Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-17447 April 30, 1963
GONZALO PUYAT SONS, !NC., plaintiff-appelle,
vs.
C!TY O" MAN!LA AN# MARCELO SARM!ENTO, $% Ci&' Tr($%)r(r o* M$+il$, defendants-
appellants
Feria, Manglapus & Associates for plainttiff-appelle.Asst. City Fiscal Manuel T. Reyes for
defendants-appellants.
PARE#ES, J.:
This is an appeal from the ud!ment of the C"# of Manila, the dispostive portion of $hich reads%
&''' (f the pa)ments made b) the plaintiff, onl) that made on (ctober *+, ,-+. in the
amount of P,,*+.... has prescribed Pa)ments made in ,-+, and thereafter are still
recoverable since the e'tra-udicial demand made on (ctober /., ,-+0 $as $ell $ithin the
si'-)ear prescriptive period of the Ne$ CivilCode.
#n vie$ of the fore!oin! considerations, ud!ment is hereb) rendered in favor of the plaintiff,
orderin! the defendants to refund the amount of P*-,1*2..., $ithout interest. No costs.
3herefore, the parties respectfull) pra) that the fore!oin! stipulation of facts be admitted
and approved b) this 4onorable Court, $ithout preudice to the parties adducin! other
evidence to prove their case not covered b) this stipulation of facts. 1wph1.!"t
5efendants6 counterclaim is hereb) dismissed for not havin! been substantiated.&
(n Au!ust ,,, ,-+1, the plaintiff 7on8alo Pu)at 9 :ons, #nc., filed an action for refund of Retail
5ealerlsTa'es paid b) it, correspondin! to the first ;uarter of ,-+. up to the third ;uarter of ,-+0,
amountin! to P//,<1+..., a!ainst the Cit) of Manila and its Cit) Treasurer.The case $as submitted
on the follo$in! stipulation of facts, to $it--
&,. That the plaintiff is a corporation dul) or!ani8ed and e'istin! accordin! to the la$s of the
Philippines, $ith offices at Manila= $hile defendant Cit) Manila is a Municipal Corporation
dul) or!ani8ed in accordance $ith the la$s of the Philippines, and defendant Marcelino
:armiento is the dul)>ualified incumbent Cit) Treasurer of Manila=
&*. That plaintiff is en!a!ed in the business of manufacturin! and sellin! all ?inds of furniture
at its factor) at ,-. Rodri!ue8-Arias, :an Mi!uel, Manila, and has a displa) room located at
0.2-0.0 Ri8al Avenue, Manila, $herein it displa)s the various ?ind of furniture manufactured
b) it and sells some !oods imported b) it, such as billiard balls, bo$lin! balls and other
accessories=
&/. That actin! pursuant to the provisions of :ec. ,. !roup ##, of (rdinance No. //02,
defendant Cit) Treasurer of Manilaassessed from plaintiff retail dealer6s ta' correspondin! to
the >uarters hereunder stated on the sales of furniture manufactured and sold b) it at its
factor) site, all of $hich assessments plaintiff paid $ithout protest in the erroneous belief that
it $as liable therefor, on the dates and in the amount enumerated herein belo$%
#eriod $ate #aid %.R. &o.
A'ount
Assessed
and #aid.
"irst ;uarter ,-+. @an. *+, ,-+. 2/0*<,A P,,*++...
:econd ;uarter ,-+. Apr. *+, ,-+. *,+1-+A ,,*+....
Third ;uarter ,-+. @ul. *+, ,-+. *2//*,A ,,*+....
"ourth ;uarter ,-+. (ct. *+, ,-+. *<,,0+A ,,*+....
B"ollo$s the assessment for different >uarters in ,-+,, ,-+*,
,-+/, ,-+2 and ,-++, fi'in! the same amount >uarterl).C ' ' '..
"irst ;uarter ,-+0 @an. *+, ,-+0 1*/.2<A ,,*+....
:econd ;uarter ,-+0 Apr. *+, ,-+0 1++-2-A ,,*+....
Third ;uarter ,-+0 @ul. *+, ,-+0 11.<1-A ,,*+....
T ( T A D . . . . . . . . . . . . . P//,<1+...
EEEEEEEEEEE
&2. That plaintiff, bein! a manufacturer of various ?inds of furniture, is e'empt from the
pa)ment of ta'es imposed under the provisions of :ec. ,, 7roup ##, of (rdinance No.
//02,$hich too? effect on :eptember *2, ,-+0, on the sale of the various ?inds of furniture
manufactured b) it pursuant to the provisions of :ec. ,1BnC of Republic Act No. 2.- BRevised
Charter of ManilaC, as restated in :ection , of (rdinance No./1,0.
&+. That, ho$ever, plaintiff, is liable for the pa)ment of ta'es prescribed in :ection ,, 7roup ##
or (rdinance No. //02mas amended b) :ec. ,, 7roup ## of (rdinance No. /1,0, $hich too?
effect on :eptember *2, ,-+0, on the sales of imported billiard balls, bo$lin! balls and other
accessories at its displa)room. The ta'es paid b) the plaintiff on the sales of said article are
as follo$s%
' ' ' ' ' ' ' ' '
&0. That on (ctober /., ,-+0, the plaintiff filed $ith defendant Cit) Treasurer of Manila, a
formal re>uest for refund of the retail dealer6s ta'es undul) paid b) it as aforestated in
para!raph /, hereof.
&<. That on @ul) *2, ,-+1, the defendant Cit) Treasurer of Maniladefinitel) denied said
re>uest for refund.
&1. 4ence on Au!ust *,, ,-+1, plaintiff filed the present complaint.
&-. Based on the above stipulation of facts, the le!al issues to be resolved b) this 4onorable
Court are% B,C the period of prescription applicable in matters of refund of municipal ta'es
errenousl) paid b) a ta'pa)er and B*C refund of ta'es not paid under protest. ' ' '.&
:aid ud!ment $as directl) appealed to this Court on t$o dominant issues to $it% B,C 3hether or not
the amounts paid b) plaintiff-appelle, as retail dealer6s ta'es under (rdinance ,-*+, as amended b)
(rdinance No. //02of the Cit) of Manila, $ithout protest, are refundable=B*C Assumin! ar!uendo,
that plaintiff-appellee is entitled to the refund of the retail ta'es in >uestion, $hether or not the claim
for refund filed in (ctober ,-+0, in so far as said claim refers to ta'es paid from ,-+. to ,-+* has
alread) prescribed. .
Fnder the first issue, defendants-appellants contend tht the ta'es in >uestion $ere voluntaril) paid
b) appellee compan) and since, in this urisdiction, in order that a le!al basis arise for claim of
refund of ta'es erroneousl) assessed, pa)ment thereof must be made under protest, and this bein!
a condition sine >ua non, and no protest havin! been made, -- verball) or in $ritin!,
thereb)indicatin! that the pa)ment $as voluntar), the action must fail. Cited in support of the above
contention, are the cases of Gara!o8a vs. Alfonso, 20 Phil. ,0.-,0,, and 7avino v. Municipalit) of
Calapan, <, Phil. 2/1..
#n refutation of the above stand of appellants, appellee avers tht the pa)ments could not have been
voluntar).At most, the) $ere paid &mista?enl) and in !ood faith&and &$ithout protest in the erroneous
belief that it $as liable thereof.& Holuntariness is incompatible $ith protest and mista?e. #t submits
that this is a simple case of &solutio indebiti&..
Appellants do not dispute the fact that appellee-compan)is e'empted from the pa)ment of the ta' in
>uestion.This is manifest from the repl) of appellant Cit) Treasurer statin! that sales of
manufactured products at the factor) site are not ta'able either under the 3holesalers (rdinance or
under the Retailers6 (rdinance. 3ith this admission, it $ould seem clear that the ta'es collected
from appellee $ere paid, thru an error or mista?e, $hich places said act of pa)ment $ithin the pale
of the ne$ Civil Code provision on solutio indebiti. The appellant Cit) of Manila, at the ver) start,
not$ithstandin! the (rdinance imposin! the Retailer6s Ta', had no ri!ht to demand pa)ment
thereof..
&#f somethin! is received $hen there is no ri!ht to demand it, and it $as undul) delivered throu!h
mista?e, the obli!ationto retun it arises& BArt. *,+2, NCCC..
Appelle cate!oricall) stated that the pa)ment $as not voluntaril) made, Ba fact found also b) the
lo$er courtC,but on the erronoues belief, that the) $ere due. Fnder this circumstance, the amount
paid, even $ithout protest is recoverable. &#f the pa)er $as in doubt $hether the debt $as due, he
ma) recover if he proves that it $as not due& BArt. *,+0, NCCC. Appellee had dul) proved that ta'es
$ere not la$full) due. There is, therefore, no doubt that the provisions of solutio indebtiti, the ne$
Civil Code, appl) to the admitted facts of the case..
3ith all, appellant >uoted Manresa as sa)in!% &' ' ' 5e la misma opinion son el :r. :anche8 Roman
) el :r. 7alcon, et cual afirma >ue si la pa!a se hi8o por error de derecho, ni e'iste el cuasi-contrato
ni esta obli!ado a la restitucion el >ue cobro, aun>ue no se debiera lo >ue se pa!o& BManresa, Tomo
,*, pa!inas 0,,-0,*C. This opinion, ho$ever, has alread) lost its persuasiveness, in vie$ of the
provisions of the Civil Code, reco!ni8in! &error de derecho& as a basis for the >uasi-contract, of
solutio indebiti. .
&Pa)ment b) reason of a mista?e in the contruction or application of a doubtful or difficult >uestion of
la$ ma) come $ithin the scope of the precedin! article& BArt. *,+++C..
There is no !ainsa)in! the fact that the pa)ments made b) appellee $as due to a mista?e in the
construction of a doubtful >uestion of la$. The reason underl)in! similar provisions, as applied to
ille!al ta'ation, in the Fnited :tates, is e'pressed in the case of Ne$port v. Rin!o, /< I). 0/+, 0/0=
,. :.3. *, in the follo$in! manner%.
&#t is too $ell settled in this state to need the citation of authorit) that if mone) be paid throu!h a
clear mista?e of la$ or fact, essentiall) affectin! the ri!hts of the parties, and $hich in la$ or
conscience $as not pa)able, and should not be retained b) the part) receivin! it, it ma) be
recovered. Both la$ and sound moralit) so dictate. Especiall) should this be the rule as to ille!al
ta'ation. The ta'pa)er has no voice in the impositionof the burden. 4e has the ri!ht to presume that
the ta'in! po$er has been la$full) e'ercised. 4e should not be re>uired to ?no$ more than those in
authorit) over him, nor should he suffer loss b) compl)in! $ith $hat he bona fide believe to be his
dut) as a !ood citi8en. Fpon the contrar), he should be promoted to its read) performance b)
refundin! to him an) le!al e'action paid b) him in i!norance of its ille!alit)= and, certainl), in such a
case, if be subect to a penalt) for nonpa)ment, his compliance under belief of its le!alit), and
$ithout a$aitin!a resort to udicial proceedin!s should not be re!rded in la$ as so far voluntar) as to
affect his ri!ht of recover).&.
&Ever) person $ho throu!h an act or performance b) another, or an) other means, ac>uires or
comes into possession of somethin! at the e'pense of the latter $ithout ust or le!al !rounds, shall
return the same to him&BArt. **, Civil CodeC. #t $ould seems unedif)in! for the !overnment, Bhere the
Cit) of ManilaC, that ?no$in! it has no ri!ht at all to collect or to receive mone) for alle!ed ta'es paid
b) mista?e, it $ould be reluctant to return the same. No one should enrich itself unustl) at the
e'pense of another BArt. *,*+, Civil CodeC..
Admittedl), plaintiff-appellee paid the ta' $ithout protest.E>uall) admitted is the fact that section <0
of the Charter of Manila provides that &No court shall entertain an) suit assailin! the validit) of ta'
assessed under this article until the ta'pa)er shall have paid, under protest the ta'es assessed
a!ainst him, ''&. #t should be noted, ho$ever, that the article referred to in said section is Article AA#,
entitled 5epartment of Assessment and the sections thereunder manifestl) sho$ that said article and
its sections relate to asseessment, collection and recover) of real estate ta'es onl). :aid section <0,
therefor, is not applicable to the case at bar, $hich relates to the recover of retail dealer ta'es..
#n the opinion of the :ecretar) of @ustice B(p. -.,:eries of ,-+<, in a >uestion similar to the case at
bar, it $as held that the re>uiredment of protest refers onl) to the pa)ment of ta'es $hich are directl)
imposed b) the charter itself, that is, real estate ta'es, $hich vie$ $as sustained b) udicial and
administrative precedents, one of $hich is the case of Medina, et al., v. Cit) of Ba!uio, 7.R. No. D-
2*0-, Au!. *-, ,-+*. #n other $ords, protest is not necessar) for the recover) of retail dealer6s ta'es,
li?e the present, because the) are not directl) imposed b) the charter. #n the Medina case, the
Charter of Ba!uio BChap. 0,, Revised Adm. CodeC, provides that &no court shall entertain an) suit
assailin! the validit) of a ta' assessed unde this charter until the ta'-pa)er shall have paid, under
protest, the ta'es assessed a!ainst him Bsec.*+2<2JbK, Rev. Adm. CodeC, a proviso similar to section
<0 of the Manila Charter. The refund of specific ta'es paid under a void ordinance $as ordered,
althou!h it did not appear that pa)ment thereof $as made under protest..
#n a recent case, 3e said% &The appellants ar!ue that the sum the refund of $hich is sou!ht b) the
appellee, $as not paid under protest and hence is not refundable. A!ain, the trial court correctl) held
that bein! unauthori8ed, it is not a ta' assessed under the Charter of the Appellant Cit) of 5avao
and for that reason, no protest is necessar) for a claim or demand for its refund& BCitin! the Medina
case, supra= East Asiatic Co., Dtd. v. Cit) of 5avao, 7.R. No. D-,0*+/, Au!. *,, ,-0*C. Dastl), bein!
a case of solutio indebiti, protest is not re>uired as a condition sine >ua non for its application..
The ne't issue in discussion is that of prescription. Appellants maintain that article ,,20 BNCCC,
$hich provides for a period of four B2C )ears Bupon inur) to the ri!hts of the plaintiffC, appl) to the
case. (n the other hand, appellee contends that provisions of Act ,-. BCode of Civ. ProcedureC
should appl), insofar as pa)ments made before the effectivit) of the Ne$ Civil Code on Au!ust /.,
,-+., the period of $hich is ten B,.C )ears, B:ec. 2.,Act No. ,-.= (sorio v. Tan @on!?o, +, (.7.
0*,,C and article ,,2+ BNCCC, for pa)ments made after said effectivit), providin! for a period of si'
B0C )ears Bupon >uasi-contracts li?e solutio indebitiC. Even if the provisionsof Act No. ,-. should
appl) to those pa)ments made before the effectivit) of the ne$ Civil Code, because &prescription
alread) runni! before the effectivit) of this Code shall be !overned b) la$s previousl) in force ' ' '&
Bart. ,,,0, NCCC, for pa)ments made after said effectivit),providin! for a period of si' B0C )ears Bupon
>uasi-contracts li?e solutio indebitiC. Even if the provisions of Act No. ,-.should appl) to those
pa)ments made before the effectivit) of the ne$ Civil Code, because &prescription alread) runnin!
before the effectivit) of of this Code shall be !overn b) la$s previousl) in force ''' & BArt. ,,,0,
NCCC, :till pa)ments made before Au!ust /., ,-+. are no lon!er recoverable in vie$ of the second
para!raph of said article B,,,0C, $hich provides%&but if since the time this Code too? effect the entire
period herein re>uired for prescription should elapse the present Code shall be applicable even
thou!h b) the former la$s a lon!er period mi!ht be re>uired&. Anent the pa)ments made after
Au!ust /., ,-+., it is abvious that the action has prescribed $ith respect to those made before
(ctober /., ,-+. onl), considerin! the fact that the prescription of action is interrupted ''' $hen is a
$ritteen e'tra-udicial demand ' ' '& BArt. ,,++, NCCC, and the $ritten demand in the case at bar
$as made on (ctober /., ,-+0 B:tipulation of "actsC.M(5#"#E5 in the sense that onl) pa)ments
made on or after (ctober /., ,-+. should be refunded, the decision appealed from is affirmed, in all
other respects. No costs. .
(eng)on, C.*., (autista Angelo, +a,rador, Concepcion,$i)on, Regala and Ma-alintal, **., concur.
#adilla, Reyes, *.(.+., and (arrera, **., too no part.