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Manila Trading - Supply Co vs. Saez, 66 Phil. 237

1) The Manila Trading & Supply Co. sold a Ford truck chassis to defendants Tomas Santos and Genrao D. Saez in 1933 on credit, secured by a chattel mortgage on the truck. 2) The defendants failed to make payments and the plaintiff repossessed and sold the truck. 3) The defendants argued the sale was subject to the Installment Sales Law, which prohibited deficiency judgments, but the court found the earlier Chattel Mortgage Law applied instead since the contract predated the Installment Sales Law. 4) Under the Chattel Mortgage Law, the plaintiff was entitled to seek the unpaid balance from the defendants after applying the sale proceeds of the repossessed truck

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92 views2 pages

Manila Trading - Supply Co vs. Saez, 66 Phil. 237

1) The Manila Trading & Supply Co. sold a Ford truck chassis to defendants Tomas Santos and Genrao D. Saez in 1933 on credit, secured by a chattel mortgage on the truck. 2) The defendants failed to make payments and the plaintiff repossessed and sold the truck. 3) The defendants argued the sale was subject to the Installment Sales Law, which prohibited deficiency judgments, but the court found the earlier Chattel Mortgage Law applied instead since the contract predated the Installment Sales Law. 4) Under the Chattel Mortgage Law, the plaintiff was entitled to seek the unpaid balance from the defendants after applying the sale proceeds of the repossessed truck

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Gilda P. Ostol
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[G.R. No. 43861. September 26, 1938.

THE MANILA TRADING & SUPPLY COMPANY, Plaintiff-Appellee, v. TOMAS


SANTOS and GENRAO D. SAEZ, Defendants-Appellants.

Facts of the Case:


The Manila Trading & Supply Co. sold a “Ford Truck chassis” to Tomas Santos and
Genrao D. Saez on October 3, 1933. However, the defendants had an unpaid balance
amounting to P2,200.00. The defendants executed twenty promissory notes stating the amount
of each checks that was payable in successively on the 16 th of every month starting November
16, 1933. And they were also bound to pay the interest of 12% per annum. To secure these
promissory notes, the defendants mortgaged the “Ford Truck chassis.” Unfortunately, the
defendants failed to pay any of the promissory notes and the plaintiff attached the chattel
mortgaged, which was sold by the sheriff during an auction. Correspondingly to Act No. 1508
(AN ACT PROVIDING FOR THE MORTGAGING OF PERSONAL PROPERTY AND
FOR THE REGISTRATION OF THE MORTGAGES SO EXECUTED), the
highest bidder was The Manila Trading & Supply Co, for the sum of P700. The plaintiff credited
the defendants the said amount and still owed with interest of P1,897.55. The defendants
answered, stating that the plaintiff’s action will not prosper because it is contrary to Act No.
4122 (otherwise known as INSTALLMENT SALES LAW).
Issue:
Whether or not there is an applicability of Act No. 4122, conformity with the pleadings
of the parties?
Whether or not the plaintiff is entitled to deficiency judgement in accordance with Act
No. 1508?

Ruling:
The court held that Act No. 4122 has no application, because otherwise it would be
given retroactive effect. It is a legal principle embodied in Article 3 of the Civil Code that law
have no retroactive effect unless it is otherwise provided therein. It is conceded that there is
nothing in Act No. 4122 which states that its provision have retroactive effect. In criminal law
the principle of irretroactivity equally applies, except when the penal provisions are favorable
to the accused (Art. 22, RPC). As a corollary principle, rights and obligations are governed by the
law by which they are created (Art. 1090, Civil Code). Rights and obligations arising from
contracts have the force of law between the contracting parties and are governed by their
stipulations (Art. 1091, Civil Code), and consensual agreements are binding provided they are
not contrary to law, morals or public order (Art. 1255, Civil Code). In accordance with the rule of
irrectroactivity, Act No. 4122 is not applicable to this case, for the reason that the mortgage
which gave rose to the plaintiff’s right was executed on October 3, 1933 and the aforesaid Act
took effect only on December 9, 1933. The contention that said Act must be applied because
the present action was instated when it was already effective, cannot be sustained. The action
is the correlative of a right and is nothing more than a remedy conceded by law to protect that
right. If the plaintiff was entitled to a deficiency judgement under Act No. 1508 (Chattel
Mortage Law), this right already existed when Act No. 4122 was approved and cannot be
affected by the prohibition in the latter Act.
“Section 14 Act No. 1508 provides, with regard to the application of the proceeds of the
sale of the chattel mortgaged, as follows:
“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 mortgages, shall be paid to mortgagor or person
holding under him on demand.”
“Which simply shows that the contention of the appellant is untenable.”
The theory of the court a quo evidently is, that a chattel mortgage is a conditional sale
of property, and, in case of a failure of the condition, to wit: to pay the debt, the sale becomes
absolute and the creditor is obliged to resort to the mortgaged property for a payment of this
debt, and the foreclosure of the mortgage is his sole recourse.
“Mr. Justice Kent, as well with other authors on the question of chattel mortgages, have
said, that “in case of a sale under a foreclosure of a chattel mortgage, there is no question that
the mortgagee or creditor may maintain an action for the deficiency, if any should occur.” And
the fact that Act No. 1508 permits a private sale, such sale is not, in fact, a satisfaction of the
debt, to any greater extent than the value of the property at the time of the sale. The amount
received at the time of the sale, of course, always requiring good faith and honesty in the sale,
is only a payment, pro tanto and an action may be maintained for deficiency in the debt.”

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