G.R. No. 204226 . April 18, 2022.
BUREAU OF INTERNAL REVENUE, PETITIONER, VS. TICO INSURANCE COMPANY, INC., GLOWIDE ENTERPRISES, INC., AND PACIFIC MILLS, INC., RESPONDENTS.

FACTS

Respondent TICO Insurance Company, Inc. (TICO) filed an interpleader case to determine who has a superior right over two condominium units registered in its name: respondents Glowide Enterprises, Inc. and Pacific Mills, Inc. (Glowide and PMI) or petitioner Bureau of Internal Revenue (BIR). Glowide and PMI had a fire insurance claim against TICO. After obtaining a favorable judgment, they secured a writ of preliminary attachment, and a notice of levy on attachment was annotated on the condominium titles on December 22, 2000. A final judgment was rendered on October 3, 2001. After TICO failed to appeal, a writ of execution was issued, and notices of levy on execution were annotated on June 13, 2002. The properties were sold at auction to Glowide and PMI on April 14, 2004, and a final deed of sale was executed on April 15, 2005. Meanwhile, the BIR had issued final tax assessments against TICO for 1996 and 1997. After TICO’s protest was denied, the BIR issued a warrant of distraint/levy and caused the annotation of a notice of tax lien on the same condominium titles on February 15, 2005. The Regional Trial Court (RTC) ruled in favor of the BIR, holding that its tax claim enjoyed preference. The Court of Appeals (CA) reversed the RTC, ruling that Glowide and PMI’s rights, which retroacted to the date of the levy on attachment (December 22, 2000), were superior to the BIR’s lien annotated later (February 15, 2005).

ISSUE

Whether the claim of Glowide and PMI over the condominium units is superior to the claim of the BIR for unpaid taxes.

RULING

Yes. The Supreme Court affirmed the CA decision, ruling in favor of Glowide and PMI. The Court held that Glowide and PMI’s levy on attachment, annotated on December 22, 2000, created a lien on the properties that was superior to the BIR’s tax lien annotated on February 15, 2005. Under Article 2242 of the Civil Code, credits annotated in the Registry of Property by virtue of a judicial order (like an attachment) upon the property affected are preferred credits with respect to specific immovable property. The preference granted to taxes under Article 2242(1) does not grant absolute priority; rather, the listed credits (including taxes and annotated judicial credits) concur and are to be satisfied pro-rata if they affect the same specific property. However, the priority among such concurrent credits is determined by the rule of “first in time, first in right.” Since Glowide and PMI’s levy on attachment was annotated years before the BIR’s tax lien, their credit enjoys priority. The Court also noted that TICO’s interpleader action was improper as Glowide and PMI had already acquired ownership of the properties through the auction sale.