SALES

3 (Art. 1484 1491)

G.R. No. L-14475 May 30, 1961 (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
SOUTHERN MOTORS, INC., plaintiff-appellee, mortgage on said truck; and
vs.
ANGELO MOSCOSO, defendant-appellant. (2) In rendering judgment in favor of the plaintiff-appellee.

Diosdado Garingalao for plaintiff-appellee. Both parties agreed that the case is governed by Article 1484 of the new Civil Case,
Calixto Zaldivar for defendant-appellant. which provides:

PAREDES, J.: 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:
The case was submitted on agreed statement of facts.
(1) Exact fulfillment of the obligation, should the vendee fail to pay; .
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 (2) Cancel the sale, should the vendee's failure to pay cover two or more installments;
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, (3) Foreclose the chattel mortgage on the thing sold, if one has been constituted,
complaint), to secure the payment of which, a chattel mortgage was constituted on should the vendee's failure to pay cover two or more installments. In this case, he
the truck in favor of the plaintiff (Annex B). Of said account of P4,915.00, the shall have no further action against the purchaser to recover any unpaid balance of
defendant had paid a total of P550.00, of which P110.00 was applied to the interest the price. Any agreement to the contrary shall be void.
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 While the appellee claims that in filing the complaint, demanding payment of the
purchase price. 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
On November 4, 1957, the plaintiff filed a complaint against the defendant, to appellant, on the other hand, contends that appellee had availed itself of the third
recover the unpaid balance of the promissory note. Upon plaintiff's petition, remedy viz, the foreclosure of the chattel mortgage on the truck.
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 The appellant argues that considering history of the law, the circumstances leading
house and lot belonging to defendant, were attached by the Sheriff of San Jose, to its enactment, the evil that the law was intended to correct and the remedy
Antique, where defendant was residing on November 25, 1957, and said truck was afforded (Art. 1454-A of the old Civil Code; Act No. 4122; Bachrach Motor Co. vs.
brought to the plaintiff's compound in Iloilo City, for safe keeping. 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
After attachment and before the trial of the case on the merits, acting upon the rendered in its favor, against the properties of the appellant; that the appellee
plaintiff's motion dated December 23, 1957, for the immediate sale of the mortgaged obtained a preliminary attachment on the subject of the chattel mortgage itself and
truck, the Provincial Sheriff of Iloilo on January 2, 1958, sold the truck at public caused said truck to be sold at public auction petition, in which he was bidder for
auction in which plaintiff itself was the only bidder for P1,000.00. The case had not P1,000.00; the result of which, was similar to what would have happened, had it
been set for hearing, then. 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
The trial court on March 27, 1958, condemned the defendant to pay the plaintiff the aforequoted. In other words, appellant submits that the matter should be looked at,
amount of P4,475.00 with interest at the rate of 12% per annum from August 16, not by the allegations in the complaint, but by the very effect and result of the
1957, until fully paid, plus 10% thereof as attorneys fees and costs against which procedural steps taken and that appellee tried to camouflage its acts by filing a
defendant interposed the present appeal, contending that the trial court erred complaint purportedly to exact the fulfillment of an obligation petition, in an attempt

SALES 3 (Art. 1484 1491)
to circumvent the provisions of Article 1484 of the new Civil Code. Appellant and may cause an attachment to be issued and levied on such property, upon
concludes that under his theory, a deficiency judgment would be without legal basis. beginning his civil action (Tizon vs. Valdez, 48 Phil. 910-911).

We do not share the views of the appellant on this matter. Manifestly, the appellee IN VIEW HEREOF, the judgment appealed from hereby is affirmed, with costs against
had chosen the first remedy. The complaint is an ordinary civil action for recovery of the defendant-appellant.
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 G.R. No. L-27862 November 20, 1974
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 LORENZO PASCUAL and LEONILA TORRES, plaintiffs-appellees,
have caused the chattel to be attached under Rule 59, and had it sold at public vs.
auction, in the manner prescribed by Rule 39. That the herein appellee did not intend UNIVERSAL MOTORS CORPORATION, defendant-appellant.
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 Cesar C. Peralejo for plaintiffs-appellees.
Southern Motors, Inc. vs. Magbanua, G.R. No. L-8578, Oct. 29, 1956, we held:
Francisco Carreon & Renato E. Taada for defendant-appellant.
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 MAKALINTAL, C.J.:p
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 In the lower court the parties entered into the following stipulation of facts:
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 1. That the plaintiffs executed the real estate mortgage subject matter of this
section 14 of the Chattel Mortgage Law. The fact that aside from the mortgaged complaint on December 14, 1960 to secure the payment of the indebtedness of PDP
truck, another Chevrolet truck and two parcels of land belonging to the defendant Transit, Inc. for the purchase of five (5) units of Mercedez Benz trucks under invoices
were attached, shows that the plaintiff did not intend to foreclose the mortgage. 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
As the plaintiff has chosen to exact the fulfillment of the defendant's obligation, the is the value of the mortgage.
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 2. That the principal obligation of P152,506.50 was to bear interest at 1% a
judgment. That part of the judgment against the properties of the defendant except month from December 14, 1960.
the mortgaged truck and discharging the writ of attachment on his other properties
is erroneous. 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'
We perceive nothing unlawful or irregular in appellee's act of attaching the principal, had paid to the defendant Universal Motors Corporation the sum of
mortgaged truck itself. Since herein appellee has chosen to exact the fulfillment of P92,964.91, thus leaving a balance of P68,641.69 including interest due as of
the appellant's obligation, it may enforce execution of the judgment that may be February 8, 1965.
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 4. That the aforementioned obligation guaranteed by the plaintiffs under the
house and lot at San Jose, Antique were also attached. No one can successfully Real Estate Mortgage, subject of this action, is further secured by separate deeds of
contest that the attachment was merely an incident to an ordinary civil action. chattel mortgages on the Mercedez Benz units covered by the aforementioned
(Sections 1 & 11, Rule 59; Sec. 16, Rule 39). The mortgage creditor may recover invoices in favor of the defendant Universal Motors Corporation.
judgment on the mortgage debt and cause an execution on the mortgaged property
SALES 3 (Art. 1484 1491)
5. That on March 19, 1965, the defendant Universal Motors Corporation filed to review by this Court. The appellant's bare allegation to the contrary cannot be
a complaint against PDP Transit, Inc. before, the Court of First Instance of Manila considered at this stage of the case.
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 The next contention is that what article 1484 withholds from the vendor is the right
plaintiffs' principal PDP Transit, Inc. including the five (5) units guaranteed under the to recover any deficiency from the purchaser after the foreclosure of the chattel
subject Real (Estate) Mortgage. 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
In addition to the foregoing the Universal Motors Corporation admitted during the been answered by this Court in this wise: "(T)o sustain appellant's argument is to
hearing that in its suit (C.C. No. 60201) against the PDP Transit, Inc. it was able to overlook the fact that if the guarantor should be compelled to pay the balance of the
repossess all the units sold to the latter, including the five (5) units guaranteed by the purchase price, the guarantor will in turn be entitled to recover what she has paid
subject real estate mortgage, and to foreclose all the chattel mortgages constituted from the debtor vendee (Art. 2066, Civil Code); so that ultimately, it will be the
thereon, resulting in the sale of the trucks at public auction. 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
With the foregoing background, the spouses Lorenzo Pascual and Leonila Torres, the given by Article 1484 would be indirectly subverted, and public policy overturned."
real estate mortgagors, filed an action in the Court of First Instance of Quezon City (Cruz vs. Filipinas Investment & Finance Corporation, L-24772, May 27, 1968; 23 SCRA
(Civil Case No. 8189) for the cancellation of the mortgage they constituted on two (2) 791).
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 The decision appealed from is affirmed, with costs against the defendant-appellant.
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 G.R. No. 82508 September 29, 1989
sum of P500.00. Unsatisfied with the decision, defendant interposed the present
appeal. FILINVEST CREDIT CORPORATION, petitioner,
vs.
In rendering judgment for the plaintiffs the lower court said in part: "... there does THE COURT OF APPEALS, JOSE SY BANG and ILUMINADA TAN SY
not seem to be any doubt that Art. 14842 of the New Civil Code may be applied in BANG,*respondents.
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 Labaquis, Loyola, Angara and Associates for petitioner.
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." Alfredo 1. Raya for private respondents.

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 SARMIENTO, J.:
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 This is a petition for review on certiorari of the decision, 1 dated March 17, 1988, of
that the purchaser had failed to pay two or more installments. The appellant also the Court of Appeals which affirmed with modification the decision 2 of the Regional
contends that in any event what article 1484 prohibits is for the vendor to recover Trial Court of Quezon, Branch LIX, Lucena City. The controversy stemmed from the
from the purchaser the unpaid balance of the price after he has foreclosed the chattel following facts: The private respondents, the spouses Jose Sy Bang and Iluminada
mortgage on the thing sold, but not a recourse against the security put up by a third Tan, were engaged in the sale of gravel produced from crushed rocks and used for
party. 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,
Both arguments are without merit. The first involves an issue of fact: whether or not to look for a rock crusher which they could buy. Mr. Mercurio referred the private
the sale was one on installments; and on this issue the lower court found that it was, respondents to the Rizal Consolidated Corporation which then had for sale one such
and that there was failure to pay two or more installments. This finding is not subject machinery described as:
SALES 3 (Art. 1484 1491)
per hour capacity of the machine as stated in the lease contract, the machine could
ONE UNIT LIPPMAN PORTABLE CRUSHING PLANT (RECONDITIONED) [sic] 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
JAW CRUSHER-10xl6 DOUBLE ROLL CRUSHER 16x16 similar written complaints to the petitioner, but the latter did not, however, act on
them. Subsequently, the private respondents stopped payment on the remaining
3 UNITS PRODUCT CONVEYOR checks they had issued to the petitioner. 5

75 HP ELECTRIC MOTOR 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
8 PCS. BRAND NEW TIRES CHASSIS NO. 19696 GOOD RUNNING CONDITION 3 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
Oscar Sy Bang, a brother of private respondent Jose Sy Bang, went to inspect the that their mortgaged properties were going to be sold at a public auction on May 25,
machine at the Rizal Consolidated's plant site. Apparently satisfied with the machine, 1983 at 10:00 o'clock in the morning at the Office of the Provincial Sheriff in Lucena
the private respondents signified their intent to purchase the same. They were City to satisfy their indebtedness to the petitioner. 7 To thwart the impending auction
however confronted with a problem-the rock crusher carried a cash price tag of P of their properties, the private respondents filed before the Regional Trial Court of
550,000.00. Bent on acquiring the machinery, the private respondents applied for Quezon, on May 4, 1983, 8 a complaint against the petitioner, for the rescission of
financial assistance from the petitioner, Filinvest Credit Corporation. The petitioner the contract of lease, annullment of the real estate mortgage, and for injunction and
agreed to extend to the private respondents financial aid on the following conditions: damages, with prayer for the issuance of a writ of preliminary injunction.9 On May
that the machinery be purchased in the petitioner's name; that it be leased (with 23, 1983, three days before the scheduled auction sale, the trial court issued a
option to purchase upon the termination of the lease period) to the private temporary restraining order commanding the Provincial Sheriff of Quezon, and the
respondents; and that the private respondents execute a real estate mortgage in petitioner, to refrain and desist from proceeding with the public auction. 10 Two
favor of the petitioner as security for the amount advanced by the latter. Accordingly, years later, on September 4, 1985, the trial court rendered a decision in favor of the
on May 18,1981, a contract of lease of machinery (with option to purchase) was private respondents, the dispositive portion of which reads:
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 WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered:
follows:
1. making the injunction permanent;
P10,000.00 - first 3 months
2. rescinding the contract of lease of the machinery and equipment and ordering the
23,000.00 - next 6 months 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
24,800.00 - next 15 months P470,950.00 it received from the latter as guaranty deposit and rentals with legal
interest thereon until the amount is fully restituted;
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 3. annulling the real estate mortgage constituted over the properties of the plaintiffs
favor of the petitioner a check for P150,550.00, as initial rental (or guaranty deposit), covered by Transfer Certificate of Title Nos. T32480 and T-5779 of the Registry of
and twenty-four (24) postdated checks corresponding to the 24 monthly rentals. In Deeds of Lucena City;
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 4. ordering the defendant corporation to pay plaintiffs P30,000.00 as attorney's fees
petitioner. The rock crusher was delivered to the private respondents on June 9, and the costs of the suit.
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, SO ORDERED. 11
sent a letter-complaint to the petitioner, alleging that contrary to the 20 to 40 tons
SALES 3 (Art. 1484 1491)
Dissatisfied with the trial court's decision, the petitioner elevated the case to the would become the property of the private respondents. This form of agreement has
respondent Court of Appeals. been criticized as a lease only in name. Thus in Vda. de Jose v. Barrueco 14 we stated:

On March 17, 1988, the appellate court, finding no error in the appealed judgment, Sellers desirous of making conditional sales of their goods, but who do not wish
affirmed the same in toto. 12 Hence, this petition. 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
Before us, the petitioner reasserts that the private respondents' cause of action is to the buyer to purchase for a small consideration at the end of term, provided the
not against it (the petitioner), but against either the Rizal Consolidated Corporation, so-called rent has been duly paid, or with stipulations that if the rent throughout the
the original owner-seller of the subject rock crusher, or Gemini Motors Sales which term is paid, title shall thereupon vest in the lessee. It is obvious that such
served as a conduit facilitator of the purchase of the said machine. The petitioner transactions are leases only in name. The so-called rent must necessarily be regarded
argues that it is a financing institution engaged in quasi-banking activities, primarily as payment of the price in installments since the due payment of the agreed amount
the lending of money to entrepreneurs such as the private respondents and the results, by the terms of bargain, in the transfer of title to the lessee. 15
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 The importance of the criticism is heightened in the light of Article 1484 of the new
only admits having financed its acquisition by the private respondents. Further, the Civil Code which provides for the remedies of an unpaid seller of movables on
petitioner absolves itself of any liability arising out of the lease contract it signed with installment basis.
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 Article 1484. In a contract of sale of personal property the price of which is payable
knowledgeable about machineries, should be held responsible for the detection of in installments, the vendor may exercise any of the following remedies:
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 (1) Exact fulfillment of the obligation, should the vendee fail to pay;
of prescription, invoking Article 1571 of the Civil Code, which provides:
(2) Cancel the sale, should the vendee's failure to pay cover two or more installments;
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. (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
We find the petitioner's first contention untenable. While it is accepted that the shall have no further action against the purchaser to recover any unpaid balance of
petitioner is a financing institution, it is not, however, immune from any recourse by the price. Any agreement to the contrary shall be void.
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 Under the aforequoted provision, the seller of movables in installments, in case the
the rock crusher was purchased from Rizal Consolidated Corporation in the name and buyer fails to pay two or more installments may elect to pursue either of the following
with the funds of the petitioner proves beyond doubt that the ownership thereof was remedies: (1) exact fulfillment by the purchaser of the obligation; (2) cancel the sale;
effectively transferred to it. It is precisely this ownership which enabled the petitioner or (3) foreclose the mortgage on the purchased property if one was constituted
to enter into the "Contract of Lease of Machinery and Equipment" with the private thereon. It is now settled that the said remedies are alternative and not cumulative
respondents. and therefore, the exercise of one bars the exercise of the others.

Be that as it may, the real intention of the parties should prevail. The nomenclature Indubitably, the device contract of lease with option to buy is at times resorted to as
of the agreement cannot change its true essence, i.e., a sale on installments. It is basic a means to circumvent Article 1484, particularly paragraph (3) thereof.Through the
that a contract is what the law defines it and the parties intend it to be, not what it is set-up, the vendor, by retaining ownership over the property in the guise of being
called by the parties. 13 It is apparent here thatthe intent of the parties to the subject the lessor, retains, likewise, the right to repossess the same, without going through
contract is for the so-called rentals to be the installment payments. Upon the the process of foreclosure, in the event the vendee-lessee defaults in the payment of
completion of the payments, then the rock crusher, subject matter of the contract, the installments. There arises therefore no need to constitute a chattel mortgage
over the movable sold. More important, the vendor, after repossessing the property
SALES 3 (Art. 1484 1491)
and, in effect, canceling the contract of sale, gets to keep all the installments-cum- the private respondents had expressly exempted the petitioner from any warranty
rentals already paid. It is thus for these reasons that Article 1485 of the new Civil whatsoever. Their Contract of Lease Of Machinery And Equipment states:
Code provides that:
WARRANTY-LESSEE absolutely releases the lessor from any liability whatsoever as to
Article 1485. The preceding article shall be applied to contracts purporting to be any and all matters in relation to warranty in accordance with the provisions
leases of personal property with option to buy, when the lessor has deprived the hereinafter stipulated. 17
lessee of possession or enjoyment of the thing. (Emphasis ours.)
Taking into account that due to the nature of its business and its mode of providing
Unfortunately, even with the foregoing findings, we however fail to find any reason financial assistance to clients, the petitioner deals in goods over which it has no
to hold the petitioner liable for the rock crusher's failure to produce in accordance sufficient know-how or expertise, and the selection of a particular item is left to the
with its described capacity. According to the petitioner, it was the private client concerned, the latter, therefore, shoulders the responsibility of protecting
respondents who chose, inspected, and tested the subject machinery. It was only himself against product defects. This is where the waiver of warranties is of
after they had inspected and tested the machine, and found it to their satisfaction, paramount importance. Common sense dictates that a buyer inspects a product
that the private respondents sought financial aid from the petitioner. These before purchasing it (under the principle of caveat emptor or "buyer beware") and
allegations of the petitioner had never been rebutted by the private respondents. In does not return it for defects discovered later on, particularly if the return of the
fact, they were even admitted by the private respondents in the contract they signed. product is not covered by or stipulated in a contract or warranty. In the case at bar,
Thus: 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
LESSEE'S SELECTION, INSPECTION AND VERIFICATION.-The LESSEE hereby confirms mere surplusage in the contract between the parties. Moreover, nowhere is it shown
and acknowledges that he has independently inspected and verified the leased in the records of the case that the private respondent has argued for its nullity or
property and has selected and received the same from the Dealer of his own choosing illegality. In any event, we find no ambiguity in the language of the waiver or the
in good order and excellent running and operating condition and on the basis of such release of warranty. There is therefore no room for any interpretation as to its effect
verification, etc. the LESSEE has agreed to enter into this Contract." 16 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
Moreover, considering that between the parties, it is the private respondents, by the rock crusher. Hence, they should bear the loss for any defect found therein.
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 WHEREFORE, the Petition is GRANTED; the Decision of the Court of Appeals dated
now to complain of any alleged deficiency of the said machinery. It is their failure or March 17, 1988 is hereby REVERSED AND SET ASIDE, and another one rendered
neglect to exercise the caution and prudence of an expert, or, at least, of a prudent DISMISSING the complaint. Costs against the private respondents.
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 SO ORDERED.
two parties, he, who by his negligence caused the loss, shall bear the same.
G.R. No. L-39806 January 27, 1983
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 LUIS RIDAD and LOURDES RIDAD, plaintiffs-appellees,
stipulations in the contract they entered into with the petitioner is an express waiver vs.
of warranties in favor of the latter. By so signing the agreement, the private FILIPINAS INVESTMENT and FINANCE CORPORATION, JOSE D. SEBASTIAN and
respondents absolved the petitioner from any liability arising from any defect or JOSE SAN AGUSTIN, in his capacity as Sheriff, defendants-appellants.
deficiency of the machinery they bought. The stipulation on the machine's
production capacity being "typewritten" and that of the waiver being "printed" does Osmundo Victoriano for plaintiffs-appellees.
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 Wilhelmina V. Joven for defendant-appellants.

SALES 3 (Art. 1484 1491)
effect.1wph1.t The certificate of sale issued by the City Sheriff of Manila in favor
DE CASTRO, J: of Filipinas Investment and Finance Corporation concerning plaintiffs' taxicab
franchise for P8,000 is accordingly cancelled and set aside, and the assignment
Appeal from the decision of the Court of First Instance of Rizal, Branch I, in Civil Case thereof made by Filipinas Investment in favor of defendant Jose Sebastian is declared
No. 9140 for annulment of contract, originally filed with the Court of Appeals but was void and of no legal effect. (Record on Appeal, p. 128).
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. 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
The materials facts of the case appearing on record may be stated as follows: On April court five alleged errors, as follows:
14, 1964, plaintiffs purchased from the Supreme Sales arid Development Corporation
two (2) brand new Ford Consul Sedans complete with accessories, for P26,887 I
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 THE LOWER COURT ERRED IN DECLARING THE CHATTEL MORTGAGE, EXHIBIT "C",
mortgage not only on the two vehicles purchased but also on another car (Chevrolet) NULL AND VOID.
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 II
of the plaintiffs, the vendor assigned its rights, title and interest to the above-
mentioned promissory note and chattel mortgage to defendant Filipinas Investment THE LOWER COURT ERRED IN HOLDING THAT THE SALE AT PUBLIC AUCTION
and Finance Corporation. CONDUCTED BY THE CITY SHERIFF OF MANILA CONCERNING THE TAXICAB
FRANCHISE IS OF NO LEGAL EFFECT.
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 III
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 THE LOWER COURT ERRED IN SETTING ASIDE THE CERTIFICATE OF SALE ISSUED BY
auction sale was held on November 16, 1965, involving the remaining properties THE CITY SHERIFF OF MANILA IN FAVOR OF FILIPINAS INVESTMENT AND FINANCE
subject of the deed of chattel mortgage since plaintiffs' obligation was not fully CORPORATION COVERING PLAINTIFFS' TAXICAB FRANCHISE.
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 IV
the highest bidder, herein defendant corporation, which subsequently sold and
conveyed the same to herein defendant Jose D. Sebastian, who then filed with the THE LOWER COURT ERRED IN DECLARING VOID AND OF NO LEGAL EFFECT THE
Public Service Commission an application for approval of said sale in his favor. ASSIGNMENT OF THE TAXICAB FRANCHISE MADE BY FILIPINAS INVESTMENT AND
FINANCE CORPORATION IN FAVOR OF DEFENDANT.
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 V
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 LOWER COURT (sic) IN NOT DECIDING THE CASE IN FAVOR OF THE DEFENDANTS.
the basis of the documentary evidence adduced by the parties during the pre-trial Appellants' Brief, pp. 9 & 10)
conference. Thereafter, the lower court rendered judgment as follows:
From the aforequoted assignment of errors, the decisive issue for consideration is
IN VIEW OF THE ABOVE CONSIDERATIONS, this Court declares the chattel mortgage, the validity of the chattel mortgage in so far as the franchise and the subsequent sale
Exhibit "C", to be null and void in so far as the taxicab franchise and the used thereof are concerned.
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
SALES 3 (Art. 1484 1491)
The resolution of said issue is unquestionably governed by the provisions of Article the case at bar. There, we have the same situation wherein the vendees offered as
1484 of the Civil Code which states: 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.
Art. 1484. In a contract of sale of personal property the price of which is payable in This Court sustained the pronouncement made by the lower court on the nullity of
installments, the vendor may exercise y of the following remedies: 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
(1) Exact fulfillment of the obligation, should the vendee fail to pay; 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
(2) Cancel the sale, should the vendee's failure to pay cover two or more of foreclosure, he cannot nor should he be allowed to insist on the sale of the house
installments; 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
(3) Foreclose the chattel mortgage on the thing sold, if one has been from those which were sold on installment. This would indeed be contrary to public
constituted, should the vendee's failure to pay cover two or more installments. In this policy and the very spirit and purpose of the law, limiting the vendor's right to
case, he shall have no further action against the purchaser to recover any unpaid foreclose the chattel mortgage only on the thing sold.
balance of the price. Any agreement to the contrary shall be void.
In the case of Cruz v. Filipinos Investment & Finance Corporation, 23 SCRA 791, this
Under the above-quoted article of the Civil Code, the vendor of personal property Court ruled that the vendor of personal property sold on the installment basis is
the purchase price of which is payable in installments, has the right, should the precluded, after foreclosing the chattel mortgage on the thing sold from having a
vendee default in the payment of two or more of the agreed installments, to exact recourse against the additional security put up by a third party to guarantee the
fulfillment by the purchaser of the obligation, or to cancel the sale, or to foreclose purchaser's performance of his obligation on the theory that to sustain the same
the mortgage on the purchased personal property, if one was constituted. 1 would overlook the fact that if the guarantor should be compelled to pay the balance
Whichever right the vendor elects, he cannot avail of the other, these remedies being of the purchase price, said guarantor will in turn be entitled to recover what he has
alternative, not cumulative. 2 Furthermore, if the vendor avails himself of the right paid from the debtor-vendee, and ultimately it will be the latter who will be made to
to foreclose his mortgage, the law prohibits him from further bringing an action bear the payment of the of the balance of the price, despite the earlier foreclosure
against the vendee for the purpose of recovering whatever balance of the debt of the chattel mortgage given by him, thereby indirectly subverting the protection
secured not satisfied by the foreclosure sale. 3 The precise purpose of the law is to given the latter. Consequently, the additional mortgage was ordered cancelled. Said
prevent mortgagees from seizing the mortgaged property, buying it at foreclosure ruling was reiterated in the case of Pascual v. Universal Motors Corporation, 61 SCRA
sale for a low price and then bringing suit against the mortgagor for a deficiency 121. If the vendor under such circumstance is prohibited from having a recourse
judgment, otherwise, the mortgagor-buyer would find himself without the property against the additional security for reasons therein stated, there is no ground why
and still owing practically the full amount of his original indebtedness. 4 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
In the instant case, defendant corporation elected to foreclose its mortgage upon being tantamount to a further action 5 that would violate Article 1484 of the Civil
default by the plaintiffs in the payment of the agreed installments. Having chosen to Code, for then is actually no between an additional security put up by the vendee
foreclose the chattel mortgage, and bought the purchased vehicles at the public himself and such security put up by a third party insofar as how the burden would
auction as the highest bidder, it submitted itself to the consequences of the law as ultimately fall on the vendee himself is concerned.
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 Reliance on the ruling in Southern Motors, inc. v. Moscoso, 2 SCRA 168, that in sales
as well as the payment of the unpaid balance. 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
Consequently, the lower court rightly declared the nullity of the chattel mortgage in of the mortgage, hence, the seller creditor is entitled to a deficiency judgment, does
question in so far as the taxicab franchise and the used Chevrolet car of plaintiffs are not for the stand of the appellants for that case is entirely different from the case at
concerned, under the authority of the ruling in the case of Levy Hermanos, Inc. vs. bar. In that case, the vendor has availed of the first remedy provided by Article 1484
Pacific Commercial Co., et al., 71 Phil. 587, the facts of which are similar to those in
SALES 3 (Art. 1484 1491)
of the Civil Code, i.e., to exact fulfillment of the obligation whereas in the present 2. ID.; ID.; ID.; ID.; EFFECT OF FAILURE OF VENDOR TO FORECLOSE THE
case, the remedy availed of was foreclosure of the chattel mortgage. 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
The foregoing disposition renders superfluous a determination of the other issue mortgage as shown by the fact that no auction sale of the vehicle was ever
raised by the parties as to the validity of the auction sale, in so far as the franchise of conducted. As we ruled in Filinvest Credit Corp. v. Phil. Acetylene Co., Inc. (G.R. No.
plaintiffs is concerned, which sale had been admittedly held without any notice to 50449, January 1982, 111 SCRA 421) "Under the law, the delivery of possession of
the plaintiffs. 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
IN VIEW HEREOF, the judgment appealed from is hereby affirmed, with costs against of the mortgaged property when it recovered possession thereof (Northern Motors,
the appellants. 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
SO ORDERED. 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
[G.R. No. 94828. September 18, 1992.] 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,
SPOUSES ROMULO DE LA CRUZ and DELIA DE LA CRUZ, and DANIEL FAJARDO, such desistance was a timely disavowal of the remedy of foreclosure, and the vendor
Petitioners, v. ASIAN CONSUMER AND INDUSTRIAL FINANCE CORPORATION and can still sue for specific performance" (Industrial Finance Corp. v. Tobias, 78 SCRA 28
the HONORABLE COURT OF APPEALS, Respondents. [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
SYLLABUS resorting to an ordinary action for collection of the unpaid balance of the purchase
price.

1. CIVIL LAW; SPECIAL CONTRACTS; SALE; REMEDIES OF UNPAID SELLER OF 3. ID.; ID.; ID.; ID.; ID.; POSSESSION OF MORTGAGED PROPERTY SHOULD BE
PERSONAL PROPERTY PAYABLE IN INSTALLMENT; RULE. The instant case is covered RETURNED TO MORTGAGEE-VENDEE UPON PAYMENT OF UNPAID BALANCE; CASE AT
by the so-called "Recto Law", now Art. 1484 of the New Civil Code, which provides: BAR. We note however that the trial court, as well as the Court of Appeals failed
"In a contract of sale of personal property the price of which is payable in to consider that the vehicle was already in the possession of ASIAN when it directed
installments, the vendor may exercise any of the following remedies: (1) Exact petitioners herein to pay P184,466.67 representing the balance of the purchase price
fulfillment of the obligation, should the vendee fail to pay; (2) Cancel the sale, should of the mortgaged property. Law and equity will not permit ASIAN to have its cake and
the vendees failure to pay cover two or more installments; (3) Foreclose the chattel eat it too, so to speak. By allowing ASIAN to retain possession of the vehicle and then
mortgage on the thing sold, if one has been constituted, should the vendees failure directing petitioners to pay the unpaid balance would certainly result in unjust
to pay cover two or more installments. In this case, he shall have no further action enrichment of the former. Accordingly, the ownership and possession of the vehicle
against the purchaser to recover any unpaid balance of the price. Any agreement to should be returned to petitioners by ASIAN in the condition that it was when
the contrary shall be void." In this jurisdiction, the three (3) remedies provided for in delivered to it, and if this be no longer feasible, to deduct from the adjudged liability
the "Recto Law" are alternative and not cumulative; the exercise of one would of petitioners the amount of P60,000.00, its corresponding appraised value.
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 D E C I S I O N
the obligation, to cancel the sale, or to foreclose the mortgage on the purchased
chattel, if one was constituted. (Pacific Commercial Co. v. De la Rama, 72 Phil. 380
(1941); Manila Motor, Inc. v. Fernandez, 99 Phil. 782 (1956); Radiowealth v. Lavin, L- BELLOSILLO, J.:
18563, April 27, 1963, 7 SCRA 804).

SALES 3 (Art. 1484 1491)
The pivotal point before Us is whether a chattel mortgagee, after opting to foreclose "Though the remedy of foreclosure was first chosen, this remedy however proved
the mortgage but failing afterwards to sell the property at public auction, may still ineffectual due to no fault of plaintiff. Therefore, plaintiff may exercise other
sue to recover the unpaid balance of the purchase price. 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."
On 22 September 1982, the spouses Romulo de la Cruz and Delia de la Cruz, and one cralawnad
Daniel Fajardo, petitioners herein, purchased on installment basis one (1) unit Hino
truck from Benter Motor Sales Corporation (BENTER for brevity). To secure payment, Petitioners take exception. While they do not dispute that where the mortgagee
they executed in favor of BENTER a chattel mortgage over the vehicle 1 and a elects the remedy of foreclosure which, according to them, includes the option to sell
promissory note for P282,360.00 payable in thirty (30) monthly installments of in a public or private sale, commences and pursues it, and in consideration of which
P9,412.00. 2 On the same date, BENTER assigned its rights and interest over the he also performs everything that is incumbent upon him to do to implement the
vehicle in favor of private respondent Asian Consumer and Industrial Finance foreclosure they nevertheless insist that he should not later be allowed to change
Corporation (ASIAN for brevity). 3 Although petitioners initially paid some course midway in the process, abandon the foreclosure and shift to other remedies
installments they subsequently defaulted on more than two (2) installments. such as collection of the balance, especially after having recovered the mortgaged
Thereafter, notwithstanding the demand letter of ASIAN, 4 petitioners failed to settle chattel from them and while retaining possession thereof.
their obligation.
We do not agree with petitioners.
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 It is not disputed that the instant case is covered by the so-called "Recto Law", now
because of the refusal of the son of petitioner, Rolando de la Cruz to surrender the Art. 1484 of the New Civil Code, which provides:jgc:chanrobles.com.ph
same. Hence, the return of the sheriff that the service was not satisfied.chanrobles
law library : red "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
On 10 October 1984, petitioner Romulo de la Cruz brought the vehicle to the office fulfillment of the obligation, should the vendee fail to pay; (2) Cancel the sale, should
of ASIAN and left it there where it was inventoried and inspected. 5 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
On 27 November 1984, ASIAN filed an ordinary action with the court a quo for to pay cover two or more installments. In this case, he shall have no further action
collection of the balance of P196,152.99 of the purchase price, plus liquidated against the purchaser to recover any unpaid balance of the price. Any agreement to
damages and attorneys fees. 6 the contrary shall be void."cralaw virtua1aw library

After trial, the court below rendered judgment in favor of ASIAN. 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
On appeal, the Court of Appeals affirmed the judgment and held that 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
". . . no extrajudicial foreclosure of chattel mortgage ever transpired in the case at of any of these three (3) remedies: either to exact fulfillment of the obligation, to
bar. Undoubtedly, plaintiff had first chosen to extrajudically foreclose the mortgage, cancel the sale, or to foreclose the mortgage on the purchased chattel, if one was
but this did not materialize through no fault of plaintiff, as defendant refused to constituted. 7
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 The records show that on 14 September 1984 ASIAN initiated a petition for
conclusive of the extrajudicial foreclosure, for in this kind of foreclosure, possession extrajudicial foreclosure of the chattel mortgage. But the sheriff failed to recover the
of the chattel by the sheriff is necessary, aside from the sale at public auction."cralaw motor vehicle from petitioners due to the refusal of the son of petitioners Romulo
virtua1aw library 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
SALES 3 (Art. 1484 1491)
balance of the purchase price was instituted on 27 November 1984.chanrobles virtual [G.R. No. 107846. April 18, 1997]
lawlibrary
LEOVILLO C. AGUSTIN, petitioner, vs. COURT OF APPEALS and FILINVEST FINANCE
It is thus clear that while ASIAN eventually succeeded in taking possession of the CORP., respondents.
mortgaged vehicle, it did not pursue the foreclosure of the mortgage as shown by the R E S O L U T I O N
fact that no auction sale of the vehicle was ever conducted. As we ruled in Filinvest
Credit Corp. v. Phil. Acetylene Co., Inc. 8 FRANCISCO, J.:

"Under the law, the delivery of possession of the mortgaged property to the This is an appeal by certiorari from the decision of respondent Court of Appeals in
mortgagee, the herein appellee, can only operate to extinguish appellants liability if CA-G.R. No. 24684[1] which affirmed the order of Regional Trial Court, Branch 40,
the appellee had actually caused the foreclosure sale of the mortgaged property Manila, in Civil Case No. 84804.[2]
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 The dispute stemmed from an unpaid promissory note dated October 28, 1970,
Motors Co., Inc. v. Fernandez, 99 Phil. 782 [1956]). It is worth noting that it is the fact executed by petitioner Leovillo C. Agustin in favor of ERM Commercial for the amount
of foreclosure and actual sale of the mortgaged chattel that bar recovery by the of P43,480.80. The note was payable in monthly installments[3] and secured by a
vendor of any balance of the purchasers outstanding obligation not satisfied by the chattel mortgage over an Isuzu diesel truck,[4] both of which were subsequently
sale (New Civil Code, par. 3, Article 1484). As held by this Court, if the vendor desisted, assigned to private respondent Filinvest Finance Corporation.[5] When petitioner
on his own initiative, from consummating the auction sale, such desistance was a defaulted in paying the installments, private respondent demanded from him the
timely disavowal of the remedy of foreclosure, and the vendor can still sue for specific payment of the entire balance or, in lieu thereof, the possession of the mortgaged
performance" (Industrial Finance Corp. v. Tobias, 78 SCRA 28 [1977]; Radiowealth, vehicle. Neither payment nor surrender was made. Aggrieved, private respondent
Inc. v. Lavin, L-18563, April 27, 1963, 7 SCRA 804; Pacific Commercial Co. v. dela Rama, filed a complaint with the Regional Trial Court of Manila, Branch 26 (RTC Branch 26)
72 Phil. 380 [1941]). 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
Consequently, in the case before Us, there being no actual foreclosure of the date until fully paid.[6] Trial ensued and, thereafter, a writ of replevin was issued by
mortgaged property, ASIAN is correct in resorting to an ordinary action for collection RTC Branch 26. By virtue thereof, private respondent acquired possession of the
of the unpaid balance of the purchase price. vehicle. Upon repossession, the latter discovered that the vehicle was no longer in
running condition and that several parts were missing which private respondent
We note however that the trial court, as well as the Court of Appeals failed to replaced. The vehicle was then foreclosed and sold at public auction.
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 Private respondent subsequently filed a supplemental complaint claiming additional
of the mortgaged property. Law and equity will not permit ASIAN to have its cake and reimbursement worth P8,852.76 as value of replacement parts[7] and for expenses
eat it too, so to speak. By allowing ASIAN to retain possession of the vehicle and then incurred in transporting the mortgaged vehicle from Cagayan to Manila. In response,
directing petitioners to pay the unpaid balance would certainly result in unjust petitioner moved to dismiss the supplemental complaint arguing that RTC Branch 26
enrichment of the former. Accordingly, the ownership and possession of the vehicle had already lost jurisdiction over the case because of the earlier extra-judicial
should be returned to petitioners by ASIAN in the condition that it was when foreclosure of the mortgage. The lower court granted the motion and the case was
delivered to it, and if this be no longer feasible, to deduct from the adjudged liability dismissed.[8] Private respondent elevated the matter to the appellate court,
of petitioners the amount of P60,000.00, its corresponding appraised value. 9 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]
WHEREFORE, the assailed decision is AFFIRMED, with the MODIFICATION that the This decision became final and executory, hence the case was accordingly remanded
subject vehicle be returned to petitioners or, at their option, they be allowed to to the Regional Trial Court of Manila, Branch 40 (RTC Branch 40) for reception of
deduct P60,000.00 from their adjudged liability. No costs. 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
SO ORDERED. damages, bonding fees and other expenses in the seizure of the vehicle in the
SALES 3 (Art. 1484 1491)
aggregate sum of P18,547.38. Petitioner moved for reconsideration. Acting thereon, At any rate, even if we were to brush aside the law of the case doctrine we find the
RTC Branch 40 modified its decision by lowering the monetary award to P8,852.76, award for repossession expenses still proper. In Filipinas Investment & Finance
the amount originally prayed for in the supplemental complaint.[11] Private Corporation v. Ridad,[17] the Court recognized an exception to the rule stated under
respondent appealed the case with respect to the reduction of the amount awarded. Article 1484(3) upon which petitioner relies. Thus:
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 x x x Where the mortgagor plainly refuses to deliver the chattel subject of the
foreclosure sale. Both appeals were consolidated and in CA- G.R. No. 24684, the mortgage upon his failure to pay two or more installments, or if he conceals the
modified order of RTC Branch 40 was affirmed. Petitioner filed a motion for chattel to place it beyond the reach of the mortgagee, what then is the mortgagee
reconsideration, but to no avail[12] Hence, this petition for review on certiorari. 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
Petitioner contends that the award of repossession expenses to private respondent replevin so that he can regain possession of the chattel, should be borne by the
as mortgagee is "contrary to the letter, intent and spirit of Article 1484[13] of the Civil mortgagor. Recoverable expenses would, in our view, include expenses properly
Code".[14] He asserts that private respondents repossession expenses have been incurred in effecting seizure of the chattel and reasonable attorneys fees in
amply covered by the foreclosure of the chattel mortgage, hence he could no longer prosecuting the action for replevin.[18]
be held liable. The arguments are devoid of merit.
Anent the denial of the award for attorneys fees, we find the same in order. The trial
Petitioners contentions, we note, were previously rejected by respondent court in its court, as well as respondent court, found no evidence to support the claim for
decision in CA-G.R. No. 56718-R the dispositive portion of which provides as follows: 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.
"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 ACCORDINGLY, the petition is DENIED for lack of merit, and the decision of the Court
incurred in effecting seizure of the chattel (and) of recoverable attorney's fees in of Appeals is hereby AFFIRMED in toto.
prosecuting the action for replevin' as `repossession expenses' prayed for in the
supplemental complaint, without pronouncement as to costs."[15] SO ORDERED.

which ruling has long acquired finality. It is clear, therefore, that the appellate court G.R. No. 81552 May 28, 1990
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 DIONISIO FIESTAN and JUANITA ARCONADO, petitioners
purpose of threshing out the correct amount of expenses and not for relitigating the vs.
accuracy of the award. Thus, the findings of RTC Branch 40, as affirmed by the COURT OF APPEALS; DEVELOPMENT BANK OF THE PHILIPPINES, LAOAG CITY
appellate court in CA-G.R. No. 24684, was confined to the appreciation of evidence BRANCH; PHILIPPINE NATIONAL BANK, VIGAN BRANCH, ILOCOS SUR, FRANCISCO
relative to the repossession expenses for the query or issue passed upon by the PERIA and REGISTER OF DEEDS OF ILOCOS SUR, respondents.
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 Pedro Singson Reyes for petitioners.
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 The Chief Legal Counsel for PNB.
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 Public Assistance Office for Francisco Peria.
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 Ruben O. Fruto, Bonifacio M. Abad and David C. Frez for DBP Laoag Branch.
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.
FERNAN, C.J.:
SALES 3 (Art. 1484 1491)
After trial, the RTC of Vigan, Ilocos Sur, Branch 20, rendered its decision 2 on
In this petition for review on certiorari, petitioners spouses Dionisio Fiestan and November 14, 1983 dismissing the complaint, declaring therein, as valid the
Juanita Arconada owners of a parcel of land (Lot No. 2B) situated in Ilocos Sur covered extrajudicial foreclosure sale of the mortgaged property in favor of the DBP as highest
by TCT T-13218 which they mortgaged to the Development Bank of the Philippines bidder in the public auction sale held on August 6, 1979, and its subsequent sale by
(DBP) as security for their P22,400.00 loan, seek the reversal of the decision of the DBP to Francisco Peria as well as the real estate mortgage constituted thereon in
Court of Appeals 1 dated June 5, 1987 affirming the dismissal of their complaint filed favor of PNB Vigan as security for the P115,000.00 loan of Francisco Peria.
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 The Court of Appeals affirmed the decision of the RTC of Vigan, Ilocos Sur on June 20,
Ilocos Sur, for annulment of sale, mortgage, and cancellation of transfer certificates 1987.
of title.
The motion for reconsideration having been denied 3 on January 19, 1988,
Records show that Lot No. 2-B was acquired by the DBP as the highest bidder at a petitioners filed the instant petition for review on certiorari with this Court.
public auction sale on August 6, 1979 after it was extrajudicially foreclosed by the Petitioners seek to annul the extrajudicial foreclosure sale of the mortgaged property
DBP in accordance with Act No. 3135, as amended by Act No. 4118, for failure of on August 6, 1979 in favor of the Development Bank of the Philippines (DBP) on the
petitioners to pay their mortgage indebtedness. A certificate of sale was ground that it was conducted by the Provincial Sheriff of Ilocos Sur without first
subsequently issued by the Provincial Sheriff of Ilocos Sur on the same day and the effecting a levy on said property before selling the same at the public auction sale.
same was registered on September 28, 1979 in the Office of the Register of Deeds of Petitioners thus maintained that the extrajudicial foreclosure sale being null and void
Ilocos Sur. Earlier, or on September 26, 1979, petitioners executed a Deed of Sale in by virtue of lack of a valid levy, the certificate of sale issued by the Provincial Sheriff
favor of DBP which was likewise registered on September 28, 1979. 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
Upon failure of petitioners to redeem the property within the one (1) year period mortgage constituted thereon by the latter in favor of PNB Vigan Branch are likewise
which expired on September 28, 1980, petitioners' TCT T-13218 over Lot No. 2-B was null and void.
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. The Court finds these contentions untenable.

On April 13,1982, the DBP sold the lot to Francisco Peria in a Deed of Absolute Sale The formalities of a levy, as an essential requisite of a valid execution sale under
and the same was registered on April 15, 1982 in the Office of the Register of Deeds Section 15 of Rule 39 and a valid attachment lien under Rule 57 of the Rules of Court,
of Ilocos Sur. Subsequently, the DBP's title over the lot was cancelled and in lieu are not basic requirements before an extrajudicially foreclosed property can be sold
thereof TCT T-19229 was issued to Francisco Peria. 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
After title over said lot was issued in his name, Francisco Peria secured a tax sale, and an extrajudicial foreclosure sale, because a different set of law applies to
declaration for said lot and accordingly paid the taxes due thereon. He thereafter each class of sale mentioned. An ordinary execution sale is governed by the pertinent
mortgaged said lot to the PNB Vigan Branch as security for his loan of P115,000.00 as provisions of Rule 39 of the Rules of Court. Rule 68 of the Rules of Court applies in
required by the bank to increase his original loan from P49,000.00 to P66,000.00 until cases of judicial foreclosure sale. On the other hand, Act No. 3135, as amended by
it finally reached the approved amount of P115,000.00. Since petitioners were still in Act No. 4118 otherwise known as "An Act to Regulate the Sale of Property under
possession of Lot No. 2-B, the Provincial Sheriff ordered them to vacate the premises. Special Powers Inserted in or Annexed to Real Estate Mortgages" applies in cases of
extrajudicial foreclosure sale.
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- The case at bar, as the facts disclose, involves an extrajudicial foreclosure sale. The
Laoag City, PNB Vigan Branch, Ilocos Sur, Francisco Peria and the Register of Deeds public auction sale conducted on August 6, 1979 by the Provincial Sheriff of Ilocos Sur
of Ilocos Sur, docketed as Civil Case No. 3447-V before the Regional Trial Court of refers to the "sale" mentioned in Section 1 of Act No. 3135, as amended, which was
Vigan, Ilocos Sur. 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.
SALES 3 (Art. 1484 1491)
It must be noted that in the mortgage contract, petitioners, as mortgagor, had creditor or any other person authorized to act for him to sell said property in
appointed private respondent DBP, for the purpose of extrajudicial foreclosure, "as accordance with the formalities required under Act No. 3135, as amended.
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 The Court finds that the formalities prescribed under Sections 2, 3 and 4 of Act No.
purpose .... In case of foreclosure, the Mortgagor hereby consents to the 3135, as amended, were substantially complied with in the instant case. Records
appointment of the mortgagee or any of its employees as receiver, without any bond, show that the notices of sale were posted by the Provincial Sheriff of Ilocos Sur and
to take charge of the mortgaged property at once, and to hold possession of the same the same were published in Ilocos Times, a newspaper of general circulation in the
... 4 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
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 The nullity of the extrajudicial foreclosure sale in the instant case is further sought by
well as the jurisprudence under said provision, to an extrajudicial foreclosure sale petitioners on the ground that the DBP cannot acquire by purchase the mortgaged
conducted under the provisions of Act No. 3135, as amended. Act No. 3135, as property at the public auction sale by virtue of par. (2) of Article 1491 and par. (7) of
amended, being a special law governing extrajudicial foreclosure proceedings, the Article 1409 of the Civil Code which prohibits agents from acquiring by purchase, even
same must govern as against the provisions on ordinary execution sale under Rule 39 at a public or judicial auction either in person or through the mediation of another,
of the Rules of Court. the property whose administration or sale may have been entrusted to them unless
the consent of the principal has been given.
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 The contention is erroneous.
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 The prohibition mandated by par. (2) of Article 1491 in relation to Article 1409 of the
practice in a judicial foreclosure sale to an extrajudicial foreclosure sale in a similar Civil Code does not apply in the instant case where the sale of the property in dispute
case considering that the governing provisions of law as mandated by Section 6 of was made under a special power inserted in or attached to the real estate mortgage
Act No. 3135, as amended, specifically Sections 29, 30 and 34 of Rule 39 of the Rules pursuant to Act No. 3135, as amended. It is a familiar rule of statutory construction
of Court (previously Sections 464, 465 and 466 of the Code of Civil Procedure) are that, as between a specific statute and general statute, the former must prevail since
silent on the matter. The said ruling cannot, however, be construed as the legal basis it evinces the legislative intent more clearly than a general statute does. 7 The Civil
for applying the requirement of a levy under Section 15 of Rule 39 of the Rules of Code (R.A. 386) is of general character while Act No. 3135, as amended, is a special
Court before an extrajudicially foreclosed property can be sold at public auction when enactment and therefore the latter must prevail. 8
none is expressly required under Act No. 3135, as amended.
Under Act No. 3135, as amended, a mortgagee-creditor is allowed to participate in
Levy, as understood under Section 15, Rule 39 of the Rules of Court in relation to the bidding and purchase under the same conditions as any other bidder, as in the
execution of money judgments, has been defined by this Court as the act whereby a case at bar, thus:
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 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
In extrajudicial foreclosure of mortgage, the property sought to be foreclosed need any other bidder, unless the contrary has been expressly provided in the mortgage
not be identified or set apart by the sheriff from the whole mass of property of the or trust deed under which the sale is made.
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 In other words, Section 5 of Act No. 3135, as amended, creates and is designed to
apart from the mass of the property of the debtor-mortgagor as security for the create an exception to the general rule that a mortgagee or trustee in a mortgage or
payment of money or the fulfillment of an obligation to answer the amount of deed of trust which contains a power of sale on default may not become the
indebtedness, in case of default of payment. By virtue of the special power inserted purchaser, either directly or through the agency of a third person, at a sale which he
or attached to the mortgage contract, the mortgagor has authorized the mortgagee- himself makes under the power. Under such an exception, the title of the mortgagee-
SALES 3 (Art. 1484 1491)
creditor over the property cannot be impeached or defeated on the ground that the Acct. No. 115008276
mortgagee cannot be a purchaser at his own sale. Makati, Metro Manila,
Philippines
Needless to state, the power to foreclose is not an ordinary agency that contemplates December 7, 1984
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 'P122,856.00
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 'For value received (installment price of the chattel/s purchased), I/We jointly and
absence of statutory provision, there is authority to hold that a mortgagee may severally promised to pay Pangasinan Auto Mart, Inc. or order, at its office at NMI
purchase at a sale under his mortgage to protect his own interest or to avoid a loss Bldg. Buendia Avenue, Makati, MM the sum of One Hundred Twenty Two Thousand
to himself by a sale to a third person at a price below the mortgage debt. 10 The Eight Hundred Fifty Six only (P122,856.00), Philippine Currency, to be payable
express mandate of Section 5 of Act No. 3135, as amended, amply protects the without need of notice or demand, in installments of the amounts following and at
interest of the mortgagee in this jurisdiction. 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
WHEREFORE, in view of the foregoing, the petition is DENIED for lack of merit and late payment charge of 3% per month shall be added on each unpaid installment from
the decision of the Court of Appeals dated June 20, 1987 is hereby AFFIRMED. No due date thereof until fully paid.
cost.
xxx xxx xxx
SO ORDERED.
'It is further agreed that if upon such default, attorney's services are availed of, an
[G.R. No. 106418. July 11, 1996] 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
DANIEL L. BORDON II AND FRANCISCO L. BORBON, petitioners, vs. SERVICEWIDE attorney's fees plus an additional sum equivalent to twenty five percent (25%) of the
SPECIALISTS, INC. & HON. COURT OF APPEALS, respondents. 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
D E C I S I O N Rules of Court.

VITUG, J.: '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
From the decision of the Court of Appeals in CA-G.R. CV No. 30693 which affirmed jurisdiction of the proper court either in the City of Manila or in the province,
that of the Regional Trial Court, NCJR, Branch 39, Manila, in Civil Case No. 85-29954, municipality or city where the branch of the holder hereof is located.
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 'Acceptance by the holder hereof of payment of any installment or any part thereof
fees, the instant appeal was interposed. 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
The appellate court adopted the factual findings of the court a quo, to wit: 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.
"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 'Maker:
among others as follows:
(S/t) DANIEL L. BORBON, II
"'PROMISSORY NOTE
Address: 14 Colt St., Rancho Estate I, Concepcion Dos, Marikina, MM
SALES 3 (Art. 1484 1491)
"Because the defendants did not pay their monthly installments, Filinvest demanded
(S/t) FRANCISCO BORBON from the defendants the payment of their installments due on January 29, 1985 by
telegram (Exh. E; pp. 3-4, tsn, Sept. 30, 1985).
Address: 73 Sterling Life Home Pamplona, Las Pias, MM
"After the accounts were assigned to the plaintiff, the plaintiff attempted to collect
"WITNESSES 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,
(illegible) ____(illegible)_____ 1985).

'PAY TO THE ORDER OF "For their defense, the defendants claim that what they intended to buy from
FILINVEST CREDIT CORPORATION 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
without recourse, notice, presentment and demand waived 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. 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
BY: 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).
(S/T) K.N. DULCE
Dealer' "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
"To secure the Promissory Note, the defendants executed a Chattel Mortgage (Exh. court. The defendants argue that an assignee stands in the place of an assignor which,
B) on 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).
'One (1) Brand new 1984 Isuzu
KCD 20 Crew Cab (Conv.) "The defendants further claim that they are not in default of their obligation because
Serial No. KC20D0F 207685 the Pangasinan Auto Mart was first guilty of not fulfilling its obligation in the contract.
Key No. 5509 The defendants claim that neither party incurs delay if the other does not comply
with his obligation. (citing Art. 1169, N.C.C.)"[1]
(Exhs. A and B, p. 2 tsn, September 10, 1985)
In sustaining the decision of the court a quo, the appellate court ruled that petitioners
"The rights of Pangasinan Auto Mart, Inc. was later assigned to Filinvest Credit could not avoid liability under the promissory note and the chattel mortgage that
Corporation on December 10, 1984, with notice to the defendants (Exh. C, p. 10, secured it since private respondent took the note for value and in good faith.
Record).
In their appeal to this Court, petitioners merely seek a modification of the decision of
"On March 21, 1985, Filinvest Credit Corporation assigned all its rights, interest and the appellate court insofar as it has upheld the court a quo in the award of liquidated
title over the Promissory Note and the chattel mortgage to the plaintiff (Exh. D; p. 3, damages and attorney's fees in favor of private respondent. Petitioners invoke the
tsn, Sept. 30, 1985). provisions of Article 1484 of the Civil Code which reads:

"The promissory note stipulates that the installment of P10,238.00 monthly should ART. 1484. In a contract of sale of personal property the price of which is payable in
be paid on the 7th day of each month starting January 1985, but the defendants failed installments, the vendor may exercise any of the following remedies:
to comply with their obligation (p. 3, tsn, Sept. 30, 1985).
"(1) Exact fulfillment of the obligation, should the vendee fail to pay;
SALES 3 (Art. 1484 1491)
foreclosure, that property may still be levied on execution and an alias writ may be
"(2) Cancel the sale, should the vendee's failure to pay cover two or more issued if the proceeds thereof are insufficient to satisfy the judgment credit.[7] So,
installments; 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-
"(3) Foreclose the chattel mortgage or the thing sold, if one has been constituted, mortgagee would have the effect of foreclosure.
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 parties here concede that the action for replevin has been instituted for the
the price. Any agreement to the contrary shall be void." 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
The remedies under Article 1484 of the Civil Code are not cumulative but alternative affirmance by the appellate court of the awards made by the court a quo of liquidated
and exclusive,[2] which means, as so held in Nonato vs. Intermediate Appellate Court damages and attorney's fees to private respondent. Petitioners hold that under
and Investor's Finance Corporation,[3] that - 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
"x x x Should the vendee or purchaser of a personal property default in the payment the contrary (would be) void."
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 The argument is aptly made. In Macondray & Co. vs. Eustaquio[9] we have said that
obligation, or to cancel the sale, or to foreclose the mortgage on the purchased the phrase "any unpaid balance" can only mean the deficiency judgment to which the
personal property, if one was constituted. These remedies have been recognized as mortgagee may be entitled to when the proceeds from the auction sale are
alternative, not cumulative, that the exercise of one would bar the exercise of the insufficient to cover the "full amount of the secured obligation which x x x include
others."[4] 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
When the seller assigns his credit to another person, the latter is likewise bound by any further action to the "unpaid balance of the principal" but, as so later ruled in
the same law. Accordingly, when the assignee forecloses on the mortgage, there can Luneta Motor Co. vs. Salvador,[10] to all other claims that may likewise be called for
be no further recovery of the deficiency,[5] and the seller-mortgagee is deemed to in the accompanying promissory note against the buyer-mortgagor or his guarantor,
have renounced any right thereto.[6] A contrario, in the event the seller-mortgagee including costs and attorney's fees.
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- In Filipinas Investment & Finance Corporation vs. Ridad[11] while we reiterated and
choice his lien on the chattel mortgage of the personal property sold by any expressed our agreement on the basic philosophy behind Article 1484, we stressed,
mortgaged back to him, although, similar to an action for specific performance, he nevertheless, that the protection given to the buyer-mortgagor should not be
may still levy on it. 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,
In ordinary alternative obligations, a mere choice categorically and unequivocally where the mortgagor unjustifiably refused to surrender the chattel subject of the
made and then communicated by the person entitled to exercise the option mortgage upon failure of two or more installments, or if he concealed the chattel to
concludes the parties. The creditor may not thereafter exercise any other option, place it beyond the reach of the mortgagee, that thereby constrained the latter to
unless the chosen alternative proves to be ineffectual or unavailing due to no fault seek court relief, the expenses incurred for the prosecution of the case, such as
on his part. This rule, in essence, is the difference between alternative obligations, attorney's fees, could rightly be awarded.
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. Private respondent bewails the instant petition in that petitioners have failed to
For instance, in one of the remedies expressed in Article 1484 of the Civil Code, it is specifically raise the issue on liquidated damages and attorney's fees stipulated in the
only when there has been a foreclosure of the chattel mortgage that the vendee- actionable documents. In several cases, we have ruled that as long as the questioned
mortgagor would be permitted to escape from a deficiency liability. Thus, if the case items bear relevance and close relation to those specifically raised, the interest of
is one for specific performance, even when this action is selected after the vendee justice would dictate that they, too, must be considered and resolved and that the
has refused to surrender the mortgaged property to permit an extrajudicial rule that only theories raised in the initial proceedings may be taken up by a party
SALES 3 (Art. 1484 1491)
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.