VICTORIAS MILLING CO., INC., PLAINTIFF AND APPELLEE, VS. CENTRAL BANK OF THE PHILIPPINES, DEFENDANT AND APPELLANT.

This is an appeal from a decision of the Court of First Instance of Manila
ordering the defendant-appellant Central Bank to refund to the plaintiff-appellee the sum of P194,058.62,
with 6% interest per annum from the date of filing of the complaint.

The parties to this suit do not dispute the facts. The appellee imported from abroad a number of bales of
Fiji cloth and
subsequently made sugar bags or containers out of them. For the transaction, it
secured from the appellant Bank the corresponding foreign exchange and for which
the Bank collected a 17% special excise tax on the authority of Section 1,
Republic Act No. 601, as originally enacted, which provided:

“SECTION I. Except as herein otherwise provided there shall be assessed,
collected and paid a special excise tax of seventeen per centum (17%) on the
value in the Philippine peso of foreign exchange sold and/or authorized to be
sold by the Central Bank of the Philippines or any of its agents during the
period of two years counted from the date of the approval of this
Act.”

Of the sugar bags made from the imported
Fiji cloth, some
were exported abroad as containers of sugar manufactured by the appellee during the periods recited in the complaint.
Accordingly, the appellee demanded from the appellant
Bank the refund of the excise tax corresponding to the sugar bags used for the
export, pursuant to the provision of Section 3 of the same Republic Act, to
wit:

“SECTION 3. The tax collected on foreign exchange
used for the payment of the cost, transportation and/or other charges incident
“to importation into the Philippines of articles or container9 used by the
importer himself in the manufacture or preparation of local products for
consignment or export abroad shall likewise be refunded upon satisfactory proof
under said rules and regulations that said imported articles or containers were
actually used in the manufacture or preparation of such local products, forming
part thereof, and that said local products have been actually
exported.”

The appellant does not deny that the bags for which the refund is demanded
were actually used and exports by the appellee.
Nevertheless, however, it rejects most of the claims for refund on the ground
that the appellee’s right to demand the same had
already prescribed. It insists that of the total claim “for P194.058.62, the
amount of P151,756.06 is no longer refundable by reason
of prescription.”

The principal issue to be resolved in this case is, therefore, the
prescriptive period for claims for refund under Section 3 of Republic Act No.
601 as originally enacted.^[1] The
defendant-appellant invokes this Court’s ruling in the case of Belman Cia Inc. vs. Central Bank,
G.R. No. L-15044, May 30,
1960 and the Resolution on the motion for reconsideration filed therefor, and maintains that the
prescriptive period is six years. On the other hand, plaintiff-appellee contends that the ruling
in the case cited is inapplicable to the present suit and that the prescriptive
period applicable is ten years.

The appellee is correct.

For a clear understanding of what We said in the
case of Belman vs. Central Bank, supra, on the
two occasions that it came for our consideration, We are reproducing hereunder
the points thereon germane to the controversy under review.

On May 30, 1960, in ,the main decision for that case, We said:

“Defendant’s collection of the Exchange Tax on April 20, 1951 and May 26, 1951, when plaintiff paid its obligations under
Credits Nos. 43729 and 41347 is erroneous and without any legal basis
because the plaintiff on these dates did not purchase any foreign exchange from
the Central Bank but merely liquidated its existing accounts under the Credits.
The sale of foreign exchange in the Present case took place at the moment when
the applications for Letters of Credit were approved and given due course, that
is, on May 29, 1950 and January 2, 1951, at which time, Republic Act No. 601
imposing a tax on the sate of Foreign Exchange was not, as yet, in existence.
(Underlying supplied.)

x x x x x
x x

“Defendant-appellant urges in this appeal that the lower court erred in not
dismissing plaintiff-appellee’s complaint on the
ground that it has prescribed.

“The contention is correct. It is to be noted that the excise tax law (Rep.
Act No. 601) contains no provision regarding the period within which a taxpayer
must bring his action to recover an excise tax erroneously or illegally
collected. Accordingly, Articles 18 and 1149 of the New Civil Code, should be applied in order to determine the said
period. x x x x .”
(Underlying supplied.)

And, on the basis of the provisions of the said Civil Code provisions, We ruled that the period of prescription was five years.

On July 14, 1960,
however, We modified the above holding in resolving the
motion for reconsideration filed therefor. So far as
relevant, We then said:

“Plaintiff-appellee has filed a motion for
reconsideration urging that his action was still timely because, it is argued,
the period of prescription applicable to the case is ten (10) years from date of
payment. To support this contention, Article 1144, paragraph (2) is cited, which
provides:

“Article 1145.—The following actions must be brought
within ten years from the time the right of action accrues:

‘(1) x x x;
‘(2) Upon
an obligation created by law;”

Since, it is claimed, the payment here was made by reason of a mistake in the
interpretation of Republic Act 601, the obligation to
return arises by virtue of Article 2155, in relation to Article 2154 of the New
Civil Code and is, therefore, one created by law.

“Movant-appellee is partly correct. However,
Articles 2154 and 2155 relied upon, specifically refer to obligations of the
nature of solutio inidebiti which are expressly classified as
quasi-contracts under Section 2, Chapter 1 of Title VII of the New Civil Code
Consequently, the law regarding prescription applicable to the action herein
involved is not Article 1144-(2) cited by movant, but
Article 1145(2) of the New Civil Code providing:

“Article 1145.—The following actions must be
commenced within six years:

(1) x x x;
(2) Upon a
quasi-contract.'”

That was how We arrived at the 6-year prescripts
period in the Belman case.

Clearly, then, what We ruled on in the Belman case
was not the prescriptive period applicable to Republic Act No. 601, but rather,
the prescriptive period for claims arising from an erroneous application of the
said law. Our ruling was that since the application of Republic Act No. 601 was
erroneous, the collection made thereunder was illegal,
and, pursuing the reasoning to its logical termination, since the collection was
illegal, the obligation to return or refund the same would be in the nature of
solutio indebiti, which* by the Civil Code, prescribes in 6
years.

The above observations, however, are not in point to the case at bar. For the
case on hand involves not an illegal collection, but on the contrary, a proper
and authorized collection. The plaintiff herein demands the refund not on the
principle and consequences of solution indebiti, but, on the authority of a positive provision
of law, Section 3, Republic Act No. 601. Doubtless, therefore, as the Central
Bank is truly obliged to make the refund, the obligation is a creation of law
and not of the rules on quasi contract. Consequently, reference must be made to
Article 1144 of the New Civil Code for the applicable prescriptive period. Under
this last mentioned Article, the period is ten years.

Upon the appellant’s own computation and on the basis of which it argued
prescription, the longest period that has elapsed in respect of the various
claims for refund by the plaintiff-appellee is 7
years, nine months and twelve days. Obviously, therefore, on our holding here
that the right under Section 3 prescribes in ten years, none of appellee’s claim for refund has prescribed.

Upon the appellant’s own computation, the prescriptive Periods that have
elapsed with respect to the several causes of action in this suit, based on the
date of payment of the foreign exchange and not from the date of exportation,
the following:

First cause of Action:

Item A–4 years, 3 months and 28 days
Item B–7 years, 4 months and 7 days

Second Cause of Action:

Item A–4 years, 8 months and 28 days
Item B–7 years, 3
months

Third Cause of Action:

Item A–4 years, 1 month and 27 days
Item B–7 years, 1 month and 28 days

Fourth cause of action:

Item A–7 years, 9 months and 12 days
Item B–7 years, 9 months and 12
days

Fifth cause of Action:

Item A–7 years and 15 days
Item B–7 years and 24 days

Sixth cause of action:

Item A—7 years and 14 days

Seventh cause of action:

Item A—7 years and 12 days
Item B—7 years and 15 days

Eight cause of action:

Item A—6 years, 7 months and 14 days

Ninth cause of action:

Item A—5 years, 2 months and 8 days

In connection with the foregoing, the Court notices that the
appellant Bank counted the prescriptive period from the date of payment or
collection to the date of the filing of the claim for refund. In this too, We cannot agree. Section 3 of the law under consideration
plainly authorizes refund only upon the exportation of the containers.
Therefore, the period must be counted from such exportation date as it is only
then that the right to refund accrues and prescription should be counted from
the time the right of action accrues.

If, therefore, the appellee’s right to refund could
not have been lost by prescription even if the same had been counted from the
date of payment of the foreign exchange, with more reason could it not have
expired if the period were counted from the date of exportation as We here rule.
For in all the instances material to this suit, the actual date of exportation were always subsequent to the date of
payment.

Finally, the appellant contends that the lower court should not have ordered
it to make the refund inasmuch as it has already turned over to the National
Treasurer the proceeds from the, tax collected. The appellant maintains that
after the collections have been turned over to the National Treasurer, it could
no longer be liable and the action for refund “should be brought against the
entity into whose hands the tax has been delivered.”

The last contention is barren of merit. We have already decided in the case
of Central Azucarera de Don Pedro vs. Central Bank,
104 Phil. 598 that suits under Section 3 of Republic Act No. 601 may be
instituted against the Central Bank alone without the necessity of bringing in
the National Treasurer since the latter is not an indispensable party.
Furthermore, Section 5 of the same Act, which provides:

“SEC. 5. The tax imposed under section one hereof
shall be paid to the Central Bank of the
Philippines by
the purchaser of the foreign exchange, and the Central Bank of the
Philippines
and/or its agents shall not sell any foreign exchange without the Payment of the
said tax. The refund of taxes pursuant to see-irons two and three of this Act
shall be made by the Central Hank of the
Philippines.
The monies collected shall accrue to the General Fund in the National Treasury.
(Underlying supplied.)

leaves no room whatsoever for argument on the point
raised by the appellant.

FOR ALL THE FOREGOING, judgment is hereby rendered affirming in full
the decision appealed from. The prescriptive period applicable to the case at
bar is ten years and tile Central Bank is hereby ordered to render the refund.
Costs against the appellant.

Bengzon, Bautista Angelo, Reyes, J.B.L.,
Barrera, Paredes, Dizon,
Makalintal, Bengzon J.P.
and Zaldivar, JJ.,
concur.

^[1] There were subsequent amendments to R.A. No.601 but they need not
be considered here because all the events and transactions involved in the
present suit occurred when R.A. No. 601 was the effective legislation.