CASTRO, Janine Marie Bernadette C.

20190200558

SPS. RAFAEL P. ESTANISLAO AND ZENAIDA ESTANISLAO vs. EAST WEST

BANKING CORPORATION

G.R. No. 178537 February 11, 2008

FACTS:

Petitioners obtained a loan from the respondent which was evidenced by a promissory
note and secured by two deeds of chattel mortgage: one covering two dump trucks and
a bulldozer to secure the loan, and another covering bulldozer and a wheel loader to
secure the loan amount. Petitioners defaulted in the amortizations and the entire
obligation became due and demandable.

Thereafter, respondent bank filed in the RTC a suit for replevin with damages, praying
that the equipment covered by the first deed of chattel mortgage be seized and
delivered to it.

Subsequently, respondent moved for suspension of the proceedings on account of an

earnest attempt to arrive at an amicable settlement of the case. The trial court
suspended the proceedings, and during the course of negotiations, a deed of
assignment was drafted.

Petitioners affixed their signatures on the deed of assignment. However, for some
unknown reason, respondent bank’s duly authorized representative failed to sign the
deed. Petitioners completed the delivery of the heavy equipment mentioned in the deed
of assignment – two dump trucks and a bulldozer – to respondent, which accepted the
same without protest or objection.

However, respondent filed a manifestation and motion to admit an amended complaint

for the seizure and delivery of two more heavy equipment – the bulldozer and wheel
loader – which are covered under the second deed of chattel mortgage. Respondent
claimed that its representative inadvertently failed to include the second deed of chattel
mortgage among the documents forwarded to its counsel when the original complaint
was being drafted. Hence, respondent amended its complaint for replevin and which
the petitioners sought to dismiss the amended complaint.

The trial court dismissed the amended complaint for lack of merit. It held that the deed
of assignment and the petitioners’ delivery of the heavy equipment effectively
extinguished petitioners’ total loan obligation. It also held that respondent was estopped
from further collecting from the petitioners when it accepted, without any protest,
CASTRO, Janine Marie Bernadette C.
20190200558

delivery of the three units of heavy equipment as full and complete satisfaction of the
petitioners’ total loan obligation. Respondent likewise failed to timely rectify its alleged
mistake in the original complaint and deed of assignment, taking almost a year to act.

Respondent bank appealed to the Court of Appeals, which reversed the trial court’s
decision.

Hence, this petition.

ISSUE:

Whether or not a chattel mortgage agreement upon which the amended complaint for
replevin exists.

HELD:

No. The Court held that a chattel mortgage cannot exist as an independent
contract since its consideration is the same as that of the principal contract.
Since there is no more credit to collect, no principal obligation to speak of, then there is
no more second deed of chattel mortgage that may subsist. Being a mere accessory
contract, its validity would depend on the validity of the loan secured by it.

The appellate court erroneously denominated the replevin suit as a collection case. A
reading of the original and amended complaints show that what the respondent initiated
was a pure replevin suit, and not a collection case. Recovery of the heavy equipment
was the principal aim of the suit; payment of the total obligation was merely an
alternative prayer which respondent sought in the event manual delivery of the heavy
equipment could no longer be made.

Replevin, broadly understood, is both a form of principal remedy and a provisional relief.
It may refer either to the action itself, i.e., to regain the possession of personal chattels
being wrongfully detained from the plaintiff by another, or to the provisional remedy that
would allow the plaintiff to retain the thing during the pendency of the action and hold it
pendente lite.

The deed of assignment was a perfected agreement which extinguished petitioners’

total outstanding obligation to the respondent. The nature of the assignment was a
dation in payment, whereby property is alienated to the creditor in satisfaction of a debt
in money. Such transaction is governed by the law on sales. Even if it was consider that
the agreement as a compromise agreement, there was no need for respondent’s
signature on the same, because with the delivery of the heavy equipment which the
CASTRO, Janine Marie Bernadette C.
20190200558

latter accepted, the agreement was consummated. Respondent’s approval may be

inferred from its unqualified acceptance of the heavy equipment.

With its years of banking experience, resources and manpower, respondent bank is
presumed to be familiar with the implications of entering into the deed of assignment,
whose terms are categorical and left nothing for interpretation. The alleged non-
inclusion in the deed of certain units of heavy equipment due to inadvertence, plain
oversight or mistake, is tantamount to inexcusable manifest negligence, which should
not invalidate the juridical tie that was created. Respondent is presumed to have
maintained a high level of meticulousness in its dealings with petitioners. The business
of a bank is affected with public interest; thus, it makes a sworn profession of diligence
and meticulousness in giving irreproachable service.

Since the agreement was consummated by the delivery on of the last unit of heavy
equipment under the deed, petitioners are deemed to have been released from all their
obligations to respondent.

This being so, the amended complaint for replevin should be dismissed, because the
chattel mortgage agreement upon which it is based had been rendered ineffectual.

ACME SHOE, RUBBER & PLASTIC CORPORATION and CHUA PAC vs. HON.
COURT OF APPEALS, et. al.
CASTRO, Janine Marie Bernadette C.
20190200558

G.R. No. 103576 August 22, 1996

FACTS:

Petitioner Chua Pac, the president and general manager of co-petitioner "Acme Shoe,
Rubber & Plastic Corporation," executed for and in behalf of the company, a chattel
mortgage in favor of private respondent Producers Bank of the Philippines. The
mortgage stood by way of security for petitioner's corporate loan.

In due time, the loan was paid by petitioner corporation. Subsequently, it obtained from
respondent bank additional financial accommodations. hese borrowings were on due
date also fully paid.

Sometime afte, the bank yet again extended to petitioner corporation a loan that was
covered by four promissory notes. Due to financial constraints, the loan was not settled
at maturity. Respondent bank thereupon applied for an extra judicial foreclosure of the
chattel mortgage, with the Sheriff of Caloocan City, prompting petitioner corporation to
forthwith file an action for injunction, with damages and a prayer for a writ of preliminary
injunction, before the Regional Trial Court. Ultimately, the court dismissed the complaint
and ordered the foreclosure of the chattel mortgage. It held petitioner corporation bound
by the stipulations of the chattel mortgage.

Petitioner corporation appealed to the Court of Appeals, however it upheld the decision
rendere by the RTC. Petitioner file a motion for reconsideration but was denied.

Hence, this petition.

ISSUE:

Whether or not a clause in a chattel mortgage that purports to likewise extend its
coverage to obligations yet to be contracted or incurred be valid and effective.

HELD:
CASTRO, Janine Marie Bernadette C.
20190200558

No. The Court held that a clause in a chattel mortgage that purports to likewise
extend to obligations yet to be contracted or incurred was invalid and ineffective.

In contracts of real security, such as a pledge, a mortgage or an antichresis, that

fulfillment is secured by an encumbrance of property — in pledge, the placing of
movable property in the possession of the creditor; in chattel mortgage, by the
execution of the corresponding deed substantially in the form prescribed by law; in real
estate mortgage, by the execution of a public instrument encumbering the real property
covered thereby; and in antichresis, by a written instrument granting to the creditor the
right to receive the fruits of an immovable property with the obligation to apply such
fruits to the payment of interest, if owing, and thereafter to the principal of his credit —
upon the essential condition that if the obligation becomes due and the debtor defaults,
then the property encumbered can be alienated for the payment of the obligation, but
that should the obligation be duly paid, then the contract is automatically extinguished
proceeding from the accessory character of the agreement. As the law so puts it, once
the obligation is complied with, then the contract of security becomes, ipso facto, null
and void.

While a pledge, real estate mortgage, or antichresis may exceptionally secure after-
incurred obligations so long as these future debts are accurately described, a chattel
mortgage, however, can only cover obligations existing at the time the mortgage is
constituted. Although a promise expressed in a chattel mortgage to include debts that
are yet to be contracted can be a binding commitment that can be compelled upon, the
security itself, however, does not come into existence or arise until after a chattel
mortgage agreement covering the newly contracted debt is executed either by
concluding a fresh chattel mortgage or by amending the old contract conformably with
the form prescribed by the Chattel Mortgage Law. Refusal on the part of the borrower to
execute the agreement so as to cover the after-incurred obligation can constitute an act
of default on the part of the borrower of the financing agreement whereon the promise is
written but, of course, the remedy of foreclosure can only cover the debts extant at the
time of constitution and during the life of the chattel mortgage sought to be foreclosed.

Hence, the questioned decisions of the appellate court and the lower court were set
aside without prejudice to the appropriate legal recourse by private respondent as may
still be warranted as an unsecured creditor.

AMADA COTONER-ZACARIAS vs. SPS ALFREDO AND THE HEIRS REVILLA OF

PAZ REVILLA
CASTRO, Janine Marie Bernadette C.
20190200558

G.R. No. 190901 November 12, 2014

FACTS:

Spouses Revilla are the owners in fee simple of an unregistered parcel of land in Silang,
Cavite. In 1983, the Revilla spouses faced financial difficulties in raising funds for
Alfredo Revilla’s travel to Saudi Arabia, so Paz Castillo-Revilla borrowed money from
Amada Cotoner-Zacarias (Amada). By way of security, the parties verbally agreed that
Amada would take physical possession of the property, cultivate it, then use the
earnings from the cultivation to pay the loan and realty taxes. Upon full payment of the
loan, Amada would return the property to the Revilla spouses.

Unknown to the Revilla spouses, Amada presented a fictitious document entitled

"Kasulatan ng Bilihan ng Lupa" before the Provincial Assessor of Cavite. This document
was executed with the Revilla spouses as sellers and Amada as buyer of the property.
Consequently, the tax declaration in the name of the Revilla spouses was cancelled,
and a tax declaration in the name of Amada was issued. Amada sold the property to the
spouses Spouses Casorla by "Deed of Absolute Sale Unregistered Land." In turn, the
Casorla spouses executed a deed of absolute sale in favor of the Spouses Sun.

In December 1994, Alfredo Revilla returned from Saudi Arabia. He asked Amada why
she had not returned their tax declaration considering their full payment of the loan. He
then discovered that the property’s tax declaration was already in the name of the Sun
spouses. Thereafter, the Revilla spouses were served a copy of the answer in the land
registration case filed by the Sun spouses for the property. The Revilla spouses then
saw a copy of the "Kasulatan ng Bilihan ng Lupa" and noticed that their signatures as
sellers were forged.

They then demanded the cancellation of the "Kasulatan ng Bilihan ng Lupa" from
Amada and all subsequent transfers of the property, its reconveyance, and the
restoration of its tax declaration in their name. Amada failed to take action.

This prompted the Revilla spouses to file a complaint before the Regional Trial Court
for the annulment of sales and transfers of title and reconveyance of the property with
damages against Amada, the Casorla spouses, the Sun spouses, and the Provincial
Assessor of Cavite.

The Regional Trial Court found the "Kasulatan ng Bilihan ng Lupa" to be a fictitious
document, and ruled in favor of the Revilla spouses. Amada appealed the trial court’s
decision, while the Sun spouses partially appealed the decision as to interest and
damages.
CASTRO, Janine Marie Bernadette C.
20190200558

The Court of Appeals dismissed the appeal of Amada, and partially granted the appeal
of the Sun spouses. Undeterred, Amanda filed a motion for reconsideration but it was
denied.

Hence, this petition.

ISSUE:

Whether or not the contract of antichresis executed between Amanda and Sps. Revilla
was void.

HELD:

Yes. The Court held that the contract of antichresis executed between Amanda
and Sps. Revilla was void. It affirmed the lower courts’ order of reinstatement and
reconveyance of the property in favor of respondents Revilla spouses.

Article 2132 of the Civil Code provides that "[b]y the contract of antichresis the creditor
acquires the right to receive the fruits of an immovable of his debtor, with the obligation
to apply them to the payment of the interest, if owing, and thereafter to the principal of
his credit."

Thus, antichresis involves an express agreement between parties such that the creditor
will have possession of the debtor’s real property given as security, and such creditor
will apply the fruits of the property to the interest owed by the debtor, if any, then to the
principal amount.

Further, in the Civil Code, antichresis provisions may be found under Title XVI, together
with other security contracts such as pledge and mortgage. Antichresis requires delivery
of the property to the antichretic creditor, but the latter cannot ordinarily acquire this
immovable property in his or her possession by prescription. Similar to the prohibition
against pactum commissorium since creditors cannot "appropriate the thingsgiven by
way of pledge or mortgage, or dispose of them," an antichretic creditor also cannot
appropriate the real property in his or her favor upon the non-payment of the debt.

Antichresis also requires that the amount of the principal and the interest be in writing
for the contract to be valid.
CASTRO, Janine Marie Bernadette C.
20190200558

However, the issue before us does not concern the nature of the relationship between
the parties, but the validity of the documents that caused the subsequent transfers of
the property involved.

Therefore, the reinstatement of the property in favor of respondents Revilla spouses

was anchored on the lower courts’ finding that their signatures as sellers in the
"Kasulatan ng Bilihan ng Lupa" were forged. The Court further held that the "question
of forgery is one of fact." Well-settled is the rule that "[f]actual findings of the lower
courts are entitled great weight and respect on appeal, and in fact accorded finality
when supported by substantial evidence on the record."