G.R. No. L-45337; April 10, 1939
MANILA MOTOR CO., INC., plaintiff-appellee, vs. ANICETO MARAÑA, defendant-appellant.

FACTS

On October 6, 1933, defendant Aniceto Maraña bought a truck on installment from plaintiff Manila Motor Co., Inc., executing a promissory note and a chattel mortgage on the vehicle as security. The mortgage deed contained a provision authorizing the mortgagee to purchase the property at any foreclosure sale and holding the mortgagor liable for any deficiency. After the defendant defaulted on payments in May 1934, the plaintiff foreclosed the mortgage, and the truck was sold at public auction for P300. The plaintiff then filed an action in the municipal court to recover the deficiency balance of P566.35, obtaining a favorable judgment that was affirmed by the Court of First Instance on appeal.

ISSUE

Whether Act No. 4122 , which bars a mortgagee from recovering any deficiency after foreclosure of a chattel mortgage, applies retroactively to a mortgage executed before its effectivity, thereby precluding the plaintiff’s action for the deficiency balance.

RULING

No. The Supreme Court affirmed the lower courts’ judgments, holding that Act No. 4122 is a substantive law and, under Article 3 of the Civil Code, laws have no retroactive effect unless expressly provided. Since the chattel mortgage was executed on October 6, 1933, prior to the effectivity of Act No. 4122 , the Act cannot be applied retroactively to bar the plaintiff’s deficiency claim. The plaintiff was therefore entitled to recover the unpaid balance.

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