Hydro Resources Contractors Corporation v. The Court of Tax Appeals

Summary

Hydro Resources contracted with NIA in 1978 for the Magat River project, with NIA importing construction equipment in 1978-1979 under a financing arrangement where ownership would transfer to Hydro upon full payment. After Hydro fully repaid the costs, formal deeds of sale were executed in December 1982 and March 1983. The Bureau of Customs assessed a 3% ad valorem duty under Executive Order 860 (effective December 21, 1982) on the transferred equipment. While the Collector and Acting Commissioner of Customs ruled in Hydro's favor, the Deputy Minister of Finance and Court of Tax Appeals held Hydro liable, reasoning that the formal transfer occurred after E.O. 860's effectivity. The Supreme Court reversed, holding that the contract of sale was perfected in 1978 when the original agreement was signed, with the subsequent deeds being mere formalities implementing a pre-existing conditional sale. Applying the principle that laws have no retroactive effect and that conditional obligations retroact to their constitution, the Court ruled that E.O. 860 could not apply to transactions perfected before its enactment, establishing important precedent on retroactivity of tax laws and timing of contractual obligations.