TSAI V. COURT OF APPEALS 336 SCRA 324

Category: Property, Ownership and Its Modifications

TSAI V. COURT OF APPEALS

336 SCRA 324

FACTS:

EVERTEX secured a loan from PBC, guaranteed by a real estate and chattel mortgage over a parcel of land where the factory stands, and the chattels located  therein,  as  included  in  a  schedule  attached  to  the  mortgage contract.  Another  loan  was  obtained  secured  by  a  chattel  mortgage  over
properties with similar descriptions listed in the first schedule.  During the date   of   execution   of   the   second   mortgage,   EVERTEX   purchased machineries and equipment.
 
Due  to  business  reverses,  EVERTEX  filed  for  insolvency  proceedings.    It failed to pay its obligation and thus, PBC initiated extrajudicial foreclosure of  the  mortgages.    PBC  was  the  highest  bidder  in  the  public  auctions, making it the owner of the properties.  It then leased the factory premises
to  Tsai.    Afterwards,  EVERTEX  sought  the  annulment  of  the  sale  and conveyance of the properties to PBC as it was allegedly a violation of the INSOLVENCY LAW.  
 
The  RTC  held  that  the  lease  and  sale  were  irregular  as  it  involved properties not included in the schedule of the mortgage contract.   

HELD:

While it is true that the controverted properties appear to be immobile, a perusal  of  the  contract  of  REM  and  CM  executed  by  the  parties  gives  a contrary indication.  In the case at bar, both the trial and appellate courts show  that  the  intention  was  to  treat  the  machineries  as  movables  or
personal property.  
 
Assuming   that  the  properties  were   considered  immovables,  nothing detracts  the  parties  from  treating  it  as  chattels  to  secure  an  obligation under the principle of estoppel.