Short answer. You split what is recovered, not each take full payment. Article 2247 of the Civil Code requires that when two or more creditors hold preferred claims on the same specific movable, the proceeds are applied first to government duties and taxes, then shared among the creditors pro rata.
What the law says
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.
Civil Code, Article 2247 — Two or More Credits on the Same Movable. Read the full provision →
The pro rata rule for competing claims on movables
Article 2247 draws a clear line: once the government's share is settled — duties, taxes, and fees owed to the State or any local subdivision — what remains is distributed among the competing preferred creditors in proportion to their respective claims. No single creditor takes precedence over the others simply by virtue of priority in time or registration. The rule applies only when both claims are preferred credits specifically attached to the same movable. A general credit against the debtor, not tied to that particular piece of property, is not part of this distribution.
How the proportional share is calculated
The proportion each creditor receives depends on how much they are owed relative to the combined total of all preferred claims on the item. If creditor A is owed sixty thousand pesos and creditor B is owed forty thousand pesos, the combined total is one hundred thousand. After taxes are paid, creditor A takes 60% of what remains and creditor B takes 40% — regardless of the order in which the claims arose. Neither receives the full amount of their claim if the recovered value falls short of satisfying both.
What happens to the unpaid portion
The shortfall — the portion of a creditor's claim that the movable's proceeds did not cover — does not disappear. It becomes a general, unsecured claim against the debtor's overall assets. The creditor still has the right to pursue that balance, but the preferred status tied specifically to that piece of equipment is exhausted once the item has been applied to the competing claims. Going forward, the creditor competes with ordinary creditors for whatever assets the debtor still holds.
Practical implications when negotiating
If you know before a formal proceeding that another party holds a competing preferred claim on the same equipment, Article 2247 sets the floor for your recovery: whatever the item fetches, minus government obligations, divided proportionally. This can affect whether it is worth pursuing an individual enforcement action or better to coordinate with the other creditor. Where the equipment's value is clearly insufficient to satisfy both claims in full, creditors sometimes negotiate a private settlement to avoid the cost of a formal distribution process. A lawyer can advise on the options available in your specific situation.