MAKATI LEASING AND FINANCE CORP. V. WEAREVER TEXTILE MILLS, INC.

Parties to a contract may by agreement treat as personal property that which by nature is a real property, as long
as no interest of 3rd party would be prejudiced.

FACTS:

To obtain financial accommodations from Makati Leasing, Wearever Textile discounted and assigned several receivables
under a Receivable Purchase Agreement with Makati Leasing. To secure the collection of receivables, it executed a
chattel mortgage over several raw materials and a machinery – Artos Aero Dryer Stentering Range (Dryer).

Wearever defaulted thus the properties mortgaged were extrajudicially foreclosed. The sheriff, after the restraining order
was lifted, was able to enter the premises of Wearever and removed the drive motor of the Dryer. The CA reversed the
order of the CFI, ordering the return of the drive motor since it cannot be the subject of a replevin suit being an immovable
bolted to the ground. Thus the case at bar.

ISSUE:

Whether the dryer is an immovable property.

HELD: NO

The SC relied on its ruling in Tumalad v. Vicencio, that if a house of strong materials can be the subject of a Chattel
Mortgage as long as the parties to the contract agree and no innocent 3rd party will be prejudiced then moreso that a
machinery may treated as a movable since it is movable by nature and becomes immobilized only by destination. And
treating it as a chattel by way of a Chattel Mortgage, Wearever is estopped from claiming otherwise.

Torres et. al. plaintiff-appellees vs.Francisco Limjap, Special Administrator of deceased Jose B. Henson
G.R. No. 34385

FACTS: The plaintiffs alleged that the defendant, in his lifetime, executed in their favor a chattel mortga
geon his drug store at Nos. 10103 Calle Rosario, known as Farmacia Henson, to secure a loan of P7,
000, although it was made to appear in the instrument that the loan was for P20,000. The defendant
denied
generally and specifically the plaintiffs' allegations and set up the defense that the chattel mortgages are null and void for
lack of sufficient particularity in thed e s c r i p t i o n o f t h e p r o p e r t y m o r t g a g e d . A j u d g m e n t w a s r e n d e r e d
in favor of the plaintiff and against the
defendant, confirming the attachment of said drug store by the sheriff of the City of Manila and the deliv
er y thereof to the plaintiff.
The defendant appealed from the judgment and made the assignments of error, among others, that the
lower court erred in failing to make a finding on the question of the sufficienc y of the description of the
chattels
mortgaged and in failing to hold that the chattel mortgages were null and void for lack of particularity in
the
description of the chattels mortgaged and in refusing to allow the defendant to introduce evidence
tending to
show that the stock of merchandise found in the two drug stores was in existence or owned by the mortgagor atthe time
of execution of the mortgages in question. Defendant then insists that a stipulation authorizing thedispos
al and substitution of chattels mortgage does not operate to extend the mortgage to after-
acquired party,and that such stipulation is in contravention of the express provision of the last paragraph of section 7 Act
No.1508, which provides that “ A chattel mortgage shall be deemed to cover only the property described
thereinand not like or substituted property thereafter acquired by the mortgagor and placed in the same depository asthe
property originally mortgaged, anything in the mortgage to the contrary notwithstanding”

ISSUE: W hether or not the provision in the chattel mortgage law that extends coverage to a
f t e r - a c q u i r e d property is valid and binding.
HELD: W e are of the opinion that (a.) the provision of the last paragraph of section 7 of Act No. 1508 is
notapplicable to drug stores, bazaars and all other stores in the nature of a revolving and floating business; (b) that
the stipulation in the chattel mortgages in question, extending their effect to after-
acquired property, is valid and binding; and (c) that the lower court committed no error in not permitting the defendant-
appellant to introduce evidence tending to show that the goods seized by the sheriff were in the nature of after-
acquired property.In order to give a correct construction to the above-
quoted provision of our Chattel Mortgage Law (Act No.1508), the spirit and intent of the law must first be ascertai
ned. When said Act was placed on our statute books by the United States Philippine Commission on July 2, 190
6, the primary aim of that law-
making body wasundoubtedly to promote business and trade in these Islands and to give impetus to the economic
development of the country. Bearing this in mind, it could not have been the intention of the Philippine Co
mmission to applythe provision of section 7 above quoted to stores open to the public for retail business
, where the goods areconstantly sold and substituted with new stock, such as drug stores, grocery stores, dry-
goods stores, etc. If said provision were intended to apply to this class of business, it would be practically i
mpossible to constitute amortgage on such stores without closing them, contrary to the very spirit about a handicap to
trade and business,would restrain the circulation of capital, and would defeat the purpose for which the law was enacted,
to wit, the promotion of business and the economic development of the country.The judgment appealed from is in accorda
nce with the facts and the law, and the same should be and is herebyaffirmed, with costs.

Acme shoe vs CA

FACTS: Petitioner Chua Pac, the president and general manager of co-petitioner Acme executed a chattel mortgage in
favor of private respondent Producers Bank as a security for a loan of P3,000,000. A provision in the chattel mortgage
agreement was to this effect:
"In case the MORTGAGOR executes subsequent promissory note or notes either as a renewal of the former note, as an
extension thereof, or as a new loan, or is given any other kind of accommodations such as overdrafts, letters of credit,
acceptances and bills of exchange, releases of import shipments on Trust Receipts, etc., this mortgage shall also stand as
security for the payment of the said promissory note or notes and/or accommodations without the necessity of
executing a new contract and this mortgage shall have the same force and effect as if the said promissory note or notes
and/or accommodations were existing on the date thereof. This mortgage shall also stand as security for said obligations
and any and all other obligations of the MORTGAGOR to the MORTGAGEE of whatever kind and nature, whether such
obligations have been contracted before, during or after the constitution of this mortgage."

In due time, the loan of P3,000,000.00 was paid. Subsequently it obtained additional loan totalling P2,700,000.00 which
was also duly paid.

Another loan was again extended (P1,000,000.00) covered by four promissory notes for P250,000.00 each, but went
unsettled prompting the bank to apply for an extrajudicial foreclosure with the Sheriff.

ISSUE:
Would it be valid and effective to have a clause in a chattel mortgage that purports to likewise extend its coverage to
obligations yet to be contracted or incurred?

HELD:
No. While a pledge, real estate mortgage, or antichresis may exceptionally secure after-incurred obligations so long as
these future debts are accurately described, a chattel mortgage, however, can only cover obligations existing at the time
the mortgage is constituted. Although a promise expressed in a chattel mortgage to include debts that are yet to be
contracted can be a binding commitment that can be compelled upon, the security itself, however, does not come into
existence or arise until after a chattel mortgage agreement covering the newly contracted debt is executed either by
concluding a fresh chattel mortgage or by amending the old contract conformably with the form prescribed by the
Chattel Mortgage Law. Refusal on the part of the borrower to execute the agreement so as to cover the after-incurred
obligation can constitute an act of default on the part of the borrower of the financing agreement whereon the promise
is written but, of course, the remedy of foreclosure can only cover the debts extant at the time of constitution and
during the life of the chattel mortgage sought to be foreclosed.

Pando vs. GimenezG.R. No. 31896February 15, 1930Antichresis

Art. 2135.
The creditor, unless there is a stipulation to the contrary, is obliged to pay the taxes and charges upon the estate. He is
also bound to bear the expenses necessary for its preservation and repair. The sums spent for the purposes stated in this
article shall be deducted from the fruits.

FACTS
Gim enez was indebted to Pando in the am ount of P8000. To secure paym ent of such loan,
h e executed and delivered a real estate mortgage over a building located in ta. !esa" and the leaseholdrights on the lot u
pon which the building was erected, Hacienda Tuason being the lessor.When Gimenez was about to leave Manila to atten
d to his business in Cagayan, he gave Pando fullcontrol, and complete and absolute administration over the property he
mortgaged, on the condition that Pando would:
1)attend to the administration, care and preservation of the building and property'
2)pay the taxes that might become due on the building
3) pay the rents of the leased property
4)pay the premium on the insurance of the building and
5)collect the rents from the tenants of the building"
t o b e a p p l i e d t o t h e p a y m e n t o f a l l e x p e n s e s n e c e s s a r y f o r t h e p r e s e r v a t i o n a n d mainte
nance of the building and the rents of the leased property.

In the course of Pando’s administration over the property, he failed and neglected to pay the taxesdue f
or several years. He also failed and neglected to pay lessor Hacienda Tuason the rents due for several ye
ars on the land leased. Because of this, the building was sold at a public auction to satisfythe taxes due. Moreover, le
ssor Hacienda Tuason cancelled the contract of lease of Gimenez, and brought a suit against him for
desahucio in the municipal court of Manila.Gimenez is now claiming that Pando, being in charge of the administration of th
e premises, had theobligation to attend to the payment of taxes and rents. Pando denies that he had such
obligation,alleging that his duties were confined to the collection of rents on the house in order to apply them tothe paym
ent of the interest on the mortgage.

Issue:
Whether or not Pando, having full control and administration over the property of Gimenez, wasobliged to
pay the taxes, charges and other necessary expenses.

Held: Yes, Pando had such obligation.The administration of the property assumed by Pando was
antichretic in character. Article 2135 of the Civil
Code expressly states that the antichretic creditor is obliged to pay the taxes and chargeswhich burden the
estate, in the absence of an agreement to the contrary. Such obligation arises fromthe very nature of the covenant, and is
correlated with the antichretic creditor’s acquired right to take charge of the property and collect the fruits for himself.
Pando, having failed in his obligation to pay tax on the house and rent of the lot, is now required to pay indemnity for dam
ages.

ANICETO BANGIS vs HEIRS OF SERAFIN AND SALUD ADOLFO

G.R. No. 190875 June 13, 2012

FACTS:

Serafin Adolfo, Sr. allegedly mortgaged a land he owned for the sum of Php12,500.00 to herein Private Respondent Ancieto Bangis, who immedi
ately tookpossession of the land. The said transaction was, however, not reduced into writing.When Serafin, Sr. died, his heirs executed a Deed of
Extrajudicial Partitioncovering the same subject property and a Torrens Certificate of Title was issued to them.In June 1998, the Heirs of Adolfo exp
ressed their intention to redeem themortgaged property from Bangis but the latter refused, claiming that the transactionbetween him and Adolfo wa
s one of SALE.During the conciliation meetings in the barangay, Bangis showed them a copy ofa deed of sale and a certificate of title of the dispute
d lot.The Heirs of Adolfo filed a complaint before the Regional Trial Court forannulment of the deed of sale and declaration of the purported contract
of sale asantichresis.The Trial Court declared the contract between the petitioners and respondents asa mere mortgage or antichresis and sinc
e the respondents have been in the possessionof the property in 1975 up to the present time enjoying all its fruits or income, themortgaged loan of
Php 12,500.00 is deemed fully paid. Aggrieved, the Heirs of Bangisappealed the decision.The Court of Appeals, affirmed the RTC in ruling that the
contract between theparties was a mortgage, not a sale. It noted that while Bangis was given the possessionof the subject property, the certificate
of title remained in the custody of Adolfo and wasnever cancelled.

ISSUE:

Whether or not the transaction between Bangis and Adolfo was one ofantichresis?

RATIO: The transaction was one of Mortgage, not Antichresis. For the contract of
antichresis to be valid, Article 2134 of the Civil Code requires that: Article 2134
“The amount of the principal and of the interest shallbe specified in writing; otherwise, the contract of antichresis shall be void.”

In this case, the heirs of Adolfo were indisputably unable to produce anydocument in support of their claim that the contract between Adolfo and Ba
ngis was anantichresis.The Supreme Court held that the possession of the subject land by Bangis is for
the security of Adolfo’s obligation to return the money he loaned.