CASE DIGEST: ASSOCIATED INSURANCE AND SURETY COMPANY v. IYA ET AL.

G.R. Nos. L-10837-38. May 30, 1958. ASSOCIATED INSURANCE AND SURETY COMPANY v. IYA ET AL.; IYA VS. VALINO ET AL.

FACTS: 

Spouses Valino executed two mortgages in favor of different mortgagees. The first was a chattel mortgage in favor of Associated Insurance covering the house. The second was a real estate mortgage in favor of Iya over the same house and lot. Spouses Valino failed to pay both of their obligations. Associated Insurance then foreclosed the property but was shocked of the existence of another mortgage over the house. Associated insurance then asked for preferential right over the said mortgaged house. In turn, Iya questioned the validity of the subject contract of the chattel mortgage. Hence, this petition.

ISSUE: 

May Associated Insurance rightfully demand for the exclusion of the house from the foreclosure of real estate mortgage by Iya?

RULING: 

No, because a mortgage creditor who purchases real properties at an extrajudicial foreclosure sale thereof by virtue of a chattel mortgage constituted in his favor is null and void with respect to real properties and he acquires no right thereto.

In the case at bar, since the house is the subject of the chattel mortgage, it is clearly null and void.