You are on page 1of 8

826

SUPREMECOURTREPORTSANNOTATED
Dy,Jr.vs.CourtofAppeals
G.R.No.92989.July8,1991.*
PERFECTO DY, JR. petitioner, vs. COURT OF APPEALS, GELAC
TRADINGINC.,andANTONIOV.GONZALES,respondents.
Chattel Mortgage: Mortgagor retains ownership over the property given as
security,andhastherighttosellitwiththeobligationtosecurewrittenconsentof
themortgagee;Validityofthesalenotaffectedifnoconsentwasobtainedfromthe
mortgagee.The mortgagor who gave the property as security under a chattel
mortgagedidnotpartwiththeownershipoverthesame.Hehadtherighttosellit
althoughhewasundertheobligationtosecurethewrittenconsentofthemortgagee
orhelayshimselfopentocriminalprosecutionundertheprovisionofArticle319
par.2oftheRevisedPenalCode.Andevenif
_______________

*THIRDDIVISION.

827

VOL.198,JULY8,1991
827
Dy,Jr.vs.CourtofAppeals

noconsentwasobtainedfromthemortgagee,thevalidityofthesalewouldstill
notbeaffected.
CivilLaw;Constructivedelivery;Thereisconstructivedeliveryuponthething
sold;Caseatbar.Intheinstantcase,actualdeliveryofthesubjecttractorcouldnot
bemade.However,therewasconstructivedeliveryalreadyupontheexecutionofthe
publicinstrumentpursuanttoArticle1498andupontheconsentoragreementofthe
partieswhenthethingsoldcannotbeimmediatelytransferredtothepossessionofthe
vendee.
PETITIONforcertioraritoreviewthedecisionoftheCourtofAppeals.

ThefactsarestatedintheopinionoftheCourt.
Zosa&QuijanoLawOfficesforpetitioner.
ExpeditoP.BugarinforrespondentGELACTrading,Inc.
GUTIERREZ,JR.,J.:
ThisisapetitionforreviewoncertiorariseekingthereversaloftheMarch
23,1990decisionoftheCourtofAppealswhichruledthatthepetitioners
purchaseofafarmtractorwasnotvalidlyconsummatedandordereda
complaintforitsrecoverydismissed.
Thefactsasestablishedbytherecordsareasfollows:
Thepetitioner,PerfectoDyandWilfredoDyarebrothers.Sometimein
1979,WilfredoDypurchasedatruckandafarmtractorthroughfinancing
extendedbyLibraFinanceandInvestmentCorporation(Libra).Bothtruck
andtractorweremortgagedtoLibraassecurityfortheloan.
ThepetitionerwantedtobuythetractorfromhisbrothersoonAugust
20, 1979, he wrote a letter to Libra requesting that he be allowed to
purchasefromWilfredoDythesaidtractorandassumethemortgagedebt
ofthelatter.
InaletterdatedAugust27,1979,Librathruitsmanager,CiprianoAres
approvedthepetitionersrequest.
Thus,onSeptember4,1979,WilfredoDyexecutedadeedofabsolute
saleinfavorofthepetitioneroverthetractorinquestion.
Atthistime,thesubjecttractorwasinthepossessionofLibra
828
828
SUPREMECOURTREPORTSANNOTATED
Dy,Jr.vs.CourtofAppeals
FinanceduetoWilfredoDysfailuretopaytheamortizations.
Despite the offer of full payment by the petitioner to Libra for the
tractor,theimmediatereleasecouldnotbeeffectedbecauseWilfredoDy
hadobtainedfinancingnotonlyforsaidtractorbutalsoforatruckand
Librainsistedonfullpaymentforboth.
The petitioner was able to convince his sister, Carol DySeno, to
purchase the truck so that full payment could be made for both. On
November22,1979,aPNBcheckwasissuedintheamountofP22,000.00
infavorofLibra,thussettlinginfulltheindebtednessofWilfredoDywith
thefinancingfirm.Paymenthavingbeeneffectedthroughanoutoftown
check,LibrainsistedthatitbeclearedfirstbeforeLibracouldreleasethe
chattelsinquestion.
Meanwhile,CivilCaseNo.R16646entitledGelacTrading,Inc.v.
WilfredoDy,acollectioncasetorecoverthesumofP12,269.80was
pendinginanothercourtinCebu.
OnthestrengthofanaliaswritofexecutionissuedonDecember27,
1979,theprovincialsheriffwasabletoseizeandlevyonthetractorwhich
was in the premises of Libra in Carmen, Cebu. The tractor was
subsequently sold at public auction where Gelac Trading was the lone
bidder.Later,Gelacsoldthetractortooneofitsstockholders,Antonio
Gonzales.
ItwasonlywhenthecheckwasclearedonJanuary17,1980thatthe
petitioner learned about GELAC having already taken custody of the
subjecttractor.Consequently,thepetitionerfiledanactiontorecoverthe
subjecttractoragainstGELACTradingwiththeRegionalTrialCourtof
CebuCity.
OnApril8,1988,theRTCrenderedjudgmentinfavorofthepetitioner.
Thedispositiveportionofthedecisionreadsasfollows:
WHEREFORE,judgmentisherebyrenderedinfavoroftheplaintiffandagainstthe
defendant,pronouncingthattheplaintiffistheownerofthetractor,subjectmatterof
this case, and directing the defendants Gelac Trading Corporation and Antonio
Gonzalestoreturnthesametotheplaintiffherein;directingthedefendantsjointly
andseverallytopaytotheplaintifftheamountofP1,541.00asexpensesforhiringa
tractor;P50,000formoraldamages;P50,000forexemplarydamages;andtopaythe
cost.(Rollo,pp.3536)
Onappeal,theCourtofAppealsreversedthedecisionofthe
829
VOL.198,JULY8,1991
829
Dy,Jr.vs.CourtofAppeals
RTCanddismissedthecomplaintwithcostsagainstthepetitioner.The
Court of Appeals held that the tractor in question still belonged to
WilfredoDywhenitwasseizedandleviedbythesheriffbyvirtueofthe
aliaswritofexecutionissuedinCivilCaseNo.R16646.
ThepetitionernowcomestotheCourtraisingthefollowingquestions:
A.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS MIS


APPREHENDEDTHEFACTSANDERREDINNOTAFFIRMINGTHETRIAL
COURTS FINDING THAT OWNERSHIP OF THE FARM TRACTOR HAD
ALREADYPASSEDTOHEREINPETITIONERWHENSAIDTRACTORWAS
LEVIED ON BY THE SHERIFF PURSUANT TO AN ALIAS WRIT OF
EXECUTION ISSUED IN ANOTHER CASE IN FAVOR OF RESPONDENT
GELACTRADINGINC.
B.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS


EMBARKEDONMERECONJECTUREANDSURMISEINHOLDINGTHAT
THESALEOFTHEAFORESAIDTRACTORTOPETITIONERWASDONEIN
FRAUDOFWILFREDODYSCREDITORS,THEREBEINGNOEVIDENCEOF
SUCHFRAUDASFOUNDBYTHETRIALCOURT.
C.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS


MISAPPREHENDED THE FACTS AND ERRED IN NOT SUSTAINING THE
FINDINGOFTHETRIALCOURTTHATTHESALEOFTHETRACTORBY
RESPONDENT GELAC TRADING TO ITS CORESPONDENT ANTONIO V.
GONZALESONAUGUST2,1980ATWHICHTIMEBOTHRESPONDENTS
ALREADY KNEW OF THE FILING OF THE INSTANT CASEWAS
VIOLATIVE OF THE HUMAN RELATIONS PROVISIONS OF THE CIVIL
CODE AND RENDERED THEM LIABLE FOR THE MORAL AND
EXEMPLARY DAMAGES SLAPPED AGAINST THEM BY THE TRIAL
COURT.(Rollo,p.13)
Therespondentsclaimthatatthetimeoftheexecutionofthedeedofsale,
noconstructivedeliverywaseffectedsincetheconsummationofthesale
dependedupontheclearanceand
830
830
SUPREMECOURTREPORTSANNOTATED
Dy,Jr.vs.CourtofAppeals
encashment of the check which was issued in payment of the subject
tractor.
Inthecaseof ServicewideSpecialistsInc.v.IntermediateAppellate
Court.(174SCRA80[1989]),westatedthat:
xxxxxxxxx
Theruleissettledthatthechattelmortgagorcontinuestobetheownerofthe
property,andtherefore,hasthepowertoalienatethesame;however,heisobliged
under pain of penal liability, to secure the written consent of the mortgagee.
(Francisco,Vicente,Jr.,RevisedRulesofCourtinthePhilippines,(1972),Volume
IVB Part I, p. 525). Thus, the instruments of mortgage are binding, while they
subsist,notonlyuponthepartiesexecutingthembutalsouponthosewholater,by
purchaseorotherwise,acquirethepropertiesreferredtotherein.
Theabsenceofthewrittenconsentofthemortgageetothesaleofthemortgaged
propertyinfavorofathirdperson,therefore,affectsnotthevalidityofthesalebut
only the penal liability of the mortgagor under the Revised Penal Code and the
bindingeffectofsuchsaleonthemortgageeundertheDeedofChattelMortgage.
xxxxxxxxx
Themortgagorwhogavethepropertyassecurityunderachattelmortgage
didnotpartwiththeownershipoverthesame.Hehadtherighttosellit
althoughhewasundertheobligationtosecurethewrittenconsentofthe
mortgagee or he lays himself open to criminal prosecution under the
provisionofArticle319par.2oftheRevisedPenalCode.Andevenifno
consentwasobtainedfromthemortgagee,thevalidityofthesalewould
stillnotbeaffected.
Thus,weseenoreasonwhyWilfredoDy,asthechattelmortgagorcan
notsellthesubjecttractor.ThereisnodisputethattheconsentofLibra
Financewasobtainedintheinstantcase.InaletterdatedAugust27,1979,
Libra allowed the petitioner to purchase the tractor and assume the
mortgagedebtofhisbrother.Thesalebetweenthebrotherswastherefore
validandbindingasbetweenthemandtothemortgagee,aswell.
Article1496oftheCivilCodestatesthattheownershipofthething
soldisacquiredbythevendeefromthemomentitisdeliveredtohimin
anyofthewaysspecifiedinArticles1497to1501orinanyothermanner
signifyinganagreementthatthe
831
VOL.198,JULY8,1991
831
Dy,Jr.vs.CourtofAppeals
possessionistransferredfromthevendortothevendee.Weagreewiththe
petitionerthatArticles1498and1499areapplicableinthecaseatbar.
Article1498states:
Art.1498.Whenthesaleismadethroughapublicinstrument,theexecutionthereof
shallbeequivalenttothedeliveryofthethingwhichistheobjectofthecontract,if
fromthedeedthecontrarydoesnotappearorcannotclearlybeinferred.
xxxxxxxxx
Article1499provides:
Article1499.Thedeliveryofmovablepropertymaylikewisebemadebythemere
consentoragreementofthecontractingparties,ifthethingsoldcannotbetransferred
tothepossessionofthevendeeatthetimeofthesale,orifthelatteralreadyhaditin
hispossessionforanyotherreason.(1463a)
Intheinstantcase,actualdeliveryofthesubjecttractorcouldnotbemade.
However,therewasconstructivedeliveryalreadyupontheexecutionof
thepublicinstrumentpursuanttoArticle1498andupontheconsentor
agreement of the parties when the thing sold cannot be immediately
transferredtothepossessionofthevendee.(Art.1499)
Therespondentcourtaversthatthevendormustfirsthavecontroland
possessionofthethingbeforehecouldtransferownershipbyconstructive
delivery.Here,itwasLibraFinancewhichwasinpossessionofthesubject
tractorduetoWilfredosfailuretopaytheamortizationasapreliminary
steptoforeclosure.Asmortgagee,hehastherightofforeclosureupon
defaultbythemortgagorintheperformanceoftheconditionsmentioned
inthecontractofmortgage.Thelawimpliesthatthemortgageeisentitled
topossessthemortgagedpropertybecausepossessionisnecessaryinorder
toenablehimtohavethepropertysold.
While it is true that Wilfredo Dy was not in actual possession and
controlofthesubjecttractor,hisrightofownershipwasnotdivestedfrom
himuponhisdefault.NeithercoulditbesaidthatLibrawastheownerof
thesubjecttractorbecausethemortgageecannotbecometheownerofor
convertandappropriateto
832
832
SUPREMECOURTREPORTSANNOTATED
Dy,Jr.vs.CourtofAppeals
himselfthepropertymortgaged.(Article2088,CivilCode)Saidproperty
continues to belong to the mortgagor. The only remedy given to the
mortgageeistohavesaidpropertysoldatpublicauctionandtheproceeds
of the sale applied to the payment of the obligation secured by the
mortgagee.(SeeMartinezv.PNB,93Phil.765,767[1953])Thereisno
showingthatLibraFinancehasalreadyforeclosedthemortgageandthatit
was the new owner of the subject tractor. Undeniably, Libra gave its
consenttothesaleofthesubjecttractortothepetitioner.Itwasawareof
thetransferofrightstothepetitioner.
Where a third person purchases the mortgaged property, he
automatically steps into the shoes of the original mortgagor. (See
IndustrialFinanceCorp.v.Apostol,177SCRA521[1989]).Hisrightof
ownershipshallbesubjecttothemortgageofthethingsoldtohim.Inthe
caseatbar,thepetitionerwasfullyawareoftheexistingmortgageofthe
subjecttractortoLibra.Infact,whenhewasobtainingLibrasconsentto
thesale,hevolunteeredtoassumetheremainingbalanceofthemortgage
debtofWilfredoDywhichLibraundeniablyagreedto.
The payment of the check was actually intended to extinguish the
mortgageobligationsothatthetractorcouldbereleasedtothepetitioner.
It was never intended nor could it be considered as payment of the
purchasepricebecausetherelationshipbetweenLibraandthepetitioneris
notoneofsalebutstillamortgage.Theclearingorencashmentofthe
checkwhichproducedtheeffectofpaymentdeterminedthefullpayment
ofthemoneyobligationandthereleaseofthechattelmortgage.Itwasnot
determinativeoftheconsummationofthesale.Thetransactionbetween
thebrothersisdistinctandapartfromthetransactionbetweenLibraand
thepetitioner.Thecontention,therefore,thattheconsummationofthesale
dependedupontheencashmentofthecheckisuntenable.
Thesaleofthesubjecttractorwasconsummatedupontheexecutionof
the public instrument on September 4, 1979. At this time constructive
deliverywasalreadyeffected.Hence,thesubjecttractorwasnolonger
owned by Wilfredo Dy when it was levied upon by the sheriff in
December, 1979. Well settled is the rule that only properties
unquestionablyownedbythejudgmentdebtorandwhicharenotexempt
bylawfromexecutionshouldbelevieduponorsoughttobeleviedupon.
Forthepower
833
VOL.198,JULY8,1991
833
Dy,Jr.vs.CourtofAppeals
ofthecourtintheexecutionofitsjudgmentextendsonlyoverproperties
belongingtothejudgmentdebtor.(ConsolidatedBankandTrustCorp.v.
CourtofAppeals,G.R.No.78771,January23,1991).
Therespondentsfurtherclaimthatatthattimethesheriffleviedonthe
tractorandtooklegalcustodythereofnooneeverprotestedorfiledathird
partyclaim.
Itisinconsequentialwhetherathirdpartyclaimhasbeenfiledornotby
thepetitionerduringthetimethesheriffleviedonthesubjecttractor.A
personotherthanthejudgmentdebtorwhoclaimsownershiporrightover
levied properties is not precluded, however, from taking other legal
remediestoprosecutehisclaim.(ConsolidatedBankandTrustCorp.v.
CourtofAppeals,supra)Thisispreciselywhatthepetitionerdidwhenhe
filedtheactionforreplevinwiththeRTC.
Anent the second and third issues raised, the Court accords great
respectandweighttothefindingsoffactofthetrialcourt.Thereisno
sufficientevidencetoshowthatthesaleofthetractorwasinfraudof
Wilfredo and creditors. While it is true that Wilfredo and Perfecto are
brothers,thisfactalonedoesnotgiverisetothepresumptionthatthesale
wasfraudulent.Relationshipisnotabadgeoffraud(Goquiolayv.Sycip,9
SCRA 663 [1963]). Moreover, fraud can not be presumed; it must be
establishedbyclearconvincingevidence.
WeagreewiththetrialcourtsfindingsthattheactuationsofGELAC
Tradingwereindeedviolativeoftheprovisionsonhumanrelations.As
foundbythetrialcourt,GELACknewverywellofthetransferofthe
propertytothepetitionersonJuly14,1980whenitreceivedsummons
basedonthecomplaintforreplevinfiledwiththeRTCbythepetitioner.
Notwithstandingsaidsummons,itcontinuedtosellthesubjecttractorto
oneofitsstockholdersonAugust2,1980.
WHEREFORE,thepetitionisherebyGRANTED.Thedecisionofthe
CourtofAppealspromulgatedonMarch23,1990isSETASIDEandthe
decisionoftheRegionalTrialCourtdatedApril8,1988isREINSTATED.
SOORDERED.
Fernan(C.J.,Chairman),FelicianoandBidin,JJ.,concur.
Davide,Jr.,J.,Nopart.Iusedtobecounselforpetitioner.
834
834
SUPREMECOURTREPORTSANNOTATED
DeGuiavs.Employees'CompensationCommission
Petitiongranted.Decisionsetaside.
o0o

Copyright 2014 Central Book Supply, Inc. All rights reserved.