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LOAN SECURITY BY CHATTEL MORTGAGE 1. '. ,. 1. 5. ). 4. +. (. 12. 11. 1'. 1,. 11. 15. 1). 14. Makati Leasing and Finance Co !o ation ". #ea e"e Te$ti%e Mi%%s& Inc.& 1'' SCRA '() *1(+,Fi%i!inas Ma .%e Co !o ation ". Inte /ediate A!!e%%ate Co0 t& 11' SCRA 1+2 *1(+)A%%ied Banking Co !o ation ". Sa%as& 1)+ SCRA 111 *1(++Se "ice3ide S!ecia%ists& Inc. ". Inte /ediate A!!e%%ate Co0 t& 141 SCRA +2 *1(+(Bico% Sa"ings Loan Association ". G0in6a3a& 1++ SCRA )1' *1((2-7 8a/eca #ood T eat/ent 8%ant& Inc. ". Co0 t o9 A!!ea%s& ,12 SCRA '+1 *1(((BA Finance Co !o ation ". Co0 t o9 A!!ea%s& '21 SCRA 154 *1((1Ce na ". Co0 t o9 A!!ea%s& ''2 SCRA 514 *1((,Fi%in"est C edit Co !o ation ". Co0 t o9 A!!ea%s& '1+ SCRA 51( *1((5Ac/e S6oe R0..e : 8%astic Co !o ation ". Co0 t o9 A!!ea%s& ')2 SCRA 411 *1(()Ce.0 Inte nationa% Finance Co !o ation ". Co0 t o9 A!!ea%s& ')+ SCRA 14+ *1((4Nico% ". B%anco& ,24 SCRA '11 *1((1-7 Nee%and ". ;i%%an0e"a& ,14 SCRA )5' *1(((Tsai ". Co0 t o9 A!!ea%s& ,)) SCRA ,'1 *'221No dic Asia Li/ited and Banke s t 0st Co. ". Co0 t o9 A!!ea%s&& 12, SCRA ,(1 *'22,86i%%i! B ot6e s Oceanic& Inc. ". Co0 t o9 A!!ea%s& 12' SCRA )25 *'22,8o%iand Ind0st ia% Li/ited ". Nationa% <e"e%o!/ent Co/!an=& 1)4 SCRA 522 *'225S!o0ses Rosa io ". 8CI Leasing and Finance& Inc. 141 SCRA 522 *'225C6ing ". S!o0ses Santos& 5,1 SCRA 4,2 *'224CHATTEL MORTGAGE ON A 8ERSONAL 8RO8ERTY SOL< ON

failed to gain entr% into $remisesof Wearever and was not able to effect the sei,ure of the aforedescribed machiner%. Ma ati !easing thereafter filed a com$laint for *udicial foreclosure. -Acting on Ma ati !easing-s a$$lication for re$levin, the lower court issued a writ of sei,ure, the enforcement of which was however subse.uentl% restrained u$on Wearever)s filing of a motion for reconsideration. After several incidents, the lower court finall% issued an order lifting the restraining order for the enforcement of the writ of sei,ure and an order to brea o$en the $remises of Wearever)s to enforce said writ. The lower court reaffirmed its stand u$on Wearever)s filing of a further motion for reconsideration. -The sheriff enforcing the sei,ure order, re$aired to the $remises Wearever)s and removed the main drive motor of the sub*ect machiner%. CA: -'et aside orders of the !ower #ourt and ordered the return of the main drive motor of the machiner%. It held that the sub*ect machiner% cannot be sub*ect of re$levin because it is a real $ro$ert% $ursuant to Article /01 of the #ivil #ode. Therefore #hattel Mortgage constituted u$on it is null and void. ISSUE -Whether or not the sub*ect machiner% is a real $ro$ert% or a $ersonal $ro$ert% to sub*ect it to chattel mortgage. HELD: -Where a chattel mortgage is constituted on machiner% attached to the ground the machiner% is to be considered as a $ersonal $ro$ert% and the chattel mortgage constituted thereon is not null and void regardless of who owns the land. - A $ro$ert% attached to the ground li e a house of strong materials, ma% be considered as $ersonal $ro$ert% for $ur$oses of executing a chattel mortgage thereon as long as the $arties to the contract so agree and no innocent third $art% will be $re*udiced thereb%, there is absolutel% no reason wh% a machiner%, which is movable in its nature and becomes immobili,ed onl% b% destination or $ur$ose, ma% not be li ewise treated as such. This is reall% because one who has so agreed is esto$$ed from den%ing the existence of the chattel mortgage. '. Fi%i!inas Ma .%e Co !o ation ". Inte /ediate A!!e%%ate Co0 t& 11' SCRA 1+2 *1(+)-

B. INSTALLMENTS 1. '. ,. 1. 5. ). 4.

Ind0st ia% Finance ". To.ias& 4+ SCRA '+ *1(44Fi%in"est C edit Co !o ation ". 86i%i!!ine Acet=%ene Co.& Inc. 111Sc a 1'1 *1(+'>a=as& S . ". L0neta Moto Co/!an=& 114 SCRA 4') *1(+'Ridad ". Fi%in"est and Finance Co !o ation& 1'2 SCRA '1) *1(+,Esg0e a ". Co0 t o9 A!!ea%s& 14, SCRA 1 *1(+(Bo .on II ". Se "ice3ide s!ecia%ist& '5+ SCRA ),1 *1(()Ag0stin ". Co0 t o9 A!!ea%s&& '41 SCRA 1), *1((4LOAN SECURITY BY CHATTEL MORTGAGE

1. Makati Leasing and Finance Co !o ation ". #ea e"e Te$ti%e Mi%%s& Inc.& 1'' SCRA '() *1(+,FACTS: -Wearever Textile Mills, Inc., discounted and assigned several receivables with the former under a Receivable Purchase Agreement in favor of Ma ati !easing and "inance #or$oration in order to obtain financial accommodations. - To secure the collection of the receivables assigned, Wearever executed a #hattel Mortgage over certain raw materials inventor% as well as a machiner% described as an Artos Aero &r%er 'tentering Range. -($on Wearever)s default, Ma ati !easing filed a $etition for extra*udicial foreclosure of the $ro$erties mortgage to it. +owever, the &e$ut% 'heriff assigned to im$lement the foreclosure

FACTS: -"ili$inas Marble #or$oration a$$lied for a loan with &evelo$ment 2an of the Phili$$ines 3&2P4 in its desire to develo$ the fun $otentials of its mining claims and de$osits and to finance ac.uisition of machiner%. &2P granted the loan sub*ect, however, to sixt% onerous conditions, among which are5 "ili$inas Marble shall have to enter into a management contract with res$ondent 2ancom '%stems #ontrol, Inc. 62ancom7 and that the loan be secured b% a mortgage. -The mortgage was not registered. -2ancom and its directors8 officers mismanaged and miss$ent the loan. -2ancom resigned with the a$$roval of &2P even before the ex$iration of the management contract, leaving "ili$inas Marble desolate and devastated. -Machineries arrived in the Phili$$ines but alleged not delivered to "ili$inas Marble.

-Also, instead of hel$ing "ili$inas Marble get bac on its feet, &2P com$letel% abandoned "ili$inas Marble)s $ro*ect and $roceeded to foreclose the $ro$erties mortgage without $revious demand or notice. -In essence, the "ili$inas Marble see s the annulment of the deeds of mortgage and deed of assignment because there was no loan at all to secure since what &2P 9lent9 to "ili$inas Marble with its right hand, it also got bac with its left hand: and that, there was failure of consideration with regard to the execution of said deeds as the loan was never delivered to the "ili$inas Marble. -The "ili$inas Marble further $ra%ed that $ending the trial on the merits of the case, the trial court immediatel% issue a restraining order and then a writ of $reliminar% in*unction against the sheriffs to en*oin the latter from $roceeding with the foreclosure and sale of the "ili$inas Marble)s $ro$erties in Metro Manila and in Romblon. DBPs DEFENSE: -o$$osed the issuance of a writ of $reliminar% in*unction stating that under Presidential &ecree ;o. <=1, &2P-s right to foreclose is mandator% as the arrearages of $etitioner had alread% amounted to P0><,=?0,>@1.=> as against its total obligation of P010,A1B,@/0.B>: that under the same decree, no court can issue an% restraining order or in*unction against it to sto$ the foreclosure since "ili$inas Marble-s arrearages had alread% reached at least twent% $ercent of its total obligations: that the alleged non-recei$t of the loan $roceeds b% the $etitioner could, at best, be acce$ted onl% in a technical sense because the mone% was received b% the officers of the $etitioner acting in such ca$acit% and, therefore, irres$ective of whoever is res$onsible for $lacing them in their $ositions. TC AND CA: -While evidence of "ili$inas Marble #or$oration a$$ears $ersuasive, still it cannot en*oin &2P from com$l%ing with the mandator% $rovisions of P& <=1. ISSUES: If there was no valid contract of loan for failure of consideration, whether or not the mortgage can exist or stand b% itself being a mere accessor% contract. Whether or not the non-registration of the #hattel Mortgage affects its validit%. HELD: - Presidential &ecree ;o. <=1 was issued $rimaril% to see to it that government financial institutions are not denied substantial cash inflows, which are necessar% to finance develo$ment $ro*ects all over the countr%, b% large borrowers who, when the% become delin.uent, resort to court actions in order to $revent or dela% the government-s collection of their debts and loans. -The government, however, is bound b% basic $rinci$les of fairness and decenc% under the due $rocess clause of the 2ill of Rights. P.&. <=1 was never meant to $rotect officials of government lending institutions who ta e over the management of a borrower cor$oration, lead that cor$oration to ban ru$tc% through mismanagement or misa$$ro$riation of its funds, and who, after ruining it, use the mandator% $rovisions of the decree to avoid the conse.uences of their misdeeds. -The designated officers of the government financing institution cannot sim$l% wal awa% and then state that since the loans were obtained in the cor$oration-s name, then P.&. <=1 must be $erem$toril% a$$lied and that there is no wa% the borrower cor$oration can $revent the automatic foreclosure of the mortgage on its $ro$erties once the arrearages reach twent% $ercent 3>?C4 of the total obligation no matter who was res$onsible.

-In the case at bar, the res$ondents tr% to im$ress u$on this #ourt that the D1,???,???.?? loan was actuall% granted and released to the $etitioner cor$oration and whatever the com$osition of the management which received the loan is of no moment because this management was acting in behalf of the cor$oration. The res$ondents also argue that since the loan was extended to the cor$oration, the releases had to be made to the then officers of that borrower cor$oration. -Precisel%, what the $etitioner is tr%ing to $oint out is that the &2P and 2ancom $eo$le who managed "ili$inas Marble miss$ent the $roceeds of the loan b% ta ing advantage of the $ositions that the% were occu$%ing in the cor$oration which resulted in the latter-s devastation instead of its rehabilitation. The $etitioner does not .uestion the authorit% under which the loan was delivered but stresses that it is $recisel% this authorit% which enabled the &2P and 2ancom $eo$le to miss$end and misa$$ro$riate the $roceeds of the loan thereb% defeating its ver% $ur$ose, that is, to develo$ the $ro*ects of the cor$oration. Therefore, it is as if the loan was never delivered to it and thus, there was failure on the $art of the res$ondent &2P to deliver the consideration for which the mortgage and the assignment of deed were executed. - Article >0>1 of the #ivil #ode clearl% $rovides that the non-registration of the mortgage does not affect the immediate $arties. It states5 Art. >0>1. In addition to the re.uisites stated in article >?=1, it is indis$ensable, in order that a mortgage ma% be validl% constituted that the document in which it a$$ears be recorded in the Registr% of Pro$ert%. If the instrument is not recorded, the mortgage is nevertheless binding between the $arties. "ili$inas marble, however, cannot invo e the above $rovision to nullif% the chattel mortgage it executed in favor of res$ondent &2P. ,. A%%ied Banking Co !o ation ". Sa%as& 1)+ SCRA 111 *1(++FACTS: -Eeneral 2an and Trust #om$an% granted Eencor Mar eting, Inc., a time loan evidenced b% a Promissor% ;ote executed b% the latter through its President, &r. #larencio '. Fu*uico. As securit% for the time loan and $ursuant to a resolution of the 2oard of &irectors of Eencor Mar eting, a &eed of #hattel Mortgage was executed b% Eencor Mar eting in favor of Eeneral 2an and Trust #om$an% involving the $ersonal $ro$erties. -The &eed of #hattel Mortgage was dul% recorded in the #hattel Mortgage Registr% of Gue,on #it%. -Hn maturit% date of the !oan and allegedl% after several subse.uent extensions of time for Eencor to settle its account, Eencor failed to $a% its obligations either to Eeneral 2an and Trust #om$an% or to Allied 2an ing which too over the affairs and8or ac.uired all the assets and assumed the liabilities of Eeneral 2an and Trust #om$an%. -Allied 2an ing extra*udiciall% foreclosed the aforesaid #hattel Mortgage and re.uested the #it% 'heriff of Gue,on #it% to effect the said foreclosure. The #it% 'heriff of Gue,on #it%, through &e$ut% 'heriff A. Tabbada levied u$on the afore-described mortgaged $ersonal $ro$erties in .uestion and issued the corres$onding ;otice of 'heriff s 'ale. -It a$$ears, however, that $rior to the extra*udicial foreclosure effected b% Allied 2an ing involving the $ersonal $ro$erties in .uestion, Metro$olitan 2an and Trust #om$an% filed an action for a sum of mone% in the amount of with $reliminar% attachment against #larencio Fu*uico and Iesus Fu*uico, a writ of $reliminar% attachment was issued in said case and the 'heriff of the #ourt of "irst Instance of Ri,al levied u$on the $ersonal $ro$erties in .uestion. -Thus, u$on teaming of the ;otice sent b% #it% 'heriff Tabbada for the sale of the foreclosed $ersonal $ro$erties in .uestion, M2T# filed an (rgent Motion to Jn*oin the 'heriff of Gue,on #it% from foreclosing and selling at $ublic auction the said $ro$erties, alleging that the $rinting

machineries and e.ui$ment $reviousl% levied and attached b% the 'heriff of Ri,al belonged exclusivel% to defendant #larencio '. Fu*uico, doing business under the firm name of Eencor Printing and as such, ma% not legall% be foreclosed and sold at auction b% the 'heriff of Gue,on #it%. -Meanwhile, Metro$olitan 2an and Trust #om$an% filed a Third Part% #laim with the Gue,on #it% 'heriff -s Hffice over the $ersonal $ro$erties in .uestion levied u$on and sought to be sold at $ublic auction b% #it% 'heriff A.Tabbada, alleging that these same $ersonal $ro$erties had been $reviousl% levied u$on b% the &e$ut% sheriff of 2ranch I of the #ourt of "irst Instance of Ri,al, $ursuant to a Writ of Attachment issued b% herein res$ondent Iudge Jmilio K. 'alas. -Allegedl% to $rotect Allied 2an ing)s rights over the $ersonal $ro$erties in .uestion, Allied ban ing)s counsel entered a s$ecial a$$earance during the scheduled hearing for the exclusive $ur$ose of o$$osing M2T#)s motion on *urisdictional grounds and gross irregularit% of $rocedure amounting to lac of *urisdiction. -+owever, over Allied 2an ing-s o$$osition, res$ondent Iudge rendered the assailed Hrder, en*oining the $ublic sale of the extra *udiciall% foreclosed $ro$erties. HELD: - The chattel mortgage lien attaches to the $ro$ert% wherever it ma% be. Thus, $rivate res$ondent as attaching creditor ac.uired the $ro$erties in .uestion sub*ect to $etitioner-s mortgage lien as it existed thereon at the time of the attachment. - The lien of $etitioner-s chattel mortgage over the mortgaged $ro$erties in .uestion su$erior to the lev% on attachment made on the same b% M2T# as creditor of chattel mortgagor #larencio Fu*uico. What ma% be attached b% $rivate res$ondent as creditor of said chattel mortgagor is onl% the e.uit% or right of redem$tion of the mortgagor. 1. Se "ice3ide S!ecia%ists& Inc. ". Inte /ediate A!!e%%ate Co0 t& 141 SCRA +2 *1(+(FACTS: - Ealicano 'iton $urchased from #ar Traders Phili$$ines, Inc. a vehicle and $aid a down$a%ment of the $rice. The remaining balance includes not onl% the remaining $rinci$al obligation but also advance interests and $remiums for motor vehicle insurance $olicies. -'iton executed a $romissor% note in favor of #ar Traders Phili$$ines, Inc. ex$ressl% sti$ulating that the face value of the note shall 9be $a%able, without need of notice of demand, in instalments. There are additional sti$ulations in the Promissor% ;ote consisting of, among others, that if default is made in the $a%ment of an% of the installments or interest thereon, the total $rinci$al sum then remaining un$aid, together with accrued interest thereon shall at once become due and demandable. -As further securit%, 'iton executed a #hattel Mortgage over the sub*ect motor vehicle in favor of #ar Traders Phili$$ines, Inc. -The credit covered b% the $romissor% note and chattel mortgage executed b% res$ondent Ealicano 'iton was first assigned b% #ar Traders Phili$$ines, Inc. in favor of "ilinvest #redit #or$oration. 'ubse.uentl%, "ilinvest #redit #or$oration li ewise reassigned said credit in favor of $etitioner 'ervicewide '$ecialists, Inc. and res$ondent 'iton was advised of this second assignment. -'iton failed to $a%, 'ervicewide '$ecialist filed this action against Ealicano 'iton and 9Iohn &oe.9

-After the service of summons, Iustiniano de &umo, identif%ing himself as the 9Iohn &oe9 in the #om$laint, inasmuch as he is in $ossession of the sub*ect vehicle, filed his Answer with #ounterclaim and with H$$osition to the $ra%er for a Writ of Re$levin. 'aid defendant, alleged the fact that he has bought the motor vehicle from Ealicano 'iton: that de &umo and 'iton testified that, before the $ro*ected sale, the% went to a certain. Att%. Killa of "ilinvest #redit #or$oration advising the latter of the intended sale and transfer. 'iton and de &umo were accordingl% advised that the verbal information given to the cor$oration would suffice, and that it would be tedious and im$ractical to effect a change of transfer of ownershi$ as that would re.uire a new credit investigation as to the ca$acit% and worthiness of Att%. &e &umo, being the new debtor. The further suggestion given b% Att%. Killa is that the account should be maintained in the name of Ealicano 'iton.: that as such successor, he ste$$ed into the rights and obligations of the seller: that he has religiousl% $aid the installments as sti$ulated u$on in the $romissor% note. +e also manifested that the Answer he has filed in his behalf should li ewise serve as a res$onsive $leading for his co-defendant Ealicano 'iton. TC affirmed ! CA: -&enied the issuance of Writ of Re$levin and ordering 'iton and &e &umo to $a% *ointl% and severall%, the $laintiff, the remaining balance on the motor vehicle . ISSUE: -Whether or not the mortgagee is bound b% the deed of sale b% the mortgagor in favour of a third $erson, as neither the mortgagee nor its $redecessors has given written or verbal consent thereto $ursuant to the deed of #hattel Mortgage. HELD: -The rule is settled that the chattel mortgagor continues to be the owner of the $ro$ert%, and therefore, has the $ower to alienate the same: however, he is obliged under $ain of $enal liabilit%, to secure the written consent of the mortgagee. Thus, the instruments of mortgage are binding, while the% subsist, not onl% u$on the $arties executing them but also u$on those who later, b% $urchase or otherwise, ac.uire the $ro$erties referred to therein. -The absence of the written consent of the mortgagee to the sale of the mortgaged $ro$ert% in favor of a third $erson, therefore, affects not the validit% of the sale but onl% the $enal liabilit% of the mortgagor under the Revised Penal #ode and the binding effect of such sale on the mortgagee under the &eed of #hattel Mortgage. -There is no dis$ute that the &eed of #hattel Mortgage executed between 'iton and the $etitioner re.uires the written consent of the latter as mortgagee in the sale or transfer of the mortgaged vehicle. We cannot ignore the findings, however, that before the sale, $rom$t in.uiries were made b% $rivate res$ondents with "ilinvest #redit #or$oration regarding an% $ossible future sale of the mortgaged $ro$ert%: and that it was u$on the advice of the com$an%-s credit law%er that such a verbal notice is sufficient and that it would be convenient if the account would remain in the name of the mortgagor 'iton. -Jven the $ersonal chec s of de &umo were acce$ted b% $etitioner as $a%ment of some of the installments under the $romissor% note. If it is true that $etitioner has not ac.uiesced in the sale, then, it should have in.uired as to wh% de &umo-s chec s were being used to $a% 'iton-s obligations. 5. Bico% Sa"ings Loan Association ". G0in6a3a& 1++ SCRA )1' *1((2-7 8a/eca #ood T eat/ent 8%ant& Inc. ". Co0 t o9 A!!ea%s& ,12 SCRA '+1 *1(((-

FACTS: -Kictorio &e$ositario together with Iaime Euinhawa, acting as solidar% co-ma er, too a loan from $etitioner 2icol 'avings and !oan Association 32I'!A4. -To secure the $a%ment of the foregoing loan obligation, Kictorio &e$ositario $ut u$ as securit% a chattel mortgage which was a Famaha Motorc%cle. 'aid motorc%cle was eventuall% foreclosed b% reason of the failure of &e$ositario and Euinhawa to $a% the loan. -As a result of the foreclosure, there was a deficienc% , where 2I'!A made a demand to $a% the same. -2I'!A4 filed a com$laint for the recover% of a sum of mone% constituting the deficienc% after foreclosure of the chattel mortgage $ut u$ b% the &e$ositario against the latter and his solidar% co-ma er Euinhawa. -&e$ositorio was dro$$ed as his where abouts were un nown and he could not be served with summons. TC: -#reditor ma% $roceed to Euinhawa being a 'olidar% debtor. CA: -Reversed. Although Euinhawa is a solidar% debtor, the creditors has alread% resorted to foreclosure, creditor has chosen to collect from &e$ositario and can no longer collect from Euinhawa not being $art% to the mortgage contract but merel% a co-ma er on the Promissor% ;ote. ISSUE: -Whether or not a co-ma er in a loan, who *ointl% and severall% bound himself to $a% loan on the $romissor% note but is not a $art% to the chattel mortgage executed to secure the same loan b% the $rinci$al debtor can be held liable for the deficienc% in case of foreclosure. HELD: -Where the obligation is one of a loan b% a chattel mortgage and not a sale where the $rice is $a%able on instalments, an inde$endent civil action ma% be instituted for the recover% of said deficienc% if after extra *udicial foreclosure of such chattel mortgage a deficienc% exist. If the mortgagee has foreclosed the mortgage *udiciall%, he ma% as for the execution of the *udgment against an% other $ro$ert% of the mortgagor for the $a%ment of the balance. To den% to the mortgagee the right to maintain an action to recover the deficienc% after foreclosure of the chattel mortgage would be to overloo the fact that the chattel mortgage is onl% given as a securit% and not as $a%ment for the debt in case of failure of $a%ment. -(nder Article 0>0@ of the #ivil #ode, the creditor ma% $roceed against an% one of the solidar% debtors or some or all of them simultaneousl%. The demand made against one of them shall not be an obstacle to those which ma% subse.uentl% be directed against the others, so long as the debt has not been full% collected. And therefore, where the $rivate res$ondent binds himself solidaril% with the $rinci$al debtor to $a% the latter-s debt, he ma% be $roceeded against b% the $rinci$al debtor. Private res$ondent as solidar% co- ma er is also a suret% 3Art. >?/B4 and that under the law, the bringing of an action against the $rinci$al debtor to enforce the $a%ment of the obligation is not inconsistent with, and does not $reclude, the bringing of another action to com$el the suret% to fulfill his obligation under the agreement.

). BA Finance Co !o ation ". Co0 t o9 A!!ea%s& '21 SCRA 154 *1((1FACTS: -'$ouses Manuel #uad% and !ilia #uad% obtained from 'u$ercars, Inc. a credit, which amount covered the cost of one unit of "ord Jscort 0<??, four-door sedan. 'aid obligation was evidenced b% a $romissor% note executed b% '$s. #uad% in favor of 'u$ercars, Inc., obligating themselves to $a% the latter or order. -To secure the faithful and $rom$t com$liance of the obligation under the said $romissor% note, the #uad% s$ouses constituted a chattel mortgage on the aforementioned motor vehicle. -'u$ercars, Inc. assigned the $romissor% note, together with the chattel mortgage, to 2.A. "inance #or$oration. The #uad%s made $artial $a%ment leaving an un $aid balance.In addition thereto, the #uad%s owe 2.A. "inance . -Parentheticall%, the 2.A. "inance #or$oration, as the assignee of the mortgage lien obtained the renewal of the insurance coverage over the aforementioned motor vehicle for the with Lenith Insurance #or$oration, when the #uad%s failed to renew said insurance coverage themselves. (nder the terms and conditions of the said insurance coverage, an% loss under the $olic% shall be $a%able to the 2.A. "inance #or$oration. -The motor vehicle figured in an accident and was badl% damaged. The unfortunate ha$$ening was re$orted to the 2.A. "inance #or$oration and to the insurer, Lenith Insurance #or$oration. The #uad%s as ed the 2.A. "inance #or$oration to consider the same as a total loss, and to claim from the insurer the face value of the car insurance $olic% and a$$l% the same to the $a%ment of their remaining account and give them the sur$lus thereof, if an%. 2ut instead of heeding the re.uest of the #uad%s, 2.A. "inance #or$oration $revailed u$on the former to *ust have the car re$aired. ;ot long thereafter, however, the car bogged down. -The #uad%s wrote 2.A. "inance #or$oration re.uesting the latter to $ursue their $rior instruction of enforcing the total loss $rovision in the insurance coverage. When 2.A. "inance #or$oration did not res$ond favorabl% to their re.uest, the #uad%s sto$$ed $a%ing their monthl% installments on the $romissor% note. In view of the failure of the #uad%s to $a% the remaining installments on the note, 2.A. "inance #or$oration sued them. TC and CA: -&ismissed the com$laint. ISSUE: -Whether or not the mortgagor has waived its rights to collect the un$aid balance of the mortgage on the $romissor% note for failure of the former to enforce the total loss $rovision in the insurance coverage of the motor vehicle sub*ect of the chattel mortgage. BA FINANCES CONTENTION: - It is the contention of 2.A. "inance #or$oration that even if it failed to enforce the total loss $rovision in the insurance $olic% of the motor vehicle sub*ect of the chattel mortgage, said failure does not o$erate to extinguish the un$aid balance on the $romissor% note, considering that the circumstances obtaining in the case at bar do not fall under Article 0><0 of the #ivil #ode relative to the modes of extinguishment of obligations.

HELD: -(nder the deed of chattel mortgage, 2.A. "inance #or$oration was constituted attorne%-in-fact with full $ower and authorit% to file, follow-u$, $rosecute, com$romise or settle insurance claims: to sign execute and deliver the corres$onding $a$ers, recei$ts and documents to the Insurance #om$an% as ma% be necessar% to $rove the claim, and to collect from the latter the $roceeds of insurance to the extent of its interests, in the event that the mortgaged car suffers an% loss or damage. In granting 2.A. "inance #or$oration the aforementioned $owers and $rerogatives, the #uad% s$ouses created in the former-s favor an agenc%. Thus, under Article 0==/ of the #ivil #ode of the Phili$$ines, 2.A. "inance #or$oration is bound b% its acce$tance to carr% out the agenc%, and is liable for damages which, through its non-$erformance, the #uad%s, the $rinci$al in the case at bar, ma% suffer: in such case, the assignee of the mortgage agreement is bound b% the same sti$ulation and if the assignee failed to file and $rosecute the insurance claim when the car was damaged totall%, the mortgagor is relieved from his obligation to $a% as he suffered a loss because of the failure of the mortgagee to file the claim. 4. Ce na ". Co0 t o9 A!!ea%s& ''2 SCRA 514 *1((,FACTS: -#elerino &elgado 3&elgado4 and #onrad !eviste 3!eviste4 entered into a loan agreement which was evidenced b% a $romissor% note. worded as follows5 -Hn the same date, &elgado executed a chattel mortgage over a Will%-s *ee$ owned b% him. And acting as the attorne%-in-fact, Manolo P. #erna, he also mortgage a 9Taunus- car owned b% the latter. -The $eriod la$sed without &elgado $a%ing the loan. This $rom$ted !eviste to a file a collection suit against &elgado and #erna as solidar% debtors. -#erna filed a Motion to &ismiss on the ground of lac of cause of action against #erna and the death of &elgado. Anent the latter, #erna claimed that the claim should be filed in the $roceedings for the settlement of &elgado-s estate as the action did not survive &elgado-s death. Moreover, he also stated that since !eviste alread% o$ted to collect on the note, he could no longer foreclose the mortgage. CA and TC: -&enied the Motion to &ismiss. ISSUES: -Whether or not a third $art%, who is not a debtor under the note but mortgaged his $ro$ert% to secure the $a%ment of the loan of another is solidaril% liable with the $rinci$al debtor. Whether or not a mortgagee who o$ted to collect ma% still foreclose the mortgage. HELD: - There is also no legal $rovision nor *uris$rudence in our *urisdiction which ma es a third $erson who secures the fulfillment of another-s obligation b% mortgaging his own $ro$ert% to be solidaril% bound with the $rinci$al obligor. A chattel mortgage ma% be 9an accessor% contract9 to a contract of loan, but that fact alone does not ma e a third-$art% mortgagor solidaril% bound with the $rinci$al debtor in fulfilling the $rinci$al obligation that is, to $a% the loan. The signator% to the $rinci$al contract M loan M remains to be $rimaril% bound. It is onl% u$on the default of the latter that the creditor ma% have been recourse on the mortgagors b% foreclosing the mortgaged $ro$erties in lieu of an

action for the recover% of the amount of the loan. And the liabilit% of the third-$art% mortgagors extends onl% to the $ro$ert% mortgaged. 'hould there be an% deficienc%, the creditors has recourse on the $rinci$al debtor. - The '$ecial Power of Attorne% did not ma e $etitioner a mortgagor. All it did was to authori,ed &elgado to mortgage certain $ro$erties belonging to $etitioner -+ence, !eviste, having chosen to file the collection suit, could not now run after $etitioner for the satisfaction of the debt. This is even more true in this case because of the death of the $rinci$al debtor, &elgado. !eviste was $ursuing a mone% claim against a deceased $erson. +. Fi%in"est C edit Co !o ation ". Co0 t o9 A!!ea%s& '1+ SCRA 51( *1((5FACTS: -'$ouses Jdilberto and Marciana Tadiaman, $urchased a 0?-wheeler I,usu cargo truc from Iordan Jnter$rises, Inc., in Gue,on #it%, in installments. -'aid s$ouses executed a $romissor% note $a%able in >/ monthl% installments in favor of Iordan Jnter$rises, Inc., and a #hattel Mortgage over the motor vehicle $urchased to secure the $a%ment of the $romissor% note. -Iordan Jnter$rises, Inc. assigned its rights and interests over the said instruments to "ilinvest "inance and !easing #or$oration, which in turn assigned them to $laintiff-a$$ellant "ilinvest #redit #or$oration. -'ubse.uentl%, the s$ouses Tadiaman defaulted in the $a%ment of the installments due on the $romissor% note, and $laintiff-a$$ellant filed an action for re$levin and damages against them with the court below. ($on motion of the $laintiff-a$$ellant, a writ of re$levin was issued, and the truc was sei,ed in the $rovince of Isabela, b% $ersons who re$resented themselves to be s$ecial sheriffs of the court, but who turned out to be em$lo%ees of the $laintiff-a$$ellant. The truc was brought b% such $ersons all the wa% bac to Metro Manila. -Thereafter, defendant s$ouses filed a counterbond, and the lower court ordered the return of the truc . This was not immediatel% im$lemented because the defendant s$ouses were met with dela%ing tactics of the $laintiff-a$$ellant, and when the% finall% recovered the truc , the% found the same to be 9cannibali,ed9. -2ecause of the said actuations of "ilinvest #redit the s$ouses Tadiaman filed a counter claim for damages. -Hn the main action, the Trial #ourt ordered the s$ouses to $a% "ilinvest #redit the balance of the $romissor% note. -Hn the counter claim, the trial court rendered *udgment in favour of '$ouses Tadiaman. CA: -Affirmed the decision of T# and ruled that "ilinvest is liable for damages not because it commenced an action for re$levin to recover $ossession of the truc $rior to its foreclosure 2(T because of the MA;;JR it carried out the sei,ute of the Truc . HELD:

-The reason wh% the law does not allow the creditor to $ossess himself of the mortgaged $ro$ert% with violence and against the will of the debtor is to be found in the fact that the creditor-s right of $ossession is conditioned u$on the fact of default, and the existence of this fact ma% naturall% be the sub*ect of controvers%. The debtor, for instance, ma% claim in good faith, and rightl% or wrongl%, that the debt is $aid, or that for some other reason the alleged default is nonexistent. +is $ossession in this situation is as full% entitled to $rotection as that of an% other $erson, and in the language of article //@ of the #ivil #ode he must be res$ected therein. To allow the creditor to sei,e the $ro$ert% against the will of the debtor would ma e the former to a certain extent both *udge and executioner in his own cause M a thing which is inadmissible in the absence of une.uivocal agreement in the contract itself or ex$ress $rovision to that effect in the statute. -It will be observed that the law $laces the res$onsibilit% of conducting the sale u$on 9a $ublic officer:9 and it might be su$$osed that an officer, such as the sheriff, can sei,e the $ro$ert% where the creditor could not. This suggestion is, we thin , without force, as it is manifest that the sheriff or other officer $roceeding under the authorit% of the language alread% .uoted from section 0/ of the #hattel Mortgage !aw, becomes pro hac vice the mere agent of the creditor. There is nothing in this $rovision which creates a s$ecific dut% on the $art of the officer to sei,e the mortgaged $ro$ert%: and no intention on the $art of the law-ma ing bod% to im$ose such a dut% can be im$lied. The conclusion is clear that for the recovery of possession, where the right is disputed, the creditor must proceed along the usual channels by action in court. Whether the sheriff, u$on being indemnified b% the creditor, could safel% $roceed to ta e the $ro$ert% from the debtor, is a $oint u$on which we ex$ress no o$inion. -2ut whatever conclusion ma% be drawn in the $remises with res$ect to the true nature of a chattel mortgage, the result must in this case be the same: for whether the mortgagee becomes the real owner of the mortgaged $ro$ert% M as some su$$ose M or ac.uires onl% certain rights therein, it is none the less clear that he has after default the right of $ossession: though it cannot be admitted that he ma% ta e the law into his own hands and wrest the $ro$ert% violentl% from the $ossession of the mortgagor. ;either can he do through the medium of a $ublic officer that which he cannot directl% do himself. The conse.uence is that in such case the creditor must either resort to a civil action to recover $ossession as a $reliminar% to a sale, or $referabl% he ma% bring an action to obtain a *udicial foreclosure in conformit%, so far as with the $rovisions of the #hattel to Mortgage !aw. -Re$levin is, of course, the a$$ro$riate action to recover $ossession $reliminar% to the extra*udicial foreclosure of a chattel mortgage. "ilinvest did in fact institute such an action and obtained a writ of re$levin. And, b% filing it, "ilinvest admitted that it cannot ac.uire $ossession of the mortgaged vehicle in an orderl% or $eaceful manner. Accordingl%, it should have left the enforcement of the writ in accordance with Rule @? of the Rules of #ourt which it had voluntaril% invo ed. (. Ac/e S6oe R0..e : 8%astic Co !o ation ". Co0 t o9 A!!ea%s& ')2 SCRA 411 *1(()FACTS: - #hua Pac, the $resident and general manager of co-$etitioner 9Acme 'hoe, Rubber N Plastic #or$oration,9 executed, for and in behalf of the com$an%, a chattel mortgage in favor of Producers 2an of the Phili$$ines. A $rovision in the chattel mortgage agreement was to this effect 9In case the MHRTEAEHR executes subse.uent $romissor% note or notes either as a renewal of the former note, as an extension thereof, or as a new loan, or is given an% other ind of accommodations such as overdrafts, letters of credit, acce$tances and bills of exchange, releases of im$ort shi$ments on Trust Recei$ts, etc., this mortgage shall also stand as securit% for the $a%ment of the said $romissor% note or notes and8or accommodations without the necessit% of executing a new contract and this mortgage shall have the same force and effect as if the said $romissor% note or notes and8or accommodations were existing on the date thereof. This mortgage shall also stand as securit% for said obligations and an% and all other obligations

of the MHRTEAEHR to the MHRTEAEJJ of whatever ind and nature, whether such obligations have been contracted before, during or after the constitution of this mortgage. -In due time, the loan was $aid b% $etitioner cor$oration. 'ubse.uentl%, in 0A=0, it obtained from Producers 2an additional financial accommodations These borrowings were on due date also full% $aid. -The ban %et again extended to A#MJ a covered b% four $romissor% notes. &ue to financial constraints, the loan was not settled at maturit%. -The ban thereu$on a$$lied for an extra*udicial foreclosure of the chattel mortgage, $rom$ting A#MJ to forthwith file an action for in*unction, with damages and a $ra%er for a writ of $reliminar% in*unction. TC and CA: -&ismissed the com$laint and ordered the foreclosure of the chattel mortgage. A#MJ is bound b% the sti$ulations, afore.uoted, of the chattel mortgage. ISSUE: -Whether or not chattel mortgage ma% secure after incurred obligations. HELD: -#ontracts of securit% are either $ersonal or real. In contracts of $ersonal securit%, such as a guarant% or a suret%shi$, the faithful $erformance of the obligation b% the $rinci$al debtor is secured b% the personal commitment of another 3the guarantor or suret%4. In contracts of real securit%, such as a $ledge, a mortgage or an antichresis, that fulfillment is secured b% an encumbrance of property - in pledge, the $lacing of movable $ro$ert% in the $ossession of the creditor: in chattel mortgage, b% the execution of the corres$onding deed substantiall% in the form $rescribed b% law: in real estate mortgage, b% the execution of a $ublic instrument encumbering the real $ro$ert% covered thereb%: and in antichresis, b% a written instrument granting to the creditor the right to receive the fruits of an immovable $ro$ert% with the obligation to a$$l% such fruits to the $a%ment of interest, if owing, and thereafter to the $rinci$al of his credit - u$on the essential condition that if the $rinci$al obligation becomes due and the debtor defaults, then the $ro$ert% encumbered can be alienated for the $a%ment of the obligation, but that should the obligation be dul% $aid, then the contract is automaticall% extinguished $roceeding from the accessor% character of the agreement. As the law so $uts it, once the obligation is com$lied with, then the contract of securit% becomes, ipso facto, null and void. -While a $ledge, real estate mortgage, or antichresis ma% exce$tionall% secure after-incurred obligations so long as these future debts are accuratel% described, a chattel mortgage, however, can onl% cover obligations existing at the time the mortgage is constituted. Although a $romise ex$ressed in a chattel mortgage to include debts that are %et to be contracted can be a binding commitment that can be com$elled u$on, the securit% itself, however, does not come into existence or arise until after a chattel mortgage agreement covering the newl% contracted debt is executed either b% concluding a fresh chattel mortgage or b% amending the old contract conformabl% with the form $rescribed b% the #hattel Mortgage !aw. Refusal on the $art of the borrower to execute the agreement so as to cover the after-incurred obligation can constitute an act of default on the $art of the borrower of the financing agreement whereon the $romise is written but, of course, the remed% of foreclosure can onl% cover the debts extant at the time of constitution and during the life of the chattel mortgage sought to be foreclosed. 12. Ce.0 Inte nationa% Finance Co !o ation ". Co0 t o9 A!!ea%s& ')+ SCRA 14+ *1((4-

FACTS: - Iacinto &% executed a '$ecial Power of Attorne% in favor of $rivate res$ondent Ang Ta%, authori,ing the latter to sell the cargo vessel owned b% &% and christened !#T 9Asiatic.9 - Through a &eed of Absolute 'ale, Ang Ta% sold the sub*ect vessel to Robert Hng 3Hng4. Hng $aid the $urchase $rice b% issuing three 3<4 chec s +owever, since the $a%ment was not made in cash, it was s$ecificall% sti$ulated in the deed of sale that the 9!#T Asiatic shall not be registered or transferred to Robert Hng until com$lete $a%ment.9 Thereafter, Hng obtained $ossession of the sub*ect vessel so he could begin deriving economic benefits therefrom. +e, li ewise, obtained co$ies of the unnotari,ed deed of sale allegedl% to be shown to the ban s to enable him to ac.uire a loan to re$lenish his 3Hng-s4 ca$ital. The afore.uoted condition, however, which was handwritten on the original deed of sale does not a$$ear on Hng-s co$ies. - #ontrar% to the aforementioned agreements and without the nowledge of Ang Ta%, Hng had his co$ies of the deed of sale 3on which the aforementioned $rohibition does not a$$ear4 notari,ed Hng $resented the notari,ed deed to the Phili$$ine #oast Euard which subse.uentl% issued him a #ertificate of Hwnershi$ and a #ertificate of Phili$$ine Register over the sub*ect vessel. Hng also succeeded in having the name of the vessel changed to !#T 9Hrient +o$e.9 -Hng ac.uired a loan from #ebu International "inance #or$oration to be $aid in installments as evidenced b% a $romissor% note of even date. -As securit% for the loan, Hng executed a chattel mortgage over the sub*ect vessel, which mortgage was registered with the Phili$$ine #oast Euard and annotated on the #ertificate of Hwnershi$. -Hng defaulted in the $a%ment of the monthl% installments. #onse.uentl%, #ebu International "inance #or$oration sent him a letter 7 demanding deliver% of the mortgaged vessel for foreclosure or in the alternative to $a% the balance $ursuant to $aragra$h 00 of the deed of chattel mortgage. -Meanwhile, the two chec s $aid b% Hng to Ang Ta% for the Purchase of the sub*ect vessel bounced. Ang Ta%-s search for the elusive Hng and all attem$ts to confer with him $roved to be futile. A subse.uent investigation and in.uir% with the Hffice of the #oast Euard revealed that the sub*ect vessel was alread% in the name of Hng, in violation of the ex$ress underta ing contained in the original deed of sale. -As a result thereof, Ang Ta% and Iacinto &% filed a civil case for rescission and re$levin with damages against Hng and his wife. -The trial court issued a writ of re$levin and the sub*ect vessel was sei,ed and subse.uentl% delivered to Ang Ta%. - #ebu International filed a motion for intervention but withdrew the same. Instead, #ebu International filed a se$arate case for re$levin and damages against Hng and 9Iohn &oe9 3Ang Ta%4. -The trial court granted $etitioner-s $ra%er for re$levin. The vessel was sei,ed and $laced in the custod% of the trial court. +owever, Ang Ta% $osted a counterbond and the vessel was returned to his $ossession. TC: -In favor of Ang Ta% and Iacinto &%. The sale of the sub*ect vessel was rescinded, the registration of the vessel with the Hffice of the #oast Euard and other government agencies in Hng-s name nullified and the vessel-s registration in &%-s name revived. Hng was, li ewise,

ordered to $a% Iacinto &% and Ang Ta% actual damages for lost income, moral damages, attorne%-s fees and litigation ex$enses. CA: -Affirmed in toto T#)s decision. ISSUE 5 -Whether or not #ebu International "inance #or$oration is a mortgagee in good faith whose lien over the mortgaged vessel should be res$ected . HELD: -The chattel mortgage constituted on a vessel b% the bu%er who was able to register the vessel in his name des$ite the agreement with the seller that the vessel would not be so registered until after full $a%ment of the $rice which do not a$$ear in the bu%er)s co$% of the deed of sale is KA!I&, for the mortgagee has the right to rel% in good faith on the certificate of registration. -The $revailing *uris$rudence is that a mortgagee has a right to rel% in good faith on the certificate of title of the mortgagor to the $ro$ert% given as securit% and in the absence of an% sign that might arouse sus$icion, has no obligation to underta e further investigation. +ence, even if the mortgagor is not the rightful owner of or does not have a valid title to the mortgaged $ro$ert%, the mortgagee or transferee in good faith is nonetheless entitled to $rotection. Although this rule generall% $ertains to real $ro$ert%, $articularl% registered land, it ma% also be a$$lied b% analog% to $ersonal $ro$ert%, in this case s$ecificall%, since shi$ owners are, li ewise, re.uired b% law to register their vessels with the Phili$$ine #oast Euard.

11. Nico% ". B%anco& ,24 SCRA '11 *1((1-7 Nee%and ". ;i%%an0e"a& ,14 SCRA )5' *1(((FACTS: - ;icol and her husband were o$erators of a mini-bus. -The% obtained a loan from Radiowealth "inance #om$an% which was later restructured due to their failure to $a% several monthl% installments. -As a collateral, the% mortgaged their mini-bus. -'ubse.uentl% with the a$$roval of the manager of R"#, 'alvacion $ledged the mini bus for two months to Jngineer Rito. -The% again defaulted on their $a%ments to R"# and their chattel was threatened to be foreclosed. -'alvacion went to the R"# office to re.uest the non-foreclosure of their mortgage and met 2lanca who was introduced b% R"#-s manager as its sheriff. -Hn different occasions 2lanca went to 'alvacion)s office as ing some amounts in consideration of not $roceeding with the foreclosure and auction sale of the mini bus. -After a month, however, she received a notice of auction sale signed b% 2lanca and went to the situs of the sale on the scheduled date, but nobod% was there and no sale too $lace. 'he in.uired from the #ler of #ourt regarding the auction sale, and was advised to as 2lanca. -2lanca informed her that Iose 2ragais won in the bidding. -'he chec ed with R"# and got the information that it was R"# that won in the bidding. 'he went to the office of R"# to arrange for the redem$tion of the mini-bus and met 2lanca there.

-This time, 2lanco told ;icol that it was Jlbert Kibal who won in the bidding and not R"#. -;icol then filed a letter-com$laint with the Hmbudsman alleging that the auction sale never too $lace on the scheduled date and $lace and that 2lanca never gave her the excess of the bid $rice. -2lanca denied and maintained that he conducted an auction sale. -The R"# filed the $etition for extra-*udicial foreclosure and he found the mini-bus in the $ossession of Jngineer Rito. -+e sent R"# and the com$lainants a notice of auction sale and was conducted later on. +e o$ined that the charge was filed against him when he failed to accommodate 2ragais who was recommended b% 'alvacion ;icol to $artici$ate in the bidding. -Hn rebuttal, 'alvacion ;icol alleged that she could not have given res$ondent an% loan since she was financiall% distressed at that time. -"or failing to meet her various financial obligations, she was charged with estafa and violation of 2.P. >>. 'he maintained that the auction sale never too $lace on the scheduled dated and $lace. 'he also claimed that res$ondent never gave her the excess of the bid $rice. -;icol furnished the H#A with co$ies of two criminal information for &irect 2riber% filed b% the Hffice of the &e$ut% Hmbudsman for !u,on against 2lanca. The criminal information accused res$ondent of ta ing advantage of his office as 'heriff b% demanding and receiving a sum of mone% from com$lainants ;icol s$ouses for and in consideration of discontinuing the auction sale of the latter-s motor vehicle. -2lanca averred that the amount received from the com$lainants is a loan he obtained $rior to the time he acted u$on the $etition for extra-*udicial foreclosure of the mini-bus. Hn recommendation of the H#A, '# referred the com$laint to Jxecutive Iudge 'antelices for investigation, re$ort and recommendation. Iudge 'antelices submitted his Re$ort and Recommendation. +e recommended that res$ondent be sus$ended for six months without $a%.

-&ue to business reverses, JKJRTJO filed insolvenc% $roceedings doc eted. The #"I issued an order on declaring the cor$oration insolvent. All its assets were ta en into the custod% of the Insolvenc% #ourt, including the collateral, real and $ersonal, securing the two mortgages as abovementioned. -In the meantime, u$on JKJRTJO)s failure to meet its obligation to P2#om, the latter commenced extra*udicial foreclosure $roceedings against JKJRTJO. -The first $ublic auction was held where $etitioner P2#om emerged as the highest bidder and a #ertificate of 'ale was issued in its favor on the same date. Another $ublic auction was held and again, P2#om was the highest bidder. -P2#om consolidated its ownershi$ over the lot and all the $ro$erties in it. 'ubse.uentl%, it leased the entire factor% $remises to $etitioner Rub% !. Tsai. -P2#om sold the factor%, loc , stoc and barrel to Tsai, including the contested machineries. - JKJRTJO filed a com$laint for annulment of sale, reconve%ance, and damages with the Regional Trial #ourt against P2#om, alleging inter alia that the extra*udicial foreclosure of sub*ect mortgage was in violation of the Insolvenc% !aw. JKJRTJO claimed that no rights having been transmitted to P2#om over the assets of insolvent JKJRTJO, therefore Tsai ac.uired no rights over such assets sold to her, and should reconve% the assets. -JKJRTJO averred that P2#om, without an% legal or factual basis, a$$ro$riated the contested $ro$erties, which were not included in the Real and #hattel Mortgages. TC" affirmed ! CA: -"ound that the lease and sale of said $ersonal $ro$erties were irregular and illegal because the% were not dul% foreclosed nor sold at the auction sale since these were not included in the schedules attached to the mortgage contracts. ISSUE: -Whether or not the inclusion of the .uestioned $ro$erties in the foreclosed $ro$erties is $ro$er and whether or not the sale of these $ro$erties to $etitioner Rub% Tsai is valid. HELD: -Assuming arguendo that the $ro$erties in .uestion are immovable b% nature, nothing detracts the $arties from treating it as chattels to secure an obligation under the $rinci$le of esto$$el. An immovable ma% be considered a $ersonal $ro$ert% if there is a sti$ulation as when it is used as securit% in the $a%ment of an obligation where a chattel mortgage is executed over it, as in the case at bar. -Inasmuch as the sub*ect mortgages were intended b% the $arties to involve chattels, insofar as e.ui$ment and machiner% were concerned, the #hattel Mortgage !aw a$$lies, which $rovides in 'ection B thereof that5 Pa chattel mortgage shall be deemed to cover only the property described therein and not like or substituted property thereafter acquired by the mortgagor and placed in the same depository as the property originally mortgaged , an%thing in the mortgage to the contrar% notwithstanding.Q -And, since the dis$uted machineries were ac.uired in 0A=0 and could not have been involved in the 0AB1 or 0ABA chattel mortgages, it was conse.uentl% an error on the $art of the 'heriff to include sub*ect machineries with the $ro$erties enumerated in said chattel mortgages.

ISSUE: -Whether or not 2lanca)s failure to turn over to the mortgagor the excess of the bid $rice constituted gross misconduct. HELD: -The Hfficer who conducted the forclosure must demand and actuall% receive the cash $roceeds of the auction sale from the highest bidder and turnover the balance to the mortgagee. It was therefore irregular for the sherrif not to demand and receive the entire bid $rice in cash from the winning bidder, or at the ver% least, to demand the excess amount and turnover to the mortgagor. 1'. Tsai ". Co0 t o9 A!!ea%s& ,)) SCRA ,'1 *'221FACTS: --Jver Textile Mills, Inc. 3JKJRTJO4 obtained a loan from $etitioner Phili$$ine 2an of #ommunications 3P2#om4. -As securit% for the loan, JKJRTJO executed in favor of P2#om, a deed of Real and #hattel Mortgage over the lot where its factor% stands, and the chattels located therein as enumerated in a schedule attached to the mortgage contract. -P2#om granted a second loan to JKJRTJO. The loan was secured b% a #hattel Mortgage over $ersonal $ro$erties enumerated in a list attached thereto. The listed $ro$erties were similar to those listed in the first mortgage deed.

-As the auction sale of the sub*ect $ro$erties to P2#om is void, no valid title $assed in its favor. #onse.uentl%, the sale thereof to Tsai is also a nullit% under the elementar% $rinci$le of nemo dat quod non habet, one cannot give what one does not have

-A contract was entered into between Philli$$ 2rothers +ong ong and 'an Erace Mining #or$oration 3'AERAM#H4. -In the contract, 'agramco agreed to sell and shi$ to Philli$$ 2others +.R at least A,??? metric tons of chrome ore.

1,. No dic Asia Li/ited and Banke s t 0st Co. ". Co0 t o9 A!!ea%s&& 12, SCRA ,(1 *'22,FACTS: -'extant Maritime obtained a loan from ;ordic Asia and executed a #hattel Mortgage covering the vessel. -'extant defaulted $a%ment. ;ordic Asia instituted an Jxtra Iudicial "oreclosure Proceeding. ;ordic $etitioned for the issuance of the arrest order against the vessel which was granted. -Hn the same da% , the un$aid crew members filed an action for sum of mone% against 'extant. -;ordic filed a com$laint-in-intervention in the collection case arguing that it has a $referred claim over the vessel. TC and CA: -"avored the un$aid crew members. ISSUE: -Whether or not the mortgagee should be allowed to intervene in a collection case filed b% a cocreditor who has a su$erior or $referred lien, for the $ur$ose of $reventing the diminution of the mortgagees share. HELD: -A mortgagee of a vessel should not be allowed to intervene in a collection case filed b% a coclaimant8 co- creditor 3un$aid crew members4 $ossessing a su$erior lien or $referred credit than the mortgagee solel% for the $ur$ose of o$$osing such claims so that its share in the mortgaged chattel ma% not be diminished substantiall%, or to $revent it from being diminished at all since the higher the claims awarded to the crew members in the collection case, which would be recovered from the attached vessel, the lesser the amount the mortgagee can obtain from their extra*udicial foreclosure. -In the case at bar, the com$laint-in-intervention merel% alleged that the mortgage $ossesses a mortgage lien and it is so situated as to be adversel% affected b% the crew member)s collection case. 2eing *ust a mortgagee, the cause of action lies with the vessel and mortgagor and not with a co-claimant. The mortgagee was unable to allege what s$ecific act or omission can be attributed to its co-claimant which violated its rights. The com$laint-in-intervention therefore failed to state a cause of action. In effect, the com$laint-in-intervention is a devise to defeat the order of $reference of claims enumerated in P& 01>03the 'hi$ Mortgage &ecree4. If the mortgagee)s tactics were allowed, it would virtuall% $ave wa% for an% creditor with a secondar% lien or *unior mortgage to bloc the claims of a $referred creditor or claimant b% sim$l% intervening to o$$ose such credits or claims.

-In consideration for the deliver% of the chrome ore., Phil2ro +.R. agreed to o$en a letter of credit under which 'agramco woulb be allowed to withdraw advances to be charged against 'agramco)s future deliveries of chrome ore. -Phil2ro +.R. o$ened the letter of #rdit with 2PI and the full amount was drawn b% 'agramco. -To secure the advance, 'agramco executed a chattel mortgage in favor of Phil2ro +.R. over 'agramco)s $ersonal $ro$erties. -Aside from the dollar advance obtained from Phil2ro +.R., sagramco se$aratel% received $eso advance from Phil. Hceanic. -'agramco was able to $roduce chrome ores the value of which is more than the dollar advance. -'ubse.uentl%, 'agramco and its cor$orate officers, '$ouses de Eracia obtained from 2PI two loans which were secured b% a Real Jstate Mortgage. -As further securit%, 'agramco executed a &eed of Assignment in favor of 2PI assigning the $roceeds of the !etter of #redit which Phil2ro +.R. o$ened with 2PI and the trust recei$ts over the 0,=??? metric tons of chrome ore stoc ed in the warehouse of Phil2ro Hceanic. -Phil2ro +.R. assigned to Phil2ro Hceanic all rights, interests and collectibles from 'agramco arising from Phil2ro +.R.)s and 'agramco)s contract and from the deed of chattel mortgage securing the same. -2PI sought $ossession of the chrome ores alleging that b% virtue of the trust recei$ts, it is the owner of the chrome ore held in trust b% 'agramco. -A writ of re$levin was issued and attem$ted to be enforced. -Phil2ro Hceanic filed a third $art%-claim alleging it was the rightful owner of the chrome ore, and subse.uentl% filed for *udicial foreclosure of the chattel mortgage. -The chrome ores were sold to $ublic auction to $revent deterioration. ISSUE: -Whether or not the chattel mortgage can be called u$on to satisf% the $eso advance obtained from Phil2ro Hceanic. HELD: -Phil2ro +.R. and Phil2ro Hceanic are two se$arate and distinct entit%. -Peso advance was sim$l% an unsecured and interest bearing loan.

#$. P%i&&i'' Br()%ers O*eani*" In*. +. C(,r) (f A''ea&s" $-. SCRA /-0 1.--23 FACTS:

-The chattel mortgage is a mere accessor% contract. +ence, it should be deemed automaticall% extinguished u$on the satisfaction of the $rinci$al obligation. It cannot extend to guarantee the

$a%ment of the obligation of another entit% which did not $artici$ate in the execution of the contract in its own right and was not an assignee thereof.

the $a%ment of ex$enses on the vessels were obtained $rior to the constitution of the mortgage in favor of &2P. CA: -;&# liable to $a% $referred maritime lien. ISSUE: -Whether or not, the mortgage lien of &2P is su$erior over the maritime lien of Poliand 3registered or which was $rior in time with the chattel mortgage.4 3;&# invo ing Art 1=? of the #ivil #ode.4 HELD: -Article 1=? of the #ivil #ode $roviding for the order of $a%ments of creditors in the event of sale of a vessel had been re$ealed b% P& 01>0, otherwise nown as the 'hi$ Mortgage &ecree of 0AB=. If the mortgage of the vessel constituted for the $ur$ose of financing the construction, ac.uisition, $urchase or initial o$eration of vessels, the mortgagee obtains a $referred status $rovided the formalities $rescribed b% law are com$lied with. ($on enforcement of the $referred mortgage and eventual foreclosure of the vessel, the $roceeds of the sale shall first be a$$lied to the claim of the mortgage creditor unless there are su$erior or $referential claims under 'ection 0B of the same law. #/. S'(,ses R(sari( +. PCI Leasin4 and Finan*e" In*. $5$ SCRA 0-- 1.--03 FACTS:

15. 8o%iand Ind0st ia% Li/ited ". Nationa% <e"e%o!/ent Co/!an=& 1)4 SCRA 522 *'225FACTS: -Asian +ardwood extended credit accommodations in favor of Ealleon. To augment Ealleon)s wor ing ca$ital de$leted as a result of the $urchase of 1 new vessels and > second hand vessels. -To finance ac.uisition of vessels, galleon obtained loans from Ia$anese lenders. -&2P executed &eed of (nderta ing to guarantee $rom$t and $unctual $a%ment of Ealleon. -To secure &2P)s guarantee under the &eed of (nderta ing, Ealleon executed a first mortgage over the vessels. -Meanwhile, President Marcos issued a !etter of Instruction directing ;&# to ac.uire the entire share holdings of Ealleon. -;&# assumed management and o$eration of Ealleon. -;&# $aid Asian +ardwood using its own fund as $artial settlement of Ealleon)s obligation. -Another !HI was issued directing the foreclosure of the mortgage for faileure of Ealleon to $a% its debt des$ite re$eated demands from &2P. -&2P ac.uired the vessel in the foreclosure then later sold it to ;&#. -Asian +ardwood assigned its rights over the outstanding obligation of Ealleon (niversal, which in turn assigned the credit to Poliand. to World

-President. A.uino issued Administrative Hrder directing ;&# to transfer some of their assets to the ;ational Eovernment through the Asset Privati,ation Trust among those transferred were the 1 Ealleons sold at the foreclosure $roceedings. -Poliand demanded to Ealleon, ;&#, and &2P for the satisfaction of the outstanding balance. -"ailure to heed, Poliand instituted a collection case against ;&#, &2P and Ealleon, claiming that under the !HI and MHA between Ealleon and ;&#, Ealleon, ;&# and &2P were solidar% liable to Poliand as assignee of the rights of the credit advances8loan accommodations to Ealleon and also claimed it had $referred maritime lien over the $roceeds of the extra *udicial foreclosure sale. -2% wa% of an alternative cause of action, Poliand sought reimbursement for the $referred maritime lien. -&2P countered that it was unaware of the Maritime !ien on the 1 vessels mortgaged. TC: -Ruled that Poliand had $reference to the maritime lien over the $roceeds of the extra *udicial foreclosure sale of Ealleon)s vessels since the loan advances8credit accommodations utili,ed for

--'$ouses Rosario $urchased an Isu,u Jlf Pic -u$ (tilit% vehicle from #arMerchants, Inc. The transaction was covered b% a Purchase Agreement whereb% the s$ouses undertoo to ma e a down $a%ment. -The s$ouses then a$$lied for a loan with P#I !easing to $a% for the balance. -($on the a$$roval of their loan a$$lication, the s$ouses Rosario executed a Promissor% ;ote in favor of P#I !easing covering the amount of the loan $lus finance charges. The s$ouses undertoo to $a% the loan in monthl% installments $a%able on the >A th da% of each month at >>.0?C annual interest. -The s$ouses Rosario also agreed that, in case of default, the $a%ment of the outstanding sum with interest shall immediatel% become due and $a%able. To secure the $a%ment of the loan, the% executed, on the same da%, a #hattel Mortgage in favor of P#I !easing over the Isu,u Jlf /2&0. The motor vehicle was delivered to the s$ouses and it was registered in their names. -&es$ite demands, the s$ouses Rosario failed to $a% the amorti,ations on their loan to P#I !easing. -P#I !easing filed a #om$laint against the s$ouses Rosario P'um of Mone% with &amages with a Pra%er for a Writ of Re$levin.Q - RT# issued an Hrder for the issuance of a writ of re$levin. Then, the 'heriffsei,ed the motor vehicle. After five 314 da%s, without the court issuing an order discharging the writ, the 'heriff turned over the $ossession of the vehicle to P#I !easing.

-In their Answer to the com$laint, the s$ouses Rosario alleged that the chattel mortgage the% executed in favor of P#I !easing covering the motor vehicle was in effect a contract of sale of $ersonal $ro$ert%, $a%able in installments to be governed b% Article 0/=/ 6 of the ;ew #ivil #ode of the Phili$$ines. The% further alleged that since P#I !easing o$ted to foreclose the chattel mortgage, it was esto$$ed from collecting the balance of their account under the $romissor% note and chattel mortgage. TC: -The trial court rendered *udgment in favor of P#I !easing. The trial court declared that the s$ouses Rosario were onl% able to $a% several monthl% installments on their loan and their account was overdue. The trial court did not, however, resolve the issue of whether Article 0/=/ of the ;ew #ivil #ode was a$$licable. CA: -Rendered *udgment dismissing the a$$eal, declaring that the s$ouses Rosario failed to $rove their claim that P#I !easing had agreed to be subrogated to the right of #arMerchants, Inc. to collect the un$aid balance of the $urchase $rice of the motor vehicle. The a$$ellate court also ruled that even if Article 0/=/ of the ;ew #ivil #ode were to be a$$lied, the chattel mortgage had not been foreclosed: hence, P#I !easing was not $recluded from collecting the balance of the a$$ellants) account. It held that the remed% of the un$aid seller under Article 0/=/ of the ;ew #ivil #ode is alternative and not cumulative. ISSUE: -Whether or not Article 0/=/ will a$$l% as against a mortgagee who is not the vendor of the chattel mortgaged. HELD: -Article 0/=/ will not a$$l% as against a mortgagee who is not the vendor of the chattel mortgaged. Thus, a suit for re$levin is not e.uivalent to an exercise of the remed% of foreclosure under Article 0/=/ of the ;ew #ivil #ode. +ence, a vendor-mortgagee is not barred from ma ing a claim for s$ecific $erformance against the bu%er mortgagor, b% mere fact that the former was alread% able to secure writ of Re$levin. 14. C6ing ". S!o0ses Santos& 5,1 SCRA 4,2 *'224FACTS: -Antonio #hing executed a loan to '$ouses 'antos secured b% a Real Jstate Mortgage. -The '$ouses issued chec s, however, some of them were dishonored, which $rom$ted ching to file a criminal case of 2P >>. -A com$romise agreement was entered into which caused the termination of the case, but '$ouses 'antos still failed to com$l% with it. -#hing tried to foreclose the Real Jstate Mortgage. ISSUE:

-Whether or not the filing of a criminal case in connection with violation of 2P >> bars the mortaggee to foreclose the Real Jstate Mortgage. HELD: -The filing of a criminal case in connection to violation of 2P >> is e.uivalent to collection suit. "ollowing the rule on the alternative remedies of a mortgagee-creditor will bar or $reclude the former from availing himself of the other civil remed% of foreclosure of the real estate mortgage because $ursuant to 'ection 0 3b4 of Rule 000 of the >??? Rules on #riminal Procedure, he is deemed to have alread% availed himself of the remed% of collection suit.



1. Ind0st ia% Finance ". To.ias& 4+ SCRA '+ *1(44FACTS: -#astor Tobias bought on installment one 304 &odge truc from !eelin Motors, Inc. To answer for his obligation he executed a $romissor% note in favor of the latter, for the sum of P>A.?B?.>= $a%able in thirt%-six 3<@4 e.ual installments with interest at the rate of 0>C $er annum $a%able in the amounts and dates indicated in said $romissor% note. - To secure $a%ment of the $romissor% note, res$ondent Tobias executed in favor of !eelin Motors, Inc. a chattel mortgage on the &odge truc . -!eelin Motors, Inc. indorsed the $romissor% note and assigned the chattel mortgage to $etitioner Industrial "inance #or$oration. -As a conse.uence res$ondent Tobias $aid six 3@4 installments on the $romissor% note directl% to the $etitioner Industrial "inance #or$oration. -When Tobias was in arrear in the $a%ment of more than two installments, I"# through a letter gave Tobias a choice of either $a%ing the balance of the $urchase $rice or surrender the truc . -Tobias res$onded to the letter and voluntaril% and willingl% surrendering the truc which was still in the custod% of !eelin Motors ever since the truc met an accident. -($on learning that the truc met an accident, $etitioner decided not to get the truc an%more from !eelin Motors, Inc. -Instead, I"# filed an action against Tobias to recover the un$aid balance of the $romissor% note. TC" affirmed ! CA: -&ismissed the com$laint on the ground that in as muc* as Tobias voluntaril% and willingl% surrendered the said truc from !eelin Motors $ursuant to the demand to surrender, Tobias has alread% com$lied with the demands of I"#. ISSUE:

-Whether or not the mortgagee is esto$$ed to insist on its claim on the balance of the $romissor% note when it demanded the return or surrender of the truc to which demand the mortgagor acceded. HELD: - Art. 0/=/ is clear that 9should the vendee or $urchaser of a $ersonal $ro$ert% be in default in the $a%ment of two or more of the agreed installments, the vendor or seller has the o$tion to either exact fulfillment b% the $urchaser of -the obligation, or to cancel the sale, or to foreclose the mortgage on the $urchased $ersonal $ro$ert%, if one was constituted. 'ince the case involves the sale of $ersonal $ro$ert% on installments Art. 0/=/ of the #ivil #ode should a$$l%. The remedies $rovided for in Art. 0/=/ are considered alternative, not cumulative such that the exercise of one would bar the exercise b% the others. -+ere, $etitioner has not cancelled the sale, nor has it exercised the remed% of foreclosure. "oreclosure, *udicial or extra-*udicial, $resu$$oses something more than a mere demand to surrender $ossession of the ob*ect of the mortgage. 'ince the $etitioner has not availed itself of the remed% of cancelling the sale of the truc in .uestion or of foreclosing the chattel mortgage on said truc , $etitioner is still free to avail of the remed% of exacting fulfillment - of the obligation of res$ondent Tobias, the vendee of the truc in .uestion. 'aid the #ourt5
The contract being a sale of machiner% $a%able in installments, the a$$licable $rovision of law is Article 0/=/ of the #ivil #ode, which gives the vendor the o$tion to exercise an% one of the alternative remedies therein mentioned5 exact fulfillment of the obligation, cancel the sale, or foreclose the chattel mortgage. 2ut the vendormortgagor in the $resent case desisted, on its own initiative, from consummating the auction sale, without gaining an% advantage or benefit, and without causing an% disadvantage, or harm to the vendees-mortgagees. The least that could be said is that such desistance of the $laintiff from $roceeding with auction sale was a timel% disavowal that cancelled and rendered useless its $revious choice to foreclose: its acts, being extra-*udicial, brought no trouble u$on an% court, and were harmless to the defendants. "or this reason, the $laintiff cannot be considered as having 9exercised9 3the #ode uses the word 9exercise94 the remed% of foreclosure because of its incom$lete im$lementation, and, therefore, the $laintiff is not barred from suing on the un$aid account.

-'ubse.uentl%, Alexander !im assigned to the "ilinvest "inance #or$oration all his rights, title, and interests in the $romissor% note and chattel mortgage b% virtue of a &eed of Assignment. -Thereafter, the "ilinvest "inance #or$oration, as a conse.uence of its merger with the #redit and &evelo$ment #or$oration assigned to the new cor$oration, "ilinvest #redit #or$oration, all its rights, title, and interests on the aforesaid $romissor% note and chattel mortgage, which, in effect, the $a%ment of the un$aid balance owed b% PA# to Alexander !im was financed b% "ilinvest #redit #or$oration such that !im became full% $aid. -PA# failed to com$l% with the terms and conditions set forth in the $romissor% note and chattel mortgage since it had defaulted in the $a%ment of nine successive installments. "ilinvest #redit #or$oration then sent a demand letter whereb% its counsel demanded 9that %ou 3a$$ellant4 remit the aforesaid amount in full in addition to sti$ulated interest and charges or return the mortgaged $ro$ert% to m% client at its office at >0<< Taft Avenue, Malate, Manila within five 314 da%s from date of this letter during office hours. 9 -Re$l%ing thereto, PA#t, thru its assistant general- manager, wrote bac advising "ilinvest #redit #or$oration of its decision to 9return the mortgaged $ro$ert%, which return shall be in full satisfaction of its indebtedness $ursuant to Article 0/=/ of the ;ew #ivil #ode.9 Accordingl%, the mortgaged vehicle was returned "ilinvest #redit #or$oration to the together with the document 9Koluntar% 'urrender with '$ecial Power of Attorne% To 'ell9 executed b% PA#. - "ilinvest #redit #or$oration wrote a letter to PA# informing the latter that "ilinvest #redit #or$oration cannot sell the motor vehicle as there were un$aid taxes on the said vehicle. Hn the last $ortion of the said letter, "ilinvest #redit #or$oration re.uested the PA# to u$date its account b% $a%ing the installments in arrears and accruing interest. "ilinvest #redit #or$oration, in a letter, offered to deliver bac the motor vehicle to the PA# but the latter refused to acce$t it, so "ilinvest #redit #or$oration instituted an action for collection of a sum of mone% with damages. -In its answer, PA#, while admitting the material allegations of the "ilinvest #redit #or$oration)s com$laint, avers that "ilinvest #redit #or$oration has no cause of action against it since its obligation towards the "ilinvest #redit #or$oration was extinguished when in com$liance with the "ilinvest #redit #or$oration-s demand letter, it returned the mortgaged $ro$ert% to the "ilinvest #redit #or$oration, and that assuming arguendo that the return of the $ro$ert% did not extinguish its obligation, it was nonetheless *ustified in refusing $a%ment since the "ilinvest #redit #or$oration is not entitled to recover the same due to the breach of warrant% committed b% the original vendor-assignor Alexander !im. LC: -Hrdered PA# to $a% the outstanding un$aid obligation and to acce$t the deliver% of the motor vehicle sub*ect of the chattel mortgage. ISSUE: -Whether or not the return the return of the mortgaged $ro$ert% b% the mortgagor to the mortgagee constituted dacion en $ago or &ation in $a%ment. HELD: - The mere return of the mortgaged motor vehicle b% the mortgagor, PA#, to the mortgagee, "ilinvest #redit #or$oration, does not constitute dation in $a%ment or dacion en pago in the absence, ex$ress or im$lied of the true intention of the $arties. Dacion en pago, according to Manresa, is the transmission of the ownershi$ of a thing b% the debtor to the creditor as an acce$ted e.uivalent of the $erformance of obligation. In dacion en pago, as a s$ecial mode of $a%ment, the debtor offers another thing to the creditor who acce$ts it as e.uivalent of $a%ment of an outstanding debt. The underta ing reall% $arta es in one sense of the nature of sale, that is, the creditor is reall% bu%ing the thing or $ro$ert% of the debtor, $a%ment for which is to be charged against the debtor-s debt. As such, the essential elements of a contract of sale, namel%, consent, ob*ect certain, and cause or consideration must be $resent. In its modern conce$t, what actuall% ta es $lace in dacion en pago is an ob*ective novation of the obligation where the thing offered as an acce$ted e.uivalent of the $erformance of an obligation is considered as the ob*ect of the contract of sale, while the debt is considered as the $urchase $rice. 0 In an% case,

-The issue of esto$$el raised b% res$ondent Tobias, to hold the $etitioner in esto$$el, it must be shown that when it gave the res$ondent the choice of either $a%ing the balance of the $urchase $rice or of surrending the truc , it had alread% nowledge of the accident and the conse.uent damage to the truc . In the $resent case $etitioner claims it had no nowledge of the accident when it gave the res$ondent the choice of either $a%ing the balance of the $romissor% note or of surrendering the truc . It is hard to believe that $etitioner would ma e such offer to res$ondent either to $a% the balance on the $romissor%, note or to surrender the truc in .uestion if it new that the truc has had an accident. The more $lausible thing it would have as ed the res$ondent is to as for the balance on the $romissor% note. 2esides the allegation of $etitioner that it had no nowledge of the accident is a negative allegation and needs no evidence to su$$ort it, not being an essential $art of the statement of the right on which the cause of action is founded. It is therefore the res$ondent Tobias who has the burden of dis$roving the claim of $etitioner that he has no nowledge of the accident when it made the offer to res$ondent either to $a% the balance on the $romissor% note or to surrender the truc . Res$ondent failed in this. '. Fi%in"est C edit Co !o ation ". 86i%i!!ine Acet=%ene Co.& Inc. 111Sc a 1'1 *1(+'FACTS: -The Phili$$ine Acet%lene #o., Inc. $urchased from one Alexander !im, as evidenced b% a &eed of 'ale, a motor vehicle described as #hevorlet, 0A@A model, $a%ing a down $a%ment and the balance $a%able at </ monthl% installments. -As securit% for the $a%ment of said $romissor% note, PA# executed a chattel mortgage over the same motor vehicle in favor of said Alexander !im.

common consent is an essential $rere.uisite, be it sale or innovation to have the effect of totall% extinguishing the debt or obligation. -The evidence on the record fails to show that the mortgagee, the herein a$$ellee, consented, or at least intended, that the mere deliver% to, and acce$tance b% him, of the mortgaged motor vehicle be construed as actual $a%ment, more s$ecificall% dation in $a%ment or dacion en pago. The fact that the mortgaged motor vehicle was delivered to him does not necessaril% mean that ownershi$ thereof, as *uridicall% contem$lated b% dacion en $ago, was transferred from a$$ellant to a$$ellee. In the absence of clear consent of a$$ellee to the $roferred s$ecial mode of $a%ment, there can be no transfer of ownershi$ of the mortgaged motor vehicle from a$$ellant to a$$ellee. If at all, onl% transfer of $ossession of the mortgaged motor vehicle too $lace, for it is .uite $ossible that a$$ellee, as mortgagee, merel% wanted to secure $ossession to forestall the loss, destruction, fraudulent transfer of the vehicle to third $ersons, or its being rendered valueless if left in the hands of the a$$ellant. ,. >a=as& S . ". L0neta Moto Co/!an=& 114 SCRA 4') *1(+'FACTS: - Jutro$io La%as, Ir. $urchased on installment basis a "ord Thames "reighter with P(+ 2od% 3Jngine /??J-0>BB<= and #hassis /??J-0>BB<=4 from Mr. Ro.ue JscaSo of the JscaSo Jnter$rises in #aga%an de Hro #it%, dealer of !uneta Motor #om$an%. -The motor vehicle was delivered to the La%as who $aid the initial $a%ment in, and executed a $romissor% note for the balance of the total selling $rice, in favor of !uneta Motor #om$an%. The $romissor% note stated the amounts and dates of $a%ment of >@ installments. 'imultaneousl% with the execution of the $romissor% note and to secure its $a%ment, La%as executed a chattel mortgage on the sub*ect motor vehicle in favor of !uneta Motors. -La%as was unable to $a% further monthl% installments $rom$ting the !uneta Motors to extra*udiciall% foreclose the chattel mortgage. The motor vehicle was sold at $ublic auction with the !uneta Motors re$resented b% Att%. !eandro 2. "ernande, as the highest bidder. 'ince the $a%ments made b% La%as $lus the $roceeds reali,ed from the foreclosure of the chattel mortgage could not cover the total amount of the $romissor% note executed b% La%as in favor of the res$ondent !uneta Motors, the latter filed an avtion for the recover% of the balance $lus interests. -The #it% #ourt affirmed b% #"I dismissed the com$laint. -!uneta Motor #om$an% a$$ealed the case to the #"I. After various incidents, the #"I issued an order remanding the case to the court of origin for further $roceedings at it is in the o$inion that the #it% #ourt should have not decided the case merel% on the .uestion of law since the $resentation of evidence is necessar% to ad*udicate the .uestions involved. +ence, the $etition for review b% certiorari filed b% La%as. ISSUE: -Whether or not the assignee in the interest of the mortgagee can still recover the deficienc% amount of the motor vehicle sub*ect of the chattel mortgage which has been sold at $ublic auction. HELD: - Article 0/=/ of the ;ew #ivil #ode, on the foreclosure of chattel mortgages over $ersonal $ro$ert% sold on installment basis, $rovides that PIn a contract of sale of $ersonal $ro$ert% the $rice of which is $a%able in installments, the vendor ma% exercise an% of the following remedies5 3<4 "oreclose the chattel ,mortgage on the thing sold, if one has been constituted, should the vendee)s failure to $a% cover two or more installments. In this case, he shall have no further action against the $urchaser to recover an% un$aid balance of the $rice. An% agreement to the contrar% shall be void.Q -The foreclosure and actual sale of a mortgaged chattel bars further recover% b% the vendor of an% balance on the $urchaser)s outstanding obligation not so satisfied b% the sale. The $rohibition a$$lies to the assignee in interes of the mortgagee.

1. Ridad ". Fi%in"est and Finance Co !o ation& 1'2 SCRA '1) *1(+,FACTS: - Hn A$ril 0/, 0A@/, $laintiffs $urchased from the 'u$reme 'ales arid &evelo$ment #or$oration two 3>4 brand new "ord #onsul 'edans com$lete with accessories, for P>@,==B $a%able in >/ monthl% installments. To secure $a%ment thereof, $laintiffs executed on the same date a $romissor% note covering the $urchase $rice and a deed of chattel mortgage not onl% on the two vehicles $urchased but also on another car 3#hevrolet4 and $laintiffs- franchise or certificate of $ublic convenience granted b% the defunct Public 'ervice #ommission for the o$eration of a taxi fleet. Then, with the conformit% of the $laintiffs, the vendor assigned its rights, title and interest to the above-mentioned $romissor% note and chattel mortgage to defendant "ili$inas Investment and "inance #or$oration. -&ue to the failure of the $laintiffs to $a% their monthl% installments as $er $romissor% note, the defendant cor$oration foreclosed the chattel mortgage extra-*udiciall%, and at the $ublic auction sale of the two "ord #onsul cars, of which the $laintiffs were not notified, the defendant cor$oration was the highest bidder and $urchaser. Another auction sale was held on ;ovember 0@, 0A@1, involving the remaining $ro$erties sub*ect of the deed of chattel mortgage since $laintiffs- obligation was not full% satisfied b% the sale of the aforesaid vehicles, and at the $ublic auction sale, the franchise of $laintiffs to o$erate five units of taxicab service was sold for P=,??? to the highest bidder, herein defendant cor$oration, which subse.uentl% sold and conve%ed the same to herein defendant Iose &. 'ebastian, who then filed with the Public 'ervice #ommission an a$$lication for a$$roval of said sale in his favor. -Hn "ebruar% >0, 0A@@, $laintiffs filed an action for annulment of contract before the #ourt of "irst Instance of Ri,al, 2ranch I, with "ili$inas Investment and "inance #or$oration, Iose &. 'ebastian and 'heriff Iose 'an Agustin, as $art%-defendants. TC: - #ourt declared the chattel mortgage, to be null and void in so far as the taxicab franchise and the used #hevrolet car of $laintiffs are concerned, and the sale at $ublic auction conducted b% the #it% 'heriff of Manila concerning said taxicab franchise, to be of no legal effect. The certificate of sale issued b% the #it% 'heriff of Manila in favor of "ili$inas Investment and "inance #or$oration concerning $laintiffs- taxicab franchise for P=,??? is accordingl% cancelled and set aside, and the assignment thereof made b% "ili$inas Investment in favor of defendant Iose 'ebastian is declared void and of no legal effect. CA *er)ified )%e *ase )( SC. ISSUE: -Whether or not the vendor of $ersonal $ro$ert% sold on installments basis is $recluded, after foreclosing the chattel mortgage on the thing sold, from having recourse against the additional securit% b% the mortgagor. HELD: -The vendor of $ersonal $ro$ert% the $urchase $rice of which is $a%able in installments, has the right, should the vendee default in the $a%ment of two or more of the agreed installments, to exact fulfillment b% the $urchaser of the obligation, or to cancel the sale, or to foreclose the mortgage on the $urchased $ersonal $ro$ert%, if one was constituted. Whichever right the vendor elects, he cannot avail of the other, these remedies being alternative, not cumulative. "urthermore, if the vendor avails himself of the right to foreclose his mortgage, the law $rohibits him from further bringing an action against the vendee for the $ur$ose of recovering whatever balance of the debt secured not satisfied b% the foreclosure sale. The $recise $ur$ose of the law

is to $revent mortgagees from sei,ing the mortgaged $ro$ert%, bu%ing it at foreclosure sale for a low $rice and then bringing suit against the mortgagor for a deficienc% *udgment, otherwise, the mortgagor-bu%er would find himself without the $ro$ert% and still owing $racticall% the full amount of his original indebtedness. -In the instant case, defendant cor$oration elected to foreclose its mortgage u$on default b% the $laintiffs in the $a%ment of the agreed installments. +aving chosen to foreclose the chattel mortgage, and bought the $urchased vehicles at the $ublic auction as the highest bidder, it submitted itself to the conse.uences of the law as s$ecificall% mentioned, b% which it is deemed to have renounced an% and all rights which it might otherwise have under the $romissor% note and the chattel mortgage as well as the $a%ment of the un$aid balance. -#onse.uentl%, the lower court rightl% declared the nullit% of the chattel mortgage in .uestion in so far as the taxicab franchise and the used #hevrolet car of $laintiffs are concerned 5. Esg0e a ". Co0 t o9 A!!ea%s& 14, SCRA 1 *1(+(FACTS: -EA Machineries Inc. sold a "ord-trader cargo to +ilario !agma% and 2onifacio Masilungan. -'ubse.uentl%, Montelibano Jsguerra bought the right to the cargo truc and assumed $a%ing the un$aid $urchase $rice. -In so doing, Jsguerra executed in favor of EAMI a $romissor% note and chattel mortgage over the truc . -Jsguerra defaulted in his obligations.

- While the mortgagee can ta e $ossession of the chattel, such ta ing did not amount to the foreclosure of the mortgage. Htherwise stated, the ta ing of Jsguerra-s truc without $roceeding to the sale of the same at $ublic auction, but instead, a$$ro$riating the same in $a%ment of Jsguerra-s indebtedness, is not lawful. -As clearl% stated in the chattel mortgage contract, the ex$ress $ur$ose of the ta ing of the mortgaged $ro$ert% is to sell the same and8or foreclose the mortgage constituted thereon either *udiciall% or extra*udiciall% and thereb%, li.uidate the indebtedness in accordance with law. -More than that, even if such automatic a$$ro$riation of the cargo truc in .uestion can be inferred from or be contem$lated under the aforesaid mortgage contract, such sti$ulation would be pactum commissorium which is ex$ressl% $rohibited b% Article >?== of the #ivil #ode and therefore, null and void. -+aving o$ted to foreclose the chattel mortgage, res$ondent EAMI can no longer cancel the sale. The three remedies of the vendor in case the vendee defaults, in a contract of sale of $ersonal $ro$ert% the $rice of which is $a%able in installment under Article 0/=/ of the #ivil #ode, are alternative and cannot be exercised simultaneousl% or cumulativel% b% the vendorcreditor.

). Bo .on II ". Se "ice3ide s!ecia%ist& '5+ SCRA ),1 *1(()FACTS: -&aniel 2orbon and "rancisco 2orbon $urchased from Pangasinan AutoMart Inc. 2rand new 0A=/ Isu,u R#& >? crew cab and signed a $romissor% note $a%able in 0> monthl% installments. -To secure the $romissor% note, the 2orbon)s executed a chattel mortgage over the vehicle.

-Eami too the truc from Jsguerra who gave his consent on the condition that he be allowed to recover its $ossession u$on $a%ment of its account. -Jsguerra tried to re$ossess the truc b% sending his wife to Eami to $artiall% settle his account. -'till, Eami refused to deliver the truc , com$elling Jsguerra to file a com$laint. TC: -&ismissed the com$laint ruling that it was not unlawful on the $art of Eami to re$ossess the cargo truc in .uestion as Jsguerra gave his consent to the re$ossession. CA: -'et aside the decision of the !# and held that while it is true that the mortgagee can ta e $ossession of the chattel, such ta ing did not amount to the foreclosure of the mortgage, otherwise stated, Eami should have foreclosed the mortgage. ISSUE: -Whether or not the mortgagee-vendor of the $ersonal $ro$ert% sold on installments is legall% obligated to foreclose the chattel mortgage and sell the chattel sub*ect thereof at $ublic auction in case the mortgagor-vendee defaults in the $a%ment of the agreed installments. HELD:

-The right of Pangasinan Automart Inc was later assigned to "ilinvest #redit #or$oration with notice to the 2orbons. -"## in turn assigned all its rights, interest and title over the $romissor% note and the chattel mortgage to 'evicewide '$ecialists. -When the 2orbon)s failed to com$l% with their obligation, 'ervicewide '$ecialist filed an action for re$levin for the foreclosure of the mortgage $ro$ert%. -The 2orbon)s claimed that the% were not in default because Pangasinan Automart delivered a vehicle different from what the% have intended to bu% and des$ite communication, the latter was not able to re$lace the vehicle until it was sei,ed b% the court. -'ustaining the decision of the court a .uo, the a$$ellate court u$held the award of li.uidated damages and attorne%)s fees in favor of 'ervicewide '$ecialists. HELD: -The remedies under Article 0/=/ of the #ivil #ode are not cumulative but alternative and exclusive, which means, that 9x x x 'hould the vendee or $urchaser of a $ersonal $ro$ert% default in the $a%ment of two or more of the agreed installments, the vendor or seller has the o$tion to avail of an% of these three remedies M either to exact fulfillment b% the $urchaser of the obligation, or to cancel the sale, or to foreclose the mortgage on the $urchased $ersonal $ro$ert%, if one was constituted. These remedies have been recogni,ed as alternative, not cumulative, that the exercise of one would bar the exercise of the others.9 -When the seller assigns his credit to another $erson, the latter is li ewise bound b% the same

law. Accordingl%, when the assignee forecloses on the mortgage, there can be no further recover% of the deficienc%, and the seller-mortgagee is deemed to have renounced an% right thereto. A contrario, in the event the seller-mortgagee first see s, instead, the enforcement of the additional mortgages, guarantees or other securit% arrangements, he must then be held to have lost b% waiver or non-choice his lien on the chattel mortgage of the $ersonal $ro$ert% sold b% an% mortgaged bac to him, although, similar to an action for s$ecific $erformance, he ma% still lev% on it. -In ordinar% alternative obligations, a mere choice categoricall% and une.uivocall% made and then communicated b% the $erson entitled to exercise the o$tion concludes the $arties. The creditor ma% not thereafter exercise an% other o$tion, unless the chosen alternative $roves to be ineffectual or unavailing due to no fault on his $art. This rule, in essence, is the difference between alternative obligations, on the one hand, and alternative remedies, u$on the other hand, where, in the latter case, the choice generall% becomes conclusive onl% u$on the exercise of the remed%. "or instance, in one of the remedies ex$ressed in Article 0/=/ of the #ivil #ode, it is onl% when there has been a foreclosure of the chattel mortgage that the vendee-mortgagor would be $ermitted to esca$e from a deficienc% liabilit%. Thus, if the case is one for s$ecific $erformance, even when this action is selected after the vendee has refused to surrender the mortgaged $ro$ert% to $ermit an extra*udicial foreclosure, that $ro$ert% ma% still be levied on execution and an alias writ ma% be issued if the $roceeds thereof are insufficient to satisf% the *udgment credit. 'o, also, a mere demand to surrender the ob*ect which is not heeded b% the mortgagor will not amount to a foreclosure, but the re$ossession thereof b% the vendormortgagee would have the effect of foreclosure

TC: -Eranted the motion. CA: -'et aside the order of dismissal and ruled that re$ossession ex$enses should be reimbursed. ISSUE: -Whether or not re$ossession ex$enses incurred b% the mortgage in action for re$levin are recoverable from the mortgage. HELD: -The necessar% ex$enses incurred in the $rosecution b% the mortgagee of the action for re$levin so that he can regain $ossession of the chattel should be borne b% the mortgagor. Recoverable ex$enses include ex$enses $ro$erl% incurred in effecting sei,ure of the chattel and reasonable attorne%)s fees in $rosecuting the action for re$levin. These re$ossession ex$enses are not $art of the un$aid claim which cannot be recovered b% the foreclosure of the chattel mortgage on the $ro$ert% sold on installments under Article 0/=/ of the #ivil #ode.

4. Ag0stin ". Co0 t o9 A!!ea%s&& '41 SCRA 1), *1((4FACTS: -Agustin executed a $romissor% note in favor of JRM commercial. -The note was $a%able in monthl% installments and secured b% chattel mortgage over an Isu,u diesel truc , both of which were subse.uentl% assigned to "ilinvest "inance #or$oration. -When Agustin defaulted in $a%ing the installments, ""# demanded from him the $a%ment of the entire balance or lieu thereof, the $ossession of the mortgage vehicle. -;either $a%ment nor surrender was made. -Aggrieved, ""# filed a com$laint against Agustin $ra%ing for the issuance of writ of re$levin or in the alternative, for $a%ment. -Trial ensued and thereafter a writ of re$levin was issued. -2% virtue thereof, "## ac.uired $ossession of the vehicle. -($on re$ossession, "## discovered that the vehicle was no longer in running condition and that several $arts were missing which "## re$laced. -The vehicle was then foreclosed and sold at $ublic auction. -'ubse.uentl%, "## filed a su$$lemental com$laint claiming additional reimbursement for the value of re$lacement $arts and for ex$enses incurred in trans$orting the mortgaged vehicle from #aga%an to Manila. -Agustin move to dismiss the su$$lemental com$laint arguing that the court had alread% lost *urisdiction over the case because of the earlier extra *udicial foreclosure of the mortgage.