G.R. No. L-19468; October 30, 1964
SALVADOR PIANSAY and CLAUDIA V. VDA. DE UY KIM, plaintiffs-appellants, vs. CONRADO S. DAVID and MARCOS MANGUBAT, defendants-appellees.

FACTS

The case originated from a loan of P3,000 secured by a chattel mortgage on a house, executed by Conrado S. David in favor of Claudia Vda. de Uy Kim. Upon default, the house was foreclosed and sold at auction to Uy Kim, who later sold it to Salvador Piansay. In a separate collection case (Civil Case No. 29078) filed by Marcos Mangubat against David, the validity of the chattel mortgage and subsequent sale was contested. The Court of First Instance and, on appeal, the Court of Appeals, declared the chattel mortgage on the house null and void, ruling it constituted an interest in real property. Consequently, the foreclosure sale to Uy Kim and her subsequent sale to Piansay were deemed ineffective against Mangubat, a judgment creditor of David.
When Mangubat levied upon the same house to satisfy his judgment against David in the execution of Civil Case No. 29078, Piansay and Uy Kim filed a petition for certiorari and mandamus in the Court of Appeals (CA-G.R. No. 28974-R) to challenge the levy. This petition was denied. Subsequently, they filed the present action (Civil Case No. 47664) seeking to establish Piansay’s ownership and to enjoin the levy and auction sale.

ISSUE

The primary issue is whether the principle of res judicata bars the present action, and subsidiarily, whether the chattel mortgage on the house was valid and could bind a third-party judgment creditor like Mangubat.

RULING

The Supreme Court affirmed the dismissal of the complaint, ruling that the action was barred by res judicata. The validity of the chattel mortgage and the ownership claims of Piansay had already been conclusively settled in the prior proceedings. In Civil Case No. 29078, the court had annulled the chattel mortgage and the subsequent sales, a decision affirmed by the Court of Appeals. This specific issue was again raised and rejected in the subsequent certiorari proceeding (CA-G.R. No. 28974-R), the denial of which became final. Therefore, Piansay and Uy Kim were precluded from re-litigating the same claim of ownership in this new action.
On the substantive issue, the Court reiterated the settled doctrine that a building of strong materials is considered immovable property by destination. A chattel mortgage constituted on such a building is null and void as to third persons who are not parties to the contract. Since Mangubat was not a party to the chattel mortgage agreement, the invalid foreclosure sale could not transfer dominion over the house to Uy Kim. Consequently, she could not convey any valid title to Piansay. As against Mangubat, a judgment creditor of the original owner David, the house rightfully remained part of David’s leviable assets. Thus, the plaintiffs failed to establish a cause of action to stop the execution levy.