BA Finance Corporation vs. Hon. Court of Appeals and Roberto M. Reyes, G.R. No. 102998, July 5, 1996


Spouses Reynaldo and Florencia Manahan executed a promissory note, binding themselves to pay Carmasters, Inc. the amount of PHP 83,080.00 in 36 monthly installments. To secure payment, the Manahan spouses executed a deed of chattel mortgage over a motor vehicle, a Ford Cortina 1.6 GL with motor and serial number CUBFWE-801010. Carmasters later assigned the promissory note and the chattel mortgage to BA Finance Corporation with the conformity of the Manahans. When the latter failed to pay the due installments, BA Finance sent demand letters, which remained unheeded. Thus, BA Finance filed a complaint for replevin with damages against the Manahan spouses and one John Doe. Upon motion and filing of a bond, the lower court issued a writ of replevin. The court, however, cautioned BA Finance that should summons be not served on the defendants within 30 days from the writ’s issuance, the case would be dismissed for failure to prosecute.

Service of summons was served on one Roberto M. Reyes, the John Doe referred to in the complaint. The Ford Cortina was seized from said Roberto M. Reyes through an order of seizure. However, Reyes alleged possession in good faith and asked for extension of time to file answer. A few months later, the court dismissed the replevin case on the ground that the Manahan spouses were never served with summons and ordered that the Ford Cortina be returned to Reyes.

BA Finance filed a motion for reconsideration, which was granted, the court allowing them to cause service of summons on the Manahan spouses within 5 days from receipt. Later, BA Finance filed a motion to declare Reyes in default, which was granted due to failure of Reyes to file answer within the reglementary period. The court likewise granted the motion to set the case for presentation of evidence ex parte. Thereupon, BA Finance submitted the promissory note, deed of chattel mortgage, the deed of assignment, statement of account in the name of Florencia Manahan and 2 demand letters.

Later, the trial court rendered a decision dismissing the complaint against the Manahans for failure of petitioner to prosecute the case against them (Manahans were not served with summons). It also dismissed the case against Reyes for failure of petitioner to show any legal basis for said respondent’s liability.

On appeal, BA finance asserted that a suit for replevin aimed at the foreclosure of the chattel is an action quasi in rem which does not necessitate the presence of the principal obligors as long as the court does not render any personal judgment against them. CA denied the appeal as well as the subsequent motion for reconsideration.

Hence, this petition.




Nature of Replevin as a legal remedy – in rem and in personam

Replevin, broadly understood, is both a form of principal remedy and of a provisional relief. It may refer either to the action itself, i.e. to regain the possession of personal chattels being wrongfully detained from the plaintiff by another, or to the provisional remedy that would allow the plaintiff to retain the thing during the pendency of the action and hold it pendente lite. The action is primarily possessory in nature and generally determines nothing more than the right of possession. Replevin is so usually described as a mixed action, being partly in rem and partly in personamin rem insofar as the recovery of specific property is concerned, and in personam as regards to damages involved. As an “action in rem,” the gist of the replevin action is the right of the plaintiff to obtain possession of specific personal property by reason of his being the owner or of his having a special interest therein. Consequently, the person in possession of the property sought to be replevied is ordinarily the proper and only necessary party defendant, and the plaintiff is not required to so join as defendants other persons claiming a right on the property but not in possession thereof. Rule 60 of the Rules of Court allows an application for the immediate possession of the property but the plaintiff must show that he has a good legal basis, i.e., a clear title thereto, for seeking such interim possession.

When there is no right dispute as to the plaintiff’s right to possess the thing, the action for replevin can be maintained against any person found in possession of the chattel

Where the right of the plaintiff to the possession of the specific 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 nostrum quae ab alio possidetur petimus, et semper adversus eum est qui rem possidet. In Northern Motors, Inc. vs. Herrera, the Court has said:

There can be no question that persons having a special right of property in 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.

In effect then, the mortgagee, upon the mortgagor’s default, is constituted an attorney-in-fact of the mortgagor enabling such mortgagee to act for and in behalf of the owner. Accordingly, 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.

But when the plaintiff’s right of possession is not clear, other necessary parties must be impleaded for a complete determination of the controversy

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 might contest the legal bases for plaintiff’s cause of action or an adverse and independent claim of ownership or right of possession is raised by that party), it could become essential to have other persons involved and accordingly impleaded for a complete determination and resolution of the controversy.

A chattel mortgagee, unlike a pledgee, need not be in, nor entitled to the possession of the property unless and until the mortgagor defaults and the mortgagee thereupon seeks to foreclose thereon. 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 mortgagee, it is not only the existence of, but also the mortgagor 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 that 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.

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