LAW ON CREDIT TRANSACTIONS – CONCURRENCE AND PREFERENCE OF CREDIT

(Arts. 2236-2251 of the Civil Code of the Philippines)

Concurrence of credits implies the possession by two or more creditors of equal rights or privileges over the same property
or all of the property of a debtor.

Preference of credit is the right held by a creditor to be preferred in the payment of his claim above others (i.e., to be paid
first) out of the debtor's assets.

When rules on preference of credits applicable

- The rules on preference of credits apply only where two or more creditors have separate and distinct claims against the
same debtor who has an insufficient property.

Liability for Obligations

- The debtor is liable with all his property, present and future, for the fulfillment of his obligations, subject to the
exemptions provided by law. (Art. 2236)

Exempt Property
1. Family home constituted jointly by husband and wife or by unmarried head of a family (Article 152, Family Code).
Exceptions:
a) for non-payment of taxes;
b) for debts incurred prior to the constitution of the family home;
c) for debts secured by mortgages on the premises before or after such constitution; and
d) for debts due to laborers, mechanics, architects, builders, material men and others who have rendered service or
furnished material for the construction of the building
2. Right to receive support as well as any money or property obtained as such support. (Article 205, Family Code)
3. Tools and implements necessarily used by him in his trade or Employment;
4. Two horses, or two cows, or two carabaos or other beasts of burden, such as the debtor may select, not exceeding one
thousand pesos in value and necessarily used by him in his ordinary occupation;
5. His necessary clothing and that of all his family.
6. Household furniture and utensils necessary for housekeeping and used for that purpose by the debtor, such as the debtor
may select, of a value not exceeding one thousand pesos;
7. Provisions for individual or family use insufficient for three months;
8. The professional libraries of attorney's, judges, physicians, pharmacists, dentist, engineers, surveyors, clergymen,
teachers and other professionals, not exceeding three thousand pesos in value;
9. One fishing boat and net, not exceeding the total value of one thousand pesos, the property of any fisherman, by the
lawful use of which he earns a livelihood;
10. So much of the earnings of the debtor for his personal services within the month preceding the levy as are necessary for
the support of his family;
11. Lettered gravestones;
12. All moneys, benefits, privileges or annuities accruing or in any manner growing out of any life insurance.
13. The right to receive legal support, or money or property obtained as such support, or any pension or gratuity from the
government;
14. Copyrights and other properties especially exempted by law (Section 12, Rule 39)
15. Property under legal custody and of the public dominion.

Preferred Credits with Respect to Specific Movable Property

1. Taxes. Duties, taxes and fees due thereon to the state or any subdivision thereof;
2. Malversation by public officials. Claims arising from misappropriation, breach of trust, or malfeasance by public
officials committed in the performance of their duties, on the movables, money or securities obtained by them;
3. Vendor's lien. Claims for the unpaid price of movable sold, on said movables, so long as they are in the possession of
the debtor, up to the value of the same, and if the movable has been resold by the debtor and the price is still unpaid,
the lien may be enforced on the price;
4. Pledge, chattel mortgage. Credits guaranteed with a pledge so long as the things pledged are in the hands of the creditor,
or those guaranteed by a chattel mortgage upon the things mortgaged, up to the value thereof;
5. Mechanic's lien. Credits for making repairs, safekeeping or preservation or personal property on the movable thus
made, repaired, kept or possessed;
6. Laborers wages. Claims for laborers wages, on the goods manufactured or the work done;
7. Salvage. For expenses of salvage, upon the goods salvaged;
8. Tenancy. Credits between the landlord and the tenant arising from the contract of tenancy on shares, on the share of
each in the fruits or harvest;
9. Carrier's lien. Credits for transportation, upon the goods carried, for the price of the contract and incidental expenses,
until their delivery and for thirty days thereafter;
10. Hotel's lien. Credits for lodging and supplies usually furnished to travelers by hotelkeepers, on the movables belonging
to the guest as long as such movables are in the hotel;
11. Crop loan. Credits for seeds and expenses for cultivation and harvest advanced to the debtor, upon the fruits harvested;
12. Rentals for a year. Credits for rent for one year, upon the personal property of the lessee existing on the immovable
leased on the fruits of the same;
13. Deposit. Claims in favor of the depositor if the depository has wrongfully sold the thing deposited, upon the price of
the sale.
Preferred Credits with Respect to Specific Immovable Property
1. Taxes. Taxes due upon the land or building;
2. Vendor's lien. For the unpaid price of real property sold upon the immovable sold;
3. Contractor's lien. Masons, mechanics and other workmen, as well as of architects, engineers and contractors, engaged
in the construction, reconstruction or repair of buildings, canals or other works, upon said buildings, canals or other
works;
4. Lien of materialmen. Claims of furnishers of materials used in the construction, reconstruction, or repair of buildings,
canals, and other works, upon said buildings, canals or other works;
5. Mortgage. Mortgage credits recorded in the Registry of Property, upon the real estate mortgage;
6. Expenses of preservation. Expenses for the preservation or improvement of real property when the law authorizes
reimbursement, upon the immovable preserved or improved;
7. Recorded attachments. Credits annotated in the Registry of Property, by virtue of a judicial order, by attachments or
executions, upon the property affected, and only as to later credits;
8. Warranty in partition. Claims of co-heirs for warranty in the partition of an immovable among them, upon the real
property thus divided;
9. Conditional donations. Claims of donors or real property for pecuniary charges or other conditions imposed upon the
done, upon the immovable donated;
10. Insurance premiums for 2 years. Credits of insurers, upon the property insured, for the insurance premium for two
years.

Order of Preference with Respect to Other Properties of the Debtor

1. Funeral expenses. Proper funeral expenses for the debtor, or children under his or her parental authority who have no
property of their own, when approved by the court;
2. Wages of employees for one year. Credits for services rendered the insolvent by employees, laborers, or household
helpers for one year preceding the commencement of the proceedings in insolvency;
3. Expenses of last illness. Expenses during the last illness of the debtor or of his or her spouse and children under his or
her parental authority, if they have no property of their own;
4. Workmen's compensation. Compensation due to the laborers of their dependents under laws providing for indemnity
for damages in cases of labor accident or illness resulting from the nature of the employment;
5. Support for one year. Credits and advancements made to the debtor for support of himself or herself, and family, during
the last preceding insolvency;
6. Support during insolvency. Support during the insolvency proceedings, and for three months thereafter;
7. Fines in crimes. Fines and civil indemnification arising from a criminal offense;
8. Legal and administration expenses. Legal expenses, and expenses incurred in the administration of the insolvent's
estate for the common interest of the creditors, when properly authorized and approved by the court;
9. Taxes. Taxes and assessments due the national government. Taxes and assessments due any province. Taxes and
assessments due any city or municipality other than those mentioned in Articles 2241, No.1 and 2242, No. 1;
10. Tort. Damages fro death or personal injuries caused by a quasi- delict:
11. Donations. Gifts due to public and private institutions of charity or beneficence;
12. Appearing in public instrument or final judgment. Credits which without special privilege, appear in (a) a public
instrument; or (b) in the final judgment, if they have been the subject of litigation. These credits shall have preference
among themselves in the order of priority of the dates of the instruments and of the judgments, respectively (Article
2244)

Order of Preference of Credits

1. Those credits which enjoy preference with respect to specific movable. excluded all others to the extent of the value of
the personal property to which the preference refers (Art. 2246).

2. If there are two or more credits with respect to the same specific movable property, they shall be satisfied pro-rata, after
the payment of duties, taxes, and fees due the State or any subdivision thereof (Art. 2247).

3. Those credits which enjoy preference in relation to specific real property or real rights, exclude all others to the extent
of the value of the immovable or real right to which the preference refers (Art. 8).

4. If there are two or more credits with respect to the same specific real property or real rights, they shall be satisfied pro
rata, after the payment of the taxes and assessments upon the immovable property or real right (Art. 2249).

5. The excess, if any, after the payment of the credits which enjoy preference with respect to specific property, real or
personal, shall be added to the free property which the debtor may have, for the payment of the other credits (Art. 2250).

6. Those credits which do not enjoy any preference with respect to specific property and those which enjoy preference, as
to the amount not paid, shall be satisfied according to the following rules:
• In the order established in Art. 2244;
• Common credits referred to in Article 2245 shall enjoy no preference and shall be paid pro rata regardless of
dated (Art. 2251).