide
difference in the duty upon the two classes of cooked opium which is of the same quality is destined to the same use and is
of equal commercial value.

In the interpretation of this as well as of some other sections of the opium law it is impossible to satisfactorily harmonize
its complicated and sometimes perplexing provisions so that it becomes the duty of the courts to choose between
convicting theories that which best accords with the letter of the law and with its purpose. In the construction of the
paragraph of section 20 under discussion, we are satisfied that the weight of argument both as to the natural interpretation
of the words of the law and as to its reasonable effect lies with the Government, and, therefore, the decision of the Court
of First Instance is hereby reversed, judgment to be entered in favor of the defendant-appellant, without costs of this
instance.

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