MARIANO CORDOVA, PETITIONER, VS. HON. GREGORIO NARVASA, ET AL., RESPONDENTS.

This is a petition for certiorari with preliminary injunction seeking to set
aside two orders of respondent Judge which are alleged to have been issued in
excess of jurisdiction or with grave abuse of discretion. The writ prayed for
was issued upon filing by petitioner of the required bond.

The orders complained of involved the payment of two-judgment credits, one in
favor of petitioner and the other of Jacinta Abella against a common debtor, G.K. Co Bun Kim. The only property of Co Bun Kim for the payment of said credits
is a seventeen-door apartment building in Ermita, Manila, and the funds in the
hands of the receiver of the building. The receivership was instituted in Civil
Case No. 16221 of the Court of First Instance of Manila at the instance of one
Natalio Enriquez in order to preserve the property and secure payment of the
credit existing in his favor.

The judgment credit of petitioner originated from a loan of P20,986.42 taken
by Co Bun Kim from one Concha Apacible which he obtained for the improvement and
preservation of the building under receivership which he built on a parcel of
land he leased from spouses Rafael Alonso and Consuelo A. Lara. This loan was
secured by Co Bun Kim with a mortgage over the same building which was duly
recorded. On August 31, 1951, upon failure of Co Bun Kim to pay the loan as
agreed upon, Apacible filed an action in the court of first instance for the
foreclosure of the mortgage which was docketed as Civil Case No. 14603. Judgment
was rendered on April 23, 1952 ordering Co Bun Kim to pay Apacible the sum of
P20,986.42, with interest, attorneys’ fees and costs. A writ of execution was
secured by Apacible on July 7, 1952, but the execution was not carried out
because the building was placed under receivership in Civil Case No. 16221 which
was instituted by Co Bun Kim against Natalio Enriquez for the annulment of a
third mortgage on the building for the amount of P50,000. It must be noted that
the mortgage in favor of Apacible is only a second mortgage on the building, the
first mortgage thereon for the sum of P30,000 being in favor of Tabacalera
Company, and the third mortgage in favor of Natalio Enriquez. When Enriquez
learned of the existence of the two prior mortgages, he bought the rights of
Tabacalera and Apacible under their mortgages. The mortgage credit of Apacible
was acquired by him on September 20, 1952 and that of Tabacalera on October 21,
1952. Subsequently however, or on March 26, 1956, Natalio Enriquez transferred
and assigned all his. rights under the three mortgages to the herein petitioner
Mariano Cordova.

In the meantime, Co Bun Kim failed to pay the rentals of the land on which
the building is erected and so on April 25, 1953, Jacinta Abella, who bought the
land from its original owners, filed an action to collect them in the Court of
First Instance of Manila which was docketed as Civil Case No. 19409. Judgment
was rendered in favor of Abella ordering Co Bun Kim to pay the rentals from

January, 1953 to January, 1955, which judgment was affirmed by the Supreme
Court on February 28, 1957.

On April 8, 1957, petitioner filed a motion
in the receivership case (Civil Case No. 16221) praying that the receiver be
authorized to pay him the judgment rendered in favor of Apacible which was
assigned to him in preference to the judgment rendered in favor of Jacinta
Abella for rentals of the building on the ground that his mortgage credit has
preference under the law over that of Abella. Petitioner, on the same date,
filed another motion praying that the judgment rendered in favor of Abella be
held in abeyance until his, judgment credit shall have been satisfied based on
the same ground of preference that his credit enjoys under the law. Both motions
were denied by respondent Judge thereby giving the impression that the judgment
in favor of Jacinta Abella for back rentals may be executed in preference to
that of petitioner. Hence the present petition for certiorari.

The issue before us is whether the judgment credit of Concha Apacible which
was assigned to petitioner is. preferred over the judgment credit in favor of
Jacinta Abella, and if so, whether the former may be executed in preference to
the latter contrary to what was decreed by respondent Judge.

Petitioner contends that his judgment credit is preferred over that of
Jacinta Abella for the following reasons:

“(a) the credit of petitioner matured and became due way back in 1951, and
the judgment thereon became final and executory in June, 1952; .while the
judgment of respondent Abella became final and executory only last March, 1957,
and the same is for rentals which fell due only from January. 1953 up to
January, 1955;

“(b) the judgment credit of petitioner is secured by a mortgage on the
building in receivership from which the funds in the hands of the receiver were
darived, which mortgage operates directly and immediately upon the said building
and its income; while the claim of Abella is only for some months’ back rentals
on the land for which there is no lien whatsoever on the building or on the
income therefrom in.the hands of the receiver;

“(c) the judgment credit of petitioner is on a loan wrich was used by the
debtor Co Bun Kim for the repair, improvement and preservation of the building
in receivership; and

“(d) the funds in the hands of the receiver, from which petitioner seeks
payment, were collected and preserved because of the institution of the
receivership at the instance of Natalio Enriquez, assignor of the petitioner,
for the payment of his (now petitioner’s mortgage credits, and not for the
payment of the claim of Abella.”

There is merit in this contention. Under Article 2244 of the new Civil Code,
re classification of credits, it is provided that, with reference to real and
personal properties of the debtor, a credit which appears in a final judgment,
which was the subject of litigation, is considered preferred, and the preference
is determined by considering the priority of the dates of the judgment. Again,
under Article 2242, it is also provided that, with reference to specific
immovable property and real rights of the debtor, a mortgage credit recorded in
the registry of property is deemed preferred in so far as the property mortgaged
is concerned, over other unsecured credits. Under these legal provisions, there
can be no question that the judgment credit rendered in favor of Concha Apacible
which was assigned to petitioner is preferred over that of Jacinta Abella for
back rentals because the same is not only prior in time but secured by a real
estate mortgage. Thus, it appears that the judgment in favor of Apacible was
rendered on April 23, 1952 and became final and executory on July 7, 1952,
whereas the judgment credit in favor of appellee became final and executory only
in March, 1957. On the other hand, the judgment credit of Abella is unsecured,
whereas the credit of Apacible is secured by real estate mortgage which was duly
recorded in the registry of property. There is therefore no plausible reason why
the judgment credit of petitioner should not be executed in preference to that
of Jacinta Abella.

It is true that the properties on which the judgment is sought to be executed
are under receivership, but it is for this reason that petitioner filed a motion
in the receivership case praying for authority for the payment of his judgment
credit by the receiver as required by law. But even this step was thwarted
because of the refusal of respondent Judge to grant the motion. Respondent-Judge
seems to have adopted the attitude that the judgment credit of Jacinta Abella is
entitled to preference and should first be executed. Obviously, respondent Judge
acted on the matter with grave abuse of discretion.

Wherefore, petition is granted. The orders subject of the petition are hereby
set aside, the writ of preliminary injunction issued by this Court is declared
permanent. Costs against respondent Jacinta Abella.

Paras, C.J., Bengzon, Montemayor, Reyes, A., Labrador, Reyes, J.B.L.,
Endencia, and Felix, JJ., concur.