Case Summary (G.R. No. 107554)
Background and Transaction Details
On March 4, 1987, Jacinto Dy executed a Special Power of Attorney in favor of Ang Tay, granting authority to sell the cargo vessel named LCT "Asiatic." Subsequently, on April 28, 1987, Ang Tay sold the vessel to Robert Ong for P900,000, with detailed check payments. The Deed of Absolute Sale explicitly stated that the vessel would not be registered or transferred to Ong until the purchase price was fully paid. Despite this, Ong obtained possession to derive economic benefits and secured a loan from the petitioner, executing a chattel mortgage over the vessel as security, which he registered.
Litigation and Judicial Proceedings
Upon defaulting on his payment obligations, Cebu International Finance Corporation (petitioner) demanded possession of the mortgaged vessel. Ang Tay had previously initiated legal proceedings against Ong due to bounced checks related to the purchase of the vessel, which led to a trial court's ruling rescinding the sale and reviving Dy’s ownership of the vessel. In the subsequent action, the trial court declared the chattel mortgage executed by Ong in favor of the petitioner as null and void, primarily because the mortgage was based on an incomplete title transfer.
Court of Appeals Ruling
The Court of Appeals affirmed the trial court's ruling, which stated that the chattel mortgage was invalid as the petitioner's transaction with Ong was deemed a sale. The appellate court reasoned that since the true ownership of the vessel lay with Dy and Ang Tay, Ong could not validly mortgage the vessel to the petitioner who had no ownership rights.
Supreme Court’s Analysis and Decision
The Supreme Court reversed the Court of Appeals' decision, asserting that the chattel mortgage should not be viewed in isolation. It highlighted the certificate of ownership issued in Ong's name, validating his status as the owner of the vessel based on documents presented to the petitioner. The Court concluded that the petitioner acted as a creditor-mortgagee and that any error in the contract's paragraph regarding ownership was likely a clerical oversight, not tantamount to bad faith.
Mortgage Validity and Creditor Rights
The Supreme Court emphasized that a mortgagee in good faith could rely on the certificate of title provided by
...continue readingCase Syllabus (G.R. No. 107554)
Case Overview
- Court: Supreme Court of the Philippines
- Date of Decision: February 13, 1997
- G.R. No.: 107554
- Petitioner: Cebu International Finance Corporation (CIFC)
- Respondents: Court of Appeals, Robert Ong, and Ang Tay
- Nature of Petition: Review on certiorari under Rule 45 of the Revised Rules of Court
Factual Background
- On March 4, 1987, Jacinto Dy executed a Special Power of Attorney in favor of Ang Tay, permitting him to sell Dy's cargo vessel, the LCT "Asiatic."
- On April 28, 1987, Ang Tay sold the vessel to Robert Ong for ₱900,000.00, with a stipulation in the deed of sale that the vessel would not be registered or transferred to Ong until full payment was made.
- Ong paid through three checks totaling ₱900,000.00, but the checks for ₱600,000.00 and ₱150,000.00 bounced.
- Ong secured possession of the vessel to utilize it for economic benefits and later had the deed notarized without the payment condition, leading to the issuance of a Certificate of Ownership by the Philippine Coast Guard on May 27, 1987.
- Ong acquired a loan from CIFC for ₱496,008.00 on October 29, 1987, secured by a chattel mortgage on the vessel, which was annotated on the Certificate of Ownership.
- Ong defaulted on the loan, prompting CIFC to demand the vessel's return for foreclosure.
Procedural History
- Ang Tay and Jacinto Dy filed a civil case for resciss