G.R.No.

L-43608 July 20, 1937

THE YEK TONG LIME FIRE AND MARINE INSURANCE CO LTD.,, Plaintiff-appellant
Vs.
PELAGIO YUSINGCO, ET., AL, Defendant
VICENTE MADRIGAL, Appellant

FACTS:
The steamship Yusingco owned by Pelagio Yusingco, the defendant was mortgaged to plaintiff, Yek Tong Lim Fire and Marine
Insurance Co., Ltd.
When the steamship Yusingco needed repair, Vicente Madrigal guaranteed the amount for the repair done by Earnshaw Docks and
Honolulu Iron Works . When both the Yusingcos could not pay for the repair made, Madrigal made the payment including the stipulated
interest, because he was bound thereto by reason of the bond filed by him. On the same date, after the credit to Earnshaw Docks and
Honolulu Iron Works had already been paid, the said company assigned its credit against the Yusingcos to the defendant, Madrigal.
Madrigal brought an action against his co-defendant compelling them to reimburse him. The result was favorable to the Madrigal and
the court ordered the Yusingco to pay him and upon failure of payment, a writ of execution would be issued to have the steamship sold
at public auction to satisfy the amount with the proceeds.
The Yusingco failed to pay Madrigal as ordered by the court thus the writ of execution was carried out to satisfy the amount with the
proceeds. However, before the sale of the steamship, the plaintiff and appellant, Yek Tong Lim Fire and Marine Insurance Co., Ltd filed
with the defendant sheriff, a third party claim, demanding steamship Yusingco for himself, alleging that it has been mortgaged to him
long before the issuance of writ of execution and that he was the owner thereof. Madrigal filed indemnity bond required by Section 451
of Act No. 190 because he wished to have the execution sought to be carried out as said by the defendant sheriff.
Yek Tong Lim Fire and Marine Insurance Co, ltd then file this case and ask for the issuance of a writ of preliminary injunction addressed
to the two defendants to restrain them from selling the steamship at a public auction which was later on dissolved. The steamship then
was sold at a public auction and was purchased by the plaintiff and appellant itself as the highest bidder. The defendant sheriff turned
over to Madrigal the payment for his judgment credit.
Thus, this appeal of the plaintiff and defendant from the judgment of the Court of the First Instance is based on the ground that the
lower court committed the alleged errors.

ISSUE:
Whether or Not the plaintiff can claim for any even if they made a merge.

RULING:
No. The purchaser of the steamship Yusingco at public auction, and it was so with full knowledge that it had a mortgage credit on said
vessel. Obligations are extinguished by the merger of the rights of the creditor and debtor.
Wherefore, the appealed judgment is modified, reversing it in so far as it orders the defendant and appellant Vicente Madrigal to turn
over to the plaintiff the amount of money paid him by the provincial sheriff of Surigao from the proceeds of the sale of the steamship
Yusingco, and affirming it in so far as it absolves said sheriff from the complaint, with the costs to the plaintiff-appellant. So ordered.