Republic v. Mambulao Lumber Co.(1962)-Barrera, J.

Plaintiff-Appellee: Republic of the Philippines

Respondents:Mambulao Lumber Company, Et Al
Concept: 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 companys 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