[G.R. No. 160544.
  February 21, 2005] whereunder it is so provided that "[Management and
TRIPLE-V vs. FILIPINO MERCHANTS
THIRD DIVISION
Gentlemen:
Quoted hereunder, for your information, is a
resolution of this Court dated FEB 21 2005.
G.R. No. 160544 (Triple-V Food Services, Inc. vs.
Filipino Merchants Insurance Company, Inc.)
Assailed in this petition for review on certiorari is the
decision[1]cralaw dated October 21, 2003 of the Court
of Appeals in CA-G.R. CV No. 71223, affirming an
earlier decision of the Regional Trial Court at Makati
City, Branch 148, in its Civil Case No. 98-838, an
action for damages thereat filed by respondent
Filipino Merchants Insurance, Company, Inc., against
the herein petitioner, Triple-V Food Services, Inc.
On March 2, 1997, at around 2:15 o'clock in the
afternoon, a certain Mary Jo-Anne De Asis (De Asis)
dined at petitioner's Kamayan Restaurant at 15 West
Avenue, Quezon City. De Asis was using a Mitsubishi
Galant Super Saloon Model 1995 with plate number
UBU 955, assigned to her by her employer Crispa
Textile Inc. (Crispa). On said date, De Asis availed of
the valet parking service of petitioner and entrusted
her car key to petitioner's valet counter. A
corresponding parking ticket was issued as receipt
for the car. The car was then parked by petitioner's
valet attendant, a certain Madridano, at the
designated parking area. Few minutes later,
Madridano noticed that the car was not in its parking
slot and its key no longer in the box where valet
attendants usually keep the keys of cars entrusted to
them. The car was never recovered. Thereafter,
Crispa filed a claim against its insurer, herein
respondent Filipino Merchants Insurance Company,
Inc. (FMICI). Having indemnified Crispa in the amount
of P669.500 for the loss of the subject vehicle, FMICI,
as subrogee to Crispa's rights, filed with the RTC at
Makati City an action for damages against petitioner
Triple-V Food Services, Inc., thereat docketed as Civil
Case No. 98-838 which was raffled to Branch 148.
In its answer, petitioner argued that the complaint
failed to aver facts to support the allegations of
recklessness and negligence committed in the
safekeeping and custody of the subject vehicle,
claiming that it and its employees wasted no time in
ascertaining the loss of the car and in informing De
Asis of the discovery of the loss. Petitioner further
argued that in accepting the complimentary valet
parking service, De Asis received a parking ticket
WHEREFORE, based on the foregoing premises, the
staff will not be responsible for any loss of or damage
incurred on the vehicle nor of valuables contained
therein", a provision which, to petitioner's mind, is an
explicit waiver of any right to claim indemnity for the
loss of the car; and that De Asis knowingly assumed
the risk of loss when she allowed petitioner to park
her vehicle, adding that its valet parking service did
not include extending a contract of insurance or
warranty for the loss of the vehicle.
During trial, petitioner challenged FMICI's
subrogation to Crispa's right to file a claim for the
loss of the car, arguing that theft is not a risk insured
against under FMICI's Insurance Policy No. PC-5975
for the subject vehicle.
In a decision dated June 22, 2001, the trial court
rendered judgment for respondent FMICI, thus:
WHEREFORE, premises considered, judgment is
hereby rendered in favor of the plaintiff (FMICI) and
against the defendant Triple V (herein petitioner) and
the latter is hereby ordered to pay plaintiff the
following:
1.  The amount of P669,500.00, representing actual
damages plus compounded (sic);
2.  The amount of P30,000.00 as acceptance fee plus
the amount equal to 25% of the total amount due as
attorney's fees;
3.  The amount of P50,000.00 as exemplary
damages;
4.  Plus, cost of suit.
Defendant Triple V is not therefore precluded from
taking appropriate action against defendant Armando
Madridano.
SO ORDERED.
Obviously displeased, petitioner appealed to the
Court of Appeals reiterating its argument that it was
not a depositary of the subject car and that it
exercised due diligence and prudence in the safe
keeping of the vehicle, in handling the car-napping
incident and in the supervision of its employees. It
further argued that there was no valid subrogation of
rights between Crispa and respondent FMICI.
In a decision dated October 21, 2003, [2]cralaw the
Court of Appeals dismissed petitioner's appeal and
affirmed the appealed decision of the trial court,
thus:
instant appeal is hereby DISMISSED. Accordingly, the
assailed June 22, 2001 Decision of the RTC of Makati
City - Branch 148 in Civil Case No. 98-838 is
AFFIRMED.
SO ORDERED.
In so dismissing the appeal and affirming the
appealed decision, the appellate court agreed with
the findings and conclusions of the trial court that:
(a) petitioner was a depositary of the subject vehicle;
(b) petitioner was negligent in its duties as a
depositary thereof and as an employer of the valet
attendant; and (c) there was a valid subrogation of
rights between Crispa and respondent FMICI.
Hence, petitioner's present recourse.
We agree with the two (2) courts below.
When De Asis entrusted the car in question to
petitioners valet attendant while eating at
petitioner's Kamayan Restaurant, the former
expected the car's safe return at the end of her meal.
Thus, petitioner was constituted as a depositary of
the same car. Petitioner cannot evade liability by
arguing that neither a contract of deposit nor that of
insurance, guaranty or surety for the loss of the car
was constituted when De Asis availed of its free valet
parking service.
In a contract of deposit, a person receives an object
belonging to another with the obligation of safely
keeping it and returning the same.[3]cralaw A deposit
may be constituted even without any consideration.
It is not necessary that the depositary receives a fee
before it becomes obligated to keep the item
entrusted for safekeeping and to return it later to the
depositor.
Specious is petitioner's insistence that the valet
parking claim stub it issued to De Asis contains a
clear exclusion of its liability and operates as an
explicit waiver by the customer of any right to claim
indemnity for any loss of or damage to the vehicle.
The parking claim stub embodying the terms and
conditions of the parking, including that of relieving
petitioner from any loss or damage to the car, is
essentially a contract of adhesion, drafted and
prepared as it is by the petitioner alone with no
participation whatsoever on the part of the
customers, like De Asis, who merely adheres to the
printed stipulations therein appearing. While
contracts of adhesion are not void in themselves, yet
this Court will not hesitate to rule out blind
adherence thereto if they prove to be one-sided
under the attendant facts and circumstances.
[4]
cralaw
Hence, and as aptly pointed out by the Court of
Appeals, petitioner must not be allowed to use its
parking claim stub's exclusionary stipulation as a
shield from any responsibility for any loss or damage
to vehicles or to the valuables contained therein.
Here, it is evident that De Asis deposited the car in
question with the petitioner as part of the latter's
enticement for customers by providing them a safe
parking space within the vicinity of its restaurant. In
a very real sense, a safe parking space is an added
attraction to petitioner's restaurant business because
customers are thereby somehow assured that their
vehicle are safely kept, rather than parking them
elsewhere at their own risk. Having entrusted the
subject car to petitioner's valet attendant, customer
De Asis, like all of petitioner's customers, fully
expects the security of her car while at petitioner's
premises/designated parking areas and its safe
return at the end of her visit at petitioner's
restaurant.
Petitioner's argument that there was no valid
subrogation of rights between Crispa and FMICI
because theft was not a risk insured against under
FMICI's Insurance Policy No. PC-5975 holds no water.
Insurance Policy No. PC-5975 which respondent FMICI
issued to Crispa contains, among others things, the
following item: "Insured's Estimate of Value of
Scheduled Vehicle- P800.000".[5]cralaw On the basis
of such item, the trial court concluded that the
coverage includes a full comprehensive insurance of
the vehicle in case of damage or loss. Besides, Crispa
paid a premium of P10,304 to cover theft. This is
clearly shown in the breakdown of premiums in the
same policy.[6]cralaw Thus, having indemnified
CRISPA for the stolen car, FMICI, as correctly ruled by
the trial court and the Court of Appeals, was properly
subrogated to Crispa's rights against petitioner,
pursuant to Article 2207 of the New Civil Code[7].
Anent the trial court's findings of negligence on the
part of the petitioner, which findings were affirmed
by the appellate court, we have consistently ruled
that findings of facts of trial courts, more so when
affirmed, as here, by the Court of Appeals, are
conclusive on this Court unless the trial court itself
ignored, overlooked or misconstrued facts and
circumstances which, if considered, warrant a
reversal of the outcome of the case. [8]cralaw This is
not so in the case at bar. For, we have ourselves
reviewed the records and find no justification to
deviate from the trial court's findings.
WHEREFORE, petition is hereby DENIED DUE
COURSE.
SO ORDERED.
FIRST DIVISION
G.R. No. 189316               June 1, 2013
PHILIPPINE NATIONAL BANK, Petitioner, 
vs.
SPOUSES BERNARD and CRESENCIA
MARANON, Respondents.
RESOLUTION
REYES, J.:
This is a petition for review on certiorari 1 under Rule
45 of the Rules of Court, assailing the Decision 2 dated
June 18, 2008 and Resolution3 dated August 10, 2009
of the Court of Appeals (CA) in CA-G.R. SP No. 02513,
which affirmed in toto the Orders dated September 8,
20064 and December 6, 20065 of the Regional Trial
Court (RTC) of Bacolod City, Branch 54, directing
petitioner Philippine National Bank (PNB) to release in
favor of Spouses Bernard and Cresencia Marafion
(Spouses Marafion) the rental fees it received
amounting to Thirty Thousand Pesos (₱30,000.00).
The Facts
The controversy at bar involves a 152-square meter
parcel of land located at Cuadra-Smith Streets,
Downtown, Bacolod (subject lot) erected with a
building leased by various tenants. The subject lot
was among the properties mortgaged by Spouses
Rodolfo and Emilie Montealegre (Spouses
Montealegre) to PNB as a security for a loan. In their
transactions with PNB, Spouses Montealegre used
Transfer Certificate of Title (TCT) No. T-156512 over
the subject lot purportedly registered in the name of
Emilie Montealegre (Emilie).6
When Spouses Montealegre failed to pay the loan,
PNB initiated foreclosure proceedings on the
mortgaged properties, including the subject lot. In
the auction sale held on August 16, 1991, PNB
emerged as the highest bidder. It was issued the
corresponding Certificate of Sale dated December 17,
19917 which was subsequently registered on
February 4, 1992.8
Before the expiration of the redemption period or on
July 29, 1992, Spouses Marañon filed before the RTC
a complaint for Annulment of Title, Reconveyance
and Damages9 against Spouses Montealegre, PNB,
the Register of Deeds of Bacolod City and the Ex-
Officio Provincial Sheriff of Negros Occidental. The
complaint, docketed as Civil Case No. 7213, alleged
that Spouses Marañon are the true registered owners
of the subject lot by virtue of TCT No. T-129577
which was illegally cancelled by TCT No. T-156512
under the name of Emilie who used a falsified Deed
of Sale bearing the forged signatures of Spouse
Marañon10 to effect the transfer of title to the
property in her name.
In its Answer,11 PNB averred that it is a mortgagee in
good faith and for value and that its mortgage lien on
the property was registered thus valid and binding
against the whole world.
As reflected in the Pre-trial Order12 dated March 12,
1996, the parties stipulated, among others, that the
period for legal redemption of the subject lot has
already expired.
While the trial proceedings were ongoing, Paterio
Tolete (Tolete), one of the tenants of the building
erected on the subject lot deposited his rental
payments with the Clerk of Court of Bacolod City
which, as of October 24, 2002, amounted to
₱144,000.00.
On June 2, 2006, the RTC rendered its Decision 13 in
favor of the respondents after finding, based on the
expert testimony of Colonel Rodolfo Castillo, Head of
the Forensic Technology Section of Bacolod City
Philippine National Police, that the signatures of
Spouses Marañon in the Deed of Sale presented by
Spouses Montealegre before the Register of Deeds to
cause the cancellation of TCT No. T-129577 were
forged. Hence, the RTC concluded the sale to be null
and void and as such it did not transfer any right or
title in law. PNB was adjudged to be a mortgagee in
good faith whose lien on the subject lot must be
respected. Accordingly, the Decision disposed as
follows:
WHEREFORE, judgment is hereby rendered in favor of
the plaintiffs herein respondents:
1. The cancellation of TCT No. 129577 over Lot 177-
A-1 Bacolod Cadastre in the name of Bernard
Marañon and the issuance of new TCT No. 156512 in
the name of defendant Emilie Montealegre are
hereby declared null and void;
2. The defendant Emilie Montealegre is ordered to
reconvey the title over Lot No. 177-A-1, Bacolod
Cadastre back to the plaintiffs Marañon herein
respondents;
3. The Real Estate Mortgage lien of the Philippine
National Bank registered on the title of Lot No. 177-A-
1 Bacolod Cadastre shall stay and be respected; and
4. The defendants - Emilie Montealegre and spouse
are ordered to pay attorney’s fees in the sum of
Php50,000.00, and to pay the costs of the suit.
SO ORDERED.14
Neither of the parties sought a reconsideration of the
above decision or any portion thereof nor did they
elevate the same for appellate review.
What precipitated the controversy at hand were the
subsequent motions filed by Spouses Marañon for
release of the rental payments deposited with the
Clerk of Court and paid to PNB by Tolete.
On June 13, 2006, Spouses Marañon filed an Urgent
Motion for the Withdrawal of Deposited
Rentals15 praying that the ₱144,000.00 rental fees
deposited by Tolete with the Clerk of Court be
released in their favor for having been adjudged as
the real owner of the subject lot. The RTC granted
the motion in its Order16 dated June 28, 2006.
On September 5, 2006, Spouses Marañon again filed
with the RTC an Urgent Ex-Parte Motion for
Withdrawal of Deposited Rentals17 praying that the
₱30,000.00 rental fees paid to PNB by Tolete on
December 12, 1999 be released in their favor. The
said lease payments were for the five (5)-month
period from August 1999 to December 1999 at the
monthly lease rate of ₱6,000.00.
The RTC granted the motion in its Order18 dated
September 8, 2006 reasoning that pursuant to its
Decision dated June 2, 2006 declaring Spouses
Marañon to be the true registered owners of the
subject lot, they are entitled to its fruits.
The PNB differed with the RTC’s ruling and moved for
reconsideration averring that as declared by the RTC
in its Decision dated June 2, 2006, its mortgage lien
should be carried over to the new title reconveying
the lot to Spouses Marañon. PNB further argued that
with the expiration of the redemption period on
February 4, 1993, or one (1) year from the
registration of the certificate of sale, PNB is now the
owner of the subject lot hence, entitled to its fruits.
PNB prayed that (1) the Order dated September 8,
2006 be set aside, and (2) an order be issued
directing Spouses Marañon to turn over to PNB the
amount of ₱144,000.00 released in their favor by the
Clerk of Court.19
On November 20, 2006, the RTC issued an Order
again directing PNB to release to Spouses Marañon
the ₱30,000.00 rental payments considering that
they were adjudged to have retained ownership over
the property.20
On December 6, 2006, the RTC issued another Order
denying PNB’s motion for reconsideration and
reiterating the directives in its Order dated
September 8, 2006.21
Aggrieved, PNB sought recourse with the CA via a
petition for certiorari and mandamus22 claiming that
as the lawful owner of the subject lot per the RTC’s
judgment dated June 2, 2006, it is entitled to the
fruits of the same such as rentals paid by tenants
hence, the ruling that "the real estate mortgage lien
of the PNB registered on the title of Lot No. 177-A-1
Bacolod Cadastre shall stay and be respected." PNB
also contended that it is an innocent mortgagee.
In its Decision23 dated June 18, 2008, the CA denied
the petition and affirmed the RTC’s judgment
ratiocinating that not being parties to the mortgage
transaction between PNB and Spouses Montealegre,
Spouses Marañon cannot be deprived of the fruits of
the subject lot as the same will amount to
deprivation of property without due process of law.
The RTC further held that PNB is not a mortgagee in
good faith because as a financial institution imbued
with public interest, it should have looked beyond the
certificate of title presented by Spouses Montealegre
and conducted an inspection on the circumstances
surrounding the transfer to Spouses Montealegre.
The decretal portion of the Decision thus read:
WHEREFORE, in view of the foregoing, the petition is
hereby DISMISSED. The Orders dated September 8,
2006 and December 6, 2006, rendered by the
respondent Presiding Judge of the Regional Trial
Court, Branch 54, Bacolod City, in Civil Case NO.
7213 directing the release of the deposited rental in
the amount of THIRTY THOUSAND PESOS
([P]30,000.00) to private respondents are hereby
AFFIRMED.
SO ORDERED.24
PNB moved for reconsideration25 but the motion was
denied in the CA Resolution dated August 10,
2009.26 Hence, the present recourse whereby PNB
argues that the RTC Decision dated June 2, 2006
lapsed into finality when it was not appealed or
submitted for reconsideration. As such, all
conclusions therein are immutable and can no longer
be modified by any court even by the RTC that
rendered the same. The CA however erroneously
altered the RTC Decision by reversing the
pronouncement that PNB is a mortgagee-in-good-
faith.
PNB further asseverates that its mortgage lien was
carried over to the new title issued to Spouses
Marañon and thus it retained the right to foreclose
the subject lot upon non-payment of the secured
debt. PNB asserts that it is entitled to the rent
because it became the subject lot’s new owner when
the redemption period expired without the property
being redeemed.
Ruling of the Court
We deny the petition.
It is readily apparent from the facts at hand that the
status of PNB’s lien on the subject lot has already
been settled by the RTC in its Decision dated June 2,
2006 where it was adjudged as a mortgagee in good
faith whose lien shall subsist and be respected. The
decision lapsed into finality when neither of the
parties moved for its reconsideration or appealed.
Being a final judgment, the dispositions and
conclusions therein have become immutable and
unalterable not only as against the parties but even
the courts. This is known as the doctrine of
immutability of judgments which espouses that a
judgment that has acquired finality becomes
immutable and unalterable, and may no longer be
modified in any respect even if the modification is
meant to correct erroneous conclusions of fact or law
and whether it will be made by the court that
rendered it or by the highest court of the land.27 The
significance of this rule was emphasized in Apo Fruits
Corporation v. Court of Appeals,28 to wit:
The reason for the rule is that if, on the application of
one party, the court could change its judgment to the
prejudice of the other, it could thereafter, on
application of the latter, again change the judgment
and continue this practice indefinitely. The equity of
a particular case must yield to the overmastering
need of certainty and unalterability of judicial
pronouncements.
The doctrine of immutability and inalterability of a
final judgment has a two-fold purpose: (1) to avoid
delay in the administration of justice and thus,
procedurally, to make orderly the discharge of
judicial business and (2) to put an end to judicial
controversies, at the risk of occasional errors, which
is precisely why courts exist. Controversies cannot
drag on indefinitely. The rights and obligations of
every litigant must not hang in suspense for an
indefinite period of time. The doctrine is not a mere
technicality to be easily brushed aside, but a matter
of public policy as well as a time-honored principle of
procedural law.29 (Citations omitted)
Hence, as correctly argued by PNB, the issue on its
status as a mortgagee in good faith have been
adjudged with finality and it was error for the CA to
still delve into and, worse, overturn, the same. The
CA had no other recourse but to uphold the status of
PNB as a mortgagee in good faith regardless of its
defects for the sake of maintaining stability of judicial
pronouncements. "The main role of the courts of
justice is to assist in the enforcement of the law and
in the maintenance of peace and order by putting an
end to judiciable controversies with finality. Nothing
better serves this role than the long established
doctrine of immutability of judgments."30
Further, it must be remembered that what reached
the CA on certiorari were RTC resolutions issued long
after the finality of the Decision dated June 2, 2006.
The RTC Orders dated September 8, 2006 and
December 6, 2006 were implements of the
pronouncement that Spouses Marañon are still the
rightful owners of the subject lot, a matter that has
been settled with finality as well. This
notwithstanding, the Court agrees with the ultimate
outcome of the CA’s assailed resolutions.
Rent is a civil fruit31 that belongs to the owner of the
property32 producing it by right of accession 33.34 The
rightful recipient of the disputed rent in this case
should thus be the owner of the subject lot at the
time the rent accrued. It is beyond question that
Spouses Marañon never lost ownership over the
subject lot. This is the precise consequence of the
final and executory judgment in Civil Case No. 7213
rendered by the RTC on June 3, 2006 whereby the
title to the subject lot was reconveyed to them and
the cloud thereon consisting of Emilie’s fraudulently
obtained title was removed. Ideally, the present
dispute can be simply resolved on the basis of such
pronouncement. However, the application of related
legal principles ought to be clarified in order to settle
the intervening right of PNB as a mortgagee in good
faith.
The protection afforded to PNB as a mortgagee in
good faith refers to the right to have its mortgage
lien carried over and annotated on the new
certificate of title issued to Spouses Marañon 35 as so
adjudged by the RTC. Thereafter, to enforce such lien
thru foreclosure proceedings in case of non-payment
of the secured debt,36 as PNB did so pursue. The
principle, however, is not the singular rule that
governs real estate mortgages and foreclosures
attended by fraudulent transfers to the mortgagor.
Rent, as an accessory follow the principal. 37 In fact,
when the principal property is mortgaged, the
mortgage shall include all natural or civil fruits and
improvements found thereon when the secured
obligation becomes due as provided in Article 2127
of the Civil Code, viz:
Art. 2127. The mortgage extends to the natural
accessions, to the improvements, growing fruits, and
the rents or income not yet received when the
obligation becomes due, and to the amount of the
indemnity granted or owing to the proprietor from
the insurers of the property mortgaged, or in virtue
of expropriation for public use, with the declarations,
amplifications and limitations established by law,
whether the estate remains in the possession of the
mortgagor, or it passes into the hands of a third
person.
Consequently, in case of non-payment of the secured
debt, foreclosure proceedings shall cover not only the
hypothecated property but all its accessions and
accessories as well. This was illustrated in the early
case of Cu Unjieng e Hijos v. Mabalacat Sugar
Co.38 where the Court held:
That a mortgage constituted on a sugar central
includes not only the land on which it is built but also
the buildings, machinery, and accessories installed at
the time the mortgage was constituted as well as the
buildings, machinery and accessories belonging to
the mortgagor, installed after the constitution thereof
x x x .39
Applying such pronouncement in the subsequent
case of Spouses Paderes v. Court of Appeals,40 the
Court declared that the improvements constructed
by the mortgagor on the subject lot are covered by
the real estate mortgage contract with the
mortgagee bank and thus included in the foreclosure
proceedings instituted by the latter. 41
However, the rule is not without qualifications. In
Castro, Jr. v. CA42 the Court explained that Article
2127 is predicated on the presumption that the
ownership of accessions and accessories also
belongs to the mortgagor as the owner of the
principal. After all, it is an indispensable requisite of a
valid real estate mortgage that the mortgagor be the
absolute owner of the encumbered property, thus:
All improvements subsequently introduced or owned
by the mortgagor on the encumbered property are
deemed to form part of the mortgage. That the
improvements are to be considered so incorporated
only if so owned by the mortgagor is a rule that can
hardly be debated since a contract of security,
whether, real or personal, needs as an indispensable
element thereof the ownership by the pledgor or
mortgagor of the property pledged or mortgaged. x x
x.43 (Citation omitted)
Otherwise stated, absent an adverse claimant or any
evidence to the contrary, all accessories and
accessions accruing or attached to the mortgaged
property are included in the mortgage contract and
may thus also be foreclosed together with the
principal property in case of non-payment of the debt
secured.
Corollary, any evidence sufficiently overthrowing the
presumption that the mortgagor owns the mortgaged
property precludes the application of Article 2127.
Otherwise stated, the provision is irrelevant and
inapplicable to mortgages and their resultant
foreclosures if the mortgagor is later on found or
declared to be not the true owner of the property, as
in the instant case.1âwphi1
It is beyond question that PNB’s mortgagors, Spouses
Montealegre, are not the true owners of the subject
lot much less of the building which produced the
disputed rent. The foreclosure proceedings on August
16, 1991 caused by PNB could not have, thus,
included the building found on the subject lot and the
rent it yields. PNB’s lien as a mortgagee in good faith
pertains to the subject lot alone because the rule that
improvements shall follow the principal in a
mortgage under Article 2127 of the Civil Code does
not apply under the premises. Accordingly, since the
building was not foreclosed, it remains a property of
Spouses Marañon; it is not affected by non-
redemption and is excluded from any consolidation of
title made by PNB over the subject lot. Thus, PNB’s
claim for the rent paid by Tolete has no basis.
It must be remembered that there is technically no
juridical tie created by a valid mortgage contract that
binds PNB to the subject lot because its mortgagor
was not the true owner. But by virtue of the
mortgagee in good faith principle, the law allows PNB
to enforce its lien. We cannot, however, extend such
principle so as to create a juridical tie between PNB
and the improvements attached to the subject lot
despite clear and undeniable evidence showing that
no such juridical tie exists.
Lastly, it is worthy to note that the effects of the
foreclosure of the subject lot is in fact still
contentious considering that as a purchaser in the
public sale, PNB was only substituted to and acquired
the right, title, interest and claim of the mortgagor to
the property as of the time of the levy.44 There being
already a final judgment reconveying the subject lot
to Spouses Marañon and declaring as null and void
Emilie's purported claim of ownership, the legal
consequences of the foreclosure sale, expiration of
the redemption period and even the consolidation of
the subject lot's title in PNB's name shall be
subjected to such final judgment. This is the clear
import of the ruling in Unionbank of the Philippines v.
Court of Appeals:45
This is because as purchaser at a public auction,
UNIONBANK is only substituted to and acquires the
right, title, interest and claim of the judgment
debtors or mortgagors to the property at the time of
levy. Perforce, the judgment in the main action for
reconveyance will not be rendered ineffectual by the
consolidation of ownership and the issuance of title in
the name of UNIONBANK.46 (Citation omitted)
Nonetheless, since the present recourse stemmed
from a mere motion claiming ownership of rent and
not from a main action for annulment of the
foreclosure sale or of its succeeding incidents, the
Court cannot proceed to make a ruling on the
bearing of the CA's Decision dated June 18, 2008 to
PNB's standing as a purchaser in the public auction.
Such matter will have to be threshed out in the
proper forum.
All told, albeit the dispositive portions of the assailed
CA decision and resolution are differently premised,
they ought to be upheld as they convey the similar
conclusion that Spouses Marañon are the rightful
owners of the rent earned by the building on the
subject lot.
WHEREFORE, foregoing considered, the petition is
hereby DENIED. The Decision dated June 18, 2008
and Resolution dated August 10, 2009 of the Court of
Appeals in CA-G.R. SP No. 02513 are AFFIRMED.
SO ORDERED.
FIRST DIVISION
G.R. No. 126200            August 16, 2001
DEVELOPMENT BANK OF THE
PHILIPPINES, petitioner,  real and personal properties and other real rights
vs.
HONORABLE COURT OF APPEALS and
REMINGTON INDUSTRIAL SALES
CORPORATION, respondents.
KAPUNAN, J.:
Before the Court is a petition for review on certiorari
under Rule 45 of the Rules of Court, seeking a review
of the Decision of the Court of Appeals dated October
6, 1995 and the Resolution of the same court dated
August 29, 1996.
The facts are as follows:
Marinduque Mining-Industrial Corporation
(Marinduque Mining), a corporation engaged in the
manufacture of pure and refined nickel, nickel and
cobalt in mixed sulfides; copper ore/concentrates,
cement and pyrite conc., obtained from the Philippine
National Bank (PNB) various loan accommodations.
To secure the loans, Marinduque Mining executed on
October 9, 1978 a Deed of Real Estate Mortgage and
Chattel Mortgage in favor of PNB. The mortgage
covered all of Marinduque Mining's real properties,
located at Surigao del Norte, Sipalay, Negros
Occidental, and at Antipolo, Rizal, including the
improvements thereon. As of November 20, 1980,
the loans extended by PNB amounted to P4 Billion,
exclusive of interest and charges. 1
On July 13, 1981, Marinduque Mining executed in
favor of PNB and the Development Bank of the
Philippines (DBP) a second Mortgage Trust
Agreement. In said agreement, Marinduque Mining
mortgaged to PNB and DBP all its real properties
located at Surigao del Norte, Sipalay, Negros
Occidental, and Antipolo, Rizal, including the
improvements thereon. The mortgage also covered
all of Marinduque Mining's chattels, as well as assets
of whatever kind, nature and description which
Marinduque Mining may subsequently acquire in
substitution or replenishment or in addition to the
properties covered by the previous Deed of Real and
Chattel Mortgage dated October 7, 1978. Apparently,
Marinduque Mining had also obtained loans totaling
P2 Billion from DBP, exclusive of interest and
charges.2
On April 27, 1984, Marinduque Mining executed in
favor of PNB and DBP an Amendment to Mortgage
Trust Agreement by virtue of which Marinduque
Mining mortgaged in favor of PNB and DBP all other
subsequently acquired by Marinduque Mining.3
For failure of Marinduque Mining to settle its loan
obligations, PNB and DBP instituted sometime on July
and August 1984 extrajudicial foreclosure
proceedings over the mortgaged properties.
The events following the foreclosure are narrated by
DBP in its petition, as follows:
In the ensuing public auction sale conducted
on August 31, 1984, PNB and DBP emerged and were
declared the highest bidders over the foreclosed real
properties, buildings, mining claims, leasehold rights
together with the improvements thereon as well as
machineries [sic] and equipments [sic] of MMIC
located at Nonoc Nickel Refinery Plant at Surigao del
Norte for a bid price of P14,238,048,150.00 [and]
[o]ver the foreclosed chattels of MMIC located at
Nonoc Refinery Plant at Surigao del Norte, PNB and
DBP as highest bidders, bidded for P170,577,610.00
(Exhs. "5" to "5-A", "6", "7" to "7-AA-" PNB/DBP). For
the foreclosed real properties together with all the
buildings, major machineries & equipment and other
improvements of MMIC located at Antipolo, Rizal,
likewise held on August 31, 1984, were sold to PNB
and DBP as highest bidders in the sum of
P1,107,167,950.00 (Exhs. "10" to "10-X"-PNB/ DBP).
At the auction sale conducted on September 7,
1984[,] over the foreclosed real properties, buildings,
& machineries/equipment of MMIC located at Sipalay,
Negros Occidental were sold to PNB and DBP, as
highest bidders, in the amount of P2,383,534,000.00
and P543,040.000.00 respectively (Exhs. "8" to "8-
BB", "9" to "90-GGGGGG"-PNB/DBP).
Finally, at the public auction sale conducted on
September 18, 1984 on the foreclosed personal
properties of MMIC, the same were sold to PNB and
DBP as the highest bidder in the sum of
P678,772,000.00 (Exhs. "11" and "12-QQQQQ"-PNB).
PNB and DBP thereafter thru a Deed of Transfer
dated August 31, 1984, purposely, in order to ensure
the continued operation of the Nickel refinery plant
and to prevent the deterioration of the assets
foreclosed, assigned and transferred to Nonoc Mining
and Industrial Corporation all their rights, interest
and participation over the foreclosed properties of
MMIC located at Nonoc Island, Surigao del Norte for
an initial consideration of P14,361,000,000.00 (Exh.
"13"-PNB).
Likewise, thru [sic] a Deed of Transfer dated June 6,
1984, PNB and DBP assigned and transferred in favor
of Maricalum Mining Corp. all its rights, interest and
participation over the foreclosed properties of MMIC
at Sipalay, Negros Occidental for an initial
consideration of P325,800,000.00 (Exh. "14"-
PNB/DBP).
On February 27, 1987, PNB and DBP, pursuant to
Proclamation No. 50 as amended, again assigned,
transferred and conveyed to the National
Government thru [sic] the Asset Privatization Trust
(APT) all its existing rights and interest over the
assets of MMIC, earlier assigned to Nonoc Mining and
Industrial Corporation, Maricalum Mining Corporation
and Island Cement Corporation (Exh. "15" & "15-A"
PNB/DBP).4”
In the meantime, between July 16, 1982 to October 4,
1983, Marinduque Mining purchased and caused to
be delivered construction materials and other
merchandise from Remington Industrial Sales
Corporation (Remington) worth P921,755.95. The
purchases remained unpaid as of August 1, 1984
when Remington filed a complaint for a sum of
money and damages against Marinduque Mining for
the value of the unpaid construction materials and
other merchandise purchased by Marinduque Mining,
as well as interest, attorney's fees and the costs of
suit.
On September 7, 1984, Remington's original
complaint was amended to include PNB and DBP as
co-defendants in view of the foreclosure by the latter
of the real and chattel mortgages on the real and
personal properties, chattels, mining claims,
machinery, equipment and other assets of
Marinduque Mining.5
On September 13, 1984, Remington filed a second
amended complaint to include as additional
defendant, the Nonoc Mining and Industrial
Corporation (Nonoc Mining). Nonoc Mining is the
assignee of all real and personal properties, chattels,
machinery, equipment and all other assets of
Marinduque Mining at its Nonoc Nickel Factory in
Surigao del Norte.6
On March 26, 1986, Remington filed a third amended
complaint including the Maricalum Mining
Corporation (Maricalum Mining) and Island Cement
Corporation (Island Cement) as co-defendants.
Remington asserted that Marinduque Mining, PNB,
DBP, Nonoc Mining, Maricalum Mining and Island
Cement must be treated in law as one and the same
entity by disregarding the veil of corporate fiction
since:
1. Co-defendants NMIC, Maricalum and Island
Cement which are newly created entities are
practically owned wholly by defendants PNB and
DBP, and managed by their officers, aside from the
fact that the aforesaid co-defendants NMIC,
Maricalum and Island Cement were organized in such
a hurry and in such suspicious circumstances by co-
defendants PNB and DBP after the supposed
extrajudicial foreclosure of MMIC's assets as to make
their supposed projects assets, machineries and
equipment which were originally owned by co-
defendant MMIC beyond the reach of creditors of the
latter.
2. The personnel, key officers and rank-and-file
workers and employees of co-defendants NMIC,
Maricalum and Island Cement creations of co-
defendants PNB and DBP were the personnel of co-
defendant MMIC such that . . . practically there has
only been a change of name for all legal purpose and
intents
3. The places of business not to mention the mining
claims and project premises of co-defendants NMIC,
Maricalum and Island Cement likewise used to be the
places of business, mining claims and project
premises of co-defendant MMIC as to make the
aforesaid co-defendants NMIC, Maricalum and Island
Cement mere adjuncts and subsidiaries of co-
defendants PNB and DBP, and subject to their control
and management.
On top of everything, co-defendants PNB, DBP NMIC,
Maricalum and Island Cement being all corporations
created by the government in the pursuit of business
ventures should not be allowed to ignore, x x x or
obliterate with impunity nay illegally, the financial
obligations of x x x MMIC whose operations co-
defendants PNB and DBP had highly financed before
the alleged extrajudicial foreclosure of defendant
MMIC's assets, machineries and equipment to the
extent that major policies of co-defendant MMIC were
being decided upon by co-defendants PNB and DBP
as major financiers who were represented in its
board of directors forming part of the majority
thereof which through the alleged extrajudicial
foreclosure culminated in a complete take-over by
co-defendants PNB and DBP bringing about the
organization of their co-defendants NMIC, Maricalum
and Island Cement to which were transferred all the
assets, machineries and pieces of equipment of co-
defendant MMIC used in its nickel mining project in
Surigao del Norte, copper mining operation in
Sipalay, Negros Occidental and cement factory in
Antipolo, Rizal to the prejudice of creditors of co-
defendant MMIC such as plaintiff Remington
Industrial Sales Corporation whose stockholders,
officers and rank-and-file workers in the legitimate
pursuit of its business activities, invested
considerable time, sweat and private money to
supply, among others, co-defendant MMIC with some
of its vital needs for its operation, which co-
defendant MMIC during the time of the transactions
material to this case became x x x co-defendants
PNB and DBP's instrumentality, business conduit,
alter ego, agency (sic), subsidiary or auxiliary
corporation, by virtue of which it becomes doubly
necessary to disregard the corporation fiction that
co-defendants PNB, DBP, MMIC, NMIC, Maricalum and
Island Cement, six (6) distinct and separate entities,
when in fact and in law, they should be treated as
one and the same at least as far as plaintiff's
transactions with co-defendant MMIC are concerned,
so as not to defeat public convenience, justify wrong,
subvert justice, protect fraud or confuse legitimate
issues involving creditors such as plaintiff, a fact
which all defendants were as (sic) still are aware of
during all the time material to the transactions
subject of this case.7”
On April 3, 1989, Remington filed a motion for leave
to file a fourth amended complaint impleading the
Asset Privatization Trust (APT) as co-defendant. Said
fourth amended complaint was admitted by the lower
court in its Order dated April 29, 1989.
On April 10, 1990, the Regional Trial Court (RTC)
rendered a decision in favor of Remington, the
dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of
the plaintiff, ordering the defendants Marinduque
Mining & Industrial Corporation, Philippine National
Bank, Development Bank of the Philippines, Nonoc
Mining and Industrial Corporation, Maricalum Mining
Corporation, Island Cement Corporation and Asset
Privatization Trust to pay, jointly and severally, the
sum of P920,755.95, representing the principal
obligation, including the stipulated interest as of June
22, 1984, plus ten percent (10%) surcharge per
annum by way of penalty, until the amount is fully
paid; the sum equivalent to 10% of the amount due
as and for attorney's fees; and to pay the costs.8
Upon appeal by PNB, DBP, Nonoc Mining, Maricalum
Mining, Island Cement and APT, the Court of Appeals,
in its Decision dated October 6, 1995, affirmed the
decision of the RTC. Petitioner filed a Motion for
Reconsideration, which was denied in the Resolution
dated August 29, 1996.
Hence, this petition, DBP maintaining that Remington
has no cause of action against it or PNB, nor against
their transferees, Nonoc Mining, Island Cement,
Maricalum Mining, and the APT.
On the other hand, private respondent Remington
submits that the transfer of the properties was made
in fraud of creditors. The presence of fraud,
according to Remington, warrants the piercing of the
corporate veil such that Marinduque Mining and its
transferees could be considered as one and the same
corporation. The transferees, therefore, are also
liable for the value of Marinduque Mining's
purchases.
In Yutivo Sons Hardware vs. Court of Tax
Appeals,9 cited by the Court of Appeals in its
decision,10 this Court declared:
It is an elementary and fundamental principle of
corporation law that a corporation is an entity
separate and distinct from its stockholders and from
other corporations to which it may be connected.
However, when the notion of legal entity is used to
defeat public convenience, justify wrong, protect
fraud, or defend crime, the law will regard the
corporation as an association of persons or in case of
two corporations, merge them into one". (Koppel
[Phils.], Inc., vs. Yatco, 71 Phil. 496, citing 1 Fletcher
Encyclopedia of Corporation, Permanent Ed., pp. 135-
136; U.S. vs. Milwaukee Refrigeration Transit Co., 142
Fed., 247, 255 per Sanborn, J.). x x x.
In accordance with the foregoing rule, this Court has
disregarded the separate personality of the
corporation where the corporate entity was used to
escape liability to third parties.11 In this case,
however, we do not find any fraud on the part of
Marinduque Mining and its transferees to warrant the
piercing of the corporate veil.
It bears stressing that PNB and DBP are mandated to
foreclose on the mortgage when the past due
account had incurred arrearages of more than 20% of
the total outstanding obligation. Section 1 of
Presidential Decree No. 385 (The Law on Mandatory
Foreclosure) provides:
It shall be mandatory for government financial
institutions, after the lapse of sixty (60) days from
the issuance of this decree, to foreclose the collateral
and/or securities for any loan, credit accommodation,
and/or guarantees granted by them whenever the
arrearages on such account, including accrued
interest and other charges, amount to at least twenty
percent (20%) of the total outstanding obligations,
including interest and other charges, as appearing in
the books of account and/or related records of the
financial institution concerned. This shall be without
prejudice to the exercise by the government financial
institution of such rights and/or remedies available to
them under their respective contracts with their
debtors, including the right to foreclose on loans,
credits, accommodations and/or guarantees on which
the arrearages are less than twenty (20%) percent.”
Thus, PNB and DBP did not only have a right, but the
duty under said law, to foreclose upon the subject
properties. The banks had no choice but to obey the
statutory command.
The import of this mandate was lost on the Court of
Appeals, which reasoned that under Article 19 of the
Civil Code, "Every person must, in the exercise of his
rights and in the performance of his duties, act with
justice, give everyone his due, and observe honesty
and good faith." The appellate court, however, did
not point to any fact evidencing bad faith on the part
of the Marinduque Mining and its transferees. Indeed,
it skirted the issue entirely by holding that the
question of actual fraudulent intent on the part of the
interlocking directors of DBP and Marinduque Mining
was irrelevant because:
As aptly stated by the appellee in its brief, "x x x
where the corporations have directors and officers in
common, there may be circumstances under which
their interest as officers in one company may
disqualify them in equity from representing both
corporations in transactions between the two. Thus,
where one corporation was 'insolvent and indebted to
another, it has been held that the directors of the
creditor corporation were disqualified, by reason of
self-interest, from acting as directors of the debtor
corporation in the authorization of a mortgage or
deed of trust to the former to secure such
indebtedness x x x" (page 105 of the Appellee's
Brief). In the same manner that "x x x when the
corporation is insolvent, its directors who are its
creditors can not secure to themselves any
advantage or preference over other creditors. They
can not thus take advantage of their fiduciary
relation and deal directly with themselves, to the
injury of others in equal right. If they do, equity will
set aside the transaction at the suit of creditors of
the corporation or their representatives, without
reference to the question of any actual fraudulent
intent on the part of the directors, for the right of the
creditors does not depend upon fraud in fact, but
upon the violation of the fiduciary relation to the
directors." x x x (page 106 of the Appellee's Brief)
We also concede that "x x x directors of insolvent
corporation, who are creditors of the company, can
not secure to themselves any preference or
advantage over other creditors in the payment of
their claims. It is not good morals or good law. The
governing body of officers thereof are charged with
the duty of conducting its affairs strictly in the
interest of its existing creditors, and it would be a
breach of such trust for them to undertake to give
any one of its members any advantage over any
other creditors in securing the payment of his debts
in preference to all others. When validity of these
mortgages, to secure debts upon which the directors
were indorsers, was questioned by other creditors of
the corporation, they should have been classed as
instruments rendered void by the legal principle
which prevents directors of an insolvent corporation
from giving themselves a preference over outside
creditors. x x x" (page 106-107 of the Appellee's
Brief.)12
The Court of Appeals made reference to two
principles in corporation law. The first pertains to
transactions between corporations with interlocking
directors resulting in the prejudice to one of the
corporations. This rule does not apply in this case,
however, since the corporation allegedly prejudiced
(Remington) is a third party, not one of the
corporations with interlocking directors (Marinduque
Mining and DBP).
The second principle invoked by respondent court
involves "directors x x x who are creditors" which is
also inapplicable herein. Here, the creditor of
Marinduque Mining is DBP, not the directors of
Marinduque Mining.
Neither do we discern any bad faith on the part of
DBP by its creation of Nonoc Mining, Maricalum and
Island Cement. As Remington itself concedes, DBP is
not authorized by its charter to engage in the mining
business.13 The creation of the three corporations was
necessary to manage and operate the assets
acquired in the foreclosure sale lest they deteriorate
from non-use and lose their value. In the absence of
any entity willing to purchase these assets from the
bank, what else would it do with these properties in
the meantime? Sound business practice required that
they be utilized for the purposes for which they were
intended.
Remington also asserted in its third amended
complaint that the use of Nonoc Mining, Maricalum
and Island Cement of the premises of Marinduque
Mining and the hiring of the latter's officers and
personnel also constitute badges of bad faith.
Assuming that the premises of Marinduque Mining
were not among those acquired by DBP in the
foreclosure sale, convenience and practicality
dictated that the corporations so created occupy the
premises where these assets were found instead of
relocating them. No doubt, many of these assets are
heavy equipment and it may have been impossible to
move them. The same reasons of convenience and
practicality, not to mention efficiency, justified the
hiring by Nonoc Mining, Maricalum and Island
Cement of Marinduque Mining's personnel to manage
and operate the properties and to maintain the
continuity of the mining operations.
To reiterate, the doctrine of piercing the veil of
corporate fiction applies only when such corporate
fiction is used to defeat public convenience, justify
wrong, protect fraud or defend crime.14 To disregard
the separate juridical personality of a corporation,
the wrongdoing must be clearly and convincingly
established. It cannot be presumed.15In this case, the
Court finds that Remington failed to discharge its
burden of proving bad faith on the part of
Marinduque Mining and its transferees in the
mortgage and foreclosure of the subject properties to
justify the piercing of the corporate veil.
The Court of Appeals also held that there exists in
Remington's favor a "lien" on the unpaid purchases
of Marinduque Mining, and as transferee of these
purchases, DBP should be held liable for the value
thereof.
In the absence of liquidation proceedings, however,
the claim of Remington cannot be enforced against
DBP. Article 2241 of the Civil Code provides:
ARTICLE 2241. With reference to specific movable
property of the debtor, the following claims or liens
shall be preferred:
xxx           xxx           xxx
(3) Claims for the unpaid price of movables sold, on
said movables, so long as they are in the possession
of the debtor, up to the value of the same; and if the
movable has been resold by the debtor and the price
is still unpaid, the lien may be enforced on the price;
this right is not lost by the immobilization of the thing
by destination, provided it has not lost its form,
substance and identity, neither is the right lost by the
sale of the thing together with other property for a
lump sum, when the price thereof can be determined
proportionally;
(4) Credits guaranteed with a pledge so long as the
things pledged are in the hands of the creditor, or
those guaranteed by a chattel mortgage, upon the
things pledged or mortgaged, up to the value
thereof; xxx           xxx           xxx
In Barretto vs. Villanueva,16 the Court had occasion to
construe Article 2242, governing claims or liens over
specific immovable property. The facts that gave rise
to the case were summarized by this Court in its
resolution as follows:
x x x Rosario Cruzado sold all her right, title, and
interest and that of her children in the house and lot
herein involved to Pura L. Villanueva for P19,000.00.
The purchaser paid P1,500 in advance, and executed
a promissory note for the balance of P17,500.00.
However, the buyer could only pay P5,500 on
account of the note, for which reason the vendor
obtained judgment for the unpaid balance. In the
meantime, the buyer Villanueva was able to secure a
clean certificate of title (No. 32626), and mortgaged
the property to appellant Magdalena C. Barretto,
married to Jose C. Baretto, to secure a loan of
P30,000.03, said mortgage having been duly
recorded.
Pura Villanueva defaulted on the mortgage loan in
favor of Barretto. The latter foreclosed the mortgage
in her favor, obtained judgment, and upon its
becoming final asked for execution on 31 July 1958.
On 14 August 1958, Cruzado filed a motion for
recognition for her "vendor's lien" in the amount of
P12,000.00, plus legal interest, invoking Articles
2242, 2243, and 2249 of the new Civil Code. After
hearing, the court below ordered the "lien" annotated
on the back of Certificate of Title No. 32526, with the
proviso that in case of sale under the foreclosure
decree the vendor's lien and the mortgage credit of
appellant Barretto should be paid pro ratafrom the
proceeds. Our original decision affirmed this order of
the Court of First Instance of Manila.”
In its decision upholding the order of the lower court,
the Court ratiocinated thus:
Article 2242 of the new Civil Code enumerates the
claims, mortgages and liens that constitute an
encumbrance on specific immovable property, and
among them are:
"(2) For the unpaid price of real property sold, upon
the immovable sold"; and
"(5) Mortgage credits recorded in the Registry of
Property."
Article 2249 of the same Code provides that "if there
are two or more credits with respect to the same
specific real property or real rights, they shall be
satisfied pro-rata, after the payment of the taxes and
assessments upon the immovable property or real
rights."
Application of the above-quoted provisions to the
case at bar would mean that the herein appellee
Rosario Cruzado as an unpaid vendor of the property
in question has the right to share pro-rata with the
appellants the proceeds of the foreclosure sale. xxx    outstanding) must necessarily be convened, and the
xxx           xxx
As to the point made that the articles of the Civil
Code on concurrence and preference of credits are
applicable only to the insolvent debtor, suffice it to
say that nothing in the law shows any such limitation.
If we are to interpret this portion of the Code as
intended only for insolvency cases, then other
creditor-debtor relationships where there are
concurrence of credits would be left without any rules
to govern them, and it would render purposeless the
special laws on insolvency. 17”
Upon motion by appellants, however, the Court
reconsidered its decision. Justice J.B.L. Reyes,
speaking for the Court, explained the reasons for the
reversal:
A. The previous decision failed to take fully into
account the radical changes introduced by the Civil
Code of the Philippines into the system of priorities
among creditors ordained by the Civil Code of 1889.
Pursuant to the former Code, conflicts among
creditors entitled to preference as to specific real
property under Article 1923 were to be resolved
according to an order of priorities established by
Article 1927, whereby one class of creditors could
exclude the creditors of lower order until the claims
of the former were fully satisfied out of the proceeds
of the sale of the real property subject of the
preference, and could even exhaust proceeds if
necessary.
Under the system of the Civil Code of the Philippines,
however, only taxes enjoy a similar absolute
preference. All the remaining thirteen classes of
preferred creditors under Article 2242 enjoy no
priority among themselves, but must be paid pro
rata, i.e., in proportion to the amount of the
respective credits. Thus, Article 2249 provides:
"If there are two or more credits with respect to the
same specific real property or real rights, they shall
be satisfied pro rata, after the payment of the taxes
and assessments upon the immovable property or
real rights."
But in order to make this prorating fully effective, the
preferred creditors enumerated in Nos. 2 to 14 of
Article 2242 (or such of them as have credits
import of their claims ascertained. It is thus apparent
that the full application of Articles 2249 and 2242
demands that there must be first some proceeding
where the claims of all the preferred creditors may
be bindingly adjudicated, such as insolvency, the
settlement of decedent's estate under Rule 87 of the
Rules of Court, or other liquidation proceedings of
similar import.
This explains the rule of Article 2243 of the new Civil
Code that —
"The claims or credits enumerated in the two
preceding articles shall be considered as mortgages
or pledges of real or personal property, or
liens within the purview of legal provisions governing
insolvency x x x (Italics supplied).
And the rule is further clarified in the Report of the
Code Commission, as follows
"The question as to whether the Civil Code and the
Insolvency Law can be harmonized is settled by this
Article (2243). The preferences named in Articles
2261 and 2262 (now 2241 and 2242) are to be
enforced in accordance with the Insolvency Law."
(Italics supplied)
Thus, it becomes evident that one preferred
creditor's third-party claim to the proceeds of a
foreclosure sale (as in the case now before us) is not
the proceeding contemplated by law for the
enforcement of preferences under Article 2242,
unless the claimant were enforcing a credit for taxes
that enjoy absolute priority. If none of the claims is
for taxes, a dispute between two creditors will not
enable the Court to ascertain the pro rata dividend
corresponding to each, because the rights of the
other creditors likewise enjoying preference under
Article 2242 can not be ascertained. Wherefore, the
order of the Court of First Instance of Manila now
appealed from, decreeing that the proceeds of the
foreclosure sale be apportioned only between
appellant and appellee, is incorrect, and must be
reversed. [Emphasis supplied]”
The ruling in Barretto was reiterated in Phil. Savings
Bank vs. Hon. Lantin, Jr., etc., et al.,18 and in two
cases both entitled Development Bank of the
Philippines vs. NLRC.19
Although Barretto involved specific immovable
property, the ruling therein should apply equally in
this case where specific movable property is
involved. As the extrajudicial foreclosure instituted
by PNB and DBP is not the liquidation proceeding
contemplated by the Civil Code, Remington cannot
claim its pro rata share from DBP.
WHEREFORE, the petition is GRANTED. The decision
of the Court of Appeals dated October 6, 1995 and its
Resolution promulgated on August 29, 1996 is
REVERSED and SET ASIDE. The original complaint
filed in the Regional Trial Court in CV Case No. 84-
25858 is hereby DISMISSED.
SO ORDERED.