PHILIPPINE NATIONAL BANK, PLAINTIFF-APPELLEE, VS. MANILA INVESTMENT & CONSTRUCTION, INC. AND CIPRIANO S. ALLAS, DEFENDANTS-APPELLANTS.

In Civil Case No. 33074 of the Court of First Instance of Manila, Branch XV entitled
“Philippine National Bank vs. Manila Investment & Construction, Inc., et al.,” decision was rendered on December 26, 1957, its dispositive
portion being partly as follows:

“IN VIEW WHEREOF, judgment is rendered condemning defendants,
jointly and severally, to pay plaintiff:

(1)  Under the first cause of action the sum of
P88,939.48 with daily interest of P12,77385 plus 1/4% commission or P194.6689
for every 30 days or a fraction thereof, plus 10% on the principal as
attorney’s fees and the cost;

(2)  On the second cause of action the sum of
P356,913.01, plus P48.46403 and 1/4% or P629.31 for every 30 days or fraction
thereof that the amount remain outstanding and unpaid plus 10% of the principal
as attorney’s fees, and the cost.”

In case of non-payment of
the amounts adjudged, the decision also provided for the sale at public auction
of the personal properties covered by the chattel mortgage executed by the
defendants in favor of the plaintiff Bank, and for the disposition of the proceeds
in accordance with law.

After
the decision had become executory, instead of having
the mortgaged personal properties sold at public auction, the parties agreed to have them sold, and
were in fact sold, at a private sale.  The
net proceeds obtained therefrom amounting to P256,941.70 were applied to the partial satisfaction of the
above judgment.

On August 11, 1964, that
is, more than five years but less than ten years from the date when the
decision aforesaid became executory, the Philippine
National Bank filed in the same Court of First Instance of Manila an action
to revive it.  On October
21, 1964, the
defendants filed their answer in which, after admitting some of the allegations
of the complaint and denying others, they interposed the following affirmative
defenses:

“1.  That sometime after the judgment rendered by
the Court of First Instance of Manila in Civil Case No. 33074 became final and executory, plaintiff sold to various parties in a private
sale the mortgaged properties specifically mentioned in the judgment to be
foreclosed and sold at public auction hence the proceeds thereof must therefore
be accounted by plaintiff to the defendants in order that the same be properly
and accordingly applied to the judgment;

 2.   That
notwithstanding the aforesaid sale which was effected
sometime in 1958, plaintiff never rendered an accounting of the proceeds of the
sale of the mortgaged properties to the defendants;

 3.   That
plaintiff has no cause of action in reviving the aforesaid judgment not until
it has rendered proper accounting, to the defendants of the proceeds of the
aforesaid sale.”

Thereafter, the parties
submitted a stipulation of facts, paragraph 3 thereof being of the following
tenor:

“3. – That as
of August 11, 1964, there
remains the sum of P382,338.47 still unsatisfied which
is arrived at in the manner specified in Annex “A”.”

After the parties had
submitted their respective memorandum, the court rendered on August
30, 1966 the
appealed decision whose dispositive portion reads as
follows:

“WHEREFORE, the Court renders judgment ordering the defendants
to pay the plaintiff, jointly and severally, the amount of THREE HUNDRED EIGHTY
TWO THOUSAND THREE HUNDRED THIRTY EIGHT AND 47/100 (P382,338.47)
PESOS, with interest at the legal rate from August 12, 1964 until fully paid.  Costs against the
defendants.”

The defendants appealed
to secure a reversal of the above decision claiming firstly, that the action
instituted below is not the proper remedy; secondly, that the private
sale of the mortgaged personal properties was null and void, and lastly, that
the appellee is not entitled to a deficiency
judgment.

We are of the opinion
that, upon the facts of the case and the law thereto applicable, appellants’
contentions are without merit.

In relation to the first,
it is true that the decision rendered in Civil Case 33074 of the Court of First
Instance of Manila provided for the sale at public auction of the personal
properties covered by the chattel mortgage executed in favor of the Bank, but
it is likewise true that said personal properties were sold at a private sale by agreement
between the parties.  Besides, We see nothing illegal, immoral or against public order in
such agreement entered into freely and voluntarily.  In line with the provisions of the
substantive law giving the contracting parties full freedom to contract
provided their agreement is not contrary to law, morals, good customs, public
order or public policy (Article 1306, Civil Code of the Philippines), We held
in Philippine National Bank vs. De Poli thus:

“Under article 1255 of the Civil Code (Art.
1306 New Civil Code), the contracting parties may stipulate that in case of
violation of the conditions of the mortgage contract, the creditor may sell, at
private sale and without previous advertisement or notice, the whole or part of
the good mortgaged for the purpose of applying the proceeds thereof on the
payment of the debt.  Said stipulation is
not contrary to law or public order, and therefore it is valid.  (Italics supplied).”

As the disposition of the
mortgaged personalties in a private sale was
by agreement between the parties, it is clear that appellants are now in
estoppel to question it except on the ground of fraud
or duress – pleas that they do not invoke. 
They do not even claim that the private sale agreed upon had
caused them substantial prejudice.

Appellants contend
likewise that, instead of the action to revive the judgment rendered in its
favor, the appellee Bank should have filed a motion
in Civil Case 33074 of the Court of First Instance of Manila for the rendition
of a deficiency judgment.  It is to be
borne in mind, in this connection, that the action for revival was instituted
after the lapse of five but of less than ten years from the time the
decision sought to be revived became executory.  Having thus become stale or dormant, it was
not subject to execution by mere motion. 
Consequently, before the judgment creditor could move for the rendition
of a deficiency judgment and for the issuance of the corresponding writ of
execution, it had to seek the revival of the decision in accordance with
law.  In Bank, etc. vs. Greene 61 Phil.
654, We held that “A judgment foreclosing a
mortgage which has lost executory force by the lapse
of five years may be revived by filing a complaint based thereon.” This,
precisely, is what the appellee Bank did.

Technically, the original
judgment rendered by the Court of First Instance of Manila in Civil Case No.
33074 should have been literally
revived, but the record
shows that at the hearing of the action below the parties formally stipulated
that the unpaid portion of the amount due under the decision in favor of the
Bank was the sum of P382,338.47 only, after taking into account all the
payments made by the judgment debtors up to the date the stipulation of facts
was submitted to the lower court. 
Consequently, the deficiency judgment that may be rendered in Civil Case
No. 33074 and the writ of execution that may be issued to enforce the same
shall be only for said amount.

Lastly, it is appellants’
contention that the appellee Bank is not entitled to
a deficiency judgment, invoking the provisions of Article 2115 of the new Civil
Code.  The issue thus raised was already
resolved in the negative in Ablaza vs. Ignacio, G.R.
No. L-11466 promulgated on March 23, 1958 where We said, inter alia, the
following:

“We are of the opinion that the trial court is in error.  It is clear from Article 2141 that the
provisions of the New Civil Code on pledge shall apply to a chattel Mortgage
only in so far as they are not counter to any provision of the Chattel Mortgage
Law, otherwise the provisions of the latter shall apply.  Here we find that the provisions of the
Chattel Mortgage with regard to the effects of the foreclosure of a chattel
mortgage are precisely contrary to the provisions of Article 2115 which were
applied by the trial Court.”

x        x         x

“Mr. Justice Kent, in the 12th Edition of his Commentaries, as
well as other authors in 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 a deficiency in the debt.” (Manila
Trading and Supply Co., vs. Tamaraw Plantation Co.,
47 Phil. 513; Italics supplied.).”

It is clear, therefore,
that the proceeds of the sale of the mortgaged personal properties of the
herein appellants constitute only a pro tanto satisfaction of the monetary award made by
the court and the appellee Bank is entitled to
collect the balance.

WHEREFORE, the decision appealed from is hereby
affirmed, with costs.

Concepcion, C.J., Reyes, J.B.L., Makalintal, Zaldivar, Castro,
Fernando, Teehankee, Barredo,
Villamor, and Makasiar, JJ., concur.