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G.R. Nos.

L-10837-38 May 30, 1958 ownership in virtue of the award given

during bidding.
SURETY COMPANY, INC., plaintiff, Iya alleged that she acquired a real right
vs. over the lot and the house constructed
ISABEL IYA, ADRIANO VALINO and thereon, and that the auction sale resulting
LUCIA VALINO, defendants. from the foreclosure of chattel mortgage
was null and void.
Valino & Valino were the owners and Surety company argued that as the lot on
possessors of a house of strong materials in which the house was constructed did not
Rizal, which they purchased on installment belong to the spouses at the time the chattel
basis. To enable her to purchase on credit mortgage was executed, the house might be
rice from NARIC, Valino filed a bond considered as personal property, and they
(P11,000) subscribed by Associated prayed that the said building be excluded
Insurance and Surety Co Inc, and as a from the real estate mortgage.
counter-guaranty, Valino executed an
alleged chattel mortgage on the Issue:
aforementioned house in favour of the surety There is no question over Iyas right over
company. At the same time, the parcel of the land by real estate mortgage; however,
land which the house was erected was as the building instructed thereon has been
registered in the name of Philippine Realty the subject of two mortgages, controversy
Corporation. arise as to which of these encumbrances
should receive preference over the other.
Valino, to secure payment of an
indebtedness (P12,000) executed a real Held:
estate mortgage over the lot and the house in The building is subject to the real estate
favour of Iya. mortgage, in favour of Iya. Iyas right to
foreclose not only the land but also the
Valino failed to satisfy her obligation to building erected thereon is recognised.
NARIC, so the surety company was
compelled to pay the same pursuant to the While it is true that real estate connotes the
undertaking of the bond. In turn, surety land and the building constructed thereon, it
company demanded reimbursement from is obvious that the inclusion of the building,
Valino, and as they failed to do so, the separate and distinct from the land, in the
company foreclosed the chattel mortgage enumeration of what may constitute real
over the house. As a result, public sale was properties (Article 415), could only mean
conducted and the property was awarded to that a building is by itself an immovable
the surety company. property. Moreover, in view of the absence
of any specific provision to the contrary, a
The surety company then learned of the building is an immovable property
existence of the real estate mortgage over irrespective of whether or not said structure
the lot and the improvements thereon; thus, and the land on which it is adhered to belong
they prayed for the exclusion of the to the same owner.
residential house from the real estate
mortgage and the declaration of its
A building certainly cannot be divested of its
character of a realty by the fact that the land
on which it is constructed belongs to

In the case at bar, as personal properties

could only be the subject of a chattel
mortgage and as obviously the structure in
question is not one, the execution of the
chattel mortgage covering said building is
clearly invalid and a nullity. While it is true
that said document was correspondingly
registered in Chattel Mortgage Registry of
Rizal, this act produced no effect
whatsoever, for where the interest conveyed
is in the nature of real property, the
registration of the document in the registry
of chattels is merely a futile act. Thus, the
registration of the chattel mortgage of a
building of strong materials produced no
effect as far as the building is concerned