No. L-27132. April 29, 1971.

PHILIPPINE NATIONAL BANK, plaintiff-appellee, vs. MANILA INVESTMENT &CONSTRUCTION,INC. and

CIPRIANO S. ALLAS, defendants-appellants.

Facts: CFI of Manila rendered a decision condemning the defendants, jointly and severally,
to pay the plaintiff of the following; under the first cause of action the sum of P88,939.48
with daily interest and the second cause of action the sum of P356,913.01. In case of non-
payment, the decision provided for the sale at public auction the personal properties
covered by the chattel mortgage executed by the defendants in favor of the plaintiff bank.
After the decision, instead of having mortgaged personal properties sold at public auction,
they agreed to do it at private sale. Net proceeds were applied to the partial satisfaction of
the judgment. Five years after the judgment, the action to revive was filed in the same
court.

Issue: Whether or not in the case of foreclosure under a chattel mortgage the mortgagee or
creditor may maintain an action for the deficiency.

Ruling: . In case of a sale under a foreclosure of a chattel mortgage, there is no question

that the mortgagee or creditor may maintain an action for the deficiency, if any should
occur. And the fact that Act No. 1508 permits a private sale, such sale is not in fact, a
satisfaction of the debt, to any greater extent than the value of the property at the time of
the sale. The amount received at the time of the sale, of course, always requiring good faith
and honesty in the sale, is only a payment, pro tanto, and an action may be maintained for
a deficiency in the debt.

It is clear from Article 2141 that the provisions of the New Civil Code on pledge shall apply
to a chattel mortgage only in so far as they are not counter to any provision of the Chattel
Mortgage Law, otherwise the provisions of the latter shall apply. The provisions of the
Chattel Mortgage with regard to the effects of the foreclosure of a chattel mortgage are
precisely contrary to the provisions of Article 2115 which were applied by the trial Court
GR No. L-58469. May 16, 1983. *

MAKATI LEASING and FINANCE CORPORATION, petitioner, vs. WEAREVER

TEXTILE MILLS, INC., and HONORABLE COURT OF APPEALS, respondents.

Facts:
To be able to secure financial accommodations from the petitioner, the private
respondent discounted and assigned several receivables under a Receivable Purchase
Agreement. To secure the collection of the receivables, a chattel mortgage was
executed over machinery found in the factory of the private respondent.

As the private respondent failed to pay, the mortgage was extrajudicially foreclosed.
Nonetheless, the sheriff was unable to seize the machinery. This prompted petitioner
to file an action for replevin. CA reversed the decision of the trial court and ordered the
return of the drive motor, after ruling that the machinery may not be the subject of a
chattel mortgage, given that it was an immovable under the provisions of Article 415. The
same was attached to the ground by means of bolts and the only way to remove it from the
plant would be to drill the ground.

Issue: Whether or not the machinery is considered a personal property, thus subject to a
chattel mortgage.

Held:

in Tumalad v. Vicencio, the Court ruled: Although there is no specific statement referring to the
subject house as personal property, yet by ceding, selling or transferring a property by way of chattel
mortgage defendants-appellants could only have meant to convey the house as chattel, or at least,
intended to treat the same as such, so that they should not now be allowed to make an inconsistent
stand by claiming otherwise. Moreover, the subject house stood on a rented lot to which defendants-
appellants merely had a temporary right as lessee, and although this can not in itself alone
determine the status of the property, it does so when combined with other factors to sustain the
interpretation that the parties, particularly the mortgagors, intended to treat the house as personality.
Finally, it is the defendants-appellants themselves, as debtors-mortgagors, who are attacking the
validity of the chattel mortgage in this case. The doctrine of estoppel therefore applies to the herein
defendants-appellants, having treated the subject house as personality.

We find no logical justification to exclude and rule out, as the appellate court did, the
present case from the application of the abovequoted pronouncement. If a house of strong
materials, like what was involved in the above Tumalad case, 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,
there is absolutely no reason why a machinery, which is movable in its nature and becomes
immobilized only by destination or purpose, may not be likewise treated as such. This is
really because one who has so agreed is estopped from denying the existence of the chattel
mortgage.

the parties to a contract may by agreement treat as personal property that which by nature would be
real property, as long as no interest of third parties would be prejudiced thereby.
Filipinas Marble Corporation vs IAC

GR No. L-68010, May 30, 1986

Facts: Filipinas Marble Corporation (FMC) applied for a loan in the amount of $5 million
with respondent Development Bank of the Philippines (DBP) in its desire to develop the full
potentials of its mining claims and deposits. DBP granted the loan subject, however, to
sixty onerous conditions, among which is the management agreement that the affairs of the
petitioner were placed under the complete control of DBP and Bancom including the
disposition and disbursement of the said loan.

Petitioners alleges that the respondents and their directors/officers mismanaged and
misspent the loan and instead of helping petitioner get back on its feet, DBP completely
abandoned the petitioner’s project and proceeded to foreclose the properties mortgaged to it
by petitioner without previous demand or notice.

In essence, the petitioner in its complaint seeks the annulment of the deeds of mortgage
and deed of assignment which it executed in favor of DBP in order to secure the loan.

The trial court decided in favor of respondents and against FMC. The appellate court
affirmed said decision. Hence this petition for review.

Issue: Whether or not there is not chattel mortgage which has not been registered, thus,
considered null and void.

Ruling: As regards the second assignment of error, we agree with the petitioner that a
mortgage is a mere accessory contract and, thus, its validity would depend on the validity of
the loan secured by it. We, however, reject the petitioner’s argument that since the chattel
mortgage involved was not registered, the same is null and void. Article 2125 of the Civil
Code clearly provides that the non-registration of the mortgage does not affect the
immediate parties. It states:

Art. 2125. In addition to the requisites stated in article 2085, it is indispensable, in order
that a mortgage may be validly constituted that the document in which it appears be
recorded in the Registry of Property. If the instrument is not recorded, the mortgage is
nevertheless binding between the parties.
Standard Oil Company of New York vs Jaramillo

GR No L-20329, March 16, 1923

Facts: On November 1922, Gervasia de la Rosa was the lessee of a parcel of land situated in the City of
Manila and owner of the house of really tough materials built thereon. She executed that fine day a
document in the form of a chattel mortgage, purporting to convey to Standard Oil Company of New York
(by way of mortgage) both the leasehold interest in said lot and the building.

After said document had been duly acknowledged and delivered, Standard Oil presented it to Joaquin
Jaramillo, as register of deeds of the City of Manila, for the purpose of having the same recorded in the
book of record of chattel mortgages. Upon examination of the instrument, Jaramillo opined that it was
not chattel mortgage, for the reason that the interest therein mortgaged did not appear to be personal
property, within the meaning of the Chattel Mortgage Law, and registration was refused on this ground
only.

Later this confusion was brought to the Supreme Court upon demurrer by Joaquin Jaramillo, register of
deeds of the City of Manila, to an original petition of the Standard Oil Company of New York, demanding
a mandamus to compel the respondent to record in the proper register a document purporting to be a
chattel mortgage executed in the City of Manila by Gervasia de la Rosa, Vda. de Vera, in favor of the
Standard Oil Company of New York.

The Supreme Court overruled the demurrer, and ordered that unless Jaramillo interposes a sufficient
answer to the petition for mandamus by Standard Oil within 5 days of notification, the writ would be
issued as prayed, but without costs.

Issue: whether or not the Registry of Deeds has powers beyond Ministerial discretion.

Ruling: The duties of a register of deeds in respect to the registration of chattel mortgages
are purely of a ministerial character, and he is clothed with no judicial or quasi-judicial
power to determine the-nature of the property, whether real or personal, which is the
subject of the mortgage. Generally speaking, he should accept the qualification of the
property adopted by the person who presents the instrument for registration and should
place the instrument on record, upon payment of the proper fee, leaving the effects of
registration to be determined by the court if such question should arise for legal
determination.
Lilius vs. Manila Railroad

GR No. 42551, September 4, 1935

Facts: In this case Laura Lindley Shuman, the Manila Wine Merchants, Ltd

pay the corresponding sums to the other persons and entities mentioned in the portion of the deci., the
Bank of the Philippine Islands. and the Manila Motor Co., Inc., have appealed from an order of the Court
of First Instance of Manila fixing the degree of preference of the claimants and distributing the proceeds
of the judgment of this court in the case of Lilius vs. Manila Railroad Co. amounting to P33,525.03. There
was a total of twenty-eight claimants to these funds, whose claims were presented and decided without
objection in the original case in the lower court.

The trial court in that case directed the defendant Railroad Company to pay P3,000 to Dr.
Waterous and to pay to Dr. Marfori P250, but failed to direct the defendant to sign copied above.

Issue: whether or not affidavit of good faith is necessary in the instant case.

Held: the rule is expressly stated that as between the parties and as to third persons who
have no rights against the mortgagor, no affidavit of good faith is necessary. It will thus be
seen that under the law, a valid chattel mortgage may exist between the parties without its
being evidenced by a public document. This court would not be justified, merely from the
reference by the lower court to a mortgage, in assuming that its date appears in a public
document.
Cebu International Finance Corp vs CA

GR No. 107554, February 13,1997

Facts: Jacinto Dy executed a Special Power of Attorney1 in favor of private respondent Ang
Tay, authorizing the latter to sell the cargo vessel owned by Dy and christened LCT
“Asiatic.” On 28 April 1987, through a Deed of Absolute Sale,2 Ang Tay sold the subject
vessel to private respondent Robert Ong (Ong) for P900,000.00. Ong issued 3 checks. It was
stipulated in the deed of sale that it shall not be registered or transferred to Robert Ong
until complete payment. Thereafter, Ong obtained possession of the subject vessel. He has
copies of the unnotarized deed of sale .The condition which was handwritten on the original
deed of sale does not appear on Ong’s copy. Ong had his copy of deed of sale notarized on
May 18,1987. Ong presented the notarized deed to the Philippine Coast Guard which was
subsequently issued him a Certificate of Registration. Ong succeeded in having the name of
the vessel changed to LCT” ORIENT HOPE”.

Ong acquired a loan from petitioner to be paid in instalment. As a security, Ong

executed a chattel mortgage over the subject vessel, which mortgage was registered with
the Philippine Coast Guard and annotated on the Certificate of Ownership. Ong defaulted
in the payment. Subsequently, Petitioner sent him a letter demanding delivery of the
mortgaged vessel for foreclosure.

Meanwhile, the 2 checks paid by Ong bounced. Ang Tay in search for the elusive ong
but no luck. Upon inquiry, it revealed that subject vessel was already in the name of the
Ong.

Trial court granted petitioner’s prayer for replevin. The vessel was seized and placed
in the custody of the trial court. CA affirmed TC decision.

Issue: whether or not petitioner is a mortgagee in good faith whose lien over the mortgaged
vessel should be respected.

Ruling: The prevailing jurisprudence is that a mortgagee has a right to rely in good faith on
the certificate of title of the mortgagor to the property given as security and in the absence
of any sign that might arouse suspicion, has no obligation to undertake further
investigation. Hence, even if the mortgagor is not the rightful owner of or does not have a
valid title to the mortgaged property, the mortgagee or transferee in good faith is
nonetheless entitled to protection. Although this rule generally pertains to real property,
particularly registered land, it may also be applied by analogy to personal property, in this
case specifically, since shipowners are, likewise, required by law to register their vessels
with the Philippine Coast Guard.
Jaca vs Davao Lumber Co

GR NO. L-25771, March 29,1982

Facts: In November, 1963, Urbano Jaca and Bonifacio Jaca filed with the Court of First
Instance of Davao a complaint for Accounting, Return of Price Differentials and Damages
against the Davao Lumber Company.

The complaint alleges that the plaintiff Urbano Jaca has been, and still is, a licensee
of a logging concession, and the co-plaintiff engaged in the logging business of producing
timber and logs for export and/or domestic purposes; that the defendant is a business
corporation with which plaintiffs had business dealings covering the sale and/or exportation
of their logs. Sometime in 1954, parties-litigants entered into an agreement whereby
plaintiffs may secure, by way of advances,from the defendant corporation, that the payment
of such account was to be maid either in cash or logs that they produce.Defendant made
Plaintiff jaca execute in its favor a chattel mortgage, however, plaintiffs were never
furnished but that as far as they can recollect the primary conditions of such chattel
mortgage were that plaintiffs would turn over to defendant corporation all the logs they
may produce. Plaintiffs made repeated demands on defendant for a formal accounting of
their business relationship but defendant failed and refused. Much to their surprise, they
received letters of demand from defendant to pay their accounts which was long overdue.

Issue: Whether or not the mortgage includes debt thereafter to be contracted

Held: A stipulation that the security is for payment of obligations contracted before and
which may hereafter be contracted by mortgagor is void.—This deed of chattel mortgage is
void because it provides that the security stated therein is for the payment of any and all
obligations herein before contracted and which may hereafter be contracted by the
Mortgagor in favor of the Mortgagee.
Lee vs Trocino

GR no. 164648, June 19,2009

Facts: On October 13, 2008, petitioner filed an Urgent Motion for Consolidation seeking
that the instant case be consolidated with the following petitions pending with the other
Divisions of the Court. Petitioner argues that there are good and compelling grounds to
allow the consolidation of the instant case with the above-mentioned cases because they
involve the same material facts and circumstances.

According to petitioner, the above Resolution of the First Division suspended or

stayed the transfer or consolidation of titles in favor of buyers “at any prior execution sale,”
which includes buyers of petitioner’s shares of stock at the execution proceedings in issue
here.

Issue: Whether or not the petitioner has no right to redeem personal property after
foreclosure

Ruling: What petitioner appears to do is to attempt to evade the effects of the sale of his
shares of stock to the buyers at the execution sale, which sale immediately transferred title
thereto to the buyers. It should be restated that since there is no right to redeem personal
property, the rights of ownership are vested to the purchaser at the foreclosure (or
execution) sale and are not entangled in any suspensive condition that is implicit in a
redemptive period. Besides, the Resolution of the First Division of the Court dated
November 13, 2002 refers to or affects only real and personal property, specifically, the
Makati Sports Club, Inc. shares of stock belonging to Urban Bank; it cannot extend to the
property or shares of stock subject of the present petition, which are nowhere mentioned in
the said Resolution.

Thus said, we find no valid reason why the buyers at execution sale of petitioner’s shares of
stock should be prevented from obtaining title to the same. The pendency of a case
involving the petitioner and Peña does not affect the registrability of the shares of stock
bought at execution sale, although the registration is without prejudice to the proceedings
to determine the liability of the parties as against each other, specifically between Urban
Bank, its directors and officers (which includes petitioner), and Peña.
Northern Motors Inc vs Herrera

GR No. L-32674, February 22,1973

Facts: petitioner filed a complaint against respondent Ralph Taguba and another person
designated as “John Doe,” alleging inter alia that on February 18, 1970 Taguba executed in
favor of plaintiff a promissory note, a copy of which was attached to the complaint as
“Annex A”, binding himself to pay plaintiff the sum of P18,623.75 in monthly instalments.

defendant Taguba on the same date executed in favor of plaintiff a chattel mortgage over a
1966 Impala sedan, which deed of mortgage—– under which it appears in effect that the
said car was purchased by defendant Taguba from plaintiff on installment basis—– was
duly registered in the chattel mortgage registry of Laguna, a copy of which deed was also
attached thereto as “Annex B”; that under the terms of the mortgage, upon default in
payment, shall be due and payable at once and the mortgage car shall be delivered by the
mortgagor to the mortgagee, and the mortgagee shall have the option of (a) selling the
mortgaged property, (b) cancelling the contract of sale with the mortgagor, (c) extra
judicially foreclosing the mortgage, (d) judicially foreclosing the mortgaged or (e) exacting
fulfillment of the mortgage obligation by ordinary civil action.

Taguba thereafter failed to pay due despite repeated demands. Petitioner has
elected to avail itself of the option to extrajudicially foreclose the mortgage.

Issue: Whether or not the sheriff without authority to seize mortgage property in the first
instance.

Held: Yes, In case of such default and the mortgagee refuses upon demand, to surrender
possession of the mortgaged chattel so that it may be sold at public auction pursuant to
Section 14 of Act 1508, it would certainly be an exercise in futility for the mortgagee to first
request or direct the sheriff to “foreclose the mortgage” or take possession of the property,
before filing an action in court to recover its possession. Such a procedure is completely
unnecessary not only because the sheriff has no duty or authority in the first instance to
seize the mortgaged property, but also because whenever the sheriff proceeds under section
14 of the Chattel Mortgage Law, he becomes pro hac vice the mere agent of the creditor. In
any event it is only upon receiving the order of the Court requiring the sheriff to take
forthwith such property into his custody, that the duty of said officer to take possession of
the mortgaged chattel arises.
 G.R. No. 107846. April 18, 1997. *

LEOVILLO C. AGUSTIN, petitioner, vs. COURT OF APPEALS and FILINVEST

FINANCE CORP., respondents.

Facts; The dispute stemmed from an unpaid promissory note dated October 28, 1970,
executed by petitioner Leovillo C. Agustin in favor of ERM Commercial for the amount of
P43,480.80. The note was payable in monthly installments and secured by a chattel
3

mortgage over an Isuzu diesel truck, both of which were subsequently assigned to private
4

respondent Filinvest Finance Corporation. When petitioner defaulted in paying the

5

installments, private respondent demanded from him the payment of the entire balance or,
in lieu thereof, the possession of the mortgaged vehicle. Neither payment nor surrender was
made.

Trial ensued and, thereafter, a writ of replevin was issued by RTC. The vehicle was then
foreclosed and sold at public auction.

Private respondent subsequently filed a “supplemental complaint” claiming additional

reimbursement worth P8,852.76 as value of replacement parts and for expenses incurred in
transporting the mortgaged vehicle from Cagayan to Manila.

CA set aside TC decision and remanded to lower court for the reception of evidence of
expenses properly incurred in effecting seizure of the chattel.

Issue: whether or not the mortgagee can recover expenses incurred in effecting seizure of
the chattel against the mortgagor

Ruling: Yes, where the mortgagor plainly refuses to deliver the chattel subject of the
mortgage upon his failure to pay two or more installments, or if he conceals the chattel to
place it beyond the reach of the mortgagee, the necessary expenses incurred in the
prosecution by the mortgagee of the action for replevin so that he can regain possession of
the chattel should be borne by the mortgagor. Recoverable expenses would, in our view,
include expenses properly incurred in effecting seizure of the chattel and reasonable
attorney’s fees in prosecuting the action for replevin.”