G.R. No. 21835. August 19, 1967
THE CHIEF OF STAFF, ARMED FORCES OF THE PHILIPPINES, PLAINTIFF-APPELLEE, VS. COLLECTOR OF INTERNAL REVENUE, ET AL., DEFENDANTS-APPELLEES. MADRIGAL SHIPPING CO., INC. AND CESARI…
BENGZON, J.P., J.:
C.Y. George Khoong and K.H. Powel Khoong, father and son, and business partners, organized the Leyte
Supply Corporation which acquired from the U.S. Foreign Liquidation Commission
surplus war materials worth P160,000.00. In June 1948 the Khoongs
purchased from said corporation the same war materials. Subsequently, they hired Cesario Sipaco to possess, keep and administer
said surplus materials while the
same were stored in Tacloban
City. Next,
they chartered the steamship Lepus of the
Madrigal Shipping Co., Inc. to transport the surplus materials to Hongkong.
SS “Lepus” arrived in Tacloban and the Visayan Workers
Union loaded the war materials on board, after which it sailed for Hongkong via the Port
of Manila. While
docked in Manila its cargo of
surplus war materials were seized by the Government pursuant to Executive Order
No. 339 dated August 7, 1950. Whereupon, the cargo was unloaded
at Pier 11 and later on stored in Hangar 801 in Nichols Air Base.
Upon prior authority of their owners, the Armed Forces of the Philippines used some of the confiscated cargo
for which it agreed to pay the price fixed of P24,292.00. This amount, however, could not immediately
be paid direct to the owners inasmuch as the Armed Forces received several claims
on the cargo which far exceeded the agreed
price of P24,292.00.
On January 21, 1953 the Chief of Staff of the Armed
Forces of the Philippines
filed a complaint in inter-pleader with the Court of First Instance of Manila
against the several claimants.
Meanwhile, with leave of
court, the remaining surplus goods were sold at public auction. The proceeds thereof plus the sum of P24,292.00
paid by the Armed Forces, amounting to P29,948.50,
were deposited with the clerk of the
trial court.
On March 23, 1963
the lower court rendered the following judgment:
“WHEREFORE, judgment is hereby rendered declaring the claim of
the Bureau of Internal Revenue in the amount of P10,100.00, the claim of
Madrigal Shipping Co., Inc. in the amount of P37,250.00, the claim of the Philippine
Port Terminal, Inc. in the amount of P5,000.00 and the claim of the Visayan Workers’ Union in the amount of P5,073.00 preferred
credits with respect to the amount of P29,948.50 now in the possession of the
Clerk of this Court, pursuant to the provisions of Article 2241 of the Civil
Code. The claim of the Bureau of
Internal Revenue, in the amount of P10,100.00 shall
first be satisfied and the claims of the Madrigal Shipping Co., Inc., the
Philippine Port Terminal, Inc., and the Visayan
Workers’ Union shall be satisfied pro rata from the balance after the payment
of the costs of this action, pursuant to the provisions of Article 2249 of the
Civil Code.”
Madrigal Shipping Co., Inc. and Cesario
Sipaco appealed to this Court on purely legal issues which
are:
1. With respect to the
preference of credits among the claimants, should the Spanish Civil Code of
1889 or the New Civil Code of the Philippines
(Republic Act 386) be applied?
2. Under the proper law,
who among the claimants enjoys preference?
All the claims against the goods in question matured and became
demandable prior to the effectivity of the Civil
Code of the Philippines. Consequently, the law prevailing at the
time, that is,
the Spanish Civil Code of 1889, should govern the
preference of credits.[1]
It is contended that the claim of the Collector of Internal
Revenue for sales taxes on the goods in question is not preferred because (1)
the Khoongs were not the persons liable for the sales taxes thereon for
they were not the importer of said goods,[2]
not to mention that the tax lien does not follow the goods into the hands of a
third party who has no knowledge of the outstanding tax liability,[3] and (2) a surety bond has been posted
to answer for the tax liability.
The theory of
non-liability of the Khoongs for the sales taxes on
the surplus goods in question for the reason that they were not the importer thereof will not hold,
considering that the Khoongs assumed liability for said taxes.[4] This assumption of liability on the part of
the Khoongs is understandable and must have been made
with good reason. The Khoongs are the 90% owner of Leyte
Supply Corporation, the original importer.
As a matter of fact, they have considered themselves as the original purchasers
of the surplus goods from the U.S. Foreign Liquidation Commission as can be
seen from their statements, to wit:
“WHEREAS, we have rights, title and interests over the
following properties which we – through
the Leyte Supply Corporation bought from the Foreign
Liquidation Commission. x x x“[5]
“x x
x and over all the surplus goods we purchased
under VSD Contract P.O. 489, Invoice No. 527-RP, from the Foreign Liquidation
Commission, U.S.A., loaded at Tacloban, Leyte in the S/S LEPUS
and later unloaded at the port of Manila, x x x.”[6]
As to the argument of
non-existence of the tax lien, it is observed that Article 1922 of the Spanish
Civil Code of 1889 does not
provide for taxes as preferred credits or liens. Sec. 315 of the National
Internal Revenue Code however states:
“SEC.
315. Nature
and extent of tax lien. – Every internal-revenue tax on property or on 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 the tax is imposed and upon all property
rights therein.”
Accordingly, the lien for sales taxes on
the surplus goods has attached from the moment they were due and shall continue
to exist in accordance with law.[7]
Section 315 of the Tax Code, the pertinent law, limits to five years the
duration of the lien for estate and gift taxes, but remains silent with
respect to all other internal revenue taxes.
Consequently, the lien as to all those other taxes continues until
there is payment or the lapse of the period within which the Commissioner of
Internal Revenue may assess and collect them pursuant to Sections 331 to 333 of the Tax Code, whichever
comes earlier. The alleged dissolution
of the lien by reason of the filing of a surety bond to answer for the payment
of taxes due, finds no support in the law.
Madrigal Shipping Co., Inc. maintains further that the claim of
the Visayan Workers Union in the amount of P5,073.00
representing stevedoring wages in loading the surplus goods in question aboard
SS “Lepus” is not preferred under Article
1922 of the Spanish Civil Code of 1889 nor
under Article 2241 of the Civil Code of the Philippines; and that claims for
laborers’ wages mentioned in paragraph (6)
of Article 2241 of the
Civil Code of the Philippines refer to labor in productive industrial entities
and not to stevedoring.
As aforestated, the Civil Code of the Philippines
does not apply herein and so We shall confine the
inquiry to the Spanish Civil Code.
Article 1922 of the Spanish Civil Code fails to mention claims for laborers’ wages as among
those given preference. Apparently, the
proposition that stevedoring wages are not preferred has merit. However, paragraph 4 of said article gives preference to credits for transportation
of goods and expenditures for the carriage and preservation thereof, under
which the stevedoring wages can be classified.
Stevedoring refers to the carriage of goods from the
warehouse or pier to the holds of the vessel.[8]
It is a necessary operation in the transportation of goods by sea. Accordingly, the expenses incurred therefor in the form of
wages are necessary expenditures in the carriage of the goods.
With respect to the claim
of the Philippine Ports Terminal for arrastre and
storage fees which the lower court declared as preferred, We
are convinced that it constitutes a
credit contemplated in paragraph 4 of
Article 1922 of the Civil Code
of 1889, it being an expense for
the preservation of the goods. The arrastre and storage service was rendered by the
Philippine Ports Terminal after the surplus goods were unloaded at Pier 11 of
the Port of Manila preliminary to their transfer to Nichols Air Base.
Without the services of the Philippine Ports Terminal, said goods
would have been left on the pier exposed to the elements and pilferage.
We now come to the claim of defendant-appellant Cesario Sipaco whose credit was not recognized by the trial court
as preferred. On September
2, 1948 the Khoongs sent Cesario Sipaco a letter-appointment[9] worded as follows:
“Effective as of September
1, 1948, you are appointed as an administrator of our company (Leyte Supply Enterprise) with a compensation of ONE HUNDRED
SEVENTY-FIVE PESOS (P175.00) a week. Your travel expense
outside of Tacloban on official business will be borne by the company.”
Subsequently,
the Khoongs executed a power of attorney dated April 8, 1949 in favor of Cesario Sipaco
and We quote:[10]
“KNOW ALL MEN BY THESE PRESENTS:
“That C.Y. GEORGE KHOONG and K.H. POWELL KHOONG, both of
legal age, married and residents
of 601 Columbia Road, Shanghai, the latter being represented in this act by
the former, have named and constituted and by these presents name and
constitute C.R. SIPACO, of legal age, married and resident of Tacloban, Leyte, to be their true
and lawful attorney-in-fact for them and in their name, place and stead and for their use and benefit, to
do and perform all or any of the following acts and things, namely:
“1. To demand
and receive from CECIL L. MARQUIS any and all of the properties and commodities, including the books of accounts
and other records, which belong to C.Y. George Khoong
and K.H. Powell Khoong by virtue of their purchase of
the same from the Leyte Supply Corporation which
properties consist of:
“aircraft spare parts and accessories, communications and
signal equipment, radio spare parts and
accessories, radio testing and aircraft testing equipment with an approximate
tonnage of 5,700 measurement tons, at present located among others at
“Cebu
City – 165
F. Gonzales St., down and upstairs
“Tacloban, Leyte – Veteranos St.
and to issue proper receipt therefore;
“2. To possess, keep and administer the foregoing
properties located in Tacloban, Leyte, with power to dispose of so much of
said properties from time to time as he shall think fit;
“3. To ship and transport the foregoing properties
to Shanghai or to any other port
designated by any or either of the above-named Khoongs;
“4. To demand, institute legal proceedings for, and receive from Cecil L.
Marquis the properties as aforestated and from any
and all persons such payments
for the sale of the properties he is herein authorized to dispose of – with
power and authority to execute and deliver full receipts for all payments made
to him;
“5. To
make, sign, seal, execute and deliver contracts, documents, agreements
and other writings of whatever nature or kind with any and all third persons,
concerns, or entities upon such terms and conditions as he shall think fit;
“6. To
open accounts in any bank in the Philippines,
to deposit money and to withdraw the same by check, receipt, draft or
any other written instrument in the name of C.Y. George Khoong
and/or Leyte Supply Enterprise; to sign, indorse,
draw, accept, make, execute, deliver, and cash treasury warrants, checks,
drafts, bills of exchange,
promissory notes, and all other
kinds of negotiable instruments and commercial papers;
“7. In general, to do all other acts, deeds, matters and
things whatsoever in or about our estate, property, and affairs as fully and
effectually to all intents and purposes as we could do in our own proper persons if personally present.
“HEREBY GIVING AND GRANTING unto our said attorney-in-fact
full power and authority whatsoever requisite and necessary or proper to be done in and about the premises, as fully to
all intents and purposes as we might do or could lawfully do if personally present, and hereby ratifying and
confirming all that our said attorney-in-fact shall do or cause to be done
under and by virtue of these presents.
“IN WITNESS WHEREOF, they have caused these presents to be
signed on this 8th day of April, 1949 in
the City of Manila, Philippines.”
By virtue of the two documents mentioned
above, Sipaco rendered service for the Khoongs and allegedly made advances in the sum of P2,300.00 for the safekeeping and preservation of the surplus
materials involved in this case. His
advances and salaries which have
remained unpaid totalled P9,050.00.
In 1951 he obtained from the Court of First Instance of Manila a judgment (based on compromise) for said amount of P9,050.00
against the Khoongs, who thereafter assigned to him
their right to collect from the Armed Forces
of the Philippines
up to said amount plus costs and fees.
Sipaco’s claim
of preference comes within the purview of paragraph 1 of Article 1922
of the Civil Code of 1889, which reads:
“1. Credits for the
construction, repair, preservation, or purchase price of personal
property in the possession of the debtor, to the extent of the value of the
same;” (emphasis supplied)
as an expense
for the preservation of the surplus goods.
It is not disputed that Sipaco was hired, and
that he rendered service primarily to keep and preserve the goods in
question. The stay of the surplus goods
in Tacloban was more or less temporary, for their
owners intended them to be shipped to Hongkong. Really there was nothing more for him to do
but preserve the goods in good condition while awaiting shipment.
WHEREFORE, the judgment appealed from is
modified. The claims of the Collector of
Internal Revenue in the amount of P10,100.00, Madrigal Shipping Co., Inc. in the amount of P37,250.00,
Philippine Ports Terminal, Inc. in the amount of P5,000.00, Visayan
Workers Union in the amount of P5,073.00 and Cesario Sipaco
in the amount of P9,050.00 are declared preferred credits. The claim of the Collector of Internal
Revenue shall first be satisfied, after which the claims of Madrigal Shipping
Co., Inc., Philippine Ports Terminal, Inc., Visayan
Workers Union and Cesario Sipaco
shall be satisfied pro rata in accordance with Article 1926 of the Civil Code
of 1889. No costs.
SO ORDERED.
Reyes, J.B.L., Makalintal, Zaldivar, Sanchez, Castro, Angeles, and Fernando, JJ., concur.
Concepcion, C.J., and Dizon, J., on official leave.
[1]
Luzon Lumber & Hardware Co., Inc. v. Quiambao, L-5638, March 20, 1954;
94 Phil. 663.
[2]
Collector of Internal Revenue v. Cojuangco,
L-13255, Sept. 29, 1960.
[3]
Hongkong & Shanghai Banking Corporation v.
Rafferty, 39 Phil. 145.
[4]
Exhibit 1-Collector.
[5]
Exhibit A-Quisumbing.
[6]
Annex K to Complaint, p. 59, Record on Appeal.
[7]
Cooley, Thomas M., The Law of Taxation, 4th Ed., p. 2463, Vol. III; Philippine Education
Co. v. Tan Tay Pao, 56 Phil. 817.
[8]
Cebu Arrastre
Service v. Collector of Internal Revenue, L-7444, May 30, 1956; Collector of Internal Revenue v.
Bohol United Workers, L-17876,
May 26, 1960.
[9]
Exhibit 1-Sipaco.
[10]
Exhibit 2-Sipaco.