No.L17447.April30,1963.

GONZALO PUYAT & SONS, INC., plaintiffappellee, vs.

ITY OF MANILA AND MARCELO SARMIENTO, as
CityTreasurerofManila,defendantsappellants.
Taxation; Retail dealers taxes; Recovery of taxes paid by
mistake; Protest not necessary.Where taxes which are not legally
duearepaidthruerrorormistake,theymay,undertheprincipleof
solutio indebiti, be recovered, even if no protest was made upon
their payment, particularly where such payment was due to a
mistakeintheconstructionofadoubtfulordifficultquestionoflaw
(Article2155newCivilCode).
Same; Same; Same; Same; Section 76 of charter of Manila and
applicable in case at bar.Section 76 of the Charter of Manila,
whichprovidesthatNocourtshallentertainanysuitassailingthe
validityoftaxunder this article untilthetaxpayershallhavepaid,
under protest the taxes assessed against him, x x x, relates to the
assessment,collectionandrecoveryofreal estate taxesonly,andnot
totherecoveryofretail dealerstaxes.
Same; Same; Same; Prescription interrupted by written extra
judicial demand.Even applying the provisions of Act No. 190 to
payments by appellee of the retail dealers taxes made before the
effectivity of the new Civil Code, because prescription already
runningbeforetheeffectivityofthisCodeshallbegovernedbylaws
previously in force x x x (Art. 1116, NCC), still payments made
before August 30, 1950, are no longer recoverable in view if the
second paragraph of the said article, which provides that but if
sincethetimethisCodetookeffecttheentireperiodhereinrequired
for prescription should elapse. The present code shall be applicable
eventhoughbytheformerlawsalongerperiodmightberequired.
The action has therefore prescribed only with respect to the
payments made before October 30, 1950, when a written demand
wasmade,consideringthattheprescriptionofactionisinterrupted
whenthereisawrittenextrajudicialdemand(Art.1155,NCC).

APPEALfromajudgmentoftheCourtofFirstInstanceof
Manila.
ThefactsarestatedintheopinionoftheCourt.
Feria, Manglapus & Associates forplaintiffappellee.
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Gonzalo Puyat & Sons, Inc. vs. City of Manila

Asst. City Fiscal Manuel T. Reyes for defendants
appellants.
PAREDES,J.:
This is an appeal from the judgment of the CFI of

Manila,thedispostiveportionofwhichreads:
xxxOfthepaymentsmadebytheplaintiff,onlythatmadeon
October 25, 1950 in the amount of P1,250.00 has prescribed
Payments made in 1951 and thereafter are still recoverable since
the extrajudicial demand made on October 30, 1956 was well
withinthesixyearprescriptiveperiodoftheNewCivilCode.
In view of the foregoing considerations, judgment is hereby
renderedinfavoroftheplaintiff,orderingthedefendantstorefund
theamountofP29,824.00,withoutinterest.Nocosts.
Defendants counterclaim is hereby dismissed for not having
beensubstantiated.

OnAugust11,1958,theplaintiffGonzaloPuyat&Sons,
Inc.,filedanactionforrefundofRetailDealersTaxespaid
by it, corresponding to the first Quarter of 1950 up to the
thirdQuarterof1956,amountingtoP33,785.00,againstthe
City of Manila and its City Treasurer. The case was
submittedonthefollowingstipulationoffacts,towit
1.That the plaintiff is a corporation duly organized
and existing according to the laws of the Philippines, with
offices at Manila; while defendant City Manila is a
Municipal Corporation duly organized in accordance with
the laws of the Philippines, and defendant Marcelino
SarmientoisthedulyqualifiedincumbentCityTreasurerof
Manila;
2.That plaintiff is engaged in the business of
manufacturing and selling all kinds of furniture at its
factory at 190 RodriguezArias, San Miguel, Manila, and
has a display room located at 604606 Rizal Avenue,
Manila, wherein it displays the various kind of furniture
manufactured by it and sells some goods imported by it,
suchasbilliardballs,bowlingballsandotheraccessories;
3.That acting pursuant to the provisions of Sec. 1.
groupII,ofOrdinanceNo.3364,defendantCityTreasurer
of Manila assessed from plaintiff retail dealers tax
correspondingtothequartershereunderstatedonthesales
offurnituremanufacturedandsoldbyitatitsfactorysite,
allofwhichassessmentsplaintiffpaidwithoutprotestinthe
erroneousbeliefthatitwasliabletherefor,onthedatesand
intheamountenumeratedhereinbelow:
972

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SUPREMECOURTREPORTSANNOTATED
Gonzalo Puyat & Sons, Inc. vs. City of Manila

Period

DatePaid

O.R.No.

Amount
Assessed
andPaid.
FirstQuarter1950
Jan.25,1950
436271X P1,255.00
SecondQuarter1950
Apr.25,1950
215895X 1,250.00
ThirdQuarter1950
Jul.25,1950
243321X 1,250.00
FourthQuarter1950
Oct.25,1950
271165X 1,250.00
(Followstheassessmentfordifferentquartersin1951,1952,
1953,1954and1955,fixingthesameamountquarterly.)xxx.
FirstQuarter1956
Jan.25,1956
823047X 1,250.00
SecondQuarter1956
Apr.25,1956
855949X 1,250.00

ThirdQuarter1956
Jul.25,1956
880789X
TOTAL.............

1,250.00
P33,785.00
========

4.That plaintiff, being a manufacturer of various kinds of

furniture, is exempt from the payment of taxes imposed under the
provisions of Sec. 1, Group II, of Ordinance No. 3364, which took
effect on September 24, 1956, on the sale of the various kinds of
furniture manufactured by it pursuant to the provisions of Sec.
18(n) of Republic Act No. 409 (Revised Charter of Manila), as
restatedinSection1ofOrdinanceNo.3816.
5.That, however, plaintiff, is liable for the payment of taxes
prescribed in Section 1, Group II or Ordinance No. 3364mas
amended by Sec. 1, Group II of Ordinance No. 3816, which took
effectonSeptember24,1956,onthesalesofimportedbilliardballs,
bowling balls and other accessories at its display room. The taxes
paidbytheplaintiffonthesalesofsaidarticleareasfollows:
xxxxxxxxx
6.ThatonOctober30,1956,theplaintifffiledwithdefendant
City Treasurer of Manila, a formal request for refund of the retail
dealers taxes unduly paid by it as aforestated in paragraph 3,
hereof.
7.That on July 24, 1958, the defendant City Treasurer of
Maniladefinitelydeniedsaidrequestforrefund.
8. Hence on August 21, 1958, plaintiff filed the present
complaint.
9.Basedontheabovestipulationoffacts,thelegalissuestobe
resolvedbythisHonorableCourtare:(1) the period of prescription
applicable in matters of refund of municipal taxes erroneously paid
by a taxpayer and (2) refund of taxes not paidunderprotest.xxx.

whichwasthebasisofthejudgmentheretoforerecited.
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Gonzalo Puyat & Sons, Inc. vs. City of Manila

SaidjudgmentwasdirectlyappealedtothisCourtontwo
dominantissuestowit:(1)Whetherornottheamountspaid
by plaintiffappellee, as retail dealers taxes under
Ordinance 1925, as amended by Ordinance No. 3364of the
City of Manila, without protest, are refundable;(2)
Assumingarguendo,thatplaintiffappelleeisentitledtothe
refund of the retail taxes in question, whether or not the
claimforrefundfiledinOctober1956,insofarassaidclaim
refers to taxes paid from 1950 to 1952 has already
prescribed.
Underthefirstissue,defendantsappellantscontendthat
the taxes in question were voluntarily paid by appellee
companyandsince,inthisjurisdiction,inorderthatalegal
basisariseforclaimofrefundoftaxeserroneouslyassessed,
payment thereof must be made under protest, and this
beingaconditionsinequanon,andnoprotesthavingbeen
made,verbally or in writing, thereby indicating that the
payment was voluntary, the action must fail. Cited in
support of the above contention, are the cases of Zaragoza

vs.Alfonso,46Phil.160161,andGavinov.Municipalityof
Calapan,71Phil.438.
In refutation of the above stand of appellants, appellee
aversthatthepaymentscouldnothavebeenvoluntary.At
most, they were paid mistakenly and in good faithand
without protest in the erroneous belief that it was liable
thereof. Voluntariness is incompatible with protest and
mistake. It submits that this is a simple case of solutio
indebiti.
Appellantsdonotdisputethefactthatappelleecompany
isexemptedfromthepaymentofthetaxinquestion.Thisis
manifestfromthereplyofappellantCityTreasurerstating
that sales of manufactured products at the factory site are
not taxable either under the Wholesalers Ordinance or
under the Retailers Ordinance. With this admission, it
wouldseemclearthatthetaxescollectedfromappelleewere
paid, thru an error or mistake, which places said act of
paymentwithinthepaleofthenewCivilCodeprovisionon
solutio indebiti. The appellant City of Manila, at the very
start, notwithstanding the Ordinance imposing the
RetailersTax,hadnorighttodemandpaymentthereof.
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SUPREMECOURTREPORTSANNOTATED
Gonzalo Puyat & Sons, Inc. vs. City of Manila

If something is received when there is no right to demand it,

and it was unduly delivered through mistake, the obligation to
returnitarises(Art.2154,NCC).

Appelle categorically stated that the payment was not

voluntarilymade,(afactfoundalsobythelowercourt),but
on the erroneous belief, that they were due. Under this
circumstance, the amount paid, even without protest is
recoverable. If the payer was in doubt whether the debt
was due, he may recover if he proves that it was not due
(Art.2156,NCC).Appelleehaddulyprovedthattaxeswere
not lawfully due. There is, therefore, no doubt that the
provisions of solutio indebiti, the new Civil Code, apply to
theadmittedfactsofthecase.
Withall,appellantquotedManresaassaying:xxxDe
lamismaopinionsonelSr.SanchezRomanyelSr.Galcon,
etcualafirmaquesilapagasehizoporerrordederecho,ni
existe el cuasicontrato ni esta obligado a la restitucion el
quecobro,aunquenosedebieraloquesepago(Manresa,
Tomo 12, paginas 611612). This opinion, however, has
alreadylostitspersuasiveness,inviewoftheprovisionsof
theCivilCode,recognizingerrordederechoasabasisfor
thequasicontract,ofsolutioindebiti.
Paymentbyreasonofamistakeinthecontructionorapplication
ofadoubtfulordifficultquestionoflawmaycomewithinthescope
oftheprecedingarticle(Art.21555).

Thereisnogainsayingthefactthatthepaymentsmadeby
appellee was due to a mistake in the construction of a
doubtful question of law. The reason underlying similar
provisions, as applied to illegal taxation, in the United

States,isexpressedinthecaseofNewportv.Ringo,37Ky.
635,636;10S.W.2,inthefollowingmanner:.
Itistoowellsettledinthisstatetoneedthecitationofauthority
that if money be paid through a clear mistake of law or fact,
essentially affecting the rights of the parties, and which in law or
consciencewasnotpayable,andshouldnotberetainedbytheparty
receiving it, it may be recovered. Both law and sound morality so
dictate.Especiallyshouldthisbetheruleastoillegaltaxation.The
taxpayer has no voice in the imposition of the burden. He has the
righttopresumethatthetaxing
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Gonzalo Puyat & Sons, Inc. vs. City of Manila

power has been lawfully exercised. He should not be required to
know more than those in authority over him, nor should he suffer
lossbycomplyingwithwhathebonafidebelievestobehisdutyas
a good citizen. Upon the contrary, he should be promoted to its
readyperformancebyrefundingtohimanylegalexactionpaidby
himinignoranceofitsillegality;and,certainly,insuchacase,ifbe
subjecttoapenaltyfornonpayment,hiscomplianceunderbeliefof
its legality, and without a waiting a resort to judicial proceedings
should not be regarded in law as so far voluntary as to affect his
rightofrecovery.

Every person who through an act or performance by

another, or any other means, acquires or comes into
possessionofsomethingattheexpenseofthelatterwithout
justorlegalgrounds,shallreturnthesametohim(Art.22,
CivilCode).Itwouldseemsunedifyingforthegovernment,
(heretheCityofManila),thatknowingithasnorightatall
to collect or to receive money for alleged taxes paid by
mistake, it would be reluctant to return the same. No one
shouldenrichitselfunjustlyattheexpenseofanother(Art.
2125,CivilCode).
Admittedly, plaintiffappellee paid the tax without
protest. Equally admitted is the fact that section 76 of the
Charter of Manila provides that No court shall entertain
any suit assailing the validity of tax assessed under this
articleuntilthetaxpayershallhavepaid,underprotestthe
taxes assessed against him, xx. It should be noted,
however,thatthearticlereferredtoinsaidsectionisArticle
XXI, entitled Department of Assessment and the sections
thereundermanifestlyshowthatsaidarticleanditssections
relate to assessment, collection and recovery of real estate
taxesonly.Saidsection76,therefor,isnotapplicabletothe
case at bar, which relates to the recover of retail dealer
taxes.
IntheopinionoftheSecretaryofJustice(Op.90,Seriesof
1957, in a question similar to the case at bar, it was held
thattherequirementofprotestrefersonlytothepaymentof
taxeswhicharedirectlyimposedbythecharteritself,that
is, real estate taxes, which view was sustained by judicial
and administrative precedents, one of which is the case of
Medina,etal.,v.CityofBaguio,G.R.No.L4269,Aug.29,
1952.Inotherwords,protestisnot

976

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SUPREMECOURTREPORTSANNOTATED
Gonzalo Puyat & Sons, Inc. vs. City of Manila

necessary for the recovery of retail dealers taxes, like the

present, because they are not directly imposed by the
charter.IntheMedinacase,theCharterofBaguio(Chap.
61, Revised Adm. Code), provides that no court shall
entertain any suit assailing the validity of a tax assessed
under this charter until the taxpayer shall have paid,
underprotest,thetaxesassessedagainsthim(sec.25474[b],
Rev. Adm. Code), a proviso similar to section 76 of the
Manila Charter. The refund of specific taxes paid under a
voidordinancewasordered,althoughitdidnotappearthat
paymentthereofwasmadeunderprotest.
Inarecentcase,Wesaid:Theappellantsarguethatthe
sumtherefundofwhichissoughtbytheappellee,wasnot
paidunderprotestandhenceisnotrefundable.Again,the
trialcourtcorrectlyheldthatbeingunauthorized,itisnota
tax assessed under the Charter of the Appellant City of
Davao and for that reason, no protest is necessary for a
claim or demand for its refund (Citing the Medina case,
supra; East Asiatic Co., Ltd. v. City of Davao, G.R. No. L
16253, Aug. 21, 1962). Lastly, being a case of solutio
indebiti,protestisnotrequiredasaconditionsinequanon
foritsapplication.
The next issue in discussion is that of prescription.
Appellants maintain that article 1146 (NCC), which
provides for a period of four (4) years (upon injury to the
rightsoftheplaintiff),applytothecase.Ontheotherhand,
appellee contends that provisions of Act 190 (Code of Civ.
Procedure) should apply, insofar as payments made before
theeffectivityoftheNewCivilCodeonAugust30,1950,the
periodofwhichisten(10)years,(Sec.40,ActNo.190;Osorio
v. Tan Jongko, 51 O.G. 6211) and article 1145 (NCC), for
paymentsmadeaftersaideffectivity,providingforaperiod
of six (6) years (upon quasicontracts like solutio indebiti).
EveniftheprovisionsofActNo.190shouldapplytothose
paymentsmadebeforetheeffectivityofthenewCivilCode,
becauseprescriptionalreadyrunningbeforetheeffectivity
of this Code shall be governed by laws previously in force
x x x (art. 1116, NCC), for payments made after said
effectivity, providing for a period of six (6) years (upon
quasicontractslikesolutioindebiti).Eveniftheprovisions
ofActNo.190shouldapplytothosepaymentsmadebefore
the effectivity of the new Civil Code, because prescription
alreadyrunningbeforetheeffectivityofthisCodeshallbe
governbylawspreviouslyinforcexxx(Art.1116,NCC),
StillpaymentsmadebeforeAugust30,1950arenolonger
recoverableinviewofthe
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Gonzalo Puyat & Sons, Inc. vs. City of Manila

977

secondparagraphofsaidarticle(1116),whichprovides:but
if since the time this Code took effect the entire period
herein required for prescription should elapse the present
Codeshallbeapplicableeventhoughbytheformerlawsa
longerperiodmightberequired.Anentthepaymentsmade
after August 30, 1950, it is obvious that the action has
prescribed with respect to those made before October 30,
1950 only, considering the fact that the prescription of
action is interrupted xxx when is a written extrajudicial
demandxxx(Art.1155,NCC),andthewrittendemandin
thecaseatbarwasmadeonOctober30,1956(Stipulationof
Facts). MODIFIED in the sense that only payments made
onorafterOctober30,1950shouldberefunded,thedecision
appealedfromisaffirmed,inallotherrespects.Nocosts..

Bengzon, C.J., Bautista Angelo, Labrador, Concepcion,

Dizon, Regala and Makalintal, JJ.,concur.
Padilla, Reyes, J.B.L., and Barrera, JJ.,tooknopart.
Decision affirmed.
Note.SeeCo Tuan v. City of ManilaL12481,Aug.31,
1961, 2 SCRA 1070 and Santos Lumber, et al, v. City of
Cebu, et al.,L14618,May30,1961,2SCRA173.
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