G.R. No. L-11658 February 15, 1918
LEUNG YEE, plaintiff-appellant,
vs.
FRANK L. STRONG MACHINERY COMPANY and J. G. WILLIAMSON, defendants-appellees.
FACTS:
The “Compañia Agricola Filipina” bought rice-cleaning machinery from Strong Machinery Company and executed a chattel mortgage over the building and the machinery where it was installed to secure payment of the purchase price, without reference to the land where the building stood. The mortgage was foreclosed and the property was sold by the sheriff to Strongman machinery.
Days after, Compañia Agricola Filipina executed a deed of sale over the land where the building stood to the machinery company, but the deed of sale which had no reference to the building, was not registered, although the deed was made a public document.
On or about the date to which the chattel mortgage was executed, Compania executed a real estate mortgage over the building in favor of Leung Yee, distinct and separate from the land. This real estate mortgage is to secure payment for its indebtedness for the construction of the building. Upon failure to pay, the mortgage was foreclosed.
Strong machinery company then filed a complaint, demanding that it be declared the rightful owner of the building. The trial court held that it was the machinery company which was the rightful owner as it had its title before the building was registered prior to the date of registry of Leung Yee’s certificate.
ISSUE:
1) Whether or not the building can be classified as a real property, so as to subject it to a real estate mortgage
2) Who has better right over the building
HELD:
Property:
1) The building of strong materials in which the rice-cleaning machinery was installed by the “Compañia Agricola Filipina” was real property, and the mere fact that the parties seem to have dealt with it separate and apart from the land on which it stood in no wise changed its character as real property. It follows that neither the original registry in the chattel mortgage of the building and the machinery installed therein, not the annotation in that registry of the sale of the mortgaged property, had any effect whatever so far as the building was concerned.
2) It appears that Yee had full knowledge of the machinery company’s claim of ownership when he executed the indemnity bond and bought in the property at the sheriff’s sale. He took the risk and must stand by the consequences; and it is in this sense that Yee was not a purchaser in good faith. One who purchases real estate with knowledge of a defect or lack of title in his vendor cannot claim that he has acquired title thereto in good faith as against the true owner of the land or of an interest therein; and the same rule must be applied to one who has knowledge of facts which should have put him upon such inquiry and investigation as might be necessary to acquaint him with the defects in the title of his vendor.
Article 1473 of the Civil Code is as follows:
If the same thing should have been sold to different vendees, the ownership shall be transfer to the person who may have the first taken possession thereof in good faith, if it should be personal property.
Should it be real property, it shall belong to the person acquiring it who first recorded it in the registry.
Should there be no entry, the property shall belong to the person who first took possession of it in good faith, and, in the absence thereof, to the person who presents the oldest title, provided there is good faith.
Law on Sales:
Article 1473 of the Civil Code is as follows:
If the same thing should have been sold to different vendees, the ownership shall be transfer to the person who may have the first taken possession thereof in good faith, if it should be personal property.
Should it be real property, it shall belong to the person acquiring it who first recorded it in the registry.
Should there be no entry, the property shall belong to the person who first took possession of it in good faith, and, in the absence thereof, to the person who presents the oldest title, provided there is good faith.