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CASE 2011-0175: UNION BANK OF THE PHILIPPINES VS. LAIN⃰ JUNIAT, WINWOOD APPAREL, INC., WINGYAN APPAREL, INC., NONWOVEN FABRIC PHILIPPINES (G.R. NO. 171569, 01 AUGUST 2011, DEL CASTILLO, J.) SUBJECTS: MORTGAGE; PLEDGE; DACION EN PAGO. (BRIEF TITLE: UNION BANK VS. JUNIAT). ======================================== JUNIAT EXECUTED A CHATTEL MORTGAGE IN FAVOR OF UNION BANK COVERING SEWING MACHINES AND OTHER EQUIPMENT FOR AND ON BEHALF OF WINWOOD AND WINGYAN. JUNIAT ET AL DID NOT PAY SUBJECT LOAN. UNION BANK SUED THEM FOR SUM OF MONEY AND MOVED TO ATTACH THE SEWING MACHINES AND EQUIPMENT. THE MACHINES AND EQUIPMENT WERE IN THE POSSESSION OF NONWOVEN. COURT ISSUED SUMMONS TO NONWOVEN. NONWOVEN ARGUED THAT IT HAS A BETTER RIGHT TO THE MACHINES AND EQUIPMENT BECAUSE JUNIAT EXECUTED DACION EN PAGO IN THEIR FAVOR. THEY THEFORE HOLD THE MACHINES AS OWNER WHILE PETITIONER HOLDS THE MACHINES ONLY AS MORTGAGEE. NONWOVEN PRESENTED A DOCUMENT WHERE JUNIAT PLEGED THE MACHINES TO NONWOVEN TO SECURE AN OBLIGATION. WHO HAS A BETTER RIGHT TO THE MACHINES AND EQUPMENT?

can be no transfer of ownership if the delivery of the property to the creditor is by way of security.[2][54] In fact, in case of doubt as to whether a transaction is one of pledge or dacion en pago, the presumption is that it is a pledge as this involves a lesser transmission of rights and interests.[3][55]

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 171569 August 1, 2011

UNION BANK OF THE PHILIPPINES, vs. ALAIN* JUNIAT, WINWOOD APPAREL, INC., WINGYAN APPAREL, INC., NONWOVEN FABRIC PHILIPPINES,Respondents. DECISION DEL CASTILLO, J.:

UNION BANK HAS A BETTER RIGHT. NONWOVEN FAILED TO PROVE THAT THERE WAS DACION EN PAGO. THE DOCUMENT EXECUTED BY JUNIAT APPEARS TO BE AN UNNOTARIZED PLEDGE. IN CASE OF DOUBT WHETHER A DEED IS A SALE OR A PLEDGE, THE DEED IS DEEMED A PLEDGE. SINCE THE PLEDGE WAS NOT NOTARIZED IT CANNOT BIND THIRD PARTIES. A perusal of the Agreement dated May 9, 1992 clearly shows that the sewing machines, snap machines and boilers were pledged to Nonwoven by Juniat to guarantee his obligation. However, under Article 2096 of the Civil Code, ―[a] pledge shall not take effect against third persons if a description of the thing pledged and the date of the pledge do not appear in a public instrument.‖ Hence, just like the chattel mortgage executed in favor of petitioner, the pledge executed by Juniat in favor of Nonwoven cannot bind petitioner. Respondents Winwood Apparel, Inc. (Winwood) and Wingyan Neither can we sustain the finding of the CA that: ―The machineries were ceded to THIRD PARTY NONWOVEN by way of dacion en pago, a contract later entered into by WINWOOD/WINGYAN and THIRD PARTY NONWOVEN.‖[1][53] As aptly pointed out by petitioner, no evidence was presented by Nonwoven to show that the attached properties were subsequently sold to it by way of a dacion en pago. Also, there is nothing in the Agreement dated May 9, 1992 to indicate that the motorized sewing machines, snap machines and boilers were ceded to Nonwoven as payment for the Wingyan’s and Winwood’s obligation. It bears stressing that there On September 3, 1992, petitioner filed with the Regional Trial Court (RTC) of Makati, Branch 57, a Complaint9 with prayer for the issuance of ex-parte writs of preliminary attachment and replevin Apparel, Inc. (Wingyan) are domestic corporations engaged in the business of apparel manufacturing.6 Both respondent corporations are owned and operated by respondent Alain Juniat (Juniat), a French national based in Hongkong.7 Respondent Nonwoven Fabric Philippines, Inc. (Nonwoven) is a Philippine corporation engaged in the manufacture and sale of various types of nonwoven fabrics.8 banking corporation organized and existing under Philippine laws.5 Petitioner Union Bank of the Philippines (Union Bank) is a universal This Petition for Review on Certiorari2 under Rule 45 of the Rules of Court assails the June 23, 2005 Decision3and the February 9, 2006 Resolution4 of the Court of Appeals (CA) in CA-G.R. CV No. 66392. To have a binding effect on third parties, a contract of pledge must appear in a public instrument.1

Factual Antecedents

against Juniat, Winwood, Wingyan, and the person in possession of the mortgaged motorized sewing machines and equipment.10 Petitioner alleged that Juniat, acting for and in behalf of Winwood and Wingyan, executed a promissory note11 dated April 11, 1992 and a Chattel Mortgage
12

"first in time, stronger in right" (prius tempore, potior jure).32 Thus, the RTC disposed of the case in this wise: WHEREFORE, above premises considered, judgment is hereby rendered as follows: 1.] Declaring the [petitioner] UNION BANK OF THE PHILIPPINES, as having the better right to the goods and/or machineries subject of the Writs of Preliminary Attachment and Replevin issued by this Court on September 10, 1992. 2.] Declaring the [petitioner] as entitled to the proceeds of

dated March 27, 1992 over

several motorized sewing machines and other allied equipment to secure their obligation arising from export bills transactions to petitioner in the amount ofP1,131,134.35;13 that as additional security for the obligation, Juniat executed a Continuing Surety Agreement14dated April 11, 1992 in favor of petitioner;15 that the loan remains unpaid;16 and that the mortgaged motorized sewing machines are insufficient to answer for the obligation.17 On September 10, 1992, the RTC issued writs of preliminary attachment and replevin in favor of petitioner.
18

the sale of the subject machineries in the amount of P1,350,000.00; 3.] Declaring [respondents] Allain Juniat, Winwood Apparel, Inc. and Wingyan Apparel, Inc. to be jointly and severally liable to the [petitioner], for the deficiency between the proceeds of the sale of the machineries subject of this suit [P1,350,000.00] and original claim of

The writs were

served by the Sheriff upon Nonwoven as it was in possession of the motorized sewing machines and equipment.19 Although Nonwoven was not impleaded in the complaint filed by petitioner, the RTC likewise served summons upon Nonwoven since it was in possession of the motorized sewing machines and equipment. On September 28, 1992, Nonwoven filed an
20

Answer,21

contending

the plaintiff [P1,919,907.03], in the amount ofP569,907.03, with legal interest at the rate of 12% per annum from date of this judgment until fully paid; and 4.] Declaring [respondents] Allain Juniat, Winwood Apparel, Inc. and Wingyan Apparel, Inc. to be jointly and severally liable to the [petitioner] for the amount of P50,000.00 as reasonable attorneys fees; and 5.] Cost of this suit against the [respondents]. SO ORDERED.33 Nonwoven moved for reconsideration34 but the RTC denied the same in its Order35 dated July 14, 1999.

that the unnotarized Chattel Mortgage executed in favor of petitioner has no binding effect on Nonwoven and that it has a better title over the motorized sewing machines and equipment because these were assigned to it by Juniat pursuant to their Agreement22 dated May 9, 1992.23 Juniat, Winwood, and Wingyan, on the other hand, were declared in default for failure to file an answer within the reglementary period.24 On November 23, 1992, petitioner filed a Motion to Sell Chattels Seized by Replevin,25 praying that the motorized sewing machines and equipment be sold to avoid depreciation and deterioration.26 However, on May 18, 1993, before the RTC could act on the motion, petitioner sold the attached properties for the amount ofP1,350,000.00.27 Nonwowen moved to cite the officers of petitioner in contempt for selling the attached properties, but the RTC denied the same on the ground that Union Bank acted in good faith.28

Ruling of the Court of Appeals
On appeal, the CA reversed the ruling of the RTC. The CA ruled that the contract of pledge entered into between Juniat and Nonwoven is valid and binding, and that the motorized sewing machines and equipment were ceded to Nonwoven by Juniat by virtue of a dacion

Ruling of the Regional Trial Court
On May 20, 1999, the RTC of Makati, Branch 145, 29 rendered a Decision30 in favor of petitioner. The RTC ruled that both the Chattel Mortgage dated March 27, 1992 in favor of petitioner and the Agreement dated May 9, 1992 in favor of Nonwoven have no obligatory effect on third persons because these documents were not notarized.31However, since the Chattel Mortgage in favor of petitioner was executed earlier, petitioner has a better right over the motorized sewing machines and equipment under the doctrine of

en pago.36 Thus, the CA declared Nonwoven entitled to the
proceeds of the sale of the attached properties.37 The fallo reads: WHEREFORE, premises considered, the assailed decision is hereby REVERSED and SET ASIDE. [Petitioner] Union Bank of the Philippines is hereby DIRECTED to pay Nonwoven Fabric Philippines,

Inc. P1,350,000.00, the amount it holds in escrow, realized from the May 18, 1993 sale of the machineries to avoid deterioration during pendency of suit. No pronouncement as to costs. SO ORDERED.38

The petition has merit. Nonwoven lays claim to the attached motorized sewing machines and equipment pursuant to the Agreement it entered into with Juniat, to wit: Hong Kong, 9th May, 1992 With reference to talks held this morning at the Holiday Inn Golden

Petitioner sought reconsideration39 which was denied by the CA in a Resolution40 dated February 9, 2006. Issues Hence, the present recourse where petitioner interposes the following issues:

Mile Coffee Shop, among the following parties: a. Redflower Garments Inc. – Mrs. Maglipon b. Nonwoven Fabrics Phils. Inc. – Mr. J. Tan

1. Whether x x x the Court of Appeals committed serious reversible error in setting aside the Decision of the trial court holding that Union Bank of the Philippines had a better right over the machineries seized/levied upon in the proceedings before the trial court and/or the proceeds of the sale thereof; a. Settlement of the accounts between Nonwoven Fabrics Phils. Inc. 2. Whether x x x the Court of Appeals seriously erred in holding that [Nonwoven] has a valid claim over the subject sewing machines.41 and Winwood Apparel Inc./Wing Yan Apparel, Inc. should be effected as agreed through partial payment by L/C with the balance to be settled at a later date for which Winwood Apparel, Inc. agrees to consign 94 sewing machines, 3 snap machines and 2 boilers, presently in the care of Redflower Garments Inc., to the care of Nonwoven Fabrics Phils., Inc. as guarantee. Meanwhile, Nonwoven Echoing the reasoning of the RTC, petitioner insists that it has a better title to the proceeds of the sale.42Although the Chattel Mortgage executed in its favor was not notarized, petitioner insists that it is nevertheless valid, and thus, has preference over a subsequent unnotarized agreement.43 Petitioner further claims that except for the said agreement, no other evidence was presented by Nonwoven to show that the motorized sewing machines and equipment were indeed transferred to them by Juniat/Winwood/Wingyan.44 We do not agree. It insists that since the attached properties were assigned or ceded to it by Juniat, it has a better right over the proceeds of the sale of the attached properties than petitioner, whose claim is based on an unnotarized Chattel Mortgage. x x x x49 (Emphasis supplied.) will resume delivery to Winwood/Win Yang as usual. IT WAS AGREED THAT: c. Winwood Apparel Inc./Wing Yan Apparel, Inc. – Mr. A. Juniat, Mrs. S. Juniat

Petitioner’s Arguments

Respondent Nonwoven’s Arguments
Indeed, the unnotarized Chattel Mortgage executed by Juniat, for Nonwoven, on the other hand, claims ownership over the proceeds of the sale under Article case.46 154445 of the Civil Code on double sale, which it claims can be applied by analogy in the instant Nonwoven contends that since its prior possession over the sale.47 Nonwoven likewise motorized sewing machines and equipment was in good faith, it has a better title over the proceeds of the maintains that petitioner has no right over the proceeds of the sale because the Chattel Mortgage executed in its favor was unnotarized, unregistered, and without an affidavit of good faith.48 Our Ruling and in behalf of Wingyan and Winwood, in favor of petitioner does not bind Nonwoven.50 However, it must be pointed out that petitioner’s primary cause of action is for a sum of money with prayer for the issuance of ex-parte writs of attachment and replevin against Juniat, Winwood, Wingyan, and the person in possession of the motorized sewing machines and equipment.51 Thus, the fact that the Chattel Mortgage executed in favor of petitioner was not notarized does not affect petitioner’s cause of action. Petitioner only needed to show that the loan of Juniat, Wingyan and Winwood remains unpaid and that it is entitled to the issuance of the writs prayed for. Considering that writs of attachment and replevin were issued by the RTC,52 Nonwoven had to prove that it has a better

right of possession or ownership over the attached properties.1avvphil This it failed to do.

Is a corporation entitled to moral damages? FACTS:

A perusal of the Agreement dated May 9, 1992 clearly shows that the sewing machines, snap machines and boilers were pledged to Nonwoven by Juniat to guarantee his obligation. However, under Article 2096 of the Civil Code, "[a] pledge shall not take effect against third persons if a description of the thing pledged and the date of the pledge do not appear in a public instrument." Hence, just like the chattel mortgage executed in favor of petitioner, the pledge executed by Juniat in favor of Nonwoven cannot bind petitioner. Neither can we sustain the finding of the CA that: "The machineries were ceded to THIRD PARTY NONWOVEN by way of dacion en pago, a contract later entered into by WINWOOD/WINGYAN and THIRD PARTY NONWOVEN."53As aptly pointed out by petitioner, no evidence was presented by Nonwoven to show that the attached properties were subsequently sold to it by way of a dacion en pago. Also, there is nothing in the Agreement dated May 9, 1992 to indicate that the motorized sewing machines, snap machines and boilers were ceded to Nonwoven as payment for the Wingyan’s and Winwood’s obligation. It bears stressing that there can be no transfer of ownership if the delivery of the property to the creditor is by way of security.54 In fact, in case of doubt as to whether a transaction is one of pledge or dacion en pago, the presumption is that it is a pledge as this involves a lesser transmission of rights and interests.55 In view of the foregoing, we are constrained to reverse the ruling of the CA. Nonwoven is not entitled to the proceeds of the sale of the attached properties because it failed to show that it has a better title over the same. WHEREFORE, the petition is hereby GRANTED. The assailed June 23, 2005 Decision and the February 9, 2006 Resolution of the Court of Appeals in CA-G.R. CV No. 66392 are hereby REVERSED and SET ASIDE. The May 20, 1999 Decision of the Regional Trial Court of Makati, Branch 145, is hereby REINSTATED and AFFIRMED. SO ORDERED.

Chua Pac, president and general manager of Acme Shoe, Rubber and Plastic Corporation, executed a chattel mortgage in favor of Producers Bank of the Philippines, as a security for a corporate loan in the amount of P3M. The chattel mortgage contained a clause that provided for the mortgage to stand as security for all other obligations contracted before, during and after the constitution of the mortgage. The P3M was paid. Subsequently, the corporation obtained additional financial accommodations totalling P2.7M. This was also paid on the due date. Again, the bank extended another loan to the corporation in the amount of P1M, covered by four promissory notes. However, the corporation was unable to pay this at maturity. Thereupon, the bank applied for an extra-judicial foreclosure of mortgage. For its part, the corporation filed an action for injunction with prayer for damages. The lower court ultimately dismissed the case and ordered the extra-judicial foreclosure of mortgage. Hence, this appeal. ISSUEs: W/N extra-judicial foreclosure of the chattel mortgage is proper If not proper, W/N the corporation is entitled to damages as a result of the extra-judicial foreclosure HELD: Contracts of Security Contracts of security are either personal or real. In contracts of personal security, such as a guaranty or suretyship, the faithful performance of the obligation by the principal debtor is secured by the personal commitment of another (the guarantor or surety). In contracts of real security, such as a pledge, a mortgage or an antichresis, that fulfillment is secured by an encumbrance of

Acme Shoe, Rubber and Plastic Corporation v. CA G.R. No. 103576, Aug. 22, 1996 Contracts of Security: Chattel Mortgage The rule on after-incurred obligations

property -- in pledge, the placing of movable property in the possession of the creditor; in chattel mortgage by the execution of the corresponding and substantially in teh form prescribed by law; in real estate mortgage, by the execution of a public instrument encumbering the real property covered thereby; and in antichresis, by a written instrument granting to the creditor the right to receive the fruits of an immovable property with the obligation to apply

such fruits to the payment of interest, if owing, and thereafter to the principal of his credit -- upon the essential condition that if the obligation becomes due and the debtor defaults, then the property encumbered can be alienated for the payment of the obligation, but that should the obligation be duly paid, then the contract is automatically extinguished proceeding from the accessory character of the agreement. As the law so puts it, once the obligation is complied with, then the contract of security becomes, ipso facto, null and void. After-incurred Obligations While a pledge, real estate mortgage, or antichresis may exceptionaly secure after-incurred obligations so long as these future debts are accurately described, a chattel mortgage, however, can only cover obligations existing at the time the mortgage is constituted. Although a promise expressed in a chattel mortgage to include debts that are yet to be contracted can be a binding commitment that can be compelled upon, the security itself, however, does not come into existence or arise until after a chattel mortgage agreement covered the newly contracted debt is executed either by concluding a fresh chattel mortgage or by amending the old contract conformably with the Chattel Mortgage Law. Refusal on the part of borrower to execute the agreement so as to cover the after-incurred obligation can constitute as an act of default on the part of the borrower of the financing agreement wherein the promise is written, but, of course, the remedy of foreclosure can only cover the debts extant at the time of constitution and during the life of the chattel mortgage sought to be foreclosed.

anguish. Mental suffering can be experienced only by one having a nervous system and it flows from real ills and sorrows and griefs of life -- all of which cannot be suffered by respondent bank as an artificial person. "Although Chua Pac was included in the case, he was only so named as a party in representation of the corporation."

260 SCRA 714 – Business Organization – Corporation Law – Rule on Moral Damages When It Comes to Corporations In June 1978, Acme Shoe, Rubber & Plastic Corporation executed a chattel mortgage in favor of Producers Bank of the Philippines in consideration of a loan in the amount of P3 million. The loan was paid. Thereafter, Producers Bank extended another P2.7 million loan to Acme. The same was paid. In 1984, Producers Bank extended a P1 million loan to Acme. This time, Acme was unable to pay and eventually, Producers Bank foreclosed the property subject of the chattel mortgage executed in June 1978. Acme opposed the foreclosure as it alleged that the 1984 loan was no longer covered by the chattel mortgage of 1978. Acme is also asking for moral damages (worth P3 million) for the groundless foreclosure done by Producers Bank. ISSUE: Whether or not Acme Shoe is entitled to moral damages.

In the case at bar, the chattel mortgage was terminated when payment for the P3M loan was made so there was no chattel mortgage to even foreclose at the time the bank instituted the extra-judicial foreclosure. Damages In its complaint, the corporation asked for moral damages sustained "as a result of the unlawful action taken by the respondent bank against it." The court said -"Moral damages are granted in recompense for physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury. A corporation, being an artificial person and having existence only in legal contemplation, has no feelings, no emotions, no senses; therefore it cannot experience physical suffering and mental HELD: No. It is true that the chattel mortgage executed in 1978 for the initial P3 million loan only covers the initial loan and not the 1984 P1 million loan. However, Acme Shoes is not entitled to moral damages. Moral damages are granted in recompense for physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury. A corporation, being an artificial person and having existence only in legal contemplation, has no feelings, no emotions, no senses; therefore, it cannot experience physical suffering and mental anguish. Mental suffering can be experienced only by one having a nervous system and it flows from real ills, sorrows, and griefs of life — all of which cannot be suffered by Acme Shoes as an artificial person.

security for said obligations and any and all other obligations of the MORTGAGOR to the MORTGAGEE of whatever kind and nature, whether such obligations have been contracted before, during or after the constitution of this mortgage."[1] In due time, the loan of P3,000,000.00 was paid by petitioner corporation. Subsequently, in 1981, it obtained from respondent bank additional financial accommodations totalling P2,700,000.00.[2] These borrowings were on due date also fully paid. On 10 and 11 January 1984, the bank yet again extended to FIRST DIVISION [G.R. No. 103576. August 22, 1996] petitioner corporation a loan of one million pesos (P1,000,000.00) covered by four promissory notes for P250,000.00 each. Due to financial constraints, the loan was not settled at maturity.[3] Respondent bank thereupon applied for an extrajudicial foreclosure of the chattel mortgage, hereinbefore cited, with the Sheriff of VITUG, J.: Caloocan City, prompting petitioner corporation to forthwith file an action for injunction, with damages and a prayer for a writ of Would it be valid and effective to have a clause in a chattel mortgage that purports to likewise extend its coverage to obligations yet to be contracted or incurred? This question is the core issue in the instant petition for review on certiorari. preliminary injunction, before the Regional Trial Court of Caloocan City (Civil Case No. C-12081). Ultimately, the court dismissed the complaint and ordered the foreclosure of the chattel mortgage. It held petitioner corporation bound by the stipulations, aforequoted, of the chattel mortgage. Petitioner Chua Pac, the president and general manager of copetitioner "Acme Shoe, Rubber & Plastic Corporation," executed on 27 June 1978, for and in behalf of the company, a chattel mortgage in favor of private respondent Producers Bank of the Philippines. The mortgage stood by way of security for petitioner's corporate loan of three million pesos (P3,000,000.00). A provision in the chattel mortgage agreement was to this effect "(c) If the MORTGAGOR, his heirs, executors or administrators shall well and truly perform the full obligation or obligations abovestated according to the terms thereof, then this mortgage shall be null and void. x x x. "In case the MORTGAGOR executes subsequent promissory note or notes either as a renewal of the former note, as an extension thereof, or as a new loan, or is given any other kind of accommodations such as overdrafts, letters of credit, acceptances and bills of exchange, releases of import shipments on Trust Receipts, etc., this mortgage shall also stand as security for the payment of the said promissory note or notes and/or accommodations without the necessity of executing a new contract and this mortgage shall have the same force and effect as if the said promissory note or notes and/or accommodations were existing on the date thereof. This mortgage shall also stand as Except in criminal cases where the penalty of reclusion perpetua or death is imposed[6] which the Court so reviews as a matter of course, an appeal from judgments of lower courts is not a matter of right but of sound judicial discretion. The circulars of the Court prescribing technical and other procedural requirements are meant to weed out unmeritorious petitions that can unnecessarily clog the docket and needlessly consume the time of the Court. These technical and procedural rules, however, are intended to help secure, not suppress, substantial justice. A deviation from the rigid Petitioner corporation appealed to the Court of Appeals[4] which, on 14 August 1991, affirmed, "in all respects," the decision of the court a quo. The motion for reconsideration was denied on 24 January 1992. The instant petition interposed by petitioner corporation was initially denied on 04 March 1992 by this Court for having been insufficient in form and substance. Private respondent filed a motion to dismiss the petition while petitioner corporation filed a compliance and an opposition to private respondent's motion to dismiss. The Court denied petitioner's first motion for reconsideration but granted a second motion for reconsideration, thereby reinstating the petition and requiring private respondent to comment thereon.[5] ACME SHOE, RUBBER & PLASTIC CORPORATION and CHUA PAC, petitioners, vs. HON. COURT OF APPEALS, PRODUCERS BANK OF THE PHILIPPINES and REGIONAL SHERIFF OF CALOOCAN CITY, respondents. DECISION

enforcement of the rules may thus be allowed to attain the prime objective for, after all, the dispensation of justice is the core reason for the existence of courts. In this instance, once again, the Court is constrained to relax the rules in order to give way to and uphold the paramount and overriding interest of justice. Contracts of security are either personal or real. In contracts of personal security, such as a guaranty or a suretyship, the faithful performance of the obligation by the principal debtor is secured by the personal commitment of another (the guarantor or surety). In contracts of real security, such as a pledge, a mortgage or an antichresis, that fulfillment is secured by an encumbrance of property - in pledge, the placing of movable property in the possession of the creditor; in chattel mortgage, by the execution of the corresponding deed substantially in the form prescribed by law; in real estate mortgage, by the execution of a public instrument encumbering the real property covered thereby; and in antichresis, by a written instrument granting to the creditor the right to receive the fruits of an immovable property with the obligation to apply such fruits to the payment of interest, if owing, and thereafter to the principal of his credit - upon the essential condition that if the principal obligation becomes due and the debtor defaults, then the property encumbered can be alienated for the payment of the obligation,[7] but that should the obligation be duly paid, then the contract is automatically extinguished proceeding from the accessory character[8] of the agreement. As the law so puts it, once the obligation is complied with, then the contract of security becomes, ipso facto, null and void.[9] While a pledge, real estate mortgage, or antichresis may exceptionally secure after-incurred obligations so long as these future debts are accurately described,[10] a chattel mortgage, however, can only cover obligations existing at the time the mortgage is constituted. Although a promise expressed in a chattel mortgage to include debts that are yet to be contracted can be a binding commitment that can be compelled upon, the security itself, however, does not come into existence or arise until after a chattel mortgage agreement covering the newly contracted debt is executed either by concluding a fresh chattel mortgage or by amending the old contract conformably with the form prescribed by the Chattel Mortgage Law.[11] Refusal on the part of the borrower to execute the agreement so as to cover the after-incurred obligation can constitute an act of default on the part of the borrower of the financing agreement whereon the promise is written but, of course, the remedy of foreclosure can only cover the

debts extant at the time of constitution and during the life of the chattel mortgage sought to be foreclosed. A chattel mortgage, as hereinbefore so intimated, must comply substantially with the form prescribed by the Chattel Mortgage Law itself. One of the requisites, under Section 5 thereof, is an affidavit of good faith. While it is not doubted that if such an affidavit is not appended to the agreement, the chattel mortgage would still be valid between the parties (not against third persons acting in good faith[12]), the fact, however, that the statute has provided that the parties to the contract must execute an oath that "x x x (the) mortgage is made for the purpose of securing the obligation specified in the conditions thereof, and for no other purpose, and that the same is a just and valid obligation, and one not entered into for the purpose of fraud."[13] makes it obvious that the debt referred to in the law is a current, not an obligation that is yet merely contemplated. In the chattel mortgage here involved, the only obligation specified in the chattel mortgage contract was the P3,000,000.00 loan which petitioner corporation later fully paid. By virtue of Section 3 of the Chattel Mortgage Law, the payment of the obligation automatically rendered the chattel mortgage void or terminated. In Belgian Catholic Missionaries, Inc., vs. Magallanes Press, Inc., et al.,[14] the Court said "x x x A mortgage that contains a stipulation in regard to future advances in the credit will take effect only from the date the same are made and not from the date of the mortgage."[15] The significance of the ruling to the instant problem would be that since the 1978 chattel mortgage had ceased to exist coincidentally with the full payment of the P3,000,000.00 loan,[16] there no longer was any chattel mortgage that could cover the new loans that were concluded thereafter. We find no merit in petitioner corporation's other prayer that the case should be remanded to the trial court for a specific finding on the amount of damages it has sustained "as a result of the unlawful action taken by respondent bank against it."[17] This prayer is not reflected in its complaint which has merely asked for the amount of P3,000,000.00 by way of moral damages.[18] In LBC Express, Inc. vs. Court of Appeals,[19] we have said: "Moral damages are granted in recompense for physical suffering, mental anguish, fright, serious anxiety, besmirched reputation,

wounded feelings, moral shock, social humiliation, and similar injury. A corporation, being an artificial person and having existence only in legal contemplation, has no feelings, no emotions, no senses; therefore, it cannot experience physical suffering and mental anguish. Mental suffering can be experienced only by one having a nervous system and it flows from real ills, sorrows, and griefs of life - all of which cannot be suffered by respondent bank as an artificial person."[20] While Chua Pac is included in the case, the complaint, however, clearly states that he has merely been so named as a party in representation of petitioner corporation. Petitioner corporation's counsel could be commended for his zeal in pursuing his client's cause. It instead turned out to be, however, a source of disappointment for this Court to read in petitioner's reply to private respondent's comment on the petition his so-called "One Final Word;" viz: "In simply quoting in toto the patently erroneous decision of the trial court, respondent Court of Appeals should be required to justify its decision which completely disregarded the basic laws on obligations and contracts, as well as the clear provisions of the Chattel Mortgage Law and well-settled jurisprudence of this Honorable Court; that in the event that its explanation is wholly unacceptable, this Honorable Court should impose appropriate sanctions on the erring justices. This is one positive step in ridding our courts of law of incompetent and dishonest magistrates especially members of a superior court of appellate jurisdiction."[21] (Italics supplied.) The statement is not called for. The Court invites counsel's attention to the admonition in Guerrero vs. Villamor;[22] thus: "(L)awyers x x x should bear in mind their basic duty `to observe and maintain the respect due to the courts of justice and judicial officers and x x x (to) insist on similar conduct by others.' This respectful attitude towards the court is to be observed, `not for the sake of the temporary incumbent of the judicial office, but for the maintenance of its supreme importance.' And it is `through a scrupulous preference for respectful language that a lawyer best demonstrates his observance of the respect due to the courts and judicial officers x x x.'"[23] The virtues of humility and of respect and concern for others must still live on even in an age of materialism.

WHEREFORE, the questioned decisions of the appellate court and the lower court are set aside without prejudice to the appropriate legal recourse by private respondent as may still be warranted as an unsecured creditor. No costs. Atty. Francisco R. Sotto, counsel for petitioners, is admonished to be circumspe

SERVICEWIDE SPECIALISTS, INC. V CA G.R. No. 110048 | November 19, 1999 | J. Purisima FACTS: 1. Leticia Laus purchased on credit a Colt Galant xxx from Fortune Motors (Phils.) Corporation and executed a promissory note for the amount of P56,028.00, inclusive of 12% annual interest, payable within a period of 48 months. In case of default in the payment of any installment, the total principal sum, together with the interest, shall become immediately due and payable. 2. As a security for the promissory note, a chattel mortgage was constituted over the said motor vehicle, with a deed of assignment incorporated therein such that the credit and mortgage rights were assigned by Fortune Motors Corp. in favor of Filinvest Credit Corporation with the consent of the mortgagor-debtor Laus. 3. Filinvest in turn assigned the credit in favor of Servicewide Specialists, Inc. 4. Laus failed to pay the monthly installment for April 1977 and the succeeding 17 months. Servicewide demanded payment of the entire outstanding balance with interests but Laus failed to pay despite formal demands. 5. As a result of Laus’ failure to settle her obligation, or at least to surrender possession of the motor vehicle for foreclosure, Servicewide instituted a complaint for replevin, impleading Hilda Tee and John Dee in whose custody the vehicle was believed to be at the time of the filing of the suit. Plaintiff alleged, among others, that it had superior lien over the mortgaged vehicle. The court approved the replevin bond. 6. Alberto Villafranca filed a third party claim contending that he is the absolute owner of the subject motor vehicle after purchasing it from a certain Remedios Yang free from all lien and emcumbrances; and that on July 1984, the said automobile was taken from his residence by Deputy Sheriff Bernardo Bernabe pursuant to the seizure order issued by the court a quo. 7. Upon motion of the plaintiff below, Villafranca was substituted as defendant and summons was served upon him. Villafranca moved for the dismissal of the complaint on the ground that there is another action pending between the same parties before the Makati RTC. The court granted the the motion but subsequently set aside the order of dismissal. For failure to file his Answer as required by

the court a quo, Villafranca was declared in default and plaintiff’s evidence was received ex parte. 8. The lower court later on dismissed the complaint for insufficiency of evidence. Its motion for reconsideration having been denied, petitioner appealed to CA on the ground that a suit for replevin aimed at the foreclosure of a chattel is an action quasi in rem, and does not require the inclusion of the principal obligor in the Complaint. 9. CA affirmed the RTC decision. It also denied petitioner’s MR, hence, the present petition for review on certiorari under Rule 45. ISSUE: W/N a case for replevin may be pursued against the defendant, Alberto Villafranca, without impleading the absconding debtormortgagor HELD: No. Rule 60 of the Revised Rules of Court requires that an applicant for replevin must show that he ―is the owner of the property claimed, particularly describing it, or is entitled to the possession thereof.‖ Where the right of the plaintiff to the possession of the specified property is so conceded or evident, the action need only be maintained against him who so possesses the property. In rem action est per quam rem nostram quae ab alio possidetur petimus, et semper adversus eum est qui rem possidet. However, in case the right of possession on the part of the plaintiff, or his authority to claim such possession or that of his principal, is put to great doubt (a contending party may contest the legal bases for plaintiff’s cause of action or an adverse and independent claim of ownership or right of possession may be raised by that party), it could become essential to have other persons involved and impleaded for a complete determination and resolution of the controversy. In a suit for replevin, a clear right of possession must be established. The conditions essential for foreclosure of chattel mortgage would be to show, firstly, the existence of the chattel mortgage and, secondly, the default of the mortgagor. Since the mortgagee’s right of possession is conditioned upon the actual fact of default which itself may be controverted, the inclusion of other parties, like the debtor or the mortgagor himself, may be required in order to allow a full and conclusive determination of the case. Laus, being an indispensable party, should have been impleaded in

the complaint for replevin and damages. 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. Petition DENIED.

Servicewide Specialists, Inc. v. Intermediate Appellate Court, 174 SCRA 80 (1989) FACTS: - Galicano Siton purchased from Car Traders Philippines, Inc. a vehicle and paid a downpayment of the price. Theremaining balance includes not only the remaining principal obligation but also advance interests and premiums for motor vehicle insurance policies.-Siton executed a promissory note in favor of Car Traders Philippines, Inc. expressly stipulating that the face valueof the note shall "be payable, without need of notice of demand, in instalments. There are additional stipulations inthe Promissory Note consisting of, among others, that if default is made in the payment of any of the installments or interest thereon, the total principal sum then remaining unpaid, together with accrued interest thereon shall at oncebecome due and demandable.-As further security, Siton executed a Chattel Mortgage over the subject motor vehicle in favor of Car TradersPhilippines, Inc.-The credit covered by the promissory note and chattel mortgage executed by respondent Galicano Siton was firstassigned by Car Traders Philippines, Inc. in favor of Filinvest Credit Corporation. Subsequently, Filinvest CreditCorporation likewise reassigned said credit in favor of petitioner Servicewide Specialists, Inc. and respondent Sitonwas advised of this second assignment.-Siton failed to pay, Servicewide Specialist filed this action against Galicano Siton and "John Doe."-After the service of summons, Justiniano de Dumo, identifying himself as the "John Doe" in the Complaint,inasmuch as he is in possession of the subject vehicle, filed his Answer with Counterclaim and with Opposition tothe prayer for a Writ of Replevin. Said defendant, alleged the fact that he has bought the motor vehicle fromGalicano Siton; that de Dumo and Siton testified that, before the projected sale, they went to a certain. Atty. Villa of Filinvest Credit Corporation advising the latter of the intended sale and transfer. Siton and de Dumo wereaccordingly advised that the verbal information given to the corporation would suffice, and that it would be tediousand impractical to effect a change of transfer of ownership as that would require a new credit investigation as to thecapacity and worthiness of Atty. De Dumo, being the new debtor. The further suggestion

given by Atty. Villa is thatthe account should be maintained in the name of Galicano Siton.; that as such successor, he stepped into the rightsand obligations of the seller; that he has religiously paid the installments as stipulated upon in the promissory note.He also manifested that the Answer he has filed in his behalf should likewise serve as a responsive pleading for hisco-defendant Galicano Siton. TC affirmed by CA: -Denied the issuance of Writ of Replevin and ordering Siton and De Dumo to pay jointly and severally, the plaintiff,the remaining balance on the motor vehicle . ISSUE: -Whether or not the mortgagee is bound by the deed of sale by the mortgagor in favour of a third person, as neither the mortgagee nor its predecessors has given written or verbal consent thereto pursuant to the deed of ChattelMortgage. HELD: -The rule is settled that the chattel mortgagor continues to be the owner of the property, and therefore, has thepower to alienate the same; however, he is obliged under pain of penal liability, to secure the written consent of themortgagee. Thus, the instruments of mortgage are binding, while they subsist, not only upon the parties executingthem but also upon those who later, by purchase or otherwise, acquire the properties referred to therein.-The absence of the written consent of the mortgagee to the sale of the mortgaged property in favor of a thirdperson, therefore, affects not the validity of the sale but only the penal liability of the mortgagor under the RevisedPenal Code and the binding effect of such sale on the mortgagee under the Deed of Chattel Mortgage.-There is no dispute that the Deed of Chattel Mortgage executed between Siton and the petitioner requires thewritten consent of the latter as mortgagee in the sale or transfer of the mortgaged vehicle. We cannot ignore thefindings, however, that before the sale, prompt inquiries were made by private respondents with Filinvest CreditCorporation regarding any possible future sale of the mortgaged property; and that it was upon the advice of thecompany's credit lawyer that such a verbal notice is sufficient and that it would be convenient if the account wouldremain in the name of the mortgagor Siton.-Even the personal checks of de Dumo were accepted by petitioner as payment of some of the installments under the promissory note. If it is true that petitioner has not

acquiesced in the sale, then, it should have inquired as to whyde Dumo's checks were being used to pay Siton's obligations.

THIRD DIVISION [G.R. No. 110048. November 19, 1999] SERVICEWIDE SPECIALISTS, INC. petitioner, vs. COURT OF APPEALS, HILDA TEE, & ALBERTO M. VILLAFRANCA, respondents. D E C I S I O N PURISIMA, J.: This is a petition for review on certiorari under Rule 45 of the Decision of the Court of Appeals[1] in CA-G.R. CV No. 19571, affirming the judgment of the Regional Trial Court of Manila, Branch XX, dismissing Civil Case No. 84-25763 for replevin and damages. The litigation involves a motor vehicle, a Colt Galant, 4-door Sedan automobile, with Motor No. 2E-08927, Serial No. A112A-5297, Model No. 1976. The appellate court culled the facts that matter as follows:[2] "On May 14, 1976, Leticia L. Laus of Quezon City purchased on credit a Colt Galant xxx from Fortune Motors (Phils.) Corporation. On the same date, she executed a promissory note for the amount of P56,028.00, inclusive of interest at 12% per annum, payable within a period of 48 months starting August, 1976 at a monthly installment of P1,167.25 due and demandable on the 17th day of each month (Exhibit ―A‖, pp. 144, Orig. Records,). It was agreed upon, among others, that in case of default in the payment of any installment the total principal sum, together with the interest, shall become immediately due and payable (Exhibit ―A‖; p. 144, Orig. Records). As a security for the promissory note, a chattel mortgage was constituted over the said motor vehicle (Exhibit ―B‖, ibid.), with a deed of assignment incorporated therein such that the credit and mortgage rights were assigned by Fortune Motors Corp. in favor of Filinvest Credit Corporation with the consent of the mortgagordebtor Leticia Laus (Exhibits ―B-1‖ and ―B-2‖; p. 147, ibid.). The vehicle was then registered in the name of Leticia L. Laus with the chattel mortgage annotated on said certificate. (Exhibit "H"; p. 154, ibid.) On September 25, 1978, Filinvest Credit Corporation in turn assigned the credit in favor of Servicewide Specialists, Inc. (Servicewide, for brevity) transferring unto the latter all its rights under the promissory note and the chattel mortgage (Exhibit ―B-3‖; p. 149, ibid.) with the corresponding notice of assignment sent to the registered car owner (Exhibit ―C‖; p. 150, Ibid.).

On April 18, 1977, Leticia Laus failed to pay the monthly installment for that month. The installments for the succeeding 17 months were not likewise fully paid, hence on September 25, 1978, pursuant to the provisions of the promissory note, Servicewide demanded payment of the entire outstanding balance of P46,775.24 inclusive of interests (Exhibits ―D‖ and ―E‖; pp. 151-152, ibid.). Despite said formal demand, Leticia Laus failed to pay all the monthly installments due until July 18, 1980. On July 25, 1984, Servicewide sent a statement of account to Leticia Laus and demanded payment of the amount of P86,613.32 representing the outstanding balance plus interests up to July 25, 1985, attorney’s fees, liquidated damages, estimated repossession expense, and bonding fee (Exhibit ―F‖; p. 153, ibid.) As a result of the failure of Leticia Laus to settle her obligation, or at least to surrender possession of the motor vehicle for the purpose of foreclosure, Servicewide instituted a complaint for replevin, impleading Hilda Tee and John Dee in whose custody the vehicle was believed to be at the time of the filing of the suit. In its complaint, plaintiff alleged that it had superior lien over the mortgaged vehicle; that it is lawfully entitled to the possession of the same together with all its accessories and equipments; (sic) that Hilda Tee was wrongfully detaining the motor vehicle for the purpose of defeating its mortgage lien; and that a sufficient bond had been filed in court. (Complaint with Annexes, pp. 1-13, ibid.). On July 30, 1984, the court approved the replevin bond (p. 20, ibid.) On August 1, 1984, Alberto Villafranca filed a third party claim contending that he is the absolute owner of the subject motor vehicle duly evidenced by the Bureau of Land Transportation’s Certificate of Registration issued in his name on June 22, 1984; that he acquired the said mother vehicle from a certain Remedios D. Yang under a Deed of Sale dated May 16, 1984; that he acquired the same free from all lien and emcumbrances; and that on July 30, 1984, the said automobile was taken from his residence by Deputy Sheriff Bernardo Bernabe pursuant to the seizure order issued by the court a quo. Upon motion of the plaintiff below, Alberto Villafranca was substituted as defendant. Summons was served upon him. (pp. 5556, ibid). On March 20, 1985, Alberto Villafranca moved for the dismissal of the complaint on the ground that there is another action pending between the same parties before the Regional Trial Court of Makati,

Branch 140, docketed as Civil Case No. 8310, involving the seizure of subject motor vehicle and the indemnity bond posted by Servicewide (Motion to Dismiss with Annexes; pp. 57-110, ibid.) On March 28, 1985, the court granted the aforesaid motion (p. 122, ibid.), but subsequently the order of dismissal was reconsidered and set aside (pp. 135-136, ibid.). For failure to file his Answer as required by the court a quo, Alberto Villafranca was declared in default and plaintiff’s evidence was received ex parte. On December 27, 1985, the lower court rendered a decision dismissing the complaint for insufficiency of evidence. Its motion for reconsideration of said decision having been denied, xxx.‖ In its appeal to the Court of Appeals, petitioner theorized that a suit for replevin aimed at the foreclosure of a chattel is an action quasi in rem, and does not require the inclusion of the principal obligor in the Complaint. However, the appellate court affirmed the decision of the lower Court; ratiocinating, thus: ―A cursory reading, however, of the Promissory Note dated May 14, 1976 in favor of Fortune Motors (Phils.) Corp. in the sum of P56,028.00 (Annex ―A‖ of Complaint, p. 7, Original Records) and the Chattel Mortgage of the same date (Annex ―B‖ of Complaint; pp. 89, ibid.) will disclose that the maker and mortgagor respectively are one and the same person: Leticia Laus. In fact, plaintiff-appellant admits in paragraphs (sic) nos. 2 and 3 of its Complaint that the aforesaid public documents (Annexes ―A‖ and ―B‖ thereof) were executed by Leticia Laus, who, for reasons not explained, was never impleaded. In the case under consideration, plaintiff-appellant’s main case is for judicial foreclosure of the chattel mortgage against Hilda Tee and John Doe who was later substituted by appellee Alberto Villafranca. But as there is no privity of contract, not even a causal link, between plaintiff-appellant Servicewide Specialists, Inc. and defendant-appellee Alberto Villafranca, the court a quo committed no reversible error when it dismissed the case for insufficiency of evidence against Hilda Tee and Alberto Villafranca since the evidence adduced pointed to Leticia Laus as the party liable for the obligation sued upon (p. 2, RTC Decision).‖[3] Petitioner presented a Motion for Reconsideration but in its Resolution[4] of May 10, 1993, the Court of Appeals denied the same, taking notice of another case ―pending between the same parties xxx relating to the very chattel mortgage of the motor vehicle in litigation.‖ Hence, the present petition for review on certiorari under Rule 45. Essentially, the sole issue here is: Whether or not a case for replevin

may be pursued against the defendant, Alberto Villafranca, without impleading the absconding debtor-mortgagor? Rule 60 of the Revised Rules of Court requires that an applicant for replevin must show that he ―is the owner of the property claimed, particularly describing it, or is entitled to the possession thereof.‖[5] Where the right of the plaintiff to the possession of the specified property is so conceded or evident, the action need only be maintained against him who so possesses the property. In rem action est per quam rem nostram quae ab alio possidetur petimus, et semper adversus eum est qui rem possidet.[6] Citing Northern Motors, Inc. vs. Herrera,[7] the Court said in the case of BA Finance (which is of similar import with the present case): ―There can be no question that persons having a special righ t of property in the goods the recovery of which is sought, such as a chattel mortgagee, may maintain an action for replevin therefor. Where the mortgage authorizes the mortgagee to take possession of the property on default, he may maintain an action to recover possession of the mortgaged chattels from the mortgagor or from any person in whose hands he may find them.‖[8] Thus, in default of the mortgagor, the mortgagee is thereby constituted as attorney-in-fact of the mortgagor, enabling such mortgagee to act for and in behalf of the owner. That the defendant is not privy to the chattel mortgage should be inconsequential. By the fact that the object of replevin is traced to his possession, one properly can be a defendant in an action for replevin. It is here assumed that the plaintiff’s right to possess the thing is not or cannot be disputed.[9] (Italics supplied) However, in case the right of possession on the part of the plaintiff, or his authority to claim such possession or that of his principal, is put to great doubt (a contending party may contest the legal bases for plaintiff’s cause of action or an adverse and independent claim of ownership or right of possession may be raised by that party), it could become essential to have other persons involved and impleaded for a complete determination and resolution of the controversy.[10] In the case under scrutiny, it is not disputed that there is an adverse and independent claim of ownership by the respondent as evinced by the existence of a pending case before the Court of Appeals involving subject motor vehicle between the same parties herein.[11] Its resolution is a factual matter, the province of which properly lies in the lower Court and not in the Supreme Court, in the guise of a petition for review on certiorari. For it is basic that under Rule 45, this Court only entertains

questions of law, and rare are the exceptions and the present case does not appear to be one of them. In a suit for replevin, a clear right of possession must be established. (Italics supplied) 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 replevin in this case has been resorted to in order to pave the way for the foreclosure of what is covered by the chattel mortgage. The conditions essential for such foreclosure would be to show, firstly, the existence of the chattel mortgage and, secondly, the default of the mortgagor. These requirements must be shown because the validity of the plaintiff’s exercise of the right of foreclosure is inevitably dependent thereon.[12] Since the mortgagee’s right of possession is conditioned upon the actual fact of default which itself may be controverted, the inclusion of other parties, like the debtor or the mortgagor himself, may be required in order to allow a full and conclusive determination of the case. When the mortgagee seeks a replevin in order to effect the eventual foreclosure of the mortgage, it is not only the existence of, but also the mortgagor’s default on, the chattel mortgage that, among other things, can properly uphold the right to replevy the property. The burden to establish a valid justification for such action lies with the plaintiff. An adverse possessor, who is not the mortgagor, cannot just be deprived of his possession, let alone be bound by the terms of the chattel mortgage contract, simply because the mortgagee brings up an action for replevin.‖[13] Leticia Laus, being an indispensable party, should have been impleaded in the complaint for replevin and damages. 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. Conversely, a party is not indispensable to the suit if his interest in the controversy or subject matter is distinct and divisible from the interest of the other parties and will not necessarily be prejudiced by a judgment which does complete justice to the parties in Court. He is not indispensable if his presence would merely complete relief between him and those already parties to the action or will simply

avoid multiple litigation.[14] Without the presence of indispensable parties to a suit or proceeding, a judgment of a Court cannot attain real finality.[15] That petitioner could not locate the mortgagor, Leticia Laus, is no excuse for resorting to a procedural short-cut. It could have properly availed of substituted service of summons under the Revised Rules of Court.[16] If it deemed such a mode to be unavailing, it could have proceeded in accordance with Section 14 of the same Rule.[17] Indeed, petitioner had other proper remedies, it could have resorted to but failed to avail of. For instance, it could have properly impleaded the mortgagor. Such failure is fatal to petitioner’s cause. With the foregoing disquisition and conclusion, the other issues raised by petitioner need not be passed upon. WHEREFORE, the Petition is DENIED and the Decision of the Court of Appeals in CA-G.R. CV No. 19571 AFFIRMED. No pronouncement as to costs. SO ORDERED.