ASSOCIATED INS. & SURETY CO., INC. v. IYA, et al.

Category: Property, Ownership and Its Modifications

ASSOCIATED INS. & SURETY CO., INC. v. IYA, et al.

A building is an immovable property irrespective of where or not said structure and the land on which it is adhered to belong to the same owner.

FACTS:

Adriano Valino and Lucia A. Valino owns a house of strong materials. Filed a bond fr 11k subscribed by the Associated Insurance and Surety Co., Inc. and as counter-guaranty therefr, the spouses Valino executed an alleged chattel mortgage on the aforementioned house in favor of the surety company.
The parcel of land on which the house is erected was still registered in the name of the Philippine Realty Corporation but was able to obtained the same from them after full payment of the purchase price. Valinos acquired another loan from Iya for 12k, executing an REM over the lot and house. However they weren’t able to pay off their other loan so the chattel mortgage was foreclosed. The surety company was awarded the land as the highest bidder in the auction. The surety company later on discovered that the land was subject to a REM. The surety company then requested that the house and lot be excluded from the REM. Iya, in her answer, said that she had a real right over the property and that the chattel mortgage on which the foreclosure was based should be declared null and void for non-compliance with the form required by law. CA ed only the foreclosure of the REM only up to the land and they awarded the structure to the surety company saying that the house is a personal property and may be subject to chattel mortgage.

ISSUE:

Which of the mortgages should have preference?

RULING:

Lopez v Orosa was used as a precedent here saying that the buildings an immovable itself, separate and distinct from the land. A building is an immovable property irrespective of where or not said structure and the land on which it is adhered to belong to the same owner.

Only personal property is subject to a chattel mortgage and since the structure in this case is an immovable, it cannot subject to a chattel mortgage. Therefore the chattel mortgage and the sale on which it was based should be declared null and void.

Iya was given the superior right not only to the land but also to the structure to foreclose them in an auction.