COMMISSIONER OF INTERNAL REVENUE vs.

NATIONAL LABOR RELATIONS

COMMISSION, DEPUTY CITY SHERIFF CARMELO V. CACHERO, MARITIME COMPANY
OF THE PHILIPPINES, DOMINGO C. NIANGAR, DANIEL C. SABINO, FERNANDO S.
TULIAO and TULMAR TRADING CORPORATION

G.R. No. 74965 November 9, 1994

MENDOZA, J:

FACTS:

January 12, 1984 CIR sent 2 letters of demand to Maritime Company of the Philippines for tax deficiency
amounting to P17,284,882.45 (common carrier’s tax, fixed tax, Commercial Broker’s tax, DST, income
tax and withholding tax). Maritime Company did not pay the tax liabilities. So the CIR, on January 23,
1985, issued warrants of distraint of personal property and levy of real. The warrants were served on
January 28, 1985 to the company accountant.

On April 16, 1985 a “Receipt of Goods, Articles, and Things Seized under the Authority of the NIRC”
was executed, covering, among other things, six barges of the Maritime Company. Receipt is required
under Section. 206 of the NIRC as proof of constructive distraint of personal properties. It is an
undertaking by the taxpayer or person in possession of the property that he will preserve the property and
deliver it upon order of the court of the Internal Revenue Commissioner. However, Maritime Company
refused to sign the said receipt.

On July 20, 1985, four of the six barges were levied by the deputy sheriff of Manila to satisfy a judgment
for unpaid wages and other benefits of the employees of the Maritime Company as granted by the NLRC.
The four barges were already sold at a public auction.

CIR asked the Labor Arbiter to annul the sale and to enjoin the sheriff from disposing the proceeds of the
sale or, in the alternative, to remit the proceeds to the BIR to serve as payment for the tax liabilities of the
Maritime Company.

Labor Arbiter denied the motion on the ground that CIR failed to show that the subject barges were
validly placed under constructive distraint since the taxpayer failed to signed the receipt which is required
according to the Labor Arbiter by the NIRC. The Labor Arbiter likewise rejected the CIR’s contention
that the government’s claim for taxes are preferred under the Civil Code. According Article 2247, in
relation to Art. 2241, taxes are given preference only if they are due on that specific movable; but since
the taxes claimed by the BIR were not due on the four barges in question, preference cannot be granted.

ISSUES:

I. Whether or not there was a valid constructive distraint by the CIR over the four barges.
II. Whether or not the CIR’s claims are superior than the private claims of the Maritime employees.

HELD:
I.
YES, there was a valid constructive distraint over the four barges of the Maritime Company.

Under Section 206 of the NIRC; xxx Constructive distraint of personal property shall be effected by
requiring the taxpayer or any person having possession or control of such property to sign a receipt
covering the property distrained and obligate himself to preserve the same intact and unaltered and not to
dispose of the same in any manner without the express authority of the Commissioner of Internal
Revenue.
The case arose out of the same facts involved in Republic v. Enriquez, in which the court sustained the
validity of the distraint of the six barges, which includes the four involved in this case. The Court found
out in Republic v. Enrique that the barges are in the possession and control of the Coast Guard, the
“Receipt for Goods, Articles and Things Seized under Authority of the NIRC” covering the six barges had
been duly executed and received by the Coast Guard through the placement of their rubber stamp and the
signature of their representative.

Apparently, what was attached to the CIR’s motion to the Labor Arbiter was a copy and not the original
with the rubber stamp and signature of the Coast Guard.

The contention of the Labor Arbiter that failure of the taxpayer to sign the receipt amounted to an invalid
constructive distraint is not correct. The NIRC provides that the taxpayer or the person in possession and
control of the properties subject of the distraint can sign the receipt. Since the six barges were in the
possession and control of the Coast Guar, the rubber stamp and the signature of its representative
amounted to a valid constructive distraint.

II.
YES, the claim of the government predicted on a tax lien is superior to the claim of a private litigant
predicated on a judgment. The tax lien attaches not only form the service of the warrant of distraint of
personal properties but from the time the tax became due and payable.

The contention of the NLRC that taxes are preferred claims only with respect to movable or immovable
properties on which they are due and since the taxes sought by the BIR are not due on the barges, the
government’s claim cannot prevail over the claims of the Maritime employees is not correct.

The Claim of the BIR for tax liabilities give rise to a tax lien upon all the properties and assets, movable
or immovable, of the taxpayer. Under Art. 2241 and 2246-2249 of the Civil Code, tax claim must be
given preference over any other claim of any other creditor, in respect of any and all properties of the
insolvent. There is no classification whether the taxes charged were from the movable itself or from
others, it covers all the properties of the taxpayer.