G.R. No. L-15206; August 30, 1962
EXEQUIEL FLORO, plaintiff-appellee, vs. PHILIPPINE NATIONAL BANK and CENTRAL BANK OF THE PHILIPPINES, defendants. CENTRAL BANK OF THE PHILIPPINES, defendant-appellant.

FACTS

The plaintiff, Exequiel Floro, applied for and was granted letters of credit by the Philippine National Bank (PNB) between July 1949 and December 1950 to finance importations from the United States. The corresponding dollar drafts were paid by PNB’s New York agency between August 1949 and March 1951, all prior to the effectivity of Republic Act No. 601 (imposing a 17% special excise tax on foreign exchange sales) on March 28, 1951. However, upon the arrival of the merchandise in Manila, Floro paid PNB the full amounts, including the 17% tax, between April and September 1951, pursuant to Central Bank Monetary Board Resolution No. 286 which interpreted the tax as collectible upon the importer’s payment. PNB remitted the collected tax to the Central Bank.
Subsequent jurisprudence, specifically Philippine National Bank vs. Zulueta (August 30, 1957), established that the tax under Republic Act No. 601 did not apply to transactions where the foreign draft was paid before the law’s effectivity. Conceding that the tax collections from Floro were thus illegal, the Central Bank nevertheless defended the levy, primarily on the ground that Floro’s action for refund had already prescribed.

ISSUE

Whether the action for the refund of the illegally collected 17% special excise tax had prescribed.

RULING

Yes, the action had prescribed. The Supreme Court, applying the Civil Code, ruled that an action for the recovery of taxes illegally collected prescribes in six years, pursuant to Article 1145(2) governing quasi-contracts. The critical point is when this prescriptive period begins to run. The Court rejected Floro’s contention that the period commenced only from the promulgation of the Zulueta decision on August 30, 1957, which clarified the illegality of the collection. Following its precedent in Nazario & Sons vs. Central Bank, the Court held that the cause of action accrues from the date of each tax payment, not from the date a judicial decision declares the collection erroneous. A mistake in the interpretation of the law by the collecting officer does not alter or extend the accrual date.
Since Floro made the tax payments between April and September 1951, and he filed his complaint only on August 7, 1958, more than six years had elapsed from the last payment. Even counting from his administrative claim for refund filed on January 18, 1958, the six-year period from the 1951 payments had already lapsed. Consequently, his right to recover the sum was extinguished by prescription. The judgment of the lower court was reversed and the complaint dismissed.