6. Servicewide Specialists, Incorporated vs. Court of Appeals, 251 SCRA 70, G.R. No.

103301

Facts:

- August 29, 1977: Eleuterio Bondoc executed a promissory note in favor of Carmark Philippines.
He also executed a chattel mortgage in favour of Carmark over a Colt Gallant Sigma 1600E, 1977
model, 4-door sedan.
- July 27, 1979: Eleuterio Bondoc executed a deed of sale with assumption of mortgage of the
balance of the account in favor of Cesar Dollente. The former also executed a promissory note in
favour of Filinvest Corporation in connection with the aforementioned transaction.
- October 26, 1979: Cesar Dollente executed a deed of sale with assumption of mortgage over the
aforementioned vehicle for the balance of his account in favor of Ernesto Dollente. The latter
also executed a promissory note in favour of Filinvest.
- Subsequently, Filinvest Corporation assigned all its rights and interests on the promissory note
and chattel mortgage to Servicewide Specialists, Incorporated (THE PETITIONER).
- Subsequently Ernesto Dollente defaulted. Petitioner demanded payment of the full amount and
the vehicle in question. Ernesto refused. As such, petitioner filed a case with a writ of seizure
with Ernesto as the original defendant . A counter-replevin bond was filed.
- However, the facts of the case shows that a certain Armando Custodio, Jr. obtained said vehicle
from Ernesto Dollente. Said Armando Custodio, Jr. is the private respondent in the present case.
(The case against Ernesto was dismissed at the insistence of the petitioner).
- RTC: Ernesto Dollente’s breach of chattel mortgage is binding upon Armando as said mortgage
was registered and is sufficient notice as to the latter.
- CA: Reversed the lower court. The dismissal of the complaint against Ernesto Dollente has
robbed the action of any cause for survival because the same was an indispensable party to the
case. The replevin suit owed its existence to an alleged right to possession of the motor vehicle,
which right in turn was founded on the alleged default of Dollente.

Issue:

Whether or not an action filed by the mortgagee for replevin to effect a foreclosure of the property
covered by the chattel mortgage would require that the mortgagor be so impleaded as an indispensable
party thereto.

Held:

Yes, an action filed by the mortgagee for replevin to effect a foreclosure of the property covered by
the chattel mortgage would require that the mortgagor be so impleaded as an indispensable party
thereto.

Rule 60 of the Rules of Court allows a plaintiff, in an action for the recovery of possession of personal
property, to apply for a writ of replevin if it can be shown that he is “the owner of the property claimed
x x x or is entitled to the possession thereof.” The question then, insofar as the matter finds relation to
the instant case, is whether or not the plaintiff (herein petitioner) who has predicated his right on being
the mortgagee of a chattel mortgage should implead the mortgagor in his complaint that seeks to
recover possession of the encumbered property in order to effect its foreclosure.

The answer has to be in the affirmative. In a suit for replevin, a clear right of possession must be
established. A foreclosure under a chattel mortgage may properly be commenced only once there is
default on the part of the mortgagor of his obligation secured by the mortgage. The conditions essential
for that foreclosure would be to show, firstly, the existence of the chattel mortgage and, secondly, the
default of the mortgagor. These requirements must be established since the validity of the plaintiff’s
exercise of the right of foreclosure are inevitably dependent thereon.

The Supreme Court ruled the following in Imson v. CA:

“An indispensable party is one whose interest will be affected by the court’s action in the litigation, and
without whom no final determination of the case can be had. The party’s interest in the subject matter of
the suit and in the relief sought are so inextricably intertwined with the other parties that his legal
presence as a party to the proceeding is an absolute necessity. In his absence there cannot be a
resolution of the dispute of the parties before the court which is effective, complete, or equitable.”

Without the presence of indispensable parties to a suit or proceeding, a judgment of a court cannot
attain real finality.

And as applied in the present case, Ernesto Dollente is an indispensable party as he is the mortgagor in
the instant case. Hence, The Supreme Court ruled in favour of the private respondent and affirmed the
CA.
11. Advent Capital and Finance Corporation vs. Young, 655 SCRA 118, G.R. No. 183018 August 3, 2011

Facts:

- July 16, 2001: Advent Capital and Finance Corporation (Advent) filed for corporate rehabilitation
with the Regional Trial Court of Makati City, Branch 142 (rehabilitation court). A stay order as to
the claims against said corporation was subsequently granted.
- November 5, 2001: Respondent Young filed his comment to said Petition for Rehabilitation,
stating that he is entitled to employee benefits (among others).
- November 6, 2002: The rehabilitation court approved the rehabilitation plan submitted by
Advent. Included in the inventory of Advent’s assets was the subject car which remained in
Young’s possession at the time. Young refused to return said car, causing Advent to file a
replevin case on July 8, 2003.
- Regional Trial Court of Makati City, Branch 147 (trial court) then issued a Writ of Seizure after
Advent filed the replevin bond (P 3,000,000, double the amount of the car). Upon receipt of the
Writ of Seizure, Young turned over the car to Advent, which delivered the same to the
rehabilitation receiver.
- Thereafter, Young filed an Answer alleging that as a former employee of Advent, he had the
option to purchase the subject car at book value pursuant to the company car plan and to offset
the value of the car with the proceeds of his retirement pay and stock option plan.
- April 28, 2005: RTC dismissed the replevin case for Advent’s failure to prosecute. In the same
order, the trial court dismissed Young’s counterclaim against Advent for lack of jurisdiction.
- June 10, 2005: Young filed a motion for partial reconsideration of the dismissal order with
respect to his counterclaim. July 8, 2005: Young filed an omnibus motion, praying that Advent
return the subject car and pay him P1.2 million in damages “(f)or the improper and irregular
seizure” of the subject car, to be charged against the replevin bond posted by Advent through
Stronghold.
- However Young’s motion for partial reconsideration was denied as the lower court held that the
replevin was duly issued and that petitioner must remain in possession of said vehicle
notwithstanding the dismissal of said replevin case because the same was dismissed without a
decision on the merits having been rendered. A subsequent for Partial Reconsideration by Young
was also dismissed. Young’s Omnibus Motion was also denied. This pushed Young to file a
petition for certiorari and mandamus with the Court of Appeals.
- CA: Ruled in favour of Young and reversed the trial court. CA held that upon dismissal of the
case, the writ of seizure issued as an incident of the main action (for replevin) became functus
officio and should have been recalled or lifted. Young’s claims were also allowed. A subsequent
MR was filed by Advent but the same was dismissed.

Issues:

1. Whether or not the Court of Appeals committed reversible error in directing the return of the
seized car to Young.
 2. Whether or not the Court of Appeals committed reversible error ordering the trial court to set a
hearing for the determination of damages against the replevin bond.

Held:

1. No, the Court of Appeals did not commit a reversible error in directing the return of the seized
car to Young.

Upon the dismissal of the replevin case for failure to prosecute, the writ of seizure, which is
merely ancillary in nature, became functus officio (of no further official authority or legal
effect) and should have been lifted. There was no adjudication on the merits, which means that
there was no determination of the issue who has the better right to possess the subject car.
Advent cannot therefore retain possession of the subject car considering that it was not
adjudged as the prevailing party entitled to the remedy of replevin.

Advent’s contention that returning the subject car to Young would constitute a violation of the
stay order issued by the rehabilitation court is untenable. As the Court of Appeals correctly
concluded, returning the seized vehicle to Young is not an enforcement of a claim against
Advent which must be suspended by virtue of the stay order issued by the rehabilitation court
pursuant to Section 6 of the Interim Rules on Corporate Rehabilitation (Interim Rules).

2. Yes, the Court of Appeals committed reversible error ordering the trial court to set a hearing
for the determination of damages against the replevin bond.

Section 10, Rule 60 of the Rules of Court governs claims for damages on account of improper or
irregular seizure in replevin cases. It provides that in replevin cases, as in receivership and
injunction cases, the damages to be awarded upon the bond “shall be claimed, ascertained, and
granted” in accordance with Section 20 of Rule 57. The same provides that an application for
damages on account of improper, irregular or excessive attachment must be filed before the
trial or before appeal is perfected or before the judgment becomes executor.

In this case, there was no application for damages against Stronghold resulting from the
issuance of the writ of seizure before the finality of the dismissal of the complaint for failure to
prosecute. It appears that Young filed his omnibus motion claiming damages against Stronghold
after the dismissal order issued by the trial court on 28 April 2005 had attained finality. While
Young filed a motion for partial reconsideration on 10 June 2005, it only concerned the dismissal
of his counterclaim, without any claim for damages against the replevin bond. Thus, Young is
barred from claiming damages against the replevin bond.