G.R. No. 150673 - Superlines Transportation Co., Inc. vs. ICC Leasing and Ficing Corp.

In 1995, Superlines Transportation Co., Inc. decided to acquire five new buses from Diamond Motors Corporation for the price of P10,873,582.00.
Lacking sufficient financial resources, Superlines authorized its President and General Manager, Manolet Lavides, to secure financing for the purchase by negotiating with a financing institution.

Lavides negotiated with ICC Leasing & Financing Corporation (ICC) through its Assistant Vice-President for Operations, Aida F. Albano, regarding a financial scheme.
ICC agreed to finance the purchase via a loan with a three-year term at a fixed interest rate of 22% per annum and required that the newly acquired buses be used as security.
As a precondition for executing the financing documents, ICC required Superlines to submit the certificates of registration for the buses under its name.

On October 19, 1995, Diamond Motors Corporation delivered five new buses to Superlines, as evidenced by vehicle invoice numbers 9225 to 9229.
The Land Transportation Office issued certificates of registration for the buses on November 22, 1995, after the invoices were filed.
Superlines, through Lavides, executed two critical documents:

A deed of chattel mortgage over the buses as security for the loan amount of P13,114,287.00.
A promissory note binding Superlines to pay ICC P10,873,582.00 in monthly installments starting December 23, 1995, with interest at 22% per annum.

A Continuing Guaranty was also executed by Superlines and Lavides for the loan amount.

ICC issued Metrobank Check No. 0661909113, dated November 23, 1995, payable to Superlines, representing the net proceeds of the loan.
Superlines remitted the check to Diamond Motors Corporation as full payment for the buses.
After making only seven monthly amortizations (from December 1995 to June 1996), Superlines defaulted on its obligations.
On April 2, 1997, ICC demanded full payment of the outstanding balance (which amounted to P12,606,020.55 as of March 31, 1997), but Superlines failed to comply.

ICC initiated legal proceedings on April 21, 1997 by filing a complaint for the collection of the sum due and for a writ of replevin in the Regional Trial Court (RTC) of Makati City in Civil Case No. 97-816.
Concurrently, a writ of seizure was issued by the RTC, and on May 29, 1997, the sheriff took possession of the five buses.
ICC then proceeded with extra-judicial foreclosure proceedings, culminating in an auction sale on July 2, 1997, where ICC, bidding P7,200,000.00, was declared the winning bidder.
Following the sale, a deficiency and additional expenses were incurred, leaving Superlines still indebted to ICC.

In its Answer with Counterclaim, Superlines and Lavides contended that the true transaction was one of financing a sale of personal property—arguing the scheme was a consumer loan subject to Article 1484(3) of the Civil Code.
The RTC ruled in favor of Superlines and Lavides, dismissing ICC’s complaint and awarding damages against ICC based on the alleged consumer loan nature.
The Court of Appeals reversed the RTC’s decision on July 30, 2001, holding that the transaction was an amortized commercial loan and that ICC was entitled to a deficiency judgment amounting to P5,956,351.18.
Testimonies by Lavides and ICC’s executive, Leonardo Serrano, Jr., among other documentary evidence, were pivotal to establishing the true nature of the transaction and the absence of a special arrangement with Diamond Motors Corporation.

Petitioners (Superlines and Lavides) raised errors regarding the characterization of the transaction as an amortized commercial loan instead of a consumer loan.
They also questioned whether Article 1484(3) of the Civil Code should apply to their case and objected to the deficiency judgment pursued by ICC.
The petition for review on certiorari was ultimately filed to challenge the Court of Appeals’ findings and conclusions.

Whether the financial transaction between Superlines and ICC should be classified as a consumer loan (with a sale of goods framework) or an amortized commercial loan (with a chattel mortgage securing a debt).
Whether Article 1484(3) of the Civil Code, which pertains to vendor-vendee relationships, is applicable in a transaction where no direct sale from vendor to vendee occurred.
Whether the alleged “special arrangement” between ICC and Diamond Motors Corporation, as contended by Superlines and Lavides, sufficiently altered the nature of the financing agreement.
Whether ICC, having foreclosed the chattel mortgage, was entitled to pursue a deficiency judgment for the outstanding balance after the sale of the buses.
Whether the Court of Appeals erred in overruling the RTC’s decision by sustaining the deficiency claim and dismissing the consumer loan argument raised by the petitioners.