Case Digest (G.R. No. 120098)
Facts:
Ruby L. Tsai v. Hon. Court of Appeals, Ever Textile Mills, Inc. and Mamerto R. Villaluz, G.R. No. 120098, and Philippine Bank of Communications v. Hon. Court of Appeals, Ever Textile Mills and Mamerto R. Villaluz, G.R. No. 120109, October 02, 2001, Supreme Court Second Division, Quisumbing, J., writing for the Court.On November 26, 1975, respondent Ever Textile Mills, Inc. (EVERTEX) obtained a P3,000,000 loan from petitioner Philippine Bank of Communications (PBCom) and executed a deed styled a “Real and Chattel Mortgage” over the lot covered by TCT No. 372097 (where the factory stood) and various machines and equipment listed in an attached schedule. On April 23, 1979, PBCom granted a second loan to EVERTEX secured by a separate Chattel Mortgage over personal properties similar to those enumerated in the 1975 mortgage schedule.
Following business reverses, EVERTEX was declared insolvent by the Court of First Instance of Pasay City in November 1982, and all of its assets (including the alleged mortgage collateral) were placed under the custody of the Insolvency Court. PBCom, alleging default, proceeded with extrajudicial foreclosure under Act 3135 and Act 1506 (The Chattel Mortgage Law); sheriff’s notices were issued and public auctions were held on December 15 and December 23, 1982, at which PBCom was the highest bidder and Certificates of Sale were issued.
PBCom consolidated possession of the lot and properties on March 7, 1984. In November 1986 PBCom leased the factory premises (including the disputed machines) to petitioner Ruby L. Tsai; on May 3, 1988 PBCom sold the entire factory, including the contested machineries, to Tsai. In 1981 EVERTEX had acquired additional machines not listed in the 1975 or 1979 mortgage schedules; these 14 Interlock Circular Knitting Machines and several other units (valued at P4,000,000) are the principal objects of controversy.
On March 16, 1989 EVERTEX filed a complaint in the Regional Trial Court (Civil Case No. 89-48265) seeking annulment of sale, reconveyance and damages, alleging that the extrajudicial foreclosure and subsequent lease and sale included properties not covered by the mortgages and that foreclosure violated the Insolvency Law. The RTC ruled for EVERTEX: it annulled PBCom’s sale to Tsai insofar as it affected the disputed personal properties, ordered their return to EVERTEX’s assignee, awarded actual and exemplary damages and attorney’s fees, and dismissed defendants’ counterclaim.
PBCom and Tsai appealed to the Court of Appeals (CA-G.R. CV No. 32986). The Court of Appeals affirmed the RTC’s judgment except that it deleted exemplary damages and reduced actual damages from P100,000 to P20,000 per month; its denial of reconsideration was resolved on April 28, 1995. PBCom and Tsai filed separate petitions for re...(Subscriber-Only)
Issues:
- Were the disputed machineries part of the mortgage security and thus properly included in the extrajudicial foreclosure sale?
- Does Section 7 of the Chattel Mortgage Law bar after-acquired property of the same description from being covered by an earlier chattel mortgage?
- Did petitioner Ruby L. Tsai acquire valid title as a purchaser in good faith and for value when she bought the foreclosed properties from PBCom?
- Are the awards of actual damages, exemplary damages, and attorney’s fees against PBCom and Tsai supported by evi...(Subscriber-Only)
Ruling:
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Ratio:
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Doctrine:
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