Ramie Textiles, Inc. vs. Mathay, Sr.; No. L-32364. April 30, 1979


Real and Local Property Taxation


Payment was made through error or mistake, in the honest belief that petitioner was liable, and therefore could not have been made under protest, but with complete voluntariness. In any case, a taxpayer should not be held to suffer loss by his good intention to comply with what he believes is his legal obligation, where such obligation does not really exist.


Ramie Textiles, Inc., a domestic corporation, commenced its operation in 1959. During the first five (5) years of operation, Ramie Textiles voluntarily paid the amount of P78,041.17 as real estate taxes on its plant machinery and equipment used by its general mill at Bagbagin, Valenzuela, Bulacan. In May 1967, it was realized that under Article 1, Section 3(f) of Commonwealth Act No. 470, otherwise known as the Assessment Law, said machineries are exempt from realty tax. Through the Provincial Assessor of Bulacan, Ramie Textiles filed a claim for refund of P 78,041.17 which it paid as real estate taxes for the said five (5) years on its plant machinery and equipment.

The Provincial Treasurer, however, denied the claim for refund on the ground that under Section 359 of the Revised Manual of Instructions to Treasurers a claim for refund of taxes erroneously paid or illegally collected or assessed should be presented within two (2) years from date of payment.


Whether Ramie Textiles, Inc. is allowed to recover the real estate taxes paid during the period from July 24 1959 to September 9 1965.


Yes, Ramie Textiles, Inc. is allowed to recover the real estate taxes paid but only during the period from October 31, 1961 to September 9, 1965.

It is not disputed that the petitioner is exempt from the payment of realty taxes during the first five (5) years of its operation. The fact that petitioner paid thru error or mistake, and the government accepted the payment, gave rise to the application of the principle of solutio indebiti under Article 2154 of the New Civil Code, which provides that “if something is received when there is no right to demand it, and it was unduly delivered through mistake, the obligation to return it arises.

The quasi-contract of solutio indebiti, is one of the concrete manifestations of the ancient principle that no one shall enrich himself unjustly at the expense of another. Hence, it would seem unedifying for the government, that knowing it has no right at all to collect or to receive money for alleged taxes paid by mistake, it would be reluctant to return the same.

Solutio indebiti is a quasi-contract, and the instant case being in the nature of sotutio indebiti the claim for refund must be commenced within six (6) years from date of payment pursuant to Article 1145(2) of the New Civil Code. Since petitioner demanded the refund of real estate taxes mistakenly paid only on May 23, 1967, it can recover only those paid during the period from October 31, 1961 to September 9, 1965 or a total amount of P61,007.33. Petitioner has, by reason of the six (6) years prescriptive period, lost its right to recover the amount of P17,033.84 paid during the period from July 24, 1959 to March 27, 196

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