Ever Textile Mills, Inc. obtained two loans from Philippine Bank of Communications (PBCom), secured by a deed of Real and Chattel Mortgage over the lot where its factory stands.

Upon EVERTEX’s failure to meet its obligation to PBCom, PBCom commenced extrajudicial foreclosure proceedings vs. EVERTEX under Act 3135 and Act 1506 or “The Chattel Mortgage Law”.  PBCom consolidated its ownership over the lot and all the properties in it.  It leased and eventually sold the entire factory premises to Ruby Tsai, including the contested machineries.

EVERTEX filed a complaint for annulment of sale, reconveyance, and damages against PBCom, alleging inter alia that the extrajudicial foreclosure of subject mortgage was not valid and that PBCom, without any legal or factual basis, appropriated the contested properties which were not included in the Real and Chattel Mortgage of the first mortgage contract nor in the second contract which is a Chattel Mortgage, and neither were those properties included in the Notice of Sheriff’s Sale.

1) W/N the contested properties are personal or movable properties
2) W/N the sale of these properties to a third person (Tsai) by the bank through an irregular foreclosure sale is valid.

Mere nuts and bolts do not foreclose the controversy. We have to look at the parties’ intent. The nature of the disputed machineries, that they were heavy, bolted or cemented on the real property mortgaged does not make them ipso facto immovable under Article 415 (3) and (5) of the New Civil Code.  While it is true that the properties appear to be immobile, a perusal of the contract of Real and Chattel Mortgage executed by the parties reveal their intent, that is – to treat machinery and equipment as chattels.

Petitioner Tsai’s act of purchasing the controverted properties despite her knowledge of EVERTEX’s claim was oppressive and subjected the already insolvent respondent to gross disadvantage.  xxx PBCom’s act of taking all the properties found in the factory of the financially handicapped respondent, including those properties not covered by or included in the mortgages, is equally oppressive and tainted with bad faith.

A purchaser in good faith and for value is one who buys the property of another without notice that some other person has a right to or interest in such property and pays a full and fair price for the same, at the time of purchase, or before he has notice of the claims or interest of some other person in the property

Related Posts

Leave a Reply