Bicol Savings & Loan Association v. Guinhawa
REITERATIONFacts
The Antecedents: Victorio Depositario obtained a loan from Bicol Savings and Loan Association (BISLA) in the amount of P10,622.00, with private respondent Jaime Guinhawa acting as a solidary co-maker. The loan was secured by a chattel mortgage on a Yamaha Motorcycle executed by Depositario. Due to non-payment, the motorcycle was foreclosed, resulting in a deficiency of P5,158.06 as of July 31, 1981. BISLA demanded payment of this deficiency. Procedural History: BISLA filed a complaint against Depositario and Guinhawa for the recovery of the deficiency. The parties entered into a stipulation of facts, agreeing to drop Depositario due to his unknown whereabouts. The sole issue was Guinhawa's liability for the deficiency. The City Court ruled in favor of BISLA, citing Article 1216 of the Civil Code. On appeal, the Court of First Instance reversed the City Court's decision, holding that the foreclosure of the chattel mortgage precluded further action for deficiency against Guinhawa, who was not a party to the mortgage. The Petition: BISLA filed a petition for review with the Supreme Court, assailing the decision of the Court of First Instance.
Issue(s)
Whether private respondent Jaime Guinhawa, as a solidary co-maker and surety, is liable for the deficiency after the foreclosure of the chattel mortgage constituted by the principal debtor, Victorio Depositario. Whether the foreclosure of the chattel mortgage by the creditor precludes an independent civil action to recover the deficiency from the solidary co-maker.
Ruling
The Supreme Court reversed and set aside the decision of the Court of First Instance and reinstated the decision of the City Court, holding private respondent Jaime Guinhawa liable for the deficiency.
Ratio Decidendi
On the liability of the solidary co-maker for the deficiency: The Court held that private respondent Guinhawa, as a solidary co-maker, is liable for the deficiency. Under Article 1216 of the Civil Code, the creditor has the right to proceed against any one of the solidary debtors or some or all of them simultaneously. The fact that Guinhawa was not a party to the chattel mortgage does not absolve him from liability, as his obligation arose from the promissory note where he jointly and severally promised to pay the loan. The Court further clarified that as a solidary co-maker, Guinhawa is also considered a surety under Article 2047 of the Civil Code. The bringing of an action against the principal debtor is not inconsistent with, nor does it preclude, the bringing of another action against the surety to fulfill his obligation. Therefore, the creditor's action to foreclose the chattel mortgage, which was executed by the principal debtor, did not preclude them from pursuing the deficiency against the solidary co-maker. On whether foreclosure precludes further action for deficiency: The Court distinguished the present case from the cited case of Pascual v. Universal Motors, which involved a sale on installment with a guarantee. In the present case, the obligation was a loan secured by a chattel mortgage, and the chattel mortgage was merely a security, not payment for the debt. The Court reiterated its established jurisprudence that if a deficiency exists after an extrajudicial foreclosure of a chattel mortgage, an independent civil action may be instituted for the recovery of said deficiency. To deny the mortgagee this right would be to overlook that the chattel mortgage is only a security. Thus, the foreclosure of the chattel mortgage did not preclude BISLA from seeking the deficiency from Guinhawa.
Main Doctrine
A solidary co-maker, who is also considered a surety, remains liable for the deficiency after the foreclosure of a chattel mortgage constituted by the principal debtor, even if the co-maker was not a party to the chattel mortgage itself, as the creditor has the right under Article 1216 of the Civil Code to proceed against any of the solidary debtors.