C. G. NAZARIO & SONS, INC., PLAINTIFF AND APPELLANT, VS. CENTRAL BANK OF THE PHILIPPINES AND PHILIPPINE NATIONAL BANK, DEFENDANTS AND APPELLEES.

Appeal from an order of the Court of First Instance of Manila, Hon. Froilan
Bayona, presiding, dismissing the complaint.

The complaint was filed by C. G. Nazario & Sons, Inc., on December 8,
1958, and seeks to recover from the Central Bank and the Philippine National
Bank the sum of P17,287.53, representing the 17 fo special tax on foreign
exchange sold to plaintiff by the Philippine National Bank between May 10, 1951
and May 29, 1951. Said tax was collected by virtue of the provisions of Republic
Act No. 601, which took effect on March 28, 1951.

Upon being summoned the Central Bank filed a motion to dismiss on the ground
that the court lacks jurisdiction to entertain the case and that the right of
action was already barred by the Statute of Limitations. It is shown in the
motion that upon the expiration of Republic Act No. 601, as amended, on December
31, 1955, the said special excise tax of 17% collected by the Central Bank which
had not yet been turned over or paid to the National Treasurer, were turned over
or paid to the Treasurer of the Philippines on June 20, 1956. This claim is
supported by official receipts (Annex 6 and Annex 7, Central Bank). Under these
facts defendant argues that pursuant to the case of Salgado vs. Ramos, 64
Phil., 726, the action to recover the tax in question should be against the
National Treasurer and not against the Central Bank.

In support of the defense of prescription, the Central Bank alleged that as
the taxes were collected by reason of a mistake of the Monetary Board in the
construction of Section 1 of Republic Act No. 601, the action for the return of
the amount (as improperly collected) is six years from the accrual of the cause
of action as provided in Article 1145 of the Civil Code of the Philippines.

In reply to the claim that the court lacks jurisdiction to entertain the
action, for the reason that the money sought to be collected has already been
turned over to the National Treasurer defendant argues that at most the defect
is not lack of jurisdiction but merely non-joinder of the National Treasurer,
which non-joinder may be cured by amendment. As to the defense of prescription,
defendant argued that as the payment was made by virtue of a mistake in the
construction of a doubtful or difficult question of law as defined in Article
2155 of the Civil Code of the Philippines, the cause oil action accrued only
when on August 30, 1957, this Court decided the case of Philippine National Bank
vs. Jose C. Zulueta, 101 Phil., 1071, wherein it was held that an
obligation, which was incurred before the creation of the 17% excise tax under
Republic Act No. 601, is not subject to tax for the reason that its imposition
on an existing obligation would have the effect of impairing the obligation of
contracts.

The court below sustained the objections of the defendant Central Bank and
dismissed the complaint. It is against this order of dismissal that the present
appeal was taken.

The court below sustained the objection that the court laeks jurisdiction
over the action because the funds sought to be refunded have already .been
turned over to the Philippine Government; it held that the action should have
been brought not Against the Central Bank and the Philippine National Bank. The
defense of prescription was also sustained, the court holding that the action
had lapsed because the law applicable is Article 1149 of the Civil Code, which
fixes the period in cases where the laws or the Code have not fixed a period.
Both resolutions of the court below are subject of this appeal.

The defense of prescription is the more important issue to be resolved, as
the other issue could be avoided by including the National Treasurer as a
principal party-defendant in the action. On this issue appellant argues that
Republic Act No. 601, which imposed the 17% foreign exchange tax, was
erroneously interpreted by the Monetary Board; that said act is indeed so
difficult of interpretation that is application could not be definitely
understood until the decision of the Court in the case of Philippine National
Bank vs. Zulueta; that plaintiff’s cause of action accrued only upon the
promulgation of said decision around August, 1957, so that the presentation was
actually filed within one year and four months from date of its accrual. We
cannot subscribe to the above theory. If the tax is unlawfully collected, the
action to recover the same should accrue from the date of collection. (Article
1150, Civil Code.) The error of the Monetary Board in the interpretation of the
law may not change or extend the time of the accrual of the action. Mistakes of
officers in the collection of taxes cannot prejudice the Government.

The period within which the action for refund should have been brought is
that fixed in Article 1145 of the Civil Code, which provides:

“The following actions must be commenced within six years:

(1) *     *     *;
(2) Upon a quasi-contract.” (Belman Compania
Incorporada vs. Central Bank of the Philippines, 108 Phil.,
478).

As the tax was paid in the year 1951 and the action brought in 1958, the
action is clearly barred.

In view of our resolution on the question of prescription, it is unnecessary
to consider the other issue.

The order of dismissal is hereby affirmed, with costs against
plaintiff-appellant.

Bengzon, C.J., Padilla, Bautista Angelo, Concepcion,
Reyes, J.B.L., Barrera, Paredes, and Dizon, JJ., concur.