RIZAL SURETY & INSURANCE CO., PLAINTIFF AND APPELLEE, VS. MARCIANO DE LA PAZ, ET AL., DEFENDANTS, APPELLANTS AND APPELLEES. MARCIANO DE LA PAZ AND DOMINGO LEONOR, DEFENDANTS AND…

On March 22, 1950, the plaintiff Rizal Surety and Insurance Company
filed a complaint in the Court of First Instance of Manila, alleging
that the sum of P20,000 was due and payable to the Federal Films, Inc.,
as proceeds of fire insurance covering a theater situated in Marikina,
Rizal, which was destroyed by fire on February 1, 1947; that as several
creditors of the insured, namely, Marciano de la Paz, Domingo Leonor,
Jose Santos and Dominador Nepomuceno, Pablo Roman, Serapion D. Yñigo,
and the Collector of Internal Revenue, were claiming said proceeds from
the plaintiff, the latter had no means of knowing definitely the order
of preference among the various claimants; and praying that said
creditors, named defendants in the complaint, be ordered to interplead
and litigate their conflicting claims, and that the sum of P20,000 be
ordered paid to the court for delivery to the proper parties, after
deducting the costs of the suit. After the defendants had filed their
respective answers, the Court of First Instance of Manila rendered a
decision the dispositive part of which reads as follows:

“Wherefore, judgment is hereby rendered in favor of
the defendants, and the plaintiff is ordered to pay said defendants out
of the P20,000 minus the costs in its favor, in the following order:
first, the Collector of Internal Revenue to be paid the sum of
P3,216.08; second, Jose Santos and Dominador Nepomuceno to be paid the
sum of P10,000; third, the defendant Pablo Roman to be paid the sum of
P9,000, with six per centum interest per annum from the date of the
filing of complaint in Civil Case No. 73256 and his costs in said case
out of the remaining balance; forth, the defendant Domingo E. Leonor to
be paid the sum of P20,000 with interest of six per centum per annum
from the date of the filing of the complaint in Civil Case No. 1749,
should there be any balance; and fifth the defendant Marciano de la Paz
to be paid the sum of P6,001.50 with interest of six per centum from
February 5, 1947, the date of the demand, plus P545 as costs and
sheriff’s fees should there be any balance left.”

From this judgment, which applied section 315 of the National
Internal Revenue Code and article 1924, paragraph 3, of the old Civil
Code, the defendants Marciano de la Paz and Domingo Leonor appealed.
Briefly the contention of appellant Marciano de la Paz is that his
claim for P6,001.50 should enjoy first priority, because on February 5,
1947, he caused to be garnished the proceeds in question, said
garnishment being prior to all other liens. The appellant Domingo
Leonor in turn contends that his claim for P2,300 is superior, except
with regards to the tax lien of the Collector of Internal Revenue,
because it is evidenced by a public document dated July 19, 1946, in
addition to the fact that he garnished the disputed insurance proceeds
on February 17, 1947. Incidentally it is insisted for both appellants
that, where priority of attachments is involved, article 1924 of the
Civil Code is not applicable. Appellant de la Paz further argues that
article 1924 may be invoked only when there is a showing of the
debtor’s insolvency.

In the first place, we may point out that, where the debtor was
insolvent, article 1924 was held not applicable, since it was
considered repealed insofar as it referred to cases of bankruptcy and
estates of deceased persons. (Peterson vs. Newberry et al., 6 Phil., 260.)

In the second place, we find that the law on attachment and the law
on preference of credits under article 1924 of the Civil Code had been
applied by this court hand in hand, as may be gleaned from the
following pronouncements in the case of Kuenzle & Streiff vs.
Villanueva, 41 Phil., 611, 614-615:

“In other words, the question for consideration is
whether an attachment levied on specific property gives to the
attaching creditor a lien or a right to a preference in the nature of a
lien, superior to the statutory right to a preference which is
recognized in article 1924 of the Civil Code in favor of the owner of
an after-acquired judgment.

“In a long and unbroken line of
decisions, running through our reports from the first volume down to
the last, we have uniformly and steadfastly sustained and recognized
the statutory preferences created by the provisions of title 17 of the
Civil Code, save only in so far as they have been expressly or by
necessary implication repealed or modified by Acts of the Commission or
the Legislature.”

* * * * * * *

“Upon full consideration of the provisions of the
New Code of Civil Procedure by virtue of which levies of attachments
are authorized, and of the circumstances under which that Code was
enacted by a commission the majority of whose members were American
lawyers, we are satisfied that it was the intention of the legislature
to give as attaching creditor a lien or at least a right in the nature
of a lien in the attached property; but we see no reason whatever for
holding that this lien, or right in the nature of a lien, rises
superior to any statutory preferences with which the property is
affected at the time of its attachment.”

We shall therefore proceed to determine the order of preference
herein, in the light of priority both by reason of attachments and by
reason of article 1924 of the Civil Code, subject however to the
superior lien of the Collector of Internal Revenue Code in virtue of
section 315 of the National Internal Revenue Code which provides as
follows:

“Every internal revenue tax on property or in any
business or occupation, and every tax on resources and receipts, and
any increment to any of them incident to delinquency, shall constitute
a lien superior to all other charges or liens’ not only on the property
itself upon which such tax may be imposed but also upon the property
used in any business or occupation upon which tax is imposed and upon
all property rights therein.”

We are of the opinion that the trial court correctly ordered that
the claim of the Collector of Internal Revenue be paid first. Said
claim being for amusement taxes on the theater insured, constitutes a
lien superior to all other charges or liens not only on the theater
itself but also upon all property rights therein, including the
insurance proceeds.

Under article 1924, paragraph 3, of the Civil Code, the order of
preference is, first, in favor of credits evidenced by a public
instrument, and, secondly, in favor of credits evidenced by a final
judgment, should they have been the subject of litigation, the
preference among the two kinds of credits being determined by priority
of dates.

The trial court was also correct in placing the claim of Jose Santos
and Dominador Nepomuceno second in the list of creditors, because their
credit is evidenced by a public document dated May 23, 1946.
Appellants, with appellee Pablo Roman, argue that said document cannot
be classified as public, because its acknowledgment is not dated. This
contention is not tenable, since an examination of the instrument shows
that the body is dated at Manila on May 23, 1946, and in the
acknowledgment the following appears: “Witness my hand and official
seal in the date and place above mentioned.” This recital logically
refers to the date and place specified in the preceding body of the
document. There is no point in the observation that the credit of
Santos and Nepomuceno, not being reduced to a judgment, should not be
entitled to any preference binding against the Federal Films, Inc.,
which is not a party hereto, because article 1924 of the Civil Code as
a matter of fact distinguishes credits evidenced by a public document
from those evidenced by a judgment. At any rate, in so far as the
absence in this case of the common debtor is concerned, all the
defendants are on equal footing.

The next in preference, in our opinion, is the credit of appellant
Domingo Leonor because, although he caused a notice of garnishment to
be served upon the plaintiff on February 17, 1947, or subsequent to the
notice of garnishment of appellant Marciano de la Paz on February 5,
1947, the former’s credit is nonetheless evidenced by a public
instrument dated July 19, 1946, duly presented as exhibit. Preference
claimed under a public document is not lost by the mere fact that the
credit is made the subject of a subsequent judicial action and
judgment. Even appellee Pablo Roman admits this proposition.

The next preferred credit is that of defendant-appellee Pablo Roman,
evidenced by a judgment which became final on September 26, 1946. It is
contended on the part of appellant Domingo Leonor that said judgment
was not yet final then, because an appeal was taken therefrom to the
Supreme Court which resolved it in favor of appellee Pablo Roman only
on May 27, 1947. However, as correctly observed by counsel for the
latter, the judgment of September 26, 1946, was not appealed, and the
petition filed before the Supreme Court was one for certiorari against
the order of the trial court dismissing the appeal; and, indeed, two
writs of execution had been issued during the pendency of the
certiorari proceeding, one on December 24, 1946, and another on January
9, 1947. In McMicking vs. Lichauco, 27 Phil., 386, it was held that “a
judgment upon which execution has not been stayed, under the provisions
of section 144 of Act No. 190, is entitled to the preference provided
for in article 1924 of the Civil Code.”

The remaining credit to be paid is that of appellant Marciano de la
Paz, whose notice of garnishment was served on the plaintiff on
February 5, 1947, the appealed decision being correct on this phase of
the case. Serapion D. Ynigo failed to present any evidence in support
of his claim.

It being understood that the various claimants should be paid in the
order indicated in this decision, and that none of them is entitled to
receive any interest (as the plaintiff-appellee cannot be deemed as
having defaulted in paying out the insurance proceeds in question), the
appealed judgment, as thus modified, is hereby affirmed. So ordered
without costs.

Pablo, Bengzon, Montemayor, Reyes, A.t Jugo, Bautista Angelo, Labrador, and Concepcion, JJ., concur.