GSIS vs Court of Appeals and Mr. & Mrs.

Racho

Facts: Spouses Racho together with Spouses Lagasca executed a deed of mortgage in favor of GSIS in
connection with 2 loans granted by the latter in the sums of p11,500.00 and p3,000.00, respectively. A
parcel of land co-owned by the mortgagor spouses was govern as security under the aforesaid deeds
and executed a promissory note promising to pay the said amounts to GSIS jointly, severally and
solidarily.

The Lagasca spouses executed an instrument obligating themselves in the assumption of the aforesaid
obligation and to secure the release of the mortgage.

Failing to comply with the conditions of the mortgage, GSIS extrajudicially foreclosed the mortgage and
caused the property to be sold at public auction.

More than 2 years after, Spouses Racho filed a complaint against GSIS and Spouses Lagasca praying that
the extrajudicial foreclosure be declared null and void. They allege that they signed the mortgage
contracts not as sureties for the Lagasca spouses but merely as accommodation party

Issue: WON the promissory note and mortgage deeds are negotiable.

Held: No. Section 29 of the NIL provides that an accommodation party is one who has signed an
instrument as maker, drawer, acceptor of indorser without receiving value therefore, but is held liable
on the instrument to a holder for value although the latter knew him to be only an accommodation
party.

Both parties appears to be misdirected and their reliance misplaced. The promissory note, as well as the
mortgage deeds subject of this case, are clearly not negotiable instrument because it did not comply
with the fourth requisite to be considered as such under Sec. 1 of the NIL they are neither payable to
order nor to bearer. The note is payable to a specified party, the GSIS.
Bank of America vs American Realty Corporation
GR 133876 December 29, 1999

Facts:

Petitioner granted loans to 3 foreign corporations. As security, the latter mortgaged a property located
in the Philippines owned by herein respondent ARC. ARC is a third party mortgagor who pledged its own
property in favor of the 3 debtor-foreign corporations.

The debtors failed to pay. Thus, petitioner filed collection suits in foreign courts to enforce the loan.
Subsequently, it filed a petition in the Sheriff to extra-judicially foreclose the said mortgage, which was
granted.

On 12 February 1993, private respondent filed before the Pasig RTC, Branch 159, an action for damages
against the petitioner, for the latters act of foreclosing extra-judicially the real estate mortgages despite
the pendency of civil suits before foreign courts for the collection of the principal loan.

Issue:

WON petitioners act of filing a collection suit against the principal debtors for the recovery of the loan
before foreign courts constituted a waiver of the remedy of foreclosure.

Held: Yes.

1. Loan; Mortgage; remedies:

In the absence of express statutory provisions, a mortgage creditor may institute against the mortgage
debtor either a personal action or debt or a real action to foreclose the mortgage. In other words, he
may pursue either of the two remedies, but not both. By such election, his cause of action can by no
means be impaired, for each of the two remedies is complete in itself.

In our jurisdiction, the remedies available to the mortgage creditor are deemed alternative and not
cumulative. Notably, an election of one remedy operates as a waiver of the other. For this purpose, a
remedy is deemed chosen upon the filing of the suit for collection or upon the filing of the complaint in
an action for foreclosure of mortgage. As to extrajudicial foreclosure, such remedy is deemed elected by
the mortgage creditor upon filing of the petition not with any court of justice but with the Office of the
Sheriff of the province where the sale is to be made.

In the case at bar, petitioner only has one cause of action which is non-payment of the debt.
Nevertheless, alternative remedies are available for its enjoyment and exercise. Petitioner then may opt
to exercise only one of two remedies so as not to violate the rule against splitting a cause of action.

Accordingly, applying the foregoing rules, we hold that petitioner, by the expediency of filing four civil
suits before foreign courts, necessarily abandoned the remedy to foreclose the real estate mortgages
constituted over the properties of third-party mortgagor and herein private respondent ARC. Moreover,
by filing the four civil actions and by eventually foreclosing extra-judicially the mortgages, petitioner in
effect transgressed the rules against splitting a cause of action well-enshrined in jurisprudence and our
statute books.
2. Conflicts of Law

Incidentally, petitioner alleges that under English Law, which according to petitioner is the governing law
with regard to the principal agreements, the mortgagee does not lose its security interest by simply
filing civil actions for sums of money.

We rule in the negative.

In a long line of decisions, this Court adopted the well-imbedded principle in our jurisdiction that there is
no judicial notice of any foreign law. A foreign law must be properly pleaded and proved as a fact. Thus,
if the foreign law involved is not properly pleaded and proved, our courts will presume that the foreign
law is the same as our local or domestic or internal
law. This is what we refer to as the doctrine of processual presumption.

In the instant case, assuming arguendo that the English Law on the matter were properly pleaded and
proved in said foreign law would still not find applicability.

Thus, when the foreign law, judgment or contract is contrary to a sound and established public policy of
the forum, the said foreign law, judgment or order shall not be applied.

Additionally, prohibitive laws concerning persons, their acts or property, and those which have for their
object public order, public policy and good customs shall not be rendered ineffective by laws or
judgments promulgated, or by determinations or conventions agreed upon in a foreign country.

The public policy sought to be protected in the instant case is the principle imbedded in our jurisdiction
proscribing the splitting up of a single cause of action.

Moreover, foreign law should not be applied when its application would work undeniable injustice to
the citizens or residents of the forum. To give justice is the most important function of law; hence, a law,
or judgment or contract that is obviously unjust negates the fundamental principles of Conflict of Laws.

Clearly then, English Law is not applicable.

2. BETITA V. GANZON EL AL. G. R. NO. L-24137, 49 PHIL. 87,

FACTS:
This action is brought to recover the possession of four carabaos with damages in the
sum of P200.
On May 15, 1924, the defendant Alejo de la Flor recovered a judgment against Tiburcia
Buhayan for the sum of P140 with costs. Under this judgment the defendant Ganzon, as
sheriff levied execution on the carabaos in question which were found in the possession
of one Simon Jacinto but registered in the name of Tiburcia Buhayan. The plaintiff,
Eulogio Betita, alleged that the carabaos had been mortgaged to him and as evidence
thereof presented a document dated May 6, 1924, but the sheriff proceeded with the sale
of the animals at public auction where they were purchased by the defendant Clemente
Perdena for the sum of P200, and this action was thereupon brought.

RTC: inasmuch as that document was prior in date to the judgment under which the execution
was levied, it was a preferred credit and judgment was rendered in favor of the plaintiff for the
possession of the carabaos, without damages and without costs.

ISSUE: WON there was a valid chattel mortgage or pledge

HELD: NO
It is not a sufficient chattel mortgage; it does not meet the requirements of section 5 of
the Chattel Mortgage Law (Act No. 1508), has not been recorded and, considered as a
chattel mortgage, is consequently of no effect as against third parties.Neither did the
document constitute a sufficient pledge of the property valid against third parties.
Article 1865 of the Civil Code provides that "no pledge shall be effective as against third
parties unless evidence of its date appears in a public instrument."
The document in question is not public, but it is suggested that its filing with the sheriff in
connection with the terceria gave in the effect of a public instrument and served to fix the
date of the pledge, and that it therefore fulfills the requirements of article 1865.
Assuming, without conceding, that the filing of the document with the sheriff had that
effect, it seems nevertheless obvious that the pledge only became effective as against
the plaintiff in execution from the date of the filing and did not rise superior to the
execution attachment previously levied (see Civil Code, article 1227).
Lanuza v De Leon

Facts: Lanuza and his wife sold their house, leasehold rights to the lot, television set and refrigerator to
Reyes and Navarro in consideration of a sum of P3,000. It was executed under a Deed of Sale with Right
to Repurchase

Lanuza mortgaged the property to the intervenor, De Leon, and recorded it in the Register of Deeds in
Manila. Upon failure to pay, De Leon filed a petition for extrajudicial foreclosure and won as the sole
bidder.

On the other hand, petitioners Reyes and Navarro filed a petition for consolidation of ownership of the
house on the ground that the vendees failed to redeem their property upon expiration of the
redemption period. Consequently, De Leon argued that the pacto de retro sale could not affect his right
as a third party.

Lower court decided in favor of Reyes and Navarro on the ground that the Lanuzas lose the right ot
mortgage their property since they were not the absolute owners of the property at that time.

Issue: Who has the better right?

Ruling: De Leon has the better right.

Art 2088 states that the creditor cannot appropriate things given by way of pledge or mortgage or
dispose of them. Any stipulation to the contrary is null and void. There were no transmission of
ownership between the Lanuzas and Reyes and Navarro. In truth, there was a provision regarding
automatic transfer of ownership which was a Pactum Commisorium and it is prohibited under the law.
Hence the intention of the parties was deemed as a mortgage rather than a sale.

The courts held that it was in reality and equitable mortgage and the claim of De Leon is preferred
because his mortgage was registered under Art 2125.
Hechanova vs Adil

Facts: This case is for the annulment of a deed of sale executed by Jose Servando in vafor of Hechanova
and Masa.

Pio Servando claimed that the land were mortgaged to him by Jose Servando to secure a loan of P20,000
with stipulation that the same be solely owned by Pio in case of failure to redeem the property on the
agreed date. He impugned the validity of the sale as being fraudulent and prayed that it be declared null
and void, or alternatively, if the sale is not annulled, to order the defendant Jose Servando to pay the
amount of P20,00 plus interest.

Hechanova and Masa move to dismiss the complaint on the ground that it did not state a cause of action,
the alleged mortgage being invalid and unenforceable since it was a mere private document and was
not recorded in te Registry of Deeds and that Pio Servando was not the real party in interest being a
mere mortgagee with no standing to question the validity of the sale.

Issue: WON an unregistered deed of mortgage in a private document with a pacto comisorio is valid

Held: NO. It is clear from the records of this case that the plaintiff has no cause of action. Plaintiff has no
standing to question the validity of the deed f sale execute by the deceased defendant Jose Servando in
favor of his co-defendants Hechanova and Masa. No valid mortgage has been constituted in plaintiffs
favor since the alleged deed of mortgage is a mere private document and not registered, moreover it
contains a stipulation (pacto comisorio) which is null and void under Art 2088.
Mobil Oil Phil vs Diocares

FACTS:
The parties Mobil and Diocares entered an agreement wherein on cash basis, Mobil will deliver
minimum of 50k liters of petroleum a month. To secure this, diocares executed a Real Mortgage.
Diocares failed to pay the balance of their indebtedness and Mobil filed an action for the collection of
the balance of the purchase amount or that the Real Property mortgaged by Diocares be sold to a public
auction and the proceeds be applied to the payment of the obligation. LC did not grant foreclosure on
the ground that the mortgage was not validly executed (not registered).

ISSUE: WON failure to register the Real Mortgage

would render it invalid

SC: NO!
- If the instrument is not recorded, the mortgage is nevertheless binding between the parties. Its
conclusion, however, is that what was thus created was merely apersonal obligation but did not
establish a real estate mortgage.
- The mere fact that there is as yet no compliance with the requirement that it be recorded cannot be a
bar to foreclosure
EDILBERTO CRUZ, ET AL. vs. BANCOM FINANCE CORPORATION (NOW UNION BANK OF THE PHILIPPINES), G.R.
No. 147788, 19 March 2002

Facts: In 1978, Norma Sulit offered to purchase an agricultural land owned by brothers Rev. Fr. Edilberto Cruz and
Simplicio Cruz. The asking price was P700,000, but Sulit only had P25,000, which Fr. Cruz accepted as earnest
money. Sulit failed to pay the balance. Capitalizing on the close relationship of a Candelaria Sanchez with the
brothers, Sulit succeeded in having Cruz execute a document of sale of the land in favor of Sanchez for P150,000.
Pursuant to the sale, Sulit was able to transfer the title of the land in her name. Evidence show that aside from the
P150,000, Sanchez undertook to pay the brothers the amount of P655,000, representing the balance of the actual
price of the land. Later, in a Special Agreement, Sulit assumed Sanchezs obligation to pay said amount.
Unbeknownst to the Cruz brothers, Sulit managed to obtain a loan from Bancom secured by a mortgage over the
land. Upon failure on the part of Sulit to pay the balance, the Cruz brothers filed this complaint for reconveyance
of the land. Meanwhile, Sulit defaulted in her payment to the bank so her mortgage was foreclosed. Bancom was
declared the highest bidder and was issued a certificate of title over the land.

Issue: whether or not Bancom was a mortgagee in good faith.

Ruling: NO. As a general rule, every person dealing with registered land may safely rely on the correctness of the
certificate of title and is no longer required to look behind the certificate in order to determine the actual owner.
This rule is, however, subject to the right of a person deprived of land through fraud to bring an action for
reconveyance, provided the rights of innocent purchasers for value and in good faith are not prejudiced. An
innocent purchaser for value or any equivalent phrase shall be deemed, under Section 38 of the Act 496, to include
an innocent lessee, mortgagee or any other encumbrancer for value. Bancom claims that, being an innocent
mortgagee, it should not be required to conduct an exhaustive investigation on the history of the mortgagors title
before it could extend a loan. Bancom, however, is not an ordinary mortgagee; it is a mortgagee-bank. As such,
unlike private individuals, it is expected to exercise greater care and prudence in its dealings, including those
involving registered lands. A banking institution is expected to exercise due diligence before entering into a
mortgage contract. The ascertainment of the status or condition of a property offered to it as security for a loan
must be a standard and indispensable part of its operations. Jurisprudence provides that: The rule that persons
dealing with registered lands can rely solely on the certificate of title does not apply to banks. Banks, indeed,
should exercise more care and prudence in dealing even with registered lands, than private individuals, for their
business is one affected with public interest, keeping in trust money belonging to their depositors, which they
should guard against loss by not committing any act of negligence which amounts to lack of good faith by which
they would be denied the protective mantle of the land registration statute, Act [No.] 496, extended only to
purchasers for value and in good faith, as well as to mortgagees of the same character and description.
G.R. No. 160898 June 27, 2008 DAVID SIA TIO and ROBERT SIA TIO, petitioners, vs. LORENZO ABAYATA, et al.

Facts: The successors-in-interest of CeledonioAbayata (respondents) filed is an action for annulment of mortgage,
mortgage sale, a subsequent sale and certificates of title with the RTC on March 12, 1990. They claimed that they
are the absolute owners of the property in dispute. Respondents alleged that through machinations, defendant
Benjamin Lasola (Lasola) was able to register the property in his name under Transfer Certificate of Title (TCT) No.
11428 and mortgage it to secure a loan from the Commercial Rural Bank of Tabogon (Cebu), Inc. (Rural Bank). In
turn, the Rural Bank foreclosed the mortgage and sold the property to petitioners who registered the property
under TCT No. 20006. Petitioners and the Rural Bank filed their respective Answers claiming that they were
innocent purchasers for value and in good faith. Defendant Lasola and his wife were declared in default. On
November 29, 1996, the RTC rendered its Decision in favor of respondents. The petitioners and the Rural Bank
appealed to the CA but it dismissed the same. Petitioners filed a motion for reconsideration but it was denied by
the CA in its Resolution dated October 8, 2003. Hence, the present petition

Issue: Whether petitioners are innocent purchasers for value and in good faith.

Held: In the present case, a review of the records shows that both the RTC and the CA not only misapprehended
but also overlooked relevant facts which warrant a reversal of their respective Decisions and a dismissal of Civil
Case No. 2230-L. To begin with, in claiming ownership over the property, respondents chiefly relied on the
Decision dated November 26, 1986, rendered by the RTC of LapuLapu City, Branch 27, in Civil Case No. 620-L,
which was an action for the recovery of property and ownership filed by Lasola against them. In Civil Case No. 620-
L, Lasola posited that he is the owner of the property and is entitled to its possession by virtue of the Deed of Sale
executed between him and the respondents' predecessor-in-interest, CeledonioAbayata. In the RTC Decision dated
November 26, 1986, the sale between Lasola and Abayata was pronounced as one of equitable mortgage. Based
on said Decision, respondents filed Civil Case No. 2230-L, the progenitor of the present petition against the
petitioners, Lasola and the Rural Bank. An equitable mortgage has been defined as one which although lacking in
some formality, or form or words, or other requisites demanded by a statute, nevertheless reveals the intention of
the parties to charge real property as security for a debt, and contains nothing impossible or contrary to law. The
mortgagor retains ownership over the property but subject to foreclosure and sale at public auction upon failure of
the mortgagor to pay his obligation. It was patently erroneous for the RTC to categorically rule that Celedonio
retained title to the property and respondents became owners thereof by succession in the absence of any
allegation or evidence that will establish that Celedonio or respondents were able to redeem the property within
30 days from the time the judgment in Civil Case No. 620-L became final and executory. Such failure on
respondents' part is fatal, as they failed to lay the basis for their right to file Civil Case No. 2230-L. Even assuming
that, indeed, they are the rightful owners of the subject property at the time of the filing of Civil Case No. 2230-L,
the Court finds that ownership of the property has already been legitimately transferred to petitioners who are
innocent purchasers for value and in good faith. Ineluctably, the Rural Bank is a mortgagee in bad faith. Records
confirm that the Rural Bank did not exercise the due diligence required of banking and financial institutions before
entering into the mortgage contract with Lasola. Rural Bank was not a mortgagee in good faith because of its
failure to examine more closely the title of the mortgagors despite the first-hand knowledge that other persons,
and not the would-be mortgagors, were in possession of the property. The very fact that the lot was not in the
possession of the Lasolas should have put the defendant bank on guard and prompted it to make a more thorough
inquiry into the ownership of the lot. x xx the defendant Rural Bank relied on the representation of BanjaminLasola
that the residents on the lot were squatters. There is no showing that it inquired from the residents themselves as
to who the real owners were, something it would have done if it were reasonably diligent and prudent in verifying
the true ownership of the lot. Instead, as testified to by Mrs.Lechido, the bank relied merely on the declarations of
Benjamin Lasola and one resident on the lot that the houses were built and occupied by squatters. x xx The
doctrine that a fraudulent title may be the root of a valid title in the name of an innocent buyer for value and in
good faith24 applies to petitioners. A purchaser in good faith 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 such purchase or before he has notice of the claim of another person.25 The sources of notice are
the title, the recordings on the title and the land itself. The rule has always been that every person dealing with
registered land may safely rely on the correctness of the certificate of title issued therefor and the law will in no
way oblige him to go beyond the certificate to determine the condition of the property. Where there is nothing in
the certificate of title to indicate any cloud or vice in the ownership of the property, or any encumbrance thereon,
the purchaser is not required to explore further than what the Torrens Title upon its face indicates in quest for any
hidden defects or inchoate right that may subsequently defeat his right thereto.26 However, where the land sold is
in the possession of a person other than the vendor, the purchaser must go beyond the certificate of title and
make inquiries concerning the actual possessor. A buyer of real property which is in possession of another must be
wary and investigate the rights of the latter. Otherwise, without such inquiry, the buyer cannot be said to be in
good faith and cannot have any right over the property.27 Petitioners bought the property in 1989 from the Rural
Bank. While at the time of the sale, title to the property still remained in the name of Lasola, the Rural Bank had
documents showing that it bought the property in a valid foreclosure proceeding. Notices of extra-judicial sale
were published.28 An auction sale was held with the Rural Bank as the lone and highest bidder.29 A Certificate of
Sale was issued by the Deputy Provincial Sheriff in favor of the Rural Bank.30 After the lapse of the oneyear
redemption period, a Definite Deed of Sale was executed by the RTC-Cebu Sheriff in favor of the Rural Bank.31 The
Certificate of Sale and the Definite Deed of Sale, including the Real Estate Mortgage between Lasola and the Rural
Bank, were inscribed on Lasola's title.32 What's more, petitioners even went beyond the Rural Bank's documents
and together with a Rural Bank representative, inspected the property. When confronted with the presence of
houses on the property, they were led to believe by the Rural Bank's representative that the occupants were
merely squatters whose occupation was being tolerated by the Rural Bank.
LOPEZ v ALVAREZ
FACTS: Appellee Evaristo holds a lien over the estate of one Vicente Lopez as the latter executed a
mortgage deed in favor of Evaristo. On April 5, 1904, Evaristo assigned his lien on the estate to appellant
Manuel Lopez through a public instrument but the same was not registered in the Registry of Deeds.
Appellee Grindrod is a creditor of Evaristo, to whom the latter promised to pay his obligation through
the sugar yielded by the hacienda, said agreement was entered into July 7, 1900. But the hacienda was
not able to increase the sugar it yielded and defendant On August 5, 1904, Grindrod who feared of not
getting paid obtained a preliminary attachment over all the property of Evaristo including the lien that
was assigned to appellant. The same was registered on August 12, 1904. A dispute arised over the
rightful owner of the lien, defendants main contention is that since the assignment made to Lopez was
not registered it is not binding and has no effect.

ISSUE: WON THE ASSIGNMENT OF A MORTGAGE CREDIT NEED TO BE REGISTERED FOR IT TO BE VALID
AND EFFECTIVE?

HELD: NO. Although the Civil Code provides that A mortgage credit may be alienated or assigned
to a third person, wholly or partially, with the formalities required by law, the fact that such assignment
was not registered in the property register is no obstacle to the transfer of the dominion or ownership
of said credit in the sum therein stated in favor of Lopez. In as much as the assignment or alienation of a
credit, made by the owner thereof in favor of another, is prior to the act of its registration, and entirely
independent of such formality to such an extent that, if any question should arise over the contract
between the assignor and the assignee, it would have to be decided according to common law without
need of previous registration of the title, which shows that a credit secured by a mortgage may be
assigned or alienated, and is a perfectly valid contract even if it were not registered. Also, the
registration of the assignment or alienation of a credit secured by mortgage, required, among others, of
the Mortgage Law, is only necessary in order that it may be effectual as against third parties.
Philippine trust company vs echaus

Facts: At a public auction, PTC acquired all the right, title and interet of Echaus in the lots and
buildings for P40,000. It also acquired lots by purchase from Siuliuong & Co. for P33,000 for which it
received the corresponding certificates of title and defendant has been occupying the lots and
buildings without paying any rental, notwithstanding the notice to vacate.

The defendant made a specific denial and alleged that the was the owner of the cement building on
one of the lots and occupied it as such, and occupied other lots in the name of Enrique Echaus whom
the defendant elleges to be the owner and that the plaintiff obtained the certificates of title by
means of fraud.

Issue: Who owned the land?

Held: Phil Trust Company

Earlier, Siuliong & Co mortgaged the lots to Caballero for P47,500 and sold it to Enrique Echaus for
P24,000 with a condition that Echaus assumed and agreed to pay the balance due and owing on the
mortgage and if he fails to pay and S & C would be compelled to pay the mortgage, the sale would
be null and void. Enrique built the cement building, then sold all of his right, title and interest to the
lots to his sister and still includes the condition previously stated.

Assuming, without deciding, that the defendant actually constructed and paid for the cement building
on lot 485, the stubborn fact remains that the original mortgage was existing at the time the building
was constructed, and that Enrique Echaus made default and never paid or satisfied the mortgage, and
for its own protection Siuliong & Co. was forced to pay and take over the mortgage, and that to protect
its interests, plaintiff was forced to pay Siuliong & Co. the amount which it paid to acquire the mortgage.

The original mortgage contains covenants that it was a lien on the land and improvements thereon to
secure the payment of the debt, and there is no claim or pretense that any exception was ever made or
its legal force and effect for the construction of the cement building. How then and upon what legal
principle can the defendant claim to be the owner of the cement building on lot 485? In the final
analysis, plaintiff's title to the property dates and relates back to the original mortgage executed by
Siuliong & Co. to Maria Caballero y Aparici on December 6, 1916.
Hogar vs PNB

Facts: Novella et. al constituted a first mortgage on 6 lots to secure payment of the sum of P28,000 with
interest representing their indebtedness to El Hogar Filipino. The deed of mortgage contained this
clause:

In case the debt hereby acknowledge should become due by reason of the nonfulfillment by the
borrower of any of the obligations, the Association has chosen to make use of its right to
consider the borrower's debt due and may proceed with the extrajudicial sale at public auction
of the mortgaged property.

Subsequently, Serafin Novella constituted a second mortgage on his share of said lots in favor of PNB.
El Hogar consented to the constitution of the second mortgage on condition that it be considered
subordinate to the first mortgage. Novella et. al have violated the contract, El Hogar declared the debt
due andproceeded with the auction sale of the mortgage lots with El Hogar having been the highest
bidder at the sale. PNB was notoified of the sale and its right of repurchase, but never used such right.

30 days after the sale, the deed of sale issued in favor of El Hogar was presented to the office of the
register of deeds. PNB opposed, alleging that under the law, it had one year to redeem the lots. El Hogar
filed an action to declare the mortgage lien in favor of PNB extinguished.

Issue: WON the second mortgage in favor of PNB is cancelled.

Ruling: Yes.
By virtue of the mortgage constituted in favor of the El HogarFilipino, and the credit thereof having
become demandable, said mortgaged lots in order to apply the proceeds to the payment of its credit.
Such is the legal effect of the mortgage. The Philippine National Bank, by reason of the second mortgage
constituted in its favor which was accepted by it as subordinate to the first mortgage in favor of El Hogar
Filipino, cannot oppose such effect. The above-quoted tenth clause of the contract being valid, the
validity of the sale made strictly in accordance therewith cannot be questioned. Therefore, the security
in favor of said bank, as second creditor, was in fact extinguished thereby. Aside from the right of
repurchase, the Philippine National Bank's only right under the mortgage constituted in its favor would
be to apply to the payment of its credit the excess of the proceeds of the sale after the payment of that
of El Hogar Filipino, such being the effect of the subordination of its mortgage to that of the latter.
However, inasmuch as the credit of El Hogar Filipino has absorbed the entire proceeds of the sale, the
mortgage in favor of the bank was in fact extinguished with it because it cannot be enforced by said
bank beyond the total value of the mortgaged lots. Consequently, the lots passed to the repurchaser
free from the mortgage in favor of the bank. The bank's claim that the second mortgage in its favor
stands to the prejudice of the purchaser is untenable, particularly because, as the repurchaser in this
case is the first mortgages, would practically be to convert the second mortgage, constituted in favor of
the Philippine National Bank, into a first mortgage, and the first mortgage, constituted in favor of El
Hogar Filipino, into a second mortgage. The fact that El Hogar tolerated the annotation of the bank's
second mortgage on the transfer certificates of title in its name is of no avail, it being clear that El
Hogar's consent to this effect was not an admission of the existence of the bank's second mortgage but
merely a compromise with the bank's claim that it was still timely for the latter to redeem the lots sold,
as shown by the fact that El Hogar consented thereto provided it was made to appear that the
annotation was merely taken from the debtors' certificates of title.
DBP VS. NLRC

FACTS:

November 14, 1986, private respondents filed with DOLE- Daet, Camarines Norte, 17 individual
complaints against Republic Hardwood Inc. (RHI) for unpaid wages and separation pay..

RHI alleged that it had ceased to operate in 1983 due to the government ban against tree-cutting and
that in May 24, 1981, its sawmill was totally burned resulting in enormous losses and that due to its
financial setbacks, RHI failed to pay its loan with the DBP. RHI contended that since DBP foreclosed its
mortgaged assets on September 24,1985, then any adjudication of monetary claims in favor of its
former employees must be satisfied against DBP. Private respondent impleaded DBP.

Labor Arbiter favored private respondents and held RHI and DBP jointly and severally liable to private
respondents. DBP appealed to the NLRC. NLRC affirmed LAs judgment. DBP filed M.R. but it was
dismissed. Thus, this petition for certiorari.

ISSUE: Whether the private respondents separation pay should be preferred than the DBPs lien over
the RHIs mortgaged assets.

(2) No. Because of the petitioners assertion that LA and NLRC incorrectly applied the provisions of
Article 110 of the Labor Code, the Supreme Court was constrained to grant the petition for certiorari.

Article 110 must be read in relation to the Civil Code concerning the classification, concurrence and
preference of credits, which is application in insolvency proceedings where the claims of all creditors,
preferred or non-preferred, may be adjudicated in a binding manner. Before the workers preference
provided by Article 110 may be invoked, there must first be a declaration of bankruptcy or a judicial
liquidation of the employers business.

NLRC committed grave abuse of discretion when it affirmed the LAs ruling. DBPs lien on RHIs
mortgaged assets, being a mortgage credit, is a special preferred credit under Article 2242 of the Civil
Code while the workers preference is an ordinary preferred credit under Article 2244.

A distinction should be made between a preference of credit and a lien. A preference applies only to
claims which do not attach to specific properties. A lien creates a charge on a particular property. The
right of first preference as regards unpaid wages recognized by Article 110 does not constitute a lien on
the property of the insolvent debtor in favor of workers. It is but a preference of credit in their favor, a
preference in application. It is a method adopted to determine and specify the order in which credits
should be paid in the final distribution of the proceeds of the insolvents assets. It is a right to a first
preference in the discharge of the funds of the judgment debtor.

Article 110 of the Labor Code does not create a lien in favor of workers or employees for unpaid wages
either upon all of the properties or upon any particular property owned by their employer. Claims for
unpaid wages do not therefore fall at all within the category of specially preferred claims established
under Articles 2241 and 2242 of the Civil Code, except to the extent that such claims for unpaid wages
are already covered by Article 2241, (6)- (claims for laborers wages, on the goods manufactured or the
work done); or by Article 2242,(3)- (claims of laborers and other workers engaged in the construction,
reconstruction or repair of buildings, canals and other works, upon said buildings, canals and other
works.

Since claims for unpaid wages fall outside the scope of Article 2241 (6) and 2242 (3), and not attached to
any specific property, they would come within the category of ordinary preferred credits under Article
2244.

(Note: SC favored DBP kasi yung mortgage nila against RHI was executed prior to the amendment of
Article 110. The amendment cant be given retroactive effect daw. Pero sa present, 1st priority na
talaga ang laborers unpaid wages regardless kung may mortgage or wala ang ibang creditors ng
employer)

Article 110 of the Labor Code has been amended by R.A. No. 6715 and now reads:

Article 110. Worker preference in case of bankruptcy. In the event of bankruptcy or liquidation of an
employers business, his workers shall enjoy first preference as regards their unpaid wages and other
monetary claims, any provision of law to the contrary notwithstanding. Such unpaid wages, and
monetary claims shall be paid in full before the claims of the Government and other creditors may be
paid.

The amendment expands worker preference to cover not only unpaid wages but also other monetary
claims to which even claims of the Government must be deemed subordinate. Hence, under the new
law, even mortgage credits are subordinate to workers claims.

R.A. No. 6715, however, took effect only on March 21, 1989. The amendment cannot therefore be
retroactively applied to, nor can it affect, the mortgage credit which was secured by the petitioner
several years prior to its effectivity.

Even if Article 110 and its Implementing Rule, as amended, should be interpreted to mean `absolute
preference, the same should be given only prospective effect in line with the cardinal rule that laws
shall have no retroactive effect, unless the contrary is provided. To give Article 110 retroactive effect
would be to wipe out the mortgage in DBPs favor and expose it to a risk which it sought to protect itself
against by requiring a collateral in the form of real property.

The public respondent, therefore, committed grave abuse of discretion when it retroactively applied the
amendment introduced by R.A. No. 6715 to the case at bar.
Roman vs Herridge

Facts: U. de Poli was declared insolvent. Roman had tobacco deposited in De Polis bodegas in the
amount of around P78,000. De Poli had paid P15,000 and executed 4 promissory notes for the balance.
She prayed for an order of the court that the option of De Poli to purchase the tobacco be cancelled
unless the assignee of the insolvent secures her in the payment of the purchase price.

The assignee filed an answer to her petition in which he claims that the four promissory notes were a
valid claim against the insolvent estate and that the transaction was one of purchase and sale.

The lower court held in legal effect that the transaction was one of purchase and sale, and that under
the provisions of article 1922 of the Civil Code, Felisa Roman had a preference right for the amount of
the unpaid purchase price on the proceeds from the sale of the tobacco then in the hands of the
assignee, and ordered him to pay her the unpaid purchase price delivered from the proceeds of such
sale.

Felisa Roman filed two other motions: (a) To declare null and void the contract of pledge between De
Poli and the Asia Banking Corporation for 576 bales of the tobacco in question, and (b) to order the
assignee to sell the 2,777 fardos of tobacco for which the court had decided that she held a preference
at the rate of P10 per quintal. it was held in legal effect that the only lien upon the tobacco which Felisa
Roman had claim was a vendor's lien, and that the claim of the Asia Banking Corporation based upon
quedans was superior to that of Felisa Roman.

Issue: W/N Roman had preference

Ruling: Felisa Roman had a vendor's lien, but she would not have such a lien until after the delivery of
the tobacco. She would not have a preferred lien under the provisions of article 1924 until after such
delivery. Until the contract was actually consummated by both parties, either had a right to rescind. The
plaintiff could refuse to make delivery, and De Poli could refuse to accept delivery of the tobacco. It was
a contract to be performed in the future, contingent upon delivery and acceptance.

A preference is an exception to the general rule, and is what its name implies. By it one person is given a
superior right or claim over another. For such reason the law as to preferences should be strictly
construed.

Under such a state of facts, Exhibit A was not a public document within the meaning of article 1924, and
the plaintiff does not have a preferred lien for the unpaid balance of the contract.
Giberson Vs Juredini Bros

Facts:

Arroyo vs Yu de Sane

CHUA GUAN VS. SAMAHANG MAGSASAKA

FACTS: Gonzalo H. Co Toco was the owner of 5,894 shares of the capital stock of the said corporation
represented by nine certificates. He then mortgaged said shares to Chua Chiu to guarantee the payment
of a debt. The said certificates of stock were delivered with the mortgage to the mortgagee, Chua Chiu.
The said mortgage was duly registered in the office of the register of deeds of Manila and in the office of
the said corporation. Subsequently, Chua Chiu assigned all his right and interest in said mortgage to the
plaintiff and the assignment was registered in the office of the register of deeds in the City of Manila on
December 28, 1931, and in the office of the said corporation on January 4, 1932. The debtor, Gonzalo H.
Co Toco, having defaulted in the payment of said debt at maturity, the plaintiff foreclosed said mortgage
and delivered the certificates of stock and copies of the mortgage and assignment to the sheriff in order
to sell the said shares at public auction. The sheriff auctioned said 5,894 shares of stock and the plaintiff
having been the highest bidder. The sheriff executed in his favor a certificate of sale of said shares. The
plaintiff tendered the certificates of stock standing in the name of Gonzalo H. Co Toco to the proper
officers of the corporation for cancellation and demanded that they issue new certificates in the name
of the plaintiff. The said officers (the individual defendants) refused and still refuse to issue said new
shares in the name of the plaintiff. Their reason is that the chattel mortgage was not properly registered
since it was not registered in place of the principal business of the corporation.

ISSUE: Did the registration of said chattel mortgage in the registry of chattel mortgages in the
office of the register of deeds of Manila, under date of July 23, 1931, give constructive notice to the said
attaching creditors?

HELD: The attaching creditors are entitled to priority over the defectively registered mortgage of the
appellant

RATIO: The property in the shares maybe deemed to be situated in the province in which the
corporation has its principal office or place of business. If this province is also the province of the
owner's domicile, a single registration is sufficient. If not, the chattel mortgage should be registered
both at the owner's domicile and in the province where the corporation has its principal office or place
of business. In this sense the property mortgaged is not the certificate but the participation and share of
the owner in the assets of the corporation.

It is a common but not accurate generalization that the situs of shares of stock is at the domicile of the
owner. The term situs is not one of fixed or invariable meaning or usage. Nor should one lose sight of
the difference between the situs of the shares and the situs of the certificate of shares. The situs of
shares of stock for some purposes may be at the domicile of the owner and for others at the domicile of
the corporation; and even elsewhere. It is a general rule that for purposes of execution, attachment and
garnishment, it is not the domicile of the owner of a certificate but the domicile of the corporation
which is decisive.

By analogy with the foregoing and considering the ownership of shares in a corporation as property
distinct from the certificates which are merely the evidence of such ownership, it seems to be a
reasonable construction of section 4 of Act 1508 to hold that the property in the shares may be deemed
to be situated in the province in which the corporation has its principal office or place of business. If this
province is also the province of the owners domicile, a single registration is sufficient. If not, the chattel
mortgage should be registered both at the owners domicile and in the province where the corporation
has its principal office or place of business. In this sense the property mortgaged is not the certificate
but the participation and share of the owner in the assets of the corporation.

Standard Oil Co. vs Jaranillo

Facts: Gervasia de la Rosa, Vda. de Vera, who was renting a parcel of land in Manila, constructed a
building of strong materials thereon, which she conveyed to Standard Oil Company of New York by way
of chattel mortgage.

When the mortgagee presented the deed to the Register of Deeds of Manila for registration in the
Chattel Mortgage Registry, Joaquin Jaranillo, the Registrar refused to allow the registration on the
ground that the building was a real property, and therefore could not be the subject of a valid chattel
mortgage.

Issue: WON there was a valid Chattel Mortgage.

Ruling: Yes. . Art.334 and 335 of the Civil Code do not supply an absolute criterion for discriminating
between real and personal property for the purpose of applying the Chattel Mortgage Law.

It should also be noted that under given conditions property may have character different from that
imputed in said articles. Parties to a contract may, by agreement, treat as personal property that which
by nature would be real property.

It is undeniable that the parties to a contract may by agreement treat aspersonal property that which by
nature would be a real property, as long as no interest of third parties would be prejudiced thereby.

LEUNG YEE V. STRONG MACHINERY COMPANY

FACTS:
Compania Agricola Filipina bought rice-cleaning machinery from the machinery company and this was
secured by a chattel mortgage on the machinery and the building to which it was installed. Upon failure
to pay, the chattel mortgage was foreclosed, the building and machinery sold in public auction and
bought by the machinery company.
Days after, the Compania Agricola Filipina executed a deed of sale over the land to which the building
stood in favor of the machinery company.

On or about the date to which the chattel mortgage was excecuted, Compania executed a real
estate mortgage over the building in favor of Leung Yee, distinct and
separate from the land.

HELD:
The building in which the machinery was installed was real property, and the mere fact that the
parties seem to have dealt with it separate and apart from the land on which it stood in no wise
changed the character as real property.

The ruling should be in favor of the machine company because the plaintiff is not a buyer in good faith
and the former is first in possession of the property. (1544)

Makati Leasing and Finance Corp., vs Wearever Textile Mills, Inc.,

FACTS
Wearever Textile Mills, Inc. executed a chattel mortgage contract in favor of Makati Leasing and Finance
Corporation covering certain raw materials and machinery. Upon default, Makati Leasing fi led a petition
for judicial foreclosure of the properties mortgaged. Acting on Makati Leasings application for replevin,
the lower court issued a writ of seizure. Pursuant thereto, the sheriff enforcing the seizure order seized
the machinery subject matter of the mortgage. In a petition for certiorari and prohibition, the Court of
Appeals ordered the return of the machinery on the ground that the same can-not be the subject of
replevin because it is a real property pursuant to Article415 of the new Civil Code, the same being
attached to the ground by means of bolts and the only way to remove it from Wearever textiles plant
would be to drill out or destroy the concrete fl oor. When the motion for reconsideration of Makati
Leasing was denied by the Court of Appeals, Makati Leasing elevated the matter to the Supreme Court.

ISSUE
Whether the machinery in suit is real or personal property from the point of view of the parties.

HELD
There is no logical justification to exclude the rule out the present case from the application of the
pronouncement in Tumalad v Vicencio, 41 SCRA 143. If a house of strong materials, like what was
involved in the 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 the denying the existence of the chattel
mortgage.

LUNA V. ENCARNACION
June 30, 1952

FACTS:
A chattel mortgage was executed by petitioner Jose Luna covering his house with mixed materials to
respondent Trinidad Reyes to secure payment for a promissory note.
Luna failed to pay the promissory note and as such, Trinidad requested the sheriff to sell the property
through an extra judicial foreclosure to satisfy the obligation.

Luna contends that the foreclosure is invalid because the property is under chattel mortgage and as
such, it is not covered by RA3135 that only speaks of real estate mortgage.

ISSUE:
WON the mortgaged property can be covered by chattel mortgage even though it is a real property.

HELD:
Even though the property is a real property, it may be covered by a chattel mortgage for as long as it
was agreed upon by the parties. Hence, the foreclosure is invalid because it is only applicable for real
properties. The remedy of the respondent is to file an action for recovery of possession and not a writ of
possession.

Davao Sawmill Co. vs Castillo

FACTS
Davao Sawmill Co., operated a sawmill. The land upon which the business was conducted was leased
from another person. On the land, Davao Sawmill erected a building which housed the machinery it
used. Some of the machines were mounted and placed on foundations of cement. In the contract of
lease, Davo Sawmill agreed to turn over free of charge all improvements and buildings erected by it on
the premises with the exception of machineries, which shall remain with the Davao Sawmill. In an action
brought by the Davao Light and Power Co., judgment was rendered against Davao Sawmill. A writ of
execution was issued and the machineries placed on the sawmill were levied upon as personalty by the
sheriff. Davao Light and Power Co., proceeded to purchase the machinery and other properties
auctioned by the sheriff.

Issue: WON machineries can be the subject of chattel mortgage

Ruling: Yes. Machinery treated by the parties as personal property subsequently installed on leased land.
(Davao Sawmill Co., Inc. vs. Castillo, 61 Phil. 709 [1935].) Thus, the nature of the machineries in dispute
(i.e., that they 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 Civil Code. Machinery and equipment,
appearing to be immobile, may be treated by the parties as chattels to secure an obligation under the
principle of estoppel.
Associated Insurance and Surety Co. vs Isabel Iya, Adriano Valino and Lucia Valino

Isabel Iya vs Adriano Valino, Lucia Valino and Associated Insurance and Surety Co.

(Consolidated case)

Facts:

Sps. Valino were the owners of a house of strong materials constructed somewhere in Caloocan, which
they bought in installment basis from Philippines Realty Co. (PRC). Sps Valino later on executed a chattel
mortgage on the house in favor of Associated Insurance and Surety Co. (AISC), which was registered
with the Chattel Mortgage Register. When the chattel mortgage took place, the title of the house was still
under the name of PRC. Eventually after completing payment, the house was registered in the name of
the Sps. Subsequently, a second mortgage was executed now a real estate mortgage over the same
house in favor of Isabel Iya.

After sometime, the chattel mortgage over the house was foreclosed and was subject to public auction, in
which AISC was awarded the property. PRC learned of the existence of the real estate mortgage over the
property; thus, PRC instituted a civil case wherein the Sps. Valino and Iya were impleaded as defendant,
praying before the court the exclusion of the residential house from the real estate mortgage in favor of
the defendant and the declaration and recognition of PRCs right over the property by virtue of the public
auction where PRC was awarded with the property. However, Iya defended that in virtue of the real estate
mortgage executed by the Sps. Valino, she acquired a real right over the property. Hence, the prior
chattel mortgage was null and void for non-compliance with form required by law.

Iya filed another civil action against Sps. Valino and AISC, praying before the court that the defendants
and any other person claiming interest on the mortgaged property be barred of all rights over the same.

PRC contends that the house and lot must be deemed as personal property, since at the time of the
execution of the chattel mortgage the property did not belong to the Sps. Hence, the chattel mortgage
was valid.

Issue: W/N the property in which was subject to a chattel and real estate mortgage is a personal property.

Held: No. A building certainly cannot be divested of its character of realty by the fact that the land on
which it is constructed belongs to another. To hold it otherwise, the possibility is not remote that it would
result in confusion, for to cloak the building with an uncertain status made dependent on the ownership of
the land, would create a situation where a permanent fixture changes its nature or character as the
ownership of the land changes hands.

Hence, as personal properties could only be the subject of chattel mortgage, the chattel mortgage
executed before the real estate mortgage in favor of Iya is null and void.
Bachrach Motor Co V. Lacson Ledesma

FACTS:

June 30, 1927: CFI favored Bachrach Motor Co., Inc (Bachrach) against Mariano Lacson
Ledesma
Ledesma mortgaged to the Philippine National Bank (PNB) Talisay-Silay Milling Co., Inc
shares
September 29, 1928: PNB brought an action against Ledesma and his wife Concepcion Diaz
for the recovery of a mortgage credit
January 2, 1929: PNB amended its complaint by including the Bachrach Motor Co., Inc., as
party defendant because they claim to have rights to some of the subject matters of this
complaint
January 30, 1929: Bachrach field a gen. denial
CFI: favored PNB
December 20, 1929: Bachrach brought an action in the CFI against the Talisay-Silay Milling
Co., Inc., to recover P13,850 against the bonus or dividend w/c, by virtue of the resolution of
December 22, 1923, Central Talisay-Silay Milling Co., Inc., had declared in favor of
Ledesma as one of the owners of the hacienda which had been mortgaged to the PNB to
secure the obligation of the Talisay-Silay Milling Co., Inc. in favor of said bank
CFI: favored Bachrach
ISSUE: W/N shares of stock are personal property and therefore can be subject to pledge or chattel mortgage

HELD: YES. AFIRMED

section 4 of the Chattel Mortgage Law, in so far as it provides that a chattel mortgage shall
not be valid against any person except the mortgagor, his executors or administrators, unless
the possession of the property is delivered to and retained by the mortgagee or unless the
mortgage is recorded in the office of the register of deeds of the province in which the
mortgagor resides.
pledge of the 6,300 stock dividends is valid against the Bachrach because the certificate was
delivered to the creditor bank, notwithstanding the fact that the contract does not appear in a
public instrument
Certificates of stock or of stock dividends, under the Corporation Law, are quasi negotiable
instruments in the sense that they may be given in pledge or mortgage to secure an obligation
certificates of stock, while not negotiable in the sense of the law merchant, like bills and
notes, are so framed and dealt with as to be transferable, when property endorsed, by mere
delivery, and as they frequently convey, by estoppel against the corporation or against prior
holders, as good a title to the transferee as if they were negotiable, and inasmuch as a large
commercial use is made of such certificates as collateral security, and it is to the public
interest that such use should be simplify and facilitated by placing them as nearly as possible
on the plane of commercial paper, they are often spoken of and treated as quasi negotiable,
that is as having some of the attributes and partaking of the character of negotiable
instruments, in passing from hand to hand, especially where they are accompanied by an
assignment and power of attorney, executed in blank, to transfer them to anyone who may
obtain possession as holders, even though such assignment and power are under seal.
Philippine Refining Co., Inc. v. Aboitiz & Co.

Facts:

Philippine Refining Co., Inc., and Francisco Jarque executed three chattel mortgages on the motor
vessels Pandan and Zaragoza, which were recorded in the record of transfers and incumbrances of
vessels for the port of Cebu. The mortgages had no appended affidavit of good faith except for the
3rd mortgage, which was not registered in the customs house within the period of 30 days prior to
the start of the insolvency proceedings against Francisco Jarque.

A fourth mortgage was executed by Francisco Jarque and Ramon Aboitiz on the motorship
Zaragoza and was entered in the chattel mortgage registry of the register of deeds.

Francisco Jarque was then declared to be an insolvent debtor that resulted to an assignment of all
his properties in favor of Jose Corominas.

Judge Jose M. Hontiveros declined the foreclosure of the mortgages and sustained the special
defenses of fatal defectiveness of the mortgages.

Issue:

Whether or not the mortgages are defective.

Held:

Vessels are considered personal property under the civil law. (Code of Commerce, article 585.)
Similarly under the common law, vessels are personal property although occasionally referred to as
a peculiar kind of personal property.

Since the term "personal property" includes vessels, they are subject to mortgage agreeably to the
provisions of the Chattel Mortgage Law. (Act No. 1508, section 2.)

The only difference between a chattel mortgage of a vessel and a chattel mortgage of other
personalty is that it is not now necessary for a chattel mortgage of a vessel to be noted n the registry
of the register of deeds, but it is essential that a record of documents affecting the title to a vessel be
entered in the record of the Collector of Customs at the port of entry. Otherwise a mortgage on a
vessel is generally like other chattel mortgages as to its requisites and validity.

A good chattel mortgage according to Section 5 of The Chattell Mortgage Law, includes the
requirement of an affidavit of good faith appended to the mortgage and recorded therewith. The
absence of the affidavit vitiates a mortgage as against creditors and subsequent encumbrancers. As
a consequence a chattel mortgage of a vessel wherein the affidavit of good faith required by the
Chattel Mortgage Law is lacking, is unenforceable against third persons.
SIBAL v. VALDEZ

FACTS: The deputy sheriff of Tarlac attached and sold to Valdez the sugarcane planted by the plaintiff.
The plaintiff asked for the redemption of the sugarcane. Valdez said that it cannot be subject to
redemption because it is a personal property.

ISSUE: WON the sugarcane in question is a personal or real property.

HELD:Sugarcane is under real property as ungathered products. The Supreme Court of Louisiana
provided that standing crops are considered as part of the land to which they are attached but the
immovability provided for is only one in abstract. The existence of a right on the growing crop is
mobilization by anticipation, a gathering as it were in advance, rendering the crop movable quoad the
right acquired therein.

-A crop raised on leased premises in no sense forms part of the immovable. It belongs to the lessee and
may be sold by him.

-Act 1508 (Chattel Mortgage Law) recognize growing crops as personal property.

Crops whether growing or ready to be harvested, when produced by annual cultivation, is not part of
realty.

Paragraph 2 of Art. 334 of the Civil Code has been modified by Sec. 450 of Code of Civil Procedure and
Act no. 1508 in the sense that for purposes of attachment and execution and Chattel Mortgage Law,
ungathered products have the nature of personal property.

INVOLUNTARY INSOLVENCY OF STROCHECKER V. RAMIREZ

44 PHIL 933
FACTS:
Three mortgages were seeking preference in the lower court. The one of
Fidelity and Surety Co. alleged that it should be given preference as the mortgage in favor of
Ramirez was not valid as the subject of the mortgage
cannot be a proper subject thereof. The subject involved in the 1st mortgage is an interest in
business of a drug store.
HELD:
Such interest in the business is a personal property capable of appropriation and not
included in the enumeration of real properties in the Civil
Code, and may be the subject of mortgage. All personal property may be mortgaged.

Ledesma vs Perez: