BORBON II VS SERVICEWIDE SPECIALISTS, INC.

FACTS:
Daniel Borbon and Francisco Borbon signed a promissory note in favor of
Pangasinan Auto Mart, Inc. and to secure the promissory note, the defendants
executed a chattel mortgage on 1 Brand New 1984 Isuzu crew cab.
The rights of Pangasinan Auto Mart, Inc. was later assigned to Filinvest Credit
Corp with a notice to Daniel and Francisco Borbon. Thereafter, Filinvest Credit
Corp assigned all its rights, interests and title over the PN and the chattel
mortgage to Servicewide Specialists, Inc.
Borbons failed to comply with their obligation. Servicewide attempted to
collect by sending a demand latter to herein petitioners for them to pay their
entire obligation.
PETITONER: They are not in default of their obligation because the
Pangasinan Auto Mart was first guilty of not fulfilling their obligation on the
contract. The defendants claim that neither party incurs delay if the other
does not comply with his obligation.
o They intended to buy from Pangasinan Auto Mart a jeepney type Isuzu
K.C. Cab but the same was not delivered. Instead, through
misrepresentation and machination, Pangasinan delivered an Isuzu
crew cab as this is the unit available at their warehouse.
CA: Petitioners could not avoid liability under the promissory note and the
chattel mortgage that secured it since private respondent took the note for
value and in good faith.
HELD:
The remedies under Art. 1484 of the Civil Code are not cumulative but
alternative and exclusive, which means that 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 of these three
remedies either to exact fulfillment by the purchaser of the obligation, or to
cancel the sale, or to foreclose the mortgage on the purchased personal
property, if one was constituted. These remedies have been recognized as
alternative, not cumulative, that the exercise of one would bar the exercise of
the others.
When the seller assigns his credit to another person, the latter is likewise
bound by the same law. Accordingly, when the assignee forecloses on the
mortgage, there can be no further recovery of the deficiency, and the sellermortgagee is deemed to have renounced any right thereto. A contrario, in the
event the seller-mortgagee first seels, instead, the enforcement of the
additional mortgages, guarantees or other security arrangements, he must
then be held to have lost by waiver or non-choice his lien on the chattel

mortgage of the personal property sold by and mortgaged back to him,

although, similar to an action for specific performance, he may still levy on it.

PASCUAL VS UNIVERSAL MOTORS CORPORATION

FACTS:
Plaintiffs executed the real estate mortgage of 2 parcels of land in favor of the
Universal Motors Corporation to secure the payment of the indebtedness of
PDP Transit, Inc for the purchase of 5 units of Mercedez Benz trucks with a
total purchase price/principal obligation of P152,506.50
o Plaintiffs guarantee is not to exceed P50,000.00 which is the value of
the mortgage.
o Principal obligation was to bear 1% a month interest
o Obligation is further secured by separate deeds of chattel mortgages on
the Mercedes Benz units in favor of defendant
PDP Transit has paid, on April 5, 1961 (2 units) and on May 22, 1961 (3 units),
the total sum of P92,964.91 leaving a balance of P68, 641.69.
Thereafter, defendant filed a complaint against PDP transit with a petition for
a writ of replevin, to collect balance due under the chattel mortgages and to
repossess all the units sold including the 5 units guaranteed under the subject
real mortgage.
o Defendant was able to repossess all the units including the 5 units
guaranteed by the subject real estate and foreclosed all the chattel
mortgages resulting in the sale of the trucks at public auction.
PETITIONER: Asked for the cancellation of the mortgage constituted.
TC rendered judgment in favor of Plaintiffs.
o There does not seem to be any doubt that Art. 1484 of the NCC may
be applied in relation to a chattel mortgage constituted upon personal
property on the installment basis precluding the mortgagee to maintain
any further action against the debtor for the purpose of recovering
whatever balance of the debt secured, and even adding that any
agreement to the contrary shall be null and void.
DEFENDANT: What Art. 1484 prohibits is for the vendor to recover from the
purchaser the unpaid balance of the price after he has foreclosed the chattel
mortgage on the thing sold, but not a recourse against the security put up by
a third party.
ISSUE: Whether or not the contention of defendant-appellant is correct.
HELD:

To sustain the appellants contention is to overlook the fact that if the

guarantor should be compelled to pay the balance of the purchase price, the
guarantor will in turn be entitled to recover what she has paid from the debtor
vendee; so ultimately, it will be the vendee who will be made to bear the payment
of the balance of the price, despite the earlier foreclosure of the chattel mortgage
given by him. Thus, the protection given by Art. 1484 would be indirectly subverted
and public policy overturned.

MAGNA FINANCIAL SERVICES GROUP, INC VS COLARINA

FACTS:
Elias Colarina bought on installment from Magna Financial Services Group,
Inc. one (1) unit of Suzuki Multicab. After making a down payment, he
executed a Promissory Note for the balance. To secure payment thereof,
Colarina executed an integrated Promissory note and deed of chattel
mortgage over the motor vehicle.
Colarina failed to pay monthly amortization. Despite repeated demands, he
failed to make necessary payment.
Petitioner then filed for Foreclosure of Chattel Mortgage with writ of Replevin.
Colarina then voluntarily surrendered physical possession of the vehicle to
the Sheriff who then turned over the motor vehicle to Magna Financial.
RESPONDENT: CA is correct due to the inconsistency of the remedies sought
by the petitioner in its complaint where it prayed for the custody of the
chattel mortgage and at the same time asked for the payment of the unpaid
balance of the motor vehicle.
ISSUE: What is the nature of a foreclosure of chattel mortgage, extrajudicial or
judicial, as an exercise of the 3rd option under Article 1484, paragraph 3 of the Civil
Code.
HELD:
Act 4122 amending Art. 1454 of the Civil Code of 1889 prevents mortgagees
from seizing the mortgaged property, buying it at foreclosure sale for a low
price and then bringing the suit against the mortgagor for a deficiency
judgment.
Also, as may be deemed provided in Art. 1484 paragraph 3, in all proceedings
for the foreclosure of chattel mortgages executed on chattels which have
been sold on the installment plan, the mortgagee is limited to the property
included in the mortgage.
A contract of chattel mortgage, which is the transaction involved in the
present case, is in the nature of a conditional sale of personal property given
as a security for the payment of a debt, or the performance of some other

obligation specified therein, the condition being that the sale shall be void
upon the seller paying to the purchaser a sum of money or doing some other
act named.
o If the conditioned is performed according to its terms, the mortgage
and sale immediately become void, and the mortgagee is thereby
divested of his title.
o In case of nonpayment, foreclosure is one of the remedies available to
a mortgagee by which he subjects the mortgaged property to the
satisfaction of the obligation to secure that for which the mortgagee
was given.
Foreclosure may be effected either judicially or extrajudicially, that is, by
ordinary action or by foreclosure under power of sale contained in the
mortgage. It may be effected by the usual methods, including sale of goods
at public auction.
o Extrajudicial foreclosure, as chosen by the petitioner, is attained by
causing the mortgaged property to be seized by the sheriff, as agent of
the mortgagee, and have it sold at public auction in the manner
prescribed by Sec. 14 of Act No. 1508 or the Chattel Mortgage Law.
FILIPINAS INVESTMENT & FINACE CORP. VS VITUG, JR.
FACTS:
Defendant Julian Vitug executed and delivered to Supreme Sales &
Development Corporation (SSDC) a promissory note in the amount of
P14,605.00 payable in monthly installments according to a schedule of
payments
o For the purchase of a 4-door Consul Sedan bought by defendant from
SSDC and was secured by a chattel mortgage over such automobile
SSDC then negotiated the PN in favor of Filipinas Investment & Finance Corp
(FIFC), assigning thereto all its rights, title and interests to the same, the
assignment including the right of recourse against appellee.
Vitug faulted in the payment of the installments.
o There being a provision in the PN and chattel mortgage that failure to
pay the installments due would result in the entire obligation becoming
due and demandable, FIFC demanded from SSDC the payment of such
outstanding balance, in turn, SSDC authorized FIFC to take such action
as may be necessary to enable it to take possession of the motor
vehicle.
FIFC secured a writ of replevin but said writ became unnecessary since Vitug
voluntarily surrendered the car to FIFC.
o Car was sold at a public auction
o Proceeds still left a deficiency of P8,349.35
o FIFC, despite foreclosure and sale, would still hold SSDC liable for the
payment of such outstanding balance.

 APPELLEE: Move to dismiss on the ground that under Art. 1884 of NCC/Recto
Law, appellant has no cause of action against appellee.
TC: Dismissed the case.
ISSUE: W/N the provisions regarding recourse contained in the agreement between
appellant and appellee violates the Recto Law which declares null and void any
agreement in the contravention thereof.
HELD: NO
The transaction between appellant and appellee was purely an ordinary
discounting transaction whereby the PN executed by Vitug was negotiated by
SSDC in favor of FIFC for a valuable consideration at a certain discount,
accompanied by an assignment also of the chattel mortgage executed by
Vitug to secure the payment of his PN and with the express stipulation that
there be any deficiency, recourse could be had against appellee. Stated
otherwise, the remedy presently being sought is not against the buyer of the
car or against Vitug but against the seller independent of whether or not such
seller may have a right of recovery against the buyer, which, in this case, he
does not have under the Recto Law.
Also, the very fact that the assignee was given the stipulated right of
recourse against the assignor negates the idea that the parties contemplated
to limit the recovery of the assignee to only the proceeds of the mortgage
sale.
OLYMPIA HOUSING, INC. VS. PANASIATIC TRAVEL CORPORATION
FACTS:
Olympia Housing, Inc. and Ma. Nelida Galvez-Ycasiano entered into a Contract
to Sell, whereby the former agreed to sell to the latter a condominium unit.
Ma. Nelida Galvez-Ycasiano made a reservation/deposit and then a down
payment.
Ycasiano made several payments in cash and thru credit card memos issued
by Olympia Housing representing the plane tickets it bought from Panasiatic
Travel Corp which is owned by Ycasiano, who credited/offset the amount of
the said plane tickets to her account due to Olympia Housing.
For failure of Ycasiano to pay her obligation, Olympia allegedly rescind the
contract by a Notarial Act of Rescission. Since the Condo Unit was then
occupied by Panasiatic, suit for recovery of Possession (Accion Publiciana)
was commenced.
Ycasiano interposed the defense that she has made substantial payments of
the purchase price and that she decided to stop payment of the said price in
the meantime because of substantial differences between her and Olympia
Housing in the computation of the balance of the purchase price.

 TC: Dismissed the case and ordered Ycasiano to pay the sum due and
demandable.
o Ycasiano tendered the amount to Olympia but the latter refused to
accept. So Ycasiano was restrained to consign it at the disposal of the
court.
HELD:
Requisites of a valid and effective cancellation under Maceda Law (RA 6552):
(1) Notarized Notice of Cancellation; and (2) Refund of Cash Surrender Value
The governing law in this case is Republic Act No. 6552, otherwise known as
the Realty Installment Buyer Protection Act. Republic Act No. 6552 is a
special law governing transactions that involve, subject to certain exceptions,
the sale on installment basis of real property. The law has been enacted
mainly to protect buyers of real estate on installment payments against
onerous and oppressive conditions.
The enactment recognizes the right of the seller to cancel the contract but
any such cancellation must be done in conformity with the requirements
therein prescribed. In addition to the notarial act of rescission, the seller is
required to refund to the buyer the cash surrender value of the payments on
the property. The actual cancellation of the contract can only be deemed to
take place upon the expiry of a 30-day period following the receipt by the
buyer of the notice of cancellation or demand for rescission by a notarial act
and the full payment of the cash surrender value.
The judicial resolution of a contract gives rise to mutual restitution which is
not necessarily the situation that can arise in an action for reconveyance.
Additionally, in an action for rescission, unlike in an action for reconveyance
predicated on an extrajudicial rescission (rescission by notarized act), the
Court, instead of decreeing rescission, may authorize for a just cause the
fixing of a period.