Piansay vs. David

A chattel mortgage on a house of strong materials is void as to third persons because buildings are regarded as mere accessories to the land, and the registration of such a mortgage in the chattel mortgage registry produces no effect. Consequently, a mortgage creditor who purchases real property at an extrajudicial foreclosure sale pursuant to a void chattel mortgage acquires no right thereto, and cannot transmit any right to an assignee as against third persons.

The plaintiffs, Salvador Piansay and Claudia V. Vda. de Uy Kim, were involved in a dispute over a house located at 1259 Sande Street, Tondo, Manila. The house was originally owned by defendant Conrado S. David, who obtained a loan from Mrs. Uy Kim secured by a chattel mortgage on the house. The dispute arose from the subsequent foreclosure of the chattel mortgage, the sale of the house to Mrs. Uy Kim, and her subsequent sale of the same to Piansay. The case involves the application of the principle that buildings are accessories to the land and cannot be the subject of a chattel mortgage.

On December 11, 1948, defendant Conrado S. David received a loan of P3,000 with interest at 12% per annum from Claudia B. Vda. de Uy Kim, one of the plaintiffs. To secure the payment of the loan, David executed a chattel mortgage on a house situated at 1259 Sande Street, Tondo, Manila, which was registered with the Register of Deeds of Manila on December 19, 1948.

On February 10, 1953, the mortgaged house was sold at public auction to satisfy the indebtedness to Mrs. Uy Kim, and the house was sold to her in the foreclosure proceedings. On March 22, 1954, Mrs. Uy Kim sold the house to Marcos Mangubat. On March 1, 1956, Mangubat filed a complaint against David, Civil Case No. 29078, in the Court of First Instance of Manila, for the collection of a loan of P2,000. On March 24, 1956, the complaint was amended to include plaintiffs Salvador Piansay and Mrs. Uy Kim as party defendants, praying that the auction sale executed by the Sheriff on February 10, 1953, and the deed of absolute sale executed by Mrs. Uy Kim in favor of Piansay be annulled.

A decision was rendered in Civil Case No. 29078 ordering David to pay Mangubat the sum of P2,000, damages, and attorney's fees, and dismissing the complaint with respect to Mrs. Uy Kim, Leonardo Uy Kim, and Piansay. Upon appeal, the Court of Appeals affirmed the decision but set aside the award of damages in favor of Mrs. Uy Kim. In the execution of Civil Case No. 29078, the house, which had been bought by Mrs. Uy Kim at the foreclosure proceedings and sold by her to Piansay, was levied upon at the instance of Mangubat. To prevent the sale at public auction of the house, the plaintiffs filed a petition for certiorari and mandamus with preliminary injunction in the Court of Appeals, CA-G.R. No. 28974-R, which denied the petition to lift or discharge the writ of execution.

On July 31, 1961, Piansay and Mrs. Uy Kim instituted the present action, Civil Case No. 47664, against David and Mangubat. In their complaint, plaintiffs alleged that David demanded from Piansay the payment of rentals for the use and occupation of the house, which Piansay claims is his property, and that the defendants were threatening to cause the house to be levied upon and sold at public auction. Plaintiffs prayed for a writ of preliminary injunction and for judgment declaring Piansay as the true and lawful owner of the house, sentencing the defendants to pay damages, and making the preliminary injunction permanent.

Mangubat moved to dismiss the complaint upon the theory that it was barred by the principle of res judicata and that plaintiffs had no personality to bring the action or to question the levy upon the house because they had no interest therein. The lower court granted the motion and dismissed the complaint with costs against the plaintiffs. A reconsideration of the order having been denied, plaintiffs interposed the present appeal directly to the Supreme Court, raising only questions of law: (1) the applicability of the principle of res judicata; and (2) the validity of the chattel mortgage constituted in favor of Mrs. Uy Kim.

• Res Judicata: Plaintiffs argued that the principle of res judicata did not apply to bar their action, as they were not parties to the prior proceedings in the same capacity or the issues were not identical.
• Validity of the Chattel Mortgage: Plaintiffs maintained that the chattel mortgage constituted in favor of Mrs. Uy Kim was valid and that the foreclosure sale validly transferred ownership of the house to her, and subsequently to Piansay.

• Res Judicata: Mangubat moved to dismiss the complaint upon the theory that the same is barred by the principle of res judicata, as the prior orders in the execution proceedings had become final and executory.
• Lack of Personality: Mangubat argued that plaintiffs have no personality to bring the action or to question the levy upon the house because they have no interest therein, since the chattel mortgage and the foreclosure sale were void as to him.

• Res Judicata: Whether the plaintiffs are barred by the principle of res judicata from asserting the validity of the chattel mortgage and the foreclosure sale.
• Validity of the Chattel Mortgage: Whether the chattel mortgage constituted in favor of Mrs. Uy Kim on a house of strong materials is valid and binding as against third persons.

• Res Judicata: Yes. The plaintiffs are barred from asserting that the chattel mortgage and the sale are valid, because the order of February 4, 1961, became final and executory upon the denial of the petition for certiorari and mandamus in CA-G.R. No. 28974-R.
• Validity of the Chattel Mortgage: No. A chattel mortgage on a house of strong materials is void as to third persons, because buildings are regarded as mere accessories to the land, and the registration of such a mortgage in the chattel mortgage registry produces no effect.

• Res Judicata: In Civil Case No. 29078, Piansay assailed the right of Mangubat to levy execution upon the house, alleging that it belonged to him, having bought it from Mrs. Uy Kim, who had acquired it at the auction sale. This pretense was overruled by Judge Perez in his order of February 4, 1961, upon the theory that the chattel mortgage and sale in favor of Mrs. Uy Kim had been annulled in the original decision, as affirmed by the Court of Appeals. Regardless of whether this theory was accurate, the order became final and executory upon the denial of the petition for certiorari and mandamus. Hence, plaintiffs are now barred from asserting that the chattel mortgage and sale are valid.

• Validity of the Chattel Mortgage: The Court cited the rule that buildings and constructions are regarded as mere accessories to the land, following the Roman maxim omne quod solo inaedificatur solo credit. Thus, a chattel mortgage on a house of strong materials is a futile act, as the registration of the document in the registry of chattels produces no effect. A mortgage creditor who purchases real properties at an extrajudicial foreclosure sale by virtue of a chattel mortgage declared null and void with respect to said real properties acquires no right thereto by virtue of said sale. As Mrs. Uy Kim could not have acquired the house when the Sheriff sold it at public auction, she could not validly transmit it to Piansay. The sale of the house in the foreclosure proceedings is null and void insofar as Mangubat is concerned, and did not confer upon Mrs. Uy Kim any dominical right in and to the house, so that she could not have transmitted to her assignee, Piansay, any such right as against Mangubat. In short, plaintiffs have no cause of action against the defendants.

• Accessory nature of buildings — Under Philippine law, buildings and constructions are regarded as mere accessories to the land, following the Roman maxim omne quod solo inaedificatur solo credit. Consequently, a chattel mortgage on a house of strong materials is void, as the registration of such a document in the registry of chattels is a futile act. The Court applied this doctrine to hold that the chattel mortgage in favor of Mrs. Uy Kim was void as to third persons, and the foreclosure sale conferred no right upon her.

• Res judicata — A final and executory order bars the parties from relitigating the same issues in a subsequent action. The Court applied this doctrine to hold that the order of February 4, 1961, which became final and executory upon the denial of the petition for certiorari and mandamus, barred the plaintiffs from asserting the validity of the chattel mortgage and the foreclosure sale.

• Void chattel mortgage and foreclosure sale — A mortgage creditor who purchases real properties at an extrajudicial foreclosure sale by virtue of a chattel mortgage declared null and void with respect to said real properties acquires no right thereto by virtue of said sale. The Court applied this doctrine to hold that Mrs. Uy Kim could not have acquired the house at the foreclosure sale, and therefore could not validly transmit it to Piansay.

• "Since it is a rule in our law that buildings and constructions are regarded as mere accessories to the land (following the Roman maxim omne quod solo inaedificatur solo credit) it is logical that said accessories should partaked of the nature of the principal thing, which is the land forming, as they do, but a single object (res) with it in contemplation of law." — This passage, quoted from the Court of Appeals decision in Ladera vs. Hodges, articulates the foundational doctrine that buildings are accessories to the land, which is central to the Court's ruling on the invalidity of the chattel mortgage.

• "A mortgage creditor who purchases real properties at an extra-judicial foreclosure sale thereof by virtue of a chattel mortgage constituted in his favor, which mortgage has been declared null and void with respect to said real properties acquires no right thereto by virtue of said sale." — This passage, quoted from De la Riva vs. Ah Kee, states the rule that a void chattel mortgage cannot support a valid foreclosure sale, which the Court applied to deny Mrs. Uy Kim any right over the house.

• "As a consequence, the sale of the house in question in the proceedings for the extrajudicial foreclosure of said chattel mortgage, is null and void insofar as defendant Mangubat is concerned, and did not confer upon Mrs. Uy Kim, as buyer in said sale, any dominical right in and to said house." — This passage states the Court's conclusion that the foreclosure sale was void as to third persons, and that Mrs. Uy Kim acquired no right over the house, which she could not transmit to Piansay.

• Ladera, et al. vs. Hodges, et al., CA-G.R. No. 8027-R, September 23, 1952 — Cited for the doctrine that buildings are accessories to the land, following the Roman maxim omne quod solo inaedificatur solo credit, and that a chattel mortgage on a building of strong materials produces no effect.

• Leung Yee vs. Strong Machinery Co., 37 Phil. 644 — Cited for the rule that the registration of a chattel mortgage of a building of strong materials produced no effect as far as the building is concerned.

• De la Riva vs. Ah Kee, 60 Phil. 899 — Cited for the rule that a mortgage creditor who purchases real properties at an extrajudicial foreclosure sale by virtue of a chattel mortgage declared null and void acquires no right thereto by virtue of said sale.

• Standard Oil Co. of N. Y. vs. Jaramillo, 44 Phil. 632-633 — Cited for the proposition that a contract constituting a chattel mortgage on a house is valid only as between the parties to said contract, but cannot bind third persons.

• Evangelista vs. Alto Surety, G.R. No. L-11139, April 23, 1958 — Cited for the rule that a chattel mortgage on real property cannot bind third persons who are not parties to the contract or their privies.

• Navarro vs. Pineda, G.R. No. L-18456, November 30, 1963 — Cited for the same rule that a chattel mortgage on real property cannot bind third persons.

• Article 415, Civil Code — The Court applied the principle that buildings are immovable property, and therefore cannot be the subject of a chattel mortgage, which applies only to personal property.

• Chattel Mortgage Law (Act No. 1508) — The Court applied this law to hold that the registration of a chattel mortgage on a house of strong materials in the registry of chattels is a futile act, as the house is real property and cannot be validly mortgaged under the chattel mortgage law.

Bengzon, C.J., Bautista Angelo, Reyes, J.B.L., Barrera, Paredes, Dizon, Regala, Makalintal, Bengzon, J.P., and Zaldivar, JJ., concurred.