CLARA DILUANGCO PALANCA, ET AL., PETITIONERS, VS. COMMISSIONER OF INTERNAL REVENUE, ET AL., RESPONDENTS.

Gliceria Diluangco died on April 18, 1947 and testate proceedings were filed
with the Court of First Instance of Manila for her estate’s settlement and
distribution. Upon discovering that the executor failed to file the return
required by law, the Commissioner of Internal Revenue required him to do so and
on March 27, 1951 he filed the requested estate and inheritance tax return. The
estate was tentatively assessed estate and inheritance taxes in the total sum of
P9,705.61, including 25% surcharge for failure to file the return on time. Atty.
Manuel V. San Jose, executor of the estate and counsel for the heirs of the
deceased, requested reconsideration of the imposition of the 25%, which the
Commissioner denied. Subsequently, Atty. San Jose again requested
reconsideration of the imposition of the same surcharge.

In a report submitted on August 25, 1951, internal revenue examiner Francisco
E. Testa stated that the estate subject to tax amounted to P150,657.40 and not
P67,187.86 as reported in the return and, accordingly, an assessment notice was
issued calling for the payment of P22,533.46 as deficiency taxes, Atty. San
Jose requested a reinvestigation of this assessment which was referred for
comment to examiner Testa who however reiterated his recommendation because of
the executor’s failure to prove his claim relative to the incorrectness of the
valuation of the properties.

On March 5, 1952, the Commissioner of Internal Revenue issued a warrant of
distraint and levy for the satisfaction of the deficiency, estate and
inheritance taxes in the total amount of P24,790.21 informing thereof at the
same time the register of deeds pursuant to the provisions of Section 104 of the
National Internal Revenue Code. However, the warrant of distraint and levy was
not executed because the executor of the estate asked for a reinvestigation of
the case and for the placing of the real properties left by the deceased under
constructive levy in order to obviate the necessity of having to file a surety
bond to guarantee the payment of the assessed taxes. This request was granted
and the case was again referred to examiner Testa for comment and
recommendation. Considering the market value of the properties as appraised by
C. M. Hoskins & Company, Inc. which was requested to do the appraisal by the
heirs themselves, examiner Testa submitted a report on July 26, 1952, and on the
basis thereof a new assessment was made calling for the payment of P10,437.76 on
or before September 30, 1952. In view of this new assessment the Commissioner
ordered the warrant of distraint and levy dated March 5, 1952 to be executed
“except that the amount to be collected should be P10,437.76 instead of
P24,790.21 stated therein.”

In his indorsement dated May 20, 1955, agent Manuel F. del Rosario reported
that Atty. San Jose refused to receive the said warrant of distraint and levy
and instead requested the suspension of the execution of said warrant in view of
certain discrepancies he allegedly found in the amount of the deficiency ransfer
taxes. In view of this objection, another warrant was issued on June 23, 1955,
which was served on the secretary of Atty. San Jose, but instead of paying the
tax Atty. San Jose sent a letter requesting that the heirs be informed of the
amounts that are respectively due from each with the assurance that upon receipt
of the information requested the heirs would immediately make arrangement for
the settlement of their tax liabilities. In compliance with this request the
Commissioner in a letter to Atty, San Jose dated April 28, 1956 explained the
breakdown of the amounts due from the heirs the total of which amounted to P13,884.78, inclusive of surcharges, interests and penalties. Atty. San Jose
wrote another letter requesting reconsideration of this assessment but the same
was denied by the Commissioner.

In a letter dated September 23, 1957, the heirs again requested a revaluation
of the properties of the deceased with the assurance that if the request is
granted they would be willing to file the requisite surety bond and a waiver of
limitations in accordance with the existing regulations, but before such request
could be acted upon which they assured was not intended for delay, the heirs,
thru counsel, made a turn-about by raising this time the defense of prescription
alleging that the right of the Government to collect by summary method the
estate and inheritance taxes in question had already prescribed. The answer of
the Commissioner was that the right of the Government to collect has not as yet
prescribed and that steps would be taken to sell the properties left by the
deceased. On March 3, 1958, the heirs filed a petition for review with the Court
of Tax Appeals disputing the right of the Government to collect the taxes in
question on the ground of prescription.

On November 24, 1959, the Court of Tax Appeals rendered decision holding
that the right of the Government to collect the sum of P10,437.76 has not
prescribed and ordered petitioners to pay respondent said amount, plus the
corresponding interest thereon to the date of payment. Petitioners have
appealed.

Section 332 (c) of the National Internal Revenue Code provides in part:
”Where the assessment of any internal revenue tax has been made within the
period of limitation above prescribed such tax may be collected by distraint or
levy or by a proceeding in court, but only if begun (1) within five years after
the assessment of the tax * * *.” It will be noted from this provision that all
that is required to start the running of the period of limitation therein
prescribed is to distraint or levy, or institute a proceeding in court, within 5
years after the assessment of the tax. A judicial action for the collection of a
tax is begun by the filing of a complaint with the proper court of first
instance, or where the assessment is appealed to the Court of Tax Appeals, by
filing an answer to the taxpayer’s petition for review wherein payment of the
tax is prayed for (Alhambra Cigar and Cigarette Manufacturing Company vs. The
Collector of Internal Revenue, G. R. Nos L-12026 & L-12131, May 29, 1959).
And the summary remedy of distraint and levy is begun by the issuance of a
warrant of distraint and levy. This has been the practice long observed in the
Bureau of Internal Revenue, and this practice had been taken cognizance of by
this Court in a number of cases, wherein it held that the right of the
Commissioner of Internal Revenue to collect by summary method has the effect of
stopping the running of prescription once a warrant of distraint and levy is
issued. (The Collector of Internal Revenue vs. Avelino, et al. 100 Phil., 327;
53 Off. Gaz., 645; The Collector of Internal Revenue vs. Zulueta, et al. 100
Phil., 872; 53 Off. Gaz., [19] 6532; Collector of Internal Revenue vs. Solano,
et al. L-11475, July 31, 1958). From such pronouncement it can be inferred that
the issuance of the warrant of distraint and levy begins the summary remedy of
distraint and levy and that it is not necessary that it be actually executed to
be made effective.

Here it is admitted that the estate and inheritance taxes in question were
finally assessed on August 18, 1952, and the warrant of distraint and levy was
issued within the 5-year period prescribed in Section 331 of the National
Internal Revenue Code from the time the return was filed. It is also admitted
that the warrant of distraint and levy was issued by respondent on June 23,
1955, but that said warrant has not been fully executed in view of the request
of counsel for petitioners for an itemized statement of the amount due from each
heir and the assurance given by said counsel that upon receipt of respondent’s
reply the heirs will immediately make arrangement for the settlement of their
shares. We, therefore, hold that the right of the Government to collect the
estate and inheritance taxes in question has not yet prescribed because the
warrant of distraint and levy for their collection was begun within the 5-year
period prescribed by law from the date of the assessment of said taxes.

Petitioners, however, contend that the issuance of the warrant in question
cannot be considered as having begun the summary remedy of distraint and levy
because (a) said warrant is defective and (b) it was not served upon the
taxpayer in accordance with law. With regard to the first contention,
petitioners allege that the warrant of distraint and levy is defective because
(1) it does not contain any description of the property sought to be levied
upon; (2) it was issued against the estate whose legal existence had long
terminated; and (3) it states the amount due in lump sum and does not itemize
the tax and penalty due from petitioners. And with regard to the second
contention, the defect is made to consist in that the warrant was served not
upon the taxpayer himself but upon one Arturo Cristi, secretary of Atty. Manuel
V. San Jose, contrary to what the law provides that a warrant should be served
upon the taxpayer himself except when he is absent from the Philippines.

Petitioners apparently confuse the warrant of distraint and levy with the
certificate mentioned in Section 324 of the Tax Code. The warrant of distraint
and levy is not the certificate referred to in said section. Said warrant is the
order to distrain and levy upon the properties of the taxpayer. The certificate
mentioned in Section 324 is one prepared and issued by the agent designated by
the Commissioner of Internal Revenue to execute the order of distraint and levy.
It is issued after the seizure of the property distrained and levied upon. In
other words, the issuance of the warrant is merely the step that starts the
summary proceeding while the seizure of the properties is the next step. It is
for this reason that the warrant did not contain the details regarding the
properties to be distrained of levied upon because they are only required in a
certificate referred to in Section 324.

As regards the claim that the warrant was issued against the estate which has
no longer legal existence because the testate proceedings were already closed,
suffice it to state that said warrant is a mere order to an agent of the
internal revenue office to collect the tax either from the estate or from the
heirs if said estate is already closed. It is wellsettled that an estate or
inheritance tax, whether assessed before or after the death of the deceased, can
be collected from the heirs even after the distribution of the properties of the
decedent (Pineda vs. Court of First Instance of Tayabas, 52 Phil., 805).

The contention that the warrant is ineffective because it was not served upon
the taxpayers themselves is also untenable considering that the same was served
upon Atty. Manuel V. San Jose, or his secretary, who has always acted right
along not only in behalf of the estate but also of the heirs of the deceased.
While the law provides that said warrant should be served upon the taxpayer
except when he is absent from the Philippines when it may be served upon his
agent or upon an occupant of the property, there is nothing therein that would
prevent the service to be made upon his authorized representative. Here it is
admitted that Atty. San Jose was the duly authorized representative.of the
estate and of the heirs.

With regard to the contention that the issuance of the warrant is not
sufficient to begin the proceeding by summary method but that it is necessary
that it be actually executed, the Court of Tax Appeals said the following on the
point:

“Section 332 of the Revenue Code provides that the collection of an internal
revenue tax may be made by distraint and levy if the proceeding is begun within
five years after assessment. In this case, the difitraint and levy proceeding
was actually begun with the issuance of the corresponding warrant of
distraint and levy and the service thereof to Attorney Manuel V. San Jose. It is
true that the warrant has not been fully executed with the seizure and sale of
any property subject to the lien, but it was not due to the voluntary desistance
of respondent; rather it was because of the request of the then counsel for
petitioners for a statement of the amount due from each heir and for an
opportunity to make arrangement for the settlement of the obligation, which
request was considered reasonable by respondentUnder the law, it is not
essential that the warrant of distraint and levy be fully executed in order that
it may have the effect of suspending the running of the statute of limitation
upon collection of the tax. It is enough that the proceeding be validly
begun or commenced and that its execution has not been suspended by
reason of the voluntary desistance of the respondent. In our opinion, the
warrant of distraint and levy of June 23, 1955 was validly issued and was duly
served upon counsel for petitioners and, therefore, the five-year period for
collection of the state and inheritance taxes in question was suspended. And it
continued to be suspended up to the date when the present appeal was filed by
petitioners on May 3, 1958. Accordingly, the right to collect said taxes has not
prescribed.”

We agree to the foregoing view. Indeed, the record shows that the warrant was
not actually executed or carried out with the seizure and sale of any property
of the deceased, not because of any voluntary desistance on the part of
respondent, but because of the many requests for postponement, reinvestigation,
revaluation, or other matters which had the effect of delaying or postponing the
execution of said warrant. Were it not for said requests for postponement or
revaluation, the warrant would have been fully executed well within the period
prescribed by law. Indeed, if by acceding to the request for postponement of a
taxpayer the period of prescription would be allowed to run even if there is
no voluntary desistance on the part of the tax collector, we would not only
countenance the commission of an injustice but would place the collection of the
tax at the mercy or caprice of the taxpayer to the prejudice of the Government.
Such a theory certainty cannot be entertained.

Wherefore, the decision appealed from is affirmed, with costs againsts
appellants.

Bengzon, C. J., Padilla, Labrador, Concepcion, Reyes, J. B. L., Barrera,
Paredes, Dizon, and De Leon, JJ., concur.