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Cruz et al v. Filipinas Investment & Finance Corp (1968) Reyes, JBL, J. Short version: Buyer bought a bus from seller. Buyer executed a chattel mortgage over the bus. However, buyer was unable to pay the downpayment so seller asks for additional security. A third person mortgaged her land in favour of seller. Seller then transfers its interests to Filipinas. After a while, buyer failed to pay several instalments. There was extrajudicial foreclosure of the chattel mortgage on the bus and the Filipinas, itself, bought the forclosed chattel mortgage at the public auction for a sum less than the buyers obligation. Since what Filipinas got from the auction was not enough to cover buyers debt, Filipinas foreclosed on the rd mortgage on 3 partys land. Issue: Was it proper for Filipinas to foreclose on the land? SC says no. Accdg to NCC 1484, one may only choose among 3 remedies, and the exercise on 1 choice bars the exercise of the other 2 choices. Action includes both judicial and extrajudicial proceeding by virtue of which the seller may lawfully be enabled to exact recovery Facts:

Cruz (Buyer) bought from Far East Motor Corp (seller) an Isuzu Bus (P44k), payable in instalments for 30 months with interest. Cruz even delivered a promissory note to Far East. To secure payment of the promissory note, buyer executed & delivered a chattel mortgage (over the bus) to seller. Buyer was not able to make a down payment. Seller asks for additional security. nd Said additional security was given by de Reyes in the form of a 2 mortgage on her land & building That land was already mortgaged to DBP to secure her loan from that bank Seller indorsed the promissory note and assigned all rights to the chattel mortgage and the real estat e mortgage to Filipinas Investment & Finance Corp o This was with due notice to buyer and de Reyes Buyer defaulted on payment of the promissory note o Sum only paid was P500 (such was applied as partial payment of interest on principal obligation) o Despite demands, buyer did not pay Because of buyers default, Filipinas foreclosed on the bus chattel mortgage o This was damaged in an accident while in possession of buyer In the foreclosure sale of the bus, Filipinas was the highest bidder (P15k) o Proceeds of the foreclosure sale were not enough to cover buyers obligation Pursuant to a provision in the real estate mortgage, seller requested the sheriff to take possession and sell the land o Filipinas paid de Reyess mortgage debt to DBP before instituting the foreclosure proceedings De Reyes asks seller to cancel the mortgage. Seller did not comply, believing that her request did not have legal basis. At her request, sheriff held the sale of the land in abeyance.

Issue: Was it proper for Filipinas to have gone against the real estate mortgage? Held: No Ratio:

Re: action This case involves a sale of personal property on instalments. Pertinent provision is NCC 1484. ART. 1484. In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise any of the following remedies: (1) Exact fulfillment of the obligation, should the vendee fail to pay; (2) Cancel the sale, should the vendee's failure to pay cover two or more installments; (3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's failure to pay cover two or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void. Filipinas argues: since the law speaks of "action", the restriction should be confined only to the bringing of judicial suits or proceedings in court. SC answers: "Action" is without a definite meaning In Hermanos v. De La Riva, it is defined as: o the legal demand of one's right, or rights; o the lawful demand of one's rights in the form given by law; o a demand of a right in a court of justice; the lawful demand of one's right in a court of justice;

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the legal and formal demand of ones rights from another person or party, made and insisted on in a court of justice; o a claim made before a tribunal; an assertion in a court of justice of a right given by law; o a demand or legal proceeding in a court of justice to secure one's rights; o the prosecution of some demand in a court of justice; o the means by which men litigate with each other; the means that the law has provided to put the cause of action into effect Considering the purpose for which the prohibition contained in NCC 1484 was intended, "action" may be construed as referring to any judicial or extrajudicial proceeding by virtue of which the seller may lawfully be enabled to exact recovery of the supposed unsatisfied balance of the purchase price from the buyer. An extrajudicial foreclosure of a real estate mortgage is one such proceeding

Re: NCC 1484 Provision is clear: should the buyer of a personal property default in the payment of two or more of installments, the seller has the option to avail of any one of 3 remedies o Exact fulfillment of the obligation of the buyer, o Cancel the sale, o Foreclose the mortgage, if one was constituted. These remedies have been recognized as alternative, not cumulative. o The exercise of one would bar the exercise of the others. Reason for this doctrine was stated in Bachrach Motor Co. vs. Millan: o To remedy the abuses committed in connection with the foreclosure of chattel mortgages o This prevents 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 o ^ Result of this procedure was that the mortgagor found himself minus the property and still owing practically the full amount of his original indebtedness

Re: Filipinass complaint against TCs failure to order reimbursement by De Reyes of amount Filipinas paid to DBP for the rel ease of the first mortgage To the extent that she was benefited by such payment, de Reyes should have been required to reimburse Filipinas Decision affirmed, modification: reimbursement