G.R. No. L-13753; February 15, 1919
MITSUI BUSSAN KAISHA, plaintiff-appellee, vs. THE MANILA ELECTRIC RAILROAD AND LIGHT COMPANY, defendant-appellant.

FACTS:
Prior to December 23, 1914, Mitsui Bussan Kaisha (plaintiff) contracted to sell coal to the Manila Electric Railroad and Light Company (defendant) at a base price of P9.45 per long ton, subject to modification only based on the coal’s calorie and ash content. While deliveries under this contract were ongoing, the Philippine Legislature enacted Act No. 2432 (December 23, 1914), imposing a specific tax on coal. This was amended by Act No. 2445, which contained a proviso stating that in contracts entered into prior to the law’s enactment, the burden of the new or increased tax “shall be borne by the person to whom said article is furnished… unless the parties have agreed or shall agree otherwise.” The U.S. Congress subsequently ratified these Acts. From March to October 1915, the plaintiff imported and delivered coal to the defendant, paying the corresponding internal revenue tax totaling P11,874.75. The plaintiff demanded reimbursement from the defendant based on Act No. 2445. The defendant refused, arguing that the fixed price in their contract implied that the seller bore all expenses necessary for delivery, including taxes. The plaintiff filed an action to recover the tax amount paid.

ISSUE:
Whether, under Act No. 2445, the burden of the newly imposed coal tax should fall upon the purchaser (defendant) or the seller (plaintiff), given that their pre-existing contract stipulated a fixed price for the coal.

RULING:
The Supreme Court ruled in favor of the plaintiff. The burden of the tax falls upon the purchaser (defendant). The Court held that the proviso in Act No. 2445, “unless the parties have agreed or shall agree otherwise,” contemplates an express stipulation made with direct reference to the burden of such internal-revenue taxes. The original contract contained no such express provision, and the parties made no subsequent agreement on the matter. The mere fact that the contract stated a fixed price, from which an implication arises that the seller bears all delivery expenses, is insufficient to constitute an agreement “otherwise” under the statute. The clear legislative intent was precisely to relieve sellers bound to fixed-price contracts from the burden of a new tax, placing it on the purchasers instead, absent an express contrary agreement. The Court further held that the validity of the statute and its proviso was beyond question due to its ratification by the U.S. Congress. Consequently, the plaintiff, having paid the tax for the defendant’s account, was entitled to reimbursement. The trial court’s judgment was affirmed.