Cordova v. Narvasa
REITERATIONFacts
The Antecedents: Petitioner Mariano Cordova sought to set aside two orders issued by respondent Judge concerning the payment of judgment credits from a common debtor, G. K. Co Bun Kim. The debtor's sole asset was a seventeen-door apartment building in Ermita, Manila, and funds held by a receiver appointed in Civil Case No. 16221. Petitioner's credit originated from a loan of P20,986.42 secured by a mortgage on the building, which was duly recorded. This mortgage was later assigned to petitioner. Respondent Jacinta Abella held a judgment credit for back rentals of the land on which the building was erected, from January 1953 to January 1955. Procedural History: Petitioner filed motions in the receivership case praying for payment of his judgment credit in preference to Abella's, citing the legal preference of his mortgage credit. Both motions were denied by the respondent Judge, implying that Abella's judgment for rentals might be executed first. The Petition: Petitioner filed a petition for certiorari with preliminary injunction, alleging that the respondent Judge issued the orders in excess of jurisdiction or with grave abuse of discretion by denying his motion for preference.
Issue(s)
Whether the judgment credit originating from a recorded mortgage and a 1952 final judgment is preferred over a 1957 final judgment for unsecured land rentals.
Ruling
The petition is granted. The orders subject of the petition are set aside, and the writ of preliminary injunction is declared permanent. Costs are against respondent Jacinta Abella.
Ratio Decidendi
On Issue 1: The Supreme Court ruled that petitioner's credit is clearly preferred under the provisions of the New Civil Code. First, under Article 2244, which governs the classification and preference of credits, the priority of credits appearing in a final judgment is determined by the dates of said judgments. The petitioner's judgment became final and executory in July 1952, whereas Abella's judgment did not reach finality until March 1957. Second, applying Article 2242, the Court emphasized that a mortgage credit recorded in the registry of property is preferred over unsecured credits with respect to the specific mortgaged immovable property. The Court observed that while the petitioner's credit was secured by a mortgage that operated directly upon the building and its income, Abella's claim for back rentals was entirely unsecured and carried no lien on the building. Furthermore, the funds in the receiver's hands were collected and preserved specifically because of the receivership initiated by petitioner's assignor to secure the mortgage credit. Consequently, the respondent Judge committed a grave abuse of discretion by ignoring these established statutory preferences and refusing to grant the petitioner's motion for priority payment.
Main Doctrine
A recorded real estate mortgage credit is preferred over unsecured credits, even if the latter are for back rentals, and such preference should be respected in the execution of judgments, particularly when the property is under receivership.