AGRICULTURAL CREDIT ADMINISTRATION, PLAINTIFF-APPELLEE, VS. LASAM FARMERS’ COOPERATIVE MARKETING ASSOCIATION, INC., ET AL., DEFENDANTS, MARTIN TAN BOON DIOK, AND REMIGIO M. BUTA…

This is an appeal from the derision of the Court of First
Instance of Manila in its Civil Case No. 60607. 
The case relates to a dispute over an International Crawler Tractor
Engine and a Bullgrader, covered by a chattel
mortgage executed by the Lasam Farmers’ Cooperative
Marketing Association, Inc. in favor of the Agricultural Credit Administration,
but subsequently levied upon on execution by the Ex-Oficio
Provincial en Sheriff of Cagayan and bought by Martin
Tan Boon Diok in the execution sale thereafter
conducted by the said officer to satisfy a judgment secured by Martin Tan Boon Diok in another case (Civil Case No. 1179-A) against the Lasam Farmers’ Cooperative Marketing Association, Inc.  The law question raised revolves around the
prayer of appellant Martin Tan Boon Diok who wants
that his execution lien be declared superior to the mortgage lien of appellee Agricultural Credit Administration.

There is no dispute about the material background facts,
succinctly stated in a portion of the decision appealed from, as follows:

“The complaint alleges and the evidence shows that in May 1955
the defendant Lasam Farmers’ Cooperative Marketing
Association, Inc., hereinafter referred to as the Lasam
Facoma, through its Manager, executed a promissory
note for a facility loan in the amount of P26,877.00 with interest thereon at
the-rate of 8% per annum payable in three equal yearly amortization (Exhibit
A).  To secure the full payment of the
principal and interest of the said facility loan, the Lasam
Facoma executed a Chattel Mortgage in favor of the
plaintiff dated April 16, 1955
of the following described properties which defendant Lasam
Facoma purchased out of the said facility loan:

“One (1)  International TD-9 Crawler tractor – Engine No. 47267;

“One (1)  Belt pulley attachment and rear take off for
TD-9, S55769 and 22712P;

“One (1)
McCormick 28 x 46 Rice Tresher;

“One (1) Endless
Belt 125 ft. 7” wide;

“One (1)
International 9WC-2 Bull-grader;

which Chattel Mortgage was duly registered
in the Registry of Deeds of the Province of Cagayan
under Inscription No. 1100; Page 364; Vol. 4; File No. 1033, on April 21, 1955,
(See page 4 of Exhibit B).  The defendant
Lasam Facoma has paid only
the amount of P3,000.00 of the principal, leaving a balance of P23,877.00 and
on the interest of said principal as of March 31, 1965 amounting to P19,732.34
said defendant has paid only the amount of P4,000.00, thereby leaving a balance
of P15,732.34. That as of March 31,
1965, the total unpaid indebtedness of Lasam
Facoma to the plaintiff amounted to P39,609.34 as evidenced by the Statement of Facility Loan
Account as of March 31, 1965
(Exhibit C).

“In Civil Case No. 1169-A entitled ‘Martin Tan Boon Diok vs. Lasam Farmer’s
Cooperative Marketing Association’, an Alias Writ of Execution was issued by
the Court of First Instance of Cagayan Second Branch,
at Aparri, in favor of the judgment creditor Martin
Tan Boon Diok, one of the defendants in the instant
case, as a result of which the Office of the Provincial Sheriff of Cagayan levied upon the International TD-9 Crawler Tractor,
Engine No. 47267 and the 9 WG-2 Bullgrader, and their
accessories, two of the properties covered by the Chattel Mortgage, Exhibit B, so
that on February 21, 1963, plaintiff through its Officer incharge
at Tuguega­rao Office wrote the Deputy Provincial
Sheriff of Aparri, Cagayan,
with an affidavit attached, dated February 21, 1963, informing said Deputy
Provincial Sheriff of plaintiff’s prior lien and right to possess said tractor
and bull-grader, a copy of which was furnished Atty. Manuel C. Manzano, counsel of Martin Tan Boon Diok
in said Civil Case No. 1169-A (Exhibit D and D-1), but in spite of the written
claim by plaintiff directed to the Deputy Provincial Sheriff of Aparri, Cagayan above stated, the
defendant herein, Remigio M. Butacan,
Ex-Oficio Provincial Sheriff, through his Deputy
Provincial Sheriff, Nemesio G. Oñate,
sold at public auction on March 29, 1963 the said Crawler Tractor and Bullgrader which are covered by the Chattel Mortgage, to
the judgment creditor Martin Tan Boon Diok for the
amount of P10,290.96 notwithstanding Martin Tan Boon Diok’s
previous knowledge of plaintiff’s superior lien.  A certificate of Sheriff’s sale dated March 29, 1963 was issued, copy of
which was introduced in evidence as Exhibit E.” [pp. 25-28, Record on
Appeal]

Thus, on April 14, 1965, the Agricultural Credit Administration
instituted the present action in the Court of First Instance of Manila against
the Lasam Facoma, Martin
Tan Boon Diok, and Remigio
M. Butacan in his capacity as Ex-Oficio
Provincial Sheriff of Cagayan, to recover from the Lasam Facoma its indebtedness in
the amount of P39,609.34 as of March 31, 1965, plus interest and attorney’s
fees; to annul the Sheriff’s sale and be declared entitled to the possession of
the properties covered by the Chattel Mortgage or, in the alternative, to
recover from Martin Tan Boon Diok the Crawler Tractor
Engine and Bullgrader referred to or its value of
P19,882.00.

Upon the facts above narrated, the Court of First Instance of
Manila rendered the decision dated September
22, 1966, with the following dispositive
portion:

“IN VIEW OF THE FOREGOING CONSIDERATIONS, judgment is hereby
rendered against the defendants:

“(a)    Ordering the defendant
Lasam Farmers’ Cooperative Marketing Association,
Inc., to pay to the plaintiff constituting its total indebtedness the sum of
P39,609.34 as of March 31, 1965, plus interest thereon until fully paid, and
ten per cent of the total amount due the plaintiff as attorney’s fees;

“(b)    Declaring the
Certificate of Sheriff’s Sale
(Exhibits ‘E’ and ‘3’) null and void;

“(c)    Declaring that the
plaintiff’s mortgaged lien over the properties described in the contract of
Chattel Mortgage (Exh. ‘B’) is superior to the execution
lien of defendant Martin Tan Boon Diok over the same
properties;

“(d)    In the alternative,
should defendant Lasam Facoma
fail to pay the amounts of money above indicated, ordering the defendant Martin
Tan Boon Diok to deliver to the plaintiff within ten
(10) days from the finality of this judgment International TD-9 Crawler Tractor
Engine No. 47267 and International 9WG-2 Bullgrader
and their accessories, or to pay the plaintiff by the said defendant of the
value thereof in the amount of P19,822.00 in case
delivery cannot be made;

“(e)    Ordering the defendant
Lasam Facoma to deliver to
the plaintiff the rest of the mortgaged properties as described in the contract
of Chattel Mortgage not included in the Certificate of Sale (Exhs. ‘E’ and 131);

“(f)     Ordering the
Provincial Sheriff of Cagayan or any of his Deputies
to take the above-mentioned properties in his custody to be disposed of in
accordance with the Revised Rules of Court; and

“(g)    Ordering
the defendants to pay the cost of suit.

“SO ORDERED.”

Martin Tan Boon Diok and the Ex-Oficio Provincial Sheriff of Cagayan
moved for the reconsideration of this decision but their motion was denied by
the court a quo in an order dated October 17, 1966; hence, this
appeal.

In Our resolution of June 25, 1969, this Court resolved to
dismiss the said appeal as prayed for by appellee
Agricultural Credit Administration in its motion dated May 28, 1969, on the
ground that appellants failed to serve copies of their brief to appellee as required under Section 1 (f) of Rule 50 in
relation to Sections 1 and 2 of Rule 56 of the Rules of Court.  It turned out, however, that before the
issuance of the said resolution dismissing the appeal, appellants personally
served copies of their brief upon appellee on June 3,
1969 and, thereafter, appellee filed with this Court
copies of its own brief – a circumstance relied upon by appellants in their
subsequent motion for reconsideration of the resolution dismissing their appeal
as an implied abandonment or waiver of the -grounds relied upon by appellee in its previous motion to dismiss.  We opt therefore to set aside the
above-mentioned resolution and, in the interest of justice, reinstate the
appeal and decide the same on the merits.

The only two errors assigned by appellants do not affect the
whole judgment of the court a quo but only the portions thereof
declaring the Certificate of Sheriff’s Sale null and void and the lien of appellee’s mortgage on the tractor and bullgrader
and their accessories superior to that of the levy on execution made on the
same properties by appellant sheriff, which are paragraphs (b), (c) and (d)
only of said judgment.  The said two
assignments of error are as follows:

“1.

THE LOWER COURT ERRED IN
DECLARING THE CERTIFICATE OF SHERIFF’S SALE (EXHIBIT ‘E’, AND ‘3’) NULL AND
VOID

“2.

THE LOWER COURT
ERRED IN DECLARING THAT PLAINTIFF-APPELLEE’S MORTGAGED LIEN OVER THE PROPERTY
IN QUESTION IS SUPERIOR TO THE
EXECUTION LIEN OF DEFENDANT-APPELLANT MARTIN TAN BOON DIOK.”

Reading the arguments advanced by both parties in their
respective briefs, We can see that the said parties
are not clear as to the issue between them. 
Apparently, neither was the trial court. 
The following statement of the issue made by His Honor is accepted by
both parties in their briefs:

“Whose lien is superior – the mortgage lien of the plaintiff
over the properties in question created by virtue of the Chattel Mortgage
Contract, Exhibit ‘B’, which was duly registered in the Registry of Property x x x or the lien of defendant
Martin Tan Boon Diok which was created by the
execution of the decision of the Court of First Instance dated February 19,
1962 rendered by said court in its case No. 1179-A x x
x x” (quoted from the
lower court’s decision, page 30 Record on Appeal)

To be accurate, however, the issue thus
stated need not be resolved here.  We do
not understand appellants to be denying the priority of the lien of appellee’s mortgage over that of the levy on execution
invoked by appellants.^[1]
As We see it, the pretense of appellants is that this
action of appellee founded on such priority has
either prescribed already or that appellee is guilty
of laches in prosecuting the same, hence, the
complaint herein should have been dismissed in so far as the enforcement of the
lien of said mortgage is concerned.

In the matter of prescription, the pose of appellant is that the
failure of the appellee to file the present action
within the one hundred twenty (120) days from the filing of the bond referred
to in Section 15 of Rule 39 (1940 Rules, since this case was submitted under
the same) caused his action to prescribe. 
Said section reads as follows:

“SEC. 15.  Proceedings where property
claimed by third person.  – If
property levied on be claimed by any other person than the defendant or his
agent, and such person make an affidavit of his title thereto or right to the
possession thereof, stating the grounds of such right or title, and serve the
same upon the officer making the levy, and a copy thereof upon the judgment
creditor, the officer shall not be bound to keep the property, unless such
judgment creditor or his agent, on demand, indemnify the officer against such
claim by a bond in a sum not greater than the value of the property levied on,
and, in case of disagreement as to such value, the same shall be determined by
the court issuing the writ of execution. 
The officer is not liable for damages, for the taking or keeping of such
property, to any such third person unless such claim is made and unless the
action for damages be brought within one hundred twenty days from the date of
the filing of the bond.  But nothing
herein contained shall prevent such third person from vindicating his claim to
the property by any proper action.  When,
however, the plaintiff, or the person in whose favor the writ of execution
runs, is the Commonwealth of the Philippines, or any officer duly representing
it, the filing of such bond shall not be required, and in case the sheriff or
attaching officer is sued for damages as a result of the attachment, he shall
be represented by the Solicitor-General and if held liable therefor,
the actual damages adjudged by the court shall be paid by the Insular Treasurer
out of such funds as may be appropriated for the purpose.”

It is explicit in this provision that the action that must be
filed within said period of one hundred twenty days is that against the sheriff
for damages on the bond of the judgment creditor and not an action for recovery
of the property or the enforcement of a superior lien thereon.  Indeed, this question raised by appellants is
not new.  In Anderson
vs. The Provincial Sheriff of Rizal, et al., 40 O.
G., 5th Supplement, 73, it was held:

“The next question is one of law – whether Anderson’s
action to recover these properties has prescribed.  The appellant contends that it has, relying
upon Section 451 of the Code of Civil Procedure, as amended by Act No. 4108,
which says, ‘No claim to property levied on by the sheriff shall be valid
against the latter, or shall be received or be notice of any rights against
him, unless a claim has been made to said property by a third party as provided
in this section and said claim has been enforced by the proper action within
one hundred and twenty days after the sale.’

“The present action was brought more than one hundred twenty
days from the date of the sale.  However,
the foregoing limitation refers solely to the sheriff.  As against the judgment creditor or the
purchaser the general law on prescription governs. This is not only manifest
from the terms of the above-quoted provision, but so it is from the following
clause:  ‘Nothing contained in this
section shall prevent the owner of the property levied on from vindicating his
claim thereto by any proper action within the period established by the laws
governing prescription.'”

Accordingly, We hold that the action of appellee has not prescribed.  Appellee brought
this action as one for the recovery of movables.  As such, its period of prescription would be
eight years (Art.  1140,
C.C.) Even on the assumption that this action is really one for the
foreclosure of a chattel mortgage, still the prescriptive period would be five
years (Art. 1149, C.C.).  The present
action was filed^[2]
less than two years and two months from the filing of the bond of appellant
Martin Tan Boon Diok with appellant sheriff on February 28, 1963.^[3]

Appellants present alternatively the contention that the failure
of the appellee to file an action on the sheriff’s
bond within the period already discussed bars any action to recover the
property sold.  In other words, the
theory of appellants is that the action reserved in the last sentence of the
above-quoted Section 15 of Rule 39 to the effect that “nothing herein
contained shall present such third person from vindicating his claim to the
property by any proper action” does not apply when a third-party claim has
been filed, since the provision requiring the filing of an action to be filed
within one hundred twenty days after the filing of the bond is the only action,
so appellants claim, that may accordingly be filed whenever a third-party claim
has been filed.  To start with, again,
appellants overlook the fact that the action referred to in the provision is an
action against the sheriff only for damages on the bond and not the action for
the recovery of the property or the enforcement of any lien thereon in which
the purchaser is the principal defendant. 
Consequently, it cannot be true that the action on the sheriff’s bond
and the action for the vindication of any claim of third-party claimant in the
property sold are mutually exclusive. 
They are founded on different causes of action which are not
inconsistent with each other. 
Incidentally, We note that this alternative
issue now raised by appellants was not alleged as an affirmative defense in the
answer in the court below, albeit His Honor did casually make reference to it
towards the end of his decision by saying, in effect, that it is also its view
that such theory of appellants is untenable. 
Even then the same point has not been specifically assigned as error in
appellants’ brief.  Under these circumstances,
this argument of appellants could have been totally ignored by this Court.

The contention of appellants regarding alleged laches deserves less favorable consideration.  Appellants claim that the fact that they had
“no notice” or that they “lacked knowledge” “that
complainant (appellee) would assert the right on
which (appellee) bases (its) suit” together with
the fact that appellant Martin Tan Boon Diok
“had no knowledge that plaintiff would file the present case after the
lapse of more than two years from the date of the execution sale” make appellee guilty of laches has
absolutely no merit.  As the right of appellee to bring the present action is based on provisions
of law already interpreted and construed previously by this Court, appellants’
posture only betrays that this appeal is, at best, half-hearted.  The loose presentation of
obviously untenable arguments in appellants’ brief notably convey such
impression.  This kind of appeal must be
discouraged.  The fact that the trial
court erroneously declared the sheriff’s sale in question null and void instead
of merely making it subject to the mortgage rights of the appellee
does not alter this view of the Court as to the untenability
of this appeal because, from all that appears in the record the foreclosure by appellee of his mortgage in question would, in effect,
leave nothing of the tractor and bull-grader and their accessories, so as to
make any subsequent execution sale thereof of any significance.  In any event, at its base, the position taken
by appellant Martin Tan Boon Diok from the inception
of this case in the trial court was legally insustainable.

Upon the foregoing premises judgment is hereby rendered modifying
Paragraphs (b), (c) and (d) of the decision of the court a quo in
the sense that instead of declaring the execution sale in question null and
void, the same is made subject to the mortgage rights of appellee
Agricultural Credit Administration; in all other re­spects, the said judgment
is affirmed, with double costs against appellant Martin Tan Boon Diok in this instance, this appeal being dilatory.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Sanchez, Castro,
Fernando, Capistrano, and Teehankee, JJ., concur.

Zaldivar, J., took no part.

^[1]
At any rate, if such were the real issue here, the same would have to be
resolved in favor of appellee.  There can be no doubt that the lien of the
duly recorded chattel mortgage in favor of appellee
is superior to that of the levy on execution in favor of appellant Martin Tan
Boon Diok or, to put it the other way, the sale on
execution made pursuant to said levy must be, as it is by law, subject to the
lien of appellee’s mortgage, for the simple reason
that appellee’s mortgage was registered and was already
existing at the time the levy on execution was made.  Sections 22 to 24 of Rule 39 of the Rules of
Court of 1940 provided very plainly, as Sections 25 to 27 of Rule 39, also, of
the current Rules do likewise provide, that all sales on execution of any kind
of property of the judgment debtor convey to the purchaser nothing more than
the rights of the judgment debtor over said property “on the day that the
execution or attachment (preliminary) was levied.” To be clearer, said
sections provide textually thus in both the old and the revised Rules of Court:

SEC. 22.  Conveyance to purchaser of
personal property capable of manual delivery.  – When the purchaser of any personal
property, capable of manual delivery, pays the purchase money, the officer
making the sale must deliver to the purchaser the property, and, if desired,
execute and deliver to him a certificate of sale.  Such sale conveys to the purchaser all the
right which the debtor had in such property on the day the execution or
attachment was levied.

SEC. 23.  Conveyance to purchaser of
personal property not capable of manual delivery.  – When the purchaser of any personal
property, not capable of manual delivery, pays the purchase money, the officer
making the sale must execute and deliver to the purchase a certificate of
sale.  Such certificate conveys to the
purchaser all the right which the debtor had in such property on the day that
the execution or attachment was levied.

SEC. 24.  Effect of sale of real
property.  Certificate
thereof given to purchaser and filed with registrar.  – Upon a sale of real property, the purchaser
shall be substituted to and acquire all the right, title, interest, and claim
of the judgment debtor thereto, subject to the right of redemption as
hereinafter provided.  The officer must
give to the purchaser a certificate of sale containing:

(a)  A particular description of the real property
sold;

(b)  The price paid for each distinct lot or
parcel;

(c)  The whole price by him paid;

(d)  The date when the right of redemption expires.

A duplicate of such certificate
must be filed by the officer in the office of the registrar of deeds of the
province.

It is elementary
that a purchaser at the sheriff’s sale acquires no better title or greater
right than the judgment debtor had in the property concerned (Villegas vs.
Tan, 57 Phil. 656, 666).  In other words,
the purchaser acquires only such right or interest as the judgment debtor had
on the property at the time of the sale (Cruz vs. Sandoval, 69 Phil.
736; Barrido vs. Barreto,
72 Phil. 187), so it follows that if at that time the judgment debtor had no
more right to or interest in the property because he had already sold it to
another, then the purchaser acquires nothing (Potenciano
vs. Dineros, 97 Phil. 196; See Feria, Civil Procedure, Annotated, 1967 ed., p. 761).  Any doubt on the matter has been clarified in
the 1964 Rules, as Section 16, a new provision of Rule 39 now provides:

SEC.
16.  Effect of
levy on execution as to third persons. 
– The levy on execution shall create a lien in favor of the judgment
creditor over the right, title and interest of the judgment debtor in such
property at the time of the levy, subject to liens or incumbrances
then existing.

Of course, there
is nothing here that declares null and void the sheriff’s sale.  All that is held is that the sale is subject
to the right of the superior lien holder.

^[2] On April 14, 1965.

^[3]
Per Appellants’ answer in the court below, p. 15, 1 Record on Appeal; see also
pp. 3 and 7, appellants’ brief.