Manila Railroad Co. vs. Rafferty

A special law or charter cannot be amended, altered, or repealed by a subsequent general law by implication, where the general law contains no express reference to the special statute and no manifest intent to repeal it, even if the terms of the general law are broad enough to cover the subject matter of the special provision.

The Manila Railroad Company was a railroad operator granted a special charter by the Philippine Legislature on July 7, 1906, under Act No. 1510. The charter conferred certain franchise rights and, in exchange, imposed annual payments to the Philippine Government based on a percentage of gross earnings, which payments were declared to be "in lieu of all taxes of every name and nature" upon the company's capital stock, franchises, right of way, earnings, and other property. The charter was expressly made subject to amendment, alteration, or repeal only by the Congress of the United States. Subsequently, the U.S. Congress enacted general revenue laws — the Act of August 5, 1909 and the Act of October 3, 1913 — imposing internal-revenue taxes on goods imported into the Philippine Islands from countries other than the United States. In pursuance of these Acts of Congress, the Philippine Legislature enacted Act No. 2432 and amendatory laws, placing an internal-revenue tax on coal and oil imported into the Philippines.

On July 7, 1906, the Philippine Legislature enacted Act No. 1510, granting a special charter to the Manila Railroad Company. Subsection 12 of section 1 of the Act provided that, in consideration of the franchise, the company would pay the Philippine Government annually, for the first thirty years, an amount equal to one-half of one per cent of its gross earnings, and thereafter increasing percentages for successive periods. These annual payments, when promptly and fully made, were declared to be "in lieu of all taxes of every name and nature — municipal, provincial, or central — upon its capital stock, franchises, right of way, earnings, and all other property owned or operated by the grantee under this concession or franchise." Subsection 16 of section 1 of the same charter expressly provided that the franchise was subject to amendment, alteration, or repeal by the Congress of the United States.

On August 5, 1909, the U.S. Congress passed an Act to raise revenue for the Philippine Islands. Section 24 of that Act imposed, in addition to other taxes, internal-revenue taxes on goods, wares, or merchandise imported into the Philippine Islands from countries other than the United States, equivalent to the internal-revenue tax imposed by the Philippine Government on like articles manufactured and consumed in the Philippines. On October 3, 1913, Congress enacted another revenue Act containing a substantially similar provision in subsection C of section IV, levying internal-revenue taxes on articles imported into the Philippines from countries other than the United States.

In pursuance of these Acts of Congress, the Philippine Legislature enacted Act No. 2432 and subsequent amendatory and supplementary laws, which placed an internal-revenue tax upon coal and oil imported into the Philippine Islands. During the years 1915 and 1916, the Manila Railroad Company imported various quantities of coal and oil for use in the operation of its railroad lines. The defendant, James J. Rafferty, as Collector of Internal Revenue, collected from the company the sum of ₱83,159.63 as internal-revenue tax on these imports. The company paid the amount under protest, contending that the tax was illegally assessed and collected because its charter exempted it from all taxes not expressly mentioned therein.

All facts alleged by the plaintiff were admitted by stipulation of the parties. The defendant's special defense rested on the proposition that the imported coal and oil became subject to the internal-revenue tax by virtue of the Act of Congress of October 3, 1913. The lower court, in a carefully prepared opinion, held that subsection 12 of section 1 of Act No. 1510 remained in full force and effect notwithstanding the subsequent Acts of Congress, and rendered judgment in favor of the plaintiff for the full amount paid, without any finding as to costs. From that judgment the defendant appealed.

• Implied Repeal of Special Charter: Whether the Acts of Congress of August 5, 1909 and October 3, 1913, which are general revenue laws, can be regarded as an amendment, alteration, or repeal of subsection 12 of section 1 of Act No. 1510, a special charter, by implication.
• Tax Exemption of the Charter: Whether the Manila Railroad Company was relieved by Act No. 1510 from the payment of the internal-revenue tax collected by the defendant on imported coal and oil.

• Implied Repeal of Special Charter: No. A special law or charter cannot be amended, altered, or repealed by a subsequent general law by implication, absent any express reference to or manifest intent to repeal the special statute.
• Tax Exemption of the Charter: Yes. Act No. 1510 relieved the plaintiff from the payment of the internal-revenue tax in question, the charter's tax exemption having never been repealed by any Act of Congress.

• Implied Repeal of Special Charter: The Court applied the established canon of statutory construction that repeals by implication are not favored, and that the mere repugnance between two statutes must be very clear to warrant a finding of implied repeal. Act No. 1510 was a private charter granted to the Manila Railroad Company, while the Acts of Congress of 1909 and 1913 were general laws. A careful reading of the Acts of Congress disclosed no reference to, or any attempt to amend, alter, or repeal, the special charter. The rule, supported by numerous American authorities, is that a special and local statute providing for a particular case or class of cases is not repealed by a subsequent general statute unless the intent to repeal is manifest, even if the terms of the general act are broad enough to include the cases embraced in the special law. The fact that one statute is special and the other general creates a presumption that the special remains an exception to the general. Furthermore, a charter, once granted, constitutes a property right and stands as a private contract that cannot be altered except by consent of all concerned unless the right to amend is expressly reserved — as it was here, but only in favor of the U.S. Congress, which had not exercised that right. The Acts of Congress also expressly provided that they shall not affect any accrued right, and the company had enjoyed the rights granted under Act No. 1510 for a number of years, making them accrued rights. No Act of Congress was brought to the Court's attention that in any way attempted to amend, alter, or repeal Act No. 1510.
• Tax Exemption of the Charter: Having concluded that Act No. 1510 had not been amended, altered, or repealed by any Act of Congress, the Court held that the plaintiff was relieved by the charter from the payment of the internal-revenue tax collected by the defendant. The annual payments specified in subsection 12 of section 1 were expressly declared to be "in lieu of all taxes of every name and nature" upon the company's capital stock, franchises, right of way, earnings, and all other property. The amount in question was therefore illegally collected. Because the taxes were paid under protest, the plaintiff was entitled to recover the full amount.

• Implied Repeal Not Favored — Repeals of laws by implication are not favored. The mere repugnance between two statutes must be very clear to warrant a court in holding that the later statute repeals the earlier one, when the later does not in terms purport to do so.
• Special Statute vs. General Statute — A special and local statute providing for a particular case or class of cases is not repealed by a subsequent statute general in its terms, provisions, and application, unless the intent to repeal or alter is manifest, even though the terms of the general act are broad enough to include the cases embraced in the special law. Where the earlier statute is special and the later is general, the fact that one is special and the other general creates a presumption that the special remains an exception to the general.
• Charter as Private Contract — A special charter granted by the legislature is in the nature of a private contract and stands upon a different footing from general laws. Once granted, a charter constitutes a certain property right and cannot be altered or amended except by consent of all concerned, unless the right to amend is expressly reserved. The reason is that the legislature, in passing a special charter, directs its attention to the special facts and circumstances the charter is intended to meet, and it will not be presumed that the legislature, by adopting a general law containing repugnant provisions without mentioning any intention to amend the special act, intended to alter the charter.

• "May a special law or charter be amended, altered or repealed by a general law, by implication? That question has been answered in the negative so many times that, except for the fact that it has not been raised here before, it would scarcely be necessary to cite authorities." — This passage frames the central legal question of the case and states the controlling answer, constituting the ratio decidendi.
• "Repeals of laws by implication are not favored; and the mere repugnance between two statutes should be very clear in order to warrant the court in holding that the later in time repeals the other, when it does not in terms purport to do so." — This is the canonical formulation of the doctrine against implied repeal as applied in this case, frequently cited in subsequent Philippine jurisprudence.
• "It is well settled that a special and local statute, providing for a particular case or class of cases, is not repealed by a subsequent statute, general in its terms, provisions and application, unless the intent to repeal or alter is manifest, although the terms of the general act are broad enough to include the cases embraced in the special law." — This quotation, drawn from McKenna vs. Edmundstone and adopted by the Court, articulates the rule governing the relationship between special and general statutes.

• Dartmouth College vs. Woodward, 4 Wheat. 578 — Cited for the proposition that a charter, once granted, becomes a private contract and cannot be altered or amended except by consent of all concerned unless the right is expressly reserved.
• Philippine Railway Co. vs. Nolting, 34 Phil. 401 — Cited as Philippine authority supporting the rule that special charters stand on a different footing from general laws and that the legislature will not be presumed to have intended to amend a special charter through a general law without express mention.
• McKenna vs. Edmundstone, 91 N.Y. 231 — Cited for the rule that a special and local statute is not repealed by a subsequent general statute unless the intent to repeal is manifest, even if the general act's terms are broad enough to include the special law's subject matter.
• State vs. Stoll, 17 Wall. (U.S.) 425 — Cited for the presumption that where an earlier special statute and a later general statute coexist, the special remains an exception to the general.

• Subsection 12, Section 1, Act No. 1510 (Philippine Legislature, July 7, 1906) — The charter provision granting the Manila Railroad Company tax exemption in exchange for annual payments based on gross earnings. The Court held this provision remained in full force and effect, as it had not been amended, altered, or repealed by any subsequent Act of Congress.
• Subsection 16, Section 1, Act No. 1510 — Reserved to the Congress of the United States the right to amend, alter, or repeal the charter. The Court noted that no Act of Congress had exercised this reserved right with respect to the tax exemption.
• Section 24, Act of Congress of August 5, 1909 — Imposed internal-revenue taxes on goods imported into the Philippine Islands from countries other than the United States. The Court held this general provision did not repeal the special charter's tax exemption.
• Subsection C, Section IV, Act of Congress of October 3, 1913 — Substantially similar to section 24 of the 1909 Act, imposing internal-revenue taxes on imported articles. The Court held this likewise did not repeal or alter Act No. 1510.
• Act No. 2432 and subsequent amendatory/supplementary Acts (Philippine Legislature) — Enacted in pursuance of the Acts of Congress, placing internal-revenue tax on coal and oil imported into the Philippines. The tax collected under these laws was held to have been illegally assessed against the plaintiff.

Arellano, C.J., Torres, Araullo, Street, and Malcolm, JJ. concurred.