RIDAD VS FILINVESt

RIDAD
vs.
FILIPINAS INVESTMENT and FINANCE CORPORATION January 27, 1983
FACTS:
Plaintiffs purchased from the Supreme Sales arid Development Corporation two
(2) brand new Ford Consul Sedans for P26,887 payable in 24 monthly installments.
To secure payment, plaintiffs 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 granted by the defunct
Public Service Commission 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.
Plaintiffs failed to pay their monthly installments, hence 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 vehicles.
Plaintiffs filed an action for annulment of contract with Filipinas Investment and Finance
Corporation before the Court of First Instance of Rizal. The court declared that the chattel
mortgage is null and void in so far as the taxicab franchise and the used Chevrolet car
of plaintiffs are concerned, and the sale at public auction conducted by the City Sheriff of
Manila concerning said taxicab franchise has no legal effect.
ISSUE: Whether or not the foreclosure of the chattel mortgage upon the additional security is
valid
HELD: NO, it is null and void
Art. 1484. n a contract of sale of personal property the price of which is payablein installments,
the vendor may exercise 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
vendees failure to pay cover two or more instalments. 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.
Whichever right the vendor elects he cannot avail of the other, these remedies being alternative
not commutative. 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.
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.