Republic of the Philippines

SUPREME COURT
Manila

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 Avancea 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 bagus. 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 bagus 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.