ANTONIO DE LA RIVA, PLAINTIFF AND APPELLANT, VS. AH KEE, JOSE BUCOY, PROVINCIAL SHERIFF OF ZAMBOANGA, AND THE PHILIPPINE NATIONAL BANK, DEFENDANTS AND APPELLANTS.

This case embraces three appeals taken,
the first by the plaintiff, Antonio de la Riva, the second by the
defendants Ah Kee and Jose Bucoy, and the third by the defendant
Philippine National Bank, from the judgment rendered by the Court of
First Instance of Zamboanga, the dispositive part of which reads as
follows:

“In view of the foregoing, the court enters
judgment ordering the defendant Philippine National Bank to pay to the
plaintiff Antonio de la Riva the sum of P2,500, with the costs;
likewise ordering the plaintiff Antonio de la Riva to deliver to the
defendant Ah Kee or to the provincial sheriff of Zamboanga, the
materials from the buildings and wharf which he had appropriated and
used; but m case the plaintiff Antonio de la Riva delivers said
materials to the sheriff or to Ah Kee, as ordered in this decision, the
Philippine National Bank is also ordered to pay to the plaintiff the
sum of P8,050 representing the total value, ‘in the opinion of the
court, of the property described in the last amended complaint, from
which should be deducted the sum of P2,500, which is the value of the
remaining part of the wharf, or P5,550. The plaintiff is ordered to pay
the costs in favor of the cross-plaintiffs Ah Kee and Jose Bucoy. The
latter defendant provincial sheriff of Zamboanga, Jose Bucoy, is
absolved from the complaint. So ordered.”

In support of their respective appeals, the appellants Antonio de
la Riva, Ah Kee and Jose Bucoy, and the Philippine National Bank
assign, the first four alleged errors; the two second, ten; and the
third five, which will be discussed in the course of this decision.

The pertinent facts which are necessary for the resolution of the
questions raised in these appeals and which have been proven without
question at the trial, are as follows:

On October 26, 1928, the Panabutan Lumber & Plantation Co.,
Inc., executed an instrument whereby it constituted a chattel mortgage
on certain personal and real properties in favor of the Philippine
National Bank to secure payment of the sum of P120,000 (Exhibit N).

On February 15, 1930, judgment was rendered in civil case No. 1676
of the Court of First Instance of Zamboanga, entitled Ah Kee et al. vs.
Panabutan Lumber & Plantation Co., Inc., in favor of the therein
plaintiffs. On November 20, 1930, the first writ of execution of said
judgment was issued (Exhibit 5-Ah Kee and Bucoy). By virtue of said
writ, the then provincial sheriff of Zamboanga, Luis de la Vega, on
December 24, 1930, attached certain properties of the-, Panabutan
Lumber & Plantation Co., Inc., which are stated in Exhibit “5-Ah
Kee and Bucoy” and which were not included in the mortgage in favor of
the Philippine National Bank. Inasmuch as the plaintiffs in whose favor
the execution was to be made could not deposit the estimated amount of
the expenses and costs of execution, the sale of the attached
properties could not be made and said sheriff had to return to
Zamboanga. The attached properties, together with those bought by the
Philippine National Bank at the foreclosure sale of the chattel
mortgage constituted in its favor by the Panabutan Lumber &
Plantation Co., Inc., were delivered under receipt to E. A. Robertson
(Exhibit 3-Ah Kee and Bucoy).

During the pendency of case No. 1683 entitled Torrejon Jurika & Co., Inc., Ah Kee et al. vs.
Panabutan Lumber & Plantation Co., the Philippine National Bank and
Luis Panaguiton, as provincial sheriff of Zamboanga, wherein annulment
of tlje chattel mortgage executed by the Panabutan Lumber &
Plantation Co., in favor of the Philippine National Bank was sought and
a writ of preliminary injunction which was later dissolved had been
issued, said bank, with Ah Kee’s opposition (Exhibit 2-Ah Kee and
Bucoy), ordered said provincial sheriff to foreclose said mortgage and
sell all the mortgaged properties at public auction, which said sheriff
did on December 24, 1930, with said Philippine National Bank as the
highest bidder (Exhibit 4-Ah Kee and Bucoy and Exhibit N). When on
February 19, 1931, judgment was rendered in said civil case No. 1683
declaring said chattel mortgage null and void with respect to the real
properties included therein, all the properties covered thereby had
already been sold to the Philippine National Bank. All the properties
of the Panabutan Lumber & Plantation Co., however, were not
included in said mortgage. The defendant Philippine National Bank
received a copy of said decision from its attorney at Zamboanga on
February 28, 1931 (Exhibit 2-Philippine National Bank). On May 14,
1931, said bank received notice from its attorney that the decision in
question had become final (Exhibit 5-Philippine National Bank).

Inasmuch as the properties, the inclusion of which in the chattel
mortgage was declared null and void, were not specified in the decision
of February 19, 1931, rendered in said civil case No. 1683, the court,
on April 8, 1931, upon motion of Ah Kee, entered an order enumerating
all the real properties excluded from the mortgage, but not all those
included therein. This gave rise to Ah Kee’s appeal from said order.
The appeal, however, was not continued because the attorney for the
Philippine National Bank had agreed to exclude all the houses and
buildings of whatever kind.or description from the mortgage constituted
in favor of said bank (Exhibit 18-Ah Kee and Bucoy). The stipulation
was approved by the court in an order dated July 8, 1931 (Exhibit 19-Ah
Kee and Bucoy). Said attorney for the Philippine National Bank, was not
authorized to make said stipulation (Exhibit 6-Philippine National
Bank).

On December 4, 1931, the defendant-appellant Philippine National
Bank sold to the plaintiff-appellant Antonio de la Riva (Exhibit A) all
the properties acquired by it in the sale of December 24, 1930,
.resulting from the foreclosure of the chattel mortgage constituted by
the Panabutan Lumber & Plantation Co.

On January 13, 1932, another writ of execution was issued in favor
of Ah Kee in said civil case No. 1676 and the properties which were not
included in the mortgage as well as those which were excluded therefrom
in the order of April 8, 1931, and in the stipulation of July 8, 1931,
were attached on February 22, 1932, by the then provincial sheriff Jose
Bucoy. Serafin de la Riva, Antonio de la Riva’s attorney in fact, was
notified by deputy sheriff Jose 6. Fernando of the second writ of
execution issued in favor of Ah Kee and was required to surrender all
the properties of the Panabutan Lumber & Plantation Co. in his
possession which were not covered by the mortgage and which had been
attached by the sheriff by virtue of the first writ of execution
(Exhibits 21, 22 and 23-Ah Kee and Bucoy).

On March 2, 1932, plaintiff-appellant Antonio de la Riva filed a
third party claim of better right to all the properties attached by
virtue of the first and second writs of execution, alleging that he had
bought them from the Philippine National Bank (Exhibit 28-Ah Kee and
Bucoy). In view of this third party claim, the sheriff required Ah Kee,
the plaintiff in case No. 1676 and defendant in this case, to file an
indemnity bond in the sum of P40,000, which the latter was unable to do
for lack of means, and the writ of attachment was dissolved (Exhibit
21-Ah Kee and Bucoy).

The first question to be decided in these appeals, which is raised
by the defendant-appellant Philipipne National Bank, is whether or not
the order of the Court of First Instance of Zamboanga clarifying its
decision of February 19, 1931, and specifying the real properties which
should be excluded from the chattel mortgage under consideration is
binding on said bank.

The dispositive part of the trial court’s decision rendered in
civil case No. 1683 thereof on February 19, 1931, reads as follows:

“The court, therefore, decides this case declaring
that the mortgage in question is valid and effectual with respect to
all the personal properties described therein. It is not so with
respect to the real properties above stated.” (Exhibit 16-Ah Kee and
Jose Bucoy.)

The aforesaid explanatory order dated April 8, 1931 (Exhibit 17-Ah
Kee and Jose Bucoy), explains the above stated dispositive part and
enumerates and describes the real properties with re3pect to which said
chattel mortgage was declared nugatory. Inasmuch as the real properties
enumerated and described by the court in its said explanatory order did
not include all the properties covered by said chattel mortgage and
said court denied the motion for reconsideration filed by the therein
plaintiff and herein defendant-appellant Ah Kee, the latter announced
his intention to appeal from said order. The appeal was not continued,
however, because the attorneys for the respective parties made a
stipulation (Exhibit 18-Ah Kee and Jose Bucoy) relative to the real
properties which should be excluded from the chattel mortgage, which
stipulation dated July 8, 1930, was approved by said court on said date
(Exhibit 19-Ah Kee and Jose Bucoy). It appears positively that the
attorney who represented the Philippine National Bank was not duly
authorized by his client to make a compromise regarding the exclusion
of the real properties from the chattel mortgage. In view of the
provision of section 27 of Act No. 190, said compromise was not binding
on the bank in question. However, the defendant-appellant Philippine
National Bank, on February 28, 1931, received from its attorney notice
of said decision of February 19, 1931, declaring said chattel mortgage
nugatory with respect to the real properties, which decision was
binding on said bank. Consequently, if on February 28, 1931, the
defendant-appellant Philippine National Bank already knew that the
chattel mortgage constituted in its favor had been declared null and
void with respect to the real properties included therein, it cannot
allege that when it sold the personal as well as the real properties
included in said mortgage to the herein plaintiff-appellant Antonio de
la Riva on December 4, 1931, it was ignorant of the exclusion therefrom
of the real properties which it had purchased at public auction
inasmuch as the annulment of said mortgage security with respect to the
real properties produced the effect of excluding said real properties
therefrom.

This court, therefore, is of the opinion that although the
defendant-appellant Philippine National Bank was not bound by the
compromise made by its attorney and those of the defendant-appellant Ah
Kee, it was, however, bound by the decision of February 19, 1931,
declaring the chattel mortgage nugatory with respect to the real
properties.

The second question to be decided refers to the amount of the
indemnity which the defendant-appellant Philippine National Bank should
pay to the plaintiff-appellant Antonio de la Riva for the real
properties sold to him and of which he could not take possession.

The vendor is bound to deliver and warrant the thing which is the
subject matter of the sale (article 1461, Civil Code); and shall be
responsible to the vendee for the legal and peaceful possession of the
thing sold and for any hidden faults or defects therein (article 1474,
Civil Code) in case the vendee, by a final judgment based upon a right
prior to the sale, is deprived of the whole or of any part of the thing
purchased (article 1475, Civil Code), the warranty consisting in the
restitution of the value which the thing: sold had at the time of the
eviction, whether it be greater or less than the price for which it was
sold (article 1478, Civil Code). The declaration of nullity of the
chattel mortgage in question, with respect to the real properties
included therein, is equivalent to a final judgment that the vendor
thereof, Philippine National Bank, had no right to sell them and the
purchaser, Antonio de la Riva, acquired no right to the ownership by
virtue of the sale and can, therefore, be dispossessed thereof, which
is equivalent to eviction. Consequently, the vendor, Philippine
National Bank, is bound to warrant the real properties sold by
restoring to the purchaser Antonio de la Riva the value thereof at the
time of the eviction.

The evidence is extremely conflicting as regards the value of the
real properties which were excluded from the chattel mortgage, but the
court a quo which tried the case and heard the testimony of
the witnesses, after considering the weight and evidentiary force of
all the evidence arrived at the conclusion that the value thereof then
amounted to P11,000. This court accepts this conclusion of fact arrived
at by the court a quo as it has not found anything of record
to justify an alteration. Therefore, the defendant Philippine National
Bank, as vendor, is bound to indemnify the plaintiff-appellant Antonio
de la Riva for said value of the real properties in question, which was
the value thereof at the time of the eviction.

However,
part of said real properties excluded from the chattel mortgage, valued
at ?8,500, was sold or otherwise disposed of by the purchaser Antonio
oTe la Riva and the other part thereof valued at P2,500 was abandoned
by him at the disposal of whomsoever believed himself entitled to its
possession. As the purchaser, Antonio de la Riva, had not used the real
properties valued at P2,500 which were excluded from the chattel
mortgage and sold to him by the Philippine National Bank, the latter is
bound to indemnify him for the value thereof at the time of the
eviction.

Inasmuch as the real properties sold or otherwise disposed of by
Antonio de la Riva, the value of which was assessed by the court at
P8,500, had been excluded from the chattel mortgage, they continued to
belong to said Panabutan Lumber & Plantation Co. at the time said
Antonio de la Riva sold or otherwise disposed of them. However, as said
lumber company is not a party to this suit, this court cannot make any
pronouncement on this matter.

The third question to be decided in this appeal is whether or not
the defendant-appellant Ah Kee is entitled to the real properties
belonging to the Panabutan Lumber & Plantation Co., which were
excluded from the chattel mortgage.

As was seen from the above statement of facts, the
defendant-appellant, Ah Kee, obtained judgment in his favor in civil
case No. 1676 against the Panabutan Lumber & Plantation Co. A writ
of execution was issued against said Panabutan Lumber & Plantation
Co. and its real properties which were excluded from the chattel
mortgage and those which were not included therein were attached. This
writ of execution could not be proceeded with, however, as it had to be
dissolved because Ah Kee, as attachment-creditor, could not deposit the
expenses for the execution and had consequently lost his right to
retain them. Another writ of execution was later issued and the same
properties were attached by virtue of said judgment in favor of Ah Kee
but the plaintiff-appellant Antonio de la Riva filed a third party
claim of better right by virtue of the sale of said properties to him
by the defendant-appellant Philippine National Bank. Inasmuch as Ah
Kee, upon being required by the sheriff to file the necessary bond for
his protection, failed to do so, the latter was compelled to dissolve
the writ of attachment. For the second time, therefore, the
defendant-appellant Ah Kee lost his right of retention over said
properties.

Therefore, if Ah Kee has acquired no right to said properties, the cross-complaint filed by him lacks merit.

For the foregoing considerations, this court is of the opinion and
so holds: (1) That a mortgage creditor, who purchases real properties
at an extrajudicial foreclosure sale thereof by virtue of a chattel
mortgage constituted in his favor, which mortgage has been declared
null and void with respect to said properties, acquires no right
thereto by virtue of said purchase; and (2) neither does the subsequent
purchaser of said properties acquire any right to the real properties
which were excluded from the chattel mortgage, and upon being evicted
therefrom by virtue of a judgment declaring that the vendor had nc
right to the properties which had been excluded from the chattel
mortgage constituted in the latter’s favor and which said vendor
purchased in the foreclosure sale thereof, said subsequent purchaser is
entitled to be indemnified for the value thereof at the time of the
eviction.

Wherefore, the appealed judgment is modified and the
defendant-appellant Philippine National Bank is ordered to pay to the
plaintiff-appellant Antonio de la Riva the sum of P2,500, plus legal
interest thereon from the date of the filing of the complaint until
fully paid, with the costs against the defendant-appellant Philippine
National Bank.

The plaintiff-appellant, Antonio de la Riva, is absolved from the
cross-complaint of the defendant-appellant Ah Kee, without special
pronouncement as to costs.

The defendant-appellant Jose Bucoy, provincial sheriff of
Zamboanga, is likewise absolved from the complaint, with costs against
the plaintiff-appellant Antonio de la Riva. So ordered.

Malcolm, Imperial, Butte, and Goddard, JJ., concur.