Nazario & Sons v. Central Bank
REITERATIONFacts
The Antecedents: C. G. Nazario & Sons, Inc. (plaintiff-appellant) filed a complaint seeking to recover P17,287.53 from the Central Bank of the Philippines and Philippine National Bank. This amount represented the 17% special tax on foreign exchange sold to the plaintiff by the Philippine National Bank between May 10, 1951, and May 29, 1951, collected by virtue of Republic Act No. 601. Procedural History: The Central Bank filed a motion to dismiss, arguing lack of jurisdiction and prescription. It contended that the collected taxes, which had not been turned over to the National Treasurer by the expiration of Republic Act No. 601 on December 31, 1955, were paid to the Treasurer on June 26, 1956. Therefore, any action to recover should be against the National Treasurer, not the Central Bank, citing Salgado vs. Ramos. Regarding prescription, the Central Bank argued that the action should be filed within six years from accrual under Article 1145 of the Civil Code, as the collection was based on a mistake in the construction of Section 1 of Republic Act No. 601. The Petition: The plaintiff-appellant appealed the dismissal order, arguing that the cause of action accrued only upon this Court's decision in Philippine National Bank vs. Jose Zulueta (G.R. No. L-7271) on August 30, 1957, which clarified the interpretation of Republic Act No. 601, making the action filed within the prescriptive period. The lower court sustained the Central Bank's objections, dismissing the complaint on grounds of lack of jurisdiction and prescription.
Issue(s)
Whether the Court of First Instance has jurisdiction over the action. Whether the plaintiff's right of action to recover the tax collected is barred by the Statute of Limitations.
Ruling
The order of dismissal is affirmed.
Ratio Decidendi
On the issue of jurisdiction: The Court found that while the lower court sustained the objection on lack of jurisdiction because the funds were already turned over to the Philippine Government, this defect could be cured by amendment by including the National Treasurer as a party-defendant. However, the Court did not dwell on this issue as it found the other ground for dismissal to be decisive. On the issue of prescription: The Court held that the action to recover unlawfully collected taxes accrues from the date of collection, not from the date of a subsequent court decision clarifying the law. The error of the Monetary Board in the interpretation of Republic Act No. 601 did not change or extend the time of accrual of the action, as mistakes of officers in the collection of taxes cannot prejudice the Government. The Court reiterated that the period within which the action for refund should have been brought is fixed in Article 1145 of the Civil Code, which provides for a six-year period for actions upon a quasi-contract. Since the taxes were paid in 1951 and the action was brought in 1958, the action was clearly barred by prescription.
Main Doctrine
An action to recover unlawfully collected taxes accrues from the date of collection, and mistakes of officers in the collection of taxes cannot prejudice the Government. The prescriptive period for such actions is six years from accrual, as provided in Article 1145 of the Civil Code.