G.R. No. 193516 - Macedonio vs. Ramo

Plaintiff Gregorio Sarasola filed the complaint seeking an injunction against the defendant, Wenceslao Trinidad, Collector of Internal Revenue of the Philippine Islands.
The injunction aimed to restrain the alleged illegal collection of taxes amounting to ₱11,739.29.

The court lacked jurisdiction over the subject matter because of Section 1578 of the Administrative Code of 1917.
The facts stated in the complaint did not legally entitle the plaintiff to the relief sought.

Judge James A. Ostrand of the Court of First Instance sustained the demurrer, relying on prior precedent from Churchill and Tait vs. Rafferty, emphasizing that the statutory prohibition in Section 1578 controlled the matter.

The plaintiff appealed from the final order dismissing the complaint, a dismissal that did not include a finding on costs.
Both parties referred to the decision in Churchill and Tait vs. Rafferty as persuasive authority, yet the Supreme Court resolved to address the issues independently.

Section 1578 expressly prohibits any court from granting an injunction to restrain the collection of internal-revenue taxes.
Section 1579 provides a remedy: if a taxpayer pays the disputed tax under protest, they may later initiate an action for the recovery of the illegally collected sum without interest, subject to certain conditions and time limits.

The inclusion of the phrase “without interest” was a significant point of contention in determining the adequacy of the taxpayer’s legal remedy.

The statute was an expression of the equity rule that should not close the door to equitable relief when the legal remedy is inadequate.
Equitable jurisdiction to issue writs should not be curtailed by local statutory provisions.
The legal remedy provided was grossly inadequate and the injury irreparable.

The Attorney-General argued that the central question was the constitutionality of the prohibition on injunctions to restrain tax collection and the disallowance of interest on recovered taxes.
The decision made extensive reference to prevailing tax doctrines and a host of American and Philippine cases, emphasizing that taxation is an exercise of sovereign power and that legislative remedies, including the method for recovery of taxes “without interest,” are a matter of public policy and legislative discretion.

Whether the Court of First Instance had jurisdiction to entertain an action seeking to enjoin the collection of internal-revenue taxes in light of Section 1578 of the Administrative Code of 1917.
Whether the plaintiff’s claim that the legal remedy was inadequate warranted an equitable remedy (injunction).

Whether Sections 1578 and 1579 of the Administrative Code of 1917, by disallowing the collection of interest and restricting injunctive relief, were constitutional.
Whether the addition of the phrase “without interest” in the statute deprived the taxpayer of an adequate remedy such that judicial intervention (through an injunction) was justified.

The extent to which previous decisions, including Churchill and Tait vs. Rafferty and various U.S. precedents, controlled the present case.
Whether the unique circumstances of the taxpayer’s situation—particularly the inability to pay the tax under protest and alleged irreparable injury—could override the statutory scheme.

Whether the courts have the authority to issue equitable relief in matters of tax collection that are predominantly regulated by statutory schemes designed by the legislature.
Whether interference with the collection of a tax, a sovereign function, would cause undue disruption to government financial operations.