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PERFECTO DY v. CA

FACTS:

Perfecto Dy wanted to purchase a farm tractor from his brother, Wilfredo Dy, who had purchased the tractor through financing from Libra Finance and Investment Corporation. Perfecto wrote a letter to Libra to request the purchase of the tractor and to assume the mortgage debt of his brother, which was approved. Wilfredo executed a deed of absolute sale in favor of Perfecto for the tractor. However, the tractor remained in the possession of Libra Finance because Wilfredo failed to pay the amortizations. Despite Perfecto's offer of full payment to Libra for the tractor, the release of the tractor was delayed as Libra insisted on full payment for both the tractor and the truck, which Wilfredo had also obtained financing for. To facilitate full payment, Perfecto persuaded his sister to purchase the truck. The payment was made through a check issued to Libra, but Libra insisted on clearing the check before releasing the tractor. Meanwhile, there was a pending collection case against Wilfredo, resulting in the issuance of an alias writ of execution. As a result, the sheriff seized and levied the tractor, which was later sold at a public auction to Gelac Trading. Gelac Trading then sold the tractor to one of its stockholders, Antonio Gonzales. Upon learning about the sale, Perfecto filed an action to recover the tractor. The RTC ruled in favor of Perfecto, but the Court of Appeals reversed the decision, claiming that the tractor still belonged to Wilfredo when it was seized and levied. Perfecto now seeks a reversal of the Court of Appeals decision.

ISSUES:

  1. Whether ownership of the farm tractor had already passed to the petitioner when it was levied on by the sheriff pursuant to an alias writ of execution issued in another case in favor of respondent Gelac Trading Inc.

  2. Whether the sale of the tractor to the petitioner was done in fraud of Wilfredo Dy's creditors.

  3. Whether the sale of the tractor by Gelac Trading to its co-respondent Antonio V. Gonzales, after both respondents already knew of the filing of the instant case, was violative of the human relations provisions of the Civil Code and rendered them liable for moral and exemplary damages.

RULING:

  1. The Court of Appeals held that ownership of the farm tractor still belonged to Wilfredo Dy when it was seized and levied by the sheriff by virtue of the alias writ of execution issued in another case. The Court of Appeals also dismissed the petitioners' claims of fraud and the respondents' liability for moral and exemplary damages.

PRINCIPLES:

  • In a chattel mortgage, the mortgagor continues to be the owner of the property and has the power to alienate it, subject to securing the written consent of the mortgagee. The absence of the mortgagee's consent affects the penal liability of the mortgagor, but not the validity of the sale. The sale is still binding on the parties involved.

  • Ownership of a property is determined by the actual delivery of the property, or in the case of movables, by the voluntary delivery of the keys or other means of control. Constructive delivery can be effected through written consent or agreement between the parties.