THE CITY OF MANILA, PLAINTIFF AND APPELLANT, VS. ASUNCION MITCHEL, VDA. DE SY QUIA, AND MANILA RAILROAD CO., DEFENDANTS AND APPELLEES.

Two fundamental questions raised in the demurrers to the
complaint are at issue in this appeal, to wit: The sufficiency of the
allegations of the complaint, and the inclusion of the Manila Railroad Company
as defendant.

Considering the defendants, Asuncion Mitchel Vda. de Sy Quia,
as administratrix of the estate of Pedro Sy Quia, and the Manila Railroad
Company, to be jointly and severally liable, the City of Manila demanded of them
the payment of the land tax upon property belonging to the estate located at No.
973-985 Calle Azcarraga, known as lot 1, block No. 14, District of Tondo, for
the year 1927, which, together with the penalties amounted to P3,053.47.

It appears from the complaint that in February 1927, the Manila
Railroad Company acquired said real property by expropriation proceeding. In the
face of this fact, the defendant administratrix does not believe herself bound
to pay the tax demanded by the plaintiff, because she alleges that at the time
the ownership of the property of said estate passed to the Manila Railroad
Company, said tax was as yet neither due nor payable, but was to become payable
some five months later, that is on June 30th, as provided by section 2493 of the
Administrative Code.

The Manila Railroad Company in turn argues that the obligation
that would at all events fall upon it would be the one arising from a real
action against the property itself and not the personal obligation to pay the
tax as demanded in the complaint, because it would be bound, in due time, only
by the preferential lien on the realty pursuant to the provisions of section
2497 of the same Code. For this reason it maintains that the complaint does not
allege facts sufficient to constitute this personal action brought against it.

It further alleges that it should be excluded from the
complaint because as its only obligation was to secure the payment of the tax
with the lien in case the taxpayer failed to do so, and as the complaint does
not allege that the latter is insolvent and cannot pay it, its inclusion as
defendant is improper and premature.

Being of opinion that the tax in question was not yet payable
at the date when the realty passed from the ownership of the defendant estate to
that of the Manila Railroad Company, and as said estate no longer owned the
realty when the tax became demandable, the trial court held that said estate was
not bound to pay the tax; neither was the new owner, the Manila Railroad
Company, called upon to pay it, being exempted therefrom by Act No. 1510. Upon
these grounds the lower court found merit in the demurrers and dismissed the
complaint.

However, the City of Manila has the right to bring this action
against both Pedro Sy Quia’s estate and the Manila Railroad Company.

The former was properly made party defendant, because although
the law grants an option to pay the land tax in two installments, this does not
prevent the tax from existing from the first day of the year; and thus it is,
that from said first day of the year; the realty is subject to the lien, the
preferential incumbrance, in favor of the State, as conclusively provided in
section 2497 of the Administrative Code.

Notwithstanding the fact that the law (2493 of the same Code)
gives the taxpayer the benefit of the installments, the State is not thereby
deprived of its right to receive the tax from the first day of year, should the
taxpayer pay it. What the State relinquishes in granting such periods, is solely
the right to enforce the payment while the periods still run.

For this reason whenever, as in the present case, the realty
subject to the tax changes ownership after the year has begun but before the
periods allowed by law for its payment have elapsed, the personal responsibility
for the tax remains in him who was the owner at the beginning of the year; and
while it is true that before such periods lapse no penalty is imposed for
failure to pay the tax, it is not so when the periods lapse, for then not only
the tax but also the penalty is demandable, not from the owner of the property
at the expiration of the term, but from the owner of the property at the
beginning of the year, inasmuch as it was from that time incumbent upon the
owner to answer for the tax.

In that case the lien, the preferential incumbrance, in favor
of the State remains on the property in spite of the transfer. It is thus
provided in section 2497 of the Administrative Code cited above. And this is the
ground of the action here brought against the Manila Railroad Company. Said
company is here made defendant as the owner and possessor of the property thus
subject to the lien in favor of the Treasury in order to submit and deliver said
property to the enforcement of the lien, should the defendant estate fail to
satisfy the tax due and the penalties. For this reason its inclusion as
defendant is not improper or premature. However, the Manila Railroad Company
does not answer for the personal obligation to pay such tax and penalties, not
because the law in general exempts it, since we are here concerned with taxes
corresponding to a year in which the property was still subject to taxation, but
because it does not appear that said company assumed the obligation to pay it.

This fact, however, does not appear from the allegations of the
complaint, in accordance with which, for the reasons stated, an action lies
against both defendants.

The appealed order is reversed, the demurrers overruled and it
is hereby ordered that the record be remanded to the court of origin in order
that the defendants may answer the complaint within the legal period, and let
the case proceed to its termination. Without costs. So ordered.

Avanceña, C. J., Johnson, Street, and Ostrand, JJ., concur.

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DISSENTING

MALCOLM, J., WITH WHOM CONCURS VILLA-REAL, J.:

In contrast to section 364 of the Revised Administrative Code
which is of general application, section 2493 of the Manila Charter provides as
to the annual tax and penalties that “All taxes shall be due and payable on or
before the thirtieth day of June of each year, and if any taxpayer shall fail to
pay the taxes assessed against him on or before the thirtieth day of June of the
year for which such taxes are due, he shall be delinquent in such payment * *
*.” Section 2497 of the City Charter further provides that “Taxes and penalties
assessed against realty shall constitute a lien thereon, which shall be superior
to all other liens, mortgages, or incumbrances of any kind whatsoever; shall be
enforceable against the property whether in the possession of the delinquent or
any subsequent owner, and can only be removed by the payment of the tax and
penalty. A lien upon real estate for taxes levied for each year shall attach on
the first day of January of such year.” Accordingly, applying the law directly
to the admitted facts, the lien attached to the property of Asuncion Mitchel
Vda. de Sy Quia on January 1, 1927. However, the land passed out of her
possession by transfer to the Manila Railroad Company in February, 1927.
Consequently, Mrs. Sy Quia was not a “delinquent,” within the meaning of the
law, because on June 30, 1927, when the taxes became due and payable she was not
a taxpayer. As to the “subsequent owner,” within the meaning of the law, the
Manila Railroad Company was not a taxpayer on June 30, 1927, because its
charter, Act No. 1510, exempted it from all municipal taxes.

There are points which cannot be reasoned away, and so I think
that the order of Judge Opisso sustaining the demurrer should be sustained.

Order reversed, demurrers overruled and case remanded with
instructions.