RIDAD vs.

FILIPINAS INVESTMENT and FINANCE CORPORATION, SEBASTIAN& SAN AGUSTIN

(GR# L-39806; Jan. 27, 1983)
FACTS: On April 14, 1964, plaintiffs purchased from the Supreme Sales arid Development Corporation
2 brand new Ford Consul Sedans complete with accessories, for P26,887 payable in 24 monthly
installments and executed a promissory note covering the purchase price and a deed of chattel
mortgage not only on the two vehicles purchased but also on another car (Chevrolet) and plaintiffs'
franchise or certificate of public convenience for the operation of a taxi fleet. Then, with the
conformity of the plaintiffs, the vendor assigned its rights, title and interest to the above-mentioned
promissory note and chattel mortgage to defendant Filipinas Investment and Finance Corporation.
Due to the failure of the plaintiffs to pay their monthly installments as per promissory note,
the defendant corporation foreclosed the chattel mortgage extra-judicially, and at the public auction
sale of the two Ford Consul cars, of which the plaintiffs were not notified, the defendant corporation
was the highest bidder and purchaser. Another auction sale was held, 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 the franchise of plaintiffs to operate five units of taxicab
service was sold for P8,000 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. On February 21,
1966, plaintiffs filed an action for annulment of contract before the CFI, with Filipinas Investment and
Finance Corporation, Jose D. Sebastian and Sheriff Jose San Agustin, as party-defendants. The lower
court rendered judgment declaring th chattel mortgage null and void. Defendants appealed to the CA
which affirmed the decision.
ISSUE: Is the chattel mortgage, so far as the franchise and the subsequent sale thereof are concerned,
valid?
HELD: The resolution of said issue is unquestionably governed by the provisions of Article 1484 of the
Civil Code. Under the said provision, the vendor of personal property the purchase price of which is
payable in installments, has the right, should the vendee default in the payment of two or more of
the agreed installments, 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. Whichever
right the vendor elects, he cannot avail of the other, these remedies being alternative, not
cumulative. Furthermore, 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. 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. 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. This
Court sustained the pronouncement made by the lower court on the nullity of the mortgage in so far
as it included the house and lot of the vendees, holding that under the law, should the vendor choose
to foreclose the mortgage, he has to content himself with the proceeds of the sale at the public
auction of the chattels which were sold on installment and mortgaged to him and having chosen the
remedy of foreclosure, he cannot nor should he 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.

SPOUSES DE LA CRUZ & DANIEL FAJARDO v. ASIAN CONSUMER AND INDUSTRIAL FINANCE
CORPORATION &CA [G.R. No. 94828. September 18, 1992.]
FACTS: On 22 September 1982, 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 and they executed in favor of BENTER a chattel mortgage over the vehicle 1 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 (ASIAN for brevity). 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. On 26
September 1984, by virtue of a petition for extrajudicial foreclosure of chattel mortgage, the sheriff
attempted to repossess the vehicle but was unsuccessful because of the refusal of the son of
petitioner, Rolando de la Cruz to surrender the same. On 10 October 1984, petitioner Romulo de la
Cruz brought the vehicle to the office of ASIAN and left it there where it was inventoried and
inspected. On 27 November 1984, ASIAN filed an ordinary action with the court a quo for collection
of the balance of P196,152.99 of the purchase price, plus liquidated damages and attorneys fees.
After trial, the court below rendered judgment in favor of ASIAN.
On appeal, the Court of Appeals affirmed the judgment and held that there was no extrajudicial
foreclosure of chattel mortgage in this case due to the refusal of defendant to surrender the truck,
and the writ of possession of plaintiff plus Technical and Inspection Report was made in connection
therewith is not conclusive EF. Petitioners take exception. While they do not dispute that where the
mortgagee elects the remedy of foreclosure which, according to them, includes the option to sell in a
public or private sale, commences and pursues it, and in consideration of which he also performs
everything that is incumbent upon him to do to implement the foreclosure they nevertheless insist
that he should not later be allowed to change course midway in the process, abandon the foreclosure
and shift to other remedies such as collection of the balance, especially after having recovered the
mortgaged chattel from them and while retaining possession thereof.
ISSUE: whether a chattel mortgagee, after opting to foreclose the mortgage but failing afterwards to
sell the property at public auction, may still sue to recover the unpaid balance of the purchase price

HELD: We do not agree with petitioners. It is not disputed that the instant case is covered by the so-
called "Recto Law", now Art. 1484 of the New Civil Code.
In this jurisdiction, the three (3) remedies provided for in the "Recto Law" are alternative
and not cumulative; the exercise of one would preclude the other remedies. Consequently, should
the vendee-mortgagor default in the payment of two or more of the agreed installments, the vendor-
mortgagee has the option to avail of any of these three (3) remedies: either to exact fulfillment of the
obligation, to cancel the sale, or to foreclose the mortgage on the purchased chattel, if one was
constituted. The records show that 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. 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. As held by this Court, if the
vendor desisted, on his own initiative, from consummating the auction sale, such desistance was a
timely disavowal of the remedy of foreclosure, and the vendor can still sue for specific performance
Consequently, in the case before Us, 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. We note however that the trial court, as well as the Court of Appeals failed to consider that
the vehicle was already in the possession of ASIAN when it directed petitioners herein to pay
P184,466.67 representing the balance of the purchase price of the mortgaged property. Law and
equity will not permit ASIAN to have its cake and eat it too, so to speak. 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. Accordingly, the ownership and possession of the vehicle
should be returned to petitioners by ASIAN in the condition that it was when delivered to it, and if
this be no longer feasible, to deduct from the adjudged liability of petitioners the amount of
P60,000.00, its corresponding appraised value.

LEOVILLO C. AGUSTINvs. CA and FILINVEST FINANCE CORP. ([G.R. No. 107846. April 18, 1997]
FACTS: The dispute stemmed from an unpaid promissory note dated October 28, 1970, executed by
petitioner Leovillo C. Agustin in favor of ERM Commercial for the amount of P43,480.80, payable in
monthly installmentsand secured by a chattel mortgage over an Isuzu diesel truck, both of which
were subsequently assigned to private respondent Filinvest Finance Corporation. When petitioner
defaulted in paying the installments, private respondent demanded from him the payment of the
entire balance or, in lieu thereof, the possession of the mortgaged vehicle. Neither payment nor
surrender was made. Aggrieved, private respondent filed a complaint with theRTC against petitioner
praying for the issuance of a writ of replevin or, in the alternative, for the payment of P32,723.97 plus
interest at the rate of 14% per annum from due date until fully paid. Trial ensued and, thereafter,
a writ of replevin was issued by RTC Branch 26. By virtue thereof, private respondent acquired
possession of the vehicle. 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. In response, petitioner moved to
dismiss the supplemental complaint arguing that RTC Branch 26 had already lost jurisdiction over the
case because of the earlier extra-judicial foreclosure of the mortgage. The lower court granted the
motion and the case was dismissed. Private respondent elevated the matter to the appellate court
which set aside the order of dismissal and 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 RTC 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 in the
aggregate sum of P18,547.38. Petitioner moved for reconsideration. RTC Branch 40 modified its
decision by lowering the monetary award toP8,852.76, the amount originally prayed for in the
supplemental complaint. Private respondent appealed the case with respect to the reduction of the
amount awarded. Petitioner, likewise, appealed impugning the trial courts order for him to pay
private respondent P8,852.76, an amount over and above the value received from the foreclosure
sale. Both appeals were consolidated and the modified order of RTC Branch 40 was affirmed.
Petitioner contends that the award of repossession expenses to private respondent as
mortgagee is "contrary to the letter, intent and spirit of Article 1484 CC. He asserts that private
respondents repossession expenses have been amply covered by the foreclosure of the chattel
mortgage, hence he could no longer be held liable.
ISSUE:
HELD: The arguments are devoid of merit.
Petitioners contentions, we note, were previously rejected by respondent court in its decision
which has long acquired finality. It is clear, therefore, that the appellate court had already settled the
propriety of awarding repossession expenses in favor of private respondent. The remand of the case
to RTC Branch 40 was for the sole purpose of threshing out the correct amount of expenses and not
for relitigating the accuracy of the award. Thus, the findings of RTC Branch 40, as affirmed by the
appellate court in CA-G.R. No. 24684, was confined to the appreciation of evidence relative to the
repossession expenses for the query or issue passed upon by the respondent court in CA-G.R. No.
56718-R (propriety of the award for repossession expenses) has become the law of the case. This
principle is defined as a term applied to an established rule that when an appellate court passes on a
question and remands the cause to the lower court for further proceedings, the question there
settled becomes the law of the case upon subsequent appeal. Having exactly the same parties and
issues, the decision in the former appeal (CA-G.R. No. 56718-R) is now the established and
controlling rule. Petitioner may not therefore be allowed in a subsequent appeal (CA-G.R. No. 24684)
and in this petition to resuscitate and revive formerly settled issues. Judgment of courts should attain
finality at some point in time, as in this case, otherwise, there will be no end to litigation.
At any rate, even if we were to brush aside the law of the case doctrine we find the award for
repossession expenses still proper. In Filipinas Investment & Finance Corporation v. Ridad, the Court
recognized an exception to the rule stated under Article 1484(3) upon which petitioner relies. Thus:
x x x Where the mortgagor plainly refuses to deliver the chattel subject of the mortgage upon his
failure to pay two or more installments, or if he conceals the chattel to place it beyond the reach of
the mortgagee, what then is the mortgagee expected to do? x x x It logically follows as a matter of
common sense, that 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 attorneys fees in prosecuting the action for replevin.

G.R. No. 81552 May 28, 1990
DIONISIO FIESTAN and JUANITA ARCONADO, vs.
COURT OF APPEALS; DEVELOPMENT BANK OF THE PHILIPPINES, LAOAG CITY BRANCH; PHILIPPINE NATIONAL BANK, VIGAN BRANCH, ILOCOS SUR, FRANCISCO PERIA and REGISTER OF DEEDS OF ILOCOS SUR
FACTS:
Petitioners spouses Dionisio Fiestan and Juanita Arconada were the owners of a parcel of land wituated in Ilocos Sur which they mortgaged to the DBP as security for their P22,400.00 loan. For failure of petitioners
to pay their mortgage indebtedness, the lot was acquired by the DBP as the highest bidder at a public auction sale after it was extrajudicially foreclosed by the DBP. A certificate of sale was subsequently issued by
the Provincial Sheriff on the same day and the same was registered in the Office of the Register of Deeds. Earlier, petitioners executed a Deed of Sale in favor of DBP which was likewise registered. Upon failure of
petitioners to redeem the property within the one-year period, petitioners TCT lot was cancelled by the Register of Deeds and in lieu thereof, it was issued to the DBP upon presentation of a duly executed
affidavit of consolidation of ownership. The DBP sold the lot to Francisco and the same was registered in the Office of the Register of Deeds. Subsequently, the DBPs title over the lot was cancelled and in lieu
thereof, the TCT was issued to Francisco Peria.
Francisco Peria secured a tax declaration for said lot and accordingly paid the taxes due thereon. He thereafter mortgaged to the PNB as security for his loan of P15,000.00 as required by the bank to increase his
original loan since petitioners were still in possession of the lot, the Provincial Sheriff ordered them to vacate the premises. On the other hand, petitioners filed on August 23, 1982 a complaint for annulment of
sale, mortgage and cancellation of transfer certificates of title against the DBP, PNB, Francisco Peria and the Register of Deeds before the RTC.
ISSUE:
Whether or not that the extrajudicial foreclosure sale is null and void by virtue of lack of a valid levy.
HELD:
No. The formalities of a levy, as an essential requisite of a valid execution sale under Section 15 of Rule 39 and a valid attachment lien under Rule 57 of the Rules of Court, are not basic requirements before an
extrajudicially foreclosed property be sold at public auction. The case at bar, as the facts disclose, involves an extrajudicial foreclosure sale.
In extrajudicial foreclosure of mortgage, the property sought to be foreclosed need not be identified or set apart by the sheriff from the whole mass of property of the mortgagor for the purpose of satisfying the
mortgage indebtedness. For, the essence of a contract of mortgage indebtedness is that a property has been identified or set apart from the mass of the property of the debtor-mortgagor as security for the
payment or fulfillment of the obligation to answer the amount of indebtedness, in case of default of payment. By virtue of the special power inserted or attached to the mortgage contract, the mortgagor has
authorized the mortgagee-creditor or any other person authorized to act for him to sell said property in accordance with the formalities required under Act No. 3135, as amended.
The Court finds that the formalities prescribed under Sections 2, 3 and 4 of Act No. 3135, as amended, were substantially complied with in the instant case.