G.R. No. 34962; September 22, 1931
THE GOVERNMENT OF THE PHILIPPINE ISLANDS, plaintiff-appellant, vs. THE BANK OF THE PHILIPPINE ISLANDS, defendant-appellee.

FACTS

Federico Luchsinger sold his hacienda for P275,000, payable in installments. He appointed the Bank of the Philippine Islands as his attorney-in-fact, with authority to collect credits and pay his taxes. Luchsinger then left the Philippines. The bank collected the installment payments but, in the income tax returns it filed on Luchsinger’s behalf, omitted to declare the profit from the sale. The Government sued the bank for the unpaid income tax, alleging the bank breached its statutory duty. The trial court sustained the bank’s demurrer, holding the complaint insufficient.

ISSUE

Whether the facts alleged in the complaint are sufficient to constitute a cause of action against the defendant bank for failure to pay the income tax due from its principal.

RULING

Yes. The complaint alleges sufficient facts. The bank, as Luchsinger’s agent specifically authorized to pay taxes, is presumed to know of his taxable income. The duty to file a complete return and pay the tax is imposed by law (Act No. 2833). The complaint’s allegation that the bank omitted the profit from the returns constitutes a prima facie breach of that statutory duty. Any defense, such as excusable ignorance of the income, is a matter for the bank to prove in its answer and at trial, not a ground for demurrer. The order sustaining the demurrer is reversed, and the case is remanded for further proceedings.

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