52. JOSE A. LUNA, Petitioner, v. DEMETRIO B.

ENCARNACION, Judge of First Instance of Rizal, TRINIDAD

REYES and THE PROVINCIAL SHERIFF OF RIZAL, Respondents.
[G.R. No. L-4637. June 30, 1952.]

FACTS:
A deed designated as chattel mortgage was executed by Jose A. Luna in favor of Trinidad Reyes whereby
the former conveyed by way of first mortgage to the latter a certain house of mixed materials to secure the
payment of a promissory note in the amount of P1,500, with interest at 12 per cent per annum. The mortgagor
failed to pay the promissory note when it fell due. The sheriff sold the property to the mortgagee for the amount
covering the whole indebtedness with interest and costs. After the period for the redemption of the property had
expired without the mortgagor having exercised his right to repurchase, the mortgagee demanded from the
mortgagor the surrender of the possession of the property, but the latter refused and so she filed a petition praying
that the provincial sheriff be authorized to place her in possession of the property invoking in her favor the
provisions of Act No. 3135, as amended by Act No. 4118.
After hearing, respondent judge granted the petition ordering the provincial sheriff of Rizal, or any of his
deputies, to immediately place petitioner in possession of the property in question while at the same time directing
the mortgagor Jose A. Luna to vacate it and relinquish it in favor of petitioner. It is from this order that Jose A.
Luna desires now to obtain relief by filing this petition for certiorari contending that the respondent judge has acted
in excess of his jurisdiction.

ISSUE: WON the extra-judicial sale made by the provincial sheriff of the mortgaged property was valid.

RULING: No. As may be gleaned from a perusal of the deed signed by the parties, the understanding executed by
them is a chattel mortgage, as the parties have so expressly designated, and not a real estate mortgage, specially
when it is considered that the property given as a security is a house of mixed materials which by its very nature is
considered as personal property. Such being the case, it is indeed a mistake for the mortgagee to consider this
transaction in the light of Act No. 3135, as amended by Act No. 4118, as was so considered by her when she
requested the provincial sheriff to sell it extra-judicially in order to secure full satisfaction of the indebtedness still
owed her by the mortgagor. It is clear that Act No. 3135, as amended, only covers real estate mortgages and is
intended merely to regulate the extra- judicial sale of the property mortgaged if and when the mortgagee is given
a special power or express authority to do so in the deed itself, or in a document annexed thereto. These
conditions do not here obtain. The mortgage before us is not a real estate mortgage nor does it contain an
express authority or power to sell the property extra-judicially.

But regardless of what we have heretofore stated, we find that the validity of the sale in question may be
maintained, it appearing that the mortgage in question is a chattel mortgage and as such it is covered and
regulated by the Chattel Mortgage Law, Act No. 1508. Section 14 of this Act allows the mortgagee to have the
property mortgaged sold at public auction through a public officer in almost the same manner as that allowed by
Act No. 3135, as amended by Act No. 4118, provided that the requirements of the law relative to notice and
registration are complied with. We are not prepared to state if these requirements of the law had been complied
with in this case for the record before us is not complete and there is no showing to that effect.

In the supposition that the sale of the property made by the sheriff has been made in accordance with law,
and the question he is confronted is how to deliver the possession of the property to the purchaser in case of
refusal to surrender its possession on the part of the debtor or mortgagor, the remedy of the purchaser, according
to the authorities, is to bring an ordinary action for recovery of possession (Continental Gin Co. v. Pannell, 160 P.,
598; 61 Okl., 102; 14 C. J. S., pp. 1027, 1028). The purchaser cannot take possession of the property by force
either directly or through the sheriff. And the reason for this is "that the creditors right of possession is conditioned
upon the fact of default, and the existence of this fact may naturally be the subject of controversy" (Bachrach
Motor Co. v. Summers, 42 Phil., 3, 6). The creditor cannot merely file a petition for a writ of possession as was
done by Trinidad Reyes in this case. Her remedy is to file an ordinary action for recovery of possession in order
that the debtor may be given an opportunity to be heard not only regarding possession but also regarding the
obligation covered by the mortgage. The petition she has filed in the lower court, which was not even docketed, is
therefore improper and should be disregarded.

53. SALVADOR PIANSAY and CLAUDIA V. VDA. DE UY KIM, plaintiffs-appellants,

vs.
CONRADO S. DAVID and MARCOS MANGUBAT, defendants-appellees.
G.R. No. L-19468 October 30, 1964

FACTS:
Conrado S. David received a loan of P3,000 with interest at 12% per annum from Claudia B. Vda. de Uy
Kim, one of the plaintiffs, and to secure the payment of the same, Conrado S. David executed a chattel mortgage
on a house situated at 1259 Sande Street, Tondo, Manila. The mortgage was foreclosed and was sold to Kim to
satisfy the debt. Two years later after the foreclosure, the house was sold by Kim to Marcos Magubat. The latter
then filed to collect the loan from David and to declare the sale issued by Kim in favour of Piansay null and void.
(It appears that Kim sold the house to two people, namely Piansay and Magubat) The trial court approved of the
collection of the loan from David but dismissed the complaint regarding the questioned sale between Kim and
Piansay, declaring the latter as rightful owner of the house and awarding damages to him. CA reversed the
decision making David the rightful owner and ordering him and his co-defendant, Mangubat, to levy the house.
Now Petitioners are trying to release the said property from the aforementioned levy by claiming that Piansay is
the rightful owner of the house.
ISSUE: WON the sale between Kim and Piansay was valid.

RULING: No. Since it is a rule in our law that buildings and constructions are regarded as mere accesories to the
land (following the Roman maxim omne quod solo inaedificatur solo credit) it is logical that said accessories
should partake of the nature of the principal thing, which is the land forming, as they do, but a single object (res)
with it in contemplation of law. A mortgage creditor who purchases real properties at an extra-judicial foreclosure
sale thereof by virtue of a chattel mortgage constituted in his favor, which mortgage has been declared null and
void with respect to said real properties acquires no right thereto by virtue of said sale. Thus, Mrs. Uy Kim had no
right to foreclose the alleged chattel mortgage constituted in her favor, because it was in reality a mere contract of
an unsecured loan. It follows that the Sheriff was not authorized to sell the house as a result of the foreclosure of
such chattel mortgage. And as Mrs. Uy Kim could not have acquired the house when the Sheriff sold it at public
auction, she could not, in the same token, it validly to Salvador Piansay. Conceding that the contract of sale
between Mrs. Uy Kim and Salvador Piansay was of no effect, we cannot nevertheless set it aside upon instance
of Mangubat because, as the court below opined, he is not a party thereto nor has he any interest in the subject
matter therein, as it was never sold or mortgaged to him At any rate, regardless of the validity of a contract
constituting a chattel mortgage on a house, as between the parties to said contract, the same cannot and does
not bind third persons, who are not parties to the aforementioned contract or their privies. As a consequence, the
sale of the house in question in the proceedings for the extrajudicial foreclosure of said chattel mortgage, is null
and void insofar as defendant Mangubat is concerned, and did not confer upon Mrs. Uy Kim, as buyer in said
sale, any dominical right in and to said house, so that she could not have transmitted to her assignee, plaintiff
Piansay any such right as against defendant Mangubat. In short plaintiffs have no cause of action against the
defendants herein.

54. MAKATI LEASING and FINANCE CORPORATION, petitioner,

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

G.R. No. L-58469 May 16, 1983

FACTS:
It appears that in order to obtain financial accommodations from herein petitioner Makati Leasing and
Finance Corporation, the private respondent Wearever Textile Mills, Inc., discounted and assigned several
receivables with the former under a Receivable Purchase Agreement. To secure the collection of the receivables
assigned, private respondent executed a Chattel Mortgage over certain raw materials inventory as well as a
machinery described as an Artos Aero Dryer Stentering Range.
Upon default, Makati Leasing filed a petition for judicial foreclosure of the properties mortgaged. Acting on
Makati Leasings application for replevin, the lower court issued a writ of seizure. Pursuant thereto, the sheriff
enforcing the seizure order seized the machinery subject matter of the mortgage. In a petition for certiorari and
prohibition, the Court of Appeals ordered the return of the machinery on the ground that the same cannot be the
subject of replevin because it is a real property pursuant to Article 415 of the new Civil Code, the same being
attached to the ground by means of bolts and the only way to remove it from Wearever textiles plant would be to
drill out or destroy the concrete floor. When the motion for reconsideration of Makati Leasing was denied by the
Court of Appeals, Makati Leasing elevated the matter to the Supreme Court.

ISSUE: WON the machinery in suit is real or personal property from the point of view of the parties.

RULING: It is deemed a personal property.

There is no logical justification to exclude the rule out the present case from the application of the
pronouncement in Tumalad v Vicencio, 41 SCRA 143. If a house of strong materials, like what was involved in
the Tumalad case, may be considered as personal property for purposes of executing a chattel mortgage
thereon as long as the parties to the contract so agree and no innocent third party will be prejudiced thereby,
there is absolutely no reason why a machinery, which is movable in its nature and becomes immobilized only by
destination or purpose, may not be likewise treated as such. This is really because one who has so agreed is
estopped from the denying the existence of the chattel mortgage.
In rejecting petitioners assertion on the applicability of the Tumalad doctrine, the CA lays stress on the
fact that the house involved therein was built on a land that did not belong to the owner of such house. But the
law makes no distinction with respect to the ownership of the land on which the house is built and We
should not lay down distinctions not contemplated by law.
It must be pointed out that the characterization by the private respondent is indicative of the intention and
impresses upon the property the character determined by the parties. As stated in Standard Oil Co. of New York
v. Jaramillo, 44 Phil. 630, it is undeniable that the parties to a contract may, by agreement, treat as personal
property that which by nature would be a real property as long as no interest of third parties would be prejudiced
thereby.
The status of the subject matter as movable or immovable property was not raised as an issue before the
lower court and the CA, except in a supplemental memorandum in support of the petition filed in the appellate
court. There is no record showing that the mortgage has been annulled, or that steps were taken to nullify the
same. On the other hand, respondent has benefited from the said contract.

Equity dictates that one should not benefit at the expense of another.
As such, private respondent could no longer be allowed to impugn the efficacy of the chattel mortgage
after it has benefited therefrom. Therefore, the questioned machinery should be considered as personal property.
55. PASTOR TOLENTINO
vs.
BASILIO BALTAZAR, DIRECTOR OF THE BUREAU OF LANDS and ESTATE OF ANGEL BALTAZAR,
G.R. No. L-14597, March 27, 1961

FACTS:
Angel Baltazar filed a homestead application which was approved by the Director of Lands. Baltazar
mortgaged the present and future improvements on said land to Pastor Tolentino for the sum of P1,500.
After Baltazars death, his widow and children conveyed to his son Basilio Baltazar their rights and
interests in and to said land. Subsequently, Homestead Patent No. V-8832 was issued to Basilio Baltazar, and
soon secured Original Certificate of Title No. P-790 in his name.
Tolentino instituted this present case against the estate of Angel Baltazar, his son Basilio, and the Director
of Lands for the cancellation of said title.

ISSUE: WON the mortgage of present and future improvements of a land acquired by homestead patent is
binding.

RULING: Yes. Pursuant to this provision a land acquired by homestead patent may neither be encumbered or
alienated from the date of the approval of the corresponding homestead application and for a period of five (5)
years after the issuance of the patent, nor be held liable for any debt contract within such period of time. However,
said section 118 explicitly permits the encumbrance, by mortgage or pledge of the improvements and crops on the
land, without limitation in point of time.
It has been established that when plaintiff saw the children of Angel Baltazar shortly after his death, they
promised to pay his debt in favor of Pastor Tolentino. In other words, Basilio Baltazar knew, before he got said
patent and the certificate of title, that the present and future improvements on the land were subject to a valid and
subsisting mortgage in favor of Pastor Tolentino and acknowledged the same. Hence, he must be deemed to
have secured such patent and title subject to a subsisting trust, insofar as plaintiff's mortgage is concerned, and,
under plaintiff's prayer for such relief as may be deemed just and equitable, this action may be considered as one
to compel the defendant to execute the instrument necessary for the registration of said mortgage and its
annotation on plaintiff's certificate of title.

56. PEOPLE'S BANK AND TRUST CO. and ATLANTIC GULF AND PACIFIC CO. OF MANILA, plaintiffs-
appellants,
vs.
DAHICAN LUMBER COMPANY, DAHICAN AMERICAN LUMBER CORPORATION and CONNELL BROS. CO.
(PHIL.), defendants-appellants.
G.R. No. L-17500, May 16, 1967

FACTS
Dahican Lumber Company (DAMCO) obtained several loans amounting to P250,000 from Peoples Bank
and, together with DALCO, another loan amounting to $250,000 from Export-Import bank secured by five
promissory notes through Peoples Bank. In both loans, DAMCO executed and registered respective mortgages
with inclusion of after acquired properties. DAMCO and DALCO failed to satisfy the fifth promissory note in favor
of Export bank so Peoples Bank paid it and subsequently filed an action for the foreclosure of the mortgaged
properties of DAMCO including the after acquired machinery, equipment and spare parts upon the latter's failure
to fulfill its obligation.
Peoples Bank asserted that the after acquired machinery and equipment of DAMCO are subject to the
deed of mortgage executed by DAMCO. Hence, these can be included in the foreclosure proceedings.
DALCO argued that the mortgages were void as regards the after acquired properties because they were
not registered in accordance with the chattel mortgage law. Moreover, provision of the fourth paragraph of each of
said mortgages did not automatically make subject to such mortgages the "after acquired properties", the only
meaning thereof being that the mortgagor was willing to constitute a lien over such properties.

ISSUES: WON the after acquired machinery and equipment of DAMCO are included as subject of the Real
Estate mortgage, thus can be foreclosed.

RULING: Yes. Judgment was rendered in favor of Plaintiff Peoples Bank. The after acquired machinery and
equipment are included in the executed mortgages. It is not disputed in the case at bar that the "after acquired
properties" were purchased by DALCO in connection with, and for use in the development of its lumber
concession and that they were purchased in addition to, or in replacement of those already existing in the
premises on July 13, 1950. In law, therefore, they must be deemed to have been immobilized, with the result that
the real estate mortgages involved herein which were registered as such did not have to be registered a second
time as chattel mortgages in order to bind the "after acquired properties" and affect third parties.
Under the fourth paragraph of both deeds of mortgage, it is crystal clear that all property of every nature
and description taken in exchange or replacement, as well as all buildings, machineries, fixtures, tools,
equipment, and other property that the mortgagor may acquire, construct, install, attach; or use in, to upon, or in
connection with the premises that is, its lumber concession "shall immediately be and become subject to the
lien" of both mortgages in the same manner and to the same extent as if already included therein at the time of
their execution. As the language thus used leaves no room for doubt as to the intention of the parties.
We see no useful purpose in discussing the matter extensively. Suffice it to say that the stipulation
referred to is common, and we might say logical, in all cases where the properties given as collateral are
perishable or subject to inevitable wear and tear or were intended to be sold, or to be used thus becoming subject
to the inevitable wear and tear but with the understanding express or implied that they shall be replaced with
others to be thereafter acquired by the mortgagor. Such stipulation is neither unlawful nor immoral, its obvious
purpose being to maintain, to the extent allowed by circumstances, the original value of the properties given
judgment on the part of the creditor who does not see to it that a similar provision is included in the contract.

57. SALDANA VS. PHIL, G.R. No. L-13194. January 29, 1960

FACTS:
In order to secure an indebtedness of P15,000.00, Josefina Vda. de Eleazar executed in favor of the
plaintiff-appellant Buenaventura Saldaa a chattel mortgage covering various properties.
Subsequent to the execution of said mortgage and while the same was still in force, the defendant
Hospital de San Juan de Dios, Inc. obtained, in Civil Case No. 1930, a judgment against Josefina Vda. de
Eleazar. A writ of execution was duly issued and the same was served on the judgment debtor by the sheriff.
The plaintiff-appellant Saldaa filed a third-party claim asserting that the above-described properties
levied are subject to his chattel mortgage. In virtue thereof, the sheriff released only some of the property
originally included in the levy.
Appellant claims that the phrase in the chattel mortgage contract "and all other furnitures, fixtures and
equipment found in the said premises", validly and sufficiently covered within its terms the personal properties
disposed of in the auction sale, as to warrant an action for damages by the plaintiff mortgagee.

ISSUE: WON the chattel mortgage contract in the instant case are in substantial compliance with the "reasonable
description rule" fixed by the chattel Mortgage Act.

RULING: Yes. The specifications in the chattel mortgage contract in the instant case are in substantial compliance
with the "reasonable description rule" fixed by the chattel Mortgage Act. We may notice in the agreement,
moreover, that the phrase in question is found after an enumeration of other specific articles. It can thus be
reasonably inferred therefrom that the "furnitures, fixtures and equipment" referred to are properties of like nature,
similarly situated or similarly used in the restaurant of the mortgagor located in front of the San Juan de Dios
Hospital at Dewey Boulevard, Pasay City, which articles can be definitely pointed out or ascertained by simple
inquiry at or about the premises. Note that the limitation found in the last paragraph of section 7 of the Chattel
Mortgage Law 1 on "like or substituted properties" make reference to those "thereafter acquired by the mortgagor
and placed in the same depository as the property originally mortgaged", not to those already existing and
originally included at the date of the constitution of the chattel mortgage. A contrary view would unduly impose a
more rigid condition than what the law prescribes, which is that the description be only such as to enable
identification after a reasonable inquiry and investigation.