Professional Documents
Culture Documents
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G.R. No. 106435. July 14, 1999.
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* THIRD DIVISION.
282
GONZAGA-REYES, J.:
Before Us for review on certiorari is the decision of the
respondent Court of Appeals in CA G.R. CV No. 27861,
promul-
283
1
gated on April 23, 1992, affirming 2in toto the decision of
the Regional Trial Court of Makati to award respondent
bank’s deficiency claim, arising from a loan secured by
chattel mortgage.
The antecedents of the case are as follows:
On April 17, 1980, petitioner PAMECA Wood Treatment
Plant, Inc. (PAMECA) obtained a loan of US$267,881.67, or
the equivalent of P2,000,000.00 from respondent Bank. By
virtue of this loan, petitioner PAMECA, through its
President, petitioner Herminio C. Teves, executed a
promissory note for the said amount, promising to pay the
loan by installment. As security for the said loan, a chattel
mortgage was also executed over PAMECA’s properties in
Dumaguete City, consisting of inventories, furniture and
equipment, to cover the whole value of the loan.
On January 18, 1984, and upon petitioner PAMECA’s
failure to pay, respondent bank extrajudicially foreclosed
the chattel mortgage, and, as sole bidder in the public
auction, purchased the foreclosed properties for a sum of
P322,350.00. On June 29, 1984, respondent bank filed a3
complaint for the collection of the balance of P4,366,332.46
with Branch 132 of the Regional Trial Court of Makati City
against petitioner PAMECA and private petitioners herein,
as solidary debtors with PAMECA under the promissory
note.
On February 8, 1990, the RTC of Makati rendered a
decision on the case, the dispositive portion of which we
reproduce as follows:
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284
The Court of Appeals affirmed the RTC decision. Hence,
this Petition.
The petition raises the following grounds:
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12 Ibid.
13 “Art. 1484. In a contract of sale of personal property the price of
which is payable in installments, the vendor may exercise the following
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remedies:
(1) Exact fulfillment of the obligation, should the vendee fail to pay;
(2) Cancel the sale, should the vendee’s failure to pay cover two or
more installments;
(3) Foreclose the chattel mortgage on the thing sold, if one has been
constituted, should the vendee’s failure to pay cover two or more
installments. In this case, he shall have no further action against
the purchaser to recover any unpaid balance of the price. Any
agreement to the contrary shall be void.” (Emphasis supplied)
14 “Art. 2115. The sale of the thing pledged shall extinguish the
principal obligation, whether or not the proceeds of the sale are equal to
the amount of the obligation, interest and expenses in a proper case. If the
price of the sale is more than said amount, the debtor shall not be entitled
to the excess, unless otherwise agreed. If the price of the sale is less,
neither shall the creditor be entitled to recover the deficiency
notwithstanding any stipulation to the contrary.” (Emphasis supplied)
15 Rollo, 14-18; Petition, 9-13.
16 G.R. No. L-11466, May 23, 1958 (unpublished).
287
case the proceeds of the foreclosure sale are less than the
amount of the principal obligation, will apply.
This Court reversed the ruling of the lower court and
held that the provisions of the Chattel Mortgage Law
regarding the effects of foreclosure of chattel mortgage,
being contrary to the provisions of Article 2115, Article
2115 in relation to Article 2141, may not be applied to the
case.
Section 14 of Act No. 1508, as amended, or the Chattel
Mortgage Law, states:
“x x x
The officer making the sale shall, within thirty days thereafter,
make in writing a return of his doings and file the same in the
office of the Registry of Deeds where the mortgage is recorded,
and the Register of Deeds shall record the same. The fees of the
officer for selling the property shall be the same as the case of sale
on execution as provided in Act Numbered One Hundred and
Ninety, and the amendments thereto, and the fees of the Register
of Deeds for registering the officer’s return shall be taxed as a
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part of the costs of sale, which the officer shall pay to the Register
of Deeds. The return shall particularly describe the articles sold,
and state the amount received for each article, and shall operate
as a discharge of the lien thereon created by the mortgage. The
proceeds of such sale shall be applied to the payment, first, of the
costs and expenses of keeping and sale, and then to the payment of
the demand or obligation secured by such mortgage, and the
residue shall be paid to persons holding subsequent mortgages in
their order, and the balance, after paying the mortgage, shall be
paid to the mortgagor or persons holding under him on demand.”
(Emphasis supplied)
It is clear from the above provision that the effects of
foreclosure under the Chattel Mortgage Law run
inconsistent with those of pledge under Article 2115.
Whereas, in pledge, the sale of the thing pledged
extinguishes the entire principal obligation, such that the
pledgor may no longer recover proceeds of the sale in excess
of the amount of the principal obligation, Section 14 of the
Chattel Mortgage Law expressly entitles the mortgagor to
the balance of the proceeds, upon satisfaction of the
principal obligation and costs.
288
Since the Chattel Mortgage Law bars the creditor-
mortgagee from retaining the excess of the sale proceeds
there is a corollary obligation on the part of the debtor-
mortgagee to pay the deficiency in case of a reduction in
the price at public auction. As explained in Manila
17
Trading
and Supply Co. vs. Tamaraw Plantation Co., cited in
Ablaza vs. Ignacio, supra:
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17 47 Phil. 513.
289
We find no reason to disturb the 18
ruling in Ablaza vs.
Ignacio, and the cases reiterating it.
Neither do We find tenable the application by analogy of
Article 1484 of the Civil Code to the instant case. As
correctly pointed out by the trial court, the said article
applies clearly and solely to the sale of personal property
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18 See Garrido vs. Tuason, 133 Phil. 717; Philippine National Bank vs.
Manila Investment and Construction, Inc., 38 SCRA 462.
19 Conte vs. Commission on Audit, 264 SCRA 19; Mendiola vs. Court of
Appeals, 258 SCRA 492; Causapin vs. Court of Appeals, 233 SCRA 615.
290
Having nonetheless examined the inventory and chattel
mortgage document as part of the records, We are not
convinced that they effectively prove that the mortgaged
properties had a market value of at least P2,000,000.00 on
January 18, 1984, the date of the foreclosure sale. At best,
the chattel mortgage contract only indicates the obligation
of the mortgagor to maintain the inventory at a value of at
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20 P.T. Cerna Corporation vs. Court of Appeals, 221 SCRA 19; Benitez
vs. Intermediate Appellate Court, 154 SCRA 41; Filinvest Corporation vs.
Relova, 117 SCRA 420.
291
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xxx
xxx
xxx
“In addition to the above, we also bind ourselves to pay for bank
advances for insurance premiums, taxes x x x”
xxx
xxx
292
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The promissory note was signed by private petitioners in
the following manner:
From the foregoing, it is clear that private petitioners
intended to bind themselves solidarily with petitioner
PAMECA in the loan. As correctly submitted by respondent
bank, private petitioners are not made to answer for the
corporate act of petitioner PAMECA, but are made liable
because they made themselves co-makers with PAMECA
under the promissory note.
IN VIEW OF THE FOREGOING, the Petition is
DENIED and the Decision of the Court of Appeals dated
April 23, 1992 in CA G.R. CV No. 27861 is hereby
AFFIRMED. Costs against petitioners.
SO ORDERED.
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21 Rollo, 29-30, 34-35; Annex “C” of the Petition; Decision of the CA, 4-5.
22 Rollo, 35; Annex “C” of the Petition; Decision of the CA, 5.
293
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