#1 FILIPINAS MARBLE CORP vs. IAC GR # L-68101| May 30, 1986 Petition: Petition for Review Petitioner: Filipinas Marble Corporation Respondent: The Honorable Intermediate Appellate Court, The Honorable Candido Villanueva, Presiding Judge of Br. 144, RTC, Makati, Development Bank of The Philippines (DBP), Bancom SystemsControl, Inc. (Bancom), Don Ferry, Casimero Tanedo, Eugenio Palileo, Alvaro Torio, Jose T. Pardo, Rolando Atienza, Simon A. Mendoza, Sheriff Norvell R. Lim, Art. 2125 and Art. 2140 DOCTRINE An unregistered chattel mortgage is a valid one FACTS •
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Filipinas Marble Corp alleged that it applied for a loan in the amount of $5,000,000.00 with respondent Development Bank of the Philippines (DBP) in its desire to develop the full potentials of its mining claims and deposits; that DBP granted the loan subject, however, to sixty onerous conditions, among which are: (a) petitioner shall have to enter into a management contract with respondent Bancom Systems Control, Inc. [Bancom]; (b) DBP shall be represented by no less than six (6) regular directors, three (3) to be nominated by Bancom and three (3) by DBP, in Filipinas Marble’s board, one of whom shall continue to be the chairman of the board; (c) the key officers/executives [the President and the officers for finance, marketing and purchasing] to be chosen by Bancom for the corporation shall be appointed only with DBP’s prior approval and all these officers are to be made directly responsible to DBP; and (d) the $5 million loan shall be secured by: 1) a final mortgage on the following assets with a total approved value of P48,630,756.00; Pursuant to these conditions, the petitioner entered into a management contract with Bancom whereby the latter agreed to manage the plaintiff company for a period of three years; that under the management agreement, the affairs of the petitioner were placed under the complete control of DBP and Bancom, including the disposition and disbursement of the $5,000,000 or P37,500,000 loan; that the respondents and their directors/officers mismanaged and misspent the loan, after which Bancom resigned with the approval of DBP even before the expiration date of the management contract, leaving petitioner desolate and devastated; that among the acts and omissions of the respondents are the following: (a) failure to purchase all the necessary machinery and equipment needed by the petitioner’s project for which the approved loan was intended; That instead of helping petitioner get back on its feet, DBP completely abandoned the petitioner’s project and proceeded to foreclose the properties mortgaged to it by petiti oner without previous demand or notice. Petitioner in its complaint seeks the Annulment of deeds of mortgage which it executed in favor of DBP in order to secure the $5,000,000.00 loan because it is petitioner’s contention that there was no loan at all to secure since what DBP “lent” to petitioner with its right hand, it also got back with its left hand; and that, there was failure of consideration with regard to the execution of said deeds as the l oan was never delivered to the petitioner.
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Petitioner further prayed issue a restraining order and then a writ of preliminary injunction against the sheriffs to enjoin the latter from proceeding with the foreclosure and sale of the petitioner’s properties RTC ruled for DBP and Bancom. CA upheld RTC ruling
ISSUE/S 1. W/N a chattel chattel mortgag mortgage e needs needs to be register registered ed to be binding binding on the the parties parties NO PROVISIONS Art. 2125. In addition to the requisites stated in article 2085, it is indispensable, in order that a mortgage may be validly constituted that the document in which it appears be recorded in the Registry of Property. If the instrument is not recorded, the mortgage is nevertheless binding between the parties.
Art. 2140. By a chattel mortgage, personal property is recorded in the Chattel Mortgage Register as a security for the performance of an obligation. If the movable, instead of being recorded, is delivered to the creditor or a third person, the contract is a pledge and not a chattel mortgage. RULING & RATIO No.
We, however, reject the petitioner’s argument that since the chattel mortgage involved was not registered, the same is null and void. Article 2125 of the Civil Code clearly provides that the nonregistration of the mortgage does not affect the immediate parties. It states: “Art. 2125. In addition to the requisites stated in article 2085, it is indispensable, in order that a mortgage may be validly constituted that the document in which it appears be recorded in the Registry of Property. If the instrument is not recorded, the mortgage is nevertheless binding between the parties. xxx “ The petitioner cannot invoke the above provision to nullify the chattel mortgage it executed in favor of respondent DBP. DISPOSITION WHEREFORE, IN VIEW OF THE FOREGOING, the petition is GRANTED. The orders of the Intermediate Appellate Court dated April 17, 1984 and July 3, 1984 are hereby ANNULLED and SET ASIDE. The trial court is ordered to proceed with the trial on the merits of the main case. In the meantime, the temporary restraining order issued by this Court on July 23, 1984 shall remain in force until the merits of the main case are resolved.
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ISSUE #2 NAVARRO vs. PINEDA Petitioner: Conrado Navarro Respondent: Rufino Pineda and Juana Gonzales DOCTRINE Where a house stands on a rented land belonging to another person, it may be the subject-matter of a chattel mortgage as personal or movable property if so stipulated in the document of mortgage, and in an action by the mortgagee for foreclosure, the validity of the chattel mortgage cannot be assailed by one of the parties to the contract of mortgage. FACTS
Defendants Rufino G. Pineda and his mother Juana Gonzales, borrowed from plaintiff Conrado P. Navarro, the sum of P2,500.00, payable after 6 months. To secure the indebtedness, Rufino executed a document captioned "DEED OF REAL ESTATE and CHATTEL MORTGAGES", whereby Juana Gonzales, by way of Real Estate Mortgage hypothecated a parcel of land, belonging to her, registered with the Register of Deeds of Tarlac and Rufino by way of Chattel Mortgage, mortgaged his two-story residential house, erected on a lot belonging to Atty. Vicente Castro and one motor truck, registered in his name. When the mortgage debt became due and payable, the defendants, after demands made on them, failed to pay. They, however, asked and were granted an extension up to June 30, 1960. Came June 30, defendants again failed to pay and, for the second time, asked for another extension, which was given, up to July 30, 1960. In the second extension, defendant Pineda in a document entitled “Promise”, categorically stated that in the remote event he should fail to make good the obligation on such date, the defendant would no longer ask for further extension and there would be no need for any formal demand, and plaintiff could proceed to take whatever action he might desire to enforce his rights, under the said mortgage contract. In spite of said promise, defendants, failed and. refused to pay the obligation. In due course, the plaintiff filed a complaint for foreclosure of the mortgage and for damages. While the case is being heard, the parties submitted a Stipulation of Facts, wherein the defendants admitted the indebtedness, the authenticity and due execution of the Real Estate and Chattel Mortgages and leaving the only issue in the case as whether or not the residential house, subject of the mortgage can be considered a Chattel.
Whether or not the residential house, subject to mortgage can be considered a chattel and still remain valid HELD Yes the house can be considered a chattel.
Where a house stands on a rented land belonging to another person, it may be the subject-matter of a chattel mortgage as personal or movable property if so stipulated in the document of mortgage, and in an action by the mortgagee for foreclosure, the validity of the chattel mortgage cannot be assailed by one of the parties to the contract of mortgage. The trial court did not predicate its decision declaring the deed of chattel mortgage valid solely on the ground that the house mortgaged was erected on the land which belonged to a third person, but also and principally on the doctrine of estoppel, in that “the parties have so expressly agreed” in the mortgage to consider the house as chattel “for its smallness and mixed materials of sawali and wood”. In construing Arts. 334 and 335 of the Spanish Civil Code (corresponding to Arts. 415 and 416, N.C.C.), for purposes of the application of the Chattel Mortgage Law, it was held that under certain conditions, “a property may have a character different from that imputed to it in said articles. It is undeniable that the parties to a contract may by agreement, treat as personal property that which by nature would be real property” In the case at bar, the house in question was treated as personal or movable property, by the parties to the contract themselves. In the deed of chattel mortgage, appellant Rufino G. Pineda conveyed by way of “Chattel Mortgage” “my personal properties”, a residential house and a truck. The mortgagor himself grouped the house with the truck, which is, inherently a movable property. DISPOSITION CONFORMABLY WITH ALL THE FOREGOING, the decision appealed from, should be, as it is hereby affirmed, with costs against appellants.
Despite such stipulation of facts, the lower court later on ruled and ordered defendants to pay the amount owing plus 12% compounded interest per annum to Navarro (90) days from receipt of the Order which further ordered defendant to deliver immediately to the Provincial Sheriff of Tarlac the personal properties used as security.
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# 3 Northern Motors v. Coquia (Short title) GR # L-40018 | August 29, 1975 Petition: Petition for review on certiorari Petitioner: NORTHERN MOTORS, INC. Respondent: The Honorable Jorge R. Coquia, , Honesto Ong, the Sheriff of Manila, Dominador Q. Cacpal, the Acting Executive Sheriff of Manila, Intervenor: Filinvest Credit Corporation FACTS -
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Manila Yellow Taxicab Co., Inc. purchased from Northern Motors, Inc, 200 Holden Torana cars and executed chattel mortgages on the cars as security for the promissory notes covering the balance of the price. o The notes and the chattel mortgages for 172 cars were assigned to Filinvest Credit Corporation. Tropical Commercial Co., Inc. obtained a judgment against Manila Yellow Taxicab Co., Inc. in another Civil Case. Part of that judgment was eventually assigned to Honesto Ong. To satisfy the judgment credit, the sheriff levied upon 20 taxicabs, of which, 8 were mortgaged to Northern and 12 to Filinvest Credit. Northern and Filinvest filed the corresponding third-party claims with the sheriff and Tropical posted indemnity bonds. On that same day, the cars were sold at public auction. The lower court cancelled the indemnity bonds without notice to the third-party claimants. The sheriff subsequently made an additional levy on 35 mortgaged taxicabs to satisfy the unpaid balance of the judgment. Of those, 7 were mortgaged to Northern while 28 were to Filinvest. Again, Northern and Filinvest filed third-party claims. The lower court refused to reinstate the indemnity bonds. It ruled that the chattel mortgagee was not entitled to the possession of the mortgaged taxicabs by the mere fact of the execution of the mortgage and that the mortgage lien followed the chattel whoever might be i ts actual possessor. Northern Motors, Inc. then filed with SC a certiorari petition to annul the resolution and to stop the second auction sale. SC issued a restraining order against the scheduled auction sale, the writ of execution and the disposition of the proceeds of the first execution sale. Filinvest was allowed to intervene in the action. Subsequently, the petition was denied and the restraining order was dissolved. SC ruled that the mortgagee's remedy is to vindicate its claim in a proper action as provided in the Rules of Court, and that its mortgage lien attached to the taxicabs wherever they might be. Upon motion of Northern Motors, Inc. on the ground that the decision had not yet become final, the restraining order was maintained. Filinvest did not file any more a motion for reconsideration because it had entered into a compromise with Ong for the release of twenty-eight taxicabs. Northern Motors, Inc. contends that as chattel mortgagee and unpaid vendor, it has the better right to the possession of the mortgaged taxicabs and that claims should be resolved in the case where the writ of execution was issued and not in a separate action which allegedly would be an ineffective remedy.
ISSUE/S 2. W/N Northern Motors has a better right to the possession RULING & RATIO 1. Yes The sheriff wrongfully levied upon the mortgaged taxicabs and erroneously took possession of them. He could have levied only upon the ri ght or equity of redemption pertaining to the Manila Yellow Taxicab Co., Inc . as chattel mortgagor and judgment debtor, because that was the only leviable or attachable property right of the company in the mortgaged taxicabs. o After a chattel mortgage is executed, there remains in the mortgagor a mere right of redemption (Tizon vs. Valdez). To levy upon the mortgagor's incorporeal right or equity of redemption, it was not necessary for the sheriff to have taken physical possession of the mortgaged taxicabs. It would have sufficed if he furnished the chattel mortgagor, Manila Yellow Taxicab Co., Inc., with a copy of the writ of execution and served upon it a notice that its right or equity of redemption in the mortgaged taxicabs was being levied upon pursuant to that writ. Levying upon the property itself is distinguishable from levying on the judgment debtor's interest in it. Justice Imperial noted that if the only attachable interest of a chattel mortgagor in a mortgaged car was his right of redemption and if the purchaser at the execution sale could not acquire anything except such right of redemption, then the purchaser was "not entitled to the actual possession and delivery of the automobile without first paying" the mortgage debt. In this case what the sheriff could have sold at public auction was merely the mortgagor's right or equity of redemption. The sheriff and the judgment creditor are deemed to have constructive notice of the chattel mortgages on the taxicabs. As a consequence of the registration of the mortgages, Northern Motors, Inc. had the symbolical possession of the taxicabs. If the judgment creditor, Tropical or the assignee, Ong, bought the mortgagor's equity of redemption at the auction sale, then it would step into the shoes of the mortgagor, Manila Yellow Taxicab Co., Inc. and be able to redeem the vehicles from Northern Motors, Inc., the mortgagee, by paying the mortgage debt. Article 2140 of the Civil Code, in defining a chattel mortgage as the recording of personal property in the Chattel Mortgage Register as security for the performance of an obligation, has adhered to the equitable conception of that contract. At the same time, article 2140 has preserved the distinction between pledge and chattel mortgage which was blurred by section 4 of the Chattel Mortgage Law when it provided that in a chattel mortgage" the possession of the property is delivered to and retained by the mortgagee" or, if no such possession is delivered, the mortgage should be recorded in the proper registry of deeds. Historically, it is not proper that the contract of pledge, as one of the four real contracts of the jus civile (the others being mutuum, commodatum and depositum) should be absorbed by the chattel mortgage contract. 3
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Under section 4 of the Chattel Mortgage Law, it was held that the registration of the chattel mortgage was tantamount to the symbolical delivery of the possession of the mortgaged chattel to the mortgagee, a symbolical delivery which was equivalent to actual delivery. The equity of redemption of the mortgagor will pass to the purchaser at an execution sale (Tizon vs. Valdez and Morales, 48 Phil. 910, 914). Inasmuch as what remains to the mortgagor is only the equity of redemption, it follows that the right of the judgment or attaching creditor, who purchased the mortgaged chattel at an execution sale, is subordinate to the lien of the mortgagee who has in his favor a valid chattel mortgage. Justice Moreland in a case observed that "no one can take the title away from the mortgagee except the mortgagor and he only in the manner prescribed by the mortgage itself and that the general statement is therefore correct that after the execution of a chattel mortgage and its registry as required by law, nobody can obtain an interest in that property adverse to that of the mortgagee". That the chattel mortgagee has the symbolical possession and that he has the preferential right to have physical possession is inferable from article 319 of the Revised Penal Code which penalizes any person who knowingly removes the mortgaged chattel to any province or city other than the one in which it was located at the time of the execution of the mortgage, without the written consent of the mortgagee or his executors, administrators or assigns. It penalizes also any mortgagor who sells or pledges the mortgaged chattel without the consent of the mortgagee written on the back of the register of deeds of the province where such chattel is located. The purpose of the Chattel Mortgage Law is to promote business and trade and to give impetus to the country's economic development. In the business world the chattel mortgage has greatly facilitated sales of goods and merchandise. Sales of merchandise would be sluggish and insubstantial if the Chattel Mortgage Law could not protect dealers against the defaults and delinquencies of their customers and if the mortgagee's lien could be nullified by the maneuvers of an unsecured judgment creditor of the chattel mortgagor. It is not right nor just that the lien of a secured creditor should be rendered nugatory by a wrongful execution engineered by an unsecured creditor.
DISPOSITION WHEREFORE, the decision of March 21, 1975 is reconsidered and set aside. Respondent Sheriff is directed to deliver to Northern Motors, Inc. (a) the proceeds of the execution sale held on December 18, 1974 for the eight taxicabs mortgaged to it less the expenses of execution and (b) the seven taxicabs which were levied upon by him and which are also mortgaged to the corporation.
#4 TSAI vs. CA Petitioner: Ruby L. Tsai Respondent: Court of Appeals, Ever Textile Mills, Inc, (EVERTEX), and Memento R. Villaruz 366 SCRA 324 | G.R. No. 120098 DOCTRINE Sec. 7 of the Chattel Mortgage Law - 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. FACTS • On November 26, 1975, EVERTEX obtained a 3m loan from PBCom and as security for the loan, a deed of Real and Chattel Mortgage over the subject lot, where a factory stands, and the chattels located therein as enumerated in the schedule of the mortgage contract. • On April 23, 1979, 2nd loan of 3.356m was availed of by EVERTEX which was secured by a Chattel Mortgage over personal properties in a list attached thereto. The listed properties were similar to those listed in the first mortgage deed. • After the date of execution of the 2nd mortgage, EVERTEX purchased various machines and equipments. • Later, EVERTEX filed for insolvency proceedings was declared insolvent by the CFI. All its assets were taken into the custody, including the securities, both real and personal. • Due to the failure of EVERTEX to meet its obligation, PBCom commenced extrajudicial foreclosure. o PBCom was the highest bidder and consolidated ownership
over the lot and all the properties in it. PBCom leased the entire factory premises and eventually sold it to Tsai, which included everything, even the contested machineries. EVERTEX filed a complaint for annulment of sale, reconveyance, and damages with the RTC against PBCom and alleged the ff: o That there was no legal basis for the appropriation of the o
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contested properties which were not included in the Real and Chattel Mortgage and neither were they included in the Notice of Sheriff’s sale. That the extrajudicial foreclosure of the subject mortgage was in violation of the Insolvency Law, therefore no right to the properties are transmitted to Tsai. • RTC and CA ruled in favor of EVERTEX. o
Hence, this petition.
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ISSUE/S 1. W/N the inclusion of the questioned in the forecloses properties are proper - NO 2. (LTD/Property Issue) W/N the sale of the properties to Tsai were valid - NO
RULING & RATIO 1. NO The “controverted machineries” are not covered by, or included in, either of the two mortgages, the Real Estate and Chattel Mortgage, and the pure Chattel Mortgage; and the said machineries were not included in the list of properties appended to the Notice of Sale, and neither were they included in the Sheriff’s Notice of Sale of the foreclosed properties. o Even if the fact the machineries were heavy, bolted or cemented on the real property mortgaged, does not make them ipso facto immovable under Article 415 (3) and (5) of the New Civil Code, as the parties’ intent has to be looked into. o Where the facts, taken together, evince the conclusion that the parties’ intention is to treat the units of machinery as chattels, a fortiori, the after-acquired properties, which are of the same description as the units referred to earlier, must also be treated as chattels.
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NO - “Nemo dat quod non habet - One Cannot give what one does not have.” \ • As the auction sale of the subject properties to PBCom is void, no valid title can therefore pass to Tsai’s favor. • A purchaser in good faith and for value is one who buys the property of another without notice that some other person has a right to or interest in such property and pays a full and fair price for the same, at the time of purchase, or before he has notice of the claims or interest of some other person in t he property. • Records reveal, however, that when Tsai purchased the controverted properties, she knew of respondent’s claim thereon. As borne out by the records, she received the letter of respondent’s counsel, apprising her of respondent’s claim, dated February 27, 1987. She replied thereto on March 9, 1987. Despite her knowledge of respondent’s claim, she proceeded to buy the contested units of machinery on May 3, 1988. • The defense of indefeasibility of Torrens Title refers to sale of lands and not to sale of properties situated therein. The mere fact that the lot where a factory and disputed properties stand in a person’s name does not automatically make such person the owner of everything found therein.
WHEREFORE , the petitions are DENIED. The assailed decision and resolution of the Court of Appeals in CA-G.R. CV No. 32986 are AFFIRMED WITH MODIFICATIONS. Petitioners Philippine Bank of Communications and Ruby L. Tsai are hereby ordered to pay jointly and severally Ever Textile Mills, Inc., the following: (1) P20,000.00 per month, as compensation for the use and possession of the properties in question from November 198631 until subject personal properties are restored to respondent corporation; (2) P100,000.00 by way of exemplary damages, and (3) P50,000.00 as attorney’s fees and litigation expenses. Costs against petitioners. SO ORDERED. #5 CEBU INTERNATIONAL FINANCE CORP. vs COURT OF APPEALS G.R. No. 107554 February 13, 1997 Petition: PETITION FOR REVIEW ON CERTIORARI Petitioner: CEBU INTERNATIONAL FINANCE CORPORATION Respondent: COURT OF APPEALS, ROBERT ONG and ANG TAY DOCTRINE The prevailing jurisprudence is that a mortgagee has a right to rely in good faith on the certificate of title of the mortgagor to the property given as security and in the absence of any sign that might arouse suspicion, mortgagee has no obligation to undertake further investigation. FACTS
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Jacinto Dy executed a Special Power of Attorney in favor of private respondent Ang Tay, authorizing the latter to sell the cargo vessel owned by Dy and christened LCT “Asiatic.” Through a Deed of Absolute Sale, Ang Tay sold the subject vessel to Robert Ong (Ong). Ong paid the purchase price by issuing three (3) checks However, since the payment was not made in cash , it was specifically stipulated in the deed of sale that the “LCT Asiatic shall not be registered or transferred to Robert Ong until complete payment.” Thereafter, Ong obtained possession of the subject vessel so he could begin deriving economic benefits therefrom. He, likewise, obtained copies of the unnotarized deed of sale allegedly to be shown to the banks to enable him to acquire a loan to replenish his (Ong’s) capital. The aforequoted condition, however, which was handwritten on the original deed of sale does not appear on Ong’s copies. Contrary to the aforementioned agreements and without the knowledge of Ang Tay, Ong had his copies of the deed of sale (on which the aforementioned prohibition does not appear) notarized. Ong presented the notarized deed to the Philippine Coast Guard which subsequently issued him a Certificate of Ownership and a Certificate of Philippine Register over the subject vessel. Ong also succeeded in having the name of the vessel changed to LCT “Orient Hope.” Using the acquired vessel, Ong acquired a loan from Cebu International Finance Corporation to be paid in installments as evidenced by a promissory note of even date. As security for the loan, Ong executed a chattel mortgage over the subject vessel, which mortgage was registered with the Philippine Coast Guard and annotated on the Certificate of Ownership. 5
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Ong defaulted in the payment of the monthly installments. Consequently, Cebu International Finance Corporation sent him a letter demanding delivery of the mortgaged vessel for foreclosure or in the alternative to pay the balance pursuant to paragraph 11 of the deed of chattel mortgage. Meanwhile, the two checks paid by Ong to Ang Tay for the Purchase of the subject vessel bounced. Ang Tay’s search for the elusive Ong and all attempts to confer with him proved to be futile. A subsequent investigation and inquiry with the Office of the Coast Guard revealed that the subject vessel was already in the name of Ong, in violation of the express undertaking contained in the original deed of sale. As a result thereof, Ang Tay and Jacinto Dy filed a civil case for rescission and replevin with damages against Ong and his wife which was granted. Cebu International Finance Corp. filed a separate case for replevin and damages against Ong and Ang Tay in the same court.
Trial Court: It ruled in favor of Ang Tay and Jacinto Dy. Moreover , it declared the chattel mortgage on the subject vessel null and void and ordered petitioner and Ong to pay Ang Tay damages. CA: It affirmed Trial Court’s ruling.
absence of any sign that might arouse suspicion, has no obligation to undertake further investigation. Hence, even if the mortgagor is not the rightful owner of or does not have a valid title to the mortgaged property, the mortgagee or transferee in good faith is nonetheless entitled to protection. Although this rule generally pertains to real property, particularly registered land, it may also be applied by analogy to personal property, in this case specifically, since shipowners are, likewise, required by law to register their vessels with the Philippine Coast Guard. The chattel mortgage constituted on a vessel by Ong who was able to register the vessel in his name despite the agreement with the Ang Tay that the vessel would not be so registered until after full payment of the price which do not appear in the Ong’s copy of the deed of sale is VALID for the mortgagee has the right to rely in good faith on the certificate of registration. DISPOSITION WHEREFORE, this Court GRANTS the Petition for Review and REVERSES the questioned decision and resolution of the Court of Appeals. The validity of the chattel mortgage on the vessel LCT ORIENT HOPE is hereby upheld without prejudice to whatever legal remedies private respondent Ang Tay may have against private respondent Robert Ong in the premises.
ISSUES
1. W/N the chattel mortgage contract between Cebu International Finance Corp and Ong is valid and subsisting. 2. W/N Cebu International Finance Corporation is a mortgagee in good faith whose lien over the mortgaged vessel should be respected. RULING 1.
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The key lies in the certificate of ownership issued in Ong's name (which, along with the deed of sale, he submitted to petitioner as proof that he is the owner of the ship he gave as security for his loan). It was plainly stated therein that the ship LCT "Orient Hope" ex "Asiatic," by means of a Deed of Absolute, was "sold and transferred by Jacinto Dy to Robert Ong." There can be no dispute then that it was Dy who was the seller and Ong the buyer of the subject vessel. Coupled with the fact that there is no evidence of any transaction between Jacinto Dy or Ang Tay and petitioner, it follows that petitioner's role in the picture is properly and logically that of a creditor-mortgagee and not owner-seller. It is paragraph 2 of the mortgage contract which accurately expresses the true nature of the transaction between petitioner and Ong -- that it is a simple loan with chattel mortgage. The amount petitioner loaned to Ong does not represent the balance of any purchase price since, as we have previously discussed, the aforementioned documents state that Ong is already the absolute owner of the subject vessel. Obviously, therefore, paragraph 3 of the said contract was filled up by mistak 2. YES The prevailing jurisprudence is that a mortgagee has a right to rely in good faith on the certificate of title of the mortgagor to the property given as security and in the
#6 LILIUS v MANILA ROAD COMPANY G.R. No. 42551, September 4, 1935 APPEAL on CERTIORARI APPELLESS: ALEKO E. LILIUS, for himself and as guardian ad litem of his minor child, Brita Marianne Lilius, and SONJA MARIA LILIUS DEFENDANT : MANILA RAILROAD COMPANY INTERVENORS – APPELLANTS: LAURA LINDLEY SHUMAN, MANILA WINE MERCHANTS, LTD., BANK OF THE PHILIPPINE ISLANDS AND MANILA MOTOR CO., INC. INTERVENORS – APPELLESS: W.H. WATEROUS, M. MARFORI, JOHN R. MCFIE, JR., ERLANGER & GALINGER, INC., PHILIPPINE EDUCATION CO., INC., HAMILTON BROWN SHOE CO., ESTRELLA DEL NORTE and EASTERN & PHILIPPINE SHIPPING AGENCIES, LTD. DOCTRINE A chattel does not have to be acknowledged before a notary public. As against creditors and subsequent encumbrances, the law does require an affidavit of good faith appended to the mortgage and recorded with it. FACTS
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In a separate case, Lilius successfully won against Manila Road Company. In that case, the Trial Court and the SC awarded Lilius the amount of Php 33,525.03 as damages. [ The case filed by Lilius was due to the damages sustained by Lilius when Manila Road Company’s train collided with the car of Lilius] Lilius sustained permanent damages due to the accident and thus not able to meet his obligations. The intervenors – appellants therefore interfere to satisfy their claims against Lilius with the awarded amount for damages. 6
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In this present case, the intervenors – appellants appealed the order of the Court of First Instance of Manila fixing the degree of preference of the claimants and distributing the proceeds of the judgment.
(Focus is on Manila Motor Co., since its appeal is based on Chattel Mortgage) (4) (5)
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For its part, Manila Motor Co., Inc. claims that the lower court erred in not holding their claims, evidenced by public instruments and final judgment, as preferred over all other claims against Aleko E. Lilius. In support of its claim of preference against the fund of Aleko E. Lilius was a certified copy of its judgment against him in a separate civil case (Civil Case no. 41159), together with a certified copy of the writ of execution and the garnishment issued by virtue of said judgment. The alleged public document evidencing its claims was not offered, Manila Motor Co merely assume its credit is evidenced by a public document dated May 10, 1931, the court on Case no. 41159 refers to a mortgage appearing in the evidence, as the basis of its judgment, without mentioning the date of the execution of the exhibit
#7 ACME CORP vs. CA GR # 103576| August 22, 1996 Petition: Petition for review on certiorari Petitioner: ACME SHOE, RUBBER & PLASTIC CORPORATION and CHUA PAC Respondent: HON. COURT OF APPEALS, PRODUCERS BANK OF THE PHILIPPINES and REGIONAL SHERIFF OF CALOOCAN CITY FACTS -
ISSUE WON the reference to a mortgage appearing in a public document in a judgment, entitled to preference under article 1924 of the Civil Code. - NO RULING/RATIO
NO. This reference in said judgment to a mortgage is not competent or satisfactory evidence as against third persons upon which to base a finding that the Manila Motor Company's credit evidenced by a public document within the meaning of article 1924 of the Civil Code. If the Manila motor Co., Inc., desired to rely upon a public document in the form of a mortgage as establishing its preference in this case, it should have offered that document in evidence, so that the court might satisfy itself as to its nature and unquestionably fix the date of its execution. Granting that a mortgage existed between the Manila Motor Co., Inc., and Aleko E. Lilius, this does not warrant the conclusion that the instrument evidencing that mortgage is a public document entitled to preference under article 1924 of the Civil Code. Under section 5 of Act No. 1507 as amended by Act No. 2496, a chattel does not have to be acknowledge before a notary public. As against creditors and subsequent encumbrances, the law does require an affidavit of good faith appended to the mortgage and recorded with it. A chattel mortgage may, however, be valid as between the parties without such an affidavit of good faith. In 11 Corpus Juris, 482, the rule is expressly stated that as between the parties and as to third persons who have no rights against the mortgagor, no affidavit of good faith is necessary. It will thus be seen that under the law, a valid mortgage may exist between the parties without its being evidenced by a public document. DISPOSITION The court, therefore, committed no error in holding that the claim of the Manila Motor Co., Inc., was inferior in preference to those of the appellees in this case. This appellant's assignments of error are overulled.
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Chua Pac, the president and general manager of 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. This was security for the P3 mil lion corporate loan. o Stipulated: "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 …. 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." This loan was paid and obtained from Producers Bank additional financial accommodations totaling P2.7 million in 1981. Said loan was also paid when it became due. In 1984, bank the again extended another loan of a million pesos covered by 4 promissory notes (250k each). The loan was not paid at maturity, due to financial constraints. Producers Bank then filed for extrajudicial foreclosure of the chattel mortgage with the Sheriff of Caloocan, prompting Acme to forthwith file an action for injunction, with damages and a prayer for a writ of preliminary injunction, before the Caloocan RTC. RTC: Dismissed. o Corporation bound by the stipulations, aforequoted, of the chattel mortgage. CA: Affirmed. The instant petition in the SC was initially denied for being insufficient in form and substance, but Acme filed a compliance with the motion for reconsideration which was denied. Only the second MR was granted. o Reason for granting second MR: 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 !
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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. Hence, this petition. ISSUE/S 3. W/N the chattel mortgage and its foreclosure is valid RULING & RATIO 2. NO. While a pledge, real estate mortgage, or antichresis may exceptionally secure after-incurred obligations so long as these future debts are accurately described, 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. 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), the fact, however, that the statute has provided that the parties to the contract must execute an oath that – o "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." In the chattel mortgage here involved, the only obligation specified in the chattel mortgage contract was the P3,000,000.00 loan. In Belgian Catholic Missionaries, Inc., vs. Magallanes Press, Inc., et al., the Court said – o "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 t he date of the mortgage." 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, there no longer was any chattel mortgage that could cover the new l oans that were concluded thereafter.
DISPOSITION 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. Notes: Atty. Sotto, the counsel of petitioners, was admonished by the Court because of this reply: "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." #8 SERVICEWIDE SPECIALISTS vs. CA G.R. No 116363 | 320 SCRA 478 | December 10, 1999 Petition: PETITION for review on certiorari Petitioner: SERVICEWIDE SPECIALISTS, INCORPORATED, Respondent: CA, JESUS PONCE, and ELIZABETH PONCE DOCTRINE When the mortgagee assigned the mortgage, it is necessary to give notice to the mortgagor and NOT CONSENT. But when the mortgagor wish to sell or alienate the property mortgage, the consent of mortgagee is necessary. FACTS
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Sometime in 1975, Sps. Atty. Jesus and Elizabeth PONCE bought on installment a Vehicle from Tecson Enterprises. o To secure payment they executed a promissory note and a chattel mortgage on the vehicle. registered in the Registry of Deeds and LTO Tecson Enterprises executed a DEED OF ASSIGNMENT of the said promissory note and chattel mortgage in favor of FILINVEST with conformity of Sps. PONCE. In 1976, Sps. PONCE transferred and delivered the vehicle to Conrado Tecson by way of sale with assumption of mortgage. FILINVEST assigned all its rights and interest to SERVICEWIDE without notice to Sps. PONCE Sps. PONCE failed to pay. Thus, SERVICEWIDE filed a complaint for replevin. !
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PONCE’s contention: they had already returned the car to Conrado Tecson pursuant to the Deed of Sale with Assumption of Mortgage. 8
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invoked Article 1626 of the Civil Code which provides that “the debtor who, before having knowledge of the assignment, pays his creditor shall be released from the obligation.”
TC: Sps. PECSON are liable and ordered Conrado Tecson to reimburse them. CA: reversed and set aside on the ground that SPS PECSON were not notified of the assignment of promissory note and chattel mortgage.
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Hence, this petitition. ISSUE/S 4. W/N the consent of debtor-mortgaggee is necessary to bind him to the assignment of a credit
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RULING & RATIO
1. NO. only notice is necessary. When the credit was assigned to SERVICEWIDE, only notice to but not the consent of the PECSONs was necessary to bind the latter. Applying Article 1627 of the Civil Code, the assignment made to SERVICEWIDE includes the accessory rights such as the mortgage. Article 2141, states that the provisions concerning a contract of pledge shall be applicable to a chattel mortgage, such as the one at bar, insofar as there is no conflict with the Chattel Mortgage Law. o a thing pledged may be alienated by the pledgor or owner “with the consent of the pledgee.” o This provision is in accordance with Act No. 1508 which provides that “a mortgagor of personal property shall not sell or pledge such property, or any part thereof, mortgaged by him without the consent of the mortgagee in writing on the back of the mortgage and on the margin of the record thereof in the office where such mortgage is DISPOSITION WHEREFORE, the decision of the Court of Appeals is REVERSED and SET ASIDE. The decision of the Regional Trial Court is AFFIRMED and REINSTATED. Respondents Jesus Ponce and Elizabeth Ponce are ORDERED to pay petitioner, jointly and severally
#9 PASCUAL v. UNIVERSAL MOTOR CORPS GR # L-27862 | November 20, 1974 Petitioner: Lorenzo Pascual and Leonila Torres Respondent: Universal Motors Corporation DOCTRINE Foreclosure of chattel mortgage precludes any further action against the debtor and his guarantor. FACTS
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Pascual and Torres executed the real estate mortgage subject matter of this complaint to secure the payment of the indebtedness of PDP Transit, Inc. for the purchase of five (5) units of Mercedez Benz trucks but plaintiffs’ guarantee is not to exceed P50,000.00 which i s the value of the mortgage. PDP Transit, Inc., plaintiffs’ principal, had paid to the defendant Universal Motors Corporation the sum of P92,964.91, thus leaving a balance of P68,641.69 including interest due The aforementioned obligation guaranteed by the plaintiffs under the Real Estate Mortgage, subject of this action, is further secured by separate deeds of chattel mortgages on the Mercedez Benz units covered by the aforementioned invoices in favor of the defendant Universal Motors Corporation. Defendant Universal Motors Corporation filed a complaint against PDP Transit, Inc. before the Court of First Instance of Manila with a petition for a writ of Replevin, to collect the balance due under the Chattel Mortgages and to repossess all the units sold to plaintiffs’ principal PDP Transit, Inc. including the five (5) units guaranteed under the subject Real (Estate) Mortgage. Universal Motors Corporation was able to repossess all the units sold to the latter, including the five (5) units guaranteed by the subject real estate mortgage, and to foreclose all the chattel mortgages constituted thereon, resulting in the sale of the trucks at public auction. With the foregoing background, the spouses Lorenzo Pascual and Leonila Torres, the real estate mortgagors, filed an action in the Court of First Instance of Quezon City for the cancellation of the mortgage they constituted on two (2) parcels of land in favor of the Universal Motors Corporation to guarantee the obligation of PDP Transit, Inc. to the extent of P50,000. The court rendered judgment for the plaintiffs, ordered the cancellation of the mortgage Unsatisfied with the decision, defendant interposed the present appeal. Universal Motors contends that what article 1484 withholds from the vendor is the right to recover any deficiency from the purchaser after the foreclosure of the chattel mortgage and not a recourse to the additional security put up by a third party to guarantee the purchaser’s performance of his obligation.
ISSUE/S W/N Universal can claim for deficiency judgment as against PDP Transit’s guarantors (Pascual and Torres) - NO RULING & RATIO No.
A similar argument has been answered by this Court in this wise: “(T)o sustain appellant’s argument is to overlook the fact that if the guarantor should be compelled 9
to pay the balance of the purchase price, the guarantor will in turn be entitled to recover what she has paid from the debtor vendee (Art. 2066, Civil Code); so that ultimately, it will be the vendee who will be made to bear the payment of the balance of the price, despite the earlier foreclosure of the chattel mortgage given by him. Thus, the protection given by Article 1484 would be indirectly subverted, and public policy overturned.”
the motor vehicle from Siton that as such successor, he stepped into the rights and obligations of the seller; that he has religiously paid the installments as stipulated upon in the promissory note. He also manifested that the Answer he has filed in his behalf should likewise serve as a responsive pleading for his co-defendant Siton. The RTC ordered defendants to pay the jointly and severally the plaintiff the remaining balance on the motor vehicle.
DISPOSITION The decision appealed from is affirmed, wi th costs against the defendant-appellant.
The IAC rendered judgment affirming in toto the decision of the trial court. #10 SERVICEWIDE SPECIALISTS, INC. vs. INTERMEDIATE APPELLATE COURT Petitioner: Servicewide Specialists, Inc. Private Respondent: Galicano Siton
Hence, the instant petition. ISSUE
DOCTRINE The chattel mortgagor continues to be the owner of the property, and therefore, has the power to alienate the same; however, he is obliged under pain of penal liability, to secure the written consent of the mortgagee.
The absence of the written consent of the mortgagee to the sale of the mortgaged property in favor of a third person, therefore, affects not the validity of the sale but only the penal liability of the mortgagor under the Revised Penal Code and the binding effect of such sale on the mortgagee under the Deed of Mortgage. FACTS
Siton purchased from Car Traders Philippines, Inc. a vehicle a two-door Mitsubishi Celeste and paid P25,000.00 as downpayment of the price. The remaining balance of P68,400.00, includes not only the remaining principal obligation but also advance interests and premiums for motor vehicle insurance policies. He executed a promissory note expressly stipulating the remaining obligation shall be payable without the need of notice of demand, and in installment basis for 36 months ( P1,900/month) due and payable on the 14th day of each month starting September 14, 1979, thru and inclusive of August 14,1982. As further Security Siton executed a Chattel Mortgage over the subject motor vehicle in favor of Car Traders The credit covered by the promissory note and chattel mortgage executed by Siton was first assigned by Car Traders Philippines, Inc. in favor of Filinvest Credit Corporation which the latter reassigned to Servicewide Specialists, Inc. Alleging that Siton failed to pay the part of the installment which fell due, the petitioner filed this action against Galicano Siton and “John Doe.” After the service of summons, Justiniano de Dumo, identifying himself as the “John Doe” in the Complaint, inasmuch as he is in possession of the subject vehicle, filed his Answer with Counterclaim and with Opposition to the prayer for a Writ of Replevin. Said defendant, alleged the fact that he has bought
Whether or not the sale between the mortgagor Siton and De Dumo was void, as the sale is prohibited under the provisions of the Deed of Chattel Mortgage, the Chattel Mortgage Act (Act 1508) and the Revised Penal Code. HELD
Yes it’s valid. There is no dispute that the Deed of Chattel Mortgage executed between Siton and the petitioner requires the written consent of the latter as mortgagee in the sale or transfer of the mortgaged vehicle. We cannot ignore the findings, however, that before the sale, prompt inquiries were made by private respondents with Filinvest Credit Corporation regarding any possible future sale of the mortgaged property; and that it was upon the advice of the company’s credit lawyer that such a verbal notice is sufficient and that it would be convenient if the account would remain in the name of the mortgagor Siton. Even the personal checks of de Dumo were accepted by petitioner as payment of some of the installments under the promissory note. If it is true that petitioner has not acquiesced in the sale, then, it should have inquired as to why de Dumo’s checks were being used to pay Si ton’s obligations. Further, it is worthy to note that despite the arguments of petitioner that it is not bound by the sale of the vehicle to de Dumo, and that the latter is a stranger to the transaction between Filinvest and Siton, nevertheless, it admitted de Dumo’s obligation as purchaser of the property when it named the latter as one of the defendants in the lower court. In view of the foregoing, We find it correct to hold both the respondents Galicano Siton and Justiniano de Dumo liable for their obligations to petitioner herein. In the case at bar, the purchase of the car by respondent de Dumo from respondent Siton does not necessarily imply the extinguishment of the liability of the latter. Since it was neither established nor shown that Siton was released from responsibility under the promissory note, the same does not constitute novation by substitution of debtors under Article 1293 of the Civil Code. Likewise, the fact that petitioner company 10
accepts payments from a third person like respondent de Dumo, who has assumed the obligation, will result merely to the addition of debtors and not novation. Hence, the creditor may therefore enforce the obligation against both debtors.
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DISPOSITION ACCORDINGLY, t he petition is GRANTED and the assailed decision of the Court of Appeals dated April 25, 1986 is hereby REVERSED and S ET ASIDE, and a new one entered, ordering the private respondents Galicano Siton and Justiniano de Dumo, jointly to pay to petitioner Servicewide Specialists, Incorporated, the total sum of the remaining unpaid balance on the promissory note with interest thereon at fourteen percent per annum from January 25, 1982 until fully paid, as well as stipulated attorney’s fees and liquidated damages; and to reimburse to petitioner the sum of P3,859.90 for the premium payments on the insurance policies over the subject vehicle. Costs against private respondents.
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The SEC initially dismissed Cordova’s complaint. But reversed itself in a resolution and granted Cordova’s claims. But since the shares had already been sold and the proceeds commingled with the other assets of Philfinance, Cordova’s status was converted into that of an ordinary creditor for the value of such shares. Thus, it ordered private respondents to pay the amount of P5,062,500 representing 15% of the monetary value of his CSPI shares plus interest at the legal rate from the time of their unauthorized sale. SEC later deleted the award for legal interest, as it would be unfair to other claimants. Cordova appealed to the CA. CA: Affirmed SEC decision. o It agreed that petitioner was indeed the owner of the CSPI shares but the recovery of such shares had become impossible. It also declared that the clarificatory order merely harmonized the dispositive portion with the body of the resolution.
SO ORDERED. Hence, this petition. Cordova vs REYES DAWAY LIM BERNARDO LINDO ROSALES LAW OFFICES GR # 146555 | July 3, 2007 Petition: Petition For Review on Certiorari Petitioner: Jose Cordova Respondent: REYES DAWAY LIM BERNARDO LINDO ROSALES LAW OFFICES , ATTY. WENDELL CORONEL and the SECURITIES AND EXCHANGE COMMISSION
ISSUE/S 5. W/N Cordova is a creditor of Philfinance 6. W/N he is a preferred or ordinary creditor and can he recover the full value of his CSPI shares or merely 15% thereof like all other ordinary creditors of Philfinance 7. W/N he is entitled to legal interest
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Sometime in 1977 and 1978, Jose C. Cordova bought from Philippine Underwriters Finance Corporation (Philfinance) certificates of stock of Celebrity Sports Plaza Incorporated (CSPI) and shares of stock of various other corporations. He was issued a confirmation of sale. The shares were physically delivered by Philfinance to Filmanbank and Philtrust Bank, as custodian banks, to hold these shares in behalf of and for the benefit of Cordova. On June 18, 1981, Philfinance was placed under receivership by the SEC. Thereafter, Reyes Daway Lim Bernardo Lindo Rosales Law Offices and Atty. Wendell Coronel were appointed as liquidators. In 1991, without the knowledge and consent of Cordova and without authority from the SEC, private respondents withdrew the CSPI shares from the custodian banks and sold the shares to Northeast Corporation and included the proceeds thereof in the funds of Philfinance. When Cordova learned of the sale, he lodged a complaint with private respondents but the latter ignored it, prompting him to file, on May 6, 1997, a formal complaint against private respondents in the receivership proceedings with the SEC, for the return of the shares. The SEC approved a 15% rate of recovery for Philfinances creditors and investors. On May 13, 1997, the liquidators began the process of settling the claims against Philfinance, from its assets.
RULING & RATIO 3. YES The SC just reiterated the SEC and CA decision. o SEC:Petitioner is seeking the return of his CSPI shares which, for the present, is no longer possible, considering that the same had already been sold by the respondents, the proceeds of which are ADMITTEDLY commingled with the assets of PHILFINANCE. This being the case, [petitioner] is now but a claimant for the value of those shares. As a claimant, he shall be treated as an ordinary creditor in so far as the value of those certificates is concerned.
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CA: Concomitantly, petitioners filing of his claim over the subject CSPI shares before the SEC in the liquidation proceedings bound him to the terms and conditions thereof. He cannot demand any special treatment [from] the liquidator , for this flies in the face of, and will contravene, the Supreme Court dictum that when a corporation threatened by bankruptcy is taken over by a receiver, all the creditors shall stand on equal footing. Not one of them should be given preference by paying one or some [of] them ahead of the others. This is precisely the philosophy underlying the suspension of all pending claims against the corporation under receivership. The rule of thumb is equality in equity
4.
Ordinary Creditor a. SAY THIS PARA LEGIT: The Civil Code provisions on concurrence and preference of credits are applicable to the liquidation proceedings. 11
b.
Petitioner argues that he was a preferred creditor because private respondents illegally withdrew his CSPI shares from the custodian banks and sold them without his knowledge and consent and without authority from the SEC. He quotes Article 2241 (2) of the Civil Code:
and subject to the provisions of Article 1169 of the Civil Code. 2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty.
With reference to specific movable property of the debtor, the following claims or liens shall be preferred: xxx xxx xxx (2) Claims arising from misappropriation, breach of trust, or malfeasance by public officials committed in the performance of their duties, on the movables, money or securities obtained by them;
Accordi ngly, where the demand is establis hed with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date of the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount of finally adjudged.
xxx xxx xxx
c. d.
Article 2241 refers only to specific movable property. His claim was for the payment of money, which, as already discussed, is generic property and not specific or determinate. Considering that petitioner did not fall under any of the provisions applicable to preferred creditors, he was deemed an ordinary creditor under Article 2245: Credits of any other kind or class, or by any other right or title not comprised in the four preceding articles, shall enjoy no preference.
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This being so, Article 2251 (2) states that: Common credits referred to in Article 2245 shall be paid pro rata regardless of dates.
f. 5.
Like all the other ordinary creditors or claimants against Philfinance, he was entitled to a rate of recovery of only 15% of his money claim.
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The guidelines for awarding interest were laid down in Eastern Shipping Lines, Inc. v. CA: I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached, the contravenor can be held liable for damages. The provisions under Title XVIII on "Damages" of the Civil Code govern in determining the measure of recoverable damages. II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows: 1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under
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3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit. Under this ruling, Cordova was not entitled to legal interest of 12% per annum (from demand) because the amount owing to him was not a loan or forbearance of money. Neither was he entitled to legal interest of 6% per annum under Article 2209 of the Civil Codesince this provision applies only when there is a delay in the payment of a sum of money. This was not the case here. In fact, petitioner himself manifested before the CA that the SEC (as liquidator) had already paid him P5,062,500 representing 15% of P 33,750,000. o Considering that petitioner had already received the amount of P5,062,500, the obligation of the SEC as liquidator of Philfinance was totally extinguished. o Same
DISPOSITION WHEREFORE, the petition is hereby DENIED. NOTES (For the badfaith of the respondents) 12
We note that there is an undisputed finding by the SEC and CA that private respondents sold the subject shares without authority from the SEC. Petitioner evidently has a cause of action against private respondents for their bad faith and unauthorized acts, and the resulting damage caused to him.
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#12 PDIC v. BIR (Short title) GR # 158261 | December 18, 2006 Petition: Petition for review on certiorari under Rule 45 of the Rules of Court Petitioner: Philippine Deposit Insurance Corporation Respondent: Bureau Of Internal Revenue
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In 1986, a special examination of Rural Bank of Bokod (Benguet), Inc (RBBI) was conducted by the Supervision and Examination Sector (SES) of BSP, wherein various loan irregularities were uncovered. In a letter, the SES required the RBBI management to infuse fresh capital into the bank, within 30 days from date of the advice, and to correct all the exceptions noted. However, up to the termination of the subsequent general examination, no concrete action was taken by the RB BI management. In view of the irregularities noted and the insolvent condition of RBBI, the members of the RBBI Board of Directors were called for a conference at the BSP. Only one RBBI Director, a certain Mr. Wakit, attended the conference, and the examination findings and related recommendations were discussed with him. In a letter, receipt of which was acknowledged by Mr. Wakit, the SES warned the RBBI Board of Directors that, unless substantial remedial measures are taken to rehabilitate the bank. Despite repeated notices, the SES received no word from RBBI. Subsequently, the Monetary Board of the BSP decided to put RBBI on receivership. A memorandum and report were submitted by the Director of the SES concluding that the RBBI remained in insolvent financial condition and it can no longer safely resume business with the depositors, creditors, and the general public. The Monetary Board ordered the liquidation of the bank and designated the Director as liquidator. The liquidator then caused the filing with the RTC of a Petition for Assistance in the Liquidation of RBBI and the Monetary Board transferred to Philippine Deposit Insurance Corporation (PDIC) the receivership/ liquidation of RBBI. PDIC then filed a Motion for Approval of Project of Distribution of the assets of RBBI, in accordance with Section 31, in relation to Section 30, of Republic Act No. 7653, otherwise known as the New Central Bank Act. During the hearing, BIR manifested that PDIC should secure a tax clearance certificate from the appropriate BIR Regional Office, pursuant to Section 52(C) of Republic Act No. 8424, or the Tax Code of 1997, before it could proceed with the dissolution of RBBI.
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RTC: Issued an order directing PDIC to comply with the Tax Code and held in abeyance the Motion for Approval of Project of Distribution. MR filed by PDIC arguing that the Tax Code does not cover closed banking institutions like RBBI as the law that covers liquidation of closed banks is the new Central Bank Law. RTC: Denied MR. PDIC should still secure the necessary tax clearance in order for it to be cleared of all its tax liabilities as regardless of what law covers the liquidation of closed banks, still these banks are subject to payment of taxes mandated by law. Hence, this petition
ISSUE/S 8. W/N BBI, as represented by its liquidator, PDIC, still needs to secure a tax clearance from the BIR before the RTC could approve the Project of Distribution of the assets of RBBI RULING & RATIO 6. NO Section 52(C) of the Tax Code of 1997 and the BIR-SEC Regulations No. 1 regulate the relations only as between the SEC and the BIR, making a certificate of tax clearance a prior requirement before the SEC could approve the dissolution of a corporation. RBBI was placed under receivership and ordered liquidated by the BSP, not the SEC; and the SEC i s not even a party in the said case. The Corporation Code is a general law applying to all types of corporations, while the New Central Bank Act regulates specifically banks and other financial institutions, including the dissolution and liquidation thereof. As between a general and special law, the latter shall prevail. The liquidation of RBBI is undertaken according to Section 30 of the New Central Bank Act which lays down the proceedings for receivership and liquidation of a bank. The said provision is silent as regards the securing of a tax clearance from the BIR and such cannot compel the Court to apply by analogy the tax clearance requirement since the dissolution of a corporation by the SEC is totally different from the receivership and liquidation of a bank by the BSP. The Court cannot simply replace "SEC" with the "BSP" for to do so would be to read into the law and the regulations something that is simply not there, and would be tantamount to judicial legislation. The alleged purpose of the BIR in requiring the liquidator PDIC to secure a tax clearance is to enable it to determine the tax liabilities of the closed bank. but what the BIR should have requested from the RTC is for PDIC to submit the final return of RBBI, a duty by PDIC provided for in Section 30(C) of the Tax Code in conjunction with Section 54. The filing by PDIC of a final tax return, on behalf of RBBI, should already address the concern of the BIR and would already enable the latter to determine if RBBI still had outstanding tax liabilities. There is unreasonableness and impossibility in requiring a tax clearance before the approval by the RTC of the Project of Distribution of the assets of the RBBI. 13
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The BIR can only issue a certificate of tax clearance when the taxpayer had completely paid off his tax liabilities. The certificate of tax clearance attests that the taxpayer no longer has any outstanding tax obligations to the Government. o Should the BIR find that RBBI still had outstanding tax liabilities, PDIC will not be able to pay the same because the Project of Distribution of the assets of RBBI remains unapproved by the RTC; o And, if RBBI still had outstanding tax liabilities, the BIR will not issue a tax clearance; but, without the tax clearance, the Project of Distribution of assets, which allocates the payment for the tax liabilities, will not be approved by the RTC. It will be a chickenand-egg dilemma. The Government, in this case, cannot generally claim preference of credit, and receive payment ahead of the other creditors of RBBI. o Duties, taxes, and fees due the Government enjoy priority only when they are with reference to a specific movable property, under Article 2241(1) of the Civil Code, or immovable property, under Article 2242(1) of the same Code. However, with reference to the other real and personal property of the debtor, sometimes referred to as "free property," the taxes and assessments due the National Government, other than those in Articles 2241(1) and 2242(1) of the Civil Code, will come only in ninth place in the order of preference. Thus, the recourse of the BIR, after assessing the final return and examining all other pertinent documents of RBBI, and making a determination of the latter’s outstanding tax liabilities, is to present its claim, on behalf of the National Government, before the RTC during the liquidation proceedings. The BIR is expected to prove and substantiate its claim, in the same manner as the other creditors. It is only after the RTC allows the claim of the BIR, together with the claims of the other creditors, can a Project for Distribution of the assets of RBBI be finalized and approved. PDIC, then, as liquidator, may proceed with the disposition of the assets of RBBI and pay the latter’s financial obligations, including its outstanding tax liabilities. And, finally, only after such payment, can the BIR issue a certificate of tax clearance in the name of RBBI. The evident void in current statutes and regulations as to the relations among the BIR, as tax collector of the National Government; the BSP, as regulator of the banks; and the PDIC, as the receiver and liquidator of banks ordered closed by the BSP, is not for this Court to fill in. It is up to the legislature to address the matter through appropriate legislation, and to the executive to provide the regulations for i ts implementation.
(b) The PDIC, as liquidator, is ORDERED to submit to the BIR the final tax return of RBBI, in accordance with the first paragraph of Section 52(C), in connection with Section 54, of the Tax Code of 1997; and (c) The RTC is ORDERED to resume the liquidation proceedings in Spec. Proc. No. 91-SP-0060 in order to determine all the claims of the creditors, including that of the National Government, as determined and presented by the BIR; and, pursuant to such determination, and guided accordingly by the provisions of the Civil Code on preference of credit, to review and approve the Project of Distribution of the assets of RBBI. SO ORDERED.
DISPOSITION WHEREFORE, in view of the foregoing, this Court rules as follows – (a) The instant Petition is GRANTED and the Orders, dated 17 January 2003 and 13 May 2003, of the RTC, sitting as the Liquidation Court of the closed RBBI, in Spec. Proc. No. 91-SP-0060, are NULLIFIED and SET ASIDE for having been rendered with grave abuse of discretion; 14
