Cerna vs.

Court of Appeals

"Solidary debtor" (D) vs. Creditor (P)

GR L-48359

Summary: A debtor used the property of a third person to secure his loan. Upon
non-payment of the loan, the creditor sued for collection against the owner of the
security alleging that the mortgage created a solidary relationship between the
debtor and the owner of the security.

Rule of Law: There is solidary liability only when the obligation expressly so states,
or when the law or the nature of the obligation requires solidarity.

Facts: Debtor Celerino Delgado entered into a loan agreement with creditor Conrad
Leviste (P) covered by a promissory note. In addition to mortgaging his vehicle,
Delgado also mortgaged another vehicle owned by Manolo Cerna (D) to secure his
loan.

The period lapsed without Delgado paying the loan. Leviste (P) filed a collection suit
against Delgado and Cerna (D) as solidary debtors. Cerna (D) filed a motion to
dismiss case alleging lack of cause of action against him because he was not a
debtor under the promissory note and secondly, that the case did not survive
Delgado's death. However, Cerna's (D) motion was dismissed.

On appeal, the court ruled that Cerna (D) and Delgado were solidary debtors and
that the mortgage created a joint and solidary obligation against Leviste (P).

Issues: Will the mortgage of a property owned by a third party to secure the debt
of the debtor make this third party solidarily liable with the debtor?

Ruling: No. Only Delgado signed the promissory note and accordingly, he was the
only one bound by the contract of loan. Nowhere did it appear in the promissory
note that Cerna (D) was a co-debtor. The law is clear that "contracts take effect only
between the parties ... " (Article 1311, Civil Code)

Cerna (D) was held solidarily liable for the debt allegedly because he was a co-
mortgagor of the principal debtor, Delgado. This ignores the basic precept that
"there is a solidary liability only when the obligation expressly so states, or when
the law or the nature of the obligation requires solidarity." (Article 1207, Civil Code)

There is also no legal provision nor jurisprudence in our jurisdiction which makes a
third person who secures the obligation of another by mortgaging his own property
to be solidarily bound with the principal obligor. A chattel mortgage may be "an
accessory contract" (Banco de Oro vs. Bayuga, 93 SCRA 443, 1979) to a contract of
loan, but that fact alone does not make a third-party mortgagor solidarily bound
with the principal debtor in fulfilling the principal obligationthat is, to pay the loan.
The signatory to the principal contract loan remains to be primarily bound. It is only
upon the default of the latter that the creditor may have recourse on the
mortgagors by foreclosing the mortgaged properties in lieu of an action for the
recovery of the amount of the loan. And the liability of the third-party mortgagors
extends only to the property mortgaged. Should there be any deficiency, the
creditor has recourse on the principal debtor.

NAVARRO V. PINEDA

FACTS:

Pineda and his mother executed real estate and chattel mortgages in favor of
Navarro, to secure a loan they got from the latter. The REM covered a parcel of land
owned by the mother while the chattel mortgage covered a residential house.
Due to the failure to pay the loan, they asked for extensions to pay for the
loan. On the second extension, Pineda executed a PROMISE wherein in case of
default in payment, he wouldnt ask for any additional extension and there would be
no need for any formal demand. In spite of this, they still failed to pay.

Navarro then filed for the foreclosure of the mortgages. The court decided in his
favor.

ISSUE:

W/N the deed of real estate mortgage and chattel mortgage appended to the
complaint is valid notwithstanding the fact that the house was made subject of
chattel mortgage for the reason that it is erected on a land that belongs to a third
person.

HELD:

Where a house stands on a rented land belonging to another person, it may

be the subject matter of a chattel mortgage as personal property if so stipulated in
the document of mortgage, and in an action by the mortgagee for the foreclosure,
the validity of the chattel mortgage cannot be assailed by one of the parties to the
contract of mortgage.
 Furthermore, although in some instances, a house of mixed materials has been
considered as a chattel between the parties and that the validity of the contract
between them, has been recognized, it has been a constant criterion that
with respect to third persons, who are not parties to the contract, and
specially in execution proceedings, the house is considered as immovable property.

G.R. No. L-30173 September 30, 1971

GAVINO A. TUMALAD and GENEROSA R. TUMALAD, plaintiffs-appellees

vs

ALBERTA VICENCIO and EMILIANO SIMEON, defendants-appellants.

Facts:

On Sep 1, 1955, Vicencio and Simeon executed a chattel mortgage in favor of

Tumalad over their house of strong materials located at Quiapo, Manila over Lot Nos
6B and 7B, Block 2554, which were being rented from Madrigal & Company, Inc. It
was also agreed that in default the payment of any amortizations would cause the
remaining unpaid balance to become immediately due and payable, the Sheriff of
the City of Manila or any of his deputies is empowered and authorized to sell all the
mortgagors property after the necessary publication in order to settle the financial
debts, plus interest and yearly fees.

When Vicencio & Simeon defaulted in paying, the mortgage was extrajudicially
foreclosed, and on 27 Mar 1956, the house was sold at public auction pursuant to
the sent contract. As highest bidder, Tumalad were issued corresponding certificate
of sale. Municipal court eventually rendered a decision ordering defendants to
vacate the premises described in the complaint.

During the pendency of the appeal to the CFI, Vicencio and Simeon failed to deposit
rent for Nov 1956. As a result, the court granted Tumalads motion for execution,
and it was issued Jan 1957. However, the judgement regarding the surrender of
possession to Tumalad could not be executed because the subject house had been
already demolished on Jan 1957 pursuant to the order of court in a separate civil
case for ejectment against the present defendants for non-payment of rentals on
the land where the house was constructed.

Vicencio & Simeon predicate their theory of nullity of the chattel mortgage on two
grounds: a) that their signatures on the chattel mortgage were obtained through
fraud, deceit, or trickery, and b) that the subject matter of mortgage is a house o
strong materials, and being an immovable, it can only be the subject of a real estate
mortgage and not a chattel mortgage.

Issue:

Whether the subject of chattel mortgage, which is a house of strong material and
being an immovable, is valid.

Held:

Yes. The subject matter of chattel mortgage is valid.

The house on rented land is not only expressly designated as chattel mortgage. It
specifically provides that the mortgagor voluntarily cedes, sells, and transfers, by
way of Chattel Mortgage, the property together with its leasehold rights over the lot
on which it is constructed. Although there is no specific statement referring to the
subject house as personal property, yet by ceding, selling, or transferring a property
by way of chattel mortgage, Vicencio & Simeon could only have meant to convey
the house as chattel, or at least, intended to treat the same as such, so that they
should not be allowed to make an inconsistent stand by claiming otherwise.

Moreover, the subject house stood on a rented lot to which Vicencio and Simeon
merely had a temporary right as lessee, although this cannot in itself alone
determine the status of the property, it does so when combined with other factors
to sustain the interpretation that the parties intended to treat the house as personal
property.

Finally, it is Vicencio and Simeon themselves who are attacking the validity of the
chattel mortgage in this case. The doctrine therefore applies to the herein
defendants, having treated the subject house as personal property.

FOR THE FOREGOING REASONS, the decision appealed from is reversed and
another one entered, dismissing the complaint. With costs against plaintiffs-
appellees.