Starke v. Philippine Sugar Commission
REITERATIONFacts
The Antecedents: Petitioner Hortensia Starke, a financed sugar planter, obtained crop loans from Philippine National Bank (PNB) for crop years 1979-80 and 1980-81. She executed chattel mortgages and deeds of assignment in favor of PNB, designating it as her agent. PNB sold her sugar at prices fixed by the Philippine Sugar Commission (PHILSUCOM), deducting her debts and giving her the surplus. She later received additional amounts representing 50% of PHILSUCOM's export profit, with the other 50% applied to a P2.7 billion NASUTRA loan. Procedural History: Petitioner filed a complaint on October 28, 1981, with the Court of First Instance of Rizal, alleging that the deduction of her share of the export profit to pay the NASUTRA loan was without her consent, unauthorized, unreasonable, arbitrary, and capricious, violating due process. The trial court ruled that PNB was authorized to sell her sugar under the chattel mortgage and deed of assignment. The Court of Appeals affirmed this decision. The Petition: Petitioner elevated the case to the Supreme Court, maintaining that PNB was not authorized to sell her sugar to NASUTRA, that NASUTRA never became the owner, and that she was entitled to the proceeds of its sale. She also claimed entitlement to the remaining 50% of the export profit used to pay the PHILSUCOM/NASUTRA loan, alleging her sugar was confiscated. She further argued that PNB's authority to sell constituted a pactum commissorium and that NASUTRA acted as her agent, thus unable to apply profits to its own loan.
Issue(s)
Whether the chattel mortgage and deed of assignment authorized PNB to sell the petitioner's sugar to NASUTRA. Whether the sale of the petitioner's sugar to NASUTRA constituted confiscation. Whether the stipulation in the chattel mortgage constituted a pactum commissorium. Whether petitioner was entitled to the 50% of the export profit applied to the NASUTRA loan.
Ruling
The Supreme Court denied the petition and affirmed the decision of the Court of Appeals, holding that PNB was authorized to sell the petitioner's sugar, that there was no confiscation, and that the stipulation in the chattel mortgage did not constitute a pactum commissorium. Petitioner was not entitled to the 50% of the export profit applied to the NASUTRA loan.
Ratio Decidendi
On whether PNB was authorized to sell the petitioner's sugar to NASUTRA: The Court affirmed the trial court's finding that Paragraph 8 of the chattel mortgages and Paragraphs 1 and 5 of the deeds of assignment clearly authorized PNB, as attorney-in-fact, to sell the mortgaged crops at a price it deemed convenient and reasonable, and to apply the proceeds to the petitioner's obligations. The Court noted that the petitioner executed these documents to secure her crop loans, and the stipulations explicitly granted PNB the power to sell and dispose of the sugar. The subsequent sale to NASUTRA, as evidenced by the payment voucher, was therefore valid. On whether the sale constituted confiscation: The Court rejected the petitioner's claim of confiscation. It pointed out that payments were made to the planters by NASUTRA in behalf of PHILSUCOM in exchange for their sugar, as evidenced by payment vouchers. The Court stated that confiscation implies taking without payment, which was not the case here. The issuance of quedans directly in the name of PHILSUCOM was a procedural measure to facilitate sales, not an act of confiscation, as PHILSUCOM was the sole buyer and seller of sugar under PD 1192. On whether the stipulation constituted a pactum commissorium: The Court found no pactum commissorium, which is prohibited by Article 2088 of the Civil Code. The chattel mortgage provision did not involve automatic appropriation by the creditor (PNB). Instead, PNB was expressly authorized to act as the petitioner's agent in the disposition of the mortgaged property for her benefit. The proceeds were applied to her account, and any excess was returned to her, demonstrating that PNB acted as an agent, not an appropriator. On petitioner's entitlement to the 50% export profit: The Court ruled that petitioner was not entitled to the 50% of the export profit applied to the NASUTRA loan as a matter of right. This amount was granted to planters as a bonus or gratuity in implementation of PHILSUCOM's policy to provide incentives and encourage production, not as a recognition of ownership over that portion of the profit. Once PHILSUCOM acquired ownership of the sugar, it had the discretion to dispose of the proceeds as it saw fit. The petitioner had irrevocably ceased to have control of the sugar after its sale and payment by NASUTRA.
Main Doctrine
A chattel mortgage provision authorizing the mortgagee to sell the mortgaged property as attorney-in-fact of the mortgagor, and apply the proceeds to the mortgagor's obligation, does not constitute a pactum commissorium, as it does not involve automatic appropriation by the creditor but a disposition for the benefit of the mortgagor.