UNION MOTOR CORPORATION, petitioner-appellant, vs.

THE COURT OF APPEALS, JARDINE-MANILA

FINANCE, INC., SPOUSES ALBIATO BERNAL and MILAGROS BERNAL, respondents-appelles.
DECISION
DE LEON, JR., J.:
Before us on appeal, by way of a petition for review on certiorari, is the Decision[1] dated March 30, 1994
and Resolution[2] dated September 14, 1994 of the Court of Appeals[3] which affirmed the Decision dated
March 6, 1989 of the Regional Trial Court of Makati, Metro Manila, Branch 150, in Civil Case No. 920 as
well as its Resolution dated September 14, 1994 which denied the Motion for Reconsideration of the
petitioner.
The facts are as follows:
On September 14, 1979, the respondent Bernal spouses purchased from petitioner Union Motor
Corporation one Cimarron Jeepney for Thirty Seven Thousand Seven Hundred Fifty Eight Pesos and Sixty
Centavos (P37,758.60) to be paid in installments. For this purpose, the respondent spouses executed a
promissory note and a deed of chattel mortgage in favor of the petitioner. Meanwhile, the petitioner entered
into a contract of assignment of the promissory note and chattel mortgage with Jardine-Manila Finance, Inc.
Through Manuel Sosmea, an agent of the petitioner, the parties agreed that the respondent spouses would
pay the amount of the promissory note to Jardine-Manila Finance, Inc., the latter being the assignee of the
petitioner. To effectuate the sale as well as the assignment of the promissory note and chattel mortgage, the
respondent spouses were required to sign a notice of assignment, a deed of assignment, a sales invoice, a
registration certificate, an affidavit, and a disclosure statement. The respondent spouses were obliged to
sign all these documents for the reason that, according to Sosmea, it was a requirement of petitioner Union
Motor Corporation and Jardine-Manila Finance, Inc. for the respondent spouses to accomplish all the said
documents in order to have their application approved. Upon the respondent spouses tender of the
downpayment worth Ten Thousand Thirty-Seven Pesos (P10,037.00), and the petitioners acceptance of the
same, the latter approved the sale. Although the respondent spouses have not yet physically possessed the
vehicle, Sosmea required them to sign the receipt as a condition for the delivery of the vehicle.
The respondent spouses continued paying the agreed installments even if the subject motor vehicle
remained undelivered inasmuch as Jardine-Manila Finance, Inc. promised to deliver the subject jeepney.
The respondent spouses have paid a total of Seven Thousand Five Hundred Seven Pesos (P7,507.00)
worth of installments before they discontinued paying on account of non-delivery of the subject motor
vehicle. According to the respondent spouses, the reason why the vehicle was not delivered was due to the
fact that Sosmea allegedly took the subject motor vehicle in his personal capacity.
On September 11, 1981, Jardine-Manila Finance, Inc., filed a complaint for a sum of money, docketed as
Civil Case No. 42849, against the respondent Bernal spouses before the then Court of First Instance of
Manila. This case was later on transferred to the Regional Trial Court of Makati, Branch 150. On November
10, 1981, the complaint was amended to include petitioner Union Motor Corporation as alternative
defendant, the reason being that if the respondent spouses refusal to pay Jardine-Manila Finance, Inc. was
due to petitioners non-delivery of the unit, the latter should pay Jardine-Manila Finance, Inc. what has been
advanced to the petitioner. After the petitioner filed its answer, the respondent spouses filed their amended
answer with cross-claim against the former and counterclaim against Jardine-Manila Finance, Inc.
Following the presentation of evidence of Jardine-Manila Finance, Inc., the respondent spouses presented
as witnesses Albiato Bernal and Pacifico Tacub in support of their defense and counterclaim against the
plaintiff and cross-claim against the petitioner. The petitioner did not present any evidence inasmuch as the
testimony of the witness it presented was ordered stricken off the record for his repeated failure to appear
for cross-examination on the scheduled hearings. The trial court deemed the presentation of the said
witness as having been waived by the petitioner.
On March 6, 1989, the trial court rendered a decision, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered ordering:
1. Plaintiff to pay spouses Bernals the sum of P7,507.15 plus legal interest until fully paid;
2. Union Motor Corporation to pay defendants spouses Bernals the downpayment in the amount of
P10,037.00, plus legal interest until fully paid;
3. Union Motor Corporation to pay plaintiff P23,268.29, plus legal interest until fully paid, and attorneys fees
equivalent to 20% of the amount due to plaintiff.
Union Motor Corporation shall further pay defendants spouses Bernals the sum of P20,000.00 as moral
damages, P10,000.00 as attorneys fees and costs of suit.[4]

The petitioner interposed an appeal before the Court of Appeals while the respondent spouses appealed to
hold the petitioner solidarily liable with Jardine-Manila Finance, Inc. The appellate court denied both
appeals and affirmed the trial courts decision by holding that:
Now, as to the appeal of defendant Union Motors, it must be noted that said defendant had failed to adduce
evidence in court to support its claim of non-liability. We cannot see how the absence of any evidence in
favor of said defendant can result in favorable reliefs to its side on appeal. There is simply no evidence to
speak of in appellant Union Motors favor to cause a reversal of the lower courts decision. In the case of
Tongson v. C.A. G.R. No. 77104, Nov. 6, 1992, the Supreme Court reiterated that:
As mandated by the Rules of Court, each party must prove his own affirmative allegation, i.e., one who
asserts the affirmative of the issue has the burden of presenting at the trial such amount of evidence
required by law to obtain a favorable judgment: by preponderance of evidence in civil cases, and by proof
beyond reasonable doubt in criminal cases. x x x.
Hence, the instant petition anchored on the following assigned errors:
I
THE HONORABLE COURT OF APPEALS (SECOND DIVISION) GRAVELY ERRED AND ABUSED ITS
DISCRETION IN NOT FINDING THAT THE LOWER COURT A QUOS DECISION OF MARCH 6, 1989 IS
CONTRARY TO LAW AND THE EVIDENCE ON RECORD;
II
THE HONORALBLE COURT OF APPEALS (SECOND DIVISION) GRAVELY ERRED AND ABUSED ITS
DISCRETION IN NOT FINDING THAT THE APPEALED DECISION WAS RENDERED IN DEPRIVATION
AND IN DENIAL OF HEREIN PETITIOENR-APPELLANTS RIGHT TO DUE PROCESS.
The first issue to be resolved in the instant case is whether there has been a delivery, physical or
constructive, of the subject motor vehicle.
On this score, petitioner Union Motor Corporation maintains that the respondent spouses are not entitled to
a return of the downpayment for the reason that there was a delivery of the subject motor vehicle.
According to the petitioner, the appellate court erred in holding that no delivery was made by relying
exclusively on the testimonial evidence of respondent Albiato Bernal without considering the other evidence
on record, like the sales invoice and delivery receipt which constitute an admission that there was indeed
delivery of the subject motor vehicle. Also, there was a constructive delivery of the vehicle when respondent
Albiato Bernal signed the registration certificate of the subject vehicle. Inasmuch as there was already
delivery of the subject motor vehicle, ownership has been transferred to the respondent spouses. The
Chattel Mortgage Contract signed by the respondent Bernal spouses in favor of the petitioner likewise
proves that ownership has already been transferred to them for the reason that, under Article 2085 of the
New Civil Code, the mortgagor must be the owner of the property.[5] As owners of the jeepney, the
respondent Bernal spouses should bear the loss thereof in accordance with Article 1504 of the New Civil
Code which provides that when the ownership of goods is transferred to the buyer, the goods are at the
buyers risk whether actual delivery has been made or not. These, then, are the contentions of the petitioner.
The main allegation of the respondent Bernal spouses, on the other hand, is that they never came into
possession of the subject motor vehicle. Thus, it is but appropriate that they be reimbursed by the petitioner
of the initial payment which they made. They also claim that Jardine-Manila Finance, Inc., and the petitioner
conspired to defraud and deprive them of the subject motor vehicle for which they suffered damages.
We rule in favor of the respondent Bernal spouses.
Undisputed is the fact that the respondent Bernal spouses did not come into possession of the subject
Cimarron jeepney that was supposed to be delivered to them by the petitioner. The registration certificate,
receipt and sales invoice that the respondent Bernal spouses signed were explained during the hearing
without any opposition by the petitioner. According to testimonial evidence adduced by the respondent
spouses during the trial of the case, the said documents were signed as a part of the processing and for the
approval of their application to buy the subject motor vehicle. Without such signed documents, no sale,
much less delivery, of the subject jeepney could be made. The documents were not therefore an
acknowledgment by respondent spouses of the physical acquisition of the subject motor vehicle but merely
a requirement of petitioner so that the said subject motor vehicle would be delivered to them.
We have ruled that the issuance of a sales invoice does not prove transfer of ownership of the thing sold to
the buyer; an invoice is nothing more than a detailed statement of the nature, quantity and cost of the thing
sold and has been considered not a bill of sale.[6]

The registration certificate signed by the respondent spouses does not conclusively prove that constructive
delivery was made nor that ownership has been transferred to the respondent spouses. Like the receipt
and the invoice, the signing of the said documents was qualified by the fact that it was a requirement of
petitioner for the sale and financing contract to be approved. In all forms of delivery, it is necessary that the
act of delivery, whether constructive or actual, should be coupled with the intention of delivering the thing.
The act, without the intention, is insufficient.[7] The critical factor in the different modes of effecting delivery
which gives legal effect to the act, is the actual intention of the vendor to deliver, and its acceptance by the
vendee. Without that intention, there is no tradition.[8] Enlightening is Addison v. Felix and Tioco[9] wherein
we ruled that:
The Code imposes upon the vendor the obligation to deliver the thing sold. The thing is considered to be
delivered when it is placed in the hands and possession of the vendee. (Civil Code, Art. 1462). It is true that
the same article declares that the execution of a public instrument is equivalent to the delivery of the thing
which is the object of the contract, but, in order that this symbolic delivery may produce the effect of
tradition, it is necessary that the vendor shall have had control over the thing sold that, at the moment of the
sale, its material delivery could have been made. It is not enough to confer upon the purchaser the
ownership and the right of possession. The thing sold must be placed in his control. When there is no
impediment whatever to prevent the thing sold passing into the tenancy of the purchaser by the sole will of
the vendor, symbolic delivery through the execution of a public instrument is sufficient. But if,
notwithstanding the execution of the instrument, the purchaser cannot have the enjoyment and material
tenancy of the thing and make use of it himself or through another in his name, because such tenancy and
enjoyment are opposed by the interposition of another will, then fiction yields to reality-the delivery has not
been effected. (Italics supplied)
The act of signing the registration certificate was not intended to transfer the ownership of the subject motor
vehicle to respondent Bernal spouses inasmuch as the petitioner still needed the same for the approval of
the financing contract with Jardine-Manila Finance, Inc. The record shows that the registration certificate
was submitted to Jardine-Manila Finance, Inc., which took possession thereof until Sosmea requested the
latter to hand over the said document to him. The fact that the registration certificate was still kept by
Jardine-Manila Finance, Inc. and its unhesitating move to give the same to Sosmea just goes to show that
the respondent spouses still had no complete control over the subject motor vehicle as they did not even
possess the said certificate of registration nor was their consent sought when Jardine-Manila Finance, Inc.
handed over the said document to Sosmea.
Inasmuch as there was neither physical nor constructive delivery of a determinate thing, (in this case, the
subject motor vehicle) the thing sold remained at the sellers risk.[10] The petitioner should therefore bear
the loss of the subject motor vehicle after Sosmea allegedly stole the same.
Petitioners reliance on the Chattel Mortgage Contract executed by the respondent spouses does not help
its assertion that ownership has been transferred to the latter since there was neither delivery nor transfer
of possession of the subject motor vehicle to respondent spouses. Consequently, the said accessory
contract of chattel mortgage has no legal effect whatsoever inasmuch as the respondent spouses are not
the absolute owners thereof, ownership of the mortgagor being an essential requirement of a valid
mortgage contract. The Carlos case[11] cited by the petitioner is not applicable to the case at bar for the
reason that in the said case, apart from the fact that it has a different issue, the buyer took possession of
the personal property and was able to sell the same to a third party. In the instant case, however, the
respondent spouses never acquired possession of the subject motor vehicle. The manifestations of
ownership are control and enjoyment over the thing owned. The respondent spouses never became the
actual owners of the subject motor vehicle inasmuch as they never had dominion over the same.
The petitioner also disputes the finding of the appellate court that there was no delivery. It did not consider,
according to the petitioner, the fact that the circumstance of non-delivery was not shown and that the
respondent spouses never made any demand for the possession of the vehicle. Contrary to the petitioners
allegation, the respondent spouses presented sufficient evidence to prove that Sosmea took delivery and
possession of that subject motor vehicle in his personal capacity as shown by a document[12] on which he
(Sosmea) personally acknowledged receipt of the registration certificate from Jardine-Manila Finance, Inc.
Also, respondent Albiato Bernal testified to the effect that they went several times to the office of the
petitioner to demand the delivery of the subject motor vehicle. The petitioner failed to refute that testimonial
evidence considering that it waived its right to present evidence.
Anent the second issue, the petitioner claims that the trial court committed a violation of due process when
it ordered the striking off of the testimony of the petitioners witness as well as the declaration that petitioner
has abandoned its right to present evidence. According to the petitioner, the delays in the hearing of the

case were neither unjust nor deliberate. It just so happened that from August 5, 1986 up to June 1987, the
designated counsel for the petitioner was either appointed to the government or was short of time to go
over the records of the case inasmuch as he was a new substitute counsel. During the last time the
petitioners counsel moved for the postponement of the case, witness Ambrosio Balones was not available
due to gastro-enteritis as shown by a medical certificate.
Well-settled is the rule that factual findings of the Court of Appeals are conclusive on the parties and not
reviewable by the Supreme Court and they carry even more weight when the Court of Appeals affirms the
factual findings of the trial court.[13] In the present case, the trial court found that after the direct testimony
of petitioners witness, Ambrosio Balones, the continuation of the cross-examination was postponed and rescheduled for four (4) times from November 21, 1986 up to June 19, 1987, all at the instance of petitioner
Union Motor Corporation. For three (3) times, the witness did not appear whenever the case was called for
hearing. On June 19, 1987, when asked by the trial court why the witness was not present, the petitioners
counsel could not give any good reason for his absence. Neither did the petitioner offer to present any other
witness to testify on that day. The appellate court assented to these findings by quoting the decision of the
trial court, to wit:
Defendant Union Motors Corporation has no evidence as the testimony of its only witness, Ambrosio
Balones, was orderd stricken off the record in the hearing of June 19, 1987, for his continuous failure to
appear on scheduled hearings. The Court further considered said defendant to have waived further
presentation of evidence.[14]
The petitioner attempts to shift the blame on the respondents for the failure of its witness, Balones, to finish
his testimony. It was at the instance of Atty. Tacub, counsel for the respondents, that the testimony of
petitioners witness, Balones, was discontinued after Atty. Tacub asked for a recess and later on for the
postponement of the cross-examination of the said witness. The petitioner had the duty to produce its
witness when he was called to finish his testimony. To place the blame on the respondent spouses is to put
a premium on the negligence of the petitioner to require its own witness to testify on cross-examination. By
presenting witness Balones on direct-examination, the petitioner had the corresponding duty to make him
available for cross-examination in accordance with fair play and due process. The respondents should not
be prejudiced by the repeated failure of the petitioner to present its said witness for cross-examination.
Hence, the trial court ordered that the unfinished testimony of said witness be stricken off the record.
However, we cannot affirm that part of the ruling of the courts a quo awarding moral damages to the
respondents. For moral damages to be awarded in cases of breach of contract, the plaintiff must prove bad
faith or fraudulent act on the part of the defendant.[15] In the instant case, the allegations about connivance
and fraudulent schemes by the petitioner and Manuel Sosmea were merely general allegations and without
any specific evidence to sustain the said claims. In fact, Exhibit 1 which bears the name and signature of
Sosmea as the person who received the registration certificate militates against the respondent spouses
claim that the petitioner connived with its agent to deprive them of the possession of the subject motor
vehicle. The said document shows that Sosmea acted only in his personal and private capacity, thereby
effectively excluding any alleged participation of the petitioner in depriving them of the possession of the
subject motor vehicle. The petitioner should not be held liable for the acts of its agent which were done by
the latter in his personal capacity.
However, we affirm the award of attorneys fees. When a party is compelled to litigate with third persons or
to incur expenses to protect his interest, attorneys fees should be awarded.[16] In the present case, the
respondent spouses were forced to implead the petitioner Union Motor Corporation on account of the
collection suit filed against them by Jardine-Manila Finance, Inc., a case which was eventually won by the
respondent spouses.
WHEREFORE, the appealed Decision dated March 30, 1994 of the Court of Appeals is hereby AFFIRMED
with the MODIFICATION that the award of moral damages is deleted. With costs against the petitioner.
SO ORDERED.

G.R. No. L-55684 December 19, 1984

CHRYSLER
PHILIPPINES
CORPORATION, petitioner,
vs.
THE HONORABLE COURT OF APPEALS and SAMBOK MOTORS CO. (BACOLOD), respondents,
Reyes, Santayana, Tayao & Picazo Law Office for petitioner.

Alampay, Alvero & Alampay Law Office for private respondent.

MELENCIO-HERRERA, J:
Subject of this Petition for Review is the Decision of the then Court of Appeals in CA-G.R. No. 65328-R
reversing the judgment of the then Court of First Instance of Rizal, Branch XX, in Civil Case No. 16624, and
dismissing petitioner Chrysler Philippines Corporation's suit for Damages against private respondent
Sambok Motors Company (Bacolod) arising from breach of contract.
Petitioner is a domestic corporation engaged in the assembling and sale of motor vehicles and other
automotive products. Respondent Sambok Motors Co., a general partnership, during the period relevant to
these proceedings, was its dealer for automotive products with offices at Bacolod (Sambok, Bacolod) and
Iloilo (Sambok, Iloilo). The two offices were run by relatives. Miguel Ng was Assistant Manager for Sambok,
Bacolod, while an elder brother, Pepito Ng, was the President. 1
On September 7, 1972, petitioner filed with the Court of First Instance of Rizal, Branch XX, Pasig, Rizal, a
Complaint for Damages against Allied Brokerage Corporation, Negros Navigation Company and Sambok,
Bacolod, alleging that on October 2, 1970, Sambok, Bacolod, ordered from petitioner various automotive
products worth P30,909.61, payable in 45 days; that on November 25, 1970, petitioner delivered said
products to its forwarding agent, Allied Brokerage Corporation, for shipment; that Allied Brokerage loaded
the goods on board the M/S Doa Florentina, a vessel owned and operated by Negros Navigation
Company, for delivery to Sambok, Bacolod; that when petitioner tried to collect from the latter the amount of
P31,037.56, representing the price of the spare parts plus handling charges, Sambok, Bacolod, refused to
pay claiming that it had not received the merchandise; that petitioner also demanded the return of the
merchandise or their value from Allied Brokerage and Negros Navigation, but both denied any liability.
In its Answer, Sambok, Bacolod, denied having received from petitioner or from any of its co-defendants,
the automotive products referred to in the Complaint, and professed no knowledge of having ordered from
petitioner said articles.
Upon a Joint Motion to Dismiss filed by petitioner and Allied Brokerage, the Trial Court. on October 23,
1975, dismissed the case with prejudice against Allied Brokerage for lack of cause of action, and also
dismissed the latter's counterclaim against petitioner.
On July 31, 1978, the Trial Court rendered its Decision dismissing the Complaint against Negros Navigation
for lack of cause of action, but finding Sambok, Bacolod, liable for the claim of petitioner, thus:
PREMISES CONSIDERED, the Court renders judgment as follows:
(1) The complaint against defendant Negros Navigation is dismissed for lack of cause of
action.
(2) Defendant Sambok Motors Co. (Bacolod) is ordered to pay plaintiff Chrysler Philippines
Corporation:
(a) The sum of Thirty-One Thousand Thirty Seven Pesos and Fifty Six
Centavos (P31,037.56) with interest at the rate of twelve percent (12) per
annum from January 1, 1971 until fully paid;
(b) The sum of Five Thousand Pesos as and for attorney's fees and
expenses of litigation;
(c) The costs of the suit.

(3) The counterclaim of defendant Negros Navigation and Sambok Motors Co. (Bacolod)
are dismissed for lack of merit.
The case against Negros Navigation was dismissed for failure of petitioner and Sambok, Bacolod, to file the
necessary notices and claims as conditions precedent for a judicial action. 2
On the other hand, the Trial Court found that the act of Sambok, Bacolod, "in refusing to take delivery of the
shipment for no justifiable reason from Negros Navigation despite having received the Bill of Lading
constituted wrongful neglect or refusal to accept and pay for the subject shipment, by reason of which
defendant Sambok Motors may be held liable for damages."
Sambok, Bacolod, appealed. On November 26, 1980, respondent Appellate Court set aside the appealed
judgment and dismissed petitioner's Complaint, after finding that the latter had not performed its part of the
obligation under the contract by not delivering the goods at Sambok, Iloilo, the place designated in the
Parts Order Form (Exhibits "A", "A-1" to "A-6"), and must, therefore, suffer the loss. In other words,
respondent Appellate Court found. that there was misdelivery.
Hence, this Petition for Review on Certiorari, with the following errors assigned to respondent Court:
I
The Respondent Court of Appeals erred in finding that the issue of misshipment or
misdelivery of the automotive spare parts involved in the litigation was raised by the private
respondent Sambok Motors Co. (Bacolod) in the Trial Court.
II
The Respondent Court of Appeals erred in refusing to apply the provisions of Section 18,
Rule 46 of the Revised Rules of Court quoted below, that since the question of misshipment
or misdelivery was not raised by the private respondent in the Trial Court, this issue cannot
for the first time be raised on appeal.
Section 18. Questions that may be raised on appeal. Whether or not the
appellant has filed a motion for new trial in the court below, he may include
in his assignment of errors any question of law or fact that has been raised
in the court below and which is within the issues framed by the parties.
III
The Respondent Court of Appeals erred in finding that the private respondent gave the
alleged instruction to the petitioner to ship the automotive spare parts to Iloilo City and not to
Bacolod City.
IV
The Respondent Court of Appeals erred in finding that the defendant Negros Navigation
notified the private respondent of the arrival of the shipment at Bacolod City.
V
The Respondent Court of Appeals erred in reversing the decision of the Trial Court that the
act of the private respondent in refusing to take delivery of the automotive spare parts that it
purchased from the petitioner after having been notified of the shipment constitutes wrongful
neglect resulting in the loss of the cargo for which it should be liable in damages to the
petitioner.

To our minds, the matter of misdelivery is not the decisive factor for relieving Sambok, Bacolod, of liability
herein. While it may be that the Parts Order Form (E exhibits "A", "A-1" to "A-6") specifically indicated Iloilo
as the destination, as testified to by Ernesto Ordonez, Parts Sales Representative of petitioner, 3 Sambok,
Bacolod, and Sambok, Iloilo, are actually one. In fact, admittedly, the order for spare parts was made by the
President of Sambok, Pepito Ng, through its marketing consultant. Notwithstanding, upon receipt of the Bill
of Lading, Sambok, Bacolod, initiated, but did not pursue, steps to take delivery as they were advised by
Negros Navigation that because some parts were missing. they would just be informed as soon as the
missing parts were located. 4
It was only four years later, however, or in 1974, when a warehouseman of Negros Navigation, Severino
Aguarte, found in their off-shore bodega, parts of the shipment.- in question, but already deteriorated and
valueless. 5
Under the circumstances, Sambok, Bacolod, cannot be faulted for not accepting or refusing to accept the
shipment from Negros Navigation four years after shipment. The evidence is clear that Negros Navigation
could not produce the merchandise nor ascertain its whereabouts at the time Sambok, Bacolod, was ready
to take delivery. Where the seller delivers to the buyer a quantity of goods less than he contracted to sell,
the buyer may reject them. 6
From the evidentiary record, Negros Navigation was the party negligent in failing to deliver the complete
shipment either to Sambok, Bacolod, or to Sambok, Iloilo, but as the Trial Court found, petitioner failed to
comply with the conditions precedent to the filing of a judicial action. Thus, in the last analysis, it is
petitioner that must shoulder the resulting loss. The general rule that before, delivery, the risk of loss is
home by the seller who is still the owner, under the principle of "res petit domino", 7 is applicable in
petitioner's case.
In sum, the judgment of respondent Appellate Court, will have to be sustained not on the basis of
misdelivery but on non-delivery since the merchandise was never placed in the control and possession of
Sambok, Bacolod, the vendee. 8
WHEREFORE, we hereby affirm the Decision of the then Court of Appeals in CA-G.R. No. 65328-R,
without pronouncement as to costs.
SO ORDERED.

G.R. No. 91029

February 7, 1991
NORKIS
DISTRIBUTORS,
vs.
THE COURT OF APPEALS & ALBERTO NEPALES, respondents.
Jose
D.
Palma
Public Attorney's Office for private respondent.

INC., petitioner,
for

petitioner.

GRIO-AQUINO, J.:
Subject of this petition for review is the decision of the Court of Appeals (Seventeenth Division) in CA-G.R.
No. 09149, affirming with modification the judgment of the Regional Trial Court, Sixth (6th) Judicial Region,
Branch LVI. Himamaylan, Negros Occidental, in Civil Case No. 1272, which was private respondent Alberto
Nepales' action for specific performance of a contract of sale with damages against petitioner Norkis
Distributors, Inc.
The facts borne out by the record are as follows:
Petitioner Norkis Distributors, Inc. (Norkis for brevity), is the distributor of Yamaha motorcycles in Negros
Occidental with office in Bacolod City with Avelino Labajo as its Branch Manager. On September 20, 1979,
private respondent Alberto Nepales bought from the Norkis-Bacolod branch a brand new Yamaha
Wonderbike motorcycle Model YL2DX with Engine No. L2-329401K Frame No. NL2-0329401, Color
Maroon, then displayed in the Norkis showroom. The price of P7,500.00 was payable by means of a Letter
of Guaranty from the Development Bank of the Philippines (DBP), Kabankalan Branch, which Norkis'
Branch Manager Labajo agreed to accept. Hence, credit was extended to Nepales for the price of the
motorcycle payable by DBP upon release of his motorcycle loan. As security for the loan, Nepales would

execute a chattel mortgage on the motorcycle in favor of DBP. Branch Manager Labajo issued Norkis Sales
Invoice No. 0120 (Exh.1) showing that the contract of sale of the motorcycle had been perfected. Nepales
signed the sales invoice to signify his conformity with the terms of the sale. In the meantime, however, the
motorcycle remained in Norkis' possession.
On November 6, 1979, the motorcycle was registered in the Land Transportation Commission in the name
of Alberto Nepales. A registration certificate (Exh. 2) in his name was issued by the Land Transportation
Commission on November 6, 1979 (Exh. 2-b). The registration fees were paid by him, evidenced by an
official receipt, Exhibit 3.
On January 22, 1980, the motorcycle was delivered to a certain Julian Nepales who was allegedly the
agent of Alberto Nepales but the latter denies it (p. 15, t.s.n., August 2, 1984). The record shows that
Alberto and Julian Nepales presented the unit to DBP's Appraiser-Investigator Ernesto Arriesta at the DBP
offices in Kabankalan, Negros Occidental Branch (p. 12, Rollo). The motorcycle met an accident on
February 3, 1980 at Binalbagan, Negros Occidental. An investigation conducted by the DBP revealed that
the unit was being driven by a certain Zacarias Payba at the time of the accident (p. 33, Rollo). The unit
was a total wreck (p. 36, t.s.n., August 2,1984; p. 13, Rollo), was returned, and stored inside Norkis'
warehouse.
On March 20, 1980, DBP released the proceeds of private respondent's motorcycle loan to Norkis in the
total sum of P7,500. As the price of the motorcycle later increased to P7,828 in March, 1980, Nepales paid
the difference of P328 (p. 13, Rollo) and demanded the delivery of the motorcycle. When Norkis could not
deliver, he filed an action for specific performance with damages against Norkis in the Regional Trial Court
of Himamaylan, Negros Occidental, Sixth (6th) Judicial Region, Branch LVI, where it was docketed as Civil
Case No. 1272. He alleged that Norkis failed to deliver the motorcycle which he purchased, thereby
causing him damages.
Norkis answered that the motorcycle had already been delivered to private respondent before the accident,
hence, the risk of loss or damage had to be borne by him as owner of the unit.
After trial on the merits, the lower court rendered a decision dated August 27, 1985 ruling in favor of private
respondent (p. 28, Rollo.) thus:
WHEREFORE, judgment is rendered in favor of the plaintiff and against the defendants. The
defendants are ordered to pay solidarity to the plaintiff the present value of the motorcycle which
was totally destroyed, plus interest equivalent to what the Kabankalan Sub-Branch of the
Development Bank of the Philippines will have to charge the plaintiff on fits account, plus P50.00
per day from February 3, 1980 until full payment of the said present value of the motorcycle, plus
P1,000.00 as exemplary damages, and costs of the litigation. In lieu of paying the present value of
the motorcycle, the defendants can deliver to the plaintiff a brand-new motorcycle of the same
brand, kind, and quality as the one which was totally destroyed in their possession last February 3,
1980. (pp. 28-29, Rollo.)
On appeal, the Court of appeals affirmed the appealed judgment on August 21, 1989, but deleted the award
of damages "in the amount of Fifty (P50.00) Pesos a day from February 3, 1980 until payment of the
present value of the damaged vehicle" (p35, Rollo). The Court of Appeals denied Norkis' motion for
reconsideration. Hence, this Petition for Review.
The principal issue in this case is who should bear the loss of the motorcycle. The answer to this question
would depend on whether there had already been a transfer of ownership of the motorcycle to private
respondent at the time it was destroyed.
Norkis' theory is that:
. . . After the contract of sale has been perfected (Art. 1475) and even before delivery, that is, even
before the ownership is transferred to the vendee, the risk of loss is shifted from the vendor to the
vendee. Under Art. 1262, the obligation of the vendor to deliver a determinate thing becomes
extinguished if the thing is lost by fortuitous event (Art. 1174), that is, without the fault or fraud of the
vendor and before he has incurred in delay (Art. 11 65, par. 3). If the thing sold is generic, the loss
or destruction does not extinguish the obligation (Art. 1263). A thing is determinate when it is
particularly designated or physically segregated from all others of the same class (Art. 1460). Thus,
the vendor becomes released from his obligation to deliver the determinate thing sold while the
vendee's obligation to pay the price subsists. If the vendee had paid the price in advance the
vendor may retain the same. The legal effect, therefore, is that the vendee assumes the risk of loss
by fortuitous event (Art. 1262) after the perfection of the contract to the time of delivery. (Civil Code
of the Philippines, Ambrosio Padilla, Vol. 5,1987 Ed., p. 87.)
Norkis concedes that there was no "actual" delivery of the vehicle. However, it insists that there was
constructive delivery of the unit upon: (1) the issuance of the Sales Invoice No. 0120 (Exh. 1) in the name
of the private respondent and the affixing of his signature thereon; (2) the registration of the vehicle on
November 6, 1979 with the Land Transportation Commission in private respondent's name (Exh. 2); and (3)
the issuance of official receipt (Exh. 3) for payment of registration fees (p. 33, Rollo).
That argument is not well taken. As pointed out by the private respondent, the issuance of a sales invoice
does not prove transfer of ownership of the thing sold to the buyer. An invoice is nothing more than a
detailed statement of the nature, quantity and cost of the thing sold and has been considered not a bill of
sale (Am. Jur. 2nd Ed., Vol. 67, p. 378).

In all forms of delivery, it is necessary that the act of delivery whether constructive or actual, be coupled
with the intention of delivering the thing. The act, without the intention, is insufficient (De Leon, Comments
and Cases on Sales, 1978 Ed., citing Manresa, p. 94).
When the motorcycle was registered by Norkis in the name of private respondent, Norkis did not intend yet
to transfer the title or ownership to Nepales, but only to facilitate the execution of a chattel mortgage in
favor of the DBP for the release of the buyer's motorcycle loan. The Letter of Guarantee (Exh. 5) issued by
the DBP, reveals that the execution in its favor of a chattel mortgage over the purchased vehicle is a prerequisite for the approval of the buyer's loan. If Norkis would not accede to that arrangement, DBP would
not approve private respondent's loan application and, consequently, there would be no sale.
In other words, the critical factor in the different modes of effecting delivery, which gives legal effect to the
act, is the actual intention of the vendor to deliver, and its acceptance by the vendee. Without that intention,
there is no tradition (Abuan vs. Garcia, 14 SCRA 759).
In the case of Addison vs. Felix and Tioco (38 Phil. 404, 408), this Court held:
The Code imposes upon the vendor the obligation to deliver the thing sold. The thing is considered
to be delivered when it is "placed in the hands and possession of the vendee." (Civil Code, Art.
1462). It is true that the same article declares that the execution of a public instrument is equivalent
to the delivery of the thing which is the object of the contract, but, in order that this symbolic delivery
may produce the effect of tradition, it is necessary that the vendor shall have had such control over
the thing sold that, at the moment of the sale, its material delivery could have been made. It is not
enough to confer upon the purchaser theownership and the right of possession. The thing sold
must be placed in his control. When there is no impediment whatever to prevent the thing sold
passing into the tenancy of the purchaser by the sole will of the vendor, symbolic delivery through
the execution of a public instrument is sufficient. But if notwithstanding the execution of the
instrument, the purchaser cannot have the enjoyment and material tenancy of the thing and make
use of it himself or through another in his name, because such tenancy and enjoyment are opposed
by the interposition of another will, then fiction yields to reality-the delivery has riot been effects .
(Emphasis supplied.)
The Court of Appeals correctly ruled that the purpose of the execution of the sales invoice dated September
20, 1979 (Exh. B) and the registration of the vehicle in the name of plaintiff-appellee (private respondent)
with the Land Registration Commission (Exhibit C) was not to transfer to Nepales the ownership and
dominion over the motorcycle, but only to comply with the requirements of the Development Bank of the
Philippines for processing private respondent's motorcycle loan. On March 20, 1980, before private
respondent's loan was released and before he even paid Norkis, the motorcycle had already figured in an
accident while driven by one Zacarias Payba. Payba was not shown by Norkis to be a representative or
relative of private respondent. The latter's supposed relative, who allegedly took possession of the vehicle
from Norkis did not explain how Payba got hold of the vehicle on February 3, 1980. Norkis' claim that Julian
Nepales was acting as Alberto's agent when he allegedly took delivery of the motorcycle (p. 20, Appellants'
Brief), is controverted by the latter. Alberto denied having authorized Julian Nepales to get the motorcycle
from Norkis Distributors or to enter into any transaction with Norkis relative to said motorcycle. (p. 5, t.s.n.,
February 6, 1985). This circumstances more than amply rebut the disputable presumption of delivery upon
which Norkis anchors its defense to Nepales' action (pp. 33-34,Rollo).
Article 1496 of the Civil Code which provides that "in the absence of an express assumption of risk by the
buyer, the things sold remain at seller's risk until the ownership thereof is transferred to the buyer," is
applicable to this case, for there was neither an actual nor constructive delivery of the thing sold, hence, the
risk of loss should be borne by the seller, Norkis, which was still the owner and possessor of the motorcycle
when it was wrecked. This is in accordance with the well-known doctrine of res perit domino.
WHEREFORE, finding no reversible error in the decision of the Court of Appeals in CA-G.R. No. 09149, we
deny the petition for review and hereby affirm the appealed decision, with costs against the petitioner.
SO ORDERED.

SPOUSES ROMULO DE LA CRUZ and DELIA DE LA CRUZ, and DANIEL FAJARDO, Petitioners, v.
ASIAN CONSUMER AND INDUSTRIAL FINANCE CORPORATION and the HONORABLE COURT OF
APPEALS, Respondents.
SYLLABUS
1. CIVIL LAW; SPECIAL CONTRACTS; SALE; REMEDIES OF UNPAID SELLER OF PERSONAL
PROPERTY PAYABLE IN INSTALLMENT; RULE. The instant case is covered by the so-called "Recto
Law", now Art. 1484 of the New Civil Code, which provides: "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 vendees 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 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." 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 vendormortgagee 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.
(Pacific Commercial Co. v. De la Rama, 72 Phil. 380 (1941); Manila Motor, Inc. v. Fernandez, 99 Phil. 782
(1956); Radiowealth v. Lavin, L-18563, April 27, 1963, 7 SCRA 804).
2. ID.; ID.; ID.; ID.; EFFECT OF FAILURE OF VENDOR TO FORECLOSE THE MORTGAGED
PROPERTY. 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 we ruled in Filinvest Credit Corp. v. Phil. Acetylene Co., Inc.
(G.R. No. 50449, January 1982, 111 SCRA 421) "Under the law, the delivery of possession of the
mortgaged property to the mortgagee, the herein appellee, can only operate to extinguish appellants
liability if the appellee had actually caused the foreclosure sale of the mortgaged property when it recovered
possession thereof (Northern Motors, Inc. v. Sapinoso, 33 SCRA 356 [1970]; Universal Motors Corp. v. Dy
Hian Tat, 28 SCRA 161 [1969]; Manila Motors Co., Inc. v. Fernandez, 99 Phil. 782 [1956]). 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 purchasers outstanding obligation not satisfied by the sale (New Civil Code, par. 3,
Article 1484). 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" (Industrial Finance Corp. v. Tobias, 78 SCRA 28 [1977]; Radiowealth, Inc. v.
Lavin, L-18563, April 27, 1963, 7 SCRA 804; Pacific Commercial Co. v. dela Rama, 72 Phil. 380 [1941]).
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.
3. ID.; ID.; ID.; ID.; ID.; POSSESSION OF MORTGAGED PROPERTY SHOULD BE RETURNED TO
MORTGAGEE-VENDEE UPON PAYMENT OF UNPAID BALANCE; CASE AT BAR. 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.
DECISION
BELLOSILLO, J.:
The pivotal point before Us is 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.
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 (BENTER for brevity). To secure payment, 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. 2 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). 3
Although petitioners initially paid some installments they subsequently defaulted on more than two (2)
installments. Thereafter, notwithstanding the demand letter of ASIAN, 4 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. Hence, the return of the sheriff that the service was not
satisfied.chanrobles law library : red
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. 5
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. 6
After trial, the court below rendered judgment in favor of ASIAN.
On appeal, the Court of Appeals affirmed the judgment and held that
". . . no extrajudicial foreclosure of chattel mortgage ever transpired in the case at bar. Undoubtedly, plaintiff
had first chosen to extrajudically foreclose the mortgage, but this did not materialize through no fault of

plaintiff, as defendant refused to surrender the Hino truck. The mere fact that the writ in now in possession
of plaintiff and a Technical and Inspection Report was made in connection therewith is not conclusive of the
extrajudicial foreclosure, for in this kind of foreclosure, possession of the chattel by the sheriff is necessary,
aside from the sale at public auction."cralaw virtua1aw library
"Though the remedy of foreclosure was first chosen, this remedy however proved ineffectual due to no fault
of plaintiff. Therefore, plaintiff may exercise other remedies such as exact fulfillment of the obligation and
thereafter recover the deficiency. This is the essence of the rule of alternative remedies under Article
1484." cralawnad
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.
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, which provides:jgc:chanrobles.com.ph
"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 vendees 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 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."cralaw virtua1aw library
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. 7
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.chanrobles virtual lawlibrary
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 we ruled in Filinvest Credit Corp. v. Phil. Acetylene Co., Inc. 8
"Under the law, the delivery of possession of the mortgaged property to the mortgagee, the herein appellee,
can only operate to extinguish appellants liability if the appellee had actually caused the foreclosure sale of
the mortgaged property when it recovered possession thereof (Northern Motors, Inc. v. Sapinoso, 33 SCRA
356 [1970]; Universal Motors Corp. v. Dy Hian Tat, 28 SCRA 161 [1969]; Manila Motors Co., Inc. v.
Fernandez, 99 Phil. 782 [1956]). 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 purchasers outstanding obligation
not satisfied by the sale (New Civil Code, par. 3, Article 1484). 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" (Industrial Finance Corp. v.
Tobias, 78 SCRA 28 [1977]; Radiowealth, Inc. v. Lavin, L-18563, April 27, 1963, 7 SCRA 804; Pacific
Commercial Co. v. dela Rama, 72 Phil. 380 [1941]).
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. 9
WHEREFORE, the assailed decision is AFFIRMED, with the MODIFICATION that the subject vehicle be
returned to petitioners or, at their option, they be allowed to deduct P60,000.00 from their adjudged liability.
No costs.
SO ORDERED.

G.R. No. L-23788

May 16, 1969

UNIVERSAL MOTORS CORPORATION, plaintiff-appellee,

vs.
DY HIAN TAT, ET AL., defendants,
DY HIAN TAT, defendant-appellant.
Teehankee and Carreon for plaintiff-appellee.
Camacho and Baez for defendant-appellant.
BARREDO, J.:
Appeal from the decision of the Court of First Instance of Manila in an action of replevin, Civil Case No.
55211 of said court, the dispositive part of which reads thus:
IN VIEW OF THE FOREGOING CONSIDERATIONS, judgment is hereby rendered adjudging that
the plaintiff has the right of possession of the Mercedes-Benz Diesel Truck in question and
confirming its title thereto, and ordering the defendant, Dy Hian Tat, to pay to the plaintiff the sum of
P9,305.30 as and for attorney's fees and costs of collection.
With costs against the defendant.
SO ORDERED.
In brief, the cause of action alleged in appellee's complaint is to the effect that appellant-defendant had
bought a Mercedes-Benz Diesel truck from it on installments and defaulted in the payment thereof, in
consequence of which, it was entitled, by virtue of the mortgage contract in its favor, to the possession of
the said truck or, in case said truck could not be recovered, to the payment of the amount of P37,221.22,
plus attorney's fees in the amount of P9,305.30 and the costs of the suit.
As further prayed for in the complaint, the court a quo issued a writ of replevin and eventually possession of
the truck was delivered to appellee by virtue of said writ.
In due time, defendant filed an answer the statement here of the details of which is not indispensable in the
determination of this case. Suffice it to say that subsequent to the filing of said answer, the parties
submitted the case for decision, and the court a quo decided the same without presentation and reception
of any evidence and solely on the basis of the following stipulation of facts:
COME NOW the parties in the above entitled case, assisted by their respective counsel, and to this
Honorable Court respectfully submit the following stipulation of facts:
1. Defendant Dy Hian Tat admits the material allegations of pars. 51 and 92 of the Complaint and the
fact that plaintiff is entitled to the possession of the chattel described in par. 2 of the Complaint;
2. That the following stipulation appears in the Chattel Mortgage executed by the defendant in favor
of the plaintiff and attached to the Complaint as Annex 'A' of said Complaint:
14. That in case of non-compliance or violation or default by the mortgagor(s), and
foreclosure or any other legal remedy is undertaken by the mortgagee to compel payment of
his (their) obligation, the mortgagee shall be entitled to a reasonable compensation in the
concept of attorney's fees and costs of collection in the sum equal to twenty-five per cent
(25%) of the total amount of the indebtedness then outstanding and unpaid by the
mortgagor(s), but in no case less than Fifty Pesos (P50.00) as well as payment of the
replevin premium bonds and costs of suit in case of court action, which amounts said
mortgagor(s) agree(s) to pay and for such payment a first lien is hereby implied in favor of
the mortgagee upon the property mortgaged.

3. Plaintiff admits that the chattel subject of the mortgage was sold by plaintiff to defendant on
installment basis;
4. That the parties submit this case on the question of law of whether or not the plaintiff is entitled to
the 25% attorney's fees and costs of collection as above stipulated.
WHEREFORE, it is respectfully prayed of this Honorable Court that the parties be given twenty (20) days
from the submission hereof within which to file their respective memorandum.
Without filing any motion for reconsideration, appellant has come to this Court with a lone assignment of
error as follows:
THE TRIAL COURT ERRED IN ADJUDGING ATTORNEY'S FEES IN FAVOR OF PLAINTIFF AND
AGAINST DEFENDANT, IT BEING CONTRARY TO THE PROVISIONS OF ARTICLE 1484 OF
THE NEW CIVIL CODE OF THE PHILIPPINES AND THE JURISPRUDENCE DECIDED UNDER IT.
Succinctly stated, the whole pose of appellant's case is that under the above-related circumstances of this
case, the lower court erred in further sentencing him to pay the P9,305.30 of attorney's fees, after the said
court had already confirmed the possession and title of the truck in favor of appellee, considering the
provisions of Article 1484 of the Civil Code, which provides:
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.
In support of his position, appellant cites, in his brief, the following authorities:
The settled jurisprudence under the aforequoted law is
The three remedies under this article, available to the vendor who has sold personal property on the
installment plan, are alternative, not cumulative. In other words, if the vendor has elected to avail
himself of any of the remedies, he is deemed to have renounced the others. (Tolentino, Civil Code
of the Philippines, Vol. V, 1959 ed., p. 27 citing the case of Pacific Commercial vs. de la Rama, O.
G. August 9, 1941, p. 1224)
In case the vendor elects to foreclose the mortgage, if one has been given on the property, he is not
obliged to return to the purchaser the amount of the installment already paid should there be an
agreement to that effect, and it is not unconscionable. In all proceedings for the foreclosure of
chattel mortgages, executed on the chattels, which have been sold on the installment plan, the
mortgagee is limited to the property only in the mortgage. (Tolentino, supra, citing the cases of
Macondray & Co. vs. Tan, 38 O.G. 2606; Macondray & Co. vs. Ruiz, 38 O.G. 2168; Bachrach
Motors Co. vs. Millan, 61 Phil. 409; Macondary vs. Benito, et al., 62 Phil. 137; Pacific Commercial
vs. De la Rama, O.G. August 9, 1941, p. 1224, Emphasis supplied.)
Undoubtedly the principal object of article 1454-A was to remedy the abuses committed in
connection with the foreclosure of chattel mortgages. This amendment prevents mortgagees from
seizing the engaged property, buying it at foreclosure for a low price and then bringing suit against
the mortgagor for the deficiency judgment. The almost invariable result of this procedure was that
the mortgagor found himself minus the property and still owing practically the full amount of the

original indebtedness. Under this amendment the vendor of personal property, the purchase price of
which is payable on installments, has the right to cancel the sale or foreclose the mortgage if one
has been given on the property, whichever right the vendor elects, he need not return to the
purchaser the amount of the installments already paid, "if there is an agreement to that effect."
Furthermore, if the vendor avails himself of the right to foreclose the mortgage, this amendment
prohibits him from bringing an action against the purchaser for the unpaid balance.lawphi1.et
In other words, under this amendment, in all proceedings for the foreclosure of the mortgage
executed on the chattels which have been sold on installment plan, the mortgagee is limited to take
property included in the mortgage. (Bachrach Motors Co. vs. Millan, 61 Phil. 409) [Emphasis
supplied]
and pursues as his main argument that:
For a proper resolution of the case, the relevant query is: What remedy is elected by the plaintiff in
the instant case?
Defendant respectfully submits that the present case is an election of the third remedy provided in
Article 1484 of the new Civil Code of the Philippines, i.e., the judicial foreclosure of the subject
chattel mortgage.
Speaking of foreclosure of a chattel mortgage, former Justice Moran says: "Of course a chattel mortgage
may be foreclosed judicially following substantially the same procedure provided in this Rule (Rule 70,
Rules of Court), ... When the mortgagor refuses to surrender possession of the mortgaged chattel an action
of judicial foreclosure necessarily arises, or one of replevin to secure possession as a preliminary to the
sale contemplated in Section 14 of Act No. 1508." (Moran's Comment, Vol. II, 1947 ed., pp. 250-251) And in
a similar case, this Court said, "Where ... the debtor refuses to yield the property, the creditor must institute
an action, either to effect a judicial foreclosure directly or to secure possession as a preliminary to the sale
above quoted." (Bachrach Motors vs. Summers, 42 Phil. 6) Leno vs. Pestolante, et al., G.R. L-11755, April
23, 1958; 103 Phil. 414."
This may be clearly gleaned from the allegations of the complaint as well as the prayer and that of
the Stipulation of Facts submitted with the trial court. (Record on Appeal, pp. 1-5 and 28-31)
Thus, when the trial court besides confirming possession and title of the chattel in favor of the
plaintiff awarded attorney's fees and costs of collection in an amount equal to 25% of the claims, it
in effect rendered judgment against defendant beyond and over that of the chattel of the mortgage
in palpable violation of the provisions of Article 1484 of the new Civil Code of the Philippines and the
authorities already decided under it. (pp. 11-12, Appellant's Brief.)
We do not agree with the appellant that Article 1484 applies to the case at bar. As aptly held by His Honor,
this case is for delivery of personal property under the provisions of Rule 60 of the Rules of Court. Nowhere
in the stipulation of facts or even in the pleadings does it appear that appellee has foreclosed its mortgage.
Merely because a copy of the mortgage has been attached to the complaint does not make this action one
of foreclosure of a chattel mortgage. (Manila Motor Co. vs. Fernandez, 99 Phil. 782.) True, appellee
succeeded in recovering the truck in question, precisely by means of the present action of replevin, but
surely, this case is far from being the action of foreclosure of chattel mortgage governed by Section 8 of
Rule 68.
We are not unmindful of the laudable purposes of Act No. 4122 which became Article 1454-A of the former
Civil Code. The same have been well elucidated in many previous cases by this Court. And it is evident to
Us that Article 1484 of the new Civil Code is just an amendment of said Article 1454-A, more popularly
known as the Recto Law. It would not only be erroneous but highly unjust for Us, however, to apply such
provision the case at bar, which in no way comes within its contemplation. The mere fact that appellee has
secured possession of the truck in question does not necessarily mean that it will foreclose its mortgage.
Indeed, there is no showing at all that appellee is causing the sale thereof at public auction or in even
preparing to do so. It is quite possible that appellee wanted merely to be sure that the truck is not lost or

rendered valueless, preparatory to having it levied upon under a writ of attachment, as sanctioned by this
Court in the case cited by appellant of Southern Motors, Inc. vs. Magbanua, 100 Phil. 155:
By praying that the defendant be ordered to pay it the sum of P4,690.00 together with the stipulated
interest at 12 per cent per annum from 17 March until fully paid, plus ten per cent of the total
amount due as attorney's fees and cost of collection, the plaintiff elected to exact the fulfillment of
the obligation and not foreclose the mortgage of the truck. Otherwise, it would not have gone to
court to collect the amount as prayed for in the complaint. Had it elected to foreclose the mortgage
on the truck, all that the plaintiff had to do was to cause the truck to be sold at public auction
pursuant to section 14 of the Chattel Mortgage Law. The fact that aside from the mortgaged truck
another Chevrolet truck and two parcels of land belonging to the defendant were attached shows
that the plaintiff did not intend to foreclose the mortgage.
As the plaintiff has chosen to exact the fulfillment of the defendant's obligation, the former may
enforce execution of the judgment rendered in its favor on the personal and real properties of the
latter not exempt from execution sufficient to satisfy the judgment. That part of the judgment
depriving the plaintiff of its right to enforce judgment against the properties of the defendant except
the mortgaged truck and discharging the writ of attachment on his other properties is erroneous.
The same doctrine was reiterated in Tajanlangit, et al., vs. Southern Motors, Inc., et al., 101 Phil. 606, also
cited by appellant. There it was held:
Discussion. Appellants' brief elaborately explains in the nine errors assigned, their original two
theories, although their "settlement" idea appears to be somewhat modified.
What is being sought in this present action" say appellants "is to prohibit and forbid the appellee
Sheriff of Iloilo from attaching and selling at public auction sale the real properties of appellants
because that is now forbidden by our law after the chattels that have been purchased and duly
mortgaged to the vendor-mortgagee had already been repossessed by the same vendor-mortgagee
and later on hold at public auction sale and purchased by the same at such meager sum of
P10,000.00.
"Our law" provides,
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;lawphi1.et
(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. (New Civil Code.)
Appellants would invoke the last paragraph. But there has been no foreclosure of the chattel
mortgage nor a foreclosure sale. Therefore the prohibition against further collection does not apply.
At any rate it is the actual sale of the mortgaged chattel in accordance with section 14 Act
No. 1508 that would bar the creditor (who chooses to foreclose) from recovering any unpaid
balance. (Pacific Com. Co. vs. De la Rama, 72 Phil. 380; Manila Motor Co. vs. Fernandez,
99 Phil. 782.)
It is true that there was a chattel mortgage on the goods sold. But the Southern Motors elected to
sue on the note exclusively, i.e., to exact fulfillment of the obligation to pay. It had a right to select
among the three remedies established in Article 1484. In choosing to sue on the note, it was not

thereby limited to the proceeds of the sale, on execution of the mortgaged good. (Manila Trading &
Supply Co. vs. Reyes, 62 Phil. 461; Macondray & Co. vs. Eustaquio, 64 Phil. 446; Manila Motor Co.
vs. Fernandez, supra.)
An earlier per curiam decision of this Court is even more controlling and practically devastates appellants
posture. In the case of Pacific Commercial Co. vs. Graciano de la Rama, 72 Phil. 380, the defendant which
had bought a car from plaintiff on installments failed to pay, by reason of which, plaintiff took steps and
actually started to extrajudicially foreclose the chattel mortgage thereon by having the sheriff take
possession of the property and proceed to sell the same. The sheriff found the car in a repair shop, so he
then and there designated the owner of the shop as his deputy-in-charge thereof; but when the plaintiff
came to know that the car was in the shop because it had met an accident, it requested the sheriff to desist
from continuing with the foreclosure. Instead, plaintiff brought an action to recover the price, plus interests
and costs. The defendant invoked Art. 1454-A of the old Civil Code. The per curiam decision held:
... El demandado no discute los hechos probados. Sostiene, sin embargo, que el Juzgado erro al
no declarar que la demandante habia optado ya por ejecutar la hipoteca del automovil y por
cancelar la venta a plazos y que, consiguientemente, el Juzgado erro al no declarar que la
demandante habia perdido ya su derecho a reclamar el saldo no pagado del importe del pagare. El
demandado funda su teoria en lo que dispone el articulo 1454-A del Codigo Civil, que ha sido
introducido por la Ley No. 4122, que se lee como sigue:
ART. 1454-A. En un contrato de venta de cosa mueble pagadera a plazos, la falta de pago
de dos o mas plazos confiere al vendedor derecho a la resolucion de la venta o la ejucucion
de la hipoteca, caso de haberse esta constituido sobre la cosa, sin reembolso al comprador
de los plazos ya pagados, si asi se hubiere pactado.
El vendedor, sin embargo, que hubiere optado por la ejecucion de la hipoteca no podra
repetir contra el comprador para el cobro de cualquier saldo que hubiese resultado contra
este, siendo nulo todo pacto en contrario.
Igual regia regira en los casos de arrendamientos de cosa mueble con opcion de compra,
cuando el arrendador hubiere optado por quitar al arrendatario el disfrute de dicha cosa
mueble.
De este articulo se infiere que el vendedor, despues que el comprador haya dejado de pagar dos o
mas plazos y en el caso de que hublera otorgado hipoteca de la cosa vendida, puede optar (1) por
resolver la venta recobrando la cosa vendida, en cuyo caso el comprador no tendra derecho al
reembolso de los plazos pagados, si asi se hubiese estipulado; (2) o por ejecutar la hipoteca en las
formas autorizadas por la Ley de Hipoteca de Bienes Muebles, en cuyo caso el vendedor no tendra
derecho a repetir contra el comprador por el cobro de cualquier saldo que hubiese resultado en
contra de este, siendo nulo todo pacto en contrario; y (3) o por cobrar simplemente el resto de la
deuda. Los remedios que confiere el articulo son alternativos y no acumulativos, de modo que si se
opta por uno de ellos se entiende que se ha renunciado a los demas.
El demandado pretende que por haberse incautado el Sheriff del automovil siguiendo instrucciones
de la demandante y encomendado su custodia a un depositario, la demandante opto ya por
ejecutar la hipoteca y, consiguientemente, perdio su derecho a cobrar el saldo deudor del importe
del pagare. Opinamos, y asi declaramos, que la teoria es insostenible. Cuando la ley alude a la
ejecucion de la hipoteca, como remedio que produce la renuncia a los demas, quiere decir la
ejecucion de la hipoteca con tados sus incidencias y tramites hasta su terminacion, incluyendo,
naturalmente, la venta en publica subasta de la cosa pignorada. En el presente caso el ultimo
tramite que traspara a un tercero el titulo de la cosa hipotecada, no se ha verificado ni cumplido
aun porque el Sheriff levanto el deposito del automovil y no lo vendio en subasta publica con forme
lo requiere el articulo 14 de la Ley No. 1508. Por esta razone el error que el demandado atribuye a
la sentencia recurida no existe. [Emphasis supplied].
This doctrine was reiterated in Manila Motor Co. vs. Fernandez, supra, this wise:

The lower court likewise committed a mistake in assuming that the suit in 1940 was on of
foreclosure. The allegations with reference the said suit and the corresponding judgment of 1941 do
not contain any suggestion in support of the assumption. Upon the other hand, in appellee's motion
to dismiss, it was stated that the car in question was commandeered from him by the Japanese
occupation forces, thereby indicating that, even during the war period, the property was in
appellee's possession and had not been sold at public auction. At any rate, it is the actual sale of
the mortgaged chattel in accordance with section 14 of Act No. 1508 that would bar the creditor
(who chooses to foreclose) from recovering any unpaid balance (Pacific Commercial Company vs.
De la Rama, 72 Phil. 380.) [Emphasis Supplied.].
We hold, therefore, that the lower court did not err in declaring, in effect, that Article 1484 of the Civil Code
does not apply to this case because this is an action of replevin under Rule 60 and not a foreclosure of
mortgage under Rule 68.
Appellant raises for the first time in this appeal the issue that appellee did not present any evidence to
prove that it actually incurred expenses by way of attorney's fees. Apart from the fact that it is too late in the
day for appellant to bring up this point, it appears that what has been awarded to appellee is in the nature of
liquidated damages. (Art. 2226, Civil Code) As these is no claim that they are iniquitous or unconscionable,

NONATO VS IAC
The issue posed in this petition for review of the decision of the respondent appellate court is whether a
vendor, or his assignee, who had cancelled the sale of a motor vehicle for failure of the buyer to pay two or
more of the stipulated installments, may also demand payment of the balance of the purchase price.
The pertinent facts are summarized by the respondent appellate court as follows:
On June 28, 1976, defendant spouses Restituto Nonato and Ester Nonato purchased one (1) unit of
Volkswagen Sakbayan from the People's Car, Inc., on installment basis. To secure complete payment, the
defendants executed a promissory note (Exh. A or 1) and a chattel mortgage in favor of People's Car, Inc,
(Exh. B or 2). People's Car, Inc., assigned its rights and interests over the note and mortgage in favor of
plaintiff Investor's Finance Corporation (FNCB) Finance). For failure of defendants to pay two or more
installments, despite demands, the car was repossessed by plaintiff on March 20, 1978 (Exh. E or 4).
Despite repossession, plaintiff demanded from defendants that they pay the balance of the price of the car
(Exhs. F and C). Finally, on June 9, 1978, plaintiff filed before the Court of First Instance of Negros
Occidental the present complaint against defendants for the latter to pay the balance of the price of the car,
with damages and attorney's fees. (Records, pp. 36-37)
In their answer, the spouses Nonato alleged by way of defense that when the company repossessed the
vehicle, it had, by that act, effectively cancelled the sale of the vehicle. It is therefore barred from exacting
recovery of the unpaid balance of the purchase price, as mandated by the provisions of Article 1484 of the
Civil Code.
After due hearing, the trial court rendered a decision in favor of the IFC and against the Nonatos, as
follows:
PREMISES CONSIDERED, the Court hereby renders judgment ordering the defendant to pay to the
plaintiff the amount of P 17,537.60 with interest at the rate of 14% per annum from July 28, 1976 until fully
paid, 10% of the amount due as attorney's fees, litigation expenses in the amount of P 133.05 plus the
costs of this suit. No pronouncement as to other charges and damages, the same not having been proven
to the satisfaction of the Court. 1
On appeal, the respondent appellate court affirmed the j judgment.
Hence, this petition for review on certiorari.
The applicable law in the case at bar, involving as it does a sale of personal property on installment, is
Article 1484 of the Civil Code which provides:
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.
The meaning of the aforequoted provision has been repeatedly enunciated in a long line of cases. Thus:
"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. 2
It is not disputed that the respondent company had taken possession of the car purchased by the Nonatos
on installments. But while the Nonatos maintain that the company had, by that act, exercised its option to
cancel the contract of sale, the company contends that the repossession of the vehicle was only for the
purpose of appraising its value and for storage and safekeeping pending full payment by the Nonatos of the
purchasing price. The company thus denies having exercised its right to cancel the sale of the repossessed
car. The records show otherwise.
The receipt issued by the respondent company to the Nonatos when it took possession of the vehicle states
that the vehicle could be redeemed within fifteen [151 days. 3 This could only mean that should petitioners
fail to redeem the car within the aforesaid period by paying the balance of the purchase price, the company
would retain permanent possession of the vehicle, as it did in fact. This was confirmed by Mr. Ernesto
Carmona, the company's witness, who testified, to wit:
ATTY. PAMPLONA:
So that Mr. Witness, it is clear now that, per your receipt and your answer, the company will not return the
unit without paying a sum of money, more particularly the balance of the account?
WITNESS: Yes, sir. 4
Respondent corporation further asserts that it repossessed the vehicle merely for the purpose of appraising
its current value. The allegation is untenable, for even after it had notified the Nonatos that the value of the
car was not sufficient to cover the balance of the purchase price, there was no attempt at all on the part of
the company to return the repossessed car,
Indeed, the acts performed by the corporation are wholly consistent with the conclusion that it had opted to
cancel the contract of sale of the vehicle. It is thus barred from exacting payment from petitioners of the
balance of the price of the vehicle which it had already repossessed. It cannot have its cake and eat it too.
WHEREFORE, the judgment of the appellate court in CA-G.R. No. 69276-R is hereby set aside and the
complaint filed by respondent Investors Finance Corporation against petitioner in Civil Case No. 13852
should be, as it is hereby, dismissed. No costs.
SO ORDERED.
DANIEL L. BORDON II AND FRANCISCO L. BORBON, petitioners, vs. SERVICEWIDE SPECIALISTS,
INC. & HON. COURT OF APPEALS, respondents.
DECISION
VITUG, J.:
From the decision of the Court of Appeals in CA-G.R. CV No. 30693 which affirmed that of the Regional
Trial Court, NCJR, Branch 39, Manila, in Civil Case No. 85-29954, confirming the disputed possession of a
motor vehicle in favor of private respondent and ordering the payment to it by petitioners of liquidated
damages and attorney's fees, the instant appeal was interposed.
The appellate court adopted the factual findings of the court a quo, to wit:
"The plaintiff's evidence shows among others that on December 7, 1984, defendants Daniel L. Borbon and
Francisco Borbon signed a promissory note (Exh. A) which states among others as follows:
"'PROMISSORY NOTE
Acct. No. 115008276
Makati, Metro Manila,
Philippines
December 7, 1984
'P122,856.00
'For value received (installment price of the chattel/s purchased), I/We jointly and severally promised to pay
Pangasinan Auto Mart, Inc. or order, at its office at NMI Bldg. Buendia Avenue, Makati, MM the sum of One
Hundred Twenty Two Thousand Eight Hundred Fifty Six only (P122,856.00), Philippine Currency, to be
payable without need of notice or demand, in installments of the amounts following and at the dates
hereinafter set forth, to wit: P10,238.00 monthly for Twelve (12) months due and payable on the 7 day of
each month starting January, 1985, provided that a late payment charge of 3% per month shall be added on
each unpaid installment from due date thereof until fully paid.
xxx xxx xxx

'It is further agreed that if upon such default, attorney's services are availed of, an additional sum equal to
twenty five percent (25%) of the total sum due thereon, which shall not be less than five hundred pesos,
shall be paid to the holder hereof for attorney's fees plus an additional sum equivalent to twenty five percent
(25%) of the total sum due which likewise shall not be less than five hundred pesos for liquidated damages,
aside from expenses of collection and the legal costs provided for in the Rules of Court.
'It is expressly agreed that all legal actions arising out of this note or in connection with the chattel(s)
subject hereof shall only be brought in or submitted to the jurisdiction of the proper court either in the City of
Manila or in the province, municipality or city where the branch of the holder hereof is located.
'Acceptance by the holder hereof of payment of any installment or any part thereof after due dated (sic)
shall not be considered as extending the time for the payment or any of the installments aforesaid or as a
modification of any of the conditions hereof. Nor shall the failure of the holder hereof to exercise any of its
right under this note constitute or be deemed as a waiver of such rights.
'Maker:
(S/t) DANIEL L. BORBON, II
Address: 14 Colt St., Rancho Estate I, Concepcion Dos, Marikina, MM
(S/t) FRANCISCO BORBON
Address: 73 Sterling Life Home Pamplona, Las Pias, MM
"WITNESSES
(illegible) ____(illegible)_____
'PAY TO THE ORDER OF
FILINVEST CREDIT CORPORATION
without recourse, notice, presentment and demand waived
PANGASINAN AUTO MART, INC.
BY:
(S/T) K.N. DULCE
Dealer'
"To secure the Promissory Note, the defendants executed a Chattel Mortgage (Exh. B) on
'One (1) Brand new 1984 Isuzu
KCD 20 Crew Cab (Conv.)
Serial No. KC20D0F 207685
Key No. 5509
(Exhs. A and B, p. 2 tsn, September 10, 1985)
"The rights of Pangasinan Auto Mart, Inc. was later assigned to Filinvest Credit Corporation on December
10, 1984, with notice to the defendants (Exh. C, p. 10, Record).
"On March 21, 1985, Filinvest Credit Corporation assigned all its rights, interest and title over the
Promissory Note and the chattel mortgage to the plaintiff (Exh. D; p. 3, tsn, Sept. 30, 1985).
"The promissory note stipulates that the installment of P10,238.00 monthly should be paid on the 7th day of
each month starting January 1985, but the defendants failed to comply with their obligation (p. 3, tsn, Sept.
30, 1985).
"Because the defendants did not pay their monthly installments, Filinvest demanded from the defendants
the payment of their installments due on January 29, 1985 by telegram (Exh. E; pp. 3-4, tsn, Sept. 30,
1985).
"After the accounts were assigned to the plaintiff, the plaintiff attempted to collect by sending a demand
letter to the defendants for them to pay their entire obligation which, as of March 12, 1985, totaled
P185,257.80 (Exh. H; pp. 3-4, tsn, Sept. 30, 1985).
"For their defense, the defendants claim that what they intended to buy from Pangasinan Auto Mart was a
jeepney type Isuzu K. C. Cab. The vehicle that they bought was not delivered (pp. 11-12, tsn, Oct. 17,
1985). Instead, through misrepresentation and machination, the Pangasinan Motor, Inc. delivered an Isuzu
crew cab, as this is the unit available at their warehouse. Later the representative of Pangasinan Auto Mart,
Inc. (assignor) told the defendants that their available stock is an Isuzu Cab but minus the rear body, which
the defendants agreed to deliver with the understanding that the Pangasinan Auto Mart, Inc. will refund the
defendants the amount of P10,000.00 to have the rear body completed (pp. 12-34, Exhs. 2 to 3-3A).

"Despite Communications with the Pangasinan Auto Mart, Inc., the latter was not able to replace the vehicle
until the vehicle delivered was seized by order of this court. The defendants argue that an assignee stands
in the place of an assignor which, to the mind of the court, is correct. The assignee exercise all the rights of
the assignor (Gonzales vs. Rama Plantation Co., C.V. 08630, Dec. 2, 1986).
"The defendants further claim that they are not in default of their obligation because the Pangasinan Auto
Mart was first guilty of not fulfilling its obligation in the contract. The defendants claim that neither party
incurs delay if the other does not comply with his obligation. (citing Art. 1169, N.C.C.)"[1]
In sustaining the decision of the court a quo, the appellate court ruled that 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.
In their appeal to this Court, petitioners merely seek a modification of the decision of the appellate court
insofar as it has upheld the court a quo in the award of liquidated damages and attorney's fees in favor of
private respondent. Petitioners invoke the provisions of Article 1484 of the Civil Code which reads:
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 or 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."
The remedies under Article 1484 of the Civil Code are not cumulative but alternative and exclusive,[2]
which means, as so held in Nonato vs. Intermediate Appellate Court and Investor's Finance Corporation,[3]
that "x x x 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."[4]
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,[5] and the seller-mortgagee is deemed to have renounced any right thereto.[6] 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 any mortgaged back to him, although, similar to an action
for specific performance, he may still levy on it.
In ordinary alternative obligations, a mere choice categorically and unequivocally made and then
communicated by the person entitled to exercise the option concludes the parties. The creditor may not
thereafter exercise any other option, unless the chosen alternative proves to be ineffectual or unavailing
due to no fault on his part. This rule, in essence, is the difference between alternative obligations, on the
one hand, and alternative remedies, upon the other hand, where, in the latter case, the choice generally
becomes conclusive only upon the exercise of the remedy. For instance, in one of the remedies expressed
in Article 1484 of the Civil Code, it is only when there has been a foreclosure of the chattel mortgage that
the vendee-mortgagor would be permitted to escape from a deficiency liability. Thus, if the case is one for
specific performance, even when this action is selected after the vendee has refused to surrender the
mortgaged property to permit an extrajudicial foreclosure, that property may still be levied on execution and
an alias writ may be issued if the proceeds thereof are insufficient to satisfy the judgment credit.[7] So, also,
a mere demand to surrender the object which is not heeded by the mortgagor will not amount to a
foreclosure,[8] but the repossession thereof by the vendor-mortgagee would have the effect of foreclosure.
The parties here concede that the action for replevin has been instituted for the foreclosure of the vehicle in
question (now in the possession of private respondent). The sole issue raised before us in this appeal is
focused on the legal propriety of the affirmance by the appellate court of the awards made by the court a
quo of liquidated damages and attorney's fees to private respondent. Petitioners hold that under Article
1484 of the Civil Code, aforequoted, the vendor-mortgagee or its assignees loses any right "to recover any
unpaid balance of the price" and any "agreement to the contrary (would be) void."
The argument is aptly made. In Macondray & Co. vs. Eustaquio[9] we have said that the phrase "any
unpaid balance" can only mean the deficiency judgment to which the mortgagee may be entitled to when

the proceeds from the auction sale are insufficient to cover the "full amount of the secured obligation which
x x x include interest on the principal, attorney's fees, expenses of collection, and costs." In sum, we have
observed that the legislative intent is not to merely limit the proscription of any further action to the "unpaid
balance of the principal" but, as so later ruled in Luneta Motor Co. vs. Salvador,[10] to all other claims that
may likewise be called for in the accompanying promissory note against the buyer-mortgagor or his
guarantor, including costs and attorney's fees.
In Filipinas Investment & Finance Corporation vs. Ridad[11] while we reiterated and expressed our
agreement on the basic philosophy behind Article 1484, we stressed, nevertheless, that the protection
given to the buyer-mortgagor should not be considered to be without circumscription or as being preclusive
of all other laws or legal principles. Hence, borrowing from the examples made in Filipinas Investment,
where the mortgagor unjustifiably refused to surrender the chattel subject of the mortgage upon failure of
two or more installments, or if he concealed the chattel to place it beyond the reach of the mortgagee, that
thereby constrained the latter to seek court relief, the expenses incurred for the prosecution of the case,
such as attorney's fees, could rightly be awarded.
Private respondent bewails the instant petition in that petitioners have failed to specifically raise the issue
on liquidated damages and attorney's fees stipulated in the actionable documents. In several cases, we
have ruled that as long as the questioned items bear relevance and close relation to those specifically
raised, the interest of justice would dictate that they, too, must be considered and resolved and that the rule
that only theories raised in the initial proceedings may be taken up by a party thereto on appeal should only
refer to independent, not concomitant matters, to support or oppose the cause of action.[12]
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.
Parenthetically, while the promissory note may appear to have been a negotiable instrument, private
respondent, however, clearly cannot claim unawareness of its accompanying documents so as to thereby
gain a right greater than that of the assignor.
WHEREFORE, the appealed decision is MODIFIED by deleting therefrom the award for liquidated
damages; in all other respects the judgment of the appellate court is AFFIRMED. No cost.
SO ORDERED.