104. RIDAD vs.

FILIPINAS INVESTMENT
120 SCRA 246

FACTS:
The spouses Ridad purchased from the Supreme Sales Development Corporation two (2)
brand new Ford Consul Sedans complete with accessories. To secure payment thereof, plaintiffs
executed on the same date a promissory note covering the purchase price and a deed of chattel
mortgage not only on the two vehicles purchased but also on another car (Chevrolet) and their
franchise or certificate of public convenience granted by the defunct Public Service Commission for
the operation of a taxi fleet with Filipinas Investment. Due to the failure of the plaintiffs to pay their
monthly installments as per promissory note, Filipinas Investment foreclosed on the chattel mortgage
on the Ford Consul Sedans. The foreclosure sale had a deficiency. Consequently, the corporation
foreclosed the mortgage constituted on the (Chevrolet) and their franchise or certificate of public
convenience.

ISSUE:
Whether Filipinas Investment is precluded from foreclosing the second mortgage to recover
the deficiency on the first mortgage

HELD:
No. The vendor of personal property sold on the installment basis is precluded, after
foreclosing the chattel mortgage on the thing sold from having a recourse against the additional
security put up by a third party to guarantee the purchaser’s performance of his obligation on the
theory that to sustain the same would overlook the fact that if the guarantor should be compelled to
pay the balance of the purchase price, said guarantor will in turn be entitled to recover what he has
paid from the debtor-vendee, and ultimately it will be the latter who will be made to bear the
payment of the of the balance of the price, despite the earlier foreclosure of the chattel mortgage
given by him, thereby indirectly subverting the protection given the latter. If the vendor under such
circumstance is prohibited from having a recourse against the additional security for reasons therein
stated, there is no ground why such vendor should not likewise be precluded from further
extrajudicially foreclosing the additional security put up by the vendees themselves, as in the instant
case, it being tantamount to a further action 5 that would violate Article 1484 of the Civil Code, for
then is actually no between an additional security put up by the vendee himself and such security put
up by a third party insofar as how the burden would ultimately fall on the vendee himself is
concerned.
105. ESGUERRA vs. COURT OF APPEALSE
173 SCRA 1

FACTS:
Esguerra bought a truck from GAMI on installments. To secure the payment, a chattel
mortgage was executed by Esguerra. Later, Esguerra failed to pay 2 installements. Consequently
GAMI filed an action for foreclosure of the chattel mortgage. Agents of GAMI, impersonated
sheriffs and took the said truck while it was in the possession of Esguerra’s driver, Carlito Padua;
and the same had remained in the possession of GAMI, notwithstanding demands for its return
by Esguerra. Esguerra filed a complaint with the then Court of First Instance of Cavite, Branch
IV, TagaytayCity to recover said truck and for damages. Esguerra alleged, among others, that
due to his failure to pay the installments due, the agents of GAMI, Jose Tino and Samuel Dore,
representing themselves as deputy sheriffs and with use of force, threats and intimidation, seized
the cargo truck in question from his driver, Carlito Padua, while unloading gravel and sand in
Pasay City; and that despite repeated demands, GAMI refused and failed to return the same.
GAMI, et al. filed their answer with a counterclaim, alleging as affirmative defense that the
plaintiff gave his consent to the taking of the truck by the agents of the corporation on condition
that he be allowed to recover its possession upon payment of his back accounts.

ISSUE:
Whether or not GAMI is liable for damages in taking the truck.

HELD:
The taking of Esguerra’s truck without proceeding to sell the same at public auction
appropriating the same in payment of Esguerra’s indebtedness is not lawful. However, the
respondent appellate court did not err in holding that while the mortgagee can take possession of
the chattel, such taking did not amount to the foreclosure of the mortgage. Otherwise stated, the
taking of Esguerra’s truck without proceeding to the sale of the same at public auction, but
instead, appropriating the same in payment of Esguerra’s indebtedness, is not lawful. As clearly
stated in the chattel mortgage contract, the express purpose of the taking of the mortgaged
property is to sell the same and/ or foreclose the mortgage constituted thereon either judicially or
extrajudicially and thereby, liquidate the indebtedness in accordance with law. A stipulation in a
contract of sale regarding automatic appropriation amounts to pactum commissorium, and is
therefore null and void. More than that, even if such automatic appropriation of the cargo truck
in question can be inferred from or be contemplated under the aforesaid mortgage contract, such
stipulation would be pactum commissorium which is expressly prohibited by Article 2088 of the
Civil Code and therefore, null and void. The three remedies of the vendor in case the vendee
defaults under Art. 1484 are alternative and cannot be exercised simultaneously or cumulatively
by the vendor creditor. Having opted to foreclose the chattel mortgage, respondent GAMI can no
longer cancel the sale. The three remedies of the vendor in case the vendee defaults, in a contract
of sale of personal property the price of which is payable in installment under Article 1484 of the
Civil Code, are alternative and cannot be exercised simultaneously or cumulatively by the
vendor-creditor. In Cruz vs. Filipinas Investment and Finance Corporation (23 SCRA 791,
[1968]), the Supreme Court construing Article 1484 of the Civil Code, held: “Should the vendee
or purchaser of a personal property default in the payment of two or more of the agreed
installments, the vendor or seller has the option to avail of any one of these three.
106. FILINVEST CREDIT CORPORATION vs. THE COURT OF APPEALS, JOSE SY
BANG and ILUMINADA TAN SY BANG 178 SCRA 188,
G.R. No. 82508 September 29, 1989

FACTS:
Herein private respondents spouses Jose Sy Bang and Iluminada Tan were engaged in the
sale of gravel produced from crushed rocks and used for construction purposes. They intended to
buy rock crusher from Rizal Consolidated Corporation which carried a cash price tag of
P550,000.00. They applied for financial assistance from herein petitioner Filinvest Credit
Corporation, who agreed to extend financial aid on the certain conditions. A contract of lease of
machinery (with option to purchase) was entered into by the parties whereby the private
respondents agreed to lease from the petitioner the rock crusher for two years starting from July
5, 1981, payable as follows: P10,000.00 – first 3 months, P23,000.00 – next 6 months,
P24,800.00 – next 15 months. It was likewise stipulated that at the end of the two-year period,
the machine would be owned by the private respondents. Thus the private respondent issued in
favor of the petitioner a check for P150,550.00, as initial rental (or guaranty deposit), and 24
postdated checks corresponding to the 24 monthly rentals. In addition, to guarantee their
compliance with the lease contract, the private respondent executed a real estate mortgage over
two parcels of land in favor of the petitioner. The rock crusher was delivered to the spouses.
However, 3 months later, the souses stopped payment when petitioner had not acted on the
complaints of the spouses about the machine. As a consequence, petitioner extra-judicially
foreclosed the real estate mortgage. The spouses filed a complaint before the RTC. The RTC
rendered a decision in favor of private respondent. The petitioner elevated the case to CA which
affirmed the decision in toto. Hence, this petition.

ISSUES:
1. Whether or not the nature of the contract is one of a contract of sale.
2. Whether or not the remedies of the seller provided for in Article 1484 are cumulative.

HELD:
1. Yes. The intent of the parties to the subject contract is for the so-called rentals to be the
installment payments. Upon the completion of the payments, then the rock crusher, subject
matter of the contract, would become the property of the private respondents. This form of
agreement has been criticized as a lease only in name. Sellers desirous of making conditional
sales of their goods, but who do not wish openly to make a bargain in that form, for one reason
or another, have frequently restored to the device of making contracts in the form of leases either
with options to the buyer to purchase for a small consideration at the end of term, provided the
so-called rent has been duly paid, or with stipulations that if the rent throughout the term is paid,
title shall thereupon vest in the lessee. It is obvious that such transactions are leases only in
name. The so-called rent must necessarily be regarded as payment of the price in installments
since the due payment of the agreed amount results, by the terms of bargain, in the transfer of
title to the lessee.
2. No, it is alternative. The seller of movable in installments, in case the buyer fails to pay
2 or more installments, may elect to pursue either of the following remedies: (1) exact fulfillment
by the purchaser of the obligation; (2) cancel the sale; or (3) foreclose the mortgage on the
purchased property if one was constituted thereon. It is now settled that the said remedies are
alternative and not cumulative, and therefore, the exercise of one bars the exercise of the others.
Indubitably, the device – contract of lease with option to buy – is at times resorted to as a means
to circumvent Article 1484, particularly paragraph (3) thereof. Through the set-up, the vendor,
by retaining ownership over the property in the guise of being the lessor, retains, likewise the
right to repossess the same, without going through the process of foreclosure, in the event the
vendee-lessee defaults in the payment of the installments. There arises therefore no need to
constitute a chattel mortgage over the movable sold. More important, the vendor, after
repossessing the property and, in effect, canceling the contract of sale, gets to keep all the
installments-cum-rentals already paid.
107. INDUSTRIAL FINANCE CORPORATION vs. HON. PEDRO A. RAMIREZ, Judge
of the Court of First instance of Manila, and CONSUELO ALCOB
G.R. No. L-43821 May 26 1977

FACTS:
On December 4, 1970 Arnaldo Dizon sold to Consuelo Alcoba his 1966 model Chevrolet
car forP13,157.89, payable in eighteen monthly installments, which were secured by a chattel
mortgage on the car. On that same date, Dizon assigned for ten thousand pesos to Industrial
Finance Corporation all his rights and interest in the chattel mortgage. Consuelo Alcoba
defaulted in the payment of the first four installments. Because of that default and by virtue of
the acceleration clause in the promissory note forming part of the mortgage, the whole obligation
became due and demandable. On November 20, 1971, or less than a year after Industrial Finance
Corporation had discounted Consuelo Alcoba's promissory, note to Dizon, the corporation sued
her in the Court of First Instance of Manila (Civil Case No. 85583). The complaint, a printed
form used by the corporation in collection cases, is denominated "replevin with damages".

ISSUE:
Whether or not Industrial Finance Corporation sought to foreclose the chattel mortgage
by means of a writ of replevin.

HELD:
According to article 1484, it is only when there has been a foreclosure that the mortgagor
is not liable for any deficiency. In this case, there was no foreclosure. The mortgagee evidently
chose the remedy of specific performance. It levied upon the car by virtue of an execution and
not as an incident of a foreclosure proceeding. It is entitled to an alias writ of execution for the
portion of the judgment that has not been satisfied. The rule is that in installment sales, if the
action instituted is for specific performance and the mortgaged property is subsequently attached
and sold, the sale thereof does not amount to a foreclosure of the mortgage. Hence, the seller-
creditor is entitled to a deficiency judgment. The court reversed its order of denying the third
writ of execution. Consuelo Alcoba, respondent, is held guilty.
108. SOUTHERN MOTORS, INC. vs. MOSCOSO
G.R. No. L-14475 May 30, 1961

FACTS:
Plaintiff Southern Motors, Inc. sold to defendant Moscoso one Chevrolet truck on
installment basis, for P6,445.00. Upon making a down payment, Moscoso executed a promissory
note for the sum of P4,915.00, representing the unpaid balance of the purchase price to secure
the payment of which, a chattel mortgage was constituted on the truck in favor of Southern. Of
said account, Moscoso had paid a total of P550.00, of which P110.00 was applied to the interest
and P400.00 to the principal, thus leaving an unpaid balance of P4,475.00. Moscoso failed to pay
3 installments on the balance, hence Southern filed a complaint against the former to recover the
unpaid balance of the promissory note. Upon its petition, a writ of attachment was issued by the
lower court on the properties of Moscoso. Pursuant thereto, the said Chevrolet truck, and a house
and lot belonging to Moscoso, were attached by the Sheriff and said truck was brought to the
plaintiff's compound for safe-keeping. After attachment and before the trial of the case on the
merits, acting upon the plaintiff's motion for the immediate sale of the mortgaged truck, the
Provincial Sheriff of Iloilo sold the truck at public auction in which Southern itself was the only
bidder for P1,000,000. The trial court condemned Moscoso to pay Southern the amount of
P4,475.00 with interest at the rate of 12% per annum from August 16, 1957,until fully paid, plus
10% thereof as attorney’s fees and costs. Hence, this appeal.

ISSUE:
Whether or not the attachment caused to be levied on the truck and its immediate sale at
public auction, was tantamount to the foreclosure of the chattel mortgage on said truck.

HELD:
No. Article 1484 of the Civil Code provides that 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: (I) Exact fulfillment of the obligation, should the vendee fail to pay; (2) Cancel the
sale, should the vendee's failure to pay cover two or more installments; and (3) Foreclose the
chattel mortgage on the thing sold, if one has been constituted, should the vendee's failure to pay
cover two or more installments. In this case, he shall have no further action against the purchaser
to recover any unpaid balance of the price. Any agreement to the contrary shall be void. The
plaintiff had chosen the first remedy. The complaint is an ordinary civil action for recovery of
there maining unpaid balance due on the promissory note. The plaintiff had not adopted the
procedure or methods outlined by Sec. 14 of the Chattel Mortgage Law but those prescribed for
ordinary civil actions, under the Rules of Court. Had the plaintiff elected the foreclosure, it
would not have instituted this case in court; it would not have caused the chattel to be attached
under Rule 59, and had it sold at public auction, in the manner prescribed by Rule 39. That the
plaintiff did not intend to foreclose the mortgage truck, is further evinced by the fact that it had
also attached the house and lot of the appellant at SanJose, Antique.We perceive nothing
unlawful or irregular in plaintiff's act of attaching the mortgaged truck itself. Since the plaintiff
has chosen to exact the fulfillment of the appellant's obligation, it may enforce execution of the
judgment that may be favorably rendered hereon, on all personal and real properties of the latter
not exempt from execution sufficient to satisfy such judgment. It should be noted that a house
and lot at San Jose, Antique were also attached. No one can successfully contest that the
attachment was merely an incident to an ordinary civil action. The mortgage creditor may
recover judgment on the mortgage debt and cause an execution on the mortgaged property and
may cause an attachment to be issued and levied on such property, upon beginning his civil
action.