G.R. No. L-6763; January 31, 1955
VISAYAN REALTY, INC., plaintiff-appellant, vs. BIBIANO L. MEER, in his capacity as Collector of Internal Revenue, defendant-appellant.

FACTS

In 1927, four individuals filed sales applications for four tracts of land in Oriental Misamis. The Director of Forestry certified in 1928 that the lands were not needed for forest purposes, subject to the condition that the applicants could not commercially cut timber without a forestry license. The lands were awarded for sale to these applicants in 1929. In 1935, the awardees transferred their rights to Visayan Realty, Inc. (plaintiff), which transfer was approved in 1940, and sales patents and Original Certificates of Title were issued to the plaintiff in November 1940. Prior to the issuance of the patents, the Bureau of Forestry issued several timber licenses, from 1934 to 1940, authorizing the plaintiff (or its predecessor) to cut timber on these lands. From 1930 to 1940, the Collector of Internal Revenue collected forest charges from the plaintiff for the timber cut. Payments from 1930 to June 1939 were made without protest, but payments from July 1939 to November 1940 were made under protest. The plaintiff filed an action seeking a refund of all forest charges paid, totaling P69,138.67. The Collector counterclaimed, alleging the plaintiff still owed P9,986.70 for unpaid forest charges from November 1935 to December 1940. The trial court, on reconsideration, ordered the defendant to refund a net balance to the plaintiff. Both parties appealed.

ISSUE

The primary issue is whether the plaintiff, Visayan Realty, Inc., was exempt from paying forest charges for timber cut from the lands covered by the sales applications before the issuance of the sales patents and certificates of title in 1940.

RULING

The Supreme Court reversed the decision of the lower court. It held that the plaintiff was not exempt from paying forest charges. Ownership of the lands did not pass from the Government to the plaintiff’s predecessors-in-interest upon the award of the sales applications in 1929. The award merely authorized possession so the applicant could fulfill legal requirements. The Government remained the owner until the issuance of the sales patent and its registration with the Register of Deeds, which occurred in 1940. Since the timber was cut before 1940, the plaintiff was not yet the owner of the land and was therefore liable for forest charges under Section 1513 of the Revised Administrative Code (later Section 266 of the National Internal Revenue Code), which mandated charges for wood cut from land not registered as private with the Director of Forestry. The certification that the land was alienable did not exempt it from forest laws, and administrative orders required a license for commercial cutting. Consequently, the plaintiff was ordered to pay the defendant the sum of P9,986.70 representing the unpaid forest charges and surcharges.