Professional Documents
Culture Documents
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R E S O L U T I O N
TINGA, J.:
For resolution is the "Motion For Leave to File And To Admit The
Attached Second Motion For Partial Reconsideration" filed by
Poliand Industrial Limited (POLIAND), seeking the partial review
of the Court’s Resolution dated November 23, 2005. Poliand is the
petitioner in G.R. No. 143866 and the respondent in G.R. No.
143877. On August 22, 2005, the Court promulgated a consolidated
Decision in G.R. Nos. 143866 & 143877, the dispositive portion of
which reads:
WHEREFORE, both Petitions in G.R. No. 143866 and G.R. No. 143877
are DENIED. The Decision of the Court of Appeals in CA-G.R. CV No.
53257 is MODIFIED to the extent that National Development Company
is liable to Poliand Industrial Limited for the amount of One
Million One Hundred Ninety Three Thousand Two Hundred Ninety Eight
US Dollars and Fifty Six US Cents (US$ 1, 193, 298.56), plus
interest of 12% per annum computed from 25 September 1991 until
fully paid. In other respects, said Decision is AFFIRMED. No
pronouncement as to costs.
SO ORDERED.
SO ORDERED.
ROMUALDEZ, J.:
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in favor of the appellant being dated September 22, 1919, and
registered also in the registry.
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Moreover, the appellant cannot deny the preferential character of
the mortgage in favor of the Fidelity & Surety Co. because in the
very document executed in his favor it was stated that his
mortgage was a second mortgage, subordinate to the one made in
favor of the Fidelity & Surety Co.
This appeal was taken by Urquijo, Zuloaga and Escubi from an order
of the Court of First Instance of Iloilo, the dispositive part of
which reads as follows:
The balance of the said funds, after the payment of the said
three claims which the court held should be given special
preference in the order above-mentioned, shall be special
distributed pro rata among the other creditors of the
insolvent whose claims have been admitted and approved, in
accordance with section 50 of Act No. 1956 on insolvency.
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II. The lower court erred in not holding that there is no
sufficient evidence in the record of this case as to the levy
of an attachment in favor of either Antonio Belo or Jose
Altavas.virtualawlibrary virtual law library
IV. The lower court erred in holding that the sale of all the
property of the Central Capiz for a lump sum, including the
personal property on which the appellants claim a vendor's
lien, is fatal to their right to establish a
preference.virtualawlibrary virtual law library
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Subsequently, Jose Altavas (civil case No. 1543) and Antonio
Belo(civil cause No. 1548) each filed a complaint against the
Capiz Central praying for an attachment, which was issued, the
same having been levied on the property of said Central on March
29, 1922 and April 26,1922, respectively.virtualawlibrary virtual
law library
On the same date, that is, August 3, 1925, Antonio Belo and Walter
A. Smith, as assignee of the Capiz, Central, entered into a
compromise agreement in civil case No. 1548 of the Court of First
Instance of Capiz, in which Antonio Belo was the plaintiff and the
Capiz Central the defendant, by virtue of which they petitioned
said court to render judgment in favor of the said plaintiff for
the sum of P11,000, as full payment of all his claims, reserving
the right to said plaintiff to raise the question of preference in
view of the attachment, which had been obtained in said civil
cause against the property of the Capiz Central, through the
presentation of the said judgment which should be considered as a
claim duly presented in the insolvency proceeding. In view of this
agreement and in accordance therewith, the Court of the First
Instance of Capiz rendered judgment in favor of Jose Belo for the
sum of P11,000.virtualawlibrary virtual law library
On August 17, 1925, Urquijo, Zuloaga and Escubi filed a claim for
the sum of P30,000 based on the judgment rendered in their favor,
claiming a right of preference by virtue of their lien as sellers
of certain movable property specified in the claim. On the same
date, August 17, 1925, Timoteo Unson and Clara Lacson filed an
opposition to this claim of preference.virtualawlibrary virtual
law library
On August 18, 1925, Jose Altavas filed a claim for the sum of
P8,000, based upon the judgment entered in his favor, alleging
that he had a preferential right though inferior to that of
Timoteo Unson and Clara Lacson by virtue of the second attachment
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levied upon the property of the Capiz Central in his favor.
Urquijo , Zuloaga and Escubi objected to this claim of preference
at the hearing on August 25, 1925.virtualawlibrary virtual law
library
On August 18, 1925, Antonio Belo filed a claim for the sum of
P11,000, based on the judgment entered in his favor, alleging that
he had a preferential right subordinate to that of Timoteo Unson
and Clara Lacson by virtue of the third attachment levied on the
property of the Capiz Central in his favor. At the hearing held on
August 25, 1925, Urquijo, Zuloaga and Escubi also objected to this
claim of preference.virtualawlibrary virtual law library
Aside from the substantial compliance with the law for the
validity of the attachment issued in favor of Timoteo Unson and
Clara Lacson and levied on the property of the Capiz Central, the
assignee, who represents the creditors (Alexandria Bank vs.
Herbert, 3 Law. ed., 479) entered into a compromise agreement with
each of the creditors, impliedly acknowledging the existence of
the respective liens in his favor and leaving, for the
determination of the court in the insolvency proceeding, the
question of the preferential right of said creditors. This
compromise agreements entered into between the assignee and the
respective creditors were approved by the competent court, and the
appellants, as creditors, are bound by the acts of their legal
representative, approved by the court. (32 C. J., par. 125, page
860).virtualawlibrary virtual law library
The third error alleged to have been committed by the trial court
is the fact that it found that the appellants had lost their
preferential right to the price of the machinery and the grinder
which had been sold to the Capiz Central, from the moment that it
was installed on the estate and became real property by
destination.virtualawlibrary virtual law library
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Article 1922, paragraph No. 1, of the Civil Code, reads as
follows:
The law gives the vendor a real right in the personal property
sold for the price of the sale while said property remains in the
possession of the purchaser. It certainly would be contrary to
equity and justice if the owner of the article sold could not
collect the purchase price of the same while it is in the
possession of the purchaser.virtualawlibrary virtual law library
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Hypotheques," paragraph 113, p. 125, translated into English, the
following:
While the price is unpaid, the vendor has a real right to the
thing. It cannot be admitted that the purchaser in imparting
to it a purely metaphysical character, and in changing its
destination for his won convenience, has been able to alter
the precise and intimate rights of the vendor and to deprive
him of his compensation; it is not within his power to give
to things sold but an imperfect destination subordinate to
the rights of the vendor.virtualawlibrary virtual law library
In the case of Lapene and Jack vs. McCan & Son (28 La. Ann., 749,
751), which dealt with steam boilers which were installed on a
sugar-cane plantation, Mr. Justice Wyly, in his concurring
opinion, said:
The foregoing opinion was cited with approval by the Supreme Court
of Louisiana in the case of Carlin vs. Gordy (32 La. Ann., 1285).
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This was a case between a mortgagee and a subsequent vendor of a
mill and machinery for the manufacture of sugar, who claimed a
right of preference by virtue of the sale, and the court said:
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See also case of Baldwin vs. Young (47 La. Ann., 1466); Walburn-
Swenson Co. vs. Darell (49 La. Ann., 1044); Hall vs. Hawley (49
La. Ann., 1046); Association vs. Johnston (51 la. Ann., 470); and
Swoop vs. St. Martin (110 La. 237).virtualawlibrary virtual law
library
And, finally, in the case of the State Trust Co. vs. De La Vergne
Refrigerating Mach. Co. (105 Fed. Rep., 468), the Circuit Court of
Appeals of Louisiana, after citing with approval the doctrines
laid down in the cases above cited, said the following: "This
seems to be in accord with the equities of the case as they are
regarded in De L'Isle vs. Succession of Moss (34 La. Ann., 166):
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It is not disputed that the machinery in question, in spite of
having been incorporated in the Capiz Central, conserves its form
and substance, and its identity has not been altered in any manner
whatsoever. Having reached the conclusion that the vendor's lien
for the price of the personal property sold continues even when
the latter is converted into real property by destination, the
fact that the machinery was not separated from the Capiz Central
to be sold apart does not deprive the vendor of such lien because
even though said machinery was sold together with the Central for
a lump sum, its proportional value in the sale may be
determined.virtualawlibrary virtual law library
In the case of McMicking vs. Tremoya (14 Phil., 252), cited by the
appellees, this court held that Holliday, Wise & Co. and no
preferential right to the proceeds of the sale of the goods
because they had not been able to prove that the goods selected
and claimed by them as sold on credit had not been paid
for.virtualawlibrary virtual law library
In the case of McMicking vs. Co Piaco (24 Phil., 439) also cited
by the appellees, the goods sold by the sheriff came partly from
one creditor and partly from another, and neither had been able to
identify which came from him; and due to the lack of
identification, this court held that neither of the claimants had
established his right of preference.virtualawlibrary virtual law
library
On the other hand, in the case of Rubert & Guamis vs. Luengo &
Martinez (8 Phil., 554), in which the sheriff sold under a writ of
execution issued in favor of Rubert and Guamis, for the lump sum
of P500 not only the cinematographic films to which the plaintiffs
had preferential right for the unpaid purchase price, but also the
cinematographic apparatus in which they had neither interest nor
right this court held that notwithstanding that conjunction, said
plaintiffs had preferential right to a proportional part of the
proceeds of the sale corresponding to the films, inasmuch as the
proportional value of the same in the sale could be determined and
deducted from the P500 received from the joint
sale.virtualawlibrary virtual law library
Briefly, then, since the machinery in question has not lost its
identity either before, during, or after its sale as an integral
part of the Capiz Central for the lump sum of P80,266 its
proportional value in the sale can be determined and the
appellants have a preferential right to said proportional value
for the unpaid price.virtualawlibrary virtual law library
(c) That by article 1922, paragraph No. 1, of the Civil Code and
the decisions of this court, interpreting it, as will as by the
Revised Civil Code of Louisiana and the decisions of the Supreme
Court and Circuit Court of Appeals of said State, the preference
granted the vendor to the personal property sold and in possession
of the purchaser for the price thereof, is superior to any other
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real right or lien, such as mortgage and
attachment.virtualawlibrary virtual law library
Separate Opinions
In the first place, we are doubtful if, under the facts, the
appellants can invoke in their favor a vendor's lien on the sugar
machinery. The said machinery was sold by Urquijo, Zuloaga y
Escubi to the Central Capiz for the manufacture of sugar.
Thereafter the Central Capiz sold all the property of the central
for a lump sum to another. The machinery thus became immobilized,
and the vendor was charged with notice of immobilization by
destination. Not only this, but the vendor now recognizing the
futility of attempting to identify and segregate the machinery,
only that he be allowed the value of the machinery in proportion
to the sum realized from the sale of all of the property of the
Central Capiz. Predicated on these facts, the decision of the
United States Supreme Court in the case of Valdes vs. Central
Altagracia ([1912], 225 U. S., 58), is in point. Citing Aubry and
Rau, Mr. Chief Justice White draws a distinction between
immobilization by the owner and immobilization by the lessee. Said
Mr. Chief Justice White: "The machinery placed by the corporation
in the plant, by the fact of its being so placed, lost its
character as a movable by destination." (See also Bank LeCompte
vs. Le Compte Cotton Oil Co. [1910], 125 La.,
844).virtualawlibrary virtual law library
For all of the above reasons, we vote for the affirmance of the
judgment.
(b) That the claim of the appellees Timoteo Unson and Clara
Lacson, Jose Altavas and Antonio Belo, by reason of the fact
that the attachments secured by them were declared valid and
held to constitute liens, are also preferential in character
and must be paid in full out of the available funds of the
insolvent estate after the extinction and payment of the
credit of the appellants Urquijo, Zuloaga and Escubi, and
with preference over any and all other ordinary unpaid
claims, following in the payment of the claims of the
appellees, the order of the dates of the respective
attachments.
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BARRERA, J.:
(2) Also by the appellee Bals, praying that there being still
two unsatisfied executions, one for the sum of P32,859.34 in
favor the land involved, Lot No. 2-a, be sold at public
auction; and (3) By Filipinas Colleges, Inc. praying that
because its properties, the house and some personal
properties, have been auctioned for P5,750.00 and P245.00
respectively in favor of the Timbang spouses who applied the
proceeds to the partial payment of the sum of P32,859.34
value of the land, Lot No. 2-a, it (Filipinas Colleges, Inc.)
be declared part owner of said lot to the extent of the total
amount realized from the execution sale of its
properties.1âwphïl.nêt
It is so ordered.
R E S O L U T I O N
(1) The vendor's lien, under Articles 2242 and 2243 of the new
Civil Code of the Philippines, can only become effective in the
event of insolvency of the vendee, which has not been proved to
exist in the instant case; and
Under the system of the Civil Code of the Philippine 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:
This explains the rule of Article 2243 of the new Civil Code that
—
While on 26 July 1951 the RFC did execute a deed selling back the
property to the erstwhile mortgagors and former owners Cruzados in
installments, subject to the condition (among others) that the
title to the property and its improvements "shall remain in the
name of the Corporation (RFC) until after said purchase price,
advances and interest shall have been fully paid", as of 27
September 1952, Cruzado had only paid a total of P1,360, and had
defaulted on six monthly amortizations; for which reason the RFC
rescinded the sale, and forfeited the payments made, in accordance
with the terms of the contract of 26 July 1951.
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Date of
Nature of Registration Amount of
Claimant Annotation of Credit Claim
1. Laguna Attachment October 10, P17,448.00
Federation writ in CFI 1958
of Facomas, Laguna Case
Inc. sc-152.
2. Valeriana Attachment October 13, 3,735.00
&Limaco de writ in CFI 1958
Almeda Laguna Case
SC-153
3. Cosmopolitan Attachment October 20, 12,650.00
Insurance writ in CFI 1958
Co., Inc. Manila Case
No. 38118
4. Florentino Attachment October 29, 26,787.50
Cayco and writ in CFI 1958
Jose Rizal Case No.
Fernandez 5238
Zorilla
5. Victoria Attachment May 23, 1960 12,500.00
Dimayuga writ in CFI
Manila Case
No. 3878
6. Jose Marfori Execution writ September 9,410.00
and Josefina CFI Cavite 26, 1960
Reyes Case No. 6480-
R
7. Pastor Attachment November 23, 25,552.00
Canillas writ in CFI 1960
Manila Case
No. 38872
8. Trinidad Execution writ November 29, 3,450.00
Calatin in CFI Laguna 1960
Case No. B-191
9. Rosauro Reg. of Deeds Not 9,000.00
Taningco and denied registered
Simplicio registration
Ramos of deed
mortgage;
registrability
became object
of suit in
Supreme Court,
L-15242.3
The above provision of the new Civil Code altered the set-up under
the old one5in that while previously the rule provided for was
priority of payment in regard to credits referring to the same
specific real property, now the general rule is pro rata.
Nonetheless, even under the new system, not all credits referring
to the same specific real property come under the pro rata rule.
Article 2249 itself, supra, expressly provides that taxes and
assessments upon the real property are to be paid first.
Similarly, the rule of pro rata does not apply to the credits
mentioned in subpar. (7) of Article 2242 of the Civil Code:
x x x x x x x x x
AQUINO, J.:ñé+.£ªwph!1
In that decision it was further held that the lien was superior to
the ACCFA's mortgage credit and that the company was entitled to
the material possession of the warehouse and ricemill building if
the ACCFA did not satisfy its claim. Moreover, the ACCFA was
ordered to pay the company the sum of P2,000 as expenses, damages
and attorney's fees plus costs (99-100 Record on Appeal).
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Lumber company's materialman's lien. — From October 11 to November
8, 1954 the Sta. Barbara Farmer's Cooperative Marketing
Association, Inc. (Facoma) purchased on credit from the Carried
Lumber Company lumber and materials which were used in the
construction of the Facoma's warehouse (Exh. H and H-1). The
company extended credit to the Facoma after having been informed
by the ACCFA's General Manager in a telegram dated October 23,
1954 that a loan of P27,200 had been approved for the construction
of the Facoma's warehouse (Exh. G and G-1).
On October 27, 1954, after the company had supplied the Facoma
with lumber and construction materials worth P4,999.40, they
executed a contract whereby it was agreed that the company would
sell lumber and construction materials to the Facoma with a value
not exceeding P27,200 (Exh. F-1).
On January 25, 1961 the ACCFA filed a third-party claim with the
sheriff. Its provincial director informed the sheriff that the
properties levied upon had already been sold to the ACCFA on
November 5, 1960. For that reason, it contended that the same
could not again be sold at public auction. It formally objected to
the proposed auction sale (Exh. 7; 79-81 Record on Appeal).
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Carried Lumber Company for the said lease rights, warehouse and
ricemill building (Exh. E).
After trial, the lower court held that the lumber company's
materialman's lien was superior to the ACCFA's mortgage lien
because the company's lien is sanctioned by paragraph 4 of article
2242 of the Civil Code, whereas the ACCFA's mortgage lien is
covered by paragraph 5 of the same article. The lower court
reasoned out that the company's lien "existed ahead" of the
ACCFA's mortgage lien. It noted that the ACCFA was aware of the
company's claim because the company sent to the ACCFA on October
23, 1954 a telegraphic inquiry as to the loan which the ACCFA
would extend to the Facoma for the construction of its warehouse
and the ACCFA confirmed in a telegraph answer that the loan would
be granted to the Facoma (Exh. G).
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ART. 2243. The claims or credits enumerated in the
preceding articles (2241 and 2242) shall be considered
as mortgages or pledges of real or personal property, or
liens within the purview of legal provisions governing
insolvency. Taxes mentioned in No. 1, article 2241, and
No. 1 article 2242, shall first be satisfied. (n)
The trial court erred in holding that the lumber company's lien
over the warehouse is superior to the ACCFA's mortgage lien. It
was mistaken in assuming that the enumeration of ten claims,
mortgages and liens in article 2242 creates an order of
preference. It is not correct to say that the materialman's
(mechanic's) lien or refectionary credit of the lumber company,
being listed as No. 4 in article 2242, is superior to the ACCFA's
mortgage credit which is listed as No. 5. The enumeration in
article 2242 is not an order of preference. That article lists the
credits which may concur with respect to specific real properties
and which would be satisfied pro rata according to article 2249.
The instant case is different from Luzon Lumber & Hardware Co. vs.
Quiambao, 94 Phil, 663, where the defendant spouses mortgaged
their three lots and the two buildings to be constructed thereon
to the Rehabilitation Finance Corporation (RFC) to secure a loan.
The mortgage was registered on September 13, 1948. The materials
used in the construction of the two buildings were bought on
credit by the defendant spouses from plaintiff lumber company
during the period from October, 1948 to March, 1949 or after the
registration of the mortgage. To cover the unpaid balance of the
price of the materials, plaintiff lumber company sued defendant
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spouses. The RFC was impleaded as a defendant after it had
foreclosed the mortgage and bought the lots and building as the
highest bidder at the auction sale.
It was held that the mortgage credit of the RFC was superior to
the refectionary credit (credito refacionario) held by the lumber
company. The RFC loan was used to defray the cost of constructing
the two buildings. By express stipulation, the mortgage included
all the improvements which would be constructed on the lots. The
mortgage lien over the buildings attached thereto as of the
recording of the mortgage and not as of the time of their
construction. (Under article 1923 of the old Code a refectionary
credit should be registered and, if not recorded, it is inferior
to a registered mortgage credit).
Should the parties within a period of thirty (30) days from the
finality of this judgment be unable to agree as to how their liens
over the Facoma warehouse should be satisfied, then the Warehouse
may be sold at public auction by the sheriff to the highest
bidder, and the net proceeds of the sale should be allocated pro
rata to the lumber company and the ACCFA.
The trial court should ascertain the net earnings or net rental
value of the warehouse from January 27, 1961, when the ACCFA was
placed in possession thereof, up to the time the carried Lumber
Company's lien is satisfied. Such net earnings or net rental value
should also be allocated pro rata to the lumber company and the
ACCFA. No pronouncement as to costs.
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