Cred Trans Last.docx

DESTILERIA LIMTUACO & CO., INC. VS. INTERMEDIATE APPELLATE COURT, ET AL. GR NO 74369, JANUARY 29, 1988 NARVASA, J. FACTS: This case questions the validity of the conclusion of the trial court and appellate court, that the use of the word “guarantee” in two ostensible mortgage deeds suffices to construe the mortgages as contracts of guaranty with the concomitant benefit of excussion. The “senior Salesman Agency Contract” required Jesus Cordua to put up a first mortgage or surety bond to guarantee or assure faithful compliance. In turn, Cordua executed two separate deeds of first mortgage executed by herein private respondents. Subsequently, Limtuaco terminated Cordua’s agency agreement alleging a shortage in his account and a complaint for foreclosure of mortgage was executed. Private respondents contend that the agreement was separate and distinct from their respective mortgage contracts and that they were entitled to the benefit of excussion since they were mere guarantors. Issue:

Whether or not the deeds of real estate mortgage is a contract of guaranty giving the mortgagors the benefit of excussion. Held:

No, it is not a contract of guaranty and thus not entitled to the benefit of excussion. The deeds executed by private respondents are clearly deeds of mortgage. They are embodied in public instruments and duly recorded in the Registry of Property. In this case, the trial court disregarded all these clear indications, features and characteristics of a real estate mortgage seizing instead upon the single word “guarantee” in the clause and ignoring the terms “answer for” and “insure” found in the same clause. Also, it utilized that solitary word “guarantee” as basis for declaring the deeds to be contracts of guaranty instead of mortgage and construed granting to the mortgagors the benefit of excussion under article 2058. In addition, the rule that a third party creating a mortgage over his property to guarantee the obligation of a principal debtor, may not be held personally liable for the obligation, his liability being limited to the value of the property mortgaged. Hence, as mortgagors the private respondents cannot invoke the benefit of excussion. Therefore, petitioner’s action for foreclosure of mortgage against the private respondents is reinstated.

PAMECA WOOD TREATMENT PLANT, INC., ET AL. VS. CA AND DEVELOPMENT BANK OF THE PHILIPPINES GR NO 106435, JULY 14, 1999 GONZAGA-REYES, J. FACTS: Petitioner obtained a loan or the equivalent of 2M from respondent Bank. By virtue of this loan executed a promissory note for the said amount promising to pay the loan by installment. As security a chattel mortgage was executed over PAMECA’s properties consisting of inventories, furniture and equipment to cover the whole value of the loan. Upon petitioner’s failure to pay, respondent bank extrajudicially foreclosed the chattel mortgage and also filed a complaint for the collection of the balance and ordered to grand the petitioner’s to pay the respondent bank. Issue: Whether or not the respondent bank has the right to recover the deficiency in case the proceeds of the foreclosure is less than the principal obligation. hELD: yes,

Since the Chattel Mortgage Law bars the creditormortgagee 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. 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. Opposite of pledge, where 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. Hence, respondent bank as a creditor may recover the deficiency where the proceeds of the foreclosure is insufficient to cover the principal amount of the loan. Therefore, petition is denied.