G.R. No. L-6687, January 25, 1912
BALDOMERO DE LA RAMA, plaintiff-appellant, vs. ROMAN MARAVILLA, ET AL., defendants-appellees.

FACTS

On May 3, 1907, the sheriff levied on certain carabaos and carts to satisfy a judgment obtained by Roman Maravilla against Fausto L. Gonzaga. Baldomero de la Rama notified the sheriff that he, not Gonzaga, owned the levied properties, claiming ownership under a mortgage and subsequent pledge executed by Gonzaga in 1889 and 1906, respectively, to secure a debt. However, on July 3, 1907, before the levy, de la Rama and Gonzaga had executed an agreement wherein Gonzaga ceded the mortgaged properties (including the carabaos and carts) to de la Rama in full payment and cancellation of the debt. De la Rama then filed an action to recover the value of the carabaos and carts sold at execution. The trial court ruled in favor of de la Rama, and Maravilla appealed.

ISSUE

Whether de la Rama retained any lien or ownership interest in the carabaos and carts by virtue of the mortgage and pledge after the execution of the July 3, 1907 agreement that extinguished the underlying debt.

RULING

No. The Supreme Court reversed the trial court’s decision and dismissed de la Rama’s complaint. The Court held that the July 3, 1907 agreement constituted a dation in payment (cession of property in payment of debt). Upon its execution, Gonzaga’s debt to de la Rama was fully paid and extinguished. Consequently, the mortgage and pledge that secured that debt ceased to have any force or effect. At the time of the levy and sale by Maravilla, the carabaos and carts were free from any lien in favor of de la Rama. Therefore, the levy and sale were valid, and de la Rama had no right to recover the value of the properties.