The Remedies Cumulative clause provides that the parties are against the defendant, to recover the unpaid
the unpaid balance of the
entitled to pursue any and all remedies that may be available
CASES
SOUTHERN MOTORS v MOSCOSO
Doctrine: SALE ON INSTALLMENTS; ACTION FILED IS FOR SPECIFIC
PERFORMANCE; MORTGAGED PROPERTY ATTACHED; SALE OF
MORTGAGED PROPERTY NOT TANTAMOUNT TO FORECLOSURE OF
MORTGAGED; DEFICIENCY JUDGMENT. — In sales on installments,
where the action instituted is for specific performance and the
mortgaged property is subsequently attached and sold, the sale
thereof does not amount to a foreclosure of the mortgaged; hence,
the seller-creditor is entitled to deficiency judgment.
Facts: On June 6, 1957, plaintiff-appellee Southern Motors, Inc. sold
to defendant-appellant Angel Moscoso one Chevrolet truck, on
installment basis, for P6,445.00. Upon making a down payment, the
defendant executed a promissory note for the sum of P4,915.00,
representing the unpaid balance of the purchase price), to secure
the payment of which, a chattel mortgage was constituted on the
truck in favor of the plaintif.
Of said account of P4,915.00, the defendant had paid a total of
P550.00, of which P110.00 was applied to the interest up to August
15, 1957, and P400.00 to the principal, thus leaving an unpaid
balance of P4,475.00.
The defendant failed to pay 3 installments on the balance of the
purchase price. On November 4, 1957, the plaintiff filed a complaint
promissory note. Upon plaintiff's petition, embodied in the
complaint, a writ of attachment was issued by the lower court on
the properties of the defendant. Pursuant thereto, the said
Chevrolet truck, and a house and lot belonging to defendant, were
attached by the Sheriff of San Jose, Antique, where defendant was
residing on November 25, 1957, and said truck was brought to the
plaintiff's compound in Iloilo City, for safe keeping.
HELD:
Manifestly, the appellee had chosen the first remedy (specific
performance). The complaint is an ordinary civil action for recovery
of the remaining unpaid balance due on the promissory note. The
plaintiff had not adopted the procedure or methods outlined by Sec.
14 of the Chattel Mortgage Law but those prescribed for ordinary
civil actions, under the Rules of Court.
Pascual & Leonila Torres vs. Universal Motors
FACTS:
Spouses Torres executed a real estate mortgage on two parcel of
land to secure the payment of the indebtedness of PDP Transit, Inc.
for the purchase of five (5) Mercedes Benz trucks from Universal
Motors Corp. Separate deeds of chattel mortgages on the Mercedez
Benz units were also executed by PDP Transit in favor of UMC PDP
Transit Inc. was able to pay a sum of P92,964.91, leaving balance of
P68,641.69 including interest due as of February 8, 1965 On March
19, 1965, Universal Motors Corporation filed a complaint against
PDP Transit, and it was able to repossess all the units sold, including
the five (5) units guaranteed by the subject real estate mortgage,
and to foreclose all the chattel mortgages constituted thereon,
resulting in the sale of the trucks at public auction. Spouses Lorenzo
Pascual and Leonila Torres filed an action in the CFI Quezon City for
the cancellation of the mortgage. A judgment was rendered in their
favor. UMC contends (on appeal) that what Article 1484 withholds
from the vendor is the right to recover any deficiency from the
purchaser after the foreclosure of the chattel mortgage and not a
recourse to the additional security put up by a third party to
guarantee the purchaser's performance of his obligation
HELD:
If the guarantor should be compelled to pay the balance of the
purchase price, the guarantor will in turn be entitled to recover
what she has paid from the debtor vendee (Art. 2066, Civil Code); so
that ultimately, it will be the vendee who will be made to bear the
payment of the balance of the price, despite the earlier foreclosure
of the chattel mortgage given by him. Thus, the protection given by
Article 1484 would be indirectly subverted, and public policy
overturned."
FILINVEST v. CA
Doctrine:
1.SPECIAL CONTRACTS; SALES;
REMEDIES OF SELLER OF MOVABLES PAYABLE IN INSTALLMENTS
WHERE BUYER FAILS TO PAY TWO OR MORE INSTALLMENTS;
REMEDIES ARE ALTERNATIVE NOT CUMULATIVE. — Under
Article 1484 of the New Civil Code, the seller of movables in
installments, in case the buyer fails to pay two or more
installments, may elect to pursue either of the following
remedies: (1) exact fulfillment by the purchaser of the
obligation; (2) cancel the sale; or (3) foreclose the mortgage on
the purchased property if one was constituted thereon. It is
now settled that the said remedies are alternative and not
cumulative and therefore, the exercise of one bars the
exercise of the others.
2. CONTRACTS OF LEASE WITH OPTION TO BUY,
RESORTED TO AS A MEANS OF CIRCUMVENT ARTICLE
1484 OF NEW CIVIL CODE. — Indubitably, the device —
contract of lease with option to buy — is at times resorted to as
a means to circumvent Article 1484, particularly paragraph (3)
thereof. Through the set-up, the vendor, by retaining ownership
over the property in the guise of being the lessor, retains,
likewise, the right to repossess the same, without going through
the process of foreclosure, in the event the vendee-lessee
defaults in the payment of the installments. There arises
therefore no need to constitute a chattel mortgage over the
movable sold. More important, the vendor, after repossessing
the property and, in effect, canceling the contract of sale, gets
to keep all the installments-cum-rentals already paid.
FACTS:
Spouses Bang and Tan sells gravel produced from crushed rocks
used for construction purposes. Wanting to increase production,
they asked Mr. Ruben Mercurio to look for a more efficient rock
crusher and were referred to Rizal Consolidated Corporation
which then had for sale one such machinery. After inspection of
said machinery, couple decided to buy the same and applied for
financial assistance from Filinvest Credit Corporation on the
conditions that: that the machinery be purchased in the
petitioner's name; that it be leased (with option to purchase upon
the termination of the lease period) to the private respondents;
and that the private respondents execute a real estate mortgage
in favor of the petitioner as security for the amount advanced by
the latter.
A contract of lease of machinery (with option to purchase) was
entered into by the parties stipulating that at the end of the two-
year period, the machine would be owned by the spouses. The
latter executed a real estate mortgage over two parcels of land
issued in favor Filinvest and issues check for P150,550.00, as initial
rental (or guaranty deposit), and twenty-four (24) postdated
checks corresponding to the 24 monthly rentals.
Three months after the delivery of the machinery, the couple
claiming that they had only tested the machine that month, sent a
letter-complaint to the Filinvest, alleging that contrary to the 20
to 40 tons per hour capacity of the machine as stated in the lease
contract, the machine could only process 5 tons of rocks and
stones per hour and refused to pay.
As a consequence of the non-payment of the rentals on the rock
crusher as they fell due despite the repeated written demands,
Filinvest extrajudicially foreclosed the real estate mortgage. To
thwart the impending auction of their properties, Spouses Jose Sy
Bang and Iluminada Tan filed before the RTC (QC) a complaint
against Filinvest, asked for the rescission of the contract of lease,
annullment of the real estate mortgage.
A judgment was rendered in their favor. On appeal, the petitioner
(Filinvest) reasserts that the cause of action should be directed
against Rizal Consolidated Corporation, the original owner-seller
of the subject rock crusher, or Gemini Motors Sales which served
as a conduit facilitator of the purchase of the said machine. The
petitioner argues that it is a financing institution engaged in quasi-
banking activities, primarily the lending of money to
entrepreneurs such as the private respondents and the general
public, but certainly not the leasing or selling of heavy
machineries like the subject rock crusher. The petitioner denies
being the seller of the rock crusher and only admits having
financed its acquisition by the private respondents. Further, the
petitioner absolves itself of any liability arising out of the lease
contract it signed with the private respondents due to the waiver
of warranty made by the latter.
HELD:
We find the petitioner's first contention untenable.
While it is accepted that the petitioner is a financing institution,
it is not, however, immune from any recourse by the private
respondents. Notwithstanding the testimony of private
respondent Jose Sy Bang that he did not purchase the rock
crusher from the petitioner, the fact that the rock crusher was
purchased from Rizal Consolidated Corporation in the name and
with the funds of the petitioner proves beyond doubt that the
ownership thereof was effectively transferred to it. It is
precisely this ownership which enabled the petitioner to enter
into the "Contract of Lease of Machinery and Equipment" with
the private respondents.
Be that as it may, the real intention of the parties
should prevail. The nomenclature of the agreement cannot
change its true essence, i.e., a sale on installments. It is basic
that a contract is what the law defines it and the parties intend
it to be, not what it is called by the parties. It is apparent here
that the intent of the parties to the subject contract is for the
so-called rentals to be the installment payments. Upon the
completion of the payments, then the rock crusher, subject
matter of the contract, would become the property of the
private respondents. This form of agreement has been criticized
as a lease only in name.
The so-called rent must necessarily be regarded as
payment of the price in installments since the due
payment of the agreed amount results, by the terms of bargain,
in the transfer of title to the lessee.
 **the private respondents have validly excused the
petitioner from any warranty on the rock crusher. Hence, they
should bear the loss for any defect found therein.
RIDAD v. FILIPINAS INVESTMENTS
DOCTRINE:
If the vendor avails himself of the right to foreclose his mortgage,
the law prohibits him from further bringing an action against the
vendee for the purpose of recovering whatever balance of the
debt secured not satisfied by the foreclosure sale. 3 The precise
purpose of the law is to prevent mortgagees from seizing the
mortgaged property, buying it at foreclosure sale for a low price
and then bringing suit against the mortgagor for a deficiency
judgment, otherwise, the mortgagor-buyer would find himself
without the property and still owing practically the full amount of
his original indebtedness.
The vendor of personal property sold on the installment basis is
precluded, after foreclosing the chattel mortgage on the thing
sold, from having a recourse against the additional security put up
by a third party to guarantee the purchaser's performance of his
obligation.|||
If the vendor under such circumstance is prohibited from having a
recourse against the additional security for reasons therein
stated, there is no ground why such vendor should not likewise be
precluded from further extrajudicially foreclosing the additional
security put up by the vendees themselves, as in the instant case,
it being tantamount to a further action that would violate Article
1484 of the Civil Code, for there is actually no difference between
an additional security put up by the vendee himself and such
security put up by a third party insofar as how the burden would
ultimately fall on the vendee himself is concerned.|||
FACTS:
Plaintiffs purchased from the Supreme Sales and Development
Corporation:
2 FORD CONSUL SEDAN and to secure payment Ridads executed
promissory note and deed of chattel mortgage on CHEVROLET;
TAXI CAB FRANCHISE. They failed to pay. Defe corporation
foreclosed the 2 cars extrajudicially.
Another auction sale was held on involving the remaining
properties subject of the deed of chattel mortgage since plaintiffs'
obligation was not fully satisfied by the sale of the aforesaid
vehicles, and at the public auction sale, the franchise of plaintiffs
to operate five units of taxicab service was sold for P'8,000 to the
highest bidder, herein defendant corporation, which subsequently
sold and conveyed the same to herein defendant Jose D.
Sebastian, who then filed with the Public Service Commission an
application for approval of said sale in his favor.
HELD:
**PRECLUDED FROM FORECLOSING ADDITIONAL SECURITY
In the instant case, defendant corporation elected to foreclose its
mortgage upon default by the plaintiffs in the payment of the
agreed installments. Having chosen to foreclose the chattel
mortgage, and bought the purchased vehicles at the public
auction as the highest bidder, it submitted itself to the
consequences of the law as specifically mentioned, by which it is
deemed to have renounced any and all rights which it might
otherwise have under the promissory note and the chattel
mortgage as well as the payment of the unpaid balance.|||
Defendant corp. cannot nor should be allowed to insist on the
sale of the house and lot of the vendees, for to do so would be
equivalent to obtaining a writ of execution against them
concerning other properties which are separate and distinct from
those which were sold on installment. This would indeed be
contrary to public policy and the very spirit and purpose of the
law, limiting the vendor's right to foreclose the chattel mortgage
only on the thing sold.
DISTINGUISHED FROM SOUTHERN MOTORS:
Southern Motors case is entirely different from the case at bar. In
that case, the vendor has availed of the first remedy provided by
Article 1484 of the Civil Code, i.e., to exact fulfillment of the
obligation; whereas in the present case, the remedy availed of
was foreclosure of the chattel mortgage.
SPS. DELA CRUZ v. CA
DOCTRINE:
Under the law, the delivery of possession of the mortgaged
property to the mortgagee, the herein appellee, can only operate
to extinguish appellant's liability if the appellee had actually
caused the foreclosure sale of the mortgaged property when it
recovered possession thereof. It is worth noting that it is the fact
of foreclosure and actual sale of the mortgaged chattel that bar
recovery by the vendor of any balance of the purchaser's
outstanding obligation not satisfied by the sale.
** There being no actual foreclosure of the mortgaged property,
ASIAN is correct in resorting to an ordinary action for collection of
the unpaid balance of the purchase price.
FACTS:
The spouses Romulo de la Cruz and Delia de la Cruz, and one
Daniel Fajardo, petitioners herein, purchased on installment basis
one (1) unit Hino truck from Benter Motor Sales Corporation
(BENTER for brevity). To secure payment, they executed in favor
of BENTER a chattel mortgage over the vehicle and a promissory
note for P282, 360.00 payable in thirty (30) monthly installments
of P9, 412.00.
On the same date, BENTER assigned its rights and interest over
the vehicle in favor of private respondent Asian Consumer and
Industrial Finance Corporation. Although petitioners initially paid
some installments they subsequently defaulted on more than two
(2) installments.
Thereafter, notwithstanding the demand letter of ASIAN,
petitioners failed to settle their obligation.
The records show that on 14 September 1984 ASIAN initiated a
petition for extrajudicial foreclosure of the chattel mortgage. But
the sheriff failed to recover the motor vehicle from petitioners due
to the refusal of the son of petitioners Romulo and Delia de la Cruz
to surrender it. It was not until 10 October 1984, or almost a month
later that petitioners delivered the unit to ASIAN. The action to
recover the balance of the purchase price was instituted on 27
November 1984.
HELD:
It is thus clear that while ASIAN eventually succeeded in taking
possession of the mortgaged vehicle, it did not pursue the
foreclosure of the mortgage as shown by the fact that no auction
sale of the vehicle was ever conducted.
Law and equity will not permit ASIAN to have its cake and eat it too.
By allowing ASIAN to retain possession of the vehicle and then
directing petitioners to pay the unpaid balance would certainly
result in unjust enrichment of the former.
*balik ng Asian yung truck or deduct ng 60k for adjudged liability of
dela cruz
LEOVILLO AGUSTIN v. CA
DOCTRINE:
The necessary expenses incurred in the prosecution by the
mortgagee of the action for replevin so that he can regain
possession of the chattel, should be borne by the mortgagor.
Recoverable expenses would, in our view, include expenses
properly incurred in effecting seizure of the chattel and reasonable
attorney's fees in prosecuting the action for replevin.
FACTS:
Agustin has an unpaid promissory note of 43k and chattel mortgage
of Isuzu diesel truck in favor of ERM which was assigned to Filinvest.
Neither payment nor surrender was made.
Filinvest prayed for the issuance of replevin = granted
Upon repossession, the latter discovered that the vehicle was no
longer in running condition and that several parts were missing
which private respondent replaced. The vehicle was then foreclosed
and sold at public auction.
Private respondent subsequently filed a "supplemental complaint"
claiming additional reimbursement worth P8,852.76 as value of
replacement parts and for expenses incurred in transporting the
mortgaged vehicle from Cagayan to Manila.
CA ruled that repossession expenses incurred by private respondent
should be reimbursed. This decision became final and executory,
hence the case was accordingly remanded to the Regional Trial
Court of Manila, Branch 40 (RTC Branch 40) for reception of
evidence to determine the amount due from petitioner. After trial,
RTC Branch 40 found petitioner liable for the repossession
expenses, attorney's fees, liquidated damages, bonding fees and
other expenses in the seizure of the vehicle.
Agustin moved to dismiss case cause X jurisdiction since there was
already a foreclosure
HELD:
GR: X entitled to recover expenses
• E: Recoverable expenses would include:
1. Expenses properly incurred in effective seizure of chattel
2. Atty’s fees in prosecution of action of replevin • CA decision
affirmed.
BORBON
DOCTRINE:
Given the circumstances, we must strike down the award for
liquidated damages made by the court a quo but we uphold the
grant of attorney's fees which we like the appellate court, find to be
reasonable.
FACTS: Daniel Borbon and Francisco Borbon signed a promissory
note in favor of Pangasinan Auto Mart, Inc. and to secure the
promissory note, the defendants executed a chattel mortgage on 1
Brand New 1984 Isuzu crew cab. The rights of Pangasinan Auto
Mart, Inc. was later assigned to Filinvest Credit Corp with a notice to
Daniel and Francisco Borbon. Thereafter, Filinvest Credit Corp
assigned all its rights, interests and title over the PN and the chattel
mortgage to Servicewide Specialists, Inc. Borbons failed to comply
with their obligation. Servicewide attempted to collect by sending a
demand latter to herein petitioners for them to pay their entire
obligation.
PETITONER: They are not in default of their obligation
because the Pangasinan Auto Mart was first guilty of not fulfilling
their obligation on the contract. The defendants claim that neither
party incurs delay if the other does not comply with his obligation.
They intended to buy from Pangasinan Auto Mart a jeepney type
Isuzu K.C. Cab but the same was not delivered. Instead,
through misrepresentation and machination, Pangasinan
delivered an Isuzu crew cab as this is the unit available at their
warehouse.
CA: Petitioners could not avoid liability under the promissory note
and the chattel mortgage that secured it since private respondent
took the note for value and in good faith
HELD: The remedies under Art. 1484 of the Civil Code are not
cumulative but alternative and exclusive, which means that should
the vendee or purchaser of a personal property default in the
payment of two or more of the agreed installments, the vendor or
seller has the option to avail of any of these three remedies – either
to exact fulfillment by the purchaser of the obligation, or to cancel
the sale, or to foreclose the mortgage on the purchased personal
property, if one was constituted. These remedies have been
recognized as alternative, not cumulative, that the exercise of one
would bar the exercise of the others. When the seller assigns his
credit to another person, the latter is likewise bound by the same
law. Accordingly, when the assignee forecloses on the mortgage,
there can be no further recovery of the deficiency, and the seller-
mortgagee is deemed to have renounced any right thereto
A contrario, in the event the seller-mortgagee first seeks, instead,
the enforcement of the additional mortgages, guarantees or other
security arrangements, he must then be held to have lost by waiver
or non-choice his lien on the chattel mortgage of the personal
property sold by and mortgaged back to him, although, similar to an
action for specific performance, he may still levy on it.
FIESTAN
Facts: Spouses Fiestan mortgaged their land to DBP as security for a
loan. Upon failure to pay, the land was foreclosed an. DBP acquired
lot as highest bidder. One year redemption period having expired,
DBP title over the land was consolidated.
Issue: WON DBP is prohibited to acquire the property under Art.
1491(2)?
Ruling: NO. The prohibition does not apply in the instant case where
the sale in dispute was made pursuant to a special power inserted
in or attached to the real estate under Act No. 3135 as amended. As
special statute, Act 3135 prevails over provisions of Civil Code as
general statute. Moreover, even in the absence of such provision,
the mortgagee may still purchase the subject property to protect his
interest.
Article 1491 Par. 2 thereof; Agents cannot acquire the property
whose administration or sale may have been intrusted to them,
unless the consent of the principal has been given. The rule,
however, does not apply to mortgagee purchasing the mortgaged
property at a public sale.