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Republic V Peralta

The Republic of the Philippines sought review of a lower court decision regarding the insolvency of Quality Tobacco Corporation. The lower court held that the claims of employee unions for separation pay were preferred over the claims of the Bureau of Customs and Bureau of Internal Revenue. The Supreme Court ruled that the government's tax claim has preference over any other creditor's claim regarding any and all properties of the insolvent corporation. The Civil Code establishes a two-tier order of preference where tax and duty claims on specific properties have first preference, while other special preferred credits like judgments have equal second-tier preference over ordinary claims from the residual value of the property.

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139 views1 page

Republic V Peralta

The Republic of the Philippines sought review of a lower court decision regarding the insolvency of Quality Tobacco Corporation. The lower court held that the claims of employee unions for separation pay were preferred over the claims of the Bureau of Customs and Bureau of Internal Revenue. The Supreme Court ruled that the government's tax claim has preference over any other creditor's claim regarding any and all properties of the insolvent corporation. The Civil Code establishes a two-tier order of preference where tax and duty claims on specific properties have first preference, while other special preferred credits like judgments have equal second-tier preference over ordinary claims from the residual value of the property.

Uploaded by

John Bas
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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32.

Republic v Peralta

Facts:

The Republic of the Philippines seeks the review on certiorari Civil Case No. 108395 entitled "In the
Matter of Voluntary Insolvency of Quality Tobacco Corporation, Quality Tobacco Corporation, Petitioner," and
of the Order dated 19 January 1981 of the same court denying the motion for reconsideration of the earlier
Order filed by the Bureau of Internal Revenue and the Bureau of Customs for the Republic. In its questioned
Order of 17 November 1980, the trial court held that the Claims of creditors of USTC Association of Employees
and workers Union-PTGWO USTC (hereafter collectively referred to as the "Unions") for separation pay of their
respective members embodied in final awards of the National Labor Relations Commission were to be preferred
over the claims of the Bureau of Customs and the Bureau of Internal Revenue. Also saying that that taxes are
absolutely preferred claims only with respect to movable or immovable properties in which they are due

The Solicitor General, in seeking the reversal of the questioned Orders, argues that Article 110 of the
Labor Code is not applicable as it speaks of "wages," a term which he asserts does not include the separation
pay claimed by the Unions. "hence the claim of the government be given preference than the claims of the other
creditors

Issue:

whether or not the claims of the government should be given preference

Ruling:

Yes. The claim of the government predicated on a tax lien is superior to the claim of a private litigant
predicated on a judgment. The tax claim must be given preference over any claim of other creditor in respect
of any and all properties of the insolvent. There is no merit in the contention of the NLRC that taxes are
absolutely preferred claims only with respect to movable or immovable properties in which they are due

Civil Code Articles 2241 and 2242 jointly with Articles 2246 to 2249 establish a two-tier order of
preference. The first tier includes only taxes, duties and fees due on specific movable or immovable property.
All other special preferred credits stand on the same second tier to be satisfied, pari passu and pro rata, out of
any residual value of the specific property to which such other credits relate. Credits which are specially
preferred because they constitute liens (tax or non-tax) in turn, take precedence over ordinary preferred credits
so far as concerns the property to which the liens have attached. The specially preferred credits must be
discharged first out of the proceeds of the property to which they relate, before ordinary preferred creditors
may lay claim to any part of such proceeds.

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