ZOSIMO D. UY, PLAINTIFF AND APPELLANT, VS. JOSE R. ZAMORA, DEFENDANT; THE ALLIED FINANCE, INC., INTERVENOR AND APPELLEE.

This is an appeal from the Court of First Instance of Manila. It originated
from a complaint filed in the Municipal Court of Manila by Zosimo D. Uy against Jose R.
Zamora for the recovery of a sum of money.

It appears that, at the instance of plaintiff Uy,
the Municipal Court ordered the attachment of a motor vehicle belonging to
defendant Zamora. The writ of
attachment was levied on the vehicle on August 11, 1960. Subsequently, the Municipal Court
rendered judgment for the plaintiff Uy and ordered
defendant Zamora to pay the sum of
P1,740, plus interest at the rate of 12 per cent per
annum, attorney’s fees in the amount of P435 and the costs of the suit. From
this judgment, the defendant Zamora
appealed to the Court of First Instance of Manila.

While the case was thus pending appeal, the Allied Finance, Inc. sought and
was allowed to intervene. According to the intervenor,
the motor vehicle, which was attached by the sheriff, had previously been
mortgaged to it by defendant Zamora
to secure the payment of a loan of P3,060 and that at
the time of the filing of the complaint in intervention on December 19, 1960 there remained a balance of
P2,451.93 in its favor. Intervenor therefore prayed
that defendant Zamora be ordered to
pay P2,451.93 as principal, P250 as attorney’s fees and
the cost.

Meanwhile, on January 12,
1961, plaintiff Uy and defendant
Zamora, who had earlier been
declared in default, submitted to the court a compromise agreement wherein
Zamora admitted being indebted to
Uy in the sum of P1,740 plus
P760, representing sheriff, guard and attorney’s fees, bond premiums and
expenses of litigation or in the total sum of P2,500. Since the motor vehicle
had already been sold on order of the Court for P2,500
to prevent depreciation, defendant
Zamora agreed to have Plaintiff
Uy’s credit paid out of the proceeds of the sale.

The court found defendant Zamora
to be liable to plaintiff Uy in the amount of P2,500, and to the intervenor in the
amount of P2,451.93, plus interest at 12 per cent per annum and attorney’s fees
for P200. But since there was not enough money with which to pay both claims,
the question was: Which of the two credits is preferred?

Plaintiff Uy claims preference on the basis of a
lien arising from the attachment of the motor vehicle on August 11, 1960. On the other hand, the intervenor bases its claim to preference on a Deed of
Chattel Mortgage covering the same motor vehicle. This deed was executed on
January 14, 1960 and
acknowledged before a notary Public on June 20, 1960. As the lower court noted, it is not shown
whether the mortgage was recorded in the Chattel Mortgage Register and noted in
the records of the Motor Vehicles Office, although both plaintiff Uy and the intervenor affirm in
their briefs that the mortgage was registered on August 24, 1960.

In resolving the issue, the lower court held that intervenor’s claim could not be considered a specially
preferred credit under Article 2241 (4) of the Civil Code because an
unregistered chattel mortgage is void. However, the court held that the same
could be considered a credit appearing in a public instrument under Article 2244
(14) so that it could be considered preferred over plaintiff’s attachment lien
because of priority of its date.

Plaintiff moved for a reconsideration but the same
was denied. Hence this appeal, plaintiff contending that—

1. The intervenor’s chattel mortgage is void for lack of
registration, citing Article 2140 of the Civil Code;

2. Since it was void, it could not affect
plaintiff’s attachment lien;

3. The intervenor’s credit could not be considered a credit
appearing in a public instrument under Article 2244 (14) because the credit was
not yet due at the time of the levy of attachment;

4. Even if it is
considered a credit in a public instrument, still plaintiff’s lien by attachment
is superior to the intervenor’s credit because
plaintiff’s lien is specially preferred.

Considering the fact that the intervenor Allied
Finance, Inc. registered its mortgage only on August 24, 1960, or subsequent to the date of the writ of
attachment obtained by plaintiff Uy on August 11, 1960, the credit of the
intervenor cannot prevail over that of the
plaintiff.

The lower court upheld intervenor’s credit on the ground that, being embodied
in a public instrument of an earlier date (June 20, 1960), it should take precedence over
plaintiff’s Hen by attachment (August 11, 1960), pursuant to Article 2244 of the
Civil Code. This is untenable for the reason that, as already stated, the credit
of the intervenor cannot be considered as preferred
until the same has been recorded in the Motor Vehicles Office. Thus, in Borlough vs. Fortune Enterprises, Inc., 53
O.G. 4070, it was held that a mortgage of motor vehicles, in order to affect
third persons, should not only be registered in the Chattel Mortgage Registry,
but the same should also be Recorded in the Motor Vehicles Office (now the Land
Transportation Commission), as required in Section 5(e) of the then Revised
Motor Vehicles Law. There is no doubt that with respect to defendant Zamora and
the intervenor Allied finance, Inc., plaintiff Uy is a third person. We therefore hold that plaintiff’s
credit should first be paid.

WHEREFORE, the decision of the lower court is reversed, without
pronouncement as to costs.

Bengzon, C. J., Bautista Angelo, Concepcion, Reyes, J.B.L., Barrera, Paredes, Dizon, Makalintal, Bengzon J.P. and
Zaldivar, JJ.,
concur.