ANTICHRESIS: Art.

2135
Pando v Gimenez (taxes and charges upon the estate)
DOCTRINE: The administration of the property in question taken over by the plaintiff towards the end of
October, 1925, is antichretic in character, and therefore justice and equity demand that the provisions of the
Civil Code relating to the obligations of a creditor in antichresis be applied to the case, among them, the
obligation to pay the taxes and charges which burden the estate. The plaintiff having failed to pay the tax on
the house and the rent of the lot where the same is built, he is by law required to pay to the appellant
indemnity for damages.
FACTS: Gimenez was indebted to the plaintiff in the sum of P8,000, and to secure the payment of the said
amount duly made, executed and delivered a real estate mortgage in favor of the said plaintiff over the
properties and leasehold rights. Thus, a contract of mortgage was created. Gimenez was leaving the City of
Manila in order to attend to his business in the Province of Cagayan. Pando requested and was granted the
full control, and complete and absolute administration of the building and the parcel of land on which
said building was erected, situated in Santa Mesa, District of Santa Mesa, mortgaged to the plaintiff, under
the condition that said plaintiff would attend to the administration, care and preservation of the said
building and the property leased from the Hacienda Tuason on which said building was erected, the
payment of the premium on the insurance of this building, the payment of the taxes might become due
on the said building, the payment to the Hacienda Tuason of the rents of the leased property, and to
collect the rents from the tenants of the said building.
They also agreed that the rents that would be collected from the said building, the plaintiff would
apply the same to the payment of all the expenses necessary for the preservation and maintenance
of the said building, the rents of the leased property, and the balance to be applied in payment on
account of the interest that may become due in favor of the plaintiff under the mortgage.
However, in the course of the administration by Pando, he failed to pay the taxes due to the City of Manila
and the rents due on the land leased. Because of this, the City of Manila sold at public auction the said
building to satisfy the taxes then due on the same, which building was sold for the sum of P244.50, and was
bought by the other defendant Massy Teague, and since that time the said building was lost to the defendant
Gimenez Moreover, because Pando failed to pay the Hacienda Tuason the rents due for several years on the
leased property on which the building in question is erected, the said lessor cancelled the contract of lease
of the defendant Gimenez, and has brought a suit against the said defendant Gimenez for desahucio in the
municipal court of the City of Manila.

Aleman v Catera (truck)

DOCTRINE: A chattel mortgage of motor vehicles, to be binding upon third persons, should not only be
registered in the Chattel Mortgage Registry, but also recorded in the corresponding Motor Vehicles Office.
FACTS: Presentacion de Catera is and was the owner and operator of a truck (Catera No. 5"). Driven by
one Ambrogo and while it was traveling on the highway, it fell into the ditch because it was over speeding as
the driver was trying to overtake another truck. Florentina Aleman and her son Antonio Real who at that time
were on the lawn in front of their house were hit by said truck thereby causing the instantaneous death of
said Antonio Real and the injury of Florentina Aleman. The son of the Alemans died and so too did several
other passengers. Each filed separate cases for recovery of damages.
A writ of attachment was issued and served upon a Catera No. 4 which Catera opposed. The lower court
adjudged her to be liable and ordered her to pay damages to the respective families. From the ruling of the
lower court and on appeal to the CA, Southern Motors, Inc. sought to intervene in the case claiming that its
right is superior to that of the victims families.
ISSUE: Which has a preferred right to the bus under attachment the Southern Motors, Inc. in whose favor,
as seller of the bus, a chattel mortgage thereon had been executed and recorded in the corresponding
registry of deeds, or the families of the vehicular accident victims who, having been awarded damages for
death and injuries, had caused an attachment on the said bus owned by the operator whose purchase and
ownership thereof had been recorded in the Motor Vehicles Office.
HELD/RATIO: FAMILIES OF THE VEHICULAR ACCIDENT VICTIMS. Southern Motors, Inc. did not record
in the Motor Vehicles Office the mortgage executed in its favor. Such being the case the mortgage is
ineffective as far as the appellees are concerned. Its right or interest, therefore, in the truck, because of the
mortgage constituted in its favor, cannot prevail over that of the appellees who though mere judgment
creditors may be deemed innocent purchasers, deriving their right from an innocent purchaser, the bus
owner-operator Presentacin de Catera, who had her purchase of the bus from Wenceslao Defensor
recorded in the Motor Vehicles Office.
ALLIED BANK v SALAS (printing machineries and equipment)
DOCTRINE: In determining who between the parties is the preferred creditor, REGISTRATION and
RECORDING in the proper Chattel Mortgage Registry is the determining factor.

ISSUE: WON Pando assumed to pay taxes making the contract one of antichresis? If so, does his failure to
pay taxes make him liable for damages?

FACTS: Petitioner-bank (through petitioners predecessor) granted Gencor Marketing, Inc. a time loan and
was secured by a Deed of Chattel Mortgage over certain printing machineries and equipments; said deed
was recorded in the Chattel Mortgage Registry in Feb. 7, 1974. Gencor failed to pay prompting petitioner to
extra judicially foreclose the mortgage and requested the Sheriff of Quezon City to effect the said
foreclosure. Upon issuance of the Notice of Sheriffs sale, private respondent filed a motion in court to enjoin
the public auction alleging that the properties have been previously levied and attached by the Sheriff of
Rizal.

HELD/RATIO: YES. While at the start, Pando only undertook to collect the rents of the house later on he
assumed the obligation to pay both the tax on the house, and the rent of the lot. Thus, the administration of
the property in question assumed by him is antichretic in character. Therefore, applying the provisions of
the Civil Code, he is liable for damages.

Metrobank is a creditor of Gencors president and claims the properties as the exclusive property of the
president doing business under the firm name of Gencor Printing and as such may not be foreclosed and
sold at auction. During the trial it was admitted by petitioner that the properties belonged to the president and
not to Gencor.

CHATTEL MORTGAGE

ISSUE: WHO between the two claimants (Allied Bank or Metrobank) has a better right over the property.

CFI Ruling: Dismissed; ordered Gimenez to pay Pando; failure to pay Pando will result in the sale of the
mortgaged properties at a public auction

ART. 2140

HELD/RATIO: ALLIED BANK. Even though petitioner admitted that it was the president and not Gencor who
owned the properties, the Court nevertheless finds that the chattel mortgage over the printing machineries
and equipment was ratified and approved by Clarencio Yujuico. As earlier stated and as pointed out by
petitioner, it was Clarencio Yujuico as president of Gencor Marketing, Inc., who signed the promissory note
evidencing the time loan granted by petitioner's predecessor General Bank and Trust Company in favor of
Gencor Marketing, Inc.

private respondent's premises and was not able to effect the seizure of the aforedescribed machinery.
Petitioner thereafter filed a complaint for judicial foreclosure with the Court of First Instance. CFI granted a
writ of seizure; it was enforced by the Sheriff after several delays; Sheriff removed the main drive motor of the
subject machinery.
CA annulled the orders of the CFI because the subject property is REAL PROPERTY and cannot thus be the
subject of a CM.
ISSUE: WON the machinery is real or personal property?

Finding the chattel mortgage to be valid, the Court takes special note of the fact that said chattel mortgage
was registered and duly recorded in the Chattel Mortgage Registry of Quezon City on February 7, 1974, prior
to April 22, 1977, the date the writ of attachment of the properties in question was issued. This is a significant
factor in determining who of two contending claimants should be given preference over the same properties
in question.

The registration of the chattel mortgage more than three years prior to the writ of attachment issued by
respondent judge is an effective and binding notice to other creditors of its existence and creates a real right
or a lien, which being recorded, follows the chattel wherever it goes. The chattel mortgage lien attaches to
the property wherever it may be. Thus, private respondent as attaching creditor acquired the properties in
question subject to petitioner's mortgage lien as it existed thereon at the time of the attachment.

In this regard, it must be stressed that the right of those who so acquire said properties should not and
cannot be superior to that of the creditor who has in his favor an instrument of mortgage executed with the
formalities of law, in good faith, and without the least indication of fraud.

Applying the foregoing principle to the case at bar, the Court finds the lien of petitioner's chattel mortgage
over the mortgaged properties in question superior to the levy on attachment made on the same by
private respondent as creditor of chattel mortgagor Clarencio Yujuico. What may be attached by
private respondent as creditor of said chattel mortgagor is only the equity or right of redemption of the
mortgagor.

MAKATI LEASING v WEAREVER TEXTILES (machinery as chattel)

DOCTRINE: Machinery though immobilized by destination if treated by the parties as a personalty for
purposes of a chattel mortgage legal, where no third party is prejudiced = valid subject matter of CM
FACTS: In order to obtain financial accommodations from herein petitioner Makati Leasing and Finance
Corporation, the private respondent Wearever Textile Mills, Inc., discounted and assigned several
receivables with the former under a Receivable Purchase Agreement. To secure the collection of the
receivables assigned, private respondent executed a Chattel Mortgage over certain raw materials inventory
as well as a machinery described as an Artos Aero Dryer Stentering Range
Upon private respondent's default, petitioner filed a petition for extrajudicial foreclosure of the properties
mortgage to it. However, the Deputy Sheriff assigned to implement the foreclosure failed to gain entry into

HELD/RATIO: PERSONAL PROPERTY. Based on the Tumalad ruling (house of strong materials = personal
property), real property may be treated as personal property for the purpose of executing a chattel mortgage
on two conditions:
1.
2.

The parties so agree; and,

No 3P is prejudiced by such agreement.

Moreover, the characterization of the subject machinery as chattel by the private respondent is indicative of
intention and impresses upon the property the character determined by the parties
TSAI v CA (knitting machines; extent of chattel mortgage: limited to what is described)
DOCTRINE: A chattel mortgage shall be deemed to cover only the property described therein and not like or
substituted property thereafter acquired by the mortgagor and placed in the same depository as the property
originally mortgaged.
FACTS:
Ever Textile (R) obtained a P3M loan from PBCOM (P), with Real Property and Chattel Mortgage over
the lot, where its factory stands and the chattels located therein as enumerated in its attached schedule
A 2nd loan was obtained secured by a Chattel Mortgage over personal properties listed in its attached
list, which is similar to the attached list to the 1 st mortgage.
On the same date of the 2nd loan, R purchased various machines and equipment
Later, R filed insolvency proceedings
P commenced an extrajudicial foreclosure (EJF), wherein P won the bid and the properties were
leased and later sold to Tsai. P sold the factory, properties and the contested machineries of R.
o
Basically, some of the machines sold at the public auction were not covered by the 2
existing mortgage contracts.
R filed for annulment of sale contending that the machineries bought by R which are not included in the
list should be excluded from the sale to TSAI
P contended that the machineries, which are connected to the land, are part of the real estate stated in
the Mortgage.
RTC and CA ruled in favor of R.
ISSUE: WON the contested machineries (property bought by R on the same day that the 2 nd loan was
executed) should be inlcluded in the auction sale and sale to TSAI?
HELD/RATIO: NO!
Based on the pieces of evidence, the true intention of P and R is to treat machinery and equipment as
chattels.
The controverted machineries are not covered by or included in either of the 2 mortgages
The machineries were not included in the Notice of Sale
An immovable may be considered a personal property if there is a stipulation as when it is used as
security in the payment of an obligation where a chattel mortgage is executed over it, as in the case at
bar.

Mere nuts and bolts do not foreclose the controversy. Court looked into the INTENT of the parties.
ACME SHOE v CA

DOCTRINE: While a pledge, real estate mortgage, or antichresis may exceptionally 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 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.

FACTS:
1) Petitioner Chua Pac, the president and general manager of co-petitioner Acme Shoe, executed on June
1978, for and in behalf of the company, a chattel mortgage in favor of private respondent Producers Bank of
the Philippines as security for petitioner's corporate loan of P3,000,000.00. It was stated that:

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 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

2) On 10 and 11 January 1984, the bank yet again extended to petitioner corporation a loan of
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. The bank then applied for an extra judicial foreclosure of the chattel mortgage,
with the Sheriff of prompting Acme to file an injunction, which was dismissed. The court also ordered the
foreclosure of the chattel mortgage. It held petitioner corporation bound by the stipulations.

ISSUE: Whether it is 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?

HELD:
A)

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 debt or is secured by the
personal commitment of another.

B)

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 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.

C)

While a pledge, real estate mortgage, or antichresis may secure after-incurred obligations so long as
these future debts are accurately described, a chattel mortgage, can only cover obligations existing at
the time the mortgage is constituted.

D)

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. 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 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.

E)

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. The fact, .that the statute has provided that the parties to the contract must execute an oath
that 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 means that the debt referred to in the law is a current, not an obligation
that is yet merely contemplated.

F)

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 other words, 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.

ART. 2141 in relation to Art. 1484 (Recto Law)

CERNA v CA

MAGNA FINANCIAL v COLARINA (Suzuki MultIcab)

DOCTRINE: A contract of chattel mortgage, w hich is the transaction involved in the present case, is in the
nature of a conditional sale of personal property given as a security for the payment of a debt, or the
performance of some other obligation specified therein, the condition being that the sale shall be void upon
the seller paying to the purchaser a sum of money or doing some other act named.
Remedies under Art. 1484 (specific performance, rescission, and foreclosure) are ALTERNATIVE.
FACTS:

Elias Colarina bought on installment from Magna Financial Services (MFS) one Suzuki Multicab.

After making a down payment, Colarina executed a promissory note for the balance of P229,284.00
payable in 36 equal monthly installments. To secure payment, Colarina executed an integrated
promissory note and deed of chattel mortgage over the motor vehicle.

Colarina failed to pay the monthly amortization accumulating an unpaid balance of P131,607.00.

Despite repeated demands, he failed to make the necessary payment.

MFS filed a Complaint for Foreclosure of Chattel Mortgage with Replevin.

Upon the filing of a Replevin Bond, a Writ of Replevin was issued. Summons, together with a copy of
the Writ of Replevin, was served on Colarina who voluntarily surrendered physical possession of the
vehicle to the Sheriff.

The motor vehicle was turned over by the sheriff to Magna Financial Services Group, Inc.

The trial court rendered judgment in favor of MFS and asked Coralina to pay the unpaid balance and
foreclose the chattel mortgage.

Colarina appealed to the Regional Trial Court which affirmed in toto the decision of the MTCC.

CA reversed the decision of MTCC and RTC stating that MTC and the RTC erred in ordering the
defendant to pay the unpaid balance of the purchase price of the subject vehicle irrespective of the fact
that the instant complaint was for the foreclosure of its chattel mortgage.
Issue:
1)
WON MFS can avail of the two remedies, payment of unpaid balance and foreclosure of chattel
mortgage?
2)
WON there was actual foreclosure?
Held:
1)
NO. Article 1484, paragraph 3, provides that if the vendor has availed himself of the right to foreclose
the chattel mortgage, he shall have no further action against the purchaser to recover any unpaid
balance of the purchase price. Any agreement to the contrary shall be void. In other words, in all
proceedings for the foreclosure of chattel mortgages executed on chattels which have been sold on the
installment plan, the mortgagee is limited to the property included in the mortgage.

2)

Be that as it may, although no actual foreclosure as contemplated under the law has taken place in this
case, since the vehicle is already in the possession of Magna Financial Services Group, Inc. and it has
persistently and consistently avowed that it elects the remedy of foreclosure, the Court of Appeals,
thus, ruled correctly in directing the foreclosure of the said vehicle without more.
BA FINANCE v CA (Ford Escort; insurance; deficiency)
DOCTRINE: B.A. Finance Corporation was deemed subrogated to the rights and obligations of Supercars,
Inc. when the latter assigned the promissory note together with the chattel mortgage constituted on the motor
vehicle in question in favor of the former.
FACTS: On July 15, 1977, Spouses Cuady obtained from Supercars, Inc. a credit, which covered the cost of
one unit of Ford Escort 1300, four-door sedan. The obligation was evidenced by a promissory note executed
by the spouses in favor of Supercars, Inc. To secure the obligation, the spouses executed a chattel
mortgage on the vehicle.
On July 25, 1977, Supercars, Inc. assigned the promissory note, together with the chattel mortgage,
to B.A. Finance Corporation. B.A. Finance Corporation, as the assignee of the mortgage lien
obtained the renewal of the insurance coverage over the vehicle with Zenith Insurance Corporation.
On April 18, 1980, the vehicle was involved in an accident and was badly damaged. The spouses asked B.A.
Finance Corporation to repair the vehicle but B.A. Finance Corporation refused to. Later, the car bogged
down. The spouses then stopped paying their monthly installments on the promissory note. B.A. Finance
Corporation sued the spouses for recovery of the remaining balance.
ISSUE: Whether B.A. Finance is entitled to remaining balance of the promissory note?
HELD: NO. B.A. Finance Corporation is bound by the terms and conditions of the chattel mortgage executed
between the Cuadys and Supercars, Inc. Under the deed of chattel mortgage, B.A. Finance
Corporation was constituted attorney-in-fact with full power and authority to collect from the insurer
the proceeds of insurance to the extent of its interests, in the event that the mortgaged car suffers any loss or
damage.
Under the established facts and circumstances, it is unjust, unfair and inequitable to require the
chattel mortgagors (Spouses) to still pay the unpaid balance of their mortgage debt on the said car,
the non-payment of which account was due to the stubborn refusal and failure of mortgagee (B.A. Finance
Corporation) to avail of the insurance money which became due and demandable after the insured motor
vehicle was badly damaged in a vehicular accident covered by the insurance risk.

Petitioner resolutely declared that it has opted for the remedy provided under Article 1484(3) of the Civil
Code, that is, to foreclose the chattel mortgage. The petitioners prayer contains two remedies,
payment of unpaid balance and foreclosure of chattel mortgage. Such a scheme is not only irregular
but is a flagrant circumvention of the prohibition of the law. By praying for the foreclosure of the chattel,
Magna Financial Services Group, Inc. renounced whatever claim it may have under the promissory
note.

DOCTRINE: In a chattel mortgage, the creditor is entitled to recover the deficiency or balance of his claim.

NO. In the case at bar, there is no dispute that the subject vehicle is already in the possession of the
petitioner, Magna Financial Services Group, Inc. However, actual foreclosure has not been pursued,
commenced or concluded by it. Where the mortgagee elects a remedy of foreclosure, the law requires
the actual foreclosure of the mortgaged chattel. It is the actual sale of the mortgaged chattel that would
bar the creditor (who chooses to foreclose) from recovering any unpaid balance. And it is deemed that
there has been foreclosure of the mortgage when all the proceedings of the foreclosure, including the
sale of the property at public auction, have been accomplished.

FACTS: Victorio Depositario together with private respondent Jaime Guinhawa, acting as solidary co-maker,
took a loan from petitioner Bicol Savings and Loan Association (BISLA) payable every 19th day of each
month. To secure the payment of the foregoing loan obligation, the principal borrower Victorio Depositario put
up as security a chattel mortgage which was a Yamaha Motorcycle. Said motorcycle was eventually
foreclosed by reason of the failure of Depositario and private respondent Guinhawa to pay the loan. There
was a deficiency in the amount of P5,158.06 where BISLA made a demand to pay the same. Petitioner
BISLA (plaintiff therein) filed a complaint for the recovery of a sum of money constituting the deficiency after

BICOL SAVINGS v GUINHAWA(Yamaha Motorcycle; deficiency)

foreclosure of the chattel mortgage put up by the principal borrower Depositario against the latter and his
solidary co-maker Guinhawa (herein private respondent) as defendants. Eventually, a stipulation of facts was
entered into between BISLA and Guinhawa. They agreed to drop Depositario, as "his whereabouts being
unknown now and he could not be served with summons". The creditor claims that he can maintain an action
for deficiency and claim P5k balance.

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.

ISSUE: WON creditor can claim remaining balance

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.

HELD/RATIO: YES! The creditor may maintain an action for deficiency although the chattel mortgage law Is
silent on this point. The reason is that a chattel mortgage is only given as a security and not as payment for
the debt in case of failure of payment.
PAMECA WOOD v CA(Yamaha Motorcycle; deficiency)
FACTS: 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 correctly pointed out by the trial court, the said article applies clearly and solely to the sale of personal
property the price of which is payable in installments. Although Article 1484, paragraph (3) expressly bars
any further action against the purchaser to recover an unpaid balance of the price, where the vendor opts to
foreclose the chattel mortgage on the thing sold, should the vendee's failure to pay cover two or more
installments, this provision is specifically applicable to a sale on installments.

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 a complaint for the collection of the balance.
Petitioners contend that the amount of P322,350.00 at which respondent bank bid for and purchased the
mortgaged properties was unconscionable and inequitable considering that, at the time of the public sale,
the mortgaged properties had a total value of more than P2,000,000.00. Petitioners argue that respondent
banks act of bidding and purchasing the mortgaged properties for P322,350.00 or only about 1/6 of their
actual value in a public sale in which it was the sole bidder was fraudulent, unconscionable and
inequitable, and constitutes sufficient ground for the annulment of the auction sale.
Also, invoking the equity jurisdiction of the Supreme Court, petitioners submit that Articles 1484 and
2115 of the Civil Code be applied in analogy to the instant case to preclude the recovery of a deficiency
claim.
ISSUE: Whether the foreclosure of the chattel mortgage valid
HELD/RATIO: VALID. The court did not find anything irregular or fraudulent in the circumstance that
respondent bank was the sole bidder in the sale, as all the legal procedures for the conduct of a foreclosure
sale have been complied with, thus giving rise to the presumption of regularity in the performance of public
duties.

SUPERLINES v ICC(buses; deficiency)

DOCTRINE: If in an extra judicial foreclosure of a chattel mortgage a deficiency exists, an independent civil
action may be instituted for the recovery of said deficiency. To deny the mortgagee the right to maintain an
action to recover the deficiency after foreclosure of the chattel mortgage would be to overlook the fact that
the chattel mortgage is only given as security and not as payment for the debt in case of failure of payment.
FACTS:

Superlines decided to acquire five (5) new buses from the Diamond Motors Corporation for the price of
P10k. However, Superlines lacked financial resources for the purpose so by virtue of a board
resolution, it authorized its President and Gen Mgr Lavides to look for a loan for the purchase of said
buses.

Lavides negotiated with ICC Leasing. ICC agreed to finance the purchase of the new buses via a loan
and proposed a 3-yr term for the payment. The new buses to be purchased were to be used by
Superlines as security for the loan.

Diamond Motors sold to Superlines 5 new buses and was registered under the name of Superlines.

Superlines executed 2 docus Deed of Chattel Mortgage over said buses a security for the purchase
price of buses in P13mill loaned by ICC to Superlines; a Continuing Guaranty to pay jointly and
severally in favour of ICC the amount of P13mill

After paying only 7 monthly amortizations, Superlines defaulted in the payment of its obligation to ICC.

ICC filed a complaint for collection of sum of money with a prayer for a writ of replevin

TC dismissed; ICC and Superlines forged a consumer loan agreement and not an amortized
commercial loan.

CA reversed;
ICC and Superlines entered into an amortized commercial loan agreement with ICC as creditormortgagee and Superlines as debtor-mortgagor, and ordered Superlines and Lavides to pay
jointly and severally the sum of P5mill as deficiency

It was Diamond Motors Corporation and not ICC which sold the subject buses to Superlines. It
held that no evidence had been presented by Superlines to show that ICC bought the said buses
from Diamond Motors Corporation under a special arrangement and that ICC sold the buses to
Superlines. The appellate court also ruled that Article 1484(3) is applicable only where there is
vendor-vendee relationship between the parties and since ICC did not sell the buses to
Superlines, the latter cannot invoke said law.

ISSUE: WON ICC is entitled to the deficiency from the auction sale?
HELD/RATIO: YES

DIAMOND is the seller of the five units of buses and not the plaintiff

No convincing evidence, except the self-serving testimony of defendant Manolet Lavides, was
presented to prove that there was an internal arrangement between the plaintiff, as financing agent,
and Diamond, as seller of the buses. In fact, defendant Lavides admitted under oath that DIAMOND
and plaintiff did not enter into transaction over the sale of the buses

The evidence shows that the transaction between the parties was an "amortized commercial loan" to
be paid in installments
P failed to adduce a preponderance of evidence to prove that R and Diamond Motors Corporation
entered into a special arrangement relative to the issuance of certificates of registration over the buses
under the name of petitioner Superlines.
P were also unable to prove that respondent purchased from Diamond Motors Corporation the new
buses. In contrast, the vehicle invoices of Diamond Motors Corporation irrefragably show that it sold the
said buses to petitioner Superlines. The net proceeds of the loan were remitted by respondent to
petitioner Superlines and the latter remitted the same to Diamond Motors Corporation in payment of
the purchase price of the buses. In fine, respondent and Diamond Motors Corporation had no direct
business transactions relative to the purchase of the buses and the payment of the purchase price
thereof.

The evidence on record shows that under the Promissory Note, Chattel Mortgage and Continuing
Guaranty, respondent was the creditor-mortgagee of petitioner Superlines and not the vendor of the
new buses. Hence, petitioners cannot find refuge in Article 1484(3) of the New Civil Code.

What should apply was the Chattel Mortgage executed by petitioner Superlines and R in relation to the
Chattel Mortgage Law.

This Court had consistently ruled that if in an extra-judicial foreclosure of a chattel mortgage a
deficiency exists, an independent civil action may be instituted for the recovery of said deficiency. To
deny the mortgagee the right to maintain an action to recover the deficiency after foreclosure of the
chattel mortgage would be to overlook the fact that the chattel mortgage is only given as security and
not as payment for the debt in case of failure of payment. Both the Chattel Mortgage Law and Act 3135
governing extra-judicial foreclosure of real estate mortgage, do not contain any provision, expressly or
impliedly, precluding the mortgagee from recovering deficiency of the principal obligation.
ESGUERRA v CA
BPI CREDIT v CA
SERVICEWIDE v CA

FACTS:

Respondents executed a promissory note and a chattel mortgage over a vehicle they bought
from the mortgagee itself, C. R. Tecson Enterprises, for the payment in installments of the
vehicle. C. R. Tecson Enterprises, on the same date, assigned in favor of Filinvest Credit
Corporation. The respondents were aware that the new mortagee is Filinvest.

Respondent spouses by way of Deed of Sale with Assumption of Mortgage transferred and
delivered the vehicle to Conrado Tecson.

Subsequently, Filinvest assigned all its rights as mortgagee to petitioner.

Respondents failed to pay the installments and despite demands from petitioner-mortgagee to
pay or to return the vehicle.

Petitioner filed a complaint for Replevin but the respondents alleged in their Answer that they can
no longer be held liable as they had already conveyed the car to Conrado Tecson.

ISSUE:
1.

WON the assignment of credit by the creditor-mortgagee quires the notice and consent of the
debtor- mortgagor?

2.

WON the assignment of credit by the debtor- mortgagor requires the notice and consent of the
creditor-mortgagee?

HELD:
1.

Only notice to the debtor-mortgagor of the assignment of credit is required. His consent is not
required.

2.

In contrast, consent of the creditor-mortgagee to the alienation of the mortgaged property is

necessary in order to bind said creditor. Since the assignee of the credit steps into the shoes of
the creditor-mortgagee to whom the chattel was mortgaged, it follows that the assignee's consent
is necessary in order to bind him of the alienation of the mortgaged thing by the debtormortgagor. This is tantamount to a novation. As the new assignee, petitioner's consent is
necessary before respondent spouses' alienation of the vehicle can be considered as binding
against third persons. Petitioner is considered a third person with respect to the sale with
mortgage between respondent spouses and third party defendant Conrado Tecson.