Bureau of Local Government Finance Opinion

June 29, 2015 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 1st Indorsement Respectfully returned to the OIC-City Treasurer, Manila, his attached letter dated June 3, 2015 requesting clarification and guidance on how to execute the Warrant of Distraint particularly on banks accounts, stocks and other securities. That Office cited Section 174 of the Local Government Code (LGC) of 1991 which provides that the civil remedies for the collection of local taxes, fees, or charges, and related surcharges and interest resulting from delinquency shall be: (a) By administrative action thru distraint of goods, chattels, or effects, and other personal property of whatever character, including stocks and other securities, debts, credits, BANK ACCOUNTS , and interest in and rights to personal property, and by levy upon real property and interest in or rights to real property; and EATCcI (b) By judicial action. Either of these remedies or all may be pursued concurrently or simultaneously at the discretion of the local government unit concerned. (Underscoring supplied) Section 175 of the LGC and Art. 263 of the Implementing Rules and Regulations (IRR) spell out the procedures in the application of the remedy by Distraint of Personal Property. On the other hand, Section 177 warns that a local treasurer who fails to issue or execute the warrant of distraint or levy after the expiration of the time prescribed or who is found guilty of abusing the exercise thereof by competent authority shall be automatically dismissed from the service after due notice and hearing. Hence, the above request posing the following queries: 1. Would the warrant be similar to a writ of garnishment? 2. What will be the recourse of this Office in the event the banks refuse to donor the warrant of distraint? In this connection, that Office should be guided by the procedures under Section 175 of the LGC, considering that bank accounts are considered personal property as contemplated under Section 174 (a) of the same Code. Section 175 (a) provides as follows: "(a) Seizure Upon failure of the person owing any local tax, fee, or charge to pay the same at the time required, the local treasurer or his deputy may, upon written notice, seize or confiscate any personal property belonging to that person or any personal property subject to the lien in sufficient quantity to satisfy the tax, fee, or charge in question, together with any increment thereto incident to delinquency and the expenses of seizure. In such case, the local treasurer or his deputy shall issue a duly authenticated certificate based upon the records of his office showing the fact of delinquency and the amounts of the tax, fee, or charge and penalty due. Such certificate shall serve as sufficient warrant for the distraint of personal property aforementioned, subject to the taxpayer's right to claim exemption under the provisions of existing laws. Distrained personal property shall be sold at public auction in the manner herein provided for." (Emphasis ours) DHITCc Pursuant to the said procedure, that Office may issue an Order of Seizure/Confiscation (OSC) to the taxpayer concerned and to the depository banks of the said taxpayer. On the other hand, garnishment is defined under the Black's Law Dictionary, 9th Edition as follows: "Garnishment A judicial proceeding in which a creditor (or potential creditor) asks the court to order a third party who is indebted to or is bailee for the debtor to turn over to the creditor or any of the debtor's property (such as wages or bank account) held by that third party". On the other hand, Section 8, Rule 7 (Preliminary Attachment) of the Civil Procedures, provides: "Garnishment is a species of attachment for reaching any property or credits pertaining or payable to a judgment debtor. It is a forced novation by the substitution of creditors: the judgment debtor, who is the original creditor of the garnishee, is, through the service of the writ at garnishment, substituted by the judgment creditor who thereby becomes creditor of the garnishee. It serves as a warning to a person having in his possession property or credits of the judgment debtor, not to pay the money or deliver the property to the latter, but rather to appear and answer the plaintiff's suit." On the basis of the above definition, it may be stated that the warrant of distraint is similar to a writ of garnishment. In the event that the banks refuse to honor the warrant of distraint, that Office may invoke Section 199 of the 2013 Omnibus Revenue Code of the City of Manila, quoted as follows: "Sec. 199. Penalty for Violation of this Ordinance. Any violation of the provision of this Ordinance shall be punishable by a fine of not less than One Thousand Pesos (P1,000.00) nor more than Five Thousand Pesos (P5,000.00) or imprisonment for not less than one (1) month or more than six (6) months, or both, at the discretion of the court." That Office may likewise file a case court with competent jurisdiction for the issuance of a Writ of Attachment which shall serve as a notice of garnishment. cEaSHC Be guided accordingly. (SGD.) SALVADOR M. DEL CASTILLO OIC-Executive Director