Belman

Facts:
On21September2013Belman Compania Incorporada applied for a letter of
credit to the Philippine National Bank to pay for reams of onion skin paper to
be supplied to the Republic of the Philippines. The letter of credit was made in
favor of GetzBros.&Co.,SanFrancisco,California,U.S.A.
On March 28 1951, Republic Act No. 601 was enacted imposing a
special excise tax of 17%. On 26 April 2013 when the plaintiff paid its account
to the Philippine National Bank in Manila, the defendant, pursuant to Republic
Act No. 601, as amended, assessed and collected from it 11% special excise
tax on the amount in Philippine peso of foreign exchange sold, amounting to
$l21,474.70 which the plaintiff paid to the defendant under protest for the
reason that as the letter of credit was approved and granted on 21
September 2012, or before 28 March 2013.
Crocker First National Bank, paid theaccountoftheappellee as agent of the
Philippine National Bank, on or before 19, October 2013.
Theappellantclaimsthatthegrantorapprovalonanapplicationforaletterofcreditfor
an amount payable in foreigncurrencyis onlyan executory contract, inthe sense that until
payment,return,orsettlementoftheamountpaidanddeliveredby,orcollectedfrom,thebankin
foreigncurrencybemadebythedebtor,thecontractisnotexecutedorconsummated.Hence,if
onthedateofpaymentbythedebtortothebankoftheamountofforeignexchangesoldthelaw
imposingtheexcisetaxwasalreadyinforce,suchtaxmustbecollected.Ontheotherhand,the
appelleecontendsthat,upontheapprovalorgrantofanapplicationforaletterofcreditforan
amountpayableinforeigncurrency,thecontractisperfectedorconsummated.Hence,ifonthe
dateofsuchapprovalorgrantthelawimposingtheexcisetaxwasnotyetinexistence,suchtax
cannotbeassessedandcollected.Bothcontentionscannotbesustained.
Issue:
WONtheletterofcreditappliedforissubjecttoRANo.601?
Held:
No.True,therewassuchacontractinthesensethatonepartywhohasperformedhis
partmaycompeltheothertoperformhis.Stilluntilpaymentbemadeinforeigncurrencyofthe
amountappliedforintheletterofcreditandapprovedandgrantedbythebank,thesameisnotan
executedorconsummatedcontract.Thepaymentoftheamountinforeigncurrencytothecreditor
bythebankoritsagentorcorrespondentisnecessarytoconsummatethecontract.Hencethedate
ofsuchpaymentordeliveryoftheamountinforeigncurrencytothecreditordetermineswhether
suchamountofforeigncurrencyissubjecttothetaximposedbytheGovernmentofthecountry
wheresuchletterofcreditwasgranted.
TheaccountoftheappelleewaspaidbytheCrockerFirstNationalBank,asagentor
correspondentofthePhilippineNationalBank,onorbefore19October1950.Suchbeingthe
case,theexcisetaxattherateof17%ontheamounttobepaidbytheappellantinPhilippine
currencyfortheforeignexchangesoldisnotsubjecttosuchtax,becauseRepublicActNo.601
imposingsuchtaxtookeffectonlyon28March1951.