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[ GR No. 13465, Nov 26, 1918 ]



39 Phil. 205

[ G.R. No. 13465, November 26, 1918 ]




The defendant, J. N. Wolfson, on June 9, 1915, lent the sum of P1,200 to Candida Pazcoguin, and as security for the payment of the notes evidencing the indebtedness took a chattel mortgage (Exhibit 1) on the furniture and cinematographic equipment in the "Cine Luna" in Malabon, which was then being operated by Candida Pazcoguin. Upon failure on the part of the debtor to meet promptly the obligations expressed in her notes and in the chattel mortgage, the defendant Wolfson took possession and proceeded to sell the mortgaged property in conformity with the provisions of Act No. 1508 and the stipulations of the mortgage itself. At the sale which was effected by the sheriff of the Province of Rizal on August 31, 1915, the defendant Wolfson became the purchaser for the sum of P325.

Prior to this sale, the plaintiff Julian Lanuza, as administrator of the estate of Timoteo Lanuza, intervened and gave notice to the sheriff that the property in question belonged to the intestate estate of Timoteo Lanuza. The sheriff, however, proceeded under indemnity to make the sale; and the plaintiff instituted this action to compel the restoration of the property sold or the payment of damages therefor in the amount of P1,500. In the Court of First Instance, judgment was rendered in favor of the defendant and the plaintiff appealed.

It appears in evidence that on February 23, 1914, Candida Pazcoguin, being then the owner of the house and lot where the cinematograph above mentioned was being conducted, as well as of the cinematographic apparatus and furniture used in connection therewith, executed a contract of sale with pacto de retro in favor of Timoteo Lanuza, covering said lot, cinematographic establishment, its furniture, and accessories, for the sum of P2,500, the period for redemption being fixed at two years (Exhibit A). Upon February 24, 1914, the same parties made another similar contract, increasing the amount of the purchase from P2,500 to P3,000, but maintaining the other provisions of the contract without material alteration. Both these contracts were ratified before a notary public, and the incumbrance thus created on the house and lot were noted in the Torrens title issued to Candida Pazcoguin in January, 1915. The chattel mortgage executed by Candida Pazcoguin on June 9, 1915, in favor of J. N. Wolf son covered the same chattels that had been included in the aforesaid sales by pacto de retro to Timoteo Lanuza.

The evidence shows, we think, that, as the trial court found, at the time the chattel mortgage was executed Wolfson had no knowledge that the chattels in question had been sold to Timoteo Lanuza, though he was aware from the recitals contained in the Torrens title for the lot on which the cine stood that the lot itself had been sold to Lanuza.

As is commonly provided in contracts of sale with pacto de retro, it was agreed that the vendor, Candida Pazcoguin, should remain in possession, as tenant of Timoteo Lanuza, upon a rental contract during the period of redemption, paying a stipulated sum for the rent of the premises; and, in accordance with this provision, she did in fact retain possession and continued to run the cinematograph until after the chattel mortgage in favor of Wolfson had been executed.

The sole question in the case is whether a chattel mortgage duly executed and registered in conformity with the provisions of Act No. 1508 takes precedence over a prior sale, with pacto de retro, duly executed and ratified before a notary public. It is not questionable that both Timoteo Lanuza and J. N. Wolfson acted in good faith, and it is clear that the latter put his money into the loan in entire ignorance of the prior sale to Lanuza.

The conclusion upon the facts stated is, in our opinion, that the title to these chattels passed out of Candida Pazcoguin to Timoteo Lanuza at the time of the execution of the first contract of sale with pacto de retro, to-wit, on January 23, 1914, in favor of Lanuza. It results that when Candida Pazcoguin mortgaged the chattels to Wolfson, she was not the owner and had at most a mere privilege to repurchase on or before January 23, 1916. It is regrettable that there is no sure means whereby a person, circumstanced as was the defendant in this case, can discover whether or not the property offered as security has been already sold to another, but the law does not require the registration of contracts of sale with pacto de retro, as a device for the protection of subsequent purchasers; and a person who buys or takes a mortgage upon property of this character must beware.

Evidence for the plaintiff tends to show that the articles seized by the defendant and sold by him were worth about P1,800; and as the defendant had advanced the sum of P1,200 upon the security of the chattel mortgage, we have no doubt that their value may be reasonably taken to be P1,500, the amount claimed as damages in the complaint.

The judgment appealed from must be reversed, and the defendants are hereby enjoined to deliver to the plaintiff the articles described in the complaint and in default thereof they shall pay to the plaintiff the sum of fifteen hundred pesos (P1,500), for which execution may issue. If part, but not all, of the articles in question should be returned, the court of origin shall determine equitably, upon such proof as may be adduced before it, the proportionate deduction to be made from the total amount awarded as damages. No special adjudication of costs is made. So ordered.

Arellano, C. J., Torres, Johnson, Avanceña, and Malcolm, JJ., concur.