Jaca v. Davao Lumber CompanyFacts: Sometime in 1954, herein parties-litigants entered into an agreement

whereby plaintiffs may secure, by way of advances, either cash or materials, foodstuffs, and/or equipment from the defendant corporation; that the payment of such account was to be made either in cash and/or by plaintiff's turning over all the logs that they produce in the aforesaid concession to the defendant, and in the latter case, the current prices, either export or domestic, of the logs at the time of their delivery was to be considered; that while the aforesaid business relationship between the parties was subsisting, defendant made plaintiff Urbano Jaca execute in its favor a chattel mortgage, a copy of which instrument. however, plaintiffs were never furnished but that as far as they can recollect the primary conditions of such chattel mortgage were that plaintiffs would turn over to defendant corporation all the logs they may produce from the aforesaid concession the same to be priced either as export or domestic and their value to be applied by defendant to, and be credited for, the account of plaintiff's indebtedness, and further that in case of need, plaintiffs may secure, by way of advances, either cash, foodstuffs, materials or equipment's, under an "open credit account"; that under the aforementioned "open credit account" relationship between the plaintiffs and defendant, orders were secured by plaintiffs, by way of advances, from the defendant, this to be paid by them with plaintiffs' production from their concession, liquidating those old accounts and keeping all accounts current. Issue: WON the chattel mortgage is valid.

Held: No. A stipulation that the security is for the payment of obligations contracted before and which may hereafter be contracted by mortgagor is void. This deed of chattel mortgage is void because it provides that the security stated therein is for the payment of any and all obligations herein before contracted and which may hereafter be contracted by the Mortgagor in favor of the Mortgagee.

Mahoney v. TuazonFacts: D.J. Mahoney, receiver of the insolvency of P. Blanc, prayed the Court of First Instance of Manila to cite Mariano Tuason to appear and explain before the court the reason why he had in his custody the jewels of P Blanc.

P. Blanc, the owner of the jewels, entered into the said contract of pledge, delivering to the creditor Mariano Tuason several jewels and other merchandise mentioned in the documents referred to, for the purpose of securing the fulfillment of the obligation which he (Blanc) had contracted in favor of the latter who had guaranteed the payment of a considerable amount of money which Blanc owed to the Chartered Bank which amount Tuason had to pay, because of Blanc’s obligation to do so.

Issue: WON a contract of chattel mortgage duly entered into is rendered null and void by an additional stipulation among the contracting parties that in case of the debtor’s failure to comply with the conditions agreed upon, the creditor would be authorized to retain the jewels and merchandise pledged in half of their value and absolutely appropriating them to himself.

Held: No. If the mortgagor defaults in the payment of the secured debt or otherwise fails to comply with the conditions of the mortgage, the creditor has no right to appropriate to himself the personal property (Arts. 2141, 2088.) because he is permitted only to recover his credit from the proceeds of the sale of the property at public auction through a public officer in the manner prescribed in Section 14 of Act No. 1508.

Makati Leasing and Finance Corp. vs. Weaver Textile Mills, Inc.,Machinery and house of mixed materials treated by parties as

personal property and no innocent third person will be prejudiced thereby.

Pameca Wood Treatment Plant v. CA, 310 SCRA 28Facts: Pameca loaned P2million from DBP and executed a promissory note, secured by its inventory of furniture and equipment. A month before the mortgage contract, its supposed market value was P2.5milion. They defaulted, so DBP extrajudicially foreclosed on the chattels. It was the only bidder so it was able to buy it for around P322,000. Then for the deficiency, it filed a complaint against Pameca and its solidary debtors (Teveses and Pulido) according to the promissory note it signedThe RTC-Makati ordered Pameca to pay the P4mil. CA affirmed.

Issues/Held:WON an action can be instituted for deficiency of a debt after foreclosure of the chattel mortgage.

In pledge, the sale of the thing pledged extinguishes the entire principal obligation such that the pledgor may no longer recover the proceeds of the sale in excess of the amount of the principal obligation. Section 14 of the Chattel Mortgage Law, on the other hand, expressly entitles the mortgagor to the balance of the proceeds upon satisfaction of the principal obligation and costs. Since the Chattel Mortgage Law bars the creditor mortgagee from retaining the excess of the sale proceeds, there is a corollary obligation on the part of the debtor-mortgagor to pay the deficiency in case of a reduction in the price at public auction.

WON public auction sale is void on the grounds of fraud and inadequacy of price.The mere fact that the mortgagee was the sole bidder for the

mortgaged property in the public sale does not warrant the conclusion that the transaction was attended with fraud. Fraud is a serious allegation that requires full and convincing evidence.

Tizon vs. Valdez and MoralesFacts: This action was instituted Domiciano Tizon against Emiliano J. Valdez and Luis Morales, the latter in the character of sheriff of Tarlac Province, for the purpose of obtaining a declaration to the effect that the plaintiff is the owner of certain chattels, consisting chiefly of a steam engine and boiler, and to require the defendants to deliver the same to the plaintiff, with damages for the detention thereof and costs.

The personal property which is the subject of this action formerly belonged to one Leon Sibal, Sr., by whom it was mortgaged, on September 14, 1920, to the defendant Valdez. On October 7, 1920, this mortgage was filed in the office of the register of the Province of Tarlac and was thereupon duly registered in the registry of chattel mortgages. On May 18, 1921, Sibal again mortgaged the same chattels to the plaintiff, Domiciano Tizon, whose mortgage was likewise duly registered in the chattel mortgage registry of Tarlac in June, 1921. When the stipulated date of payment arrived Sibal defaulted in the making of payment, and Valdez thereupon instituted a civil action (case No. 2301) to recover the indebtedness, in connection with which he sued out a writ of attachment and on June 24, 1921, caused the same to be levied upon the property which is the subject of this action. The property, however, was not retained by the attaching officer for the reason that Tizon gave a counter bond and lifted the attachment. The end of this civil action was that, on March 7, 1923, Valdez recovered of Sibal the sum of P19,026.24, with interest at 12 per centum per annum on P15,187.12 from August 1, 1921. Upon this judgment Valdez caused an execution to be issued, which, on April 24, 1924, was levied upon the property now in question, being the same property included in Valdez's chattel mortgage.

Meanwhile Domiciano Tizon, proceeding under his own mortgage, had caused the sheriff to sell the same property in a foreclosure proceeding conducted in conformity with the provisions of the Chattel Mortgage law (Act No. 1508, sec. 14). The sale in these proceedings was effected on June 28, 1923, Tizon becoming purchaser for the consideration of P1,000. As purchaser at his own foreclosure sale, Tizon assumed possession of the property, and it was found in his possession when the sheriff levied upon it by virtue of the execution issued in the civil case No. 2301, above mentioned. At the time this levy was made, or soon thereafter, Tizon filed a claim with the sheriff, asserting that the property belonged to him and was not liable to be taken upon an execution directed against Sibal. The sheriff, however, under indemnity from Valdez, retained the property and sold it in due course at an execution sale, Valdez becoming purchaser at the price of P500. Pursuant to this sale Valdez now took possession, and Tizon presently instituted the present action.

Issue: WON the petitioner as the second mortgagee can recover the property.

Held: Generally, no. Before payment of debt. — After a chattel mortgage is executed, there

remains in the mortgagor a mere right of redemption and only this right passes to the second mortgagee in case of a second mortgage. As between the first and second mortgagees, therefore, the latter can only recover the property from the former by paying him the mortgage debt. Even when the second mortgagee goes through the formality of an extrajudicial foreclosure, the purchaser acquires no more than the right of redemption from the first mortgagee. After payment of debt. — If the only leviable or attachable interest of a chattel mortgagor in a mortgaged property is his right of redemption, it follows that the judgment or attaching creditor who purchased the property at the execution sale could not acquire anything except such right of redemption. He is not entitled to the actual possession and delivery of the property without first paying the mortgage debt.