G.R. Nos. L-10837-38 May 30, 1958
ASSOCIATED INSURANCE and SURETY COMPANY, INC., plaintiff,
ISABEL IYA, ADRIANO VALINO and LUCIA VALINO, defendants.
Valino & Valino were the owners and possessors of a house of strong materials in Rizal, which they purchased on installment basis. To enable her to purchase on credit rice from NARIC, Valino filed a bond (P11,000) subscribed by Associated Insurance and Surety Co Inc, and as a counter-guaranty, Valino executed an alleged chattel mortgage on the aforementioned house in favour of the surety company. At the same time, the parcel of land which the house was erected was registered in the name of Philippine Realty Corporation.
Valino, to secure payment of an indebtedness (P12,000) executed a real estate mortgage over the lot and the house in favour of Iya.
Valino failed to satisfy her obligation to NARIC, so the surety company was compelled to pay the same pursuant to the undertaking of the bond. In turn, surety company demanded reimbursement from Valino, and as they failed to do so, the company foreclosed the chattel mortgage over the house. As a result, public sale was conducted and the property was awarded to the surety company.
The surety company then learned of the existence of the real estate mortgage over the lot and the improvements thereon; thus, they prayed for the exclusion of the residential house from the real estate mortgage and the declaration of its ownership in virtue of the award given during bidding.
Iya alleged that she acquired a real right over the lot and the house constructed thereon, and that the auction sale resulting from the foreclosure of chattel mortgage was null and void.
Surety company argued that as the lot on which the house was constructed did not belong to the spouses at the time the chattel mortgage was executed, the house might be considered as personal property, and they prayed that the said building be excluded from the real estate mortgage.
There is no question over Iya’s right over the land by real estate mortgage; however, as the building instructed thereon has been the subject of two mortgages, controversy arise as to which of these encumbrances should receive preference over the other.
The building is subject to the real estate mortgage, in favour of Iya. Iya’s right to foreclose not only the land but also the building erected thereon is recognised.
While it is true that real estate connotes the land and the building constructed thereon, it is obvious that the inclusion of the building, separate and distinct from the land, in the enumeration of what may constitute real properties (Article 415), could only mean that a building is by itself an immovable property. Moreover, in view of the absence of any specific provision to the contrary, a building is an immovable property irrespective of whether or not said structure and the land on which it is adhered to belong to the same owner.
A building certainly cannot be divested of its character of a realty by the fact that the land on which it is constructed belongs to another.
In the case at bar, as personal properties could only be the subject of a chattel mortgage and as obviously the structure in question is not one, the execution of the chattel mortgage covering said building is clearly invalid and a nullity. While it is true that said document was correspondingly registered in Chattel Mortgage Registry of Rizal, this act produced no effect whatsoever, for where the interest conveyed is in the nature of real property, the registration of the document in the registry of chattels is merely a futile act. Thus, the registration of the chattel mortgage of a building of strong materials produced no effect as far as the building is concerned.