credit transaction case

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RCBC v. ROYAL CARGO CORPORATION Terrymanila, Inc. filed a petition for voluntary insolvency with the RTC of Bataan on February 13, 1 creditors was petitioner with which it had an obli"ation of #3 $illion that was secured by a chattel e%ecuted on February 1&, 1'. Royal Car"o, another creditor of Terrymanila, filed before the RTC of of sum of money and preliminarily attached (some) of Terrymanila*s personal properties on $arch +, 1 the satisfaction of a ud"ment award of #-&,&&-.1&. !n pril 11, the Bataan RTC declared Terryman insolvent. The $anila RTC rendered ud"ment in the collection case in favor of respondent. In the me petitioner sou"ht in the insolvency proceedin"s at the Bataan RTC permission to e%tra/ udicially fo chattel mort"a"e. t the auction sale, petitioner, the sole bidder of the properties, purchased th Respondent later filed for annulment of the auction sale. Issue0 ho should be "iven preference over the sub ect properties2 4560 RCBC 6espite its window of opportunity to e%ercise its e7uity of redemption, however, respondent chose to shrewd about its chances, preferrin" instead to see8 annulment of the auction sale, which was the re foreclosure of the mort"a"e, permission to conduct which it had early on opposed before the insolven ne"li"ence or omission to e%ercise its e7uity of redemption within a reasonable time, or even on the auction sale, warrants a presumption that it had either abandoned it or opted not to assert it. It bears notin" that the chattel mort"a"e in favor of petitioner was re"istered more than two years of a writ of attachment over some of Terrymanila*s chattels in favor of respondent 9ince the re"istr mort"a"e is an effective and bindin" notice to other creditors of its e%istence and creates a real r follows the property wherever it may be, the ri"ht of respondent, as an attachin" creditor or as pur purchased the mort"a"ed chattel at the auction sale, is subordinate to the lien of the mort"a"ee wh a valid chattel mort"a"e. MANOLO P. CERNA vs. THE HONORABLE COURT OF APPEALS and CONRAD C. LEVISTE !n or about !ctober 1&, 1:-, Celerino 6el"ado ;6el"ado< and Conrad 5eviste ;5eviste< entered into a a"reement which was evidenced by a promissory note. !n the same date, 6el"ado e%ecuted a chattel mor over a illy=s eep owned by him. nd actin" as the attorney/in/fact of herein petitioner, $anolo # ;petitioner<, he also mort"a"e a >Taunus= car owned by the latter.The period lapsed without 6el"ado This prompted 5eviste to a file a collection suit CFI of Ri?al a"ainst 6el"ado and petitioner as sol #etitioner claimed that the claim should be filed in the proceedin"s for the settlement of 6el"ado=s action did not survive 6el"ado=s death. $oreover, he also stated that since 5eviste already opted to note, he could no lon"er foreclose the mort"a"e. C and TC0 6enied the $otion to 6ismiss I99@490 hether or not a third party, who is not a debtor under the note but mort"a"ed his property to secu the loan of another is solidarily liable with the principal debtor. hether or not a mort"a"ee who opted to collect may still foreclose the mort"a"e. 4560 There is also no le"al provision nor urisprudence in our urisdiction which ma8es a third person wh fulfillment of another=s obli"ation by mort"a"in" his own property to be solidarily bound with the p chattel mort"a"e may be >an accessory contract> to a contract of loan, but that fact alone does n party mort"a"or solidarily bound with the principal debtor in fulfillin" the principal obli"ation t loan.The si"natory to the principal contract A loan A remains to be primarily bound. It is only upon the latter that the creditor may have been recourse on the mort"a"ors by foreclosin" the mort"a"ed p of an action for the recovery of the amount of the loan. nd the liability of the third/party mort"

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RCBC v. ROYALCARGO CORPORATIONTerrymanila, Inc. filed a petition for voluntary insolvency with theRTC of BataanonFebruary 13, 1991. One of its creditors was petitioner with which it had an obligation ofP3 Million that was secured by achattelmortgage executed onFebruary 16, 1989.Royal Cargo, another creditor of Terrymanila, filed before the RTC of for collection of sum of money and preliminarily attached some of Terrymanilas personal propertiesonMarch 5, 1991to secure the satisfaction of a judgment award ofP296,662.16.OnApril 1991, the Bataan RTC declared Terrymanila insolvent.The Manila RTC rendered judgment in the collection case in favor of respondent.In the meantime, petitioner sought in the insolvency proceedings at the Bataan RTC permission to extra-judicially foreclose the chattel mortgage. At the auction sale, petitioner, the sole bidder of the properties, purchased them forP1.5 Million. Respondent later filed forannulment of the auction sale.Issue: Who should be given preference over the subject properties?

HELD: RCBC

Despite its window of opportunity to exercise its equity of redemption, however, respondent chose to be technically shrewd about its chances, preferring instead to seek annulment of the auction sale, which was the result of the foreclosure of the mortgage, permission to conduct which it had early on opposed before the insolvency court.Its negligence or omission to exercise its equity of redemption within a reasonable time, or even on the day of the auction sale, warrants a presumption that it had either abandoned it or opted not to assert it.

It bears noting that the chattel mortgage in favor of petitioner was registered more than two yearsbeforethe issuance of a writ of attachment over some of Terrymanilas chattels in favor of respondent Since the registration of a chattel mortgage is an effective and binding notice to other creditors of its existence and creates a real right or lien that follows the property wherever it may be, the right of respondent, as an attaching creditor or as purchaser, had it purchased the mortgaged chattel at the auction sale, is subordinate to the lien of the mortgagee who has in his favor a valid chattel mortgage.MANOLO P. CERNA vs. THE HONORABLE COURT OF APPEALS and CONRAD C. LEVISTE

On or about October 16, 1972, Celerino Delgado (Delgado) and Conrad Leviste (Leviste) entered into a loan agreement which was evidenced by a promissory note. On the same date, Delgado executed a chattel mortgage 2 over a Willy's jeep owned by him. And acting as the attorney-in-fact of herein petitioner, Manolo P. Cerna (petitioner), he also mortgage a "Taunus' car owned by the latter.The period lapsed without Delgado paying the loan. This prompted Leviste to a file a collection suit CFI of Rizal against Delgado and petitioner as solidary debtors. Petitioner claimed that the claim should be filed in the proceedings for the settlement of Delgado's estate as the action did not survive Delgado's death. Moreover, he also stated that since Leviste already opted to collect on the note, he could no longer foreclose the mortgage. CA and TC: Denied the Motion to Dismiss

ISSUES:

Whether or not a third party, who is not a debtor under the note but mortgaged his property to secure the payment of the loan of another is solidarily liable with the principal debtor.Whether or not a mortgagee who opted to collect may still foreclose the mortgage.HELD:

There is also no legal provision nor jurisprudence in our jurisdiction which makes a third person who secures the fulfillment of another's obligation by mortgaging his own property to be solidarily bound with the principal obligor. A chattel mortgage may be "an accessory contract" to a contract of loan, but that fact alone does not make a third-party mortgagor solidarily bound with the principal debtor in fulfilling the principal obligation that is, to pay the loan.The signatory to the principal contract loan remains to be primarily bound. It is only upon the default of the latter that the creditor may have been recourse on the mortgagors by foreclosing the mortgaged properties in lieu ofan action for the recovery of the amount of the loan. And the liability of the third-party mortgagors extends only to the property mortgaged. Should there be any deficiency, the creditors has recourse on the principal debtor.- The Special Power of Attorney did not make petitioner a mortgagor. All it did was to authorized Delgado to mortgage certain properties belonging to petitioner.Hence, Leviste having chosen to file the collection suit, could not now run after petitioner for the satisfaction of the debt. This is even moretrue in this case because of the death of the principal debtor, Delgado. Leviste was pursuing a money claim against a deceased person.