G.R. No. L-27132. April 29, 1971.
PHILIPPINE NATIONAL BANK, plaintiff-appellee, vs. MANILA INVESTMENT & CONSTRUCTION, INC. and CIPRIANO S. ALLAS, defendants-appellants.

FACTS

The Philippine National Bank (PNB) obtained a favorable judgment against Manila Investment & Construction, Inc. and Cipriano S. Allas for the payment of sums of money, secured by a chattel mortgage. The 1957 decision ordered the defendants to pay specific amounts with interest and attorney’s fees, and provided for the sale at public auction of the mortgaged personal properties in case of non-payment. After the judgment became final and executory, the parties, by mutual agreement, deviated from the court’s directive and instead sold the mortgaged properties at a private sale. The net proceeds were applied to the judgment debt.
More than five years but less than ten years after the judgment became executory, PNB filed an action for its revival, claiming a remaining unsatisfied balance. The defendants-appellants contended that PNB had no cause of action for revival until it rendered a proper accounting of the private sale proceeds. They also argued the private sale was void and that PNB was not entitled to a deficiency judgment.

ISSUE

The primary issues were: (1) whether the action for revival of judgment was the proper remedy; (2) whether the private sale of the mortgaged properties was valid; and (3) whether PNB was entitled to a deficiency judgment for the unpaid balance.

RULING

The Supreme Court affirmed the lower court’s decision, ruling against the appellants on all points. On the first issue, the Court held that the revival action was the correct procedural step. Since over five years had lapsed from the judgment’s finality, it had become dormant and could no longer be enforced by mere motion for execution. A separate action for revival was necessary to restore its enforceability, as established in prior jurisprudence.
On the validity of the private sale, the Court found no legal infirmity. While the original decision ordered a public auction, the parties subsequently agreed to a private sale. Applying Article 1306 of the Civil Code on the freedom to contract, and citing the precedent in Philippine National Bank vs. De Poli, the Court ruled such a stipulation or subsequent agreement is valid provided it is not contrary to law, morals, or public policy. The appellants, having freely agreed, were estopped from challenging the sale’s validity absent any allegation of fraud or duress.
Finally, the Court rejected the argument against a deficiency judgment. The appellants invoked Article 2115 of the Civil Code on pledges, arguing it barred recovery of any balance. The Court clarified that the Chattel Mortgage Law governs chattel mortgages, and its provisions, which permit an action for any deficiency after a foreclosure sale, prevail over contrary provisions in the Civil Code’s section on pledge. Citing Ablaza vs. Ignacio and Manila Trading and Supply Co. vs. Tamaraw Plantation Co., the Court held that the proceeds from a foreclosure sale—whether public or private—constitute only a pro tanto (partial) payment, and the creditor is entitled to recover the remaining deficiency. The stipulated unpaid balance was therefore legally collectible.