G.R. No. L-16524; June 30, 1964
FRANCISCO S. OLIZON, plaintiff-appellee, vs. CENTRAL BANK OF THE PHILIPPINES, defendant-appellant.

FACTS

The Central Bank collected from Francisco Olizon the total sum of P9,713.94 as Special Excise Tax on Foreign Exchange on various dates from 1952 to 1955, pursuant to its Monetary Board Resolution No. 286. Olizon later requested a refund, citing Supreme Court rulings that had declared the underlying resolution illegal. The Central Bank conceded the illegality of the resolution and its collection but refused the refund, asserting that Olizon’s claim had prescribed. The Bank argued the prescriptive period was five years under Article 1149 of the Civil Code, as no specific period was provided in the tax code.
The trial court rejected this, applying a ten-year prescriptive period under Article 1144(2) for obligations created by law, and ordered the refund. The Central Bank appealed. During the pendency of the appeal, the Supreme Court decided Belman Cia, Inc. v. Central Bank, which ruled the applicable prescriptive period was six years. Following this, the Central Bank conceded the refundability of most claims, except for P436.54, arguing insufficient records to verify its timeliness. It also raised new defenses, including that the funds had been remitted to the national treasury and that Olizon had an outstanding tax liability that should be set off.

ISSUE

What is the applicable prescriptive period for filing an action to recover illegally collected excise taxes, and are the Central Bank’s ancillary defenses tenable?

RULING

The Supreme Court affirmed the trial court’s judgment ordering the refund. On prescription, the Court held the six-year period under Article 1145(2) of the Civil Code governs, as the obligation to refund arises from a quasi-contract (solutio indebiti) under Articles 2154 and 2155. Since the Central Bank admitted the claims were filed within this six-year period, prescription did not bar the action. The exception for the P436.54 claim was untenable; the Bank’s own admissions and records established the payments and the illegality of the levy, and it could not evade refund by citing lost documents after conceding the claims’ timeliness.
The Court rejected the Bank’s other defenses. The suit was not against the state; the Central Bank, under its charter, can sue and be sued, and Republic Act No. 601 specifically designates it to handle such refunds. The claim of an outstanding tax liability by Olizon was an improper belated counterclaim raised only at the memorandum stage, depriving Olizon of a fair opportunity to contest it, in violation of procedural rules. The Court emphasized the Bank’s duty to promptly refund amounts admittedly collected under an illegal resolution without resorting to technical obstructions.