BIR Ruling

June 21, 1968 MEMORANDUM FOR: The Commissioner This refers to the inquiry on the legality of a distraint of any of the following personal properties, viz.: (1) proceeds of an auction sale of things pledged to and/or with a pawnshop; (2) theater receipts; and (3) money in the hands of the taxpayer. The weight of authorities is to the effect that the proper and legal subject of a distraint is personal property owned by and/or belonging to the taxpayer. (Sections 316-323, N.I.R.C.; see also Lopez v. Alvarez, 9 Phil. 28; Alvaran V. Marquez, 11 Phil. 263; Tufezis v. Alaguera and Mun. Council of Guinobatan, 32 Phil 654; Codesal & Ocampo. v. Ascie, 38 Phil. 902) There is no question that the properties (nos. 1, 2 & 3) adverted to in this inquiry are personal properties. Any of the abovementioned properties can therefore be legally distrained in payment or satisfaction of its owner's tax liabilities. The word "owner" in the revenue act, is always used in the' sense of absolute owner. An "owner" is one who owns; a rightful proprietor. The word "owner" is a comprehensive term, and is applied to any person who has dominion of a thing real or personal, corporeal or incorporeal, and a right of enjoyment and disposition." (Bouvier) "Owner" is one who has dominion of a thing, real or personal, corporeal or incorporeal, which he has a right to enjoy and to do with it as he pleases even to spoil or destroy it, as far as the law permits, unless he is prevented by some agreement or covenant which restrains his right. (Ramsey v. Leeper, 31 p. 2d 852, 859, 168 Okl. 43) Ownership is the right by which a thing belongs to an individual, to the exclusion of all other persons. (Converse v. Kellogg, N.Y., 7 Barb. 590, 597; Hill v. Cumberland Valley Mut. Petroleum Co., 59 Pa. (9 P.F. Smith) 474, 477 cited in Vol. 30 Words & Phrases) The possession of personal property is prima facie evidence of ownership, and the term "personal property" applies as well to notes and money as to goods and chattels. Cash money is "personal property". (In re Whitford's Estate, 262 N.Y.S. 452, 146 Misc. 82; Brownell v. Dixon, 37 Ill. 197, 205). In the light of the foregoing, it is believed that if the taxpayer is the proprietor, lessee or operator of the theater, his corresponding share in the gross receipts of the theater (Sec. 260, N.I.R.C.) may be legally distrained in payment or satisfaction of his tax liabilities. The same is true with regard to money in the hands of the taxpayer, so long as such money belongs to the latter. Moreover, if the taxpayer is the creditor, pledgee or owner of the pawnshop, the proceeds of an auction sale of the things pledged to and/or with him can be legally distrained. The thing pledged is a security to guarantee the fulfillment of the principal obligation. It is true that the thing pledged belongs to the pledgor. However, it is the essence of a contract of pledge that when the principal obligation becomes due, the thing pledged may be alienated for the payment of such obligation to the creditor or pledgee. (Art. 2087, N.C.C.) Consequently, the proceeds of the sale of the things pledged belong to the pledgee and may be legally distrained to enforce the collection of taxes due from him. Respectfully submitted: (SGD.) ELIAS E. VEGA Revenue Operations Head (Legal)