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INVOLUNTARY INSOLVENCY OF STROCHECKER V. RAMIREZ44 PHIL 933 FACTS: Three mortgages were seeking preference in the lower court. The one of Fidelity and Surety Co. alleged that it should be given preference as the mortgage in favor of Ramirez was not valid as the subject of the mortgage cannot be a proper subject thereof. The subject involved in the 1st mortgage is an interest in business of a drug store. HELD: Such interest in the business is a personal property capable of appropriation and not included in the enumeration of real properties in the CC, and may be the subject of mortgage. All personal property may be mortgaged. INVOLUNTARY INSOLVENCY OF PAUL STROCHECKER V. RAMIREZ (GR 18700, 26 September 1922) FACTS: The half-interest in the business (Antigua Botica Ramirez) was mortgaged with Fidelity & Surety Co. on 10 March 1919, and registered in due time in the registry of property, while another mortgage was made with Ildefonso Ramirez on 22 September 1919 and registered also in the registry. Raised in the lower court, the trial court declared the mortgage of Fidelity & Surety Co. entitled to preference over that of Ildefonso Ramirez and another mortgage by Concepcion Ayala. Ayala did not appeal, but Ramirez did. ISSUE:Whether or not half-interest over a business is a movable property RULING: Yes. 1. Interest in business may be subject of mortgage With regard to the nature of the property mortgaged which is one-half interest in the business, such interest is a personal property capable of appropriation and not included in the enumeration of real properties in articles 335 of the Civil Code, and may be the subject of mortgage. All personal property may be mortgaged. (Sec. 7, Act 1508.) 2. Description of mortgage property sufficient The description contained in the document is sufficient. The law (sec. 7, Act 1508) requires only a description of the mortgaged property shall be such as to enable the parties to the mortgage, or any other person, after reasonable inquiry and investigation, to identify the same. In the case at bar, his half interest in the drug business known as Antigua Botica Ramirez, located at Calle Real Nos. 123 and 125, District of Intramuros, Manila Philippine Islands" is sufficient. 3. Article 1922 (1-3) of the Civil Code applicable only to mortgage property in possession Numbers 1, 2, and 3 of the article 1922 of the Civil Code are not applicable as neither the debtor, nor himself, is in possession of the property mortgaged, which is, and since the registration of the mortgage has been, legally in possession of the surety company 4. Stipulation about personal property not a mortgage upon property - In no way can the mortgage executed be given effect as of the date of the sale of the store in question; as there was a mere stipulation about personal security during said date, but not a mortgage upon property, and much less upon the property in question.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-13194 January 29, 1960 BUENAVENTURA T. SALDANA, plaintiff-appellant, vs. PHILIPPINE GUARANTY COMPANY, INC., et al., defendants-appellees. Gatchalian & Padilla for appellant. Emiliano Tabasondra for appellee Company.Teodoro Padilla for the other appellees. REYES, J.B.L., J.: This case arose from a complaint for damages filed by Buenaventura Saldana (docketed as Civil Case No. 32703 of the Court of First Instance of Manila) that was dismissed by order of the Court dated August 20, 1957, for lack of sufficient cause of action. In another order of September 30, 1957 of the same court, plaintiff's motion for reconsideration was denied, and the case was appealed to this Court. The facts are that on May 8, 1953, in order to secure an indebtedness of P15,000.00, Josefina Vda. de Aleazar executed in favor of the plaintiff-appellant Buenaventura Saldana a chattel mortgage covering properties described as follows:

A building of strong materials, used for restaurant business, located in front of the San Juan de Dios Hospital at Dewey Boulevard, Pasay City, and the following personal properties therein contained: 1 Radio, Zenith, cabinet type. 1 Cooler. 1 Electric range, stateside, 4 burners. 1 Frigidaire, 8 cubic feet. 1 G.E. Deepfreezer. 8 Tables, stateside. 32 Chromium chairs, stateside. 1 Sala set upholstered, 6 pieces. 1 Bedroom set, 6 pieces. And all other furniture's, fixtures or equipment found in the said premises. Subsequent to the execution of said mortgage and while the same was still in force, the defendant Hospital de San Juan de Dios, Inc. obtained, in Civil Case No. 1930 of the Municipal Court of Pasay City, a judgment was duly Josewfina Vda. de Eleazar. A writ of execution was duly issued and, on January 28, 1957, the same was served on the judgment debtor by the sheriff of Pasay City; whereupon the following properties of Josefina Eleazar were levied upon: 8 Tables with 4 (upholstered) chairs each. 1 Table with 4 (wooden) chairs. 1 Table (large) with 5 chairs. 1 Radio-phono (Zenith, 8 tubes). 2 Showcases (big, with mirrors). 1 Rattan sala set with 4 chairs, 1 table and 3 sidetables . 1 Wooden drawer. 1 Tocador (brown with mirror). 1 Aparador . 2 Beds (single type). 1 Freezer (deep freeze). 1 Gas range (magic chef, with 4 burners). 1 Freezer (G.E.). On January 31, 1957, the plaintiff-appellant Saldana filed a third-party claim asserting that the abovedescribed properties levied are subject to his chattel mortgage of May 8, 1953. In virtue thereof, the sheriff released only some of the property originally included in the levy of January 28, 1957, to wit: 1 Radio, Zenith, cabinet type. 8 Tables, stateside. 32 Chromiun chairs, stateside. 1 G.E. Deep freezer. To proceed with the execution sale of the rest of the properties still under levy, the defendants-appellees Hospital de San Juan de Dios, Inc. and the Philippine Guaranty Co., Inc., executed an indemnity bond to answer for any damages that plaintiff might suffer. Accordingly, on February 13, 1957, the said properties were sold to the defendant hospital as the highest bidder, for P1,500.00. Appellants claims that the phrase in the chattel mortgage contract "and all other furnitures, fixtures and equipment found in the said premises", validly and sufficiently covered within its terms the personal properties disposed of in the auction sale, as to warrant an action for damages by the plaintiff mortgagee. There is merit in appellant's contention. Section 7 of Act No. 1508, commonly and better known as the Chattel Mortgage Law, does not demand a minute and specific description of every chattel mortgaged in the deal of mortgage but only requires that the description of the properties be such "as to enable the parties in the mortgage, or any other person, after reasonable inquiry and investigation to identify the

same". Gauged by this standard, general description have been held by this Court. (See Stockholder vs. Ramirez, 44 Phil., 993; Pedro de Jesus vs. Guam Bee Co., Inc., 72 Phil., 464). A similar rule obtains in the United States courts and decisions there have repeatedly upheld clauses of general import in mortgages of chattels other than goods for trade, and containing expressions similar to that of the contract now before us. Thus, "and all other stones belonging to me and all other goods and chattels" (Russel vs. Winne, 97 Am. Dec. 755); "all of the property of the said W.W. Allen used or situated upon the leased premises" (Dorman vs. Crooks State Bank, 64 A.L.R. 614); "all goods in the store where they are doing business in E. City, N.C." (Davis vs. Turner, 120 Fed. 605); "all and singular the goods, wares, stock, iron tools manufactured articles and property of every description, being situated in or about the shop or building now occupied by me in Howley Stree" (Winslow vs. Merchants Ins. Co., 38 Am. Dec. 368,) were held sufficient description, on the theory that parol evidence could supplement it to render identification rule is expressed in Walker vs. Johnson (Mont.) 1254 A.L.R. 937: The courts and textbook writers have developed several rules for determination of the sufficiency of the description in a chattel mortgage. The rules are general in nature and are different where the controversy is between the parties to the mortgage from the situation where third parties with out actual notice come in. In 11 C.J. 457, it is said: "Ad against third persons the description in the mortgage must point out its subject matter so that such person may identify the chattels observed, but it is not essential that the description be so specific that the property may be identified by it alone, if such description or means of identification which, if pursued will disclose the property conveyed." In 5 R.C.L. 423 the rule is stated that a description which will enable a third person, aided by inquires which the instrument itself suggest to identify the property is sufficiently definite." In 1 Jones on Chattel Mortgages and Conditional Sales, Bowers Edition, at page 95 the writer says: "As to them (third persons), the description is sufficient if it points to evidence whereby the precise thing mortgaged may be ascertained with certainty." Here there is nothing in the description "873 head of sheep" from which anyone, the mortgagee or third persons, could ascertain with any certainty what chattels were covered by the mortgage. In many instances the courts have held the description good where, though otherwise faulty, the mortgage explicity states that the property is in the possession of the mortgagor, and especially where it is the only property of that kind owned by him. The specifications in the chattel mortgage contract in the instant case, we believe, in substantial compliance with the "reasonable description rule" fixed by the chattel Mortgage Act. We may notice in the agreement, moreover, that the phrase in question is found after an enumeration of other specific articles. It can thus be reasonably inferred therefrom that the "furnitures, fixture and equipment" referred to are properties of like nature, similarly situated or similarly used in the restaurant of the mortgagor located in front of the San Juan de Dos Hospital at Dewey Boulevard, Pasay City, which articles can be definitely pointed out or ascertain by simple inquiry at or about the premises. Note that the limitation found in the last paragraph of section 7 of the Chattel Mortgage Law 1 on "like or subsituated properties" make reference to those "thereafter acquired by the mortgagor and placed in the same depository as the property originally mortgaged", not to those already existing and originally included at the date of the constitution of the chattel mortgage. A contrary view would unduly impose a more rigid condition than what the law prescribes, which is that the description be only such as to enable identification after a reasonable inquiry and investigation. The case of Giberson vs. A.N. Jureidini Bros., 44 Phil., 216, 219, cited by the appellees and the lower court, cannot be likened to the case at bar, for there, what were sought to be mortgaged included two stores wit all its merchandise, effects, wares, and other bazar goods which were being constantly disposed of and replaced with new supplies in connection with the business, thereby making any particular or definite identification either impractical or impossible under the circumstances. Here, the properties deemed overed were more or less fixed, or at least permanently situated or used in the premises of the mortgagor's restaurant.

The rule in the Jureidini case is further weakened by the court's observation that (44 Phil., p. 220) Moreover, if there should exist any doubts on the questions we have just discussed, they should be treshed out in the insolvency proceedings, which appears inconsistent with the definitive character of the rulings invoked. We find that the ground for the appealed order (lack of cause of action) does not appear so indubitable as to warrant a dismissal of the action without inquiry into the merits and without the description in the deed of mortgage (Nico vs. Blanco, 81 Phil., 213; Zobel vs. Abreau, 52 Off. Gaz., 3592). Wherefore, the orders appealed from are set aside and the case remanded to the lower court for further proceedings. Costs against appellee. Footnotes
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"A chattel mortage shall be deem to cover only the property prescribed therein and not like or substituted property thereafter acquired by the mortgagor and place in the same depository as the property originally mortgaged, anything in the mortgage to the contrary notwithstanding." Chattel Mortgage2. Filipinas Marble Corporation v. Intermediate Appellate Court, 142 SCRA 180 (1986) FACTS: -Filipinas Marble Corporation applied for a loan with Development Bank of the Philippines (DBP) in its desire to develop the fun potentials of its mining claims and deposits and to finance acquisition of machinery. DBP granted the loan subject, however, to sixty onerous conditions, among which are: Filipinas Marble shall have to enter into a management contract with respondent Bancom Systems Control, Inc. [Bancom] and that the loan be secured by a mortgage.-The mortgage was not registered.-Bancom and its directors/ officers mismanaged and misspent the loan.-Bancom resigned with the approval of DBP even before the expiration of the management contract, leaving Filipinas Marble desolate and devastated.-Machineries arrived in the Philippines but alleged not delivered to Filipinas Marble.-Also, instead of helping Filipinas Marble get back on its feet, DBP completely abandoned Filipinas Marbles projectand proceeded to foreclose the properties mortgage without previous demand or notice.-In essence, the Filipinas Marble seeks the annulment of the deeds of mortgage and deed of assignment because there was no loan at all to secure since what DBP "lent" to Filipinas Marble with its right hand, it also got back with its left hand; and that, there was failure of consideration with regard to the execution of said deeds as the loan was never delivered to the Filipinas Marble.-The Filipinas Marble further prayed that pending the trial on the merits of the case, the trial court immediately issue a restraining order and then a writ of preliminary injunction against the sheriffs to enjoin the latter from proceeding with the foreclosure and sale of the Filipinas Marbles properties in Metro Manila and in Romblon. DBPs DEFENSE:-opposed the issuance of a writ of preliminary injunction stating that under Presidential Decree No. 385, DBP's right to foreclose is mandatory as the arrearages of petitioner had already amounted to P123,801,265.82 as against its total obligation of P151,957,641.72; that under the same decree, no court can issue any restraining order or injunction against it to stop the foreclosure since Filipinas Marble's arrearages had already reached at least twenty percent of its total obligations; that the alleged non-receipt of the loan proceeds by the petitioner could, at best, be accepted only in a technical sense because the money was received by the officers of the petitioner acting in such capacity and, therefore, irrespective of whoever is responsible for placing them in their positions. TCANDCA:-While evidence of Filipinas Marble Corporation appears persuasive, still it cannot enjoin DBP from complying with the mandatory provisions of PD 385. ISSUES: If there was no valid contract of loan for failure of consideration, whether or not the mortgage can exist or stand by itself being a mere accessory contract. Whether or not the non-registration of the Chattel Mortgage affects its validity. HELD:

- Presidential Decree No. 385 was issued primarily to see to it that government financial institutions are not denied substantial cash inflows, which are necessary to finance development projects all over the country, by large borrowers who, when they become delinquent, resort to court actions in order to prevent or delay the government's collection of their debts and loans.-The government, however, is bound by basic principles of fairness and decency under the due process clause of the Bill of Rights. P.D. 385 was never meant to protect officials of government lending institutions who take over themanagement of a borrower corporation, lead that corporation to bankruptcy through mism anagement or misappropriation of its funds, and who, after ruining it, use the mandatory provisions of the decree to avoid the consequences of their misdeeds.-The designated officers of the government financing institution cannot simply walk away and then state that since the loans were obtained in the corporation's name, then P.D. 385 must be peremptorily applied and that there is no way the borrower corporation can prevent the automatic foreclosure of the mortgage on its properties once the arrearages reach twenty percent (20%) of the total obligation no matter who was responsible.-In the case at bar, the respondents try to impress upon this Court that the $5,000,000.00 loan was actually granted and released to the petitioner corporation and whatever the composition of the management which received the loan is of no moment because this management was acting in behalf of the corporation. The respondents also argue that since the loan was extended to the corporation, the releases had to be made to the then officers of that borrower corporation.-Precisely, what the petitioner is trying to point out is that the DBP and Bancom people who managed Filipinas Marble misspent the proceeds of the loan by taking advantage of the positions that they were occupying in the corporation which resulted in the latter's devastation instead of its rehabilitation. The petitioner does not question the authority under which the loan was delivered but stresses that it is precisely this authority which enabled the DBP and Bancom people to misspend and misappropriate the proceeds of the loan thereby defeating its very purpose, that is, to develop the projects of the corporation. Therefore, it is as if the loan was never delivered to it and thus, there was failure on the part of the respondent DBP to deliver the consideration for which the mortgage and the assignment of deed were executed.- Article 2125 of the Civil Code clearly provides that the non -registration of the mortgage does not affect the immediate parties. It states: Art. 2125. In addition to the requisites stated in article 2085, it is indispensable, in order that a mortgage may be validly constituted that the document in which it appears be recorded in the Registry of Property. If the instrument is not recorded, the mortgage is nevertheless binding between the parties. Filipinas marble, however, cannot invoke the above provision to nullify the chattel mortgage it executed in favor of respondent DBP. Servicewide Specialists, Inc. v. Intermediate Appellate Court, 174 SCRA 80 (1989) FACTS: - Galicano Siton purchased from Car Traders Philippines, Inc. a vehicle and paid a downpayment of the price. The remaining balance includes not only the remaining principal obligation but also advance interests and premiums for motor vehicle insurance policies.-Siton executed a promissory note in favor of Car Traders Philippines, Inc. expressly stipulating that the face value of the note shall "be payable, without need of notice of demand, in installments. There are additional stipulations in the Promissory Note consisting of, among others, that if default is made in the payment of any of the installments or interest thereon, the total principal sum then remaining unpaid, together with accrued interest thereon shall at once become due and demandable.-As further security, Siton executed a Chattel Mortgage over the subject motor vehicle in favor of Car Traders Philippines, Inc.-The credit covered by the promissory note and chattel mortgage executed by respondent Galicano Siton was first assigned by Car Traders Philippines, Inc. in favor of Filinvest Credit Corporation. Subsequently, Filinvest Credit Corporation likewise reassigned said credit in favor of petitioner Servicewide Specialists, Inc. and respondent Siton was advised of this second assignment.-Siton failed to pay, Servicewide Specialist filed this action against Galicano Siton and "John Doe."-After the service of summons, Justiniano de Dumo, identifying himself as the "John Doe" in the Complaint, inasmuch as he is in possession of the subject vehicle, filed his Answer with Counterclaim and with Opposition tothe prayer for a Writ of Replevin. Said defendant, alleged the fact that he has bought the motor vehicle from Galicano Siton; that de Dumo and Siton testified that, before the projected sale, they went to a certain. Atty. Villa of Filinvest Credit Corporation advising the latter of the intended sale and transfer. Siton and de Dumo were accordingly advised that the verbal information given to the

corporation would suffice, and that it would be tedious and impractical to effect a change of transfer of ownership as that would require a new credit investigation as to the capacity and worthiness of Atty. De Dumo, being the new debtor. The further suggestion given by Atty. Villa is that the account should be maintained in the name of Galicano Siton.; that as such successor, he stepped into the rights and obligations of the seller; that he has religiously paid the installments as stipulated upon in the promissory note. He also manifested that the Answer he has filed in his behalf should likewise serve as a responsive pleading for his co-defendant Galicano Siton. TC affirmed by CA:-Denied the issuance of Writ of Replevin and ordering Siton and De Dumo to pay jointly and severally, the plaintiff, the remaining balance on the motor vehicle . ISSUE:-Whether or not the mortgagee is bound by the deed of sale by the mortgagor in favour of a third person, as neither the mortgagee nor its predecessors has given written or verbal consent thereto pursuant to the deed of Chattel Mortgage. HELD: The rule is settled that the chattel mortgagor continues to be the owner of the property, and therefore, has the power to alienate the same; however, he is obliged under pain of penal liability, to secure the written consent of the mortgagee. Thus, the instruments of mortgage are binding, while they subsist, not only upon the parties executing them but also upon those who later, by purchase or otherwise, acquire the properties referred to therein.-The absence of the written consent of the mortgagee to the sale of the mortgaged property in favor of a third person, therefore, affects not the validity of the sale but only the penal liability of the mortgagor under the Revised Penal Code and the binding effect of such sale on the mortgagee under the Deed of Chattel Mortgage.-There is no dispute that the Deed of Chattel Mortgage executed between Siton and the petitioner requires the written consent of the latter as mortgagee in the sale or transfer of the mortgaged vehicle. We cannot ignore the findings, however, that before the sale, prompt inquiries were made by private respondents with Filinvest Credit Corporation regarding any possible future sale of the mortgaged property; and that it was upon the advice of the company's credit lawyer that such a verbal notice is sufficient and that it would be convenient if the account wouldremain in the name of the mortgagor Siton.-Even the personal checks of de Dumo were accepted by petitioner as payment of some of the installments under the promissory note. If it is true that petitioner has not acquiesced in the sale, then, it should have inquired as to why de Dumo's checks were being used to pay Siton's obligations. Bicol Savings Loan Association v. Guinhawa, 188 SCRA 642 (1990); Pameca Wood Treatment Plant,Inc. v. Court of Appeals, 310 SCRA 281 (1999) FACTS: -Victorio Depositario together with Jaime Guinhawa, acting as solidary co-maker, took a loan from petitioner Bicol Savings and Loan Association (BISLA).-To secure the payment of the foregoing loan obligation, Victorio Depositario put up as security a chattel mortgage which was a Yamaha Motorcycle. Said motorcycle was eventually foreclosed by reason of the failure of Depositario and Guinhawa to pay the loan.-As a result of the foreclosure, there was a deficiency , where BISLA made a demand to pay the same.-BISLA) filed a complaint for the recovery of a sum of money constituting the deficiency after foreclosure of the chattel mortgage put up by the Depositario against the latter and his solidary co-maker Guinhawa.-Depositorio was dropped as his whereabouts were unknown and he could not be served with summons. TC:-Creditor may proceed to Guinhawa being a Solidary debtor. CA: -Reversed. Although Guinhawa is a solidary debtor, the creditors has already resorted to foreclosure, creditor has chosen to collect from Depositario and can no longer collect from Guinhawa not being party to the mortgage contract but merely a co-maker on the Promissory Note. ISSUE: SPCL Chattel Mortgage

-Whether or not a co-maker in a loan, who jointly and severally bound himself to pay loan on the promissory note but is not a party to the chattel mortgage executed to secure the same loan by the principal debtor can be held liable for the deficiency in case of foreclosure. HELD: -Where the obligation is one of a loan by a chattel mortgage and not a sale where the price is payable on installments, an independent civil action may be instituted for the recovery of said deficiency if after extra judicial foreclosure of such chattel mortgage a deficiency exist. If the mortgagee has foreclosed the mortgage judicially, he may ask for the execution of the judgment against any other property of the mortgagor for the payment of the balance. To deny to the mortgagee the right to maintain an action to recover the deficiency after foreclosure of the chattel mortgage would be to overlook the fact that the chattel mortgage is only given as a security and not as payment for the debt in case of failure of payment.-Under Article 1216 of the Civil Code, the creditor may proceed against any one of the solidary debtors or some or all of them simultaneously. The demand made against one of them shall not be an obstacle to those which may subsequently be directed against the others, so long as the debt has not been fully collected. And therefore, where the private respondent binds himself solidarily with the principal debtor to pay the latter's debt, he may be proceeded against by the principal debtor. Private respondent as solidary co- maker is also a surety (Art. 2047) and that under the law, the bringing of an action against the principal debtor to enforce the payment of the obligation is not inconsistent with, and does not preclude, the bringing of another action to compel the surety to fulfill his obligation under the agreement. Acme Shoe Rubber & Plastic Corporation v. Court of Appeals, 260 SCRA 714 (1996) FACTS: - Chua Pac, the president and general manager of co-petitioner "Acme Shoe, Rubber & Plastic Corporation," executed, for and in behalf of the company, a chattel mortgage in favor of Producers Bank of the Philippines. A provision in the chattel mortgage agreement was to this effect -"In case the MORTGAGOR executes subsequent promissory note or notes either as a renewal of the former note, as an extension thereof, or as a new loan, or is given any other kind of accommodations such as overdrafts, letters of credit, acceptances and bills of exchange, releases of import shipments on Trust Receipts, etc., this mortgage shall also stand as security for the payment of the said promissory note or notes and/or accommodations without the necessity of executing a new contract and this mortgage shall have the same force and effect as if the said promissory note or notes and/or accommodations were existing on the date thereof. This mortgage shall also stand as security for said obligations and any and all other obligations of the MORTGAGOR to the MORTGAGEE of whatever kind and nature, whether such obligations have been contracted before, during or after the constitution of this mortgage.-In due time, the loan was paid by petitioner corporation. Subsequently, in 1981, it obtained from Producers Bank additional financial accommodations These borrowings were on due date also fully paid.-The bank yet again extended to ACME a covered by four promissory notes. Due to financial constraints, the loan was not settled at maturity.-The bank thereupon applied for an extrajudicial foreclosure of the chattel mortgage, prompting ACME to forth with file an action for injunction, with damages and a prayer for a writ of preliminary injunction. TCandCA: -Dismissed the complaint and ordered the foreclosure of the chattel mortgage. ACME is bound by the stipulations ,aforequoted, of the chattel mortgage. ISSUE: -Whether or not chattel mortgage may secure after incurred obligations. HELD: -Contracts of security are either personal or real. In contracts of personal security, such as a guaranty or a suretyship, the faithful performance of the obligation by the principal debtor is secured by the personal commitment of another (the guarantor or surety). In contracts of real security, such as a pledge, a mortgage or an antichresis, that fulfillment is secured by an encumbrance of property - in pledge, the placing of movable property in the possession of the creditor; in chattel mortgage, by the execution of the corresponding deed substantially in the form prescribed by law; in real estate mortgage, by the execution of a public instrument encumbering the real property covered thereby; and in antichresis, by a written instrument granting to the creditor the right to receive the fruits of an immovable property with the obligation to apply such fruits to the payment of interest, if owing, and thereafter to the principal of his credit - upon the essential condition that if the principal obligation becomes due and the debtor defaults, then the property encumbered can be alienated for the payment of the obligation, but that should the obligation be duly paid, then the contract is automatically extinguished proceeding from the accessory character of the agreement. As the law so puts it, once

the obligation is complied with, then the contract of security becomes, ipso facto, null and void.-While a pledge, real estate mortgage, or antichresis may exceptionally secure after-incurred obligations so long as these future debts are accurately described, a chattel mortgage, however, can only cover obligations existing at the time the mortgage is constituted. Although a promise expressed in a chattel mortgage to include debts that are yet to be contracted can be a binding commitment that can be compelled upon, the security itself, however, does not come into existence or arise until after a chattel mortgage agreement covering the newly contracted debt is executed either by concluding a fresh chattel mortgage or by amending the old contract conformably with the form prescribed by the Chattel Mortgage Law. Refusal on the part of the borrower to execute the agreement so as to cover the after-incurred obligation can constitute an act of default on the part of the borrower of the financing agreement whereon the promise is written but, of course, the remedy of foreclosure can only cover the debts extant at the time of constitution and during the life of the chattel mortgage sought to be foreclosed Case: SALVADOR PIANSAY and CLAUDIA V. VDA. DE UY KIM v. CONRADO DAVID and MARCOSMANGUBATDate: October 30, 1964Ponente: J. ConcepcionPlace: Sande St., Tondo, Manila Facts: David obtained a loan of P3,000 with 12% interest from Uy Kim; to secure the payment of the same, he executed a chattel mortgage on a house in Tondo. The chattel mortgage was registered but later on, upon Davids failure to pay, it was foreclosed and Uy Kim bought the house at the public auction and thereafter sold the same to Salvador Piansay. Later on, Marcos Mangubat filed a complaint against David before the CFI Manila for the collection of the loan of P2,000. The complaint was later amended to implead Uy Kim and Piansay praying that the auction sale and deed of absolute sale executed by Uy Kim in favor of Piansay beannulled.CFI Manila ordered David to pay and annulled the chattel mortgage. CA affirmed. David was ordered to pay and the house was levied upon. To prevent the sale at the public auction, Piansay and Uy Kim filed a petition for certiorari and mandamus with preliminary injunction before the CA; it was denied. Subsequently, Piansay and Uy Kim instituted an action against David and Mangubat praying that judgment be rendered declaring Piansay as the true owner and restrain the levy and sale to public auction. David demanded from Piansay the payment of the rentals for the use and occupation of the house; the latter claims it is his property. Mangubat, on one hand, moved to dismiss the complaint on the ground of res adjudicate and lack of personality to sue; it was granted. CA affirmed explaining that Uy Kim had no right to foreclose the chattel mortgage because it was in reality a mere contract of an unsecured loan. Piansay assailed Mangubats right to levy execution upon the house alleging that the same belongs to him, he having bought it from Uy Kim who acquired it at the auction sale. Issue: WON the chattel mortgage and sale are valid Held: No. Ratio: Upon the theory that the chattel mortgage and sale in favor of Uy Kim had been annulled in the original decision, as affirmed by the CA, the fact is that said order became final and executory upon the denial of the petition for certiorari and mandamus. Hence, Uy Kim and Piansay are now barred from asserting that the chattel mortgage and sale are valid. At any rate, regardless of the validity of a contract constituting a chattel mortgage on a house, as between the parties to said contract, the same cannot and does not bind third persons, who are not parties to the contract of their privies. As a consequence, the sale of the house in question in the proceedings for the extrajudicial foreclosure of said chattel mortgage, is null and void insofar as defendant Mangubat is concerned, and did not confer upon Uy Kim, as buyer in said sale, any dominical right in and to said house, so that she could not have transmitted to her assignee Piansay any such right as against Mangubat. In short, they do not have a cause of action against Mangubat and David.