GR L 11988; (February, 1918)

EN BANC

G.R. No. L-11988; February 1, 1918

JACINTO MOLINA, plaintiff-appellee,

vs.
JAMES J. RAFFERTY, as Collector of Internal Revenue, defendant-appellant.

Attorney-General Avanceña for appellant.
Mariano Escueta for appellee.

MALCOLM, J.:

This appeal present for resolution the question of whether or not fish are an agricultural product.

FACTS.

The facts are not in dispute. Plaintiff is the owner of various fish ponds (pesquerias) in the municipality of Bulacan, Province of Bulacan. Between January 1 and September 30, 1915, plaintiff consigned to a commission merchant in Manila quantities of fish which sold for P5,264.89. The commission merchant paid the merchant’s percentage and fixed taxes due under the Internal Revenue Law. Plaintiff, however, had not previously paid the merchant’s tax, although from August 1. 1904, the date when the first Internal Revenue Law became effective, until October 26, 1915, plaintiff had been engaged in this business, Plaintiff had been paid the real estate tax on the land upon which the fishponds are located. On the date last mentioned, on demand of a representative of the Bureau of Internal revenue, plaintiff paid under protest P71.81, the total internal-revenue tax on the gross sum received for the first three-quarters of the year 1915. The ground of the protest was that plaintiff is an agriculturist and not a merchant and therefore exempt from the taxes imposed by the Internal Revenue Law upon the gross sales of merchants. The protest was denied by the Collector of Internal Revenue, who held that the plaintiff was a merchant. Suit to recover this amount of P71.81 was thereupon instituted in the Court of First Instance of the city of Manila against the defendant as collector of internal revenue. After trial on an agreed statement of facts, the Honorable Jose Abreu in a carefully prepared decision ordered defendant to refund the P71.81 paid by plaintiff as internal-revenue taxes and penalties under protest, with legal interest thereon from November 26, 1915, the date of such payment under protest. Defendant appealed making four assignments of error, all of which, however, with the exception of the last, which need not be considered, center around the question which we set out in the beginning of this decision. Both appellee and appellant have further favored the court with an exceptionally able presentation of their respective contentions. We are given to understand that this is in the nature of a test case, concerning not alone the comparatively small amount involved but affecting the taxes of numerous other persons in an amount which will run up into thousands of pesos.

In addition to the foregoing statement of the case, we must note the nature of the fishponds and of the fish. As to the first, before the lands are suitable for use as fishponds, it is necessary for the land to be prepared by the erection of dikes and cleaning out and deepening the bottom. The presence of caretakers is necessary to see that the fishponds do not become damaged and to regulate the entrance and exit of water through the floodgates. The fish are of the species known bañgus. These fish are obtained from small fishes (semillas), which are placed in the fishponds. These small fishes are first put in a comparatively small compartment, surrounded by walls of earth, which is found within the fishery itself. Afterwards when they get to be about the size of a cigarette, they are let loose into the other compartments of the same fishery. This compartment for semillas is allowed to dry and is cleaned well before the semillas are placed therein; it is even plowed to kill all the bugs that may eat up the fish. In order to make marine plants grow, a small amount of sea water is allowed to enter. When the fish have become large an endeavor is made to fill the fishery with water. From time to time the water contained in the fishery is renewed to avoid the killing of the fish. The walls of a fishery are constructed to preserve and to retain the water and the fishes inside the fishery. These walls are constructed on a swampy lands and in some cases on rice fields bounded by a river or the sea.

The food of the bañgus includes marine plants. These algae are of seven classes, their scientific names being cladophora, chaetomorpha, oscillatoria, oedogonium, lyngbya, enteromorpha, and najas. One of these plants is rooted. Some of the others are very loosely attached to the ground, but not rooted. Generally the algae float in the water.

LAW.

The provisions of the law which it is necessary to construe are not extensive. The different internal-revenue laws have provided for a merchant’s tax. “Merchant,” as used in the law, “means a person engaged in the sale, barter, or exchange of personal property of whatever character.” (Act No. 2339, sec. 40; Administrative Code [1917] sec. 1459.) The succeeding section (Act no. 2339, sec. 41; Administrative Code [1917], sec. 1460) is entitled “Sales not subject to merchant’s tax.” The section provides:

In computing the tax above imposed transactions in the following commodities shall be excluded: . . . .

(c) Agricultural products when sold by the producer or owner of the land where grown, whether in their original state or not.”

With the facts and the law before us, we return to the question first suggested.

QUESTION.

Are fish an agricultural product within the meaning of the exemption provisions of the Internal revenue Law?

OPINION.

Different methods of approach to this question are possible. For example, all argument could disposed of peremptorily with the bald statement that in accordance with the rule of stare decisis, the decision of this court in The United States vs. Laxa ([1917], 36 Phil. Rep., 670) is decisive. Justice Araullo, in his opinion, held that fish are not an agricultural product, that the owner of a fishpond who sells the fish at the fishpond is a merchant, that such a merchant is not entitled to the exemption provided by the Internal Revenue Law, and that the said owner is guilty of violation of the Internal Revenue Law. We prefer not to take such a stand, although we are confident that it could be defended, because of the vigorous objection to a decision in a criminal prosecution becoming a precedent in a civil action for the recovery of taxes.

As opposed to the Laxa decision, counsel for plaintiff invites special attention to the cases of Mapa vs. Insular Government ([1908] 10 Phil., 175) and Mercado vs. Collector of Internal Revenue ([1915] 32 Phil. Rep., 271). In the first case, the Supreme Court said ?

The question before us is not what is agricultural land, but what definition has been given to that phrase by the Act of Congress.

The Philippine Bill, it was found, classified land as agricultural public land in order to distinguish such land from timber or mineral land. Neither Congress nor the court gave any definition of agricultural land as such or of the products of the land. Moreover, the court made the observation that, “The land in question in this case, which is used as a fishery, could be filled up and any kind of crops raised thereon.” If the case can be considered as an authority, it must be that the court recognizes that agricultural land, as the term is used in the Act of Congress, may be devoted to other than agricultural purposes, and that using agricultural land for a fishpond is a use other than agricultural. In the second case of Mercado vs. Collector of Internal Revenue, following Mapa vs. Insular Government (supra), the Court said ?

It is, then unquestionable that bakawan firewood is an agricultural product, differing from other kinds of firewood obtained from the forest trees because the bakawan plant grows only on land subject to overflow, which require clearing and care by workers skilled in agricultural pursuits, in order that it may thrive. It is also to be noted that up to the present time mangrove swamps have been found suitable for no other useful crop.

But it is plainly a far cry from holding that bakawan, planted and grown through the culture of the soil, is an agricultural product, to finding that fish are in similar sense planted and grown as a result of the culture of the soil. Whatever comfort can be derived from these decisions are persuasive authority is more than nullified by the later case of The United States vs. Laxa ([1917] 36 Phil. Rep., 670).”

Just, therefore, as the facts and the law are indisputable, so do we prefer to forget these three cases for the time being and to rest our decision on the plain and ordinary meaning of the law disclosed by the elementary rules of statutory construction.

And first, in order to dispose of the question, is the owner of a fishpond, such as the plaintiff, who sells fish taken from a fishpond, a “merchant” as defined in the Internal revenue Law? Recalling this definition of a “merchant,” it would appear undeniable that the plaintiff is properly included in such classification. To paraphrase the law, he is a person engaged in the sale of fish. Under our law, whatever may be the usual conception of a merchant, buying and selling are not essential; to sell only is sufficient. (See also In re Cameron Town Mut. Fire, Lightning and Windstorm Ins. Co. [1899], 96 Fed., 756.)

If such a man is a merchant, does his sale of fish place him under the exemption of the Internal Revenue Law? We know the meaning of “fish.” In the authoritative work by Dr. C. L. G. Gunther on the Study of Fishes, we find the following:

According to the views generally adopted at present, all those vertebrate animals are referred to the class of fishes, which, living in water, breathe air dissolved in water by means of gills or branchiae; whose heart consists of a single ventricle and single atrium; whose limbs, if present, are modified into fins, supplemented by unpaired median fins; and whose skin is either naked, or covered with scales or osseous plates or bucklers . . . .

We then have left to define merely the words “agricultural products.”

“Agriculture” is defined by Webster as “the art or science of cultivating the ground, including the preparation of the soil, the planting of seeds, the raising and harvesting of crops, and the rearing, feeding, and management of live stock.” Let us test our facts by this definition. The ground of the fishpond is cultivated. The soil is prepared. We, however, greatly doubt that seeds (of fish) are planted or that crops (of fish) are raised and harvested. Certainly, the seeds of fish are not sown in the ground as one would sow corn, while as distinguished from the rearing, feeding, and management of live stock, which consumes the products of the farm, the fish living in water depending upon water for life, only receive nourishment from marine plants most of which have little or no connection with the land.

To proceed. The equivalent of “agriculture” in “husbandry.” And “husbandry” is defined by Webster as “the business of a farmer, comprehending agriculture or tillage of the ground, the raising, managing, and fattening of cattle and other domestic animals, the management of the dairy and whatever the land produces.” Again, we are far from confident that a farmer is generally understood to be a fisherman, and that the land can be said to produce fish. In a case in which these definitions were considered, the supreme court of Tennessee said that “agriculture” means “in its original sense, the cultivation of the ground for the purpose of procuring vegetables and fruits for the use of man and beast, or the act of preparing the soil, sowing and planting seeds, dressing the plants, and removing the crops. In this sense of the word includes gardening or horticulture, and also the raising and feeding of cattle or stock; but in a more common and appropriate sense is used to signify that specie of cultivation which is intended to raise grain and other field crops for a man and beast.” (Simons vs. Lovell [1872], 54 Tenn. [7 Heisk.], 510; see also In re Drake [1902], 114 Fed., 229.)

To proceed. “Agricultural products,” the supreme court of Georgia has held, “in ordinary usage,” is confined to the yield of the soil, as corn, wheat, rye, hay, etc. (Davis and Co. vs. Mayor and Council of Macon [1879], 64 Ga., 128.) The court had here to determine if beef cattle were exempt from taxation as “an agricultural product.” The court asked ?

“And when it is thought of closely, would it not be rather an unusual application of the phrase ‘agricultural products’ to make it comprehend beef cattle? In ordinary usage, is not the phrase confined to the yield of the soil, as corn, wheat, rye. oats, hay, etc., in its primary form? When there has been conversion of the fruits of the soil into animal tissues are still to apply the phrase? And suppose we are to disregard the change in its first stage, and call a cow or a steer an agricultural product, must we carry the name forward to the steak or roast which the butcher sells us from the slaughter animal? If cattle fall under the denomination, so do hogs; and if beef, so does bacon.” (See also State vs. Patterson [1887], 4 S. E., 47.)

Another case, coming from the supreme court of the District of Columbia, gives a much broader meaning to the phrase. (District of Columbia vs. Oyster [1885], 4 Am. Rep., 275.) The court said ?

The common parlance of the country, and the common practice of the county, have been to consider all those things as farming products or agricultural products which had the situs of their production upon the farm, and which were brought into condition for the uses of society by the labor of those engaged in agricultural pursuits, as contra-distinguished from manufacturing or other industrial pursuits. The product of the dairy or the product of the poultry yard, while it does not come directly out of the soil, is necessarily connected with the soil and with those who are engaged in the culture of the soil. It is, in every sense of the word, a part of the farm product. It is depended upon and looked upon as one of the results and one of the means of income of the farm, and in a just sense, therefore, it may be considered produce.

To indicate further the wide sweep of the term “agricultural products,” and to show how such terminology influences those who disagree with us, “agricultural products” has been held to include swine, horses, meat cattle, sheep, manure, cordwood, hay, poultry, vegetables, fruit, eggs, milk, butter, and lard. (See Mayor vs. Davis, 6 W. and S., 279.) But never by any court to include fish.

Like everything else in the world, it must be that there is a limit to the things which can be included in the term “agricultural products.” The District of Columbia case, much relied upon by the plaintiff, gives the clue. Agriculture is but one pursuit. Agriculture and what it includes is contradistinguished from other occupations and professions, as manufacturing ? and we believe, fishing. Thus, of fisheries the Encyclopedia Britannica (p. 429) says ?

For the most part the operations of fishing have been comparable with those of primitive hunting rather than with agriculture.

Fisheries, while possibly in concomitance with the soil, are even more certainly concerned with the water in which the fish live and have their being, If fishing is farming, then conversely farming must be fishing. Waiving all the technical definitions, does the ordinary man when he speaks of agriculture and farming think of a farmer as a fisherman, and when he speaks of fisheries does he think of a fisherman as a farmer?

One other word in the law, “grown” is necessarily included and must be considered in finding the proper meaning. The law provides that “agricultural products” must be “grown.” Again referring to Webster, “grown” means “to cause to grow; to cultivate; to produce; as, to grow a crop; to grow wheat, hops, or tobacco.” The fish taken from the fishponds and sold are certainly not the natural products of such land. They are retained therein by the construction of artificial dykes. They are animals farae nature, They have none of the characteristics of the natural products of the soil. Fish are not “grown” as wheat, hops, or tobacco are grown.”

The question as to whether or not a similar exemption in favor of agriculturists contained in the Internal Revenue Law of 1904 operated to exclude from the merchant’s tax, receipts from the sale of fish, arose shortly after the passage of that Act. The Attorney-General in an opinion rendered on March 14, 1906 (3 Op. Atty. gen., 65), held in effect that the culture of the soil was determining factor in considering what products are or are not agricultural products. As to quarrymen and fishermen. the Attorney-General observed ?

The occupation of the lumberman and the stockman, in the historical development of these industries, as well as in present day practice, has never been confused with that of the agriculturist; while as to quarrymen and fishermen it may be observed that tillers of the soil are not wont to plow the fields in quest of rock or in anticipation of a crop of fishes or of pearls.

This opinion of the Attorney-General was concurred in by the then Governor-General and Acting Secretary of Finance Justice, who had helped draft the law. The Collector of the Internal Revenue thereupon published the opinion in full in Bureau of Internal Revenue Circular, No. 106. This official ruling of the executive officials is now entitled to consideration by the courts. Courts will and should respect the contemporaneous construction placed upon a statue by the executive officers whose duty it is to enforce it, and unless such interpretation is clearly erroneous will ordinarily be controlled thereby. (In re Allen [1903], 2 Phil., 630, following Pennoyer vs. McConnaughy [1890], 140 U. S., 363; Government of the Philippine Islands Ex Rel. Municipality of Cardona vs. Municipality of Binangonan [1916], 34 Phil. Rep., 518.)

We have thus far considered the etymology of the words. We frankly admit to a slight doubt of exact interpretation by this method. We, however, believe that viewed from the standpoint of the most elementary of all rules of statutory construction there is but one possible result. In other words, our sole duty is to ascertain and give effect to the intention of the lawmaking body. We can best discover this intention through the medium of the action taken by the Legislature in the enactment of other laws.

The first Internal revenue law (Act No. 1189) was enacted by the Philippine Commission. It is plain that the Commissioners must have had in mind agriculture as known to them in the United States. The organization of the American Government includes a “Department of Agriculture,” the “Bureau of Fisheries” is under the Department of Commerce. Agriculture and fishing are therefore separate and distinct. In Great Britain there is a “Board of Agriculture and Fisheries.” Moreover, the same Philippine Legislature which provided an exemption from taxation for agricultural products was also interested in establishing a Bureau of Agriculture. In enumerating the functions of this Bureau, not one word is said of fish or fisheries. We rather doubt if the experts in agronomy in the Bureau of Agriculture would consider themselves competent to advise as to piscatology. On the contrary, you find a section of fisheries established not in the Bureau of Agriculture but in the Bureau of Science. Instead, also, you find special laws unrelated to agriculture dealing with the granting of fishery privileges. The purpose of the Legislature in exempting agricultural products from taxation under the Internal Revenue Law was to encourage farming and not fishing. This court has herefore held, and we reiterate, that “where language is plain, subtle refinements which tinge words so as to give them the color of a particular judicial theory are not only unnecessary but decidedly harmful.” (Yangco vs. Court of First Instance of Manila and Yangco [1915], 29 Phil., 183.) Chief Justice Marshall in the historic case of Gibbons vs. Ogden, ([1824], 9 Wheat., 1) said:

As men, whose intentions require no concealment, generally employ the words which most directly and aptly express the ideas they intend to convey, the enlightened patriots who framed our Constitution, and the people who adopted it must be understood to have employed words in their natural sense, and to have intended what they have said.

The answer to our question are ? A person engaged in the sale of fish is a merchant. Fish are not an agriculture product. This merchant is not entitled to exemption under the Internal Revenue Law.

The further objection is made that the particular tax would constitute double taxation. It is sufficient to note in this respect that this court in Gil Hermanos vs. Hord ([1908] 10 Phil., 218) said:

It is very apparent that tax under discussion is not a tax upon property. It is rather a tax upon the occupation or industry in which a person is engaged.

The internal-revenue tax is also uniform for all of a class. In opposition to such a contention, it could be advanced if necessary that the burden is on plaintiff to establish that the surrender of the taxing power is manifested by words too plain to be mistaken. “When exemption is claimed, it must be shown indubitably to exist.” (Farrington vs. Tennessee [1877], 95 U. S., 697, 686.) “The presumption is always against any surrender of the taxing power.” (Tennessee vs. Whitworth [1885], 117 U. S., 129, 136.)

We have permitted our discussion of the question raised by this appeal to proceed much farther than is really necessary for the decision of the case. If we have fallen into the mire of proximity, it has been because we approached the subject with a desire to accede, if possible, to the request of the plaintiff. We are as much interested in upholding legislation which will assist in the commercial development of the Islands as any one. We cannot, however, step outside the settled and ordinary meaning of the law and by judicial legislation give to the law a meaning not intended. If redress is proper, under these circumstances, complainants must look to the Legislature and not to the courts.

The judgment of the lower court is reversed and the defendant is absolved of the complaint, with the costs of the first instance against the plaintiff, and without special finding as to costs of this instance. So ordered.

Carson, Araullo and Street, JJ., concur.

Separate Opinions

JONHSON, J., with whom concurs ARELLANO, C.J., dissenting:

The only important question presented by this appeal is whether or not the products of a “vivero de peces” should be considered as an agricultural product and as such relieved from the internal-revenue tax in accordance with paragraph (c) of article 41 of Act No. 2339.

The Court of First Instance, in a very well-reasoned opinion, held that said products were exempt from the internal-revenue tax under said Act. This court, by a majority opinion, held that said products were not exempt from the payment of the internal-revenue tax and reversed the judgment of the lower court.

We think the majority opinion misses both the spirit and purposes of the law, and woks a great imjustice and a severe hardship upon thousands of the inhabitants of the Philippine Islands who are engaged in purely agricultural pursuits. Said decision places a great burden upon those who are least able to bear it. By reason of the very small profits of the agriculturist, earned by the hardest of labor, every intendment of the law should be, at least, liberally construed in his favor.

Paragraph (c) of section 41 of Act No. 2339 provides that the tax imposed under said law shall not be imposed upon “agricultural products when sold by the producer or owner of the land where grown, whether in their original state or not.” Under the interpretation given in the majority opinion, the Collector of Internal Revenue may collect taxes upon every grain of rice produced by the farmers of the Philippine Islands, unless he sells the same “where grown.” Such an interpretation, in our opinion, was never intended by the lawmaker.

The majority opinion has fallen into error, in our opinion, in not distinguishing a “pesqueria” from a vivero de peces.” no contention is made that the products of a “pesquera,” as the terms is generally used, should be relieved from the internal-revenue tax. Our contention is simply that the products of a “vivero de peces” should be relieved from the internal-revenue tax, upon the theory that they are as much of an agricultural product as any other product of the farm by reason of the method employed in producing them. The majority opinion admits [that] whether a particular product is or is not an agricultural product depends upon the methods used in producing it.

A “pesqueria,” as distinguished from a “vivero de peces,” may be defined as a specie of trap placed upon the farm in which fish are caught from time to time. While a “vivero de peces” may be defined as apart of the same as is done in the production of corn, sugar cane, rice, bananas, coconuts, ducks, chickens, eggs, milk, butter, lard, hay, wood, cattle, horses, sheep, or any other great variety of products produced by the farmers in the Philippine Islands, the only difference being one of degree of the care and labor necessary for production.

The error which the majority opinion has fallen into may best illustrated by an example:

A is the owner of a farm. A portion of the same is dry land capable of producing sugar cane, or corn, or other varieties of farm products which can only be produced upon dry land. A portion of said farm, by virtue of its location with reference to water, sunlight, and air may be used for the production of abaca, bananas, or some of the various classes of fruits. Another portion of the farm is low land, upon which rice or certain classes of vegetables only can be produced profitably. Still another portion of the farm is swamp land, covered by water and incapable of being properly drained. Another portion of the farm is mountainous so that it cannot be cultivated at all. Upon the mountainous portion of said farm the owner raises cattle, sheep, goats, horses, hogs, chickens, turkeys, eggs, lard, butter, wool and hides. Another portion of the farm can most profitably be devoted to the production of bacauan which was held to be an agricultural product. (Mercado vs. Collector of Internal Revenue, 32 Phil. Rep., 271.) The swamp land of his farm is of such a character that it can not profitably be devoted to the production of rice or any of the cereals, and is too swampy upon which to raise cattle, sheep, horses, goats, etc. The farmer, therefore, utilizes that portion for the production of geese, ducks, and other domestic fowls, as well as for the production of eggs. There comes a time when the swamp land ceases to be profitable for the production of rice as well as for the production of said fowls and eggs. All of said farm, including the various classes of land as above described, is taxed as agricultural land; and it is a matter of common knowledge that the “vivero de peces” are taxed as agricultural land, and equally as high, if not higher, than other lands devoted to the production of rice, corn or sugar cane, etc.

A great demand may arise for fish in the country. The farmer, in order to reap the advantage of said demand, ceases to produce eggs, or ducks, or geese upon the swamp lands of his farm and turn the same into a “vevero de peces.” He, thus, wisely utilizing the different portions of the farm for the production of all of the products which farmers generally produce, is greatly increasing the wealth of the State.

The majority opinion admits that domestic fowls ? chickens, ducks, geese, turkeys ? and eggs, butter, lard, milk, vegetables, fruit, etc., are agricultural products, but argues that nothing is, or may be considered, an agricultural product which does not result from a cultivation of the soil. To admit that eggs, butter, lard and milk are agricultural products, and to argue that nothing is an agricultural product which does not result from a cultivation of the soil presents a consistency in argument and conclusion which we are unable to understand. It is admitted that the land for the “vevero de peces” is specially prepared. A certain cultivation and preparation is necessary for the creation of a “vivero de peces.” It is difficult to understand what special preparation of the soil is necessary for the production of hen’s eggs, butter, lard, milk, or cattle, or sheep or horses or hogs, or goats which makes those products agricultural products. It is a matter of common knowledge that land may be specially prepared for the production of rice this year and then changed into a “vivero de peces” next year and vice versa. Under what interpretation of the law and under what definition of agricultural products may we conclude that the year in which the same parcel of land produces rice produces an agricultural product while in the year it is producing fish is not also producing an agricultural products? Of course, as we stated above, a “vivero de peces” must not be confused with a “pesqueria” which is used as a trap for the purpose of catching fish. No contention is made that the products of the latter is in any sense an agricultural product any more than the product of a trap placed in the fields for the purpose of catching wild animals, which from time to time pass upon the land, is an agricultural product.

It is admitted in the majority opinion that the land for a “vivero de peces” must be specially prepared by first building dykes and cultivating the land preparatory to the planting of the fish. the only difference, therefore, between the preparation of a “vivero de peces” and the preparation of a rice paddy is one in extent of labor employed. In both cases the land is specially prepared for the particular purpose to which the farmer desires to devote it. Forgetting for a moment the stereotyped and the lexicographer’s definition of agricultural products, and forgetting for a moment that there is no more difference, so far as the method of production is concerned, between the production of corn and the production of ducks and eggs, we will find ourselves driven to the conclusion that from the standpoint of method of production there is no difference between the production of fish in a “vivero de peces” and the production of ducks upon land which is recognized as agricultural lands. The majority opinion has fallen into error by trying to make a 15th century definition apply to 20th century conditions. The judgment of the lower court should be affirmed with costs.

Batas Pinas