Republic v. Mambulao Lumber Co.(1962)-Barrera, J.Plaintiff-Appellee: Republic of the Philippines Respondents:Mambulao Lumber Company, Et AlConcept: Taxes; Taxes Distinguished from Debts

Brief Facts:Mambulao Lumber Company paid the government reforestation charges . After having been found liable for an aggregate amount of P4,802.37 for forest charges, it contended that since the Republic (Government) has not made use of the reforestation charges for reforesting the denuded area of the land covered by the company’s license, the Republic should refund said amount or, if it cannot be refunded, at least the company should be compensated with what the forest charges it owed. CFI ruled in favor of Mambulao Lumber Company. Hence, this appeal.Doctrine:Internal Revenue Taxes, such as forest charges, cannot be the subject of setoff or compensation. It is because taxes are not in the nature of contracts between the parties but grow out of a duty to, and are positive acts of, the Government, to the making and enforcing of which, the personal consent of the individual taxpayer is not required.

FACTS:1. Mambulao Lumber Company paid the Government a total of P 9,127.50 as reforestation

charges for the years 1947 to 1956. - Section 1 of Republic Act 115 provides that these reforestation charges shall be

collected, in addition to the regular forest charges 2. Company contends that said sum of 9,127.50, not having been used in the reforestation of

the area covered by its license, the Philippines should refund the amount, or alternatively, the amount may be applied in compensation of P 4,802.37 due from it as forest charges. 

3. Court of First Instance of Manila ordered the company to pay the government the sum of P 4,802.37 with 6% interest thereon from date of the filing of the complaint until fully paid, plus costs.

4. Hence, this appeal.

ISSUES: Whether the sum Mambulao Lumber Company paid as reforestation charges may be set off or applied to the payment of forest charges it owes the government-NO

RATIO:1. NO. Set-off or compensation is not proper.

- The amount paid by a licensee as reforestation charges is in the nature of a tax which forms part of the Forestation Fund, payable by him irrespective of whether the area covered by his license is reforested or not. 

o Said fund, as the law expressly provides, shall be expended in carrying out the purposes provided for thereunder, namely, the reforestation or afforestation, among others, of denuded areas needing reforestation or afforestation. 

o Law does not require that the amount collected as reforestation charges should be used exclusively for the reforestation of the area covered by the license of a licensee or concessionaire, and that if not so used, the same shall be refunded to him. 

o The licensee's area may or may not be reforested at all, depending on whether the investigation thereof by the Director of Forestry shows that said area needs reforestation.

- Republic of the Philippines and the Mambulao Lumber Company are not creditors and debtors of each other, because compensation refers to mutual debts. 

- The weight of authority is to the effect that internal revenue taxes, such as the forest charges in question is not subject to set-off or compensation.

o Taxes are not in the nature of contracts between the parties but grow out of a duty to, and are positive acts of the government, to the making and enforcing of which, the personal consent of the individual taxpayers is not required. 

DISPOSITIVE: the judgment of the trial court appealed from is hereby affirmed in all respects, with costs against the defendantappellant

Digester: Joni