Commissioner of Internal Revenue v. National Labor Relations Commission
REITERATIONFacts
The Antecedents: The Commissioner of Internal Revenue (CIR) assessed Maritime Company of the Philippines (MCP) for deficiency taxes totaling P17,284,882.45. MCP did not contest the assessment, which became final and executory. As MCP failed to pay, the CIR issued warrants of distraint of personal property and levy of real property. A "Receipt for Goods, Articles, and Things Seized" was prepared for six barges (MCP-1 to MCP-6) under constructive distraint, but it was not signed by MCP's representative, who allegedly refused to sign. The CIR explained that individuals possessing the barges refused to sign. Procedural History: On July 20, 1985, Deputy Sheriff Carmelo V. Cachero levied upon four of these barges (MCP-2, MCP-3, MCP-5, and MCP-6) through a writ of execution to satisfy a judgment for unpaid wages and benefits of MCP employees in NLRC Case No. NCR-12-4233-84, amounting to P490,749.21. The four barges were sold at public auction on August 12, 1985, to Daniel C. Sabino, who subsequently sold them to Fernando S. Tuliao and Tulmar Trading Corporation. On September 4, 1985, the CIR filed a motion with the Labor Arbiter to annul the sheriff's sale or, alternatively, to remit the proceeds to the Bureau of Internal Revenue (BIR) for satisfaction of MCP's tax liabilities. The Labor Arbiter denied the motion, finding no valid constructive distraint due to the unsigned receipt and ruling that the government's tax claim was not preferred as it was not due on the specific barges. The National Labor Relations Commission (NLRC) affirmed the denial. The Petition: The CIR filed a petition for certiorari with the Supreme Court, seeking to set aside the NLRC resolution.
Issue(s)
Whether the constructive distraint of the four barges was validly effected. Whether the government's claim for taxes is superior to the claims of the employees for unpaid wages, despite the latter being levied upon by a writ of execution prior to the remittance of proceeds to the BIR. Whether Article 110 of the Labor Code applies to the claims of employees in this case.
Ruling
The petition is granted. The resolution of the NLRC is set aside insofar as it denies the government's claim for taxes. Respondent deputy sheriff is ordered to remit the proceeds of the auction sale to the Bureau of Internal Revenue to be applied as part payment of Maritime Company's tax liabilities.
Ratio Decidendi
On the validity of the constructive distraint: The Court found that the constructive distraint was validly effected, referencing its ruling in Republic v. Enriquez. Although the receipt for goods seized was not signed by MCP's representative, a copy of the signed receipt, acknowledged by the First Coast Guard District, was submitted in a prior case involving similar barges. This receipt, along with a "Notice of Seizure of Personal Property" issued by the CIR and received by MCP's counsel, belied the sheriff's claim that there was no indication of prior distraint. The Court reiterated that constructive distraint is effected by requiring a receipt and, if refused, by preparing a list of the property in the presence of two witnesses, after which the property is deemed distrained. The acknowledgment by the Coast Guard served as proof of constructive distraint. On the superiority of the government's tax claim over the employees' claims: The Court held that the government's claim for taxes, predicated on a tax lien, is superior to a private litigant's claim based on a judgment. The tax lien attaches from the time the tax became due and payable, and in this case, the distraint and notice of seizure were made by the CIR long before the writ of execution was issued. Therefore, at the time of the levy, the barges were no longer unencumbered properties of MCP. The power of a court in execution extends only to properties unquestionably belonging to the judgment debtor, and a purchaser acquires only the rights the debtor had at the time of sale. The sheriff is not authorized to levy on property not belonging to the judgment debtor. On the applicability of Article 110 of the Labor Code: The Court rejected the NLRC's contention that the government's claim was not preferred because the taxes were not due on the specific barges. Citing Republic v. Peralta, the Court clarified that tax claims give rise to a lien upon all properties of the taxpayer, and such claims must be given preference over other creditors' claims. Furthermore, the Court emphasized that Article 110 of the Labor Code, which grants workers first preference in case of bankruptcy or liquidation, applies only in such specific circumstances. Since the present case did not involve the bankruptcy or liquidation of MCP's business, Article 110 was not applicable. The claims for unpaid wages, to the extent not covered by specific provisions of the Civil Code (Articles 2241, No. 6 and 2242, No. 3), are considered ordinary preferred credits under Article 2244, which are subordinate to tax liens.
Main Doctrine
The government's claim for taxes, arising from a tax lien, is superior to a private litigant's claim predicated on a judgment, and the tax lien attaches from the time the tax became due and payable, even if the distraint and notice of seizure were made before the writ of execution was issued. Article 110 of the Labor Code, concerning worker preference in case of bankruptcy or liquidation, does not apply to ordinary collection proceedings.