B.3 PAMECA Wood Treatment Plant, Inc. vs.

Court of Appeals | 310 SCRA 281 [1999]

FACTS: PAMECA loaned P2M from DBP and executed a promissory note, secured by its inventory of furniture and
equipment. PAMECA defaulted thus DBP extrajudicially foreclosed on the chattels. DBP was the only bidder so it was
able to buy said property for P322K. Subsequently for the deficiency, it filed a complaint against PAMECA and its
solidary debtors, according to the promissory note it signed.
ISSUE: Whether an action can be instituted for deficiency of a debt after a foreclosure of the chattel mortgage.
RULING: Yes. Chattel Mortgage Law expressly entitles the mortgagor to the balance of the proceeds, upon
satisfaction of the principal obligation and costs. Since the Chattel Mortgage Law bars the creditor-mortgagee from
retaining the excess of the sale proceeds, there is a corollary obligation on the part of the debtor-mortgagee to pay the
deficiency in case of a reduction in the price at public auction.