G.R. No. L-11990; May 29, 1959
JOSE MOVIDO, plaintiff-appellant, vs. REHABILITATION FINANCE CORPORATION and THE PROVINCIAL SHERIFF OF SAMAR, defendants-appellees.

FACTS

On July 1, 1946, Vet. Bros. & Company, Inc. mortgaged a sawmill and its equipment to Jose S. Movido to secure a P15,000 loan. This chattel mortgage was registered on February 28, 1947. On July 28, 1948, Movido filed a personal action (Civil Case No. 441) against Vet. Bros. & Company, Inc. in the Court of First Instance of Leyte to recover the loan balance. The case was terminated by a compromise agreement, which was approved and a judgment was rendered based on it on February 7, 1949. Subsequently, on March 3, 1949, and May 17, 1949, Vet. Bros. & Company, Inc. and the spouses Simeon G. Toribio and Maximiana Escobar de Toribio mortgaged the same chattels, among other properties, to the Rehabilitation Finance Corporation (RFC) to secure a P46,000 loan. These mortgages were registered. In 1953, RFC initiated the extrajudicial foreclosure of its chattel mortgage. The Provincial Sheriff of Samar advertised the properties for public auction. Movido filed a third-party claim based on his prior chattel mortgage and the judgment in his favor. The sheriff proceeded with the sale on June 11, 1953. Movido obtained a writ of execution for his judgment only on June 26, 1953, after the auction. Movido then sued RFC and the Sheriff for damages, alleging they unlawfully disregarded his superior lien.

ISSUE

Whether Jose S. Movido, by filing a personal action and obtaining a judgment based on a compromise agreement against the mortgagor, waived or abandoned his mortgage lien on the chattels, thereby rendering his claim inferior to the subsequent mortgage of the Rehabilitation Finance Corporation.

RULING

Yes. The Supreme Court affirmed the trial court’s judgment dismissing Movido’s complaint. The Court held that a mortgagee who sues and obtains a personal judgment against the mortgagor upon the credit waives the right to enforce the mortgage securing it. By instituting Civil Case No. 441 and securing a judgment based on the compromise agreement, Movido abandoned his mortgage lien on the chattels. Consequently, when Vet. Bros. & Company, Inc. later mortgaged the same chattels to RFC, Movido no longer had any lien on them. The rule cited by Movido from older cases had been abandoned. Furthermore, the Court noted that Movido secured a writ of execution for his judgment only after RFC’s foreclosure sale had been carried out. Therefore, RFC’s mortgage lien was valid and superior, and the sheriff’s proceeding with the sale was lawful. Costs were imposed on the appellant, Movido.