G.R. No. L-48925; August 30, 1943
LUCITA Y. MATIAS, petitioner-appellant, vs. THE PROVINCIAL SHERIFF OF NUEVA ECIJA, respondent-appellee.

FACTS

In Civil Case No. 6043 of the Court of First Instance of Nueva Ecija, plaintiff Lucita Y. Matias obtained a judgment against defendant Gonzalo H. Cotoco for P11,023.80 with interest. Prior to judgment, Matias attached Cotoco’s 5,894 shares in Samahang Magsasaka, Inc., which were later levied upon and advertised for sale at public auction under a writ of execution. Before the sale, the Provincial Fiscal, representing the Collector of Internal Revenue, claimed a preferential lien over the shares (and any proceeds from their sale) for Cotoco’s unpaid sales and income taxes, citing Section 1588 of the Administrative Code. Another third-party claimant, Guan Suy, also emerged. Matias filed a P58,000 indemnity bond with the sheriff specifically “in view of the claim of Guan Suy.” At the auction on October 3, 1932, Matias, as the highest bidder, purchased the shares for P2,947. The sheriff demanded cash payment from Matias due to the Collector’s claim, but she refused, arguing that as the execution creditor, she was not obligated to pay cash. The sheriff consequently refused to issue a certificate of sale. Matias filed an action to compel the sheriff to issue the certificate.

ISSUE

1. Whether an execution creditor who is the successful bidder at a public auction sale of the judgment debtor’s property is required to pay the bid amount in cash when a third party (the Collector of Internal Revenue) asserts a superior lien over the proceeds of the sale.
2. Whether the court can adjudicate the validity of the Collector of Internal Revenue’s preferential tax lien claim when the Collector is not a party to the case.

RULING

1. On the requirement of cash payment: The Court ruled that the sheriff rightfully demanded cash payment from Matias. While generally, an execution creditor need not pay cash if the bid does not exceed the judgment debt (absent third-party claims), the situation differs when a third party asserts a superior claim to the sale proceeds. Here, the Collector of Internal Revenue claimed a preferential tax lien. The sheriff, faced with conflicting claims, had no authority to resolve the dispute and was justified in demanding cash to hold the funds subject to the court’s determination. This protects the sheriff from liability. The indemnity bond filed by Matias did not cover the Collector’s claim, as it was explicitly filed only “in view of the claim of Guan Suy.” Thus, Matias’s refusal to pay cash was not justified.
2. On adjudicating the tax lien claim: The Court declined to rule on the merits of the Collector’s preferential claim because the Collector of Internal Revenue was not made a party to the case. The Provincial Fiscal and Solicitor General appeared only for the sheriff, not for the Collector. Any decision on the tax lien without the Collector as a party would not be binding on him for lack of jurisdiction over his person. Therefore, the trial court and the Supreme Court lacked jurisdiction to resolve that controversy.
DISPOSITIVE: The decision of the trial court dismissing the complaint was affirmed, without costs.