Part 4 Case 2 Digest Torres vs. Limjap

Part 4 Case 2 Alejandra Torres et. al. plaintiff-appellees vs. Francisco Limjap, Special Administrator of deceased Jose B. Henson, defendant-appellant G.R. No. 34385 FACTS: The plaintiffs alleged that the defendant, 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. The defendant denied generally and specifically the plaintiffs' allegations and set up the defense 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. A judgment was rendered in favor of the plaintiff and against the defendant, confirming the attachment of said drug store by the sheriff of the City of Manila and the delivery thereof to the plaintiff. The defendant appealed from the judgment and made the assignments of error, among others, that 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 and in refusing to allow the defendant to introduce evidence tending to show that the stock of merchandise found in the two drug stores was in existence or owned by the mortgagor at the time of execution of the mortgages in question. Defendant then insists that a stipulation authorizing the disposal and substitution of chattels mortgage does not operate to extend the mortgage to after-acquired party, and that such stipulation is in contravention of the express provision of the last paragraph of section 7 Act No. 1508, which provides 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”. ISSUE: Whether or not the provision in the chattel mortgage law that extends coverage to after-acquired property is valid and binding. HELD: We are of the opinion that (a.) 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. 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. The judgment appealed from is in accordance with the facts and the law, and the same should be and is hereby affirmed, with costs.