G.R. No. 204226 - Bureau of Internal Revenue vs. TICO Insurance Co., Inc.

Case Summary (G.R. No. 204226)

Key Dates and Procedural Milestones

Insurance policies and fire loss arising in 1997.
BIR final assessments served on TICO: January 31, 2000.
Notice of levy on attachment by Glowide/PMI annotated on CCTs: December 22, 2000.
RTC Quezon City judgment in favor of Glowide/PMI: October 3, 2001; motion for execution granted June 3, 2002; writ of execution annotated June 13, 2002.
Insurance Commission placed TICO under liquidation: April 22, 2002.
Sheriff’s auction sale: April 14, 2004; certificate of sale annotated April 15, 2004; final deed of sale executed April 15, 2005 after redemption period lapsed.
BIR annotation of notice of tax lien on the CCTs: February 15, 2005.
TICO filed interpleader in RTC Makati: August 7, 2006.
RTC Makati Decision favoring BIR: March 25, 2008.
CA Decision reversing RTC and recognizing Glowide/PMI’s superior right: December 16, 2011; CA Resolution denying BIR’s late motion for reconsideration: October 22, 2012.
Supreme Court disposition on petition for review: denial (per the record provided).

Core Facts

Glowide and PMI were insured by TICO under a fire policy; insured properties were destroyed by fire. Glowide/PMI sued TICO for unpaid insurance proceeds, obtained a judgment (Oct. 3, 2001), and secured a writ of execution and corresponding notices of levy/attachment on two condominium units registered under TICO’s name (CCT Nos. 39452 and 39453). The sheriff auctioned and sold those units to Glowide/PMI in April 2004; final deed of sale was executed April 15, 2005 after the redemption period expired. Separately, the BIR assessed TICO for various deficiency taxes (serving final assessments Jan. 31, 2000) and, after administrative processes, caused annotation of a notice of tax lien on the subject CCTs on February 15, 2005. TICO was placed in liquidation by the Insurance Commission on April 22, 2002, with a conservator appointed.

Glowide and PMI’s Position

Glowide and PMI claim they secured a final judgment against TICO and executed that judgment via levy, auction sale and final deed; their rights to the condominium units attach and retroact to the date of annotation of the levy on attachment (December 22, 2000). They assert that their judicially created, registered execution lien is a special preferred credit under Civil Code Article 2242(7) and thus outranks BIR’s claim, particularly because BIR’s notice of tax lien was only annotated in the Register of Deeds on February 15, 2005 — after Glowide/PMI’s levy and sale were already annotated and after the auction sale occurred.

BIR’s Position

The BIR contended that its tax assessments (served January 31, 2000) created a tax lien that retroacts to the time of assessment under Section 219 of the Tax Code, giving it priority over other creditors. The BIR maintained that its tax lien should be effective against TICO’s properties and claim superior to Glowide/PMI’s rights. The BIR also advanced procedural and notice-based contentions—arguing, among other things, that the TICO liquidator was not properly given notice to pay the judgment and that the writ of execution diverged from a court order directing claims to be coursed through the conservator.

RTC Makati Ruling

RTC Makati (March 25, 2008) held that BIR’s claim to the condominium units was preferred over Glowide/PMI’s, applying the Civil Code’s rules on concurrence and preference of credits (citing Article 2242 and related provisions) and concluding that taxes are given preference under the applicable provisions.

Court of Appeals Ruling

The Court of Appeals reversed RTC Makati (December 16, 2011), declaring the sheriff’s auction sale valid, retroacting the purchaser’s rights to the date of annotation of the levy (December 22, 2000), and ruling that Glowide and PMI have superior right over the condominium units against the BIR. The CA emphasized that BIR’s tax lien was only annotated on the titles on February 15, 2005; therefore, the BIR’s lien could not affect rights that had already vested in Glowide/PMI by virtue of the execution sale. The CA also criticized TICO’s resort to interpleader as improper in light of the final judgment and subsequent execution in favor of Glowide/PMI, which made TICO’s interpleader a belated and collaterally attacking measure.

Issues Presented to the Supreme Court

Whether the BIR’s petition should be dismissed on procedural/technical grounds (late motion for reconsideration before the CA).
Whether TICO’s complaint for interpleader was proper.
Which party — BIR or Glowide/PMI — has the superior right to the condominium units.

Supreme Court’s Procedural Holding: Finality and the Late Motion for Reconsideration

The Supreme Court denied the petition primarily on procedural grounds. The BIR’s motion for reconsideration before the CA was filed one day late; under Rule 52, Section 1 of the Rules of Court the 15-day reglementary period for filing a motion for reconsideration is non-extendible. Per the Court’s reasoning in the record, timely perfection of appellate remedies is jurisdictional; failure to comply deprives the appellate tribunal of jurisdiction to alter the judgment. The Court rejected inadvertence or counsel’s negligence as sufficient justification to relax the rule. Consequently, the CA’s December 16, 2011 Decision became final and executory, placing the matter beyond further alteration by the courts on procedural grounds.

Supreme Court’s Merits Analysis: Interpleader Improperness

Even were the petition not procedurally foreclosed, the Supreme Court agreed with the CA that TICO’s interpleader action was improper. Interpleader is available to a stakeholder who claims no interest and seeks to join competing claimants to avoid multiple liabilities. However, where a stakeholder has already been held liable in a final and executory judgment in favor of one claimant, impleading that successful claimant subsequently in an interpleader action effectively forces the claimant to reestablish a right already judicially determined — a collateral attack on a final judgment. The Court found that TICO had been sued, litigated and lost before the RTC QC and that TICO’s belated interpleader came only after final unfavorable rulings; TICO had knowledge of conflicting claims yet failed to implead earlier. The interpleader thus amounted to an untimely and unjustified attempt to relitigate final adjudicated rights, barred by laches and the immutability of final judgments.

Supreme Court’s Merits Analysis: Priority of Rights and Retroaction of Execution Sale

The Court upheld the CA’s legal conclusions on competing claims and the legal effect of execution and registration:

Execution levy and sale: An execution sale vests title in the purchaser immediately upon sale, subject to the debtor’s redemption right within the statutory period. The purchaser’s rights are entitled to protection as inchoate rights that become absolute if redemption is not exercised. An execution or auction sale retroacts to the date of annotation of the levy on attachment; the annotation is the operative act that conveys and affects the land with respect to priority.
Tax lien under Section 219 of the Tax Code: Although a tax assessment creates a lien that retroacts to the assessment date, the proviso to Section 219 provides that the tax lien is not valid against a mortgagee, purchaser or judgment creditor until notice of such lien is filed with the Register of Deeds where the property is located. The operative date for effectiveness against judgment creditors is therefore the date of annotation in the Register of Deeds.
Application to the facts: Glowide/PMI’s levy on attachment was annotated on December 22, 2000; their execution sale was annotated in April 2004 and became final after redemption lapsed (final deed April 15, 2005). The BIR’s notice of tax lien was annotated only on February 15, 2005 — after Glowide/PMI’s levy annotation and after the auction sale had already been annotated. Consequently, when the BIR’s tax lien was registered, Glowide/PMI already had vested rights deriving from the execution sale that retroacted to December 22, 2000. Therefore the BIR’s tax lien could not invalidate or outrank those rights.

Classification of Credits and Preference under the Civil Code

The Court applied the Civil Code’s system of concurrence and preference of credits:

Glowide/PMI’s claim originates in judicial attachment and execution and is a special preferred credit under Article 2242(7) (credits annotated in the Registry by attachments or executions on the property concerned). Such specially preferred credits constitute liens upon the specific property and exclude other claims to the extent of the property’s value.
The BIR’s assessed claims relate to various deficiencies (income tax, registration fees, VAT, withholding taxes, documentary stamp tax, etc.) not tied to taxes specifically levied on the particular condominium units; under the preference scheme, such taxes are classified as ordina

Case Syllabus (G.R. No. 204226)

Case Caption and Nature of Petition

Petition for Review on Certiorari filed by the Bureau of Internal Revenue (BIR) assailing: (a) the December 16, 2011 Decision of the Court of Appeals (CA) in CA‑G.R. CV. No. 91856, and (b) the CA’s October 22, 2012 Resolution denying the BIR’s motion for reconsideration.
The CA had reversed and set aside the March 25, 2008 Decision of the Regional Trial Court of Makati, Branch 147 (RTC Makati), declaring that Glowide Enterprises, Inc. (Glowide) and Pacific Mills, Inc. (PMI) have superior rights over condominium Units 7A and 7B of Trafalgar Plaza (CCT Nos. 39452 and 39453), as against the BIR.
The Supreme Court docketed the matter as G.R. No. 204226 and resolved the petition by a decision authored by Justice Hernando, with concurrence of the listed members.

Antecedent Facts — Background of Parties and Property

TICO Insurance Company, Inc. (TICO): an insurance company organized under Philippine laws, engaged in life insurance business until placed under liquidation by the Insurance Commission in April 2002; Atty. Rommel A. Frias was appointed liquidator/conservator.
Glowide Enterprises, Inc. (Glowide) and Pacific Mills, Inc. (PMI): clients of TICO who had fire insurance policies over certain properties; those insured properties were destroyed by fire while the policy was in effect.
The subject properties for this dispute are condominium Units 7A and 7B of Trafalgar Plaza Condominium covered by CCT Nos. 39452 and 39453, which were registered under TICO’s name and later became the focus of competing claims by Glowide & PMI (judgment creditors) and the BIR (tax creditor).

Procedural History — Glowide and PMI’s Judicial Remedies Against TICO

Glowide and PMI sued TICO for sums due and damages, seeking a writ of preliminary attachment before the RTC of Quezon City (RTC QC), docketed Civil Case No. Q‑00‑42328.
RTC QC issued, by Order dated November 23, 2000, the writ of preliminary attachment to attach all properties of TICO sufficient to satisfy Glowide and PMI’s claim; notice of levy on attachment was annotated on CCT Nos. 39452 and 39453 on December 22, 2000.
RTC QC rendered judgment on October 3, 2001 ordering TICO to pay P5,442,209.97 plus interest, attorney’s fees, and costs of suit.
Glowide and PMI moved for execution on January 8, 2002; writ of execution issued June 3, 2002; notices of levy on execution were annotated on the CCTs on June 13, 2002.
Sheriff conducted sale: notice of sheriff’s sale issued March 17, 2004; auction conducted April 14, 2004; Glowide and PMI were highest bidders; certificate of sale was annotated on the CCTs April 15, 2004; no redemption occurred within the statutory period; final deed of sale executed April 15, 2005 in favor of Glowide and PMI.
RTC QC denied TICO’s petitions to relieve from the judgment and execution as filed out of time (Orders of September 3, 2003 and February 16, 2004). The CA dismissed TICO’s certiorari petition (CA decision of August 23, 2007 in CA‑G.R. SP No. 83365); TICO did not further appeal.

Procedural History — BIR’s Assessments and Lien Annotation

On January 31, 2000 the BIR served final assessment notices against TICO for alleged deficiency internal revenue taxes (income tax, annual registration fee, VAT, percentage tax, withholding tax on wages, expanded withholding tax, documentary stamp tax) for calendar years 1996 and 1997, totaling P73,020,590.12; after protest and denial, liability was reduced to P69,479,440.59.
BIR alleged nonpayment and issued a warrant of distraint and/or levy and a notice of tax lien covering CCT Nos. 39452 and 39453; the notice of tax lien was annotated on the titles on February 15, 2005.

RTC Makati Interpleader Action (Special Civil Action No. 06‑667)

TICO (stakeholder) filed a complaint for interpleader on August 7, 2006 in RTC Makati to determine superior claim between Glowide & PMI and the BIR over the condominium units then registered in TICO’s name.
RTC Makati, in its March 25, 2008 Decision, held that the BIR’s claim over the condominium units was preferred to that of Glowide and PMI, applying Civil Code provisions on concurrence and preference of credits; RTC Makati’s July 19, 2008 Order denied Glowide and PMI’s motion for reconsideration.
Glowide and PMI appealed to the Court of Appeals.

Court of Appeals Ruling and Its Grounds

CA Decision dated December 16, 2011 reversed RTC Makati and declared the auction sale of the condominium units valid, retroacting to the date of the annotation of the notice of levy on attachment (December 22, 2000), thereby holding Glowide and PMI to have superior rights to the condominium units as against the BIR.
CA’s reasoning emphasized: (a) right of Glowide and PMI reverts to annotation date of levy on attachment (December 22, 2000); (b) BIR’s tax lien was annotated only on February 15, 2005; and (c) the interpleader was improper because Glowide and PMI had already obtained a final and executory judgment against TICO, making interpleader a source of conflicting rulings between RTC Makati and RTC QC.
CA denied BIR’s motion for reconsideration by Resolution dated October 22, 2012.

Issues Presented to the Supreme Court

Whether the petition should be dismissed on technical grounds (BIR’s late filing of motion for reconsideration with the CA).
Whether TICO’s complaint for interpleader was proper or constituted an improper collateral attack on prior final and executed judgments.
Which party — BIR, or Glowide and PMI — has the superior right over the condominium units.

Supreme Court Ruling — Disposition

The Supreme Court denied the petition for review and affirmed the CA’s December 16, 2011 Decision and October 22, 2012 Resolution.
Primary ground for dismissal: BIR’s failure to timely file its motion for reconsideration rendered the CA Decision final, immutable, and beyond the power of the courts to amend or revoke.
Even aside from the procedural infirmity, the Court found the pe