ASSIGNED CASES

PCI LEASING VS TROJAN MENTAL INDUSTRIES INC. (BAYDID)

GR No 176381 December 15, 2010

FACTS:Respondent Trojan Metal Industries, Inc. came to petitioner, a leasing and

finance company, for the purpose of obtaining a loan. However, instead of
extending said loan, petitioner offered to buy various equipment owned by
respondent which was evidenced by a deed of sale executed by both parties.
Then, both parties entered into a lease agreement whereby respondent leased the
properties the latter previously owned guaranteed by a sum of money.
Subsequently, respondent obtained an additional loan from another financing
company using said leased equipment as temporary collateral. Petitioner
considered this a violation of the lease agreement entered into with respondent
and despite repeated demands against respondent to fulfil the latters obligation,
that is payment of its outstanding balance, the same fell into deaf ears. Petitioner
then instituted before the court an action for the recovery of sum of money, which
the lower court granted. Petitioner, with the assistance of the sheriff then sold
said properties which garnered an amount more than that respondent owed him.
On appeal, respondent obtained a favourable judgment, in which the lower court
held that petitioner herein is only entitled to the amount due him.

ISSUE:WON Petitioners action will prosper.

HELD:No. The Court ruled that the real transaction entered into by petitioner and
respondent was a contract of loan secured by a chattel mortgage. Pursuant to the
Chattel Mortgage Law, the debtor-mortgagor is entitled to the balance of the
proceeds, upon satisfaction of the principal loan and costs. Further, Chattel
Mortgage Law also bars the creditor-mortgagor from retaining the excess of the
sale proceeds.

ACME SHOE, RUBBER & PLASTIC CORP. VS CA

GR No 103576 August 22, 1996
FACTS: Petitioner Chua Pac, the president and general manager of co-petitioner Acme
executed a chattel mortgage in favor of private respondent Producers Bank as a
security for a loan of P3,000,000. A provision in the chattel mortgage agreement was to
this effect:
"In case the MORTGAGOR executes subsequent promissory note or notes either as a
renewal of the former note, as an extension thereof, or as a new loan, or is given any
other kind of accommodations such as overdrafts, letters of credit, acceptances and
bills of exchange, releases of import shipments on Trust Receipts, etc., this mortgage
shall also stand as security for the payment of the said promissory note or notes and/or
accommodations without the necessity of executing a new contract and this mortgage
shall have the same force and effect as if the said promissory note or notes and/or
accommodations were existing on the date thereof. This mortgage shall also stand as
security for said obligations and any and all other obligations of the MORTGAGOR to
the MORTGAGEE of whatever kind and nature, whether such obligations have been
contracted before, during or after the constitution of this mortgage."

In due time, the loan of P3,000,000.00 was paid. Subsequently it obtained additional
loan totalling P2,700,000.00 which was also duly paid.

Another loan was again extended (P1,000,000.00) covered by four promissory notes for
P250,000.00 each, but went unsettled prompting the bank to apply for an extrajudicial
foreclosure with the Sheriff.

ISSUE: Whether or no it is valid and effective to have a clause in a chattel mortgage

that purports to likewise extend its coverage to obligations yet to be contracted or
incurred?

HELD: NO. While a pledge, real estate mortgage, or antichresis may exceptionally
secure after-incurred obligations so long as these future debts are accurately described,
a chattel mortgage, however, can only cover obligations existing at the time the
mortgage is constituted.

Although a promise expressed in a chattel mortgage to include debts that are yet
to be contracted can be a binding commitment that can be compelled upon, the security
itself, however, does not come into existence or arise until after a chattel mortgage
agreement covering the newly contracted debt is executed either by concluding a fresh
chattel mortgage or by amending the old contract conformably with the form prescribed
by the Chattel Mortgage Law. A mortgage that contains a stipulation in regard to future
advances in the credit will take effect only from the date the same are made and not
from the date of the mortgage. Refusal on the part of the borrower to execute the
agreement so as to cover the after-incurred obligation can constitute an act of default on
the part of the borrower of the financing agreement whereon the promise is written but,
of course, the remedy of foreclosure can only cover the debts extant at the time of
constitution and during the life of the chattel mortgage sought to be foreclosed.

MAKATI LEASING VS WEAREVER TEXTILE MILLS, INC.

GR No L-58469 May 16, 1983
FACTS: Private respondent, Wearever Textile Mills, Inc. (Weaver), obtained financial
accommodations from herein petitioner, Makati Leasing and Finance Corporation
(Makati Leasing), by discounting and assigning several receivables to the latter. To
secure the collection of the receivables assigned, Wearever executed a Chattel
Mortgage over its raw materials inventory and over a machine, subject property of this
case.

As Wearever failed to pay, the mortgage was extrajudicially foreclosed. Nonetheless,

the sheriff was unable to seize the machinery because he failed to gain entry into
Wearevers premises. This prompted Makati Leasing to file an action for replevin.

The Court of Appeals acting on certiorari and prohibition proceedings filed by Wearever
ordered the return of the drive motor ruling that the machine in suit cannot be the
subject of replevin and moreso of a chattel mortgage because it is a real property as
defined by Art. 415 of the Civil Code, being attached to the ground by means of bolts
and the only way to remove it would be to drill out the concrete floor.

ISSUE: Whether or not the subject property of this case is real property

HELD: No. If a house of strong materials, like what was involved in the case of Tumalad
vs. Vicencio, may be considered as personal property for purposes of executing a
chattel mortgage thereon as long as the parties to the contract so agree and no
innocent third party will be prejudiced thereby, there is absolutely no reason why a
machinery, which is movable in its nature and becomes immobilized only by destination
or purpose, may not be likewise treated as such. This is really because one who has so
agreed is estopped from denying the existence of the chattel mortgage.

In rejecting Makati Leasings assertion on the applicability of the Tumalad doctrine, the
Court of Appeals lays stress on the fact that the house involved therein was built on a
land that did not belong to the owner of such house. But the law makes no distinction
with respect to the ownership of the land on which the house is built and we should not
lay down distinctions not contemplated by law.

It must be pointed out that the characterization of the subject machinery as chattel by
the Wearever is indicative of intention and impresses upon the property the character
determined by the parties. As earlier pronounced by the Court, it is undeniable that the
parties to a contract may by agreement treat as personal property that which by nature
would be real property, as long as no interest of third parties would be prejudiced
thereby.

DY VS CA
GR No 92989 July 8, 1991
FACTS:Wilfredo Dy purchased a truck and farm tractor from Libra Finance and
Investment Corporation. Both truck and farm tractor were also mortgaged to Libra
Finance and Investment Corporation as security for a loan and as such, they took
possession of it. The brother of Wilfredo, Perfecto Dy and his sister Carol Dy-Seno
requested Libra that they be allowed to buy the property and assume the mortgage
debt. Libra agreed to the request.

Meanwhile, a collection suit was filed against Wilfredo Dy by Gelac Trading Inc. On the
strength of a writ of execution, the sheriff was able to obtain the tractor on the premises
of Libra. It was sold in a public auction in which Gelac Trading was the lone bidder.
Gelac subsequently sold it to one of their stockholders.

The respondents claim that at the time of the execution of the deed of sale, no
constructive delivery was effected since the consummation of the sale depended upon
the clearance and encashment of the check which was issued in payment of the subject
tractor.

ISSUE:Whether or not Wilfredo Dy was still the owner of the tractor when it was
obtained by Gelac Trading Inc. through the writ of execution.

HELD:No. Wilfredo Dy was no longer the owner of the subject tractor when it was
obtained by the sheriff because he already sold it to his brother Perfecto Dy.

Wilfredo Dy has the right to sell his property even though it was mortgaged because the
mortgagor in a chattel mortgage doesnt part with the ownership over the property
mortgaged as security. He is allowed to sell the property as long as there is consent
from the mortgagee such as in this case. But even if there is no consent given, the sale
would still be valid without prejudice to the criminal action against the mortgagor.

While it is true that Wilfredo Dy was not in actual possession and control of the subject
tractor, his right of ownership was not divested from him upon his default. Neither could
it be said that Libra was the owner of the subject tractor because the mortgagee can not
become the owner of or convert and appropriate to himself the property mortgaged.
(Article 2088, Civil Code) Said property continues to belong to the mortgagor.

When Wilfredo Dy sold the tractor, he already transferred the ownership of it because
the Civil Code states that the ownership of the thing sold is acquired by the vendee from
the moment it is delivered to him or in any other manner signing an agreement that the
possession is transferred from the vendor to the vendee. In the instant case, actual
delivery of the subject tractor could not be made but there was constructive delivery
already upon the execution of a public instrument which in this case is a deed of sale.

The payment of the check was actually intended to extinguish the mortgage obligation.
The sale of the subject tractor was consummated upon the execution of the public
instrument on September 4, 1979. At this time constructive delivery was already
effected. Hence, the subject tractor was no longer owned by Wilfredo Dy when it was
levied upon by the sheriff in December, 1979. Well settled is the rule that only properties
unquestionably owned by the judgment debtor and which are not exempt by law from
execution should be levied upon or sought to be levied upon.

PAMECA VS CA
GR No 106435 July 14, 1999
FACTS: On April 17, 1980, PAMECA Wood Treatment Plant, Inc. obtained a loan of
P2,000,000.00 from respondent Development Bank of the Philippines. By virtue of this
loan, PAMECA, through its President, Herminio C. Teves, executed a promissory note
for the said amount, promising to pay the loan by installment. As security for the said
loan, a chattel mortgage was also executed over PAMECAs properties in Dumaguete
City to cover the whole value of the loan.

On January 18, 1984, upon PAMECAs failure to pay, DBP extrajudicially

foreclosed the chattel mortgage, and, as sole bidder in the public auction, purchased
the foreclosed properties for a sum of P322,350.00. On June 29, 1984, DBP filed a
complaint for the collection of the balance of P4,366,332.46 against PAMECA and
Teves, as solidary debtors with PAMECA under the promissory note.

On February 8, 1990, the RTC of Makati ordered Pameca to pay the

P4,366,332.46. The Court of Appeals affirmed the RTC decision. Petitioner raised as a
ground that respondent appellate court gravely erred in not reversing the decision of the
trial court, and in not holding that the public auction sale of petitioner PAMECAs chattels
were tainted with fraud, as the chattels of the said petitioner were bought by private
respondent as sole bidder in only 1/6 of the market value of the property, hence
unconscionable and inequitable, and therefore null and void. Pameca argues that Article
2115 should be applied by analogy reading the spirit of the law, and taking into
consideration that the contract of loan was a contract of adhesion.

ISSUES:
1. Whether or not can an action be instituted for deficiency of a debt after
foreclosure of the chattel mortgage?
2. Whether or not the sale is void on ground of inadequacy of price
3. Whether or not the sale is void on ground of fraud because respondent is the
sole bidder

HELD:
1. The effects of foreclosure under the Chattel Mortgage Law run inconsistent with
those of pledge under Article 2115. Whereas, in pledge, the sale of the thing pledged
extinguishes the entire principal obligation, such that the pledgor may no longer recover
proceeds of the sale in excess of the amount of the principal obligation, Section 14 of
the Chattel Mortgage Law expressly entitles the mortgagor to the balance of the
proceeds, upon satisfaction of the principal obligation and costs.

Since the Chattel Mortgage Law bars the creditor-mortgagee from retaining the
excess of the sale proceeds there is a corollary obligation on the part of the debtor-
mortgagee to pay the deficiency in case of a reduction in the price at public auction. As
explained in Manila Trading and Supply Co. vs. Tamaraw Plantation Co., while it is true
that section 3 of Act No. 1508 provides that a chattel mortgage is a conditional sale, it
further provides that it is a conditional sale of personal property as security for the
payment of a debt, or for the performance of some other obligation specified therein.
The lower court overlooked the fact that the chattels included in the chattel mortgage
are only given as security and not as a payment of the debt, in case of a failure of
payment.

2. NO. The Court are also unable to find merit in petitioner's submission that the
public auction sale is void on grounds of fraud and inadequacy of price. Petitioners
never assailed the validity of the sale in the RTC, and only in the Court of Appeals did
they attempt to prove inadequacy of price through the documents and inventory.

Having nonetheless examined the inventory and chattel mortgage document as

part of the records, We are not convinced that they effectively prove that the mortgaged
properties had a market value of at least P2,000,000.00 on January 18, 1984, the date
of the foreclosure sale. At best, the chattel mortgage contract only indicates the
obligation of the mortgagor to maintain the inventory at a value of at least
P2,000,000.00, but does not evidence compliance therewith. The inventory, in turn, was
as of March 31, 1980, or even prior to April 17, 1980, the date when the parties entered
into the contracts of loan and chattel mortgage, and is far from being an accurate
estimate of the market value of the properties at the time of the foreclosure sale four
years thereafter. Thus, even assuming that the inventory and chattel mortgage contract
were duly submitted as evidence before the trial court, it is clear that they cannot suffice
to substantiate petitioners allegation of inadequacy of price.

3. NO. Furthermore, the mere fact that respondent bank was the sole bidder for
the mortgaged properties in the public sale does not warrant the conclusion that the
transaction was attended with fraud. Fraud is a serious allegation that requires full and
convincing evidence, and may not be inferred from the lone circumstance that it was
only respondent bank that bid in the sale of the foreclosed properties. The sparseness
of petitioner's evidence in this regard leaves the Court no discretion but to uphold the
presumption of regularity in the conduct of the public sale.

SERVICE WIDE SPECIALIST VS CA

GR No 116363 December 10, 1999
FACTS:This controversy is between a mortgagor who alienated the mortgaged property
without the consent of the mortgagee, on the one hand, and the assignee of the
mortgagee to whom the latter assigned his credit without notice to the mortgagor, on the
other hand. Sometime in 1975, respondent spouses Atty. Jesus and Elizabeth Ponce
bought on installment a Holden Torana vehicle from C. R. Tecson Enterprises. They
executed a promissory note and a chattel mortgage on the vehicle dated December 24,
1975 in favor of the C. R. Tecson Enterprises to secure payment of the note. The
mortgage was registered both in the Registry of Deeds and the Land Transportation
Office. On the same date, C.R. Tecson Enterprises, in turn, executed a deed of
assignment of said promissory note and chattel mortgage in favor of Filinvest Credit
Corporation with the conformity of respondent spouses. The latter were aware of the
endorsement of the note and the mortgage to Filinvest as they in fact availed of its
financing services to pay for the car.

In 1976, respondent spouses transferred and delivered the vehicle to Conrado R.

Tecson by way of sale with assumption of mortgage. Subsequently, in 1978, Filinvest
assigned all its rights and interest over the same promissory note and chattel mortgage
to petitioner Servicewide Specialists Inc. without notice to respondent spouses. Due to
the failure of respondent spouses to pay the installments under the promissory note
from October 1977 to March 1978, and despite demands to pay the same or to return
the vehicle, petitioner was constrained to file before the Regional Trial Court of Manila
on May 22, 1978 a complaint for replevin with damages against them, docketed as Civil
Case No. 115567. In their answer, respondent spouses denied any liability claiming
they had already returned the car to Conrado Tecson pursuant to the Deed of Sale with
Assumption of Mortgage.

After trial, the lower court found respondent spouses jointly and solidarily liable to
petitioner, however, the third party defendant Conrado Tecson was ordered to
reimburse the respondent spouses for the sum that they would pay to petitioner. On
appeal, the Court of Appeals reversed and set aside the judgment of the court a quo on
the principal ground that respondent spouses were not notified of the assignment of the
promissory note and chattel mortgage to petitioner.

ISSUE:Whether the consent of the creditor-mortgagee is needed when the debtor-

mortgagor alienates the property to a third person.

HELD: The consent of the creditor-mortgagee to the alienation of the mortgaged

property is necessary in order to bind said creditor. Article 2141, on the other hand,
states that the provisions concerning a contract of pledge shall be applicable to a chattel
mortgage, such as the one at bar, insofar as there is no conflict with Act No. 1508, the
Chattel Mortgage Law. As provided in Article 2096 in relation to Article 2141 of the Civil
Code, a thing pledged may be alienated by the pledgor or owner with the consent of the
pledgee. This provision is in accordance with Act No. 1508 which provides that a
mortgagor of personal property shall not sell or pledge such property, or any part
thereof, mortgaged by him without the consent of the mortgagee in writing on the back
of the mortgage and on the margin of the record thereof in the office where such
mortgage is recorded. Although this provision in the chattel mortgage has been
expressly repealed by Article 367 of the Revised Penal Code, yet under Article 319 (2)
of the same Code, the sale of the thing mortgaged may be made provided that the
mortgagee gives his consent and that the same is recorded. In any case, applying by
analogy Article 2128 of the Civil Code to a chattel mortgage, it appears that a mortgage
credit may be alienated or assigned to a third person. Since the assignee of the credit
steps into the shoes of the creditor-mortgagee to whom the chattel was mortgaged, it
follows that the assignees consent is necessary in order to bind him of the alienation of
the mortgaged thing by the debtor-mortgagor. This is tantamount to a novation. As the
new assignee, petitioners consent is necessary before respondent spouses alienation of
the vehicle can be considered as binding against third persons. Petitioner is considered
a third person with respect to the sale with mortgage between respondent spouses and
third party defendant Conrado Tecson.
In this case, however, since the alienation by the respondent spouses of the vehicle
occurred prior to the assignment of credit to petitioner, it follows that the former were not
bound to obtain the consent of the latter as it was not yet an assignee of the credit at
the time of the alienation of the mortgaged vehicle.

One thing, however, that militates against the posture of respondent spouses is that
although they are not bound to obtain the consent of the petitioner before alienating the
property, they should have obtained the consent of Filinvest since they were already
aware of the assignment to the latter. So that, insofar as Filinvest is concerned, the
debtor is still respondent spouses because of the absence of its consent to the sale.
Worse, Filinvest was not even notified of such sale. Having subsequently stepped into
the shoes of Filinvest, petitioner acquired the same rights as the former had against
respondent spouses. The defenses that could have been invoked by Filinvest against
the spouses can be successfully raised by petitioner. Therefore, for failure of
respondent spouses to obtain the consent of Filinvest thereto, the sale of the vehicle to
Conrado R. Tecson was not binding on the former. When the credit was assigned by
Filinvest to petitioner, respondent spouses stood on record as the debtor-mortgagor.

RIZAL COMMERCIAL BANK VS ROYAL CARGO

GR No 179756 October 2, 2009
FACTS: Terrymanila, Inc. filed a petition for voluntary insolvency with the RTC of
Bataan on February 13, 1991. One of its creditors was Rizal Commercial Banking
Corporation (petitioner) with which it had an obligation of P3 Million that was secured by
a chattel mortgage executed on February 16, 1989. The chattel mortgage was duly
recorded in the notarial register.

Royal Cargo Corporation (respondent), another creditor of Terrymanila, filed an

action before the RTC of Manila for collection of sum of money and preliminarily
attached some of Terrymanila's personal properties on March 5, 1991 to secure the
satisfaction of a judgment award of P296,662.16.

On April 12, 1991, the Bataan RTC declared Terrymanila insolvent. On June 11,
1991, the Manila RTC, by Decision of even date, rendered judgment in the collection
case in favor of respondent.

In the meantime, RCBC sought in the insolvency proceedings at Bataan RTC

permission to extrajudicially foreclose the chattel mortgage. Provincial Sheriff scheduled
the public auction sale of mortgaged personal properties in Bataan. At the auction sale,
RCBC was the sole bidder, and purchased them for P1.5M.

Royal Cargo filed a petition for annulment of auction sale before Manila RTC,
against the Provincial Sheriff of Bataan RTC and RCBC. They questioned the failure to
duly notify Royal Cargo of the sale at least 10 days prior to the sale according to Sec.
14 of Act No. 1508.

ISSUE: Whether or not the mortgagee had the duty to notify the respondent of the
public auction sale.

HELD: Yes. Section 15 of Act No. 1508 provides that at least ten days' notice of the
time, place, and purpose of such sale has been posted at two or more public places in
such municipality, and the mortgagee, his executor, administrator, or assign, shall notify
the mortgagor or person holding under him and the persons holding subsequent
mortgages of the time and place of sale, either by notice in writing directed to him or left
at his abode, if within the municipality, or sent by mail if he does not reside in such
municipality, at least ten days previous to the sale.

Section 13 of the Chattel Mortgage Law allows the would-be redemptioner

thereunder to redeem the mortgaged property only before its sale. Unmistakably, the
redemption cited in Section 13 partakes of an equity of redemption, which is the right of
the mortgagor to redeem the mortgaged property after his default in the performance of
the conditions of the mortgage but before the sale of the property to clear it from the
encumbrance of the mortgage. It is not the same as right of redemption which is the
right of the mortgagor to redeem the mortgaged property after registration of the
foreclosure sale, and even after confirmation of the sale.

While respondent had attached some of Terrymanilas assets to secure the

satisfaction of a P296,662.16 judgment rendered in another case, what it effectively
attached was Terrymanilas equity of redemption. That respondents claim is much
lower than the P1.5 million actual bid of petitioner at the auction sale does not defeat
respondents equity of redemption.

Having thus attached Terrymanilas equity of redemption, respondent had to be

informed of the date of sale of the mortgaged assets for it to exercise such equity of
redemption over some of those foreclosed properties, as provided for in Section 13.

However, even prior to receiving, through counsel, a mailed notice of the auction
sale on the date of the auction sale itself on June 16, 1992, respondent was already put
on notice of the impending foreclosure sale of the mortgaged chattels. Despite its
window of opportunity to exercise its equity of redemption, however, respondent chose
to be technically shrewd about its chances, preferring instead to seek annulment of the
auction sale, which was the result of the foreclosure of the mortgage, permission to
conduct which it had early on opposed before the insolvency court.

RESEARCHED CASES

PHIL. NATIONAL BANK VS MANILA INVESTMENT & CONSTRUCTION, INC.

GR No. L-27132 April 29, 1971
Facts: In case of non-payment of the amounts adjudged, the decision provided for the
sale at public auction of the personal properties covered by the chattel mortgage
executed by the defendants in favor of the plaintiff Bank, and for the disposition of the
proceeds in accordance with law. After the decision had become executory, instead of
having the mortgaged personal properties sold at public auction, the parties agreed to
have them sold, and were in fact sold, at a private sale. The net proceeds obtained
therefrom amounting to P256,941.70 were applied to the partial satisfaction of the
judgement. The defendants argued that the private sale of the mortgaged personal
properties was null and void, and lastly, that the appellee is not entitled to a deficiency
judgment.

Issue: Whether or not the sale was null and void

Held: Yes. The Supreme Court ruled that it is true that the decision rendered in Civil
Case 33074 of the Court of First Instance of Manila provided for the sale at public
auction of the personal properties covered by the chattel mortgage executed in favor of
the Bank, but it is likewise true that said personal properties were sold at a private sale
by agreement between the parties. Besides, we see nothing illegal, immoral or against
public order in such agreement entered into freely and voluntarily. As the disposition of
the mortgaged personalities in a private sale was by agreement between the parties, it
is clear that appellants are now in estoppel to question it except on the ground of fraud
or duress pleas that they do not invoke. They do not even claim that the private sale
agreed upon had caused them substantial prejudice.

EQUITABLE SAVINGS BANK V. ROSALINDA PLACES

GR No. 214752

Facts: On August 15, 2005, Rosalina purchased a Hyundai Starex GRX Jumbo through
a loan granted by petitioner Equitable Savings Bank in the amount of P1,196,100.00. In
connection therewith, Palces executed a Promissory' Note with Chattel Mortgage in
favor of petitioner, stating Palces shall pay petitioner the aforesaid amount in 36-
monthly installments.

From September 18, 2005 to December 21, 2006, respondent paid the monthly
installment. However, she failed to pay the monthly installments in January and
February 2007. As the demand went unheeded, petitioner filed on March 7, 2007 a
complaint for the issuance of a writ of replevin to order the seizure of the subject vehicle
and its delivery to petitioner or in the alternative as when the recovery of the subject
vehicle cannot be effected, to render judgment ordering respondent to pay the
remaining balance of the loan.

Palces then maintained that in order to update her installment payments, she
paid petitioner the amounts of P70,000.00 on March 8, 2007 and P33,000.00 on March
20, 2007, or a total of P103,000.00. Despite the payments, Palces was surprised when
petitioner filed the complaint, resulting in the sheriff taking possession of the subject
vehicle.

RTC ruled in petitioner's favor and, accordingly, confirmed petitioner's right and
possession over the subject vehicle. Citing Article 1484 of the Civil Code, specifically
paragraph 3 thereof, the CA ruled that petitioner had already waived its right to recover
any unpaid installments when it sought and was granted a writ of replevin in order to
regain possession of the subject vehicle. As such, petitioner is no longer entitled to
receive respondent's late partial payments in the aggregate amount of P103,000.00.

Issue: Whether or not the mortgagee is entitled to the payment of late installments
while it is seeking the recovery of the subject of the mortgage.

Held: Yes. Article 1484 of the Civil Code governs the sale of personal properties in
installments. In this case, there was no vendor-vendee relationship between respondent
and petitioner. A judicious perusal of the records would reveal that respondent never
bought the subject vehicle from petitioner but from a third party, and merely sought
financing from petitioner for its full purchase price. Indubitably, a loan contract with the
accessory chattel mortgage contract - and not a contract of sale of personal property in
installments - was entered into by the parties with respondent standing as the debtor-
mortgagor and petitioner as the creditor-mortgagee. Therefore, the conclusion of the CA
that Article 1484 finds application in this case is misplaced, and thus, must be set aside.

Further, there is nothing in the Promissory Note with Chattel Mortgage that bars
petitioner from receiving any late partial payments from respondent. If at all, petitioner's
acceptance of respondent's late partial payments in the aggregate amount of
P103,000.00 will only operate to reduce her outstanding obligation to petitioner from
P664,500.00 to P561,500.00. Such a reduction in respondent's outstanding obligation
should be accounted for when petitioner conducts the impending foreclosure sale of the
subject vehicle. Once such foreclosure sale has been made, the proceeds thereof
should be applied to the reduced amount of respondent's outstanding obligation, and
the excess of said proceeds, if any, should be returned to her.

UNION BANK OF THE PHILIPPINES VS. ALAIN JUNIAT

G.R. No. 171569

Facts: Petitioner Union Bank of the Philippines (Union Bank) is a universal banking
corporation organized and existing under Philippine laws.

Respondents Winwood Apparel, Inc. (Winwood) and Wingyan Apparel, Inc. (Wingyan)
are domestic corporations engaged in the business of apparel manufacturing. Both
respondent corporations are owned and operated by respondent Alain Juniat (Juniat), a
French national based in Hongkong. Respondent Nonwoven Fabric Philippines, Inc.
(Nonwoven) is a Philippine corporation engaged in the manufacture and sale of various
types of nonwoven fabrics.]

On September 3, 1992, petitioner filed with the Regional Trial Court (RTC) of Makati,
Branch 57, a Complaint with prayer for the issuance of ex-parte writs of preliminary
attachment and replevin against Juniat, Winwood, Wingyan, and the person in
possession of the mortgaged motorized sewing machines and equipment. Petitioner
alleged that Juniat, acting for and in behalf of Winwood and Wingyan, executed a
promissory note dated April 11, 1992 and a Chattel Mortgage dated March 27, 1992
over several motorized sewing machines and other allied equipment to secure their
obligation arising from export bills transactions to petitioner in the amount of
P1,131,134.35;

On September 10, 1992, the RTC issued writs of preliminary attachment and replevin in
favor of petitioner.

On September 28, 1992, Nonwoven filed an Answer, contending that the unnotarized
Chattel Mortgage executed in favor of petitioner has no binding effect on Nonwoven and
that it has a better title over the motorized sewing machines and equipment because
these were assigned to it by Juniat pursuant to their Agreement dated May 9, 1992.

On November 23, 1992, petitioner filed a Motion to Sell Chattels Seized by

Replevin,praying that the motorized sewing machines and equipment be sold to avoid
depreciation and deterioration. However, on May 18, 1993, before the RTC could act on
the motion, petitioner sold the attached properties for the amount of P1,350,000.00

Issue: Whether or not that unnotarized chattel mortgaged affects the cause of action of
the petitioner for collection of some of money.

Held: Indeed, the unnotarized Chattel Mortgage executed by Juniat, for and in behalf of
Wingyan and Winwood, in favor of petitioner does not bind Nonwoven. However, it must
be pointed out that petitioner's primary cause of action is for a sum of money with prayer
for the issuance of ex-parte writs of attachment and replevin against Juniat, Winwood,
Wingyan, and the person in possession of the motorized sewing machines and
equipment.Thus, the fact that the Chattel Mortgage executed in favor of petitioner was
not notarized does not affect petitioner's cause of action. Petitioner only needed to
show that the loan of Juniat, Wingyan and Winwood remains unpaid and that it is
entitled to the issuance of the writs prayed for. Considering that writs of attachment and
replevin were issued by the RTC.

SPOUSES DEO AGNER AND MARICON AGNER VS. BPI FAMILY SAVINGS BANK
G.R. No. 182963

Facts: On February 15, 2001, petitioners spouses Deo Agner and Maricon Agner
executed a Promissory Note with Chattel Mortgage in favor of Citimotors, Inc. The
contract provides, among others, that: for receiving the amount of Php834, 768.00,
petitioners shall pay Php 17,391.00 every 15th day of each succeeding month until fully
paid; the loan is secured by a 2001 Mitsubishi Adventure Super Sport; and an interest of
6% per month shall be imposed for failure to pay each installment on or before the
stated due date.

On the same day, Citimotors, Inc. assigned all its rights, title and interests in the
Promissory Note with Chattel Mortgage to ABN AMRO Savings Bank, Inc. (ABN
AMRO), which, on May 31, 2002, likewise assigned the same to respondent BPI Family
Savings Bank, Inc.

For failure to pay four successive installments from May 15, 2002 to August 15, 2002,
respondent, through counsel, sent to petitioners a demand letter dated August 29, 2002,
declaring the entire obligation as due and demandable and requiring to pay
Php576,664.04, or surrender the mortgaged vehicle immediately upon receiving the
letter. As the demand was left unheeded, respondent filed on October 4, 2002 an action
for Replevin and Damages before the Manila Regional Trial Court (RTC).

A writ of replevin was issued. Despite this, the subject vehicle was not seized. Trial on
the merits ensued. On August 11, 2005, the Manila RTC Br. 33 ruled for the respondent
and ordered petitioners to jointly and severally pay the amount of Php576,664.04 plus
interest at the rate of 72% per annum from August 20, 2002 until fully paid, and the
costs of suit.

Petitioners appealed the decision to the Court of Appeals (CA), but the CA affirmed the
lower courts decision and, subsequently, denied the motion for reconsideration; hence,
this petition.

Issue: Whether or not respondents remedy of resorting to both action of replevin and
collection of sum of money is contrary to the provision of Art. 1484 of the Civil Code and
the ruling in Elisco Tool Manufacturing Corporation vs. Court of Appeals

Held: The remedies provided for in Art. 1484 are alternative, not cumulative. The
exercise of one bars the exercise of the others. This limitation applies to contracts
purporting to be leases of personal property with option to buy by virtue of Art. 1485.
The condition that the lessor has deprived the lessee of possession or enjoyment of the
thing for the purpose of applying Art. 1485 was fulfilled in the Elisco case by the filing by
petitioner of the complaint for replevin to recover possession of movable property. By
virtue of the writ of seizure issued by the trial court, the deputy sheriff seized the vehicle
on August 6, 1986 and thereby deprived private respondents of its use. The car was not
returned to private respondent until April 16, 1989, after two (2) years and eight (8)
months, upon issuance by the Court of Appeals of a writ of execution.

Compared with Elisco, the vehicle subject matter of this case was never recovered and
delivered to respondent despite the issuance of a writ of replevin. As there was no
seizure that transpired, it cannot be said that petitioners were deprived of the use and
enjoyment of the mortgaged vehicle or that respondent pursued, commenced or
concluded its actual foreclosure. The trial court, therefore, rightfully granted the
alternative prayer for sum of money, which is equivalent to the remedy of "exacting
fulfillment of the obligation." Certainly, there is no double recovery or unjust enrichment
to speak of.

Magna Financial Services Group vs Elias Colarina

G.R. No. 158635

Facts: Elias Colarina bought on installment from Magna Financial Services Group, Inc.,
1 unit of Suzuki Multicab. After making a down payment, Colarina executed a
Promissory Note for the balance of P229,284. To secure payment thereof, Colarina
executed a chattel mortgage over the motor vehicle.

Colarina failed to pay the monthly amortization beginning January 1999,

accumulating an unpaid balance of P131,607. Despite repeated demands, he failed to
make the necessary payment. Magna Financial Services Group, Inc. filed a Complaint
for Foreclosure of Chattel Mortgage with Replevin before the MTCC. Upon filing of a
bond, a writ of replevin was issued. Colarina who voluntarily surrendered physical
possession of the vehicle to the Sheriff. After declaring Colarina in default, the trial
court ruled against defendant and ordered him to pay the sum of P131,607 plus penalty
charges, attorneys fees and cost and in case of nonpayment, the multicab shall be sold
at public auction. The RTC affirmed. The CA rendered its decision ruling that the courts
erred in ordering the defendant to pay the unpaid balance of the purchase price
irrespective of the fact that the complaint was for the foreclosure of the chattel
mortgage.

Issue: Whether or not a mortgagee may avail of the two remedies, payment of unpaid
balance and foreclosure of chattel mortgage?

Held: It is unmistakable from the Complaint that petitioner preferred to avail itself of the
first and third remedies under Article 1484, at the same time suing for replevin. For this
reason, the Court of Appeals justifiably set aside the decision of the RTC. Perusing the
Complaint, the petitioner, under its prayer number 1, sought for the payment of the
unpaid amortizations which is a remedy that is provided under Article 1484(1) of the
Civil Code, allowing an unpaid vendee to exact fulfillment of the obligation. At the same
time, petitioner prayed that Colarina be ordered to surrender possession of the vehicle
so that it may ultimately be sold at public auction, which remedy is contained under
Article 1484(3). Such a scheme is not only irregular but is a flagrant circumvention of
the prohibition of the law. By praying for the foreclosure of the chattel, Magna Financial
Services Group, Inc. renounced whatever claim it may have under the promissory note.

In case of non-payment, foreclosure is one of the remedies available to a

mortgagee by which he subjects the mortgaged property to the satisfaction of the
obligation to secure that for which the mortgage was given. Foreclosure may be
effected either judicially or extrajudicially, that is, by ordinary action or by foreclosure
under power of sale contained in the mortgage. It may be effected by the usual
methods, including sale of goods at public auction. Extrajudicial foreclosure, as chosen
by the petitioner, is attained by causing the mortgaged property to be seized by the
sheriff, as agent of the mortgagee, and have it sold at public auction in the manner
prescribed by Section 14 of Act No. 1508, or the Chattel Mortgage Law. This rule
governs extrajudicial foreclosure of chattel mortgage. Since the petitioner has
undeniably elected a remedy of foreclosure under Article 1484(3) of the Civil Code, it is
bound by its election and thus may not be allowed to change what it has opted for nor to
ask for more.