GR L 29280; (August, 1988) (Digest)
G.R. No. L-29280 August 11, 1988
PEOPLE’S BANK AND TRUST COMPANY, plaintiff-appellee, vs. SYVEL’S INCORPORATED, ANTONIO Y. SYYAP and ANGEL Y SYYAP, defendants-appellants.
FACTS
The plaintiff-appellee, People’s Bank and Trust Company, extended a P900,000.00 credit line to defendant Syvel’s Incorporated, secured by a chattel mortgage on the corporation’s stocks and merchandise. Defendants Antonio V. Syyap and Angel Y. Syyap executed an unconditional guaranty for the corporation’s debts. Upon Syvel’s failure to pay the obligations, which amounted to P601,633.01 as of June 16, 1967, the bank initiated an action for foreclosure of the chattel mortgage. During the pendency of the case, defendant Antonio V. Syyap, seeking an amicable settlement to avoid damaging corporate goodwill, offered a real estate mortgage on his Bacoor, Cavite property as additional collateral. The bank accepted, and the real estate mortgage was executed, wherein Syyap expressly admitted the outstanding corporate indebtedness. However, the parties could not agree on dismissing the pending foreclosure case, as the defendants insisted on preserving their counterclaim for damages arising from a previously issued writ of preliminary attachment.
ISSUE
The core issues were: (1) whether the execution of the real estate mortgage novated or extinguished the original obligation secured by the chattel mortgage, thereby warranting dismissal of the foreclosure case; and (2) whether the writ of preliminary attachment was wrongfully issued, justifying the defendants’ counterclaim for damages.
RULING
The Supreme Court affirmed the trial court’s judgment, holding the defendants jointly and severally liable. On the first issue, the Court ruled that novation did not occur. The real estate mortgage was executed merely as an additional security for the same pre-existing obligation. The original debtors and the nature of the principal obligation remained unchanged. Critically, the deed of real estate mortgage contained an express acknowledgment of the existing debt and lacked any stipulation, express or implied, indicating an intention to extinguish the original chattel mortgage or to substitute a new obligation. Since novation is never presumed and must be clearly proven, the chattel mortgage remained a valid and enforceable security.
Regarding the attachment, the Court found its issuance legally justified. The bank’s affidavits and witness testimonies established that the defendants were disposing of the mortgaged stocks without remitting proceeds to the bank and were closing stores, acts constituting fraudulent removal or concealment of property to defraud creditors. Intent to defraud can be inferred from such circumstances. The defendants failed to prove that the bank acted in bad faith or with malice in seeking the attachment. Consequently, the counterclaim for damages was correctly dismissed. The appeal was dismissed for lack of merit.