Associated Insurance vs Valino

PET: Associated Insurance and Surety Company Inc

RESP: Isabel Iya, Adriano Valino and Lucia Valino
Felix, J.
Summary:
Facts:
Valino were owners and possessors of house in Grace Park Subdv in Caloocan,
Rizal, which they purchased on instalment basis from the Philippine Realty
Corporation (PRC)
Nov 6, 1951: Lucia Valino filed a P11,000 bond (to purchase rice from NARIC)
subscribed by the Associated Insurance & Surety Co Inc. As counter-guaranty
the spouses executed an alleged chattel mortgage on the house in favour of
PET.
o Parcel of land was still registered in the name of PRC
Dec 6, 1951: Chattel Mortgage was registered
Oct 18, 1958: title on the land was secured
Oct 24, 1952: real estate mortgage over the lot and the house in favour of
Isabel Iya
Lucia Valino failed to satisfy obligation with NARIC and the surety company
was compelled to pay. Surety company demanded from the spouses but the
spouses failed to comply. Thus PET foreclosed chattel mortgage over the
house.
o Property awarded to PET for P8,000*
o PET caused said house to be in its name for tax purposes
July 1953: learned of the existence of the real estate mortgage and thus
instituted Civil Case naming Valinos with Iya as defendants
o Prayed for the exclusion of the residential house from the real estate
mortgage in favour of Iya
o Declaration and recognition of PETs rights to ownership
Iya: she acquired real right over the house and lot and that the auction
conducted by the Provincial Sheriff as a result of the *foreclosure of the
chattel mortgage on the house was null and void.
Valino: prayed for dismissal for lack of cause of action because plaintiff was
already the ownder of the house
Oct 29, 1953: Iya filed another civil action against the Valinos and the surety
company
o That to secure payment of the P 12,000 loan, defendants mortgaged
house and lot
Answer of surety company: house did not belong to the spouses at the time
the chattel mortgage was executed, the house might be considered as
personal property and that the subsequent foreclosure proceedings were
proper.
o Building should be excluded from the real estate mortgage

Spouses took the side of the surety company: the building was already
encumbered before the real estate mortgage was executed
LC: in favour of surety company. Valinos were not yet registered owners of the
land at the time of the first encumbrance thus the building was the personal
property of the Valinos and chattel mortgage was proper
o

WN the house was a personal property and the cm was proper? NO

Lopez v Orosa: 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 cannot be divested of its character of a realty by the fact that the
land belongs to another
Because only personal property can be the subject of CM the mortgage is
invalid and a nullity

Reversed.
Iyas right to foreclose not only the land and building is recognized. Decision without
prejudice to any right of the surety company to recover against the spouses.