G.R. No. 120098 - Tsai vs. Court of Appeals

On November 26, 1975, Ever Textile Mills, Inc. (EVERTEX) obtained a P3,000,000 loan from PBCom, secured by a Real and Chattel Mortgage covering TCT No. 372097 (land and improvements) and a detailed schedule of machineries and equipment.
On April 23, 1979, PBCom extended a second loan of P3,356,000 to EVERTEX, secured by a Chattel Mortgage listing similar machines and equipment.

EVERTEX filed insolvency proceedings on November 19, 1982; the court declared insolvency on November 24, 1982, and took custody of its assets.
PBCom initiated extrajudicial foreclosure under Acts 3135 and 1506; public auctions on December 15 and 23, 1982, resulted in PBCom as highest bidder and issuance of Certificates of Sale; PBCom consolidated title on March 7, 1984.

In November 1986, PBCom leased the factory (including machinery) to Ruby L. Tsai for P50,000/month; on May 3, 1988, PBCom sold the entire factory “lock, stock and barrel” to Tsai for P9,000,000, including the contested machines.
On March 16, 1989, EVERTEX sued PBCom and Tsai to annul the sale of certain machines (14 Interlock Circular Knitting Machines, a jet dryer, a dryer, a raisin and a heatset equipment) allegedly excluded from the mortgages and sheriff’s sale, and to recover damages.
The RTC annulled the sale insofar as it affected those machines, ordered their return, and awarded actual, exemplary damages, attorney’s fees and costs; the Court of Appeals affirmed with deletion of exemplary damages and reduction of actual damages.

Whether the machines acquired in 1981 were included in the 1975 Real and Chattel Mortgage or the 1979 Chattel Mortgage.
Whether extrajudicial foreclosure validly extended to those machines under Act 3135 and Act 1506.

Whether Tsai is a purchaser in good faith and for value with a better right than EVERTEX.
Whether the defenses of prescription, laches, and Torrens title indefeasibility bar EVERTEX’s claims.