G.R. No. L-15225; April 29, 1961
C. G. NAZARIO & SONS, INC., plaintiff-appellant, vs. CENTRAL BANK OF THE PHILIPPINES and PHILIPPINE NATIONAL BANK, defendants-appellees.

FACTS

C. G. Nazario & Sons, Inc. filed a complaint on December 8, 1958, seeking to recover from the Central Bank the sum of P17,287.53, representing a 17% special excise tax on foreign exchange sold to it by the Philippine National Bank between May 10 and May 29, 1951. The tax was collected under Republic Act No. 601 . The Central Bank moved to dismiss the complaint on two grounds: first, that the court lacked jurisdiction because the collected tax funds had already been turned over to the National Treasurer on June 26, 1956, making the proper party defendant the National Treasurer; and second, that the action was barred by the statute of limitations.
The plaintiff-appellant countered that the defect was merely a non-joinder of a necessary party, which could be cured by amendment. On prescription, it argued that the tax was collected due to a mistake of law by the Monetary Board in interpreting RA 601, a difficult legal question only clarified by this Court’s decision in Philippine National Bank vs. Zulueta on August 30, 1957. It contended that its cause of action accrued only from that 1957 decision, making the 1958 filing timely. The trial court sustained the Central Bank’s defenses and dismissed the complaint.

ISSUE

The primary issue is whether the action for tax refund is barred by prescription. A secondary issue is whether the trial court correctly dismissed the case for lack of jurisdiction due to the non-inclusion of the National Treasurer as a party defendant.

RULING

The Supreme Court affirmed the dismissal, ruling that the action was indeed barred by prescription. The Court rejected the appellant’s theory that the cause of action accrued only upon the promulgation of the Zulueta decision in 1957. It held that if a tax is unlawfully collected, the action to recover it accrues from the date of payment, not from the date a judicial decision clarifies the law. The error of the Monetary Board in interpretation does not change or extend the time for accrual of the action.
Applying Article 1145 of the Civil Code, which governs actions upon a quasi-contract, the prescriptive period is six years. Since the tax payments were made in 1951 and the complaint was filed only in 1958, more than six years had elapsed, clearly barring the claim. The Court cited its precedent in Belman Compañia Incorporada vs. Central Bank to support this application. Having resolved the case on the ground of prescription, the Supreme Court deemed it unnecessary to address the jurisdictional issue regarding the proper party defendant. The order of dismissal was affirmed.