[ G. R. No. 43142. August 26, 1937 ] 64 Phil. 640
[ G. R. No. 43142. August 26, 1937 ]
WEE POCO & CO., INC., PLAINTIFF AND APPELLANT, VS. JUAN POSADAS, JR., COLLECTOR OF INTERNAL REVENUE, DEFENDANT AND APPELLEE. D E C I S I O N
CONCEPCION, J.:
This is an appeal taken from the judgment rendered by the Court of First Instance of Zamboanga, dismissing the complaint filed therein by the herein appellant Wee Poco & Co., Inc., otherwise known in said locality by the name of Chin Tay & Company.
The complaint contained three causes of action. Under the first cause of action, the plaintiff sought of the defendant-appellee Collector of Internal Revenue the refund of the sum of P705 collected by way of execution, which represented the proceeds of the sale of certain properties belonging to the plaintiff to enforce payment of the sum of P2,155.14 demanded of it as merchant’s tax on alleged shipments of goods made from Zamboanga to Hoc Chuan Tay in Cotabato, from January, 1925, to August, 1926. In said first cause of action, the plaintiff likewise demanded payment of the sum of P1,295 as damages from the sale of its distrained properties for P705 which properties, it is alleged, were worth not less than P2,000. In the second cause of action, said plaintiff demanded the refund of the sum of P1,450.14 paid by it under protest, which represented the balance of said tax of P2,156.14, after the distrained properties of the plaintiff had been sold for P705. In the third cause of action, the plaintiff demanded the refund of the sums of P1,996.97 and P485.20 paid by it under protest as merchant’s tax and additional tax, respectively, asking later for the return of both sums amounting to P2,482.17. Said taxes had been demanded of the plaintiff for alleged sales of merchandise worth P59,169.35 which, according to the defendant, had been sent by the former from Zamboanga to Hoc Chuan Tay in Cotabato in the year 1924.
The appellant assigns in its brief seven alleged errors claimed by it to have been committed by the court a quo, and the defendant-appellee, in refuting them, first raises the question that the appellant is not entitled to demand the refund of the sum of P705 (1st cause of action), nor that of P1,450.14 (2d cause of action), for the reason that the former sum was not paid under protest and the refund of both sums was not requested of the defendant before the filing of the complaint.
Section 1579 of the Administrative Code, as amended by Act No. 3685, provides as follows:
“When the validity of any tax is questioned, or its amount disputed, or other question raised as to liability therefor, the person against whom or against whose property the same is sought to be enforced shall pay the tax under instant protest, or upon protest within thirty days, and shall thereupon request the decision of the Collector of Internal Revenue. If the decision of the Collector of Internal Revenue is adverse, or if no decision is made by him within six months from the date when his decision was requested, the taxpayer may proceed, at any time within two years after the payment of the tax to bring an action against the Collector of Internal Revenue for the recovery without interest of the sum alleged to have been illegally collected, the process to be served upon him, upon the provincial treasurer, or upon the officer collecting the tax.”
From the foregoing quotation it is inferred that the fulfillment of two conditions is required before a complaint may be filed for the recovery of the amount paid for the tax in question, to wit: (1) that the protest be made at the time the tax is paid, or within thirty days subsequent thereto, and (2) that the taxpayer request the decision of the Collector of Internal Revenue.
“PROTEST.—The spontaneous declaration made to acquire or keep some right or to prevent an impending damage.” (9 Alcubilla, Diccionario de la Adntinistracion Espanola, page 95.)
“PAYMENT UNDER PROTEST.—One who is called upon to pay an import duty, a tax, subscription, or the like, which he thinks he ought not to be required to pay, but is unwilling to encounter the delay and expense of a lawsuit at that time, pays the sum demanded under protest; * * * (6 Words & Phrases Judicially Defined, page 5745.)
Well then: as to the first cause of action, this court is of the opinion that the requisite of protest can not be demanded with respect to the payment of the sum of P705 on the ground that said sum was not paid directly by the plaintiff corporation, but the collection thereof was effected by the attachment and sale at public auction of some properties belonging to the corporation. It should be noted, however, that the attachment was protested by the plaintiff. Furthermore, inasmuch as the sum of P1,450.14 referred to in the second cause of action, which, together with the sum of P705, completes that of P2.155.14, the total amount of the tax charged and levied on the value of the merchandise allegedly shipped by the plaintiff to Hoc Chuan Tay in Cotabato from January, 1925, to August, 1926, was paid under protest, the protest under these circumstances should be considered to have been made against the payment of the total amount of P2,155.14.
However, the Collector of Internal Revenue contends that the plaintiff not only should have made the payment under protest but should have also demanded of him the refund of the sums referred to in the first and second causes of action, concluding that as it had failed to do so, the present action does not lie.
This court is of the opinion that the contention of the Collector of Internal Revenue is fundamentally supported by law. It has already been seen above that according to section 1579 of the Administrative Code, the law requires two conditions precedent to the filing of an action for the recovery of a tax paid, to wit: the protest and the request to the Collector of Internal Revenue to render his decision. The law has not prescribed these requisites giving the taxpayer the right to choose one or any of the two for compliance therewith, it being presumed that the legislator in requiring them had some purpose in mind, and in fact each of said requisites serves a purpose. The protest is to notify the collector of the taxpayer’s nonconformity to the payment of the tax demanded of him. Without the protest, the taxpayer would have no right to demand the refund of the tax paid, as he would be understood to have paid it voluntarily (Fernandez vs. Shearer, 19 Phil., 75). However, the protest is not sufficient. The law requires the taxpayer to request the decision of the collector, and such requirement is not merely directory but clearly mandatory, as may be inferred from the words: “and shall thereupon request the decision of the Collector of Internal Revenue.” One objection might be interposed herein if we take into consideration what this court stated in the case of onso (46 Phil., 159, 161), to wit:
“Inasmuch as a rule has been established for years in this jurisdiction that a mere protest of record against the payment of an illegal demand, is sufficient to constitute an involuntary payment, and justifies an action for its recovery, we find no reason for invoking the doctrine announced in other jurisdictions.”
However, it is not inferred from the above-quoted doctrine that the protest is the only requisite to be complied with in order to place the taxpayer in a position to bring an action against the government. The question whether or not the taxpayer, before filing his complaint, should request the decision of the Collector of Internal Revenue, has neither been raised nor expressly discussed in said case. Neither is it inferable therefrom that said second requisite is unnecessary because it has been held therein that a mere protest is sufficient, for we should not lose sight of the fact that the above-quoted ruling of this court is the conclusion arrived at by it after passing upon the question raised by the appellant, to wit: “whether or not the payment of same license fees under a mere protest of record is equivalent to an involuntary payment in this jurisdiction, and justifies the bringing of an action for the recovery thereof.” That was the only question decided by this court, that is, whether or not a mere protest of record is sufficient to constitute an involuntary payment.
Taking now into consideration that the protest is entered for the sole purpose of preserving the taxpayer’s right to question the legality of the tax, hence the necessity of later requesting the decision of the Collector of Internal Revenue, and in order that said official may have an opportunity to render a decision with knowledge of the facts of the case, the taxpayer must state in his petition his reasons for questioning the legality of the tax and for demanding the refund of the amount paid by him. Otherwise, if the protest were the only legal condition required by the law, or were sufficient to require the Collector of Internal Revenue to decide the question, we would be imposing upon him a duty impossible to comply with, inasmuch as, with the mere protest which does not specify the grounds thereof, the collector would not know what the taxpayer had in mind when he formulated the same.
The Collector of Internal Revenue, however, does not claim that the appellant should have requested his decision but, according to him, he should have asked for the refund of the sums paid by him under protest. In the last analysis and by their purpose, both requisites are one and the same thing. Section 1579 of the Administrative Code does not require the taxpayer to request the refund of the amount paid as tax but the decision of the collector. The petition for refund is a necessary prerequisite in the United States. There, before the taxpayer can institute a suit for the recovery of a tax, he must appeal to the Commissioner of Internal Revenue so that the latter may decide the question of refund (Rev. Stats., sec. 3226; New York Mail & Newspaper Transp. Co. vs. Anderson [1916], 234 Fed., 590; State Line & S. R. Co. vs. Davis [1915], 228 Fed., 246; Merck vs. Treat [1909], 174 Fed., 388 and others). The requirement of the decision of the Collector of Internal Revenue, demanded in the Philippines, is patterned after the requisite demanded in section 3226 of the Revised Statutes of the United States relative to the appeal or claim for refund addressed to the Commissioner of Internal Revenue, as the decision of the Collector of Internal Revenue required herein in the end has to refer necessarily to the refund of the amount paid by the taxpayer under protest.
In the present case, there is no evidence of record to the effect that before the filing of the complaint, the appellant had requested of the defendant the refund of the sums stated in the first and second causes of action, or the defendant’s decision, after it had made its protest. Failure to comply with this requisite is fatal because it has been repeatedly held that no action for the recovery of a tax paid can be maintained without strictly complying with each and every one of the conditions required by the law to that effect.
“It is settled beyond controversy that the State, which in the eye of the law is recognized as a sovereign, cannot without its consent be sued by a citizen. In case the State, through its legislative department, has granted the right or privilege to claimants to institute actions against it upon certain terms and conditions, all persons seeking to avail themselves of the privilege so granted must accept it subject to the terms and conditions attached thereto or forming part of the right as granted by the State.” (Underscoring ours.) (State vs. Mutual Life Ins. Co., 175 Ind., 59, 71.)
“Statutes permitting the state to be sued are in derogation of its sovereignty and will be strictly construed.” (Underscoring ours.) (Miller vs. Pillsbury, 128 Pac., 327; and Western & Atlantic R. Co. vs. State of Georgia, 14 L. R. A., 438.)
“Before a suit can be commenced to recover taxes erroneously or illegally assessed or collected, * * * an appeal must be made to and a decision rendered by the Commissioner of Internal Revenue.” (Underscoring ours.) (Holmes, Federal Taxes, p. 615; Id., 6th ed., p. 1531.)
“In a recent case the Supreme Court has decided that a claim for refund is necessary as a prerequisite to recovery in the courts, * * *.” (Underscoring ours.) (Holmes, Fed. Taxes, 1921 Supplement, p. 333.)
In this jurisdiction, this court has declared:
“It appears from the record that the plaintiffs not only neglected and failed to take the proceedings required by law for the protection of their interests but also without protest or objection of any kind paid the taxes which they now seek to recover. * * * Not having taken the steps required by law for the protection of their interests, the action can not be maintained.” (Underscoring ours.) (Fernandez vs. Shearer, 19 Phil., 75, 78.)
“The power to tax necessarily carries with it the power to collect the taxes. This being true, the weight of authority supports the proposition that the government may fix the conditions upon which it will consent to litigate the validity of its original taxes.” (Underscoring ours.) (Churchill and Tait vs. Rafferty, 32 Phil., 580, 592.)
“In its final analysis, the letter of April first should be construed as a polite and courteous demand and request for the refund of the tax in question, to be paid at such time as the correct amount was ascertained and determined.” (Underscoring ours.) (Asiatic Petroleum Co. vs. Posadas, 52 Phil., 728, 743.)
Inasmuch as the plaintiff has not strictly complied with the provisions of section 1579 of the Administrative Code, as amended, it is not entitled to recover the sums paid as merchant’s tax referred to in the first and second causes of action of its amended complaint.
With respect to the sum of P1,295, claimed as damages in the first cause of action, no evidence has been adduced by the plaintiff in support of said claim. The court, in its judgment, has made no reference thereto and the plaintiff itself has made no assignment of error on this point.
With respect to the third cause of action, it has been established and the appellee admits that the plaintiff paid under protest the sum of P2,482.17, and asked of the defendant-appellee for the refund thereof.
The defendant demanded payment and collected the sum of P1,996.97, together with P485.20, or a total amount of P2,482.17, as merchant’s tax on merchandise claimed by him to have been sold and shipped by the plaintiff to Hoc Chuan Tay in Cotabato in the year 1924. It is admitted by the defendant in his brief that of the sum of P2,482.17 in question, he should and is willing to refund f=246.59.
The evidence shows that Hoc Tay Chan was a branch of the plaintiff in Cotabato. The license for said branch was obtained and paid for on April 19, 1924, in the name of the plaintiff because the latter was the owner of the merchandise sold in the store named Hoc Tay Chan. The license was renewed in 1925 and the business was continued until July 31, 1925, when the plaintiff closed said store, keeping the merchandise left therein in the upper floor of the building occupied by it in Cotabato up to the time said merchandise was combined with that of Hoc Chuan Tay, another branch of said plaintiff. For the sales made by the plaintiff in said branch named Hoc Tay Chan, it paid the taxes corresponding to the second, third and fourth quarters of 1924 and to the first and second quarters of 1925.
The defendant, in demanding of the plaintiff the payment of the sum the refund of which is sought in the third cause of action, mistook the plaintiff’s branch Hoc Tay Chan for the firm Hoc Chuan Tay. The evidence, however, affords no room for doubt that Hoc Tay Chan is a branch different from Hoc Chuan Tay. Included in the evidence presented by the plaintiff are Exhibit BBB, page 281, and Exhibit BBB, page 282; of the bundle of exhibits. Exhibit BBB (page 281) is an information dated October 23, 1931, for estafa through falsification of mercantile documents, filed in the Court of First Instance of Zamboanga against Dalmacio Wee Guevara, manager of the plaintiff corporation, alleging that said Guevara had falsified a book of account by inserting therein the words “Wee Poco & Co., Branch” with a view to defrauding the government in the payment of the tax of P2,155.14 (1st cause of action). Exhibit BBB (page 282) is the judgment rendered on April 19, 1932, that is, after the complaint in this case had already been filed, acquitting the accused and making a statement of facts as follows:
“That Wee Poco & Co., Inc. (the herein plaintiff and appellant) began to operate in Zamboanga prior to July 11, 1924, and in the course of its business, it established a branch in the municipality of Cotabato of the Province of the same name, which branch was known by the name of Hoc Tay Chan; that about said date, July 11, 1924, another firm Hoc Chuan Tay was likewise established in Cotabato, said firm Hoc Chuan Tay having been constituted by the majority of the partners or capitalists of Wee Poco & Co., Inc. * * *.” (Underscoring ours.)
There is no room for doubt that Hoc Tay Chan was a branch of the plaintiff-appellant for the transactions of which the latter paid not only the license but also the merchant’s tax.
The appellee contends that the judgment rendered in the case against Guevara is inadmissible as evidence in the present case. But if it is taken into consideration that Guevara was charged in said case as manager, and for being manager of the herein plaintiff-appellant Wee Poco & Co., Inc., precisely in connection with a book of account in which the falsification is alleged to have been committed for the purpose of defrauding the government in the payment of the tax the refund of which is the subject matter of the first cause of action; if it is taken into consideration that the prosecution was conducted by the government with the continuous collaboration and help of the agents of the herein defendant, Collector of Internal Revenue, so that in fact and in truth the real parties in said criminal case are the same as in this case, the facts involved in both cases being, on the other hand, identical, this court is of the opinion that the judgment rendered in said other case is perfectly admissible in this case.
“A record in a criminal action cannot be admitted in a civil action except by way of inducement or to show a collateral fact. The rule might be different if the party in the civil action had control over the proceedings in the criminal action as by showing that the party in the civil action supplied the lawyer for the accused in the criminal action.” (Underscoring ours.) (City of Manila vs. Manila Electric Co., 52 Phil., 586.)
“It is also a most obvious principle of justice, that no man ought to be bound by proceedings to which he was a stranger; but the converse of this rule is equally true, that by proceedings to which he was not a stranger he may well be held bound. Under the term parties, in this connection, the law includes all who are directly interested in the subject matter, and had a right to make defense, or to control the proceedings, and to appeal from the judgment.” (Underscoring ours.) (1 Greenleaf, 7th ed., p. 656.)
“Judgments, whatever, are conclusive proof, as against all persons, of the existence of that state of things which they actually effect, when the existence of the state of things so effected is a fact in issue, or is, or is deemed to be, relevant to the issue.” (Steph. Ev., art. 40; Dorrell vs. State, 85 Ind., 357.)
For all the foregoing, the judgment is affirmed as to the first and second causes of action, and reversed as to the third, and by virtue thereof, the appellee is ordered to refund to the appellant, without interest, the sum of P2,235.58. The appealed judgment is likewise affirmed in so far as it orders the defendant to return to the plaintiff the sum of P246.59, without special pronouncement as to the costs. So ordered.
Avancena, C. J., and Abad Santos, J., concur.