3. PERFECTO DY, JR. petitioner, vs. COURT OF APPEALS, GELAC TRADING INC., and ANTONIO V.

GONZALES, Respondents. (CHATTEL MORTGAGE)

G.R. No. 92989 July 8, 1991

FACTS: Wilfredo Dy purchased a truck and a farm tractor through LIBRA which was also mortgaged
with the latter, as a security to the loan.

Petitioner, expresses his desire to purchased his brother’s tractor in a letter to LIBRA which also
includes his intention to shoulder its mortgaged. LIBRA approved the request. At the time that
Wilfredo Dy executed a deed of absolute sale in favor of petitioner, the tractor and truck were in
the possession of LIBRA for his failure to pay the amortization.

When petitioner finally fulfilled its obligation to pay the tractor, LIBRA would only release the same
only if he would also pay for the truck. In order to fulfill LIBRA’s condition, petitioner convinced his
sister to pay for the remaining truck, to which she released a check amounting to P22,000. LIBRA
however, insisted that the check must be first cleared before it delivers the truck and tractor.

Meanwhile, another case penned “Gelac Trading Inc vs. Wilfredo Dy” was pending in Cebu as a
case to recover for a sum of money (P12,269.80). By a writ of execution the court in Cebu ordered
to seize and levy the tractor which was in the premise of LIBRA, it was sold in a public auction to
which it was purchased by GELAC. The latter then sold the tractor to Antonio Gonzales.

RTC rendered in favor of petitioner.

CA dismissed the case, alleging that it still belongs to Wilfredo Dy.

ISSUE:

Whether or not there was a consummated sale between Petitioner and LIBRA?

HELD:NO. The mortgagor who gave the property as security under a chattel mortgage did not part
with the ownership over the same. He had the right to sell it although he was under the obligation
to secure the written consent of the mortgagee. And even if no consent was obtained from the
mortgagee, the validity of the sale would still not be affected.

Article 1496 of the Civil Code states that the ownership of the thing sold is acquired by the vendee
from the moment it is delivered to him in any of the ways specified in Articles 1497 to 1501 or in
any other manner signing an agreement that the possession is transferred from the vendor to the
vendee. In the instant case, actual delivery of the subject tractor could not be made. However,
there was constructive delivery already upon the execution of the public instrument pursuant to
Article 1498 and upon the consent or agreement of the parties when the thing sold cannot be
immediately transferred to the possession of the vendee.
The payment of the check was actually intended to extinguish the mortgage obligation so that the
tractor could be released to the petitioner. It was never intended nor could it be considered as
payment of the purchase price because the relationship between Libra and the petitioner is not
one of sale but still a mortgage. The clearing or encashment of the check which produced the
effect of payment determined the full payment of the money obligation and the release of the
chattel mortgage. It was not determinative of the consummation of the sale. The transaction
between the brothers is distinct and apart from the transaction between Libra and the petitioner.
The contention, therefore, that the consummation of the sale depended upon the encashment of
the check is untenable.