PNB vs.

Manila

Facts:
In Civil Case No. 33074 of the Court of First Instance of Manila, Branch XV
entitled "Philippine National Bank vs. Manila Investment & Construction, Inc., et
al.," decision was rendered on December 26, 1957, its dispositive portion being
partly as follows:
IN VIEW WHEREOF, judgment is rendered condemning defendants, jointly and
severally, to pay plaintiff:
(1) Under the first cause of action the sum of P88,939.48 with daily interest of
P12,77385 plus 1/4% commission or P194.6689 for every 30 days or a fraction
thereof, plus 10% on the principal as attorney's fees and the cost;
(2) On the second cause of action the sum of P356,913.01, plus P48,464 03 and
1/4% or P629.31 for every 30 days or fraction thereof that the amount remain
outstanding and unpaid plus 10% of the principal as attorney's fees, and the cost.

In case of non-payment of the amounts adjudged, the decision also provided for
the sale at public auction of the personal properties covered by the chattel
mortgage executed by the defendants in favor of the plaintiff Bank, and for the
disposition of the proceeds in accordance with law. After the decision had
become executory, instead of having the mortgaged personal properties sold at
public auction, the parties agreed to have them sold, and were in fact sold, at a
private sale. The net proceeds obtained therefrom amounting to P256,941.70
were applied to the partial satisfaction of the above judgment.

Issue:
Whether or not the private sale of the mortgaged personal properties was null
and void.

Ruling:
The court sees nothing illegal, immoral or against public order in such agreement
entered into freely and voluntarily. In line with the provisions of the substantive
law giving the contracting parties full freedom to contract provided their
agreement is not contrary to law, morals, good customs, public order or public
policy (Article 1306, Civil Code of the Philippines), We held in Philippine National
Bank vs. De Poli thus:
Under article 1255 of the Civil Code (Art. 1306 New Civil Code), the contracting
parties may stipulate that in case of violation of the conditions of the mortgage
contract, the creditor may sell, at private sale and without previous advertisement
or notice, the whole or part of the good mortgaged for the purpose of applying the
proceeds thereof on the payment of the debt. Said stipulation is not contrary to
law or public order, and therefore it is valid. (Emphasis supplied).
As the disposition of the mortgaged personalities in a private sale was by
agreement between the parties, it is clear that appellants are now in estoppel to
question it except on the ground of fraud or duress pleas that they do not
invoke. They do not even claim that the private sale agreed upon had caused

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them substantial prejudice.