CLASSIFICATION AND PREFERENCE OF CREDITORS
ORDER OF DISTRIBUTION
1. Equitable claims under Section 48
2. Preferred claims with respect to specific movable property and specific immovable property
3. Preferred claims as to the encumbered property of the debtor which shall be paid in the order named in Article 2244 CC
4. Common or ordinary credits which shall be paid pro rata regardless of the dates under Article 2245 CC
5. With respect to specific movable and immovable property, the taxes due the State shall first be established
EQUITABLE CLAIMS UNDER THE INSOLVENCY LAW
1. Paraphernal property belonging to the wife of the insolvent
2. Property held by the insolvent on deposit, administration, lease or usufruct
3. Merchandise held by the debtor on commodatum
4. Negotiable instruments for collection or remittance
5. Money held by the debtor for remittance
6. Amounts due the insolvent for sales or merchandise on commission
7. Merchandise bought by the insolvent on credit where no delivery is made or where the right of ownership or possession has been retained by the seller
8. Goods or chattels wrongfully taken by the insolvent or the amount of the value thereof
CLASSIFICATION AND PREFERENCE OF CREDITORS
SECTION 48. Property not belonging to insolvent; Dowry; Paraphernalia property. — Merchandise, effects, and any other kind of property found among the property of the insolvent, the ownership of which has not been conveyed to him by a legal and irrevocable title, shall be considered to be the property of other persons and shall be placed at the disposal of its lawful owners on order of the court made at the hearing mentioned in section forty-three or at any ordinary hearing, if the assignee or any creditor whose right in the estate of the insolvent has been established shall petition in writing for such hearing and the court in its discretion shall so order, the creditors, however, retaining such rights in said property as belong to the insolvent, and ubrogating him whenever they shall have complied with all obligations concerning said property.
The following shall be included in this section:
1. Dowry property inestimado and such property estimado which may remain in the possession of the husband where the receipt thereof is a matter of record in a public instrument registered under the provisions of sections twenty-one and twenty-seven of the Code of Commerce in force.
2. Paraphernal property which the wife may have acquired by inheritance, legacy, or donation whether remaining in the form in which it was received or subrogated or invested in other property, provided that such investment or subrogation has been registered in the registro mercantile in accordance with the provisions of the sections of the Code of Commerce mentioned in the next preceding paragraph.
3. Property and effects deposited with the bankrupt, or administered, leased, rented, or held in usufruct by him.
4. Merchandise in the possession of the bankrupt, on commission, for purchase, sale, forwarding, or delivery.
5. Bills of exchange or promissory notes without endorsement or other expression transferring ownership remitted to the insolvent for collection
6. Money remitted to the insolvent, otherwise than on current account, and which is in his possession for delivery to a definite person in the name and for the account of the remitter or for the settlement of claims which are to be met at the unsolvent's domicile.
7. Amounts due the insolvent for sales of merchandise on commission, and bills of exchange and promissory notes derived therefrom in his possession, even when the same are not made payable to the owner of the merchandise sold, provided it is proven that for the obligation to the insolvent is derived therefrom and that said bills of exchange and promissory notes were in the possession of the insolvent for account of the owner of the merchandise to be cashed and remitted, in due time, to the said owner; all of which shall be a legal presumption when the amount involved in any such sale shall not have been credited on the books of both the owner of the merchandise and of the insolvent.
8. Merchandise bought on credit by the insolvent so long as the actual delivery thereof has not been made to him at his store or at any other place stipulated for such delivery, and merchandise the bills of lading or shipping receipts of which have been sent him after the same has been loaded by order of the purchaser and for his account and risk.
In all cases arising under this paragraph assignees may retain the merchandise so purchased or claim it for the creditors by paying the price thereof to the vendor.
9. Goods or chattels wrongfully taken, converted, or withheld by the insolvent if still existing in his possession or the amount of the value thereof.
SECTION 49. Creditors sharing pro rata. — All creditors, except those whose claims are mentioned in the next following section, whose debts are duly proved and allowed shall be entitled to share in the property and estate pro rata, after the property belonging to other persons referred to in the last in preceding section has been deducted therefrom, without priority or preference whatever:
Provided, That any debt proved by any person liable as bail, surety, guarantor, or otherwise, for the debtor, shall not be paid to the person so proving the same until satisfactory evidence shall be produced of the payment of such debt by such person so liable, and the share to which such debt would be entitled may be paid into court, or otherwise held, for the benefit of the party entitled thereto, as the court may direct.
SECTION 50. The following are the preferred claims which shall be paid in the order named:
(a) Necessary funeral expenses of the debtor, or of his wife, or children who are under their parental authority and have no property of their own, when approved by the court;
(b) Debts due for personal services rendered the insolvent by employees, laborers, or domestic servants immediately preceding the commencement of proceedings in insolvency;
(c) Compensation due the laborers or their dependents under the provisions of Act Numbered Thirty-four hundred and twenty-eight, known as the Workmen's Compensation Act, 22 as amended by Act Numbered Thirty-eight hundred and twelve, and under the provisions of Act Numbered Eighteen hundred and seventy-four, known as the Employees' Liability Act 23 and of other laws providing for payment of indemnity for damages in cases of labor accidents;
(d) 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;
(e) Debts, taxes, and assessments due the Insular Government; 24
(f) Debts, taxes, and assessments due to any province or provinces of the Philippine Islands;
(g) Debts, taxes, and assessments due to any municipality or municipalities of the Philippine Islands;
All other creditors shall be paid pro rata.
