1. DE BARRETO V.

VILLANUEVA ISSUES/HELD:
2237
FACTS: A. W/N Cruzado as unpaid vendor has the right to share PRO RATA with
- Rosario Cruzado as administratrix of estate of husband obtained Barettos of the proceeds?
from RFC loan amounting to 11K. To secure payment she - Baretto argues that unpaid vendors lien was not registered, hence it
mortgaged the land. couldn't prejudice her rights over the property which was registered.
- She failed to pay certain installments on the loan and the mortgage o Law did not give this requirement of registration on the
was foreclosed. She was given rights to repurchase the same. mortgage credits or vendors lien.
- The land was sold back to her conditionally for P14K payable in 7yrs. ! Law doesn't distinguish re: registered vendors lien
2 yrs after, Cruzado was authorized by the court w/ consent of RFC and unregistered lien. Hence, any kind of vendors
to sell the land with the improvements lien enjoys preference.
- Cruzado sold it to Pura Villanueva free from all charges and o Baretto further argues that giving the same standing to an
encumbrances unregistered vendors lien and a registered mortgage credit
- Villanueva assumes to pay to the RFC obligations of Cruzado, would be to nullify the principle of land registration that prior
Villanueva issued P/N in favor of Cruzado and she was able to unrecorded interest cannot prejudice persons who
secure TCT in her name subsequently acquire rights over the property
- Villanueva mortgaged the property to de Baretto as security for a o LRA however, respects the paramount right of lien holders
loan in the amount of 30k on real property.
- Villanueva failed to pay the remaining installments on her P/N so B. W/N concurrence and preference credits are applicable only to insolvent
Cruzado filed complaint for recovery. debtor? NO.
o Pending trial, LIEN was constituted on the property in favor - nothing in the law provides for such limitation; if we construe it that
of Cruzado, this was annotated. way then other creditor-debtor relations where there are concurrence
o Decision was rendered ordering Villanueva to pay Cruzados of credit will be left w/o rules to govern them
- Villanueva failed to bay he debt to Baretto, so Baretto instituted a
foreclosure of mortgage; IMPLEADING Cruzado 2. DE BARETTO V. VILLANUEVA (Liquidation proceeding needed
o Decision absolved Cruzados, sentencing Villanueva to pay to apply 2242 and 2249; Cruzado doesn't have vendors lien)
- Barettos filed for issuance of writ of execution. In response, FACTS: Same with first case
Cruzados filed their VENDORS LIEN
o Court gave due course to the lien and ordered that should JBL Reyes RESOLUTION for MR:
the realty be sold in a public auction, Cruzados shall be - Baretto is entitled to full satisfaction of her mortgage credit
credited with PRO RATA share of proceeds. o Previous decision failed to take in account he changes n the
- Barettos acquired the property at the public auction for P49K Civ Code re: system of priorities among creditors
o CFI confirmed the sale, subject to VENDORS LIEN of o Only taxes enjoy absolute preference the 13 classes of
Cruzado, Baretto appealed this. preferred creditors under 2242 enjoy NO PRIORITY among
- Court said that Cruzado was an unpaid vendor of the realty and the themselves. = should be PRO RATA
P/N was for the unpaid balance of the purchase price of the property o For prorating to be fully effective = the preferred creditors
bought by Villanueva enumerated in 2242 MUST necessarily be convened
- ART 2242: enumerates the claims, mortgages and liens that o It is apparent that for the full application of 2249 and 2242
constitute encumbrance on specific movable property there should be first some proceeding where all claims of
o For unpaid price of real property sold, upon immovable sold preferred creditors may be adjudicated. (Ex. insolvency,
o Mortgage credits recorded in the registry of property settlement of estate or other liquidation proceedings of
- ART 2249: if there are 2 or more credits re: the SAME SPECIFIC similar import)
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property, they shall be satisfied PRO RATA after the payment of o Preferred creditors 3 party claim to the proceeds of a
taxes and assessments foreclosure sale is not a proceeding contemplated by law for
the enforcement of preference
o Since there was no insolvency or liquidation, claim of
Cruzado as unpaid vendor did not acquire the rank co-equal
 to mortgagees recorded encumbrance= Cruzados rights
remain subordinate.
- There are also DOUBTS on W/N Cruzado should be considered an ISSUE/S:
unpaid vendor A. W/N levy over the jalousies was proper? NO
o The contract of resale in favor of Cruzado did NOT REVEST B. W/N Sampaguita can get the jalousies? YES
ownership in them because they failed to comply with the
terms and conditions of the contract itself. TITLE should HELD:
remain with RFC until price was fully paid. - Jalousies were delivered and installed in the leased premises,
o Cruzados sale to Villanuevas= merely an assignment of Capitol became the owner. Ownership transferred not by perfection
whatever rights or claims they might have; BUT but by delivery. This is true even if the purchase was on credit
OWNERSHIP remained with RFC. because payment of purchase price is not essential to transfer
! RFC should be regarded as true vendor ownership.
! Cruzados only transferred to Villanueva option to - Sampaguita is the owner of the jalousies by virtue of the contract
acquire property BUT NOT the property itself - When the levy of the items were made, Capitol (judgment debtor)
! Cruzados credit cannot be considered a vendors was no longer the owner
lien o Items were illegally levied upon since they don't belong to
debtor.
3. SAMPAGUITA PICTURES v. JALWINDOR (provider of Materials o The power of the court in execution of judgment extend only
cannot defeat right of Lessor who acquired the materials as 2241 to properties belonging to debtor.
improvements) o Complaint of sampaguita to nullify sale is well founded
FACTS: o Execution sales only affect the rights of judgment debtor, the
- Sampaguita pictures is the owner of Building, the roofdeck and all purchaser at the auction sale only acquires the right that
existing improvement thereon were leased to CAPITOL. debtor has at the time of the sale.
o It was agreed upon that premises shall be used for the clubs o Levy and auction sale = null and void because sheriff cannot
social purposes. attach property that doesn't belong to debtor.
o All permanent improvements made by lessee on the
premises shall belong to lessor w/o obligation to reimburse
the lessee for expenses. 4. UY v. ZAMORA (CM on vehicle not registered in MVO) 2241
! The improvements made by lessee will be FACTS:
considered part of the monthly rentals - UY obtained attachment on Zamoras vehicle
- Capitol purchased on credit from JALWINDOR glass and wooden o Writ of attachment was levied on vehicle on Aug 1960
jalousies which were delivered and installed in the premises. o Mun. Court rendered judgment in favor of UY and ordered
- Jalwindor filed action for collection of sum of money against Zamora to pay
CAPITOL for its failure to pay purchases ! P1740 + interest & attys fees
o Capitol acknowledged indebtedness to JALWINDOR - Zamora appealed to CFI Manila
o Pending liquidation of the obligation, the materials purchase - Allied sought to intervene. It contends
will be considered as security. o Vehicle attached was previously mortgaged by Zamora to
- Capitol was also not able to pay rentals to Sampaguita, Sampaguita secure payment of a loan worth P3000 and Zamora still had
filed for collection for sum of money and ejectment. unpaid balance of P2400
- Sheriff made a levy on the glass an wooden jalousies ! The deed of CM was recorded in chattel mortgage
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o Sampaguita filed 3 party claim saying that it is the owner of register in favor of UY
the materials and not Capitol. ! It wasn't recorded in MVO
o Jalwindor filed indemnity bond and items were sold at public - Allied wants Zamora to pay P2400 as principal
auction. - The vehicle was already sold on order of court for P2500 to prevent
o Sampaguita filed action to nullify the sheriffs sale and depreciation, Zamora agreed to have UYs credit to be paid out of
Jalwindor was ordered to maintain status quo. the proceeds of the sale
 - Court found that Zamora is indebted to UY for 2500 and was also
indebted to Allied for P2400.
ISSUE: 5. PHIL SAVINGS BANK V. LANTIN (architect contractor lien) 2242
- Since there was not enough money to pay both claims, which of the FACTS: Tabligan
2 credits is preferred? - duplex was owned by spouses Tagbilan and Espiritu
- Architect Ramos built the building as contractor for P32K
HELD - Spouses paid Ramos only 7k so Ramos used his own money (25k)
- Uy claims preference on basis of a lien arising from attachment of to finish the construction.
vehicle on Aug 11 1960 - Spouses obtained loan from Phil Savings Bank in the amount of 35k
- Allied claims preference based on Deed of CM covering the vehicle for the completion of the construction of the duplex.
(this deed was executed in Jan 14 1960 and acknowledged before o Spouses executed in favor of the bank the ff:
notary public on June 20 1960) ! 3 P/Ns
o Lower court said that it was not shown whether CM was ! REM over the duplex
recorded in CM Register or in MVO but both parties agreed - Bank registered the REM with the registry of deeds, TCT at this time
that Mortgage was registered on Aug 24 1960 (After the was free from liens/ encumbrances
attachment) - Spouses failed to pay monthly amortization hence bank foreclosed
- Court resolved that it couldn't be considered specially preferred o Bank registered certificate of sale and consolidated
credit under 2241 (4) because unregistered CM is VOID. BUT it can ownership
still be considered preferred credit under 2241(14) as a credit - Ramos (architect) filed an action against spouses to collect the
appearing in a public instrument unpaid cost of the construction of the duplex.
o It is considered preferred over Uys attachment lien because o Ramos succeeded in the issuance of a writ of preliminary
of PRIORITY of date attachment and had the property attached.
- UY appealed, his arguments: ! Decision of the civil case = in favor of Ramos
o Allieds CM is void for lack of registration, since it was void, it AGAINST spouses
could not affect his lien o Spouses did not have enough properties to satisfy Ramos
o Allieds credit cound not be considered credit appearing in a claim, Ramos sent letter to bank to deliver to him his pro-rata
public instrument because it was not yet due at the time of share in the value of the duplex.
levy of attachment ! Bank refused to pay pro-rata value
o Even if the credi is considered to be a credit in public ! This prompted Ramos to file action against bank
instrument UYs lien by attachment is SUPERIO because his ISSUE:
lien is SPECIALLY preferred. W/N Ramos is entitled to pro-rata share? NO
- SC held : lower court is wrong in upholding Allieds credit; that it was
allegedly embodied in a public instrument in an earlier date than Arguments:
UYs attachment lien even if the CM was registered AFTER the Bank:
attachment - for 2242 to apply there must first be an insolvency proceeding or
o Credit of allied CANNOT be considered preferred UNTI it is other liquidation proceeding
recorded in MVO. - there couldn't be an insolvency proceeding because there are only 2
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o Mortgage of motor vehicles in order to be binding to 3 creditors. (under sec 20 of insolvency law, adjudication of insolvency
persons must be recorded in MVO must be made on petition of 3 or more creditors)
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! UY is a 3 person, his credit should be preferred! - Ramos unpaid contractor claim did not acquire character of lien
! Note: preference in mortgage credits is determined equal to the banks registered mortgage.
by first in time, preferred in right doctrine Ramos:
- proceedings in the lower court can qualify as general liquidation of
estate of the spouses because the duplex is the only existing
property of the spouses
 ! It appears that Laguna Fed, Valeriana & Limaco and
Cosmopolitan insurance registered their credits
HELD: PRIOR to Cayco and Zorilla.
- Applicable provision is 2242 ! Decision of CFI = claimants are entitled to the
- Concurrence of credit raises no question when assets are sufficient proceeds of the sale in order of registration of
to cover debts in favor of all creditors credits. CAYCO and ZORILLA appealed
- However, when assets are INSUFFICIENT, question of preference
would arise re: who should be paid first? ISSUE:
- Only taxes enjoy absolute preference, credits under 2242 enjoy NO Whether the rule to follow in the satisfaction of credits is the order of dates of
PREFERENCE among themselves= this should be satisfied pro-rata registration or distribution pro rata?
- Under Baretto ruling = there must first be an insolvency, settlement
of estate or liquidation proceeding before for 2242 and 2249 not HELD: preference in the order of dates of registration NOT PRO RATA
apply
- Bank is correct = proceedings in the lower court do not partake the Arguments:
nature of an insolvency proceeding Cayco and Zorilla claim:
o Action filed by Ramos in LC is to collect the unpaid cost of - several credits referring to the same specific real property must be
construction it is NOT A GENERAL LIQUIDATION of the satisfied pro rata (2249)
estate of the spouses. o there are exceptions!
! Insolvency proceedings of estate = IN REM ! Taxes and assessments on real property paid first
! Ramos admitted that bank could not have known ! 2242(7) pro rata doesn't apply to:
that property had lien purchaser in GF (Bank) claims, mortgages and liens shall be
takes the property free from lien/ encumbrances preferred and shall constitute an
other than the annotation in the certificate of title encumbrance on the immovable
- Although the lower court held that only known creditors are Ramos credits annotated in the registry of property
and bank = this is NOT conclusive, it will not bar any other creditors by virtue of judicial order, by attachment or
from showing up and presenting their claims execution upon the property affected and
only as to later credits
6. MANABAT v. LAGUNA FEDERATION (order of registration o this means that for the purpose of
should be followed to determine distribution of proceeds) 2242 satisfying several credits annotated
by attachments or executions, the
FACTS: rule is = preference according to
- suit was filed by Laguna Federation against Nieves Roxas, judgment priority of creditors in the order of
was rendered by Manabat. time.
o Writ of execution was issued and sheriff sold at public - Cayco and Zorillas claim is later than Laguna Fed et al. Hence
auction all rights, titles and interests of Roxas in 10 parcels Lagunas credit is superior and to apply pro rata distribution would
of land for total price of P37K erase the difference between earlier and later credits provided by
o Sheriff discovered that parcels of land were subject to paragraph 7 of 2242
registered liens (ie writs of execution, attachments annotated
at the back of the certificates of title
o Sheriff instituted action for interpleader for the different
creditors/ lienholders to litigate among themselves and
determine the rights to the P37k proceeds of the sale.
! Nature of annotations, date of registration of credit
and amount of claims were included in the claims of
the 9 creditors
 7. PCIB v. MAINES (union workers right to wages preferred over 2244 ! Right of the UNION of the properties of PIM vested
mortgage etc) the date NLRC approved PIMs application for
clearance.
FACTS: ! PCIB sold the properties while knowing that workers
- National Mines and Allied Workers Union obtained judgment had rights over it, they cannot cheat the workers of
ordering PHL Iron Mines to pay the union around P4.2 M as what is due them by force of law.
severance pay
o Judgment was a result of an unfair labor practice case 8. CENTRAL BANK v. MORFE (judgment in favor of Depositor in
against PIM because of its failure to comply with the bank not preferred credit when bank already INSOLVENT) 2245
conditions re: its shutting down of operations and lay off of FACTS:
personnel due to bankruptcy - final judgment for payment of time deposit in a savings bank was
- NLRC granted the garnishment of P4.2 M due from Atlas rendered after bank was declared insolvent. Is this a preferred claim?
Consolidated Mining as part of the price for which the mining - Monetary Board found Fidelity Savings Bank insolvent and forbade it
machinery and equipment of the PHL Iron Mines was sold by the 2 to do business
bank to Atlas - After the insolvency, spouses ELIZES filed complaint against Fidelity
o Atlas complied and delivered to the sheriff check worth 4.2 M for the recovery of the balance of their time deposits.
o Court ordered for injunction ordered the union to desist o Fidelity was ordered to pay the spouses
from encashing the check. - In another case, spouses PADILLA secured judgment against
! Turned out that it was already encashed and Fidelity for balance of their time deposits as well.
distributed to the members. - Depositors claim = bank should pay their time deposits as preferred
- PIM was a mortgage debtor separately of the DBP and PCIB, but credits, evidenced by final judgment w/in the meaning of 2244(14b)
DBP later conveyed its rights to PCIB - Central Ban appealed: it claimed that the final judgments of the
o PCIB foreclosed all the mortgages in its favor spouses do not enjoy preference because there were given after
o Union had already levied certain properties of PIM Fidelity was declared insolvent
o NO valid final judgment can be obtained against insolvent
ISSUE: bank
Who has the better right over the properties? Union or PCIB? - General Banking Act = provides for sanctions on officers of Banking
Institutions who pays out or permits or cause to be paid out funds or
HELD: the said bank after it is declared insolvent.
- PCIB liable to Union for the judgment against PIM - Civ Code = insolvency shall be governed by special laws not
o Workers enjoy first preference as regards to wages due for inconsistent with civ code
services rendered prior to the bankruptcy or liquidation - CB reasons that: judgments against insolvent bank should not be
against other creditors considered as preferred credits
o Payment of wages = paid in full before other creditors may o Assets of insolvent bank are held in trust for the equal
establish claim to the assets. benefit of all creditors, a person cannot obtain judgment to
o Wages = refer to all remunerations, earning and other allow disbursement to the prejudice of others.
benefits in terms of money accruing to the employees or ! If depositors find out that they could get reimbursed
workers for services rendered by insolvent bank they would rush to secure
o Even if the employers properties are encumbered by means judgments resulting to multiple suits
of mortgage, the workers wages still enjoy first preference in o Fixed saving, current deposits of money in banks are NOT
case of bankruptcy or liquidation. = there is an automatic first TRUE DEPOSITS. They are simple loans and are NOT
lien in favor of the workers PREFERED CREDITS
! This is because of HUMANITARIAN REASONS / -
human justice
! Human beings must be treated above chattels and
machineries