Short answer. Yes. Taxes, duties, and fees due on specific movable property are expressly made to rank ahead of the other preferred credits on that same property, including a chattel mortgage — so unpaid government taxes on the vehicle are satisfied first, before your mortgage lien reaches the vehicle's value.
What the law says
Taxes mentioned in No. 1, article 2241, and No. 1, article 2242, shall first be satisfied.
Civil Code, Article 2243 — Taxes Come First. Read the full provision →
Where both taxes and your mortgage sit on the list
Article 2241 lists the preferred claims attaching to specific movable property, and it places duties, taxes and fees due thereon to the State or any subdivision thereof as the very first item on that list. Your chattel mortgage lien appears further down that same list, among the credits guaranteed by a pledge or chattel mortgage. Both are preferences over the same vehicle, but they do not rank equally.
Taxes are given first satisfaction
This anchor article resolves the ranking directly: the taxes described in the first item of Article 2241 shall first be satisfied, ahead of the other preferred credits enumerated alongside it — including the chattel mortgage lien. In practical terms, if the vehicle is sold or its value applied to competing claims, the unpaid government taxes on the car are paid out of that value before your mortgage claim is reached.
Why this ordering exists
This article also clarifies that the claims listed in the two preceding articles function as mortgages or pledges of real or personal property, or liens for purposes of insolvency law, which is why they are ranked against each other at all rather than treated as unrelated claims. Placing tax obligations at the very top of that ranking reflects that these are amounts owed to the government specifically because of the property itself, and the law gives that public obligation priority over privately arranged security interests like a chattel mortgage on the same asset.
What this does not change
This ranking applies specifically to the taxes, duties, and fees due on that movable property itself — it does not give every kind of tax debt a preference over your mortgage, only the ones tied to the vehicle under Article 2241's first item. It also does not extinguish your mortgage lien; it simply places the tax claim ahead of it in the order of satisfaction, so your lien remains valid and enforceable against whatever value of the vehicle remains once the tax claim is paid.
Cases citing this provision
These Supreme Court decisions cite the provision above. We list them so you can read them yourself; the summaries of what each decided are not ours to give.
- Strategic Alliance Development Corporation vs. Radstock Securities Limited and Philippine National Construction corporation, G.R. No. 178158 / G.R. No. 180428, December 4, 2009 — read the decision on LawPhil →
- Manuel D. Yngson, Jr., (in his capacity as the Liquidator of ARCAM & Co., Inc.) vs. Philippine National Bank, G.R. No. 171132, August 15, 2012 — read the decision on LawPhil →
- Maricalum Mining Corp. vs. Remington Industrial Sales Corp, G.R. No. 158332, February 11, 2008 — read the decision on LawPhil →
- Development Bank of the Philippines vs. Hon. Court of Appeals, et al, G.R. No. 126200, August 16, 2001 — read the decision on LawPhil →
Related provisions
- Civil Code, Article 2243 — Taxes Come First
- Civil Code, Article 2241 — Preferred Credits on Specific Movables