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RCBC v.

ROYAL CARGO
J. Gutierrez

Petitioner: Rizal Commercial Banking Corporation


Respondents: Royal Cargo Corporation Royal Cargo attached Terry's equity of redemption.
Thus it had to be informed of the date of sale of
FACTS: Terrymanila Inc. filed a petition for voluntary mortgaged assets for it to exercise such equity of
insolvency with RTC of Bataan. One of its creditors was redemption over some of those foreclosed properties.
RCBC (P3M secured by chattel mortgage)
Royal Cargo was aware of the auction sale
Royal Cargo Corporation, another creditor of Terrymanila, - It was informed about the Order of the insolvency court
filed an action before the RTC of Manila for collection that granted leave to RCBC to foreclose the chattel
of sum of money and preliminarily attached "some" of mortgage.
Terrymanila's personal properties to secure the - Its negligence or omission to exercise its equity of
satisfaction of judgment award of P296,662.16, exclusive redemption within a reasonable time, or even on the day
of interests and atty's fees. of auction sale, warrants a presumption that it had either
abandoned it or opted not to assert it
Bataan RTC declared Terry insolvent
Royal Cargo was not prejudiced by the auction sale
Manila RTC judgment in favor of Royal Cargo - Terry had sufficient, unencumbered assets to cover
obligations owing to its other creditors
In the meantime, RCBC sought in the insolvency
proceedings at Bataan RTC permission to RCBC had a superior lien over the mortgaged assets
extrajudicially foreclose the chattel mortgage - - The right of those who acquire properties should not and
granted cannot be superior to that of a creditor, who has in his
favor an instrument of mortgage, executed with the
Provincial Sheriff scheduled the public auction sale of formalities of law, in good faith, and without the least
mortgaged personal properties in Bataan. At the auction indication of fraud
sale, RCBC was the sole bidder, and purchased them for - Right of Royal Cargo was subordinate to the lien of the
P1.5M. mortgagee, who has in his favor a valid chattel mortgage

Royal Cargo filed a petition for annulment of auction


sale before Manila RTC, against the Provincial Sheriff of (2) WON RCBC was guilty of constructive fraud in
Bataan RTC and RCBC. failing to provide Royal Cargo with a 10-day notice
- Questioned the failure to duly notify Royal - NO
Cargo
of the sale at least 10 days prior to the sale Foreclosure suits may be initiated even during insolvency
- Basis: Act No. 1508, Sec. 14 proceedings, as long as leave must first be obtained from
the insolvency court, as what RCBC did.
Manila RTC judged in favor of Royal Cargo

CA affirmed and increased atty's fees and awarded


exemplary damages and interest on principal amount

ISSUES/HELD:
(1) WON Royal Cargo should have been notified of
the foreclosure sale - NO

Petitioner: Chattel Mortgage Law only allows an


attaching creditor or judgment creditor to "redeem" the
mortgage, BEFORE the holding of the auction.

SC: Agrees. Sec. 13 of the Chattel Mortgage Law allows


the would-be redemptioner to redeem the mortgaged
property only BEFORE its sale.

The redemption cited in Sec. 13 partakes of an equity of


redemption, which is the right of the mortgagor to
redeem the mortgaged property after his default in the
performance of conditions of the mortgage, but before the
sale of property, to clear it from encumbrance of the
mortgage.