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Tumalad vs. Vicencio, 41 SCRA 143
Tumalad vs. Vicencio, 41 SCRA 143
EN BANC validity of the chattel mortgage in this case. The doctrine of estoppel therefore
applies to the herein defendants-appellants, having treated the subject house as
[G.R. No. L-30173. September 30, 1971.] personality.
6. ID.; ID.; MORTGAGE; FORECLOSURE; MORTGAGOR MAY BE ALLOWED
GAVINO A. TUMALAD and GENEROSA R. TUMALAD, Plaintiffs-Appellees, v. POSSESSION DURING THE ONE-YEAR PERIOD OF REDEMPTION. — Section 6 of
ALBERTA VICENCIO and EMILIANO SIMEON, Defendants-Appellants. the Act referred to (Act No. 3135) provides that the debtor-mortgagor
(defendants-appellants herein) may, at any time within one year from and after
Castelo & Suck for Plaintiffs-Appellees. the date of the auction sale, redeem the property sold at the extra judicial
foreclosure sale. Section 7 of the same Act allows the purchaser of the property
Jose Q. Calingo, for Defendants-Appellants. to obtain from the court the possession during the period of redemption: but the
SYLLABUS same provision expressly requires the filing of a petition with the proper Court
of First Instance and the furnishing of a bond. It is only upon filing of the proper
1. REMEDIAL LAW; SPECIAL CIVIL ACTION; UNLAWFUL DETAINER; CLAIM OF motion and the approval of the corresponding bond that the order for a writ of
OWNERSHIP IS A MATTER OF DEFENSE THEREIN. — In detainer cases the claim possession issues as a matter of course. No discretion is left to the court. In the
of ownership "is a matter of defense and raises an issue of fact which should be absence of such a compliance, as in the instant case, the purchaser can not claim
determined from the evidence at the trial." possession during the period of redemption as a matter of right.
2. CIVIL LAW; CONTRACTS; FRAUD OR DECEIT RENDERS CONTRACT VOIDABLE, 7. ID.; ID.; ID.; ID.; PURCHASER RECEIVING RENTALS DURING REDEMPTION
NOT VOID AB INITIO. — Fraud or deceit does not render a contract void ab initio, PERIOD IS ACCOUNTABLE TO MORTGAGOR; RATIONALE. — "In other words,
and can only be a ground for rendering the contract voidable or annullable before the expiration of the 1-year period within which the judgment-debtor or
pursuant to Article 1390 of the New Civil Code, by a proper action in court. mortgagor may redeem the property, the purchaser thereof is not entitled, as a
3. ID.; ID.; PARTIES THERETO MAY TREAT AS PERSONAL PROPERTY THAT matter of right, to possession of the same. Thus, while it is true that the Rules of
WHICH IS REAL PROPERTY. — In the case of Manarang and Manarang v. Ofilada Court allow the purchaser to receive the rentals if the purchased property is
(99 Phil. 109), this Court stated that "it is undeniable that the parties to a contract occupied by tenants, he is, nevertheless, accountable to the judgment-debtor or
may by agreement treat as personal property that which by nature would be real mortgagor as the case may be, for the amount so received and the same will be
property," citing Standard Oil Company of New York v. Jaramillo (44 Phil. 632). duly credited against the redemption price when the said debtor or mortgagor
effects the redemption. Differently stated, the rentals receivable from tenants,
4. ID.; ID.; ID.; CASE AT BAR. — In the contract now before Us, the house on rented although they may be collected by the purchaser during the redemption period,
land is not only expressly designated as Chattel Mortgage; it specifically provides do not belong to the latter but still pertain to the debtor or mortgagor. The
that "the mortgagor. . . voluntarily CEDES, SELLS and TRANSFERS by way of rationale for the Rule, it seems, is to secure for the benefit of the debtor or
Chattel Mortgage the property together with its leasehold rights over the lot on mortgagor, the payment of the redemption amount and the consequent return to
which it is constructed and participation . . ." Although there is no specific him of his properties sold at public auction." (Italics supplied)
statement referring to the subject house as personal property, yet by ceding,
selling or transferring a property by way of chattel mortgage defendants- DECISION
appellants could only have meant to convey the house as chattel, or at least, REYES, J.B.L., J.:
intended to treat the same as such, so that they should not now be allowed to
Case certified to this Court by the Court of Appeals (CA-G.R. No. 27824-R) for the
make an inconsistent stand by claiming otherwise. Moreover, the subject house
reason that only questions of law are involved.
stood on a rented lot to which defendants-appellants merely had a temporary
right as lessee, and although this can not in itself alone determine the status of This case was originally commenced by defendants-appellants in the municipal
the property, it does so when combined with other factors to sustain the court of Manila in Civil Case No. 43073, for ejectment. Having lost therein,
interpretation that the parties, particularly the mortgagors, intended to treat the defendants-appellants appealed to the court a quo (Civil Case No. 30993) which
house as personality. also rendered a decision against them, the dispositive portion of which follows:
5. ID.; ID.; PARTIES ESTOPPED TO ASSAIL VALIDITY THEREOF. — It is the "WHEREFORE, the court hereby renders judgment in favor of the plaintiffs and
defendants-appellants themselves, as debtors-mortgagors, who are attacking the against the defendants, ordering the latter to pay jointly and severally the former
Tumalad vs. Vicencio, 41 SCRA 143
Page 2 of 6
a monthly rent of P200.00 on the house, subject-matter of this action, from March of December, 1956 as ordered in the decision of the municipal court. As a result,
27, 1956, to January 14, 1967, with interest at the legal rate from April 18, 1956, the court granted plaintiffs-appellees’ motion for execution, and it was actually
the filing of the complaint, until fully paid, plus attorney’s fees in the sum of issued on 24 January 1957. However, the judgment regarding the surrender of
P300.00 and to pay the costs." possession to plaintiffs-appellees could not be executed because the subject
It appears on the records that on 1 September 1955 defendants-appellants house had been already demolished on 14 January 1957 pursuant to the order of
the court in a separate civil case (No. 25816) for ejectment against the present
executed a chattel mortgage 1 in favor of plaintiffs-appellees over their house of
defendants for non-payment of rentals on the land on which the house was
strong materials located at No. 550 Int. 3, Quezon Boulevard, Quiapo, Manila, over
Lot No. 6-B and 7-B, Block No. 2554, which were being rented from Madrigal & constructed.
Company, Inc. The mortgage was registered in the Registry of Deeds of Manila on The motion of plaintiffs for dismissal of the appeal, execution of the supersedeas
2 September 1955. The herein mortgage was executed to guarantee a loan of bond and withdrawal of deposited rentals was denied for the reason that the
P4,800.00 received from plaintiffs-appellees, payable within one year at 12% per liability therefor was disclaimed and was still being litigated, and under Section
annum. The mode of payment was P150.00 monthly, starting September, 1955, 8, Rule 72, rentals deposited had to be held until final disposition of the appeal. 7
up to July 1956, and the lump sum of P3,150 was payable on or before August,
On 7 October 1957, the appellate court of First Instance rendered its decision, the
1956. It was also agreed that default in the payment of any of the amortizations dispositive portion of which is quoted earlier. The said decision was appealed by
would cause the remaining unpaid balance to become immediately due and
defendants to the Court of Appeals which, in turn, certified the appeal to this
payable and — "the Chattel Mortgage will be enforceable in accordance with the
Court. Plaintiffs-appellees failed to file a brief and this appeal was submitted for
provisions of Special Act No. 3135, and for this purpose, the Sheriff of the City of
decision without it.
Manila or any of his deputies is hereby empowered and authorized to sell all the
Mortgagor’s property after the necessary publication in order to settle the Defendants-appellants submitted numerous assignments of error which can be
financial debts of P4,500.00, plus 12% yearly interest, and attorney’s fees. . ." 2 condensed into two questions, namely:chanrob1es virtual 1aw library
When defendants-appellants defaulted in paying, the mortgage was (a) Whether the municipal court from which the case originated had jurisdiction
extrajudicially foreclosed, and on 27 March 1956, the house was sold at public to adjudicate the same;
auction pursuant to the said contract. As highest bidder, plaintiffs-appellees were (b) Whether the defendants are, under the law, legally bound to pay rentals to the
issued the corresponding certificate of sale. 3 Thereafter, on 18 April 1956, plaintiffs during the period of one (1) year provided by law for the redemption of
plaintiffs-appellees commenced Civil Case No. 43073 in the municipal court of the extrajudicially foreclosed house.
Manila, praying, among other things, that the house be vacated and its possession
surrendered to them, and for defendants-appellants to pay rent of P200.00 We will consider these questions seriatim.
monthly from 27 March 1956 up to the time the possession is surrendered. 4 On (a) Defendants-appellants mortgagors question the jurisdiction of the
21 September 1956, the municipal court rendered its decision — ". . . ordering municipal court from which the case originated, and consequently, the
the defendants to vacate the premises described in the complaint; ordering appellate jurisdiction of the Court of First Instance a quo, on the theory that
further to pay monthly the amount of P200.00 from March 27, 1956, until such the chattel mortgage is void ab initio; whence it would follow that the
(time that) the premises is (sic) completely vacated; plus attorney’s fees of extrajudicial foreclosure, and necessarily the consequent auction sale, are
P100.00 and the costs of the suit." 5 also void. Thus, the ownership of the house still remained with defendants-
Defendants-appellants, in their answers in both the municipal court and court a appellants who are entitled to possession and not plaintiffs-appellees.
quo impugned the legality of the chattel mortgage, claiming that they are still the Therefore, it is argued by defendants-appellants, the issue of ownership will
owners of the house; but they waived the right to introduce evidence, oral or have to be adjudicated first in order to determine possession. It is
documentary. Instead, they relied on their memoranda in support of their motion contended further that ownership being in issue, it is the Court of First
to dismiss, predicated mainly on the grounds that: (a) the municipal court did not Instance which has jurisdiction and not the municipal court.
have jurisdiction to try and decide the case because (1) the issue involved is Defendants-appellants predicate their theory of nullity of the chattel mortgage
ownership, and (2) there was no allegation of prior possession; and (b) failure to on two grounds, which are: (a) that their signatures on the chattel mortgage
prove prior demand pursuant to Section 2, Rule 72, of the Rules of Courts. 6 were obtained through fraud, deceit, or trickery; and (b) that the subject matter
During the pendency of the appeal to the Court of First Instance, defendants- of the mortgage is a house of strong materials, and, being an immovable, it can
appellants failed to deposit the rent for November, 1956 within the first 10 days only be the subject of a real estate mortgage and not a chattel mortgage.
Tumalad vs. Vicencio, 41 SCRA 143
Page 3 of 6
On the charge of fraud, deceit or trickery, the Court of First Instance found Mortgage was a house of mixed materials, and this Court held therein that it was
defendants-appellants’ contentions as not supported by evidence and a valid Chattel mortgage because it was so expressly designated and specifically
accordingly dismissed the charge, 8 confirming the earlier finding of the that the property given as security "is a house of mixed materials, which by its
municipal court that "the defense of ownership as well as the allegations of fraud very nature is considered personal property." In the later case of Navarro v.
and deceit . . . are mere allegations." 9 Pineda, 21 this Court stated that —
It has been held in Supia and Batiaco v. Quintero and Ayala 10 that "the answer "The view that parties to a deed of chattel mortgage may agree to consider a
is a mere statement of the facts which the party filing it expects to prove, but it is house as personal property for the purposes of said contract, ‘is good only insofar
not evidence; 11 and further, that when the question to be determined is one of as the contracting parties are concerned. It is based, partly, upon the principle of
title, the Court is given the authority to proceed with the hearing of the cause until estoppel’ (Evangelista v. Alto Surety, No. L-11139, 23 April 1958). In a case, a
this fact is clearly established. In the case of Sy v. Dalman, 12 wherein the mortgaged house built on a rented land was held to be a personal property, not
defendant was also a successful bidder in an auction sale, it was likewise held by only because the deed of mortgage considered it as such, but also because it did
this Court that in detainer cases the claim of ownership "is a matter of defense not form part of the land (Evangelista v. Abad, [CA]; 36 O.G. 2913), for it is now
and raises an issue of fact which should be determined from the evidence at the settled that an object placed on land by one who had only a temporary right to
trial." What determines jurisdiction are the allegations or averments in the the same, such as the lessee or usufructuary, does not become immobilized by
complaint and the relief asked for. 13 attachment (Valdez v. Central Altagracia, 222 U.S. 58, cited in Davao Sawmill Co.,
Inc. v. Castillo, Et Al., 61 Phil. 709). Hence, if a house belonging to a person stands
Moreover, even granting that the charge is true, fraud or deceit does not render
a contract void ab initio, and can only be a ground for rendering the contract on a rented land belonging to another person, it may be mortgaged as a personal
property as so stipulated in the document of mortgage. (Evangelista v. Abad,
voidable or annullable pursuant to Article 1390 of the New Civil Code, by a proper
supra.) It should be noted, however that the principle is predicated on statements
action in court. 14 There is nothing on record to show that the mortgage has been
annulled. Neither is it disclosed that steps were taken to nullify the same. Hence, by the owner declaring his house to be a chattel, a conduct that may conceivably
estop him from subsequently claiming otherwise." (Ladera v. C.N. Hodges, [CA]
defendants-appellants’ claim of ownership on the basis of a voidable contract
48 O.G. 5374). 22
which has not been voided fails.
It is claimed in the alternative by defendants-appellants that even if there was no In the contract now before Us, the house on rented land is not only expressly
designated as Chattel Mortgage; it specifically provides that "the mortgagor . . .
fraud, deceit or trickery, the chattel mortgage was still null and void ab initio
voluntarily CEDES, SELLS and TRANSFERS by way of Chattel Mortgage 23 the
because only personal properties can be subject of a chattel mortgage. The rule
about the status of buildings as immovable property is stated in Lopez v. Orosa, property together with its leasehold rights over the lot on which it is constructed
and participation . . ." 24 Although there is no specific statement referring to the
Jr. and Plaza Theatre, Inc., 15 cited in Associated Insurance Surety Co., Inc. v. Iya,
subject house as personal property, yet by ceding, selling or transferring a
Et. Al. 16 to the effect that —
property by way of chattel mortgage defendants-appellants could only have
". . . it is obvious that the inclusion of the building, separate and distinct meant to convey the house as chattel, or at least, intended to treat the same as
from the land, in the enumeration of what may constitute real properties such, so that they should not now be allowed to make an inconsistent stand by
(art. 415, New Civil Code) could only mean one thing — that a building claiming otherwise. Moreover, the subject house stood on a rented lot to which
is by itself an immovable property irrespective of whether or not said defendants-appellants merely had a temporary right as lessee, and although this
structure and the land on which it is adhered to belong to the same can not in itself alone determine the status of the property, it does so when
owner." combined with other factors to sustain the interpretation that the parties,
Certain deviations, however, have been allowed for various reasons. In the case particularly the mortgagors, intended to treat the house as personality. Finally,
of Manarang and Manarang v. Ofilada, 17 is Court stated that "it is undeniable that unlike in the Iya cases, Lopez v. Orosa, Jr. and Plaza Theatre, Inc. 25 and Leung
the parties to a contract may by agreement treat as personal property that which Yee v. F. L. Strong Machinery and Williamson, 26 wherein third persons assailed
by ,nature would be real property", citing Standard Oil Company of New York v. the validity of the chattel mortgage, 27 it is the defendants-appellants themselves,
Jaramillo. 18 In the latter case, the mortgagor conveyed and transferred to the as debtors-mortgagors, who are attacking the validity of the chattel mortgage in
mortgagee by way of mortgage "the following described personal property." 19 this case. The doctrine of estoppel therefore applies to the herein defendants-
The "personal property" consisted of leasehold rights and a building. Again, in the appellants, having treated the subject house as personality.
case of Luna v. Encarnacion, 20 the subject of the contract designated as Chattel
Tumalad vs. Vicencio, 41 SCRA 143
Page 4 of 6
(b) Turning now to the question of possession and rentals of the premises in accountable to the judgment-debtor or mortgagor as the case may be, for the
question. The Court of First Instance noted in its decision that nearly a amount so received and the same will be duly credited against the
year after the foreclosure sale the mortgaged house had been redemption price when the said debtor or mortgagor effects the redemption.
demolished on 14 and 15 January 1957 by virtue of a decision obtained Differently stated, the rentals receivable from tenants, although they may be
by the lessor of the land on which the house stood. For this reason, the collected by the purchaser during the redemption period, do not belong to
said court limited itself to sentencing the erstwhile mortgagors to pay the latter but still pertain to the debtor of mortgagor. The rationale for the
plaintiffs a monthly rent of P200.00 from 27 March 1956 (when the Rule, it seems, is to secure for the benefit of the debtor or mortgagor, the
chattel mortgage was foreclosed and the house sold) until 14 January payment of the redemption amount and the consequent return to him of his
1957 (when it was torn down by the Sheriff), plus P300.00 attorney’s properties sold at public auction." (Emphasis supplied)
fees.
The Hamada case reiterates the previous ruling in Chan v. Espe. 36
Appellants mortgagors question this award, claiming that they were entitled Since the defendants-appellants were occupying the house at the time of the
to remain in possession without any obligation to pay rent during the one
auction sale, they are entitled to remain in possession during the period of
year redemption period after the foreclosure sale, i.e., until 27 March 1957.
redemption or within one year from and after 27 March 1956, the date of the
On this issue, We must rule for the appellants.97
auction sale, and to collect the rents or profits during the said period.
Chattel mortgages are covered and regulated by the Chattel Mortgage Law,
It will be noted further that in the case at bar the period of redemption had
Act No. 1508. 28 Section 14 of this Act allows the mortgagee to have the not yet expired when action was instituted in the court of origin, and that
property mortgaged sold at public auction through a public officer in almost
plaintiffs-appellees did not choose to take possession under Section 7, Act
the same manner as that allowed by Act No. 3135, as amended by Act No.
No. 3135, as amended, which is the law selected by the parties to govern the
4118, provided that the requirements of the law relative to notice and extrajudicial foreclosure of the chattel mortgage. Neither was there an
registration are complied with. 29 In the instant case, the parties specifically
allegation to that effect. Since plaintiffs-appellees’ right to possess was not
stipulated that "the chattel mortgage will be enforceable in accordance with
yet born at the filing of the complaint, there could be no violation or breach
the provisions of Special Act No. 3135 . . ." 30 (Emphasis supplied).
thereof. Wherefore, the original complaint stated no cause of action and was
Section 6 of the Act referred to 31 provides that the debtor-mortgagor prematurely filed. For this reason, the same should be ordered dismissed,
(defendants-appellants herein) may, at any time within one year from and even if there was no assignment of error to that effect. The Supreme Court is
after the date of the auction sale, redeem the property sold at the extra clothed with ample authority to review palpable errors not assigned as such
judicial foreclosure sale. Section 7 of the same Act 32 allows the purchaser of if it finds that their consideration is necessary in arriving at a just decision of
the property to obtain from the court the possession during the period of the case. 37
redemption: but the same provision expressly requires the filing of a petition It follows that the court below erred in requiring the mortgagors to pay rents
with the proper Court of First Instance and the furnishing of a bond. It is only
for the year following the foreclosure sale, as well as attorney’s fees.
upon filing of the proper motion and the approval of the corresponding bond
that the order for a writ of possession issues as a matter of course. No FOR THE FOREGOING REASONS, the decision appealed from is reversed and
discretion is left to the court. 33 In the absence of such a compliance, as in another one entered, dismissing the complaint. With costs against Plaintiffs-
the instant case, the purchaser can not claim possession during the period of Appellees.
redemption as a matter of right. In such a case, the governing provision is Concepcion, C.J., Dizon, Makalintal, Zaldivar, Castro, Fernando, Teehankee,
Section 34, Rule 39, of the Revised Rules of Court 34 which also applies to Barredo, Villamor and Makasiar, JJ., concur.
properties purchased in extrajudicial foreclosure proceedings. 35
Construing the said section, this Court stated in the aforestated case of Reyes Endnotes:
v. Hamada, 1. Exhibit "A," page 1, Folder of Exhibits.
"In other words, before the expiration of the 1-year period within which the 2. See paragraph "G," Exhibit "4" supra.
judgment-debtor or mortgagor may redeem the property, the purchaser
thereof is not entitled, as a matter of right, to possession of the same. Thus, 3. Exhibit "B," page 4, Folder of Exhibits.
while it is true that the Rules of Court allow the purchaser to receive the 4. Page 2, Defendants’ Record on appeal, page 97, Rollo.
rentals if the purchased property is occupied by tenants, he is, nevertheless,
Tumalad vs. Vicencio, 41 SCRA 143
Page 5 of 6
35. See Reyes v. Hamada, No. L-19967, 31 May 1965, 14 SCRA 215; Italics
supplied.
36. No. L-16777, 20 April 1961, 1 SCRA 1004.
37. Saura Import & Export Co. v. Philippine international Surety Co., Et Al., No. L-
15184, 31 May 1963, 8 SCRA 143, 148; Hernandez v. Andal, 78 Phil. 198, See also
Sec. 7, Rule 51, of the Revised Rules of Court. Cf. Santaella v. Otto Lange Co., 155
Fed. 719; Mast v. Superior Drill Co., 154 Fed., 45, Francisco, Rules of Court (1965
Ed), Vol. 3, page 765.