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G.R. No. L-17500 May 16, 1967 People's Bank and Trus !o "s #a$%&an Lu'(er P)*PL)'+ B,N- ,N# TR.+T !*. and ,TL,NT/! G.L0 ,N# P,!/0/! !*. *0 M,N/L,, plaintiffs-appellants, vs. #,1/!,N L.MB)R !*MP,N2, #,1/!,N ,M)R/!,N L.MB)R !*RP*R,T/*N and !*NN)LL BR*+. !*. 3P1/L.4, defendants-appellants. On September 8, 1948, Atlantic Gulf & Pacific C mpan! f "anila, a #est $ir%inia c rp rati n licensed t d business in t&e P&ilippines ' &ereinafter referred t as A()A*(+C ' s ld and assi%ned all its ri%&ts in t&e ,a&ican )umber c ncessi n t ,a&ican )umber C mpan! ' &ereinafter referred t as ,A)CO ' f r t&e t tal sum f -.//,///.//, f 0&ic& nl! t&e am unt f -./,///.// 0as paid. (&ereafter, t devel p t&e c ncessi n, ,A)CO btained vari us l ans fr m t&e Pe ple1s 2an3 & (rust C mpan! ' &ereinafter referred t as t&e 2A*4 ' am untin%, as f 5ul! 16, 19./, t P7//,///.//. +n additi n, ,A)CO btained, t&r u%& t&e 2A*4, a l an f -7./,///.// fr m t&e 89p rt-+mp rt 2an3 f #as&in%t n ,.C., evidenced b! five pr miss r! n tes f -./,///.// eac&, maturin% n different dates, e9ecuted b! b t& ,A)CO and t&e ,a&ican America )umber C rp rati n, a f rei%n c rp rati n and a st c3& lder f ,A)CO, ' &ereinafter referred t as ,A"CO, all pa!able t t&e 2A*4 r its rder. As securit! f r t&e pa!ment f t&e ab vementi ned l ans, n 5ul! 16, 19./ ,A)CO e9ecuted in fav r f t&e 2A*4 ' t&e latter actin% f r itself and as trustee f r t&e 89p rt-+mp rt 2an3 f #as&in%t n ,.C. ' a deed f m rt%a%e c verin% five parcels f land situated in t&e pr vince f Camarines * rte t %et&er 0it& all t&e buildin%s and t&er impr vements e9istin% t&ere n and all t&e pers nal pr perties f t&e m rt%a% r l cated in its place f business in t&e municipalities f "ambula and Capal n%a, Camarines * rte :89&ibit ,;. On t&e same date, ,A)CO e9ecuted a sec nd m rt%a%e n t&e same pr perties in fav r f A()A*(+C t secure pa!ment f t&e unpaid balance f t&e sale price f t&e lumber c ncessi n am untin% t t&e sum f -4./,///.// :89&ibit G;. 2 t& deeds c ntained t&e f ll 0in% pr visi n e9tendin% t&e m rt%a%e lien t pr perties t be subse<uentl! ac<uired ' referred t &ereafter as =after ac<uired pr perties= ' b! t&e m rt%a% r> All pr pert! f ever! nature and descripti n ta3en in e9c&an%e r replacement, and all buildin%s, mac&iner!, fi9tures, t ls e<uipment and t&er pr pert! 0&ic& t&e " rt%a% r ma! &ereafter ac<uire, c nstruct, install, attac&, r use in, t , up n, r in c nnecti n 0it& t&e premises, s&all immediatel! be and bec me sub?ect t t&e lien f t&is m rt%a%e in t&e same

manner and t t&e same e9tent as if n 0 included t&erein, and t&e " rt%a% r s&all fr m time t time durin% t&e e9istence f t&is m rt%a%e furnis& t&e " rt%a%ee 0it& an accurate invent r! f suc& substituted and subse<uentl! ac<uired pr pert!. 2 t& m rt%a%es 0ere re%istered in t&e Office f t&e @e%ister f ,eeds f Camarines * rte. +n additi n t&eret ,A)CO and ,A"CO pled%ed t t&e 2A*4 A,79B s&ares f st c3 f ,A)CO and 9,78B s&ares f ,A"CO t secure t&e same bli%ati ns. Cp n ,A)CO1s and ,A"CO1s failure t pa! t&e fift& pr miss r! n te up n its maturit!, t&e 2A*4 paid t&e same t t&e 89p rt-+mp rt 2an3 f #as&in%t n ,.C., and t&e latter assi%ned t t&e f rmer its credit and t&e first m rt%a%e securin% it. Subse<uentl!, t&e 2A*4 %ave ,A)CO and ,A"CO up t April 1, 19.6 t pa! t&e verdue pr miss r! n te. After 5ul! 16, 19./ ' t&e date f e9ecuti n f t&e m rt%a%es menti ned ab ve ' ,A)CO purc&ased vari us mac&ineries, e<uipment, spare parts and supplies in additi n t , r in replacement f s me f t& se alread! 0ned and used b! it n t&e date af resaid. Pursuant t t&e pr visi n f t&e m rt%a%e deeds <u ted t&eret f re re%ardin% =after ac<uired pr perties,= t&e 2A*4 re<uested ,A)CO t submit c mplete lists f said pr perties but t&e latter failed t d s . +n c nnecti n 0it& t&ese purc&ases, t&ere appeared in t&e b 3s f ,A)CO as due t C nnell 2r s. C mpan! :P&ilippines; ' a d mestic c rp rati n 0& 0as actin% as t&e %eneral purc&asin% a%ent f ,A)CO ' t&ereinafter called CO**8)) ' t&e sum f P4.7,8B/... and t ,A"CO, t&e sum f P7,1.1,BA8.64. On ,ecember 1B, 19.7, t&e 2 ard f ,irect rs f ,A)CO, in a special meetin% called f r t&e purp se, passed a res luti n a%reein% t rescind t&e alle%ed sales f e<uipment, spare parts and supplies b! CO**8)) and ,A"CO t it. (&ereafter, t&e c rresp ndin% a%reements f rescissi n f sale 0ere e9ecuted bet0een ,A)CO and ,A"CO, n t&e ne &and and bet0een ,A)CO and CO**8)), n t&e t&er. On 5anuar! 16, 19.6, t&e 2A*4, in its 0n be&alf and t&at f A()A*(+C, demanded t&at said a%reements be cancelled but CO**8)) and ,A"CO refused t d s . As a result, n Debruar! 17, 19.6E A()A*(+C and t&e 2A*4, c mmenced f recl sure pr ceedin%s in t&e C urt f Dirst +nstance f Camarines * rte a%ainst ,A)CO and ,A"CO. On t&e same date t&e! filed an ex-parte applicati n f r t&e app intment f a @eceiver andF r f r t&e issuance f a 0rit f preliminar! in?uncti n t restrain ,A)CO fr m rem vin% its pr perties. (&e c urt %ranted b t& remedies and app inted Ge r%e G. 8vans as @eceiver. Cp n

defendants1 m ti n, & 0ever, t&e c urt, in its rder f Debruar! 71, 19.6, disc&ar%ed t&e @eceiver. On "arc& 7, 19.6, defendants filed t&eir ans0er den!in% t&e material alle%ati ns f t&e c mplaint and alle%in% several affirmative defenses and a c unterclaim. On "arc& 4 f t&e same !ear, CO**8)), filed a m ti n f r interventi n alle%in% t&at it 0as t&e 0ner and p ssess r f s me f t&e e<uipments, spare parts and supplies 0&ic& ,A)CO &ad ac<uired subse<uent t t&e e9ecuti n f t&e m rt%a%es s u%&t t be f recl sed and 0&ic& plaintiffs claimed 0ere c vered b! t&e lien. +n its rder f "arc& 18,19.6 t&e C urt %ranted t&e m ti n, as 0ell as plaintiffs1 m ti n t set aside t&e rder disc&ar%in% t&e @eceiver. C nse<uentl!, 8vans 0as reinstated. On April 1, 19.6, CO**8)) filed its ans0er den!in% t&e material averment f t&e c mplaint, and assertin% affirmative defenses and a c unterclaim. Cp n m ti n f t&e parties t&e C urt, n September 6/, 19.6, issued an rder transferrin% t&e venue f t&e acti n t t&e C urt f Dirst +nstance f "anila 0&ere it 0as d c3eted as Civil Case * . 7/98A. On Au%ust 6/, 19.8, up n m ti n f all t&e parties, t&e C urt rdered t&e sale f all t&e mac&ineries, e<uipment and supplies f ,A)CO, and t&e same 0ere subse<uentl! s ld f r a t tal c nsiderati n f P1A.,///.// 0&ic& 0as dep sited in c urt pendin% final determinati n f t&e acti n. 2! a similar a%reement ne-&alf :P8A,.//.//; f t&is am unt 0as c nsidered as representin% t&e pr ceeds btained fr m t&e sale f t&e =undebated pr perties= :t& se n t claimed b! ,A"CO and CO**8));, and t&e t&er &alf as representin% t& se btained fr m t&e sale f t&e =after ac<uired pr perties=. After due trial, t&e C urt, n 5ul! 1., 19B/, rendered ?ud%ment as f ll 0s> +* $+8# #G8@8DO@8, t&e C urt> 1. C ndemns ,a&ican )umber C . t pa! unt Pe ple1s 2an3 t&e sum f P7//,///,// 0it& AH interest per annum fr m 5ul! 16, 19./, Plus an t&er sum f P1//,///.// 0it& .H interest per annum fr m 5ul! 16, 19./E plus 1/H n b t& principal sums as att rne!1s feesE

7. C ndemns ,a&ican )umber C . t pa! unt Atlantic Gulf t&e sum f P9//,///.// 0it& 4H interest per annum fr m 5ul! 6, 19./, plus 1/H n b t& principal as att rne!1s feesE 6. C ndemns ,a&ican )umber C . t pa! unt C nnell 2r s, t&e sum f P47.,8B/..., and t pa! unt ,a&ican American )umber C . t&e sum f P7,1.1,BA8.74 b t& 0it& le%al interest fr m t&e date f t&e filin% f t&e respective ans0ers f t& se parties, 1/H f t&e principals as att rne!1s feesE 4. Orders t&at f t&e sum realiIed fr m t&e sale f t&e pr perties f P1A.,///.//, after deductin% t&e rec %niIed e9penses, ne-&alf t&ere f be ad?udicated unt plaintiffs, t&e c urt n l n%er specif!in% t&e s&are f eac& because f t&at ann unced intenti n under t&e stipulati n f facts t =p l t&eir res urces=E as t t&e t&er ne-&alf, t&e same s& uld be ad?udicated unt b t& plaintiffs, and defendant ,a&ican American and C nnell 2r s. in t&e pr p rti n alread! set f rt& n pa%e 9, lines 71, 77 and 76 f t&e b d! f t&is decisi nE but 0it& t&e understandin% t&at 0&atever plaintiffs and ,a&ican American and C nnell 2r s. s& uld receive fr m t&e P1A.,///.// dep sited in t&e C urt s&all be applied t t&e ?ud%ments particularl! rendered in fav r f eac&E .. * t&er pr n uncement as t c stsE but t&e c sts f t&e receivers&ip as t t&e debated pr perties s&all be b rne b! Pe ple1s 2an3, Atlantic Gulf, C nnell 2r s., and ,a&ican American )umber C ., pr -rata. On t&e f ll 0in% da!, t&e C urt issued t&e f ll 0in% supplementar! decisi n> +* $+8# #G8@8OD, t&e disp sitive part f t&e decisi n is &ereb! amended in rder t add t&e f ll 0in% para%rap& B> B. +f t&e sums menti ned in para%rap&s 1 and 7 are n t paid 0it&in ninet! :9/; da!s, t&e C urt rders t&e sale at public aucti n f t&e lands b?ect f t&e m rt%a%es t satisf! t&e said m rt%a%es and c sts f f recl sure. Dr m t&e ab ve-<u ted decisi n, all t&e parties appealed. "ain c ntenti ns f plaintiffs as appellants are t&e f ll 0in%> t&at t&e =after ac<uired pr perties= 0ere sub?ect t t&e deeds f m rt%a%e menti ned &eret f reE t&at said pr perties 0ere ac<uired fr m suppliers t&er t&an ,A"CO and CO**8))E t&at even %rantin% t&at ,A"CO and CO**8)) 0ere t&e real

suppliers, t&e rescissi n f t&e sales t ,A)CO c uld n t pre?udice t&e m rt%a%e lien in fav r f plaintiffsE t&at c nsiderin% t&e f re% in%, t&e pr ceeds btained fr m t&e sale f t&e =after ac<uired pr perties= as 0ell as t& se btained fr m t&e sale f t&e =undebated pr perties= in t&e t tal sum f P1A.,///.// s& uld &ave been a0arded e9clusivel! t plaintiffs b! reas n f t&e m rt%a%e lien t&e! &ad t&ere nE t&at dama%es s& uld &ave been a0arded t plaintiffs a%ainst defendants, all f t&em bein% %uilt! f an attempt t defraud t&e f rmer 0&en t&e! s u%&t t rescind t&e sales alread! menti ned f r t&e purp se f defeatin% t&eir m rt%a%e lien, and finall!, t&at defendants s& uld &ave been made t bear all t&e e9penses f t&e receivers&ip, c sts and att rne!1s fees. On t&e t&er &and, defendants-appellants c ntend t&at t&e trial c urt erred> firstl!, in n t & ldin% t&at plaintiffs &ad n cause f acti n a%ainst t&em because t&e pr miss r! n te sued up n 0as n t !et due 0&en t&e acti n t f recl se t&e m rt%a%es 0as c mmencedE sec ndl!, in n t & ldin% t&at t&e m rt%a%es af resaid 0ere null and v id as re%ards t&e =after ac<uired pr perties= f ,A)CO because t&e! 0ere n t re%istered in acc rdance 0it& t&e C&attel " rt%a%e )a0, t&e c urt errin%, as a c nse<uence, in & ldin% t&at said pr perties 0ere sub?ect t t&e m rt%a%e lien in fav r f plaintiffsE t&irdl!, in n t & ldin% t&at t&e pr visi n f t&e f urt& para%rap& f eac& f said m rt%a%es did n t aut maticall! ma3e sub?ect t suc& m rt%a%es t&e =after ac<uired pr perties=, t&e nl! meanin% t&ere f bein% t&at t&e m rt%a% r 0as 0illin% t c nstitute a lien ver suc& pr pertiesE f urt&l!, in n t rulin% t&at said stipulati n 0as v id as a%ainst ,A"CO and CO**8)) and in n t a0ardin% t&e pr ceeds btained fr m t&e sale f t&e =after ac<uired pr perties= t t&e latter e9clusivel!E fift&l!, in app intin% a @eceiver and in & ldin% t&at t&e dama%es suffered b! ,A"CO and CO**8)) b! reas n f t&e depreciati n r l ss in value f t&e =after ac<uired pr perties= placed under receivers&ip 0as damnum absque injuria and, c nse<uentl!, in n t a0ardin%, t said parties t&e c rresp ndin% dama%es claimed in t&eir c unterclaimE lastl!, in sentencin% ,A)CO and ,A"CO t pa! att rne!1s fees and in re<uirin% ,A"CO and CO**8)) t pa! t&e c sts f t&e @eceivers&ip, instead f sentencin% plaintiffs t pa! att rne!1s fees. Plaintiffs1 brief as appellants submit si9 assi%nments f err r, 0&ile t&at f defendants als as appellants submit a t tal f seventeen. G 0ever, t&e multifari us issues t&us bef re Cs ma! be res lved, directl! r indirectl!, b! decidin% t&e f ll 0in% issues> Dirstl!, are t&e s -called =after ac<uired pr perties= c vered b! and sub?ect t t&e deeds f m rt%a%e sub?ect f f recl sureJE sec ndl!, assumin% t&at t&e! are sub?ect t&eret , are t&e m rt%a%es valid and bindin% n t&e pr perties af resaid inspite f t&e fact t&at t&e! 0ere n t re%istered in acc rdance 0it& t&e pr visi ns f t&e

C&attel " rt%a%e )a0JE t&irdl!, assumin% a%ain t&at t&e m rt%a%es are valid and bindin% up n t&e =after ac<uired pr perties=, 0&at is t&e effect t&ere n, if an!, f t&e rescissi n f sales entered int , n t&e ne &and, bet0een ,A"CO and ,A)CO, and bet0een ,A)CO and CO**8)), n t&e t&erJE and lastl!, 0as t&e acti n t f recl se t&e m rt%a%es prematureJ A. Cnder t&e f urt& para%rap& f b t& deeds f m rt%a%e, it is cr!stal clear t&at all pr pert! f ever! nature and descripti n ta3en in e9c&an%e r replacement, as 0ell as all buildin%s, mac&ineries, fi9tures, t ls, e<uipments, and t&er pr pert! t&at t&e m rt%a% r ma! ac<uire, c nstruct, install, attac&E r use in, t up n, r in c nnecti n 0it& t&e premises ' t&at is, its lumber c ncessi n ' =s&all immediatel! be and bec me sub?ect t t&e lien= f b t& m rt%a%es in t&e same manner and t t&e same e9tent as if alread! included t&erein at t&e time f t&eir e9ecuti n. As t&e lan%ua%e t&us used leaves n r m f r d ubt as t t&e intenti n f t&e parties, #e see n useful purp se in discussin% t&e matter e9tensivel!. Suffice it t sa! t&at t&e stipulati n referred t is c mm n, and #e mi%&t sa! l %ical, in all cases 0&ere t&e pr perties %iven as c llateral are peris&able r sub?ect t inevitable 0ear and tear r 0ere intended t be s ld, r t be used ' t&us bec min% sub?ect t t&e inevitable 0ear and tear ' but 0it& t&e understandin% ' e9press r implied ' t&at t&e! s&all be replaced 0it& t&ers t be t&ereafter ac<uired b! t&e m rt%a% r. Suc& stipulati n is neit&er unla0ful n r imm ral, its bvi us purp se bein% t maintain, t t&e e9tent all 0ed b! circumstances, t&e ri%inal value f t&e pr perties %iven as securit!. +ndeed, if suc& pr perties 0ere f t&e nature alread! referred t , it 0 uld be p r ?ud%ment n t&e part f t&e credit r 0& d es n t see t it t&at a similar pr visi n is included in t&e c ntract. 2. 2ut defendants c ntend t&at, %rantin% 0it& ut admittin%, t&at t&e deeds f m rt%a%e in <uesti n c ver t&e =after ac<uired pr perties= f ,A)CO, t&e same are v id and ineffectual because t&e! 0ere n t re%istered in acc rdance 0it& t&e C&attel " rt%a%e )a0. +n supp rt f t&is and f t&e pr p siti n t&at, even if said m rt%a%es 0ere valid, t&e! s& uld n t pre?udice t&em, t&e defendants ar%ue :1; t&at t&e deeds d n t describe t&e m rt%a%ed c&attels specificall!, n r 0ere t&e! re%istered in acc rdance 0it& t&e C&attel " rt%a%e )a0E :7; t&at t&e stipulati n c ntained in t&e f urt& para%rap& t&ere f c nstitutes =mere e9ecut r! a%reements t %ive a lien= ver t&e =after ac<uired pr perties= up n t&eir ac<uisiti nE and :6; t&at an! m rt%a%e stipulati n c ncernin% =after ac<uired pr perties= s& uld n t pre?udice credit rs and t&er t&ird pers ns suc& as ,A"CO and CO**8)). (&e stipulati n under c nsiderati n str n%l! belies defendants c ntenti n. As adverted t &ereinbef re, it states t&at all pr pert! f ever! nature, buildin%, mac&iner! etc. ta3en in e9c&an%e r replacement b! t&e m rt%a% r =s&all

immediatel! be and bec me sub?ect t t&e lien f t&is m rt%a%e in t&e same manner and t t&e same e9tent as if n 0 included t&erein=. * clearer lan%ua%e c uld &ave been c& sen. C ncedin%, n t&e t&er &and, t&at it is t&e la0 in t&is ?urisdicti n t&at, t affect t&ird pers ns, a c&attel m rt%a%e must be re%istered and must describe t&e m rt%a%ed c&attels r pers nal pr perties sufficientl! t enable t&e parties and an! t&er pers n t identif! t&em, #e sa! t&at suc& la0 d es n t appl! t t&is case. As t&e m rt%a%es in <uesti n 0ere e9ecuted n 5ul! 16, 19./ 0it& t&e ld Civil C de still in f rce, t&ere can be n d ubt t&at t&e pr visi ns f said c de must % vern t&eir interpretati n and t&e <uesti n f t&eir validit!. +t &appens & 0ever, t&at Articles 664 and 18AA f t&e ld Civil C de are substantiall! repr duced in Articles 41. and 717A, respectivel!, f t&e ne0 Civil C de. +t is, t&eref re, immaterial in t&is case 0&et&er 0e ta3e t&e f rmer r t&e latter as %uide in decidin% t&e p int under c nsiderati n. Article 41. d es n t define real pr pert! but enumerates 0&at are c nsidered as suc&, am n% t&em bein% mac&iner!, receptacles, instruments r replacements intended b! 0ner f t&e tenement f r an industr! r 0 r3s 0&ic& ma! be carried n in a buildin% r n a piece f land, and s&all tend directl! t meet t&e needs f t&e said industr! r 0 r3s. On t&e stren%t& f t&e ab ve-<u ted le%al pr visi ns, t&e l 0er c urt &eld t&at inasmuc& as =t&e c&attels 0ere placed in t&e real pr perties m rt%a%ed t plaintiffs, t&e! came 0it&in t&e perati n f Art. 41., para%rap& . and Art. 717A f t&e *e0 Civil C de=. #e find t&e ab ve rulin% in a%reement 0it& ur decisi ns n t&e sub?ect> :1; +n Berkenkotter vs. Cu Unjieng, B1 P&il. BB6, #e &eld t&at Article 664, para%rap& . f t&e Civil C de : ld; %ives t&e c&aracter f real pr pert! t mac&iner!, li<uid c ntainers, instruments r replacements intended b! t&e 0ner f an! buildin% r land f r use in c nnecti n 0it& an! industr! r trade bein% carried n t&erein and 0&ic& are e9pressl! adapted t meet t&e re<uirements f suc& trade r industr!. :7; +n Cu Unjieng e Hijos vs. Mabalacat Sugar Co., .8 P&il. 469, #e &eld t&at a m rt%a%e c nstituted n a su%ar central includes n t nl! t&e land n 0&ic& it is built but als t&e buildin%s, mac&iner! and access ries installed at t&e time t&e

m rt%a%e 0as c nstituted as 0ell as t&e buildin%s, mac iner! and accessories bel n%in% t t&e m rt%a% r, installed a"ter t e constitution t ereo" . +t is n t disputed in t&e case at bar t&at t&e =after ac<uired pr perties= 0ere purc&ased b! ,A)CO in c nnecti n 0it&, and f r use in t&e devel pment f its lumber c ncessi n and t&at t&e! 0ere purc&ased in additi n t , r in replacement f t& se alread! e9istin% in t&e premises n 5ul! 16, 19./. +n )a0, t&eref re, t&e! must be deemed t &ave been immobili#ed, 0it& t&e result t&at t&e real estate m rt%a%es inv lved &erein ' 0&ic& 0ere re%istered as suc& ' did n t &ave t be re%istered a sec nd time as c&attel m rt%a%es in rder t bind t&e =after ac<uired pr perties= and affect t&ird parties. 2ut defendants, inv 3in% t&e case f $avao Sa%mill Compan! vs. Castillo, B1 P&il. A/9, claim t&at t&e =after ac<uired pr perties= did n t bec me immobili#ed because ,A)CO did n t 0n t&e 0& le area f its lumber c ncessi n all ver 0&ic& said pr perties 0ere scattered. (&e facts in t&e ,ava Sa0mill case, & 0ever, are n t n all f urs 0it& t&e nes btainin% in t&e present. +n t&e f rmer, t&e ,ava Sa0mill C mpan!, +nc., &ad repeatedl! treated t&e mac&iner! t&erein inv lved as personal propert! b! e9ecutin% c&attel m rt%a%es t&ere n in fav r f t&ird parties, 0&ile in t&e present case t&e parties &ad treated t&e =after ac<uired pr perties= as real properties b! e9pressl! and une<uiv call! a%reein% t&at t&e! s&all aut maticall! bec me sub?ect t t&e lien f t&e real estate m rt%a%es e9ecuted b! t&em. +n t&e ,ava Sa0mill decisi n it 0as, in fact, stated t&at =t&e c&aracteriIati n f t&e pr pert! as c&attels b! t&e appellant is indicative f intenti n and impresses upon t e propert! t e c aracter determined b! t e parties= :B1 P&il. 117, emp&asis supplied;. +n t&e present case, t&e c&aracteriIati n f t&e =after ac<uired pr perties= as real pr pert! 0as made n t nl! b! ne but b! b t& interested parties. (&ere is, t&eref re, m re reas n t & ld t&at suc& c nsensus impresses up n t&e pr perties t&e c&aracter determined b! t&e parties 0& must n 0 be &eld in est ppel t <uesti n it. " re ver, <u ted in t&e ,ava Sa0mill case 0as t&at f &alde# vs. Central 'ltagracia, (nc. :77. C.S. .8; 0&ere it 0as &eld t&at 0&ile under t&e %eneral la0 f Puert @ic , mac&iner! placed n pr pert! b! a tenant d es n t bec me imm biliIed, !et, 0&en t&e tenant places it t&ere pursuant t c ntract t&at it s&all bel n% t t&e 0ner, it t&en bec mes imm biliIed as to t at tenant and even as a%ainst &is assi%nees and credit rs 0& &ad sufficient n tice f suc& stipulati n. +n t&e case at bar it is n t disputed t&at ,A)CO purc&ased t&e =after ac<uired pr perties= t be placed n, and be used in t&e devel pment f its lumber c ncessi n, and a%reed furt&er t&at t&e same s&all bec me immediatel! sub?ect t

t&e lien c nstituted b! t&e <uesti ned m rt%a%es. (&ere is als abundant evidence in t&e rec rd t&at ,A"CO and CO**8)) &ad full n tice f suc& stipulati n and &ad never t& u%&t f disputed validit! until t&e present case 0as filed. C nse<uentl! all f t&em must be deemed barred fr m den!in% t&at t&e pr perties in <uesti n &ad bec me immobili#ed. #&at #e &ave said &eret f re sufficientl! disp ses all t&e ar%uments adduced b! defendants in supp rt t&eir c ntenti n t&at t&e m rt%a%es under f recl sure are v id, and, t&at, even if valid, are ineffectual as a%ainst ,A"CO and CO**8)). * 0 t t&e <uesti n f 0&et&er r n t ,A"CO CO**8)) &ave ri%&ts ver t&e =after ac<uired pr perties= superi r t t&e m rt%a%e lien c nstituted t&ere n in fav r f plaintiffs. +t is defendants1 c ntenti n t&at in relati n t said pr perties t&e! are =unpaid sellers=E t&at as suc& t&e! &ad n t nl! a superi r lien n t&e =after ac<uired pr perties= but als t&e ri%&t t rescind t&e sales t&ere f t ,A)CO. (&is c ntenti n ' it is bvi us ' 0 uld &ave validit! nl! if it 0ere true t&at ,A"CO and CO**8)) 0ere t&e suppliers r vend rs f t&e =after ac<uired pr perties=. Acc rdin% t t&e rec rd, plaintiffs did n t 3n 0 t&eir e9act identit! and descripti n pri r t t&e filin% f t&e case bar because ,A)CO, in vi lati n f its bli%ati n under t&e m rt%a%es, &ad failed and refused t&eret f re t submit a c mplete list t&ere f. +n t&e c urse f t&e pr ceedin%s, & 0ever, 0&en defendants m ved t diss lve t&e rder f receivers&ip and t&e 0rit f preliminar! in?uncti n issued b! t&e l 0er c urt, t&e! attac&ed t t&eir m ti n t&e lists mar3ed as 89&ibits 1, 7 and 6 describin% t&e pr perties af resaid. )ater n, t&e parties a%reed t c nsider said lists as identif!in% and describin% t&e =after ac<uire pr perties,= and en%a%ed t&e services f audit rs t e9amine t&e b 3s f ,A)CO s as t brin% ut t&e details t&ere f. (&e rep rt f t&e audit rs and its anne9es :89&ibits $, $-1 ' $4; s& 0 t&at neit&er ,A"CO n r CO**8)) &ad supplied an! f t&e % ds f 0&ic& t&e! respective claimed t be t&e unpaid sellerE t&at all items 0ere supplied b! different parties, neit&er f 0& m appeared t be ,A"CO r CO**8)) t&at, in fact, CO**8)) c llected a .H service c&ar%e n t&e net value f all items it claims t &ave s ld t ,A)CO and 0&ic&, in trut&, it &ad purc&ased f r ,A)CO as t&e latter1s %eneral a%entE t&at CO**8)) &ad t issue its 0n inv ices in additi n t t& se f t&e real suppliers in rder t c llect and ?ustif! suc& service c&ar%e. (a3in% int acc unt t&e ab ve circumstances t %et&er 0it& t&e fact t&at ,A"CO 0as a st c3& lder and CO**8)) 0as n t nl! a st c3& lder but t&e %eneral a%ent f ,A)CO, t&eir claim t be t&e suppliers f t&e =after ac<uired re<uired pr perties= 0 uld seem t be prep ster us. (&e m st t&at can be claimed n t&e basis f t&e evidence is t&at ,A"CO and CO**8)) pr babl! financed s me f

t&e purc&ases. 2ut if ,A)CO still 0es t&em an! am unt in t&is c nnecti n, it is clear t&at, as "inanciers, t&e! can n t claim an! ri%&t ver t&e =after ac<uired pr perties= superi r t t&e lien c nstituted t&ere n b! virtue f t&e deeds f m rt%a%e under f recl sure. +ndeed, t&e e9ecuti n f t&e rescissi n f sales menti ned &eret f re appears t be but a desperate attempt t better r impr ve ,A"CO and CO**8))1s p siti n b! enablin% t&em t assume t&e r le f =unpaid suppliers= and t&us claim a vend r1s lien ver t&e =after ac<uired pr perties=. (&e attempt, f c urse, is utterl! ineffectual, n t nl! because t&e! are n t t&e =unpaid sellers= t&e! claim t be but als because t&ere is abundant evidence in t&e rec rd s& 0in% t&at b t& ,A"CO and CO**8)) &ad 3n 0n and admitted fr m t&e be%innin% t&at t&e =after ac<uired pr perties= f ,A)CO 0ere meant t be included in t&e first and sec nd m rt%a%es under f recl sure. (&e claim t&at 2elden, f A()A*(+C, &ad %iven &is c nsent t t&e rescissi n, e9pressl! r t&er0ise, is f n c nse<uence and d es n t ma3e t&e rescissi n valid and le%all! effective. +t must be stated clearl!, & 0ever, in ?ustice t 2elden, t&at, as a member f t&e 2 ard f ,irect rs f ,A)CO, &e pp sed t&e res luti n f ,ecember 1., 19.7 passed b! said 2 ard and t&e subse<uent rescissi n f t&e sales. Dinall!, defendants claim t&at t&e acti n t f recl se t&e m rt%a%es filed n Debruar! 17, 19.6 0as premature because t&e pr miss r! n te sued up n did n t fall due until April 1 f t&e same !ear, c ncludin% fr m t&is t&at, 0&en t&e acti n 0as c mmenced, t&e plaintiffs &ad n cause f acti n. Cp n t&is <uesti n t&e l 0er c urt sa!s t&e f ll 0in% in t&e appealed ?ud%mentE (&e t&er is t&e defense f prematurit! f t&e causes f acti n in t&at plaintiffs, as a matter f %race, c nceded an e9tensi n f time t pa! up t 1 April, 19.6 0&ile t&e acti n 0as filed n 17 Debruar!, 19.6, but, as t t&is, t&e C urt ta3in% it t&at t&ere is abs lutel! n debate t&at ,a&ican )umber C ., 0as ins lvent as f t&e date f t&e filin% f t&e c mplaint, it s& uld f ll 0 t&at t&e debt r t&ereb! l st t&e benefit t t&e peri d. 9 9 9 unless &e %ives a %uarant! r securit! f r t&e debt . . . :Art. 1198, *e0 Civil C de;E and as t&e %uarant! 0as plainl! inade<uate since t&e claim f plaintiffs reac&ed in t&e a%%re%ate, P1,7//,/// e9cludin% interest 0&ile t&e a%%re%ate price f t&e =after-ac<uired= c&attels claimed b! C nnell under t&e rescissi n c ntracts 0as P1,B14,BA..94, 89&. 1, 89&. $, rep rt f audit rs, and as a matter f fact, alm st all t&e pr perties 0ere s ld after0ards f r

nl! P1A.,///.//, pa%e 4A, $ l. +$, and t&e C urt understandin% t&at 0&en t&e la0 permits t&e debt r t en? ! t&e benefits f t&e peri d n t0it&standin% t&at &e is ins lvent b! &is %ivin% a %uarant! f r t&e debt, t&at must mean a ne0 and efficient %uarant!, must c ncede t&at t&e causes f acti n f r c llecti n f t&e n tes 0ere n t premature. $er! little need be added t t&e ab ve. ,efendants, & 0ever, c ntend t&at t&e l 0er c urt &ad n basis f r findin% t&at, 0&en t&e acti n 0as c mmenced, ,A)CO 0as ins lvent f r purp ses related t Article 1198, para%rap& 1 f t&e Civil C de. #e find, & 0ever, t&at t&e findin% f t&e trial c urt is sufficientl! supp rted b! t&e evidence particularl! t&e res luti n mar3ed as 89&ibit 4, 0&ic& s& 0s t&at n ,ecember 1B, 19.7 ' in t&e 0 rds f t&e C&airman f t&e 2 ard ' ,A)CO 0as =0it& ut funds, neit&er d es it e9pect t &ave an! funds in t&e f reseeable future.= :p. B4, rec rd n appeal;. (&e remainin% issues, namel!, 0&et&er r n t t&e pr ceeds btained fr m t&e sale f t&e =after ac<uired pr perties= s& uld &ave been a0arded e9clusivel! t t&e plaintiffs r t ,A"CO and CO**8)), and if in la0 t&e! s& uld be distributed am n% said parties, 0&et&er r n t t&e distributi n s& uld be pr -rata r t&er0iseE 0&et&er r n t plaintiffs are entitled t dama%esE and, lastl!, 0&et&er r n t t&e e9penses incidental t t&e @eceivers&ip s& uld be b rne b! all t&e parties n a pr rata basis r e9clusivel! b! ne r s me f t&em are f a sec ndar! nature as t&e! are alread! impliedl! res lved b! 0&at &as been said &eret f re. As re%ard t&e pr ceeds btained fr m t&e sale f t&e f after ac<uired pr perties= and t&e =undebated pr perties=, it is clear, in vie0 f ur pini n sustainin% t&e validit! f t&e m rt%a%es in relati n t&eret , t&at said pr ceeds s& uld be a0arded e9clusivel! t t&e plaintiffs in pa!ment f t&e m ne! bli%ati ns secured b! t&e m rt%a%es under f recl sure. On t&e <uesti n f plaintiffs1 ri%&t t rec ver dama%es fr m t&e defendants, t&e la0 :Articles 1616 and 1614 f t&e *e0 Civil C de; pr vides t&at credit rs are pr tected in cases f c ntracts intended t defraud t&emE and t&at an! t&ird pers n 0& induces an t&er t vi late &is c ntract s&all be liable f r dama%es t t&e t&er c ntractin% part!. Similar liabilit! is demandable under Arts. 7/ and 71 ' 0&ic& ma! be %iven retr active effect :Arts. 77.7.6; ' r under Arts. 19/7 and 71AB f t&e Old Civil C de. (&e facts f t&is case, as stated &eret f re, clearl! s& 0 t&at ,A)CO and ,A"CO, after failin% t pa! t&e fift& pr miss r! n te up n its maturit!, c nspired ? intl!

0it& CO**8)) t vi late t&e pr visi ns f t&e f urt& para%rap& under f recl sure b! attemptin% t defeat plaintiffs1 m rt%a%e lien ac<uired pr perties=. As a result, t&e plaintiffs &ad t % t c urt t ri%&ts t&us ?e pardiIed. ,efendants1 liabilit! f r dama%es is t&eref

f t&e m rt%a%es n t&e =after pr tect t&eir re clear.

G 0ever, t&e measure f t&e dama%es suffered b! t&e plaintiffs is n t 0&at t&e latter claim, namel!, t&e difference bet0een t&e alle%ed t tal bli%ati n secured b! t&e m rt%a%es am untin% t ar und P1,7//,///.//, plus t&e stipulated interest and att rne!1s fees, n t&e ne &and, and t&e pr ceeds btained fr m t&e sale f =after ac<uired pr perties=, and f t& se t&at 0ere n t claimed neit&er b! ,A"CO n r CO**8)), n t&e t&er. C nsiderin% t&at t&e sale f t&e real pr perties sub?ect t t&e m rt%a%es under f recl sure &as n t been effected, and c nsiderin% furt&er t&e lac3 f evidence s& 0in% t&at t&e true value f all t&e pr perties alread! s ld 0as n t realiIed because t&eir sale 0as under stress, #e feel t&at #e d n t &ave bef re Cs t&e true elements r fact rs t&at s& uld determine t&e am unt f dama%es t&at plaintiffs are entitled rec ver fr m defendants. +t is, & 0ever, ur c nsidered pini n t&at, up n t&e facts establis&ed, all t&e e9penses f t&e @eceivers&ip, 0&ic& 0as deemed necessar! t safe%uard t&e ri%&ts f t&e plaintiffs, s& uld be b rne b! t&e defendants, ? intl! and severall!, in t&e same manner t&at all f t&em s& uld pa! t t&e plaintiffs, ? intl! a severall!, att rne!1s fees a0arded in t&e appealed ?ud%ment. +n c ns nance 0it& t&e p rti n f t&is decisi n c ncernin% t&e dama%es t&at t&e plaintiffs are entitled t rec ver fr m t&e defendants, t&e rec rd f t&is case s&all be remanded bel 0 f r t&e c rresp ndin% pr ceedin%s. " dified as ab ve indicated, t&e appealed ?ud%ment is affirmed in all t&er respects. #it& c sts.

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