Movido v. RFC

Facts:

Vet. Bros. & Company, Inc. mortgaged to Jose S. Movido its rights, title, interest and participation "in a complete sawmill in barrio Mauo, Allen, Samar, with all its machineries, tools and equipment in good running condition" to secure the payment of a loan of P15,000 and interest at the rate of 12% per annum obtained by the former from the latter. The chattel mortgage was registered in the Office of the Registrar of Deeds in and for the province of Samar. Jose S. Movido brought an action against Vet. Bros. & Company, Inc. in CFI Leyte to recover the sum of P13,494.35 with the interest at the rate of 12% per annum until the principal is fully paid and P2,000 by way of damages and expenses of litigation. The parties entered into and submitted to the Court a compromise agreement terminating their dispute and renouncing their respective claims for damages and for any other claim in connection with the subject matter of the case which was approved and the court rendered judgment in accordance therewith.

Vet Bros. & Company, Inc. and the spouses Simeon G. Toribio and Maximiana Escobar de Toribio mortgaged the real estate and chattels therein enumerated and described in favor of the Rehabilitation finance Corporation to secure the payment of a loan of P46,000 and on "addendum to chattel mortgage" describing the machinery and logging equipment purchased out of the proceeds of the loan was duly executed by the mortgagors. The chattel mortgages were registered in the registry of deeds for the province of Samar.

Upon the petition of the Rehabilitation Finance Corporation, the provincial sheriff of Samar advertized a public auction sale to be held on 14 May 1953 from (9:00 o'clock in the morning to 4:00 o'clock in the afternoon at the municipal building of Allen, Samar, under the provisions of Act No. 3135, as amended by Act No. 4118, of the chattels enumerated and described "to apply the proceeds of the sale to the payment of the amount of P31,165.12 computed as of January 20, 1953, including interest thereon up to the date of the sale, plus P3,451.59 thereafter, plus 10% of said amount as attorney's fees, and plus the sheriff fees and incidental expenses:". Jose S. Movido filed with the Sheriff a third party claim on the chattels advertised for sale at public auction asserting a prior and superior right in them because of his chattel mortgage recorded before that of the Rehabilitation Finance Corporation and by virtue of a judgment in his favor rendered by the Court of First Instance of Leyte in civil case No. 441. Despite such claim the Sheriff proceeded to carry out the sale and sold the chattels, except those expressly excluded from the public auction sale, to the successful bidders. The proceeds of the sale in the amount of P10,794 was turned over to the Rehabilitation Finance Corporation. 15 days after the auction sale, a writ of execution was issued.

Jose S. Movido brought in CFI Leyte an action against the Rehabilitation Finance Corporation and the Provincial Sheriff of Samar charging the latter with having unlawfully, fraudulently and maliciously disregarded his third party claim on the chattels and sold them at public auction, upon the request and for the benefit of the former.

After trial, the Court rendered judgment holding that the compromise agreement entered into by and between the parties in civil case No. 441 and the judgment rendered by the Court pursuant thereto novated the plaintiff's credit secured by the chattel mortgage, and that when the Vet. Bros. Company, Inc. and the spouses Simeon G. Toribio and Maximiana Escobar de Toribio mortgaged to the Rehabilitation Finance Corporation the same chattels and other properties, the plaintiff's lien on the chattels no longer existed; and dismissing the plaintiff's complaint with costs against him but without awarding damages to the defendants. His motion and amended motion for new trial and MR were denied. Hence this appeal originally to the Court of Appeals but certified to this Court on the ground that only questions of law are involved.

Held:

A mortgage who sues and obtains a personal judgment against a mortgagor upon his credit waives thereby his right to enforce the mortgage securing it. By instituting the case in CFI Leyte to recover the sum from the Vet. Bros & Company, Inc., and by securing a judgment in his favor upon the compromise agreement entered into by and between him and the defendant therein, the appellant abandoned his mortgage lien in the chattels in question. Vet. Bros & Company, Inc. and the spouses Simeon G. Toribio and Maximiana Escobar de Toribio mortgaged the chattels and other properties to the appellee, the appellant had no longer any lien on the chattels. The rule in Tizon vs. Valdez, 48 Phil., 910 and Matienzo vs. San Jose, G.R. No. 39510, 16 June 1934, relied upon by the appellants, has been abandoned in Bachrach Motor Company vs. Icarañgal, supra. Moreover, the appellant secured a writ of execution of the judgment rendered in the civil case, or fifteen days after the public auction sale had been carried out. The judgment appealed from is affirmed, with cost against the appellant.