De Barretto digest.docx

De Barretto v Villanueva Rosario Cruzado obtained a loan from Rehabilitation Finance Corporation (RFC). To secure payment she mort!a!ed the land o"ned by her and her deceased husband. • #  $s she failed to pay certain certain installments on on the loan the the mort!a!e "as foreclosed and the RFC ac%uired the property. # &ater on the land "as sold bac' to her conditionally for the amount of * +,-./ payable in seven years. # Cruzado  "ith the consent of RFC sold to respondent ura &. Villanueva for -. 0all their ri!hts interest1 title and dominion and over the land. Respondent paid 22 in advance and e3ecuted a promissory note for the balance. • # 4he "as subse%uently able to secure in her name TCT coverin! the property and she mort!a!ed it to petitioner 5a!dalena C. Barretto as security for a loan the amount of /.. # 6avin! failed to pay the remainin! installments on the promissory note a “ Vendor ’ s lien”(unre!istered) "as constituted upon the property in favor of the Cruzados said lien bein! annotated at the bac' of TCT. # 4he li'e"ise failed to pay her indebtedness of / . to petitioner the latter instituted a!ainst the Villanueva spouses an action for foreclosure of mort!a!e. # The lo"er court the vendor1s lien of Cruzado and the mort!a!e credit of petitioner Barretto should be •

paid pro paid pro rata from the proceeds. # Barettos sou!ht reconsideration of the order of the court !ivin! due course to the said vendor1s lien ar!uin! that7 8The vendor1s lien under the 9e" Civil Code of the hilippines can only become effective in the event of insolvency of the vendee "hich has not been proved to e3ist in the instant case ” . :;9 vendor ’ s lien can only become effective in the event of insolvency of vendee. # <=4. (4ee -,+  Rulin!) 1961 CASE (in case c ase Sir Si r will wil l ask) ask ) # 9;. # 9othin! in the la" sho"s that the articles of the Civil Code on concurrence and preference of credits particularly ++*+ and ++*- are applicable only to the insolvent debtor. # >f they are intended only for i nsolvency cases then other creditor?debtor relationships "here there are concurrence of credits "ould be left "ithout any rules to !overn them and it "ould render purposeless the special la"s on insolvency. #  $rticle ++*+ of the ne" Civil Civil Code enumerates enumerates t he claims mort!a!e and liens that constitute an encumbrance on specific immovable property and amon! them are7 # (+) For the unpaid price of real property sold upon the immovable sold@ and # (2) 5ort!a!e credits recorded in the Re!istry of roperty. ”  $rticle ++*++*- of the same Code provides that 0if there are t"o or more credits "ith respect to the same specific real property or real ri!hts they shall be satisfied pro-ra pro -rata ta after the payment of the ta3es and assessment upon the immovable property or real ri!hts. Cruzado as an unpaid vendor of the property in %uestion has the ri!ht to share pro?rata "ith the appellants the proceeds of the foreclosure sale.

•

•

1962 CASE (Important. This is the new ruling.) # <=4. The 4C set aside its ori!inal decision (-, c ase). # The %uestion as to "hether the Civil Code and the insolvency &a" can be harmonized is settled by $rticle ++*/. #  $rticle ++*/ of the ne" Civil Code that — The claims or credits enumerated in the t"o precedin! articles (++*+ ++*- concurrence and preference of credits) shall be considered as mort!a!es or pled!es of real or personal property or liens "ithin the purvie" of le!al provisions !overnin! insolvency. • The preferences named in $rticles ++, and ++,+ (no" ++* and ++*+) are to be enforced in accordance "ith the >nsolvency &a". • There being no insolvency or liquidation the clai! o" the Cru#ado as unpaid vendor did not require the character and ran$ o" a statutory lien co-equal to the !ortgagee%s recorded encu!brance and !ust re!ain subordinate to the latter&

A9;T=7 Cruzado is no lon!er the o"ner of the property. RFC is the o"ner.