(1) GAVINO A. TUMALAD and GENEROSA R. TUMALAD, plaintiffs-appellees, vs.

ALBERTA VICENCIO
and EMILIANO SIMEON, defendants-appellants.
REYES, J.B.L., J.:
Case certified to this Court by the Court of Appeals (CA-G.R. No. 27824-R) for the reason that only questions of
law are involved.
This case was originally commenced by defendants-appellants in the municipal court of Manila in Civil Case No.
43073, for ejectment. Having lost therein, defendants-appellants appealed to the court a quo (Civil Case No. 30993)
which also rendered a decision against them, the dispositive portion of which follows:
WHEREFORE, the court hereby renders judgment in favor of the plaintiffs and against the
defendants, ordering the latter to pay jointly and severally the former a monthly rent of P200.00 on
the house, subject-matter of this action, from March 27, 1956, to January 14, 1967, with interest at
the legal rate from April 18, 1956, the filing of the complaint, until fully paid, plus attorney's fees
in the sum of P300.00 and to pay the costs.
It appears on the records that on 1 September 1955 defendants-appellants executed a chattel mortgage in favor of
plaintiffs-appellees over their house of strong materials located at No. 550 Int. 3, Quezon Boulevard, Quiapo,
Manila, over Lot Nos. 6-B and 7-B, Block No. 2554, which were being rented from Madrigal & Company, Inc. The
mortgage was registered in the Registry of Deeds of Manila on 2 September 1955. The herein mortgage was
executed to guarantee a loan of P4,800.00 received from plaintiffs-appellees, payable within one year at 12% per
annum. The mode of payment was P150.00 monthly, starting September, 1955, up to July 1956, and the lump sum
of P3,150 was payable on or before August, 1956. It was also agreed that default in the payment of any of the
amortizations, would cause the remaining unpaid balance to becomeimmediately due and Payable and
the Chattel Mortgage will be enforceable in accordance with the provisions of Special Act No.
3135, and for this purpose, the Sheriff of the City of Manila or any of his deputies is hereby
empowered and authorized to sell all the Mortgagor's property after the necessary publication in
order to settle the financial debts of P4,800.00, plus 12% yearly interest, and attorney's fees... 2
When defendants-appellants defaulted in paying, the mortgage was extrajudicially foreclosed, and on 27 March
1956, the house was sold at public auction pursuant to the said contract. As highest bidder, plaintiffs-appellees were
issued the corresponding certificate of sale. 3 Thereafter, on 18 April 1956, plaintiffs-appellant commenced Civil
Case No. 43073 in the municipal court of Manila, praying, among other things, that the house be vacated and its
possession surrendered to them, and for defendants-appellants to pay rent of P200.00 monthly from 27 March 1956
up to the time the possession is surrendered. 4 On 21 September 1956, the municipal court rendered its decision
... ordering the defendants to vacate the premises described in the complaint; ordering further to
pay monthly the amount of P200.00 from March 27, 1956, until such (time that) the premises is
(sic) completely vacated; plus attorney's fees of P100.00 and the costs of the suit. 5
Defendants-appellants, in their answers in both the municipal court and court a quo impugned the legality of the
chattel mortgage, claiming that they are still the owners of the house; but they waived the right to introduce
evidence, oral or documentary. Instead, they relied on their memoranda in support of their motion to dismiss,
predicated mainly on the grounds that: (a) the municipal court did not have jurisdiction to try and decide the case
because (1) the issue involved, is ownership, and (2) there was no allegation of prior possession; and (b) failure to
prove prior demand pursuant to Section 2, Rule 72, of the Rules of Court. 6
During the pendency of the appeal to the Court of First Instance, defendants-appellants failed to deposit the rent for
November, 1956 within the first 10 days of December, 1956 as ordered in the decision of the municipal court. As a
result, the court granted plaintiffs-appellees' motion for execution, and it was actually issued on 24 January 1957.
However, the judgment regarding the surrender of possession to plaintiffs-appellees could not be executed because

the subject house had been already demolished on 14 January 1957 pursuant to the order of the court in a separate
civil case (No. 25816) for ejectment against the present defendants for non-payment of rentals on the land on which
the house was constructed.
The motion of plaintiffs for dismissal of the appeal, execution of the supersedeas bond and withdrawal of deposited
rentals was denied for the reason that the liability therefor was disclaimed and was still being litigated, and under
Section 8, Rule 72, rentals deposited had to be held until final disposition of the appeal. 7
On 7 October 1957, the appellate court of First Instance rendered its decision, the dispositive portion of which is
quoted earlier. The said decision was appealed by defendants to the Court of Appeals which, in turn, certified the
appeal to this Court. Plaintiffs-appellees failed to file a brief and this appeal was submitted for decision without it.
Defendants-appellants submitted numerous assignments of error which can be condensed into two questions,
namely: .
(a) Whether the municipal court from which the case originated had jurisdiction to adjudicate the
same;
(b) Whether the defendants are, under the law, legally bound to pay rentals to the plaintiffs during
the period of one (1) year provided by law for the redemption of the extrajudicially foreclosed
house.
We will consider these questions seriatim.
(a) Defendants-appellants mortgagors question the jurisdiction of the municipal court from which the case
originated, and consequently, the appellate jurisdiction of the Court of First Instance a quo, on the theory that the
chattel mortgage is void ab initio; whence it would follow that the extrajudicial foreclosure, and necessarily the
consequent auction sale, are also void. Thus, the ownership of the house still remained with defendants-appellants
who are entitled to possession and not plaintiffs-appellees. Therefore, it is argued by defendants-appellants, the issue
of ownership will have to be adjudicated first in order to determine possession. lt is contended further that ownership
being in issue, it is the Court of First Instance which has jurisdiction and not the municipal court.
Defendants-appellants predicate their theory of nullity of the chattel mortgage on two grounds, which are: (a) that,
their signatures on the chattel mortgage were obtained through fraud, deceit, or trickery; and (b) that the subject
matter of the mortgage is a house of strong materials, and, being an immovable, it can only be the subject of a real
estate mortgage and not a chattel mortgage.
On the charge of fraud, deceit or trickery, the Court of First Instance found defendants-appellants' contentions as not
supported by evidence and accordingly dismissed the charge, 8 confirming the earlier finding of the municipal court
that "the defense of ownership as well as the allegations of fraud and deceit ... are mere allegations." 9
It has been held in Supia and Batiaco vs. Quintero and Ayala 10 that "the answer is a mere statement of the facts
which the party filing it expects to prove, but it is not evidence; 11 and further, that when the question to be
determined is one of title, the Court is given the authority to proceed with the hearing of the cause until this fact is
clearly established. In the case of Sy vs. Dalman, 12 wherein the defendant was also a successful bidder in an auction
sale, it was likewise held by this Court that in detainer cases the aim of ownership "is a matter of defense and raises
an issue of fact which should be determined from the evidence at the trial." What determines jurisdiction are the
allegations or averments in the complaint and the relief asked for. 13
Moreover, even granting that the charge is true, fraud or deceit does not render a contract void ab initio, and can
only be a ground for rendering the contract voidable or annullable pursuant to Article 1390 of the New Civil Code,
by a proper action in court. 14 There is nothing on record to show that the mortgage has been annulled. Neither is it

disclosed that steps were taken to nullify the same. Hence, defendants-appellants' claim of ownership on the basis of
a voidable contract which has not been voided fails.
It is claimed in the alternative by defendants-appellants that even if there was no fraud, deceit or trickery, the chattel
mortgage was still null and void ab initio because only personal properties can be subject of a chattel mortgage. The
rule about the status of buildings as immovable property is stated in Lopez vs. Orosa, Jr. and Plaza Theatre
Inc., 15 cited in Associated Insurance Surety Co., Inc. vs. Iya, et al. 16 to the effect that
... it is obvious that the inclusion of the building, separate and distinct from the land, in the
enumeration of what may constitute real properties (art. 415, New Civil Code) could only mean
one thing that a building is by itself an immovable property irrespective of whether or not said
structure and the land on which it is adhered to belong to the same owner.
Certain deviations, however, have been allowed for various reasons. In the case of Manarang and Manarang vs.
Ofilada, 17 this Court stated that "it is undeniable that the parties to a contract may by agreement treat as personal
property that which by nature would be real property", citing Standard Oil Company of New York vs. Jaramillo. 18 In
the latter case, the mortgagor conveyed and transferred to the mortgagee by way of mortgage "the following
described personal property."19 The "personal property" consisted of leasehold rights and a building. Again, in the
case of Luna vs. Encarnacion, 20 the subject of the contract designated as Chattel Mortgage was a house of mixed
materials, and this Court hold therein that it was a valid Chattel mortgage because it was so expressly designated and
specifically that the property given as security "is a house of mixed materials, which by its very nature is considered
personal property." In the later case of Navarro vs. Pineda, 21 this Court stated that
The view that parties to a deed of chattel mortgage may agree to consider a house as personal property for the
purposes of said contract, "is good only insofar as the contracting parties are concerned. It is based, partly,
upon the principle of estoppel" (Evangelista vs. Alto Surety, No. L-11139, 23 April 1958). In a case, a
mortgaged house built on a rented land was held to be a personal property, not only because the deed of
mortgage considered it as such, but also because it did not form part of the land (Evangelists vs. Abad, [CA];
36 O.G. 2913), for it is now settled that an object placed on land by one who had only a temporary right to
the same, such as the lessee or usufructuary, does not become immobilized by attachment (Valdez vs. Central
Altagracia, 222 U.S. 58, cited in Davao Sawmill Co., Inc. vs. Castillo, et al., 61 Phil. 709). Hence, if a house
belonging to a person stands on a rented land belonging to another person, it may be mortgaged as a personal
property as so stipulated in the document of mortgage. (Evangelista vs. Abad, Supra.) It should be noted,
however that the principle is predicated on statements by the owner declaring his house to be a chattel, a
conduct that may conceivably estop him from subsequently claiming otherwise. (Ladera vs. C.N. Hodges,
[CA] 48 O.G. 5374): 22

In the contract now before Us, the house on rented land is not only expressly designated as Chattel Mortgage; it
specifically provides that "the mortgagor ... voluntarily CEDES, SELLS and TRANSFERS by way of Chattel
Mortgage 23 the property together with its leasehold rights over the lot on which it is constructed and participation
..." 24Although there is no specific statement referring to the subject house as personal property, yet by ceding,
selling or transferring a property by way of chattel mortgage defendants-appellants could only have meant to convey
the house as chattel, or at least, intended to treat the same as such, so that they should not now be allowed to make
an inconsistent stand by claiming otherwise. Moreover, the subject house stood on a rented lot to which defendatsappellants merely had a temporary right as lessee, and although this can not in itself alone determine the status of the
property, it does so when combined with other factors to sustain the interpretation that the parties, particularly the
mortgagors, intended to treat the house as personalty. Finally unlike in the Iya cases, Lopez vs. Orosa, Jr. and Plaza
Theatre, Inc. 25 and Leung Yee vs. F. L. Strong Machinery and Williamson, 26 wherein third persons assailed the
validity of the chattel mortgage, 27 it is the defendants-appellants themselves, as debtors-mortgagors, who are
attacking the validity of the chattel mortgage in this case. The doctrine of estoppel therefore applies to the herein
defendants-appellants, having treated the subject house as personalty.
(b) Turning to the question of possession and rentals of the premises in question. The Court of First Instance noted
in its decision that nearly a year after the foreclosure sale the mortgaged house had been demolished on 14 and 15
January 1957 by virtue of a decision obtained by the lessor of the land on which the house stood. For this reason, the
said court limited itself to sentencing the erstwhile mortgagors to pay plaintiffs a monthly rent of P200.00 from 27

March 1956 (when the chattel mortgage was foreclosed and the house sold) until 14 January 1957 (when it was torn
down by the Sheriff), plus P300.00 attorney's fees.
Appellants mortgagors question this award, claiming that they were entitled to remain in possession without any
obligation to pay rent during the one year redemption period after the foreclosure sale, i.e., until 27 March 1957. On
this issue, We must rule for the appellants.
Chattel mortgages are covered and regulated by the Chattel Mortgage Law, Act No. 1508. 28 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. 29 In the instant case, the parties specifically stipulated that
"the chattel mortgage will be enforceable in accordance with the provisions of Special Act No. 3135 ...
." 30 (Emphasis supplied).
Section 6 of the Act referred to 31 provides that the debtor-mortgagor (defendants-appellants herein) may, at any
time within one year from and after the date of the auction sale, redeem the property sold at the extra judicial
foreclosure sale. Section 7 of the same Act 32 allows the purchaser of the property to obtain from the court the
possession during the period of redemption: but the same provision expressly requires the filing of a petition with
the proper Court of First Instance and the furnishing of a bond. It is only upon filing of the proper motion and the
approval of the corresponding bond that the order for a writ of possession issues as a matter of course. No discretion
is left to the court. 33 In the absence of such a compliance, as in the instant case, the purchaser can not claim
possession during the period of redemption as a matter of right. In such a case, the governing provision is Section
34, Rule 39, of the Revised Rules of Court 34 which also applies to properties purchased in extrajudicial foreclosure
proceedings. 35 Construing the said section, this Court stated in the aforestated case of Reyes vs. Hamada.
In other words, before the expiration of the 1-year period within which the judgment-debtor or mortgagor
may redeem the property, the purchaser thereof is not entitled, as a matter of right, to possession of the same.
Thus, while it is true that the Rules of Court allow the purchaser to receive the rentals if the purchased
property is occupied by tenants, he is, nevertheless, accountable to the judgment-debtor or mortgagor as the
case may be, for the amount so received and the same will be duly credited against the redemption price
when the said debtor or mortgagor effects the redemption.Differently stated, the rentals receivable from
tenants, although they may be collected by the purchaser during the redemption period, do not belong to the
latter but still pertain to the debtor of mortgagor. The rationale for the Rule, it seems, is to secure for the
benefit of the debtor or mortgagor, the payment of the redemption amount and the consequent return to him
of his properties sold at public auction. (Emphasis supplied)

The Hamada case reiterates the previous ruling in Chan vs. Espe. 36
Since the defendants-appellants were occupying the house at the time of the auction sale, they are entitled to remain
in possession during the period of redemption or within one year from and after 27 March 1956, the date of the
auction sale, and to collect the rents or profits during the said period.
It will be noted further that in the case at bar the period of redemption had not yet expired when action was instituted
in the court of origin, and that plaintiffs-appellees did not choose to take possession under Section 7, Act No. 3135,
as amended, which is the law selected by the parties to govern the extrajudicial foreclosure of the chattel mortgage.
Neither was there an allegation to that effect. Since plaintiffs-appellees' right to possess was not yet born at the filing
of the complaint, there could be no violation or breach thereof. Wherefore, the original complaint stated no cause of
action and was prematurely filed. For this reason, the same should be ordered dismissed, even if there was no
assignment of error to that effect. The Supreme Court is clothed with ample authority to review palpable errors not
assigned as such if it finds that their consideration is necessary in arriving at a just decision of the cases. 37
It follows that the court below erred in requiring the mortgagors to pay rents for the year following the foreclosure
sale, as well as attorney's fees. FOR THE FOREGOING REASONS, the decision appealed from is reversed and
another one entered, dismissing the complaint. With costs against plaintiffs-appellees.

(2) 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]
DE CASTRO, J.:
Petition for review on certiorari of the decision of the Court of Appeals (now Intermediate Appellate Court)
promulgated on August 27, 1981 in CA-G.R. No. SP-12731, setting aside certain Orders later specified herein, of
Judge Ricardo J. Francisco, as Presiding Judge of the Court of First instance of Rizal Branch VI, issued in Civil
Case No. 36040, as wen as the resolution dated September 22, 1981 of the said appellate court, denying petitioner's
motion for reconsideration.
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 private respondent's default, petitioner filed a petition for extrajudicial foreclosure of the properties mortgage
to it. However, the Deputy Sheriff assigned to implement the foreclosure failed to gain entry into private
respondent's premises and was not able to effect the seizure of the aforedescribed machinery. Petitioner thereafter
filed a complaint for judicial foreclosure with the Court of First Instance of Rizal, Branch VI, docketed as Civil Case
No. 36040, the case before the lower court.
Acting on petitioner's application for replevin, the lower court issued a writ of seizure, the enforcement of which
was however subsequently restrained upon private respondent's filing of a motion for reconsideration. After several
incidents, the lower court finally issued on February 11, 1981, an order lifting the restraining order for the
enforcement of the writ of seizure and an order to break open the premises of private respondent to enforce said writ.
The lower court reaffirmed its stand upon private respondent's filing of a further motion for reconsideration.
On July 13, 1981, the sheriff enforcing the seizure order, repaired to the premises of private respondent and removed
the main drive motor of the subject machinery.
The Court of Appeals, in certiorari and prohibition proceedings subsequently filed by herein private respondent, set
aside the Orders of the lower court and ordered the return of the drive motor seized by the sheriff pursuant to said
Orders, after ruling that the machinery in suit cannot be the subject of replevin, much less of a chattel mortgage,
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 respondent's plant would be to drill out or destroy the concrete
floor, the reason why all that the sheriff could do to enfore the writ was to take the main drive motor of said
machinery. The appellate court rejected petitioner's argument that private respondent is estopped from claiming that
the machine is real property by constituting a chattel mortgage thereon.
A motion for reconsideration of this decision of the Court of Appeals having been denied, petitioner has brought the
case to this Court for review by writ of certiorari. It is contended by private respondent, however, that the instant
petition was rendered moot and academic by petitioner's act of returning the subject motor drive of respondent's
machinery after the Court of Appeals' decision was promulgated.
The contention of private respondent is without merit. When petitioner returned the subject motor drive, it made
itself unequivocably clear that said action was without prejudice to a motion for reconsideration of the Court of
Appeals decision, as shown by the receipt duly signed by respondent's representative. 1 Considering that petitioner
has reserved its right to question the propriety of the Court of Appeals' decision, the contention of private respondent
that this petition has been mooted by such return may not be sustained.
The next and the more crucial question to be resolved in this Petition is whether the machinery in suit is real or
personal property from the point of view of the parties, with petitioner arguing that it is a personality, while the

respondent claiming the contrary, and was sustained by the appellate court, which accordingly held that the chattel
mortgage constituted thereon is null and void, as contended by said respondent.
A similar, if not Identical issue was raised in Tumalad v. Vicencio, 41 SCRA 143 where this Court, speaking through
Justice J.B.L. Reyes, ruled:
Although there is no specific statement referring to the subject house as personal property, yet by ceding, selling or
transferring a property by way of chattel mortgage defendants-appellants could only have meant to convey the house as
chattel, or at least, intended to treat the same as such, so that they should not now be allowed to make an inconsistent stand
by claiming otherwise. Moreover, the subject house stood on a rented lot to which defendants-appellants merely had a
temporary right as lessee, and although this can not in itself alone determine the status of the property, it does so when
combined with other factors to sustain the interpretation that the parties, particularly the mortgagors, intended to treat the
house as personality. Finally, unlike in the Iya cases, Lopez vs. Orosa, Jr. & Plaza Theatre, Inc. & Leung Yee vs. F.L.
Strong Machinery & Williamson, wherein third persons assailed the validity of the chattel mortgage, it is the defendantsappellants themselves, as debtors-mortgagors, who are attacking the validity of the chattel mortgage in this case. The
doctrine of estoppel therefore applies to the herein defendants-appellants, having treated the subject house as personality.

Examining the records of the instant case, We find no logical justification to exclude the rule out, as the appellate
court did, the present case from the application of the abovequoted pronouncement. If a house of strong materials,
like what was involved in the above 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 denying the existence of the chattel mortgage.
In rejecting petitioner's assertion on the applicability of the Tumalad doctrine, the Court of Appeals 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 of the subject machinery as chattel by the private respondent is
indicative of intention and impresses upon the property the character determined by the parties. As stated inStandard
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 real property, as long as no interest of third parties would be
prejudiced thereby.
Private respondent contends that estoppel cannot apply against it because it had never represented nor agreed that
the machinery in suit be considered as personal property but was merely required and dictated on by herein
petitioner to sign a printed form of chattel mortgage which was in a blank form at the time of signing. This
contention lacks persuasiveness. As aptly pointed out by petitioner and not denied by the respondent, the status of
the subject machinery as movable or immovable was never placed in issue before the lower court and the Court of
Appeals except in a supplemental memorandum in support of the petition filed in the appellate court. Moreover,
even granting that the charge is true, such fact alone does not render a contract void ab initio, but can only be a
ground for rendering said contract voidable, or annullable pursuant to Article 1390 of the new Civil Code, by a
proper action in court. There is nothing on record to show that the mortgage has been annulled. Neither is it
disclosed that steps were taken to nullify the same. On the other hand, as pointed out by petitioner and again not
refuted by respondent, the latter has indubitably benefited from said contract. Equity dictates that one should not
benefit at the expense of another. Private respondent could not now therefore, be allowed to impugn the efficacy of
the chattel mortgage after it has benefited therefrom,
From what has been said above, the error of the appellate court in ruling that the questioned machinery is real, not personal
property, becomes very apparent. Moreover, the case of Machinery and Engineering Supplies, Inc. v. CA, 96 Phil. 70, heavily
relied upon by said court is not applicable to the case at bar, the nature of the machinery and equipment involved therein as real
properties never having been disputed nor in issue, and they were not the subject of a Chattel Mortgage. Undoubtedly, the
Tumalad case bears more nearly perfect parity with the instant case to be the more controlling jurisprudential authority.
WHEREFORE, the questioned decision and resolution of the Court of Appeals are hereby reversed and set aside, and the Orders
of the lower court are hereby reinstated, with costs against the private respondent. SO ORDERED.

(3) ALEJANDRA TORRES, ET AL., plaintiff-appellees, vs. FRANCISCO LIMJAP, Special Administrator of
the estate of the deceased Jose B. Henson, defendant-appellant. [G.R. No. 34385 September 21, 1931]
x---------------------------------------------------------x
SABINA VERGARA VDA. DE TORRES, ET AL., plaintiffs-appellees, vs. FRANCISCO LIMJAP, Special
Administration of the estate of the deceased Jose B. Henson, defendant-appellant. [G.R. No. 34386 September
21, 1931]
JOHNSON, J.:
These two actions were commenced in the Court of First Instance of Manila on April 16, 1930, for the purpose of
securing from the defendant the possession of two drug stores located in the City of Manila, covered by two chattel
mortgages executed by the deceased Jose B. Henson in favor of the plaintiffs.
In the first case the plaintiffs alleged that Jose B. Henson, in his lifetime, executed in their favor a chattel mortgage
(Exhibit A) on his drug store at Nos. 101-103 Calle Rosario, known as Farmacia Henson, to secure a loan of P7,000,
although it was made to appear in the instrument that the loan was for P20,000.
In the second case the plaintiffs alleged that they were the heirs of the late Don Florentino Torres; and that Jose B.
Henson, in his lifetime, executed in favor of Don Florentino Torres a chattel mortgage (also Exhibit A) on his three
drug stores known as Henson's Pharmacy, Farmacia Henson and Botica Hensonina, to secure a loan of P50,000,
which was later reduced to P26,000, and for which, Henson's Pharmacy at Nos. 71-73 Escolta, remained as the only
security by agreement of the parties.
In both cases the plaintiffs alleged that the defendant violated the terms of the mortgage and that, in consequence
thereof they became entitled to the possession of the chattels and to foreclose their mortgages thereon. Upon the
petition of the plaintiffs and after the filing of the necessary bonds, the court issued in each case an order directing
the sheriff of the City of Manila to take immediate possession of said drug stores.
The defendant filed practically the same answer to both complaints. He denied generally and specifically the
plaintiffs' allegations, and set up the following special defenses:
(1) That the chattel mortgages (Exhibit A, in G.R. No. 34385 and Exhibit A, in G.R. No. 34286) are null and void
for lack of sufficient particularity in the description of the property mortgaged; and
(2) That the chattels which the plaintiffs sought to recover were not the same property described in the mortgage.
The defendant also filed a counterclaim for damages in the sum of P20,000 in the first case and P100,000 in the
second case.
Upon the issue thus raised by the pleadings, the two causes were tried together by agreement of the parties. After
hearing the evidence adduced during the trial and on July 17, 1930, the Honorable Mariano Albert, judge, in a very
carefully prepared opinion, arrived at the conclusion (a) that the defendant defaulted in the payment of interest on
the loans secured by the mortgages, in violation of the terms thereof; (b) that by reason of said failure said
mortgages became due, and (c) that the plaintiffs, as mortgagees, were entitled to the possession of the drug stores
Farmacia Henson at Nos. 101-103 Calle Rosario and Henson's Pharmacy at Nos. 71-73 Escolta. Accordingly, a
judgment was rendered in favor of the plaintiffs and against the defendant, confirming the attachment of said drug
stores by the sheriff of the City of Manila and the delivery thereof to the plaintiffs. The dispositive part of the
decision reads as follows:
En virtud de todo lo expuesto, el Juzgado dicta sentencia confirmado en todas sus partes los ordenes de
fechas 16 y 17 de abril de presente ano, dictadas en las causas Nos. 37096 y 37097, respectivamente, y

declara definitiva la entrega hecha a los demandantes por el Sheriff de Manila de las boticas en cuestion. Se
condena en costas al demandado en ambas causas.
From the judgment the defendant appealed, and now makes the following assignments of error:
I. The lower court erred in failing to make a finding on the question of the sufficiency of the description of
the chattels mortgaged and in failing to hold that the chattel mortgages were null and void for lack of
particularity in the description of the chattels mortgaged.
II. The lower court erred in refusing to allow the defendant to introduce evidence tending to show that the
stock of merchandise found in the two drug stores was not in existence or owned by the mortgagor at the
time of the execution of the mortgages in question.
III. The lower court erred in holding that the administrator of the deceased is now estopped from contesting
the validity of the mortgages in question.
IV. The lower court erred in failing to make a finding on the counterclaims of the defendant.
With reference to the first assignment of error, we deem it unnecessary to discuss the question therein raised,
inasmuch as according to our view on the question of estoppel, as we shall hereinafter set forth in our discussion of
the third assignment of error, the defendant is estopped from questioning the validity of these chattel mortgages.
In his second assignment of error the appellant attacks the validity of the stipulation in said mortgages authorizing
the mortgagor to sell the goods covered thereby and to replace them with other goods thereafter acquired. He insists
that a stipulation authorizing the disposal and substitution of the chattels mortgaged does not operate to extend the
mortgage to after-acquired property, and that such stipulation is in contravention of the express provision of the last
paragraph of section 7 Act No. 1508, which reads as follows:
A chattel mortgage shall be deemed to cover only the property described therein and not like or substituted
property thereafter acquired by the mortgagor and placed in the same depository as the property originally
mortgaged, anything in the mortgage to the contrary notwithstanding.
In order to give a correct construction to the above-quoted provision of our Chattel Mortgage Law (Act No. 1508),
the spirit and intent of the law must first be ascertained. When said Act was placed on our statute books by the
United States Philippine Commission on July 2, 1906, the primary aim of that law-making body was undoubtedly to
promote business and trade in these Islands and to give impetus to the economic development of the country.
Bearing this in mind, it could not have been the intention of the Philippine Commission to apply the provision of
section 7 above quoted to stores open to the public for retail business, where the goods are constantly sold and
substituted with new stock, such as drug stores, grocery stores, dry-goods stores, etc. If said provision were intended
to apply to this class of business, it would be practically impossible to constitute a mortgage on such stores without
closing them, contrary to the very spirit about a handicap to trade and business, would restrain the circulation of
capital, and would defeat the purpose for which the law was enacted, to wit, the promotion of business and the
economic development of the country.
In the interpretation and construction of a statute the intent of the law-maker should always be ascertained and given
effect, and courts will not follow the letter of a statute when it leads away from the true intent and purpose of the
Legislature and to conclusions inconsistent with the spirit of the Act. On this subject, Sutherland, the foremost
authority on statutory construction, says:
The Intent of Statute is the Law. If a statute is valid it is to have effect according to the purpose and
intent of the lawmaker. The intent is the vital part, the essence of the law, and the primary rule of
construction is to ascertain and give effect to that intent. The intention of the legislature in enacting a law is
the law itself, and must be enforced when ascertained, although it may not be consistent with the strict

letter of the statute. Courts will not follow the letter of a statute when it leads away from the true intent and
purpose of the legislature and to conclusions inconsistent with the general purpose of the act. Intent is the
spirit which gives life to a legislative enactment. In construing statutes the proper course is to start out and
follow the true intent of the legislature and to adopt that sense which harmonizes best with the content and
promotes in the fullest manner the apparent policy and objects of the legislature. (Vol. II Sutherland,
Statutory Construction, pp. 693-695.)
A stipulation in the mortgage, extending its scope and effect to after-acquired property, is valid and binding
. . . where the after-acquired property is in renewal of, or in substitution for, goods on hand when the
mortgage was executed, or is purchased with the proceeds of the sale of such goods, etc. (11 C.J., p. 436.)
Cobbey, a well-known authority on Chattel Mortgages, recognizes the validity of stipulations relating to afteracquired and substituted chattels. His views are based on the decisions of the supreme courts of several states of the
Union. He says: "A mortgage may, by express stipulations, be drawn to cover goods put in stock in place of others
sold out from time to time. A mortgage may be made to include future acquisitions of goods to be added to the
original stock mortgaged, but the mortgage must expressly provide that such future acquisitions shall be held as
included in the mortgage. ... Where a mortgage covering the stock in trade, furniture, and fixtures in the mortgagor's
store provides that "all goods, stock in trade, furniture, and fixtures hereafter purchased by the mortgagor shall be
included in and covered by the mortgage," the mortgage covers all after-acquired property of the classes mentioned,
and, upon foreclosure, such property may be taken and sold by the mortgagee the same as the property in possession
of the mortgagor at the time the mortgage was executed." (Vol. I, Cobbey on Chattel Mortgages, sec. 361, pp. 474,
475.)
In harmony with the foregoing, we are of the opinion (a) that the provision of the last paragraph of section 7 of Act
No. 1508 is not applicable to drug stores, bazaars and all other stores in the nature of a revolving and floating
business; (b) that the stipulation in the chattel mortgages in question, extending their effect to after-acquired
property, is valid and binding; and (c) that the lower court committed no error in not permitting the defendantappellant to introduce evidence tending to show that the goods seized by the sheriff were in the nature of afteracquired property.
With reference to the third assignment of error, we agree with the lower court that, from the facts of record, the
defendant-appellant is estopped from contenting the validity of the mortgages in question. This feature of the case
has been very ably and fully discussed by the lower court in its decision, and said discussion is made, by reference, a
part of this opinion.
As to the fourth assignment of error regarding the counterclaims of the defendant-appellant, it may be said that in
view of the conclusions reached by the lower court, which are sustained by this court, the lower court committed no
error in not making any express finding as to said counterclaims. As a matter of form, however, the counter-claims
should have been dismissed, but as the trial court decided both cases in favor of the plaintiffs and confirmed and
ratified the orders directing the sheriff to take possession of the chattels on behalf of the plaintiffs, there was, in
effect, a dismissal of the defendant's counterclaims.
For all of the foregoing, we are of the opinion and so hold that the judgment appealed from is in accordance with the
facts and the law, and the same should be and is hereby affirmed, with costs. So ordered.

(4) ACME SHOE, RUBBER & PLASTIC CORPORATION and CHUA PAC, petitioners, vs. HON. COURT
OF APPEALS, PRODUCERS BANK OF THE PHILIPPINES and REGIONAL SHERIFF OF CALOOCAN
CITY, respondents. [G.R. No. 103576. August 22, 1996]

DECISION
VITUG, J.:
Would it be valid and effective to have a clause in a chattel mortgage that purports to likewise extend its
coverage to obligations yet to be contracted or incurred? This question is the core issue in the instant petition for
review on certiorari.
Petitioner Chua Pac, the president and general manager of co-petitioner "Acme Shoe, Rubber & Plastic
Corporation," executed on 27 June 1978, for and in behalf of the company, a chattel mortgage in favor of private
respondent Producers Bank of the Philippines. The mortgage stood by way of security for petitioner's corporate loan
of three million pesos (P3,000,000.00). A provision in the chattel mortgage agreement was to this effect "(c) If the MORTGAGOR, his heirs, executors or administrators shall well and truly perform the full obligation or
obligations above-stated according to the terms thereof, then this mortgage shall be null and void. x x x.
"In case the MORTGAGOR executes subsequent promissory note or notes either as a renewal of the former note, as
an extension thereof, or as a new loan, or is given any other kind of accommodations such as overdrafts, letters of
credit, acceptances and bills of exchange, releases of import shipments on Trust Receipts, etc., this mortgage shall
also stand as security for the payment of the said promissory note or notes and/or accommodations without the
necessity of executing a new contract and this mortgage shall have the same force and effect as if the said
promissory note or notes and/or accommodations were existing on the date thereof. This mortgage shall also stand
as security for said obligations and any and all other obligations of the MORTGAGOR to the MORTGAGEE of
whatever kind and nature, whether such obligations have been contracted before, during or after the constitution of
this mortgage."[1]
In due time, the loan of P3,000,000.00 was paid by petitioner corporation. Subsequently, in 1981, it obtained
from respondent bank additional financial accommodations totalling P2,700,000.00.[2] These borrowings were on
due date also fully paid.
On 10 and 11 January 1984, the bank yet again extended to petitioner corporation a loan of one million pesos
(P1,000,000.00) covered by four promissory notes for P250,000.00 each. Due to financial constraints, the loan was
not settled at maturity.[3] Respondent bank thereupon applied for an extrajudicial foreclosure of the chattel mortgage,
hereinbefore cited, with the Sheriff of Caloocan City, prompting petitioner corporation to forthwith file an action for
injunction, with damages and a prayer for a writ of preliminary injunction, before the Regional Trial Court of
Caloocan City (Civil Case No. C-12081). Ultimately, the court dismissed the complaint and ordered the foreclosure
of the chattel mortgage. It held petitioner corporation bound by the stipulations, aforequoted, of the chattel
mortgage.
Petitioner corporation appealed to the Court of Appeals[4] which, on 14 August 1991, affirmed, "in all
respects," the decision of the court a quo. The motion for reconsideration was denied on 24 January 1992.
The instant petition interposed by petitioner corporation was initially denied on 04 March 1992 by this Court
for having been insufficient in form and substance. Private respondent filed a motion to dismiss the petition while
petitioner corporation filed a compliance and an opposition to private respondent's motion to dismiss. The Court
denied petitioner's first motion for reconsideration but granted a second motion for reconsideration, thereby
reinstating the petition and requiring private respondent to comment thereon. [5]
Except in criminal cases where the penalty of reclusion perpetua or death is imposed[6] which the Court so
reviews as a matter of course, an appeal from judgments of lower courts is not a matter of right but of sound judicial
discretion. The circulars of the Court prescribing technical and other procedural requirements are meant to weed out

unmeritorious petitions that can unnecessarily clog the docket and needlessly consume the time of the Court. These
technical and procedural rules, however, are intended to help secure, not suppress, substantial justice. A deviation
from the rigid enforcement of the rules may thus be allowed to attain the prime objective for, after all, the
dispensation of justice is the core reason for the existence of courts. In this instance, once again, the Court is
constrained to relax the rules in order to give way to and uphold the paramount and overriding interest of justice.
Contracts of security are either personal or real. In contracts of personal security, such as a guaranty or a
suretyship, the faithful performance of the obligation by the principal debtor is secured by the personal commitment
of another (the guarantor or surety). In contracts of real security, such as a pledge, a mortgage or an antichresis, that
fulfillment is secured by an encumbrance of property - in pledge, the placing of movable property in the possession
of the creditor; in chattel mortgage, by the execution of the corresponding deed substantially in the form prescribed
by law; in real estate mortgage, by the execution of a public instrument encumbering the real property covered
thereby; and in antichresis, by a written instrument granting to the creditor the right to receive the fruits of an
immovable property with the obligation to apply such fruits to the payment of interest, if owing, and thereafter to the
principal of his credit - upon the essential condition that if the principal obligation becomes due and the debtor
defaults, then the property encumbered can be alienated for the payment of the obligation, [7] but that should the
obligation be duly paid, then the contract is automatically extinguished proceeding from the accessory character [8] of
the agreement. As the law so puts it, once the obligation is complied with, then the contract of security
becomes, ipso facto, null and void.[9]
While a pledge, real estate mortgage, or antichresis may exceptionally secure after-incurred obligations so long
as these future debts are accurately described,[10] a chattel mortgage, however, can only cover obligations existing at
the time the mortgage is constituted. Although a promise expressed in a chattel mortgage to include debts that are
yet to be contracted can be a binding commitment that can be compelled upon, the security itself, however, does not
come into existence or arise until after a chattel mortgage agreement covering the newly contracted debt is executed
either by concluding a fresh chattel mortgage or by amending the old contract conformably with the form prescribed
by the Chattel Mortgage Law.[11] Refusal on the part of the borrower to execute the agreement so as to cover the
after-incurred obligation can constitute an act of default on the part of the borrower of the financing agreement
whereon the promise is written but, of course, the remedy of foreclosure can only cover the debts extant at the time
of constitution and during the life of the chattel mortgage sought to be foreclosed.
A chattel mortgage, as hereinbefore so intimated, must comply substantially with the form prescribed by the
Chattel Mortgage Law itself. One of the requisites, under Section 5 thereof, is an affidavit of good faith. While it is
not doubted that if such an affidavit is not appended to the agreement, the chattel mortgage would still be valid
between the parties (not against third persons acting in good faith[12]), the fact, however, that the statute has provided
that the parties to the contract must execute an oath that "x x x (the) mortgage is made for the purpose of securing the obligation specified in the conditions thereof, and for
no other purpose, and that the same is a just and valid obligation, and one not entered into for the purpose of
fraud."[13]
makes it obvious that the debt referred to in the law is a current, not an obligation that is yet merely
contemplated. In the chattel mortgage here involved, the only obligation specified in the chattel mortgage contract
was the P3,000,000.00 loan which petitioner corporation later fully paid. By virtue of Section 3 of the Chattel
Mortgage Law, the payment of the obligation automatically rendered the chattel mortgage void or
terminated. In Belgian Catholic Missionaries, Inc., vs. Magallanes Press, Inc., et al., [14] the Court said "x x x A mortgage that contains a stipulation in regard to future advances in the credit will take effect only from the
date the same are made and not from the date of the mortgage." [15]
The significance of the ruling to the instant problem would be that since the 1978 chattel mortgage had ceased to
exist coincidentally with the full payment of the P3,000,000.00 loan, [16] there no longer was any chattel mortgage
that could cover the new loans that were concluded thereafter.
We find no merit in petitioner corporation's other prayer that the case should be remanded to the trial court for
a specific finding on the amount of damages it has sustained "as a result of the unlawful action taken by respondent

bank against it."[17] This prayer is not reflected in its complaint which has merely asked for the amount of
P3,000,000.00 by way of moral damages.[18] In LBC Express, Inc. vs. Court of Appeals,[19] we have said:
"Moral damages are granted in recompense for physical suffering, mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury. A corporation, being
an artificial person and having existence only in legal contemplation, has no feelings, no emotions, no senses;
therefore, it cannot experience physical suffering and mental anguish. Mental suffering can be experienced only by
one having a nervous system and it flows from real ills, sorrows, and griefs of life - all of which cannot be suffered
by respondent bank as an artificial person."[20]
While Chua Pac is included in the case, the complaint, however, clearly states that he has merely been so named as a
party in representation of petitioner corporation.
Petitioner corporation's counsel could be commended for his zeal in pursuing his client's cause. It instead
turned out to be, however, a source of disappointment for this Court to read in petitioner's reply to private
respondent's comment on the petition his so-called "One Final Word;" viz:
"In simply quoting in toto the patently erroneous decision of the trial court, respondent Court of Appeals should be
required to justify its decision which completely disregarded the basic laws on obligations and contracts, as well as
the clear provisions of the Chattel Mortgage Law and well-settled jurisprudence of this Honorable Court; that in the
event that its explanation is wholly unacceptable, this Honorable Court should impose appropriate sanctions on the
erring justices. This is one positive step in ridding our courts of law of incompetent and dishonest magistrates
especially members of a superior court of appellate jurisdiction."[21] (Italics supplied.)
The statement is not called for. The Court invites counsel's attention to the admonition in Guerrero vs.
Villamor;[22] thus:
"(L)awyers x x x should bear in mind their basic duty `to observe and maintain the respect due to the courts of
justice and judicial officers and x x x (to) insist on similar conduct by others.' This respectful attitude towards the
court is to be observed, `not for the sake of the temporary incumbent of the judicial office, but for the maintenance
of its supreme importance.' And it is `through a scrupulous preference for respectful language that a lawyer best
demonstrates his observance of the respect due to the courts and judicial officers x x x.'" [23]
The virtues of humility and of respect and concern for others must still live on even in an age of materialism.
WHEREFORE, the questioned decisions of the appellate court and the lower court are set aside without
prejudice to the appropriate legal recourse by private respondent as may still be warranted as an unsecured
creditor. No costs.
Atty. Francisco R. Sotto, counsel for petitioners, is admonished to be circumspect in dealing with the courts.
SO ORDERED.

(5) PACIFIC COMMERCIAL COMPANY, plaintiff and respondent, vs. GRACIANO BRANCH, defendant and
appellant.
[GR No. L-47771 June 17, 1941]
PER CURIAM:
The defendant appealed the judgment of the Court of First Instance of Iloilo that I condemn him to pay the sum of
P2,869.93 Demante, its interest to 12 percent a year from 18 January 1938 until full payment, additional THE
AMOUNT of P297.99 in respect of honoracios attorney and collection fees, and costs. The appeal was filed to the
Court of Appeal, but the court's raised to the Supreme Court in view of any issue of fact is not raised and are raised
right.
On 18 September 1937 the defendant bought installment of the complainant a automivil La Salle, Sedan , and
awarded in favor of this a promissory note in the amount of P3,120 representing the unpaid balance of the price.To
guarantee the amount of the promissory note the defendant mortgaged the same car, having itself registered
mortgage deed in the office of the Registrar of Titles Negros Occidental. Having failed to pay the defendant the first
three periods, except the amount of P200, and having beaten the other installments in accordance with the terms of
the promissory note, the applicant, through his lawyer, January 18, 1938 wrote a letter to Negros Occidental
Provincial Sheriff requiring you to take possession of the mortgaged car and sell it at public auction on February 7
of that year, and the impact sent it a copy of the mortgage deed. The Sheriff notify the defendant the instructions
received from the applicant. The defendant informed the Sheriff that the car was in the repair shop Auterio
Lizares. The Sheriff is directed to the shop and having found the car in, I designate Lizares as manager or custodian
thereof and this will issued a receipt. On 29 January 1938 the applicant learned that the car had been in an accident
for which reason he had been sent to the shop for repair, so I wrote another letter to Sheriff instructing him to desist
from foreclosing. The Sheriff replied to the applicant that it had already seized the car and that was in power Lizares
whom I designate as depositary. By letter dated February 4, 1938 by telegram and 5 of the same month, addressed to
the Sheriff, the applicant reiterated its request that the official desist to foreclose and sell the car. On 19 March the
applicant wrote another letter to Sheriff requiring you to give him back the mortgage deed; and 7 marzodel same
year an agent of the applicant was personally seen with the Sheriff and required this quen not continue with laventa
of cars, what the Sheriff suspended the sale at public auction, with notice of suspension both the defendant as the
depositary.
The plaintiff brought the action to collect the respondent not satisfied with the amount of the promissory balance;the
judgment appealed condemn the defendant to pay the amounts claimed, stated interest on capital, and court
costs. The defendant does not dispute the facts found. He argues, however, that the erro Court by not finding that the
applicant had already chosen to foreclose automotive and to cancel the purchase agreement and that, consequently,
the erro Court by not finding that the applicant had already lost their right saido to claim the unpaid amount of the
promissory note. The defendant bases his theory on what has the articulo1454-A of the Civil Code, which was
introduced by Law No. 4122, which reads as follows:
Art. 1454-A. In a contract of sale of chattel payable in installments, non-payment of two or more terms
confers the right vendor to the resolution of the sale or the execution of the mortgage, if already this
constituted on the thing without reimbursement to purchaser of the installments already paid, so if you been
agreed.
The seller, however, has opted for the execution of the mortgage not be able to sue the buyer for the
charges of any balance would have been against this, being void agreed.
The same rule shall govern in cases of chattel leases with option to buy lessor has opted for qauitar the
tenant's enjoyment of the chattel.
This article is inferred that the seller after the buyer fails to pay two or more installments and in the event that it has
granted mortgage of the thing sold, may choose: (1) to resolve the sale recorbrando the thing sold, in which case the

purchaser shall not be entitled to reembolos of the installments paid, if she were so forth; (2) foreclose on those
authorized by the Act Chattel Mortgage, in which case forms the seller shall not be entitled to sue the buyer for the
payment of any balance would have been against this, being void otherwise agreed; and (3) or simply collect the
remaining debt. The remedies conferred by article are alternative and not cumulative, so if you opt for one of them is
understood to have been waived others.
The demanadado intended that the Sheriff's car having seized the instructions of the principal-enconmendando
custody to a depositary, the applicant opto and pr foreclose and consequently lost his right to charge the debtor
balance of the promissory note. We believe, and so hold, that the theory is untenable. When the law refers to the
execution of the mortgage, as a remedy that produces the renunciation of others, means the execution of the
mortgage with all its incidents and steps up its termination, including, of course, the sale at public auction of the
thing pledged. In this case the last processed, which transferred to a third title to the mortgaged thing is not verified
or compliment to a raise because the Sheriff deposit automotive and sold in subasata not published as required by
Article 14 Law No. 1508. For this reason the error that the respondent attributed to the judgment does not exist.
The defendant contends that the instructions iqualmente the applicant gave the Sheriff equivalent and involved the
resolution of the sale. It does not seem well founded pretension. They remembered their instructions consisted in the
Sheriff's car was seized and sold at public auction. This processed was necessary to do it the official to foreclose and
in no way can be interpreted as a step that the applicant had given to show that it had resolved the sale or had opted
for the resolution of it. In addition, for the resolution of a Contrado not enough unilateral will of the applicant, it was
necessary for the correspondeinte action shall be brought and end to the effect sentencing.
The decision under appeal, the costs of this instance the defendant-appellant is confirmed. So it is ordered.

(6) SOUTHERN MOTORS, INC., plaintiff-appellee, vs. ANGELO MOSCOSO, defendant-appellant. [G.R. No.
L-14475 May 30, 1961]
PAREDES, J.:
The case was submitted on agreed statement of facts.
On June 6, 1957, plaintiff-appellee Southern Motors, Inc. sold to defendant-appellant Angel Moscoso one Chevrolet
truck, on installment basis, for P6,445.00. Upon making a down payment, the defendant executed a promissory note
for the sum of P4,915.00, representing the unpaid balance of the purchase price (Annex A, complaint), to secure the
payment of which, a chattel mortgage was constituted on the truck in favor of the plaintiff (Annex B). Of said
account of P4,915.00, the defendant had paid a total of P550.00, of which P110.00 was applied to the interest up to
August 15, 1957, and P400.00 to the principal, thus leaving an unpaid balance of P4,475.00. The defendant failed to
pay 3 installments on the balance of the purchase price.
On November 4, 1957, the plaintiff filed a complaint against the defendant, to recover the unpaid balance of the
promissory note. Upon plaintiff's petition, embodied in the complaint, a writ of attachment was issued by the lower
court on the properties Of the defendant. Pursuant thereto, the said Chevrolet truck, and a house and lot belonging to
defendant, were attached by the Sheriff of San Jose, Antique, where defendant was residing on November 25, 1957,
and said truck was brought to the plaintiff's compound in Iloilo City, for safe keeping.
After attachment and before the trial of the case on the merits, acting upon the plaintiff's motion dated December 23,
1957, for the immediate sale of the mortgaged truck, the Provincial Sheriff of Iloilo on January 2, 1958, sold the
truck at public auction in which plaintiff itself was the only bidder for P1,000.00. The case had not been set for
hearing, then.
The trial court on March 27, 1958, condemned the defendant to pay the plaintiff the amount of P4,475.00 with
interest at the rate of 12% per annum from August 16, 1957, until fully paid, plus 10% thereof as attorneys fees and
costs against which defendant interposed the present appeal, contending that the trial court erred
(1) In not finding that the attachment caused to be levied on the truck and its immediate sale at public
auction, was tantamount to the foreclosure of the chattel mortgage on said truck; and
(2) In rendering judgment in favor of the plaintiff-appellee.
Both parties agreed that the case is governed by Article 1484 of the new Civil Case, which provides:
ART. 1484. In a contract of sale of personal property the price of which is payable in installments, the
vendor may exercise any of the following remedies:
(1) Exact fulfillment of the obligation, should the vendee fail to pay; .
(2) Cancel the sale, should the vendee's failure to pay cover two or more installments;
(3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's failure
to pay cover two or more installments. In this case, he shall have no further action against the purchaser to
recover any unpaid balance of the price. Any agreement to the contrary shall be void.
While the appellee claims that in filing the complaint, demanding payment of the unpaid balance of the purchase
price, it has availed of the first remedy provided in said article i.e. to exact fulfillment of the obligation (specific
performance); the appellant, on the other hand, contends that appellee had availed itself of the third remedy viz, the
foreclosure of the chattel mortgage on the truck.

The appellant argues that considering history of the law, the circumstances leading to its enactment, the evil that the
law was intended to correct and the remedy afforded (Art. 1454-A of the old Civil Code; Act No. 4122; Bachrach
Motor Co. vs. Reyes, 62 Phil. 461, 466-469); that the appellee did not content itself by waiting for the judgment on
the complaint and then executed the judgment which might be rendered in its favor, against the properties of the
appellant; that the appellee obtained a preliminary attachment on the subject of the chattel mortgage itself and
caused said truck to be sold at public auction petition, in which he was bidder for P1,000.00; the result of which, was
similar to what would have happened, had it foreclosed the mortgage pursuant to the provisions of Sec. 14 of Act
No. 1508 (Chattel Mortgage Law) the said appellee had availed itself of the third remedy aforequoted. In other
words, appellant submits that the matter should be looked at, not by the allegations in the complaint, but by the very
effect and result of the procedural steps taken and that appellee tried to camouflage its acts by filing a complaint
purportedly to exact the fulfillment of an obligation petition, in an attempt to circumvent the provisions of Article
1484 of the new Civil Code. Appellant concludes that under his theory, a deficiency judgment would be without
legal basis.
We do not share the views of the appellant on this matter. Manifestly, the appellee had chosen the first remedy. The
complaint is an ordinary civil action for recovery of the remaining unpaid balance due on the promissory note. The
plaintiff had not adopted the procedure or methods outlined by Sec. 14 of the Chattel Mortgage Law but those
prescribed for ordinary civil actions, under the Rules of Court. Had appellee elected the foreclosure, it would not
have instituted this case in court; it would not have caused the chattel to be attached under Rule 59, and had it sold at
public auction, in the manner prescribed by Rule 39. That the herein appellee did not intend to foreclose the
mortgage truck, is further evinced by the fact that it had also attached the house and lot of the appellant at San Jose,
Antique. In the case of Southern Motors, Inc. vs. Magbanua, G.R. No. L-8578, Oct. 29, 1956, we held:
By praying that the defendant be ordered to pay it the sum of P4,690.00 together with the stipulated interest
of 12% per annum from 17 March 1954 until fully paid, plus 10% of the total amount due as attorney's fees
and cost of collection, the plaintiff elected to exact the fulfillment of the obligation, and not to foreclose the
mortgage on the truck. Otherwise, it would not have gone to court to collect the amount as prayed for in the
complaint. Had it elected to foreclose the mortgage on the truck, all the plaintiff had to do was to cause the
truck to be sold at public auction pursuant to section 14 of the Chattel Mortgage Law. The fact that aside
from the mortgaged truck, another Chevrolet truck and two parcels of land belonging to the defendant were
attached, shows that the plaintiff did not intend to foreclose the mortgage.
As the plaintiff has chosen to exact the fulfillment of the defendant's obligation, the former may enforce
execution of the judgment rendered in its favor on the personal and real property of the latter not exempt
from execution sufficient to satisfy the judgment. That part of the judgment against the properties of the
defendant except the mortgaged truck and discharging the writ of attachment on his other properties is
erroneous.
We perceive nothing unlawful or irregular in appellee's act of attaching the mortgaged truck itself. Since herein
appellee has chosen to exact the fulfillment of the appellant's obligation, it may enforce execution of the judgment
that may be favorably rendered hereon, on all personal and real properties of the latter not exempt from execution
sufficient to satisfy such judgment. It should be noted that a house and lot at San Jose, Antique were also attached.
No one can successfully contest that the attachment was merely an incident to an ordinary civil action. (Sections 1 &
11, Rule 59; Sec. 16, Rule 39). The mortgage creditor may recover judgment on the mortgage debt and cause an
execution on the mortgaged property and may cause an attachment to be issued and levied on such property, upon
beginning his civil action (Tizon vs. Valdez, 48 Phil. 910-911).
IN VIEW HEREOF, the judgment appealed from hereby is affirmed, with costs against the defendant-appellant.

(7) IFC SERVICE LEASING and ACCEPTANCE CORPORATION, petitioner and appellee, vs. VENANCIO
NERA, movant and appellant. [G.R. No. L-21720 January 30, 1967]
REGALA, J.:
This is an appeal from an order of the Court of First instance of Rizal, denying appellant's motion to set aside the
writ of possession issued by the Court and the auction sale held before that by the sheriff.
The writ of possession was issued by the lower court on February 26, 1963, on the ex parte application of the
appellee. The petition recited that, as mortgagee of the property of the spouses Venancio Nera and Rosa F. Nera,
situated at No. 9 Aleman Street, Quezon City, appellee filed with the sheriff's office in Quezon City a verified
petition for the extrajudicial foreclosure of the mortgage; that on October 27, 1961, after notice and publication, the
property (consisting of a house and lot) was sold to appellee as the highest bidder for P28,451.77; that the period of
redemption expired on October 27, 1962 without the property being redeemed, for which reason the property was
consolidated in the name of appellee of whom a new title, Transfer Certificate of Title No. 65575, was issued.
On March 6, 1963, appellant asked for a reconsideration of the order granting the writ of possession on the ground
that his failure to redeem the property was due to appellee's misrepresentation. According to appellant, he was
notified by the appellee on October 31, 1962 that the period of redemption had expired when the truth was, as he
found later, that the sale was registered only on November 3, 1961 from which date the period of redemption must
be reckoned. The court denied the motion for failure of appellant to serve a copy on the appellee.
On March 26, 1963, appellant filed another motion, an ex parte application to set aside the writ of possession and
the auction sale, on the ground that the court had no jurisdiction to issue the writ and that the price at which the
mortgaged property was sold was grossly inadequate. As stated in the beginning, the motion was denied prompting
appellant to bring this appeal.
The only issue raised in this appeal is whether in cases of extrajudicial foreclosure of real estate mortgages, a regular
action must be instituted in order to secure possession of the property sold. Appellant contends that the jurisdiction
of the lower court to issue a writ of possession is limited only to the duration of the period of redemption and that
after the expiration of that period, the mortgagee's remedy is an ordinary action for recovery of possession. In
support of this proposition, appellant cites the following provisions of Act No. 3135, as amended by Act No. 4118:
SEC. 7. In any sale made under the provisions of this Act, the purchaser may petition the Court of First
Instance of the province or place where the property or any part thereof is situated, to give him possession
thereof during the redemption period, furnishing a bond in an amount equivalent to the use of the property
for a period of twelve months, to indemnify the debtor in case it be shown that the sale was made without
violating the mortgage or without complying with the requirements of this Act. Such petition shall be made
under oath and filed in form of an ex parte motion in the registration or cadastral proceedings if the
property is registered, or in special proceedings in the case of property registered under the Mortgage Law
or under section one hundred and ninety-four of the Administrative Code, or of any other real property
encumbered with a mortgage duly registered in the office of any register of deeds in accordance with any
existing law, and in each case the clerk of court shall, upon the filing of such petition, collect the fees
specified in paragraph eleven of section one hundred and fourteen of Act Numbered Four hundred and
ninety six, as amended by Act Numbered Twenty-eight hundred and sixty-six, and the court shall, upon
approval of the bond, order that a writ of possession issue addressed to the sheriff of the province in which
the property is situated, who shall execute said order immediately. (Emphasis supplied).
Appellant also invokes Luna vs. Encarnacion, 91 Phil. 531 (1952) in which it was held that in case of
refusal of the mortgagor to surrender the possession of the property sold by the Sheriff the remedy of the
purchaser is to bring an ordinary action for recovery of possession, instead of merely asking for a writ of
possession, in order to give the mortgagor the opportunity to be heard not only regarding possession but
also regarding the obligation covered by the mortgage.

The contention is without merit. The applicable provision of Act No. 3135 is Section 6 which provides that, in cases
in which an extrajudicial sale is made, "redemption shall be governed by the provisions of sections four hundred and
sixty-four to four hundred and sixty-six, inclusive, of the Code of Civil Procedure in so far as these are not
inconsistent with the provisions of this Act." Sections 464-466 of the Code of Civil Procedure were superseded by
Sections 25-27 and Section 31 of Rule 39 of the Rules of Court which in turn were replaced by Sections 29-31 and
Section 35 of Rule 39 of the Revised Rules of Court. Section 35 of Rule 39 of the Revised Rules of Court expressly
states that "If no redemption be made within twelve (12) months after the sale, the purchaser, or his assignee, is
entitled to a conveyance and possession of the property .... The possession of the property shall be given to the
purchaser or last redemptioner by the officer unless a third party is actually holding the property adversely to the
judgment debtor."
Indeed, as this Court held in Tan Soo Huat vs. Ongwico, 63 Phil. 746, 749 (1936),
There is no law in this jurisdiction whereby the purchaser at a sheriff's sale of real property is obliged to
bring a separate and independent suit for possession after the one-year period for redemption has expired
and after he has obtained the sheriff's final certificate of sale. There is neither legal ground nor reason of
public policy precluding the court from ordering the sheriff in this case to yield possession of the property
purchased at public auction where it appears that the judgment debtor is the one in possession thereof and
no rights of third persons are involved.
This same ruling was made in Rivera vs. Court of First Instance of Nueva Ecija, 61 Phil. 201 (1935) (judicial
foreclosure of mortgage) and in Republic vs. Nable, G.R. No. L-4979, April 30, 1952 (execution sale).
Moreover, if under Section 7 of Act No. 3135 the court has the power, on the ex parte application of the purchaser,
to issue a writ of possession during the period of redemption, there is no reason why it should not also have the same
power after the expiration of that period, especially where, as in this case, a new title has already been issued in the
name of the purchaser.
The case of Luna vs. Encarnacion, supra, cannot be applied to the present case because that case involves the
extrajudicial foreclosure of a chattel mortgage. The Chattel Mortgage Law (Act No. 1508) contains no provisions
similar to Sections 6 and 7 of Act No. 3135 which, as already pointed out, make the Rules of Court provisions on
redemption in cases of judicial and execution sales applicable.
In view of the foregoing, the order appealed from is hereby affirmed, without pronouncement as to costs.