G.R. No. L-5771 - Paterno vs. City of Manila

Laguna Federation of Facomas, Inc. filed a suit against Nieves M. Vda. de Roxas which resulted in a judgment in favor of the plaintiff.
Pursuant to this judgment, a writ of execution was issued on February 8, 1960, entrusting Francisco C. Manabat, in his capacity as Provincial Sheriff of Laguna, Branch I, to enforce the order.
On November 24, 1960, the sheriff conducted a public auction and sold all rights, titles, and interests of Nieves M. Vda. de Roxas in ten (10) parcels of land for a total price of P37,000.

After the sale, it was discovered that the parcels of land were encumbered by registered liens and annotations such as writs of execution and attachments recorded on the reverse of the respective title certificates.
To resolve the ensuing conflicts among the various creditors or lienholders over the proceeds from the sale, the sheriff instituted an action for interpleader on February 21, 1961, in the Court of First Instance of Laguna.
The action sought to have the parties litigate among themselves to determine their respective rights to the P37,000 received from the public sale.

Several pertinent claims were asserted by different parties, with the main claims detailed as follows:

Laguna Federation of Facomas, Inc. – Attachment writ in CFI Laguna, Case SC-152 (registered October 10, 1958) claiming P17,448.00.
Valeriana Limaco de Almeda – Attachment writ in CFI Laguna, Case SC-153 (registered October 13, 1958) claiming P3,735.00.
Cosmopolitan Insurance Co., Inc. – Attachment writ in CFI Manila, Case No. 38118 (registered October 20, 1958) claiming P12,650.00.
Florentino Cayco and Jose Fernandez Zorilla – Attachment writ in CFI Rizal, Case No. 5238 (registered October 29, 1958) claiming P26,787.50.
Victoria Dimayuga – Attachment writ in CFI Manila, Case No. 3878 (registered May 23, 1960) claiming P12,500.00.
Jose Marfori and Josefina Reyes – Execution writ in CFI Cavite, Case No. 6480-R (registered September 26, 1960) claiming P9,410.00.
Pastor Canillas – Attachment writ in CFI Manila, Case No. 38872 (registered November 23, 1960) claiming P25,552.00.
Trinidad Calatin – Execution writ in CFI Laguna, Case No. B-191 (registered November 29, 1960) claiming P3,450.00.
Rosauro Taningco and Simplicio Ramos – A claim arising from a deed of mortgage whose registration was denied (registrability became the object of a subsequent suit in the Supreme Court, G.R. No. L-15242) claiming P9,000.00.

After a stipulation of facts and the presentation of documentary evidence by the parties, the Court of First Instance rendered a decision on December 6, 1961.
The ruling granted that the various creditors or lienholders were entitled to the proceeds of the sale.
The distribution was to be made in the order of preference following the dates of registration of their credits.

Of all the claimants, only Florentino Cayco and Jose Fernandez Zorilla appealed the ruling of the lower court.
The Court of Appeals, determining that the case involved a question purely of law, certified the appeal to the Supreme Court by resolution dated November 12, 1964.

Whether the appropriate rule for satisfying the credits at issue is based on the order of the dates of registration (i.e., a preference rule), as held by the Court of First Instance, or whether the credits should be distributed pro rata, as argued by the appellants.

Whether Article 2249 of the Civil Code, which mandates pro rata distribution of credits concerning the same specific immovable property (after payment of taxes and assessments), is applicable to the credits in question.
Whether the exception provided in Article 2242, paragraph (7) of the Civil Code, which establishes the preference of credits by registration for later credits, controls the distribution of proceeds from attachment or execution liens.