BPI vs Concepcion Hijos | Ostrand, J.
FACTS
Concepcion executed executed a PN in favor of the plaintiff for the sum of P342,372.64, payable on demand, and as security for payment, deposited 700 shares of the Philippine National Bank as collateral with the plaintiff and gave it a mortgage on 5,680 square meters of land, with improvements, situated on R. Hidalgo Street in Manila. It defaulted in payment so foreclosure proceedings were instituted. Elser entered into negotiations with the Concepcions and offered to take over the mortgaged property and assume the mortgage debt. To this the Concepcions agreed on the condition that they be relieved of all liability for the debt. Elser wrote the bank informing it of the agreement with the Concepcions but the bank did not reply. It appeared that it was unwilling to release the Concepcions from their liability for the mortgage debt and insisted on their confessing a judgment in the foreclosure proceedings. Concepcions refused to do unless the bank would agree to bid in the mortgage property for the full amount of the judgment. Elser wrote to the bank again with the understanding that the bank would bid in the land at the foreclosure sale for the full amount of the judgment and sell it to him for the same price. No direct reply was given and Elser invited plaintiff to a conference with Nolting, the president of the bank, in regard to the matter. The negotiations did not lead to any action on the part of the bank, but, Elser entered into an agreement in the form of bilateral deed of sale, with V. Concepcion & Hijos, Inc., and Venancio Concepcion. Concepcion. The bank never gave notice of its conformity with the agreement. It petitioned the court to include Henry W. Elser as defendant in the complaint, on the strength of the obligations assumed by him in said agreement. agreement. Elser died and the plaintiff asked that the administrator of the estate, C. W. Rosenstock, be substituted in his place as defendants, and that the action be continued against Rosenstock in the capacity on the ground that this action is for the foreclosure of a mortgage.
ISSUES/HELD
1.
2.
WON the the bank, having having failed failed to present present its claim claim to the committ committee ee on claims claims and appraisal, appraisal, it must must be regarded as having elected to rely on its mortgage alone and therefore can have no personal judgement against the Elser estate / YES WON the amount amount of the the deficiency deficiency,, if any, could not be proved proved before before the foreclosu foreclosure re sale and had had been effected; that section 708 expressly provide for the proof of the deficiency judgment before the committee after the sale of the mortgaged property; that this provisions must be construed to mean that the presentation and prosecution of the claim of the deficiency must be made after, not before, the sale; and that if the mortgagee mortgagee presents presents his claim from a deficienc deficiency y before before a deficienc deficiency y judgment judgment have been rendered, he will loose his rights under the mortgage and be regarded as having abandon his security / NO
RATIO
1. According to Section 7081 of the Code of Civil Procedure, the mortgagee has the election of one out of three courses: (1) He may abandon his security and share in the general distribution of the assets of the estate, or (2) he may foreclose, secure a deficiency judgment and prove his deficiency judgment before the committee, or (3) he may rely upon his security alone, in which case he can receive no share in the distribution of the assets of the estate. In this case the bank did not abandon the security and took no steps of any sort before the committee within the time limit provided by the sections 689 and 690 of the Code of Civil Procedure. The committed ceased to function long ago, and the bank has now nothing to rely on except the mortgage. Internationally Internationally or not, it has bought itself within the third course provided for in section 708; it has no alternative.
1
SEC. 708. Mortgage debt due from estate. estate . — A creditor holding a claim against the deceased, secured by mortgage or other collateral security, may abandon the security and prosecute his claim before the committee, and share in the general distribution of the assets of the estate; or he may foreclose his mortgage or realize upon security, by ordinary action in court, making the executor or administrator a party defendant; and if there is a judgment for a deficiency, after the sale of the mortgaged premises, or the property pledge, in the foreclosure or other proceedings to realize upon the security, he any prove his deficiency judgment before the committee against the estate of the deceased; or he may rely upon his mortgage or other security alone, and foreclose the same at any time, within the period of statute of limitations, and in that event he shall not be admitted as an creditor, and shall receive no share in the distribution of the other assets of the estate
2. This clearly a misconception of the statute, and the cases cited by the appellant in support for its contention are not in point. Until the foreclosure sale is made, the demand for the payment of deficiency is a contingent claim within the meaning of sections 746, 747, and 748 of the Code of Civil Procedure 2. These sections are in entire harmony with section 708; the amount of the deficiency cannot be ascertained or proven until the foreclosure proceedings have terminated, but the claim for the deficiency must be presented to the committee within the period fixed by sections 689 and 690 of the Code. The committee does not then pass upon the validity of the claim but reports it to the court. If the court "from the report of the committee" or from "the proofs exhibited to it" is satisfied satisfied that the contingent contingent claim is valid, valid, the executor executor or administra administrator tor may be required to retain retain in his possession possession sufficient sufficient assets assets to pay the claim when it becomes becomes absolute, absolute, or enough enough to pay the creditor creditor his proportionate share if the assets of the estate are insufficient to pay the debts. When the contingent claim has become absolute, its amount may be ascertained and established in the manner indicated by sections 748 and 749. As will be seen, the bank both could and should have presented its claim to the committee within the time prescribed by the law.
DISPOSITIVE
The appeal is without merit and the judgment of the court below is affirmed with the costs against the plaintiffappellant.
2
SEC. 746. Claims may be presented to committee. committee . — If a person is liable as surety for the deceased, or has other contingent claims against his estate which cannot be proved as a debt before the committee, the same may be presented with the proof, to the committee, who shall state in their report that such claim was presented to them.
SEC. 747. Estate to be retained to meet claims . — If the court is satisfied from the report of the committee, committee, or from proofs exhibited to it, that such contingent claim is valid, it may order the executor or administrator to retains in his hands sufficient estate to pay such contingent claim, when the same becomes absolute, or if the estate is insolvent, sufficient to pay a portion equal to the dividend of the other creditors. SEC. 748. Claim becoming absolute in two years, how allowed . — If such contingent claims becomes absolute and is presented to the court, or to the executor or administrator, within two years from the time limited for other creditors to present their claims, it may be allowed by the court if not disputed by the executor or administrator, and, if disputed, it may be proved that the committee already appointed, or before others to be appointed, for the purpose, as if presented for allowance before the committee had made its report.
