1. G.R. No. L-42256 April 25, 1935 7.
l 25, 1935 7. The defendant had offered to return the said second
THE BACHRACH MOTOR CO., INC., plaintiff-appellant,
vs.
PABLO A. MILLAN, defendant-appellee.
Ohnick and Opisso for appellant.
B. Francisco for appellee.
GODDARD, J.:
This action was instituted in the Court of First Instance of the City of Manila for
the purpose of recovering an alleged balance due the plaintiff from the defendant
on a promissory note executed by the latter on December 12, 1933. The trial
court dismissed the action with costs against the plaintiff.
This case was submitted for decision on the following agreed statement of facts:
1. That the plaintiff is a corporation duly organized according to the
laws of the Philippine Islands, with its principal place of business in
the City of Manila, and the defendant, Pablo A. Millan, is of legal age,
and a resident of the City of Manila, Philippine Islands;
2. That on December 12, 1933, the defendant for value received,
executed and delivered to the plaintiff his promissory note for the sum
of P939 payable in the City of Manila, Philippine Islands, in monthly
installments, as may be seen from a true copy of said promissory
note, hereto attached, marked Appendix A, and made a part hereof;
3. That the said amount of P939 was the balance of the purchase
price of one second hand Renault touring car purchased by the said
defendant from the plaintiff, as may be seen from the chattel
mortgage executed by the defendant in favor of the plaintiff, hereto
attached, marked Appendix B, and made a part hereof, which chattel
mortgage was executed by the defendant on the said date, December
12, 1933, and registered in the office of the Register of Deeds of the
City of Manila;
4. That the defendant has violated the terms of the said promissory
note and chattel mortgage by failing to pay the installments which fell
due on December 22, 1933, and January 22 and February 22, 1934;
5. That after crediting the defendant with all the payments made by
him on account of said promissory note, Appendix A, there is still due
and owing from said defendant in favor of the plaintiff the sum of
P928.50, together with interest thereon at the rate of 12 per cent per
annum from March 17, 1934, until paid, as may be seen from the
statement of account hereto attached, marked Appendix C, and made
a part hereof;1ªvvphïl.nët
6. That the complaint in the present case was made by the plaintiff
without foreclosing the said chattel mortgage, Appendix B;
judgment of his original indebtedness. Under this amendment the vendor of
hand Renault touring car to the plaintiff in payment of the full amount
under the promissory note, Appendix A, and the chattel mortgage,
Appendix B, but the said plaintiff refused to receive the same, and has
filed this complaint for the full amount of the purchase price.
The trial court, after embodying in its decision the above stipulation of facts,
passed on to consider the provisions of article 1454-A of the Civil Code (Act No.
4122 of the Philippine Legislature) and held that inasmuch as that article gives
the vendor the alternative of either cancelling the sale or foreclosing the mortgage
and the vendor, appellant n this case, having elected not to foreclose the
mortgage, it can only make use of the other alternative, that is, cancel the sale
and retain the total amount of the installments already paid on account of the
purchase price of the automobile bought by the defendant from the plaintiff. Upon
this theory the trial court dismissed this case.
The plaintiff-appellant's only assignment of error reads as follows:
The lower court erred in holding that under article 1454-A of the Civil
Code the vendor, who has sold a chattel on installments secured by
mortgage of the chattel, has no other alternative but to either
foreclose the mortgage or rescind the sale; and in holding that under
said article, said vendor cannot demand the fulfillment of the
obligation as contained in the promissory notes separately signed by
the purchaser.
Article 1454 of the Civil Code, as amended by Act No. 4122 of the Philippine
Legislature, now reads:
ART. 1454. When earnest money or a pledge has been given to bind
the contract of purchase and sale, the contract may be rescinded if
the vendee should be willing to forfeit the earnest money or pledge or
the vendor to return double the amount.
ART. 1454-A. In a contract for the sale of personal property payable in
installments, failure to pay two or more installments shall confer upon
the vendor the right to cancel the sale or foreclose the mortgage if one
has been given on the property, without reimbursement to the
purchaser of the installments already paid, if there be an agreement to
this effect.
However, if the vendor has chosen to foreclose the mortgage he shall
have no further action against the purchaser for the recovery of any
unpaid balance owing by the same, and any agreement to the
contrary shall be null and void.
The same rule shall apply to leases of personal property with option to
purchase, when the lessor has chosen to deprive the lessee of the
enjoyment of such personal property.
Undoubtedly the principal object of the above amendment was to remedy the
abuses committed in connection with the foreclosure of chattel mortgages. This
amendment prevents 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. The almost invariable result of this procedure was that the
mortgagor found himself minus the property and still owing practically the full
personal property, the purchase price of which is payable in installments, has the
right to cancel the sale or foreclose the mortgage if one has been given on the
property. Whichever right the vendor elects he need not return to the purchaser
the amount of the installments already paid, "if there be an agreement to that
effect". Furthermore, if the vendor avails himself of the right to foreclose the
mortgage this amendment prohibits him from bringing an action against the
purchaser for the unpaid balance.
In other words, under this amendment, in all proceedings for the foreclosure of
chattel mortgages, executed on chattels which have been sold on the installment
plan, the mortgagee is limited to the property included in the mortgage.
The question now before this court is, Can a vendor of personal property on the
installment plan, upon the failure of the purchaser to comply with his obligation
under such a contract, exact the fulfillment of that obligation, or does article 1454-
A deprive him of that right and limit him to the right to cancel such a sale or
foreclose a mortgage if one has been given on the property?
Has the adoption of article 1454-A, amending article 1454 of the Civil Code also
repealed that part of article 1124 of the Civil Code, which gives the prejudiced
person the right to exact the fulfillment of an obligation?
ART. 1124. The right to resolve reciprocal obligations, in case one of
the obligors should fail to comply with that which is incumbent upon
him, is deemed to be implied.
The person prejudiced may choose between exacting the fulfillment of
the obligation or its resolution with indemnity for losses and payment
of interest in either case. He may also demand the resolution of the
obligation even after having elected its fulfillment, should the latter be
found impossible.
The right to cancel a contract for the sale of personal property, payable in
installments, in case the vendee fails to comply with the terms of the contract and
the right to foreclose a mortgage, if one has been given on such property, in case
the mortgagor fails to live up to the terms thereof are legal remedies which were
available to a vendor long before Act No. 4122 was passed. This being so it
follows that said Act, in so far as it refers to these remedies, is merely a
redeclaration of rights which existed at the time that law was adopted. This Act
however places a certain limitation on the privilege to exercise these rights in the
case of installment sales of personal property in that they are now available to the
vendor after the vendee has failed to pay two or more installments. It furthermore
prescribes and limits the rights of the vendor after he has availed himself of either
remedy.
Before Act No. 4122 was adopted the legal right to exact the fulfillment of an
obligation was also available to the person prejudiced by the failure of one of the
obligors to comply with the terms of an obligation. Act No. 4122 does not
expressly or impliedly prohibit the party injured by the failure of one of the
obligors, in a sale of personal property on installments, from exacting the
fulfillment of that obligation. Neither do the terms of that Act expressly provide nor
do they imply that, upon failure to pay two or more installments on the purchase
price of personal property sold on the installment plan, the vendor must "cancel
the sale or foreclose the mortgage if one has been given on the property."
In view of the foregoing, it is evident that the Legislature in adopting Act No. 4122
did not intend to limit the remedies available to a vendor of personal property on
the installment plan to the right to cancel the sale or foreclose the mortgage if one
had been given on the property. The real object of that law is to prevent the
exercise of either of these rights by such a vendor until after the vendee has
failed to pay two or more installments and furthermore to prescribe and limit the
rights of the vendor after he has availed himself of either of the remedies
mentioned therein.
It is apparent that that part of article 1124 of the Civil Code, mentioned above, has
not been repealed.
Wherefore, we hold that in a sale of personal property on the installment plan the
vendor may elect to exact the fulfillment of the obligation, as the plaintiff has done
in this case, cancel the sale or foreclose his mortgage if one has been given on
the property so sold. If he elects to cancel or foreclose he is bound by the
provisions of article 1454-A of the Civil Code.1ªvvphïl.nët
The judgment of the trial court is reversed and let judgment be entered in favor of
the plaintiff and against the defendant for the sum of P928.50 with interest
thereon at the rate of 12 per cent per annum from March 17, 1934, until paid in
full, plus the sum of P232.12 as attorneys' fees and penalty, without costs in
either instance.
2. G.R. No. L-27862 November 20, 1974
LORENZO PASCUAL and LEONILA TORRES, plaintiffs-appellees,
vs.
UNIVERSAL MOTORS CORPORATION, defendant-appellant.
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.
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 land1 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. 14842 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."
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.
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.
Castro, Makasiar, Esguerra and Muñoz Palma, JJ., concur.
3. G.R. No. L-10789 May 28, 1957
AMADOR TAJANLANGIT, ET AL., plaintiff-appellants,
vs.
SOUTHERN MOTORS, INC., ET AL., defendants-appellees.
BENGZON, J.:
The case. Appellants seek to reverse the order of Hon. Pantaleon Pelayo, Judge
of the Iloilo court of first instance refusing to interfere with the alias writ of
execution issued in Civil Case No. 2942 pending in another sala of the same
court.
The facts. In April 1953 Amador Tajanlangit and his wife Angeles, residents of
Iloilo, bought, from the Southern Motors Inc. of Iloilo two tractors and a thresher.
In payment for the same, they executed the promissory note Annex A whereby
they undertook to satisfy the total purchase price of P24,755.75 in several
installments (with interest) payable on stated dates from May 18, 1953 December
10, 1955. The note stipulated that if default be made in the payment of interest or
of any installment, then the total principal sum still unpaid with interest shall at
once become demandable etc. The spouse failed to meet any installment.
Wherefore, they were sued, in the above Civil Case No. 2942, for the amount of
the promissory note.1 The spouses defaulted, and the court, after listening to the
Southern Motors' evidence entered Judgment for it in the total sum of P24,755.75
together with interest at 12 per cent, plus 10 per cent of the total amount due as
attorney's fees and costs of collection.
Carrying out the order of execution, the sheriff levied on the same machineries
and farm implements which had been bought by the spouses; and later sold them
at public auction to the highest bidder — which turned out to be the Southern
Motors itself — for the total sum of P10,000.
As its judgment called for much more, the Southern Motors subsequently asked
and obtained, an alias writ of execution; and pursuant thereto, the provincial
sheriff levied attachment on the Tajanlangits' rights and interests in certain real
properties — with a view to another sale on execution.
To prevent such sale, the Tajanlangits instituted this action in the Iloilo court of
first instance for the purpose among others, of annulling the alias writ of execution
and all proceedings subsequent thereto. Their two main theories: (1) They had
returned the machineries and farm implements to the Southern Motors Inc., the
latter accepted them, and had thereby settled their accounts; for that reason, said
spouses did not contest the action in Civil Case No. 2942; and (2) as the
Southern Motors Inc. had repossessed the machines purchased on installment
(and mortgaged) the buyers were thereby relieved from further responsibility, in
view of the Recto Law, now article 1484 of the New Civil Code.
For answer, the company denied the alleged "settlement and understanding"
during the pendency of civil case No. 2949. It also denied having repossessed the
machineries, the truth being that they were attached by the sheriff and then
deposited by the latter in its shop for safekeeping, before the sale at public
auction.
The case was submitted for decision mostly upon a stipulation of facts. Additional As the plaintiff has chosen to exact the fulfillment of the defendant's
testimony was offered together with documentary evidence. Everything obligation, the former may enforce execution of the judgement
considered the court entered judgment, saying in part; rendered in its favor on the personal and real properties of the latter
The proceedings in Civil Case No. 2942 above referred to, were had not exempt from execution sufficient to satisfy the judgment. That part
in the Court of First Instance (Branch 1) of the Province and of the of the judgement depriving the plaintiff of its right to enforce judgment
City of Iloilo. While this court (Branch IV) sympathizes with plaintiffs, it against the properties of the defendant except the mortgaged truck
cannot grant, in this action, the relief prayed for the complaint and discharging the writ of attachment on his other properties
because courts of similar jurisdiction cannot invalidate the judgments is erroneous. (Emphasis ours.)
and orders of each other. Plaintiffs have not pursued the proper Concerning their second theory, — settlement or cancellation — appellants allege
remedy. This court is without authority and jurisdiction to declare null that the very implements sold "were duly returned" by them, and "were duly
and void the order directing the issuance of alias writ of execution received and accepted by the said vendor-mortgagee". Therefore they argue,
because it was made by another court of equal rank and category "upon the return of the same chattels and due acceptance of the same by the
(see Cabiao and Izquierdo vs. Del Rosario and Lim, 44 Phil., 82-186). vendor-mortgagee, the conditional sale is ipso facto cancelled, with the right of
WHEREFORE, judgement is hereby rendered dismissing the the vendor-mortgagee to appropriate whatever downpayment and posterior
complaint with costs against plaintiffs costs against plaintiffs. Let the monthly installments made by the purchaser as it did happen in the present case
writ of preliminiary injunction issued on August 26, 1954, be lifted. at bar."
The plaintiffs reasonably brought the matter to the Court of Appeals, but the latter The trouble with the argument is that it assumes that acceptance of the goods by
forwarded the expediente, being of the opinion that the appeal involved questions the Southern Motors Co, with a view to "cancellation" of the sale. The company
of jurisdiction and/or law denies such acceptance and cancellation, asserting the goods, were deposited in
Discussion. Appellants' brief elaborately explains in the nine errors assigned, their its shop when the sheriff attached them in pursuance of the execution. Its
original two theories although their "settlement" idea appears to be somewhat assertion is backed up by the sheriff, of whose credibility there is no reason to
modified. doubt. Anyway this cancellation or settlement theory may not be heeded now,
"What is being sought in this present action" say appellants "is to prohibit and because it would contravene the decision in Civil Case No. 2942 above-
forbid the appellee Sheriff of Iloilo from attaching and selling at public auction sale mentioned — it would show the Tajanlangits owned nothing to Southern Motors
the real properties of appellants because that is now forbidden by our law after Inc. Such decision is binding upon them, unless and until they manage to set it
the chattels that have been purchased and duly mortgagee had already been aside in a proper proceeding — and this is not it.
repossessed by the same vendor-mortgagee and later on sold at public auction There are other points involved in the case, such as the authority of the judge of
sale and purchased by the same at such meager sum of P10,000." one branch of a court of first instance to enjoin proceedings in another branch of
"Our law" provides, the same court. As stated, Judge Pelayo refused to interfere on that ground.
ART. 1484. In a contract of sale of personal property the price of Appellants insist this was error on several counts. We deem it unnecessary to
which is payable in installments, the vendor may exercise of the deal with this procedural aspect, inasmuch as we find that, on the merits, plaintiffs
following remedies: are not entitled to the relief demanded.
(1) Exact fulfillment of the obligation, should the vendee fail to pay; Judgment. The decision dismissing the complaint, is affirmed, with costs against
(2) Cancel the sale, should the vendee's failure to pay cover two or appellants. So ordered.
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. (New Civil Code.)
Appellants would invoke the last paragraph. But there has been no foreclosure of
the chattel mortgage nor a foreclosure sale. Therefore the prohibition against
further collection does not apply.
At any rate it is the actual sale of the mortgaged chattel in accordance
with section 14 Act No. 1508 that would bar the creditor (who chooses
to foreclose) from recovering any unpaid balance. (Pacific Com.
Co. vs.De la Rama, 72 Phil. 380.) (Manila Motor Co. vs. Fernandez,
99 Phil., 782.).
It is true that there was a chattel mortgage on the goods sold. But the Southern
Motors elected to sue on the note exclusively, i.e. to exact fulfillment of the
obligation to pay. It had a right to select among the three remedies established in
Article 1484. In choosing to sue on the note, it was not thereby limited to the
proceeds of the sale, on execution, of the mortgaged good. 2
In Southern Motors Inc. vs. Magbanua, (100 Phil., 155) a similar situation arose in
connection with the purchase on installment of a Chevrolet truck by Magbanua.
Upon the latter's default, suit on the note was filed, and the truck levied on
together with other properties of the debtor. Contending that the seller was limited
to the truck, the debtor obtained a discharge of the other properties. This court
said:
By praying that the defendant be ordered to pay the sum of P4,690
together with the stipulated interest at 12% per annum from 17 March
1954 until fully paid, plus 10 per cent of the total amount due as
attorney's fees and cost of collection, the plaintiff acted to exact the
fulfillment of the obligation and not to foreclose the mortgage on the
truck. . . .