1. DE BARRETO V.

VILLANUEVA
FACTS:
- Rosario Cruzado as administratrix of estate of husband obtained
from RFC loan amounting to 11K. To secure payment she
mortgaged the land.
- She failed to pay certain installments on the loan and the mortgage
was foreclosed. She was given rights to repurchase the same.
- The land was sold back to her conditionally for P14K payable in 7yrs.
2 yrs after, Cruzado was authorized by the court w/ consent of RFC
to sell the land with the improvements
- Cruzado sold it to Pura Villanueva free from all charges and
encumbrances
- Villanueva assumes to pay to the RFC obligations of Cruzado,
Villanueva issued P/N in favor of Cruzado and she was able to
secure TCT in her name
- Villanueva mortgaged the property to de Baretto as security for a
loan in the amount of 30k
- Villanueva failed to pay the remaining installments on her P/N so
Cruzado filed complaint for recovery.
o Pending trial, LIEN was constituted on the property in favor
of Cruzado, this was annotated.
o Decision was rendered ordering Villanueva to pay Cruzados
- Villanueva failed to bay he debt to Baretto, so Baretto instituted a
foreclosure of mortgage; IMPLEADING Cruzado
o Decision absolved Cruzados, sentencing Villanueva to pay
- Barettos filed for issuance of writ of execution. In response,
Cruzados filed their VENDORS LIEN
o Court gave due course to the lien and ordered that should
the realty be sold in a public auction, Cruzados shall be
credited with PRO RATA share of proceeds.
- Barettos acquired the property at the public auction for P49K
o CFI confirmed the sale, subject to VENDORS LIEN of
Cruzado, Baretto appealed this.
- Court said that Cruzado was an unpaid vendor of the realty and the
P/N was for the unpaid balance of the purchase price of the property
bought by Villanueva
- ART 2242: enumerates the claims, mortgages and liens that
constitute encumbrance on specific movable property
o For unpaid price of real property sold, upon immovable sold
o Mortgage credits recorded in the registry of property
- ART 2249: if there are 2 or more credits re: the SAME SPECIFIC
property, they shall be satisfied PRO RATA after the payment of
taxes and assessments



ISSUES/HELD:
A. W/N Cruzado as unpaid vendor has the right to share PRO RATA with
Barettos of the proceeds?
- Baretto argues that unpaid vendors lien was not registered, hence it
couldn't prejudice her rights over the property which was registered.
o Law did not give this requirement of registration on the
mortgage credits or vendors lien.
! Law doesn't distinguish re: registered vendors lien
and unregistered lien. Hence, any kind of vendors
lien enjoys preference.
o Baretto further argues that giving the same standing to an
unregistered vendors lien and a registered mortgage credit
would be to nullify the principle of land registration that prior
unrecorded interest cannot prejudice persons who
subsequently acquire rights over the property
o LRA however, respects the paramount right of lien holders
on real property.
B. W/N concurrence and preference credits are applicable only to insolvent
debtor? NO.
- nothing in the law provides for such limitation; if we construe it that
way then other creditor-debtor relations where there are concurrence
of credit will be left w/o rules to govern them

2. DE BARETTO V. VILLANUEVA (Liquidation proceeding needed
to apply 2242 and 2249; Cruzado doesn't have vendors lien)
FACTS: Same with first case

JBL Reyes RESOLUTION for MR:
- Baretto is entitled to full satisfaction of her mortgage credit
o Previous decision failed to take in account he changes n the
Civ Code re: system of priorities among creditors
o Only taxes enjoy absolute preference the 13 classes of
preferred creditors under 2242 enjoy NO PRIORITY among
themselves. = should be PRO RATA
o For prorating to be fully effective = the preferred creditors
enumerated in 2242 MUST necessarily be convened
o It is apparent that for the full application of 2249 and 2242
there should be first some proceeding where all claims of
preferred creditors may be adjudicated. (Ex. insolvency,
settlement of estate or other liquidation proceedings of
similar import)
o Preferred creditors 3
rd
party claim to the proceeds of a
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
2237
to mortgagees recorded encumbrance= Cruzados rights
remain subordinate.
- There are also DOUBTS on W/N Cruzado should be considered an
unpaid vendor
o The contract of resale in favor of Cruzado did NOT REVEST
ownership in them because they failed to comply with the
terms and conditions of the contract itself. TITLE should
remain with RFC until price was fully paid.
o Cruzados sale to Villanuevas= merely an assignment of
whatever rights or claims they might have; BUT
OWNERSHIP remained with RFC.
! RFC should be regarded as true vendor
! Cruzados only transferred to Villanueva option to
acquire property BUT NOT the property itself
! Cruzados credit cannot be considered a vendors
lien

3. SAMPAGUITA PICTURES v. JALWINDOR (provider of Materials
cannot defeat right of Lessor who acquired the materials as
improvements)
FACTS:
- Sampaguita pictures is the owner of Building, the roofdeck and all
existing improvement thereon were leased to CAPITOL.
o It was agreed upon that premises shall be used for the clubs
social purposes.
o All permanent improvements made by lessee on the
premises shall belong to lessor w/o obligation to reimburse
the lessee for expenses.
! The improvements made by lessee will be
considered part of the monthly rentals
- Capitol purchased on credit from JALWINDOR glass and wooden
jalousies which were delivered and installed in the premises.
- Jalwindor filed action for collection of sum of money against
CAPITOL for its failure to pay purchases
o Capitol acknowledged indebtedness to JALWINDOR
o Pending liquidation of the obligation, the materials purchase
will be considered as security.
- Capitol was also not able to pay rentals to Sampaguita, Sampaguita
filed for collection for sum of money and ejectment.
- Sheriff made a levy on the glass an wooden jalousies
o Sampaguita filed 3
rd
party claim saying that it is the owner of
the materials and not Capitol.
o Jalwindor filed indemnity bond and items were sold at public
auction.
o Sampaguita filed action to nullify the sheriffs sale and
Jalwindor was ordered to maintain status quo.


ISSUE/S:
A. W/N levy over the jalousies was proper? NO
B. W/N Sampaguita can get the jalousies? YES

HELD:
- Jalousies were delivered and installed in the leased premises,
Capitol became the owner. Ownership transferred not by perfection
but by delivery. This is true even if the purchase was on credit
because payment of purchase price is not essential to transfer
ownership.
- Sampaguita is the owner of the jalousies by virtue of the contract
- When the levy of the items were made, Capitol (judgment debtor)
was no longer the owner
o Items were illegally levied upon since they don't belong to
debtor.
o The power of the court in execution of judgment extend only
to properties belonging to debtor.
o Complaint of sampaguita to nullify sale is well founded
o Execution sales only affect the rights of judgment debtor, the
purchaser at the auction sale only acquires the right that
debtor has at the time of the sale.
o Levy and auction sale = null and void because sheriff cannot
attach property that doesn't belong to debtor.


4. UY v. ZAMORA (CM on vehicle not registered in MVO)
FACTS:
- UY obtained attachment on Zamoras vehicle
o Writ of attachment was levied on vehicle on Aug 1960
o Mun. Court rendered judgment in favor of UY and ordered
Zamora to pay
! P1740 + interest & attys fees
- Zamora appealed to CFI Manila
- Allied sought to intervene. It contends
o Vehicle attached was previously mortgaged by Zamora to
secure payment of a loan worth P3000 and Zamora still had
unpaid balance of P2400
! The deed of CM was recorded in chattel mortgage
register in favor of UY
! It wasn't recorded in MVO
- Allied wants Zamora to pay P2400 as principal
- The vehicle was already sold on order of court for P2500 to prevent
depreciation, Zamora agreed to have UYs credit to be paid out of
the proceeds of the sale
2241
2241
- Court found that Zamora is indebted to UY for 2500 and was also
indebted to Allied for P2400.
ISSUE:
- Since there was not enough money to pay both claims, which of the
2 credits is preferred?

HELD
- Uy claims preference on basis of a lien arising from attachment of
vehicle on Aug 11 1960
- Allied claims preference based on Deed of CM covering the vehicle
(this deed was executed in Jan 14 1960 and acknowledged before
notary public on June 20 1960)
o Lower court said that it was not shown whether CM was
recorded in CM Register or in MVO but both parties agreed
that Mortgage was registered on Aug 24 1960 (After the
attachment)
- Court resolved that it couldn't be considered specially preferred
credit under 2241 (4) because unregistered CM is VOID. BUT it can
still be considered preferred credit under 2241(14) as a credit
appearing in a public instrument
o It is considered preferred over Uys attachment lien because
of PRIORITY of date
- UY appealed, his arguments:
o Allieds CM is void for lack of registration, since it was void, it
could not affect his lien
o Allieds credit cound not be considered credit appearing in a
public instrument because it was not yet due at the time of
levy of attachment
o Even if the credi is considered to be a credit in public
instrument UYs lien by attachment is SUPERIO because his
lien is SPECIALLY preferred.
- SC held : lower court is wrong in upholding Allieds credit; that it was
allegedly embodied in a public instrument in an earlier date than
UYs attachment lien even if the CM was registered AFTER the
attachment
o Credit of allied CANNOT be considered preferred UNTI it is
recorded in MVO.
o Mortgage of motor vehicles in order to be binding to 3
rd

persons must be recorded in MVO
! UY is a 3
rd
person, his credit should be preferred!
! Note: preference in mortgage credits is determined
by first in time, preferred in right doctrine






5. PHIL SAVINGS BANK V. LANTIN (architect contractor lien)
FACTS:
- duplex was owned by spouses Tagbilan and Espiritu
- Architect Ramos built the building as contractor for P32K
- Spouses paid Ramos only 7k so Ramos used his own money (25k)
to finish the construction.
- Spouses obtained loan from Phil Savings Bank in the amount of 35k
for the completion of the construction of the duplex.
o Spouses executed in favor of the bank the ff:
! 3 P/Ns
! REM over the duplex
- Bank registered the REM with the registry of deeds, TCT at this time
was free from liens/ encumbrances
- Spouses failed to pay monthly amortization hence bank foreclosed
o Bank registered certificate of sale and consolidated
ownership
- Ramos (architect) filed an action against spouses to collect the
unpaid cost of the construction of the duplex.
o Ramos succeeded in the issuance of a writ of preliminary
attachment and had the property attached.
! Decision of the civil case = in favor of Ramos
AGAINST spouses
o Spouses did not have enough properties to satisfy Ramos
claim, Ramos sent letter to bank to deliver to him his pro-rata
share in the value of the duplex.
! Bank refused to pay pro-rata value
! This prompted Ramos to file action against bank
ISSUE:
W/N Ramos is entitled to pro-rata share? NO

Arguments:
Bank:
- for 2242 to apply there must first be an insolvency proceeding or
other liquidation proceeding
- there couldn't be an insolvency proceeding because there are only 2
creditors. (under sec 20 of insolvency law, adjudication of insolvency
must be made on petition of 3 or more creditors)
- Ramos unpaid contractor claim did not acquire character of lien
equal to the banks registered mortgage.
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

2242
Tabligan


HELD:
- Applicable provision is 2242
- Concurrence of credit raises no question when assets are sufficient
to cover debts in favor of all creditors
- However, when assets are INSUFFICIENT, question of preference
would arise re: who should be paid first?
- Only taxes enjoy absolute preference, credits under 2242 enjoy NO
PREFERENCE among themselves= this should be satisfied pro-rata
- Under Baretto ruling = there must first be an insolvency, settlement
of estate or liquidation proceeding before for 2242 and 2249 not
apply
- Bank is correct = proceedings in the lower court do not partake the
nature of an insolvency proceeding
o Action filed by Ramos in LC is to collect the unpaid cost of
construction it is NOT A GENERAL LIQUIDATION of the
estate of the spouses.
! Insolvency proceedings of estate = IN REM
! Ramos admitted that bank could not have known
that property had lien purchaser in GF (Bank)
takes the property free from lien/ encumbrances
other than the annotation in the certificate of title
- Although the lower court held that only known creditors are Ramos
and bank = this is NOT conclusive, it will not bar any other creditors
from showing up and presenting their claims

6. MANABAT v. LAGUNA FEDERATION (order of registration
should be followed to determine distribution of proceeds)

FACTS:
- suit was filed by Laguna Federation against Nieves Roxas, judgment
was rendered by Manabat.
o Writ of execution was issued and sheriff sold at public
auction all rights, titles and interests of Roxas in 10 parcels
of land for total price of P37K
o Sheriff discovered that parcels of land were subject to
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
! It appears that Laguna Fed, Valeriana & Limaco and
Cosmopolitan insurance registered their credits
PRIOR to Cayco and Zorilla.
! Decision of CFI = claimants are entitled to the
proceeds of the sale in order of registration of
credits. CAYCO and ZORILLA appealed

ISSUE:
Whether the rule to follow in the satisfaction of credits is the order of dates of
registration or distribution pro rata?

HELD: preference in the order of dates of registration NOT PRO RATA

Arguments:
Cayco and Zorilla claim:
- several credits referring to the same specific real property must be
satisfied pro rata (2249)
o there are exceptions!
! Taxes and assessments on real property paid first
! 2242(7) pro rata doesn't apply to:
claims, mortgages and liens shall be
preferred and shall constitute an
encumbrance on the immovable
credits annotated in the registry of property
by virtue of judicial order, by attachment or
execution upon the property affected and
only as to later credits
o this means that for the purpose of
satisfying several credits annotated
by attachments or executions, the
rule is = preference according to
priority of creditors in the order of
time.
- Cayco and Zorillas claim is later than Laguna Fed et al. Hence
Lagunas credit is superior and to apply pro rata distribution would
erase the difference between earlier and later credits provided by
paragraph 7 of 2242



2242
7. PCIB v. MAINES (union workers right to wages preferred over
mortgage etc)

FACTS:
- National Mines and Allied Workers Union obtained judgment
ordering PHL Iron Mines to pay the union around P4.2 M as
severance pay
o Judgment was a result of an unfair labor practice case
against PIM because of its failure to comply with the
conditions re: its shutting down of operations and lay off of
personnel due to bankruptcy
- NLRC granted the garnishment of P4.2 M due from Atlas
Consolidated Mining as part of the price for which the mining
machinery and equipment of the PHL Iron Mines was sold by the 2
bank to Atlas
o Atlas complied and delivered to the sheriff check worth 4.2 M
o Court ordered for injunction ordered the union to desist
from encashing the check.
! Turned out that it was already encashed and
distributed to the members.
- PIM was a mortgage debtor separately of the DBP and PCIB, but
DBP later conveyed its rights to PCIB
o PCIB foreclosed all the mortgages in its favor
o Union had already levied certain properties of PIM

ISSUE:
Who has the better right over the properties? Union or PCIB?

HELD:
- PCIB liable to Union for the judgment against PIM
o Workers enjoy first preference as regards to wages due for
services rendered prior to the bankruptcy or liquidation
against other creditors
o Payment of wages = paid in full before other creditors may
establish claim to the assets.
o Wages = refer to all remunerations, earning and other
benefits in terms of money accruing to the employees or
workers for services rendered
o Even if the employers properties are encumbered by means
of mortgage, the workers wages still enjoy first preference in
case of bankruptcy or liquidation. = there is an automatic first
lien in favor of the workers
! This is because of HUMANITARIAN REASONS /
human justice
! Human beings must be treated above chattels and
machineries
! Right of the UNION of the properties of PIM vested
the date NLRC approved PIMs application for
clearance.
! PCIB sold the properties while knowing that workers
had rights over it, they cannot cheat the workers of
what is due them by force of law.

8. CENTRAL BANK v. MORFE (judgment in favor of Depositor in
bank not preferred credit when bank already INSOLVENT)
FACTS:
- final judgment for payment of time deposit in a savings bank was
rendered after bank was declared insolvent. Is this a preferred claim?
- Monetary Board found Fidelity Savings Bank insolvent and forbade it
to do business
- After the insolvency, spouses ELIZES filed complaint against Fidelity
for the recovery of the balance of their time deposits.
o Fidelity was ordered to pay the spouses
- In another case, spouses PADILLA secured judgment against
Fidelity for balance of their time deposits as well.
- Depositors claim = bank should pay their time deposits as preferred
credits, evidenced by final judgment w/in the meaning of 2244(14b)
- Central Ban appealed: it claimed that the final judgments of the
spouses do not enjoy preference because there were given after
Fidelity was declared insolvent
o NO valid final judgment can be obtained against insolvent
bank
- General Banking Act = provides for sanctions on officers of Banking
Institutions who pays out or permits or cause to be paid out funds or
the said bank after it is declared insolvent.
- Civ Code = insolvency shall be governed by special laws not
inconsistent with civ code
- CB reasons that: judgments against insolvent bank should not be
considered as preferred credits
o Assets of insolvent bank are held in trust for the equal
benefit of all creditors, a person cannot obtain judgment to
allow disbursement to the prejudice of others.
! If depositors find out that they could get reimbursed
by insolvent bank they would rush to secure
judgments resulting to multiple suits
o Fixed saving, current deposits of money in banks are NOT
TRUE DEPOSITS. They are simple loans and are NOT
PREFERED CREDITS
-



2244
2245