GR. No. 82040 ‘August 27, 1991 BA FINANCE CORPORATION, petitioner, vs. HON. COURT OF APPEALS, Hon. Presiding Judge of Regional Trial Court of Manila, Branch 43, MANUEL CUADY and LILIA CUADY, respondents, FACTS: © Private respondents Manuel Cuady and Lilia Cus obtained a credit form Supercars. Inc. amounting of Php 3057480 ‘equal et ri ‘of one uni of Ford Escort 1300, four-door sedan. * A promissory note was executed by private respondents in favor of Supercars, “THe ablgalng tremseves to pay he sum of 39,574 60-inclusve of lsrast — Pee ae ie aon eae le on monthly instalments of P1,098.00 every 16th ay of the month until full payment. They aiso stipulated a Php 10.00 penalty fee for every late installment payment. * To secure the faithful and prompt compliance of the obligation under the said promissory note, the Cuady spouses constituted a chattel mortage on the motor__ Vehicle. Supercars, Inc. assigned the promissory note, together with the chattel ‘nance Corporation. * The Cuadys paid a total of P36,730.15 to B.A. Finance Corporation, thus leant At ead balance GF PY STARE TIS Chadhs owe BA, Finance Corporation PA0,00 penalios Gr surcharges or tardy monthly instalments © When the Cuadys failed to renew said insurance coverage themsely Finance Cosporaion, os the assigwe of tha morigage lon decided io eno “HE HATES SOVeTAgE TOS jeer 1980 with Zenith Insurance Corporation. Under te terms and conditions ofthe sald insurance Coveiage any ee andar the policy shall be payable to the B.A, Finance Corporation. + The motor vehicle had an accident and was badly damaged subsequently it was reporiad BA Finenée Corporation and io Zarit euranes Cotporation ‘The Cuadys asked the B.A. Finance Corporation to consider the same as a totallose, ad to cai rom the insurer the fa value tthe car nsufancepolcy and apply the same to the payment oftheir remaining account and give them the surplus thereof, if any. But instead of heeding the request of B.A_Finence Corporation prevailed upon the former to just have the car repaired. Not long thereafter, however, the car bogged down. The Cuadys wrote BA. Finance Corporation requesting the latter to pursue their prior instruetion of enforcing the total loss provision in the insurance coverage. When BA. Finants Corporation id not respond favorably to tell EqUES!, the Cuadys stopped paying their monthly installments on the promissory note «Atty. .Noel Earle. counsel for the petitioner, fled a motion for postponement, the reason being that the “handling” counsel, Atty. Ferdinand Macibay was femporarily assigned in Cebu City and would not be back. Said motion was ‘denied by the trial court. However, the trial court allowed private respondents to adduce evidence ex-parte in the form of an affidavit to be swom to before ‘any authorized officer. B.A. Finance Corporation filed _a_motion_for reconsideration of the order”of the flal court denying “ts” motion for postponement. The Court grants plaintiff's motion for reconsideration in the Eense that pint alowed To sddice evidence iv the orm of courier affidavits of its witnesses, to be swom to before any person authorized to ‘administer oaths, within ten days from notice hereof.* The court dismisses the complaint on the grounds that BA. Finance Corporation never complied with the order. ISSUE: Whether or not B.A. Finance Corporation has waived its right to collect the unpaid balance of thé Cuady spouses i to enforce the total loss provision in the insurance coverage of the motor vehicle ‘Tsubject of the chattel mortgage. HELD: Itis the contention of B.A. Finance Corporation that even ifit failed to enforce the total loss provision in the insurance policy of the motor vehicle subject of the chattel mortgage, said failure does not operate to extinguish the unpaid balance on the, promissory note, considering that the circumstances obiaining in the case at bar do ‘ot fall under Article 1231 of the Civil Code relative to the modes of extinguishment of obligations. —_— B.A. Finance Corporation was deemed subrogated to the rights and obligations of “TEREST FY BBE EEE HOT VOT m ‘constituted on the motor vehicle in question in favor of the former. Consequently, B.A, Finance Corporation is bound by the terms and conditions of the chattel mortgage executed between the Cuadys and Supercars, Inc. Under the deed of chattel mortgage, B.A. Finance Corporation was constituted attorney-in-fact with full ower and authority to fle, follow-up, prosécuts, compromise or settle insurance Sepa cers es it ser Sa SarsepOORT SUPE TSCM Bnd docmeria to the Insurance Company as may be necessary to prove the claim, and to collect from the latter the proceeds of insurance to the extent of ts interests, in the event that the mortgaged car sulfers any inance Corporation the aforementioned powers and prerogatives, the Cuady spouses created in the formers favor an agency. Thus, under Article 1884 of the Civil Code of the Philippines, Finance Corporation is bound by its acceptance to carry out the agency, and is liable faa ‘damages which, through its non-performance, the Cuadys, the principal in the case ‘at bar, may suffer. That instead of acting on the instruction of the Cuadys to enforce the total loss provision in the insurance policy, the petitioner insisted on just having the motor vehicle repaired, to which private respondents reluctantly acceded. As heretofore mentioned, the repair shop chosen was not able to restore the aforementioned motor vehicle to its condition prior to the accident. Thus, the said vehicle bogged down shortly thereafter. The subsequent request of the Cuadys for the B.A. Finance Corporation to file @ claim for total loss with the insurer fell on deaf ears, prompting the Cuadys to stop paying the remaining balance on the promissory note.