Case Digest (G.R. No. 16014)
Facts:
The case involves the Bank of the Philippine Islands as the plaintiff and appellant, and Wenceslao Trinidad, the Collector of Internal Revenue, as the defendant and appellee. The events leading to the case began on July 13, 1916, when the defendant, through an authorized agent in Zamboanga, seized certain personal property belonging to the plaintiff. This property consisted of machinery used for sawing lumber, which was specifically detailed in the complaint. The seizure was executed to recover the amount of P2,159.79, which was claimed to be due to the government from Pujalte & Co. as forestry charges. The defendant asserted that the machinery belonged to Pujalte & Co. and was used in the business for which the taxes were owed, thus making it liable for seizure. Conversely, the plaintiff contended that it was the rightful owner of the machinery and demanded its release. When the demand was denied, the plaintiff paid the amount under protest to prevent the sale of the...
Case Digest (G.R. No. 16014)
Facts:
- Seizure of Property: On July 13, 1916, the defendant, Wenceslao Trinidad, Collector of Internal Revenue, seized and distrained certain personal property (machinery for sawing lumber) belonging to Pujalte & Co. to cover forestry charges amounting to P2,159.79.
- Ownership Claim: The plaintiff, Bank of the Philippine Islands (BPI), claimed ownership of the seized property, asserting it was covered by a chattel mortgage executed by Taba Saw Mill Co. (a partnership involving Pujalte & Co. and Ramon Murga) on September 26, 1912. The mortgage was registered on December 26, 1912.
- Payment Under Protest: To prevent the sale of the property, BPI paid the P2,159.79 under protest and filed a lawsuit to recover the amount, along with interest and costs.
- Lower Court Decision: The Court of First Instance of Zamboanga dismissed BPI’s complaint, ruling that BPI voluntarily paid the debt of Pujalte & Co. and should have proceeded under Section 141 of Act No. 2339 (recovery of forfeited property) instead of Section 140 (recovery of tax paid under protest).
Issue:
- Whether BPI had the right to recover the amount paid under protest to the Collector of Internal Revenue.
- Whether the seized property, covered by a chattel mortgage, could be held liable for the forestry charges owed by Pujalte & Co.
- Whether the lower court erred in dismissing BPI’s complaint and absolving the defendant.
Ruling:
The Supreme Court reversed the lower court’s decision and ruled in favor of BPI. The Court held:
- BPI did not voluntarily pay the debt of Pujalte & Co. but paid under protest to protect its property.
- The property seized was covered by a valid and subsisting chattel mortgage, making BPI the legal owner of the property at the time of seizure.
- The property, owned by BPI, could not be held liable for the forestry charges owed by Pujalte & Co., as the lien under Section 149 of Act No. 2339 applies only to property owned by the taxpayer.
Ratio:
- Payment Under Protest: Section 140 of Act No. 2339 allows a taxpayer to pay under protest and recover the amount if the tax is found to be illegal. BPI complied with this provision.
- Chattel Mortgage Ownership: A chattel mortgage transfers dominion over the property to the mortgagee (BPI) upon registration. Thus, BPI, not Pujalte & Co., was the legal owner of the property at the time of seizure.
- Tax Lien on Third-Party Property: A tax lien under Section 149 of Act No. 2339 applies only to property owned by the taxpayer. It cannot extend to property owned by an innocent third party, such as BPI.
- Forfeiture vs. Tax Lien: The seizure was to enforce a tax lien, not a forfeiture. Forfeiture involves divestiture of property without compensation due to an offense, which was not the case here.
The Supreme Court ordered the defendant to refund P2,159.79 to BPI, with legal interest from July 13, 1916.