CArMEN AYALA DE ROXAS, PLAINTIFF AND APPELLANT, VS. THE CITY OF MANILA, DEFENDANT AND APPELLEE.

Doña Carmen Ayala de Roxas, the
plaintiff in this case, was in 1901, 1902, and 1903, and has since been, the
owner of certain property on the Escolta numbered 98-104, which was and is known
and designated on the books and tax-roll of the city of Manila as lot 3, block
35, district of Binondo. This property was assessed for taxation by the
officials of the city of Manila for the years 1901 and 1902 as follows:

Land…………………………………………………………..
P205,407.00
Improvements……………………………………………..….
30,000.00

Total
……………………………………………………………
235,407.00

The taxes levied during these two years pursuant to the assessment were duly
paid by the plaintiff.

On the 8th of January, 1903, the Philippine Commission passed an Act, No.
581, for the purpose, expressed in the title, of creating a board of tax
revision to revise the assessments of real estate and improvements in the city
of Manila. The board therein created, in the performance of the duty laid upon
it by said Act, reassessed the plaintiff’s property on April 4, 1903, fixing the
value thereof at P120,534 for the land and P50,000 for the improvements, in all
P170,534.

In February, 1903, plaintiff commenced the reconstruction of
the improvements on said land at a cost of P25,000, and on April 4, 1903, when
the commission appointed in pursuance of Act No. 581 made the reassessment of
plaintiff’s property, the latter was then in the act of reconstructing,
altering: and making additions to the improvements on said land.

On November 3, 1903, Act No. 975 was passed authorizing and requiring the
Municipal Board “in all cases in which land assessed for taxation in
the city of Manila for the years 1901 and 1902 was assessed at more than fifty
per centum above the assessment” for 1903, as fixed by the board of tax
revision, to reduce the assessments for 1901 and 1902 to the amount fixed in the
assessment for 1903, This Act then went on to provide:

“SEC. 2. In all cases in which the money has been paid upon the excessive
assessment as described in section one, either for one or two years, the city
tax assessor and collector shall allow the amount of such excess payment to be
applied upon the taxes due for nineteen hundred and three, or some subsequent
year.”

It is alleged in the amended complaint, admitted by the defendant, and found
as a fact by the court that on December 10, 1903, the plaintiff made inquiry as
to the amount of the 1903 taxes upon the premises in question; that she was
informed by the city assessor and collector that the tax for that year was
P2,558.02, but that she was entitled to a refund under Act No. 975 of P2,121.80
arising from the excessive assessments of 1901 and 1902, which assessments had
been revised and reduced as aforesaid by the tax revision commission appointed
under Act No. 581. The plaintiff thereupon paid the difference between P2,558.02
and P2,121.80, or P436.22, taking a receipt in full for the sum of P2,558.02,
the taxes for 1903.

The refund under the statute was made by the city
assessor and collector in pursuance of a resolution of the Municipal Board of
the city of Manila passed on December 8, 1903, as follows:

“Whereas the city assessor and collector has submitted a statement showing
all cases in which land assessed for taxation in the city of Manila for the
years 1901 and 1902, was assessed at more than 50 per cent above the assessment
for the year 1903, as revised by the board of tax revision; and

“Whereas, by Act No. 975, the Municipal Board is authorized and required
to reduce the assessment for the years 1901 and 1902 to the amount fixed by the
board of tax revision for the same land in 1903: Be it, therefore, on
motion,

“Resolved, that by virtue of Act No. 975, the city
assessor and collector is hereby authorized and directed to make such reductions
in the assessment, and, in all cases in which the money has been paid upon such
excessive assessment, to allow the amount of such excess payments to be applied
on the taxes due for the year 1903, or some subsequent year.”

In the statement mentioned in said resolution appears the entry of the
property in question as follows:

On January 6, 1911, the Collector of Internal Revenue issued to the chief of
the real estate division written instructions as follows:

“Referring to the attached papers regarding the decision of the Supreme Court
in cases involving the interpretation of Act No. 975, I desire to have this
matter again tested in the courts by collecting from a few large taxpayers the
amounts refunded to them in 1903 under the interpretation of Act No. 975 by the
city assessor and collector, which, according to the Supreme Court, was an
erroneous interpretation. You will therefore arrange to enter on the 1903 tax
rolls back taxes for the year 1903 against the properties shown on the attached
list in amounts equal to the refunds granted by the city assessor and collector
under Act No. 975. Notices regarding these entries should be forwarded1 to each
of the taxpayers as per the attached form as soon as possible and at such time
so as to enable the putting of such properties on the list for the next tax sale
if payments of these back taxes are not made.”

Pursuant to these instructions the following letter was sent to and received
by the plaintiff:

“Subject:—Decision of the Supreme Court, re Act No.
975.

“JANUARY 11, 1911.

“Mrs. CARMEN AYALA,

“No. 154 Malacañang, Manila.

“Madam: You are informed that the Supreme Court of these Islands has, in two
decisions, one in the case of Felipe Zamora against the city of Manila, and the
other in the case of Jose P. Paterno against the city of Manila, held that the
word ‘land’ as used in section 1 of Act No. 975 of the Philippine Commission
includes both the land and the, buildings thereon. As construed by the city
assessor and collector the word ‘land/ as used in the above-mentioned Act, did
not include the improvements upon the land, and therefore the credit of
P2,121.80 allowed by the city assessor and collector on the tax lists for the
year 1903 as a partial payment of the tax on your property located at Nos.
98-104 Escolta, known as lot 3, block 35, district of Binondo, was erroneously
applied according to the construction of the said Act by the Supreme Court in
the cases above stated, since the total value of the property in question, as
per assessment in 1901 and 1902, was not 50 per cent more than the value fixed
by the board of tax revision, although the value of the land was 50 per cent
more for 1901 and 1902 than that fixed by the board of tax revision.

“By direction of the Municipal Board of Manila, approved by His Excellency,
the Governor-General, the amount above stated which has been applied as a
partial payment of your real estate tax for 1903 has been entered on the tax
lists for 1903 and is a lien upon the said property, which can only be removed
by the payment of the proper amount.

“By authority contained in a
resolution adopted by the Municipal Board on December 10, 1910, the payment of
the said sum, which is a delinquent tax for 1903, will be accepted without
penalty if made within twenty days from the date this communication is received
by you.

“Very respectfully,

(Sgd.) “ELLIS CROMWELL,

‘Collector of Internal Revenue,

“Ex Officio City Assessor and Collector.”

To clear her property of this alleged encumbrance and to prevent the
collector from carrying into effect his threat to sell the property at public
sale, plaintiff, under protest, paid to the city assessor and collector the
P2,121.80 demanded, which sum is now in special deposit in the Insular Treasury
awaiting the outcome of this action.

This action was begun by the plaintiff to recover the said amount paid as
aforesaid. The learned trial court dismissed the complaint on the merits and
this appeal is taken from that judgment.

The defendant states its position in this controversy as follows:

“From the figures set forth above, relating to plaintiff’s property, it
appears that the land alone was assessed during 1901 and 1902 at more than 50
per cent, in fact 70 per cent, above the valuation fixed for 1903, but that the
land and improvements together were assessed during 1901 and 1902 at less than
50 per cent, in fact, only 38 per cent, above the valuation fixed for 1903.
Consequently, if the word ‘land’ as used in Act No. 975 were to be construed as
‘land only’ then plaintiff was entitled to a refund of a certain amount of
excess paid, but if by ‘land’ the legislature contemplated ‘land and
improvements’ or ‘real estate in general’ then the plaintiff was not entitled to
any refund. The city assessor and collector erroneously adopted the former
construction as the correct one and estimated that the proper amount of refund
of the excess payment by the plaintiff for the years 1901 and 1902, as provided
in Act No. 975, would be the sum of P2,121.80. * * *

“Subsequent to this payment, however, the Supreme Court decided in the case
of Felipe Zamora vs. City of Manila (7 Phil. Rep., 584) that the word
‘land’ as used in Act No. 975 should not be construed in a limited sense but
that it was intended by the legislature to include not only the land as such but
also the improvements thereon. The city assessor and collector, by direction of
the municipal board approved by the Governor-General, then addressed a letter to
the plaintiff explaining the mistake of the collector made in 1903, and stating
that this amount of P2,121.80 had been entered upon the tax lists for 1903, and
that it was a lien upon her property only to be removed by payment of the proper
amount, which if paid within a certain time would be received without penalty.
This the plaintiff then paid to the city assessor under protest and now brings
this action for the recovery back of the P2,121.80 so paid.”

From what has been said, it is clear that the basic contention of the city is
that the city assessor and collector erroneously, and, therefore, unlawfully,
refunded to the plaintiff herein, when she paid her tax in 1903, the sum of
P2,121.80, and that, having so wrongly and unlawfully refunded the said amount,
the city is entitled to recover from the plaintiff that sum by the process, as
the city council called it, of putting it on the tax lists for 1903. The reason
for claiming that this sum was unlawfully and erroneously refunded is that the
word “land,” as used in Act No. 975, was held by the Supreme Court in the case
of Zamora vs. City of Manila (7 Phil. Rep., 584).. to include the word
“improvements,” and that this Act requiring also, prior to the right to refund
in any given case, that the assessments for the years 1901 and 1902 should be
more than 50 per cent higher than was the assessment of the same property in
1903, the basis on which the right rests does not exist, for, while the land
itself was assessed in 1901 and 1902 about 70 per cent higher than it was in
1903, the improvements upon the land were assessed almost twice as high in 1903
as in 1901 and 1902, and while a rebate might be allowed upon the assessment on
the land if it had not been held by the Supreme Court to include improvements,
no rebate can, in fact, be allowed, because the assessments of the land and
improvements, under the decision referred to, must be taken, that is,
added, together; and that being the case, the assessments of both land
and improvements for the years 1901 and 1902 were not, when added together, 50
per cent higher than the total of the two was in 1903. As a necessary result,
says the city, the refund was improper.

This contention may be answered
in two ways. In the first place, section 46 of Act No. 183 provides that “it
shall be the duty of every owner of real estate in the city of Manila to prepare
or cause to be prepared a statement of the amount of land and the improvements
thereon which he owns.” This statement must be filed with the city assessor and
collector and from it, primarily, he makes up the list of the taxable real
estate in the city. Under the system established by this Act and by the practice
which was adopted and has been consistently followed under it, the improvements
are assessed separately from the land even though both may be owned by the same
person. This was the way the assessment was made in 1901, 1902, and 1903, and it
is the manner in which assessments have been made since that time. This was the
condition of assessments when the remedial Act referred to was passed and
presents the situation which the commission had before it. This being so, it
might with propriety be contended that an owner of land might have been entitled
to the refund provided for in Act No. 975 with respect to the land itself
although he would not have been with respect to the improvements. The fact that
the Supreme Court held, in the case referred to, that, under the statute, land
included improvements, does not necessarily mean that the contention of the city
is correct that the assessment for both land and improvements as made in 1901
and 1902 should have been added together and the sum of the two compared with
the total assessments for land and improvements as made in 1903 before it could
be determined whether the taxpayer was entitled to a refund. In the case
referred to the plaintiff, as guardian for his minor children, brought suit
against the city of Manila to recover the excess taxes paid to the city under
the assessments of 1901 and 1902. The assessments for that year were, land
P7,700, and house P8,000. In 1903 the assessment was, land P4,476, and house
P5,000. The plaintiff claimed a right to the refund on both the land and the
house but the department of assessments and collections of the city allowed it
on the land only, denying the benefits of the Act with regard to the
improvements upon the theory that the Act referred to land only. This court held
in that case that, inasmuch as the statute was remedial, the plaintiff was
entitled, under the liberal construction given to that kind of statute, to a
refund not only as to the taxes on the land but also as to those on the
improvements. In that case the assessments were treated separately, the one
relating to the land and the other to the improvements, each one standing upon
its own footing, the plaintiff evidently being permitted to claim her right as
to each apart from the other.

In the second place, it may be said, in answer to the city’s contention that
there was no reassessment made in 1903 of the improvements assessed in 1901 and
1902, and that, therefore, there was no basis from which it could be determined
whether the improvements were assessed higher in 1901 and 1902 than they were in
1903 or vice versa. When the assessment was made by the commission in 1903 the
taxpayer was engaged in making very extensive improvements upon the premises, to
a large extent rebuilding the buildings already thereon. It is undisputed that
she was adding at least P25,000 worth of repairs to the premises at that time.
It is very probable that, in making the assessment, the commission took into
consideration these improvements and added their value to the improvements as
they were assessed in 1901 and 1902. This appears to be so not only from the
fact that it was at that time impracticable to assess the improvements as they
existed in 1901 and 1902, but also from the fact that the assessed valuation of
the improvements in 1903 was almost double what it was in 1901 and 1902. This
latter fact is significant for the reason that the assessments in 1901 and 1902
were almost universally excessive—so much so in fact that it led the Legislature
in 1903, as we have seen, to pass a special Act for a reassessment of city
property and the refunding of money paid as taxes under the excessive
assessments of those years. This being the case, it would be but fair to assume
that, if the improvements as assessed in 1901 and 1902 had been assessed in
1903, the value thereof would have been largely reduced. As a matter of fact,
however, due undoubtedly to the extensive improvements that were then being
made, the assessment of the improvements in 1903 was almost double that in 1901
and 1902.

We believe it, therefore, a necessary conclusion that the city
erred in adding the assessment of the improvements as made in 1903 to the land
assessment of that year in order to determine whether or not the plaintiff was
entitled to the refund in question. As we have already intimated, the
improvements as assessed in 1901 and 1902 no longer existed when the assessment
of 1903 was made, and that, in reality and as matter of fact, no assessment was
made in 1903 of the improvements assessed in 1901 and 1902. As a necessary
result, we have no basis from which we may compare the assessment of the
improvements of 1903 with those of 1901 and 1902. If the plaintiff can gain
nothing from this fact, she certainly should lose nothing from it. The land
assessed in 1901 and 1902 was the same land assessed in 1903 and upon that land
alone she was entitled to the refund of P2,121.80, which was made to her when
she paid her taxes in 1903. If the improvements had been assessed in 1903 the
same as they were in 1901 and 1902, then the total of the assessments for 1901
and 1902 would have been more than 50 per cent higher than the total as assessed
in 1903. It was only the addition in 1903 of about P20,000 to the assessed
valuation of the improvements made in 1901 and 1902 that, even under the theory
of the city, removed the plaintiff’s claim from the provisions of the statute,
the total assessments in 1901 and 1902, under that theory, not being 50 per cent
more than the total assessment in 1903. It is clear, therefore, that plaintiff
was entitled to the refund with respect to her 1903 taxes, that the refund was
duly authorized by a resolution of the municipal board, and that she received it
as a credit upon her taxes pursuant to that resolution.

It is our
opinion, therefore, that the taxes for 1903 were duly paid and the lien thereof
fully discharged, and that the demand made by the defendant upon plaintiff that
she again pay the taxes for that year was without authority of law and
unenforceable. Such demand placed upon the plaintiff no duty except that of
selecting a legal method of contesting the validity of defendant’s claims. She
selected the method of paying the sum demanded, under protest, and beginning an
action to recover it, following the procedure prescribed in ordinary tax cases.
In doing that she was entirely justified, it appearing that the city claimed
that the taxes for 1903 had not been paid, that they were a lien upon the
plaintiff’s property, and that, if they were not paid, proceedings would be
taken to seize and sell said lands by virtue thereof; and, particularly in view
of that provision of the tax law which requires that, before the validity of a
tax can be attacked or a decision obtained therein in the courts, the tax must
be paid under protest and an action begun for its recovery. It is reasonable
that a man who denies the legality of a tax should have a clear and certain
remedy. The rule being established that, apart from special circumstances, he
cannot interfere by injunction with the state’s collection of its revenues, an
action at law to recover back what he has paid is the alternative left. Of
course, we are speaking of those cases where the state is put to an action where
the citizen refuses to pay. In these latter he can interpose his objections by
way of defense, but when, as is common, the state has a more summary remedy,
such as distress, and the party indicates by protest that he is yielding to what
he cannot prevent, courts have been a little too slow to recognize the implied
duress under which the payment is made. But even if the state is driven to an
action, if at the same time the citizen is put at a serious disadvantage in the
assertion of his legal rights by defense in the suit, justice may require that
he should be at liberty to avoid those disadvantages by paying promptly and
bringing suit on his side. He is entitled to assert his supposed rights on
reasonably equal terms. (Atchison etc. Ry. Co. vs. O’Connor, 223 U. S.,
280.)

The judgment appealed from is reversed, and the cause is remanded to the
Court of First Instance whence it came with instructions to enter a judgment in
favor of the plaintiff and against the defendant for the sum of P2,121.80 with
interest thereon from the 26th day of January, 1911. No costs in this
instance.

Arellano, C. J., Carson, Trent, and Araullo, JJ.,
concur.

Judgment reversed and cause remanded with instructions.