G.R. No. L-19482 March 31, 1965
ZOSIMO D. UY, plaintiff-appellant, vs. JOSE R. ZAMORA, defendant, THE ALLIED FINANCE, INC., intervenor-appellee.

FACTS

Zosimo D. Uy filed a complaint against Jose R. Zamora for a sum of money in the Municipal Court of Manila. The court ordered the attachment of a motor vehicle belonging to Zamora, which was levied on August 11, 1960. The Municipal Court rendered judgment in favor of Uy. Zamora appealed to the Court of First Instance of Manila. While the case was pending appeal, Allied Finance, Inc. was allowed to intervene, claiming that the attached vehicle had been mortgaged to it by Zamora on January 14, 1960 (acknowledged before a notary public on June 20, 1960) to secure a loan, with a balance of P2,451.93 due. The mortgage was registered on August 24, 1960. Uy and Zamora entered into a compromise agreement, wherein Zamora admitted an indebtedness of P2,500 to Uy, to be paid from the proceeds of the sale of the vehicle, which had been sold for P2,500. The court found Zamora liable to Uy for P2,500 and to Allied Finance for P2,451.93 plus interest and attorney’s fees. The issue arose as to which credit was preferred given insufficient funds.

ISSUE

Which credit is preferred: Uy’s attachment lien (levied on August 11, 1960) or Allied Finance’s claim based on a chattel mortgage (executed earlier but registered on August 24, 1960)?

RULING

The Supreme Court reversed the lower court’s decision. It held that Uy’s credit, based on the attachment lien levied on August 11, 1960, is preferred over Allied Finance’s claim. For a chattel mortgage on a motor vehicle to affect third persons, it must not only be registered in the Chattel Mortgage Registry but also recorded in the Motor Vehicles Office (now Land Transportation Commission). Since Allied Finance’s mortgage was registered only on August 24, 1960, after the levy of Uy’s attachment on August 11, 1960, it cannot prevail over Uy’s lien. Uy, as a third person, is protected, and his credit should be paid first.