Unson v. Urquijo
REITERATIONFacts
The Antecedents: The case involves the voluntary insolvency of "Central Capiz." Claimants-appellants Urquijo, Zuloaga & Escubi sought preference for the unpaid price of machinery sold to the insolvent. Procedural History: In a previous decision (G.R. No. 26293), the Supreme Court ruled that the appellants' right of preference was only on the value of the unpaid machinery, not to exceed P30,000. The case was remanded. The lower court, after supplementary proceedings, rendered an amended decision finding the unpaid portion of the machinery price to be P19,285.71 5/7 and granted a preferential right for this sum. The court then ordered the payment of various creditors, including Urquijo, Zuloaga and Escubi for P19,285.71 5/7. The Petition: Claimants Urquijo, Zuloaga and Escubi appealed, arguing that the trial court erred in limiting their preferential right to P19,285.71 5/7 and not to the full P30,000, which they contended was the value of the machinery obtained from its sale.
Issue(s)
Whether the vendor's preferential right for the unpaid balance of the purchase price of personal property is limited only to a proportional part of the machinery still unpaid, or if it extends to the total value/proceeds of the machinery.
Ruling
The judgment appealed from is reversed. The appellants Urquijo, Zuloaga and Escubi have the right to collect their credit of P30,000 from the total proceeds of the sale of the machinery. The assignee is ordered to make said payment.
Ratio Decidendi
On Issue 1: The Supreme Court held that the vendor's preferential right under Article 1922, paragraph 1 of the Civil Code applies to the whole of the personal property in the debtor's possession to the extent of its value. The Court reasoned that the basic principle of this preference is one of equity and justice, noting that without the original sale, the property would never have become a 'pledge' for the other creditors of the insolvent. Citing the Enciclopedia Juridica Española, the Court emphasized that a vendor should not be turned into a 'gratuitous surety' for the purchaser's other creditors. The law makes no distinction between situations where the price is partially paid and where it is not paid at all; thus, the courts cannot create such a distinction without impairing the legal preference. If the preference were limited to only a part of the property proportionate to the unpaid portion, the security intended by the law for the vendor would be significantly diminished. Therefore, the vendor can claim against the total proceeds of the resale until the full original price is satisfied, provided it does not exceed the resale value.
Main Doctrine
The vendor's preferential right to the purchase price of personal property sold extends to all of said property, whether the purchase price has been partially paid or not, while said property remains in the vendee's possession, and to the extent of its value.