Question 13, 2018 Civil Law Bar Exam

Atty. Jericho Del Puerto

Atty. Jericho Del Puerto

Lawyer, Author, Mentor

XIII

(Question XIII, Civil Law, 2018 Bar Exam)

Sonny Inc., (SI) purchased several heavy machineries from Single Equipment Philippines, Inc. (SEP) for PhP 10 million, payable in 36 monthly installments. A chattel mortgage was constituted on the same machineries as security for the amount. As additional security, the President of SI, Stan Smith, mortgaged his personal house and lot. SI failed to pay the 16th and succeeding monthly installments. SEP then commenced a collection suit against SI, and in the course of the proceedings, a writ of attachment was issued against Sl’s properties, including the mortgaged machineries. The attached properties were subsequently sold at public action, but the proceeds thereof were insufficient to satisfy the judgment credit.

(a) Can SEP legally recover the deficiency? (2.5%)

(b) Instead of collecting the deficiency, can SEP commence extrajudicial proceedings to foreclose the mortgage on Stan’s house and lot in order to recover the deficiency? (2.5%)

Suggested Answer:

(a) Yes. Answer

Under the jurisprudence, if there has been no foreclosure of the chattel mortgage nor a foreclosure sale, the prohibition against further collection under the Recto Law does not apply. Rule

In the case at bar, there has been no foreclosure of the chattel mortgage nor a foreclosure sale. Instead, SEP instituted a collection suit. Should the proceeds resulting from public auction be insufficient, SEP is not prohibited from recovering the deficiency. Apply

Thus, SEP can legally recover the deficiency. Conclusion

(b) No. Answer

Under jurisprudence, these remedies under the Recto Law are alternative, not cumulative. The exercise of one would bar the exercise of the others. Rule

In the case at bar, SEP already chose to institute a collection suit. This barred the remedy of extrajudicial foreclosure. Apply

Thus, SEP cannot commence extrajudicial proceedings to foreclose the mortgage on Stan’s house and lot in order to recover the deficiency. Conclusion

(Notice: The suggested answers simulate those that a bar examinee may provide, and thus specific citations are not provided. Notwithstanding, in the reviewers, the bar exam question is answered under the appropriate topic which discusses the concepts and principles, as well as provide for specific citations. Accordingly, please refer to it on the reviewer or in the Library.)

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