CHATTEL MORTGAGE LAW

G.R. No. 34385 September 21, 1931

ALEJANDRA TORRES, ET AL., plaintiff-appellees,

vs.
FRANCISCO LIMJAP, Special Administrator of the estate of the deceased Jose B.
Henson, defendant-appellant.

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G.R. No. 34386 September 21, 1931

SABINA VERGARA VDA. DE TORRES, ET AL., plaintiffs-appellees,

vs.
FRANCISCO LIMJAP, Special Administration of the estate of the deceased Jose B.
Henson, defendant-appellant.

PAKS: Jose Henson executed in favor of the plaintiffs a chattel mortgage of his drugstores to
secure loans. When Henson defaulted in the terms of the mortgage , the plaintiff sought
possession of the drugstores foreclosing the mortgage. The lower court issued an order
directing the Sheriff to take possession of said drugstores.

ISYU; WON the stipulation in the chattel mortgage extending its coverage to properties
acquired after its constitution is valid and binding?

WON plaintiffs violated the last paragraph of Sec. 7 Act 1508 of the Chattel Mortgage Law?

RULING: Yes, a stipulation in the chattel mortgage extending its coverage to properties
acquired after its constitution is valid and binding where the after acquired property is in
renewal of or in substitution for , goods on hand when the mortgage was executed , or is
purchased with the proceed of the sale of such goods.
As per the second issue, the plaintiffs did not violate such provision of the law because such
provision does not apply to stores open to the public for retail businesses where the goods are
constantly sold and substituted with new stock, such as drug stores , grocery stores etc….

DE ASIS , MARK NINO D.

G.R. No. 103576 August 22, 1996

ACME SHOE, RUBBER & PLASTIC CORPORATION and CHUA PAC, petitioners,
vs.
HON. COURT OF APPEALS, BANK OF THE PHILIPPINES and REGIONAL SHERIFF OF
CALOOCAN CITY,respondents.

PAKS: `Petitioner Chua Pac executed a chattel mortgage in favor of respondent Bank by way
of security of petitioner’s loan of Php 3M..Under the contract, it was stated the following:

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.

In due time , petitioner paid the loan of Php3M and then subsequently obtained another loan
of Php2.7 M using the same contract and it was also paid. A 3rd loan of Php 1M was executed
again by virtue of 4 promissory notes but petitioner this time failed to pay, thereby respondent
bank applied for extra judicial foreclosure of the chattel mortgage with the sheriff that’s why
the petitioner filed an injunction before he RTC but the complaint was dismissed. Petitioner
filed the case before the CA and likewise got the same decision.

ISYU: WON the security in CM comes into existence or applicable in an after incurred
obligations ?

RULING: No, while pledge , real estate mortgage , or under antichresis may exceptionally
secure after incurred obligations as long as future debts are accurately described therein,
however, a chattel mortgage 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

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.

DE ASIS , MARK NINO D.

G.R. No. L-14475 May 30, 1961

SOUTHERN MOTORS, INC., plaintiff-appellee,

vs.
ANGELO MOSCOSO, defendant-appellant.

Diosdado Garingalao for plaintiff-appellee.

Calixto Zaldivar for defendant-appellant.

PAKS: On June 6, 1957, Plaintiff sold to defendant a Chevrolet truck on installment basis. To
secure payment , a chattel mortgage was constituted on the truck in favor of the plaintiff.
Defendant failed to pay 3 installments on the balance. Plaintiff filed a complaint to recover the
unpaid balance of the promissory note. A writ of attachment was issued by the lower court on
the properties of the defendant including the Chev truck and house and lot of defendant.
Provincial Sheriff sold to public auction the truck by Php 1,000 and acquired by the plaintiff.
The lower court condemned defendant to pay the deficiency of Php 4,475 to plaintiff

ISYU; WON the action of plaintiff by attaching and selling the mortgaged property is of
specific performance or foreclosure of mortgage under RECTO LAW?

RULING: The complaint is an ordinary civil action for recovery of the remaining unpaid
balance due on the promissory note If the plaintiff chose foreclosure , it would not bring the
action in court and it would not also attached the house and lot of the defendant. Therefore,
the plaintiff availed the first remedy under Art.1484 of the CC of which is Exact fulfillment or
Specific performance by attaching and selling the mortgaged property, and therefore, seller-
plaintiff is entitled to deficiency.

That in sales on installments, where the action instituted is for specific performance and the
mortgaged property is subsequently attached and sold, the sale thereof does not amount to a
foreclosure of the mortgage, hence, the seller-creditor is entitled to a deficiency judgment

DE ASIS , MARK NINO D.

G.R. No. L-25951 June 30, 1969

FILIPINAS INVESTMENT & FINANCE CORPORATION, plaintiff-appellant,

vs.
JULIAN R. VITUG, JR. and SUPREME SALES & DEVELOPMENT
CORPORATION, defendants-appellees.

PAKS: Julian Vitug executed a promissory note to Supreme Sales in the amount of Php
14,605 payable in monthly installments for purchasing a car and was secured by a chattel
mortgage. On the same day , Supreme Sales negotiated the promissory note to plaintiff
,Filipinas Investment assigning all the rights, title and interest including the right of recourse
against Supreme Sales should Julian Vitug failed to pay. Defendant defaulted in payment.
Plaintiff secured possession of the mortgaged vehicle by means of a writ of replevin duly
obtained from the court but Vitug surrendered the car. Thereafter, said car cas sold to public
auction but the proceeds left a deficiency of Php 8,349. According to plaintiff , Supreme Sales
is still liable to them by virtue of their negotiated promissory note with a right of recourse. The
lower decided the case in favor of Supreme Sales.

ISYU: WON Filipinas Investment can recover the deficiency of Php8,349 against Supreme
Sales by virtue of their agreement ‘with recourse”?

RULING: Yes, Filipinas Investment can recover the balance from Supreme Sales because it
negotiated in favor of plaintiff the promissory note on a with recourse basis whereby in case of
the failure and/or refusal of the maker thereof, defendant Julian R. Vitug, Jr. ,to pay the
obligation under the said promissory note, plaintiff shall have the right to recourse against the
said defendant corporation{Supreme Sales}