GR#L-22331 June 6, 1967

Facts:

Issue: Who has a better right?

Rodolfo Lanuza and his wife Belen sold their

house, leasehold rights to the lot, television set
and a refrigerator to Reyes and Navarro in
consideration of a sum of P3,000. It was executed
under a Deed of Sale with Right to Repurchase.
The parties extended the term for the redemption
when the original expired.

Held:

Subsequently, the Lanuzas mortgaged the

property to the intervenor, De Leon recorded in
the Register of Deeds in Manila. And upon failure
to pay of the former, the latter filed in the
sheriffs
office
petition
for
extrajudicial
foreclosure. De Leon then won as the sole bidder.
On the other hand, the petitioners Reyes and
Navarro filed a petition for consolidation of
ownership of the house on the ground that the
vendees failed to redeem their property upon the
expiration
of
the
redemption
period.
Consequently, De Leon argued that the pacto de
retro sale could not affect his right as a third
party.
The lower court decided the case in favor of
Reyes and Navarro on the ground that the
Lanuzas lose the right to mortgage their property
because they were not the absolute owners of the
property that time.

De Leon has a better right.

Art 2088 of the New Civil Code states that the
creditor cannot appropriate the things given by
way of pledge or mortgage, or dispose of them.
Any stipulation to the contrary is null and void.
There were no transmission of ownership
between the Lanuzas and Reyes and Navarro. In
truth, there was a provision regarding automatic
transfer of ownership which was a Pactum
Commisorium and it is prohibited under the law.
Hnece, the intention of the parties was deemed
as a mortgage rather than of a sale.
The court held that it was in reality an equitable
mortgage and the claims of De Leon is preferred
because his mortgage was registered under art.
2125 of the New Civil Code - 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.

JOSE MOVIDO, plaintiff-appellant, vs.REHABILITATION FINANCE CORPORATION and

THEPROVINCIAL SHERIFF OF SAMAR, defendants-appellees. GR#L-11990 May 29, 1959
FACT:
the Vet. Bros. & Company, Inc. mortgaged to Jose
S. Movido its rights, title, interest and
participation "in a complete sawmill in barrio
Mauo, Allen, Samar, with all its machineries, tools
and equipment in good running condition" to
secure the payment of a loan of P15,000 and
interest at the rate of 12% per annum. On 28
February 1947 the chattel mortgage was
registered in the Office of the Registrar of Deeds.
On 28 July 1948 Jose S. Movido brought an action
against Vet. Bros. & Company, Inc. in the Court of
First Instance of Leyte to recover the sum of
P13,494.35 with the interest at the rate of 12%
per annum from 1 July 1948 until the principal is
fully paid and P2,000 by way of damages and
expenses of litigation. In which the parties
entered into a compromise agreement.
Subsequently on 3 March 1949, by an instrument
duly executed, Vet Bros. & Company, Inc. and the
spouses Simeon G. Toribio and Maximiana
Escobar de Toribio mortgaged the real estate and
chattels therein enumerated and described in
favor of the Rehabilitation finance Corporation to
secure the payment of a loan of P46,000. It was
sold at the public auction in favor of RFC.
On 24 April 1953 Jose S. Movido filed with the
Sheriff a third party claim on the chattels
advertised for sale at public auction asserting a
prior and superior right in them because of his
chattel mortgage recorded before that of the
Rehabilitation Finance Corporation and by virtue
of a judgment in his favor rendered by the Court

of First Instance of Leyte in civil case No. 441.

Nonetheless, the sheriff still proceeded to the
sale.
Movido filed an action to the CFI Leyte charging
them with having unlawfully, fraudulently and
maliciously disregarded his third party claim on
the chattels and sold them at public auction on
11 June 1953, upon the request and for the
benefit of the former, thereby causing him actual
damages in the sum of P5,000 in addition to the
expense of P2,000 for attorney's fee.
Issue: Who has a better right?
Held:
RFC has a better right. Due to the compromise
agreement executed by Movido and the Vet
brothers as regards the first suit, the chattel that
was mortgaged was released. The contract
between them was deemed novated. The lien no
longer exist. Therefore A mortgage who sues and
obtains a personal judgment against a mortgagor
upon his credit waives thereby his right to
enforce the mortgage securing it. The judgment
appealed from is affirmed, with cost against the
appellant.