No. L17447. April 30, 1963.GONZALOPUYAT&SONS,INC.,plaintiffappellee,vs.ITYOFMANILAANDMARCELOSARMIENTO,asCity Treasurer of Manila, defendantsappellants.Taxation;Retaildealerstaxes;Recoveryoftaxespaidbymistake;Protestnotnecessary.Wheretaxeswhicharenotlegallydue are paid thru error or mistake, they may, under the principle ofsolutioindebiti,berecovered,evenifnoprotestwasmadeupontheirpayment,particularlywheresuchpaymentwasduetoamistake in the construction of a doubtful or difficult question of law(Article 2155 new Civil Code).Same; Same; Same; Same; Section 76 of charter of Manila andapplicableincaseatbar.Section76oftheCharterofManila,which provides that No court shall entertain any suit assailing thevalidity of tax under this article until the taxpayer shall have paid,under protestthetaxesassessedagainsthim,xxx,relatestotheassessment, collection and recovery of real estate taxes only, and notto the recovery of retail dealers taxes.Same;Same;Same;Prescriptioninterruptedbywrittenextrajudicial demand.EvenapplyingtheprovisionsofActNo.190topaymentsbyappelleeoftheretaildealerstaxesmadebeforetheeffectivityofthenewCivilCode,becauseprescriptionalreadyrunning before the effectivity of this Code shall be governed by lawspreviouslyinforcexxx(Art.1116,NCC),stillpaymentsmadebeforeAugust30,1950,arenolongerrecoverableinviewifthesecondparagraphofthesaidarticle,whichprovidesthatbutifsince the time this Code took effect the entire period herein requiredforprescriptionshouldelapse.Thepresentcodeshallbeapplicableeven though by the former laws a longer period might be required.TheactionhasthereforeprescribedonlywithrespecttothepaymentsmadebeforeOctober30,1950,whenawrittendemandwas made, considering that the prescription of action is interruptedwhen there is a written extrajudicial demand (Art. 1155, NCC).APPEAL from a judgment of the Court of First Instance ofManila. The facts are stated in the opinion of the Court.Feria, Manglapus & Associates for plaintiffappellee.971VOL. 7, APRIL 30, 1963 971Gonzalo Puyat & Sons, Inc. vs. City of ManilaAsst.CityFiscalManuelT.Reyesfordefendantsappellants.PAREDES, J.:ThisisanappealfromthejudgmentoftheCFIofManila, the dispostive portion of which reads:x x x Of the payments made by the plaintiff, only that made onOctober25,1950intheamountofP1,250.00hasprescribedPaymentsmadein1951andthereafterarestillrecoverablesincetheextrajudicialdemandmadeonOctober30,1956waswellwithin the sixyear prescriptive period of the New Civil Code.Inviewoftheforegoingconsiderations,judgmentisherebyrendered in favor of the plaintiff, ordering the defendants to refundthe amount of P29,824.00, without interest. No costs.Defendantscounterclaimisherebydismissedfornothavingbeen substantiated. On August 11, 1958, the plaintiff Gonzalo Puyat & Sons,Inc., filed an action for refund of Retail Dealers Taxes paidbyit,correspondingtothefirstQuarterof1950uptothethird Quarter of 1956, amounting to P33,785.00, against theCityofManilaanditsCityTreasurer.Thecasewassubmitted on the following stipulation of facts, to wit1. ThattheplaintiffisacorporationdulyorganizedandexistingaccordingtothelawsofthePhilippines,withofficesatManila;whiledefendantCityManilaisaMunicipalCorporationdulyorganizedinaccordancewiththelawsofthePhilippines,anddefendantMarcelinoSarmiento is the duly qualified incumbent City Treasurer ofManila;2. Thatplaintiffisengagedinthebusinessofmanufacturingandsellingallkindsoffurnitureatitsfactoryat190RodriguezArias,SanMiguel,Manila,andhasadisplayroomlocatedat604606RizalAvenue,Manila,whereinitdisplaysthevariouskindoffurnituremanufacturedbyitandsellssomegoodsimportedbyit,such as billiard balls, bowling balls and other accessories;3. ThatactingpursuanttotheprovisionsofSec.1.group II, of Ordinance No. 3364, defendant City TreasurerofManilaassessedfromplaintiffretaildealerstaxcorresponding to the quarters hereunder stated on the salesof furniture manufactured and sold by it at its factory site,all of which assessments plaintiff paid without protest in theerroneous belief that it was liable therefor, on the dates andin the amount enumerated herein below:972972 SUPREME COURT REPORTS ANNOTATEDGonzalo Puyat & Sons, Inc. vs. City of ManilaPeriod Date Paid O.R. No. Amount Assessed and Paid.First Quarter 1950 Jan. 25, 1950 436271X P1,255.00Second Quarter 1950 Apr. 25, 1950 215895X1,250.00Third Quarter 1950 Jul. 25, 1950 243321X1,250.00Fourth Quarter 1950 Oct. 25, 1950 271165X1,250.00(Follows the assessment for different quarters in 1951, 1952,1953, 1954 and 1955, fixing the same amount quarterly.) x x x.First Quarter 1956 Jan. 25, 1956 823047X 1,250.00Second Quarter 1956 Apr. 25, 1956 855949X 1,250.00Third Quarter 1956 Jul. 25, 1956 880789X 1,250.00 T O T A L . . . . . . . . . . . . . P33,785.00======== 4. Thatplaintiff,beingamanufacturerofvariouskindsoffurniture,isexemptfromthepaymentoftaxesimposedundertheprovisionsofSec.1,GroupII,ofOrdinanceNo.3364,whichtookeffectonSeptember24,1956,onthesaleofthevariouskindsoffurnituremanufacturedbyitpursuanttotheprovisionsofSec.18(n)ofRepublicActNo.409(RevisedCharterofManila),asrestated in Section 1 of Ordinance No.3816.5. That,however,plaintiff,isliableforthepaymentoftaxesprescribedinSection1,GroupIIorOrdinanceNo.3364masamendedbySec.1,GroupIIofOrdinanceNo.3816,whichtookeffect on September 24, 1956, on the sales of imported billiard balls,bowlingballsandotheraccessoriesatitsdisplayroom.Thetaxespaid by the plaintiff on the sales of said article are as follows:x x x x x x x x x6. That on October 30, 1956, the plaintiff filed with defendantCityTreasurerofManila,aformalrequestforrefundoftheretaildealerstaxesundulypaidbyitasaforestatedinparagraph3,hereof.7. ThatonJuly24,1958,thedefendantCityTreasurerofManila definitely denied said request for refund.8. HenceonAugust21,1958,plaintifffiledthepresentcomplaint.9. Based on the above stipulation of facts, the legal issues to beresolved by this Honorable Court are: (1)theperiodofprescriptionapplicable in matters of refund of municipal taxes erroneously paidby a taxpayer and (2) refund of taxes not paid under protest. x x x.which was the basis of the judgment heretofore recited.973VOL. 7, APRIL 30, 1963 973Gonzalo Puyat & Sons, Inc. vs. City of ManilaSaid judgment was directly appealed to this Court on twodominant issues to wit: (1) Whether or not the amounts paidbyplaintiffappellee,asretaildealerstaxesunderOrdinance1925,asamendedbyOrdinanceNo.3364oftheCityofManila,withoutprotest,arerefundable;(2)Assuming arguendo, that plaintiffappellee is entitled to therefundoftheretailtaxesinquestion,whetherornottheclaim for refund filed in October 1956, in so far as said claimreferstotaxespaidfrom1950to1952hasalreadyprescribed.Under the first issue, defendantsappellants contend thatthetaxesinquestionwerevoluntarilypaidbyappelleecompany and since, in this jurisdiction, in order that a legalbasis arise for claim of refund of taxes erroneously assessed,paymentthereofmustbemadeunderprotest,andthisbeing a condition sine qua non, and no protest having beenmade,verballyorinwriting,therebyindicatingthatthepaymentwasvoluntary,theactionmustfail.Citedinsupportoftheabovecontention,arethecasesofZaragozavs. Alfonso, 46 Phil. 160161, and Gavino v. Municipality ofCalapan, 71 Phil. 438.Inrefutationoftheabovestandofappellants,appelleeavers that the payments could not have been voluntary. Atmost,theywerepaidmistakenlyandingoodfaithandwithoutprotestintheerroneousbeliefthatitwasliablethereof.Voluntarinessisincompatiblewithprotestandmistake.Itsubmitsthatthisisasimplecaseofsolutioindebiti.Appellants do not dispute the fact that appelleecompanyis exempted from the payment of the tax in question. This ismanifest from the reply of appellant City Treasurer statingthatsalesofmanufacturedproductsatthefactorysitearenottaxableeitherundertheWholesalersOrdinanceorundertheRetailersOrdinance.Withthisadmission,itwould seem clear that the taxes collected from appellee werepaid,thruanerrorormistake,whichplacessaidactofpayment within the pale of the new Civil Code provision onsolutioindebiti.TheappellantCityofManila,attheverystart,notwithstandingtheOrdinanceimposingtheRetailers Tax, had no right to demand payment thereof.974974 SUPREME COURT REPORTS ANNOTATEDGonzalo Puyat & Sons, Inc. vs. City of ManilaIfsomethingisreceivedwhenthereisnorighttodemandit,anditwasundulydeliveredthroughmistake,theobligationtoreturn it arises (Art. 2154, NCC).Appellecategoricallystatedthatthepaymentwasnotvoluntarily made, (a fact found also by the lower court),butontheerroneousbelief,thattheyweredue.Underthiscircumstance,theamountpaid,evenwithoutprotestisrecoverable.Ifthepayerwasindoubtwhetherthedebtwasdue,hemayrecoverifheprovesthatitwasnotdue(Art. 2156, NCC). Appellee had duly proved that taxes werenotlawfullydue.Thereis,therefore,nodoubtthattheprovisionsofsolutioindebiti,thenewCivilCode,applytothe admitted facts of the case.With all, appellant quoted Manresa as saying: x x x Dela misma opinion son el Sr. Sanchez Roman y el Sr. Galcon,et cual afirma que si la paga se hizo por error de derecho, niexisteelcuasicontratoniestaobligadoalarestitucionelquecobro,aunquenosedebieraloquesepago(Manresa,Tomo12,paginas611612).Thisopinion,however,hasalreadylostitspersuasiveness,inviewoftheprovisionsofthe Civil Code, recognizing error de derecho as a basis forthe quasicontract, of solutio indebiti.Payment by reason of a mistake in the contruction or applicationof a doubtful or difficult question of law may come within the scopeof the preceding article (Art. 21555).There is no gainsaying the fact that the payments made byappelleewasduetoamistakeintheconstructionofadoubtfulquestionoflaw.Thereasonunderlyingsimilarprovisions,asappliedtoillegaltaxation,intheUnitedStates, is expressed in the case of Newport v. Ringo, 37 Ky.635, 636; 10 S.W. 2, in the following manner:.It is too well settled in this state to need the citation of authoritythatifmoneybepaidthroughaclearmistakeoflaworfact,essentiallyaffectingtherightsoftheparties,andwhichinlaworconscience was not payable, and should not be retained by the partyreceivingit,itmayberecovered.Bothlawandsoundmoralitysodictate. Especially should this be the rule as to illegal taxation. Thetaxpayerhasnovoiceintheimpositionoftheburden.Hehastheright to presume that the taxing975VOL. 7, APRIL 30, 1963 975Gonzalo Puyat & Sons, Inc. vs. City of Manilapowerhasbeenlawfullyexercised.Heshouldnotberequiredtoknowmorethanthoseinauthorityoverhim,norshouldhesufferloss by complying with what he bona fide believes to be his duty asagoodcitizen.Uponthecontrary,heshouldbepromotedtoitsreadyperformancebyrefundingtohimanylegalexactionpaidbyhim in ignorance of its illegality; and, certainly, in such a case, if besubject to a penalty for nonpayment, his compliance under belief ofitslegality,andwithoutawaitingaresorttojudicialproceedingsshouldnotberegardedinlawassofarvoluntaryastoaffecthisright of recovery.Everypersonwhothroughanactorperformancebyanother,oranyothermeans,acquiresorcomesintopossession of something at the expense of the latter withoutjust or legal grounds, shall return the same to him(Art. 22,Civil Code). It would seems unedifying for the government,(here the City of Manila), that knowing it has no right at alltocollectortoreceivemoneyforallegedtaxespaidbymistake,itwouldbereluctanttoreturnthesame.Nooneshould enrich itself unjustly at the expense of another (Art.2125, Civil Code).Admittedly,plaintiffappelleepaidthetaxwithoutprotest.Equallyadmittedisthefactthatsection76oftheCharterofManilaprovidesthatNocourtshallentertainanysuitassailingthevalidityoftaxassessedunderthisarticle until the taxpayer shall have paid, under protest thetaxesassessedagainsthim,xx.Itshouldbenoted,however, that the article referred to in said section is ArticleXXI,entitledDepartmentofAssessmentandthesectionsthereunder manifestly show that said article and its sectionsrelatetoassessment,collectionandrecoveryofrealestatetaxes only. Said section 76, therefor, is not applicable to thecaseatbar,whichrelatestotherecoverofretaildealertaxes.In the opinion of the Secretary of Justice (Op. 90,Series of1957,inaquestionsimilartothecaseatbar,itwasheldthat the requirement of protest refers only to the payment oftaxes which are directly imposed by the charter itself, thatis,realestatetaxes,whichviewwassustainedbyjudicialandadministrativeprecedents,oneofwhichisthecaseofMedina, et al., v. City of Baguio, G.R. No. L4269, Aug. 29,1952. In other words, protest is not976976 SUPREME COURT REPORTS ANNOTATEDGonzalo Puyat & Sons, Inc. vs. City of Manilanecessaryfortherecoveryofretaildealerstaxes,likethepresent,becausetheyarenotdirectlyimposedbythecharter.IntheMedinacase,theCharterofBaguio(Chap.61,RevisedAdm.Code),providesthatnocourtshallentertainanysuitassailingthevalidityofataxassessedunderthischarteruntilthetaxpayershallhavepaid,under protest, the taxes assessed against him (sec.25474[b],Rev.Adm.Code),aprovisosimilartosection76oftheManilaCharter.Therefundofspecifictaxespaidunderavoid ordinance was ordered, although it did not appear thatpayment thereof was made under protest.In a recent case, We said: The appellants argue that thesum the refund of which is sought by the appellee, was notpaid under protest and hence is not refundable. Again, thetrial court correctly held that being unauthorized, it is not ataxassessedundertheCharteroftheAppellantCityofDavaoandforthatreason,noprotestisnecessaryforaclaimordemandforitsrefund(CitingtheMedinacase,supra;EastAsiaticCo.,Ltd.v.CityofDavao,G.R.No.L16253,Aug.21,1962).Lastly,beingacaseofsolutioindebiti, protest is not required as a condition sine quanonfor its application.Thenextissueindiscussionisthatofprescription.Appellantsmaintainthatarticle1146(NCC),whichprovidesforaperiodoffour(4)years(uponinjurytotherights of the plaintiff), apply to the case. On the other hand,appelleecontendsthatprovisionsofAct190(CodeofCiv.Procedure)shouldapply,insofaraspaymentsmadebeforethe effectivity of the New Civil Code on August 30, 1950, theperiod of which is ten (10) years, (Sec. 40,Act No. 190; Osoriov.TanJongko,51O.G.6211)andarticle1145(NCC),forpayments made after said effectivity, providing for a periodofsix(6)years(uponquasicontractslikesolutioindebiti).Even if the provisions of Act No. 190 should apply to thosepayments made before the effectivity of the new Civil Code,because prescription already running before the effectivityofthisCodeshallbegovernedbylawspreviouslyinforcexxx(art.1116,NCC),forpaymentsmadeaftersaideffectivity,providingforaperiodofsix(6)years(uponquasicontracts like solutio indebiti). Even if the provisionsof Act No. 190should apply to those payments made beforetheeffectivityofthenewCivilCode,becauseprescriptionalready running before the effectivity of this Code shall begovern by laws previously in force x x x (Art. 1116, NCC),StillpaymentsmadebeforeAugust30,1950arenolongerrecoverable in view of the977VOL. 7, APRIL 30, 1963 977Gonzalo Puyat & Sons, Inc. vs. City of Manilasecond paragraph of said article (1116), which provides: butifsincethetimethisCodetookeffecttheentireperiodhereinrequiredforprescriptionshouldelapsethepresentCode shall be applicable even though by the former laws alonger period might be required. Anent the payments madeafterAugust30,1950,itisobviousthattheactionhasprescribedwithrespecttothosemadebeforeOctober30,1950only,consideringthefactthattheprescriptionofactionisinterruptedxxxwhenisawrittenextrajudicialdemand x x x (Art. 1155, NCC), and the written demand inthe case at bar was made on October 30, 1956 (Stipulation ofFacts).MODIFIEDinthesensethatonlypaymentsmadeon or after October 30, 1950 should be refunded, the decisionappealed from is affirmed, in all other respects. No costs. . Bengzon,C.J.,BautistaAngelo,Labrador,Concepcion,Dizon, Regala and Makalintal, JJ., concur.Padilla, Reyes, J.B.L., and Barrera, JJ., took no part.Decision affirmed.Note.See Co Tuan v. City of Manila L12481, Aug. 31,1961,2SCRA1070andSantosLumber,etal,v.CityofCebu, et al., L14618, May 30, 1961, 2 SCRA 173._______________ Copyright 2015 Central Book Supply, Inc. All rights reserved.