G.R. No.

L-19468

October 30, 1964

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

vs.
CONRADO S. DAVID and MARCOS MANGUBAT, defendants-appellees.
CONCEPCION, J.:
This is an appeal from an order of the Court of First Instance of Manila in Civil Case No. 47664 thereof. The
pertinent facts are set forth in said order from which we quote:
It appears from the complaint that on December 11, 1948, defendant herein Conrado S. David
received a loan of P3,000 with interest at 12% per annum from Claudia B. Vda. de Uy Kim, one of
the plaintiffs, and to secure the payment of the same, Conrado S. David executed a chattel
mortgage on a house situated at 1259 Sande Street, Tondo, Manila; that the chattel mortgage was
registered with the Register of Deeds of Manila on December 19, 1948; that on February 10, 1953,
the mortgaged house was sold at public auction to satisfy the indebtedness to Claudia B. Vda. de
Uy Kim, and the house was sold to Claudia B. Vda. de Uy Kim in the said foreclosure proceedings;
that on March 22, 1954, Claudia B. Vda. de Uy Kim sold the said house to Marcos Mangubat, and on
March 1, 1956. Marcos Mangubat filed a complaint against Conrado S. David, Civil Case No. 29078,
in the Court of First Instance of Manila, for the collection of the loan of P2,000; that on March 24,
1956, the complaint was amended to include the plaintiffs herein Salvador Piansay and Claudia B.
Vda. de Uy Kim as party defendants and praying that auction sale executed by the Sheriff on
February 10, 1953, and the deed of absolute sale executed by Claudia B. Vda. de Uy Kim in favor of
Salvador Piansay be annulled; that decision was rendered in Civil Case No. 29078 ordering Conrado
S. David to pay the plaintiff the sum of P2,000, damages and attorney's fees, and dismissing the
complaint with respect to Claudia B. Vda. de Uy Kim, Leonardo Uy Kim and Salvador Piansay; that
upon appeal, the Court of Appeals affirmed the decision but setting aside the award of damages in
favor of Claudia B. Vda. de Uy Kim; that in the execution of Civil Case No. 29078, which was
affirmed by the Court of Appeals in CA-G.R. No. 21797-R, the house, which had been bought by Uy
Kim at the foreclosure proceedings and sold by her to Salvador Piansay, was levied upon at the
instance of the defendant Marcos Mangubat; that to prevent the sale at public auction of the house
here in question, the plaintiffs herein filed a petition forcertiorari and mandamus with preliminary
injunction in the Court of Appeals, CA-G.R. No. 28974-R, entitled Claudia B. Vda. de Uy Kim
and Salvador Piansay versus Hon. Judge Jesus Y. Perez, et al.; that acting upon the said petition, the
Court of Appeals in its order of April 28, 1961, denied the petition to lift or discharge the writ of
execution.
Thereupon, or on July 31, 1961, Piansay and Mrs. Uy Kim, hereinafter referred to as the plaintiffs, instituted
the present action which was docketed as Civil Case No. 47664 of the Court of First Instance of Manila,
against David and Mangubat, hereinafter referred to as the defendants. In their complaint, plaintiffs, after
averring the foregoing facts, allege that, in the proceedings for the execution of the decision in Civil Case
No. 29078. David demanded from Piansay the payment of rentals for the use and occupation of the house
aforementioned, which, Piansay claims, is his property, and that the defendants are threatening to cause
said house to be levied upon and sold at public auction in violation of the alleged rights of the plaintiffs.
Accordingly plaintiffs prayed that a writ of preliminary injunction to restrain said levy and sale at public
auction be issued and that, after appropriate proceedings, judgment be rendered declaring that Piansay is
the true and lawful owner of said house sentencing the defendants to pay damages and making the
preliminary injunction permanent.
Mangubat moved to dismiss said complaint, upon the theory that the same is barred by the principle of res
adjudicata and that plaintiffs have no personality to bring this action or to question the levy upon the
house in question, because they have no interest therein. After due hearing the lower court issued the

order appealed from, granting said motion and dismissing the complaint, with costs against the plaintiffs. A
reconsideration of said order having been denied, plaintiffs interposed the present appeal directly to this
Court only questions of law being raised in the appeal, namely: (1) applicability of the principle of res
adjudicata; and (2) validity of the chattel mortgage constituted in favor of Mrs. Uy Kim.
With reference to the first question, it should be noted that in case CA-G.R. No. 21797-R, the Court of
Appeals affirmed the decision in Case No. 29078 of the Court of First Instance of Manila stating:
In the case of Ladera, et al., vs. Hodges, et al. (CA-G.R. No. 8027-R, promulgated Sept. 23, 1952)
this Court, thru Justice J. B. L. Reyes, said, among others:
Since it is a rule in our law that buildings and constructions are regarded as mere accesories
to the land (following the Roman maxim omne quod solo inaedificatur solo credit) it is logical
that said accessories should partaked of the nature of the principal thing, which is the land
forming, as they do, but a single object (res) with it in contemplation of law.
... While it is true that said document was correspondingly registered in the Chattel
Mortgage Register of Rizal, this Act produced no effect whatsoever for where the interest
conveyed is in the nature of real property, the registration of the document in the registry of
chattels is merely a futile act. Thus the registration of the chattel mortgage of a building of
strong materials produced no effect as far as the building is concerned (Leung Yee vs. Strong
Machinery Co., 37 Phil. 644). Nor can we give any consideration to that contention of the
surety that it has acquired ownership over the property in question by reason of the sale
conducted by the Provincial Sheriff of Rizal for as this court has aptly pronounced:
A mortgage creditor who purchases real properties at an extra-judicial foreclosure
sale thereof by virtue of a chattel mortgage constituted in his favor, which mortgage
has been declared null and void with respect to said real properties acquires no right
thereto by virtue of said sale. (De la Riva vs. Ah Kee, 60 Phil. 899).
Thus, Mrs. Uy Kim had no right to foreclose the alleged chattel mortgage constituted in her
favor, because it was in reality a mere contract of an unsecured loan. It follows that the Sheriff was
not authorized to sell the house as a result of the foreclosure of such chattel mortgage. And as Mrs.
Uy Kim could not have acquired the house when the Sheriff sold it at public auction, she could not,
in the same token, it validly to Salvador Piansay. Conceding that the contract of sale between Mrs.
Uy Kim and Salvador Piansay was of no effect, we cannot nevertheless set it aside upon instance of
Mangubat because, as the court below opined, he is not a party thereto nor has he any interest in
the subject matter therein, as it was never sold or mortgaged to him (Emphasis supplied);
that, thereafter, the records of the case were remanded to the Court of First Instance of Manila, which
caused the corresponding writ of execution to be issued; that upon the request of Mangubat, the house in
question was levied upon; that Piansay filed with the trial court, presided over by Hon. Jesus Y. Perez,
Judge, a motion to set aside said levy; that this motion was denied by said court, in an order dated
February 4, 1961, upon the following ground:
Considering that the decision rendered by the Court of Appeals in this case when the same was
elevated to said Court recognizes that defendant Claudia B. de Uy Kim did not acquire the house of
defendant Conrado S. David and can therefore be executed by the plaintiff to satisfy the
judgment rendered against said defendant David in favor of the plaintiff. The mere fact that the
dispositive part of the decision states that the complaint is dismissed with respect to defendants
Claudia B. de Uy Kim, Leonardo Uy Kim and Salvador Piansay is of no moment because the chattel
mortgage executed by David in favor of Claudia B. de Uy Kim might not be annulled but it did not
transmit any right from defendant David to Claudia B. de Uy Kim. The house in question can

therefore be levied upon because it had remained the property of defendant David (Emphasis
supplied);
that a reconsideration of this order of February 4, 1961 having been denied by Judge Perez, on February
25, 1961, plaintiffs instituted case CA-G.R. No. 28974-R of the Court of Appeals, for a writ
of certiorari andmandamus to annul said orders of Judge Perez and to compel him to release said house
from the aforementioned levy; and that on March 3, 1961, the Court of Appeals denied said petition
for certiorari andmandamus "insofar as it prays that the order of respondent Judge denying the lifting and
discharge of the writ of execution be set aside and revoked."
In other words, in Civil Case No. 29078 of the Court of First Instance of Manila, Piansay assailed the right of
Mangubat to levy execution upon the house in question alleging that the same belongs to him, he having
bought it from Mrs. Uy Kim, who had acquired it at the auction sale held in connection with the
extrajudicial foreclosure of the chattel mortgage constituted in her favor by David. This pretense was,
however, overruled by Judge Perez, who presided at said court, in its order of February 4, 1961, upon the
theory that the chattel mortgage and sale in favor of Mrs. Uy Kim had been annulled in the original
decision in said case, as affirmed by the Court of Appeals in CA-G.R. No. 21797-R. Regardless of whether
this theory is accurate or not, the fact is that said order became final and executory upon the denial of the
petition for certiorari and mandamus, to annul the same in CA-G.R. No. 28974-R of the Court of Appeals.
Hence, plaintiffs are now barred from asserting that the aforementioned 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 (Standard Oil Co. of N. Y. vs. Jaramillo, 44 Phil. 632-633), the same cannot and
does not bind third persons, who are not parties to the aforementioned contract or their privies (Leung Yee
vs. Strong Machinery Co., 37 Phil. 644; Evangelista vs. Alto Surety, G.R. No. L-11139, April 23, 1958;
Navarro vs. Pineda, G.R. No. L-18456, November 30, 1963). As a consequence, the sale of the house in
question in the proceedings for the extrajudicial foreclosure of said chattel mortgage, is null and void
insofar as defendant Mangubat is concerned, and did not confer upon Mrs. Uy Kim, as buyer in said sale,
any dominical right in and to said house (De la Riva vs. Ah Yee, 60 Phil. 800), so that she could not have
transmitted to her assignee, plaintiff Piansay any such right as against defendant Mangubat. In short
plaintiffs have no cause of action against the defendants herein.
WHEREFORE, the others appealed from are hereby affirmed, with costs against plaintiffs Salvador Piansay
and Claudia B. Vda. de Uy Kim. It is so ordered.

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

MAKATI LEASING and FINANCE CORPORATION, petitioner,
vs.
WEAREVER TEXTILE MILLS, INC., and HONORABLE COURT OF APPEALS, respondents.
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 defendantsappellants 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 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 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.

G.R. No. L-40018 December 15, 1975

NORTHERN MOTORS, INC., petitioner,
vs.
HON. JORGE R. COQUIA, etc., et al., respondents, FILINVEST CREDIT CORPORATION, intervenor.
RESOLUTION

AQUINO, J.:
Respondent Honesto Ong and City Sheriff of Manila filed a motion for the reconsideration of this Court's
resolution of August 29, 1975. In that resolution, it was held that the lien of Northern Motors, Inc., as
chattel mortgagee, over certain taxicabs is superior to the levy made on the said cabs by Honesto Ong,
the assignee of the unsecured judgment creditor of the chattel mortgagor, Manila Yellow Taxicab Co., Inc.
On the other hand, Northern Motors, Inc. in its motion for the partial reconsideration of the same August 29
resolution, prayed for the reversal of the lower court's orders cancelling the bond filed by Filwriters
Guaranty Assurance Corporation. Northern Motors, Inc. further prayed that the sheriff should be required
to deliver to it the proceeds of the execution sale of the mortgaged taxicabs without deducting the
expenses of execution.
1. Respondents' motion for reconsideration. Honesto Ong in his motion invokes his supposed "legal and
equity status" vis-a-vis the mortgaged taxicabs. He contends that his only recourse was to levy upon the
taxicabs which were in the possession of the judgment debtor, Manila Yellow Taxicab Co. Inc., whereas,
Northern Motors, Inc., as unpaid seller and mortgagee, "has still an independent legal remedy" against the
mortgagor for the recovery of the unpaid balance of the price.
That contention is not a justification for setting aside the holding that Ong had no right to levy upon the
mortgaged taxicabs and that he could have levied only upon the mortgagor's equity of redemption. The
essence of the chattel mortgage is that the mortgaged chattels should answer for the mortgage credit and
not for the judgment credit of the mortgagor's unsecured creditor. The mortgagee is not obligated to file an
"independent action" for the enforcement of his credit. To require him to do so would be a nullification of
his lien and would defeat the purpose of the chattel mortgage which is to give him preference over the
mortgaged chattels for the satisfaction of his credit. (See art. 2087, Civil Code).
It is relevant to note that intervenor Filinvest Credit Corporation, the assignee of a portion of the chattel
mortgage credit, realized that to vindicate its claim by independent action would be illusory. For that
pragmatic reason, it was constrained to enter into a compromise with Honesto Ong by agreeing to pay him
P145,000. That amount was characterized by Northern Motors, Inc. as the "ransom" for the taxicabs levied
upon by the sheriff at the behest of Honesto Ong.

Honesto Ong's theory that Manila Yellow Taxicab's breach of the chattel mortgage should not affect him
because he is not privy of such contract is untenable. The registration of the chattel mortgage is an
effective and binding notice to him of its existence (Ong Liong Tiak vs. Luneta Motor Company, 66 Phil
459). The mortgage creates a real right (derecho real, jus in re or jus ad rem, XI Enciclopedia Juridica
Espaola 294) or a lien which, being recorded, follows the chattel wherever it goes.
Honesto Ong's contention that Northern Motors, Inc., was negligent because it did not sue the sheriff
within the 120-day period provided for in section 17, Rule 39 of the Rules of Court is not correct. Such
action was filed on April 14, 1975 in the Court of First Instance of Rizal, Pasig Branch XIII, in Civil Case No.
21065 entitled "Northern Motors, Inc. vs. Filwriters Guaranty Assurance Corporation, et al.". However,
instead of Honesto Ong, his assignor, Tropical Commercial Corporation, was impleaded as a defendant
therein. That might explain his unawareness of the pendency of such action.
The other arguments of Honesto Ong in his motion may be boiled down to the proposition that the levy
made by mortgagor's judgment creditor against the chattel mortgagor should prevail over the chattel
mortgage credit. That proposition is devoid of any legal sanction and is glaringly contrary to the nature of a
chattel mortgage. To uphold that contention is to destroy the essence of chattel mortgage as a paramount
encumbrance on the mortgaged chattel.
Respondent Ong admits "that the mortgagee's right to the mortgaged property is superior to that of the
judgment creditor". But he contends that the rights of the purchasers of the cars at the execution sale
should be respected. He reasons out they were not parties to the mortgage and that they acquired the
cars prior to the mortgagee's assertion of its rights thereto.
That contention is not well-taken. The third-party claim filed by Northern Motors, Inc. should have alerted
the purchasers to the risk which they were taking when they took part in the auction sale. Moreover, at an
execution sale the buyers acquire only the right of the judgment debtor which in this case was a mere right
or equity of redemption. The sale did not extinguish the pre-existing mortgage lien (See sec. 25, Rule 39,
Rules of Court; Potenciano vs. Dineros and Provincial Sheriff of Rizal, 97 Phil, 196; Lara vs. Bayona, 97 Phil.
951; Hacbang vs. Leyte Autobus Co., Inc., L-7907, May 30, 1963, 8 SCRA 103).
Some arguments adduced by Honesto Ong in his motion were intended to protect the interests of the
mortgagor, Manila Yellow Taxicab Co., Inc., which he erroneously characterized as a "respondent" (it is not
a respondent in this case). Ong argues that the proceeds of the execution sale, which was held on
December 18, 1974, should be delivered to Northern Motors, Inc. "only to such extent as has exceeded the
amount paid by respondent Manila Yellow Taxicab to" Northern Motors, Inc. That argument is not clear. Ong
probably means that the installments already paid by Manila Yellow Taxicab Co., Inc. to Northern Motors,
Inc. should be deducted from the proceeds of the execution sale. If that is the point which Ong is trying to
put across, and it is something which does not directly affect him, then, that matter should be raised by
Manila Yellow Taxicab Co., Inc. in the replevin case, Civil Case No. 20536 of the Court of First Instance of
Rizal, Pasig Branch VI, entitled "Northern Motors, Inc. versus Manila Yellow Taxicab Co., Inc. et al."
Ong's contention, that the writ of execution, which was enforced against the seven taxicabs (whose sale at
public auction was stopped) should have precedence over the mortgage lien, cannot be sustained. Those
cabs cannot be sold at an execution sale because, as explained in the resolution under reconsideration, the
levy thereon was wrongful.
The motion for reconsideration of Ong and the sheriff should be denied.
2. Petitioners motion for partial reconsideration. The lower court in its order of January 3, 1975 cancelled
the indemnity bonds for P480,000 filed on December 18, 1975 by Filwriters Guaranty Assurance
Corporation for Tropical Commercial Co., Inc. The bonds were cancelled without notice to Northern Motors,
Inc. as third-party claimant.

We already held that the cancellation of the bonds constituted a grave abuse of discretion but we
previously denied petitioner's prayer for the reinstatement of the bonds because Northern Motors Inc. had
given the impression that it had not filed any action for damages against the sheriff within the one
hundred twenty-day period contemplated in Section 17, Rule 39 of the Rules of Court.
As already noted above, the truth is that such an action for damages was filed on April 14, 1975 against
the surety, the sheriff and the judgment creditor in Civil Case No. 21065 of the Court of First Instance of
Rizal, Pasig Branch XIII. The action involves the indemnity bond for P240,000 (No. 0032 posted on
December 18, 1974).
It may also be noted that in a prior case, Civil Case No. 20536 of the Court of First Instance of Rizal at
Pasig, entitled "Northern Motors, Inc. vs. Manila Yellow Taxicab Co., Inc., et al.", a replevin case (where an
amended complaint dated January 15, 1975 was filed), the surety, Filwriters Guaranty Assurance
Corporation, was impleaded as a defendant by reason of its bond for P240,000. Northern Motors, Inc. in
that case prayed that the surety be ordered to pay to it damages in the event that the eight taxicabs could
not be surrendered to the mortgagee.
Northern Motors, Inc., in its instant motion for partial reconsideration, reiterates its petition for the
reinstatement of the bond filed by Filwriters Guaranty Assurance Corporation. If the said bond is not
reinstated or if the lower court's orders cancelling it are allowed to stand, the aforementioned Civil Cases
Nos. 20536 and 21065 would be baseless or futile actions against the surety. That injustice should be
corrected. Hence, our resolution of August 29, 1975, insofar as it did not disturb the lower court's orders
cancelling the indemnity bonds, should be reconsidered.
Northern Motors. Inc. further prays for the reconsideration of that portion of our resolution allowing the
sheriff to deduct expenses from the proceeds of the execution sale for the eight taxicabs which sale was
held on December 18, 1974. It argues that Honesto Ong or Manila Yellow Taxicab Co., Inc. should shoulder
such expenses of execution.
We already held that the execution was not justified and that Northern Motors, Inc., as mortgagee, was
entitled to the possession of the eight taxicabs. Those cabs should not have been levied upon and sold at
public auction to satisfy the judgment credit which was inferior to the chattel mortgage. Since the cabs
could no longer be recovered because apparently they had been transferred to persons whose addresses
are unknown (see par. 12, page 4, Annex B of motion), the proceeds of the execution sale may be regarded
as a partial substitute for the unrecovarable cabs (See arts. 1189[2] and 1269, Civil Code; Urrutia & Co. vs.
Baco River Plantation Co., 26 Phil. 632). Northern Motors, Inc. is entitled to the entire proceeds without
deduction of the expenses of execution.
WHEREFORE, private respondents' motion for reconsideration is denied and petitioner's motion for partial
reconsideration is granted. The resolution of August 29, 1975 is modified in the sense that the lower
court's orders of January 3 and 6, 1975, cancelling the indemnity bond for P240,000 (as reaffirmed in its
order of January 17, 1975), are set aside. The said indemnity bond for P240,000 is regarded as in full force
and Respondent Sheriff of Manila is further directed to deliver to Northern Motors, Inc. the entire proceeds
of the execution sale held on December 18, 1974 for the eight taxicabs which were mortgagt