Facts:

In the case of Bank of the Philippine Islands vs. Wenceslao Trinidad, G.R. No. 20780, decided on November 9, 1923, the plaintiff, the Bank of the Philippine Islands (BPI), is a domestic banking corporation located in Manila, established under a special charter known as Act No. 1790. The defendant, Wenceslao Trinidad, serves as the duly appointed Collector of Internal Revenue for the Philippine Islands. BPI's cause of action is based on the assertion that Article 26 of its Charter prohibits the enforcement of any tax provisions that do not apply equally to other banks under similar conditions. BPI alleged that the Philippine National Bank (PNB), which was established later by Act No. 2612, was exempt from internal revenue taxes on its circulating notes as provided in Section 18 of its charter. Over the years, BPI contended that it was wrongfully compelled to pay internal revenue taxes on its circulating notes, which amounted to P103,389.61 between 1919 and 1921, while the PNB

...

Facts:

Parties Involved

• Plaintiff: Bank of the Philippine Islands, a domestic banking corporation incorporated under Act No. 1790 with a special charter that includes a provision (Article 26) renouncing any exclusive privilege to issue circulating notes and guaranteeing that no law or regulation shall impose a charge or tax upon it unless such measures apply equally to banks of a similar type and operating under similar conditions.
• Defendant: Wenceslao Trinidad, the duly appointed, qualified, and acting Collector of Internal Revenue of the Philippine Islands.

Statutory and Charter Background

• The plaintiff’s charter (Act No. 1790) contains Article 26, which, while not granting any privilege to issue circulating notes exclusively, promises that any charges or taxes imposed shall uniformly affect all banks of similar type and circumstances.
• The Philippine National Bank (PNB) was established by Act No. 2612 on February 4, 1916, which explicitly empowered it to issue circulating notes. Section 18 of this Act provided that these circulating notes "shall be exempt from any and all taxes levied or assessed by the Philippine Government."
• Subsequent legislative amendments, through Acts Nos. 2747 (February 20, 1918) and 2938 (January 30, 1921), modified the original Act No. 2612 provisions—especially concerning the issuance of circulating notes against gold coin—and removed the tax-exemption characteristic for non–gold coin–backed notes.

Facts Leading to the Dispute

• The defendant, acting in his official capacity, has consistently required the plaintiff to pay internal revenue tax on its circulating notes at the rate of one-twelfth of one percent per month based on the average amount in circulation.
• The plaintiff paid these taxes under protest on various dates, specifying amounts on October 27, 1919 (P15,170.72), April 30, 1920 (P20,884.75), October 30, 1920 (P22,415.58), April 30, 1921 (P22,460.00), and October 31, 1921 (P22,458.56) with accumulated interest, totaling P103,389.61 plus additional protest interest of P5,728.32.
• The plaintiff contends that, as a bank of similar type to the Philippine National Bank, it should enjoy the same tax-exempt privileges (as originally derived from its charter) and that the imposition and collection of these taxes constitute a breach of contract with the Government.

Procedural History and Admissions

• The case began when the defendant filed a demurrer to the complaint on the ground of insufficiency of factual allegations.
• The lower court sustained the demurrer; however, upon appeal, this Court reversed the decision and remanded with leave to answer.
• In the subsequent answer, the defendant admitted the collection of taxes as alleged but raised special defenses:
• Asserting that the plaintiff is a private corporation, while the Philippine National Bank is a government institution (with significant government ownership and supervision).
• Claiming that the plaintiff is not of a similar type or operating under similar conditions compared to the Philippine National Bank, thereby not qualifying for the same exemptions.
• Arguing that by the time taxes were paid, Act No. 2612 had been amended and superseded by Acts Nos. 2747 and 2938, which do not provide the exemption for circulating notes as once provided.
• Contending that the plaintiff paid taxes voluntarily under protest without compulsion and that these taxes were legally due.
• Claiming, as an additional defense, that the recovery action for the tax paid on October 27, 1919, is barred by the statute of limitations.

Stipulated and Agreed Facts During the Proceedings

• It was stipulated that:
• The plaintiff is a domestic corporation operating solely for private purposes under Act No. 1790.
• The Philippine National Bank was organized under Acts Nos. 2612, 2747, and 2938, with 92% of its capital stock owned by the Government and 8% by private interests.
• The respective activities and businesses of both banks fall within the permissions of their enabling statutes.
• Payments of taxes by both banks were made under protest, though the Philippine National Bank later paid taxes on circulating notes (including a 25% surcharge) pursuant to its modified statutory framework.
• The plaintiff’s action was filed on November 1, 1921, and subsequent demand for tax payments were made to the Philippine National Bank after commencement of this action.
• The plaintiff offered expert testimony to establish the similarity of the operations and conditions of both banks, but this testimony was objected to by the defendant and subsequently excluded by the court.

Issue:

Tax Exemption and Equal Privilege Under the Charter

• Whether the exemption granted to the Philippine National Bank under section 18 of Act No. 2612 (as later amended by Acts No. 2747 and 2938) extends to the Bank of the Philippine Islands based on its charter provision guaranteeing equal treatment.
• Whether the similarity in type and operating conditions between the two banks, as required by the charter’s promise, is legally sustainable.

Contractual Breach vs. Legislative Supremacy

• Whether the collection of taxes from the plaintiff constitutes a breach of the contractual terms implied by its charter, particularly when compared to the tax status of the Philippine National Bank.
• How the incorporation of later legislative acts (Acts Nos. 2747 and 2938) affects or nullifies any alleged breach of contract between the plaintiff and the Government.

Legality of Tax Collection

• Whether the taxes imposed upon the plaintiff’s circulating notes were legally due under the Administrative Code of 1917 and subsequent amendments.
• Whether voluntary payment under protest precludes any claim for a refund of such taxes.

Procedural Issue

• The potential impact of the statute of limitations on the action for the recovery of taxes (specifically the tax paid on October 27, 1919).

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Doctrine:

• (Subscriber-Only)