G.R. No.
L-48696 November 28, 1942 FACTS:
FELIZA ZUBIRI, petitioner,
vs.
LUCIO QUIJANO, respondent.
E.P. Virata and Ferrier, Gomez and Sotelo for petitioner.
Virola and Leuterio for respondent.
PARAS, J.:
(FULL TEXT, guys. OA sa ikli nito.)
This is an appeal from a decision of the Court of Appeals holding
that the contract dated May 15, 1934, purporting to be a two-
year pacto de retro sale of three parcels of land from the
petitioner, Feliza Zubiri, to the respondent, Lucio Quijano, is an
equitable mortgage, sentencing the former to pay to the latter,
within three months, the alleged purchase price of P700, with
legal interest from the date of the filing of the complaint
(November 15, 1937), and ordering that, in default of payment,
the land be sold at public auction and the proceeds of the sale
applied to the satisfaction of the judgment, without special
pronouncement as to costs.
Under the first assignment, the petitioner contends that the
Court of Appeals erred in ordering the sale of the land in case of
non-payment of the judgment, on the ground that the contract
relied upon by the respondent, not having been registered in
accordance with the Land Registration Act, cannot operate as a
mortgage so as to justify its foreclosure. There is no merit in the
contention. The contract, evidencing a pacto de retro sale which
is unquestionably more disadvantageous to the petitioner, has
been held to be an equitable mortgage and, from its very nature,
the lien thereby created ought not to be defeated by requiring
compliance with the formalities necessary to the validity of a
voluntary real estate mortgage, as long as the land remains in
the hands of the petitioner and the rights of innocent third parties
are not affected. In the case of Correa vs. Mateo and
Icasiano (55 Phil., 79), wherein an unrecorded pacto de
retro sale was construed as an equitable mortgage, it was held
that the plaintiff had the right "within sixty days after final
judgment, for a failure to pay the amount due and owing him, to
foreclose his mortgage in a proper proceeding and sell all or any
part of the ten parcels of land to satisfy his debt."
Under the second assignment, the petitioner alleges that the
Court of Appeals erred in not finding that he had paid to the
respondent usurious interest amounting (as found by the Court
of First Instance of Mindoro) to P950. The pronouncements of
the Court of Appeals, to wit, "pero rechazamos la pretension de
la demandada, aceptada por el Tribunal a quo, de que el
demandante percibio interes usurarios" and "Con respeto a la
alegacion sobre usura, la misma nos parece insostenible," being
conclusions of fact, must be accepted for the purposes of the
present appeal, since we cannot make contrary findings without
re-examining the evidence, and we are not authorized to do this.
It results that the Court of Appeals did not commit any error. In
the exercise, however, of our equity jurisdiction, and especially
considering that the present complaint did not originally seek the
recovery of a debt, that the petitioner obtained a favorable
judgment in the Court of First Instance and that the vote in the
Court of Appeals was three to two, we are inclined to hold that
the petitioner should be sentenced to pay interest only from the
date our decision becomes final. As thus modified, the appealed
decision is affirmed, with costs against the petitioner.
Yulo, C.J., Moran, Ozaeta and Bocobo, JJ., concur.
G.R. No. L-22331 June 6, 1967
IN RE: PETITION FOR CONSOLIDATION OF TITLE IN THE
VENDEES OF A HOUSE AND THE RIGHTS TO A LOT.
MARIA BAUTISTA VDA. DE REYES, ET AL., vendees-
petitioners-appellees.
RODOLFO LANUZA, vendor,
vs.
MARTIN DE LEON, intervenor-appellant.
REGALA, J.:
 RODOLFO LANUZA and wife BELEN - owners of a two-
story house built on a lot of the Maria Guizon Subdivision in
Tondo, Manila, which the spouses leased from the
Consolidated Asiatic Co.
o Jan. 12, 1961 - Lanuza executed a document
entitled "Deed of Sale with Right to Repurchase"
whereby he conveyed to Maria Bautista Vda. de
Reyes and Aurelia R. Navarro the house, together
with the leasehold rights to the lot, a television set
and a refrigerator in consideration of the sum of
P3,000.
o When the original period of redemption expired,
the parties extended it to July 12, 1961 by an
annotation to this effect on the left margin of the
instrument. Lanuza's wife, who did not sign the
deed, this time signed her name below the
annotation.
o After the execution of the instrument, Lanuza and
his wife mortgaged the same house in favor of
Martin de Leon to secure the payment of P2,720
within one year.
 The Lanuzas failed to pay on their obligation and De Leon
filed in the sheriff's office on October 5, 1962 a petition for
the extra-judicial foreclosure of the mortgage. On the other
hand, Reyes and Navarro followed suit by filing in the Court
of First Instance of Manila a petition for the consolidation of
ownership of the house on the ground that the period of
redemption expired on July 12, 1961 without the vendees
exercising their right of repurchase.
o Oct 23, 1962 - the house was sold to De Leon as
the only bidder at the sheriffs sale. De Leon
immediately took possession of the house,
secured a discharge of the mortgage on the house
in favor of a rural bank by paying P2,000
o Oct 29 – he intervened in court and asked for the
dismissal of the petition filed by Reyes and
Navarro on the ground that the unrecorded pacto
de retro sale could not affect his rights as a third
party.
 TRIAL COURT – TC said that in this case, “it appears,
however, that no other instrument was executed between
the parties extending the period of redemption. What was
done was simply to annotate on the deed of sale with right
to repurchase that "the period to repurchase, extended as
requested until July 12, 1961." Needless to say, the
purchasers a retro, in the exercise of their freedom to make
contracts, have the power to extend the period of
repurchase. Such extension is valid and effective as it is not
contrary to any provision of law.”
 De Leon appealed to the SC contending that:
o that the sale in question is not only voidable but
void ab initio for having been made by Lanuza
without the consent of his wife
o that the pacto de retro sale is in reality an equitable
mortgage and therefore can not be the basis of a
petition for consolidation of ownership; and
o that at any rate the sale, being unrecorded, cannot
affect third parties.
 SUPREME COURT – affirmed the TC ruling that a
conveyance of real property of the conjugal partnership
made by the husband without the consent of his wife is
merely voidable. This is clear from article 173 of the Civil
Code which gives the wife ten years within which to bring
an action for annulment. As such it can be ratified as
Lanuza's wife in effect did in this case when she gave her
conformity to the extension of the period of redemption by
signing the annotation on the margin of the deed.
o Also agreed with the lower court that between an
unrecorded sale of a prior date and a recorded
mortgage of a later date the former is preferred to
the latter for the reason that if the original owner
had parted with his ownership of the thing sold
then he no longer had the ownership and free
disposal of that thing so as to be able to mortgage
it again. Registration of the mortgage under Act
No. 3344 would, in such case, be of no moment
since it is understood to be without prejudice to the
better right of third parties.2 Nor would it avail the
mortgagee any to assert that he is in actual
possession of the property for the execution of the
conveyance in a public instrument earlier was
equivalent to the delivery of the thing sold to the
vendee.
 Different conclusion about the nature of the Deed of
Sale with Right to Repurchase:
 o We refer to the nature of the so-called "Deed of
Sale with Right to Repurchase" and the claim that
it is in reality an equitable mortgage.
o While De Leon raised the question below and
again in this Court in his second assignment of
error, he has not demonstrated his point; neither
has he pursued the logical implication of his
argument beyond stating that a petition for
consolidation of ownership is an inappropriate
remedy to enforce a mortgage.
 The Supreme Court laid down 3 circumstances which
indubitably show that what was intended was a mortgage
and not a sale.
1. The gross inadequacy of the price
2. The non-transmission of ownership to the vendees
3. The delay in filing of the petition for consolidation
 Under these circumstances we cannot but conclude that the
deed in question is in reality a mortgage. This conclusion is
of far-reaching consequence because it means not only
that this action for consolidation of ownership is
improper, as De Leon claims, but, what is more that
between the unrecorded deed of Reyes and Navarro
which we hold to be an equitable mortgage, and the
registered mortgage of De Leon, the latter must be
preferred. Preference of mortgage credits is determined by
the priority of registration of the mortgages,8 following the
maxim "Prior tempore potior jure" (He who is first in time is
preferred in right.)9 Under article 2125 of the Civil Code, the
equitable mortgage, while valid between Reyes and
Navarro, on the one hand, and the Lanuzas, on the other,
as the immediate parties thereto, cannot prevail over the
registered mortgage of De Leon.
G.R. No. L-4373 February 2, 1909
SAMUEL BISCHOFF, plaintiff-appellant,
vs.
JUAN D. POMAR and THE COMPAÑIA GENERAL DE
TABACOS DE FILIPINAS, defendants-appellees.
TORRES, J.
FACTS:
 December 27, 1905 - counsel for Samuel Bischoff filed a
complaint, alleging that – the following are the contents of
the complaint:
o the latter was the owner of the steam sugar mill
fitted with a portable 8-horse-power boiler with its
attachments, a complete tramway with rails and
other fittings for a distance of not less than 3
kilometers, and fifteen small cars, all of which were
at the Hacienda San Jose, of San Carlos,
occidental Negros.
o that the defendant Compañia de Tabacos had
asked and obtained from the Court of First
Instance, in or about the month of October of the
same year, the appointment of a receive for the
property of Romana Ganzon, among which
property that the described above was included at
the instance of the defendant as belonging to the
debtor Ganzon
o that at the designation of the Compañia de
Tabacos Juan Pomar was appointed receiver and
upon taking charge of the property of the said
Romana Ganzon he did not confine himself
thereto, but unlawfully and without any right
whatever took possession, as receive, of the
property of the plaintiff herein before described
o that notwithstanding the repeated demands made
by the plaintiff, Bischoff, the latter was unable to
secure from the defendants the return of the said
property
o that they refused to deliver the said property to him
and continued to use the same to the prejudice of
the plaintiff, whose loss and damages amounted
to P30 a day
o the plaintiff therefore prayed that judgment be
entered in his favor, declaring that the property
described in the first paragraph of the complaint
belonged to him
o that the said defendants be ordered to pay the said
losses and damages with costs.
 TRIAL COURT
o rendered judgment, holding that the steam sugar
mill and 8-horsepower portable boiler and fittings,
the tramway, rails and cars upon the Hacienda of
San Jose, should be considered as included in the
mortgage executed by Romana Ganzon in favor of
Lazaro Mota, which mortgage was transferred to
the Compañia General de Tabacos and ratified in
favor of the latter by the debtor
o the defendants were therefore absolved of the
complaint without costs, and such right of action
was reserved to Samuel Bischoff as he may be
entitled for the return from Romana Ganzon of
whatever sum he paid for the said property.
 ISSUE as submitted by the plaintiff by appeal: Supposing
that the steam sugar mill and portable boiler, and the
tramway with fifteen small wagons, rail, and other fittings,
mounted at the Hacienda San Jose and in use thereon,
were improvements upon said hacienda, are they to be
considered for this sole reason as necessarily included in
the mortgage of the said hacienda, even though not
specifically described in the instruments as included
therein?
 SUPREME COURT - (buong held, hindi maiintindihan
kapag ni-cut ko pa.)
The plaintiff avers, without proof, that the said articles were
excluded from the mortgage of the Hacienda San Jose were
they are to be found, because in the instruments wherein the
Hacienda San Jose was repeatedly mortgaged, far from it being
stated that, by agreement between the contracting parties, the
objects claimed the complaint should be understood to be
positively excluded, in the successive mortgage deeds executed
by Romana Ganzon in favor of Lazaro Mota y Ayo on July 20
and October 8, 1900, and September 6, 1902, Exhibit D, as
security for the increasing loans made by the latter, the debtor
mortgaged her Hacienda San Jose with the improvements
thereon to guarantee the payment of the total sum of 21,423.93
pesos; in the last instrument, as well as in the previous ones, it
is stated that the warehouse, farmhouse, furnaces, machinery,
and the described land that constitutes the said hacienda shall
be liable for the payment of her total indebtedness, the legal
interest thereon, and loss and damages and costs in case of
judicial proceedings having to be instituted; said instrument, like
the previous ones, was recorded in the registry of property, and
is should be noted that by express desire of the contracting
parties, in the successive documents of indebtedness of 1900,
the mortgage of the hacienda with the improvements thereon
was maintained, and was afterwards repeated in the last
instrument.
Owing to the non -payment of the said sum of P21,423.93,
notwithstanding the demands made upon and extensions of time
granted to the debtor, on September 30, 1904, the creditor,
Lazaro Mota, assigned and transferred the said Tabacos by
means of a public instrument which was recorded in the registry,
and appears as Exhibit B herein.
In the private document marked as Exhibit A, dated September
10, 1902, it appears that the Compañia General de Tabacos
opened an anual credit of P15,000 under the conditions therein
stated, the debtor having offered as security the said hacienda
with the cattle, buildings, and two steam engines, and stating in
addition, that the said hacienda with its buildings, machinery,
and cattle had already been mortgaged by her to Lazaro Mota.
Moreover, even in the instrument on the 10th of December,
1904, when Romana Ganzon created a mortgaged in favor of
the Compañia General de Tabacos to guarantee her debt of
P53,042.53, she designated the said hacienda with all the
improvements, buildings, machinery, and carabaos thereon,
and in addition declared that the same hacienda and its
dependencies were already mortgaged to the said Lazaro Mota.
So that in the instruments of mortgage above referred to, three
of which are anterior to the sale a retro, effected on the 8th of
November, 1904, upon which the plaintiff bases his claim, the
improvements on the Hacienda San Jose, among which is the
machinery that was already mounted, appear as expressly
mortgaged at the time of executing the instrument of mortgage
of September 6, 1902, and later on, that of transfer of the
mortgage credit on the 30th of September, 1904, to the
Compañia General de Tabacos.
From none of the said instruments does it appear that the
contracting parties had expressly agreed to exclude the said
machinery and tramway from the repeated mortgages, of said
hacienda, so that no value would be given to the words written
therein proving in an unquestionable manner that it was the will
of the contracting parties to include the lien all the improvements
upon the hacienda, among which was the machinery mounted
thereon for the needs of the said hacienda:
Article 110 of the Mortgage Law in force reads:
A mortgage extends to natural increase,
improvements, growing crop, and rents not collected
when the obligation falls due, and the value of
indemnities allowed or due the owner for insurance on
the property mortgaged, or by virtue of condemnation
by right of eminent domain.
The same precept is repeated in detail and more extensively in
the following article 111 of said law.
Article 1877 of the Civil Code contains the same precept but
treats as greater length than in the preinserted article 110 of the
Mortgage Law; it is as follows:
A mortgage includes the natural accessions,
improvements, growing fruits, and rents not collected
when the obligation is due, and the amount of the
indemnities granted or due the owner by the
underwriters of the property mortgaged or by virtue of
the exercise of eminent domain by reason of public
utility, with the declarations, amplifications, and
limitations established by law, in case the estate
continues in the possession of the person who
mortgaged it, as well as when it passes into the hands
of a third person.
As may be seen from the doctrine established by the Supreme
Court of Washington in its decision in the matter of The Royal
Insurance Company vs. R. Miller, liquidator, and Amadeo (26
Sup. Ct. Rep., 461) the above quoted legal precepts in force in
these Islands are in accord with the American laws:
3. Mortgage — Right of Mortgagee to Insurance on
Harvested Crop. — The avails of insurance on sugar
and molasses coming into the sugar house on a sugar
plantation as the result of the manufacture of a crop
growing thereon when the insurance was effected inure
to the benefit of the mortgagee in a mortgage of the
realty and the fruits thereof if the loss occurred after the
execution of the mortgage, under the Porto Rico
Mortgage Law of 1880, which subjects to a mortgage
of real property the crops growing or harvested when
the mortgage fails due, "but not yet removed or
warehoused," and the indemnities awarded or due the
owner of the realty either for the insurance or for the
crops, provided the damage occurred after the creation
of the mortgage.
4. Mortgage — Right of Mortgage to Sue for Insurance
without Exhausting Other Remedies. — The mortgage
creditor in a mortgage governed by the civil law may
sue for the avails of the insurance subject to his
mortgage without first exhausting his remedies against
other property embraced by the mortgaged.
So that even though no mention had been made of said
machinery and tramway in the mortgage instrument, the
mortgage of the property whereon they are located is
understood by law to extend to them and they must be
considered as included therein, as well as all other
improvements, unless there was an express stipulation between
the parties that they should be excluded. Such exclusion,
however, certainly does not appear in the record; on the
contrary, they are manifestly included in the mortgage.
It has already been stated that the machinery in question was
already mounted on said property and was in use thereon when
the mortgage given to secure the debt of Romana Ganzon to the
original creditor, Lazaro Mota was created; but even if these
were not so, article 111 of the Mortgage Law, hereinbefore cited,
provides that the following shall be considered as mortgaged
with the estate, provided they belong to the owner of said estate,
although they not be mentioned in the contract:
1. Chattels permanently located in a building, either
useful or ornamental, or for the service of some
industry even though they were placed there after the
creation of the mortgage.
It should be noted that the said machinery and tramway were
exclusively owned by Romana Ganzon, the owner of the
hacienda, and that at the time when the mortgage was made
they had not yet been sold a retro to the plaintiff Bischoff; this
sale was effected on November 8, 1904, long after the property
was mortgaged.
Given the rights of dominion possessed by Romana Ganzon
over the articles in question it is not possible to deny that she
had the right to dispose of them, as she did, by sale under pacto
de retro to the plaintiff, but the alienation thereof does not
release them from the encumbrance to which they are subjected
until the redeemed from the mortgage that weighs upon them,
since the right of the creditor limits that the owner of the thing
mortgaged, and the purchaser, is necessarily bond to
acknowledge and respect the encumbrance to which is
subjected the purchased thing and which is at the disposal of
the said creditor in order that he, under the terms of the contract,
may recover the amount of his credit therefrom.
If it be true and inconvertible fact that at the time the plaintiff
Bischoff acquired under pacto de retro the machinery and the
tramway in question, they were already affected by and included
in the mortgaged of the Hacienda San Jose, the placing of the
said hacienda, together with all of the property existing thereon
in the hands of a receiver at the instance of the creditor, the
Compañia General de Tabacos, has not occasioned any
damage to the plaintiff, inasmuch as the defendant limited itself
to the duty of the plaintiff to respect the encumbrance that
burdens of the property acquired by him under these conditions,
and therefore, he cannot acquired any right to indemnity for loss
and damages, for the reason that he purchased goods that were
already liable to the credit of the company that was the creditor
of Romana Ganzon and which latter sold them on pacto de retro;
he therefore did not obtain possession of the same.
For the above considerations, and accepting the conclusion
contained in the judgment appealed from so far as they agree
with the foregoing, it is our opinion that the same should be
affirmed, without any ruling as to the costs of this instance.
G.R. No. L-11990 May 29, 1959
JOSE MOVIDO, plaintiff-appellant,
vs.
REHABILITATION FINANCE CORPORATION and THE
PROVINCIAL SHERIFF OF SAMAR, defendants-appellees.
PADILLA, J.
FACTS:
 July 1, 1946 - the Vet. Bros. & Company, Inc. mortgaged to
Jose S. Movido its rights, title, interest and participation "in
a complete sawmill in barrio Mauo, Allen, Samar, with all its
machineries, tools and equipment in good running
condition" to secure the payment of a loan of P15,000 and
interest at the rate of 12% per annum obtained by the former
from the latter. Same was registered in the Office of
Registrar of Deeds in Samar.
 July 28, 1948 - Jose S. Movido brought an action against
Vet. Bros. & Company, Inc. in the Court of First Instance of
Leyte to recover the sum of P13,494.35 with the interest at
the rate of 12% per annum from 1 July 1948 until the
principal is fully paid and P2,000 by way of damages and
expenses of litigation
 February 7, 1949 - the parties thereto, assisted by their
respective counsel, entered into and submitted to the Court
a compromise agreement terminating their dispute and
renouncing their respective claims for damages and for any
other claim in connection with the subject matter of the case
which was approved and the court rendered judgment in
accordance therewith.
 March 3, 1949 - Vet Bros. & Company, Inc. and the
spouses Simeon G. Toribio and Maximiana Escobar de
Toribio mortgaged the real estate and chattels therein
enumerated and described in favor of the Rehabilitation
finance Corporation to secure the payment of a loan of
P46,000
 March 1, 1955 - Jose S. Movido brought in the Court of First
Instance of Leyte an action against the Rehabilitation
Finance Corporation and the Provincial Sheriff of Samar
 charging the latter with having unlawfully, fraudulently and
maliciously disregarded his third party claim on the chattels
and sold them at public auction on 11 June 1953, upon the
request and for the benefit of the former, thereby causing
him actual damages in the sum of P5,000 in addition to the
expense of P2,000 for attorney's fee.
 The defendants filed separate answers. The Rehabilitation
Finance Corporation set up the defense:
o that by filing a complaint against the Vet Bros &
Company, Inc. in the Court of First Instance of
Leyte (civil No. 441), to recover the sum due from
it, the plaintiff waived his right to foreclose the
mortgage and for that reason abandoned his
mortgage lien on the chattels
o that the plaintiff's third party claim was not valid
and sufficient in form and substance to stop and
frustrate the public auction sale in question, it
being a mere claim for preference in the
distribution of the proceeds of the public auction
sale
o that the alleged chattel mortgage of the plaintiff
was invalid and did not bind the chattels
o that its mortgage lien in the real estate and chattels
was prior, preferred and superior to that of the
plaintiff's; and that it had not done or caused to be
done any actionable wrong or harm to the plaintiff
to make it liable for damages claimed to have been
sustained by the plaintiff.

 TRIAL COURT - rendered judgment holding that the

compromise agreement entered into by and between the
parties in civil case No. 441 and the judgment rendered by
the Court pursuant thereto novated the plaintiff's credit
secured by the chattel mortgage, and that when the Vet.
Bros. Company, Inc. and the spouses Simeon G. Toribio
and Maximiana Escobar de Toribio mortgaged to the
Rehabilitation Finance Corporation the same chattels and
other properties enumerated in Exhibits 8, RFC and 9, RFC,
the plaintiff's lien on the chattels no longer existed; and
dismissing the plaintiff's complaint with costs against him
but without awarding damages to the defendants.
 Plaintiff’s motion and amended motion for new trial and
motion for reconsideration were denied. Hence this appeal
originally to the Court of Appeals but certified to this Court
on the ground that only questions of law are involved.

 SUPREME COURT – (buong ruling also, one paragraph

lang.)

A mortgage who sues and obtains a personal judgment

against a mortgagor upon his credit waives thereby his right
to enforce the mortgage securing it.1 By instituting civil case
No. 441 in the Court of First Instance of Leyte to recover the
sum of P13,494.35 from the Vet. Bros & Company, Inc., on
28 July 1948 and by securing a judgment in his favor upon
the compromise agreement entered into by and between
him and the defendant therein on 7 February 1949, the
appellant abandoned his mortgage lien in the chattels in
question. When on 3 March 1949 and on 17 May 1949,
therefore, Vet. Bros & Company, Inc. and the spouses
Simeon G. Toribio and Maximiana Escobar de Toribio
mortgaged the chattels and other properties described in
Exhibit 8, RFC 9, RFC to the appellee, the appellant had no
longer any lien on the chattels. The rule in Tizon vs. Valdez,
48 Phil., 910 and Matienzo vs. San Jose, G.R. No. 39510,
16 June 1934, relied upon by the appellants, has been
abandoned in Bachrach Motor Company vs. Icarañgal,
supra. Moreover, the appellant secured a writ of execution
of the judgment rendered in civil case No. 441 on 26 June
1953 only (Exhibits 1-F, Sabarre; 1-F, RFC), or fifteen days
after the public auction sale had been carried out. The
judgment appealed from is affirmed, with cost against the
appellant.