PREFERENCE AND CONCURRENCE OF CREDITS

UY V. ZAMORA
Article 2241 — Specific movables
SAMPAGUITA PICTURES V. JALWINDOR
- Sampaguita leased its building’s roofdeck and improvements to
Capitol with the agreement that all improvements made by Capitol
shall belong to Sampaguita, without need to reimburse the price.
- Later, Capitol bought on credit window jalousies from Jalwindor,
which were were installed at the premises.
- 
 Jalwindor then sued Capitol for the windows’ value. They reached
a compromise agreement with the jalousies as security.
- Meanwhile, Sampaguita filed for ejection and collection of rent
against Capitol.
- The QC Sheriff levied on the jalousies due to Capitol’s failure to
comply with the compromise agreement.
- Sampaguita opposed, claiming that it is the owner of the materials
levied on and not Capitol. The Sheriff still sold the jalousies.
- Sampaguita sought to annul the sale and stop Jalwindor from
removing the windows.
- Uy sued Zamora for collection, resulting in a writ of attachment over
Zamora’s car.
- Allied Finance intervened, claiming that Zamora previously
mortgaged to it the car and that there was still an unpaid balance.
- The car was sold. The proceeds were not enough to settle both
claims (Allied + Uy).
Which credit is preferred? — Uy’s credit
- Allied registered its mortgage only on August 24, 1960. The writ of
attachment in favor of Uy was issued on August 11, 1960.
- Allied’s credit cannot be considered preferred until it is recorded in
the Motor Vehicles Office.
- For CM of motor vehicles to affect third persons, it must be
registered in (1) the Chattel Mortgage Registry and (2) the Motor
Vehicles Office

Is the Sheriff’s sale valid? — NO

- When the windows were delivered and installed, Capitol became
the owner thereof, even if the sale was on credit.
- Payment of the purchase price is not essential to transfer of
ownership, as long as the property sold has been delivered.
- Sampaguita then became the owner of the windows by virtue of the
terms of the lease contract.
- Thus, when the levy was made, Capitol was no longer the owner.
- Because the sheriff is not authorized to attach properties not
belonging to the judgment debtor, the sale should be nullified.

Article 2244 — Other properties, real or personal

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Article 2245 — Of any other class
CORDOVA V. REYES
- Cordova bought stock certificates from Philfinance in 1977.
- SEC later placed Philfinance under receivership, with Reyes and
Coronel as liquidators.
- In 1991, Reyes sold the CSPI shares without Cordova’s consent
and SEC authority. Cordova sued to demand their return.
- obtained after the bank was declared insolvent, preferred claims
Is Cordova a preferred creditor? — NO
- It became impossible to recover the proceeds of the sale because
they were commingled with Philfinance’s other assets. Cordova can
only recover the monetary value of his shares, making him a
creditor of Philfinance.
- However, Cordova is not a preferred creditor under 2241(2).
Although there was an illegal withdrawal and an unauthorized sale,
Article 2241 applies only to specific movable property.
- His claim was for money. thus, he is only an ordinary creditor.
- Under Article 2245, credits of any kind or class, or by any other
right or title not comprised in the four preceding articles, enjoy no
preference.
Can Cordova recover the full monetary value of his shares? — NO
- He is an ordinary creditor under Art. 2245, so Art. 2251(2) applies
- Common credits in Art. 2245 shall be paid pro rata regardless of
dates. Like all the other ordinary creditors or claimants against
Philfinance, he was entitled to a rate of recovery of only 15% of his
money claim, and not the full amount.
CENTRAL BANK V. MORFE, SPS. PADILLA, SPS ELIZES
- The Monetary Board (MB) declared Fidelity Savings Bank (FSB) to
be insolvent — its assets were seized, it was forbidden from doing
business, and legal actions were instituted against it
- AFTER the declaration of FSB’s insolvency but PRIOR to CB’s
institution of liquidation proceedings, the CFI granted Sps. Padilla
and Sps. Elizes a judgment to recover the value of their time
deposits with interest, damages, and legal fees
- Upon motion of Sps. Elizes and Sps. Padilla, the CFI ordered the
CB, as Liquidator, to honor the judgments and include these in the
list of preferred credits in FSB’s liquidation proceedings
- The CB resisted this order and appealed to the SC, arguing that
final judgments obtained by both spouses do not enjoy any
preference as these judgments were rendered after FSB was
already declared insolvent.
Are final judgments for the payments of time deposits in a bank,
against the bank? — NO
- Time deposits are not true deposits — they are only simple loans
and as such are not preferred credits
- The CB Charter provides that when a bank is found to be insolvent,
the MB shall forbid it to do business and shall take charge of its
assets — this is to prevent some depositors from having any undue
or fraudulent preference over other creditors and depositors
- Applied to this case, the judicial declaration that the
deposits were payable to the depositors, as indisputably
they were due, could not have given Sps. Elizes and Sps.
Padilla spouses a priority over the other depositors whose
deposits were likewise indisputably due and owing from
the insolvent bank but who did not want to incur litigation
expenses in securing a judgment for the payment of the
deposits
- Art. 2244(14b) does not apply to judgments for the payment of the
deposits in an insolvent bank obtained after the declaration of
insolvency
- CFI decision reversed
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 Article 2249 — Two or more credits with respect to the same real property;
satisfied pro rata
MANABAT V. LAGUNA FED
- Laguna Fed won a case against one Nieves de Roxas — after the
writ of execution was issued, Sheriff Manabat held a public auction
in which he sold 10 parcels of land for P37k
- It was later discovered that the lands were subject to registered
liens annotated on the TCTs
- Manabat filed an action for interpleader for all creditors with rights
to the lands to determine their rights to the proceeds of the sale
- CFI ruled that these creditors were entitled to the proceeds in the
order of preference in accordance with the dates of the registration
of their credits
- Creditors Cayco and Zorilla appealed, arguing that Art. 2249 should
be applied (satisfied pro rata)
Should the satisfaction of several claims be pro rata? — NO
- It must be preference in the order of dates of registration
- Art. 2249 admits of exceptions:
- Art. 2249 itself provides that taxes and assessments upon
the real property are to be paid first
- Art. 2242(7) — “only as to later credits” qualifies
the order of preference as to those credits
annotated in the Registry of Property
- For purposes of satisfying several credits annotated by
attachments or executions, the rule is still preference
according to priority of the credits in the order of time
- Since Cayco and Zorilia's credits were "later" than those of
Laguna Fed. and the other creditors, their credits are
deemed inferior to those of the latter
PHIL. SAVINGS BANK V. LANTIN AND RAMOS
- Ramos was an architect/contractor; built a duplex apartment house
for the Tabligan. He used his own money to finish the construction.
- Sps. Tabligan obtained a P35k loan from PSB to pay for the
construction and executed 3 PNS and 3 REMS over the apartment.
At the time of the registration of the REMS, the title to the
apartment was free from any encumbrances and liens.
- Failure to pay — PSB foreclosed the apartment and was highest
bidder. After his request for the pro rata share in the value of the
apartment was denied, Ramos filed a case for collection with the
CFI which was granted by J. Lantin.
- PSB argued that Ramos is not entitled to the pro rata share
because there must have been an insolvency proceeding or other
liquidation proceedings in order for Art. 2242 (on specific
immovables) to apply.
Is Ramos entitled to the pro rata share in the value of the apartment?
— NO
- Art. 2249 provides that only taxes and assessments upon
immovables enjoy absolute preference — all the remaining
specified classes of preferred creditors under Art. 2242 enjoy no
priority amongst themselves
- Their credits shall be satisfied pro-rata, i.e., in proportion
to the amount of the respective credits
- De Baretto v. Villanueva — there must have been an insolvency
proceeding or other liquidation proceedings for Art. 2242 to apply
- The action filed by Ramos was only to collect the unpaid
cost of the construction — this is far from being a general
liquidation of the estate of Sps. Tabligan
- Thus, the well-established principle that a purchaser in
good faith and for value who takes registered land free
from liens and encumbrances must be applied (remember
that the titles were clean at the time the 3 REMs were
constituted in favor of PNB — the only registered liens
were thus those of PSB; thus, Ramos’s claim is
subordinate to PSB’s).