JOSE DE BORJA, PETITIONER AND APPELLEE, VS. VICENTE G. GELLA, ET AL., RESPONDENTS AND APPELLANTS.

Jose de Borja has been delinquent in the payment of
his real estate taxes since 1958 for properties located in
the City of Manila and Pasay City and has offered to pay
them with two negotiable certificates of indebtedness Nos.
3064 and 3065 in the amounts of P793.40 and P717.39,
aforesaid negotiable certificates, the applicants for backpay
rights covered by them being respectively Rafael Vizcaya
and Pablo Batario Luna.

The offers to pay real estate taxes in question were
rejected by the city treasurers of both Manila and Pasay

cities on the ground of their limited negotiability under
Section 2, Republic Act No. 304, as amended by Republic ;
Act 800, and in the case of the city treasurer of Manila on
the further ground that he was ordered not to accept them
by the city mayor, for which reason Borja was prompted
to bring the question to the Treasurer of the Philippines
who opined, among others, that the negotiable certificates
cannot be accepted as payment of real estate taxes inasmuch
as the law provides for their acceptance from their backpay holder only or the original applicant himself, but not
his assignee. In his letter of April 29, 1960 to the Treasurer of the Philippines, however, Borja entertained hope
that the certificates would be accepted for payment in
view of the fact that they were already long past due and
redeemable, but his hope was frustrated. So on June, 30,
1960, Borja filed an action against the treasurers of both
the City of Manila and Pasay City, as well as the Treasurer of the Philippines, to compel them to execute an act
which the law allegedly requires them to perform, to wit:
to accept the above-mentioned certificates of indebtedness
considering that they were already due and redeemable so
as not to deprive him illegally of his privilege to pay his
obligation to the government thru such means

Respondents in due time filed their answer setting up ,
the reasons for their refusal to accept the certificates, and
after the requisite trial was held, the court a quo rendered t
judgment the dispositive part of which reads:

“Wherefore, the treasurers of the City of Manila and Pasay City,
their agents and other persons acting in their behalf are hereby
enjoned from including petitioner’s properties in the payment of
real estate taxes, and to sell them at public auction, and respondent
Treasurer of the Philippines, and the treasurers of the City of
Manila and Pasay City are hereby ordered to accept petitioners
Negotiable Certificates of Indebtedness Nos. 3064 and 3065 in the
sums of P793.40 and P717.39 in payment of real estate taxes of his
properties in the City of Manila and Pasay City, respectively, without cost.”

Respondents took this appeal on purely questions of law.

Reduced to bare essentials, the 12 errors assigned by
appellants may be boiled down to the following: (a) has
appellee the right to apply to the payment of his real
estate taxes to the governments of Manila and Pasay cities
the certificates of indebtedness he holds while appellants
have the correlative legal duty to accept the certificates in
payment of said taxes?; (b)
can compensation be invoked to extinguish appellee’s estate tax
liability between the latter’s obligation and the credit represented by
said certificates of indebtedness?

Anent the first issue, the pertinent legal provision to be
reckoned with is Section 2 of Republic Act No. 304, as
amended by Republic Act No. 800, which in part reads:

“Sec. 2. The Treasurer of the Philippines shall, upon application,
and within one year from the approval of this Act, and under such
rules and regulations as may be promulgated by the Secretary of
Finance, acknowledge and file requests for the recognition of the
right to the salaries and wages as provided in section one, hereof,
and notice of such acknowledgment shall be issued to the applicant
which shall state the total amount of such salaries or wages due to
the applicant, and certify that it shall be redeemed by the Government of the Philippines within ten years from the date of their
issuance unthout interest: Provided,
That upon application * * * , a certificate of indebtedness may be
issued by the Treasurer of the Philippines covering the whole or part
of the total salaries or wages the right to which has been duly
acknowledged and recognized, provided that the face value of such
certificate of indebtedness shall not . exceed the amount that the
applicant may need for the payment of (1) obligations subsisting at the
time of the approval of this Act ‘ for which the applicant may directly
be liable to the Government or , to any of its branches or
instrumentalities, or the corporations owned or controlled by the
Government, or to any citizen of the Philippines, who may be willing to
accept the same for such settlement; (2) his taxes; * * * And Provided, also, That any person who is not
an alien, bank or other financial institution at least sixty per centum
of whose capital is owned by Filipinos may, notwithstanding any
provision of its charter, articles of incorporation, by-laws, or rules
and regulations to the contrary, accept or discount at not more than
three and one-half per centum per annum for ten years a negotiable

certificate of indebtedness which shall be issued by the treasurer of
the Philippines upon application by a holder of a backpay acknowledgment.

To begin with, it cannot be contended that appellants
are in duty bound to accept the negotiable certificates of
indebtedness held by appellee in payment of his real estate
taxes for the simple reason that they were not obligations
subsisting at the time of the approval of Republic Act No.
304 which took effect on June 18,1948. It should be noted
that the real estate taxes in question have reference to
those due in 1958 and subsequent years. The law is
explicit that in order that a certificate may be used in payment of an obligation the same must be subsisting at the
time of its approval even if we hold that a tax partakes of
this character. Neither can it be contended that appellee
can compel the government to accept the alleged certificates
of indebtedness in payment of his real estate taxes under
proviso No. 2 above quoted also for the reason that in order
that such payment may be allowed the tax must be owed
by the applicant himself.
This is the correct implication that may be drawn from the use by the
law of the word “his taxes”. Verily, the right to use the backpay
certificate in settlement of taxes is given only to an applicant and
not to any holder of any negotiable certificate to whom the law only
gives the right to have it discounted by a Filipino citizen or
corporation under certain limitations. Here appellee is not himself the
applicant of the certificate h in question. He is merely an assignee
thereof, or a subsequent holder whose right is at most to have it
discounted upon maturity or to negotiate it in the meantime. A fortiori it may be concluded that, not having the right to
use said certificates to pay his taxes, appellee cannot compel appellants to accept them as he requests in the present
petition for mandamus. As a consequence, we can not but
hold that mandamus does not lie against appellants because they have in no way neglected to perform an act
enjoined upon them by law as a duty, nor have they unlawfully excluded appellee from the use or enjoyment of
a right to which he is entitled.^[1]

We are aware of the cases^[2] cited by the court a quo
wherein the government banking institutions were ordered to accept the
backpay certificates of petitioners in payment of their indebtedness to
them, but they are not here in point because in the cases mentioned the
petitioners were applicants and original holders of the corresponding
back- pay certificates. Here appellee is not. With regard to the second
issue, i.e. whether compensation can be invoked insofar as the two
obligations are concerned, Articles 1278 and 1279 of the new Civil Code
provide:

“Art. 1278. Compensation shall take place when two persons, in
their own right, are creditors and debtors of each other.

“Art. 1279. In order that compensation may be proper, it is necessary:

(1) That each one of the obligors be bound principally, and that
he be at the same time a principal creditor of the other;

(2) That both debts consist in a sum of money, or if the things
due are consummable, they be of the same kind, and also of the same
quality if the latter has been stated;

(3) That the two debts be due;

(4) That they be liquidated and demandable;

(5) That over neither of them there be any retention or controversy, commenced by third persons and communicated in due time
to the debtor.”

It is clear from the above legal provisions that
compensation cannot be effected with regard to the two obligations in
question. In the first place, the debtor insofar as the certificates of
indebtedness are concerned is the Republic of the Philippines, whereas
the real estate taxes owed by appellee are due to the City of Manila
and Pasay City, each one of which having a distinct and separate
personality from our Republic. With regard to the Certificates, the
creditor is the appellee while the debtor is the Republic of the
Philippines. And with regard to the taxes, the creditors are the City
of Manila and Pasay City while the debtor is the appellee. It appears,
therefore, that each one of the obligors concerning the two
obligations is not at the same time the principal creditor of the
other. It cannot also be said for certain that certificates are already
due. Although on their faces the certificates issued to appellee state
that they are redeemable on June 18,1958, yet the law does not say that
they are redeemable from its approval on June 18, 1958 but “within ten
years from the date of issuance” of the certificates. There is no
certainty, therefore, when the certificate are really redeemable with
in the meaning of the law. Since the requisites for the accomplishment
of legal compensation cannot be fulfilled, the latter cannot take place
with regard to the two obligations as found by the court a quo.

Wherefore, the decision appealed from is reversed. The
petition for mandamus is dismissed. The injunction issued
against respondents-appellants is hereby lifted.
No costs.

Padilla, Labrador, Concepcion,, Reyes, J.B.L., Barrera,
Paredes, Dizon, Regala, and Makalintal, JJ., concur.

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^[1] Section 3, Rule 67, Rules of Court; Mendoza vs. E. C. McCullough & Co., 29 Phil. 465; Olsen & Co. Herstein, et. al., 32 Phil. 520.

^[2] Florentino vs. PNB, 42 O.G. 2522; Sabalino vs. RFC, G.R. L-11790, September 30, 1958.