DELFIN MONTANO, PLAINTIFF AND APPELLEE VS. JOSE LIM ANG, ET AL., DEFENDANTS. ANGEL M. TINIO, THIRD-PARTY PLAINTIFF AND APPELLANT, VS. MANILA TRADING AND SUPPLY COMPANY, THIRD-PA…

Delfin Montano brought to the Philippines from the United States
a Cadillac car which he registered in his name in the Motor Vehicles Office and
for which he obtained a certificate of registration. On May 30, 1952, he sold
the car to Jose Lim Ang and his wife Teodora A. Gonzales for the sum of
P28,000.00, payable in installments, for which the latter executed a promissory
note. Having paid part of the price, said spouses executed on the same date a
chattel mortgage on the car in favor of Montano to guarantee the payment of the
balance. Because Montano did not want to transfer the registration certificate
to Jose Lim Ang before the registration of the mortgage, the latter was
registered in the effice of the register of deeds on June 4, 1952, but Montano
failed to notify the Motor Vehicles Office of the execution of the mortgage
pursuant to the requirement of Section 5(e) of Act No. 3992, known as the
Revised Motor Vehicles Law.

On June 12, 1952, Jose Lim Ang transferred the registration
certificate to Eugenio Villanueva. On June 18, 1952, Villanueva sold the car to
Amador D. Santos for P25,000.00, transferring to the latter the registration
certificate. On the same date, Santos sold the car to the Manila Trading &
Supply Company for P25,000.00, and on the same date this company sold the car to
Angel M. Tinio for P26,000.00. Tinio made a down payment of P12,000.00 and for
the balance he executed a promissory note which he assumed to pay in monthly
installments. He also executed a chattel mortgage on the same car to secure the
payment of the promissory note. This mortgage was registered both in the office
of the register of deeds as well as in the Motor Vehicles Office. After paying
his obligation in full, the mortgage executed by Tinio in favor of the Manila
Trading & Supply Company was cancelled, and as a consequence he secured the
transfer to his name of the certificate of registration from the Motor Vehicles
Office. None of the transferees took the trouble of investigating from whom Jose
Lim Ang had acquired the Cadillac car, and neither did any of them investigate
in the office of the registered of deeds if there was any incumbrance existing
thereon.

Jose Lim Ang failed to pay the balance of the purchase price to
Montano in spite of the latter’s demand and so on December 8, 1952 Montano
requested the sheriff of Manila to sell the car in accordance with the
conditions agreed upon in the chattel mortgage. Having found, however, that the
car was no longer in the possession of Lim Ang but in that of Angel M. Tinio who
claimed ownership thereof, on July 8, 1953 Montano commenced the present action
of replevin before the Court of First Instance of Manila against spouses Jose
Lim Ang and Teodora A. Gonzales and Angel M. Tinio to recover the ownership and
possession of the car in question (Civil Case No. 1998).

In order to obtain possession of the car, Montano put up a bond
in the amount of P30,000.00 and, accordingly, on July 11, 1953 an order for the
seizure of the car was issued by the trial court. The sheriff hauled the car
from Tinio’s garage only to return the same on the promise of Tinio to post a
counterbond to enable him to retain possession thereof. In effect, Tinio posted
a counterbond in the amount of P30,000.00, and forthwith filed a third-party
complaint in the same case against the Marila Trading & Supply Company from
which he bought the car in question. This company in turn filed a fourth-party
complaint against Amador D. Santos, who in turn brought into the case as
defendants Marciano and Eugenio Villanueva. The Villanuevas filed a cross-claim
against Jose Lim Ang arid his wife Teodora A. Gonzales. On March 29, 1954, these
spouses were declared in default for their failure to answer Montano’s complaint
within the reglementary period.

Meanwhile, during the pendency of the replevin case, it was
brought to the attention of the court a quo that on May 15, 1953, at the
instance of Montano, the aforesaid spouses were accused of estafa under Article
319, paragraph 2, of the Revised Penal Code for having sold the car in question
without the consent of Montano notwithstanding the existence thereon of the
chattel mortgage (Criminal Case No. 22627); that Atty. Abraham Sarmiento,
Montano’s counsel in the replevin case, appeared as private prosecutor in the
criminal case; and that having been awarded an indemnity, in the amount of
P7,875.00 which is the same amount Montano seeks to recover in the civil case,
said award has the effect of a waiver on his part to further prosecute the
same.

On September 24, 1955, the court a quo rendered decision
the dispositive part of which reads:

“(a) The court orders defendants Jose Lim Ang, Teodora A.
Gonzales and Angel M. Tinio to deliver the car in question to plaintiff Delfin
Montano or to pay jointly and severally to plaintiff Delfin Montano the sum of
P6,000.00 plus 12% interest per annum from August 15, 1952, until the amount is
fully paid with costs;

“(b) The court orders Manila Trading & Supply Co. to
reimburse defendant and third-party plaintiff Angel M. Tinio the amount of
P6,000.00 plus interest at the rate of 12% per annum from August 15, 1952, until
the said amount is fully paid with costs. This amount of reimbursement shall be
made by Manila Trading & Supply Co. even if defendant and third-party
plaintiff Angel M. Tinio delivers the car back to plaintiff Delfin Montano. If
Angel M. Tinio elects to return the car to Delfin Montano instead of paying him
the sum of P6,000.00 plus 12% interest per annum, the value of the car must have
been reduced to P6,000.00 only, or less, due to its use. Manila Trading &
Supply Co. as third-party defendant shall also pay to defendant Angel M. Tinio
as third-party plaintiff the sum of P3,000.00 for damages actual and moral,
expenses so far incurred by him in defending himself in this case, and
attorney’s fees;

“(c) The court orders fourth-party defendant Amador D,
Santos to reimburse to fourth-party plaintiff Manila Trading & Supply Co.
the sum of P6 000.00, plus 12% interest per annum from August 15, 1952, until
this sum is paid by Manila Trading & Supply Co. to defendant and third-party
plaintiff Angel M. Tinio, plus costs. No reimbursement for damages and
attorney’s fees is ordered because Manila Trading & Supply Co. waived
damages and attorney’s fees from Amador D. Santos;

“(d) The court orders defendant spouses Jose Lim Ang and
Teodora A. Gonzales to pay jointly and severally to Amador D. Santos, as
reimbursement, all sums the said Amador D. Santos shall have paid Manila Trading
& Supply Co. in compliance with this decision.

“Fifth-party defendants Marciano Villanueva and Eugenio
Villanueva are absolved from the fifth-party complaint of Amador D. Santos
because the evidence is conclusive that Eugenio Villanueva acted as dummy only
of Jose Lim Ang. Amador D. Santos himself testified expressly and positively
that he refused to buy the car in question unless it was transferred to the
Villanuevas. Fifth-party defendants Eugenio Villanueva and Marciano Villanueva
conclusively proved that they received not a cent of the price of the car in
question from Amador D. Santos. The sum of P11, 228.50, for which Amador D.
Santos extended a promissory note and which was paid by him the following day,
was the price of Eugenio Villanueva’s Oldsmobile car. The Villanuevas
conclusively established that on June 18, 1953, when the car in question was
sold to Amador D. Santos, Eugenio Villanueva signer the deed of sale in order to
get tho payment for his Oldsmobile car.”

Their motions for reconsideration having been denied, defendant
and third-party plaintiff Angel M. Tinio, third-party defendant and fourth-party
plaintiff Manila Trading & Supply Company, fourth-party defendant and
fifth-party plaintiff Amador D. Santos, fifth-party defendants and
cross-claimants Marciano Villanueva and Eugenio Villanueva appealed to the Court
of Appeals. The case is now before us upon certification of the Court of Appeals
on the ground that only questions of law are involved.

Amador D. Santos died during the pendency of this case and so he
was substituted by his wife Dolores L. Santos, special administratrix of his
estate.

The issues posed in this appeal are: (1) whether or not the
chattel mortgage executed by Jose Lim Ang and his wife Teodora A. Gonzales on
May 30, 1952 before the car was actually registered in their name is valid and
regular; (2) whether or not the chattel mortgage executed by Jose Lim Ang and
Teodora A. Gonzales in favor of Delfin Montano is binding against third persons
even if they failed to give notice thereof to the Motor Vehicles Office as
required, by Section 5(c) of the Revised Motor Vehicles Law; and (3) whether or
not the intervention of Montano in the prosecution of the criminal case against
Jose Lim Ang and his wife for estafa under Article 319, paragraph 2, of the
Revised Penal Code wherein he was awarded an indemnity of P7,875.00 constitutes
a waiver of his right to foreclose the chattel mortgage executed by said spouses
on the ear in question.

Anent the first issue, appellants maintain the negative. They
aver that since the chattel mortgage was executed on May 30, 1952 and the
transfer of the registration certificate was made only on June 7, 1952, said
mortgage is invalid because the mortgagors were not yefc the owners of the car
when the mortgage was executed. They bolster up their claim by invoking the
testimony of Montano to the effect that on May 31, 1952 he still considered
himself owner of the car because he intended to transfer its ownership to the
mortgagors only after the registration of the mortgage in the office of register
of deeds.

This contention is untenable. It is not disputed that Montano
agreed to sell and the spouses Ang agreed to buy the car for P28,000.00 for
which a promissory note was executed and that to guarantee the same the spouses
executed a chattel mortgage and took possession of the car sold. It is therefore
safe to conclude that at the time of the sale wherein the parties agreed over
the car and the price, the contract became perfected, and when part of the
purchase price was paid and the car was delivered upon the execution of the
promissory note and the mortgage, the sale became consummated.^[1] The fact that the registration certificate of
the car has not as yet been transmitted to the purchasers when the mortgage was
constituted is of no moment for, as this Court well said: “The registry of the
transfer of automobiles and of the certificates of license for their use in the
Bureau of Public Works (now Motor Vehicles Office) merely constitutes an
administrative proceeding which does not bear any essential relation to the
contract of sale entered into between the parties.”^[2] At any rate, this flaw, if any, is deemed to
have been cured when after the registration of the mortgage the registration
certificate was transferred to the purchasers on June 4, 1952.

The second issue raised is not new. In a similar case
decided by this Court, we said: “A mortgage 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 as required by section 5(e)
of the Revised Motor Vehicles Law: And the failure of the respondent mortgagee
to report the mortgage executed in its favor had the effect of making said
mortgage ineffective against Borlough, who had his purchase registered in the
said Motor Vehicles Offices.”^[3] Adopting
this view in our case the inevitable conclusion is that as between Montano whose
mortgage over the car was not recorded in the Motor Vehicles Office and Angel M.
Tinio who notified said office of his purchase and registered the car in his
name, the latter is entitled to preference considering that the mere
registration of the chattel mortgage in the office of the register of deeds is
in itself not sufficient to hold it binding against third persons.

Having reached the foregoing conclusion, we deem it unnecessary
to discuss the third issue relative to Montano’s intervention in Criminal Case
No. 22627.

With regard to the claim for damages of Angel M. Tinio, we find
no factual basis to grant the same it appearing that Montano filed the present
case merely to protect his interest.

Wherefore, the decision appealed from is affirmed insofar as it
orders defendants Jose Lim Ang and his wife Teodora A. Gonzales to pay Delfin
Montano the sum of P6,000.00, plus 12% interest thereon per annum from August
15, 1952 until it is fully paid.

The rest of the decision is reversed, without pronouncement as
to costs.

Bengzon, C.J., Padilla, Labrador, Concepcion, J. B. L.,
Barrera, Paredes, Dizon, Regala, and Makalintal, JJ.,
concur.

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^[1] Articles 1475, 1477, 1496 and 1497,
Civil Code; De Santos, et al. vs. The Secretary of Agriculture and
Natural Resources ,et al., 48 Off. Gaz., No. 8, p. 3367; Pilar Gil Vda. do
Murciano vs. The Auditor General, et al., 103 Phil., 907.

^[2] Chinchilla
vs. Rafel and Verdaguer, 39 Phil., 888.

^[3] Borlough
vs. Fortune Enterprises, Inc., et al., 100 Phil., 1063