David v.

Ramos and Castro

October 31, 1951 | Jugo, J. | Injunction to Restrain Collection of Taxes

SUMMARY: Maria B. Castro filed in the CFI of Manila a complaint for preliminary
injunction against Collector of Internal Revenue (Saturnino David) to enjoin the CIR from
proceeding with the sale of her properties to satisfy the war profits tax assessed against
her. The CIR alleged that the CFI has no jurisdiction to entertain the complaint nor to
issue a temporary or permanent writ of injunction to restrain the collection of the war
profits tax. The lower court declared that the court had authority to proceed with the
case, but denied the petition of Maria B. Castro for a preliminary injunction. The CIR
then proceeded with the distraint, levy and sale at a public auction of the properties of
Maria B. Castro. Saturnino David filed a petition for certiorari, prohibition, and injunction
arguing that the CFI has no jurisdiction to restrain the collection of taxes, the remedy
being to pay and sue for recovery. The Collector prays for a preliminary injunction,
pending the decision of this case and to restrain the respondent Judge from proceeding
with the hearing of Civil Case in CFI Manila.

DOCTRINE: no suit for enjoining the collection of a tax, disputed or undisputed, can be
brought, the remedy being to pay the tax first, formerly under protest and now without
need of protest, file the claim with the Collector, and if he denies it, bring an action for
recovery against him.

FACTS:
1. The respondent Maria B. Castro filed in the CFI of Manila a complaint against
Collector of Internal Revenue (Saturnino David), alleging that: (a) she had been
acquitted in a criminal case for non-payment of the war profit tax for insufficiency
of evidence; (b) that despite her acquittal, the CIR announced that respondent’s
properties would be sold at public to satisfy the war profits tax assessed against
her.
2. Respondent prayed for a preliminary injunction to enjoin the CIR from proceeding
with the sale.
3. The Collector of Internal Revenue alleged as special defenses that: (a) CFI had
no jurisdiction to entertain the complaint nor to issue a temporary or permanent
writ of injunction to restrain the collection of the war profits tax; (b) that the
plaintiff had an adequate remedy by first paying the tax and suing for its
recovery; (c) that the criminal case was dismissed with consent of the defendant;
(d) that the witness Felipe Aquino testified that a larger amount than that stated
in the information in the criminal case was due from Maria B. Castro; and (e) that
there had been res judicata.
4. The lower court declared that the court had authority to proceed with the case,
but denied the petition of Maria B. Castro for a preliminary injunction.
5. The CIR then proceeded with the distraint, levy and sale at a public auction of the
properties of Maria B. Castro.
6. Saturnino David filed a petition for certiorari, prohibition, and injunction arguing
that the CFI has no jurisdiction to restrain the collection of taxes, the remedy
being to pay and sue for recovery.
7. The Collector prays for a preliminary injunction, pending the decision of this case
and to restrain the respondent Judge from proceeding with the hearing of Civil
Case in CFI Manila.

ISSUE: WON a suit for enjoining the collection of a disputed tax (injunction to restrain
collection of taxes) can be filed without paying the assessed tax first. NO.

RULES:
SEC. 9 of Republic Act No. 55 (War Profits Tax Law). Administrative Remedies.—
All administrative, special and general provisions of law including the laws in relation to
the assessment, remission, collection and refund of national internal revenue taxes, not
inconsistent with the provisions of this Act, are hereby extended and made applicable to
all the provisions of this law, and to the tax herein imposed.

SEC. 305 (NIRC). Injunction not available to restrain collection of tax.—No court
shall have authority to grant an injunction to restrain the collection of any internal-
revenue tax, fee, or charge imposed by this Code.

SEC. 306 (NIRC). Recovery of the tax erroneously or illegally collected.—No suit or
proceeding shall be maintained in any court for the recovery of any national internal-
revenue tax hereafter alleged to have been erroneously or illegally assessed or collected
or of any penalty claimed to have been excessive or in any manner wrongfully collected,
until a claim for refund or credit has been duly filed with the Collector of Internal
Revenue; but such suit or proceeding may be maintained, whether or not such tax,
penalty or sum has been paid under protest or duress. In any case, no such suit or
proceeding shall be begun after the expiration of two years from the date of payment of
the tax or penalty.

RATIO:
1. It is clear that the word "tax", as used in said section 305, means a tax even if it
is disputed by the taxpayer, for otherwise it would be sufficient to dispute a tax in
order to take it out from the provisions of said section, rendering them practically
nugatory.
2. It has been the uniform holding of the Court that no suit for enjoining the
collection of a tax, disputed or undisputed, can be brought, the remedy being to
pay the tax first, formerly under protest and now without need of protest, file the
claim with the Collector, and if he denies it, bring an action for recovery against
him.
3. The respondent cited some cases in the United States in which the principle that
the collection of taxes should not be restrained by injunction has been found
subject to certain exceptions. It has never held the rule to be absolute, but has
repeatedly indicated that extraordinary and exceptional circumstances render its
provisions inapplicable.
4. In the case at bar, it has not been that extra-ordinary and exceptional
circumstances exist so as to take this case out of the rule.
5. It should be borne in mind that under the New Deal established by President
Franklin D. Roosevelt in the United States, numerous cases have arisen
regarding the validity of taxes in which extraordinary and exceptional
circumstances have been found to exist. In the Philippines no extraordinary and
exceptional circumstances of the magnitude of those occurring in the United
States have existed. On the whole it is believed that Court should not disrupt the
regular procedure prescribed by our laws, as uniformly construed by our courts.

DISPOSITIVE: CFI of Manila is declared without jurisdiction to proceed with the trial of
Civil Case No. 12356, and its order dated November 8, 1950, in so far as it orders the
continuation of the proceedings, is set aside. With costs against the respondents.