4"SARSOLA"V.

"TRINIDAD"&"CIR"(1919)"
Power!of!Taxation!is!Legislative!
!
FACTS:""
The! purpose! of! this! complaint! is! to! have! an! injunction! issued! to! restrain! the! defendant,! the! Collector! of! Internal!
Revenue,!from!the!alleged!illegal!collection!of!taxes!in!the!amount!of!P11,739.29.!
!
CIR!interposed!a!demurrer!to!the!complaint,!based!on!two!grounds,!namely:!(1)!that!the!court!had!no!jurisdiction!of!
the!subject!matter!of!the!action!because"of"the"provisions"of"section"1578"of"the"Administrative"Code"of"1917!and!
(2)!that!the!facts!stated!in!the!complaint!did!not!entitle!the!plaintiff!to!the!relief!demanded.!!
!
CFI! Judge! sustained! demurrer! and! held! that:! according! to! jurisprudence,! the! fact! that! section" 1579" of" the"
Administrative"Code"of"1917"disallows!interest!on!the!internal!revenue!taxes!recovered!back!is!hardly!sufficient!to!
vary!the!rule."!!
!
ISSUE:!Constitutionality!of!sections!1578"and"1579"of"the"Administrative"Code!of!1917?!
SEC." 1578.! 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.!!
SEC." 1579.! Recovery! of! tax! paid! under! protest.! ! 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!ten!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.!
!
SARSOLA"(PLAINTIFFS"ARGUMENT):"
SARSOLA!claims!that!he!should!still!be!granted!interest!(even!if!1579!says!without!interest)!because!the!law!provides!
an! insufficient! remedy! (or! has! caused! him! irreparable! injury).! He! argues! that! [the! taxes! were! completely! illegal!
because]!he!was!not!engaged!in!the!business!of!a!commission!merchant!in!the!city!of!Manila,!and!so!was!not!liable!to!
the!payment!of!a!tax!as!such.!
!
HELD:"
1579%without%Interest%is%valid.%
1.! In%Tax,%whatever%determination%arrived%at%by%Legislature%should%not%be%interfered%with,%unless%there%be%a%
clear%violation%of%some%constitutional%inhibition.%
We!first!look!at!the!right!to!interest.!It!is!well!settled!both!on!principle!and!authority!that!interest!is!not!to!be!awarded!
against!a!sovereign!government,!as!the!United!States!or!a!State,!unless!its!consent!has!been!manifested!by!an!Act!of!
its!Legislature!or!by!a!lawful!contract!of!its!executive!officers.!If!there!be!doubt!upon!the!subject,!that!doubt!must!be!
resolved!in!favor!of!the!State.!Interest!is!only!payable!by!statute!or!by!contract.!The!State!never!pays!interest!unless!
she!expressly!engages!to!do!so.!Judge!Cooley!says!that!"The!recovery!(in!tax!suits)!must!be!limited!
to!the!money!received!Interest!is!recoverable!only!when!expressly!allowed!by!statute."!Thus,!taxes!only!draw!interest!
as!do!sums!of!money!when!expressly!authorized.!
!
It!has!been!urged!that!since!interest!is!in!the!nature!of!damages,!it!is!proper!for!allowance.!While!this!may!be!true!in!
the!general!run!of!cases,!it!is"not"necessary"true"when"the"sovereign"power!is!concerned.!The!state!is!not!amenable!
to!judgments!for!damages!or!costs!without!its!consent.!!
!
His!right!was!to!collect!such!damages!as!the!State,!in!its!discretion,!provided!should!be!paid!by!defendant!who!should!
fail! to! promptly! pay! judgments! which! should! be! entered! against! them,! and! such! right! has! not! been! destroyed! or!
interfered!with!by!legislation.!The!discretion!exercised!by!the!legislature!in!prescribing!what,!if!any,!damages!
shall!be!paid!by!way!of!compensation!for!delay!in!the!payment!of!judgments!is!based!on!reasons!of!public!
policy,!and!is!altogether!outside!the!sphere!of!private!contracts.!
!

!
2.! The%only%way%to%justify%granting%of%interest%is%if%the%tax%caused%Irreparable%Injury,%which%it%did%not.%
The!broad!principle!is!that!every!taxpayer!has!a!right!to!a!remedy!for!any!actual!wrong!he!may!have!suffered!in!the!
collection!of!taxes.!An!exceptional!circumstance!which!serves!to!take!cases!out!of!the!general!rule!comes!under!the!
head!of!irreparable!injury.!Irreparable!injury!was!remarked!that!there!can!be!no!case!of!equitable!cognizance.!Sarsolas!
situation!is!not!what!is!known!to!the!law!as!irreparable!injury.!The!courts!have!never!recognized!the!
consequences!of!the!mere!enforcement!of!a!money!demand!as!falling!within!that!category!
!
Our!statute,!it!will!be!remembered,!not!only!does!not!authorize!interest!but!negatives!the!payment!of!interest.!While,!
therefore,!coming!under!the!purview!of!the!general!principle!pertaining!to!legislative!discretion,!it!also!avoids!any!
trouble!to!be!found!in!those!decisions!which!allow!interest!without!any!express!provision!on!the!subject,!because!the!
statute!provides!that!interest!shall!not!be!allowed.!From!whatever!direction!we!look!at!the!subject,!therefore,!we!
reach!either!the!conclusion"that"the"law"is"valid,"or"that"the"plaintiff"has"not"proven"such"a"case"of"irreparable"injury"
as"would"warrant"the"issuance"of"the"extraordinary"writ"of"injunction.!
!
!
DOCTRINE"(Ampil:(A(doctrine(is(only(1(sentence.(Rephrase.(Breath.):(
(she(copied(this(whole(part(in(her(book(so,(it(is(important)!
Public! policy! decrees! that,! since! upon! the! prompt" collection" of" revenue! there" depends" the" very" existence" of"
government" itself,! whatever" determination" shall" be" arrived" at" by" the" Legislature" should" not" be" interfered" with,"
unless"there"be"a"clear"violation"of"some"constitutional"inhibition.!As!said!in!Dows!vs.!The!City!of!Chicago,!supra,!"It!
is!upon!taxation!that!the!several!states!chiefly!rely!to!obtain!the!means!to!carry!on!their!respective!governments,!and!
it!is!of!the!utmost!importance!to!all!of!them!that!the!modes!adopted!to!enforce!the!taxes!levied!should!be!interfered!
with!as!little!as!possible.!Any"delay"in"the"proceedings"of"the"officers,"upon"whom"the"duty"is"devolved"of"collecting"
the"taxes,"may"derange"the"operations"of"government,!and!thereby!cause!serious!detriment!to!the!public."!Or!as!said!
in!Snyder!vs.!Marks,!supra,!"The!system!prescribed!by!the!United!States!in!regard!to!both!customs!duties!and!internal!
revenue! taxes,! of! stringent! measures,! not! judicial,! to! collect! them,! with! appeals! to! specified! tribunals! and! suits! to!
recover!back!moneys!illegally!exacted,!was!a!system!of!corrective!justice,!intended!to!be!complete!and!enacted!under!
the!right!belonging!to!the!Government,!to!prescribe!the!conditions!on!which!it!would!subject!itself!to!the!judgment!of!
the!courts!in!the!collection!of!its!revenues."!Or!as!said!in!Tennesse!vs.!Sneed,!supra,!"The"Government"may"fix"the"
conditions"upon"which"it"will"consent"to"litigate"the"validity"of"its"original"taxes."!Or!as!said!in!a!New!York!case,!"The!
power!of!taxation!being!legislative,!all!the!incidents!are!within!the!control!of!the!Legislature."!Or!as!said!by!Chief!Justice!
Marshall!in!McCulloch!vs.!Maryland,!supra,!"The!people!of!a!state!give!to!their!government!a!right!of!taxing!themselves!
and!their!property,!and!as!the!exigencies!of!the!Government!cannot!be!limited,!they!prescribe!no!limit!to!the!exercise!
of!this!right,!resting!confidently!on!the!interest!of!the!legislator!and!on!the!influence!of!the!constituents!over!their!
representatives,!to!guard!themselves!against!its!abuse."!
!