G.R. No.

L-14475

May 30, 1961

SOUTHERN MOTORS, INC., plaintiff-appellee,

vs.
ANGELO MOSCOSO, defendant-appellant.
PAREDES, J.: The case was submitted on agreed statement of facts.
On June 6, 1957, plaintiff-appellee Southern Motors, Inc. sold to defendant-appellant Angel Moscoso one
Chevrolet truck, on installment basis, for P6,445.00. Upon making a down payment, the defendant executed
a promissory note for the sum of P4,915.00, representing the unpaid balance of the purchase price (Annex
A, complaint), to secure the payment of which, a chattel mortgage was constituted on the truck in favor of
the plaintiff (Annex B). Of said account of P4,915.00, the defendant had paid a total of P550.00, of which
P110.00 was applied to the interest up to August 15, 1957, and P400.00 to the principal, thus leaving an
unpaid balance of P4,475.00. The defendant failed to pay 3 installments on the balance of the purchase
price.
On November 4, 1957, the plaintiff filed a complaint against the defendant, to recover the unpaid balance of
the promissory note. Upon plaintiff's petition, embodied in the complaint, a writ of attachment was issued
by the lower court on the properties Of the defendant. Pursuant thereto, the said Chevrolet truck, and a
house and lot belonging to defendant, were attached by the Sheriff of San Jose, Antique, where defendant
was residing on November 25, 1957, and said truck was brought to the plaintiff's compound in Iloilo City, for
safe keeping.
After attachment and before the trial of the case on the merits, acting upon the plaintiff's motion dated
December 23, 1957, for the immediate sale of the mortgaged truck, the Provincial Sheriff of Iloilo on January
2, 1958, sold the truck at public auction in which plaintiff itself was the only bidder for P1,000.00. The case
had not been set for hearing, then.
The trial court on March 27, 1958, condemned the defendant to pay the plaintiff the amount of P4,475.00
with interest at the rate of 12% per annum from August 16, 1957, until fully paid, plus 10% thereof as
attorneys fees and costs against which defendant interposed the present appeal, contending that the trial
court erred
(1) In not finding that the attachment caused to be levied on the truck and its immediate sale at
public auction, was tantamount to the foreclosure of the chattel mortgage on said truck; and
(2) In rendering judgment in favor of the plaintiff-appellee.
Both parties agreed that the case is governed by Article 1484 of the new Civil Case, 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.

While the appellee claims that in filing the complaint, demanding payment of the unpaid balance of the
purchase price, it has availed of the first remedy provided in said article i.e. to exact fulfillment of the
obligation (specific performance); the appellant, on the other hand, contends that appellee had availed itself
of the third remedy viz, the foreclosure of the chattel mortgage on the truck.
The appellant argues that considering history of the law, the circumstances leading to its enactment, the
evil that the law was intended to correct and the remedy afforded (Art. 1454-A of the old Civil Code; Act No.
4122; Bachrach Motor Co. vs. Reyes, 62 Phil. 461, 466-469); that the appellee did not content itself by
waiting for the judgment on the complaint and then executed the judgment which might be rendered in its
favor, against the properties of the appellant; that the appellee obtained a preliminary attachment on the
subject of the chattel mortgage itself and caused said truck to be sold at public auction petition, in which he
was bidder for P1,000.00; the result of which, was similar to what would have happened, had it foreclosed
the mortgage pursuant to the provisions of Sec. 14 of Act No. 1508 (Chattel Mortgage Law) the said
appellee had availed itself of the third remedy aforequoted. In other words, appellant submits that the
matter should be looked at, not by the allegations in the complaint, but by the very effect and result of the
procedural steps taken and that appellee tried to camouflage its acts by filing a complaint purportedly to
exact the fulfillment of an obligation petition, in an attempt to circumvent the provisions of Article 1484 of
the new Civil Code. Appellant concludes that under his theory, a deficiency judgment would be without legal
basis.
We do not share the views of the appellant on this matter. Manifestly, the appellee had chosen the first
remedy. The complaint is an ordinary civil action for recovery of the remaining unpaid balance due on the
promissory note. The plaintiff had not adopted the procedure or methods outlined by Sec. 14 of the Chattel
Mortgage Law but those prescribed for ordinary civil actions, under the Rules of Court. Had appellee elected
the foreclosure, it would not have instituted this case in court; it would not have caused the chattel to be
attached under Rule 59, and had it sold at public auction, in the manner prescribed by Rule 39. That the
herein appellee did not intend to foreclose the mortgage truck, is further evinced by the fact that it had also
attached the house and lot of the appellant at San Jose, Antique. In the case of Southern Motors, Inc. vs.
Magbanua, G.R. No. L-8578, Oct. 29, 1956, we held:
By praying that the defendant be ordered to pay it the sum of P4,690.00 together with the
stipulated interest of 12% per annum from 17 March 1954 until fully paid, plus 10% 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 to foreclose the mortgage on 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 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 property of the
latter not exempt from execution sufficient to satisfy the judgment. That part of the judgment
against the properties of the defendant except the mortgaged truck and discharging the writ of
attachment on his other properties is erroneous.
We perceive nothing unlawful or irregular in appellee's act of attaching the mortgaged truck itself. Since
herein appellee has chosen to exact the fulfillment of the appellant's obligation, it may enforce execution of
the judgment that may be favorably rendered hereon, on all personal and real properties of the latter not
exempt from execution sufficient to satisfy such judgment. It should be noted that a house and lot at San
Jose, Antique were also attached. No one can successfully contest that the attachment was merely an
incident to an ordinary civil action. (Sections 1 & 11, Rule 59; Sec. 16, Rule 39). The mortgage creditor may
recover judgment on the mortgage debt and cause an execution on the mortgaged property and may cause
an attachment to be issued and levied on such property, upon beginning his civil action (Tizon vs. Valdez, 48
Phil. 910-911).

IN VIEW HEREOF, the judgment appealed from hereby is affirmed, with costs against the defendantappellant

In addition to the foregoing the Universal Motors Corporation admitted during the hearing that in its suit
(C.C. No. 60201) against the PDP Transit, Inc. it was able to repossess all the units sold to the latter,
including the five (5) units guaranteed by the subject real estate mortgage, and to foreclose all the chattel
mortgages constituted thereon, resulting in the sale of the trucks at public auction.
With the foregoing background, the spouses Lorenzo Pascual and Leonila Torres, the real estate mortgagors,
filed an action in the Court of First Instance of Quezon City (Civil Case No. 8189) for the cancellation of the
mortgage they constituted on two (2) parcels of land 1 in favor of the Universal Motors Corporation to
guarantee the obligation of PDP Transit, Inc. to the extent of P50,000. The court rendered judgment for the
plaintiffs, ordered the cancellation of the mortgage, and directed the defendant Universal Motors
Corporation to pay attorney's fees to the plaintiffs in the sum of P500.00. Unsatisfied with the decision,
defendant interposed the present appeal.
In rendering judgment for the plaintiffs the lower court said in part: "... there does not seem to be any doubt
that Art. 1484 2 of the New Civil Code may be applied in relation to a chattel mortgage constituted upon
personal property on the installment basis (as in the present case) precluding the mortgagee to maintain
any further action against the debtor for the purpose of recovering whatever balance of the debt secured,
and even adding that any agreement to the contrary shall be null and void."

G.R. No. L-27862 November 20, 1974

LORENZO PASCUAL and LEONILA TORRES, plaintiffs-appellees,
vs.
UNIVERSAL MOTORS CORPORATION, defendant-appellant.

The appellant now disputes the applicability of Article 1484 of the Civil Code to the case at bar on the
ground that there is no evidence on record that the purchase by PDP Transit, Inc. of the five (5) trucks, the
payment of the price of which was partly guaranteed by the real estate mortgage in question, was payable
in installments and that the purchaser had failed to pay two or more installments. The appellant also
contends that in any event what article 1484 prohibits is for the vendor to recover from the purchaser the
unpaid balance of the price after he has foreclosed the chattel mortgage on the thing sold, but not a
recourse against the security put up by a third party.

MAKALINTAL, C.J.:p In the lower court the parties entered into the following stipulation of facts:
1. That the plaintiffs executed the real estate mortgage subject matter of this complaint
on December 14, 1960 to secure the payment of the indebtedness of PDP Transit, Inc.
for the purchase of five (5) units of Mercedez Benz trucks under invoices Nos. 2836,
2837, 2838, 2839 and 2840 with a total purchase price or principal obligation of
P152,506.50 but plaintiffs' guarantee is not to exceed P50,000.00 which is the value of
the mortgage.
2. That the principal obligation of P152,506.50 was to bear interest at 1% a month from
December 14, 1960.
3. That as of April 5, 1961 with reference to the two units mentioned above and as of
May 22, 1961 with reference to the three units, PDP Transit, Inc., plaintiffs' principal,
had paid to the defendant Universal Motors Corporation the sum of P92,964.91, thus
leaving a balance of P68,641.69 including interest due as of February 8, 1965.
4. That the aforementioned obligation guaranteed by the plaintiffs under the Real
Estate Mortgage, subject of this action, is further secured by separate deeds of chattel
mortgages on the Mercedez Benz units covered by the aforementioned invoices in favor
of the defendant Universal Motors Corporation.
5. That on March 19, 1965, the defendant Universal Motors Corporation filed a
complaint against PDP Transit, Inc. before, the Court of First Instance of Manila docketed
as Civil Case No. 60201 with a petition for a writ of Replevin, to collect the balance due
under the Chattel Mortgages and to repossess all the units to sold to plaintiffs' principal
PDP Transit, Inc. including the five (5) units guaranteed under the subject Real (Estate)
Mortgage.

Both arguments are without merit. The first involves an issue of fact: whether or not the sale was one on
installments; and on this issue the lower court found that it was, and that there was failure to pay two or
more installments. This finding is not subject to review by this Court. The appellant's bare allegation to the
contrary cannot be considered at this stage of the case.
The next contention is that what article 1484 withholds from the vendor is the right to recover any
deficiency from the purchaser after the foreclosure of the chattel mortgage and not a recourse to the
additional security put up by a third party to guarantee the purchaser's performance of his obligation. A
similar argument has been answered by this Court in this wise: "(T)o sustain appellant's argument is to
overlook the fact that if the guarantor should be compelled to pay the balance of the purchase price, the
guarantor will in turn be entitled to recover what she has paid from the debtor vendee (Art. 2066, Civil
Code); so that ultimately, it will be the vendee who will be made to bear the payment of the balance of the
price, despite the earlier foreclosure of the chattel mortgage given by him. Thus, the protection given by
Article 1484 would be indirectly subverted, and public policy overturned." (Cruz vs. Filipinas Investment &
Finance Corporation, L-24772, May 27, 1968; 23 SCRA 791).
The decision appealed from is affirmed, with costs against the defendant-appellant.

Oscar Sy Bang, a brother of private respondent Jose Sy Bang, went to inspect the machine at the Rizal
Consolidated's plant site. Apparently satisfied with the machine, the private respondents signified their
intent to purchase the same. They were however confronted with a problem-the rock crusher carried a cash
price tag of P 550,000.00. Bent on acquiring the machinery, the private respondents applied for financial
assistance from the petitioner, Filinvest Credit Corporation. The petitioner agreed to extend to the private
respondents financial aid on the following conditions: that the machinery be purchased in the petitioner's
name; that it be leased (with option to purchase upon the termination of the lease period) to the private
respondents; and that the private respondents execute a real estate mortgage in favor of the petitioner as
security for the amount advanced by the latter. Accordingly, on May 18,1981, a contract of lease of
machinery (with option to purchase) was entered into by the parties whereby the private respondents
agreed to lease from the petitioner the rock crusher for two years starting from July 5, 1 981 payable as
follows:
P10,000.00 - first 3 months
23,000.00 - next 6 months
24,800.00 - next 15 months
The contract likewise stipulated that at the end of the two-year period, the machine would be owned by the
private respondents. Thus, the private respondents issued in favor of the petitioner a check for P150,550.00,
as initial rental (or guaranty deposit), and twenty-four (24) postdated checks corresponding to the 24
monthly rentals. In addition, to guarantee their compliance with the lease contract, the private respondents
executed a real estate mortgage over two parcels of land in favor of the petitioner. The rock crusher was
delivered to the private respondents on June 9, 1981. Three months from the date of delivery, or on
September 7, 1981, however, the private respondents, claiming that they had only tested the machine that
month, sent a letter-complaint to the petitioner, alleging that contrary to the 20 to 40 tons per hour capacity
of the machine as stated in the lease contract, the machine could only process 5 tons of rocks and stones
per hour. They then demanded that the petitioner make good the stipulation in the lease contract. They
followed that up with similar written complaints to the petitioner, but the latter did not, however, act on
them. Subsequently, the private respondents stopped payment on the remaining checks they had issued to
the petitioner. 5

G.R. No. 82508 September 29, 1989

FILINVEST CREDIT CORPORATION, petitioner,
vs.
THE COURT OF APPEALS, JOSE SY BANG and ILUMINADA TAN SY BANG,*respondents.
SARMIENTO, J.: This is a petition for review on certiorari of the decision, 1 dated March 17, 1988, of the
Court of Appeals which affirmed with modification the decision 2 of the Regional Trial Court of Quezon,
Branch LIX, Lucena City. The controversy stemmed from the following facts: The private respondents, the
spouses Jose Sy Bang and Iluminada Tan, were engaged in the sale of gravel produced from crushed rocks
and used for construction purposes. In order to increase their production, they engaged the services of Mr.
Ruben Mercurio, the proprietor of Gemini Motor Sales in Lucena City, to look for a rock crusher which they
could buy. Mr. Mercurio referred the private respondents to the Rizal Consolidated Corporation which then
had for sale one such machinery described as:

As a consequence of the non-payment by the private respondents of the rentals on the rock crusher as they
fell due despite the repeated written demands, the petitioner extrajudicially foreclosed the real estate
mortgage. 6 On April 18, 1983, the private respondents received a Sheriff s Notice of Auction Sale informing
them that their mortgaged properties were going to be sold at a public auction on May 25, 1983 at 10:00
o'clock in the morning at the Office of the Provincial Sheriff in Lucena City to satisfy their indebtedness to
the petitioner. 7 To thwart the impending auction of their properties, the private respondents filed before the
Regional Trial Court of Quezon, on May 4, 1983, 8 a complaint against the petitioner, for the rescission of the
contract of lease, annullment of the real estate mortgage, and for injunction and damages, with prayer for
the issuance of a writ of preliminary injunction. 9 On May 23, 1983, three days before the scheduled auction
sale, the trial court issued a temporary restraining order commanding the Provincial Sheriff of Quezon, and
the petitioner, to refrain and desist from proceeding with the public auction. 10 Two years later, on
September 4, 1985, the trial court rendered a decision in favor of the private respondents, the dispositive
portion of which reads:

ONE UNIT LIPPMAN PORTABLE CRUSHING PLANT (RECONDITIONED) [sic]

WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered:
JAW CRUSHER-10xl6 DOUBLE ROLL CRUSHER 16x16
1. making the injunction permanent;
3 UNITS PRODUCT CONVEYOR
75 HP ELECTRIC MOTOR
8 PCS. BRAND NEW TIRES CHASSIS NO. 19696 GOOD RUNNING CONDITION

2. rescinding the contract of lease of the machinery and equipment and ordering the
plaintiffs to return to the defendant corporation the machinery subject of the lease
contract, and the defendant corporation to return to plaintiffs the sum of P470,950.00 it
received from the latter as guaranty deposit and rentals with legal interest thereon until
the amount is fully restituted;

3. annulling the real estate mortgage constituted over the properties of the plaintiffs
covered by Transfer Certificate of Title Nos. T32480 and T-5779 of the Registry of Deeds
of Lucena City;
4. ordering the defendant corporation to pay plaintiffs P30,000.00 as attorney's fees
and the costs of the suit.

The importance of the criticism is heightened in the light of Article 1484 of the new Civil Code which
provides for the remedies of an unpaid seller of movables on installment basis.
Article 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;

SO ORDERED.

11

(2) Cancel the sale, should the vendee's failure to pay cover two or more installments;
Dissatisfied with the trial court's decision, the petitioner elevated the case to the respondent Court of
Appeals.
On March 17, 1988, the appellate court, finding no error in the appealed judgment, affirmed the same in
toto. 12Hence, this petition.
Before us, the petitioner reasserts that the private respondents' cause of action is not against it (the
petitioner), but against either the Rizal Consolidated Corporation, the original owner-seller of the subject
rock crusher, or Gemini Motors Sales which served as a conduit facilitator of the purchase of the said
machine. The petitioner argues that it is a financing institution engaged in quasi-banking activities, primarily
the lending of money to entrepreneurs such as the private respondents and the general public, but certainly
not the leasing or selling of heavy machineries like the subject rock crusher. The petitioner denies being the
seller of the rock crusher and only admits having financed its acquisition by the private respondents.
Further, the petitioner absolves itself of any liability arising out of the lease contract it signed with the
private respondents due to the waiver of warranty made by the latter. The petitioner likewise maintains that
the private respondents being presumed to be knowledgeable about machineries, should be held
responsible for the detection of defects in the machine they had acquired, and on account of that, they are
estopped from claiming any breach of warranty. Finally, the petitioner interposed the defense of
prescription, invoking Article 1571 of the Civil Code, which provides:
Art. 1571. Actions arising from the provisions of the preceding ten articles shall be barred after six months,
from the delivery of the thing sold.
We find the petitioner's first contention untenable. While it is accepted that the petitioner is a financing
institution, it is not, however, immune from any recourse by the private respondents. Notwithstanding the
testimony of private respondent Jose Sy Bang that he did not purchase the rock crusher from the petitioner,
the fact that the rock crusher was purchased from Rizal Consolidated Corporation in the name and with the
funds of the petitioner proves beyond doubt that the ownership thereof was effectively transferred to it. It is
precisely this ownership which enabled the petitioner to enter into the "Contract of Lease of Machinery and
Equipment" with the private respondents.
Be that as it may, the real intention of the parties should prevail. The nomenclature of the agreement
cannot change its true essence, i.e., a sale on installments. It is basic that a contract is what the law defines
it and the parties intend it to be, not what it is called by the parties. 13 It is apparent here thatthe intent of
the parties to the subject contract is for the so-called rentals to be the installment payments. Upon the
completion of the payments, then the rock crusher, subject matter of the contract, would become the
property of the private respondents. This form of agreement has been criticized as a lease only in name.
Thus in Vda. de Jose v. Barrueco 14 we stated:
Sellers desirous of making conditional sales of their goods, but who do not wish openly to make a bargain in
that form, for one reason or another, have frequently resorted to the device of making contracts in the form
of leases either with options to the buyer to purchase for a small consideration at the end of term, provided
the so-called rent has been duly paid, or with stipulations that if the rent throughout the term is paid, title
shall thereupon vest in the lessee. It is obvious that such transactions are leases only in name. The so-called
rent must necessarily be regarded as payment of the price in installments since the due payment of the
agreed amount results, by the terms of bargain, in the transfer of title to the lessee. 15

(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.
Under the aforequoted provision, the seller of movables in installments, in case the buyer fails to pay two or
more installments may elect to pursue either of the following remedies: (1) exact fulfillment by the
purchaser of the obligation; (2) cancel the sale; or (3) foreclose the mortgage on the purchased property if
one was constituted thereon. It is now settled that the said remedies are alternative and not cumulative and
therefore, the exercise of one bars the exercise of the others.
Indubitably, the device contract of lease with option to buy is at times resorted to as a means to circumvent
Article 1484, particularly paragraph (3) thereof.Through the set-up, the vendor, by retaining ownership over
the property in the guise of being the lessor, retains, likewise, the right to repossess the same, without
going through the process of foreclosure, in the event the vendee-lessee defaults in the payment of the
installments. There arises therefore no need to constitute a chattel mortgage over the movable sold. More
important, the vendor, after repossessing the property and, in effect, canceling the contract of sale, gets to
keep all the installments-cum-rentals already paid. It is thus for these reasons that Article 1485 of the new
Civil Code provides that:
Article 1485. The preceding article shall be applied to contracts purporting to be leases
of personal property with option to buy, when the lessor has deprived the lessee of
possession or enjoyment of the thing. (Emphasis ours.)
Unfortunately, even with the foregoing findings, we however fail to find any reason to hold the petitioner
liable for the rock crusher's failure to produce in accordance with its described capacity. According to the
petitioner, it was the private respondents who chose, inspected, and tested the subject machinery. It was
only after they had inspected and tested the machine, and found it to their satisfaction, that the private
respondents sought financial aid from the petitioner. These allegations of the petitioner had never been
rebutted by the private respondents. In fact, they were even admitted by the private respondents in the
contract they signed. Thus:
LESSEE'S SELECTION, INSPECTION AND VERIFICATION.-The LESSEE hereby confirms and acknowledges that
he has independently inspected and verified the leased property and has selected and received the same
from the Dealer of his own choosing in good order and excellent running and operating condition and on the
basis of such verification, etc. the LESSEE has agreed to enter into this Contract." 16
Moreover, considering that between the parties, it is the private respondents, by reason of their business,
who are presumed to be more knowledgeable, if not experts, on the machinery subject of the contract, they
should not therefore be heard now to complain of any alleged deficiency of the said machinery. It is their
failure or neglect to exercise the caution and prudence of an expert, or, at least, of a prudent man, in the
selection, testing, and inspection of the rock crusher that gave rise to their difficulty and to this conflict. A
well- established principle in law is that between two parties, he, who by his negligence caused the loss,
shall bear the same.

At any rate, even if the private respondents could not be adjudged as negligent, they still are precluded
from imputing any liability on the petitioner. One of the stipulations in the contract they entered into with
the petitioner is an express waiver of warranties in favor of the latter. By so signing the agreement, the
private respondents absolved the petitioner from any liability arising from any defect or deficiency of the
machinery they bought. The stipulation on the machine's production capacity being "typewritten" and that
of the waiver being "printed" does not militate against the latter's effectivity. As such, whether "a capacity
of 20 to 40 tons per hour" is a condition or a description is of no moment. What stands is that the private
respondents had expressly exempted the petitioner from any warranty whatsoever. Their Contract of Lease
Of Machinery And Equipment states:
WARRANTY-LESSEE absolutely releases the lessor from any liability whatsoever as to any and all matters in
relation to warranty in accordance with the provisions hereinafter stipulated. 17
G.R. No. L-39806 January 27, 1983
Taking into account that due to the nature of its business and its mode of providing financial assistance to
clients, the petitioner deals in goods over which it has no sufficient know-how or expertise, and the selection
of a particular item is left to the client concerned, the latter, therefore, shoulders the responsibility of
protecting himself against product defects. This is where the waiver of warranties is of paramount
importance. Common sense dictates that a buyer inspects a product before purchasing it (under the
principle of caveat emptor or "buyer beware") and does not return it for defects discovered later on,
particularly if the return of the product is not covered by or stipulated in a contract or warranty. In the case
at bar, to declare the waiver as non-effective, as the lower courts did, would impair the obligation of
contracts. Certainly, the waiver in question could not be considered a mere surplusage in the contract
between the parties. Moreover, nowhere is it shown in the records of the case that the private respondent
has argued for its nullity or illegality. In any event, we find no ambiguity in the language of the waiver or the
release of warranty. There is therefore no room for any interpretation as to its effect or applicability vis-a- vis
the deficient output of the rock crusher. Suffice it to say that the private respondents have validly excused
the petitioner from any warranty on the rock crusher. Hence, they should bear the loss for any defect found
therein.
WHEREFORE, the Petition is GRANTED; the Decision of the Court of Appeals dated March 17, 1988 is hereby
REVERSED AND SET ASIDE, and another one rendered DISMISSING the complaint. Costs against the private
respondents.

LUIS RIDAD and LOURDES RIDAD, plaintiffs-appellees, vs. FILIPINAS INVESTMENT and FINANCE
CORPORATION, JOSE D. SEBASTIAN and JOSE SAN AGUSTIN, in his capacity as
Sheriff, defendants-appellants.
DE CASTRO, J:Appeal from the decision of the Court of First Instance of Rizal, Branch I, in Civil Case No.
9140 for annulment of contract, originally filed with the Court of Appeals but was subsequently certified to
this Court pursuant to Section 3 of Rule 50 of the Rules of Court, there being no issue of fact involved in this
appeal.
The materials facts of the case appearing on record may be stated as follows: On April 14, 1964, plaintiffs
purchased from the Supreme Sales arid Development Corporation two (2) brand new Ford Consul Sedans
complete with accessories, for P26,887 payable in 24 monthly installments. To secure payment thereof,
plaintiffs executed on the same date a promissory note covering the purchase price and a deed of chattel
mortgage not only on the two vehicles purchased but also on another car (Chevrolet) and plaintiffs'
franchise or certificate of public convenience granted by the defunct Public Service Commission for the
operation of a taxi fleet. Then, with the conformity of the plaintiffs, the vendor assigned its rights, title and
interest to the above-mentioned promissory note and chattel mortgage to defendant Filipinas Investment
and Finance Corporation.

SO ORDERED.
Due to the failure of the plaintiffs to pay their monthly installments as per promissory note, the defendant
corporation foreclosed the chattel mortgage extra-judicially, and at the public auction sale of the two Ford
Consul cars, of which the plaintiffs were not notified, the defendant corporation was the highest bidder and
purchaser. Another auction sale was held on November 16, 1965, involving the remaining properties subject
of the deed of chattel mortgage since plaintiffs' obligation was not fully satisfied by the sale of the aforesaid
vehicles, and at the public auction sale, the franchise of plaintiffs to operate five units of taxicab service was
sold for P8,000 to the highest bidder, herein defendant corporation, which subsequently sold and conveyed
the same to herein defendant Jose D. Sebastian, who then filed with the Public Service Commission an
application for approval of said sale in his favor.
On February 21, 1966, plaintiffs filed an action for annulment of contract before the Court of First Instance of
Rizal, Branch I, with Filipinas Investment and Finance Corporation, Jose D. Sebastian and Sheriff Jose San
Agustin, as party-defendants. By agreement of the parties, the case was submitted for decision in the lower
court on the basis of the documentary evidence adduced by the parties during the pre-trial conference.
Thereafter, the lower court rendered judgment as follows:
IN VIEW OF THE ABOVE CONSIDERATIONS, this Court declares the chattel mortgage,
Exhibit "C", to be null and void in so far as the taxicab franchise and the used Chevrolet
car of plaintiffs are concerned, and the sale at public auction conducted by the City
Sheriff of Manila concerning said taxicab franchise, to be of no legal
effect.1wph1.t The certificate of sale issued by the City Sheriff of Manila in favor of
Filipinas Investment and Finance Corporation concerning plaintiffs' taxicab franchise for
P8,000 is accordingly cancelled and set aside, and the assignment thereof made by

Filipinas Investment in favor of defendant Jose Sebastian is declared void and of no

legal effect. (Record on Appeal, p. 128).
From the foregoing judgment, defendants appealed to the Court of Appeals which, as earlier stated, certified
the appeal to this Court, appellants imputing to the lower court five alleged errors, as follows:
I
THE LOWER COURT ERRED IN DECLARING THE CHATTEL MORTGAGE, EXHIBIT "C", NULL
AND VOID.
II
THE LOWER COURT ERRED IN HOLDING THAT THE SALE AT PUBLIC AUCTION
CONDUCTED BY THE CITY SHERIFF OF MANILA CONCERNING THE TAXICAB FRANCHISE
IS OF NO LEGAL EFFECT.
III
THE LOWER COURT ERRED IN SETTING ASIDE THE CERTIFICATE OF SALE ISSUED BY THE
CITY SHERIFF OF MANILA IN FAVOR OF FILIPINAS INVESTMENT AND FINANCE
CORPORATION COVERING PLAINTIFFS' TAXICAB FRANCHISE.
IV
THE LOWER COURT ERRED IN DECLARING VOID AND OF NO LEGAL EFFECT THE
ASSIGNMENT OF THE TAXICAB FRANCHISE MADE BY FILIPINAS INVESTMENT AND
FINANCE CORPORATION IN FAVOR OF DEFENDANT.
V
THE LOWER COURT (sic) IN NOT DECIDING THE CASE IN FAVOR OF THE DEFENDANTS.
Appellants' Brief, pp. 9 & 10)
From the aforequoted assignment of errors, the decisive issue for consideration is the validity of the chattel
mortgage in so far as the franchise and the subsequent sale thereof are concerned.
The resolution of said issue is unquestionably governed by the provisions of Article 1484 of the Civil Code
which states:
Art. 1484. In a contract of sale of personal property the price of which is payable in
installments, the vendor may exercise y of the following remedies:

Under the above-quoted article of the Civil Code, the vendor of personal property the purchase price of
which is payable in installments, has the right, should the vendee default in the payment of two or more of
the agreed installments, to exact fulfillment by the purchaser of the obligation, or to cancel the sale, or to
foreclose the mortgage on the purchased personal property, if one was constituted. 1 Whichever right the
vendor elects, he cannot avail of the other, these remedies being alternative, not cumulative. 2 Furthermore,
if the vendor avails himself of the right to foreclose his mortgage, the law prohibits him from further
bringing an action against the vendee for the purpose of recovering whatever balance of the debt secured
not satisfied by the foreclosure sale. 3 The precise purpose of the law is to prevent mortgagees from seizing
the mortgaged property, buying it at foreclosure sale for a low price and then bringing suit against the
mortgagor for a deficiency judgment, otherwise, the mortgagor-buyer would find himself without the
property and still owing practically the full amount of his original indebtedness. 4
In the instant case, defendant corporation elected to foreclose its mortgage upon default by the plaintiffs in
the payment of the agreed installments. Having chosen to foreclose the chattel mortgage, and bought the
purchased vehicles at the public auction as the highest bidder, it submitted itself to the consequences of the
law as specifically mentioned, by which it is deemed to have renounced any and all rights which it might
otherwise have under the promissory note and the chattel mortgage as well as the payment of the unpaid
balance.
Consequently, the lower court rightly declared the nullity of the chattel mortgage in question in so far as the
taxicab franchise and the used Chevrolet car of plaintiffs are concerned, under the authority of the ruling in
the case of Levy Hermanos, Inc. vs. Pacific Commercial Co., et al., 71 Phil. 587, the facts of which are similar
to those in the case at bar. There, we have the same situation wherein the vendees offered as security for
the payment of the purchase price not only the motor vehicles which were bought on installment, but also a
residential lot and a house of strong materials. This Court sustained the pronouncement made by the lower
court on the nullity of the mortgage in so far as it included the house and lot of the vendees, holding that
under the law, should the vendor choose to foreclose the mortgage, he has to content himself with the
proceeds of the sale at the public auction of the chattels which were sold on installment and mortgaged to
him and having chosen the remedy of foreclosure, he cannot nor should he be allowed to insist on the sale
of the house and lot of the vendees, for to do so would be equivalent to obtaining a writ of execution against
them concerning other properties which are separate and distinct from those which were sold on
installment. This would indeed be contrary to public policy and the very spirit and purpose of the law,
limiting the vendor's right to foreclose the chattel mortgage only on the thing sold.
In the case of Cruz v. Filipinos Investment & Finance Corporation, 23 SCRA 791, this Court ruled that the
vendor of personal property sold on the installment basis is precluded, after foreclosing the chattel
mortgage on the thing sold from having a recourse against the additional security put up by a third party to
guarantee the purchaser's performance of his obligation on the theory that to sustain the same would
overlook the fact that if the guarantor should be compelled to pay the balance of the purchase price, said
guarantor will in turn be entitled to recover what he has paid from the debtor-vendee, and ultimately it will
be the latter who will be made to bear the payment of the of the balance of the price, despite the earlier
foreclosure of the chattel mortgage given by him, thereby indirectly subverting the protection given the
latter. Consequently, the additional mortgage was ordered cancelled. Said ruling was reiterated in the case
of Pascual v. Universal Motors Corporation, 61 SCRA 121. If the vendor under such circumstance is
prohibited from having a recourse against the additional security for reasons therein stated, there is no
ground why such vendor should not likewise be precluded from further extrajudicially foreclosing the
additional security put up by the vendees themselves, as in the instant case, it being tantamount to a
further action 5 that would violate Article 1484 of the Civil Code, for then is actually no between an
additional security put up by the vendee himself and such security put up by a third party insofar as how
the burden would ultimately fall on the vendee himself is concerned.

(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.

Reliance on the ruling in Southern Motors, inc. v. Moscoso, 2 SCRA 168, that in sales on installments, where
the action instituted is for and the mortgaged property is subsequently attached and sold, the sales thereof
does not amount to a foreclosure of the mortgage, hence, the seller creditor is entitled to a deficiency
judgment, does not for the stand of the appellants for that case is entirely different from the case at bar. In
that case, the vendor has availed of the first remedy provided by Article 1484 of the Civil Code, i.e., to exact
fulfillment of the obligation whereas in the present case, the remedy availed of was foreclosure of the
chattel mortgage.

The foregoing disposition renders superfluous a determination of the other issue raised by the parties as to
the validity of the auction sale, in so far as the franchise of plaintiffs is concerned, which sale had been
admittedly held without any notice to the plaintiffs.
IN VIEW HEREOF, the judgment appealed from is hereby affirmed, with costs against the appellants.SO
ORDERED.
[G.R. No. 94828. September 18, 1992.]
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 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. (Pacific Commercial Co. v. De la
Rama, 72 Phil. 380 (1941); Manila Motor, Inc. v. Fernandez, 99 Phil. 782 (1956); Radiowealth v. Lavin, L18563, 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 MORTGAGEEVENDEE 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 vendeemortgagor 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.
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. 107846. April 18, 1997]
LEOVILLO C. AGUSTIN, petitioner, vs. COURT OF APPEALS and FILINVEST FINANCE
CORP., respondents.
RESOLUTION
FRANCISCO, J.:
This is an appeal by certiorari from the decision of respondent Court of Appeals in CA-G.R. No.
24684[1] which affirmed the order of Regional Trial Court, Branch 40, Manila, in Civil Case No. 84804. [2]
The dispute stemmed from an unpaid promissory note dated October 28, 1970, executed by
petitioner Leovillo C. Agustin in favor of ERM Commercial for the amount of P43,480.80.The note was
payable in monthly installments[3] and secured by a chattel mortgage over an Isuzu diesel truck, [4] both of
which were subsequently assigned to private respondent Filinvest Finance Corporation. [5] When petitioner
defaulted in paying the installments, private respondent demanded from him the payment of the entire
balance or, in lieu thereof, the possession of the mortgaged vehicle. Neither payment nor surrender was
made. Aggrieved, private respondent filed a complaint with the Regional Trial Court of Manila, Branch 26
(RTC Branch 26) against petitioner praying for the issuance of a writ of replevin or, in the alternative, for the
payment of P32,723.97 plus interest at the rate of 14% per annum from due date until fully paid. [6]Trial
ensued and, thereafter, a writ of replevin was issued by RTC Branch 26. By virtue thereof, private
respondent acquired possession of the vehicle. Upon repossession, the latter discovered that the vehicle
was no longer in running condition and that several parts were missing which private respondent
replaced. The vehicle was then foreclosed and sold at public auction.
Private respondent subsequently filed a supplemental complaint claiming additional reimbursement
worth P8,852.76 as value of replacement parts [7] and for expenses incurred in transporting the mortgaged
vehicle from Cagayan to Manila. In response, petitioner moved to dismiss the supplemental complaint
arguing that RTC Branch 26 had already lost jurisdiction over the case because of the earlier extra-judicial
foreclosure of the mortgage. The lower court granted the motion and the case was dismissed. [8] Private
respondent elevated the matter to the appellate court, docketed as CA-G.R. No. 56718-R, which set aside
the order of dismissal and ruled that repossession expenses incurred by private respondent should be
reimbursed.[9]This decision became final and executory, hence the case was accordingly remanded to the

Regional Trial Court of Manila, Branch 40 (RTC Branch 40) for reception of evidence to determine the amount
due from petitioner.[10] After trial, RTC Branch 40 found petitioner liable for the repossession expenses,
attorney's fees, liquidated damages, bonding fees and other expenses in the seizure of the vehicle in the
aggregate sum of P18,547.38. Petitioner moved for reconsideration. Acting thereon, RTC Branch 40 modified
its decision by lowering the monetary award to P8,852.76, the amount originally prayed for in the
supplemental complaint.[11] Private respondent appealed the case with respect to the reduction of the
amount awarded.Petitioner, likewise, appealed impugning the trial courts order for him to pay private
respondent P8,852.76, an amount over and above the value received from the foreclosure sale. Both
appeals were consolidated and in CA- G.R. No. 24684, the modified order of RTC Branch 40 was affirmed.
Petitioner filed a motion for reconsideration, but to no avail[12] Hence, this petition for review on certiorari.
Petitioner contends that the award of repossession expenses to private respondent as mortgagee is
"contrary to the letter, intent and spirit of Article 1484 [13] of the Civil Code".[14] He asserts that private
respondents repossession expenses have been amply covered by the foreclosure of the chattel mortgage,
hence he could no longer be held liable. The arguments are devoid of merit.
Petitioners contentions, we note, were previously rejected by respondent court in its decision in CAG.R. No. 56718-R the dispositive portion of which provides as follows:
"WHEREFORE, the order dismissing the case is hereby set aside and the case is remanded to the lower court
for reception of evidence of `expenses properly incurred in effecting seizure of the chattel (and) of
recoverable attorney's fees in prosecuting the action for replevin' as `repossession expenses' prayed for in
the supplemental complaint, without pronouncement as to costs."[15]
which ruling has long acquired finality. It is clear, therefore, that the appellate court had already settled the
propriety of awarding repossession expenses in favor of private respondent. The remand of the case to RTC
Branch 40 was for the sole purpose of threshing out the correct amount of expenses and not for relitigating
the accuracy of the award. Thus, the findings of RTC Branch 40, as affirmed by the appellate court in CAG.R. No. 24684, was confined to the appreciation of evidence relative to the repossession expenses for the
query or issue passed upon by the respondent court in CA-G.R. No. 56718-R (propriety of the award for
repossession expenses) has become the law of the case. This principle is defined as a term applied to an
established rule that when an appellate court passes on a question and remands the cause to the lower
court for further proceedings, the question there settled becomes the law of the case upon subsequent
appeal.[16] Having exactly the same parties and issues, the decision in the former appeal (CA-G.R. No.
56718-R) is now the established and controlling rule.Petitioner may not therefore be allowed in a
subsequent appeal (CA-G.R. No. 24684) and in this petition to resuscitate and revive formerly settled
issues. Judgment of courts should attain finality at some point in time, as in this case, otherwise, there will
be no end to litigation.
At any rate, even if we were to brush aside the law of the case doctrine we find the award for
repossession expenses still proper. In Filipinas Investment & Finance Corporation v. Ridad,[17] the Court
recognized an exception to the rule stated under Article 1484(3) upon which petitioner relies. Thus:
x x x Where the mortgagor plainly refuses to deliver the chattel subject of the mortgage upon his failure to
pay two or more installments, or if he conceals the chattel to place it beyond the reach of the mortgagee,
what then is the mortgagee expected to do? x x x It logically follows as a matter of common sense, that the
necessary expenses incurred in the prosecution by the mortgagee of the action for replevin so that he can
regain possession of the chattel, should be borne by the mortgagor. Recoverable expenses would, in our
view, include expenses properly incurred in effecting seizure of the chattel and reasonable attorneys fees in
prosecuting the action for replevin.[18]
Anent the denial of the award for attorneys fees, we find the same in order. The trial court, as well as
respondent court, found no evidence to support the claim for attorney's fees which factual finding is binding
on us.[19] We find no compelling reason, and none was presented, to set aside this ruling.

ACCORDINGLY, the petition is DENIED for lack of merit, and the decision of the Court of Appeals is
hereby AFFIRMED in toto.

PHILIPPINE NATIONAL BANK, VIGAN BRANCH, ILOCOS SUR, FRANCISCO PERIA and REGISTER OF
DEEDS OF ILOCOS SUR, respondents.

SO ORDERED.
FERNAN, C.J.: In this petition for review on certiorari, petitioners spouses Dionisio Fiestan and Juanita
Arconada owners of a parcel of land (Lot No. 2B) situated in Ilocos Sur covered by TCT T-13218 which they
mortgaged to the Development Bank of the Philippines (DBP) as security for their P22,400.00 loan, seek the
reversal of the decision of the Court of Appeals 1 dated June 5, 1987 affirming the dismissal of their
complaint filed against the Development Bank of the Philippines, Laoag City Branch, Philippine National
Bank, Vigan Branch, Ilocos Sur, Francisco Peria and the Register of Deeds of Ilocos Sur, for annulment of
sale, mortgage, and cancellation of transfer certificates of title.
Records show that Lot No. 2-B was acquired by the DBP as the highest bidder at a public auction sale on
August 6, 1979 after it was extrajudicially foreclosed by the DBP in accordance with Act No. 3135, as
amended by Act No. 4118, for failure of petitioners to pay their mortgage indebtedness. A certificate of sale
was subsequently issued by the Provincial Sheriff of Ilocos Sur on the same day and the same was
registered on September 28, 1979 in the Office of the Register of Deeds of Ilocos Sur. Earlier, or on
September 26, 1979, petitioners executed a Deed of Sale in favor of DBP which was likewise registered on
September 28, 1979.
Upon failure of petitioners to redeem the property within the one (1) year period which expired on
September 28, 1980, petitioners' TCT T-13218 over Lot No. 2-B was cancelled by the Register of Deeds and
in lieu thereof TCT T-19077 was issued to the DBP upon presentation of a duly executed affidavit of
consolidation of ownership.
On April 13,1982, the DBP sold the lot to Francisco Peria in a Deed of Absolute Sale and the same was
registered on April 15, 1982 in the Office of the Register of Deeds of Ilocos Sur. Subsequently, the DBP's title
over the lot was cancelled and in lieu thereof TCT T-19229 was issued to Francisco Peria.
After title over said lot was issued in his name, Francisco Peria secured a tax declaration for said lot and
accordingly paid the taxes due thereon. He thereafter mortgaged said lot to the PNB Vigan Branch as
security for his loan of P115,000.00 as required by the bank to increase his original loan from P49,000.00 to
P66,000.00 until it finally reached the approved amount of P115,000.00. Since petitioners were still in
possession of Lot No. 2-B, the Provincial Sheriff ordered them to vacate the premises.
On the other hand, petitioners filed on August 23, 1982 a complaint for annulment of sale, mortgage and
cancellation of transfer certificates of title against the DBP-Laoag City, PNB Vigan Branch, Ilocos Sur,
Francisco Peria and the Register of Deeds of Ilocos Sur, docketed as Civil Case No. 3447-V before the
Regional Trial Court of Vigan, Ilocos Sur.
After trial, the RTC of Vigan, Ilocos Sur, Branch 20, rendered its decision 2 on November 14, 1983 dismissing
the complaint, declaring therein, as valid the extrajudicial foreclosure sale of the mortgaged property in
favor of the DBP as highest bidder in the public auction sale held on August 6, 1979, and its subsequent sale
by DBP to Francisco Peria as well as the real estate mortgage constituted thereon in favor of PNB Vigan as
security for the P115,000.00 loan of Francisco Peria.
The Court of Appeals affirmed the decision of the RTC of Vigan, Ilocos Sur on June 20, 1987.
G.R. No. 81552 May 28, 1990
DIONISIO FIESTAN and JUANITA ARCONADO, petitioners
vs.
COURT OF APPEALS; DEVELOPMENT BANK OF THE PHILIPPINES, LAOAG CITY BRANCH;

The motion for reconsideration having been denied 3 on January 19, 1988, petitioners filed the instant
petition for review on certiorari with this Court. Petitioners seek to annul the extrajudicial foreclosure sale of
the mortgaged property on August 6, 1979 in favor of the Development Bank of the Philippines (DBP) on the
ground that it was conducted by the Provincial Sheriff of Ilocos Sur without first effecting a levy on said
property before selling the same at the public auction sale. Petitioners thus maintained that the extrajudicial
foreclosure sale being null and void by virtue of lack of a valid levy, the certificate of sale issued by the

Provincial Sheriff cannot transfer ownership over the lot in question to the DBP and consequently the deed
of sale executed by the DBP in favor of Francisco Peria and the real estate mortgage constituted thereon by
the latter in favor of PNB Vigan Branch are likewise null and void.
The Court finds these contentions untenable.
The formalities of a levy, as an essential requisite of a valid execution sale under Section 15 of Rule 39 and
a valid attachment lien under Rule 57 of the Rules of Court, are not basic requirements before an
extrajudicially foreclosed property can be sold at public auction. At the outset, distinction should be made of
the three different kinds of sales under the law, namely: an ordinary execution sale, a judicial foreclosure
sale, and an extrajudicial foreclosure sale, because a different set of law applies to each class of sale
mentioned. An ordinary execution sale is governed by the pertinent provisions of Rule 39 of the Rules of
Court. Rule 68 of the Rules of Court applies in cases of judicial foreclosure sale. On the other hand, Act No.
3135, as amended by Act No. 4118 otherwise known as "An Act to Regulate the Sale of Property under
Special Powers Inserted in or Annexed to Real Estate Mortgages" applies in cases of extrajudicial foreclosure
sale.
The case at bar, as the facts disclose, involves an extrajudicial foreclosure sale. The public auction sale
conducted on August 6, 1979 by the Provincial Sheriff of Ilocos Sur refers to the "sale" mentioned in Section
1 of Act No. 3135, as amended, which was made pursuant to a special power inserted in or attached to a
real estate mortgage made as security for the payment of money or the fulfillment of any other obligation. It
must be noted that in the mortgage contract, petitioners, as mortgagor, had appointed private respondent
DBP, for the purpose of extrajudicial foreclosure, "as his attorney-in-fact to sell the property mortgaged
under Act No. 3135, as amended, to sign all documents and perform any act requisite and necessary to
accomplish said purpose .... In case of foreclosure, the Mortgagor hereby consents to the appointment of the
mortgagee or any of its employees as receiver, without any bond, to take charge of the mortgaged property
at once, and to hold possession of the same ... 4
There is no justifiable basis, therefore, to apply by analogy the provisions of Rule 39 of the Rules of Court on
ordinary execution sale, particularly Section 15 thereof as well as the jurisprudence under said provision, to
an extrajudicial foreclosure sale conducted under the provisions of Act No. 3135, as amended. Act No. 3135,
as amended, being a special law governing extrajudicial foreclosure proceedings, the same must govern as
against the provisions on ordinary execution sale under Rule 39 of the Rules of Court.
In that sense, the case of Aparri vs. Court Of Appeals, 13 SCRA 611 (1965), cited by petitioners, must be
distinguished from the instant case. On the question of what should be done in the event the highest bid
made for the property at the extrajudicial foreclosure sale is in excess of the mortgage debt, this Court
applied the rule and practice in a judicial foreclosure sale to an extrajudicial foreclosure sale in a similar
case considering that the governing provisions of law as mandated by Section 6 of Act No. 3135, as
amended, specifically Sections 29, 30 and 34 of Rule 39 of the Rules of Court (previously Sections 464, 465
and 466 of the Code of Civil Procedure) are silent on the matter. The said ruling cannot, however, be
construed as the legal basis for applying the requirement of a levy under Section 15 of Rule 39 of the Rules
of Court before an extrajudicially foreclosed property can be sold at public auction when none is expressly
required under Act No. 3135, as amended.
Levy, as understood under Section 15, Rule 39 of the Rules of Court in relation to execution of money
judgments, has been defined by this Court as the act whereby a sheriff sets apart or appropriates for the
purpose of satisfying the command of the writ, a part or the whole of the judgment-debtor's property. 5
In extrajudicial foreclosure of mortgage, the property sought to be foreclosed need not be identified or set
apart by the sheriff from the whole mass of property of the mortgagor for the purpose of satisfying the
mortgage indebtedness. For, the essence of a contract of mortgage indebtedness is that a property has
been identified or set apart from the mass of the property of the debtor-mortgagor as security for the
payment of money or the fulfillment of an obligation to answer the amount of indebtedness, in case of
default of payment. By virtue of the special power inserted or attached to the mortgage contract, the
mortgagor has authorized the mortgagee-creditor or any other person authorized to act for him to sell said
property in accordance with the formalities required under Act No. 3135, as amended.

The Court finds that the formalities prescribed under Sections 2, 3 and 4 of Act No. 3135, as amended, were
substantially complied with in the instant case. Records show that the notices of sale were posted by the
Provincial Sheriff of Ilocos Sur and the same were published in Ilocos Times, a newspaper of general
circulation in the province of Ilocos Sur, setting the date of the auction sale on August 6, 1979 at 10:00 a.m.
in the Office of the Sheriff, Vigan, Ilocos Sur. 6
The nullity of the extrajudicial foreclosure sale in the instant case is further sought by petitioners on the
ground that the DBP cannot acquire by purchase the mortgaged property at the public auction sale by virtue
of par. (2) of Article 1491 and par. (7) of Article 1409 of the Civil Code which prohibits agents from acquiring
by purchase, even at a public or judicial auction either in person or through the mediation of another, the
property whose administration or sale may have been entrusted to them unless the consent of the principal
has been given.
The contention is erroneous.
The prohibition mandated by par. (2) of Article 1491 in relation to Article 1409 of the Civil Code does not
apply in the instant case where the sale of the property in dispute was made under a special power inserted
in or attached to the real estate mortgage pursuant to Act No. 3135, as amended. It is a familiar rule of
statutory construction that, as between a specific statute and general statute, the former must prevail since
it evinces the legislative intent more clearly than a general statute does. 7 The Civil Code (R.A. 386) is of
general character while Act No. 3135, as amended, is a special enactment and therefore the latter must
prevail. 8
Under Act No. 3135, as amended, a mortgagee-creditor is allowed to participate in the bidding and purchase
under the same conditions as any other bidder, as in the case at bar, thus:
Section 5. At any sale, the creditor, trustee, or other person authorized to act for the
creditor, may participate in the bidding and purchase under the same conditions as any
other bidder, unless the contrary has been expressly provided in the mortgage or trust
deed under which the sale is made.
In other words, Section 5 of Act No. 3135, as amended, creates and is designed to create an exception to
the general rule that a mortgagee or trustee in a mortgage or deed of trust which contains a power of sale
on default may not become the purchaser, either directly or through the agency of a third person, at a sale
which he himself makes under the power. Under such an exception, the title of the mortgagee-creditor over
the property cannot be impeached or defeated on the ground that the mortgagee cannot be a purchaser at
his own sale.
Needless to state, the power to foreclose is not an ordinary agency that contemplates exclusively the
representation of the principal by the agent but is primarily an authority conferred upon the mortgagee for
the latter's own protection. It is an ancillary stipulation supported by the same cause or consideration for
the mortgage and forms an essential and inseparable part of that bilateral agreement. 9 Even in the
absence of statutory provision, there is authority to hold that a mortgagee may purchase at a sale under his
mortgage to protect his own interest or to avoid a loss to himself by a sale to a third person at a price below
the mortgage debt. 10 The express mandate of Section 5 of Act No. 3135, as amended, amply protects the
interest of the mortgagee in this jurisdiction.
WHEREFORE, in view of the foregoing, the petition is DENIED for lack of merit and the decision of the Court
of Appeals dated June 20, 1987 is hereby AFFIRMED. No cost.
SO ORDERED.

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:
[G.R. No. 106418. July 11, 1996]
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.

(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.

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.

BY:
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:

(S/T) K.N. DULCE

Dealer'
"To secure the Promissory Note, the defendants executed a Chattel Mortgage (Exh. B) on

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:

'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).

"(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,
which means, as so held in Nonato vs. Intermediate Appellate Court and Investor's Finance Corporation,
that -

"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).

[2]

"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).

"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]

"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

[3]

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.