G.R. No. L-6463; May 26, 1954
RIZAL SURETY AND INSURANCE CO., plaintiff-appellee, vs. MARCIANO DE LA PAZ, ET AL., defendants, appellants-appellees. MARCIANO DE LA PAZ and DOMINGO LEONOR, defendants-appellants.

FACTS

On March 22, 1950, Rizal Surety and Insurance Company filed a complaint for interpleader in the Court of First Instance of Manila. The plaintiff held P20,000, the proceeds of a fire insurance policy covering a theater in Marikina, Rizal, owned by Federal Films, Inc., which was destroyed by fire on February 1, 1947. Several creditors of the insured (Federal Films, Inc.) claimed these proceeds: Marciano de la Paz, Domingo Leonor, Jose Santos and Dominador Nepomuceno, Pablo Roman, Serapion D. Yñigo, and the Collector of Internal Revenue. The plaintiff, unable to determine the order of preference among the claimants, sought a judicial determination. The trial court rendered a decision ordering payment in a specific sequence. From this judgment, defendants Marciano de la Paz and Domingo Leonor appealed, contesting the order of preference.

ISSUE

The primary issue is the determination of the correct order of preference or priority among the various creditors claiming the insurance proceeds, considering the applicable laws on tax liens, attachments, and credits evidenced by public documents or final judgments.

RULING

The Supreme Court modified the trial court’s decision and established the following order of preference for payment from the P20,000 insurance proceeds:
1. First: The Collector of Internal Revenue, for amusement taxes amounting to P3,216.08. This claim constitutes a superior lien under Section 315 of the National Internal Revenue Code, which creates a lien on the property and all property rights therein, including the insurance proceeds.
2. Second: Jose Santos and Dominador Nepomuceno, for a credit evidenced by a public document dated May 23, 1946. The Court rejected the argument that the document was not public due to an undated acknowledgment, finding the acknowledgment referred to the date in the body of the instrument.
3. Third: Domingo Leonor, for a credit evidenced by a public instrument dated July 19, 1946. Although his garnishment was served on February 17, 1947 (after de la Paz’s), the preference arises from the earlier public document. A preference under a public document is not lost by a subsequent judicial action.
4. Fourth: Pablo Roman, for a credit evidenced by a judgment that became final on September 26, 1946. The Court rejected the contention that the judgment was not final, noting the appeal to the Supreme Court was a petition for certiorari against an order dismissing the appeal, and writs of execution had already been issued.
5. Fifth: Marciano de la Paz, whose claim was based on a garnishment served on February 5, 1947. His credit, not evidenced by a public document or a final judgment at the relevant time, was placed last among the competing creditors.
6. Serapion D. Yñigo’s claim was denied for failure to present evidence.
The Court held that Article 1924 of the old Civil Code (on preference of credits) and the law on attachments are to be applied together. It also ruled that none of the claimants were entitled to interest from the plaintiff, as the plaintiff could not be deemed in default. The appealed judgment was affirmed with this modification.