NORTHERN MOTORS VS.

COQUIA

Facts:
Manila Yellow Taxicab, executed a chattel mortgage over several taxicabs in favor of Northern Motors.
TROPICAL is a judgment creditor of Yellow Taxicab who assigned the judgment to ONG. On December
12 1974, Sheriff then levied upon 20taxicabs, 8 of which are security for the chattel mortgage. Northern
Motors filed an intervention on December 18, 1974; however, the levied taxicabs were sold the same
day at 2pm although agreement shows that it should have happened at 4pm.Indemnity bond was
posted by TROPICAL, but the bond was cancelled after the sale without notice to Northern Motors. The
petitioner now seeks reconsideration also on the reinstatement of the bond. A second levy was
made upon 35 taxicabs, 7 of which are mortgaged to Northern Motors. This is a motion for
reconsideration in the SC decision pronouncing that the Mortgagee has a better right than the judgment
debtor over the taxicabs. The taxies were levied and sold at an auction sale. Ong argues admits that the
mortgagee has a better right that the judgment creditor, but argues that the purchaser from the auction
sale must have a right superior to that of the mortgagee. The auction sale proceeded and the purchasers
were of unknown addresses, hence the 8 taxicabs cannot be recovered. The proceeds of the auction
were in contest and the sheriff is deducting the expenses of the execution sale from the proceeds.

Issue/s:
Whether the expenses for the execution sale should be deducted from the proceeds thereof?
Whether the purchaser has a better right than the creditor?
Whether the bond should be reinstated?

Held:
1st: No, it was already established that the levy on the property was illegal, it is therefore improper to
deduct the expenses of an illegal auction from the proceeds thereof. The mortgagee can only able
to collect the proceeds from the auction sale because the purchasers are of unknown addresses. The full
proceeds of the sale are due to the mortgagee without any unreasonable and illegal deductions.
2nd: No, the purchaser of the auction sale merely steps in the shoes of the judgment creditor as they
have been aware of the claim of the mortgagee. The mortgagee has a better right to the possession of
the taxicabs, however, since the addresses of the purchasers are unknown, the proceeds of the
sale must be delivered to the mortgagee.
3rd: Yes, the bond should be reinstated, as it is to serve as indemnity for damages in cases that the
sold taxicabs cannot be recovered. Proceedings in the lower court would be an exercise in futility if the
bond will not be reinstated.

TOLENTINO VS. BALTAZAR

FACTS:
1. Baltazar filed a homestead application which was approved by Director of Lands on April 14, 1940. On
April 1, 1941, he mortgaged the present and future improvements on said land to Tolentino for the sum
of 1500.
2. Stipulated that in case of default, Tolentino could elect, either to foreclose the mortgage or to compel
the debtor to execute deed of absolute sale.
3. Baltazar died and his son Basilio took his place for the application of homestead, which was soon
granted and was issued Original Certificate of Title No. P-790.
4. Basilio Baltazar filed with the Bureau of Lands a petition praying that the homestead application in his
father's name be cancelled, and that, in lieu thereof, his own (Basilio's) application be admitted. This
petition was soon granted;
5. Tolentino filed an action against Basilio for the cancellation of the OCT upon the ground that Basilio
had secured it by fraud.
6. CFI: Basilio had not been guilty of fraud in securing the homestead patent and certificate of title in his
own name and Director of Lands is estopped from saying there is fraud since it is its duty to know if
there is fraud in the first place. And that Tolentino has merely a money claim that should be filed against
the estate of the deceased.

ISSUE:
WON Tolentino can still foreclose the mortgage?

HELD:
Yes. A land acquired by homestead patent may neither be encumbered or alienated from the date of
the approval of the corresponding homestead application and for a period of five (5) years after the
issuance of the patent, nor be held liable for any debt contract within such period of time. However,
said Section 118 of Commonwealth Act No. 141 explicitly permits the encumbrance, by
mortgage or pledge of the improvements and crops on the land, without limitation in point of time.
At any rate, even if Basilio Baltazar had not been guilty of fraud in securing the homestead patent and
the certificate of title in his favor, it has been established that when plaintiff saw the children of Angel
Baltazar shortly after his death, they promised to pay his debt in favor of Pastor Tolentino. In other
words, Basilio Baltazar knew, before he got said patent and the certificate of title, that the present and
future improvements on the land were subject to a valid and subsisting mortgage in favor of Pastor
Tolentino and acknowledged the same. Hence, he must be deemed to have secured such patent and
title subject to a subsisting trust, insofar as plaintiff's mortgage is concerned, and, under plaintiff's
prayer for such relief as may be deemed just and equitable, this action may be considered as one to
compel the defendant to execute the instrument necessary for the registration of said mortgage and its
annotation on plaintiff's certificate of title.

DBP VS. SANTOS

FACTS:
LIRAG was a mortgage debtor of DBP. LAND was the bargaining representative of the more or less 800
former rank and file employees of LIRAG. LIRAG started terminating the services of its employees on the
ground of retrenchment. LIRAG has since ceased operations presumably due to financial reverses.
Joselito Albay, one of the employees dismissed, filed a complaint before NLRC against LIRAG for illegal
dismissal. LAND also filed a Complaint against LIRAG seeking separation pay, 13th month pay, gratuity
pay, sick leave and vacation leave pay and emergency allowance. These two cases were consolidated
and jointly heard by the NLRC. Labor Arbiter ordered LIRAG to pay the individual complainants. The
NLRC affirmed. That judgment became final and executory. A Writ of Execution was issued. DBP
extrajudicially foreclosed the mortgaged properties for failure of LIRAG to pay its mortgage
obligation. DBP acquired said mortgaged properties for P31,346,462.90. Since DBP was the sole
mortgagee, no actual payment was made, the amount of the bid having been merely credited in partial
satisfaction of LIRAG's indebtedness. By reason of said foreclosure, the Writ of Execution issued in favor
of the complainants remained unsatisfied. LAND filed a "Motion for Writ of Execution and Garnishment"
of the proceeds of the foreclosure sale. Labor Arbiter granted the Writ of  Garnishment and directed DBP
to remit to the NLRC the sum of P6,292,380.00 out of the proceeds of the foreclosed properties of LIRAG
sold at public auction in order to satisfy the judgment previously rendered. DBP sought
reconsideration which was denied. DBP appealed that denial to the NLRC which affirmed the appealed
Order and dismissed the DBP appeal. The Asset Privatization Trust (APT) became the transferee of the
DBP foreclosed assets of LIRAG. A partial Compromise Agreement was entered into between APT and
LAND whereby APT paid the complainants-employees, the sum of P750,000.00 "in full settlement of
their claims, past and present, with respect to all assets of LITEX transferred by DBP to APT”. However
LAND filed its opposition to the Compromise Agreement for being contrary to law, morals and public
policy.

ISSUE:
Whether or not the NLRC gravely abused its discretion in affirming the Order of the Labor Arbiter
granting the Writ of Garnishment out of the proceeds of LIRAG's properties foreclosed by DBP to satisfy
the judgment in these cases.

RULING:
We are constrained to rule in the affirmative. Article 110 of the Labor Code provides:
Worker preference in case of bankruptcy 
In the event of bankruptcy or liquidation of an employer's business, his workers shall enjoy first
preference as regards wages due them for services rendered during the period prior to the bankruptcy
or liquidation, any provision to the contrary notwithstanding. Unpaid wages shall be paid in full before
other creditors may establish any claim to a share in the assets of the employer. Because of its impact
on the entire system of credit, Article 110 of the Labor Code cannot be viewed in isolation but must be
read in relation to the Civil Code scheme on classification and preference of credits. In the event of
insolvency, a principal objective should be to effect an equitable distribution of the insolvent's property
among his creditors. To accomplish this there must first be some proceeding where notice to all of the
insolvent creditors may be given and where the claims of preferred creditors may be bindingly  A
distinction should be made between a preference of credit and a lien. A preference applies only to
claims which do not attach to specific properties. A lien creates a charge on a particular property. The
right of first preference as regards unpaid wages recognized by Article 110 does not constitute a lien on
the property of the insolvent debtor in favor of workers. It is but a preference of credit in their favor, a
preference in application. It is a method adopted to determine and specify the order in which credits
should be paid in the final distribution of the proceeds of the insolvent's assets. It is a right to a first
preference in the discharge of the funds of the judgment debtor.
 
The DBP anchors its claim on a mortgage credit. A mortgage directly and immediately subjects the
property upon which itis imposed, whoever the possessor may be, to the fulfillment of the obligation for
whose security it was constituted (Article2176, Civil Code). It creates a real right which is enforceable
against the whole world. It is a lien on an identifiedimmovable property, which a preference is not. A
recorded mortgage credit is a special preferred credit under Article 2242(5) of the Civil Code on
classification of credits. The preference given by Article 110, when not falling within Article 2241(6) and
Article 2242 (3) of the Civil Code and not attached to any specific property, is an ordinary preferred
credit although its impact is to move it from second priority to first priority in the order of preference
established by Article 2244 of the Civil Code.