ALTERNATIVE REMEDIES - Doreena Pauline v.

aranal

DISTRAINT

It is a remedy whereby the collection of delinquent taxes is enforced on the goods, chattels or effects and other personal
property of whatever character of the taxpayer, including stocks and other securities, debts, credits, bank accounts and
interests in and rights to personal property.

Two kinds of Distraint:

1. Actual Distraint

2. Constructive Distraint

ACTUAL DISTRAINT

• Is resorted to when at the time required for payment, a person fails to pay his delinquent tax obligation.

• It consists in the actual seizure and taking possession of personal property of the taxpayer.

CONSTRUCTIVE DISTRAINT

• Is issued where no actual tax delinquency of the taxpayer is necessary before the same is resorted to by
government.

• It is a preventive remedy to forestall hiding or possible dissipation of the taxpayer’s assets when tax deliquency
takes place.

The Constructive Distraint may be availed of:

1. When a delinquent taxpayer or any taxpayer who, in the opinion of the CIR, is retiring from any business subject
to tax; or

2. When the taxpayer intends to leave the Philippines; or

3. When the taxpayer removes, hides, or conceals his property therefrom; or

4. When the taxpayer performs any act tending to obstruct the proceedings for collecting the tax due or which may
be due from him

Constructive Distraint shall be effected:

1. By requiring the taxpayer or any person having possession or control of such property to sign a receipt covering
the property distrained; and

2. Obligate himself to preserve the same intact and unaltered and not to dispose of the same in any manner
whatever without the express authority of the CIR

In case the taxpayer or the person refuses or fails to sign the receipt:

1. The Revenue Officer effecting the constructive distraint shall proceed to prepare a list of such property; and

2. In the presence of two(2) witnesses, leave a copy thereof in the premises where the property distraint is located

LEVY

It is the remedy whereby the collection of delinquent taxes is enforced on the real property belonging to the delinquent
taxpayer.

PROCEDURE for DISTRAINT and LEVY

Delinquent taxpayer fails to pay on time.

i. If the delinquent tax is more than P1M, CIR seizes sufficient personal property to satisfy the tax, charge and
expenses of seizure.
ii. If the delinquent tax is not more than P1M, Revenue District Officer seizes sufficient personal property to
satisfy the tax, charge and expenses of seizure.
 The distraining officer accounts for the goods distrained.

RDO posts notice in at least two (2) public places in the municipality/city where the distraint is made. One place of
posting must be at the mayor’s office. Time of the sale shall not be less than twenty (20) days after the notice.

Goods shall be restored to owner if charges are paid. Otherwise, officer conducts public auction.

The distrianing officer shall make or cause to be made an account of the goods, chattels, effects, or other personal
property distrained within ten(10) days from receipt of the warrant.

 A copy of such report, signed by levying officer, shall be left either:

 with the owner or person from whose possession the personal properties were taken; or

 At the dwelling or place of business of such person and with someone of suitable age and discretion

 A note stating the following shall be added to the list:

 A statement of the sum demanded; and

 Time and place of sale

 Stocks and other securities:

 By serving a copy of the warrant of distraint upon the taxpayer; and

 Upon the president, manager, treasurer, or other responsible officer of the corporation, company, or
association, which issued the said stocks or securities.

 Debts and credits:

 By leaving a copy of the warrant of distraint with the person owing the debts; or

 Having in his possession or under his control such credits, or with his agent.

 Bank Accounts:

 By serving a warrant of distraint upon the taxpayer; and

 Upon the president, manager, treasurer, or other responsible officer of the bank.

 Sugar Quota:

 Is a real property. Hence, subject for levy not distraint.

If the bid is not equal to the amount of tax or very much less than the fair market value of goods distrained, the CIR may
purchase property for the National Government. The property may be resold and the net proceeds shall be remitted to
the National Treasury as internal revenue.

If the bid is just right, the officer sells the goods to the highest bidder for cash or, with the CIR’s approval, through
commodity/stock exchanges.

 In the case of stock and other securities, the officer making the sale shall:

 Execute a bill of sale;

 Deliver to the buyer;

 Copy furnished to the corporation, company, or association which issued the stocks or other securities.
  Upon receipt of the copy of the bill of sale, the corporation, company, or association shall:

a. make the corresponding entry in its books;

b. transfer the stocks or other securities sold in the name of the buyer;

c. issue, if required to do so, the corresponding certificates of stocks or other securities.

Excess proceeds over the entire claim shall be returned to the owner. No charge shall be imposed for the services of the
officer.

Within two (2) days after the sale, officer shall report to the CIR. Within five (5) days after sale, distraining officer shall
enter return proceedings in the record of Revenue Collection Officer, RDO, and Revenue Regional Director.

Real Property may be levied on before, simultaneously, or after the distraint of personal property.

Internal Revenue officer designated by the CIR, shall prepare a certificate with the force of a nationwide legal execution.

Levy shall be effected by writing upon said certificate a description of the property. Notice of the levy shall be served
upon the Register of Deeds of LGU where the property is located and upon the owner.

Within ten (10) days after receipt of the warrant, levying officer shall report to the CIR who shall have the authority to
loft the warrant of levy.

Within twenty (20) days after levy, officer shall post notice at the main entrance of the municipality/city hall and in a
public place in the barrio/district where the real estate lies for at least thirty (30) days and publish it once a week for
three (3) weeks. Owner may prevent sale by paying all charges.

Sale shall be held at the main entrance of the municipality/city hall or on the premises of the property.

A. LEVY

 Written notice of the levy shall be mailed to or served upon the Registry of Deeds of the province or city where
the property is located and upon the delinquent taxpayer or, if he be absent from the Philippines, to his agent or
the manager of the business in respect to which the liability arose, or, if there be none, to the occupant of the
property is question.

 A FAILURE OF NOTICE IS A FATAL DEFECT.

 Advertisement shall contain:

 Statement of the amount of taxes and penalties due;

 Time and place of sale;

 Name of the taxpayer against whom taxes are levied; and

 Short description of the property to be sold

A FAILURE OF NOTICE, MISTAKE IN THE OWNER’S NAME, MISDESCRIPTION OF THE PROPERTY OR INACCURATE DATE
OF SALE ARE FATAL DEFECTS.

In case the levy on real property is not issued before, or simultaneously with the warrant of distraint in personal
property, and personal property is not sufficient, Revenue District Officer, Regional Director or Commissioner, as the
case may be, shall within 30 days after execution of distraint, proceed with the levy on the taxpayer’s real property

If there is no bidder or the highest bidder is insufficient, the officer conducting sale shall forfeit the property to the
government. Within two(2) days, he shall make a return of the forfeiture. The Registrar of Deeds shall transfer title to
the government without need of a court order, upon registration or forfeiture. Within one(1) year from forfeiture,
taxpayer may redeem said property by paying full amount of the taxes and charges. CIR may, after twenty(20) day
notice, sell property at public auction or at a private sale with approval of Sec. of Finance. Proceeds shall be deposited
with the National Treasury.

If there is a bidder and the highest bid is sufficient, excess of proceeds of sale over claim and cost f sale shall be turned
over to the owner. Within five(5) days after sale, levying officer shall enter return of the proceedings upon the records of
the RCO, RDO, RRD. Within one(1) year from sale, owner may redeem by paying to RDO amount of the taxes, penalties
and interest from date of delinquency to the date of sale, and 15% per annum interest on the purchase price form the
date of purchase to date of redemption. Owner shall not be deprived of possession and shall be entitled to the fruits
until one(1) year expires.

Levy and distraint may be repeated until the full amount due and all expenses are collected.

RIGHT OF REDEMPTION

Within one (1) year from the date of sale, the delinquent taxpayer, or anyone from him, shall have the right of paying to
the Revenue District Officer the amount of the public taxes, penalties and interest thereon from the date of delinquency
to the date of sale, together with interest on said purchase price at the rate of fifteen percent (15%) per annum from the
date of purchase to the date of redemption.

 Effects:

 Purchaser shall deliver the certificate issued to the taxpayer

 Revenue District Officer shall deliver a certificate that he has redeemed the property

 Revenue District Officer shall forthwith pay over to the purchaser the amount by which such property has thus
been redeemed.

 Said property thereafter shall be free from the lien of such taxes and penalties

The owner shall not, however, be deprived of the possession of the said property and shall be entitled to the rents and
other income thereof until the expiration of the time allowed for its redemption.

In case the taxpayer shall not redeem, the Revenue District Officer shall, as grantor, execute a deed conveying to the
purchases so much of the property as has been sold, free from all liens of any kind, and the deed shall succinctly recite
all the proceedings upon which the validity of the sale depends.

FORFEITURE

Instances where forfeiture may be applied:

a. No bidder for real property exposed;

b. Highest bidder is for an amount insufficient to pay the taxes, penalties, and costs

The Internal Revenue Officer conducting the sale shall:

1. declare the property forfeited to the government in satisfaction of the claim in question;

2. Within two(2) days, shall make a return of his proceedings and the forfeiture which shall be spread upon the records
of his office.

Register of Deeds, upon registration with his office, to transfer the title of the property forfeited to the Government
without the necessity of an order from a competent court.

Within one year from the date of forfeiture, the taxpayer, or anyone from him, may redeem said property by paying to
the CIR the full amount of the taxes and penalties, together with interest thereon and the costs of sale.

Right of redemption was not exercised – forfeiture shall become absolute.

The CIR may, upon giving of not less than 20 days notice, sell and dispose of the same at public auction or, with the
approval of the Secretary of Finance, at private sale.

Cabrera vs. The Provincial Treasurer of Tayabas

FACTS:

The Provincial Treasurer of Tayabas issued a notice for the sale at public auction f the real properties of Nemesio
Cabrera forfeited for tax delinquency on December 15, 1940.
The letter sent to Nemesio Cabrera but was returned and marked “Unclaimed”, for the latter was already dead in 1935.
The land was actually sold in a rescheduled public auction on May 1941 to Catigbac and was finalized in May 1942.
Basilia Cabrera, the registered owner of the land subject to attachment, filed a complaint with the CFI – Tayabas against
the Provincial Treasurer and Catigbac attacking the validity of the sale on the grounds that she was not notified, even
though the property had remained in the assessment book in the name of Nemesio Cabrera, because she became the
registered owner thereof since 1934 when a Torrens Title was issued to her by the Register of Deeds of Tayabas.

ISSUE:

Whether or not there is a need for an issuance of a new notice if the land was not sold on the date specified in the
previous notice?

RULING:

YES.

Under the law, even if the notice states that the sale would take place on a specified date ad every day thereafter, it is a
general and indefinite notice. In order to protect the taxpayer’s rights, the taxpayer should at least be apprised of the
exact date of the proceeding by which she is to lose her property.

Besides, the appellee admittedly being not notified also vitiates the proceeding.

She is the registered owner of the land and had become liable for taxes thereon. For all purposes, she is the delinquent
taxpayer “against whom the taxes were assessed”. It cannot be Nemesio for the latter’s obligation to pay ended where
Basilia’s liability began.

Basilia may be criticized for failure to have changed the name in assessment record. However, such circumstance,
nevertheless, cannot supplant the absence of notice.

Collector of Internal Revenue vs. Vda. De Codiñera

FACTS:

The Collector of Internal Revenue sent a warrant of distraint and levy against the properties of Resituto Codiñera for
collection of certain deficiency specific tax. However, it could not be effected in view of the attachment of the said
properties of the CFI-Manila of another case.

After seven years, the Collector of Internal Revenue issued a warrant of distraint and levy commanding the City
Treasurer of Cebu City to distrain the goods, chattels, or effects and other personal property of whatever character, and
levy upon the real property and interest in or rights to real property of the estate of the deceased.

The heirs of the deceased filed an action with the Court of Tax Appeals barring the government to collect said deficiency
on the ground of prescription therefore praying to declare null and void, ad of no legal force and effect the warrant of
distraint and levy which the respondent issued.

ISSUE:

Does the attachment made by a court in a civil case over certain properties of a taxpayer bar the government from
enforcing a warrant of distraint and levy over the aforesaid properties in order to collect the taxes due?

RULING:

NO.

There may be a valid reason for non-distraint of the property which was due to the attachment of the CFI-Manila in
another case. However, such property levied by a competent court may, with the consent thereof, be subsequently
distrained, subject to the prior lien of the attachment creditor.

The attachment merely deprives the Collector of Internal Revenue the power to divest the Court of its jurisdiction over
said property but it does not impair such rights as the Government may have for the collection of taxes.