714

SUPREMECOURTREPORTSANNOTATED
AcmeShoe,Rubber&PlasticCorp.vs.CourtofAppeals
G.R.No.103576.August22,1996.*
ACME SHOE, RUBBER & PLASTIC CORPORATION and CHUA
PAC, petitioners, vs. HON. COURT OF APPEALS, PRODUCERS
BANK OF THE PHILIPPINES and REGIONAL SHERIFF OF
CALOOCANCITY,respondents.
Actions;Appeals;PleadingsandPractice;Exceptincriminalcaseswherethe
penaltyofreclusionperpetuaordeathisimposedwhichtheCourtsoreviewsasa
matterofcourse,anappealfromjudgmentsoflowercourtsisnotamatterofright
butofsoundjudicialdiscretion;Technicalandproceduralrulesareintendedtohelp
secure,notsuppress,substantialevidenceandadeviationfromtherigidenforcement
of the rules may be allowed to attain the prime objective for, after all, the
dispensation of justice is the core reason for theexistence ofcourts.Except in
criminalcaseswherethepenaltyofreclusionperpetuaordeathisimposedwhichthe
Courtsoreviewsasamatterofcourse,anappealfromjudgmentsoflowercourtsis
not a matter of right but of sound judicial discretion. The circulars of the Court
prescribing technical and other procedural requirements are meant to weed out
unmeritorious petitions that can unnecessarily clog the docket and needlessly
consumethetimeoftheCourt.Thesetechnicalandproceduralrules,however,are
intendedtohelpsecure,notsuppress,substantialjustice.Adeviationfromtherigid
enforcementoftherulesmaythusbeallowedtoattaintheprimeobjectivefor,after
all,thedispensationofjusticeisthecorereasonfortheexistenceofcourts.Inthis
instance,onceagain,theCourtisconstrainedtorelaxtherulesinordertogivewayto
andupholdtheparamountandoverridinginterestofjustice.
_______________

*FIRSTDIVISION.

715
VOL.260,AUGUST22,1996
715
AcmeShoe,Rubber&PlasticCorp.vs.CourtofAppeals
Contracts;ChattelMortgages;Contractsofsecurityareeitherpersonalorreal
intheformer,thefaithfulperformanceoftheobligationbytheprincipaldebtoris
securedbythepersonalcommitmentofanotherwhileinthelatter,thatfulfillmentis
securedbyanencumbranceofproperty.Contractsofsecurityareeitherpersonalor
real.Incontractsofpersonalsecurity,suchasaguarantyorasuretyship,thefaithful
performance of the obligation by the principal debtor is secured by the personal
commitmentofanother(theguarantororsurety).Incontractsofrealsecurity,suchas
apledge,amortgageoranantichresis,thatfulfillmentissecuredbyanencumbrance
of propertyin pledge, theplacing of movable property in the possession of the
creditor; in chattel mortgage, by the execution of the corresponding deed
substantiallyintheformprescribedbylaw;inrealestatemortgage,bytheexecution
of a public instrument encumbering the real property covered thereby; and in
antichresis, byawritteninstrumentgrantingtothecreditortherighttoreceivethe
fruits of an immovable property with the obligation to apply such fruits to the
paymentofinterest,ifowing,andthereaftertotheprincipalofhiscredituponthe
essential condition that if the principal obligation becomes due and the debtor
defaults, then the property encumbered can be alienated for the payment of the
obligation, but that should the obligation be duly paid, then the contract is
automatically extinguished proceeding from the accessory character of the
agreement.As thelawso putsit,oncetheobligationis compliedwith,thenthe
contractofsecuritybecomes,ipsofacto,nullandvoid.
Same; Same; While a pledge, real estate mortgage, or antichresis may
exceptionally secure afterincurred obligations so long as these future debts are
accurately described, a chattel mortgage, however, can only cover obligations
existing at the time the mortgage is constituted.While a pledge, real estate
mortgage,orantichresismayexceptionallysecureafterincurredobligationssolong
asthesefuturedebtsareaccuratelydescribed,achattelmortgage,however,canonly
coverobligationsexistingatthetimethemortgageisconstituted.Althoughapromise
expressedinachattelmortgagetoincludedebtsthatareyettobecontractedcanbea
bindingcommitmentthatcanbecompelledupon,thesecurityitself,however,does
notcomeintoexistenceorariseuntilafterachattelmortgageagreementcoveringthe
newlycontracteddebtisexecutedeitherbyconcludingafreshchattelmortgageorby
amending the old contract conformably with the form prescribed by the Chattel
MortgageLaw.
716

716
SUPREMECOURTREPORTSANNOTATED
AcmeShoe,Rubber&PlasticCorp.vs.CourtofAppeals
Refusalonthepartoftheborrowertoexecutetheagreementsoastocoverthe
afterincurredobligationcanconstituteanactofdefaultonthepartoftheborrowerof
thefinancingagreementwhereonthepromiseiswrittenbut,ofcourse,theremedyof
foreclosurecanonlycoverthedebtsextantatthetimeofconstitutionandduringthe
lifeofthechattelmortgagesoughttobeforeclosed.
Damages;Corporations;Acorporation,beinganartificialpersonandhaving
existenceonlyinlegalcontemplation,hasnofeelings,noemotions,nosensesit
cannot,therefore,experiencephysicalsufferingandmentalanguish.Wefindno
meritinpetitionercorporationsotherprayerthatthecaseshouldberemandedtothe
trialcourtforaspecificfindingontheamountofdamagesithassustainedasaresult
of the unlawful action taken by respondent bank against it. This prayer is not
reflectedinitscomplaintwhichhasmerelyaskedfortheamountofP3,000,000.00by
wayof moraldamages. In LBCExpress,Inc.vs.CourtofAppeals, wehavesaid:
Moraldamagesaregrantedinrecompenseforphysicalsuffering,mentalanguish,
fright,seriousanxiety,besmirchedreputation,woundedfeelings,moralshock,social
humiliation,andsimilarinjury.Acorporation,beinganartificialpersonandhaving
existence only in legal contemplation, has no feelings, no emotions, no senses;
therefore, it cannot experience physical suffering and mental anguish. Mental
sufferingcanbeexperiencedonlybyonehavinganervoussystemanditflowsfrom
realills,sorrows,andgriefsoflifeallofwhichcannotbesufferedbyrespondent
bankasanartificialperson.
Courts;Attorneys;Lawyersshouldbearinmindtheirbasicdutytoobserveand
maintaintherespectduetothecourtsofjusticeandjudicialofficersandtoinsiston
similarconductbyothersthevirtuesofhumilityandofrespectandconcernfor
othersmuststillliveoneveninanageofmaterialism.TheCourtinvitescounsels
attentiontotheadmonitioninGuerrerov.Villamor,thus:(L)awyersxxxshould
bearinmindtheirbasicdutytoobserveandmaintaintherespectduetothecourtsof
justiceandjudicialofficersandxxx(to)insistonsimilarconductbyothers.This
respectful attitude towards the court is to be observed, not for the sake of the
temporaryincumbentofthejudicialoffice,butforthemaintenanceofitssupreme
importance.Anditisthroughascrupulouspreferenceforrespectfullanguagethata
lawyerbestdemonstrateshisobservanceoftherespectduetothecourtsandjudicial
officersxxx.Thevir
717

VOL.260,AUGUST22,1996
717
AcmeShoe,Rubber&PlasticCorp.vs.CourtofAppeals
tuesofhumilityandofrespectandconcernforothersmuststillliveonevenin
anageofmaterialism.
PETITIONforreviewoncertiorariofadecisionoftheCourtofAppeals.

ThefactsarestatedintheopinionoftheCourt.
Sotto&SottoLawOfficesforpetitioners.
R.C. Domingo, Jr. & Associates for Producers Bank of the
Philippines.
VITUG,J.:

Woulditbevalidandeffectivetohaveaclauseinachattelmortgagethat
purportstolikewiseextenditscoveragetoobligationsyettobecontracted
or incurred? This question is the core issue in the instant petition for
reviewoncertiorari.
PetitionerChuaPac,thepresidentandgeneralmanagerofcopetitioner
AcmeShoe,Rubber&PlasticCorporation,executedon27June1978,
forandinbehalfofthecompany,achattelmortgageinfavorofprivate
respondentProducersBankofthePhilippines.Themortgagestoodbyway
of security for petitioners corporate loan of three million pesos
(P3,000,000.00).Aprovisioninthechattelmortgageagreementwastothis
effect
(c)IftheMORTGAGOR,hisheirs,executorsoradministratorsshallwellandtruly
performthefullobligationorobligationsabovestatedaccordingtothetermsthereof,
thenthismortgageshallbenullandvoid.xxx.
IncasetheMORTGAGORexecutessubsequentpromissorynoteornoteseither
asarenewaloftheformernote,asanextensionthereof,orasanewloan,orisgiven
anyotherkindofaccommodationssuchasoverdrafts,lettersofcredit,acceptances
and bills of exchange, releases of import shipments on Trust Receipts, etc., this
mortgageshallalsostandassecurityforthepaymentofthesaidpromissorynoteor
notesand/oraccommodationswithoutthenecessityofexecutinganewcontractand
thismortgageshallhavethesameforceandeffectasifthesaidpromissorynoteor
notesand/or
718
718
SUPREMECOURTREPORTSANNOTATED
AcmeShoe,Rubber&PlasticCorp.vs.CourtofAppeals
accommodationswereexistingonthedatethereof.Thismortgageshallalsostandas
securityforsaidobligationsandanyandallotherobligationsoftheMORTGAGOR
totheMORTGAGEEofwhateverkindandnature,whethersuchobligationshave
beencontractedbefore,duringoraftertheconstitutionofthismortgage.1
Induetime,theloanofP3,000,000.00waspaidbypetitionercorporation.
Subsequently, in 1981, it obtained from respondent bank additional
financial accommodations totalling P2,700,000.00.2 These borrowings
wereonduedatealsofullypaid.
On10and11January1984,thebankyetagainextendedtopetitioner
corporationaloanofonemillionpesos(P1,000,000.00)coveredbyfour
promissorynotesforP250,000.00each.Duetofinancialconstraints,the
loanwasnotsettledatmaturity.3 Respondentbankthereuponappliedfor
an extrajudicial foreclosure of the chattel mortgage, hereinbefore cited,
with the Sheriff of Caloocan City, prompting petitioner corporation to
forthwithfileanactionforinjunction,withdamagesandaprayerforawrit
of preliminary injunction, before the Regional Trial Court of Caloocan
City (Civil Case No. C12081). Ultimately, the court dismissed the
complaint and ordered the foreclosure of the chattel mortgage. It held
petitionercorporationboundbythestipulations,aforequoted,ofthechattel
mortgage.
PetitionercorporationappealedtotheCourtofAppeals4which,on14
August1991,affirmed,inallrespects,thedecisionofthecourt aquo.
Themotionforreconsiderationwasdeniedon24January1992.
Theinstantpetitioninterposedbypetitionercorporationwasinitially
deniedon04March1992bythisCourtforhav
_______________

1Rollo,p.45.

2Ibid.,p.34.

3Ibid.

4AssociateJusticeConsueloYnaresSantiago,ponente,withAssociateJusticesRicardo

L.Pronove,Jr.andNicolasP.Lapea,Jr.,concurring.
719
VOL.260,AUGUST22,1996
719
AcmeShoe,Rubber&PlasticCorp.vs.CourtofAppeals
ing been insufficient in form and substance. Private respondent filed a
motion to dismiss the petition while petitioner corporation filed a
complianceandanoppositiontoprivaterespondentsmotiontodismiss.
TheCourtdeniedpetitionersfirstmotionforreconsiderationbutgranteda
second motion for reconsideration, thereby reinstating the petition and
requiringprivaterespondenttocommentthereon.5
Except in criminal cases where the penalty of reclusion perpetuaor
deathisimposed6 whichtheCourtsoreviewsasamatterofcourse,an
appealfromjudgmentsoflowercourtsisnotamatterofrightbutofsound
judicialdiscretion.ThecircularsoftheCourtprescribingtechnicaland
other procedural requirements are meant to weed out unmeritorious
petitionsthatcanunnecessarilyclogthedocketandneedlesslyconsume
thetimeoftheCourt.Thesetechnicalandproceduralrules,however,are
intendedtohelpsecure,notsuppress,substantialjustice.Adeviationfrom
therigidenforcementoftherulesmaythusbeallowedtoattaintheprime
objectivefor,afterall,thedispensationofjusticeisthecorereasonforthe
existenceofcourts.Inthisinstance,onceagain,theCourtisconstrainedto
relax the rules in order to give way to and uphold the paramount and
overridinginterestofjustice.
Contractsofsecurityareeitherpersonalorreal.Incontractsofpersonal
security,suchasaguarantyorasuretyship,thefaithfulperformanceofthe
obligationbytheprincipaldebtorissecuredbythepersonal commitment
ofanother(theguarantororsurety).Incontractsofrealsecurity,suchasa
pledge, a mortgage or an antichresis, that fulfillment is secured by an
encumbranceofpropertyin pledge, theplacingofmovablepropertyin
thepossessionofthecreditor;inchattelmortgage,bytheexecutionofthe
correspondingdeedsubstantiallyintheformprescribedbylaw;in real
estatemortgage,bytheexecutionofapublicinstrumentencumberingthe
realpropertycoveredthereby;andinantichresis,byawritteninstrument
grantingtothecreditortherighttoreceivethe
______________

5IntheCourtsresolution,dated27May1992,Rollo,p.91.

6Sec.5(2)(d),Art.VIII,1987Constitution.

720
720
SUPREMECOURTREPORTSANNOTATED
AcmeShoe,Rubber&PlasticCorp.vs.CourtofAppeals
fruitsofanimmovablepropertywiththeobligationtoapplysuchfruitsto
thepaymentofinterest,ifowing,andthereaftertotheprincipalofhis
creditupon the essential condition that if the principal obligation
becomesdueandthedebtordefaults,thenthepropertyencumberedcanbe
alienatedforthepaymentoftheobligation,7butthatshouldtheobligation
bedulypaid,thenthecontractisautomaticallyextinguishedproceeding
fromtheaccessorycharacter8oftheagreement.Asthelawsoputsit,once
the obligation is compliedwith, thenthe contract ofsecurity becomes,
ipsofacto,nullandvoid.9
Whileapledge,realestatemortgage,orantichresismayexceptionally
secure afterincurred obligations so long as these future debts are
accurately described,10 a chattel mortgage, however, can only cover
obligationsexistingatthetimethemortgageisconstituted.Althougha
promiseexpressedinachattelmortgagetoincludedebtsthatareyettobe
contractedcanbeabindingcommitmentthatcanbecompelledupon,the
securityitself,however,doesnotcomeintoexistenceorariseuntilaftera
chattel mortgage agreement covering the newly contracted debt is
executedeitherbyconcludingafreshchattelmortgageorbyamendingthe
old contract conformably with the form prescribed by the Chattel
Mortgage Law.11 Refusal on the part of the borrower to execute the
agreementsoastocovertheafterincurredobligationcanconstituteanact
ofdefaultonthepartoftheborrowerofthefinancingagreementwhereon
thepromiseiswrittenbut,ofcourse,theremedyofforeclosurecanonly
coverthedebtsextantatthetimeofconstitutionandduringthelifeofthe
chattelmortgagesoughttobeforeclosed.
_____________

7SeeArts.2085,2087,2093,2125,2126,2132,2139and2140,CivilCode.

8SeeManilaSurety&FidelityCo.vs.Velayo,21SCRA515.

9SeeSec.3,Act1508.

10SeeMojicavs.CourtofAppeals,201SCRA517;LimJulianvs.Lutero,49Phil.703.

11ActNo.1508.

721
VOL.260,AUGUST22,1996
721
AcmeShoe,Rubber&PlasticCorp.vs.CourtofAppeals
A chattel mortgage, as hereinbefore so intimated, must comply
substantiallywiththeformprescribedbytheChattelMortgageLawitself.
Oneoftherequisites,underSection5thereof,isanaffidavitofgoodfaith.
Whileitisnotdoubtedthatifsuchanaffidavitisnotappendedtothe
agreement,thechattelmortgagewouldstillbevalidbetweentheparties
(notagainstthirdpersonsactingingoodfaith 12),thefact,however,thatthe
statutehasprovidedthatthepartiestothecontractmustexecuteanoath
that
xxx(the)mortgageismadeforthepurposeofsecuringtheobligationspecifiedin
theconditionsthereof,andfornootherpurpose,andthatthesameisajustandvalid
obligation,andonenotenteredintoforthepurposeoffraud.13
makesitobviousthatthedebtreferredtointhelawisacurrent,notan
obligationthatisyetmerelycontemplated.Inthechattelmortgagehere
involved,theonlyobligationspecifiedinthechattelmortgagecontract
wastheP3,000,000.00loanwhichpetitionercorporationlaterfullypaid.
ByvirtueofSection3oftheChattelMortgageLaw,thepaymentofthe
obligationautomaticallyrenderedthechattelmortgagevoidorterminated.
InBelgianCatholicMissionaries,Inc.vs.MagallanesPress,Inc.,etal., 14
theCourtsaid
xxxAmortgagethatcontainsastipulationinregardtofutureadvancesinthecredit
willtakeeffectonlyfromthedatethesamearemadeandnotfromthedateofthe
mortgage.15
Thesignificanceoftherulingtotheinstantproblemwouldbethatsince
the1978chattelmortgagehadceasedtoexistcoin
________________

12SeePhilippineRefiningCo.vs.Jarque,61Phil.229.

13CivilCode,Vol.3,1990EditionbyRamonC.AquinoandCarolinaC.GrioAquino,

pp.610611.
1449Phil.647.

15Atp.655.ThisrulingwasreiteratedinJacavs.DavaoLumberCompany,113SCRA

107.
722
722
SUPREMECOURTREPORTSANNOTATED
AcmeShoe,Rubber&PlasticCorp.vs.CourtofAppeals
cidentally with the full payment of the P3,000,000.00 loan, 16 there no
longerwasanychattelmortgagethatcouldcoverthenewloansthatwere
concludedthereafter.
 Wefindnomeritinpetitionercorporationsotherprayerthatthecase
shouldberemandedtothetrialcourtforaspecificfindingontheamount
ofdamagesithassustainedasaresultoftheunlawfulactiontakenby
respondentbankagainstit.17Thisprayerisnotreflectedinitscomplaint
whichhasmerelyaskedfortheamountofP3,000,000.00bywayofmoral
damages.18InLBCExpress,Inc.vs.CourtofAppeals,19wehavesaid:
Moraldamagesaregrantedinrecompenseforphysicalsuffering,mentalanguish,
fright,seriousanxiety,besmirchedreputation,woundedfeelings,moralshock,social
humiliation,andsimilarinjury.Acorporation,beinganartificialpersonandhaving
existence only in legal contemplation, has no feelings, no emotions, no senses;
therefore, it cannot experience physical suffering and mental anguish. Mental
sufferingcanbeexperiencedonlybyonehavinganervoussystemanditflowsfrom
realills,sorrows,andgriefsoflifeallofwhichcannotbesufferedbyrespondent
bankasanartificialperson.20
WhileChuaPacisincludedinthecase,thecomplaint,however,clearly
statesthathehasmerelybeensonamedasapartyinrepresentation of
petitionercorporation.
Petitionercorporationscounselcouldbecommendedforhiszealin
pursuinghisclientscause.Itinsteadturnedouttobe,however,asource
ofdisappointmentforthisCourttoreadinpetitionersreplytoprivate
respondentscommentonthepetitionhissocalledOneFinalWord;viz:
________________

16 Being merely accessory in nature, it cannot exist independently of the principal

obligation.
17PetitionersMemorandum,p.5;Rollo,p.119.

18Complaint,p.6;Record,p.9.

19236SCRA602.

20Atp.607.

723
VOL.260,AUGUST22,1996
723
AcmeShoe,Rubber&PlasticCorp.vs.CourtofAppeals
In simply quoting in toto the patently erroneous decision of the trial court,
respondent Court of Appeals should be required to justify its decision which
completelydisregardedthebasiclawsonobligationsandcontracts,aswellasthe
clearprovisionsoftheChattelMortgageLawandwellsettledjurisprudenceofthis
HonorableCourt;thatintheeventthatitsexplanationiswhollyunacceptable,this
HonorableCourtshouldimposeappropriatesanctionsontheerringjustices.Thisis
one positive step in ridding our courts of law of incompetent and dishonest
magistrates especially members of a superior court of appellate jurisdiction.21
(Italicssupplied)
Thestatementisnotcalledfor.TheCourtinvitescounselsattentiontothe
admonitioninGuerrerovs.Villamor;22thus:
(L)awyersxxxshouldbearinmindtheirbasicdutytoobserveandmaintainthe
respectduetothecourtsofjusticeandjudicialofficersandxxx(to)insistonsimilar
conductbyothers.Thisrespectfulattitudetowardsthecourtistobeobserved,not
forthesakeofthetemporaryincumbentofthejudicialoffice,butforthemaintenance
ofitssupremeimportance.Anditisthroughascrupulouspreferenceforrespectful
languagethatalawyerbestdemonstrateshisobservanceoftherespectduetothe
courtsandjudicialofficersxxx.23
Thevirtuesofhumilityandofrespectandconcernforothersmuststilllive
oneveninanageofmaterialism.
WHEREFORE,thequestioneddecisionsoftheappellatecourtandthe
lower court are set aside without prejudice to the appropriate legal
recoursebyprivaterespondentasmaystillbewarrantedasanunsecured
creditor. No costs. Atty. Francisco R. Sotto, counsel for petitioners, is
admonishedtobecircumspectindealingwiththecourts.
SOORDERED.
KapunanandHermosisima,Jr.,JJ.,concur.
________________

21Rollo,p.113.

22179SCRA355,362.

23Atp.362.

724
724
SUPREMECOURTREPORTSANNOTATED
Peoplevs.Broncano
Padilla, J., No part in view of lessorlessee relationship with
respondentbank.
Bellosillo,J.,Onleave.
Judgmentsofrespondentcourtandcourtaquosetaside.
 Notes.Replevin is the appropriate action to recover possession
preliminary to the extrajudicial foreclosure of a chattel mortgage.
(FilinvestCreditCorporationvs.CourtofAppeals,248SCRA549[1995])
The mortgagee, upon the mortgagors default, is constituted an
attorneyinfactofthemortgagorenablingsuchmortgageetoactforandin
behalfoftheownerandthefactthatthedefendantisnotprivytothe
chattelmortgageisinconsequential.(BAFinanceCorporationvs.Courtof
Appeals,258SCRA102[1996])
o0o

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