Lopez v. Alvarez
REITERATIONFacts
The Antecedents: Manuel Lopez y Villanueva initiated a lawsuit seeking to recover P5,973, plus interest, from Evaristo Alvarez y Perez. Lopez claimed that Alvarez had assigned to him a portion of a mortgage credit originally held by Alvarez on the hacienda Bunglas, which belonged to the testate succession of the late Vicente Lopez y Alvarez. Lopez further alleged that the defendants J. H. Grindrod and Juan Thomson Casells were partners in a claim against Alvarez and that their rights to the mortgage credit were subsequent and secondary to his own. The underlying dispute stemmed from a mortgage deed executed by Vicente Lopez y Alvarez in favor of Evaristo Alvarez y Perez for P13,300, which remained unpaid at the time of Vicente Lopez's death. Evaristo Alvarez later assigned a portion of this mortgage credit to Manuel Lopez to settle a debt owed to Lopez. Procedural History: The plaintiff, Manuel Lopez, filed an amended complaint in the Court of First Instance of Iloilo. In response, J. H. Grindrod sought dismissal, asserting his own prior claim against Evaristo Alvarez, which he alleged was secured by a deed dated July 7, 1900, and later attached to Alvarez's rights in the hacienda Bunglas. Grindrod obtained a judgment against Alvarez for P32,867.44, and subsequently, Alvarez's rights to the hacienda Bunglas mortgage were sold at public auction to Juan Thomson Casells. The Court of First Instance ruled in favor of the defendants, finding that the plaintiff had failed to establish his right. Lopez excepted to this decision and moved for a new trial, which was denied. He then appealed the decision. The Petition: The plaintiff, Manuel Lopez, appealed to the Supreme Court, arguing that his acquisition of the P5,973 mortgage credit from Evaristo Alvarez via a public instrument dated April 5, 1904, granted him indisputable ownership. He contended that the subsequent auction and sale of Alvarez's rights to Juan Thomson Casells, at the instance of J. H. Grindrod, were null and void concerning the portion of the credit already assigned to Lopez. Lopez asserted that Grindrod, as a personal creditor, could not claim rights superior to his as the assignee of a mortgage credit, even if Grindrod's attachment was recorded. He argued that the sale of property not belonging to the debtor (Alvarez) was invalid and that his prior acquisition of the credit, evidenced by a public instrument, should take precedence over Grindrod's subsequent attachment and sale.
Issue(s)
Whether the assignment of a mortgage credit, made through a public instrument, is valid and effective even if not registered in the property registry. Whether a personal creditor, who has attached a mortgage credit, can be considered a "third person" under the Mortgage Law and claim preference over a prior assignee of that credit. Whether the sale of a portion of a mortgage credit, which had already been validly assigned to a third party, is null and void with respect to the assigned portion.
Ruling
The Supreme Court reversed the decision of the Court of First Instance. It held that the mortgage credit secured upon the hacienda Bunglas, amounting to P5,973, to which the deed of April 5, 1904, referred, was the exclusive ownership of Manuel Lopez y Villanueva as assignee. The Court declared the sale of such part of the credit null and void and ruled that the plaintiff is entitled to recover from the proceeds of the sale of the said hacienda, in preference to the testate or intestate succession of J. H. Grindrod, the amount of his credit together with the agreed interest.
Ratio Decidendi
On the validity and effectiveness of the assignment of a mortgage credit without registration: The Court held that the assignment of a mortgage credit, executed by means of a public instrument on April 5, 1904, transferred indisputable dominion over the credit to the plaintiff, Manuel Lopez. This assignment is in accordance with Article 1878 of the Civil Code, which allows for the alienation or assignment of a mortgage credit. The Court emphasized that the fact that such assignment was not registered in the property registry is not an obstacle to the transfer of ownership of the credit. The assignment or alienation of a credit by its owner is prior to and independent of its registration. While Article 152 of the Mortgage Law requires registration for effectiveness against third parties, the lack of registration does not invalidate the assignment between the assignor and the assignee. Article 1218 of the Civil Code provides that a public instrument is evidence, even against a third person, of the facts giving rise to its execution and its date, thus precluding suspicion of fraud regarding the transfer date. On whether a personal creditor with an attachment can be considered a "third person" under the Mortgage Law: The Court clarified that J. H. Grindrod, as a personal creditor, could not be considered a "third person" for the purposes of Article 27 of the Mortgage Law. This provision is intended to protect dominion over real property and rights in rem. Grindrod's credit was a personal right, not a real right in rem over the credit assigned to Lopez. Even if Grindrod's attachment had been recorded, it would not confer any right in rem over the portion of the credit already alienated to Lopez. The Supreme Court of Spain's decisions were cited, establishing that a creditor who obtains a preliminary attachment cannot be considered a third person if their right is only to preference regarding property recorded and only as regards subsequent credits. Furthermore, the preliminary recording of an attachment only secures consequences and does not create or declare rights, nor does it alter the nature of obligations or injure the rights of others. On the nullity of the sale of the already assigned portion of the credit: The Court found the sale of the mortgage credit conducted at the instance of Grindrod to be null and void with respect to the P5,973 portion that had already been validly assigned to Manuel Lopez. It was established that Lopez had filed his complaint in intervention prior to the sheriff's sale. Therefore, the sale should have been suspended. The sheriff sold a thing that belonged to another person, namely Manuel Lopez, and in which the creditor Grindrod had no right. The Court reiterated that the attachment of property is conditional upon that property belonging to the debtor. If the property does not belong to the debtor, the attachment is invalid. The recording of a sale of a credit that is null in accordance with the law does not validate it. The sale of that part of the credit owned by Lopez was null and void and could not deprive him of his property without due process of law.
Main Doctrine
An assignment of a mortgage credit, even if not registered, is valid and effective between the assignor and assignee. A mere personal creditor, even with an attachment, cannot claim the rights of a third person under the Mortgage Law against a validly assigned mortgage credit, as such attachment does not create a real right over the credit.