Consti2Digest – Juan Luna Subdivision, Inc. Vs M.

Sarmiento, et al, 91 Phil 371, GR L-3538, (28

JUAN LUNA SUBDIVISION, INC., Petitioner, -versus- M. SARMIENTO, ET AL, Respondents G.R.
No. L-3538, EN BANC, May 28, 1952, TUASON, J.

We do not see that literal interpretation of Commonwealth Act No. 703 runs counter and does
violence to its spirit and intention , nor do we think that such interpretation would be
"constitutionally bad" in that "it would unduly discriminate against taxpayers who had paid in
favor of delinquent taxpayers."

The remission of taxes due and payable to the exclusion of taxes already collected does not
constitute unfair discrimination. Each set of taxes is a class by itself, and the law would be open
to attack as class legislation only if all taxpayers belonging to one class were not treated alike.
They are not.

FACTS:
The plaintiff was a corporation duly organized and existing under the laws of the Philippines with
principal office in Manila. On December 29, 1941 it issued to the City Treasurer of Manila, and the
City Treasurer accepted checks No. 628334 for P2,210.52 drawn upon the Philippine Trust
Company with which it had a credit balance of P4,940.17 on its account. This check was to be
applied to plaintiff's land tax for the second semester of 1941 the exact amount of which was yet
undetermine and so it was entered in the ledger, Exhibit "F", as deposit by the taxpayer. On
February 20, 1942, presumably after the exact amount had been verified, which was P341.60, the
balance of P1,868.92, covered by voucher No. 1487 of the City Treasure's office, was noted in the
ledger as a credit to the Juan Luna Subdivision, Inc.

Further than this, the records of the City Treasurer's office do not show what was done with the
check. But the books of the Philippine Trust Company do reveal that it was deposited with the
Philippine National Bank, the City Treasurer's sole depository, on December 29, 1941, and that it
was presented by that Bank to the Philippine Trust Company on May 1, 1944 and was cashed by
the drawee. Manuel F. Garcia, Assistant Treasurer of the Philippine Trust Company, testified that
soon after his bank was authorized in March, 1942, to reopen for business (it had been closed by
order of the Japanese military authorities,) it received from the Philippine National Bank a bundle
of checks, including appellees check No. 628334, drawn upon the Philippine Trust Company
before the Japanese occupation and held in abeyance by the Philippine National Bank pending
resumption of operation by the Philippine Trust Company; that these checks, including the
appellee's check, were accepted and the amounts thereof debited against the respective drawer's
accounts; that with respect to check No. 628334, the operation was effected on May 1, 1944.

The City refused after liberation to refund the plaintiff's deposit or apply it to such future taxes as
might be found due, while the Philippine Trust Company was unwilling to reverse its debit entry

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against the Juan Luna Subdivision, Inc. It was upon this predicament that the Juan Luna
Subdivision, Inc. brought this suit against the City Treasurer and the Philippine Trust Company as
defendants in the alternative. The purpose of the action is determine which of the two defendants
is liable for plaintiff's check. There is a separate cause of action which concerns the plaintiff and
the City Treasurer alone.

The amount to be refunded to the plaintiff is the subject of another disagreement between the
Juan Luna Subdivision, Inc. and the City Treasurer. This is the ground of other cause of action
heretofore referred to.

The plaintiff claims the whole amount of the check contending that taxes for the last semester of
1941 have been remitted by Commonwealth Act No. 703.

Section 1 of this Act, which was approved on November 1, 1945, provides:

All land taxes and penalties due and payable for the years nineteen hundred and forty-two
nineteen hundred and forty-three nineteen hundred and forty-four and fifty per cent of the tax
due for nineteen hundred and forty-five, are hereby remitted. The land taxes and penalties due
and payable for the second semester of the year nineteen hundred and forty-one shall also be
remitted the if the remaining fifty per cent corresponding to the year nineteen hundred and forty-
five shall been paid on or before December thirty-first, nineteen hundred and forty-five.

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ISSUE:
Whether the provision cover taxes paid before its enactment as the plaintiff maintains and the court
below held, or does it refer, (YES)

RULING:
There is no ambiguity in the language of the law. It says "taxes and penalties due and payable," the literal
meaning of which taxes owned or owing. (See Webster's New International Dictionary) Note that the
provision speaks of penalties, and note that penalties accrue only when taxes are not paid on time. The
word "remit" underlined by the appellant does not help its theory, for to remit to desist or refrain from
exacting, inflicting, or enforcing something as well as to restore what has already been taken. (Webster's
New International Dictionary.)

We do not see that literal interpretation of Commonwealth Act No. 703 runs counter and does violence
to its spirit and intention , nor do we think that such interpretation would be "constitutionally bad" in that
"it would unduly discriminate against taxpayers who had paid in favor of delinquent taxpayers."

The remission of taxes due and payable to the exclusion of taxes already collected does not constitute
unfair discrimination. Each set of taxes is a class by itself, and the law would be open to attack as class
legislation only if all taxpayers belonging to one class were not treated alike. They are not.

As to the justice of the measure, the confinement of the condonation to deliquent taxes was not without
good reason. The property owners who had paid their taxes before liberation and those who had not were
not on the same footing on the need of material relief. It is true that the ravages and devastations wrought
by was operations had rendered the bulk of the people destitute or impoverished and that it was this
situation which prompted the passage of Commonwealth Act No. 703. But it is also true that the taxpayers
who had been in arrears in their obligation would have to satisfy their liability with genuine currency,
while the taxes paid during the occupation had been satisfied in Japanese military notes, many of them
at a time when those notes were well-nigh worthless. To refund those taxes with the restored currency,
even if the Government could afford to do so, would be unduly to enrich many of the payers at a greater
expense to the people at large. What is more, the process of refunding would entail a tremendous amount
of work and difficulties, what with the destruction of tax records and the great number of claimants who
would take advantage of such grace.

It is said that the plaintiff's check was in the nature of deposit, held trust by the City Treasurer, and that
for this reason, plaintiff's taxes are to be regarded as still due and payable. This argument is well taken
but only to the extent of P1,868.92. The amount of P341.60 as early as February 20, 1942, had been
applied to the second half of plaintiff's 1941 tax and become part of the general funds of the city treasury.
From that date that tax was legally and actually paid and settled.

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