Jose Sison, Et Al. vs. F. M. Yap Tico, Et Al.: Supreme Court

Jose Sison, et al. vs. F. M. Yap Tico, et al.
Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-11583 February 8, 1918
JOSE SISON and EMILIO SISON, plaintiffs-appellants,

vs.
F. M. YAP TICO and AMANDO AVANCEÑA, provincial sheriff of
IloIlo, defendants-appellees.
C. Lozano for appellant.

No appearance for appellees.
JOHNSON, J.:
The principal question presented by this appeal is whether or not the mortgagor of a
chattel mortgage is relieved from liability by paying the mortgagee after the mortgage
has been assigned to a third person, when he has no actual notice of said transfer.
The pertinent facts as they appear in the record are: That on the 11th day of April, 1912,
the plaintiffs borrowed of Eugenio Kilayko the sum they executed and delivered to the
said Kilayko a chattel mortgage covering machinery, crops and a number of carabaos;
that said debt was due and payable on or before the 30th day of May, 1913; that the
mortgagors had to deliver to the mortgagee (Kilayko) in the city of Iloilo their entire
crop of sugar for the years 1912-13; that in the compliance with the mortgage the
plaintiffs herein did deliver sugar for said years from time to time in the city of Iloilo at
the bodega (warehouse) of the defendant Yap Tico at the request of the said Kilayko;
that, finally a liquidation was made and there was found to be still due the mortgagee
(Kilayko) the sum of P650; that sum was sent to the mortgagee by a representative of
the mortgagors (Antonio Horrilleno) and was by him delivered to Kilayko; that upon the
delivery of said sum (P650) the mortgagee (Kilayko) on the 14th day of May, 1914,
executed and delivered a cancellation of said mortgage; that in the month of May, 1912,
the mortgagee (Kilayko) assigned and transferred said mortgage to the defendant
herein, F. M. Yap Tico; that said assignment and transfer were duly registered upon the
14th day of April, 1913, nearly one year after the transfer had been made; that the
cancellation of said mortgage as above indicated was duly registered on the 19th day of
December, 1914; that neither Kilayko and Yap Tico gave any notice whatever to the
plaintiffs herein that said mortgage had been transferred; that the plaintiffs had no
notice that the mortgage had been transferred nor that said transfer had been
registered; that at the time the last payment was made on said mortgage (14th day of
May, 1914) the mortgage (Kilayko) gave no notice to the mortgagors, or to their
representative, that the mortgage had been transferred, but upon the contrary made a
search among the papers of his office attempting to find it, and not being able to find it
at the time, promised to return the same to the mortgagors as soon as he could find it;
that later the assignee of said mortgagee (Yap Tico), in accordance with the provisions of
the Chattel Mortgage Law (Act No. 1508), proceeded to foreclose said mortgage, and the
sheriff attached and took possession of all the property which said mortgage covered. It
is admitted that the sheriff, as well as Yap Tico, were notified by the plaintiffs, at the
time of said attachment, that the mortgage had been paid and cancelled.
Notwithstanding that notice the sheriff insisted upon enforcing the attachment, and the
plaintiffs, after some delay, obtained the release of the property so attached by the
execution and delivery of a bond. This action was brought for the purpose of recovering
the property, together with damages caused by said alleged illegal attachment.
The defendants answered by a general denial. Upon the issue presented by the petition
and answer, the cause was brought on for trial, and after hearing the respective parties,
the Honorable J. S. Powell, judge, rendered a judgment relieving the defendants from all
liability under the complaint and ordered that the defendants recover of the plaintiffs
the sum of P2,000, with interest at 12 per cent from the 28th day of May, 1912, and the
costs of the suit. From that judgment the plaintiffs appealed to this court.
The fact is not denied that while the mortgage in question was transferred by the
mortgagee, Kilayko, to the defendant, Yap Tico, within less than two months after its
execution and delivery, and that the plaintiffs had delivered sugar at the bodega of Yap
Tico from time to time covering a period of nearly two years in partial payment to the
plaintiffs that he was the owner of said mortgage. It is further established beyond
question that the plaintiffs had no notice whatever of said transfer, unless the
registration of said assignment had the effect of giving them notice, until long after full
amount of said mortgage had been paid to the original mortgagee, Kilayko, and said
mortgage had been cancelled.
Under the recording of the assignment operated as notice to the mortgagors their
payment of the same, without actual notice of said transfer, relieved them from all
liability under said mortgage. Article 1527 of the Civil Code provides that a debtor who,
before having been informed of the assignment, pays the creditor, shall be free from the
obligation. (See also, to the same effect, arts. 152 and 154 of the Mortgage Law.)
Manresa, in commenting upon the provisions of article 1527 of the Civil Code, after
discussing the articles of the Mortgage Law, says:
We have said that article 1527 deals with the individual phase or aspect which
presupposes the existence of a relationship with third parties, that is, with the
person of the debtor. Let us see what way. "The above-mentioned article states
that a debtor who, before having knowledge, of the assignment, should pay the
creditor shall be released from the obligation.
In the first place, the necessity for the notice to the debtor in order that the
assignment may fully produce its legal effects may be inferred from the above. It
refers to a notice and not to a petition for the consent which is not necessary. We
say that the notice is not necessary in order that the legal effects may be fully
produce, because if it should be omitted, such omission will not imply that the
assignment will not exist legally, but that its effects will be limited to the parties
thereto; at least, they will not reach the debtor.
xxx xxx xxx
Let us go to the legal effects produced by the failure to give the notice. In the
beginning, we have said that the contract does not lose it efficacy with respect to
the parties who made it; but article 1527 determines specifically one of the
consequences arising from the failure to give the notice, for it evidently takes for
granted that the debtor who, before having knowledge of the assignment, should
pay the creditor shall be released from the obligation. So that if the creditor
assigned his credit, acting in bad faith and taking advantage of the fact that the
debtor does not know anything about the assignment because the latter has not
been notified, and collects its amount, the debtor shall be free from the
obligation, inasmuch as it has been legally extinguished by a payment which fully
redounds to his benefit. The assignee can take advantage of all civil and criminal
actions against the assignor, but he can ask no thing from the debtor, because the
latter did not know of the assignment, nor was he bound to know it; the assignor
should blame himself for his failure to have the notice made.
xxx xxx xxx
Hence there not having been any notice to the debtor, the existence of his
knowledge of the assignment should be proved by him who is interested therein;
and the debtor is not bound to prove his ignorance. (10 Manresa, 384, 385, 387.)

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Jose Sison, et al. vs. F. M. Yap Tico, et al.

Republic of the Philippines

G.R. No. L-11583 February 8, 1918

JOSE SISON and EMILIO SISON, plaintiffs-appellants,

C. Lozano for appellant.

xxx xxx xxx

xxx xxx xxx

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