41.) Dy vs.
CA cleared first before Libra could release the chattels in
GR NO.92989 question.
July 8, 1991 Meanwhile, Civil Case No. R-16646 entitled "Gelac Trading, Inc. v.
By: Martin Wilfredo Dy", a collection case to recover the sum of P12,269.80
was pending in another court in Cebu. On the strength of
Petitioner: Perfecto Dy
an alias writ of execution issued on December 27, 1979, the
Respondent: CA, GELAC TRADING, Antonio Gonzales
provincial sheriff was able to seize and levy on the tractor which
DOCTRINE/LAWS was in the premises of Libra in Carmen, Cebu. The tractor was
Article 1498 states: subsequently sold at public auction where Gelac Trading was
Art. 1498. When the sale is made through a public instrument, the the lone bidder. Later, Gelac sold the tractor to one of its
execution thereof shall be equivalent to the delivery of the thing which is the stockholders, Antonio Gonzales.
object of the contract, if from the deed the contrary does not appear or
It was only when the check was cleared on January 17, 1980 that
cannot clearly be inferred.
the petitioner learned about GELAC having already taken custody
Article 1499 provides:
of the subject tractor. Consequently, the petitioner filed an action to
Article 1499. The delivery of movable property may likewise be
recover the subject tractor against GELAC Trading with the RTC of
made by the mere consent or agreement of the contracting parties, if the
Cebu City
thing sold cannot be transferred to the possession of the vendee at the time
RTC ruled in favor of the Petitioners however the CA reversed their
of the sale, or if the latter already had it in his possession for any other
reason. decision. Hence this petition.
ISSUE
FACTS Whether or not the CA misapprehended the facts and erred in not affirming
the trial court's finding that ownership of the farm tractor had already passed
Perfecto Dy and Wilfredo Dy are brothers. Sometime in 1979,
to herein petitioner when said tractor was levied on by the sheriff pursuant to
Wilfredo Dy purchased a truck and a farm tractor through financing
an alias writ of execution issued in another case in favor of respondent
extended by Libra Finance and Investment Corporation (Libra).
Gelac trading inc.
Both truck and tractor were mortgaged to Libra as security for the
loan.
HELD/RATIO
Petitioner wanted to buy the tractor from his brother so on August
Yes
20, 1979, he wrote a letter to Libra requesting that he be allowed to
purchase from Wilfredo Dy the said tractor and assume the The mortgagor who gave the property as security under a chattel
mortgage debt of the latter. It was approved. mortgage did not part with the ownership over the same. He had
On September 4, 1979, Wilfredo Dy executed a deed of absolute the right to sell it although he was under the obligation to secure
sale in favor of the petitioner over the tractor in question. the written consent of the mortgagee or he lays himself open to
criminal prosecution under the provision of Article 319 par. 2 of the
At this time, the subject tractor was in the possession of Libra
Revised Penal Code. And even if no consent was obtained from
Finance due to Wilfredo Dy's failure to pay the amortizations.
the mortgagee, the validity of the sale would still not be affected.
Despite the offer of full payment by the petitioner to Libra for the
Thus, we see no reason why Wilfredo Dy, as the chattel mortgagor
tractor, the immediate release could not be effected because
can not sell the subject tractor. There is no dispute that the consent
Wilfredo Dy had obtained financing not only for said tractor but also
of Libra Finance was obtained in the instant case. In a letter dated
for a truck and Libra insisted on full payment for both.
August 27, 1979, Libra allowed the petitioner to purchase the
The petitioner was able to convince his sister, Carol Dy-Seno, to
tractor and assume the mortgage debt of his brother. The sale
purchase the truck so that full payment could be made for both. On
between the brothers was therefore valid and binding as between
November 22, 1979, a PNB check was issued in the amount of
them and to the mortgagee, as well.
P22,000.00 in favor of Libra, thus settling in full the indebtedness of
Article 1496 of the Civil Code states that the ownership of the thing
Wilfredo Dy with the financing firm. Payment having been
sold is acquired by the vendee from the moment it is delivered to
effected through an out-of-town check, Libra insisted that it be
him in any of the ways specified in Articles 1497 to 1501 or in any
other manner signing an agreement that the possession is
transferred from the vendor to the vendee. We agree with the
petitioner that Articles 1498 and 1499 are applicable in the case at
bar.
The respondent court avers that the vendor must first have control
and possession of the thing before he could transfer ownership by
constructive delivery. Here, it was Libra Finance which was in
possession of the subject tractor due to Wilfredo's failure to pay the
amortization as a preliminary step to foreclosure. As mortgagee, he
has the right of foreclosure upon default by the mortgagor in the
performance of the conditions mentioned in the contract of
mortgage. The law implies that the mortgagee is entitled to possess
the mortgaged property because possession is necessary in order
to enable him to have the property sold.
While it is true that Wilfredo Dy was not in actual possession
and control of the subject tractor, his right of ownership was
not divested from him upon his default. Neither could it be
said that Libra was the owner of the subject tractor because
the mortgagee can not become the owner of or convert and
appropriate to himself the property mortgaged. (Article 2088,
Civil Code) Said property continues to belong to the
mortgagor. The only remedy given to the mortgagee is to have
said property sold at public auction and the proceeds of the
sale applied to the payment of the obligation secured by the
mortgagee
The payment of the check was actually intended to extinguish the
mortgage obligation so that the tractor could be released to the
petitioner. It was never intended nor could it be considered as
payment of the purchase price because the relationship between
Libra and the petitioner is not one of sale but still a mortgage. The
clearing or encashment of the check which produced the effect of
payment determined the full payment of the money obligation and
the release of the chattel mortgage. It was not determinative of the
consummation of the sale. The transaction between the brothers is
distinct and apart from the transaction between Libra and the
petitioner. The contention, therefore, that the consummation of the
sale depended upon the encashment of the check is untenable.
