G.R. No. L-33052 - Quimpo vs. Mendoza

Case Summary (G.R. No. L-33052)

Factual Background

Angel R. Quimpo owned a building in Cagayan de Oro assessed at P20,000 for 1969 under Tax Declaration No. 2102, with the annual realty tax fixed at P400.00. Under the amendment effected by R.A. 5447, the basic and additional property tax became due in four equal installments of P100.00, payable on or before March 31, June 30, September 30, and December 31. Petitioner paid the first three installments totaling P300.00 on time. On August 27, 1970 petitioner tendered P124.00 to Leoncio Mendoza, which he computed as P100.00 for the last installment plus P24.00 as penalty. The Treasurer refused and demanded P196.00, asserting penalty computation on the original tax of P400.00 pursuant to Sec. 42, R.A. 521 and Provincial Circular No. 18-64 dated July 17, 1964. Petitioner deposited P124.00 by consignation with the Clerk of Court on September 2, 1970 and filed an action for mandamus and damages seeking acceptance of P124.00, issuance of official receipt and tax clearance, declaration that the Treasurer’s imposition was illegal, and damages totaling P12,000.00.

Lower Court Proceedings

The Court of First Instance dismissed the petition against Leoncio Mendoza, relying on the principle in Padilla vs. City of Pasay. The lower court reasoned that the real estate tax is a single annual tax due on a specified date, and that installment privileges do not alter the rule that delinquency and penalty compute on the original tax from the statutory due date. The trial court thus computed petitioner’s penalty at two percent per month on P400.00 for the period April 1969 to July 1970, producing a penalty of P96.00. The lower court also held that it lacked jurisdiction because petitioner had not paid the contested tax under protest as required by Sec. 58(b), R.A. 521. The court denied damages on the ground that any error by the Treasurer arose from an honest interpretation of the law.

Issues Presented

The Supreme Court distilled the controversies into three principal assignments of error: whether under Sec. 4, R.A. 5447 the installments have a single due date or are payable in four separate installments with distinct due dates; whether the taxpayer must first pay the penalty under protest before maintaining a suit challenging imposition of the penalty under Sec. 58(b), R.A. 521; and whether the Treasurer’s erroneous interpretation, if any, precluded the award of damages.

Parties’ Contentions

Petitioner argued that R.A. 5447 expressly made the basic and additional property tax due and payable in four equal installments on specified dates and that the penalty should therefore be computed on the delinquent installment only. Petitioner further asserted that the requirement to pay a tax “under protest” did not extend to penal charges and that he had tendered payment in good faith prior to suit. The Treasurer and the trial court relied on Padilla to maintain that the statute contemplates one tax due date and that penalties must be computed on the original tax due; the Treasurer also invoked municipal procedural requirements including the protest payment provision.

Legal Analysis on Installment Due Dates and Penalty Basis

The Court examined the text and relationship of R.A. 521 and R.A. 5447. R.A. 521, as originally worded, set a single due date for the annual real estate tax and provided an option to pay in two installments, while prescribing that penalties be computed “on the amount of the original tax due.” R.A. 5447 subsequently declared that the basic and additional property tax “shall be due and payable in four equal installments” with specified quarterly cut-off dates. The Court held that R.A. 5447 altered the payment scheme by mandating four statutory installment due dates and that, as to the fourth installment, delinquency begins only after December 31 and hence penalty should commence on January 1 following the taxable year. The Court rejected the extension of the rule in Padilla to the post-R.A. 5447 regime because Padilla applied to a different statutory scheme in force prior to R.A. 5447.

Legal Analysis on the Measure of Penalty

The Court addressed the textual gap that R.A. 5447 did not expressly amend the penalty provision of Sec. 42, R.A. 521, which speaks of penalty on the “original tax due.” The Court adopted the taxpayer-favoring rule of statutory construction in tax matters and held that the penalty must be computed on the amount of the delinquent installment and not on the whole annual tax when the law permits installment payments with distinct statutory due dates. The Court further noted that P.D. No. 464, Sec. 66, enacted in 1974, expressly prescribes penalty on the amount of the delinquent installment and thus confirms the proper measure of penalty in the modern statutory scheme. The Court concluded that Sec. 42, R.A. 521 was to be read as modified by implication so as to conform with the installment regime established by R.A. 5447.

Ruling on the Protest Payment Requirement

The Court considered whether petitioner’s failure to pay the contested charges “under protest” under Sec. 58(b), R.A. 521 deprived courts of jurisdiction. It recognized that the phrase “tax assessed” in Section 58(b) reasonably denotes the tax proper and not surcharges or penalties. The Court invoked Collector of Internal Revenue vs. Bautista to show that a surcharge is in the nature of a penalty and not a tax per se. Considering petitioner’s apparent good faith, his prior tender of payment, and the fact that the Treasurer also erred in law, the Court held that the procedural bar of Section 58(b) did not extinguish the court’s authority to entertain the suit challenging the penal charge. The Court observed that the Treasurer’s proper recourse to recover any unpaid balance lay in enforcement measures provided by Sec. 43, R.A. 521, including authenticated certificate and seizure after the statutory period.

Ruling on Damages

The Court found that petitioner was not entitled to actual, moral, or exemplary damages. The Court agreed with the lower court that the Treasurer’s interpretation of the statutes did not show bad faith. The Court cited Cabungcal, et al. vs. Mayor Cordova and Gustilo for the proposition that an erroneous interpretation of an ordinance or statute does not ipso f

Case Syllabus (G.R. No. L-33052)

Parties and Procedural Posture

Angel R. Quimpo was the petitioner who filed an action for mandamus and damages against Leoncio Mendoza, as City Treasurer of Cagayan de Oro, in his official and personal capacities, and named Judge Bernardo Teves as respondent in connection with the dismissal by the trial court.
The trial court, Branch IV of the Court of First Instance of Misamis Oriental, dismissed the complaint and relied on Padilla vs. City of Pasay and City Treasurer (L-24039, June 29, 1968, 23 SCRA 1349) and on the charter provisions of R.A. 521.
The petitioner sought review by certiorari in the Supreme Court challenging the trial court's rulings on the computation of delinquency penalty and the alleged requirement to pay under protest before suing.

Key Factual Allegations

Petitioner owned a building assessed at P20,000.00 for 1969 under Tax Declaration No. 2102, with an annual realty tax of P400.00 payable in four equal installments under R.A. 5447.
Petitioner timely paid the first three installments totaling P300.00 and tendered P124.00 on August 27, 1970, which he computed to cover the P100.00 last installment plus P24.00 penalty.
The City Treasurer refused to accept P124.00 and demanded P196.00, computed as P100.00 plus P96.00 penalty, the latter being two per centum per month on the original P400.00 tax from April 1969 to July 1970 as interpreted by the Treasurer.
Petitioner deposited P124.00 by consignation with the Clerk of Court on September 2, 1970, and filed the instant suit seeking acceptance of payment, issuance of official receipt and tax clearance, declaration of illegality of the Treasurer's penalty computation, and damages totaling P12,000.00.

Statutory Framework

Section 42, R.A. 521 provided that real estate tax was due and payable annually on June 1, allowed payment at the option of the taxpayer in two installments not later than May 31 and October 30, and prescribed a penalty of two per centum for each full month of delinquency on the amount of the original tax due not exceeding twenty-four per centum.
R.A. 5447, second paragraph, Section 4, mandated that the basic and additional property tax shall be due and payable in four equal installments with statutory due dates on or before March 31, June 30, September 30, and December 31 of each year.
P.D. No. 464, Real Property Tax Code, Section 66, provided that failure to pay quarterly installments before expiration thereof shall subject the taxpayer to a penalty of two per centum on the amount of the delinquent tax for each month or fraction thereof, not exceeding twenty-four per centum, and took effect June 1, 1974.
Section 58(b), R.A. 521 provided that no court shall entertain any suit assailing the validity of a tax assessed under the Charter until the taxpayer shall have paid, under protest, the taxes assessed against him.
Section 43, R.A. 521 authorized the city treasurer to issue a certificate of delinquency and to seize personal property for taxes and penalties remaining unpaid ninety days after due date.

Issues Presented

Whether R.A. 5447 converted the annual real property tax into four separate installments with separate due dates so that delinquency and penalty for the last installment begin after December 31.
Whether the penalty for delinquency is to be computed on the original tax due or on the amount of the delinquent installment after the enactment of R.A. 5447.
Whether failure to pay the tax and penalty under protest barred the trial court from entertaining petitioner’s suit under Section 58(b), R.A. 521.
Whether the petitioner was entitled to actual, moral, exemplary damages and attorneys' fees for the Treasurer’s refusal to accept tendered payment.

Contentions of the Parties

Petitioner argued that R.A. 5447 amended R.A. 521 to make the tax due and payable in four specified installments and that any penalty for delinquency must be computed on the delinquent installment rather than on the original tax.
The City Treasurer contended that the penalty should be computed on the original tax due in accordance with Section 42, R.A. 521, as interpreted in Padilla, and