Case: SALVADOR PIANSAY and CLAUDIA V. VDA. DE UY KIM v.

CONRADO DAVID and MARCOS MANGUBAT Date: October 30, 1964 Ponente: J. Concepcion Place: Sande St., Tondo, Manila Facts: David obtained a loan of P3,000 with 12% interest from Uy Kim; to secure the payment of the same, he executed a chattel mortgage on a house in Tondo. The chattel mortgage was registered but later on, upon Davids failure to pay, it was foreclosed and Uy Kim bought the house at the public auction and thereafter sold the same to Salvador Piansay. Later on, Marcos Mangubat filed a complaint against David before the CFI Manila for the collection of the loan of P2,000. The complaint was later amended to implead Uy Kim and Piansay praying that the auction sale and deed of absolute sale executed by Uy Kim in favor of Piansay be annulled. CFI Manila ordered David to pay and annulled the chattel mortgage. CA affirmed. David was ordered to pay and the house was levied upon. To prevent the sale at the public auction, Piansay and Uy Kim filed a petition for certiorari and mandamus with preliminary injunction before the CA; it was denied. Subsequently, Piansay and Uy Kim instituted an action against David and Mangubat praying that judgment be rendered declaring Piansay as the true owner and restrain the levy and sale to public auction. David demanded from Piansay the payment of the rentals for the use and occupation of the house; the latter claims it is his property. Mangubat, on one hand, moved to dismiss the complaint on the ground of res adjudicata and lack of personality to sue; it was granted. CA affirmed explaining that Uy Kim had no right to foreclose the chattel mortgage because it was in reality a mere contract of an unsecured loan. Piansay assailed Mangubats right to levy execution upon the house alleging that the same belongs to him, he having bought it from Uy Kim who acquired it at the auction sale. Issue: WON the chattel mortgage and sale are valid Held: No. Ratio: Upon the theory that the chattel mortgage and sale in favor of Uy Kim had been annulled in the original decision, as affirmed by the CA, the fact is that said order became final and executory upon the denial of the petition for certiorari and mandamus. Hence, Uy Kim and Piansay are now barred from asserting that the chattel mortgage and sale are valid. At any rate, regardless of the validity of a contract constituting a chattel mortgage on a house, as between the parties to said contract, the same cannot and does not bind third persons, who are not parties to the contract of their privies. As a consequence, the sale of the house in question in the proceedings for the extrajudicial foreclosure of said chattel mortgage, is null and void insofar as defendant Mangubat is concerned, and did not confer upon Uy Kim, as buyer in said sale, any dominical right in and to said house, so that she could not have transmitted to her assignee Piansay any such right as against Mangubat. In short, they do not have a cause of action against Mangubat and David.