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VDA. DE UY KIM, plaintiffs-appellants, vs. CONRADO S. DAVID and MARCOS MANGUBAT, defendants-appellees. Santiago F. Alidio for plaintiffs-appellants. Marcos Mangubat in his own behalf and for co-defendant-appellee Conrado S. David. CONCEPCION, J.: This is an appeal from an order of the Court of First Instance of Manila in Civil Case No. 47664 thereof. The pertinent facts are set forth in said order from which we quote: It appears from the complaint that on December 11, 1948, defendant herein Conrado S. David received a loan of P3,000 with interest at 12% per annum from Claudia B. Vda. de Uy Kim, one of the plaintiffs, and to secure the payment of the same, Conrado S. David executed a chattel mortgage on a house situated at 1259 Sande Street, Tondo, Manila; that the chattel mortgage was registered with the Register of Deeds of Manila on December 19, 1948; that on February 10, 1953, the mortgaged house was sold at public auction to satisfy the indebtedness to Claudia B. Vda. de Uy Kim, and the house was sold to Claudia B. Vda. de Uy Kim in the said foreclosure proceedings; that on March 22, 1954, Claudia B. Vda. de Uy Kim sold the said house to Marcos Mangubat, and on March 1, 1956. Marcos Mangubat filed a complaint against Conrado S. David, Civil Case No. 29078, in the Court of First Instance of Manila, for the collection of the loan of P2,000; that on March 24, 1956, the complaint was amended to include the plaintiffs herein Salvador Piansay and Claudia B. Vda. de Uy Kim as party defendants and praying that auction sale executed by the Sheriff on February 10, 1953, and the deed of absolute sale executed by Claudia B. Vda. de Uy Kim in favor of Salvador Piansay be annulled; that decision was rendered in Civil Case No. 29078 ordering Conrado S. David to pay the plaintiff the sum of P2,000, damages and attorney's fees, and dismissing the complaint with respect to Claudia B. Vda. de Uy Kim, Leonardo Uy Kim and Salvador Piansay; that upon appeal, the Court of Appeals affirmed the decision but setting aside the award of damages in favor of Claudia B. Vda. de Uy Kim; that in the execution of Civil Case No. 29078, which was affirmed by the Court of Appeals in CA-G.R. No. 21797-R, the house, which had been bought by Uy Kim at the foreclosure proceedings and sold by her to Salvador Piansay, was levied upon at the instance of the defendant Marcos Mangubat; that to prevent the sale at public auction of the house here in question, the
plaintiffs herein filed a petition for certiorari and mandamus with preliminary injunction in the Court of Appeals, CA-G.R. No. 28974-R, entitled Claudia B. Vda. de Uy Kim and Salvador Piansay versus Hon. Judge Jesus Y. Perez, et al.; that acting upon the said petition, the Court of Appeals in its order of April 28, 1961, denied the petition to lift or discharge the writ of execution. Thereupon, or on July 31, 1961, Piansay and Mrs. Uy Kim, hereinafter referred to as the plaintiffs, instituted the present action which was docketed as Civil Case No. 47664 of the Court of First Instance of Manila, against David and Mangubat, hereinafter referred to as the defendants. In their complaint, plaintiffs, after averring the foregoing facts, allege that, in the proceedings for the execution of the decision in Civil Case No. 29078. David demanded from Piansay the payment of rentals for the use and occupation of the house aforementioned, which, Piansay claims, is his property, and that the defendants are threatening to cause said house to be levied upon and sold at public auction in violation of the alleged rights of the plaintiffs. Accordingly plaintiffs prayed that a writ of preliminary injunction to restrain said levy and sale at public auction be issued and that, after appropriate proceedings, judgment be rendered declaring that Piansay is the true and lawful owner of said house sentencing the defendants to pay damages and making the preliminary injunction permanent. Mangubat moved to dismiss said complaint, upon the theory that the same is barred by the principle of res adjudicata and that plaintiffs have no personality to bring this action or to question the levy upon the house in question, because they have no interest therein. After due hearing the lower court issued the order appealed from, granting said motion and dismissing the complaint, with costs against the plaintiffs. A reconsideration of said order having been denied, plaintiffs interposed the present appeal directly to this Court only questions of law being raised in the appeal, namely: (1) applicability of the principle of res adjudicata; and (2) validity of the chattel mortgage constituted in favor of Mrs. Uy Kim. With reference to the first question, it should be noted that in case CA-G.R. No. 21797-R, the Court of Appeals affirmed the decision in Case No. 29078 of the Court of First Instance of Manila stating: In the case of Ladera, et al., vs. Hodges, et al. (CA-G.R. No. 8027-R, promulgated Sept. 23, 1952) this Court, thru Justice J. B. L. Reyes, said, among others: Since it is a rule in our law that buildings and constructions are regarded as mere accesories to the land (following the Roman maxim omne quod solo inaedificatur solo credit) it is logical that said accessories should partaked of
Jaramillo. April 23. as affirmed by the Court of Appeals in CA-G. in an order dated February 4.. L-18456. This pretense was. Strong Machinery Co. that a reconsideration of this order of February 4. thereafter. upon the theory that the chattel mortgage and sale in favor of Mrs. 1961. is null and void insofar as defendant Mangubat is concerned.R. who presided at said court. de Uy Kim. who are not parties to the aforementioned contract or their privies (Leung Yee vs. 1961. however. she could not. plaintiffs are now barred from asserting that the aforementioned chattel mortgage and sale are valid. on February 25. Nor can we give any consideration to that contention of the surety that it has acquired ownership over the property in question by reason of the sale conducted by the Provincial Sheriff of Rizal for as this court has aptly pronounced: A mortgage creditor who purchases real properties at an extra-judicial foreclosure sale thereof by virtue of a chattel mortgage constituted in his favor. 1961 having been denied by Judge Perez. and that on March 3. G. Uy Kim. but a single object (res) with it in contemplation of law. de Uy Kim did not acquire the house of defendant Conrado S. that Piansay filed with the trial court. 60 Phil. which caused the corresponding writ of execution to be issued. Uy Kim had been annulled in the original decision in said case. he is not a party thereto nor has he any interest in the subject matter therein. the sale of the house in question in the proceedings for the extrajudicial foreclosure of said chattel mortgage. L-11139. the same cannot and does not bind third persons. 632-633). 644. the registration of the document in the registry of chattels is merely a futile act. No. 1961. Alto Surety. as the court below opined. it validly to Salvador Piansay. 21797-R. as buyer in said sale. At any rate. Thus the registration of the chattel mortgage of a building of strong materials produced no effect as far as the building is concerned (Leung Yee vs. the fact is that said order became final and executory upon the denial of the petition for certiorari and mandamus. No. in the same token. of N.R. Uy Kim and Salvador Piansay was of no effect. Conceding that the contract of sale between Mrs. Mrs. The house in question can therefore be levied upon because it had remained the property of defendant David (Emphasis supplied). the house in question was levied upon. the records of the case were remanded to the Court of First Instance of Manila. G. in its order of February 4. 1958. this Act produced no effect whatsoever for where the interest conveyed is in the nature of real property. Evangelista vs. we cannot nevertheless set it aside upon instance of Mangubat because. for a writ of certiorari and mandamus to annul said orders of Judge Perez and to compel him to release said house from the aforementioned levy. 44 Phil. Ah Kee. 37 Phil. who had acquired it at the auction sale held in connection with the extrajudicial foreclosure of the chattel mortgage constituted in her favor by David. that. presided over by Hon. de Uy Kim might not be annulled but it did not transmit any right from defendant David to Claudia B.R. a motion to set aside said levy. Hence. The mere fact that the dispositive part of the decision states that the complaint is dismissed with respect to defendants Claudia B. No." In other words. 644). which is the land forming. . Thus. as they do.R. and did not confer upon Mrs. 899).. regardless of the validity of a contract constituting a chattel mortgage on a house. Judge. to annul the same in CA-G.R. because it was in reality a mere contract of an unsecured loan. as it was never sold or mortgaged to him (Emphasis supplied). 29078 of the Court of First Instance of Manila. Navarro vs. plaintiffs instituted case CA-G. November 30. Regardless of whether this theory is accurate or not. Perez.. overruled by Judge Perez. any . (De la Riva vs. Uy Kim. No. And as Mrs. As a consequence. in Civil Case No. Uy Kim had no right to foreclose the alleged chattel mortgage constituted in her favor. that this motion was denied by said court. Y. as between the parties to said contract (Standard Oil Co. he having bought it from Mrs. upon the following ground: Considering that the decision rendered by the Court of Appeals in this case when the same was elevated to said Court recognizes that defendant Claudia B. 28974-R of the Court of Appeals. No. Strong Machinery Co. It follows that the Sheriff was not authorized to sell the house as a result of the foreclosure of such chattel mortgage. 28974-R of the Court of Appeals. Piansay assailed the right of Mangubat to levy execution upon the house in question alleging that the same belongs to him. vs. de Uy Kim. Pineda. 1961. Uy Kim could not have acquired the house when the Sheriff sold it at public auction. David and can therefore be executed by the plaintiff to satisfy the judgment rendered against said defendant David in favor of the plaintiff. the Court of Appeals denied said petition for certiorari and mandamus "insofar as it prays that the order of respondent Judge denying the lifting and discharge of the writ of execution be set aside and revoked. While it is true that said document was correspondingly registered in the Chattel Mortgage Register of Rizal. Jesus Y.. which mortgage has been declared null and void with respect to said real properties acquires no right thereto by virtue of said sale. that upon the request of Mangubat. 1963). Leonardo Uy Kim and Salvador Piansay is of no moment because the chattel mortgage executed by David in favor of Claudia B.the nature of the principal thing. 37 Phil.
with costs against plaintiffs Salvador Piansay and Claudia B.dominical right in and to said house (De la Riva vs. concur. as between the parties to the said contract. JJ.. WHEREFORE. 60 Phil. The latter then filed charges against David for the collection of loan and praying that the deed of sale issued by Kim in favor of Piansay be declared null and void. Vda. Bautista Angelo. the others appealed from are hereby affirmed. As a consequence. Reyes. de Uy Kim. The trial court held David liable to Mangubat but dismissed the complaint with regard Kim and Piansay. Bengzon. is null and void insofar as Mangubat is concerned and didn’t confer upon Kim as buyer in said sale. Makalintal. Barrera. which the latter claims to be his property. 800). It is so ordered.P. Due to the civil case. Kim and Piansay then filed charges against David and Mangubat. Bengzon. Paredes. J. plaintiff Piansay any such right as against defendant Mangubat. the sale of the house in question in the proceedings for the sale of the house in question in the proceedings for the extrajudicial foreclosure of said chattel mortgage. Due to failure to pay. Ah Yee. any dominical right in and to said house.L. HELD: Regardless of the validity of a contract constituting a chattel mortgage on a house. De Uy Kim. the CM was foreclosed and Kim was the highest bidder in the public auction. In short plaintiffs have no cause of action against the defendants herein. and Zaldivar. DAVID 12 SCRA 227 FACTS: David secured a loan from Vda.. he executed a chattel mortgage over a house in favor of Kim. . the same cannot and doesn’t bind third persons who aren’t parties to the aforementioned contract or their privies. J. C.J.B. Kim then sold the house to Mangubat. David demanded from Piansay the payment of rentals for the use of the house. Dizon Regala. PIANSAY V. so that she could not have transmitted to her assignee. and to secure the payment.
with petitioner arguing that it is a personality. 36040. The contention of private respondent is without merit. After several incidents. 122 SCRA 296 . (collaborating counsel) for petitioner.. Petitioner thereafter filed a complaint for judicial foreclosure with the Court of First Instance of Rizal.R. the lower court issued a writ of seizure. as Presiding Judge of the Court of First instance of Rizal Branch VI. 1981. 1981 in CA-G. respondents. which accordingly held that the chattel mortgage constituted thereon is null and void. and HONORABLE COURT OF APPEALS. repaired to the premises of private respondent and removed the main drive motor of the subject machinery. while the respondent claiming the contrary. A motion for reconsideration of this decision of the Court of Appeals having been denied.. Inc.R. vs. petitioner has brought the case to this Court for review by writ of certiorari. because it is a real property pursuant to Article 415 of the new Civil Code. vs. The next and the more crucial question to be resolved in this Petition is whether the machinery in suit is real or personal property from the point of view of the parties. Reyes. Vicencio. an order lifting the restraining order for the enforcement of the writ of seizure and an order to break open the premises of private respondent to enforce said writ.L. On July 13. that the instant petition was rendered moot and academic by petitioner's act of returning the subject motor drive of respondent's machinery after the Court of Appeals' decision was promulgated. Baduan for petitioner.Makati Leasing and Finance Corp. setting aside certain Orders later specified herein. and was sustained by the appellate court. discounted and assigned several receivables with the former under a Receivable Purchase Agreement. it made itself unequivocably clear that said action was without prejudice to a motion for reconsideration of the Court of Appeals decision. the enforcement of which was however subsequently restrained upon private respondent's filing of a motion for reconsideration. the reason why all that the sheriff could do to enfore the writ was to take the main drive motor of said machinery. 36040. It appears that in order to obtain financial accommodations from herein petitioner Makati Leasing and Finance Corporation. if not Identical issue was raised in Tumalad v. DE CASTRO. 1 Considering that petitioner has reserved its right to question the propriety of the Court of Appeals' decision. Francisco. much less of a chattel mortgage. No. Ramon D. the same being attached to the ground by means of bolts and the only way to remove it from respondent's plant would be to drill out or destroy the concrete floor. the contention of private respondent that this petition has been mooted by such return may not be sustained. J. Inc. 1981.B. 41 SCRA 143 where this Court. 1983 G. However. the lower court finally issued on February 11. the case before the lower court. The Court of Appeals. Upon private respondent's default. petitioner filed a petition for extrajudicial foreclosure of the properties mortgage to it. When petitioner returned the subject motor drive. as wen as the resolution dated September 22. Jose V. after ruling that the machinery in suit cannot be the subject of replevin.: Petition for review on certiorari of the decision of the Court of Appeals (now Intermediate Appellate Court) promulgated on August 27. petitioner. as contended by said respondent. issued in Civil Case No. 1983 MAKATI LEASING and FINANCE CORPORATION.. A similar. The lower court reaffirmed its stand upon private respondent's filing of a further motion for reconsideration. however. To secure the collection of the receivables assigned. Mancella for respondent. ruled: . speaking through Justice J. the private respondent Wearever Textile Mills. May 16. Wearever Textile Mills. set aside the Orders of the lower court and ordered the return of the drive motor seized by the sheriff pursuant to said Orders. It is contended by private respondent. No. denying petitioner's motion for reconsideration. the sheriff enforcing the seizure order. 1981 of the said appellate court. WEAREVER TEXTILE MILLS. SP-12731. the Deputy Sheriff assigned to implement the foreclosure failed to gain entry into private respondent's premises and was not able to effect the seizure of the aforedescribed machinery. Loreto C. Acting on petitioner's application for replevin. private respondent executed a Chattel Mortgage over certain raw materials inventory as well as a machinery described as an Artos Aero Dryer Stentering Range. The appellate court rejected petitioner's argument that private respondent is estopped from claiming that the machine is real property by constituting a chattel mortgage thereon. INC. Bagatsing & Assoc. No. Branch VI. L-58469 May 16. in certiorari and prohibition proceedings subsequently filed by herein private respondent. docketed as Civil Case No. as shown by the receipt duly signed by respondent's representative. L58469. of Judge Ricardo J.
which is movable in its nature and becomes immobilized only by destination or purpose. by a proper action in court. the status of the subject machinery as movable or immovable was never placed in issue before the lower court and the Court of Appeals except in a supplemental memorandum in support of the petition filed in the appellate court. be allowed to impugn the efficacy of the chattel mortgage after it has benefited therefrom. But the law makes no distinction with respect to the ownership of the land on which the house is built and We should not lay down distinctions not contemplated by law. Private respondent could not now therefore. It must be pointed out that the characterization of the subject machinery as chattel by the private respondent is indicative of intention and impresses upon the property the character determined by the parties. This contention lacks persuasiveness. From what has been said above. the error of the appellate court in ruling that the questioned machinery is real. & Leung Yee vs. it does so when combined with other factors to sustain the interpretation that the parties. In rejecting petitioner's assertion on the applicability of the Tumalad doctrine. such fact alone does not render a contract void ab initio. 630. Examining the records of the instant case. F. As aptly pointed out by petitioner and not denied by the respondent. but can only be a ground for rendering said contract voidable. selling or transferring a property by way of chattel mortgage defendants-appellants could only have meant to convey the house as chattel. like what was involved in the above Tumalad case. Moreover. We find no logical justification to exclude the rule out. Guerrero and Escolin JJ. Equity dictates that one should not benefit at the expense of another. J.. as debtors-mortgagors. Strong Machinery & Williamson. yet by ceding. 70. particularly the mortgagors. the Court of Appeals lays stress on the fact that the house involved therein was built on a land that did not belong to the owner of such house. the subject house stood on a rented lot to which defendants-appellants merely had a temporary right as lessee. as long as no interest of third parties would be prejudiced thereby. concurs in the result. the present case from the application of the abovequoted pronouncement. CA. If a house of strong materials. The doctrine of estoppel therefore applies to the herein defendants-appellants. it is the defendants-appellants themselves. v. Abad Santos.L. wherein third persons assailed the validity of the chattel mortgage. or at least. and they were not the subject of a Chattel Mortgage. intended to treat the same as such. There is nothing on record to show that the mortgage has been annulled. Aquino. may be considered as personal property for purposes of executing a chattel mortgage thereon as long as the parties to the contract so agree and no innocent third party will be prejudiced thereby. WHEREFORE. so that they should not now be allowed to make an inconsistent stand by claiming otherwise. Undoubtedly. unlike in the Iya cases. even granting that the charge is true. . Concepcion Jr. Inc. Lopez vs. there is absolutely no reason why a machinery. concur. the case of Machinery and Engineering Supplies. Private respondent contends that estoppel cannot apply against it because it had never represented nor agreed that the machinery in suit be considered as personal property but was merely required and dictated on by herein petitioner to sign a printed form of chattel mortgage which was in a blank form at the time of signing. Neither is it disclosed that steps were taken to nullify the same. may not be likewise treated as such. heavily relied upon by said court is not applicable to the case at bar. Makasiar (Chairman). the Tumalad case bears more nearly perfect parity with the instant case to be the more controlling jurisprudential authority. it is undeniable that the parties to a contract may by agreement treat as personal property that which by nature would be real property. Finally. intended to treat the house as personality. 96 Phil. & Plaza Theatre.. as the appellate court did. Moreover. As stated in Standard Oil Co. and the Orders of the lower court are hereby reinstated.Although there is no specific statement referring to the subject house as personal property. SO ORDERED. Inc. having treated the subject house as personality. Orosa. Moreover. who are attacking the validity of the chattel mortgage in this case. Jaramillo. or annullable pursuant to Article 1390 of the new Civil Code. On the other hand. and although this can not in itself alone determine the status of the property.. as pointed out by petitioner and again not refuted by respondent. the questioned decision and resolution of the Court of Appeals are hereby reversed and set aside. not personal property. with costs against the private respondent. 44 Phil. Jr. the nature of the machinery and equipment involved therein as real properties never having been disputed nor in issue. This is really because one who has so agreed is estopped from denying the existence of the chattel mortgage. of New York v. the latter has indubitably benefited from said contract. becomes very apparent.
Inc. may not be likewise treated as such. 1983 FACTS Wearever Textile Mills. On the other hand. There is no record showing that the mortgage has been annulled. or that steps were taken to nullify the same. vs Wearever Textile Mills. Inc. private respondent could no longer be allowed to impugn the efficacy of the chattel mortgage after it has benefited therefrom. the sheriff enforcing the seizure order seized the machinery subject matter of the mortgage. In rejecting petitioner’s assertion on the applicability of the Tumalad doctrine. like what was involved in the Tumalad case. But the law makes no distinction with respect to the ownership of the land on which the house is built and We should not lay down distinctions not contemplated by law. may be considered as personal property for purposes of executing a chattel mortgage thereon as long as the parties to the contract so agree and no innocent third party will be prejudiced thereby. by agreement.Makati Leasing and Finance Corp.. Makati Leasing fi led a petition for judicial foreclosure of the properties mortgaged. If a house of strong materials.. Upon default. Therefore. executed a chattel mortgage contract in favor of Makati Leasing and Finance Corporation covering certain raw materials and machinery. which is movable in its nature and becomes immobilized only by destination or purpose. Makati Leasing elevated the matter to the Supreme Court. 630. 122 SCRA 296 GR No. The status of the subject matter as movable or immovable property was not raised as an issue before the lower court and the CA. Acting on Makati Leasing’s application for replevin. As stated in Standard Oil Co. It must be pointed out that the characterization by the private respondent is indicative of the intention and impresses upon the property the character determined by the parties. Pursuant thereto. the questioned machinery should be considered as personal property. there is absolutely no reason why a machinery. This is really because one who has so agreed is estopped from the denying the existence of the chattel mortgage. the same being attached to the ground by means of bolts and the only way to remove it from Wearever textile’s plant would be to drill out or destroy the concrete fl oor. Equity dictates that one should not benefit at the expense of another. 41 SCRA 143. 44 Phil. Jaramillo. L-58469 May 16. the CA lays stress on the fact that the house involved therein was built on a land that did not belong to the owner of such house. treat as personal property that which by nature would be a real property as long as no interest of third parties would be prejudiced thereby. When the motion for reconsideration of Makati Leasing was denied by the Court of Appeals. ISSUE Whether the machinery in suit is real or personal property from the point of view of the parties. of New York v. it is undeniable that the parties to a contract may. HELD There is no logical justification to exclude the rule out the present case from the application of the pronouncement in Tumalad v Vicencio. the lower court issued a writ of seizure. except in a supplemental memorandum in support of the petition filed in the appellate court. As such. . the Court of Appeals ordered the return of the machinery on the ground that the same can-not be the subject of replevin because it is a real property pursuant to Article415 of the new Civil Code. In a petition for certiorari and prohibition. respondent has benefited from the said contract.
(Filinvest Credit Corporation did not file any motion for reconsideration because it had entered into a compromise with Ong.. on the ground that the decision had not yet become final. It agreed to pay Ong.: Northern Motors. It invoked the additional ground that it has an unpaid vendor's lien on the mortgaged taxicabs.27 against Manila Yellow Taxicab Co. Of those thirty-five taxicabs.. the sheriff on December 12. Inc. and twelve to Filinvest Credit Corporation under the assignment already mentioned.. FILINVEST CREDIT CORPORATION. which were levied upon by the mortgagor's unsecured judgment creditor. petitioner. at two-thirty in the afternoon. Inc. 1974 purchased on the installment plan from Northern Motors. Inc. The sheriff made an additional levy on thirty-five mortgaged taxicabs to satisfy the unpaid balance of the judgment. On that same day. In the decision sought to be reconsidered. 1975 Northern Motors. Filinvest Credit Corporation was allowed to intervene in the action. Inc. raised anew the issue of whether its chattel mortgage lien over certain taxicabs. in Civil Case No. Later. vs. COQUIA. 1974 levied upon twenty taxicabs of which eight were mortgaged to Northern Motors. the petition was denied and the restraining order was dissolved. intervenor. It further contends that the lower court gravely abused its discretion in cancelling the indemnity bonds posted by the judgment creditor of the chattel mortgagor. P145. DOMINADOR Q. through his counsel. It ruled that the chattel mortgagee was not entitled to the possession of the mortgaged taxicabs by the mere fact of the execution of the mortgage and that the mortgage lien followed the chattel whoever might be its actual possessor. THE SHERIFF OF MANILA. Northern Motors. It executed chattel mortgages on the cars in favor of Northern Motors. as held in that decision. filed its certiorari petition in this case to annul the resolution of January 17. and Filinvest Credit Corporation filed the corresponding third-party claims with the sheriff. the factual background of that issue is as follows: Manila Yellow Taxicab Co. Inc. 1974 Tropical Commercial Co. and Filinvest Credit Corporation filed third-party claims. . Rule 39 of the Rules of Court. No. L-40018 August 29.311. 1975 G. Again.R. Inc.. On January 23. Northern Motors. in May and June. 1975. Inc. the lower court cancelled the indemnity bonds without notice to the third-party claimants. obtained a judgment for P167. As set forth in the decision. while twenty-eight were mortgaged to Filinvest Credit Corporation. CACPAL. No. 1975. 68 SCRA 374 . posted indemnity bonds. It realized that an independent action would be illusory). The Acting Executive Sheriff of Manila. December 15. J. Coquia. Inc. the cars were sold at public auction although there was an alleged agreement that the cars would be sold at four o'clock. 71584 of the Court of First Instance of Manila. The notes and the chattel mortgages for 172 cars were assigned to Filinvest Credit Corporation. The lower court in its resolution of January 17. Part of that judgment or the sum of P110.000 on each car. seven were mortgaged to Northern Motors. To satisfy the judgment credit. 1975 NORTHERN MOTORS.. It made a down payment of P1. Inc. HONESTO ONG. L-40018. Inc.. We ruled that the mortgagee's remedy is to vindicate its claim in a proper action as provided in section 17. Inc. This Court issued a restraining order against the scheduled auction sale. and that its mortgage lien attached to the taxicabs wherever they might be. the writ of execution and the disposition of the proceeds of the first execution sale.250 for each car. Inc. vs.000 was eventually assigned to Honesto Ong for an unspecified valuable consideration. could be asserted in the case where the judgment was rendered or should be ventilated in an independent action. two hundred Holden Torana cars at the price of P28. Northern Motors. Inc.Northern Motors. the restraining order was maintained. Inc. 1975 and to stop the second auction sale. Inc. INC. as security for the promissory notes covering the balance of the price. and/or his duly authorized deputy sheriff or representative. The auction sale was scheduled on January 23. contends in its motion for reconsideration that as chattel mortgagee and unpaid vendor it has the better right to the possession of the mortgaged taxicabs and that claims should be resolved in the case where the writ of execution was issued and not in a separate action which allegedly would be an ineffective remedy. On December 18. in its motion for the reconsideration of this Court's decision promulgated on March 21.000 for the release of twenty-eight taxicabs. 1975 refused to reinstate the indemnity bonds. THE HONORABLE JORGE R. Upon motion of Northern Motors. Executive Judge of the Court of First Instance of Manila. RESOLUTION AQUINO. Tropical Commercial Co.
since Northern Motors. and be able to redeem the vehicles from Northern Motors. Inc. 1508).It insists that it is entitled to the possession of the taxicabs because the condition of the chattel mortgages had already been broken and. It alleges that some of the buyers at the auction sale were fictitious and that the cars valued at P28. Inc. then the purchaser was "not entitled to the actual possession and delivery of the automobile without first paying" the mortgage debt (Levy Hermanos.. Rule 39. Levy Hermanos. L-32674. Manila Yellow Taxicab Co. 42 Phil.. To regard it as a conditional sale is to rattle" the bones of an antiquated skeleton from which all semblance of animate life has long since departed". If the judgment creditor. for that reason. To levy upon the mortgagor's incorporeal right or equity of redemption. the Serra ruling (infra) does not apply to this case. 916). He could have levied only upon the right or equity of redemption pertaining to the Manila Yellow Taxicab Co. Ong. "After a chattel mortgage is executed. The sheriff and the judgment creditor are deemed to have constructive notice of the chattel mortgages on the taxicabs (Ong Liong Tiak vs. Levying upon the property itself is distinguishable from levying on the judgment debtor's interest in it (McCullough & Co.. Ramirez and Casimiro. 978. 1 Originally. Inc..000 each. had the symbolical possession of the taxicabs (Meyers vs. Inasmuch as the condition of the chattel mortgages had already been broken and Northern Motors. under the facts of this case. with a copy of the writ of execution and served upon it a notice that its right or equity of redemption in the mortgaged taxicabs was being levied upon pursuant to that writ (Sec. preferential and paramount right to have possession of the mortgaged taxicabs and to claim the proceeds of the execution sale (See Bachrach Motor Co. vs. 15 Phil. Luneta Motor Co. 7[e]. Inc . Rule 39 and see. the chattel mortgage was regarded as a conditional sale of personal property (See. Northern Motors. Herrera. vs. because that was the only leviable or attachable property right of the company in the mortgaged taxicabs (Manila Mercantile Co. As a consequence of the registration of the mortgages. vs. there was no necessity for an indemnity bond. the judgment creditor and the sheriff argue that. Inc. vs. 984." there is no real analogy between the chattel mortgage contract and a conditional sale as understood in the civil law. noted that if the only attachable interest of a chattel mortgagor in a mortgaged car was his right of redemption and if the purchaser at the execution sale could not acquire anything except such right of redemption. Manila Yellow Taxicab Co. in a concurring opinion. the chattel mortgagee. was not a proper third-party claimant. 459). 66 Phil.. as held in Serra vs. that Northern Motors. Article 2140 of the Civil Code. 15. As clarified in Bachrach Motor Co. Inc.. in defining a chattel mortgage as the recording of personal property in the Chattel Mortgage Register as security for the performance of an obligation. Act No. Inc. Valdez and Morales. 60 Phil. 1974. Ramirez and Casimiro. It would have sufficed if he furnished the chattel mortgagor. it was similar to a pacto de retro sale of personality. article 2140 has preserved the distinction between pledge and chattel mortgage which was blurred by . We hold. Inc. reiterate their contention that the chattel mortgagee's remedy is in an independent action. Justice Imperial. Inc. 759. it was not necessary for the sheriff to have taken physical possession of the mortgaged taxicabs. In this case what the sheriff could have sold at public auction was merely the mortgagor's right or equity of redemption. Tropical Commercial Co. It was ruled in the Serra case that a chattel mortgagee could not be regarded as a third-party claimant within the meaning of section 14. 56 SCRA 538. 110. 48 Phil. the rule involved in the instant case) "because a chattel mortgage is merely a security for a loan and does not transfer title of the property mortgaged to the chattel mortgagee". 115). vs. At the same time. 20536. has adhered to the equitable conception of that contract. bought the mortgagor's equity of redemption at the auction sale. should not be required to vindicate in a separate action its claims for the seven mortgaged taxicabs and for the proceeds of the execution sale of the other eight mortgaged taxicabs. Rodriguez.. 303). 42 Phil. the mortgagee. 978. 25 Phil. as chattel mortgagee and unpaid vendor. vs. 985). had in fact instituted an action for replevin so that it could take possession of the mortgaged taxicabs (Civil Case No. by paying the mortgage debt. Rizal CFI)..250 each were sold for less than P3.. Respondent sheriff wrongfully levied upon the mortgaged taxicabs and erroneously took possession of them. As such. then it would step into the shoes of the mortgagor. 3. 60 Phil. Flores. Inc.. 910. February 22. As a corollary. 1973. Thein. as chattel mortgagor and judgment debtor. per Makasiar. 981). 2nd par. Inc. April 22. 49 SCRA 392). it has a superior. Inc. Taylor. Summers. Summers. Rule 57 of the Rules of Court). 3.. Rule 57 of the Rules of Court (similar to section 17. there remains in the mortgagor a mere right of redemption" (Tizon vs. or the assignee. L-25546.. Northern Motors. J. in their opposition to the motion for reconsideration. The judgment creditor and the sheriff. vs. 50 Phil." The prevailing equitable conception of the chattel mortgage is that it is merely a security. 3.
. 822-824). Luneta Motor Co. 1006. appliances and machinery. Dealers of cars. 66 Phil. 1969.J. The equity of redemption of the mortgagor will pass to the purchaser at an execution sale (Tizon vs. (14 C. and Filinvest Credit Corporation. A seizure and sale of the mortgaged property under a writ of attachment or execution in derogation of the mortgagee's rights constitutes a conversion. commodatum and depositum should be absorbed by the chattel mortgage contract. Evangelista. trucks. That the chattel mortgagee has the symbolical possession and that he has the preferential right to have physical possession is inferable from article 319 of the Revised Penal Code which penalizes any person who knowingly removes the mortgaged chattel to any province or city other than the one in which it was located at the time of the execution of the mortgage. 17. Inasmuch as what remains to the mortgagor is only the equity of redemption. observed that "no one can take the title away from the mortgagee except the mortgagor and he only in the manner prescribed by the mortgage itself and that the general statement is therefore correct that after the execution of a chattel mortgage and its registry as required by law.section 4 of the Chattel Mortgage Law when it provided that in a chattel mortgage" the possession of the property is delivered to and retained by the mortgagee" or. 28 SCRA 1000.000 filed on December 18. (Article 319 was taken from sections 9 to 12 of the Chattel Mortgage. 1974 by Filriters Guaranty Assurance Corporation for Tropical Commercial Co. 1975. In the Cabral case the unsecured judgment creditor (of the chattel mortgagor) who bought the mortgaged chattels at the execution sale was held solidarily liable with the mortgagor to the chattel mortgagee for the mortgage obligation. if no such possession is delivered. as a third-party claimant. or a subsequent attaching creditor may redeem the same by paying or delivering to the mortgagee the amount due on such mortgage and the reasonable costs and expenses incurred by such breach of condition before the sale thereof. 13. Inc. in his concurring opinion in the case of In re Du Tec Chuan.. Limjap. A chattel mortgagee. have relied on the chattel mortgage as an effective security. When the condition of a chattel mortgage is broken a mortgagor or person holding a subsequent mortgage. without the written consent of the mortgagee or his executors. Historically. It is not right nor just that the lien of a secured creditor should be rendered nugatory by a wrongful execution engineered by an unsecured creditor. 145). Inc. who resort to installment sales. 48 Phil. 303. is subordinate to the lien of the mortgagee who has in his favor a valid chattel mortgage (Cabral vs. comes within the purview of the following provisions of Rule 39: SEC. be reinstated. L-26860. 459 462. Proceedings where property claimed by third person. who purchased the mortgaged chattel at an execution sale. 1508 provides: SEC. administrators or assigns. 2 A third person with actual or constructive notice who wrongfully interferes with a mortgaged chattel may be liable for damages or for a conversion. July 30.J. Thein. nobody can obtain an interest in that property adverse to that of the mortgagee". it was held that the registration of the chattel mortgage was tantamount to the symbolical delivery of the possession of the mortgaged chattel to the mortgagee. C. 15 Phil. as one of the four real contracts of the jus civile (the others being mutuum. Justice Moreland. 141. 306. In the business world the chattel mortgage has greatly facilitated sales of goods and merchandise. Valdez and Morales. 914).) Act No. per Arellano. 488. Under section 4 of the Chattel Mortgage Law. An attaching creditor who so redeems shall be subrogated to the rights of the mortgagee and entitled to foreclose the mortgage in the same manner that the mortgagee could foreclose it by the terms of this Act. it is not proper that the contract of pledge (pignus). 34 Phil. — If property levied on be claimed by any other person than the judgment debtor or his . Ong Liong Tiak vs.S. It penalizes also any mortgagor who sells or pledges the mortgaged chattel without the consent of the mortgagee written on the back of the register of deeds of the province where such chattel is located. it follows that the right of the judgment or attaching creditor. a symbolical delivery which was equivalent to actual delivery (Meyers vs. Northern Motors. prayed in its motion that the two indemnity bonds for P480. 1975 and reaffirmed the cancellation in its order of January 17. 56 Phil. 910. Sales of merchandise would be sluggish and insubstantial if the Chattel Mortgage Law could not protect dealers against the defaults and delinquencies of their customers and if the mortgagee's lien could be nullified by the maneuvers of an unsecured judgment creditor of the chattel mortgagor. The lower court cancelled ex parte said bonds in its order of January 3. We hold that there was grave abuse of discretion in cancelling the said bonds without notice to Northern Motors. the mortgage should be recorded in the proper registry of deeds. 2 Our ruling in this case is in consonance with the purpose of the Chattel Mortgage Law to promote business and trade and to give impetus to the country's economic development (Torres vs. Inc.
Northern Motors. Castro...Indemnity bond was posted by TROPICAL. on demand of the officer. 8 of which are security for the chattel mortgage. is entitled to bring the appropriate action to recover the damages which it might have suffered in consequence of the wrongful execution. and a copy thereof upon the judgment creditor.. Ong argues admits that the mortgagee has a better right that the judgment creditor. unless such judgment creditor or his agent. Inc. 1974. but the bond was cancelled after the sale without notice to Northern Motors. (a) the proceeds of the execution sale held on December 18. Muñoz Palma. 1975 is reconsidered and set aside. executed a chattel mortgage over several taxicabs in favor of Northern Motors. Costs against respondent Ong. On December 12 1974. Teehankee. JJ. 1975 Facts: Manila Yellow Taxicab. to any third-party claimant unless a claim is made by the latter and unless an action for damages is brought by him against the officer within one hundred twenty (120) days from the date of the filing of the bond. C.. and because what a judgment creditor of the chattel mortgagor can attach is only the equity or right of redemption and. Concepcion Jr. Thein. indemnify the officer against such claim by a bond in a sum not greater than the value of the property. levied on.. Sheriff then levied upon 20taxicabs. The officer is not liable for damages. Inc. Esguerra. But nothing herein contained shall prevent such claimant or any third person from vindicating his claim to the property by any proper action . the propriety and justice of ordering them to re-file the indemnity bonds appear to be doubtful. COQUIA G. The proceeds of the auction were in contest and the sheriff is deducting the expenses of the execution sale from the proceeds. concurs in the result. The auction sale proceeded and the purchasers were of unknown addresses. for the mortgage obligations secured by the eight mortgaged taxicabs which were sold at the execution sale. the decision of March 21.J. . as already noted.R. stating the grounds of such right or title. The petitioner now seeks reconsideration also on the reinstatement of the bond. However.. the recording of the mortgage gives him the symbolical possession of the mortgaged chattel which was construed as "equivalent to the actual delivery of possession to the creditor" (Meyers vs. contemplates that the mortgagor should always have the physical possession of the mortgaged chattel until there is a breach. took no part. inasmuch as the one hundred twenty-day period for filing an action against the sheriff had already expired. is on leave. Fernando. and serve the same upon the officer making the levy. The taxies were levied and sold at an auction sale. to effectuate the attachment levy it is not requisite that the mortgaged chattel itself be seized by the sheriff. but argues that the purchaser from the auction sale must have a right superior to that of the mortgagee. in relation to article 319 of the Revised Penal Code. J. The chattel mortgagee may file a third-party claim. WHEREFORE. 1974 for the eight taxicabs mortgaged to it less the expenses of execution and (b) the seven taxicabs which were levied upon by him and which are also mortgaged to the corporation. Inc. Antonio. concur.. 7 of which are mortgaged to Northern Motors. A second levy was made upon 35 taxicabs. Following the ruling the Cabral case. NORTHERN MOTORS VS. Makasiar. and the surety have not been impleaded in this case.. the officer shall not be bound to keep the property. and since Tropical Commercial Co. Northern Motors filed an intervention on December 18. No. and such person make an affidavit of his title thereto or right to the possession thereof. This is a motion for reconsideration in the SC decision pronouncing that the Mortgagee has a better right than the judgment debtor over the taxicabs. L-40018 December 15. and Martin. the same shall be determined by the court issuing the writ of execution. J.. Inc. less the net proceeds of the sale. SO ORDERED.. the levied taxicabs were sold the same day at 2pm although agreement shows that it should have happened at 4pm.. J. The Chattel Mortgage Law. even before there is a breach of the mortgage because. in which case the mortgagee become entitled to take possession of the chattel so that the mortgage can be foreclosed.agent. hence the 8 taxicabs cannot be recovered. Makalintal. however. supra on page 306). Respondent Sheriff is directed to deliver to Northern Motors. for the taking or keeping of the property. TROPICAL is a judgment creditor of Yellow Taxicab who assigned the judgment to ONG. Barredo. respondent Honesto Ong is held solidarity liable with Manila Yellow Taxicab Co. In case of disagreement as to such value.
since the addresses of the purchasers are unknown. the proceeds of the sale must be delivered to the mortgagee. The mortgagee has a better right to the possession of the taxicabs. it is therefore improper to deduct the expenses of an illegal auction from the proceeds thereof. however. . 2nd: No.Issue/s: Whether the expenses for the execution sale should be deducted from the proceeds thereof? Whether the purchaser has a better right than the creditor? Whether the bond should be reinstated? Held: 1st: No. The full proceeds of the sale are due to the mortgagee without any unreasonable and illegal deductions. the purchaser of the auction sale merely steps in the shoes of the judgment creditor as they have been aware of the claim of the mortgagee. The mortgagee can only able to collect the proceeds from the auction sale because the purchasers are of unknown addresses. it was already established that the levy on the property was illegal.
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