EN BANC

[G.R. No. 42256. April 25, 1935.]

THE BACHRACH MOTOR CO., INC. , plaintiff-appellee, vs . PABLO A.

MILLAN , defendant-appellee.

Ohnick & Opisso for appellant.

B. Francisco for appellee.

SYLLABUS

1. contract; purchase and sale of personal property payable in installments;

remedies available to vendor BEFORE act no. 4122 was passed. — the right to cancel a
contract for the sale of personal property, payable in installment, 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 remedy 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 failed himself of
either remedy.
2. ID.; ID.; ACT NO. 4122 CONSTRUED. — 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 ful llment 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."
3. ID.; ID.; ID. — 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.
4. ID.; ID.; REMEDIES NOW AVAILABLE TO VENDOR. — In a sale of personal
property on the installment plan the vendor may elect to exact the ful llment 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 Civil Code.

DECISION
CD Technologies Asia, Inc. 2018 cdasiaonline.com
 GODDARD , J : p

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 copy of said promissory note, hereto attached,
marked Appendix A, and made a part hereof;
"3. That the said amount 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
state, December 12, 1933, and registered in the o ce 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 installment which fell due on
December 22, 1933, an 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;
"6. That the complaint in the present case was made by the plaintiff
without foreclosing the said chattel mortgage, Appendix B;
"7. That the defendant had offered to return the said second 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 led 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 in 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
installment 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:
CD Technologies Asia, Inc. 2018 cdasiaonline.com
 "The lower court erred in holding that under article 1454-A of the Civil Code
the vendor, who has sold a chattel on installment 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
ful llment of the obligation as contained in the promissory notes separately
signed by the purchaser."
Article 1454 of the Civil Code, s 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 installment 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 foreclose of chattel mortgages. This
amendment prevents mortgagees from seizing the mortgaged property, buying it at
foreclose sale for a lower price and then bringing suit against the mortgagor for a
de ciency judgment. The almost invariable result of this procedure was that the
mortgagor found himself minus the property and still owing practically the full amount
of his original indebtedness. Under this amendment the vendor of 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 the 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 amendments, in all proceedings for the foreclosure of
chattel mortgages, executed on chattel which have been sold on the 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 is obligation under
such a contract, exact the ful llment 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 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
CD Technologies Asia, Inc. 2018 cdasiaonline.com
 deemed to be implied.
"The person prejudiced may choose between exacting the ful llment of the
obligation or its resolution with indemnity for losses and payment of 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 had availed himself of either remedy.
Before Act No. 4122 was adopted the legal right to exact the ful llment 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 ful llment 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 ful llment of the obligation, as the plaintiff had 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.
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 annum from March 17, 1934, until paid in full, plus the sum of
P232.12 as attorney's fees. and penalty, without costs in either instance.
Malcolm, Hull, Butte and Diaz, JJ., concur.

CD Technologies Asia, Inc. 2018 cdasiaonline.com