DBP v.

NLRC
G.R. No. 108031
Facts:
1. Ang is a Personnel Officer of Tropical Philippines Wood Industries (TPWII).
2. In 1983, DBP, a mortgagee of TPWII foreclosed its plant facilities and equipment. And in 1986,
took possession of the properties. From then on, the company ceased its operations. Ang was then
verbally terminated from service.
3. Ang filed with Labor Arbiter a complaint for separation pay, 13 month pay, vacation and sick
leave.
4. Labor Arbiter found TPWII primarily liable and DBP subsidiarily liable and rationalized that the
right of an employee to be paid benefits due him from the properties of his employer is superior
to the right of the mortgage of DBP.
5. NLRC affirmed, hence this appeal.
Issue: W/N there is worker preference towards Ang despite no formal declaration of bankruptcy or
liquidation from TPWII? - NO
Held:
A preference of credit bestows upon the preferred creditor an advantage of having his credit satisfied first
ahead of other claims which may be established against the debtor. Logically, it becomes material only
when the properties and assets of the debtors are insufficient to pay his debts in full; for if the debtor is
amply able to pay his various creditors in full, how can the necessity exist to determine which of his
creditors shall be paid first or whether they shall be paid out of the proceeds of the sale (of) the debtor's
specific property. Indubitably, the preferential right of credit attains significance only after the properties
of the debtor have been inventoried and liquidated, and the claims held by his various creditors have been
established
In the present case, there is as yet no declaration of bankruptcy nor judicial liquidation of TPWII. Hence,
it would be premature to enforce the worker's preference.
The DBP anchors its claim on a mortgage credit. A mortgage directly and immediately subjects the
property upon which it is imposed, whoever the possessor may be, to the fulfillment of the obligation for
whose security it was constituted (Article 2176, Civil Code). It creates a real right which is enforceable
against the whole world. It is a lien on an identified immovable 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 1l0, when not falling within Article 2241 (6) and
Article 2242 (3), of the Civil Code and not attached to any specific property, is all 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.
J.L. Bernardo Construction vs. Court of Appeals,
G.R. No. 105827
Facts:
1. J.L. Bernardo Construction got into a construction agreement with the municipality of san
Antonio for the construction of their public market.
2. Under the agreement, the municipality agreed to assume the expenses for the demolition, clearing
and site filling totalling to 1.150 million and provide for cash equity of 767,305.99 directly to
petitioners.
3. When the whole amount of the cash equity became due, the municipality refused to pay
notwithstanding that the public market was 98%. Furthermore, the petitioners paid the expenses
for the demolition, etc. Petitioners were not reimbursed for any of the advances.
4. Petitioners filed a complaint for breach of contract, specific performance, and collection of a sum
of money, with prayer of preliminary attachment and enforcement of contractor’s lien against the
municipality of san Antonio.
5. RTC held in favor of Petitioners, issuing the attachment prayed. Further granting the right to
maintain possession of the public market and operate the same.
a. With regards to the contractor's lien, the trial court held that since plaintiffs have not been
reimbursed for the cash equity and for the demolition, clearing and site filling expenses,
they stand in the position of an unpaid contractor and as such are entitled, pursuant to
articles 2242 and 2243 of the Civil Code,
b. It was explained that, although the usual way of enforcing a lien is by a decree for the
sale of the property and the application of the proceeds to the payment of the debt secured
by it, it is more practical and reasonable to permit plaintiffs to operate the public market
and to apply to their claims the income derived therefrom, in the form of rentals and
goodwill from the prospective stallholders of the market, as prayed for by plaintiffs.
6. Upon appeal to the CA, decision was reversed.
7. Hence this petition
Issue:
Held:

1. Article 2242 of the Civil Code applies when there is a concurrence of credits, i.e. when the same
specific property of the debtor is subjected to the claims of several creditors and the value of such
property of the debtor is insufficient to pay in full all the creditors.—Article 2242 only finds
application when there is a concurrence of credits, i.e. when the same specific property of the
debtor is subjected to the claims of several creditors and the value of such property of the debtor
is insufficient to pay in full all the creditors.
2. In such a situation, the question of preference will arise, that is, there will be a need to determine
which of the creditors will be paid ahead of the others. Fundamental tenets of due process will
dictate that this statutory lien should then only be enforced in the context of some kind of a
proceeding where the claims of all the preferred creditors may be bindingly adjudicated, such as
insolvency proceedings.
3. The action filed by petitioners in the trial court does not partake of the nature of an insolvency
proceeding. It is basically for specific performance and damages.17 Thus, even if it is finally
 adjudicated that petitioners herein actually stand in the position of unpaid contractors and are
entitled to invoke the contractor's lien granted under Article 2242, such lien cannot be enforced in
the present action for there is no way of determining whether or not there exist other preferred
creditors with claims over the San Antonio Public Market.
4. The records do not contain any allegation that petitioners are the only creditors with respect to
such property. The fact that no third party claims have been filed in the trial court will not bar
other creditors from subsequently bringing actions and claiming that they also have preferred
liens against the property involved.
Carried Lumber Co. vs. ACCFA G.R. No. L-21836
Facts:
1. Facoma purchased on credit from Carried Lumber Company lumber and materials for the
construction of their warehouse. Prior to this, Facoma obtained a loan of 27,200 from ACCFA for
the construction of the same.
2. Carried Lumber delivered materials worth 8,233.55. Facoma made partial payments but failed to
completely settle the obligation. Carried Lumber filed a complaint and secured a judgment
ordering Facoma to pay the remaining balance.
3. Facoma still failed to pay prompting Carried Lumber to secure a writ of execution to enforce the
judgment. Sheriff then levied Facoma’s lease rights, warehouse, and rice mill building in
preparation to sell it in public auction.
4. ACCFA interporsed a third-party claim stating that the properties levied have already been to
sold to ACCFA 2 months ago.
5. However, the sheriff still proceeded to sell the properties with Carried Lumber being the highest
bidder.
6. Thereafter, Carried Lumber sued ACCFA enforcing its superior materialman’s lien, which held
on its favor.
7.
Issue: W/N Carried Lumber has a superior lien over ACCFA? (NO)

Held:
Credits with reference to specific immovable property; Article 2242 of Civil Code provides for
concurrence of credits; Materialman’s lien and mortgage lien; Case at bar.—
The trial court erred in holding that the lumber company ’s lien over the warehouse is superior to the
ACCFA’s mortgage lien. It was mistaken in assuming that the enumeration of ten claims, mortgages and
liens in article 2242 creates an order of preference. It is not correct to say that the materialman’s
(mechanic’s) lien or refectionary credit of the lumber company, being listed as No. 4 in article 2242, is
superior to the ACCFA’ s mortgage credit which is listed as No. 5. The enumeration in article 2242 is not
an order of preference. That article lists the credits which may concur with respect to specific real
properties, and which would be satisfied pro rata according to article 2249.
“Pro-rata” explained.—The term pro-rata in article 2249 means in proportion or ratably, or a division
according to share, interest or liability of each.
There is no dispute that the Facoma warehouse was constructed by means of the materials supplied by
Carried Lumber Company and that the construction was financed by the ACCFA which had loaned
P27,200 to the Facoma (Exh. 1). Therefore, it is just and proper that the two creditors should have pro rata
shares in that warehouse
The lower court's solution of awarding the warehouse to the lumber company was an unwarranted
disregard of the ACCFA's claim. On the other hand, the sheriff's adjudication of the whole warehouse to
the ACCFA nullifies the lumber company's claim. Neither solution is just because it results in unjust
enrichment by one party at the expense of the other.
Barayoga vs. Asset Privatization Trust,
G.R. No. 160073
Facts:
1. In 1987, Pursuant to Sec. 23 of Proclamation No. 50 the financial claim of the PNB against
BISUDECO were transferred to the National Government via a secured loan. APT was
constituted as trustee over BISUDECO’s account with the PNB.
2. In 1988, BISUDECO contracted the services of Philsucor for the management of the sugar
plantation and milling operations.
3. BISUDECO failed to pay its outstanding obligations hence PNB foreclosed it properties with
APT has highest bidder.
4. APT sold the sugar plantation and mill of BISUDECO to BAPCI under the name Pensumil.
5. Simultaneous to this, BISUDECO has filed complains unfair labor practice, illegal dismissal,
illegal deduction, and underpayment of wages ad other labor standard benefits plus damages.
6. Labor Arbiter ordered APT to pay BISUDECO’s money claims. APT should have treated
petitioner’s claim as a lien on the BISUDECO.
7. CA reversed this and held that APT not liable for BISUDECO’s money claims as it was only
possessor of the properties as trustee and later on highest bidder in foreclosure proceedings.
8. Hence this petition
Issue: W/N APT is lialble to pay the monetary claims of BISUDECO? (NO)
Held:
No succession of employment rights and obligations can be said to have taken place between the two.
Furthermore, under the principle of absorption, a bona fide buyer or transferee of all, or substantially
all, the properties of the seller or transferor is not obliged to absorb the latter’s employees. The most that
the purchasing company may do, for reasons of public policy and social justice, is to give preference of
reemployment to the selling company’s qualified separated employees, who in its judgment are necessary
to the continued operation of the business establishment
Under Articles 2241 and 2242 of the Civil Code, a mortgage credit is a special preferred credit that
enjoys preference with respect to a specific/determinate property of the debtor. On the other hand, the
worker’s preference under Article 110 of the Labor Code is an ordinary preferred credit.
The same has no preference over special preferred credits.—This Court has ruled in a long line of cases
that under Articles 2241 and 2242 of the Civil Code, a mortgage credit is a special preferred credit that
enjoys preference with respect to a specific/determinate property of the debtor.
On the other hand, the worker’s preference under Article 110 of the Labor Code is an ordinary preferred
credit. While this provision raises the worker’s money claim to first priority in the order of preference
established under Article 2244 of the Civil Code, the claim has no preference over special preferred
credits. Thus, the right of employees to be paid benefits due them from the properties of their employer
cannot have any preference over the latter’s mortgage credit. In other words, being a mortgage credit,
APT’s lien on BISUDECO’s mortgaged assets is a special preferred lien that must be satisfied first before
the claims of the workers.
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.