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G.R. No.

L-48696 November 28, 1942 FACTS:

 RODOLFO LANUZA and wife BELEN - owners of a two-
FELIZA ZUBIRI, petitioner, story house built on a lot of the Maria Guizon Subdivision in
vs. Tondo, Manila, which the spouses leased from the
LUCIO QUIJANO, respondent. Consolidated Asiatic Co.
o Jan. 12, 1961 - Lanuza executed a document
entitled "Deed of Sale with Right to Repurchase"
E.P. Virata and Ferrier, Gomez and Sotelo for petitioner. whereby he conveyed to Maria Bautista Vda. de
Virola and Leuterio for respondent. Reyes and Aurelia R. Navarro the house, together
with the leasehold rights to the lot, a television set
PARAS, J.: and a refrigerator in consideration of the sum of
(FULL TEXT, guys. OA sa ikli nito.) o When the original period of redemption expired,
the parties extended it to July 12, 1961 by an
annotation to this effect on the left margin of the
This is an appeal from a decision of the Court of Appeals holding instrument. Lanuza's wife, who did not sign the
that the contract dated May 15, 1934, purporting to be a two- deed, this time signed her name below the
year pacto de retro sale of three parcels of land from the annotation.
petitioner, Feliza Zubiri, to the respondent, Lucio Quijano, is an o After the execution of the instrument, Lanuza and
equitable mortgage, sentencing the former to pay to the latter, his wife mortgaged the same house in favor of
within three months, the alleged purchase price of P700, with Martin de Leon to secure the payment of P2,720
legal interest from the date of the filing of the complaint within one year.
(November 15, 1937), and ordering that, in default of payment,  The Lanuzas failed to pay on their obligation and De Leon
the land be sold at public auction and the proceeds of the sale filed in the sheriff's office on October 5, 1962 a petition for
applied to the satisfaction of the judgment, without special the extra-judicial foreclosure of the mortgage. On the other
pronouncement as to costs. hand, Reyes and Navarro followed suit by filing in the Court
of First Instance of Manila a petition for the consolidation of
Under the first assignment, the petitioner contends that the ownership of the house on the ground that the period of
Court of Appeals erred in ordering the sale of the land in case of redemption expired on July 12, 1961 without the vendees
non-payment of the judgment, on the ground that the contract exercising their right of repurchase.
relied upon by the respondent, not having been registered in o Oct 23, 1962 - the house was sold to De Leon as
accordance with the Land Registration Act, cannot operate as a the only bidder at the sheriffs sale. De Leon
mortgage so as to justify its foreclosure. There is no merit in the immediately took possession of the house,
contention. The contract, evidencing a pacto de retro sale which secured a discharge of the mortgage on the house
is unquestionably more disadvantageous to the petitioner, has in favor of a rural bank by paying P2,000
been held to be an equitable mortgage and, from its very nature, o Oct 29 – he intervened in court and asked for the
the lien thereby created ought not to be defeated by requiring dismissal of the petition filed by Reyes and
compliance with the formalities necessary to the validity of a Navarro on the ground that the unrecorded pacto
voluntary real estate mortgage, as long as the land remains in de retro sale could not affect his rights as a third
the hands of the petitioner and the rights of innocent third parties party.
are not affected. In the case of Correa vs. Mateo and
Icasiano (55 Phil., 79), wherein an unrecorded pacto de  TRIAL COURT – TC said that in this case, “it appears,
retro sale was construed as an equitable mortgage, it was held however, that no other instrument was executed between
that the plaintiff had the right "within sixty days after final the parties extending the period of redemption. What was
judgment, for a failure to pay the amount due and owing him, to done was simply to annotate on the deed of sale with right
foreclose his mortgage in a proper proceeding and sell all or any to repurchase that "the period to repurchase, extended as
part of the ten parcels of land to satisfy his debt." requested until July 12, 1961." Needless to say, the
purchasers a retro, in the exercise of their freedom to make
Under the second assignment, the petitioner alleges that the contracts, have the power to extend the period of
Court of Appeals erred in not finding that he had paid to the repurchase. Such extension is valid and effective as it is not
respondent usurious interest amounting (as found by the Court contrary to any provision of law.”
of First Instance of Mindoro) to P950. The pronouncements of  De Leon appealed to the SC contending that:
the Court of Appeals, to wit, "pero rechazamos la pretension de o that the sale in question is not only voidable but
la demandada, aceptada por el Tribunal a quo, de que el void ab initio for having been made by Lanuza
demandante percibio interes usurarios" and "Con respeto a la without the consent of his wife
alegacion sobre usura, la misma nos parece insostenible," being o that the pacto de retro sale is in reality an equitable
conclusions of fact, must be accepted for the purposes of the mortgage and therefore can not be the basis of a
present appeal, since we cannot make contrary findings without petition for consolidation of ownership; and
re-examining the evidence, and we are not authorized to do this. o that at any rate the sale, being unrecorded, cannot
affect third parties.
It results that the Court of Appeals did not commit any error. In
 SUPREME COURT – affirmed the TC ruling that a
the exercise, however, of our equity jurisdiction, and especially
conveyance of real property of the conjugal partnership
considering that the present complaint did not originally seek the
made by the husband without the consent of his wife is
recovery of a debt, that the petitioner obtained a favorable
merely voidable. This is clear from article 173 of the Civil
judgment in the Court of First Instance and that the vote in the
Code which gives the wife ten years within which to bring
Court of Appeals was three to two, we are inclined to hold that
an action for annulment. As such it can be ratified as
the petitioner should be sentenced to pay interest only from the
Lanuza's wife in effect did in this case when she gave her
date our decision becomes final. As thus modified, the appealed
conformity to the extension of the period of redemption by
decision is affirmed, with costs against the petitioner.
signing the annotation on the margin of the deed.
o Also agreed with the lower court that between an
Yulo, C.J., Moran, Ozaeta and Bocobo, JJ., concur. unrecorded sale of a prior date and a recorded
mortgage of a later date the former is preferred to
the latter for the reason that if the original owner
had parted with his ownership of the thing sold
then he no longer had the ownership and free
G.R. No. L-22331 June 6, 1967 disposal of that thing so as to be able to mortgage
it again. Registration of the mortgage under Act
IN RE: PETITION FOR CONSOLIDATION OF TITLE IN THE No. 3344 would, in such case, be of no moment
VENDEES OF A HOUSE AND THE RIGHTS TO A LOT. since it is understood to be without prejudice to the
MARIA BAUTISTA VDA. DE REYES, ET AL., vendees- better right of third parties.2 Nor would it avail the
petitioners-appellees. mortgagee any to assert that he is in actual
RODOLFO LANUZA, vendor, possession of the property for the execution of the
vs. conveyance in a public instrument earlier was
MARTIN DE LEON, intervenor-appellant. equivalent to the delivery of the thing sold to the
 Different conclusion about the nature of the Deed of
Sale with Right to Repurchase:
o We refer to the nature of the so-called "Deed of o rendered judgment, holding that the steam sugar
Sale with Right to Repurchase" and the claim that mill and 8-horsepower portable boiler and fittings,
it is in reality an equitable mortgage. the tramway, rails and cars upon the Hacienda of
o While De Leon raised the question below and San Jose, should be considered as included in the
again in this Court in his second assignment of mortgage executed by Romana Ganzon in favor of
error, he has not demonstrated his point; neither Lazaro Mota, which mortgage was transferred to
has he pursued the logical implication of his the Compañia General de Tabacos and ratified in
argument beyond stating that a petition for favor of the latter by the debtor
consolidation of ownership is an inappropriate o the defendants were therefore absolved of the
remedy to enforce a mortgage. complaint without costs, and such right of action
 The Supreme Court laid down 3 circumstances which was reserved to Samuel Bischoff as he may be
indubitably show that what was intended was a mortgage entitled for the return from Romana Ganzon of
and not a sale. whatever sum he paid for the said property.
1. The gross inadequacy of the price
2. The non-transmission of ownership to the vendees  ISSUE as submitted by the plaintiff by appeal: Supposing
3. The delay in filing of the petition for consolidation that the steam sugar mill and portable boiler, and the
tramway with fifteen small wagons, rail, and other fittings,
 Under these circumstances we cannot but conclude that the mounted at the Hacienda San Jose and in use thereon,
deed in question is in reality a mortgage. This conclusion is were improvements upon said hacienda, are they to be
of far-reaching consequence because it means not only considered for this sole reason as necessarily included in
that this action for consolidation of ownership is the mortgage of the said hacienda, even though not
improper, as De Leon claims, but, what is more that specifically described in the instruments as included
between the unrecorded deed of Reyes and Navarro therein?
which we hold to be an equitable mortgage, and the
registered mortgage of De Leon, the latter must be  SUPREME COURT - (buong held, hindi maiintindihan
preferred. Preference of mortgage credits is determined by kapag ni-cut ko pa.)
the priority of registration of the mortgages,8 following the
maxim "Prior tempore potior jure" (He who is first in time is
preferred in right.)9 Under article 2125 of the Civil Code, the The plaintiff avers, without proof, that the said articles were
equitable mortgage, while valid between Reyes and excluded from the mortgage of the Hacienda San Jose were
Navarro, on the one hand, and the Lanuzas, on the other, they are to be found, because in the instruments wherein the
as the immediate parties thereto, cannot prevail over the Hacienda San Jose was repeatedly mortgaged, far from it being
registered mortgage of De Leon. stated that, by agreement between the contracting parties, the
objects claimed the complaint should be understood to be
positively excluded, in the successive mortgage deeds executed
by Romana Ganzon in favor of Lazaro Mota y Ayo on July 20
G.R. No. L-4373 February 2, 1909 and October 8, 1900, and September 6, 1902, Exhibit D, as
security for the increasing loans made by the latter, the debtor
mortgaged her Hacienda San Jose with the improvements
SAMUEL BISCHOFF, plaintiff-appellant,
thereon to guarantee the payment of the total sum of 21,423.93
pesos; in the last instrument, as well as in the previous ones, it
is stated that the warehouse, farmhouse, furnaces, machinery,
TABACOS DE FILIPINAS, defendants-appellees.
and the described land that constitutes the said hacienda shall
be liable for the payment of her total indebtedness, the legal
TORRES, J. interest thereon, and loss and damages and costs in case of
judicial proceedings having to be instituted; said instrument, like
FACTS: the previous ones, was recorded in the registry of property, and
 December 27, 1905 - counsel for Samuel Bischoff filed a is should be noted that by express desire of the contracting
complaint, alleging that – the following are the contents of parties, in the successive documents of indebtedness of 1900,
the complaint: the mortgage of the hacienda with the improvements thereon
o the latter was the owner of the steam sugar mill was maintained, and was afterwards repeated in the last
fitted with a portable 8-horse-power boiler with its instrument.
attachments, a complete tramway with rails and
other fittings for a distance of not less than 3 Owing to the non -payment of the said sum of P21,423.93,
kilometers, and fifteen small cars, all of which were notwithstanding the demands made upon and extensions of time
at the Hacienda San Jose, of San Carlos, granted to the debtor, on September 30, 1904, the creditor,
occidental Negros. Lazaro Mota, assigned and transferred the said Tabacos by
o that the defendant Compañia de Tabacos had means of a public instrument which was recorded in the registry,
asked and obtained from the Court of First and appears as Exhibit B herein.
Instance, in or about the month of October of the
same year, the appointment of a receive for the
property of Romana Ganzon, among which In the private document marked as Exhibit A, dated September
property that the described above was included at 10, 1902, it appears that the Compañia General de Tabacos
the instance of the defendant as belonging to the opened an anual credit of P15,000 under the conditions therein
debtor Ganzon stated, the debtor having offered as security the said hacienda
o that at the designation of the Compañia de with the cattle, buildings, and two steam engines, and stating in
Tabacos Juan Pomar was appointed receiver and addition, that the said hacienda with its buildings, machinery,
upon taking charge of the property of the said and cattle had already been mortgaged by her to Lazaro Mota.
Romana Ganzon he did not confine himself
thereto, but unlawfully and without any right Moreover, even in the instrument on the 10th of December,
whatever took possession, as receive, of the 1904, when Romana Ganzon created a mortgaged in favor of
property of the plaintiff herein before described the Compañia General de Tabacos to guarantee her debt of
o that notwithstanding the repeated demands made P53,042.53, she designated the said hacienda with all the
by the plaintiff, Bischoff, the latter was unable to improvements, buildings, machinery, and carabaos thereon,
secure from the defendants the return of the said and in addition declared that the same hacienda and its
property dependencies were already mortgaged to the said Lazaro Mota.
o that they refused to deliver the said property to him
and continued to use the same to the prejudice of
So that in the instruments of mortgage above referred to, three
the plaintiff, whose loss and damages amounted
of which are anterior to the sale a retro, effected on the 8th of
to P30 a day
November, 1904, upon which the plaintiff bases his claim, the
o the plaintiff therefore prayed that judgment be
improvements on the Hacienda San Jose, among which is the
entered in his favor, declaring that the property
machinery that was already mounted, appear as expressly
described in the first paragraph of the complaint
mortgaged at the time of executing the instrument of mortgage
belonged to him
of September 6, 1902, and later on, that of transfer of the
o that the said defendants be ordered to pay the said
mortgage credit on the 30th of September, 1904, to the
losses and damages with costs.
Compañia General de Tabacos.
From none of the said instruments does it appear that the
contracting parties had expressly agreed to exclude the said
machinery and tramway from the repeated mortgages, of said industry even though they were placed there after the
hacienda, so that no value would be given to the words written creation of the mortgage.
therein proving in an unquestionable manner that it was the will
of the contracting parties to include the lien all the improvements It should be noted that the said machinery and tramway were
upon the hacienda, among which was the machinery mounted exclusively owned by Romana Ganzon, the owner of the
thereon for the needs of the said hacienda: hacienda, and that at the time when the mortgage was made
they had not yet been sold a retro to the plaintiff Bischoff; this
Article 110 of the Mortgage Law in force reads: sale was effected on November 8, 1904, long after the property
was mortgaged.
A mortgage extends to natural increase,
improvements, growing crop, and rents not collected Given the rights of dominion possessed by Romana Ganzon
when the obligation falls due, and the value of over the articles in question it is not possible to deny that she
indemnities allowed or due the owner for insurance on had the right to dispose of them, as she did, by sale under pacto
the property mortgaged, or by virtue of condemnation de retro to the plaintiff, but the alienation thereof does not
by right of eminent domain. release them from the encumbrance to which they are subjected
until the redeemed from the mortgage that weighs upon them,
The same precept is repeated in detail and more extensively in since the right of the creditor limits that the owner of the thing
the following article 111 of said law. mortgaged, and the purchaser, is necessarily bond to
acknowledge and respect the encumbrance to which is
subjected the purchased thing and which is at the disposal of
Article 1877 of the Civil Code contains the same precept but the said creditor in order that he, under the terms of the contract,
treats as greater length than in the preinserted article 110 of the may recover the amount of his credit therefrom.
Mortgage Law; it is as follows:
If it be true and inconvertible fact that at the time the plaintiff
A mortgage includes the natural accessions, Bischoff acquired under pacto de retro the machinery and the
improvements, growing fruits, and rents not collected tramway in question, they were already affected by and included
when the obligation is due, and the amount of the in the mortgaged of the Hacienda San Jose, the placing of the
indemnities granted or due the owner by the said hacienda, together with all of the property existing thereon
underwriters of the property mortgaged or by virtue of in the hands of a receiver at the instance of the creditor, the
the exercise of eminent domain by reason of public Compañia General de Tabacos, has not occasioned any
utility, with the declarations, amplifications, and damage to the plaintiff, inasmuch as the defendant limited itself
limitations established by law, in case the estate to the duty of the plaintiff to respect the encumbrance that
continues in the possession of the person who burdens of the property acquired by him under these conditions,
mortgaged it, as well as when it passes into the hands and therefore, he cannot acquired any right to indemnity for loss
of a third person. and damages, for the reason that he purchased goods that were
already liable to the credit of the company that was the creditor
As may be seen from the doctrine established by the Supreme of Romana Ganzon and which latter sold them on pacto de retro;
Court of Washington in its decision in the matter of The Royal he therefore did not obtain possession of the same.
Insurance Company vs. R. Miller, liquidator, and Amadeo (26
Sup. Ct. Rep., 461) the above quoted legal precepts in force in For the above considerations, and accepting the conclusion
these Islands are in accord with the American laws: contained in the judgment appealed from so far as they agree
with the foregoing, it is our opinion that the same should be
3. Mortgage — Right of Mortgagee to Insurance on affirmed, without any ruling as to the costs of this instance.
Harvested Crop. — The avails of insurance on sugar
and molasses coming into the sugar house on a sugar
plantation as the result of the manufacture of a crop G.R. No. L-11990 May 29, 1959
growing thereon when the insurance was effected inure
to the benefit of the mortgagee in a mortgage of the
realty and the fruits thereof if the loss occurred after the JOSE MOVIDO, plaintiff-appellant,
execution of the mortgage, under the Porto Rico vs.
Mortgage Law of 1880, which subjects to a mortgage REHABILITATION FINANCE CORPORATION and THE
of real property the crops growing or harvested when PROVINCIAL SHERIFF OF SAMAR, defendants-appellees.
the mortgage fails due, "but not yet removed or
warehoused," and the indemnities awarded or due the PADILLA, J.
owner of the realty either for the insurance or for the
crops, provided the damage occurred after the creation FACTS:
of the mortgage.  July 1, 1946 - the Vet. Bros. & Company, Inc. mortgaged to
Jose S. Movido its rights, title, interest and participation "in
4. Mortgage — Right of Mortgage to Sue for Insurance a complete sawmill in barrio Mauo, Allen, Samar, with all its
without Exhausting Other Remedies. — The mortgage machineries, tools and equipment in good running
creditor in a mortgage governed by the civil law may condition" to secure the payment of a loan of P15,000 and
sue for the avails of the insurance subject to his interest at the rate of 12% per annum obtained by the former
mortgage without first exhausting his remedies against from the latter. Same was registered in the Office of
other property embraced by the mortgaged. Registrar of Deeds in Samar.
 July 28, 1948 - Jose S. Movido brought an action against
So that even though no mention had been made of said Vet. Bros. & Company, Inc. in the Court of First Instance of
machinery and tramway in the mortgage instrument, the Leyte to recover the sum of P13,494.35 with the interest at
mortgage of the property whereon they are located is the rate of 12% per annum from 1 July 1948 until the
understood by law to extend to them and they must be principal is fully paid and P2,000 by way of damages and
considered as included therein, as well as all other expenses of litigation
improvements, unless there was an express stipulation between  February 7, 1949 - the parties thereto, assisted by their
the parties that they should be excluded. Such exclusion, respective counsel, entered into and submitted to the Court
however, certainly does not appear in the record; on the a compromise agreement terminating their dispute and
contrary, they are manifestly included in the mortgage. renouncing their respective claims for damages and for any
other claim in connection with the subject matter of the case
which was approved and the court rendered judgment in
It has already been stated that the machinery in question was accordance therewith.
already mounted on said property and was in use thereon when
the mortgage given to secure the debt of Romana Ganzon to the  March 3, 1949 - Vet Bros. & Company, Inc. and the
original creditor, Lazaro Mota was created; but even if these spouses Simeon G. Toribio and Maximiana Escobar de
were not so, article 111 of the Mortgage Law, hereinbefore cited, Toribio mortgaged the real estate and chattels therein
provides that the following shall be considered as mortgaged enumerated and described in favor of the Rehabilitation
with the estate, provided they belong to the owner of said estate, finance Corporation to secure the payment of a loan of
although they not be mentioned in the contract: P46,000

1. Chattels permanently located in a building, either  March 1, 1955 - Jose S. Movido brought in the Court of First
useful or ornamental, or for the service of some Instance of Leyte an action against the Rehabilitation
Finance Corporation and the Provincial Sheriff of Samar
charging the latter 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.
 The defendants filed separate answers. The Rehabilitation
Finance Corporation set up the defense:
o that by filing a complaint against the Vet Bros &
Company, Inc. in the Court of First Instance of
Leyte (civil No. 441), to recover the sum due from
it, the plaintiff waived his right to foreclose the
mortgage and for that reason abandoned his
mortgage lien on the chattels
o that the plaintiff's third party claim was not valid
and sufficient in form and substance to stop and
frustrate the public auction sale in question, it
being a mere claim for preference in the
distribution of the proceeds of the public auction
o that the alleged chattel mortgage of the plaintiff
was invalid and did not bind the chattels
o that its mortgage lien in the real estate and chattels
was prior, preferred and superior to that of the
plaintiff's; and that it had not done or caused to be
done any actionable wrong or harm to the plaintiff
to make it liable for damages claimed to have been
sustained by the plaintiff.

 TRIAL COURT - rendered judgment holding that the

compromise agreement entered into by and between the
parties in civil case No. 441 and the judgment rendered by
the Court pursuant thereto novated the plaintiff's credit
secured by the chattel mortgage, and that when the Vet.
Bros. Company, Inc. and the spouses Simeon G. Toribio
and Maximiana Escobar de Toribio mortgaged to the
Rehabilitation Finance Corporation the same chattels and
other properties enumerated in Exhibits 8, RFC and 9, RFC,
the plaintiff's lien on the chattels no longer existed; and
dismissing the plaintiff's complaint with costs against him
but without awarding damages to the defendants.
 Plaintiff’s motion and amended motion for new trial and
motion for reconsideration were denied. Hence this appeal
originally to the Court of Appeals but certified to this Court
on the ground that only questions of law are involved.

 SUPREME COURT – (buong ruling also, one paragraph


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.1 By instituting civil case
No. 441 in the Court of First Instance of Leyte to recover the
sum of P13,494.35 from the Vet. Bros & Company, Inc., on
28 July 1948 and by securing a judgment in his favor upon
the compromise agreement entered into by and between
him and the defendant therein on 7 February 1949, the
appellant abandoned his mortgage lien in the chattels in
question. When on 3 March 1949 and on 17 May 1949,
therefore, Vet. Bros & Company, Inc. and the spouses
Simeon G. Toribio and Maximiana Escobar de Toribio
mortgaged the chattels and other properties described in
Exhibit 8, RFC 9, RFC to the appellee, the appellant had no
longer any lien on the chattels. The rule in Tizon vs. Valdez,
48 Phil., 910 and Matienzo vs. San Jose, G.R. No. 39510,
16 June 1934, relied upon by the appellants, has been
abandoned in Bachrach Motor Company vs. Icarañgal,
supra. Moreover, the appellant secured a writ of execution
of the judgment rendered in civil case No. 441 on 26 June
1953 only (Exhibits 1-F, Sabarre; 1-F, RFC), or fifteen days
after the public auction sale had been carried out. The
judgment appealed from is affirmed, with cost against the