Go Ka Toc Sons and Co. vs. Rice and Corn Board

Section 1 of RA 3018 plainly includes "the by-products" of rice and corn within the "rice and/or corn industry," so a non-wholly-Filipino partnership that acquires "sungo," "tahup," and rice husk and processes them into vegetable oil and corn meal falls within the statutory prohibition; where the statute is clear, the court's only duty is to apply it as written, and the legislative purpose stated in the introductory note of the bill may control the text only in case of ambiguity.

Go Ka Toc Sons & Co. is a duly registered partnership that is not wholly owned by Filipinos, and since 1958 it has manufactured, processed, and marketed vegetable oil extracted from corn, rice, copra, soybean, peanuts, fish, and other vegetable products. Republic Act No. 3018, approved August 2, 1960, barred persons and entities whose capital was not wholly owned by Filipino citizens from engaging, directly or indirectly, in the rice and/or corn industry, but allowed those already registered with the municipal treasurer to continue for purposes of liquidation until two years from and after January 1, 1961. The same law created the Rice and Corn Board (RICOB) and, under Section 6, empowered it to issue implementing rules; RICOB exercised that power through Resolution No. 10 of November 21, 1960, defining the term "by-product," and General Circular No. 1 of July 10, 1961, as amended, defining "capital investment," both of which were duly published and translated into the local dialect.

After the two-year period allowed by RA 3018 lapsed, Go Ka Toc Sons & Co. stopped buying and selling rice and corn and confined its operations to the trade, processing, and manufacture of corn and rice oil. Its raw materials were corn germ proper or embryo, called "sungo," and "tahup," which it obtained from rice and corn millers, and rice husk, which it secured from others who milled rice and corn. Processing these materials yielded a residue called "corn meal" or "corn germ meal," which the partnership sold and traded.

RICOB agents thereafter required the partnership to register under Section 2 of the law, and a RICOB resolution dated January 3, 1961 ruled that manufacturers and/or dealers of bijon, noodle, corn starch, gawgaw, rice wine, poultry feeds, and other by-products of rice and corn were covered by RA 3018. On the strength of that demand and ruling, Go Ka Toc filed an action in the Court of First Instance to declare the law, RICOB Resolution No. 10 of November 21, 1960, and General Circular No. 1 of July 10, 1961 inapplicable to it. Pending trial on the merits, the lower court issued the writ of preliminary injunction prayed for, and the parties then entered into a stipulation of facts to abbreviate the proceedings.

In the decision that followed, the lower court found that the partnership acquired "tahup," "sungo," and rice husk from rice and corn millers, manufactured vegetable oil from them, and produced "corn meal" or "corn germ meal" which it distributed and sold, and that it had engaged in these activities since December 31, 1962 and had been partly engaged in them since its formation in 1959. The lower court likewise found that the partnership's raw materials came from those engaged in milling rice and/or corn.

• Coverage of By-Products: Whether a partnership not wholly owned by Filipinos, engaged in the processing and manufacture of vegetable oil from "sungo," "tahup," and rice husk and in the sale of the resulting "corn meal" or "corn germ meal," is engaged in the "rice and/or corn industry" as defined in Section 1 of RA 3018.
• Statutory Construction: Whether the lower court properly resorted to statutory construction, in light of the legislative purpose stated in the introductory note of the bill, to exclude the processing of rice and corn by-products from the coverage of RA 3018.
• Sufficiency of the Title: Whether the inclusion of the term "by-product" in the body of RA 3018, although not stated in its title, invalidates the law.
• Validity of RICOB Resolution No. 10: Whether RICOB Resolution No. 10 of November 21, 1960, defining the term "by-product," is valid.

• Coverage of By-Products: Yes. Section 1 expressly reaches "the acquisition for the purpose of trade of rice (husked or unhusked) or corn and the by-products thereof," and "tahup," "sungo," and rice husk are by-products of rice and/or corn.
• Statutory Construction: No. The law is clear, so the lower court's only duty was to apply it as written; the purpose expressed in the introductory note of the bill can control the language of the law only in case of ambiguity.
• Sufficiency of the Title: No. The inclusion of "by-product" in the body of the law is germane to the subject matter expressed in the title, and defining the term in the statute is not an invalid legislative usurpation of the court's function to interpret the laws.
• Validity of RICOB Resolution No. 10: Valid. RICOB's power to issue implementing rules proceeds from Section 6 of RA 3018 itself, and the resolution, by enumerating specific examples of by-products, merely carried out the provisions of law.

• Coverage of By-Products: Section 1 of RA 3018 defines the "rice and/or corn industry" as including "the handling [of] distribution, either in wholesale or retail, and the acquisition for purpose of trade, of the by-products of rice and corn." The SC noted that the partnership admittedly stopped engaging in the purchase and sale of rice and/or corn after the two-year period lapsed and limited its activities to the trade, processing, and manufacture of corn and rice oil from raw materials consisting of corn germ proper or embryo ("sungo") and "tahup," as well as from rice husk secured from others who mill rice and corn, producing as residue a "corn meal" or "corn germ meal" which it sold and traded. On these admitted facts, the SC concluded that "tahup," "sungo," and rice husk are clearly by-products of rice and/or corn, a characterization RICOB Resolution No. 10 itself illustrates. Because the statutory definition expressly covers the acquisition for trade of by-products, the partnership's operations fall squarely within the law.

• Statutory Construction: The lower court read the legislative intent as limited to the rice and corn industry proper, reasoning that Filipinos do not depend for their survival on eating the by-products of rice and corn, and on that basis excluded the partnership's activities from the statute. The SC held that this resort to statutory construction was both improper and incorrect. The law is clear in enunciating the policy that only Filipinos and associations, partnerships, or corporations that are 100% Filipino-owned may engage even in the trade and acquisition of the by-products of rice and/or corn, so the court's only duty was to apply the law as it was. The purpose of the Act as expressed in the introductory note of the bill can control the language of the law only in case of ambiguity, and there is none in this case. The SC added that the lower court's interpretation would render the statute nugatory and defeat its aims rather than apply and effectuate its provisions, since it in effect struck the phrase "by-products thereof" from the text of the law.

• Sufficiency of the Title: The term "by-product" is not particularly and specifically stated in the title of RA 3018, but the SC held that its inclusion in the body of the law is not invalid, since it is germane to the subject matter expressed in the title. The SC likewise rejected the lower court's view that the statutory inclusion of the term in the definition of "rice and/or corn industry" amounted to an invalid legislative usurpation of the court's function to interpret the laws, because the definition is part of the law itself.

• Validity of RICOB Resolution No. 10: Since the partnership is covered by the statute, the SC found no necessity for an extensive discussion of the validity of Resolution No. 10. The power and authority of RICOB to issue rules and regulations implementing the law proceeds from the law itself, specifically Section 6 of RA 3018. The resolution, by enumerating some specific examples of by-products of rice and/or corn, merely carried out the provisions of law. The sole reason the lower court invalidated it was its mistaken stand that the term "by-product" ought not to have been made a part of the statute. With the resolution sustained, the SC held that the question regarding the validity of General Circular No. 1 of July 10, 1961 was rendered moot and academic.

• Plain Meaning Rule — Where the language of a statute is clear and unambiguous, the court's only duty is to apply it as written; the purpose of the law as expressed in the introductory note of the bill can control the language of the law only in case of ambiguity. The SC applied this to Section 1 of RA 3018, holding that the phrase "the by-products thereof" left no room for the lower court's construction limiting the law to the rice and corn industry proper.
• Germane-to-the-Title Test — A provision in the body of a statute that is not specifically stated in its title is valid so long as it is germane to the subject matter expressed in the title. The SC applied this to uphold the inclusion of the term "by-product" in RA 3018 despite its absence from the title.
• Legislative Definition Is Part of the Law — When a statute itself defines a term used in its provisions, that definition is part of the law, and the legislature's act of defining does not amount to an invalid usurpation of the judiciary's power to interpret the laws. The SC applied this to the statutory definition of "rice and/or corn industry" as including by-products.
• Administrative Rules Derive Authority from the Statute — The power of an administrative body to issue rules and regulations implementing a law proceeds from the law itself. The SC applied this to RICOB, whose Resolution No. 10 merely enumerated specific examples of by-products and thereby carried out the provisions of RA 3018.
• Statute Must Be Read as a Whole — An interpretation that strikes a phrase from the text of the law renders the statute nugatory and defeats its aims; the court must instead apply and effectuate its provisions. The SC used this to reject the lower court's reading, which in effect deleted "by-products thereof" from Section 1.

• "Now, 'tahup,' 'sungo' and 'rice husk,' which plaintiffs acquires from rice and corn millers and from which it manufactures the vegetable oil and produces the 'corn meal' or 'corn germ meal' that it subsequently distributes and sells are clearly by-products of rice and/or corn." — This is the core factual-legal holding that brought the partnership's post-liquidation operations within the coverage of RA 3018.
• "The law is clear in enunciating the policy that only Filipinos and associations, partnerships or corporations 100% Filipino can engage even in the trade and acquisition of the by-products of rice and/or corn. So the court's only duty was to apply the law as it was." — This states the plain meaning rule as applied and rejects the lower court's resort to statutory construction.
• "The purpose of the Act, as expressed in the introductory note of the bill, can control the language of the law only in case of ambiguity." — This is the canonical formulation of the limit on using legislative purpose as an interpretive aid.
• "Although the term 'by-product' is not particularly and by specifically stated in the title of Republic Act 3018, its inclusion in the body of the law is not invalid, as the lower court held, since it is germane to the subject matter expressed in the title of the law." — This is the SC's application of the germane-to-the-title test to defeat the lower court's constitutional objection.

• Sumulong vs. COMELEC, 73 Phil. 288 — Cited to support the ruling that a term included in the body of the law but not stated in its title is valid where germane to the subject matter expressed in the title.
• Cordero vs. Cabatuando, L-14542, Oct. 31, 1962 — Cited together with Sumulong for the same germane-to-the-title proposition.
• People vs. Garcia, 85 Phil. 651 — Cited for the rule that the court's duty is to apply the law as it is written.
• Tecson vs. S.S.S., L-15798, Dec. 29, 1961 — Cited together with People vs. Garcia for the same rule on applying a clear statute as written.

• Section 1, Republic Act No. 3018 — Defines the "rice and/or corn industry" as including the culture, milling, warehousing, transporting, exportation, importation, handling of distribution either in wholesale or retail, or the acquisition for purpose of trade of rice (husked or unhusked) or corn and the by-products thereof. The SC applied this provision to hold that the partnership's acquisition and processing of "sungo," "tahup," and rice husk, and its sale of "corn meal," fell within the statutory definition.
• Section 2, Republic Act No. 3018 — Requires covered persons and entities to register with the municipal treasurer. The partnership was required by RICOB agents to register under this section, and that demand precipitated the suit.
• Section 3, Republic Act No. 3018 — Allows registered entities to continue their lines of activity in the rice and/or corn industry for purposes of liquidation, with Section 3 (a) fixing the period for those engaged in retail, wholesale, culture, transporting, handling, distribution, or acquisition for trade at two years from the date of effectivity. The lapse of this period is what led the partnership to stop buying and selling rice and corn and to confine itself to the by-product operations at issue.
• Section 6, Republic Act No. 3018 — The source of RICOB's power and authority to issue rules and regulations implementing the law, and the provision under which Resolution No. 10 and General Circular No. 1 were issued and duly published and translated into the local dialect. The SC relied on this provision to uphold Resolution No. 10.