GR L 26860; (July, 1969) (Digest)
G.R. No. L-26860 July 30, 1969
ALBERTA B. CABRAL and RENATO CABRAL, plaintiffs-appellees, vs. TEODORA EVANGELISTA, and JUAN N. EVANGELISTA, defendants-appellants, and GEORGE L. TUNAYA, defendant.
FACTS
On December 12, 1959, defendant George L. Tunaya executed a chattel mortgage in favor of plaintiffs Alberta B. and Renato Cabral over a piano and an electric stove to secure a promissory note for P1,000.00. The mortgage was duly inscribed on December 14, 1959. The note matured but was not paid. Meanwhile, defendants-appellants Teodora and Juan Evangelista obtained a money judgment against Tunaya on January 4, 1960. They levied on his properties, including the mortgaged chattels, and purchased them at a sheriff’s auction on June 24, 1960. On October 11, 1960, plaintiffs filed a complaint against Tunaya and the Evangelistas to recover the amount due on the note or to have the chattels sold to satisfy their mortgage credit. The City Court dismissed the complaint against the Evangelistas. On appeal, the Court of First Instance ruled in favor of the plaintiffs, holding their mortgage lien superior and ordering Tunaya and the Evangelistas to pay solidarily. The Evangelistas appealed.
ISSUE
Whether the rights of a mortgage creditor over mortgaged chattels are superior to the rights of a subsequent attaching creditor who purchased the same chattels at an execution sale.
RULING
Yes. The Supreme Court reaffirmed the principle that a mortgagee’s lien is superior to the rights of a subsequent attaching or judgment creditor. The chattel mortgage was duly registered, giving constructive notice. The Evangelistas, as purchasers at the execution sale, acquired only Tunaya’s rights in the property, which were subject to the existing mortgage lien. Their claims of prescription and laches were without merit, as the mortgage action was filed well within the prescriptive period and promptly after learning of the auction. The Court also found that the Evangelistas had disposed of the chattels to third parties, thereby defeating the plaintiffs’ right to foreclose. Consequently, the lower court’s judgment holding them solidarily liable with Tunaya for the mortgage debt was affirmed, with modification regarding the accrual of interest and the elimination of the order to deliver the chattels, as they had been disposed of.