G.R. No. L-7132, February 20, 1912
MARIA ESGUERRA, plaintiff-appellee, vs. MARIANO TECSON, ET AL., defendants-appellants.

FACTS

Potenciano Roxas assumed a debt of P1,612 owed by Mariano Tecson to Maria Esguerra, secured by a mortgage on a steam rice mill, its frame building, bamboo fence, and galvanized-iron roof. The debt was payable three months after June 4, 1907. Subsequently, other creditors (Hidalgo, Cuyugan & Co. and Manuel E. Cuyugan) obtained money judgments against Potenciano Roxas. On May 27, 1908, the Provincial Sheriff of Bulacan levied upon the mortgaged properties (the steam engine/rice mill and a house/warehouse with equipment) to satisfy these judgments. The properties were sold at public auction on June 26, 1908, with the machinery going to Castle Bros-Wolf & Sons and the house/warehouse to the judgment creditors. The sheriff issued the corresponding bills of sale on June 27, 1908. Maria Esguerra first asserted her mortgage credit and claimed preference over the judgment creditors on June 25, 1908, and the sheriff was formally notified and enjoined on June 29, 1908after the auction sale had been consummated and the proceeds paid to the judgment creditors. The Court of First Instance of Bulacan ruled in favor of Esguerra, declaring her credit preferential and ordering the judgment creditors to either turn over sufficient proceeds from the sale or the warehouse itself to satisfy her claim. Both parties appealed.

ISSUE

Whether Maria Esguerra, a mortgage creditor, can enforce her preferential right over the proceeds of an execution sale or the property itself after the sale has been consummated and the proceeds distributed to the judgment creditors.

RULING

No. The Supreme Court reversed the judgment of the lower court. The Court held that:
1. The sheriff could not comply with Esguerra’s injunction to retain the sale proceeds because they had already been lawfully paid to the judgment creditors on June 27, 1908, before the injunction was served on June 29, 1908.
2. The judgment creditors, having received the proceeds through a valid execution and auction, had a right to retain them as payment of their judgments.
3. The judgment creditors could not be compelled to surrender the property they purchased at the auction, as they had acquired all rights to it through the sheriff’s bill of sale, and no action had been brought to annul or rescind that sale.
4. Even assuming Esguerra’s credit was preferential, such preference cannot be used to annul already concluded judgments and executions. The law protects those who vigilantly assert their rights (vigilanti prospiciunt jura).
5. The issue of preference should have been raised before the judgment and payment were completed; it was improper to litigate it after the fact.

Thus, the Court denied Esguerra’s claim for preference over the proceeds or the property, without special costs in the second instance.