Cu Unjieng e Hijos v. Mabalacat Sugar Company
REITERATIONFacts
The Antecedents: This case involves an appeal by the defendant, Mabalacat Sugar Company, from an order of the Court of First Instance of Pampanga confirming the sheriff's sale of the company's properties pursuant to a writ of execution. The sale was a consequence of a judgment rendered by the Supreme Court in a foreclosure action. Procedural History: The Court of First Instance of Pampanga ordered the confirmation of the sheriff's sale. The defendant appealed this order. The Petition: The appellant assigned 19 alleged errors committed by the trial court in its order confirming the sale. The primary issues raised concerned the propriety of selling mortgaged properties in the hands of a receiver, the inclusion of certain machinery and accessories in the sale, and the alleged inadequacy of the sale price.
Issue(s)
Whether it is proper to order the sale at public auction of mortgaged properties in the hands of a receiver appointed by the same court that tried the foreclosure action. Whether the sheriff committed an irregularity by including in the sale certain machinery and accessories alleged not to have been included in the mortgage nor in the notice of sale. Whether the sheriff committed an irregularity by selling the mortgaged properties at an absolutely inadequate price. Whether the sheriff committed an irregularity by not selling the mortgaged properties by lots or piece by piece.
Ruling
The Supreme Court affirmed the order of the Court of First Instance of Pampanga confirming the sale of the mortgaged properties. The appeal was dismissed, and the order was affirmed in toto.
Ratio Decidendi
On the propriety of selling mortgaged properties in the hands of a receiver: The Court held that the placing of mortgaged properties in the hands of a receiver is for the purpose of securing income and preserving the properties. While an accounting by the receiver is generally necessary, the Court noted that it had previously decided in certiorari proceedings that the sale could proceed even if the receiver's accounts were pending approval. Furthermore, the fact that the properties are in custodia legis does not prevent the same court that ordered the receivership from ordering the sale, as there is no conflict of jurisdiction. On the inclusion of machinery and accessories: The Court found that the machinery and accessories in question were acquired and installed after the mortgage was constituted. However, the mortgage contract explicitly included "all the buildings, improvement, sugar-cane mill, railway, or telephone installations, apparatus, utensils, and everything forming part or necessary to complete the said sugar-cane mill..." Article 1877 of the Civil Code provides that a mortgage includes all natural accessions and improvements. Citing Bischoff vs. Pomar, the Court reiterated that in a mortgage of real estate, improvements and fixtures are included, and objects permanently attached, even if placed after the mortgage, are also included unless expressly stipulated otherwise. Therefore, the machinery and accessories were deemed included in the mortgage. On the alleged inadequacy of the sale price: The Court acknowledged conflicting testimonies regarding the value of the properties. However, it cited Bank of the Philippine Islands vs. Green, stating that an inadequate price alone is not sufficient to annul a sale confirmation. The Court also noted that no purchaser was ready to offer a greater amount than that offered by the plaintiffs, and it was not proven that the sheriff prevented any purchaser from bidding. The assertion that the sheriff prevented a purchaser from bidding was intimated but not proven, and no claim was made that such a purchaser was ready to offer a greater sum. On the manner of sale (by entirety vs. by lots): The Court held that selling a sugar central in its entirety is the most advantageous method for both creditors and debtors. Selling the pieces separately would diminish their intrinsic value, rendering them sellable only as second-hand articles at a significantly lower price. Therefore, the sheriff's manner of sale was deemed the most advantageous.
Main Doctrine
A mortgage constituted on a sugar central includes not only the land but also the buildings, machinery, and accessories installed at the time of the mortgage and those acquired and installed thereafter. The sheriff's sale of mortgaged properties, even if the price is inadequate, may be confirmed if no greater offer is presented and the sale was conducted in the most advantageous manner. The court that ordered the receivership has jurisdiction to order the sale of mortgaged properties even before the termination of the receivership.