G.R. No. 12182. March 27, 1918
VIUDA E HIJOS DE PEDRO P. ROXAS, PLAINTIFFS AND APPELLEES, VS. JAMES J. RAFFERTY, COLLECTOR OF INTERNAL REVENUE, EX OFFICIO CITY ASSESSOR AND COLLECTOR OF MANILA, DEFENDANT AND …
MALCOLM, J.:
the Roxas Building in the city of Manila for the year 1915.
FACTS.
Plaintiffs own a parcel of land located on the Escolta in the city of Manila.
In the latter part of 1913, the improvements on this land were demolished, and
the construction of a reinforced concrete building was begun. No taxes on the
improvements were levied or paid for the year 1914. Accepting the findings of
fact by the trial court, the Roxas Building in December, 1914, when the city
assessor and collector attempted to assess it for taxation, still lacked the
pavement of the entrances, the floors of some of the stores, the dividing
partitions between the stores, the dividing partitions between the greater part
of the rooms in the upper stories, sanitary installation, the elevators,
electrical installation, the roof of the building, the concrete covering and
towers of the elevator shaft, and the doors and windows of many rooms. It was
finished in all respects on February 15, 1915.
The city assessor and collector of Manila, under date of December 1, 1914,
sent plaintiffs notice, received by them on December 25, 1914, requiring them to
declare the new improvements for assessment for the year 1915. Prior to this, in
November, the city assessor and collector had had the building inspected and had
assessed the new improvements for taxation for 1915 at P300,000. On January 20,
1915, plaintiffs were notified of this assessment. Plaintiffs paid the amount of
the taxes, which amounted to P3,000, under protest, on June 30, 1915. Suit was
begun in the Court of First Instance of Manila to recover this sum with interest
at the legal rate from the date of payment. The court, the Honorable Simplicio
del Rosario, found with plaintiffs without express finding as to costs.
Defendant, by the city attorney of Manila, appealed, making five assignments of
error, which we combine for purposes of convenience into three issues.
LEGAL ISSUES.
1. Jurisdiction.—The first assignment of error, concerning the
jurisdiction of the lower court, presents a question of primary importance, for
obviously if the lower court had no right to take cognizance of this case, we
should not burden ourselves with the consideration of its merits. This question,
appellee emphasizes, is argued for the first time on appeal. In the trial court,
defendant appeared, demurred, and answered without assailing jurisdiction.
However, as jurisdiction is the power of a court to act at all, we should even
now resolve the question. Objection for want of jurisdiction may be raised for
the first time on appeal.
The local law, as elsewhere, provides an administrative procedure for the
assessment of realty. An assessor to fix the value of the property in the first
instance, and a board of tax appeals to review the action of the assessor in the
second instance are constituted. Proceedings before this board are
quasi-judicial in nature. To it the citizen must apply for relief against
excessive and irregular taxation. Here must the aggrieved party go for the
correction of errors in assessments. Administrative remedies must be exhausted
before resort can be had to the courts. It is a condition precedent to the
exercise of the taxpayer’s right of action in a court of justice that previous
and timely effort shall have been made on his part to have the board of tax
appeals correct an alleged error while the matter was yet in their hands and
under their control. Even when the courts assume jurisdiction, they will not
presume to interfere with the intelligent exercise of the judgment of men
specially trained in appraising property. ( See Stanley vs.
Supervisors of Albany [1887], 121 U. S., 535.)
This is hardly our case. We do not have before us merely a dispute as to an
excessive or unequal assessment. The assessment is claimed to be wholly void.
The contention is that the assessor has attempted to levy a tax upon property,
which is by law exempt, and that in this attempt the assessor has violated the
provisions of law which exist for the protection of the taxpayer. Not the
correctness of the assessment, but the legality of the assessment is involved.
The rule of taxation is that where the tax is illegal, the taxpayer may bring an
action directly in the courts to recover back the tax. (Roman Catholic Church
vs. Hastings and City of Manila [1906], 5 Phil, 701, citing 2 Cooley on
Taxation, 3d ed., p. 1382, and Stanley vs. Supervisors of Albany,
supra.) This Court has taken cognizance of questions concerning
assessments of and improvements on realty in a number of cases. (See
Fernandez vs. Shearer [1911], 19 Phil., 75; Ayala de Roxas vs.
City of Manila [1914], 27 Phil., 336; Young Men’s Christian Association of
Manila vs. Collector of Internal Revenue [1916], 33 Phil. Rep.,
217.)
The distinction is between a void and an erroneous tax. The first identifies
the existing situation and gives jurisdiction to the courts.
The situation in its simplest terms may be described as follows: The citizen
is forced to pay the alleged tax. As will hereafter appear, he had no
appropriate opportunity to present his grievance to the board of tax appeals. He
did all that was required by protesting at the time of paying the tax. The
citizen can therefore in turn be permitted to bring suit to recover the amount
which he claims was unlawfully collected. Appeal to the board of tax appeals is
not a necessary prerequisite. Nor is the decision of the assessor as to the
right to tax property of such a judicial or discretionary character as to be
free from collateral attack. When the state (here the city of Manila) makes the
assessment, and when the citizen pays the tax under protest, the state and the
citizen stand on reasonably equal terms. The power of the state and the remedy
of the citizen are and should be reciprocal. It is for the courts to arbitrate
the controversy between the state and the citizen.
The Court of First Instance of the city of Manila had jurisdiction over this
suit and the Supreme Court of the Philippine Islands now possesses similar
appellate jurisdiction.
2. Legality of assessment.—The second, third, and fourth assignments
of error concern the point of when an improvement can be said to be completed
within the meaning of the Manila Charter. We feel it unnecessary to decide this
question for even more basic in aspect is the point raised by the fifth
assignment of error concerning the legality of the assessment, particularly as
relating to notification. The exact situation can be more vividly pictured by
quoting the provisions of the law and then applying these provisions to the
facts.
The Manila Charter provides: “It shall be the duty of each person who at any
time acquires real estate in the city, and of any person who constructs or adds
to any improvement on real estate owned by him within the city, to prepare and
present to the city assessor and collector, within a period of sixty days
next succeeding the completion of such acquisition, construction
or addition, a sworn declaration setting forth the value of the real estate
acquired or the improvement constructed or addition made by him and containing a
description of such property sufficient to enable the city assessor and
collector readily to identify the same. * * *” (Section 2484, Administrative
Code of 1917.) Plaintiffs were under obligation to present a declaration of
their improvements within sixty days succeeding completion, i.e. on or before
April 15, 1915. Under an attempted assessment in November and December, 1914,
the plaintiffs had and could have had no opportunity to comply with the law.
The Charter continues:1 “The city assessor and collector shall, during the
first fifteen days of December of each year, add to his list of taxable real
estate in the city the value of the improvements placed upon such property
during the preceding year, and any property which is taxable and which has
theretofore escaped taxation. * * *” (Sec. 2487, Administrative Code of 1917.)
Between December 1 and December 15, 1915, the city assessor and
collector was under the obligation of adding the improvements on the Roxas
property to the assessment list. Between December 1 and December 15,
1914, the city assessor and collector could not prematurely and by
anticipation perform this duty on improvements not yet completed. There may be
doubt as to the exact meaning which should be given to the words “during the
preceding year.” The common sense construction would be that the phrase includes
December of the previous year and the current year up to December. The city
assessor and collector perforce could not in 1914 levy a tax on incomplete
improvements made during the current year, when the statute only authorized him
to make such levy upon completed improvements made during the year.
The Charter continues: “He (the city assessor and collector) shall give
notice by publication for ten days prior to December first in two newspapers of
general circulation published in the city, one printed in English and one in
Spanish, that he will be present in his office for that purpose on said days,
and he shall further notify in writing each person the amount of whose tax will
be changed by such action or such proposed change, by delivering or mailing such
notification to such person or his authorized agent at the last known address of
such owner or agent in the Philippine Islands some time in the month of
November.” (Sec. 2487, Administrative Code of 1917.) And finally the
Charter provides that, “No court shall entertain any suit assailing the validity
of a tax assessed under this article until the taxpayer shall have paid, under
protest, the taxes assessed against him, nor shall any court declare any tax
invalid by reason of irregularities or informalities in the proceedings of the
officers charged with the assessment or collection of the taxes, or of a failure
to perform their duties within the times herein specified for their performance,
unless such irregularities, informalities, or failures shall have impaired the
substantial rights of the taxpayer; nor shall any court declare any tax assessed
under the provisions of this article invalid except upon condition that the
taxpayer shall pay the just amount of his tax as determined by the court in the
pending proceeding.” (Sec. 2504, Administrative Code of 1917.) It is a general
rule that those provisions of a statute relating to the assessment of taxes,
which are intended for the security of the citizen, or to insure the equality of
taxation, or for certainty as to the nature and amount of each person’s tax, are
mandatory; but those designed merely for the information or direction of
officers or to secure methodical and systematic modes of proceedings are merely
directory. In the language of the United States Supreme Court, “When the
regulations prescribed are intended for the protection of the citizen and to
prevent a sacrifice of his property, and by a disregard of which his right might
be, and generally would be, injuriously affected, they are not directory but
mandatory.” (French vs. Edwards [1871], 13 Wall, 506.) Sometimes
statutes requiring the assessor to notify the taxpayer have been held merely
directory. But in the majority of jurisdictions this requirement is held to be
mandatory, so that the assessor cannot make a valid assessment unless he has
given proper notice. (37 Cyc, pp. 988, 991, citing cases.) Applied to our facts,
the assessor should have notified the plaintiffs during November, 1915. His
attempted notification on December 25, 1914, was not given during the time fixed
by statute and was no more than a reminder to plaintiffs to present a sworn
declaration of the value of the new improvements on their property. In this
instance there was no such substantial compliance with the law as amounts to due
process of law.
There was no legal assessment of the Roxas Building for the year 1915.
3. Interest.—To narrow our discussion and to avoid misunderstanding,
let us set down a few principles which every one knows. The United States of
America, a State of the American Union, and the Government of the Philippine
Islands cannot be sued without their consent. Whether interest could be adjudged
to a taxpayer against any of these entities, is beside our question. But what is
of moment is that the city of Manila is not sovereign but is a public
corporation with certain delegated powers, including that of suing and being
sued.
Turning to the American authorities, which are controlling, we find the
following: The basic case is Erskine vs. Van Arsdale ([1872], 15 Wall., 68-75).
Suit was brought against a collecting officer to recover back certain taxes
claimed to be exempt under a Federal statute. Interest was added to the judgment
for the plaintiff. The United States Supreme Court, through the Chief Justice,
said that, “Where an illegal tax has been collected, the citizen who has paid
it, and has been obliged to bring suit against the collector, is, we think,
entitled to interest in the event of recovery, from the time of the illegal
exaction.” This case should not be confused with the others which hold that the
United States cannot be subjected to the payment of interest unless there be an
authorized engagement to pay it or a statute permitting its recovery. (Angarica
vs. Bayard [1888] 127 U. S., 251; United States vs. State of
North Carolina [1890], 136 U. S., 211; National Home for Disabled Volunteer
Soldiers vs. Parrish [1912], 229 U. S., 494.) The distinction appears
to be between suits to recover moneys illegally exacted as taxes and paid under
protest, brought against collectors, although the judgment is not to be paid by
the collector but directly from the Treasury, and suits against the United
States. A late decision of the United States Supreme Court (National Home for
Disabled Volunteer Soldiers vs. Parrish, supra), which reviews
the previous cases, held that the National Home for Disabled Volunteer Soldiers
was not exempt from the payment of interest on a judgment for the recovery of
taxes. The court said that the exemption in favor of the United States “has
never as yet been applied to subordinate governmental agencies.”
Some States hold that a municipal corporation is not liable for interest
unless so required by special contract or by statute. In other States, however,
it is held that notwithstanding a municipal corporation has delegated to it
certain powers of government, it is to be regarded as a private person with
respect to its contracts, which are to be considered in the same manner and with
a like effect as those of natural persons. (See 15 R. C. L., 18.) Even
where the stricter rule is observed, as in Illinois, it is nevertheless settled
that a municipal corporation which wrongfully exacts money and holds the same
without just claim or right is liable for interest thereon. (City of Chicago
vs. N. W. Mutual Ins. Co. [1905], 218 111., 40. See also In re
O’Berry [1904], 179 N. Y., 285.) Laches on the part of the plaintiff would, of
course, defeat the right to recover interest. (Redfield vs. Ystefera
Iron Co. [1884], 110 U. S., 174.)
The city of Manila, a public corporation, even in the absence of statute, is
liable to pay interest at the legal rate, from the date of exaction, on the
amount of taxes illegally collected.
CONCLUSION.
In conclusion, as an authority which is on all fours with the prominent
issues before us, we invite attention to the decision of a United States Circuit
Court, in Powder River Cattle Co. vs. Board of Commissioners of Custer
County ([1891], 45 Fed., 323). The Revised Statutes of Montana provided that the
assessor shall demand of each taxpayer in the district a list of his personal
property and on his refusing to give it, the assessor shall. list his properly
on information and belief. The assessor listed the property of the defendant
without demanding1 a list from the taxpayer. The court held that the taxpayer
may recover the illegal taxes paid under compulsion and is not required to apply
to the board of equalization for an abatement. The court, finally, adjudged
legal interest on the sum illegally exacted from the date collection was
made.
We think the court below took the correct view of the case, and, while
resolving the appeal on somewhat different grounds, believe that the judgment
should stand. Accordingly, the judgment is affirmed, without special finding as
to costs. So ordered.
Arellano, C. J., Torres, Carson, Araullo, Street, and Avanceña,
JJ., concur.