First National City Bank of New York v. Cheng Tan
REITERATIONFacts
The Antecedents: On July 2, 1947, the Court of First Instance of Manila rendered a judgment in Civil Case No. 59502, ordering defendants, including Silvio Cheng Tan, to pay The First National City Bank of New York P142,000.56 jointly and severally, with stipulated interest. A deficiency judgment was rendered on March 25, 1950, for P98,256.13. After the sale of mortgaged properties, P38,090.06 remained unsatisfied, with stipulated interest from October 3, 1941. Procedural History: As other defendants had died or could not be found, and the five-year period for enforcing the deficiency judgment by motion had expired, The First National City Bank of New York filed the present action on June 26, 1957, to revive the judgment. During the pendency of this case, Silvio Cheng Tan died and was substituted by his legal representative, Serafin Cheng. The latter filed a motion to dismiss, arguing that the plaintiff should have filed its claim in the intestate estate proceedings of the deceased, which were pending in the Court of First Instance of Rizal. The lower court granted the motion to dismiss. The Petition: The First National City Bank of New York appealed the dismissal order, contending that the judgment had ceased to be executory and had been reduced to a mere right of action, making the present action one for revival, not for recovery of money. It also stated that a contingent claim had been filed against the estate.
Issue(s)
Whether a pending action to revive a deficiency judgment must be dismissed and filed as a claim in the probate court upon the death of the judgment debtor.
Ruling
The Supreme Court affirmed the order of the lower court dismissing the action to revive the judgment. The Court held that the plaintiff has the right to go directly to the probate court to file its claim based on the deficiency judgment.
Ratio Decidendi
On Issue 1: The Court held that a deficiency judgment is a contingent claim and must be filed with the probate court within the period fixed for filing claims. Under Section 5, Rule 87 of the Rules of Court, judgments for money against a decedent whose estate is in judicial settlement must be filed with the probate court, or they are deemed barred forever. Although a judgment older than five years is reduced to a 'mere right of action' per Cia. General de Tabacos vs. Martinez, this status actually strengthens the requirement to file it in probate, as it becomes functionally equivalent to a promissory note. The Court reasoned that 'reasons of expediency' support this conclusion because even if the revival action were successful, the judgment could not be enforced by ordinary execution due to the debtor's death. Pursuant to Section 7, Rule 39 of the Rules of Court, the judgment would still have to be processed through the probate court for satisfaction. Therefore, there is no legal necessity to maintain a separate action for revival when the creditor can go directly to the probate court to file the claim based on the deficiency judgment.
Main Doctrine
A deficiency judgment, even after the five-year period for its execution by motion has elapsed and it has been reduced to a mere right of action, must be filed as a contingent claim with the probate court where the settlement of the deceased debtor's estate is pending, and cannot be revived through a separate action for revival of judgment.