Associated Insurance and Surety Co vs. Iya, 103 Phil.

972
FACTS: Spouses Valino own a house of strong materials. The
spouses Valino executed a chattel mortgage on the said house
in favor of Associated Insurance and Surety Company.
Subsequently, to secure payment for indebtedness, the spouses
executed a real estate mortgage over the house and lot in
favor of Isabel Iya. When the Valinos failed to comply with their
obligations to the surety company, the latter moved to foreclose
of the chattel mortgage and the house was later awarded to the
surety company.
When the surety company learned that the house and lot was
subject to a real estate mortgage, they filed a complaint for the
exclusion of the house from such mortgage. Iya, on the other
hand, sought to annul the chattel mortgage contending that the
building is a real property, thus, cannot be the object of such
mortgage. The surety company argued that at the time of the
execution of the chattel mortgage, the lot was not yet owned by
the spouses, making the house as personal property.
ISSUE: Should the residential house be considered as personal
property? Who has a better right to the house?
DECISION:

NO. A building is an immovable by itself, separate and distinct

from the land. A building is an immovable property

irrespective of whether or not said structure and the land on

which it is adhered to belong to the same owner

Only personal properties can be the subject of a chattel

mortgage and since the structure in this case is an immovable, it
cannot subject to a chattel mortgage. Therefore, the chattel
mortgage and the sale on which it was based should be declared
null and void.

In this case, appellant Isabel Iya has a better right to foreclose

not only the land but also to the house because a building
certainly cannot be divested of its realty character by the fact
that the land on which it is constructed belongs to another.