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Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No.

L-14938 January 28, 1961

MAGDALENA C. DE BARRETO, ET AL., plaintiffs-appellants, vs. JOSE G. VILLANUEVA, ET AL., defendants-appellees. Bausa, Ampil & Suarez for plaintiffs-appellants. Esteban Ocampo for defendants-appellees. GUTIERREZ DAVID, J.: On May 10, 1948, Rosario Cruzado, for herself and as administratix of the intestate estate of her deceased husband Pedro Cruzado in Special Proceedings No. 4959 of the Court of First Instance of Manila, obtained from the defunct Rehabilitation Finance Corporation (hereinafter referred to as the RFC a loan in the amount of P11,000.00. To secure payment thereof, she mortgaged the land then covered by Transfer Certificate of Title No. 61358 issued in her name and that of her deceased. husband. As she failed to pay certain installments on the loan, the mortgage was foreclosed and the RFC acquired the property for P11,000.00, subject to her rights as mortgagor to re-purchase the same. On July 26, 1951, upon her application, the land was sold back to her conditionally for the amount of P14,269.03, payable in seven years. About two years thereafter, or on February 13, 1953 Rosario Cruzado, as guardian of her minor children in Special Proceedings No. 14198 of the Court of First Instance of Manila, was authorized by the court, to sell with the previous consent of the RFC the land in question together with the improvements thereon for a sum not less than P19,000. Pursuant to such authority and with the consent of the RFC, she sold to Pura L. Villanueva for P19,000.00 "all their rights, interest,' title and dominion and over the herein described parcel of land together with the existing improvements thereon, including one use and an annex thereon; free from all charges and encumbrances, , with the exception of the sum of P11,009.52, is stipulated interest thereon, which the vendor, is still presently obligated to the RFC and which the vendee herein now assumes to pay to the RFC under the same terms and conditions specified in that deed of sale dated July 26, 1951." Having paid in advance the sum of P500.00, Pura L. Villanueva, the vendee, in consideration of the aforesaid sale, executed in favor of the vendor Rosario Cruzado a promissory note dated March 9, 1953, undertaking to pay the balance of P17,500.00 in monthly installments. On April 22, 1953, she made an additional payment of P5,500.00 on the promissory note. She was, subsequently, able to secure in her name Transfer Certificate of Title No. 32526 covering the house and lot above referred to, and on July 10, 1953, she mortgaged the said property to Magdalena C. Barretto as security for a loan the amount of P30,000.00. As said Pura L. Villanueva had failed to pay the remaining installments on the unpaid balance of P12,000.00 her promissory note for the sale of the property in question, a complaint for the recovery of the same from her and her husband was filed on September 21, 1963 by Rosario Cruzado in her own right and in her capacity as judicial guardian of her minor children. Pending trial of the case, a lien was constituted upon the property in the nature of a levy in attachment in favor of the Cruzados said lien being annotated at the back of Transfer Certificate of Title No. 32526. After trial, decision was rendered ordering Pura Villanueva and her husband, jointly and severally, to pay Rosario Cruzado the sum of P12,000.00, with legal interest thereon from the date of the filing of the complaint until fully paid plus the sum of P1,500.00 as attorney's fees. Pura Villanueva having, likewise, failed to pay her indebtedness of P30,000.00 to Magdalena C. Barretto, the latter, jointly with her husband, instituted against the Villanueva spouses an action for foreclosure of mortgage, impleading Rosario Cruzado and her children as parties defendants. On November 11, 1956, decision was rendered in the case absolving the Cruzados from the complaint and sentencing the Villanuevas to pay the Barrettos, jointly and severally, the sum of P30,000.00, with interest thereon at the rate of 12% per annum from January 11, 1954 plus the sum of P4,000.00 as attorney's fees. Upon the finality of this decision, the Barrettos filed a motion for the issuance of a writ of execution which was granted by the lower court on July 31, 1958. On August 14, 1958, the Cruzados filed their "Vendor's Lien" in the amount of P12,000.00, plus legal interest, over the real property subject of the foreclosure suit, the said amount representing the unpaid balance of the purchase price of the said property. Giving due course to the line, the court on August 18, 1958 ordered the

same annotated in Transfer Certificate of Title No. 32526 of the Registry of Deeds of Manila, decreeing that should the realty in question be sold at public auction in the foreclosure proceedings, the Cruzados shall be credited with their pro-rata share in the proceeds thereof, "pursuant to the provision of articles 2248 and 2249 of the new Civil Code in relation to Article 2242, paragraph 2 of the same Code." The Barrettos filed a motion for reconsideration on September 12, 1958, but on that same date, the sheriff of Manila, acting in pursuance of the order of the court granting the writ of execution, sold at public auction the property in question. As highest bidder, the Barrettos themselves acquired the properties for the sum of P49,000.00. On October 4, 1958, 'the Court of First Instance issued an order confirming the aforesaid sale and directing the Register of Deeds of the City of Manila to issue to the Barrettos the corresponding certificate of title, subject, however, to the order of August 18, 1958 concerning,. the vendor's lien. On the same date, the motion of the Barettos seeking reconsideration of the order of the court giving due course to the said vendor's lien was denied. From this last order, the Barretto spouses interposed the present appeal. The appeal is devoid of merit. In claiming that the decision of the Court, of First Instance of Manila in Civil Case No. 20075 . awarding the amount of P12,000.00 in favor of Rosario Cruzado and her minor children . cannot constitute a basis for the vendor's lien filed by the appellee Rosario Cruzado, appellants allege that the action in said civil case was merely to recover the balance of a promissory note. But while, apparently, the action was to recover the remaining obligation of promissor Pura Villanueva on the note, the fact remains that Rosario P. Cruzado as guardian of her minor children, was an unpaid vendor., of the realty in question, and the promissory note, was, precisely, for the unpaid balance of the price of the property bought by, said Pura Villanueva. Article 2242 of the new Civil, Code enumerates the claims, mortgage 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 assessment 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. The appellants, however, argue that inasmuch as the unpaid vendor's lien in this case was not registered, it should not prejudice the said appellants' registered rights over the property. There is nothing to this argument. Note must be taken of the fact that article 2242 of the new Civil Code enumerating the preferred claims, mortgages and liens on immovables, specifically requires that . unlike the unpaid price of real property sold . mortgage credits, in order to be given preference, should be recorded in the Registry of Property. If the legislative intent was to impose the same requirement in the case of the vendor's lien, or the unpaid price of real property sold, the lawmakers could have easily inserted the same qualification which now modifies the mortgage credits. The law, however, does not make any distinction between registered and unregistered vendor's lien, which only goes to show that any lien of that kind enjoys the preferred credit status. Appellants also argue that to give the unrecorded vendor's lien the same standing as the registered mortgage credit would be to nullify the principle in land registration system that prior unrecorded interests cannot prejudice persons who subsequently acquire interests over the same property. The Land Registration Act itself, however, respects without reserve or qualification the paramount rights of lien holders on real property. Thus, section 70 of that Act provides that . Registered land, and ownership therein shall in all respects be subject to the same burdens and incidents attached by law to unregistered land. Nothing contained in this Act shall in any way be construed to relieve registered land or the owners thereof from any rights incident to the relation of husband and wife, or from liability to attachment on mesne process or levy, on execution, or from liability to any lien of any description established by law on land and the buildings thereon, or the

interest of the owners of such land or buildings, or to change the laws of descent, or the rights of partition between co-owners, joint tenants and other co-tenants or the right to take the same by eminent domain, or to relieve such land from liability to be appropriated in any lawful manner for the payment of debts, or to change or affect in any other way any other rights or liabilities created by law and applicable to unregistered land, except as otherwise expressly provided in this Act or in the amendments thereof, (Emphasis supplied) 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 an insolvency. Premises considered, the order appealed from is hereby affirmed. Costs against the appellants. Bengzon, Padilla, Bautista Angelo, Labrador, Paredes and Dizon, JJ., concur. Concepcion, Reyes, J.B.L. and Barrera, JJ., concur in the result.

RESOLUTION ON MOTION TO RECONSIDER December 29, 1962 REYES, J.B.L., J.: Appellants, spouses Barretto, have filed a motion vigorously urging, for reason to be discussed in the course of this resolution, that our decision of 28 January 1961 be reconsidered and set aside, and a new one entered declaring that their right as mortgagees remain superior to the unrecorded claim of herein appellee for the balance of the purchase price of her rights, title, and interests in the mortgaged property. It will be recalled that, with Court authority, Rosario Cruzado sold all her right, title, and interest and that of her children in the house and lot herein involved to Pura I. Villanueva for P19,000.00. The purchaser paid Pl,500 in advance, and executed a promissory note for the balance of P17,506.00. 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. Barretto, 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 Pl2,000.00, 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 rata from the proceeds. Our original decision affirmed this order of the Court of First Instance of Manila. Appellants insist that: (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 . (2) That the appellee Cruzado is not a true vendor of the foreclosed property. We have given protracted and mature consideration to the facts and law of this case, and have reached the conclusion that our original decision must be reconsidered and set aside, for the following reasons: 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 their, as have credits outstanding) must necessarily be convened, and the 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 proceedings where the claims of all the preferred creditors may be bindingly adjudicated, such as insolvency, the settlement of decedents 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 . . . (Emphasis supplied), And the rule is further clarified in he 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." (Emphasis 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. In the absence of insolvency proceedings (or other equivalent general liquidation of the debtor's estate), the conflict between the parties now before us must be decided pursuant to the well established principle concerning registered lands; that a purchaser in good faith and for value (as the appellant concededly is) takes registered property free from liens and encumbrances other than statutory liens and those recorded in the certificate of title. There being no insolvency or liquidation, the claim of the appellee, as unpaid vendor, did not require the character and rank of a statutory lien co-equal to the mortgagee's recorded encumbrance, and must remain subordinate to the latter. We are understandably loathed (absent a clear precept of law so commanding) to adopt a rule that would undermine the faith and credit to be accorded to registered Torrens titles and nullify the beneficient objectives sought to be obtained by the Land Registration Act. No argument is needed to stress that if a person dealing with registered land were to be held to take it in every instance subject to all the fourteen preferred claims enumerate in Article 2242 of the new Civil Code, even if the existence and import thereof can not be ascertained from the records, all confidence in Torrens titles would be destroyed, and credit transactions on the faith of such titles would be hampered, if not prevented, with incalculable results. Loans on real estate security would become aleatory and risky transactions, for no, prospective lender could accurately estimate the hidden liens on the property offered as security, unless he indulged in complicated, tedious investigations, . The logical result might well be a contraction of credit unforeseeable proportions that could lead to economic disaster.

Upon the other hand, it does not appear excessively burdensome to require the privileged creditors to cause their claims to be recorded in the books of the Register of deeds should they desire to protect their rights even outside of insolvency or liquidation proceedings. B. The close study of the facts disclosed by the records lasts strong doubt on the proposition that appellees Cruzados should be regarded as unpaid vendors of the property( land, buildings, and improvements ) involved in the case at bar so as to be entitled to preference under Article 2242. The record on appeal, specially the final decision of the Court of First Instance of Manila in the suit of the ,Cruzados against Villanueva, clearly establishes that after her husband's death, and with due court authority, Rosario Cruzado, for herself and as administratrix of her husband's state, mortgaged the property to the Rehabilitation Finance Corporation (RFC) to secure payment of a loan of P11,000, installments, but that the debtor failed to pay some of the installments; wherefore the RFC, on 24 August 1949, foreclosed the mortgage, and acquired the property, subject to the debtor's right to redeem or repurchase the said property; and that on 25 September 1950, the RFC consolidated its ownership, and the certificate of title of the Cruzados was cancelled and a new certificate issued in the name of the RFC. 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 Corporation (RFC) until after said purchase price, advances and interests 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. It was only on 10 March 1953 that the Cruzados sold to Pura L. Villanueva all "their rights, title, interest and dominion on and over" the property, lot, house, and improvements for P19,000.00, the buyer undertaking to assume payment of the obligation to the RFC, and by resolution of 30 April 1953, the RFC approved "the transfer of the rights and interest of Rosario P. Cruzado and her children in their property herein above-described in favor of Pura L. Villanueva"; and on 7 May 1953 the RFC executed a deed of absolute sale of the property to said party, who had fully paid the price of P14,269.03. Thereupon, the spouses Villanueva obtained a new Transfer Certificate of Title No. 32526 in their name. On 10 July 1953, the Villanuevas mortgaged the property to the spouses Barretto, appellants herein. It is clear from the facts above-stated that ownership of the property had passed to the Rehabilitation Finance Corporation since 1950, when it consolidated its purchase at the foreclosure sale and obtained a certificate of title in its corporate name. The subsequent contract of resale in favor of the Cruzados did not revest ownership in them, since they failed to comply with its terms and conditions, and the contract itself provided that the title should remain in the name of the RFC until the price was fully paid. Therefore, when after defaulting in their payments due under the resale contract with the RFC the appellants Cruzados sold to Villanueva "their rights, title, interest and dominion" to the property, they merely assigned whatever rights or claims they might still have thereto; the ownership of the property rested with the RFC. The sale from Cruzado to Villanueva, therefore, was not so much a sale of the land and its improvements as it was a quit-claim deed in favor of Villanueva. In law, the operative sale was that from the RFC to the latter, and it was the RFC that should be regarded as the true vendor of the property. At the most, the Cruzados transferred to Villanueva an option to acquire the property, but not the property itself, and their credit, therefore, can not legally constitute a vendor's lien on the corpus of that property that should stand on an equal footing with the mortgaged credit held by appellant Barretto. In view of the foregoing, the previous decision of this Court, promulgated on 28 January 1961, is hereby reconsidered and set aside, and a new one entered reversing the judgment appealed from and declaring the appellants Barretto entitled to full satisfaction of their mortgaged credit out of the proceeds of the foreclosure sale in the hands of the Sheriff of the City of Manila. No costs. Padilla, Bautista Angelo, Concepcion, Barrera, Paredes, Regala and Makalintal, JJ., concur. Bengzon, Labrador and Dizon, JJ., took no part.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION

G.R. No. 123240 August 11, 1997 STATE INVESTMENT HOUSE, INC., petitioner, vs. THE COURT OF APPEALS, the SECURITIES & EXCHANGE COMMISSION and PHILIPPINE BLOOMING MILLS, CO., INC., respondents.

MELO, J.: In a minute resolution we issued on February 5, 1996, the petition at bench was denied due course for its failure to show that respondent court committed any reversible error (p. 114, Rollo). On March 1, 1996, petitioner filed a motion for reconsideration imputing upon this Court the principal error of having stated that the doctrine in PCIB vs. Court of Appeals (172 SCRA 436 [1989]), had already been abrogated by the rulings of this Court in the cases of Alemar's Sibal & Sons vs. Elbinias (186 SCRA 94 [1990]; BF Homes Ins. vs. Court of Appeals, 190 SCRA 262 [1990]; Araneta vs. Court of Appeals, 211 SCRA 390 [1992]; and RCBC vs. Court of Appeals, 213 SCRA 830 [1992]), where we ruled that whenever a distressed corporation asks the Securities and Exchange Commission (SEC) for rehabilitation and suspension of payments, preferred creditors may no longer assert such preference, but shall stand on equal footing with other creditors. Petitioner points out two main matters for consideration: (1) that the above-cited cases of Alemar's, BF Homes, Araneta, and BPI vs. Court of Appeals (229 SCRA 223 [1994]) all involved unsecured creditors and are, therefore, not relevant to the resolution of this case, and (2) that of the above-cited cases where the Court ruled contrary to PCIB, thereby abandoning the ruling in said case, only the RCBC Case could have complied with the Constitutional requirement that no doctrine or principle of law rendered en banc or in division may be modified or reversed except by the Court sitting en banc (Par. 3, Section 4, Article VIII, 1987 Constitution), because only the RCBC Case was rendered by the Court en banc. Nonetheless, petitioner submits that the judgment in RCBC has not yet attained finality as the motion for reconsideration therein up to the present time, has remained pending and unresolved, and could, therefore, not be relied upon in the instant case as a precedent. After review of the arguments presented in the motion for reconsideration, we find no cogent reason to reverse our previous dismissal of the instant case. However, if only to clarify matters for the guidance of the bench and the bar, we shall discuss the applicable law on the matter. To put the case at hand in its proper factual perspective, it is worthy to note that what petitioner filed with the SEC in the pending action for settlement of claims of the various creditors of respondent Philippine Blooming Mills Co., Inc. (PBM) was a "Motion to Declare and Confirm the Highest Preference of Movant's First Mortgage Lien". The SEC hearing officer denied said motion. Petitioner appealed this denial to the SEC en banc, which dismissed the appeal. Then, on appeal before respondent court, the Court of Appeals affirmed the SEC decision. Finally, finding no reversible error committed by respondent Court of Appeals, we denied due course to the instant petition. Now, the present motion for reconsideration. Stated plainly, the issue squarely raised in the main petition is whether or not petitioner SIHI, as mortgagee of respondent PBM, may be declared to have highest preference over specific property subject of the mortgage, despite the pendency of rehabilitation/receivership proceedings pending before the SEC. Under the factual circumstances obtaining in the instant case, as well as the applicable provisions of the law, the Court is duty bound to resolve this issue in negative.

In any rehabilitation/receivership proceedings where claims of several creditors shall have to be resolved, the provisions of the Title XIX of the Civil Code "Concurrence and Preference of Credits" applies. In the present case where a mortgaged piece of realty is involved, the following relevant articles govern, to wit: Art. 2242. With reference to specific immovable property and real lights of the debtor, the following claims, mortgages and liens shall be preferred, and shall constitute an encumbrance on the immovable or real light: (1) Taxes due upon the land or building; (2) For unpaid price of real property sold, upon the immovable sold; (3) Claims of laborers, mason, mechanics and other workmen, as well as architects, engineers and contractors, engaged in the construction, reconstitution or repair of buildings, canals or other works, upon said buildings, canals or other works; (4) Claims of furnishers of materials used in the construction, reconstruction, or repair of buildings, canals or other works, upon said buildings, canals or other works; (5) Mortgaged credits recorded in the Registry of Property, upon the real estate mortgaged; (6) Expenses for the preservation or improvement of real property when the law authorized reimbursement, upon the immovable preserved or improved; (7) Credits annotated in the Registry of Property in virtue of a judicial order, by attachment or executions, upon the property affected, and only as to the latter credits; (8) Claims of co-heirs for warranty in the partition of an immovable among them, upon the real property thus divided; (9) Claims of donors of real property for pecuniary charges or other conditions imposed upon the donee, upon the immovable donated; (10) Credits of insurers, upon the property insured, for the insurance premium for two years. Art. 2243. The claims of credits enumerated in the two preceding articles shall be considered as mortgagees 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. It may easily be seen that petitioner's motion to declare and confirm the highest preference of it first mortgage lien is at the very least premature. There may or may not exist claims enumerated in the above-cited Article 2242 which, by virtue of Article 2243, shall be considered as mortgagees of the specific property involved. At best this issue should be resolved in the light of the rehabilitation plan approved by the SEC on January 3, 1990 which includes the schedule of payment. Verily, this rehabilitation plan is not included among the matters submitted for review in the present petition. On this score alone, without having to refer to any of the abovecited decisions yet, the instant petition may already be dismissed. We shall reserve our ruling on whether or not petitioner may be adjudged to be a preferred creditor at the proper opportunity when the entire judgment of the SEC shall be before us for review. Petitioner cannot compel us to blindly adhere to the case of Philippine Commercial International Bank vs. Court of Appeals (172 SCRA 436 [1989]), which relied upon the case of Chartered Bank vs. Imperial and National Bank (48 Phil. 931 [1928]). It is significant to note that Chartered Bank was decided before the passage of Republic Act No. 386, the Civil Code of the Philippines (which took effect on August 30, 1950), when the abovecited Articles 2242 and 2243 or any similar provisions were not yet operative. However, if only to appease petitioner on its insistence that the instant case should be consolidated with the RCBC as these two cases involve similar facts and issues, we rule to deny such player first, because the decision

in RCBC had long been rendered, and second, the factual premises in RCBC are not on all fours with the instant case. It is worthy to stress that RCBC was precipitated by the Rizal provincial sheriff's refusal to execute a certificate of sale of the property sold on public auction before any writ of execution against the conduct of such public auction had been issued. The regional trial court before which the action for mandamus was filed by RCBC granted the petition, thereby ordering respondent provincial sheriff to execute and deliver to petitioner the Certificate of Auction Sale of January 29, 1985, involving the property sold therein. . . (RCBC vs. IAC, 213 SCRA 830, at pp. 833-834). Aggrieved thereby, BF Homes filed an original complaint with then Intermediate Appellate Court (IAC) for the annulment of this judgment of the regional trial court. This action for annulment before the IAC prospered and the Register of Deeds of Pasay City was accordingly ordered to suspend the issuance to the mortgagee-purchaser RCBC of the owner's copies of the new land titles until the matter shall have been resolved by the Securities and Exchange Commission in the rehabilitation case before it. It was this judgment of the IAC which was the subject of the aforecited RCBC Case. The issues involved in the RCBC Case are, therefore, essentially different from the issues in the instant case. There, the question of retroactive application of the writ of injunction to the foreclosure proceedings was involved. Also, the propriety of the IAC's disposition of the original action for annulment of judgment which is the proper subject of the petition in the RCBC Case necessarily involves issues concerning the requisite elements of a void judgment, such as lack of jurisdiction and/or fraud, accident, mistake or excusable negligence. In the present petition, the foreclosure sale of the mortgaged property was declared by this Court in G.R. No. 87053 to be totally null and void, and petitioner SIHI's claim was accordingly referred to the SEC for determination of the preferences or priorities under the law in the settlement of claims of firms under receivership or liquidation. Hence, unlike in RCBC, in the present case there are no longer any previous foreclosure proceedings to speak of. Also, in the present petition, the factual consideration in the issuance of the pertinent rehabilitation plan where SIHI's claim had been reportedly included in the schedule of payment finds relevance. This was not true in the RCBC Case. As seen in the foregoing disquisition, the resolution of the motion for reconsideration in the RCBC Case is not a crucial matter in the present case. WHEREFORE, premises considered, petitioner's motion for consolidation is denied and its motion for reconsideration is hereby likewise DENIED, with finality. SO ORDERED. Narvasa, C.J., Davide, Jr., Francisco and Panganiban, JJ., concur.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 73884 September 24, 1987 SPOUSES ROMEO LIPANA and MILAGROS LIPANA, petitioners, vs. DEVELOPMENT BANK OF RIZAL, respondent.

PARAS, J.: This is a petition for review on certiorari of the August 30, 1985 Order of the Regional Trial Court of Pasig denying petitioners' Motion to Lift Stay of Execution in Civil Case No. 50802. During the period from 1982 to January, 1984, herein petitioners opened and maintained both time and savings deposits with the herein respondent Development Bank of Rizal all in the aggregate amount of P939,737.32. When some of the Time Deposit Certificates matured, petitioners were not able to cash them but instead were issued a manager's check which was dishonored upon presentment. Demands for the payment of both time and savings deposits having failed, on March 14, 1984, petitioners filed with the Regional Trial Court of Pasig a Complaint With Prayer For Issuance of a Writ of Preliminary Attachment for collection of a sum of money with damages, docketed therein as Civil Case No. 50802 (Record, pp. 3-11). Respondent Judge, in an Order dated March 19, 1984 (Ibid., p. 19-21), ordered the issuance of a writ of attachment, and pursuant thereto, a writ of attachment dated March 20, 1984 was issued in favor of the petitioners (Ibid., p. 33). On June 27, 1984, respondent bank filed its Answer (Ibid., p. 58-61). On July 23, 1984, petitioners filed a Motion For Judgment on the Pleadings (Ibid., pp. 68-73), opposed by respondent bank (Ibid., pp. 74-76), but respondent judge, in a Decision dated November 13, 1984, rendered judgment in favor of petitioners. The dispositive portion of the said Decision, reads: IN VIEW OF ALL THE FOREGOING, the Court renders judgment in favor of the plaintiffs, ordering the defendant to pay the total sum of P939,737.32 plus stipulated interest; the sum equivalent to 15% of the amount due as attorney's fees; and costs of suit. The counterclaim is dismissed, for lack of merit. Meanwhile, on August 10, 1984, the Monetary Board, in its Resolution No. 1009, finding that the condition of respondent bank was one of insolvency and that its continuance in business would result in probable loss to its depositors and creditors, decided to place it under receivership (Rollo, p. 84). On December 7, 1984, petitioners filed a Motion for Execution Pending Appeal (Rcd., pp. 91-93), which was opposed by respondent bank (Ibid., p. 94-96). On December 27, 1984, petitioners filed their Reply to the opposition (Ibid., pp. 98-101), to which respondent bank filed its Rejoinder on January 1, 1985 (Ibid., pp. 102105).

In an order dated January 29, 1985, respondent judge ordered the issuance of a writ of execution (Ibid., p. 106). On February 11, 1985, respondent bank filed a Motion for Reconsideration of order dated January 29, 1985 and to Stay Writ of Execution (Ibid., pp. 109-110), opposed by petitioners (Ibid., p. 111) but in an Order dated March 6, 1985, respondent judge stayed the execution (Ibid., p. 113). On August 7, 1985, petitioners filed a Motion to Lift Stay of Execution (Ibid., pp. 119-122), opposed by respondent bank (Ibid., pp. 123-127), and in an Order dated August 30, 1985, respondent judge denied the said motion (Ibid., p. 130). Hence, the instant petition (Rollo, pp. 8-17). The Second Division of the Court, in a resolution dated May 5, 1986, resolved to require the respondent to comment (Ibid., p. 52). In compliance therewith, respondent bank filed its Comment on June 9, 1986 (Ibid., pp. 53-58). The petition was given due course in a resolution dated August 11, 1986, and the parties were required to file their respective memoranda (Ibid., p. 61). In compliance therewith, petitioners filed their Memorandum on September 19, 1986 (Ibid., p. 63-75), while respondent bank filed its Memorandum on September 25, 1986 (Ibid., pp. 76-83), and the case was considered submitted for deliberation in the Resolution dated October 8, 1986 (Ibid., p. 88) Petitioners raised the following issues: 1. Respondent judge cannot legally stay execution of judgement that has already become final and executory; 2. The placing under receivership by the Central Bank of the respondent bank, long after the complaint was filed removed it from the application of the doctrine in Re: Central Bank vs. Morfe (63 SCRA 113); 3. The filing of the complaint for a sum of money With damages against respondent bank and the subsequent attachment of its property in Pasig, Metro Manila long before the receivership took place render inapplicable the doctrine laid down by this Honorable Supreme Court in the said Morfe case; 4. The indefinite stay of execution without a ruling as to how long it will last, amounts to deprivation of petitioners of their property without due process of law. The instant petition is without merit. I. The main issue in this case is whether or not respondent judge could legally stay execution of judgment that has already become final and executory. The answer is in the affirmative. The rule that once a decision becomes final and executory, it is the ministerial duty of the court to order its execution, admits of certain exceptions as in cases of special and exceptional nature where it becomes imperative in the higher interest of justice to direct the suspension of its execution (Vecine vs. Geronimo, 59 O.G. 579); whenever it is necessary to accomplish the aims of justice (Pascual vs. Tan, 85 Phil. 164); or when certain facts and circumstances transpired after the judgment became final which could render the execution of the judgment unjust (Cabrias vs. Adil, 135 SCRA 354). In the instant case, the stay of the execution of judgment is warranted by the fact that respondent bank was placed under receivership. To execute the judgment would unduly deplete the assets of respondent bank to the obvious prejudice of other depositors and creditors, since, as aptly stated in Central Bank of the Philippines vs. Morfe (63 SCRA 114), after the Monetary Board has declared that a bank is insolvent and has ordered it to cease operations, the Board becomes the trustee of its assets for the equal benefit of all the creditors, including depositors. The assets of the insolvent banking institution are held in trust for the equal benefit of all creditors,

and after its insolvency, one cannot obtain an advantage or a preference over another by an attachment, execution or otherwise. Moreover, it will be noted that respondent bank was placed under receivership on August 10, 1984, and the Decision of respondent judge is dated November 13, 1984. Accordingly, in line with the ruling in the aforesaid Morfe case, which reads: The circumstance that the Fidelity Savings Bank, having stopped operations since February 19, 1969, was forbidden to do business (and that ban would include the payment of time deposits) implies that suits for the payment of such deposits were prohibited. What was directly prohibited should not be encompassed indirectly. ... petitioners 'complaint should have been dismissed. II. It is the contention of petitioners, however, that the placing under receivership of respondent bank long after the filing of the complaint removed it from the doctrine in the said Morfe case. This contention is untenable. The time of the filing of the complaint is immaterial. It is the execution that win obviously prejudice the other depositors and creditors. Moreover, as stated in the said Morfe case, the effect of the judgment is only to fix the amount of the debt, and not give priority over other depositors and creditors. III. Anent the contention of petitioners that the attachment of one of the properties of respondent bank was erased by virtue of the delayed receivership is to expand the power of the Central Bank, Suffice it to say that in the case of Central Bank of the Philippines, et al. vs. Court of Appeals, et al. (Resolution of this Court dated September 17, 1984 in G.R. No. 33302), wherein the original plaintiff Algue Inc. was able to obtain a writ of preliminary attachment against the original defendant Island Savings Bank, this Court refused to recognize any preference resulting from such attachment and ruled that after a declaration of insolvency, the remedy of the depositors is to intervene in the liquidation proceedings. IV. It is also contended by the petitioners that the indefinite stay of execution without ruling as to how long it will last, amounts to a deprivation of their property without due process of law. Said contention, likewise, is devoid of merit. Apart from the fact that the stay of execution is not only in accordance with law but is also supported by jurisprudence, such staying of execution is not without a time limit. In fact, the Monetary Board, in its resolution No. 4-33 approved the liquidation of respondent bank on April 26, 1985 and ordered, among others, the filing of a petition in the Regional Trial Court praying for assistance of said court in the liquidation of the bank. (Rollo, p. 81). The staying of the writ of execution will be lifted after approval by the liquidation court of the project of distribution, and the liquidator or his deputy will authorize payments to all claimants concerned in accordance with the approved project of distribution. PREMISES CONSIDERED, the instant petition is hereby DISMISSED. SO ORDERED. Yap (Chairman), Melencio-Herrera, Padilla and Sarmiento, JJ., concur.

476 SUPREME COURT REPORTS ANNOTATED Philippine Savings Bank vs. Lantin No. L-33929. September 2, 1983.* PHILIPPINE SAVINGS BANK, petitioner, vs. HON. GREGORIO T. LANTIN, Presiding Judge, Court of First Instance of Manila, Branch VII, and CANDIDO RAMOS, respondents. Obligations; Loans; When the law on concurrence of credits becomes material.Concurrence of credits occurs when the same specific property of the debtor or all of his property is subjected to the claims of several creditors. The concurrence of credits raises no questions of consequence where the value of the property or the value of all assets of the debtor is sufficient to pay in full all the creditors. However, it becomes material when said assets are insufficient for then some creditors of necessity will not be paid or some creditors will not obtain the full satisfaction of their claims. In this situation, the question of preference will then arise, that is to say who of the creditors will be paid ahead of the others. (Caguioa, Comments and Cases on Civil Law, 1970 ed., Vol. VI, p. 472.) Same; Same; Taxation; Only taxes and realty assessments enjoy absolute preference over any other type of obligation.Under the system established by Article 2249 of the Civil Code of the Philippines, only taxes and assessments upon immovable property _______________ * FIRST DIVISION. 477 VOL. 124, SEPTEMBER 2, 1983 477 Philippine Savings Bank vs. Lantin enjoy absolute preference. All the remaining specified classes of preferred creditors under Article 2242 enjoy no priority among themselves. Their credits shall be satisfied pro-rata, i.e., in proportion to the amount of the respective credits. Same; Same; The law on the concurrence of credits cannot be applied in a mere action to collect from the obligor. There must be an insolvency or other type of in rem liquidation proceeding of obligors estate.The proceedings in the court below do not partake of the nature of insolvency proceedings or settlement of a decedents estate. The action filed by Ramos was only to collect the unpaid cost of the construction of the duplex apartment. It is far from being a general liquidation of the estate of the Tabligan spouses. Same; Same; Same.Insolvency proceedings and settlement of a decedents estate are both proceedings in rem which are binding against the whole world. All persons having interest in the subject matter involved, whether they were notified or not, are equally bound. Consequently, a liquidation of similar import or other equivalent general liquidation must also necessarily be a proceeding in rem so that all interested persons whether known to the parties or not may be bound by such proceeding. Same; Same; Same.In the case at bar, although the lower court found that there were no known creditors other than the plaintiff and the defendant herein, this can not be conclusive. It will not bar other creditors in the event they show up and present their claims against the petitioner bank, claiming that they also have preferred liens against the property involved. Consequently, Transfer Certificate of Title No. 101864 issued in favor of the bank which is supposed to be indefeasible would remain constantly unstable and questionable. Such could not have been the intention of Article 2243 of the Civil Code although it considers claims and credits under Article 2242 as statutory liens. Neither does the De Barretto case sanction such instability.

Same; Sales; A purchaser in good faith takes a registered land free from liens not therein annotated.Since the action filed by the private respondent is not one which can be considered as equivalent general liquidation having the same import as an insolvency or settlement of the decedents estate proceeding, the well established principle must be applied that a purchaser in good faith and for value takes registered land free from liens and encumbrances other than 478 478 SUPREME COURT REPORTS ANNOTATED Philippine Savings Bank vs. Lantin statutory liens and those recorded in the Certificate of Title. It is an admitted fact that at the time the deeds of real estate mortgage in favor of the petitioner bank were constituted, the transfer certificate of title of the spouses Tabligan was free from any recorded alien and encumbrances, so that the only registered liens in the title were deeds in favor of the petitioner. PETITION for review of the decision of the Court of First Instance of Manila, Br. VII. Lantin, J. The facts are stated in the opinion of the Court. Jose Diokno for petitioner. Romeo C. Carlos for private respondent. GUTIERREZ, JR., J.: This is a petition for review of the decision of the Court of First Instance of Manila, Branch VII, presided over by respondent Judge Gregorio T. Lantin, in Civil Case No. 79914 entitled Candido Ramos v. Philippine Savings Bank and of the order denying a motion for its reconsideration. The dispositive portion of the decision reads: WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant ordering the defendant to pay the plaintiff the sum of P15,000.00 as his pro-rata share in the value of the duplex-apartment house which was built by the plaintiff for the spouses Filomeno Tabligan and Socorro Espiritu, which is now registered in the name of the defendant under Transfer Certificate of Title No. 101864 issued by the Register of Deeds of the City of Manila, on August 6, 1970, with legal interest from the date of the filing of the complaint until fully paid; to pay the sum of P500.00 as attorneys fees; and to pay the costs. The counterclaim interposed by the defendant is hereby dismissed. Involved in this case is a duplex-apartment house on a lot covered by TCT No. 86195 situated at San Diego Street, Sampaloc, Manila, and owned by the spouses Filomeno and Socorro Tabligan. The duplex-apartment house was built for the spouses by 479 VOL. 124, SEPTEMBER 2, 1983 479 Philippine Savings Bank vs. Lantin private respondent Candido Ramos, a duly licensed architect and building contractor, at a total cost of P32,927.00. The spouses paid private respondent the sum of P7,139.00 only. Hence, the latter used his own money, P25,788.50 in all, to finish the construction of the duplex-apartment. Meanwhile, on December 16, 1966, February 1, 1967, and February 28, 1967, the spouses Tabligan obtained from petitioner Philippine Savings Bank three (3) loans in the total amount of P35,000.00, the purpose of which was to complete the construction of the duplex-apartment. To secure payment of the loans, the spouses

executed in favor of the petitioner three (3) promissory notes and three (3) deeds of real estate mortgages over the property subject matter of this litigation. On December 19, 1966, the petitioner registered the December 16, 1966 deed of real estate mortgage with the Register of Deeds of Manila. The subsequent mortgages of February 1, 1967, and February 28, 1967, were registered with the Register of Deeds of Manila on February 2, 1967 and March 1, 1967, respectively. At the time of the registration of these mortgages, Transfer Certificate of Title No. 86195 was free from all liens and encumbrances. The spouses failed to pay their monthly amortizations. As a result thereof, the petitioner bank foreclosed the mortgages, and at the public auction held on July 23, 1969, was the highest bidder. On August 5, 1969, the petitioner bank registered the certificate of sale issued in its favor. On August 9, 1970, the bank consolidated its ownership over the property in question, and Transfer Certificate of Title No. 101864 was issued by the Register of Deeds of Manila in the name of the petitioner bank. Upon the other hand, the private respondent filed an action against the spouses to collect the unpaid cost of the construction of the duplex-apartment before the Court of First Instance of Manila, Branch I, which case was docketed therein as Civil Case No. 69228. During its pendency, the private respondent succeeded in obtaining the issuance of a writ of preliminary attachment, and pursuant thereto, had the property in question attached. Consequently, a notice of 480 480 SUPREME COURT REPORTS ANNOTATED Philippine Savings Bank vs. Lantin adverse claim was annotated at the back of Transfer Certificate of Title No. 86195. On August 26, 1968, a decision was rendered in Civil Case No. 69228 in favor of the private respondent and against the spouses. A writ of execution was accordingly issued but was returned unsatisfied. As the spouses did not have any properties to satisfy the judgment in Civil Case No. 69228, the private respondent addressed a letter to the petitioner for the delivery to him (private respondent) of his pro-rata share in the value of the duplex-apartment in accordance with Article 2242 of the Civil Code. The petitioner refused to pay the pro-rata value prompting the private respondent to file the instant action. As earlier stated, a decision was rendered in favor of the private respondent. The parties are agreed that the only issue is whether or not the private respondent is entitled to claim a pro-rata share in the value of the property in question. The applicable provision, Article 2242 of the Civil Code, reads as follows: ART. 2242. With reference to specific immovable property and real rights of the debtor, the following claims, mortgages and liens shall be preferred, and shall constitute an encumbrance on the immovable or real right: (1) Taxes due upon the land or building; (2) For the unpaid price of real property sold, upon the immovable sold; (3) Claims of laborers, masons, mechanics and other workmen, as well as of architects, engineers and contractors, engaged in the construction, reconstruction or repair of buildings, canals or other works, upon said buildings, canals or other works; (4) Claims of furnishers of materials used in the construction, reconstruction, or repair of buildings, canals or other works upon said buildings, canals or other works; (5) Mortgage credits recorded in the Registry of Property, upon the real estate mortgaged; (6) Expenses for the preservation or improvement of real property when the law authorizes reimbursement, upon the immovable preserved or improved; 481 VOL. 124, SEPTEMBER 2, 1983

481 Philippine Savings Bank vs. Lantin (7) Credits annotated in the Registry of Property, in virtue of a judicial order, by attachments or executions, upon the property affected, and only as to later credits; (8) Claims of co-heirs for warranty in the partition of an immovable among them, upon the real property thus divided; (9) Claims of donors of real property for pecuniary charges or other conditions imposed upon the donee, upon the immovable donated; (10) Credits of insurers upon the property insured, for the insurance premium for two years. Both the petitioner bank and private respondent Ramos rely on the case of De Barreto v. Villanueva (6 SCRA 928). The petitioner bank would impress upon this Court that the proceedings had before the court below is not one of the proceedings contemplated in the De Barreto case that will sustain the authority of the respondent court to adjudicate the claims of all preferred creditors under Article 2242 of the Civil Code. Petitioner argues that for Article 2242 of the Civil Code to apply, there must have been an insolvency proceeding or other liquidation proceedings of similar import. And under the facts then obtaining, there could have been no insolvency proceeding as there were only two known creditors.** Consequently, it is argued that private respondents unpaid contractors claim did not acquire the character of a statutory lien equal to the petitioners registered mortgage. Upon the other hand, private respondent Ramos maintains that the proceedings had before the court below can qualify as a general liquidation of the estate of the spouses Tabligan because the only existing property of said spouses is the property subject matter of this litigation. Concurrence of credits occurs when the same specific property of the debtor or all of his property is subjected to the claims of several creditors. The concurrence of credits raises no questions of consequence where the value of the property or _______________ ** Section 20 of the Insolvency Law provides that the adjudication of insolvency must be made on the petition of three or more creditors. 482 482 SUPREME COURT REPORTS ANNOTATED Philippine Savings Bank vs. Lantin the value of all assets of the debtor is sufficient to pay in full all the creditors. However, it becomes material when said assets are insufficient for then some creditors of necessity will not be paid or some creditors will not obtain the full satisfaction of their claims. In this situation, the question of preference will then arise, that is to say who of the creditors will be paid ahead of the others. (Caguioa, Comments and Cases on Civil Law, 1970 ed., Vol. VI, p. 472.) Under the system established by Article 2249 of the Civil Code of the Philippines, only taxes and assessments upon immovable property enjoy absolute preference. All the remaining specified classes of preferred creditors under Article 2242 enjoy no priority among themselves. Their credits shall be satisfied pro-rata, i.e., in proportion to the amount of the respective credits. Under the De Barreto decision, the full application of Articles 2242 and 2249 demands that there must first be some proceeding where the claims of all the preferred creditors may be bindingly adjudicated, such as insolvency, the settlement of a decedents estate under Rule 87 of the Rules of Court, or other liquidation proceedings of similar import. The pertinent ruling reads:

Thus, it becomes evident that one preferred creditors 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. In the absence of insolvency proceedings (or other equivalent general liquidation of the debtors estate), the conflict between the parties now before us must be decided pursuant to the well established principle concerning registered lands; that a purchaser in 483 VOL. 124, SEPTEMBER 2, 1983 483 Philippine Savings Bank vs. Lantin good faith and for value (as the appellant concededly is) takes registered property free from liens and encumbrances other than statutory liens and those recorded in the certificate of title. There being no insolvency or liquidation, the claim of the appellee, as unpaid vendor, did not acquire the character and rank of a statutory lien co-equal to the mortgagees recorded encumbrance, and must remain subordinate to the latter. The resolution of this petition, therefore, hinges on the determination of whether an insolvency proceeding or other liquidation proceeding of similar import may be considered to have been conducted in the court below. The respondent court ruled in the affirmative holding that: There were no known creditors, other than the plaintiff and defendant herein, and the proceedings in the present case may ascertain and bindingly adjudicate the respective claims of the plaintiff and the defendant, serving as a substantial compliance with what the Supreme Court stated: x x x it is thus apparent that the full application of Articles 2242 and 2249 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 a decedents estate under Rule 87 of the Rules of Court, or other liquidation proceedings of similar import. (de Barretto v. Villanueva, et al., G.R. No. L-14938, December 29, 1962). A careful considering of this petition leads us to agree with the petitioner. The conclusions of the lower court are not supported by the law and the facts. The proceedings in the court below do not partake of the nature of the insolvency proceedings or settlement of a decedents estate. The action filed by Ramos was only to collect the unpaid cost of the construction of the duplex apartment. It is far from being a general liquidation of the estate of the Tabligan spouses. Insolvency proceedings and settlement of a decedents estate are both proceedings in rem which are binding against the whole world. All persons having interest in the subject matter involved, whether they were notified or not, are equally bound. Consequently, a liquidation of similar import or other 484 484 SUPREME COURT REPORTS ANNOTATED Philippine Savings Bank vs. Lantin equivalent general liquidation must also necessarily be a proceeding in rem so that all interested persons whether known to the parties or not may be bound by such proceeding.

In the case at bar, although the lower court found that there were no known creditors other than the plaintiff and the defendant herein, this can not be conclusive. It will not bar other creditors in the event they show up and present their claims against the petitioner bank, claiming that they also have preferred liens against the property involved. Consequently, Transfer Certificate of Title No. 101864 issued in favor of the bank which is supposed to be indefeasible would remain constantly unstable and questionable. Such could not have been the intention of Article 2243 of the Civil Code although it considers claims and credits under Article 2242 as statutory liens. Neither does the De Barretto case sanction such instability. It emphasized the following: We are understandably loath (absent a clear precept of law so commanding) to adopt a rule that would undermine the faith and credit to be accorded to registered Torrens titles and nullify the beneficient objectives sought to be obtained by the Land Registration Act. No argument is needed to stress that if a person dealing with registered land were to be held to take it in every instance subject to all the fourteen preferred claims enumerated in Article 2242 of the new Civil Code, even if the existence and import thereof can not be ascertained from the records, all confidence in Torrens titles would be destroyed, and credit transactions on the faith of such titles would be hampered, if not prevented, with incalculable results. Loans on real estate security would become aleatory and risky transactions, for no prospective lender could accurately estimate the hidden liens on the property offered as security, unless he indulged in complicated, tedious investigations. The logical result might well be a contraction of credit to unforeseable proportions that could lead to economic disaster. Upon the other hand, it does not appear excessively burdensome to require the privileged creditors to cause their claims to be recorded in the books of the Register of Deeds should they desire to protect their rights even outside of insolvency or liquidation proceedings. In fact, an annotation, as suggested above, would inure to 485 VOL. 124, SEPTEMBER 2, 1983 485 Philippine Savings Bank vs. Lantin the benefit of the public, particularly those who may subsequently wish to buy the property in question or who have a business transaction in connection therewith. It would facilitate the enforcement of a legal statutory right which cannot be barred by laches. (See Manila Railroad Co. v. Luzon Stevedoring Co., 100 Phil. 135). Respondent Ramos admitted in the partial stipulation of facts submitted by both parties that at the time of the loans to the spouses, the petitioners bank had no actual or constructive knowledge of any lien against the property in question. The duplex apartment house was built for P32,927.00. The spouses Tabligan borrowed P35,000.00 for the construction of the apartment house. The bank could not have known of any contractors lien because, as far as it was concerned, it financed the entire construction even if the stated purpose of the loans was only to complete the construction. Since the action filed by the private respondent is not one which can be considered as equivalent general liquidation having the same import as an insolvency or settlement of the decedents estate proceeding, the well established principle must be applied that a purchaser in good faith and for value takes registered land free from liens and encumbrances other than statutory liens and those recorded in the Certificate of Title. It is an admitted fact that at the time the deeds of real estate mortgage in favor of the petitioner bank were constituted, the transfer certificate of title of the spouses Tabligan was free from any recorded lien and encumbrances, so that the only registered liens in the title were deeds in favor of the petitioner. Prescinding from the foregoing, the private respondents claim must remain subordinate to the petitioner banks title over the property evidenced by TCT No. 101864. WHEREFORE, the petition is granted. The decision of the Court of First Instance of Manila, Branch VII is, hereby, reversed and set aside. The complaint and the counterclaim are dismissed. SO ORDERED. 486

486 SUPREME COURT REPORTS ANNOTATED People vs. Almeda Teehankee (Chairman), Melencio-Herrera, Plana, Vasquez and Relova, JJ., concur. Petition granted. Decision reversed and set aside. Notes.A mortgage does not constitute just title on the part of the mortgagee since ownership is retained by the mortgagor. (Reyes vs. Sierra, 93 SCRA 472.) The Philippine National Bank is estopped for having reneged on its commitments to allow redemptioner to redeem the mortgaged property foreclosed by the bank and instead allowed another to buy the property. (Philippine National Bank vs. Court of Appeals, 94 SCRA 357.) The automatic rescission clause is not applicable to contracts for redemption of the mortgage property when foreclosed, but applies only to contracts to sell real estate on installments. (Philippine National Bank vs. Court of Appeals, 94 SCRA 357.) Pres. Decree No. 385 mandates courts to place a government financial institution in possession of a foreclosed mortgaged property. (Philippine National Bank vs. Adil, 118 SCRA 110.) Foreclosure and sale of mortgaged chattel bars further recovery by vendor of outstanding obligation of purchaser not satisfied by the sale. (Zayas, Sr. vs. Luneta Motors Co., 117 SCRA 726.) [Philippine Savings Bank vs. Lantin, 124 SCRA 476(1983)]

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