MITSUI BUSSAN KAISHA vs. MANILA E.R.R. & L.

CO (1919) Coal tax case On December 23, 1914, the Legislature passed Act No. 2432 imposing a specific tax of P1.00 per metric ton on coal. The Act was later amended by Act. 2445, and the provision was inserted, Whenever any person has prior to the enactment of this law entered into a contract the burden of said tax or increased rate of tax shall be borne by the person to whom said article is furnished pursuant to such contract, unless the parties have agreed or shall agree otherwise. Prior to the enactment of Act No. 2432 and Act 2445, Mitsui Bussan Kaisha had contracted to sell large quantities of coal to the Manila Electric Railroad and Light Company. The basic price fixed in the contract was P9.45 per long ton but it was stipulated that the price was subject to modification in proportion to variations in calories and ash content, and not otherwise. This means that the price could be made certain by the application of known factors. From March to October 1915, Mitsui brought to Manila from Japan 11,874.75 metric tons for delivery and paid the new internal revenue tax imposed by Acts No. 2432 and 2445. When Mitsui demanded reimbursement of the P11,874.75 taxes it paid, Manila E.R.R. & L. refused saying that Mitsui was obligated to deliver at that price and incidentally was bound to bear any expense necessary to enable it so to deliver coal to the defendant, and that the parties had agreed that the internal-revenue tax should be paid that the seller. Is the contract to sell at a FIXED PRICE within the contemplation of the law stating unless the parties have agreed or shall agree otherwise? YES. The words unless the parties have agreed or shall agree otherwise contemplates the case where express provision has been made with direct reference to the burden of such internal revenue taxes as the Legislature might impose. The very purpose of the phrase was to evade the effect of the implication that the seller should bear all the expenses necessary to enable It to fulfill the principal obligation, and to put the burden of the new tax on the purchaser in the absence of express stipulation to the contrary. Evidently the intent of the Legislature was to relieve the person who had bound himself to make deliveries at a fixed price. The contract states in proportion to variations in calories and ash content, and not otherwise. Can this be considered that the parties have already agreed as to the fixed price and therefore the seller shall bear the additional tax burden? NO. The stipulation between Mitsui and Manila E.R.R.&L has exclusive reference to the quality of the coal delivered, and has no other purpose than to supply a means of ascertaining the value of the coal by determining its utility in combustion. It has no bearing upon liability for the internalrevenue tax.