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SPCL Chattel MortgageCHATTEL MORTGAGE

LOAN SECURITY BY CHATTEL MORTGAGE

1. Makati Leasig a! "ia#e Cor$oratio %. &eare%er Te'tile Mills( I#.( 1)) SCRA )*+ ,1*-/

). "ili$ias Mar0le Cor$oratio %. Itere!iate A$$ellate Co2rt( 13) SCRA 1-4 ,1*-+/

. Allie! Bakig Cor$oratio %. Salas( 1+- SCRA 313 ,1*--/

3. Ser%i#e5i!e S$e#ialists( I#. %. Itere!iate A$$ellate Co2rt( 163 SCRA -4 ,1*-*/

7. Bi#ol Sa%igs Loa Asso#iatio %. G2iha5a( 1-- SCRA +3) ,1**4/8 Pae#a &oo! Treatet Plat( I#.

%. Co2rt o9 A$$eals( 14 SCRA )-1 ,1***/

+. BA "ia#e Cor$oratio %. Co2rt o9 A$$eals( )41 SCRA 176 ,1**1/

6. Cera %. Co2rt o9 A$$eals( ))4 SCRA 716 ,1**/

-. "ili%est Cre!it Cor$oratio %. Co2rt o9 A$$eals( )3- SCRA 73* ,1**7/

*. A#e Shoe R200er : Plasti# Cor$oratio %. Co2rt o9 A$$eals( )+4 SCRA 613 ,1**+/

14. Ce02 Iteratioal "ia#e Cor$oratio %. Co2rt o9 A$$eals( )+- SCRA 16- ,1**6/

11. Ni#ol %. Bla#o( 46 SCRA )31 ,1**1/8 Neela! %. ;illa2e%a( 16 SCRA +7) ,1***/

1). Tsai %. Co2rt o9 A$$eals( ++ SCRA )3 ,)441/

1. Nor!i# Asia Liite! a! Bakers tr2st Co. %. Co2rt o9 A$$eals(( 34 SCRA *1 ,)44/

13. Philli$ Brothers O#eai#( I#. %. Co2rt o9 A$$eals( 34) SCRA +47 ,)44/

17. Polia! I!2strial Liite! %. Natioal

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SPCL Chattel Mortgage

+. Bor0o II %. Ser%i#e5i!e s$e#ialist( )7- SCRA +3 ,1**+/

6. Ag2sti %. Co2rt o9 A$$eals(( )61 SCRA 3+ ,1**6/

LOAN SECURITY BY CHATTEL MORTGAGE

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SPCL Chattel Mortgage1. Makati Leasig a! "ia#e Cor$oratio %. &eare%er Te'tile Mills( I#.( 1)) SCRA )*+ ,1*-/

FACTS:

-Wearever Textile Mills, Inc., disconted and assigned several receiva!les "it# t#e former nder a $eceiva!le

Prc#ase Agreement in favor of Ma%ati &easing and 'inance Cor(oration in order to o!tain financia

accommodations.

- To secre t#e collection of t#e receiva!les assigned, Wearever exected a C#attel Mortgage over certain ra"

materials inventor) as "ell as a mac#iner) descri!ed as an Artos Aero *r)er +tentering $ange.

-(on Wearevers defalt, Ma%ati &easing filed a (etition for extradicial foreclosre of t#e (ro(erties mortgage to

it. o"ever, t#e *e(t) +#eriff assigned to im(lement t#e foreclosre failed to gain entr) into (remisesof

Wearever and "as not a!le to effect t#e sei0re of t#e aforedescri!ed mac#iner). Ma%ati &easing t#ereafter filed a

com(laint for dicial foreclosre.

-Acting on Ma%ati &easings a((lication for re(levin, t#e lo"er cort issed a "rit of sei0re, t#e enforcement of

"#ic# "as #o"ever s!seentl) restrained (on Wearevers filing of a motion for reconsideration. After severa

incidents, t#e lo"er cort finall) issed an order lifting t#e restraining order for t#e enforcement of t#e "rit of

sei0re and an order to !rea% o(en t#e (remises of Wearevers to enforce said "rit. T#e lo"er cort reaffirmed itsstand (on Wearevers filing of a frt#er motion for reconsideration.

-T#e s#eriff enforcing t#e sei0re order, re(aired to t#e (remises Wearevers and removed t#e main drive motor

of t#e s!ect mac#iner).

CA:

-+et aside orders of t#e &o"er Cort and ordered t#e retrn of t#e main drive motor of t#e mac#iner). It #eld t#at

t#e s!ect mac#iner) cannot !e s!ect of re(levin !ecase it is a real (ro(ert) (rsant to Article 14 of t#e

Civil Code. T#erefore C#attel Mortgage constitted (on it is nll and void.

ISSUE:

-W#et#er or not t#e s!ect mac#iner) is a real (ro(ert) or a (ersonal (ro(ert) to s!ect it to c#attel mortgage.

HELD:

-W#ere a c#attel mortgage is constitted on mac#iner) attac#ed to t#e grond t#e mac#iner) is to !e considered

as a (ersonal (ro(ert) and t#e c#attel mortgage constitted t#ereon is not nll and void regardless of "#o o"ns

t#e land.

- A (ro(ert) attac#ed to t#e grond li%e a #ose of strong materials, ma) !e considered as (ersonal (ro(ert) for

(r(oses of execting a c#attel mortgage t#ereon as long as t#e (arties to t#e contract so agree and no innocent

t#ird (art) "ill !e (rediced t#ere!), t#ere is a!soltel) no reason "#) a mac#iner), "#ic# is mova!le in its

natre and !ecomes immo!ili0ed onl) !) destination or (r(ose, ma) not !e li%e"ise treated as sc#. T#is is

reall) !ecase one "#o #as so agreed is esto((ed from den)ing t#e existence of t#e c#attel mortgage.


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). "ili$ias Mar0le Cor$oratio %. Itere!iate A$$ellate Co2rt( 13) SCRA 1-4 ,1*-+/

FACTS:

-'ili(inas Mar!le Cor(oration a((lied for a loan "it# *evelo(ment 5an% of t#e P#ili((ines 6*5P7 in its desire to

develo( t#e fn (otentials of its mining claims and de(osits and to finance acisition of mac#iner). *5P granted

t#e loan s!ect, #o"ever, to sixt) oneros conditions, among "#ic# are8 'ili(inas Mar!le s#all #ave to enter into

a management contract "it# res(ondent 5ancom +)stems Control, Inc. 95ancom: and t#at t#e loan !e secred !)

a mortgage.

-T#e mortgage "as not registered.

-5ancom and its directors/ officers mismanaged and miss(ent t#e loan.

-5ancom resigned "it# t#e a((roval of *5P even !efore t#e ex(iration of t#e management contract, leaving

'ili(inas Mar!le desolate and devastated.

-Mac#ineries arrived in t#e P#ili((ines !t alleged not delivered to 'ili(inas Mar!le.

-Also, instead of #el(ing 'ili(inas Mar!le get !ac% on its feet, *5P com(letel) a!andoned 'ili(inas Mar!les

(roect and (roceeded to foreclose t#e (ro(erties mortgage "it#ot (revios demand or notice.

-In essence, t#e 'ili(inas Mar!le see%s t#e annlment of t#e deeds of mortgage and deed of assignment !ecase

t#ere "as no loan at all to secre since "#at *5P ;lent; to 'ili(inas Mar!le "it# its rig#t #and, it also got !ac%

"it# its left #and< and t#at, t#ere "as failre of consideration "it# regard to t#e exection of said deeds as t#e

loan "as never delivered to t#e 'ili(inas Mar!le.

-T#e 'ili(inas Mar!le frt#er (ra)ed t#at (ending t#e trial on t#e merits of t#e case, t#e trial cort immediatel)

isse a restraining order and t#en a "rit of (reliminar) innction against t#e s#eriffs to enoin t#e latter from

(roceeding "it# t#e foreclosre and sale of t#e 'ili(inas Mar!les (ro(erties in Metro Manila and in $om!lon.

DBPs DEFENSE:

-o((osed t#e issance of a "rit of (reliminar) innction stating t#at nder Presidential *ecree =o. 3>4, *5Ps

rig#t to foreclose is mandator) as t#e arrearages of (etitioner #ad alread) amonted to P123,>?1,2@4.>2 as

against its total o!ligation of P141,4B,@1.B2< t#at nder t#e same decree, no cort can isse an) restraining

order or innction against it to sto( t#e foreclosre since 'ili(inas Mar!les arrearages #ad alread) reac#ed at

least t"ent) (ercent of its total o!ligations< t#at t#e alleged non-recei(t of t#e loan (roceeds !) t#e (etitioner

cold, at !est, !e acce(ted onl) in a tec#nical sense !ecase t#e mone) "as received !) t#e officers of t#e

(etitioner acting in sc# ca(acit) and, t#erefore, irres(ective of "#oever is res(onsi!le for (lacing t#em in t#eir(ositions.

TC AND CA:

-W#ile evidence of 'ili(inas Mar!le Cor(oration a((ears (ersasive, still it cannot enoin *5P from com(l)ing

"it# t#e mandator) (rovisions of P* 3>4.

ISSUES:

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If t#ere "as no valid contract of loan for failre of consideration, "#et#er or not t#e mortgage can exist or stand !)

itself !eing a mere accessor) contract.

W#et#er or not t#e non-registration of t#e C#attel Mortgage affects its validit).

HELD:

- Presidential *ecree =o. 3>4 "as issed (rimaril) to see to it t#at government financial instittions are not denied

s!stantial cas# inflo"s, "#ic# are necessar) to finance develo(ment (roects all over t#e contr), !) large

!orro"ers "#o, "#en t#e) !ecome delinent, resort to cort actions in order to (revent or dela) t#e

governments collection of t#eir de!ts and loans.

-T#e government, #o"ever, is !ond !) !asic (rinci(les of fairness and decenc) nder t#e de (rocess clase of

t#e 5ill of $ig#ts. P.*. 3>4 "as never meant to (rotect officials of government lending instittions "#o ta%e over

t#e management of a !orro"er cor(oration, lead t#at cor(oration to !an%r(tc) t#rog# mismanagement or

misa((ro(riation of its fnds, and "#o, after rining it, se t#e mandator) (rovisions of t#e decree to avoid t#e

conseences of t#eir misdeeds.

-T#e designated officers of t#e government financing instittion cannot sim(l) "al% a"a) and t#en state t#at since

t#e loans "ere o!tained in t#e cor(orations name, t#en P.*. 3>4 mst !e (erem(toril) a((lied and t#at t#ere isno "a) t#e !orro"er cor(oration can (revent t#e atomatic foreclosre of t#e mortgage on its (ro(erties once t#e

arrearages reac# t"ent) (ercent 62?7 of t#e total o!ligation no matter "#o "as res(onsi!le.

-In t#e case at !ar, t#e res(ondents tr) to im(ress (on t#is Cort t#at t#e D4,???,???.?? loan "as actall)

granted and released to t#e (etitioner cor(oration and "#atever t#e com(osition of t#e management "#ic#

received t#e loan is of no moment !ecase t#is management "as acting in !e#alf of t#e cor(oration. T#e

res(ondents also arge t#at since t#e loan "as extended to t#e cor(oration, t#e releases #ad to !e made to t#e

t#en officers of t#at !orro"er cor(oration.

-Precisel), "#at t#e (etitioner is tr)ing to (oint ot is t#at t#e *5P and 5ancom (eo(le "#o managed 'ili(inas

Mar!le miss(ent t#e (roceeds of t#e loan !) ta%ing advantage of t#e (ositions t#at t#e) "ere occ()ing in t#e

cor(oration "#ic# reslted in t#e latters devastation instead of its re#a!ilitation. T#e (etitioner does not estion

t#e at#orit) nder "#ic# t#e loan "as delivered !t stresses t#at it is (recisel) t#is at#orit) "#ic# ena!led t#e

*5P and 5ancom (eo(le to miss(end and misa((ro(riate t#e (roceeds of t#e loan t#ere!) defeating its ver)

(r(ose, t#at is, to develo( t#e (roects of t#e cor(oration. T#erefore, it is as if t#e loan "as never delivered to it

and t#s, t#ere "as failre on t#e (art of t#e res(ondent *5P to deliver t#e consideration for "#ic# t#e mortgage

and t#e assignment of deed "ere exected.

- Article 2124 of t#e Civil Code clearl) (rovides t#at t#e non-registration of t#e mortgage does not affect t#e

immediate (arties. It states8

Art. 2124. In addition to t#e reisites stated in article 2?>4, it is indis(ensa!le, in order t#at a mortgage ma) !e

validl) constitted t#at t#e docment in "#ic# it a((ears !e recorded in t#e $egistr) of Pro(ert). If t#e instrmentis not recorded, t#e mortgage is nevert#eless !inding !et"een t#e (arties.

'ili(inas mar!le, #o"ever, cannot invo%e t#e a!ove (rovision to nllif) t#e c#attel mortgage it exected in favor of

res(ondent *5P.

. Allie! Bakig Cor$oratio %. Salas( 1+- SCRA 313 ,1*--/

FACTS:


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SPCL Chattel Mortgage-Eeneral 5an% and Trst Com(an) granted Eencor Mar%eting, Inc., a time loan evidenced !) a Promissor) =ote

exected !) t#e latter t#rog# its President, *r. Clarencio +. Fico.As secrit) for t#e time loan and (rsant to

a resoltion of t#e 5oard of *irectors of Eencor Mar%eting, a *eed of C#attel Mortgage "as exected !) Eencor

Mar%eting in favor of Eeneral 5an% and Trst Com(an) involving t#e (ersonal (ro(erties.

-T#e *eed of C#attel Mortgage "as dl) recorded in t#e C#attel Mortgage $egistr) of Ge0on Cit).

-Hn matrit) date of t#e &oan and allegedl) after several s!seent extensions of time for Eencor to settle its

accont, Eencor failed to (a) its o!ligations eit#er to Eeneral 5an% and Trst Com(an) or to Allied 5an%ing "#ic#

too% over t#e affairs and/or acired all t#e assets and assmed t#e lia!ilities of Eeneral 5an% and Trst

Com(an).

-Allied 5an%ing extradiciall) foreclosed t#e aforesaid C#attel Mortgage and reested t#e Cit) +#eriff of Ge0on

Cit) to effect t#e said foreclosre. T#e Cit) +#eriff of Ge0on Cit), t#rog# *e(t) +#eriff A. Ta!!ada levied (on

t#e afore-descri!ed mortgaged (ersonal (ro(erties in estion and issed t#e corres(onding =otice of +#eriff s

+ale.

-It a((ears, #o"ever, t#at (rior to t#e extradicial foreclosre effected !) Allied 5an%ing involving t#e (ersonal

(ro(erties in estion, Metro(olitan 5an% and Trst Com(an) filed an action for a sm of mone) in t#e amont of

"it# (reliminar) attac#ment against Clarencio Fico and ess Fico, a "rit of (reliminar) attac#ment "asissed in said case and t#e +#eriff of t#e Cort of 'irst Instance of $i0al levied (on t#e (ersonal (ro(erties in

estion.

-T#s, (on teaming of t#e =otice sent !) Cit) +#eriff Ta!!ada for t#e sale of t#e foreclosed (ersonal (ro(erties

in estion, M5TC filed an rgent Motion to Jnoin t#e +#eriff of Ge0on Cit) from foreclosing and selling at

(!lic action t#e said (ro(erties, alleging t#at t#e (rinting mac#ineries and ei(ment (reviosl) levied and

attac#ed !) t#e +#eriff of $i0al !elonged exclsivel) to defendant Clarencio +. Fico, doing !siness nder t#e

firm name of Eencor Printing and as sc#, ma) not legall) !e foreclosed and sold at action !) t#e +#eriff of

Ge0on Cit).

-Mean"#ile, Metro(olitan 5an% and Trst Com(an) filed a T#ird Part) Claim "it# t#e Ge0on Cit) +#eriff s Hffice

over t#e (ersonal (ro(erties in estion levied (on and sog#t to !e sold at (!lic action !) Cit) +#eriff

A.Ta!!ada, alleging t#at t#ese same (ersonal (ro(erties #ad !een (reviosl) levied (on !) t#e *e(t) s#eriff o

5ranc# I of t#e Cort of 'irst Instance of $i0al, (rsant to a Writ of Attac#ment issed !) #erein res(ondent

dge Jmilio K. +alas.

-Allegedl) to (rotect Allied 5an%ings rig#ts over t#e (ersonal (ro(erties in estion, Allied !an%ings conse

entered a s(ecial a((earance dring t#e sc#edled #earing for t#e exclsive (r(ose of o((osing M5TCs motion

on risdictional gronds and gross irreglarit) of (rocedre amonting to lac% of risdiction.

-o"ever, over Allied 5an%ings o((osition, res(ondent dge rendered t#e assailed Hrder, enoining t#e (!lic

sale of t#e extra diciall) foreclosed (ro(erties.

HELD:

- T#e c#attel mortgage lien attac#es to t#e (ro(ert) "#erever it ma) !e. T#s, (rivate res(ondent as attac#ing

creditor acired t#e (ro(erties in estion s!ect to (etitioners mortgage lien as it existed t#ereon at t#e time of

t#e attac#ment.

- T#e lien of (etitioners c#attel mortgage over t#e mortgaged (ro(erties in estion s(erior to t#e lev) on

attac#ment made on t#e same !) M5TC as creditor of c#attel mortgagor Clarencio Fico. W#at ma) !e

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SPCL Chattel Mortgageattac#ed !) (rivate res(ondent as creditor of said c#attel mortgagor is onl) t#e eit) or rig#t of redem(tion of t#e

mortgagor.

3. Ser%i#e5i!e S$e#ialists( I#. %. Itere!iate A$$ellate Co2rt( 163 SCRA -4 ,1*-*/

FACTS:

- Ealicano +iton (rc#ased from Car Traders P#ili((ines, Inc. a ve#icle and (aid a do"n(a)ment of t#e (rice. T#e

remaining !alance incldes not onl) t#e remaining (rinci(al o!ligation !t also advance interests and (remims

for motor ve#icle insrance (olicies.

-+iton exected a (romissor) note in favor of Car Traders P#ili((ines, Inc. ex(ressl) sti(lating t#at t#e face vale

of t#e note s#all ;!e (a)a!le, "it#ot need of notice of demand, in instalments. T#ere are additional sti(lations in

t#e Promissor) =ote consisting of, among ot#ers, t#at if defalt is made in t#e (a)ment of an) of t#e installments

or interest t#ereon, t#e total (rinci(al sm t#en remaining n(aid, toget#er "it# accred interest t#ereon s#all at

once !ecome de and demanda!le.

-As frt#er secrit), +iton exected a C#attel Mortgage over t#e s!ect motor ve#icle in favor of Car Traders

P#ili((ines, Inc.

-T#e credit covered !) t#e (romissor) note and c#attel mortgage exected !) res(ondent Ealicano +iton "as first

assigned !) Car Traders P#ili((ines, Inc. in favor of 'ilinvest Credit Cor(oration. +!seentl), 'ilinvest Credit

Cor(oration li%e"ise reassigned said credit in favor of (etitioner +ervice"ide +(ecialists, Inc. and res(ondent

+iton "as advised of t#is second assignment.

-+iton failed to (a), +ervice"ide +(ecialist filed t#is action against Ealicano +iton and ;o#n *oe.;

-After t#e service of smmons, stiniano de *mo, identif)ing #imself as t#e ;o#n *oe; in t#e Com(laint,

inasmc# as #e is in (ossession of t#e s!ect ve#icle, filed #is Ans"er "it# Conterclaim and "it# H((osition to

t#e (ra)er for a Writ of $e(levin. +aid defendant, alleged t#e fact t#at #e #as !og#t t#e motor ve#icle from

Ealicano +iton< t#at de *mo and +iton testified t#at, !efore t#e (roected sale, t#e) "ent to a certain. Att). Killa

of 'ilinvest Credit Cor(oration advising t#e latter of t#e intended sale and transfer. +iton and de *mo "ere

accordingl) advised t#at t#e ver!al information given to t#e cor(oration "old sffice, and t#at it "old !e tedios

and im(ractical to effect a c#ange of transfer of o"ners#i( as t#at "old reire a ne" credit investigation as to

t#e ca(acit) and "ort#iness of Att). *e *mo, !eing t#e ne" de!tor. T#e frt#er sggestion given !) Att). Killa is

t#at t#e accont s#old !e maintained in t#e name of Ealicano +iton.< t#at as sc# sccessor, #e ste((ed into t#e

rig#ts and o!ligations of t#e seller< t#at #e #as religiosl) (aid t#e installments as sti(lated (on in t#e

(romissor) note. e also manifested t#at t#e Ans"er #e #as filed in #is !e#alf s#old li%e"ise serve as a

res(onsive (leading for #is co-defendant Ealicano +iton.

TC affirmed by CA:

-*enied t#e issance of Writ of $e(levin and ordering +iton and *e *mo to (a) ointl) and severall), t#e (laintiff

t#e remaining !alance on t#e motor ve#icle .

ISSUE:

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SPCL Chattel Mortgage-W#et#er or not t#e mortgagee is !ond !) t#e deed of sale !) t#e mortgagor in favor of a t#ird (erson, as

neit#er t#e mortgagee nor its (redecessors #as given "ritten or ver!al consent t#ereto (rsant to t#e deed of

C#attel Mortgage.

HELD:

-T#e rle is settled t#at t#e c#attel mortgagor contines to !e t#e o"ner of t#e (ro(ert), and t#erefore, #as t#e

(o"er to alienate t#e same< #o"ever, #e is o!liged nder (ain of (enal lia!ilit), to secre t#e "ritten consent of

t#e mortgagee. T#s, t#e instrments of mortgage are !inding, "#ile t#e) s!sist, not onl) (on t#e (arties

execting t#em !t also (on t#ose "#o later, !) (rc#ase or ot#er"ise, acire t#e (ro(erties referred to

t#erein.

-T#e a!sence of t#e "ritten consent of t#e mortgagee to t#e sale of t#e mortgaged (ro(ert) in favor of a t#ird

(erson, t#erefore, affects not t#e validit) of t#e sale !t onl) t#e (enal lia!ilit) of t#e mortgagor nder t#e $evised

Penal Code and t#e !inding effect of sc# sale on t#e mortgagee nder t#e *eed of C#attel Mortgage.

-T#ere is no dis(te t#at t#e *eed of C#attel Mortgage exected !et"een +iton and t#e (etitioner reires t#e

"ritten consent of t#e latter as mortgagee in t#e sale or transfer of t#e mortgaged ve#icle. We cannot ignore t#e

findings, #o"ever, t#at !efore t#e sale, (rom(t iniries "ere made !) (rivate res(ondents "it# 'ilinvest CreditCor(oration regarding an) (ossi!le ftre sale of t#e mortgaged (ro(ert)< and t#at it "as (on t#e advice of t#e

com(an)s credit la")er t#at sc# a ver!al notice is sfficient and t#at it "old !e convenient if t#e accont "old

remain in t#e name of t#e mortgagor +iton.

-Jven t#e (ersonal c#ec%s of de *mo "ere acce(ted !) (etitioner as (a)ment of some of t#e installments nder

t#e (romissor) note. If it is tre t#at (etitioner #as not aciesced in t#e sale, t#en, it s#old #ave inired as to

"#) de *mos c#ec%s "ere !eing sed to (a) +itons o!ligations.

7. Bi#ol Sa%igs Loa Asso#iatio %. G2iha5a( 1-- SCRA +3) ,1**4/8 Pae#a &oo! Treatet Plat( I#.

%. Co2rt o9 A$$eals( 14 SCRA )-1 ,1***/

FACTS:

-Kictorio *e(ositario toget#er "it# aime Ein#a"a, acting as solidar) co-ma%er, too% a loan from (etitioner 5ico

+avings and &oan Association 65I+&A7.

-To secre t#e (a)ment of t#e foregoing loan o!ligation, Kictorio *e(ositario (t ( as secrit) a c#attel mortgage

"#ic# "as a Fama#a Motorc)cle. +aid motorc)cle "as eventall) foreclosed !) reason of t#e failre of

*e(ositario and Ein#a"a to (a) t#e loan.

-As a reslt of t#e foreclosre, t#ere "as a deficienc) , "#ere 5I+&A made a demand to (a) t#e same.

-5I+&A7 filed a com(laint for t#e recover) of a sm of mone) constitting t#e deficienc) after foreclosre of t#ec#attel mortgage (t ( !) t#e *e(ositario against t#e latter and #is solidar) co-ma%er Ein#a"a.

-*e(ositorio "as dro((ed as #is "#ere a!ots "ere n%no"n and #e cold not !e served "it# smmons.

TC:

-Creditor ma) (roceed to Ein#a"a !eing a +olidar) de!tor.

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SPCL Chattel Mortgage-T#e motor ve#icle figred in an accident and "as !adl) damaged. T#e nfortnate #a((ening "as re(orted to

t#e 5.A. 'inance Cor(oration and to t#e insrer, Lenit# Insrance Cor(oration. T#e Cad)s as%ed t#e 5.A.

'inance Cor(oration to consider t#e same as a total loss, and to claim from t#e insrer t#e face vale of t#e car

insrance (olic) and a((l) t#e same to t#e (a)ment of t#eir remaining accont and give t#em t#e sr(ls t#ereof,

if an). 5t instead of #eeding t#e reest of t#e Cad)s, 5.A. 'inance Cor(oration (revailed (on t#e former to

st #ave t#e car re(aired. =ot long t#ereafter, #o"ever, t#e car !ogged do"n.

-T#e Cad)s "rote 5.A. 'inance Cor(oration reesting t#e latter to (rse t#eir (rior instrction of enforcing t#e

total loss (rovision in t#e insrance coverage. W#en 5.A. 'inance Cor(oration did not res(ond favora!l) to t#eir

reest, t#e Cad)s sto((ed (a)ing t#eir mont#l) installments on t#e (romissor) note.

In vie" of t#e failre of t#e Cad)s to (a) t#e remaining installments on t#e note, 5.A. 'inance Cor(oration sed

t#em.

TC and CA:

-*ismissed t#e com(laint.

ISSUE:

-W#et#er or not t#e mortgagor #as "aived its rig#ts to collect t#e n(aid !alance of t#e mortgage on t#e

(romissor) note for failre of t#e former to enforce t#e total loss (rovision in t#e insrance coverage of t#e motor

ve#icle s!ect of t#e c#attel mortgage.

BA FINANCES CONTENTION:

- It is t#e contention of 5.A. 'inance Cor(oration t#at even if it failed to enforce t#e total loss (rovision in t#e

insrance (olic) of t#e motor ve#icle s!ect of t#e c#attel mortgage, said failre does not o(erate to extingis#

t#e n(aid !alance on t#e (romissor) note, considering t#at t#e circmstances o!taining in t#e case at !ar do not

fall nder Article 1231 of t#e Civil Code relative to t#e modes of extingis#ment of o!ligations.

HELD:

-nder t#e deed of c#attel mortgage, 5.A. 'inance Cor(oration "as constitted attorne)-in-fact "it# fll (o"er

and at#orit) to file, follo"-(, (rosecte, com(romise or settle insrance claims< to sign execte and deliver t#e

corres(onding (a(ers, recei(ts and docments to t#e Insrance Com(an) as ma) !e necessar) to (rove t#e

claim, and to collect from t#e latter t#e (roceeds of insrance to t#e extent of its interests, in t#e event t#at t#e

mortgaged car sffers an) loss or damage. In granting 5.A. 'inance Cor(oration t#e aforementioned (o"ers and

(rerogatives, t#e Cad) s(oses created in t#e formers favor an agenc). T#s, nder Article 1>> of t#e Civil

Code of t#e P#ili((ines, 5.A. 'inance Cor(oration is !ond !) its acce(tance to carr) ot t#e agenc), and is lia!lefor damages "#ic#, t#rog# its non-(erformance, t#e Cad)s, t#e (rinci(al in t#e case at !ar, ma) sffer< in sc#

case, t#e assignee of t#e mortgage agreement is !ond !) t#e same sti(lation and if t#e assignee failed to file

and (rosecte t#e insrance claim "#en t#e car "as damaged totall), t#e mortgagor is relieved from #is

o!ligation to (a) as #e sffered a loss !ecase of t#e failre of t#e mortgagee to file t#e claim.

6. Cera %. Co2rt o9 A$$eals( ))4 SCRA 716 ,1**/

FACTS:

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SPCL Chattel Mortgage-Celerino *elgado 6*elgado7 and Conrad &eviste 6&eviste7 entered into a loan agreement "#ic# "as evidenced

!) a (romissor) note. "orded as follo"s8

-Hn t#e same date, *elgado exected a c#attel mortgage over a Will)s ee( o"ned !) #im. And acting as t#e

attorne)-in-fact, Manolo P. Cerna, #e also mortgage a ;Tans car o"ned !) t#e latter.

-T#e (eriod la(sed "it#ot *elgado (a)ing t#e loan. T#is (rom(ted &eviste to a file a collection sit against

*elgado and Cerna as solidar) de!tors.

-Cerna filed a Motion to *ismiss on t#e grond of lac% of case of action against Cerna and t#e deat# of *elgado

Anent t#e latter, Cerna claimed t#at t#e claim s#old !e filed in t#e (roceedings for t#e settlement of *elgados

estate as t#e action did not srvive *elgados deat#. Moreover, #e also stated t#at since &eviste alread) o(ted to

collect on t#e note, #e cold no longer foreclose t#e mortgage.

CA and TC:

-*enied t#e Motion to *ismiss.

ISSUES:

-W#et#er or not a t#ird (art), "#o is not a de!tor nder t#e note !t mortgaged #is (ro(ert) to secre t#e

(a)ment of t#e loan of anot#er is solidaril) lia!le "it# t#e (rinci(al de!tor.

W#et#er or not a mortgagee "#o o(ted to collect ma) still foreclose t#e mortgage.

HELD:

- T#ere is also no legal (rovision nor ris(rdence in or risdiction "#ic# ma%es a t#ird (erson "#o secres t#e

flfillment of anot#ers o!ligation !) mortgaging #is o"n (ro(ert) to !e solidaril) !ond "it# t#e (rinci(al o!ligor. A

c#attel mortgage ma) !e ;an accessor) contract; to a contract of loan, !t t#at fact alone does not ma%e a t#ird-

(art) mortgagor solidaril) !ond "it# t#e (rinci(al de!tor in flfilling t#e (rinci(al o!ligation t#at is, to (a) t#e loan

T#e signator) to t#e (rinci(al contract loan remains to !e (rimaril) !ond. It is onl) (on t#e defalt of t#e

latter t#at t#e creditor ma) #ave !een recorse on t#e mortgagors !) foreclosing t#e mortgaged (ro(erties in lie

of an action for t#e recover) of t#e amont of t#e loan. And t#e lia!ilit) of t#e t#ird-(art) mortgagors extends onl)

to t#e (ro(ert) mortgaged. +#old t#ere !e an) deficienc), t#e creditors #as recorse on t#e (rinci(al de!tor.

- T#e +(ecial Po"er of Attorne) did not ma%e (etitioner a mortgagor. All it did "as to at#ori0ed *elgado to

mortgage certain (ro(erties !elonging to (etitioner

-ence, &eviste, #aving c#osen to file t#e collection sit, cold not no" rn after (etitioner for t#e satisfaction of

t#e de!t. T#is is even more tre in t#is case !ecase of t#e deat# of t#e (rinci(al de!tor, *elgado. &eviste "as

(rsing a mone) claim against a deceased (erson.

-. "ili%est Cre!it Cor$oratio %. Co2rt o9 A$$eals( )3- SCRA 73* ,1**7/

FACTS:

-+(oses Jdil!erto and Marciana Tadiaman, (rc#ased a 1?-"#eeler I0s cargo trc% from ordan Jnter(rises,

Inc., in Ge0on Cit), in installments.


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SPCL Chattel Mortgage-+aid s(oses exected a (romissor) note (a)a!le in 2 mont#l) installments in favor of ordan Jnter(rises, Inc.

and a C#attel Mortgage over t#e motor ve#icle (rc#ased to secre t#e (a)ment of t#e (romissor) note.

-ordan Jnter(rises, Inc. assigned its rig#ts and interests over t#e said instrments to 'ilinvest 'inance and

&easing Cor(oration, "#ic# in trn assigned t#em to (laintiff-a((ellant 'ilinvest Credit Cor(oration.

-+!seentl), t#e s(oses Tadiaman defalted in t#e (a)ment of t#e installments de on t#e (romissor) note,

and (laintiff-a((ellant filed an action for re(levin and damages against t#em "it# t#e cort !elo". (on motion of

t#e (laintiff-a((ellant, a "rit of re(levin "as issed, and t#e trc% "as sei0ed in t#e (rovince of Isa!ela, !)

(ersons "#o re(resented t#emselves to !e s(ecial s#eriffs of t#e cort, !t "#o trned ot to !e em(lo)ees of

t#e (laintiff-a((ellant. T#e trc% "as !rog#t !) sc# (ersons all t#e "a) !ac% to Metro Manila.

-T#ereafter, defendant s(oses filed a conter!ond, and t#e lo"er cort ordered t#e retrn of t#e trc%. T#is "as

not immediatel) im(lemented !ecase t#e defendant s(oses "ere met "it# dela)ing tactics of t#e (laintiff-

a((ellant, and "#en t#e) finall) recovered t#e trc%, t#e) fond t#e same to !e ;canni!ali0ed;.

-5ecase of t#e said actations of 'ilinvest Credit t#e s(oses Tadiaman filed a conter claim for damages.

-Hn t#e main action, t#e Trial Cort ordered t#e s(oses to (a) 'ilinvest Credit t#e !alance of t#e (romissor)

note.

-Hn t#e conter claim, t#e trial cort rendered dgment in favor of +(oses Tadiaman.

CA:

-Affirmed t#e decision of TC and rled t#at 'ilinvest is lia!le for damages not !ecase it commenced an action for

re(levin to recover (ossession of t#e trc% (rior to its foreclosre 5T !ecase of t#e MA==J$ it carried ot t#e

sei0te of t#e Trc%.

HELD:

-T#e reason "#) t#e la" does not allo" t#e creditor to (ossess #imself of t#e mortgaged (ro(ert) "it# violence

and against t#e "ill of t#e de!tor is to !e fond in t#e fact t#at t#e creditors rig#t of (ossession is conditioned

(on t#e fact of defalt, and t#e existence of t#is fact ma) natrall) !e t#e s!ect of controvers). T#e de!tor, for

instance, ma) claim in good fait#, and rig#tl) or "rongl), t#at t#e de!t is (aid, or t#at for some ot#er reason t#e

alleged defalt is nonexistent. is (ossession in t#is sitation is as fll) entitled to (rotection as t#at of an) ot#er

(erson, and in t#e langage of article @ of t#e Civil Code #e mst !e res(ected t#erein. To allo" t#e creditor to

sei0e t#e (ro(ert) against t#e "ill of t#e de!tor "old ma%e t#e former to a certain extent !ot# dge and

exectioner in #is o"n case a t#ing "#ic# is inadmissi!le in t#e a!sence of neivocal agreement in t#e

contract itself or ex(ress (rovision to t#at effect in t#e statte.

-It "ill !e o!served t#at t#e la" (laces t#e res(onsi!ilit) of condcting t#e sale (on ;a (!lic officer

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-5t "#atever conclsion ma) !e dra"n in t#e (remises "it# res(ect to t#e tre natre of a c#attel mortgage, t#e

reslt mst in t#is case !e t#e same< for "#et#er t#e mortgagee !ecomes t#e real o"ner of t#e mortgaged

(ro(ert) as some s((ose or acires onl) certain rig#ts t#erein, it is none t#e less clear t#at #e #as after

defalt t#e rig#t of (ossession< t#og# it cannot !e admitted t#at #e ma) ta%e t#e la" into #is o"n #ands and

"rest t#e (ro(ert) violentl) from t#e (ossession of t#e mortgagor. =eit#er can #e do t#rog# t#e medim of a

(!lic officer t#at "#ic# #e cannot directl) do #imself. T#e conseence is t#at in sc# case t#e creditor mst

eit#er resort to a civil action to recover (ossession as a (reliminar) to a sale, or (refera!l) #e ma) !ring an action

to o!tain a dicial foreclosre in conformit), so far as "it# t#e (rovisions of t#e C#attel to Mortgage &a".

-$e(levin is, of corse, t#e a((ro(riate action to recover (ossession (reliminar) to t#e extradicial foreclosre o

a c#attel mortgage. 'ilinvest did in fact institte sc# an action and o!tained a "rit of re(levin. And, !) filing it,

'ilinvest admitted t#at it cannot acire (ossession of t#e mortgaged ve#icle in an orderl) or (eacefl manner

Accordingl), it s#old #ave left t#e enforcement of t#e "rit in accordance "it# $le @? of t#e $les of Cort "#ic#

it #ad volntaril) invo%ed.

*. A#e Shoe R200er : Plasti# Cor$oratio %. Co2rt o9 A$$eals( )+4 SCRA 613 ,1**+/

FACTS:

- C#a Pac, t#e (resident and general manager of co-(etitioner ;Acme +#oe, $!!er N Plastic Cor(oration,;

exected, for and in !e#alf of t#e com(an), a c#attel mortgage in favor of Prodcers 5an% of t#e P#ili((ines. A

(rovision in t#e c#attel mortgage agreement "as to t#is effect -

;In case t#e MH$TEAEH$ exectes s!seent (romissor) note or notes eit#er as a rene"al of t#e former note

as an extension t#ereof, or as a ne" loan, or is given an) ot#er %ind of accommodations sc# as overdrafts,

letters of credit, acce(tances and !ills of exc#ange, releases of im(ort s#i(ments on Trst $ecei(ts, etc., t#is

mortgage s#all also stand as secrit) for t#e (a)ment of t#e said (romissor) note or notes and/o

accommodations "it#ot t#e necessit) of execting a ne" contract and t#is mortgage s#all #ave t#e same force

and effect as if t#e said (romissor) note or notes and/or accommodations "ere existing on t#e date t#ereof. T#is

mortgage s#all also stand as secrit) for said o!ligations and an) and all ot#er o!ligations of t#e MH$TEAEH$

to t#e MH$TEAEJJ of "#atever %ind and natre, "#et#er sc# o!ligations #ave !een contracted !efore, dring

or after t#e constittion of t#is mortgage.

-In de time, t#e loan "as (aid !) (etitioner cor(oration. +!seentl), in 1>1, it o!tained from Prodcers 5an%

additional financial accommodations T#ese !orro"ings "ere on de date also fll) (aid.

-T#e !an% )et again extended to ACMJ a covered !) for (romissor) notes. *e to financial constraints, t#e loan

"as not settled at matrit).

-T#e !an% t#ere(on a((lied for an extradicial foreclosre of t#e c#attel mortgage, (rom(ting ACMJ to fort#"it#

file an action for innction, "it# damages and a (ra)er for a "rit of (reliminar) innction.

TC and CA:

-*ismissed t#e com(laint and ordered t#e foreclosre of t#e c#attel mortgage. ACMJ is !ond !) t#e

sti(lations, aforeoted, of t#e c#attel mortgage.

ISSUE:

-W#et#er or not c#attel mortgage ma) secre after incrred o!ligations.


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HELD:

-Contracts of secrit) are eit#er (ersonal or real. In contracts of (ersonal secrit), sc# as a garant) or a

sret)s#i(, t#e fait#fl (erformance of t#e o!ligation !) t#e (rinci(al de!tor is secred !) t#e persona

commitment of anot#er 6t#e garantor or sret)7. In contracts of real secrit), sc# as a (ledge, a mortgage or an

antic#resis, t#at flfillment is secred !) an encumbrance of property- inpledge, t#e (lacing of mova!le (ro(ert)

in t#e (ossession of t#e creditor< in chattelmortgage, !) t#e exection of t#e corres(onding deed s!stantiall) in

t#e form (rescri!ed !) la"< in real estate mortgage,!) t#e exection of a (!lic instrment encm!ering t#e rea

(ro(ert) covered t#ere!)< and in antichresis, !) a "ritten instrment granting to t#e creditor t#e rig#t to receive

t#e frits of an immova!le (ro(ert) "it# t#e o!ligation to a((l) sc# frits to t#e (a)ment of interest, if o"ing, and

t#ereafter to t#e (rinci(al of #is credit - (on t#e essential condition t#at if t#e (rinci(al o!ligation !ecomes de

and t#e de!tor defalts, t#en t#e (ro(ert) encm!ered can !e alienated for t#e (a)ment of t#e o!ligation, !t t#at

s#old t#e o!ligation !e dl) (aid, t#en t#e contract is atomaticall) extingis#ed (roceeding from t#e accessor)

c#aracter of t#e agreement. As t#e la" so (ts it, once t#e o!ligation is com(lied "it#, t#en t#e contract of

secrit) !ecomes, ipso facto, nll and void.

-W#ile a (ledge, real estate mortgage, or antic#resis ma) exce(tionall) secre after-incrred o!ligations so long

as t#ese ftre de!ts are accratel) descri!ed, a c#attel mortgage, #o"ever, can onl) cover o!ligations existingat t#e time t#e mortgage is constitted. Alt#og# a (romise ex(ressed in a c#attel mortgage to inclde de!ts t#at

are )et to !e contracted can !e a !inding commitment t#at can !e com(elled (on, t#e secrit) itself, #o"ever,

does not come into existence or arise ntil after a c#attel mortgage agreement covering t#e ne"l) contracted de!t

is exected eit#er !) conclding a fres# c#attel mortgage or !) amending t#e old contract conforma!l) "it# t#e

form (rescri!ed !) t#e C#attel Mortgage &a". $efsal on t#e (art of t#e !orro"er to execte t#e agreement so as

to cover t#e after-incrred o!ligation can constitte an act of defalt on t#e (art of t#e !orro"er of t#e financing

agreement "#ereon t#e (romise is "ritten !t, of corse, t#e remed) of foreclosre can onl) cover t#e de!ts

extant at t#e time of constittion and dring t#e life of t#e c#attel mortgage sog#t to !e foreclosed.

14. Ce02 Iteratioal "ia#e Cor$oratio %. Co2rt o9 A$$eals( )+- SCRA 16- ,1**6/

FACTS:

- acinto *) exected a +(ecial Po"er of Attorne)in favor of (rivate res(ondent Ang Ta), at#ori0ing t#e latter to

sell t#e cargo vessel o"ned !) *) and c#ristened &CT ;Asiatic.;

- T#rog# a *eed of A!solte +ale, Ang Ta) sold t#e s!ect vessel to $o!ert Hng 6Hng7. Hng (aid t#e (rc#ase

(rice !) issing t#ree 637 c#ec%s o"ever, since t#e (a)ment "as not made in cas#, it "as s(ecificall) sti(lated

in t#e deed of sale t#at t#e ;&CT Asiatic s#all not !e registered or transferred to $o!ert Hng ntil com(lete

(a)ment.; T#ereafter, Hng o!tained (ossession of t#e s!ect vessel so #e cold !egin deriving economic

!enefits t#erefrom. e, li%e"ise, o!tained co(ies of t#e nnotari0ed deed of sale allegedl) to !e s#o"n to t#e

!an%s to ena!le #im to acire a loan to re(lenis# #is 6Hngs7 ca(ital. T#e aforeoted condition, #o"ever, "#ic#"as #and"ritten on t#e original deed of sale does not a((ear on Hngs co(ies.

- Contrar) to t#e aforementioned agreements and "it#ot t#e %no"ledge of Ang Ta), Hng #ad #is co(ies of t#e

deed of sale 6on "#ic# t#e aforementioned (ro#i!ition does not a((ear7 notari0ed Hng (resented t#e notari0ed

deed to t#e P#ili((ine Coast Eard "#ic# s!seentl) issed #im a Certificate of H"ners#i( and a Certificate of

P#ili((ine $egister over t#e s!ect vessel. Hng also scceeded in #aving t#e name of t#e vessel c#anged to

&CT ;Hrient o(e.;


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SPCL Chattel Mortgage-Hng acired a loan from Ce! International 'inance Cor(oration to !e (aid in installments as evidenced !) a

(romissor) note of even date.

-As secrit) for t#e loan, Hng exected a c#attel mortgage over t#e s!ect vessel, "#ic# mortgage "as

registered "it# t#e P#ili((ine Coast Eard and annotated on t#e Certificate of H"ners#i(.

-Hng defalted in t#e (a)ment of t#e mont#l) installments. Conseentl), Ce! International 'inance Cor(oration

sent #im a letter:demanding deliver) of t#e mortgaged vessel for foreclosre or in t#e alternative to (a) t#e

!alance (rsant to (aragra(# 11 of t#e deed of c#attel mortgage.

-Mean"#ile, t#e t"o c#ec%s (aid !) Hng to Ang Ta) for t#e Prc#ase of t#e s!ect vessel !onced. Ang Ta)s

searc# for t#e elsive Hng and all attem(ts to confer "it# #im (roved to !e ftile. A s!seent investigation and

inir) "it# t#e Hffice of t#e Coast Eard revealed t#at t#e s!ect vessel "as alread) in t#e name of Hng, in

violation of t#e ex(ress nderta%ing contained in t#e original deed of sale.

-As a reslt t#ereof, Ang Ta) and acinto *) filed a civil case for rescission and re(levin "it# damages against

Hng and #is "ife.

-T#e trial cort issed a "rit of re(levin and t#e s!ect vessel "as sei0ed and s!seentl) delivered to Ang Ta).

- Ce! International filed a motion for intervention !t "it#dre" t#e same. Instead, Ce! International filed a

se(arate case for re(levin and damages against Hng and ;o#n *oe; 6Ang Ta)7.

-T#e trial cort granted (etitioners (ra)er for re(levin. T#e vessel "as sei0ed and (laced in t#e cstod) of t#e tria

cort. o"ever, Ang Ta) (osted a conter!ond and t#e vessel "as retrned to #is (ossession.

TC:

-In favor of Ang Ta) and acinto *). T#e sale of t#e s!ect vessel "as rescinded, t#e registration of t#e vessel

"it# t#e Hffice of t#e Coast Eard and ot#er government agencies in Hngs name nllified and t#e vessels

registration in *)s name revived. Hng "as, li%e"ise, ordered to (a) acinto *) and Ang Ta) actal damages for

lost income, moral damages, attorne)s fees and litigation ex(enses.

CA:

-Affirmed in toto TCs decision.

ISSUE

8

-W#et#er or not Ce! International 'inance Cor(oration is a mortgagee in good fait# "#ose lien over t#e

mortgaged vessel s#old !e res(ected.

HELD:

-T#e c#attel mortgage constitted on a vessel !) t#e !)er "#o "as a!le to register t#e vessel in #is name

des(ite t#e agreement "it# t#e seller t#at t#e vessel "old not !e so registered ntil after fll (a)ment of t#e (rice

"#ic# do not a((ear in t#e !)ers co() of t#e deed of sale is KA&I*, for t#e mortgagee #as t#e rig#t to rel) in

good fait# on t#e certificate of registration.


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SPCL Chattel Mortgage-T#e (revailing ris(rdence is t#at a mortgagee #as a rig#t to rel) in good fait# on t#e certificate of title of t#e

mortgagor to t#e (ro(ert) given as secrit) and in t#e a!sence of an) sign t#at mig#t arose ss(icion, #as no

o!ligation to nderta%e frt#er investigation. ence, even if t#e mortgagor is not t#e rig#tfl o"ner of or does not

#ave a valid title to t#e mortgaged (ro(ert), t#e mortgagee or transferee in good fait# is nonet#eless entitled to

(rotection. Alt#og# t#is rle generall) (ertains to real (ro(ert), (articlarl) registered land, it ma) also !e a((lied

!) analog) to (ersonal (ro(ert), in t#is case s(ecificall), since s#i( o"ners are, li%e"ise, reired !) la" to

register t#eir vessels "it# t#e P#ili((ine Coast Eard.

11. Ni#ol %. Bla#o( 46 SCRA )31 ,1**1/8 Neela! %. ;illa2e%a( 16 SCRA +7) ,1***/

FACTS:

- =icol and #er #s!and "ere o(erators of a mini-!s.

-T#e) o!tained a loan from $adio"ealt# 'inance Com(an) "#ic# "as later restrctred de to t#eir failre to (a)

several mont#l) installments.

-As a collateral, t#e) mortgaged t#eir mini-!s.

-+!seentl) "it# t#e a((roval of t#e manager of $'C, +alvacion (ledged t#e mini !s for t"o mont#s to

Jngineer $ito.

-T#e) again defalted on t#eir (a)ments to $'C and t#eir c#attel "as t#reatened to !e foreclosed.

-+alvacion "ent to t#e $'C office to reest t#e non-foreclosre of t#eir mortgage and met 5lanca "#o "as

introdced !) $'Cs manager as its s#eriff.

-Hn different occasions 5lanca "ent to +alvacions office as%ing some amonts in consideration of not (roceeding

"it# t#e foreclosre and action sale of t#e mini !s.

-After a mont#, #o"ever, s#e received a notice of action sale signed !) 5lanca and "ent to t#e sits of t#e sale

on t#e sc#edled date, !t no!od) "as t#ere and no sale too% (lace. +#e inired from t#e Cler% of Cort

regarding t#e action sale, and "as advised to as% 5lanca.

-5lanca informed #er t#at ose 5ragais "on in t#e !idding.

-+#e c#ec%ed "it# $'C and got t#e information t#at it "as $'C t#at "on in t#e !idding. +#e "ent to t#e office of

$'C to arrange for t#e redem(tion of t#e mini-!s and met 5lanca t#ere.

-T#is time, 5lanco told =icol t#at it "as Jl!ert Ki!al "#o "on in t#e !idding and not $'C.

-=icol t#en filed a letter-com(laint "it# t#e Hm!dsman alleging t#at t#e action sale never too% (lace on t#e

sc#edled date and (lace and t#at 5lanca never gave #er t#e excess of t#e !id (rice.

-5lanca denied and maintained t#at #e condcted an action sale.

-T#e $'C filed t#e (etition for extra-dicial foreclosre and #e fond t#e mini-!s in t#e (ossession of Jngineer

$ito.

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SPCL Chattel Mortgage-e sent $'C and t#e com(lainants a notice of action sale and "as condcted later on. e o(ined t#at t#e

c#arge "as filed against #im "#en #e failed to accommodate 5ragais "#o "as recommended !) +alvacion =ico

to (artici(ate in t#e !idding.

-Hn re!ttal, +alvacion =icol alleged t#at s#e cold not #ave given res(ondent an) loan since s#e "as financiall)

distressed at t#at time.

-'or failing to meet #er varios financial o!ligations, s#e "as c#arged "it# estafa and violation of 5.P. 22. +#emaintained t#at t#e action sale never too% (lace on t#e sc#edled dated and (lace. +#e also claimed t#at

res(ondent never gave #er t#e excess of t#e !id (rice.

-=icol frnis#ed t#e HCA "it# co(ies of t"o criminal information for *irect 5ri!er) filed !) t#e Hffice of t#e *e(t)

Hm!dsman for &0on against 5lanca. T#e criminal information accsed res(ondent of ta%ing advantage of #is

office as +#eriff !) demanding and receiving a sm of mone) from com(lainants =icol s(oses for and in

consideration of discontining t#e action sale of t#e latters motor ve#icle.

-5lanca averred t#at t#e amont received from t#e com(lainants is a loan #e o!tained (rior to t#e time #e acted

(on t#e (etition for extra-dicial foreclosre of t#e mini-!s. Hn recommendation of t#e HCA, +C referred t#e

com(laint to Jxective dge +antelices for investigation, re(ort and recommendation. dge +antelices

s!mitted #is $e(ort and $ecommendation. e recommended t#at res(ondent !e ss(ended for six mont#s"it#ot (a).

ISSUE:

-W#et#er or not 5lancas failre to trn over to t#e mortgagor t#e excess of t#e !id (rice constitted gross

miscondct.

HELD:

-T#e Hfficer "#o condcted t#e forclosre mst demand and actall) receive t#e cas# (roceeds of t#e action

sale from t#e #ig#est !idder and trnover t#e !alance to t#e mortgagee. It "as t#erefore irreglar for t#e s#errif

not to demand and receive t#e entire !id (rice in cas# from t#e "inning !idder, or at t#e ver) least, to demand t#e

excess amont and trnover to t#e mortgagor.

1). Tsai %. Co2rt o9 A$$eals( ++ SCRA )3 ,)441/

FACTS:

--Jver Textile Mills, Inc. 6JKJ$TJO7 o!tained a loan from (etitioner P#ili((ine 5an% of Commnications 6P5Com7.

-As secrit) for t#e loan, JKJ$TJO exected in favor of P5Com, a deed of $eal and C#attel Mortgage over t#e

lot "#ere its factor) stands, and t#e c#attels located t#erein as enmerated in a sc#edle attac#ed to t#e

mortgage contract.

-P5Com granted a second loan to JKJ$TJO. T#e loan "as secred !) a C#attel Mortgage over (ersona

(ro(erties enmerated in a list attac#ed t#ereto. T#e listed (ro(erties "ere similar to t#ose listed in t#e first

mortgage deed.

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SPCL Chattel Mortgage-*e to !siness reverses, JKJ$TJO filed insolvenc) (roceedings doc%eted. T#e C'I issed an order on

declaring t#e cor(oration insolvent. All its assets "ere ta%en into t#e cstod) of t#e Insolvenc) Cort, inclding

t#e collateral, real and (ersonal, secring t#e t"o mortgages as a!ovementioned.

-In t#e meantime, (on JKJ$TJOs failre to meet its o!ligation to P5Com, t#e latter commenced extradicial

foreclosre (roceedings against JKJ$TJO.

-T#e first (!lic action "as #eld "#ere (etitioner P5Com emerged as t#e #ig#est !idder and a Certificate of +ale

"as issed in its favor on t#e same date. Anot#er (!lic action "as #eld and again, P5Com "as t#e #ig#est

!idder.

-P5Com consolidated its o"ners#i( over t#e lot and all t#e (ro(erties in it. +!seentl), it leased t#e entire

factor) (remises to (etitioner $!) &. Tsai.

-P5Com sold t#e factor), loc%, stoc% and !arrel to Tsai, inclding t#e contested mac#ineries.

- JKJ$TJO filed a com(laint for annlment of sale, reconve)ance, and damages "it# t#e $egional Trial Cort

against P5Com, alleging inter alia t#at t#e extradicial foreclosre of s!ect mortgage "as in violation of t#e

Insolvenc) &a". JKJ$TJO claimed t#at no rig#ts #aving !een transmitted to P5Com over t#e assets of insolvent

JKJ$TJO, t#erefore Tsai acired no rig#ts over sc# assets sold to #er, and s#old reconve) t#e assets.

-JKJ$TJO averred t#at P5Com, "it#ot an) legal or factal !asis, a((ro(riated t#e contested (ro(erties, "#ic#

"ere not inclded in t#e $eal and C#attel Mortgages.

TC, affirmed by CA:

-'ond t#at t#e lease and sale of said (ersonal (ro(erties "ere irreglar and illegal !ecase t#e) "ere not dl)

foreclosed nor sold at t#e action sale since t#ese "ere not inclded in t#e sc#edles attac#ed to t#e mortgage

contracts.

ISSUE:

-W#et#er or not t#e inclsion of t#e estioned (ro(erties in t#e foreclosed (ro(erties is (ro(er and "#et#er or

not t#e sale of t#ese (ro(erties to (etitioner $!) Tsai is valid.

HELD:

-Assming arguendot#at t#e (ro(erties in estion are immova!le !) natre, not#ing detracts t#e (arties fromtreating it as c#attels to secre an o!ligation nder t#e (rinci(le of esto((el. An immova!le ma) !e considered a

(ersonal (ro(ert) if t#ere is a sti(lation as "#en it is sed as secrit) in t#e (a)ment of an o!ligation "#ere a

c#attel mortgage is exected over it, as in t#e case at !ar.

-Inasmc# as t#e s!ect mortgages "ere intended !) t#e (arties to involve c#attels, insofar as ei(ment and

mac#iner) "ere concerned, t#e C#attel Mortgage &a" a((lies, "#ic# (rovides in +ection B t#ereof t#at8 a c#atte

mortgage s#all !e 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)t#ing in t#e mortgage to t#e contrar) not"it#standing.Q

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-And, since t#e dis(ted mac#ineries "ere acired in 1>1 and cold not #ave !een involved in t#e 1B4 or

1B c#attel mortgages, it "as conseentl) an error on t#e (art of t#e +#eriff to inclde s!ect mac#ineries "it#

t#e (ro(erties enmerated in said c#attel mortgages.

-As t#e action sale of t#e s!ect (ro(erties to P5Com is void, no valid title (assed in its favor. Conseentl)

t#e sale t#ereof to Tsai is also a nllit) nder t#e elementar) (rinci(le of nemo dat quod non habet, one canno

give "#at one does not #ave

1. Nor!i# Asia Liite! a! Bakers tr2st Co. %. Co2rt o9 A$$eals(( 34 SCRA *1 ,)44/

FACTS:

-+extant Maritime o!tained a loan from =ordic Asia and exected a C#attel Mortgage covering t#e vessel.

-+extant defalted (a)ment. =ordic Asia institted an Jxtra dicial 'oreclosre Proceeding. =ordic (etitioned for

t#e issance of t#e arrest order against t#e vessel "#ic# "as granted.

-Hn t#e same da) , t#e n(aid cre" mem!ers filed an action for sm of mone) against +extant.

-=ordic filed a com(laint-in-intervention in t#e collection case arging t#at it #as a (referred claim over t#e vessel.

TC and CA:

-'avored t#e n(aid cre" mem!ers.

ISSUE:

-W#et#er or not t#e mortgagee s#old !e allo"ed to intervene in a collection case filed !) a co-creditor "#o #as

a s(erior or (referred lien, for t#e (r(ose of (reventing t#e dimintion of t#e mortgagees s#are.

HELD:

-A mortgagee of a vessel s#old not !e allo"ed to intervene in a collection case filed !) a co-claimant/ co-

creditor 6n(aid cre" mem!ers7 (ossessing a s(erior lien or (referred credit t#an t#e mortgagee solel) for t#e

(r(ose of o((osing sc# claims so t#at its s#are in t#e mortgaged c#attel ma) not !e diminis#ed s!stantiall), or

to (revent it from !eing diminis#ed at all since t#e #ig#er t#e claims a"arded to t#e cre" mem!ers in t#ecollection case, "#ic# "old !e recovered from t#e attac#ed vessel, t#e lesser t#e amont t#e mortgagee can

o!tain from t#eir extradicial foreclosre.

-In t#e case at !ar, t#e com(laint-in-intervention merel) alleged t#at t#e mortgage (ossesses a mortgage lien and

it is so sitated as to !e adversel) affected !) t#e cre" mem!ers collection case. 5eing st a mortgagee, t#e

case of action lies "it# t#e vessel and mortgagor and not "it# a co-claimant. T#e mortgagee "as na!le to

allege "#at s(ecific act or omission can !e attri!ted to its co-claimant "#ic# violated its rig#ts. T#e com(laint-in-

intervention t#erefore failed to state a case of action. In effect, t#e com(laint-in-intervention is a devise to defeat

t#e order of (reference of claims enmerated in P* 14216t#e +#i( Mortgage *ecree7. If t#e mortgagees tactics


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SPCL Chattel Mortgage"ere allo"ed, it "old virtall) (ave "a) for an) creditor "it# a secondar) lien or nior mortgage to !loc% t#e

claims of a (referred creditor or claimant !) sim(l) intervening to o((ose sc# credits or claims.

!. P"i##i$$ Br%&"ers O'eani', In'. (. C%)r& %f A$$ea#s, !*+ SCA -* /+**01

FACTS:

-A contract "as entered into !et"een P#illi(( 5rot#ers ong%ong and +an Erace Mining Cor(oration

6+AE$AMCH7.

-In t#e contract, +agramco agreed to sell and s#i( to P#illi(( 5ot#ers .R at least ,??? metric tons of c#rome

ore.

-In consideration for t#e deliver) of t#e c#rome ore., P#il5ro .R. agreed to o(en a letter of credit nder "#ic#

+agramco "ol! !e allo"ed to "it#dra" advances to !e c#arged against +agramcos ftre deliveries of c#rome

ore.

-P#il5ro .R. o(ened t#e letter of Crdit "it# 5PI and t#e fll amont "as dra"n !) +agramco.

-To secre t#e advance, +agramco exected a c#attel mortgage in favor of P#il5ro .R. over +agramcos

(ersonal (ro(erties.

-Aside from t#e dollar advance o!tained from P#il5ro .R., sagramco se(aratel) received (eso advance from

P#il. Hceanic.

-+agramco "as a!le to (rodce c#rome ores t#e vale of "#ic# is more t#an t#e dollar advance.

-+!seentl), +agramco and its cor(orate officers, +(oses de Eracia o!tained from 5PI t"o loans "#ic# "ere

secred !) a $eal Jstate Mortgage.

-As frt#er secrit), +agramco exected a *eed of Assignment in favor of 5PI assigning t#e (roceeds of t#e

&etter of Credit "#ic# P#il5ro .R. o(ened "it# 5PI and t#e trst recei(ts over t#e 1,>??? metric tons of c#rome

ore stoc%ed in t#e "are#ose of P#il5ro Hceanic.

-P#il5ro .R. assigned to P#il5ro Hceanic all rig#ts, interests and collecti!les from +agramco arising from P#il5ro

.R.s and +agramcos contract and from t#e deed of c#attel mortgage secring t#e same.

-5PI sog#t (ossession of t#e c#rome ores alleging t#at !) virte of t#e trst recei(ts, it is t#e o"ner of t#e

c#rome ore #eld in trst !) +agramco.

-A "rit of re(levin "as issed and attem(ted to !e enforced.

-P#il5ro Hceanic filed a t#ird (art)-claim alleging it "as t#e rig#tfl o"ner of t#e c#rome ore, and s!seentl)

filed for dicial foreclosre of t#e c#attel mortgage.

-T#e c#rome ores "ere sold to (!lic action to (revent deterioration.

ISSUE:


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SPCL Chattel Mortgage-W#et#er or not t#e c#attel mortgage can !e called (on to satisf) t#e (eso advance o!tained from P#il5ro

Hceanic.

HELD:

-P#il5ro .R. and P#il5ro Hceanic are t"o se(arate and distinct entit).

-Peso advance "as sim(l) an nsecred and interest !earing loan.

-T#e c#attel mortgage is a mere accessor) contract. ence, it s#old !e deemed atomaticall) extingis#ed (on

t#e satisfaction of t#e (rinci(al o!ligation. It cannot extend to garantee t#e (a)ment of t#e o!ligation of anot#er

entit) "#ic# did not (artici(ate in t#e exection of t#e contract in its o"n rig#t and "as not an assignee t#ereof.

17. Polia! I!2strial Liite! %. Natioal

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SPCL Chattel Mortgagerig#ts of t#e credit advances/loan accommodations to Ealleon and also claimed it #ad (referred maritime lien over

t#e (roceeds of t#e extra dicial foreclosre sale.

-5) "a) of an alternative case of action, Poliand sog#t reim!rsement for t#e (referred maritime lien.

-*5P contered t#at it "as na"are of t#e Maritime &ien on t#e 4 vessels mortgaged.

TC:

-$led t#at Poliand #ad (reference to t#e maritime lien over t#e (roceeds of t#e extra dicial foreclosre sale of

Ealleons vessels since t#e loan advances/credit accommodations tili0ed for t#e (a)ment of ex(enses on t#e

vessels "ere o!tained (rior to t#e constittion of t#e mortgage in favor of *5P.

CA:

-=*C lia!le to (a) (referred maritime lien.

ISSUE:

-W#et#er or not, t#e mortgage lien of *5P is s(erior over t#e maritime lien of Poliand 6registered or "#ic# "as

(rior in time "it# t#e c#attel mortgage.7 6=*C invo%ing Art 4>? of t#e Civil Code.7

HELD:

-Article 4>? of t#e Civil Code (roviding for t#e order of (a)ments of creditors in t#e event of sale of a vessel #ad

!een re(ealed !) P* 1421, ot#er"ise %no"n as t#e +#i( Mortgage *ecree of 1B>. If t#e mortgage of t#e vesse

constitted for t#e (r(ose of financing t#e constrction, acisition, (rc#ase or initial o(eration of vessels, t#e

mortgagee o!tains a (referred stats (rovided t#e formalities (rescri!ed !) la" are com(lied "it#. (on

enforcement of t#e (referred mortgage and evental foreclosre of t#e vessel, t#e (roceeds of t#e sale s#all first

!e a((lied to t#e claim of t#e mortgage creditor nless t#ere are s(erior or (referential claims nder +ection 1B

of t#e same la".

-. S$%)ses %sari% (. PCI Leasin2 and Finan'e, In'. !3! SCA ** /+**1

FACTS:

--+(oses $osario (rc#ased an Is0 Jlf Pic%-( tilit) ve#icle from CarMerc#ants, Inc. T#e transaction "as

covered !) a Prc#ase Agreement "#ere!) t#e s(oses ndertoo% to ma%e a do"n (a)ment.

-T#e s(oses t#en a((lied for a loan "it# PCI &easing to (a) for t#e !alance.

-(on t#e a((roval of t#eir loan a((lication, t#e s(oses $osario exected a Promissor) =ote in favor of PC

&easing covering t#e amont of t#e loan (ls finance c#arges. T#e s(oses ndertoo% to (a) t#e loan in mont#l)

installments (a)a!le on t#e 2t#da) of eac# mont# at 22.1? annal interest.

-T#e s(oses $osario also agreed t#at, in case of defalt, t#e (a)ment of t#e otstanding sm "it# interest s#all

immediatel) !ecome de and (a)a!le. To secre t#e (a)ment of t#e loan, t#e) exected, on t#e same da), a


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SPCL Chattel MortgageC#attel Mortgage in favor of PCI &easing over t#e Is0 Jlf 5*1. T#e motor ve#icle "as delivered to t#e

s(oses and it "as registered in t#eir names.

-*es(ite demands, t#e s(oses $osario failed to (a) t#e amorti0ations on t#eir loan to PCI &easing.

-PCI &easing filed a Com(laint against t#e s(oses $osario +m of Mone) "it# *amages "it# a Pra)er for a

Writ of $e(levin.Q

- $TC issed an Hrder for t#e issance of a "rit of re(levin. T#en, t#e +#eriffsei0ed t#e motor ve#icle. After five

647 da)s, "it#ot t#e cort issing an order disc#arging t#e "rit, t#e +#eriff trned over t#e (ossession of t#e

ve#icle to PCI &easing.

-In t#eir Ans"er to t#e com(laint, t#e s(oses $osario alleged t#at t#e c#attel mortgage t#e) exected in favor of

PCI &easing covering t#e motor ve#icle "as in effect a contract of sale of (ersonal (ro(ert), (a)a!le in

installments to !e governed !) Article 1> 9of t#e =e" Civil Code of t#e P#ili((ines. T#e) frt#er alleged t#a

since PCI &easing o(ted to foreclose t#e c#attel mortgage, it "as esto((ed from collecting t#e !alance of t#eir

accont nder t#e (romissor) note and c#attel mortgage.

TC:

-T#e trial cort rendered dgment in favor of PCI &easing. T#e trial cort declared t#at t#e s(oses $osario "ere

onl) a!le to (a) several mont#l) installments on t#eir loan and t#eir accont "as overde. T#e trial cort did not,

#o"ever, resolve t#e isse of "#et#er Article 1> of t#e =e" Civil Code "as a((lica!le.

CA:

-$endered dgment dismissing t#e a((eal, declaring t#at t#e s(oses $osario failed to (rove t#eir claim t#a

PCI &easing #ad agreed to !e s!rogated to t#e rig#t of CarMerc#ants, Inc. to collect t#e n(aid !alance of t#e

(rc#ase (rice of t#e motor ve#icle. T#e a((ellate cort also rled t#at even if Article 1> of t#e =e" Civil Code

"ere to !e a((lied, t#e c#attel mortgage #ad not !een foreclosed< #ence, PCI &easing "as not (reclded from

collecting t#e !alance of t#e a((ellants accont. It #eld t#at t#e remed) of t#e n(aid seller nder Article 1> of

t#e =e" Civil Code is alternative and not cmlative.

ISSUE:

-W#et#er or not Article 1> "ill a((l) as against a mortgagee "#o is not t#e vendor of t#e c#attel mortgaged.

HELD:

-Article 1> "ill not a((l) as against a mortgagee "#o is not t#e vendor of t#e c#attel mortgaged. T#s, a sit for

re(levin is not eivalent to an exercise of t#e remed) of foreclosre nder Article 1> of t#e =e" Civil Code.

ence, a vendor-mortgagee is not !arred from ma%ing a claim for s(ecific (erformance against t#e !)er

mortgagor, !) mere fact t#at t#e former "as alread) a!le to secre "rit of $e(levin.


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SPCL Chattel Mortgage16. Chig %. S$o2ses Satos( 71 SCRA 64 ,)446/

FACTS:

-Antonio C#ing exected a loan to +(oses +antos secred !) a $eal Jstate Mortgage.

-T#e +(oses issed c#ec%s, #o"ever, some of t#em "ere dis#onored, "#ic# (rom(ted c#ing to file a criminal

case of 5P 22.

-A com(romise agreement "as entered into "#ic# cased t#e termination of t#e case, !t +(oses +antos stil

failed to com(l) "it# it.

-C#ing tried to foreclose t#e $eal Jstate Mortgage.

ISSUE:

-W#et#er or not t#e filing of a criminal case in connection "it# violation of 5P 22 !ars t#e mortaggee to foreclose

t#e $eal Jstate Mortgage.

HELD:

-T#e filing of a criminal case in connection to violation of 5P 22 is eivalent to collection sit. 'ollo"ing t#e rle

on t#e alternative remedies of a mortgagee-creditor "ill !ar or (reclde t#e former from availing #imself of t#e

ot#er civil remed) of foreclosre of t#e real estate mortgage !ecase (rsant to +ection 1 6!7 of $le 111 of t#e

2??? $les on Criminal Procedre, #e is deemed to #ave alread) availed #imself of t#e remed) of collection sit.

B. CHATTEL MORTGAGE ON A PERSONAL PROPERTY SOL< ON INSTALLMENTS

1. I!2strial "ia#e %. To0ias( 6- SCRA )- ,1*66/

FACTS:

-Castor To!ias !og#t on installment one 617 *odge trc% from &eelin Motors, Inc. To ans"er for #is o!ligation #e

exected a (romissor) note in favor of t#e latter, for t#e sm of P2.?B?.2> (a)a!le in t#irt)-six 63@7 eal

installments "it# interest at t#e rate of 12 (er annm (a)a!le in t#e amonts and dates indicated in said

(romissor) note.

- To secre (a)ment of t#e (romissor) note, res(ondent To!ias exected in favor of &eelin Motors, Inc. a c#attel

mortgage on t#e *odge trc%.

-&eelin Motors, Inc. indorsed t#e (romissor) note and assigned t#e c#attel mortgage to (etitioner Indstrial

'inance Cor(oration.

-As a conseence res(ondent To!ias (aid six 6@7 installments on t#e (romissor) note directl) to t#e (etitioner

Indstrial 'inance Cor(oration.

-W#en To!ias "as in arrear in t#e (a)ment of more t#an t"o installments, I'C t#rog# a letter gave To!ias a

c#oice of eit#er (a)ing t#e !alance of t#e (rc#ase (rice or srrender t#e trc%.


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SPCL Chattel Mortgage-To!ias res(onded to t#e letter and volntaril) and "illingl) srrendering t#e trc% "#ic# "as still in t#e cstod) of

&eelin Motors ever since t#e trc% met an accident.

-(on learning t#at t#e trc% met an accident, (etitioner decided not to get t#e trc% an)more from &eelin Motors

Inc.

-Instead, I'C filed an action against To!ias to recover t#e n(aid !alance of t#e (romissor) note.

TC, affirmed by CA:

-*ismissed t#e com(laint on t#e grond t#at in as mc as To!ias volntaril) and "illingl) srrendered t#e said

trc% from &eelin Motors (rsant to t#e demand to srrender, To!ias #as alread) com(lied "it# t#e demands of

I'C.

ISSUE:

-W#et#er or not t#e mortgagee is esto((ed to insist on its claim on t#e !alance of t#e (romissor) note "#en itdemanded t#e retrn or srrender of t#e trc% to "#ic# demand t#e mortgagor acceded.

HELD:

- Art. 1> is clear t#at ;s#old t#e vendee or (rc#aser of a (ersonal (ro(ert) !e in defalt in t#e (a)ment of t"o

or more of t#e agreed installments, t#e vendor or seller #as t#e o(tion to eit#er exact flfillment !) t#e (rc#aser

of -t#e o!ligation, or to cancel t#e sale, or to foreclose t#e mortgage on t#e (rc#ased (ersonal (ro(ert), if one

"as constitted. +ince t#e case involves t#e sale of (ersonal (ro(ert) on installments Art. 1> of t#e Civil Code

s#old a((l). T#e remedies (rovided for in Art. 1> are considered alternative, not cmlative sc# t#at t#e

exercise of one "old !ar t#e exercise !) t#e ot#ers.

-ere, (etitioner #as not cancelled t#e sale, nor #as it exercised t#e remed) of foreclosre. 'oreclosre, dicial

or extra-dicial, (res((oses somet#ing more t#an a mere demand to srrender (ossession of t#e o!ect of t#e

mortgage. +ince t#e (etitioner #as not availed itself of t#e remed) of cancelling t#e sale of t#e trc% in estion or

of foreclosing t#e c#attel mortgage on said trc%, (etitioner is still free to avail of t#e remed) of exacting flfillmen

of t#e o!ligation of res(ondent To!ias, t#e vendee of t#e trc% in estion. +aid t#e Cort8

T#e contract !eing a sale of mac#iner) (a)a!le in installments, t#e a((lica!le (rovision of la" is

Article 1> of t#e Civil Code, "#ic# gives t#e vendor t#e o(tion to exercise an) one of t#e

alternative remedies t#erein mentioned8 exact flfillment of t#e o!ligation, cancel t#e sale, or

foreclose t#e c#attel mortgage. 5t t#e vendor- mortgagor in t#e (resent case desisted, on itso"n initiative, from consmmating t#e action sale, "it#ot gaining an) advantage or !enefit, and

"it#ot casing an) disadvantage, or #arm to t#e vendees-mortgagees. T#e least t#at cold !e

said is t#at sc# desistance of t#e (laintiff from (roceeding "it# action sale "as a timel)

disavo"al t#at cancelled and rendered seless its (revios c#oice to foreclose< its acts, !eing

extra-dicial, !rog#t no tro!le (on an) cort, and "ere #armless to t#e defendants. 'or t#is

reason, t#e (laintiff cannot !e considered as #aving ;exercised; 6t#e Code ses t#e "ord

;exercise;7 t#e remed) of foreclosre !ecase of its incom(lete im(lementation, and, t#erefore

t#e (laintiff is not !arred from sing on t#e n(aid accont.


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SPCL Chattel Mortgage-T#e isse of esto((el raised !) res(ondent To!ias, to #old t#e (etitioner in esto((el, it mst !e s#o"n t#at "#en

it gave t#e res(ondent t#e c#oice of eit#er (a)ing t#e !alance of t#e (rc#ase (rice or of srrending t#e trc%, it

#ad alread) %no"ledge of t#e accident and t#e conseent damage to t#e trc%. In t#e (resent case (etitioner

claims it #ad no %no"ledge of t#e accident "#en it gave t#e res(ondent t#e c#oice of eit#er (a)ing t#e !alance of

t#e (romissor) note or of srrendering t#e trc%. It is #ard to !elieve t#at (etitioner "old ma%e sc# offer to

res(ondent eit#er to (a) t#e !alance on t#e (romissor), note or to srrender t#e trc% in estion if it %ne" t#at

t#e trc% #as #ad an accident. T#e more (lasi!le t#ing it "old #ave as%ed t#e res(ondent is to as% for t#e

!alance on t#e (romissor) note. 5esides t#e allegation of (etitioner t#at it #ad no %no"ledge of t#e accident is a

negative allegation and needs no evidence to s((ort it, not !eing an essential (art of t#e statement of t#e rig#t

on "#ic# t#e case of action is fonded. It is t#erefore t#e res(ondent To!ias "#o #as t#e !rden of dis(roving

t#e claim of (etitioner t#at #e #as no %no"ledge of t#e accident "#en it made t#e offer to res(ondent eit#er to (a)

t#e !alance on t#e (romissor) note or to srrender t#e trc%. $es(ondent failed in t#is.

). "ili%est Cre!it Cor$oratio %. Phili$$ie A#et=lee Co.( I#. 111S#ra 3)1 ,1*-)/

FACTS:

-T#e P#ili((ine Acet)lene Co., Inc. (rc#ased from one Alexander &im, as evidenced !) a *eed of +ale, a motor

ve#icle descri!ed as C#evorlet, 1@ model, (a)ing a do"n (a)ment and t#e !alance (a)a!le at 3 mont#l)installments.

-As secrit) for t#e (a)ment of said (romissor) note, PAC exected a c#attel mortgage over t#e same motor

ve#icle in favor of said Alexander &im.

-+!seentl), Alexander &im assigned to t#e 'ilinvest 'inance Cor(oration all #is rig#ts, title, and interests in t#e

(romissor) note and c#attel mortgage !) virte of a *eed of Assignment.

-T#ereafter, t#e 'ilinvest 'inance Cor(oration, as a conseence of its merger "it# t#e Credit and *evelo(ment

Cor(oration assigned to t#e ne" cor(oration, 'ilinvest Credit Cor(oration, all its rig#ts, title, and interests on t#e

aforesaid (romissor) note and c#attel mortgage, "#ic#, in effect, t#e (a)ment of t#e n(aid !alance o"ed !)PAC to Alexander &im "as financed !) 'ilinvest Credit Cor(oration sc# t#at &im !ecame fll) (aid.

-PAC failed to com(l) "it# t#e terms and conditions set fort# in t#e (romissor) note and c#attel mortgage since it

#ad defalted in t#e (a)ment of nine sccessive installments. 'ilinvest Credit Cor(oration t#en sent a demand

letter "#ere!) its consel demanded ;t#at )o 6a((ellant7 remit t#e aforesaid amont in fll in addition to

sti(lated interest and c#arges or retrn t#e mortgaged (ro(ert) to m) client at its office at 2133 Taft Avene,

Malate, Manila "it#in five 647 da)s from date of t#is letter dring office #ors. ;

-$e(l)ing t#ereto, PACt, t#r its assistant general- manager, "rote !ac% advising 'ilinvest Credit Cor(oration of

its decision to ;retrn t#e mortgaged (ro(ert), "#ic# retrn s#all !e in fll satisfaction of its inde!tedness (rsant

to Article 1> of t#e =e" Civil Code.; Accordingl), t#e mortgaged ve#icle "as retrned 'ilinvest Credi

Cor(oration to t#e toget#er "it# t#e docment ;Kolntar) +rrender "it# +(ecial Po"er of Attorne) To +ell;exected !) PAC.

- 'ilinvest Credit Cor(oration "rote a letter to PAC informing t#e latter t#at 'ilinvest Credit Cor(oration cannot sel

t#e motor ve#icle as t#ere "ere n(aid taxes on t#e said ve#icle. Hn t#e last (ortion of t#e said letter, 'ilinvest

Credit Cor(oration reested t#e PAC to (date its accont !) (a)ing t#e installments in arrears and accring

interest.

'ilinvest Credit Cor(oration, in a letter, offered to deliver !ac% t#e motor ve#icle to t#e PAC !t t#e latter refsed

to acce(t it, so 'ilinvest Credit Cor(oration institted an action for collection of a sm of mone) "it# damages.

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SPCL Chattel Mortgage-In its ans"er, PAC, "#ile admitting t#e material allegations of t#e 'ilinvest Credit Cor(orations com(laint, avers

t#at 'ilinvest Credit Cor(oration #as no case of action against it since its o!ligation to"ards t#e 'ilinvest Credit

Cor(oration "as extingis#ed "#en in com(liance "it# t#e 'ilinvest Credit Cor(orations demand letter, it

retrned t#e mortgaged (ro(ert) to t#e 'ilinvest Credit Cor(oration, and t#at assming argendo t#at t#e retrn of

t#e (ro(ert) did not extingis# its o!ligation, it "as nonet#eless stified in refsing (a)ment since t#e 'ilinvest

Credit Cor(oration is not entitled to recover t#e same de to t#e !reac# of "arrant) committed !) t#e origina

vendor-assignor Alexander &im.

LC:

-Hrdered PAC to (a) t#e otstanding n(aid o!ligation and to acce(t t#e deliver) of t#e motor ve#icle s!ect of

t#e c#attel mortgage.

ISSUE:

-W#et#er or not t#e retrn t#e retrn of t#e mortgaged (ro(ert) !) t#e mortgagor to t#e mortgagee constitteddacion en (ago or *ation in (a)ment.

HELD:

- T#e mere retrn of t#e mortgaged motor ve#icle !) t#e mortgagor, PAC, to t#e mortgagee, 'ilinvest Credit

Cor(oration, does not constitte dation in (a)ment or dacion en pagoin t#e a!sence, ex(ress or im(lied of t#e

tre intention of t#e (arties. Dacion en pago, according to Manresa, is t#e transmission of t#e o"ners#i( of a t#ing

!) t#e de!tor to t#e creditor as an acce(ted eivalent of t#e (erformance of o!ligation. In dacion en pago, as a

s(ecial mode of (a)ment, t#e de!tor offers anot#er t#ing to t#e creditor "#o acce(ts it as eivalent of (a)mentof an otstanding de!t. T#e nderta%ing reall) (arta%es in one sense of t#e natre of sale, t#at is, t#e creditor is

reall) !)ing t#e t#ing or (ro(ert) of t#e de!tor, (a)ment for "#ic# is to !e c#arged against t#e de!tors de!t. As

sc#, t#e essential elements of a contract of sale, namel), consent, o!ect certain, and case or consideration

mst !e (resent. In its modern conce(t, "#at actall) ta%es (lace in dacion en pagois an o!ective novation of

t#e o!ligation "#ere t#e t#ing offered as an acce(ted eivalent of t#e (erformance of an o!ligation is considered

as t#e o!ect of t#e contract of sale, "#ile t#e de!t is considered as t#e (rc#ase (rice. In an) case, common

consent is an essential (rereisite, !e it sale or innovation to #ave t#e effect of totall) extingis#ing t#e de!t or

o!ligation.

-T#e evidence on t#e record fails to s#o" t#at t#e mortgagee, t#e #erein a((ellee, consented, or at least

intended, t#at t#e mere deliver) to, and acce(tance !) #im, of t#e mortgaged motor ve#icle !e constred as

actal (a)ment, more s(ecificall) dation in (a)ment or dacion en pago.T#e fact t#at t#e mortgaged motor ve#icle

"as delivered to #im does not necessaril) mean t#at o"ners#i( t#ereof, as ridicall) contem(lated !) dacion en

(ago, "as transferred from a((ellant to a((ellee. In t#e a!sence of clear consent of a((ellee to t#e (roferred

s(ecial mode of (a)ment, t#ere can !e no transfer of o"ners#i( of t#e mortgaged motor ve#icle from a((ellant to

a((ellee. If at all, onl) transfer of (ossession of t#e mortgaged motor ve#icle too% (lace, for it is ite (ossi!le

t#at a((ellee, as mortgagee, merel) "anted to secre (ossession to forestall t#e loss, destrction, fradlent

transfer of t#e ve#icle to t#ird (ersons, or its !eing rendered valeless if left in t#e #ands of t#e a((ellant.

. >a=as( Sr. %. L2eta Motor Co$a=( 116 SCRA 6)+ ,1*-)/

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FACTS:

- Jtro(io La)as, r. (rc#ased on installment !asis a 'ord T#ames 'reig#ter "it# P 5od) 6Jngine ??J-

12BB3> and C#assis ??J-12BB3>7 from Mr. $oe JscaSo of t#e JscaSo Jnter(rises in Caga)an de Hro Cit)

dealer of &neta Motor Com(an).

-T#e motor ve#icle "as delivered to t#e La)as "#o (aid t#e initial (a)ment in, and exected a (romissor) note fort#e !alance of t#e total selling (rice, in favor of &neta Motor Com(an). T#e (romissor) note stated t#e amonts

and dates of (a)ment of 2@ installments. +imltaneosl) "it# t#e exection of t#e (romissor) note and to secre

its (a)ment, La)as exected a c#attel mortgage on t#e s!ect motor ve#icle in favor of &neta Motors.

-La)as "as na!le to (a) frt#er mont#l) installments (rom(ting t#e &neta Motors to extradiciall) foreclose t#e

c#attel mortgage. T#e motor ve#icle "as sold at (!lic action "it# t#e &neta Motors re(resented !) Att).

&eandro 5. 'ernande0 as t#e #ig#est !idder.

+ince t#e (a)ments made !) La)as (ls t#e (roceeds reali0ed from t#e foreclosre of t#e c#attel mortgage cold

not cover t#e total amont of t#e (romissor) note exected !) La)as in favor of t#e res(ondent &neta Motors,

t#e latter filed an avtion for t#e recover) of t#e !alance (ls interests.

-T#e Cit) Cort affirmed !) C'I dismissed t#e com(laint.

-&neta Motor Com(an) a((ealed t#e case to t#e C'I. After varios incidents, t#e C'I issed an order remanding

t#e case to t#e cort of origin for frt#er (roceedings at it is in t#e o(inion t#at t#e Cit) Cort s#old #ave not

decided t#e case merel) on t#e estion of la" since t#e (resentation of evidence is necessar) to addicate t#e

estions involved. ence, t#e (etition for revie" !) certiorari filed !) La)as.

ISSUE:

-W#et#er or not t#e assignee in t#e interest of t#e mortgagee can still recover t#e deficienc) amont of t#e motorve#icle s!ect of t#e c#attel mortgage "#ic# #as !een sold at (!lic action.

HELD:

- Article 1> of t#e =e" Civil Code, on t#e foreclosre of c#attel mortgages over (ersonal (ro(ert) sold on

installment !asis, (rovides t#at In a contract of sale of (ersonal (ro(ert) t#e (rice of "#ic# is (a)a!le in

installments, t#e vendor ma) exercise an) of t#e follo"ing remedies8 637 'oreclose t#e c#attel ,mortgage on t#e

t#ing sold, if one #as !een constitted, s#old t#e vendees failre to (a) cover t"o or more installments. In t#is

case, #e s#all #ave no frt#er action against t#e (rc#aser to recover an) n(aid !alance of t#e (rice. An)

agreement to t#e contrar) s#all !e void.Q

-T#e foreclosre and actal sale of a mortgaged c#attel !ars frt#er recover) !) t#e vendor of an) !alance on t#e

(rc#asers otstanding o!ligation not so satisfied !) t#e sale. T#e (ro#i!ition a((lies to t#e assignee in interes

of t#e mortgagee.

3. Ri!a! %. "ili%est a! "ia#e Cor$oratio( 1)4 SCRA )3+ ,1*-/

FACTS:

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- Hn A(ril 1, 1@, (laintiffs (rc#ased from t#e +(reme +ales arid *evelo(ment Cor(oration t"o 627 !rand

ne" 'ord Consl +edans com(lete "it# accessories, for P2@,>>B (a)a!le in 2 mont#l) installments. To secre

(a)ment t#ereof, (laintiffs exected on t#e same date a (romissor) note covering t#e (rc#ase (rice and a deed

of c#attel mortgage not onl) on t#e t"o ve#icles (rc#ased !t also on anot#er car 6C#evrolet7 and (laintiffs

franc#ise or certificate of (!lic convenience granted !) t#e defnct P!lic +ervice Commission for t#e o(eration

of a taxi fleet. T#en, "it# t#e conformit) of t#e (laintiffs, t#e vendor assigned its rig#ts, title and interest to t#e

a!ove-mentioned (romissor) note and c#attel mortgage to defendant 'ili(inas Investment and 'inance

Cor(oration.

-*e to t#e failre of t#e (laintiffs to (a) t#eir mont#l) installments as (er (romissor) note, t#e defendan

cor(oration foreclosed t#e c#attel mortgage extra-diciall), and at t#e (!lic action sale of t#e t"o 'ord Consl

cars, of "#ic# t#e (laintiffs "ere not notified, t#e defendant cor(oration "as t#e #ig#est !idder and (rc#aser.

Anot#er action sale "as #eld on =ovem!er 1@, 1@4, involving t#e remaining (ro(erties s!ect of t#e deed of

c#attel mortgage since (laintiffs o!ligation "as not fll) satisfied !) t#e sale of t#e aforesaid ve#icles, and at t#e

(!lic action sale, t#e franc#ise of (laintiffs to o(erate five nits of taxica! service "as sold for P>,??? to t#e

#ig#est !idder, #erein defendant cor(oration, "#ic# s!seentl) sold and conve)ed t#e same to #erein

defendant ose *. +e!astian, "#o t#en filed "it# t#e P!lic +ervice Commission an a((lication for a((roval of

said sale in #is favor.

-Hn 'e!rar) 21, 1@@, (laintiffs filed an action for annlment of contract !efore t#e Cort of 'irst Instance of

$i0al, 5ranc# I, "it# 'ili(inas Investment and 'inance Cor(oration, ose *. +e!astian and +#eriff ose +an

Agstin, as (art)-defendants.

TC:

- Cort declared t#e c#attel mortgage, to !e nll and void in so far as t#e taxica! franc#ise and t#e sed

C#evrolet car of (laintiffs are concerned, and t#e sale at (!lic action condcted !) t#e Cit) +#eriff of Manila

concerning said taxica! franc#ise, to !e of no legal effect. T#e certificate of sale issed !) t#e Cit) +#eriff of

Manila in favor of 'ili(inas Investment and 'inance Cor(oration concerning (laintiffs taxica! franc#ise for P>,???

is accordingl) cancelled and set aside, and t#e assignment t#ereof made !) 'ili(inas Investment in favor of

defendant ose +e!astian is declared void and of no legal effect.

CA 'er&ified &"e 'ase &% SC.

ISSUE:

-W#et#er or not t#e vendor of (ersonal (ro(ert) sold on installments !asis is (reclded, after foreclosing t#e

c#attel mortgage on t#e t#ing sold, from #aving recorse against t#e additional secrit) !) t#e mortgagor.

HELD:

-T#e vendor of (ersonal (ro(ert) t#e (rc#ase (rice of "#ic# is (a)a!le in installments, #as t#e rig#t, s#old t#e

vendee defalt in t#e (a)ment of t"o or more of t#e agreed installments, to exact flfillment !) t#e (rc#aser of

t#e o!ligation, or to cancel t#e sale, or to foreclose t#e mortgage on t#e (rc#ased (ersonal (ro(ert), if one "as

constitted. W#ic#ever rig#t t#e vendor elects, #e cannot avail of t#e ot#er, t#ese remedies !eing alternative, not

cmlative. 'rt#ermore, if t#e vendor avails #imself of t#e rig#t to foreclose #is mortgage, t#e la" (ro#i!its #im


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SPCL Chattel Mortgagefrom frt#er !ringing an action against t#e vendee for t#e (r(ose of recovering "#atever !alance of t#e de!t

secred not satisfied !) t#e foreclosre sale. T#e (recise (r(ose of t#e la" is to (revent mortgagees from

sei0ing t#e mortgaged (ro(ert), !)ing it at foreclosre sale for a lo" (rice and t#en !ringing sit against t#e

mortgagor for a deficienc) dgment, ot#er"ise, t#e mortgagor-!)er "old find #imself "it#ot t#e (ro(ert) and

still o"ing (racticall) t#e fll amont of #is original inde!tedness.

-In t#e instant case, defendant cor(oration elected to foreclose its mortgage (on defalt !) t#e (laintiffs in t#e

(a)ment of t#e agreed installments. aving c#osen to foreclose t#e c#attel mortgage, and !og#t t#e (rc#ased

ve#icles at t#e (!lic action as t#e #ig#est !idder, it s!mitted itself to t#e conseences of t#e la" as

s(ecificall) mentioned, !) "#ic# it is deemed to #ave renonced an) and all rig#ts "#ic# it mig#t ot#er"ise #ave

nder t#e (romissor) note and t#e c#attel mortgage as "ell as t#e (a)ment of t#e n(aid !alance.

-Conseentl), t#e lo"er cort rig#tl) declared t#e nllit) of t#e c#attel mortgage in estion in so far as t#e

taxica! franc#ise and t#e sed C#evrolet car of (laintiffs are concerned

7. Esg2erra %. Co2rt o9 A$$eals( 16 SCRA 1 ,1*-*/

FACTS:

-EA Mac#ineries Inc. sold a 'ord-trader cargo to ilario &agma) and 5onifacio Masilngan.

-+!seentl), Monteli!ano Jsgerra !og#t t#e rig#t to t#e cargo trc% and assmed (a)ing t#e n(aid

(rc#ase (rice.

-In so doing, Jsgerra exected in favor of EAMI a (romissor) note and c#attel mortgage over t#e trc%.

-Jsgerra defalted in #is o!ligations.

-Eami too% t#e trc% from Jsgerra "#o gave #is consent on t#e condition t#at #e !e allo"ed to recover its

(ossession (on (a)ment of its accont.

-Jsgerra tried to re(ossess t#e trc% !) sending #is "ife to Eami to (artiall) settle #is accont.

-+till, Eami refsed to deliver t#e trc%, com(elling Jsgerra to file a com(laint.

TC:

-*ismissed t#e com(laint rling t#at it "as not nla"fl on t#e (art of Eami to re(ossess t#e cargo trc% in

estion as Jsgerra gave #is consent to t#e re(ossession.

CA:

-+et aside t#e decision of t#e &C and #eld t#at "#ile it is tre t#at t#e mortgagee can ta%e (ossession of t#e

c#attel, sc# ta%ing did not amont to t#e foreclosre of t#e mortgage, ot#er"ise stated, Eami s#old #ave

foreclosed t#e mortgage.


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ISSUE:

-W#et#er or not t#e mortgagee-vendor of t#e (ersonal (ro(ert) sold on installments is legall) o!ligated to

foreclose t#e c#attel mortgage and sell t#e c#attel s!ect t#ereof at (!lic action in case t#e mortgagor-vendee

defalts in t#e (a)ment of t#e agreed installments.

HELD:

- W#ile t#e mortgagee can ta%e (ossession of t#e c#attel, sc# ta%ing did not amont to t#e foreclosre of t#e

mortgage. Ht#er"ise stated, t#e ta%ing of Jsgerras trc% "it#ot (roceeding to t#e sale of t#e same at (!lic

action, !t instead, a((ro(riating t#e same in (a)ment of Jsgerras inde!tedness, is not la"fl.

-As clearl) stated in t#e c#attel mortgage contract, t#e ex(ress (r(ose of t#e ta%ing of t#e mortgaged (ro(ert) is

to sell t#e same and/or foreclose t#e mortgage constitted t#ereon eit#er diciall) or extradiciall) and t#ere!),

liidate t#e inde!tedness in accordance "it# la".

-More t#an t#at, even if sc# atomatic a((ro(riation of t#e cargo trc% in estion can !e inferred from or !e

contem(lated nder t#e aforesaid mortgage contract, sc# sti(lation "old !e pactum commissorium"#ic# is

ex(ressl) (ro#i!ited !) Article 2?>> of t#e Civil Code and t#erefore, nll and void.

-aving o(ted to foreclose t#e c#attel mortgage, res(ondent EAMI can no longer cancel t#e sale. T#e t#ree

remedies of t#e vendor in case t#e vendee defalts, in a contract of sale of (ersonal (ro(ert) t#e (rice of "#ic# is

(a)a!le in installment nder Article 1> of t#e Civil Code, are alternative and cannot !e exercised

simltaneosl) or cmlativel) !) t#e vendor-creditor.

+. Bor0o II %. Ser%i#e5i!e s$e#ialist( )7- SCRA +3 ,1**+/

FACTS:

-*aniel 5or!on and 'rancisco 5or!on (rc#ased from Pangasinan AtoMart Inc. 5rand ne" 1> Is0 RC* 2?

cre" ca! and signed a (romissor) note (a)a!le in 12 mont#l) installments.

-To secre t#e (romissor) note, t#e 5or!ons exected a c#attel mortgage over t#e ve#icle.

-T#e rig#t of Pangasinan Atomart Inc "as later assigned to 'ilinvest Credit Cor(oration "it# notice to t#e

5or!ons.

-'CC in trn assigned all its rig#ts, interest and title over t#e (romissor) note and t#e c#attel mortgage to

+evice"ide +(ecialists.

-W#en t#e 5or!ons failed to com(l) "it# t#eir o!ligation, +ervice"ide +(ecialist filed an action for re(levin for t#e

foreclosre of t#e mortgage (ro(ert).

-T#e 5or!ons claimed t#at t#e) "ere not in defalt !ecase Pangasinan Atomart delivered a ve#icle different

from "#at t#e) #ave intended to !) and des(ite commnication, t#e latter "as not a!le to re(lace t#e ve#icle

ntil it "as sei0ed !) t#e cort.


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-+staining t#e decision of t#e cort a o, t#e a((ellate cort (#eld t#e a"ard of liidated damages and

attorne)s fees in favor of +ervice"ide +(ecialists.

HELD:

-T#e remedies nder Article 1> of t#e Civil Code are not cmlative !t alternative and exclsive, "#ic# meanst#at -

;x x x +#old t#e vendee or (rc#aser of a (ersonal (ro(ert) defalt in t#e (a)ment of t"o or more

of t#e agreed installments, t#e vendor or seller #as t#e o(tion to avail of an) of t#ese t#ree remedies

eit#er to exact flfillment !) t#e (rc#aser of t#e o!ligation, or to cancel t#e sale, or to foreclose t#e

mortgage on t#e (rc#ased (ersonal (ro(ert), if one "as constitted. T#ese remedies #ave !een

recogni0ed as alternative, not cmlative, t#at t#e exercise of one "old !ar t#e exercise of t#e ot#ers.;

-W#en t#e seller assigns #is credit to anot#er (

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