UY VS ZAMORA

FACTS:

In the instance of plaintiff Uy, the Municipal Court ordered to attach the motor
vehicle belonging to defendant Zamora. The Municipal Court rendered judgement for Uy
and ordered Zamora to pay the sum of 1,740 pesos plus interest of 12% and the judgement
was appealed to CFI.

While the case ws pending Allied Finance Inc. was allowed to intervene, and
according to them the motor vehicle attached by the sheriff was previously mortgaged to
them by Zamora for the payment of a loan for 3,600 pesos, and that at the time of the filing
of the complaint in intervention there remained a balance of 2451.93. They prayed that
Zamora was to pay the remaining balance with attorney’ fees.

Uy and Zamora submitted a compromise agreement wherein Zamora admitted to be

indebted to Uy. Because the vehicle was already sold on order of the court to prevent
depreciation, Zamora agreed to have Uy’s credit paid out of the proceeds of the sale, but
there was not enough money to pay both claims. The lower court ruled in favor of the
intervenor and Uy moved for a reconsideration but was denied.

ISSUE:

Which of the 2 credits was preferred?

RULING:

Uy’s credit should be paid 1st.

The intervenor’s claim cannot be considered preferred because they registered it’s
mortgage only on August 24 1960, or subsequent to the date of the writ of attachment
obtained by Uy on August 11, 1960. The credit of the intervenor cannot prevail over the
credit of Uy.

The ruling of the lower court based on Art. 2244 of the civil code is untenable for the
reason that, as already stated the credit of the intervenor cannot be considered preferred
until it has been recorded in the Motor Vehicles Office. In the case of Borlough vs. Fortune
Enterprise. It was held that mortgage on motor vehicles, in order to affect third persons,
should not only be registered in the Chattel Mortgage registry but the same should aslo be
recorded in the Motor Vehicles Office, hence Uy’s credit should be paid first.