CM cases

G.R. No. 18520

September 26, 1922

INVOLUNTARY INSOLVENCY OF PAUL STROCHECKER, appellee, vs. ILDEFONSO RAMIREZ, creditor and appellant. WILLIAM EDMONDS, assignee. Lim & Lim for appellant. Ross & Lawrence and Antonio T. Carrascoso, jr., for the Fidelity & Surety Co. ROMUALDEZ, J.: The question at issue in this appeal is, which of the two mortgages here in question must be given preference? Is it the one in favor of the Fidelity & Surety Co., or that in favor of Ildefonso Ramirez. The first was declared by the trial court to be entitled to preference. In the lower court there were three mortgagees each of whom claimed preference. They were the two above mentioned and Concepcion Ayala. The latter's claim was rejected by the trial court, and from that ruling she did not appeal. There is no question as to the priority in time of the mortgage in favor of the Fidelity & Surety Co. which was executed on March 10, 1919, and registered in due time in the registry of property, that in favor of the appellant being dated September 22, 1919, and registered also in the registry. The appellant claims preference on these grounds: (a) That the first mortgage above-mentioned is not valid because the property which is the subject-matter thereof is not capable of being mortgaged, and the description of said property is not sufficient; and (b) that the amount due the appellant is a purchase price, citing article 1922 of the Civil Code in support thereof, and that his mortgage is but a modification of the security given by the debtor on February 15, 1919, that is, prior to the mortgage executed in favor of the Fidelity & Surety Co. As to the first ground, the thing that was mortgaged to this corporation is described in the document as follows: . . . his half interest in the drug business known as Antigua Botica Ramirez (owned by Srta. Dolores del Rosario and the mortgagor herein referred to as the partnership), located at Calle Real Nos. 123 and 125, District of Intramuros, Manila, Philippine Islands. With regard to the nature of the property thus mortgaged, which is one-half interest in the business above described, such interest is a personal property capable of appropriation and not included in the enumeration of real properties in article 335 of the Civil Code, and may be the subject of mortgage. All personal property may be mortgaged. (Sec. 2, Act No. 1508.) The description contained in the document is sufficient. The law (sec. 7, Act No. 1508) requires only a description of the following nature: The description of the mortgaged property shall be such as to enable the parties to the mortgage, or any other person, after reasonable inquiry and investigation, to identify the same.

Turning to the second error assigned, numbers 1, 2, and 3 of article 1922 of the Civil Code invoked by the appellant are not applicable. Neither he, as debtor, nor the debtor himself, is in possession of the property mortgaged, which is, and since the registration of the mortgage has been, legally in possession of the Fidelity & Surety Co. (Sec. 4, Act No. 1508; Meyers vs. Thein, 15 Phil., 303.) In no way can the mortgage executed in favor of the appellant on September 22, 1919, be given effect as of February 15, 1919, the date of the sale of the drug store in question. On the 15th of February of that year, there was a stipulation about a persons security, but not a mortgage upon any property, and much less upon the property in question. Moreover, the appellant cannot deny the preferential character of the mortgage in favor of the Fidelity & Surety Co. because in the very document executed in his favor it was stated that his mortgage was a second mortgage, subordinate to the one made in favor of the Fidelity & Surety Co. ALEJANDRA TORRES, ET AL., plaintiff-appellees, vs. FRANCISCO LIMJAP, Special Administrator of the estate of the deceased Jose B. Henson, defendant-appellant. x---------------------------------------------------------x G.R. No. 34386

September 21, 1931

SABINA VERGARA VDA. DE TORRES, ET AL., plaintiffs-appellees, vs. FRANCISCO LIMJAP, Special Administration of the estate of the deceased Jose B. Henson, defendant-appellant. Duran, Lim and Tuason for appellant. Guevara, Francisco and Recto for appellees. JOHNSON, J.: These two actions were commenced in the Court of First Instance of Manila on April 16, 1930, for the purpose of securing from the defendant the possession of two drug stores located in the City of Manila, covered by two chattel mortgages executed by the deceased Jose B. Henson in favor of the plaintiffs. In the first case the plaintiffs alleged that Jose B. Henson, in his lifetime, executed in their favor a chattel mortgage (Exhibit A) on his drug store at Nos. 101-103 Calle Rosario, known as Farmacia Henson, to secure a loan of P7,000, although it was made to appear in the instrument that the loan was for P20,000. In the second case the plaintiffs alleged that they were the heirs of the late Don Florentino Torres; and that Jose B. Henson, in his lifetime, executed in favor of Don Florentino Torres a chattel mortgage (also Exhibit A) on his three drug stores known as Henson's Pharmacy, Farmacia Henson and Botica Hensonina, to secure a loan of P50,000, which was later reduced to P26,000, and for which, Henson's Pharmacy at Nos. 71-73 Escolta, remained as the only security by agreement of the parties.

In both cases the plaintiffs alleged that the defendant violated the terms of the mortgage and that, in consequence thereof they became entitled to the possession of the chattels and to foreclose their mortgages thereon. Upon the petition of the plaintiffs and after the filing of the necessary bonds, the court issued in each case an order directing the sheriff of the City of Manila to take immediate possession of said drug stores. The defendant filed practically the same answer to both complaints. He denied generally and specifically the plaintiffs' allegations, and set up the following special defenses: (1) That the chattel mortgages (Exhibit A, in G.R. No. 34385 and Exhibit A, in G.R. No. 34286) are null and void for lack of sufficient particularity in the description of the property mortgaged; and (2) That the chattels which the plaintiffs sought to recover were not the same property described in the mortgage. The defendant also filed a counterclaim for damages in the sum of P20,000 in the first case and P100,000 in the second case. Upon the issue thus raised by the pleadings, the two causes were tried together by agreement of the parties. After hearing the evidence adduced during the trial and on July 17, 1930, the Honorable Mariano Albert, judge, in a very carefully prepared opinion, arrived at the conclusion (a) that the defendant defaulted in the payment of interest on the loans secured by the mortgages, in violation of the terms thereof; (b) that by reason of said failure said mortgages became due, and (c) that the plaintiffs, as mortgagees, were entitled to the possession of the drug stores Farmacia Henson at Nos. 101-103 Calle Rosario and Henson's Pharmacy at Nos. 71-73 Escolta. Accordingly, a judgment was rendered in favor of the plaintiffs and against the defendant, confirming the attachment of said drug stores by the sheriff of the City of Manila and the delivery thereof to the plaintiffs. The dispositive part of the decision reads as follows: En virtud de todo lo expuesto, el Juzgado dicta sentencia confirmado en todas sus partes los ordenes de fechas 16 y 17 de abril de presente ano, dictadas en las causas Nos. 37096 y 37097, respectivamente, y declara definitiva la entrega hecha a los demandantes por el Sheriff de Manila de las boticas en cuestion. Se condena en costas al demandado en ambas causas. From the judgment the defendant appealed, and now makes the following assignments of error: I. The lower court erred in failing to make a finding on the question of the sufficiency of the description of the chattels mortgaged and in failing to hold that the chattel mortgages were null and void for lack of particularity in the description of the chattels mortgaged. II. The lower court erred in refusing to allow the defendant to introduce evidence tending to show that the stock of merchandise found in the two drug stores was not in existence or owned by the mortgagor at the time of the execution of the mortgages in question. III. The lower court erred in holding that the administrator of the deceased is now estopped from contesting the validity of the mortgages in question. IV. The lower court erred in failing to make a finding on the counterclaims of the defendant. With reference to the first assignment of error, we deem it unnecessary to discuss the question therein raised, inasmuch as according to our view on the question of estoppel, as we shall

hereinafter set forth in our discussion of the third assignment of error, the defendant is estopped from questioning the validity of these chattel mortgages. In his second assignment of error the appellant attacks the validity of the stipulation in said mortgages authorizing the mortgagor to sell the goods covered thereby and to replace them with other goods thereafter acquired. He insists that a stipulation authorizing the disposal and substitution of the chattels mortgaged does not operate to extend the mortgage to after-acquired property, and that such stipulation is in contravention of the express provision of the last paragraph of section 7 Act No. 1508, which reads as follows: A chattel mortgage shall be deemed to cover only the property described therein and not like or substituted property thereafter acquired by the mortgagor and placed in the same depository as the property originally mortgaged, anything in the mortgage to the contrary notwithstanding. In order to give a correct construction to the above-quoted provision of our Chattel Mortgage Law (Act No. 1508), the spirit and intent of the law must first be ascertained. When said Act was placed on our statute books by the United States Philippine Commission on July 2, 1906, the primary aim of that law-making body was undoubtedly to promote business and trade in these Islands and to give impetus to the economic development of the country. Bearing this in mind, it could not have been the intention of the Philippine Commission to apply the provision of section 7 above quoted to stores open to the public for retail business, where the goods are constantly sold and substituted with new stock, such as drug stores, grocery stores, dry-goods stores, etc. If said provision were intended to apply to this class of business, it would be practically impossible to constitute a mortgage on such stores without closing them, contrary to the very spirit about a handicap to trade and business, would restrain the circulation of capital, and would defeat the purpose for which the law was enacted, to wit, the promotion of business and the economic development of the country. In the interpretation and construction of a statute the intent of the law-maker should always be ascertained and given effect, and courts will not follow the letter of a statute when it leads away from the true intent and purpose of the Legislature and to conclusions inconsistent with the spirit of the Act. On this subject, Sutherland, the foremost authority on statutory construction, says: The Intent of Statute is the Law. — If a statute is valid it is to have effect according to the purpose and intent of the lawmaker. The intent is the vital part, the essence of the law, and the primary rule of construction is to ascertain and give effect to that intent. The intention of the legislature in enacting a law is the law itself, and must be enforced when ascertained, although it may not be consistent with the strict letter of the statute. Courts will not follow the letter of a statute when it leads away from the true intent and purpose of the legislature and to conclusions inconsistent with the general purpose of the act. Intent is the spirit which gives life to a legislative enactment. In construing statutes the proper course is to start out and follow the true intent of the legislature and to adopt that sense which harmonizes best with the content and promotes in the fullest manner the apparent policy and objects of the legislature. (Vol. II Sutherland, Statutory Construction, pp. 693-695.) A stipulation in the mortgage, extending its scope and effect to after-acquired property, is valid and binding — . . . where the after-acquired property is in renewal of, or in substitution for, goods on hand when the mortgage was executed, or is purchased with the proceeds of the sale of such goods, etc. (11 C.J., p. 436.)

Cobbey, a well-known authority on Chattel Mortgages, recognizes the validity of stipulations relating to after-acquired and substituted chattels. His views are based on the decisions of the supreme courts of several states of the Union. He says: "A mortgage may, by express stipulations, be drawn to cover goods put in stock in place of others sold out from time to time. A mortgage may be made to include future acquisitions of goods to be added to the original stock mortgaged, but the mortgage must expressly provide that such future acquisitions shall be held as included in the mortgage. ... Where a mortgage covering the stock in trade, furniture, and fixtures in the mortgagor's store provides that "all goods, stock in trade, furniture, and fixtures hereafter purchased by the mortgagor shall be included in and covered by the mortgage," the mortgage covers all after-acquired property of the classes mentioned, and, upon foreclosure, such property may be taken and sold by the mortgagee the same as the property in possession of the mortgagor at the time the mortgage was executed." (Vol. I, Cobbey on Chattel Mortgages, sec. 361, pp. 474, 475.) In harmony with the foregoing, we are of the opinion (a) that the provision of the last paragraph of section 7 of Act No. 1508 is not applicable to drug stores, bazaars and all other stores in the nature of a revolving and floating business; (b) that the stipulation in the chattel mortgages in question, extending their effect to after-acquired property, is valid and binding; and (c) that the lower court committed no error in not permitting the defendant-appellant to introduce evidence tending to show that the goods seized by the sheriff were in the nature of after-acquired property. With reference to the third assignment of error, we agree with the lower court that, from the facts of record, the defendant-appellant is estopped from contenting the validity of the mortgages in question. This feature of the case has been very ably and fully discussed by the lower court in its decision, and said discussion is made, by reference, a part of this opinion. As to the fourth assignment of error regarding the counterclaims of the defendant-appellant, it may be said that in view of the conclusions reached by the lower court, which are sustained by this court, the lower court committed no error in not making any express finding as to said counterclaims. As a matter of form, however, the counter-claims should have been dismissed, but as the trial court decided both cases in favor of the plaintiffs and confirmed and ratified the orders directing the sheriff to take possession of the chattels on behalf of the plaintiffs, there was, in effect, a dismissal of the defendant's counterclaims. For all of the foregoing, we are of the opinion and so hold that the judgment appealed from is in accordance with the facts and the law, and the same should be and is hereby affirmed, with costs. So ordered. Makati Leasing and Finance Corporation v. Wearever Textile Mills, Inc., 122 SCRA 296 (1983) FACTS: -Wearever Textile Mills, Inc., discounted and assigned several receivables with the former under a Receivable Purchase Agreement in favor of Makati Leasing and Finance Corporation in order to obtain financial accommodations. - To secure the collection of the receivables assigned, Wearever executed a Chattel Mortgage over certain raw materials inventory as well as a machinery described as an Artos Aero Dryer Stentering Range. -Upon Wearever’s default, Makati Leasing 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 premisesof Wearever and was not able to effect the seizure of the aforedescribed machinery. Makati Leasing thereafter filed a complaint for judicial foreclosure. -Acting on Makati Leasing's application for replevin, the lower court issued a writ of seizure, the enforcement of which was however subsequently restrained upon Wearever’s filing of a motion for reconsideration. After several incidents, the lower court finally issued an order lifting the restraining order for the enforcement of the writ of seizure and an order to break open the premises of Wearever’s to enforce said writ. The lower court reaffirmed its stand upon Wearever’s filing of a further motion for reconsideration. -The sheriff enforcing the seizure order, repaired to the premises Wearever’s and removed the main drive motor of the subject machinery. CA: -Set aside orders of the Lower Court and ordered the return of the main drive motor of the machinery. It held that the subject machinery cannot be subject of replevin because it is a real property pursuant to Article 415 of the Civil Code. Therefore Chattel Mortgage constituted upon it is null and void. ISSUE: -Whether or not the subject machinery is a real property or a personal property to subject it to chattel mortgage. HELD: -Where a chattel mortgage is constituted on machinery attached to the ground the machinery is to be considered as a personal property and the chattel mortgage constituted thereon is not null and void regardless of who owns the land. - A property attached to the ground like a house of strong materials, 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. SANTOS EVANGELISTA, petitioner, vs. ALTO SURETY & INSURANCE CO., INC., respondent. Gonzalo D. David for petitioner. Raul A. Aristorenas and Benjamin Relova for respondent. CONCEPCION, J.: This is an appeal by certiorari from a decision of the Court of Appeals. Briefly, the facts are: On June 4, 1949, petitioner herein, Santos Evangelista, instituted Civil Case No. 8235 of the Court of First, Instance of Manila entitled " Santos Evangelista vs. Ricardo Rivera," for a sum of money. On the same date, he obtained a writ of attachment, which levied upon a house,

built by Rivera on a land situated in Manila and leased to him, by filing copy of said writ and the corresponding notice of attachment with the Office of the Register of Deeds of Manila, on June 8, 1949. In due course, judgment was rendered in favor of Evangelista, who, on October 8, 1951, bought the house at public auction held in compliance with the writ of execution issued in said case. The corresponding definite deed of sale was issued to him on October 22, 1952, upon expiration of the period of redemption. When Evangelista sought to take possession of the house, Rivera refused to surrender it, upon the ground that he had leased the property from the Alto Surety & Insurance Co., Inc. — respondent herein — and that the latter is now the true owner of said property. It appears that on May 10, 1952, a definite deed of sale of the same house had been issued to respondent, as the highest bidder at an auction sale held, on September 29, 1950, in compliance with a writ of execution issued in Civil Case No. 6268 of the same court, entitled "Alto Surety & Insurance Co., Inc. vs. Maximo Quiambao, Rosario Guevara and Ricardo Rivera," in which judgment, for the sum of money, had been rendered in favor respondent herein, as plaintiff therein. Hence, on June 13, 1953, Evangelista instituted the present action against respondent and Ricardo Rivera, for the purpose of establishing his (Evangelista) title over said house, securing possession thereof, apart from recovering damages. In its answer, respondent alleged, in substance, that it has a better right to the house, because the sale made, and the definite deed of sale executed, in its favor, on September 29, 1950 and May 10, 1952, respectively, precede the sale to Evangelista (October 8, 1951) and the definite deed of sale in his favor (October 22, 1952). It, also, made some special defenses which are discussed hereafter. Rivera, in effect, joined forces with respondent. After due trial, the Court of First Instance of Manila rendered judgment for Evangelista, sentencing Rivera and respondent to deliver the house in question to petitioner herein and to pay him, jointly and severally, forty pesos (P40.00) a month from October, 1952, until said delivery, plus costs. On appeal taken by respondent, this decision was reversed by the Court of Appeals, which absolved said respondent from the complaint, upon the ground that, although the writ of attachment in favor of Evangelista had been filed with the Register of Deeds of Manila prior to the sale in favor of respondent, Evangelista did not acquire thereby a preferential lien, the attachment having been levied as if the house in question were immovable property, although in the opinion of the Court of Appeals, it is "ostensibly a personal property." As such, the Court of Appeals held, "the order of attachment . . . should have been served in the manner provided in subsection (e) of section 7 of Rule 59," of the Rules of Court, reading: The property of the defendant shall be attached by the officer executing the order in the following manner: (e) Debts and credits, and other personal property not capable of manual delivery, by leaving with the person owing such debts, or having in his possession or under his control, such credits or other personal property, or with, his agent, a copy of the order, and a notice that the debts owing by him to the defendant, and the credits and other personal property in his possession, or under his control, belonging to the defendant, are attached in pursuance of such order. (Emphasis ours.) However, the Court of Appeals seems to have been of the opinion, also, that the house of Rivera should have been attached in accordance with subsection (c) of said section 7, as "personal property capable of manual delivery, by taking and safely keeping in his custody", for it declared that "Evangelists could not have . . . validly purchased Ricardo Rivera's house from the sheriff as the latter was not in possession thereof at the time he sold it at a public auction."

Evangelista now seeks a review, by certiorari, of this decision of the Court of Appeals. In this connection, it is not disputed that although the sale to the respondent preceded that made to Evangelists, the latter would have a better right if the writ of attachment, issued in his favor before the sale to the respondent, had been properly executed or enforced. This question, in turn, depends upon whether the house of Ricardo Rivera is real property or not. In the affirmative case, the applicable provision would be subsection (a) of section 7, Rule 59 of the Rules of Court, pursuant to which the attachment should be made "by filing with the registrar of deeds a copy of the order, together with a description of the property attached, and a notice that it is attached, and by leaving a copy of such order, description, and notice with the occupant of the property, if any there be." Respondent maintains, however, and the Court of Appeals held, that Rivera's house is personal property, the levy upon which must be made in conformity with subsections (c) and (e) of said section 7 of Rule 59. Hence, the main issue before us is whether a house, constructed the lessee of the land on which it is built, should be dealt with, for purpose, of attachment, as immovable property, or as personal property. It is, our considered opinion that said house is not personal property, much less a debt, credit or other personal property not capable of manual delivery, but immovable property. As explicitly held, in Laddera vs. Hodges (48 Off. Gaz., 5374), "a true building (not merely superimposed on the soil) is immovable or real property, whether it is erected by the owner of the land or by usufructuary or lessee. This is the doctrine of our Supreme Court in Leung Yee vs. Strong Machinery Company, 37 Phil., 644. And it is amply supported by the rulings of the French Court. . . ." It is true that the parties to a deed of chattel mortgage may agree to consider a house as personal property for purposes of said contract (Luna vs. Encarnacion, * 48 Off. Gaz., 2664; Standard Oil Co. of New York vs. Jaramillo, 44 Phil., 630; De Jesus vs. Juan Dee Co., Inc., 72 Phil., 464). However, this view is good only insofar as thecontracting parties are concerned. It is based, partly, upon the principle of estoppel. Neither this principle, nor said view, is applicable to strangers to said contract. Much less is it in point where there has been no contractwhatsoever, with respect to the status of the house involved, as in the case at bar. Apart from this, in Manarang vs. Ofilada (99 Phil., 108; 52 Off. Gaz., 3954), we held: The question now before us, however, is: Does the fact that the parties entering into a contract regarding a house gave said property the consideration of personal property in their contract, bind the sheriff in advertising the property's sale at public auction as personal property? It is to be remembered that in the case at bar the action was to collect a loan secured by a chattel mortgage on the house. It is also to be remembered that in practice it is the judgment creditor who points out to the sheriff the properties that the sheriff is to levy upon in execution, and the judgment creditor in the case at bar is the party in whose favor the owner of the house had conveyed it by way of chattel mortgage and, therefore, knew its consideration as personal property. These considerations notwithstanding, we hold that the rules on execution do not allow, and, we should notinterpret them in such a way as to allow, the special consideration that parties to a contract may have desired to impart to real estate, for example, as personal property, when they are, not ordinarily so. Sales on execution affect the public and third persons. The regulation governing sales on execution are for public officials to follow. The form of proceedings prescribed for each kind of property is suited to its character, not to the character, which the parties have given to it or desire to give it. When the rules speak of personal property, property which is ordinarily so considered is meant; and when real property is spoken of, it means property which is generally known as real property. The regulations

were never intended to suit the consideration that parties may have privately given to the property levied upon. Enforcement of regulations would be difficult were the convenience or agreement of private parties to determine or govern the nature of the proceedings. We therefore hold that the mere fact that a house was the subject of the chattel mortgage and was considered as personal property by the parties does not make said house personal property for purposes of the notice to be given for its sale of public auction. This ruling is demanded by the need for a definite, orderly and well defined regulation for official and public guidance and would prevent confusion and misunderstanding. We, therefore, declare that the house of mixed materials levied upon on execution, although subject of a contract of chattel mortgage between the owner and a third person, is real property within the purview of Rule 39, section 16, of the Rules of Court as it has become a permanent fixture of the land, which, is real property. (42 Am. Jur. 199-200; Leung Yee vs. Strong Machinery Co., 37 Phil., 644; Republic vs. Ceniza, et al., 90 Phil., 544; Ladera,, et al. vs. Hodges, et al., [C.A.] Off. Gaz. 5374.)" (Emphasis ours.) The foregoing considerations apply, with equal force, to the conditions for the levy of attachment, for it similarly affects the public and third persons. It is argued, however, that, even if the house in question were immovable property, its attachment by Evangelista was void or ineffective, because, in the language of the Court of Appeals, "after presenting a Copy of the order of attachment in the Office of the Register of Deeds, the person who might then be in possession of the house, the sheriff took no pains to serve Ricardo Rivera, or other copies thereof." This finding of the Court of Appeals is neither conclusive upon us, nor accurate. The Record on Appeal, annexed to the petition for Certiorari, shows that petitioner alleged, in paragraph 3 of the complaint, that he acquired the house in question "as a consequence of the levy of an attachment and execution of the judgment in Civil Case No. 8235" of the Court of First Instance of Manila. In his answer (paragraph 2), Ricardo Rivera admitted said attachment execution of judgment. He alleged, however, by way a of special defense, that the title of respondent "is superior to that of plaintiff because it is based on a public instrument," whereas Evangelista relied upon a "promissory note" which "is only a private instrument"; that said Public instrument in favor of respondent "is superior also to the judgment in Civil Case No. 8235"; and that plaintiff's claim against Rivera amounted only to P866, "which is much below the real value" of said house, for which reason it would be "grossly unjust to acquire the property for such an inadequate consideration." Thus, Rivera impliedly admitted that his house had been attached, that the house had been sold to Evangelista in accordance with the requisite formalities, and that said attachment was valid, although allegedly inferior to the rights of respondent, and the consideration for the sale to Evangelista was claimed to be inadequate. Respondent, in turn, denied the allegation in said paragraph 3 of the complaint, but only " for the reasons stated in its special defenses" namely: (1) that by virtue of the sale at public auction, and the final deed executed by the sheriff in favor of respondent, the same became the "legitimate owner of the house" in question; (2) that respondent "is a buyer in good faith and for value"; (3) that respondent "took possession and control of said house"; (4) that "there was no valid attachment by the plaintiff and/or the Sheriff of Manila of the property in question as neither took actual or constructive possession or control of the property at any time"; and (5) "that the alleged registration of plaintiff's attachment, certificate of sale and final deed in the Office of Register of Deeds, Manila, if there was any, is likewise, not valid as there is no registry of transactions covering houses erected on land belonging to or leased from another." In this manner, respondent claimed a better right, merely under the theory that, in case of double sale of immovable property, the purchaser who first obtains possession in good faith, acquires title, if the sale has not been "recorded . . . in the Registry

of Property" (Art. 1544, Civil Code of the Philippines), and that the writ of attachment and the notice of attachment in favor of Evangelista should be considered unregistered, "as there is no registry of transactions covering houses erected on land belonging to or leased from another." In fact, said article 1544 of the Civil Code of the Philippines, governing double sales, was quoted on page 15 of the brief for respondent in the Court of Appeals, in support of its fourth assignment of error therein, to the effect that it "has preference or priority over the sale of the same property" to Evangelista. In other words, there was no issue on whether copy of the writ and notice of attachment had been served on Rivera. No evidence whatsoever, to the effect that Rivera had not been served with copies of said writ and notice, was introduced in the Court of First Instance. In its brief in the Court of Appeals, respondent did not aver, or even, intimate, that no such copies were served by the sheriff upon Rivera. Service thereof on Rivera had been impliedly admitted by the defendants, in their respective answers, and by their behaviour throughout the proceedings in the Court of First Instance, and, as regards respondent, in the Court of Appeals. In fact, petitioner asserts in his brief herein (p. 26) that copies of said writ and notice were delivered to Rivera, simultaneously with copies of the complaint, upon service of summons, prior to the filing of copies of said writ and notice with the register deeds, andthe truth of this assertion has not been directly and positively challenged or denied in the brief filed before us by respondent herein. The latter did not dare therein to go beyond making a statement — for the first time in the course of these proceedings, begun almost five (5) years ago (June 18, 1953) — reproducing substantially the aforementioned finding of the Court of Appeals and then quoting the same. Considering, therefore, that neither the pleadings, nor the briefs in the Court of Appeals, raised an issue on whether or not copies of the writ of attachment and notice of attachment had been served upon Rivera; that the defendants had impliedly admitted-in said pleadings and briefs, as well as by their conduct during the entire proceedings, prior to the rendition of the decision of the Court of Appeals — that Rivera had received copies of said documents; and that, for this reason, evidently, no proof was introduced thereon, we, are of the opinion, and so hold that the finding of the Court of Appeals to the effect that said copies had not been served upon Rivera is based upon a misapprehension of the specific issues involved therein and goes beyond the range of such issues, apart from being contrary to the aforementioned admission by the parties, and that, accordingly, a grave abuse of discretion was committed in making said finding, which is, furthermore, inaccurate. Filipinas Marble Corporation v. Intermediate Appellate Court, 142 SCRA 180 (1986) FACTS: -Filipinas Marble Corporation applied for a loan with Development Bank of the Philippines (DBP) in its desire to develop the fun potentials of its mining claims and deposits and to finance acquisition of machinery. DBP granted the loan subject, however, to sixty onerous conditions, among which are: Filipinas Marble shall have to enter into a management contract with respondent Bancom Systems Control, Inc. [Bancom] and that the loan be secured by a mortgage. -The mortgage was not registered. -Bancom and its directors/ officers mismanaged and misspent the loan. -Bancom resigned with the approval of DBP even before the expiration of the management contract, leaving Filipinas Marble desolate and devastated. -Machineries arrived in the Philippines but alleged not delivered to Filipinas Marble.

-Also, instead of helping Filipinas Marble get back on its feet, DBP completely abandoned Filipinas Marble’s project and proceeded to foreclose the properties mortgage without previous demand or notice. -In essence, the Filipinas Marble seeks the annulment of the deeds of mortgage and deed of assignment because there was no loan at all to secure since what DBP "lent" to Filipinas Marble with its right hand, it also got back with its left hand; and that, there was failure of consideration with regard to the execution of said deeds as the loan was never delivered to the Filipinas Marble. -The Filipinas Marble further prayed that pending the trial on the merits of the case, the trial court immediately issue a restraining order and then a writ of preliminary injunction against the sheriffs to enjoin the latter from proceeding with the foreclosure and sale of the Filipinas Marble’s properties in Metro Manila and in Romblon. DBP’s DEFENSE: -opposed the issuance of a writ of preliminary injunction stating that under Presidential Decree No. 385, DBP's right to foreclose is mandatory as the arrearages of petitioner had already amounted to P123,801,265.82 as against its total obligation of P151,957,641.72; that under the same decree, no court can issue any restraining order or injunction against it to stop the foreclosure since Filipinas Marble's arrearages had already reached at least twenty percent of its total obligations; that the alleged non-receipt of the loan proceeds by the petitioner could, at best, be accepted only in a technical sense because the money was received by the officers of the petitioner acting in such capacity and, therefore, irrespective of whoever is responsible for placing them in their positions. TC AND CA: -While evidence of Filipinas Marble Corporation appears persuasive, still it cannot enjoin DBP from complying with the mandatory provisions of PD 385. ISSUES: If there was no valid contract of loan for failure of consideration, whether or not the mortgage can exist or stand by itself being a mere accessory contract. Whether or not the non-registration of the Chattel Mortgage affects its validity. HELD: - Presidential Decree No. 385 was issued primarily to see to it that government financial institutions are not denied substantial cash inflows, which are necessary to finance development projects all over the country, by large borrowers who, when they become delinquent, resort to court actions in order to prevent or delay the government's collection of their debts and loans. -The government, however, is bound by basic principles of fairness and decency under the due process clause of the Bill of Rights. P.D. 385 was never meant to protect officials of government lending institutions who take over the management of a borrower corporation, lead that corporation to bankruptcy through mismanagement or misappropriation of its funds, and who, after ruining it, use the mandatory provisions of the decree to avoid the consequences of their misdeeds. -The designated officers of the government financing institution cannot simply walk away and then state that since the loans were obtained in the corporation's name, then P.D. 385 must be peremptorily applied and that there is no way the borrower corporation can prevent the automatic

foreclosure of the mortgage on its properties once the arrearages reach twenty percent (20%) of the total obligation no matter who was responsible. -In the case at bar, the respondents try to impress upon this Court that the $5,000,000.00 loan was actually granted and released to the petitioner corporation and whatever the composition of the management which received the loan is of no moment because this management was acting in behalf of the corporation. The respondents also argue that since the loan was extended to the corporation, the releases had to be made to the then officers of that borrower corporation. -Precisely, what the petitioner is trying to point out is that the DBP and Bancom people who managed Filipinas Marble misspent the proceeds of the loan by taking advantage of the positions that they were occupying in the corporation which resulted in the latter's devastation instead of its rehabilitation. The petitioner does not question the authority under which the loan was delivered but stresses that it is precisely this authority which enabled the DBP and Bancom people to misspend and misappropriate the proceeds of the loan thereby defeating its very purpose, that is, to develop the projects of the corporation. Therefore, it is as if the loan was never delivered to it and thus, there was failure on the part of the respondent DBP to deliver the consideration for which the mortgage and the assignment of deed were executed. - Article 2125 of the Civil Code clearly provides that the non-registration of the mortgage does not affect the immediate parties. It states: Art. 2125. In addition to the requisites stated in article 2085, it is indispensable, in order that a mortgage may be validly constituted that the document in which it appears be recorded in the Registry of Property. If the instrument is not recorded, the mortgage is nevertheless binding between the parties. Filipinas marble, however, cannot invoke the above provision to nullify the chattel mortgage it executed in favor of respondent DBP. G.R. No. L-39587 ALEKO E. LILIUS, ET AL. vs. THE MANILA RAILROAD COMPANY FACTS: Lilius with his wife and daughter was on a sight-seeing trip for Pagsanjan via Dayap. It was the first time that he made said trip although he had already been to many places, driving his own car, in and outside the Philippines. Where the road was clear and unobstructed, the plaintiff drove at the rate of from 19 to 25 miles an hour. Prior thereto, he had made the trip as far as Calauan, but never from Calauan to Pagsanjan, via Dayap. He was entirely unacquainted with the conditions of the road at said points and had no knowledge of the existence of a railroad crossing at Dayap. Before reaching the crossing in question, there was nothing to indicate its existence and inasmuch as there were many houses, shrubs and trees along the road, it was impossible to see an approaching train. At about seven or eight meters from the crossing, coming from Calauan, the plaintiff saw an autotruck parked on the left side of the road. Several people, who seemed to have alighted from the said truck, were walking on the opposite side. He slowed down to about 12 miles an hour and sounded his horn for the people to get out of the way. With his attention thus occupied, he did not see the crossing but he heard two short whistles. Immediately afterwards, he saw a huge black mass fling itself upon him, which turned out to be locomotive No. 713 of the defendant company’s train coming eastward from Bay to Dayap station. The locomotive struck the plaintiff’s car right in the center. After dragging the said car a distance of about ten meters, the locomotive threw it upon a siding. The force of the impact was so great that the plaintiff’s wife and daughter were thrown from the car and were picked

up from the ground unconscious and seriously hurt. In spite of the efforts of engineer Andres Basilio, he was unable to stop the locomotive until after it had gone about seventy meters from the crossing. Issue: WON Manila Road Company is guilty of negligence and civilly liable. Held: this court is of the opinion that the accident was due to negligence on the part of the defendant-appellant company, for not having had on that occasion any semaphore at the crossing at Dayap, to serve as a warning to passers-by of its existence in order that they might take the necessary precautions before crossing the railroad; and, on the part of its employees — the flagman and switchman, for not having remained at his post at the crossing in question to warn passers-by of the approaching train; the stationmaster, for failure to send the said flagman and switchman to his post on time; and the engineer, for not having taken the necessary precautions to avoid an accident, in view of the absence of said flagman and switchman, by slackening his speed and continuously ringing the bell and blowing the whistle before arriving at the crossing. Although it is probable that the defendant-appellant entity employed the diligence of a good father of a family in selecting its aforesaid employees, however, it did not employ such diligence in supervising their work and the discharge of their duties because, otherwise, it would have had a semaphore or sign at the crossing and, on previous occasions as well as on the night in question, the flagman and switchman would have always been at his post at the crossing upon the arrival of a train. The diligence of a good father of a family, which the law requires in order to avoid damage, is not confined to the careful and prudent selection of subordinates or employees but includes inspection of their work and supervision of the discharge of their duties. December 21, 1922 G.R. No. L-19207 W. R. GIBERSON, plaintiff-appellee, vs. A. N. JUREIDINI BROS., INC., defendant-appellant. Del Rosario and Del Rosario for appellant. McVean and Vickers and Block, Johnston and Greenbaum for appellee. Malcolm, J.: This is an appeal from a judgment rendered by the Honorable Adolph Wislizenus, Judge of First Instance of Cebu, finding in favor of each of plaintiff’s four causes of action, and authorizing the recovery by the plaintiff, the receiver in insolvency proceedings in civil case No. 3586, of various goods, wares, merchandise, credits, and money transferred by H. K. Motoomul & Co. to A. N. Jureidini Bros., Inc., on May 24, 1921, and June 13, 1921. H. K. Motoomul & Co. was, at the times mentioned in the complaint, a partnership doing business in the cities of Cebu and Iloilo. Sometime prior to May 24, 1921, the company became financially embarrassed. A. N. Jureidini Bros., Inc., a larger creditor of Motoomul & Co., became aware of the precarious condition of the latter, because of the diminishing payments on account of a debt. Ultimately, Motoomul & Co. delivered to Jureidini Brothers, on May 24, 1921, one of the debtor’s Iloilo stores known as Bazar Aguila de Oro. On the same day also, credits receivable belonging to Motoomul & Co. were transferred to Jureidini Bros. Still later, on June 13, 1921, another stock of goods belonging to Motoomul & Co. passes to Jureidini Bros. The documents evidencing these transfer appears in the record.

Within thirty days after these assignments were made, or, to be exact, on June 22, 1921, a number of creditors of H. K. Motoomul & Co. initiated successfully involuntary insolvency proceedings against it. Later, action was brought by the receiver appointed by the court, with the results above related. The above constitute the principal facts, which are accurately stated in the decision of the trial court. In so far as the ten assignments of error made in this court relate to question of fact, we may say, generally, that we agree with the findings of the trial judge. It would be possible to forego consideration of many of appellant’s point, because he himself announces on page 46 of the bill of exceptions, “That the defendant has not filed the bond required by the court, because it agrees to the judgment being executed in accordance with law, except so far as concerns the second cause of action.” We prefer, however, not to hold appellant to this allegation or admission in his own pleadings, and propose, therefore, to comment on the various assignments of error. Addressing attention directly to appellant’s third, fifth, sixth, and eight assignments of error, the court clearly did not err in holding that the transfer or assignments must be revoked, because made for the purpose of giving A. N. Jureidini Bros., Inc., preference over the other creditors of H. K. Motoomul & Co. The provisions of section 70 of the Insolvency Law (Act No. 1956), were placed on the statute books to cover exactly such a situation, and to give equal rights to all of the creditors of the insolvent. The evidence discloses that A. N. Jureidini Bros., Inc. had reasonable cause to believe that H. K. Motoomul & Co. was insolvent. With reference to appellant’s first and seventh assignments of error, no one denies that H. K. Motoomul & Co. was indebted to A. N. Jureidini Bros., Inc., for a considerable sum of money. This reason, alone, however, gives the creditor no right to a preference. But, in this connection, appellant relies on Exhibit 1, which purports to be a chattel mortgage executed in the sum of P100,000 by H. Dialdas Motoomul and A. N. Jureidini Bros., Inc., on December 1, 1919, but not registered until May 5, 1921. The operative words in the alleged mortgage make reference to the list A, and the only description of the property contained in this list is: “1. A store No. 79 on Magallanes Street, municipality of Cebu, formerly belonging to T. Thakurdas, with all the merchandise, effects, wares, and other bazar goods contained on the said store. 2. A store No. 19 on Real Street, Iloilo, Panay, P. I., formerly belonging to Guillermo Asayas, with all the merchandise, effects, wares and other bazar goods contained in the said store.” The document contains no oath as required by our Chattel Mortgage Law. The trial judge held, and properly, that Exhibit 1 was invalid because the oath required by law did not appear therein, and because the subject-matter was not described therein with sufficient particularity. The Chattel Mortgage Law, in its section 5, in describing what shall be deemed sufficient to constitute a good chattel mortgage, includes the requirements of an affidavit of good faith appended to the mortgage and recorded therewith. It has been held by reputable courts that the absence of the affidavits vitiates a mortgage as against creditors and subsequent encumbrancers. (People vs. Burns [1910], 161 Mich., 169; 137 A. S. R., 466, and notes; Deseret National Bank vs. Kidman [1903], 25 Utah, 379; 95 A. S. R., 856.) Section 7 of the Chattel Mortgage Law provides that “The description of the mortgage property shall be such as to enable the parties to the mortgage, or any other person, after reasonable inquiry and investigation, to identify the same.” Identification of the mortgaged property would be impossible in this case.

Moreover, if there should exist any doubt on the questions we have just discussed, they should be thrashed out in the insolvency proceedings. Our constant ruling has been that the court having possession of the property of the insolvent has ancillary jurisdiction to hear and determine all questions concerning the title, possession, or control of the same. (De Amuzategui vs. Macleod [1915], 33 Phil., 80; De Krafft vs. Velez [1916], 34 Phil., 854; Mitsui Bussan Kaisha vs. Hongkong & Shanghai Banking Corporation [1917], 36 Phil., 27.) With reference to the proper valuation of the merchandise, which is the subject of appellant’s second and fourth assignments of error, we find sufficient evidence in the record to support the findings of the trial court. The documents of transfer did not accurately appraise the value of the property. As to the credits amounting to P16,892.72, assigned by H. K. Motoomul & Co. to the defendant, the evidence discloses that with the possible exception of P1,117.06 paid by Florentino Espiritu and P400 paid by Panjoomul Fulsidas, none of the rest have been collected. Hence, appellant’s ninth assignment of error should be sustained in part. The assignee takes the property in the same plight and condition that the bankrupt held it. (Winsor vs. McLellan [1843], 2 Story 492; Fed. Cas. No. 17887; Stewart vs. Platt [1879], 101 U. S., 739.) Judgment is affirmed, with the sole modification that the defendant, under plaintiff’s second cause of action, shall turn over to the plaintiff only such portions of the credits as have been realized, but the evidences of indebtedness shall pass to the receiver for such action as may be proper. Without special finding as to costs in this instance, it is so ordered. Acme Shoe Rubber & Plastic Corporation v. Court of Appeals, 260 SCRA 714 (1996) FACTS: - Chua Pac, the president and general manager of co-petitioner "Acme Shoe, Rubber & Plastic Corporation," executed, for and in behalf of the company, a chattel mortgage in favor of Producers Bank of the Philippines. A provision in the chattel mortgage agreement was to this effect "In case the MORTGAGOR executes subsequent promissory note or notes either as a renewal of the former note, as an extension thereof, or as a new loan, or is given any other kind of accommodations such as overdrafts, letters of credit, acceptances and bills of exchange, releases of import shipments on Trust Receipts, etc., this mortgage shall also stand as security for the payment of the said promissory note or notes and/or accommodations without the necessity of executing a new contract and this mortgage shall have the same force and effect as if the said promissory note or notes and/or accommodations were existing on the date thereof. This mortgage shall also stand as security for said obligations and any and all other obligations of the MORTGAGOR to the MORTGAGEE of whatever kind and nature, whether such obligations have been contracted before, during or after the constitution of this mortgage. -In due time, the loan was paid by petitioner corporation. Subsequently, in 1981, it obtained from Producers Bank additional financial accommodations These borrowings were on due date also fully paid. -The bank yet again extended to ACME a covered by four promissory notes. Due to financial constraints, the loan was not settled at maturity.

-The bank thereupon applied for an extrajudicial foreclosure of the chattel mortgage, prompting ACME to forthwith file an action for injunction, with damages and a prayer for a writ of preliminary injunction. TC and CA: -Dismissed the complaint and ordered the foreclosure of the chattel mortgage. ACME is bound by the stipulations, aforequoted, of the chattel mortgage. ISSUE: -Whether or not chattel mortgage may secure after incurred obligations. HELD: -Contracts of security are either personal or real. In contracts of personal security, such as a guaranty or a suretyship, the faithful performance of the obligation by the principal debtor is secured by the personal commitment of another (the guarantor or surety). In contracts of real security, such as a pledge, a mortgage or an antichresis, that fulfillment is secured by an encumbrance of property - in pledge, the placing of movable property in the possession of the creditor; in chattel mortgage, by the execution of the corresponding deed substantially in the form prescribed by law; in real estate mortgage, by the execution of a public instrument encumbering the real property covered thereby; and in antichresis, by a written instrument granting to the creditor the right to receive the fruits of an immovable property with the obligation to apply such fruits to the payment of interest, if owing, and thereafter to the principal of his credit - upon the essential condition that if the principal obligation becomes due and the debtor defaults, then the property encumbered can be alienated for the payment of the obligation, but that should the obligation be duly paid, then the contract is automatically extinguished proceeding from the accessory character of the agreement. As the law so puts it, once the obligation is complied with, then the contract of security becomes, ipso facto, null and void.

-While a pledge, real estate mortgage, or antichresis may exceptionally secure after-incurred obligations so long as these future debts are accurately described, a chattel mortgage, however, can only cover obligations existing at the time the mortgage is constituted. Although a promise expressed in a chattel mortgage to include debts that are yet to be contracted can be a binding commitment that can be compelled upon, the security itself, however, does not come into existence or arise until after a chattel mortgage agreement covering the newly contracted debt is executed either by concluding a fresh chattel mortgage or by amending the old contract conformably with the form prescribed by the Chattel Mortgage Law. Refusal on the part of the borrower to execute the agreement so as to cover the after-incurred obligation can constitute an act of default on the part of the borrower of the financing agreement whereon the promise is written but, of course, the remedy of foreclosure can only cover the debts extant at the time of constitution and during the life of the chattel mortgage sought to be foreclosed. BUENAVENTURA T. SALDANA, plaintiff-appellant, vs. PHILIPPINE GUARANTY COMPANY, INC., et al., defendants-appellees.

Gatchalian & Padilla for appellant. Emiliano Tabasondra for appellee Company.Teodoro Padilla for the other appellees. REYES, J.B.L., J.: This case arose from a complaint for damages filed by Buenaventura Saldana (docketed as Civil Case No. 32703 of the Court of First Instance of Manila) that was dismissed by order of the Court dated August 20, 1957, for lack of sufficient cause of action. In another order of September 30, 1957 of the same court, plaintiff's motion for reconsideration was denied, and the case was appealed to this Court. The facts are that on May 8, 1953, in order to secure an indebtedness of P15,000.00, Josefina Vda. de Aleazar executed in favor of the plaintiff-appellant Buenaventura Saldana a chattel mortgage covering properties described as follows: A building of strong materials, used for restaurant business, located in front of the San Juan de Dios Hospital at Dewey Boulevard, Pasay City, and the following personal properties therein contained: 1 Radio, Zenith, cabinet type. 1 Cooler. 1 Electric range, stateside, 4 burners. 1 Frigidaire, 8 cubic feet. 1 G.E. Deepfreezer. 8 Tables, stateside. 32 Chromium chairs, stateside. 1 Sala set upholstered, 6 pieces. 1 Bedroom set, 6 pieces. And all other furniture's, fixtures or equipment found in the said premises. Subsequent to the execution of said mortgage and while the same was still in force, the defendant Hospital de San Juan de Dios, Inc. obtained, in Civil Case No. 1930 of the Municipal Court of Pasay City, a judgment was duly Josewfina Vda. de Eleazar. A writ of execution was duly issued and, on January 28, 1957, the same was served on the judgment debtor by the sheriff of Pasay City; whereupon the following properties of Josefina Eleazar were levied upon: 8 Tables with 4 (upholstered) chairs each. 1 Table with 4 (wooden) chairs. 1 Table (large) with 5 chairs.

1 Radio-phono (Zenith, 8 tubes). 2 Showcases (big, with mirrors). 1 Rattan sala set with 4 chairs, 1 table and 3 sidetables . 1 Wooden drawer. 1 Tocador (brown with mirror). 1 Aparador . 2 Beds (single type). 1 Freezer (deep freeze). 1 Gas range (magic chef, with 4 burners). 1 Freezer (G.E.). On January 31, 1957, the plaintiff-appellant Saldana filed a third-party claim asserting that the above-described properties levied are subject to his chattel mortgage of May 8, 1953. In virtue thereof, the sheriff released only some of the property originally included in the levy of January 28, 1957, to wit: 1 Radio, Zenith, cabinet type. 8 Tables, stateside. 32 Chromiun chairs, stateside. 1 G.E. Deep freezer. To proceed with the execution sale of the rest of the properties still under levy, the defendantsappellees Hospital de San Juan de Dios, Inc. and the Philippine Guaranty Co., Inc., executed an indemnity bond to answer for any damages that plaintiff might suffer. Accordingly, on February 13, 1957, the said properties were sold to the defendant hospital as the highest bidder, for P1,500.00. Appellants claims that the phrase in the chattel mortgage contract — "and all other furnitures, fixtures and equipment found in the said premises", validly and sufficiently covered within its terms the personal properties disposed of in the auction sale, as to warrant an action for damages by the plaintiff mortgagee. There is merit in appellant's contention. Section 7 of Act No. 1508, commonly and better known as the Chattel Mortgage Law, does not demand a minute and specific description of every chattel mortgaged in the deal of mortgage but only requires that the description of the properties be such "as to enable the parties in the mortgage, or any other person, after reasonable inquiry and investigation to identify the same". Gauged by this standard, general description have been held by this Court. (See Stockholder vs. Ramirez, 44 Phil., 993; Pedro de Jesus vs. Guam Bee Co., Inc., 72 Phil., 464).

A similar rule obtains in the United States courts and decisions there have repeatedly upheld clauses of general import in mortgages of chattels other than goods for trade, and containing expressions similar to that of the contract now before us. Thus, "and all other stones belonging to me and all other goods and chattels" (Russel vs. Winne, 97 Am. Dec. 755); "all of the property of the said W.W. Allen used or situated upon the leased premises" (Dorman vs. Crooks State Bank, 64 A.L.R. 614); "all goods in the store where they are doing business in E. City, N.C." (Davis vs. Turner, 120 Fed. 605); "all and singular the goods, wares, stock, iron tools manufactured articles and property of every description, being situated in or about the shop or building now occupied by me in Howley Stree" (Winslow vs. Merchants Ins. Co., 38 Am. Dec. 368,) were held sufficient description, on the theory that parol evidence could supplement it to render identification rule is expressed in Walker vs. Johnson (Mont.) 1254 A.L.R. 937: The courts and textbook writers have developed several rules for determination of the sufficiency of the description in a chattel mortgage. The rules are general in nature and are different where the controversy is between the parties to the mortgage from the situation where third parties with out actual notice come in. In 11 C.J. 457, it is said: "Ad against third persons the description in the mortgage must point out its subject matter so that such person may identify the chattels observed, but it is not essential that the description be so specific that the property may be identified by it alone, if such description or means of identification which, if pursued will disclose the property conveyed." In 5 R.C.L. 423 the rule is stated that a description which will enable a third person, aided by inquires which the instrument itself suggest to identify the property is sufficiently definite." In 1 Jones on Chattel Mortgages and Conditional Sales, Bowers Edition, at page 95 the writer says: "As to them (third persons), the description is sufficient if it points to evidence whereby the precise thing mortgaged may be ascertained with certainty." Here there is nothing in the description "873 head of sheep" from which anyone, the mortgagee or third persons, could ascertain with any certainty what chattels were covered by the mortgage. In many instances the courts have held the description good where, though otherwise faulty, the mortgage explicity states that the property is in the possession of the mortgagor, and especially where it is the only property of that kind owned by him. The specifications in the chattel mortgage contract in the instant case, we believe, in substantial compliance with the "reasonable description rule" fixed by the chattel Mortgage Act. We may notice in the agreement, moreover, that the phrase in question is found after an enumeration of other specific articles. It can thus be reasonably inferred therefrom that the "furnitures, fixture and equipment" referred to are properties of like nature, similarly situated or similarly used in the restaurant of the mortgagor located in front of the San Juan de Dos Hospital at Dewey Boulevard, Pasay City, which articles can be definitely pointed out or ascertain by simple inquiry at or about the premises. Note that the limitation found in the last paragraph of section 7 of the Chattel Mortgage Law1 on "like or subsituated properties" make reference to those "thereafter acquired by the mortgagor and placed in the same depository as the property originally mortgaged", not to those already existing and originally included at the date of the constitution of the chattel mortgage. A contrary view would unduly impose a more rigid condition than what the law prescribes, which is that the description be only such as to enable identification after a reasonable inquiry and investigation. The case of Giberson vs. A.N. Jureidini Bros., 44 Phil., 216, 219, cited by the appellees and the lower court, cannot be likened to the case at bar, for there, what were sought to be mortgaged included two stores wit all its merchandise, effects, wares, and other bazar goods which were being constantly disposed of and replaced with new supplies in connection with the business, thereby making any particular or definite identification either impractical or impossible under the

circumstances. Here, the properties deemed overed were more or less fixed, or at least permanently situated or used in the premises of the mortgagor's restaurant. The rule in the Jureidini case is further weakened by the court's observation that (44 Phil., p. 220) — Moreover, if there should exist any doubts on the questions we have just discussed, they should be treshed out in the insolvency proceedings, which appears inconsistent with the definitive character of the rulings invoked. We find that the ground for the appealed order (lack of cause of action) does not appear so indubitable as to warrant a dismissal of the action without inquiry into the merits and without the description in the deed of mortgage (Nico vs. Blanco, 81 Phil., 213; Zobel vs. Abreau, 52 Off. Gaz., 3592). Wherefore, the orders appealed from are set aside and the case remanded to the lower court for further proceedings. Costs against appellee. Tsai v. Court of Appeals, 366 SCRA 324 (2001) FACTS: --Ever Textile Mills, Inc. (EVERTEX) obtained a loan from petitioner Philippine Bank of Communications (PBCom). -As security for the loan, EVERTEX executed in favor of PBCom, a deed of Real and Chattel Mortgage over the lot where its factory stands, and the chattels located therein as enumerated in a schedule attached to the mortgage contract. -PBCom granted a second loan to EVERTEX. The loan was secured by a Chattel Mortgage over personal properties enumerated in a list attached thereto. The listed properties were similar to those listed in the first mortgage deed. -Due to business reverses, EVERTEX filed insolvency proceedings docketed. The CFI issued an order on declaring the corporation insolvent. All its assets were taken into the custody of the Insolvency Court, including the collateral, real and personal, securing the two mortgages as abovementioned. -In the meantime, upon EVERTEX’s failure to meet its obligation to PBCom, the latter commenced extrajudicial foreclosure proceedings against EVERTEX. -The first public auction was held where petitioner PBCom emerged as the highest bidder and a Certificate of Sale was issued in its favor on the same date. Another public auction was held and again, PBCom was the highest bidder. -PBCom consolidated its ownership over the lot and all the properties in it. Subsequently, it leased the entire factory premises to petitioner Ruby L. Tsai. -PBCom sold the factory, lock, stock and barrel to Tsai, including the contested machineries. - EVERTEX filed a complaint for annulment of sale, reconveyance, and damages with the Regional Trial Court against PBCom, alleging inter alia that the extrajudicial foreclosure of subject mortgage was in violation of the Insolvency Law. EVERTEX claimed that no rights having been transmitted to

PBCom over the assets of insolvent EVERTEX, therefore Tsai acquired no rights over such assets sold to her, and should reconvey the assets. -EVERTEX averred that PBCom, without any legal or factual basis, appropriated the contested properties, which were not included in the Real and Chattel Mortgages. TC, affirmed by CA: -Found that the lease and sale of said personal properties were irregular and illegal because they were not duly foreclosed nor sold at the auction sale since these were not included in the schedules attached to the mortgage contracts. ISSUE: -Whether or not the inclusion of the questioned properties in the foreclosed properties is proper and whether or not the sale of these properties to petitioner Ruby Tsai is valid. HELD: -Assuming arguendo that the properties in question are immovable by nature, nothing detracts the parties from treating it as chattels to secure an obligation under the principle of estoppel. An immovable may be considered a personal property if there is a stipulation as when it is used as security in the payment of an obligation where a chattel mortgage is executed over it, as in the case at bar. -Inasmuch as the subject mortgages were intended by the parties to involve chattels, insofar as equipment and machinery were concerned, the Chattel Mortgage Law applies, which provides in Section 7 thereof that: “a chattel mortgage shall be deemed to cover only the property described therein and not like or substituted property thereafter acquired by the mortgagor and placed in the same depository as the property originally mortgaged, anything in the mortgage to the contrary notwithstanding.” -And, since the disputed machineries were acquired in 1981 and could not have been involved in the 1975 or 1979 chattel mortgages, it was consequently an error on the part of the Sheriff to include subject machineries with the properties enumerated in said chattel mortgages. -As the auction sale of the subject properties to PBCom is void, no valid title passed in its favor. Consequently, the sale thereof to Tsai is also a nullity under the elementary principle of nemo dat quod non habet, one cannot give what one does not have. PHILIPPINE NATIONAL BANK, plaintiff-appellee, vs. MANILA INVESTMENT & CONSTRUCTION, INC. and CIPRIANO S. ALLAS defendantsappellants. DIZON, J.: In Civil Case No. 33074 of the Court of First Instance of Manila, Branch XV entitled "Philippine National Bank vs. Manila Investment & Construction, Inc., et al.," decision was rendered on December 26, 1957, its dispositive portion being partly as follows: IN VIEW WHEREOF, judgment is rendered condemning defendants, jointly and severally, to pay plaintiff:

(1) Under the first cause of action the sum of P88,939.48 with daily interest of P12,77385 plus 1/4% commission or P194.6689 for every 30 days or a fraction thereof, plus 10% on the principal as attorney's fees and the cost; (2) On the second cause of action the sum of P356,913.01, plus P48,464 03 and 1/4% or P629.31 for every 30 days or fraction thereof that the amount remain outstanding and unpaid plus 10% of the principal as attorney's fees, and the cost. In case of non-payment of the amounts adjudged, the decision also provided for the sale at public auction of the personal properties covered by the chattel mortgage executed by the defendants in favor of the plaintiff Bank, and for the disposition of the proceeds in accordance with law. After the decision had become executory, instead of having the mortgaged personal properties sold at public auction, the parties agreed to have them sold, and were in fact sold, at a private sale. The net proceeds obtained therefrom amounting to P256,941.70 were applied to the partial satisfaction of the above judgment. On August 11, 1964, that is, more than five years but less than ten years from the date when the decision aforesaid became executory, the Philippine National Bank filed in the same Court of First Instance of Manila an action to revive it. On October 21, 1964, the defendants filed their answer in which, after admitting some of the allegations of the complaint and denying others, they interposed the following affirmative defenses: 1. That sometime after the judgment rendered by the Court of First Instance of Manila in Civil Case No. 33074 became final and executory, plaintiff sold to various parties in a private sale the mortgaged properties specifically mentioned in the judgment to be foreclosed and sold at public auction hence the proceeds thereof must therefore be accounted by plaintiff to the defendants in order that the same be properly and accordingly applied to the judgment. 2. That notwithstanding the aforesaid sale which was effected sometime in 1958, plaintiff never rendered an accounting of the proceeds of the sale of the mortgaged properties to the defendants; 3. That plaintiff has no cause of action in reviving the aforesaid judgment not until it has rendered proper accounting to the defendants of the proceeds of the aforesaid sale. Thereafter, the parties submitted a stipulation of facts, paragraph 3 thereof being of the following tenor: 3.—That as of August 11, 1964, here remains the sum of P382,388.47 still unsatisfied which is arrived at in the manner specified in Annex "A". After the parties had submitted their respective memorandum, the court rendered on August 30, 196,6 the appealed decision whose dispositive portion reads as follows: WHEREFORE, the Court renders judgment ordering the defendants to pay the plaintiff, jointly and severally, the amount of THREE HUNDRED EIGHTY TWO THOUSAND THREE HUNDRED THIRTY EIGHT AND 47/100 (P382,338.47) PESOS, with interest at the legal rate from August 12, 1964 until fully paid. Costs against the defendants.

The defendants appealed to secure a reversal of the above decision claiming firstly, that the action instituted below is not the proper remedy; secondly, that the private sale of the mortgaged personal properties was null and void, and lastly, that the appellee is not entitled to a deficiency judgment. We are of the opinion that, upon the facts of the case and the law thereto applicable, appellants' contentions are without merit. In relation to the first, it is true that the decision rendered in Civil Case 33074 of the Court of First Instance of Manila provided for the sale at public auction of the personal properties covered by the chattel mortgage executed in favor of the Bank, but it is likewise true that said personal properties were sold at a private sale by agreementbetween the parties. Besides, We see nothing illegal, immoral or against public order in such agreement entered into freely and voluntarily. In line with the provisions of the substantive law giving the contracting parties full freedom to contract provided their agreement is not contrary to law, morals, good customs, public order or public policy (Article 1306, Civil Code of the Philippines), We held in Philippine National Bank vs. De Poli thus: Under article 1255 of the Civil Code (Art. 1306 New Civil Code), the contracting parties may stipulate that in case of violation of the conditions of the mortgage contract, the creditor may sell, at private sale and without previous advertisement or notice, the whole or part of the good mortgaged for the purpose of applying the proceeds thereof on the payment of the debt. Said stipulation is not contrary to law or public order, and therefore it is valid. (Emphasis supplied). As the disposition of the mortgaged personalities in a private sale was by agreement between the parties, it is clear that appellants are now in estoppel to question it except on the ground of fraud or duress — pleas that they do not invoke. They do not even claim that the private sale agreed upon had caused them substantial prejudice. Appellants contend likewise that, instead of the action to revive the judgment rendered in its favor, the appellee Bank should have filed a motion in Civil Case 33074 of the Court of First Instance of Manila for the rendition of a deficiency judgment. It is to be borne in mind, in this connection, that the action for revival was instituted after the lapse of five but of less than ten years from the time the decision sought to be revived became executory. Having thus become stale or dormant, it was not subject to execution by mere motion. Consequently, before the judgment creditor could move for the rendition of a deficiency judgment and for the issuance of the corresponding writ of execution, it had to seek the revival of the decision in accordance with law. In Bank, etc. vs. Greene 61 Phil. 654, We held that "A judgment foreclosing a mortgage which has lost executory force by the lapse of five years may be revived by filing a complaint based thereon." This, precisely, is what the appellee Bank did. Technically, the original judgment, rendered by the Court of First Instance of Manila in Civil Case No. 33074 should have been literally revived, but the record shows that at the hearing of the action below the parties formally stipulated that the unpaid portion of the amount due under the decision in favor of the Bank was the sum of P383,388.47 only, after taking into account all the payments made by the judgment debtors up to the date the stipulation of facts was submitted to the lower court. Consequently, the deficiency judgment that may be rendered in Civil Case No. 33074 and the writ of execution that may be issued to enforce the same shall be only for said amount. Lastly, it is appellants' contention that the appellee Bank is not entitled to a deficiency judgment, invoking the provisions of Article 2115 of the new Civil Code. The issue thus raised was already resolved in the negative inAblaza vs. Ignacio, G.R. No. L-11466, promulgated on March 23, 1958 where We said, inter alia, the following:

We are of the opinion that the trial court is in error. It is clear from Article 2141 that the provisions of the New Civil Code on pledge shall apply to a chattel Mortgage only in so far as they are not counter to any provision of the Chattel Mortgage Law, otherwise the provisions of the latter will not apply. Here we find that the provisions of the Chattel Mortgage with regard to the effects of the foreclosure of a chattel mortgage are precisely contrary to the provisions of Article 2115 which were applied by the trial Court. xxx xxx xxx Mr. Justice Kent, in the 12th Edition of his Commentaries, as well as other authors in the question of chattel mortgages, have said, that in case of a sale under a foreclosure of a chattel mortgage, there is no question that the mortgagee or creditor may maintain an action for the deficiency, if any should occur. And the fact that Act No. 1508 permits a private sale, such sale is not in fact, a satisfaction of the debt, to any greater extent than the value of the property at the time of the sale. The amount received at the time of the sale, of course, always requiring good faith and honesty in the sale, is only a payment, pro tanto and an action may be maintained for a deficiency in the debt. (Manila Trading and Supply Co., vs. Tamaraw Plantation Co., 47 Phil. 513; Emphasis supplied.) It is clear, therefore, that the proceeds of the sale of the mortgaged personal properties of the herein appellants constitute only a pro tanto satisfaction of the monetary award made by the court and the appellee Bank is entitled to collect the balance. WHEREFORE, the decision appealed from is hereby affirmed, with costs. MANARANG AND MANARANG V. OFILADA AND ESTEBAN FACTS: Manarang secured a loan from Esteban guaranteed by a chattel mortgage over a house of mixed materials. Due to failure to pay, the chattel mortgage was foreclosed. Before the sale of the property, Manarang tried to pay for the property but the sheriff refused to accept tender unless there is payment for the publication of the notice of sale in the newspapers. This prompted Manarang to bring this suit to compel the sheriff to accept payment. He averred that the publication was unnecessary as the house should be considered as personal property per agreement in the chattel mortgage, and the publication for notice of sale is unnecessary. HELD: There is no question that a building of mixed materials may be a subject of chattel mortgage, in which case it is considered as between the parties as personal property. The mere fact that a house was the subject of chattel mortgage and was considered as personal property by the parties doesn’t make the said house personal property for purposes of the notice to be given for its sale in public auction. It is real property within the purview of Rule 39, Section 16 of the Rules of Court as it has become a permanent fixture on the land, which is real property. Manarang vs. Ofilada 99 PHIL 108

Facts: On September 8, 1951, petitioner Lucia D. Manarang obtained a loan of P200 from Ernesto Esteban, and to secure its payment she executed a chattel mortgage over a house of mixed materials erected on a lot on Alvarado Street, Manila. As Manarang did not pay the loan as agreed upon, Esteban brought an action against her in,the municipal court of Manila for its recovery, alleging that the loan was secured by a chattel mortgage on her property. Judgment having been entered in plaintiff's favor, execution was issued against the same property mortgaged. Before the property could be sold Manarang offered to pay the sum of P277, which represented the amount of the judgment of P250, the interest thereon, the costs, and the sheriff's fees, but the sheriff refused the tender unless the additional amount of P260 representing the publication of the notice of sale in two newspapers be paid also. So defendants therein brought this suitu to compel the sheriff to accept the amount of P277 as full payment of the judgment and to annul the published notice of sale. On the basis of the above facts counsel for Alanarang contended in the court below that the house in question should be considered as personal property and the publication of the notice of its sale at public auction in execution considered unnecessary. The Court of First Instance held that although real property may sometimes be considered as personal property, the sheriff was in duty bound to cause the publication of the notice of its sale in order to, make the sale valid or to prevent its being declared void or voidable, and he did not, therefore, err in causing such publication of the notice. So it denied the petition. Issue: Whether or not the house remains a real property? Ruling: Yes. HOUSE IS PERSONAL PROPERTY FOR PURPOSES OF CHATTEL MORTGAGE ONLY; REMAINS REAL PROPERTY. The mere fact that a house was the subject of a chattel mortgage and was considered as personal property by the parties does not make said house personal property for purposes of the notice to be given for its sale at public auction. It is real property within the purview of Rule 39, section 16,of the Rules of Court as it has become a permanent fixture on the land, which is real property. MAMBULAO LUMBER COMPANY, plaintiff-appellant, vs. PHILIPPINE NATIONAL BANK and ANACLETO HERALDO Deputy Provincial Sheriff of Camarines Norte,defendants-appellees. Ernesto P. Vilar and Arthur Tordesillas for plaintiff-appellant. Tomas Besa and Jose B. Galang for defendants-appellees. ANGELES, J.: An appeal from a decision, dated April 2, 1964, of the Court of First Instance of Manila in Civil Case No. 52089, entitled "Mambulao Lumber Company, plaintiff, versus Philippine National Bank and Anacleto Heraldo, defendants", dismissing the complaint against both defendants and sentencing the plaintiff to pay to defendant Philippine National Bank (PNB for short) the sum of

P3,582.52 with interest thereon at the rate of 6% per annum from December 22, 1961 until fully paid, and the costs of suit. In seeking the reversal of the decision, the plaintiff advances several propositions in its brief which may be restated as follows: 1. That its total indebtedness to the PNB as of November 21, 1961, was only P56,485.87 and not P58,213.51 as concluded by the court a quo; hence, the proceeds of the foreclosure sale of its real property alone in the amount of P56,908.00 on that date, added to the sum of P738.59 it remitted to the PNB thereafter was more than sufficient to liquidate its obligation, thereby rendering the subsequent foreclosure sale of its chattels unlawful; 2. That it is not liable to pay PNB the amount of P5,821.35 for attorney's fees and the additional sum of P298.54 as expenses of the foreclosure sale; 3. That the subsequent foreclosure sale of its chattels is null and void, not only because it had already settled its indebtedness to the PNB at the time the sale was effected, but also for the reason that the said sale was not conducted in accordance with the provisions of the Chattel Mortgage Law and the venue agreed upon by the parties in the mortgage contract; 4. That the PNB, having illegally sold the chattels, is liable to the plaintiff for its value; and 5. That for the acts of the PNB in proceeding with the sale of the chattels, in utter disregard of plaintiff's vigorous opposition thereto, and in taking possession thereof after the sale thru force, intimidation, coercion, and by detaining its "man-in-charge" of said properties, the PNB is liable to plaintiff for damages and attorney's fees. The antecedent facts of the case, as found by the trial court, are as follows: On May 5, 1956 the plaintiff applied for an industrial loan of P155,000 with the Naga Branch of defendant PNB and the former offered real estate, machinery, logging and transportation equipments as collaterals. The application, however, was approved for a loan of P100,000 only. To secure the payment of the loan, the plaintiff mortgaged to defendant PNB a parcel of land, together with the buildings and improvements existing thereon, situated in the poblacion of Jose Panganiban (formerly Mambulao), province of Camarines Norte, and covered by Transfer Certificate of Title No. 381 of the land records of said province, as well as various sawmill equipment, rolling unit and other fixed assets of the plaintiff, all situated in its compound in the aforementioned municipality. On August 2, 1956, the PNB released from the approved loan the sum of P27,500, for which the plaintiff signed a promissory note wherein it promised to pay to the PNB the said sum in five equal yearly installments at the rate of P6,528.40 beginning July 31, 1957, and every year thereafter, the last of which would be on July 31, 1961. On October 19, 1956, the PNB made another release of P15,500 as part of the approved loan granted to the plaintiff and so on the said date, the latter executed another promissory note wherein it agreed to pay to the former the said sum in five equal yearly installments at the rate of P3,679.64 beginning July 31, 1957, and ending on July 31, 1961. The plaintiff failed to pay the amortization on the amounts released to and received by it. Repeated demands were made upon the plaintiff to pay its obligation but it failed or otherwise refused to do so. Upon inspection and verification made by employees of the PNB,

it was found that the plaintiff had already stopped operation about the end of 1957 or early part of 1958. On September 27, 1961, the PNB sent a letter to the Provincial Sheriff of Camarines Norte requesting him to take possession of the parcel of land, together with the improvements existing thereon, covered by Transfer Certificate of Title No. 381 of the land records of Camarines Norte, and to sell it at public auction in accordance with the provisions of Act No. 3135, as amended, for the satisfaction of the unpaid obligation of the plaintiff, which as of September 22, 1961, amounted to P57,646.59, excluding attorney's fees. In compliance with the request, on October 16, 1961, the Provincial Sheriff of Camarines Norte issued the corresponding notice of extra-judicial sale and sent a copy thereof to the plaintiff. According to the notice, the mortgaged property would be sold at public auction at 10:00 a.m. on November 21, 1961, at the ground floor of the Court House in Daet, Camarines Norte. On November 6, 1961, the PNB sent a letter to the Provincial Sheriff of Camarines Norte requesting him to take possession of the chattels mortgaged to it by the plaintiff and sell them at public auction also on November 21, 1961, for the satisfaction of the sum of P57,646.59, plus 6% annual interest therefore from September 23, 1961, attorney's fees equivalent to 10% of the amount due and the costs and expenses of the sale. On the same day, the PNB sent notice to the plaintiff that the former was foreclosing extrajudicially the chattels mortgaged by the latter and that the auction sale thereof would be held on November 21, 1961, between 9:00 and 12:00 a.m., in Mambulao, Camarines Norte, where the mortgaged chattels were situated. On November 8, 1961, Deputy Provincial Sheriff Anacleto Heraldo took possession of the chattels mortgaged by the plaintiff and made an inventory thereof in the presence of a PC Sergeant and a policeman of the municipality of Jose Panganiban. On November 9, 1961, the said Deputy Sheriff issued the corresponding notice of public auction sale of the mortgaged chattels to be held on November 21, 1961, at 10:00 a.m., at the plaintiff's compound situated in the municipality of Jose Panganiban, Province of Camarines Norte. On November 19, 1961, the plaintiff sent separate letters, posted as registered air mail matter, one to the Naga Branch of the PNB and another to the Provincial Sheriff of Camarines Norte, protesting against the foreclosure of the real estate and chattel mortgages on the grounds that they could not be effected unless a Court's order was issued against it (plaintiff) for said purpose and that the foreclosure proceedings, according to the terms of the mortgage contracts, should be made in Manila. In said letter to the Naga Branch of the PNB, it was intimated that if the public auction sale would be suspended and the plaintiff would be given an extension of ninety (90) days, its obligation would be settled satisfactorily because an important negotiation was then going on for the sale of its "whole interest" for an amount more than sufficient to liquidate said obligation. The letter of the plaintiff to the Naga Branch of the PNB was construed by the latter as a request for extension of the foreclosure sale of the mortgaged chattels and so it advised the Sheriff of Camarines Norte to defer it to December 21, 1961, at the same time and place. A copy of said advice was sent to the plaintiff for its information and guidance. The foreclosure sale of the parcel of land, together with the buildings and improvements thereon, covered by Transfer Certificate of Title No. 381, was, however, held on November 21, 1961, and the said property was sold to the PNB for the sum of P56,908.00, subject to the right of the plaintiff to redeem the same within a period of one year. On the same date, Deputy

Provincial Sheriff Heraldo executed a certificate of sale in favor of the PNB and a copy thereof was sent to the plaintiff. In a letter dated December 14, 1961 (but apparently posted several days later), the plaintiff sent a bank draft for P738.59 to the Naga Branch of the PNB, allegedly in full settlement of the balance of the obligation of the plaintiff after the application thereto of the sum of P56,908.00 representing the proceeds of the foreclosure sale of parcel of land described in Transfer Certificate of Title No. 381. In the said letter, the plaintiff reiterated its request that the foreclosure sale of the mortgaged chattels be discontinued on the grounds that the mortgaged indebtedness had been fully paid and that it could not be legally effected at a place other than the City of Manila. In a letter dated December 16, 1961, the plaintiff advised the Provincial Sheriff of Camarines Norte that it had fully paid its obligation to the PNB, and enclosed therewith a copy of its letter to the latter dated December 14, 1961. On December 18, 1961, the Attorney of the Naga Branch of the PNB, wrote to the plaintiff acknowledging the remittance of P738.59 with the advice, however, that as of that date the balance of the account of the plaintiff was P9,161.76, to which should be added the expenses of guarding the mortgaged chattels at the rate of P4.00 a day beginning December 19, 1961. It was further explained in said letter that the sum of P57,646.59, which was stated in the request for the foreclosure of the real estate mortgage, did not include the 10% attorney's fees and expenses of the sale. Accordingly, the plaintiff was advised that the foreclosure sale scheduled on the 21st of said month would be stopped if a remittance of P9,161.76, plus interest thereon and guarding fees, would be made. On December 21, 1961, the foreclosure sale of the mortgaged chattels was held at 10:00 a.m. and they were awarded to the PNB for the sum of P4,200 and the corresponding bill of sale was issued in its favor by Deputy Provincial Sheriff Heraldo. In a letter dated December 26, 1961, the Manager of the Naga Branch of the PNB advised the plaintiff giving it priority to repurchase the chattels acquired by the former at public auction. This offer was reiterated in a letter dated January 3, 1962, of the Attorney of the Naga Branch of the PNB to the plaintiff, with the suggestion that it exercise its right of redemption and that it apply for the condonation of the attorney's fees. The plaintiff did not follow the advice but on the contrary it made known of its intention to file appropriate action or actions for the protection of its interests. On May 24, 1962, several employees of the PNB arrived in the compound of the plaintiff in Jose Panganiban, Camarines Norte, and they informed Luis Salgado, Chief Security Guard of the premises, that the properties therein had been auctioned and bought by the PNB, which in turn sold them to Mariano Bundok. Upon being advised that the purchaser would take delivery of the things he bought, Salgado was at first reluctant to allow any piece of property to be taken out of the compound of the plaintiff. The employees of the PNB explained that should Salgado refuse, he would be exposing himself to a litigation wherein he could be held liable to pay big sum of money by way of damages. Apprehensive of the risk that he would take, Salgado immediately sent a wire to the President of the plaintiff in Manila, asking advice as to what he should do. In the meantime, Mariano Bundok was able to take out from the plaintiff's compound two truckloads of equipment. In the afternoon of the same day, Salgado received a telegram from plaintiff's President directing him not to deliver the "chattels" without court order, with the information that the

company was then filing an action for damages against the PNB. On the following day, May 25, 1962, two trucks and men of Mariano Bundok arrived but Salgado did not permit them to take out any equipment from inside the compound of the plaintiff. Thru the intervention, however, of the local police and PC soldiers, the trucks of Mariano Bundok were able finally to haul the properties originally mortgaged by the plaintiff to the PNB, which were bought by it at the foreclosure sale and subsequently sold to Mariano Bundok. Upon the foregoing facts, the trial court rendered the decision appealed from which, as stated in the first paragraph of this opinion, sentenced the Mambulao Lumber Company to pay to the defendant PNB the sum of P3,582.52 with interest thereon at the rate of 6% per annum from December 22, 1961 (day following the date of the questioned foreclosure of plaintiff's chattels) until fully paid, and the costs. Mambulao Lumber Company interposed the instant appeal. We shall discuss the various points raised in appellant's brief in seriatim. The first question Mambulao Lumber Company poses is that which relates to the amount of its indebtedness to the PNB arising out of the principal loans and the accrued interest thereon. It is contended that its obligation under the terms of the two promissory notes it had executed in favor of the PNB amounts only to P56,485.87 as of November 21, 1961, when the sale of real property was effected, and not P58,213.51 as found by the trial court. There is merit to this claim. Examining the terms of the promissory note executed by the appellant in favor of the PNB, we find that the agreed interest on the loan of P43,000.00 — P27,500.00 released on August 2, 1956 as per promissory note of even date (Exhibit C-3), and P15,500.00 released on October 19, 1956, as per promissory note of the same date (Exhibit C-4) — was six per cent (6%) per annum from the respective date of said notes "until paid". In the statement of account of the appellant as of September 22, 1961, submitted by the PNB, it appears that in arriving at the total indebtedness of P57,646.59 as of that date, the PNB had compounded the principal of the loan and the accrued 6% interest thereon each time the yearly amortizations became due, and on the basis of these compounded amounts charged additional delinquency interest on them up to September 22, 1961; and to this erroneously computed total of P57,646.59, the trial court added 6% interest per annum from September 23, 1961 to November 21 of the same year. In effect, the PNB has claimed, and the trial court has adjudicated to it, interest on accrued interests from the time the various amortizations of the loan became due until the real estate mortgage executed to secure the loan was extra-judicially foreclosed on November 21, 1961. This is an error. Section 5 of Act No. 2655 expressly provides that in computing the interest on any obligation, promissory note or other instrument or contract, compound interest shall not be reckoned, except by agreement, or in default thereof, whenever the debt is judicially claimed. This is also the clear mandate of Article 2212 of the new Civil Code which provides that interest due shall earn legal interest only from the time it is judicially demanded, and of Article 1959 of the same code which ordains that interest due and unpaid shall not earn interest. Of course, the parties may, by stipulation, capitalize the interest due and unpaid, which as added principal shall earn new interest; but such stipulation is nowhere to be found in the terms of the promissory notes involved in this case. Clearly therefore, the trial court fell into error when it awarded interest on accrued interests, without any agreement to that effect and before they had been judicially demanded. Appellant next assails the award of attorney's fees and the expenses of the foreclosure sale in favor of the PNB. With respect to the amount of P298.54 allowed as expenses of the extra-judicial sale of the real property, appellant maintains that the same has no basis, factual or legal, and should not have been awarded. It likewise decries the award of attorney's fees which, according to the appellant, should not be deducted from the proceeds of the sale of the real property, not only because there is no express agreement in the real estate mortgage contract to pay attorney's fees in

case the same is extra-judicially foreclosed, but also for the reason that the PNB neither spent nor incurred any obligation to pay attorney's fees in connection with the said extra-judicial foreclosure under consideration. There is reason for the appellant to assail the award of P298.54 as expenses of the sale. In this respect, the trial court said: The parcel of land, together with the buildings and improvements existing thereon covered by Transfer Certificate of Title No. 381, was sold for P56,908. There was, however, no evidence how much was the expenses of the foreclosure sale although from the pertinent provisions of the Rules of Court, the Sheriff's fees would be P1 for advertising the sale (par. k, Sec. 7, Rule 130 of the Old Rules) and P297.54 as his commission for the sale (par. n, Sec. 7, Rule 130 of the Old Rules) or a total of P298.54. There is really no evidence of record to support the conclusion that the PNB is entitled to the amount awarded as expenses of the extra-judicial foreclosure sale. The court below committed error in applying the provisions of the Rules of Court for purposes of arriving at the amount awarded. It is to be borne in mind that the fees enumerated under paragraphs k and n, Section 7, of Rule 130 (now Rule 141) are demandable, only by a sheriff serving processes of the court in connection with judicial foreclosure of mortgages under Rule 68 of the new Rules, and not in cases of extra-judicial foreclosure of mortgages under Act 3135. The law applicable is Section 4 of Act 3135 which provides that the officer conducting the sale is entitled to collect a fee of P5.00 for each day of actual work performed in addition to his expenses in connection with the foreclosure sale. Admittedly, the PNB failed to prove during the trial of the case, that it actually spent any amount in connection with the said foreclosure sale. Neither may expenses for publication of the notice be legally allowed in the absence of evidence on record to support it. 1 It is true, as pointed out by the appellee bank, that courts should take judicial notice of the fees provided for by law which need not be proved; but in the absence of evidence to show at least the number of working days the sheriff concerned actually spent in connection with the extra-judicial foreclosure sale, the most that he may be entitled to, would be the amount of P10.00 as a reasonable allowance for two day's work — one for the preparation of the necessary notices of sale, and the other for conducting the auction sale and issuance of the corresponding certificate of sale in favor of the buyer. Obviously, therefore, the award of P298.54 as expenses of the sale should be set aside. But the claim of the appellant that the real estate mortgage does not provide for attorney's fees in case the same is extra-judicially foreclosed, cannot be favorably considered, as would readily be revealed by an examination of the pertinent provision of the mortgage contract. The parties to the mortgage appear to have stipulated under paragraph (c) thereof, inter alia: . . . For the purpose of extra-judicial foreclosure, the Mortgagor hereby appoints the Mortgagee his attorney-in-fact to sell the property mortgaged under Act 3135, as amended, to sign all documents and to perform all acts requisite and necessary to accomplish said purpose and to appoint its substitute as such attorney-in-fact with the same powers as above specified. In case of judicial foreclosure, the Mortgagor hereby consents to the appointment of the Mortgagee or any of its employees as receiver, without any bond, to take charge of the mortgaged property at once, and to hold possession of the same and the rents, benefits and profits derived from the mortgaged property before the sale, less the costs and expenses of the receivership; the Mortgagor hereby agrees further that in all cases, attorney's fees hereby fixed at Ten Per cent (10%) of the total indebtedness then unpaid which in no case shall be less than P100.00 exclusive of all fees allowed by law, and the expenses of collection shall be the obligation of the Mortgagor and shall with priority, be paid to the Mortgagee out of any sums realized as rents and profits derived from the mortgaged property or from the proceeds

realized from the sale of the said property and this mortgage shall likewise stand as security therefor. . . . We find the above stipulation to pay attorney's fees clear enough to cover both cases of foreclosure sale mentioned thereunder, i.e., judicially or extra-judicially. While the phrase "in all cases" appears to be part of the second sentence, a reading of the whole context of the stipulation would readily show that it logically refers to extra-judicial foreclosure found in the first sentence and to judicial foreclosure mentioned in the next sentence. And the ambiguity in the stipulation suggested and pointed out by the appellant by reason of the faulty sentence construction should not be made to defeat the otherwise clear intention of the parties in the agreement. It is suggested by the appellant, however, that even if the above stipulation to pay attorney's fees were applicable to the extra-judicial foreclosure sale of its real properties, still, the award of P5,821.35 for attorney's fees has no legal justification, considering the circumstance that the PNB did not actually spend anything by way of attorney's fees in connection with the sale. In support of this proposition, appellant cites authorities to the effect: (1) that when the mortgagee has neither paid nor incurred any obligation to pay an attorney in connection with the foreclosure sale, the claim for such fees should be denied; 2 and (2) that attorney's fees will not be allowed when the attorney conducting the foreclosure proceedings is an officer of the corporation (mortgagee) who receives a salary for all the legal services performed by him for the corporation. 3 These authorities are indeed enlightening; but they should not be applied in this case. The very same authority first cited suggests that said principle is not absolute, for there is authority to the contrary. As to the fact that the foreclosure proceeding's were handled by an attorney of the legal staff of the PNB, we are reluctant to exonerate herein appellant from the payment of the stipulated attorney's fees on this ground alone, considering the express agreement between the parties in the mortgage contract under which appellant became liable to pay the same. At any rate, we find merit in the contention of the appellant that the award of P5,821.35 in favor of the PNB as attorney's fees is unconscionable and unreasonable, considering that all that the branch attorney of the said bank did in connection with the foreclosure sale of the real property was to file a petition with the provincial sheriff of Camarines Norte requesting the latter to sell the same in accordance with the provisions of Act 3135. The principle that courts should reduce stipulated attorney's fees whenever it is found under the circumstances of the case that the same is unreasonable, is now deeply rooted in this jurisdiction to entertain any serious objection to it. Thus, this Court has explained: But the principle that it may be lawfully stipulated that the legal expenses involved in the collection of a debt shall be defrayed by the debtor does not imply that such stipulations must be enforced in accordance with the terms, no matter how injurious or oppressive they may be. The lawful purpose to be accomplished by such a stipulation is to permit the creditor to receive the amount due him under his contract without a deduction of the expenses caused by the delinquency of the debtor. It should not be permitted for him to convert such a stipulation into a source of speculative profit at the expense of the debtor. Contracts for attorney's services in this jurisdiction stands upon an entirely different footing from contracts for the payment of compensation for any other services. By express provision of section 29 of the Code of Civil Procedure, an attorney is not entitled in the absence of express contract to recover more than a reasonable compensation for his services; and even when an express contract is made the court can ignore it and limit the recovery to reasonable compensation if the amount of the stipulated fee is found by the court to be unreasonable. This is a very different rule from that announced in section 1091 of the Civil Code with reference to the obligation of contracts in general, where it is said that such obligation has the force of law between the contracting parties. Had the plaintiff herein made

an express contract to pay his attorney an uncontingent fee of P2,115.25 for the services to be rendered in reducing the note here in suit to judgment, it would not have been enforced against him had he seen fit to oppose it, as such a fee is obviously far greater than is necessary to remunerate the attorney for the work involved and is therefore unreasonable. In order to enable the court to ignore an express contract for an attorney's fees, it is not necessary to show, as in other contracts, that it is contrary to morality or public policy (Art. 1255, Civil Code). It is enough that it is unreasonable or unconscionable. 4 Since then this Court has invariably fixed counsel fees on a quantum meruit basis whenever the fees stipulated appear excessive, unconscionable, or unreasonable, because a lawyer is primarily a court officer charged with the duty of assisting the court in administering impartial justice between the parties, and hence, the fees should be subject to judicial control. Nor should it be ignored that sound public policy demands that courts disregard stipulations for counsel fees, whenever they appear to be a source of speculative profit at the expense of the debtor or mortgagor. 5 And it is not material that the present action is between the debtor and the creditor, and not between attorney and client. As court have power to fix the fee as between attorney and client, it must necessarily have the right to say whether a stipulation like this, inserted in a mortgage contract, is valid. 6 In determining the compensation of an attorney, the following circumstances should be considered: the amount and character of the services rendered; the responsibility imposed; the amount of money or the value of the property affected by the controversy, or involved in the employment; the skill and experience called for in the performance of the service; the professional standing of the attorney; the results secured; and whether or not the fee is contingent or absolute, it being a recognized rule that an attorney may properly charge a much larger fee when it is to be contingent than when it is not. 7 From the stipulation in the mortgage contract earlier quoted, it appears that the agreed fee is 10% of the total indebtedness, irrespective of the manner the foreclosure of the mortgage is to be effected. The agreement is perhaps fair enough in case the foreclosure proceedings is prosecuted judicially but, surely, it is unreasonable when, as in this case, the mortgage was foreclosed extra-judicially, and all that the attorney did was to file a petition for foreclosure with the sheriff concerned. It is to be assumed though, that the said branch attorney of the PNB made a study of the case before deciding to file the petition for foreclosure; but even with this in mind, we believe the amount of P5,821.35 is far too excessive a fee for such services. Considering the above circumstances mentioned, it is our considered opinion that the amount of P1,000.00 would be more than sufficient to compensate the work aforementioned. The next issue raised deals with the claim that the proceeds of the sale of the real properties alone together with the amount it remitted to the PNB later was more than sufficient to liquidate its total obligation to herein appellee bank. Again, we find merit in this claim. From the foregoing discussion of the first two errors assigned, and for purposes of determining the total obligation of herein appellant to the PNB as of November 21, 1961 when the real estate mortgage was foreclosed, we have the following illustration in support of this conclusion:1äwphï1.ñët A. I.

Principal Loan (a) Promissory note dated August 2, 1956 (1) Interest at 6% per annum from Aug. 2, 1956 to Nov. 21, 1961 (b) Promissory note dated October 19, 1956

P27,500.00 8,751.78 P15,500.00

(1) Interest at 6% per annum from Oct.19, 1956 to Nov. 21, 1961 II.

Sheriff's fees [for two (2) day's work]

4,734.08 10.00

III. Attorney's fee

1,000.00 Total obligation as of Nov. 21, 1961

P57,495.86

B. I.

Proceeds of the foreclosure sale of the real estate mortgage on Nov. 21, 1961 P56,908.00

II.

Additional amount remitted to the PNB on Dec. 18, 1961 Total amount of Payment made to PNB as of Dec. 18, 1961 Deduct: Total obligation to the PNB Excess Payment to the PNB

738.59 P57,646.59 P57,495.86 P 150.73 ========

From the foregoing illustration or computation, it is clear that there was no further necessity to foreclose the mortgage of herein appellant's chattels on December 21, 1961; and on this ground alone, we may declare the sale of appellant's chattels on the said date, illegal and void. But we take into consideration the fact that the PNB must have been led to believe that the stipulated 10% of the unpaid loan for attorney's fees in the real estate mortgage was legally maintainable, and in accordance with such belief, herein appellee bank insisted that the proceeds of the sale of appellant's real property was deficient to liquidate the latter's total indebtedness. Be that as it may, however, we still find the subsequent sale of herein appellant's chattels illegal and objectionable on other grounds. That appellant vigorously objected to the foreclosure of its chattel mortgage after the foreclosure of its real estate mortgage on November 21, 1961, can not be doubted, as shown not only by its letter to the PNB on November 19, 1961, but also in its letter to the provincial sheriff of Camarines Norte on the same date. These letters were followed by another letter to the appellee bank on December 14, 1961, wherein herein appellant, in no uncertain terms, reiterated its objection to the scheduled sale of its chattels on December 21, 1961 at Jose Panganiban, Camarines Norte for the reasons therein stated that: (1) it had settled in full its total obligation to the PNB by the sale of the real estate and its subsequent remittance of the amount of P738.59; and (2) that the contemplated sale at Jose Panganiban would violate their agreement embodied under paragraph (i) in the Chattel Mortgage which provides as follows: (i) In case of both judicial and extra-judicial foreclosure under Act 1508, as amended, the parties hereto agree that the corresponding complaint for foreclosure or the petition for sale should be filed with the courts or the sheriff of the City of Manila, as the case may be; and that the Mortgagor shall pay attorney's fees hereby fixed at ten per cent (10%) of the total indebtedness then unpaid but in no case shall it be less than P100.00, exclusive of all costs and fees allowed by law and of other expenses incurred in connection with the said foreclosure. [Emphasis supplied] Notwithstanding the abovequoted agreement in the chattel mortgage contract, and in utter disregard of the objection of herein appellant to the sale of its chattels at Jose Panganiban,

Camarines Norte and not in the City of Manila as agreed upon, the PNB proceeded with the foreclosure sale of said chattels. The trial court, however, justified said action of the PNB in the decision appealed from in the following rationale: While it is true that it was stipulated in the chattel mortgage contract that a petition for the extra-judicial foreclosure thereof should be filed with the Sheriff of the City of Manila, nevertheless, the effect thereof was merely to provide another place where the mortgage chattel could be sold in addition to those specified in the Chattel Mortgage Law. Indeed, a stipulation in a contract cannot abrogate much less impliedly repeal a specific provision of the statute. Considering that Section 14 of Act No. 1508 vests in the mortgagee the choice where the foreclosure sale should be held, hence, in the case under consideration, the PNB had three places from which to select, namely: (1) the place of residence of the mortgagor; (2) the place of the mortgaged chattels were situated; and (3) the place stipulated in the contract. The PNB selected the second and, accordingly, the foreclosure sale held in Jose Panganiban, Camarines Norte, was legal and valid. To the foregoing conclusion, We disagree. While the law grants power and authority to the mortgagee to sell the mortgaged property at a public place in the municipality where the mortgagor resides or where the property is situated, 8 this Court has held that the sale of a mortgaged chattel may be made in a place other than that where it is found, provided that the owner thereof consents thereto; or that there is an agreement to this effect between the mortgagor and the mortgagee. 9 But when, as in this case, the parties agreed to have the sale of the mortgaged chattels in the City of Manila, which, any way, is the residence of the mortgagor, it cannot be rightly said that mortgagee still retained the power and authority to select from among the places provided for in the law and the place designated in their agreement over the objection of the mortgagor. In providing that the mortgaged chattel may be sold at the place of residence of the mortgagor or the place where it is situated, at the option of the mortgagee, the law clearly contemplated benefits not only to the mortgagor but to the mortgagee as well. Their right arising thereunder, however, are personal to them; they do not affect either public policy or the rights of third persons. They may validly be waived. So, when herein mortgagor and mortgagee agreed in the mortgage contract that in cases of both judicial and extra-judicial foreclosure under Act 1508, as amended, the corresponding complaint for foreclosure or the petition for sale should be filed with the courts or the Sheriff of Manila, as the case may be, they waived their corresponding rights under the law. The correlative obligation arising from that agreement have the force of law between them and should be complied with in good faith. 10 By said agreement the parties waived the legal venue, and such waiver is valid and legally effective, because it, was merely a personal privilege they waived, which is not contrary, to public policy or to the prejudice of third persons. It is a general principle that a person may renounce any right which the law gives unless such renunciation is expressly prohibited or the right conferred is of such nature that its renunciation would be against public policy. 11 On the other hand, if a place of sale is specified in the mortgage and statutory requirements in regard thereto are complied with, a sale is properly conducted in that place. Indeed, in the absence of a statute to the contrary, a sale conducted at a place other than that stipulated for in the mortgage is invalid, unless the mortgagor consents to such sale. 12 Moreover, Section 14 of Act 1508, as amended, provides that the officer making the sale should make a return of his doings which shall particularly describe the articles sold and the amount received from each article. From this, it is clear that the law requires that sale be made article by article, otherwise, it would be impossible for him to state the amount received for each item. This

requirement was totally disregarded by the Deputy Sheriff of Camarines Norte when he sold the chattels in question in bulk, notwithstanding the fact that the said chattels consisted of no less than twenty different items as shown in the bill of sale. 13 This makes the sale of the chattels manifestly objectionable. And in the absence of any evidence to show that the mortgagor had agreed or consented to such sale in gross, the same should be set aside. It is said that the mortgagee is guilty of conversion when he sells under the mortgage but not in accordance with its terms, or where the proceedings as to the sale of foreclosure do not comply with the statute. 14 This rule applies squarely to the facts of this case where, as earlier shown, herein appellee bank insisted, and the appellee deputy sheriff of Camarines Norte proceeded with the sale of the mortgaged chattels at Jose Panganiban, Camarines Norte, in utter disregard of the valid objection of the mortgagor thereto for the reason that it is not the place of sale agreed upon in the mortgage contract; and the said deputy sheriff sold all the chattels (among which were a skagit with caterpillar engine, three GMC 6 x 6 trucks, a Herring Hall Safe, and Sawmill equipment consisting of a 150 HP Murphy Engine, plainer, large circular saws etc.) as a single lot in violation of the requirement of the law to sell the same article by article. The PNB has resold the chattels to another buyer with whom it appears to have actively cooperated in subsequently taking possession of and removing the chattels from appellant compound by force, as shown by the circumstance that they had to take along PC soldiers and municipal policemen of Jose Panganiban who placed the chief security officer of the premises in jail to deprive herein appellant of its possession thereof. To exonerate itself of any liability for the breach of peace thus committed, the PNB would want us to believe that it was the subsequent buyer alone, who is not a party to this case, that was responsible for the forcible taking of the property; but assuming this to be so, still the PNB cannot escape liability for the conversion of the mortgaged chattels by parting with its interest in the property. Neither would its claim that it afterwards gave a chance to herein appellant to repurchase or redeem the chattels, improve its position, for the mortgagor is not under obligation to take affirmative steps to repossess the chattels that were converted by the mortgagee. 15 As a consequence of the said wrongful acts of the PNB and the Deputy Sheriff of Camarines Norte, therefore, We have to declare that herein appellant is entitled to collect from them, jointly and severally, the full value of the chattels in question at the time they were illegally sold by them. To this effect was the holding of this Court in a similar situation. 16 The effect of this irregularity was, in our opinion to make the plaintiff liable to the defendant for the full value of the truck at the time the plaintiff thus carried it off to be sold; and of course, the burden is on the defendant to prove the damage to which he was thus subjected. . . . This brings us to the problem of determining the value of the mortgaged chattels at the time of their sale in 1961. The trial court did not make any finding on the value of the chattels in the decision appealed from and denied altogether the right of the appellant to recover the same. We find enough evidence of record, however, which may be used as a guide to ascertain their value. The record shows that at the time herein appellant applied for its loan with the PNB in 1956, for which the chattels in question were mortgaged as part of the security therefore, herein appellant submitted a list of the chattels together with its application for the loan with a stated value of P107,115.85. An official of the PNB made an inspection of the chattels in the same year giving it an appraised value of P42,850.00 and a market value of P85,700.00. 17 The same chattels with some additional equipment acquired by herein appellant with part of the proceeds of the loan were reappraised in a reinspection conducted by the same official in 1958, in the report of which he gave all the chattels an appraised value of P26,850.00 and a market value of P48,200.00. 18 Another re-inspection report in 1959 gave the appraised value as P19,400.00 and the market value at P25,600.00. 19 The said official of the PNB who made the foregoing reports of inspection and re-inspections testified in court that in giving the values appearing in the reports, he used a conservative method of appraisal which, of course, is to be expected of an official of the appellee bank. And it appears that the values were

considerably reduced in all the re-inspection reports for the reason that when he went to herein appellant's premises at the time, he found the chattels no longer in use with some of the heavier equipments dismantled with parts thereof kept in the bodega; and finding it difficult to ascertain the value of the dismantled chattels in such condition, he did not give them anymore any value in his reports. Noteworthy is the fact, however, that in the last re-inspection report he made of the chattels in 1961, just a few months before the foreclosure sale, the same inspector of the PNB reported that the heavy equipment of herein appellant were "lying idle and rusty" but were "with a shed free from rains" 20 showing that although they were no longer in use at the time, they were kept in a proper place and not exposed to the elements. The President of the appellant company, on the other hand, testified that its caterpillar (tractor) alone is worth P35,000.00 in the market, and that the value of its two trucks acquired by it with part of the proceeds of the loan and included as additional items in the mortgaged chattels were worth no less than P14,000.00. He likewise appraised the worth of its Murphy engine at P16,000.00 which, according to him, when taken together with the heavy equipments he mentioned, the sawmill itself and all other equipment forming part of the chattels under consideration, and bearing in mind the current cost of equipments these days which he alleged to have increased by about five (5) times, could safely be estimated at P120,000.00. This testimony, except for the appraised and market values appearing in the inspection and re-inspection reports of the PNB official earlier mentioned, stand uncontroverted in the record; but We are not inclined to accept such testimony at its par value, knowing that the equipments of herein appellant had been idle and unused since it stopped operating its sawmill in 1958 up to the time of the sale of the chattels in 1961. We have no doubt that the value of chattels was depreciated after all those years of inoperation, although from the evidence aforementioned, We may also safely conclude that the amount of P4,200.00 for which the chattels were sold in the foreclosure sale in question was grossly unfair to the mortgagor. Considering, however, the facts that the appraised value of P42,850.00 and the market value of P85,700.00 originally given by the PNB official were admittedly conservative; that two 6 x 6 trucks subsequently bought by the appellant company had thereafter been added to the chattels; and that the real value thereof, although depreciated after several years of inoperation, was in a way maintained because the depreciation is off-set by the marked increase in the cost of heavy equipment in the market, it is our opinion that the market value of the chattels at the time of the sale should be fixed at the original appraised value of P42,850.00. Herein appellant's claim for moral damages, however, seems to have no legal or factual basis. Obviously, an artificial person like herein appellant corporation cannot experience physical sufferings, mental anguish, fright, serious anxiety, wounded feelings, moral shock or social humiliation which are basis of moral damages. 21 A corporation may have a good reputation which, if besmirched, may also be a ground for the award of moral damages. The same cannot be considered under the facts of this case, however, not only because it is admitted that herein appellant had already ceased in its business operation at the time of the foreclosure sale of the chattels, but also for the reason that whatever adverse effects of the foreclosure sale of the chattels could have upon its reputation or business standing would undoubtedly be the same whether the sale was conducted at Jose Panganiban, Camarines Norte, or in Manila which is the place agreed upon by the parties in the mortgage contract. But for the wrongful acts of herein appellee bank and the deputy sheriff of Camarines Norte in proceeding with the sale in utter disregard of the agreement to have the chattels sold in Manila as provided for in the mortgage contract, to which their attentions were timely called by herein appellant, and in disposing of the chattels in gross for the miserable amount of P4,200.00, herein appellant should be awarded exemplary damages in the sum of P10,000.00. The circumstances of the case also warrant the award of P3,000.00 as attorney's fees for herein appellant. WHEREFORE AND CONSIDERING ALL THE FOREGOING, the decision appealed from should be, as hereby, it is set aside. The Philippine National Bank and the Deputy Sheriff of the

province of Camarines Norte are ordered to pay, jointly and severally, to Mambulao Lumber Company the total amount of P56,000.73, broken as follows: P150.73 overpaid by the latter to the PNB, P42,850.00 the value of the chattels at the time of the sale with interest at the rate of 6% per annum from December 21, 1961, until fully paid, P10,000.00 in exemplary damages, and P3,000.00 as attorney's fees. Costs against both appellees.