Sales

Republic of the Philippines
SUPREME COURT
Manila
installment of 500 pesos each, to wit, on July 15, September 15, and
November 15, adding in his letter that if the plaintiff accepted the plan of
payment suggested by him the sale would become effective on the
following day; that plaintiff on or about the 24th of the same month had
notified the defendant through Agustin Pastor that he accepted the plan of
payment suggested by him and that from that date the vessel was at his
disposal, and offered to deliver the same at once to defendant if he so
desired; that the contract having been closed and the vessel being ready
for delivery to the purchaser, it was sunk about 3 o'clock p. m., June 25, in
the harbor of Manila and is a total loss, as a result of a severe storm; and
that on the 30th of the same month demand was made upon the defendant
for the payment of the purchase price of the vessel in the manner
stipulated and defendant failed to pay. Plaintiff finally prayed that
judgment be rendered in accordance with the prayer of his previous
complaint.
EN BANC
G.R. No. L-2412
April 11, 1906
PEDRO ROMAN, plaintiff-appellant,

vs.
ANDRES GRIMALT, defendant-appellee.
Alberto Barretto, for appellant.
Chicote, Miranda and Sierra, for appellee.
On October 24 of the same year the court made an order sustaining the
demurer filed by defendant to the complaint and allowing plaintiff ten
days within which to amend his complaint. To this order the plaintiff duly
excepted.
Defendant in his answer asked that the complaint be dismissed with costs
to the plaintiff, alleging that on or about June 13 both parties met in a
public establishment of this city and the plaintiff personally proposed to
the defendant the sale of the said vessel, the plaintiff stating that the
vessel belonged to him and that it was then in a sea worthy condition; that
defendant accepted the offer of sale on condition that the title papers were
found to be satisfactory, also that the vessel was in a seaworthy condition;
that both parties then called on Calixto Reyes, a notary public, who, after
examining the documents, informed them that they were insufficient to
show the ownership of the vessel and to transfer title thereto; that plaintiff
then promised to perfect his title and about June 23 called on defendant to
close the sale, and the defendant believing that plaintiff had perfected his
title, wrote to him on the 23d of June and set the following day for the
execution of the contract, but, upon being informed that plaintiff had done
nothing to perfect his title, he insisted that he would buy the vessel only
when the title papers were perfected and the vessel duly inspected.
Counsel for plaintiff on November 5 amended his complaint and alleged

that between the 13th and the 23rd day of June, 1904, both parties,
through one Fernando Agustin Pastor, verbally agreed upon the sale of the
said schooner; that the defendant in a letter dated June 23 had agreed to
purchase the said schooner and of offered to pay therefor in three
Defendant also denied the other allegations of the complaint inconsistent

with his own allegations and further denied the statement contained in
paragraph 4 of the complaint to the effect that the contract was completed
as to the vessel; that the purchase price and method of payment had been
agreed upon; that the vessel was ready for delivery to the purchaser and
TORRES, J.:
On July 2, 1904, counsel for Pedro Roman filed a complaint in the Court
of First Instance of this city against Andres Grimalt, praying that
judgment be entered in his favor and against the defendant (1) for the
purchase price of the schooner Santa Marina, to wit, 1,500 pesos or its
equivalent in Philippine currency, payable by installments in the manner
stipulated; (2) for legal interest on the installments due on the dates set
forth in the complaint; (3) for costs of proceedings; and (4) for such other
and further remedy as might be considered just and equitable.
that an attempt had been made to deliver the same, but admitted, however,
the allegations contained in the last part of the said paragraph.
purchase it and who was unable to do so on account of failure on the part

of the owner to show proper title to the vessel and thus enable them to
draw up the contract of sale.
The court below found that the parties had not arrived at a definite
understanding. We think that this finding is supported by the evidence
introduced at the trial.
The vessel was sunk in the bay on the afternoon of the 25th of June, 1904,
during a severe storm and before the owner had complied with the
condition exacted by the proposed purchaser, to wit, the production of the
proper papers showing that the plaintiff was in fact the owner of the
vessel in question.
A sale shall be considered perfected and binding as between vendor and

vendee when they have agreed as to the thing which is the object of the
contract and as to the price, even though neither has been actually
delivered. (Art. 1450 of the Civil Code.)
The defendant was under no obligation to pay the price of the vessel, the
purchase of which had not been concluded. The conversations had
between the parties and the letter written by defendant to plaintiff did not
establish a contract sufficient in itself to create reciprocal rights between
the parties.
Ownership is not considered transmitted until the property is actually

delivered and the purchaser has taken possession of the value and paid the
price agreed upon, in which case the sale is considered perfected.
It follows, therefore, that article 1452 of the Civil Code relative to the
injury or benefit of the thing sold after a contract has been perfected and
articles 1096 and 1182 of the same code relative to the obligation to
deliver a specified thing and the extinction of such obligation when the
thing is either lost or destroyed, are not applicable to the case at bar.
When the sale is made by means of a public instrument the execution

thereof shall be equivalent to the delivery of the thing which is the object
of the contract. (Art. 1462 of the Civil Code.)
Pedro Roman, the owner, and Andres Grimalt, the purchaser, had been for
several days negotiating for the purchase of the schooner Santa Marina
from the 13th to the 23d of June, 1904. They agreed upon the sale of
the vessel for the sum of 1,500 pesos, payable in three installments,
provided the title papers to the vessel were in proper form. It is so stated
in the letter written by the purchaser to the owner on the 23rd of June.
The first paragraph of article 1460 of the Civil Code and section 335 of
the Code of Civil Procedure are not applicable. These provisions
contemplate the existence of a perfected contract which can not, however,
be enforced on account of the entire loss of the thing or made the basis of
an action in court through failure to conform to the requisites provided by
law.
The sale of the schooner was not perfected and the purchaser did not
consent to the execution of the deed of transfer for the reason that the title
of the vessel was in the name of one Paulina Giron and not in the name of
Pedro Roman, the alleged owner. Roman promised, however, to perfect
his title to the vessel, but he failed to do so. The papers presented by him
did not show that he was the owner of the vessel.
The judgment of the court below is affirmed and the complaint is

dismissed with costs against the plaintiff. After the expiration of twenty
days from the date hereof let judgment be entered in accordance herewith
and ten days thereafter let the case be remanded to the Court of First
Instance for proper action. So ordered.
If no contract of sale was actually executed by the parties the loss of the
vessel must be borne by its owner and not by a party who only intended to
Arellano, C.J., Mapa, Johnson, Carson and Willard, JJ., concur.
parties.
If no contract of sale was actually executed by the parties the loss of
the vessel must be borne by its owner and not by the party who only
intended to purchase it and who was unable to do so on account of
failure on the part of the owner to show proper title to the vessel and
thus enable them to draw up contract of sale.
ROMAN vs. GRIMALT
G.R.No. 2412, April 11, 1906
FACTS:
Pedro Roman, the owner of the schooner Sta. Maria and Andres
Grimalt had been negotiating for several days for the purchase of the
schooner. They agreed upon the sale of the vessel for the sum of
P1500 payable on three installments, provided the title papers to the
vessel were in proper form. The sale was not perfected and the
purchaser did not consent to the execution of the deed of transfer for
the reason that the title of the vessel was in the name of one Paulina
Giron and not in the name of Pedro Roman. Roman promised
however, to perfect his title to the vessel but he failed to do so. The
vessel was sunk in the bay in the afternoon of June 25, 1904 during a
severe storm and before the owner had complied with the condition
exacted by the proposed purchaser. On the 30th of June 1904, plaintiff
demanded for the payment of the purchase price of the vessel in the
manner stipulated and defendant failed to pay.
ISSUE:
Whether there was a perfected contract of sale and who will bear the
loss.
HELD:
There was no perfected contract of sale because the purchase of
which had not been concluded. The conversations had between the
parties and the letter written by defendant to plaintiff did not establish a
contract sufficient in itself to create reciprocal rights between the
set of American Jurisprudence, General Index, consisting of 4 volumes,

for a total price of P1,675.50 which, in addition to the cost of freight of
P6.90, makes a total of P1,682.40. Tabora made a partial payment of
P300.00, leaving a balance of P1,382.40. The books were duly delivered
and receipted for by Tabora on May 15, 1955 in his law office Ignacio
Building, Naga City.
In the midnight of the same date, however, a big fire broke out in that
locality which destroyed and burned all the buildings standing on one
whole block including at the law office and library of Tabora As a result,
the books bought from the company as above stated, together with
Tabora's important documents and papers, were burned during the
conflagration. This unfortunate event was immediately reported by Tabora
to the company in a letter he sent on May 20, 1955. On May 23, the
company replied and as a token of goodwill it sent to Tabora free of
charge volumes 75, 76, 77 and 78 of the Philippine Reports. As Tabora
failed to pay he monthly installments agreed upon on the balance of the
purchase price notwithstanding the long time that had elapsed, the
company demanded payment of the installments due, and having failed, to
pay the same, it commenced the present action before the Court of First
Instance of Manila for the recovery of the balance of the obligation.
Plaintiff also prayed that defendant be ordered to pay 25% of the amount
due as liquidated damages, and the cost of action.

SUPREME COURT
Manila
EN BANC
G.R. No. L-21263
April 30, 1965
LAWYERS COOPERATIVE PUBLISHING COMPANY, plaintiffappellee,

vs.
PERFECTO A. TABORA, defendant-appellant.
Defendant, in his answer, pleaded force majeure as a defense. He alleged

that the books bought from the plaintiff were burned during the fire that
broke out in Naga City on May 15, 1955, and since the loss was due to
force majeure he cannot be held responsible for the loss. He prayed that
the complaint be dismissed and that he be awarded moral damages in the
amount of P15,000.00.
Paredes, Poblador, Cruz and Nazareno for plaintiff-appellee.

Tabora and Concon for defendant-appellant.
After due hearing, the court a quo rendered judgment for the plaintiff. It
ordered the defendant to pay the sum of P1,382.40, with legal interest
thereon from the filing of the complaint, plus a sum equivalent to 25% of
the total amount due as liquidated damages, and the cost of action.
BAUTISTA ANGELO, J.:

On May 3, 1955, Perfecto A. Tabora bought from the Lawyers
Cooperative Publishing Company one complete set of American
Jurisprudence consisting of 48 volumes with 1954 pocket parts, plus one
Defendant took the case to the Court of Appeals, but the same is now
before us by virtue of a certification issued by that Court that the case

involves only questions of law.
(1) Where delivery of the goods has been made to the buyer or to a bailee
for the buyer, in pursuance of the contract and the ownership in the goods
has been retained by the seller merely to secure performance by the buyer
of his obligations under the contract, the goods are at the buyer's risk from
the time of such delivery.
Appellant bought from appellee one set of American Jurisprudence,

including one set of general index, payable on installment plan. It was
provided in the contract that "title to and ownership of the books shall
remain with the seller until the purchase price shall have been fully paid.
Loss or damage to the books after delivery to the buyer shall be borne by
the buyer." The total price of the books, including the cost of freight,
amounts to P1,682.40. Appellant only made a down payment of P300.00
thereby leaving a balance of P1,382.40. This is now the import of the
present action aside from liquidated damages.
Neither can appellant find comfort in the claim that since the books were
destroyed by fire without any fault on his part he should be relieved from
the resultant obligation under the rule that an obligor should be held
exempt from liability when the loss occurs thru a fortuitous event. This is
because this rule only holds true when the obligation consists in the
delivery of a determinate thing and there is no stipulation holding him
liable even in case of fortuitous event. Here these qualifications are not
present. The obligation does not refer to a determinate thing, but is
pecuniary in nature, and the obligor bound himself to assume the loss
after the delivery of the goods to him. In other words, the obligor agreed
to assume any risk concerning the goods from the time of their delivery,
which is an exception to the rule provided for in Article 1262 of our Civil
Code.
Appellant now contends that since it was agreed that the title to and the
ownership of the books shall remain with the seller until the purchase
price shall have been fully paid, and the books were burned or destroyed
immediately after the transaction, appellee should be the one to bear the
loss for, as a result, the loss is always borne by the owner. Moreover, even
assuming that the ownership of the books were transferred to the buyer
after the perfection of the contract the latter should not answer for the loss
since the same occurred through force majeure. Here, there is no evidence
that appellant has contributed in any way to the occurrence of the
conflagration.1wph1.t
Appellant likewise contends that the court a quo erred in sentencing him
to pay attorney's fees. This is merely the result of a misapprehension for
what the court a quo ordered appellant to pay is not 25% of the amount
due as attorney's fees, but as liquidated damages, which is in line with an
express stipulation of the contract. We believe, however, that the appellant
should not be made to pay any damages because his denial to pay the
balance of the account is not due to bad faith.
This contention cannot be sustained. While as a rule the loss of the object
of the contract of sale is borne by the owner or in case of force majeure
the one under obligation to deliver the object is exempt from liability, the
application of that rule does not here obtain because the law on the
contract entered into on the matter argues against it. It is true that in the
contract entered into between the parties the seller agreed that the
ownership of the books shall remain with it until the purchase price shall
have been fully paid, but such stipulation cannot make the seller liable in
case of loss not only because such was agreed merely to secure the
performance by the buyer of his obligation but in the very contract it was
expressly agreed that the "loss or damage to the books after delivery to
the buyer shall be borne by the buyer." Any such stipulation is sanctioned
by Article 1504 of our Civil Code, which in part provides:
WHEREFORE, the decision appealed from is modified by eliminating

that portion which refers to liquidated damages. No costs.
Bengzon, C.J., Concepcion, Barrera, Paredes, Dizon, Regala, Makalintal,
Bengzon, J.P., and Zaldivar, JJ., concur.
Reyes, J.B.L., J., concurs in the result.
same day, a fire broke out, burning down Taboras law office and library.
Tabora immediately reported it to LCBC. The company replied and as a
token of goodwill it sent to Tabora free of charge 4 Philippine Reports
volumes.
As Tabora failed to pay the monthly installments agreed upon,
LCBC filed an action to recover of the balance.
TABORAS CONTENTIONS
1
Contract: title to and the ownership of the books shall remain with
the seller until the purchase price shall have been fully paid, so LCBC
should bear the loss
2
Even assuming that the ownership was transferred to Tabora, he
should not answer for the loss: force majeure (no evidence that Tabora
contributed in any way)
ISSUE & HOLDING
Who bears the loss? Tabora
LAWYERS COOPERATIVE
PERFECTO A. TABORA
PUBLISHING
COMPANY
v.
RATIO
GENERAL RULE The loss of the object of the contract of sale is borne
by the owner or in case offorce majeure the one under obligation to
deliver the object is exempt from liability
FACTS
Perfecto Tabora bought from the Lawyers Cooperative Publishing
Company a complete set of AmJur, plus a set of AmJur, General Index.
3
THIS IS NOT APPLICABLE HERE Contract provides that loss or
damage after delivery shall beborne by the buyer
CONTRACT Title to and ownership of the books shall remain with the
seller until the purchase price shall have been fully paid. Loss or damage
to the books after delivery to the buyer shall be borne by the buyer.
FORCE MAJEURE DEFENSE FAILS

The rule only holds true when the obligation consists in the delivery of a
determinate thing and there is no stipulation holding him liable even in
Tabora made a partial payment of P300.00, leaving a balance of

P1,382.40. The books were delivered and receipted for by Tabora. On the
case of fortuitous event.
Facts:
Perfecto A. Tabora(buyer) bought from the Lawyers Cooperative

Publishing Company(seller) one complete set of American
Jurisprudence consisting of 48 volumes with 1954 pocket parts, plus
one set of American Jurisprudence,General Index, consisting of 4
volumes, for a total price of P1,675.50 which, in addition to the cost of
freight of P6.90, makes a total of P1,682.40. Tabora made a partial
payment of P300.00, leaving a balance of P1,382.40. The books were
duly delivered and receipted for by Tabora on May 15, 1955 in his law
office in Naga City.
NOT PRESENT IN THIS CASE
The obligation is pecuniaryin nature, and the obligor bound himself to

assume the loss after the delivery.
However, a big fire broke out in that locality which destroyed and
burned all the buildings standing on one whole block including at the
law office and library of Tabora.
As a result, the books bought from the company as above stated,
together with Tabora's important documents and papers, were burned
during the conflagration.
This unfortunate event was immediately reported by Tabora to the
company ina letter he sent on May 20, 1955. On May 23, the company
replied and as atoken of goodwill it sent to Tabora free of charge
volumes 75, 76, 77 and 78 of the Philippine Reports.
As Tabora failed to pay he monthly installments agreed upon on
thebalance of the purchase price notwithstanding the long time that
had elapsed,the company demanded payment of the installments due,
and having failed,to pay the same, it commenced the present action
before the CFI of Manila forthe recovery of the balance of the
obligation.
Defendant, in his answer, pleaded force majeure as a defense. He
alleged that the books bought from the plaintiff were burned during the
fire that broke out in Naga City on May 15, 1955, and since the loss
was due to force majeure he cannot be held responsible for the loss.
LAWYERS COOPERATIVE PUBLISHING COMPANY V. PERFECTO

A. TABORA
G.R. No. L-21263 April 30, 1965
CFI rendered judgment for the plaintiff. It ordered Tabora to pay the
sum of P1,382.40, with legal interest thereon from the filing of the
complaint, plus asum equivalent to 25% of the total amount due as
liquidated damages, andthe cost of action.
(1) Where delivery of the goods has been made to the buyer or to a
bailee forthe buyer, in pursuance of the contract and the ownership in
the goods has been retained by the seller merely to secure
performance by the buyer of his obligations under the contract, the
goods are at the buyer's risk from the time of such delivery.
Tabora appealed to the CA, but the case was forwarded to the SC by
virtue of a certification issued by the CA that the case involves only
questions of law.
Force majeure will not exempt Tabora from his liability. This is because
this only holds true when the obligation consists in the delivery of a
determinate thing and there is no stipulation holding him liable evenin
case of fortuitous event. Here these qualifications are not present. The
obligation does not refer to a determinate thing, but is pecuniary in
nature (money), and the obligor bound himself to assume the loss
after the delivery of the goods to him. Obligor(Tabora) agreed to
assume any risk concerning the goods from the time of their delivery.
Issue:
W/N respondent Tabora should bear the loss and pay the unpaid
purchase price.
Ratio: YES.
WHEREFORE, the decision appealed from is modified by eliminating

that portion whichrefers to liquidated damages. No costs.
It was provided in the contract that "title to and ownership of the

booksshall remain with the seller until the purchase price shall have
beenfully paid. Loss or damage to the books after delivery to the
buyershall be borne by the buyer."
General Rule: the loss of the object of the contract of sale is borne by
theowner, or in case of force majeure the one under obligation to
deliver theobject is exempt from liability. BUT, this rule does not apply
in this case because the parties clearly agreed to the abovementioned
contrary stipulation.
Although the seller agreed that the ownership of the books shall
remain with ituntil the purchase price shall have been fully paid, such
stipulation cannotmake the seller liable in case of loss not only
because such was agreed merely to secure the performance by the
buyer of his obligation but in the very contract it was expressly agreed
that the "loss or damage to the books after delivery to the buyer shall
be borne by the buyer."
Any such stipulation is sanctioned by Article 1504 of our Civil Code,
which in part provides:

SUPREME COURT
Manila
EN BANC
G.R. No. L-46306
October 27, 1939
LEVY HERMANOS, INC., plaintiff-appellant,

vs.
LAZARO BLAS GERVACIO, defendant-appellee.
Felipe Caniblas for appellant.
Abreu, Lichaucco and Picazo for appellee.
MORAN, J.:
On February 9-4, 1938, plaintiff filed a complaint in the Court of First
Instance of Manila, which substantially recites the following facts:
On March 10, 1937, plaintiff Levy Hermanos, Inc., sold to defendant
Lazaro Blas Gervacio, a Packard car. Defendant, after making the initial
payment, executed a promissory note for the balance of P2,400, payable
on or before June 15, 1937, with interest at 12 per cent per annum, to
secure the payment of the note, he mortgaged the car to the plaintiff.
Defendant failed to pay the note it its maturity. Wherefore, plaintiff

foreclosed the mortgage and the car was sold at public auction, at which
plaintiff was the highest bidder for P1,800. The present action is for the
collection of the balance of P1,600 and interest.
Undoubtedly, the law is aimed at those sales where the price is payable in
several installments, for, generally, it is in these cases that partial
payments consist in relatively small amounts, constituting thus a great
temptation for improvident purchasers to buy beyond their means. There
is no such temptation where the price is to be paid in cash, or, as in the
instant case, partly in cash and partly in one term, for, in the latter case,
the partial payments are not so small as to place purchasers off their guard
and delude them to a miscalculation of their ability to pay. The oretically,
perhaps, there is no difference between paying the price in tow
installments, in so far as the size of each partial payment is concerned; but
in actual practice the difference exists, for, according to the regular course
of business, in contracts providing for payment of the price in two
installments, there is generally a provision for initial payment. But all
these considerations are immaterial, the language of the law being so clear
as to require no construction at all.lwphi1.nt
Defendant admitted the allegations of the complaint, and with this

admission, the parties submitted the case for decision. The lower court
applied, the provisions of Act No. 4122, inserted as articles 1454-A of the
Civil Code, and rendered judgment in favor of the defendant. Plaintiff
appealed.
Article 1454-A of the Civil Code reads as follows:
In a contract for the sale of personal property payable in 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 installments already paid, if there be an agreement to
this effect.
The suggestion that the cash payment made in this case should be
considered as an installment in order to bring the contract sued upon
under the operation of the law, is completely untenable. A cash payment
cannot be considered as a payment by installment, and even if it can be so
considered, still the law does not apply, for it requires non-payment of
two or more installments in order that its provisions may be invoked.
Here, only one installment was unpaid.
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.
Judgment is reversed, and the defendant-appellee is hereby sentenced to

pay plaintiff-appellant the sum of P1,600 with interest at the rate of 12 per
cent per annum from June 15, 1937, and the sum of P52.08 with interest
at the rate of 6 per cent from the date of the filing of the complaint, with
costs in both instances against the appellee.
In Macondray and Co. vs. De Santos (33 Off. Gaz., 2170), we held that
"in order to apply the provisions of article 1454-A of the Civil Code it
must appear that there was a contract for the sale of personal property
payable in installments and that there has been a failure to pay two or
more installments." The contract, in the instant case, while a sale of
personal property, is not, however, one on installments, but on straight
term, in which the balance, after payment of the initial sum, should be
paid in its totality at the time specified in the promissory note. The
transaction is not is not, therefore, the one contemplated in Act No. 4122
and accordingly the mortgagee is not bound by the prohibition therein
contained as to the right to the recovery of the unpaid balance.
Avancea, C.J., Villa-Real, Imperial, Diaz and Concepcion, JJ., concur.
10
SECOND DIVISION
[G.R. No. 61043. September 2, 1992.]
DELTA MOTOR SALES CORPORATION, Plaintiff-Appellee, v. NIU
KIM DUAN and CHAN FUE ENG, Defendants-Appellants.
11
Francisco C. Bonoan for Plaintiff-Appellee.
remedy, he cannot avail himself of the other two.
Agapito M. Joaquin, for Defendants-Appellants.
DECISION
SYLLABUS
NOCON, J.:
Elevated to this Court by the Court of Appeals, in its Resolution of May
20, 1982, on a pure question of law, 1 is the appeal therein by defendantsappellants, Niu Kim Duan and Chan Fue Eng assailing the trial courts
decision promulgated on October 11, 1977, 2 which ordered them to pay
plaintiff-appellee, Delta Motor Sales Corporation, the amount of
P6,188.29 with a 14% per annum interest which was due on the three (3)
"Daikin" air-conditioners defendants-appellants purchased from plaintiffappellee under a Deed of Conditional Sale, after the same was declared
rescinded by the trial court. They were likewise ordered to pay plaintiffappellee P1,000.00 for and as attorneys fees.
1. CIVIL LAW; SALES; TREATMENT OF THE INSTALLMENT

PAYMENTS AS RENTALS; STIPULATION IN A CONTRACT THAT
THE INSTALLMENTS PAID SHALL NOT BE RETURNED TO THE
VENDEE HELD VALID PROVIDED IT IS NOT UNCONSCIONABLE.
Defendants-appellants cannot complain that their downpayment of
P774.00 and installment payments of P5,655.92 were treated as rentals
even though the total amount of P6,429,92 which they had paid,
approximates one-third (1/3) of the cost of the three (3) air-conditioners.
A stipulation in a contract that the installments paid shall not be returned
to the vendee is valid insofar as the same may not be unconscionable
under the circumstances is sanctioned by Article 1486 of the New Civil
Code. The monthly installment payable by defendants-appellants was
P774.00. The P5,655.92 installment payments correspond only to seven
(7) monthly installments. Since they admit having used the airconditioners for twenty-two (22) months, this means that they did not pay
fifteen (15) monthly installments on the said air-conditioners and were
thus using the same FREE for said period to the prejudice of plaintiffappellee. Under the circumstances, the treatment of the installment
payments as rentals cannot be said to be unconscionable.
The events which led to the filing of the case in the lower court were
summarized by the Court of Appeals, as follows:
"On July 5, 1975, the defendants purchased from the plaintiff three (3)
units of DAIKIN air-conditioner all valued at P19,350.00 as evidenced
by the Deed of Conditional Sale, Exhibit A; that the aforesaid deed of sale
had the following terms and conditions:
(a) the defendants shall pay a down payment of P774.00 and the balance
of P18,576.00 shall [be] paid by them in twenty four (24) installments; (b)
the title to the properties purchased shall remain with the plaintiff until the
purchase price thereof is fully paid; (c) if any two installments are not
paid by the defendants on their due dates, the whole of the principal sum
remaining unpaid shall become due, with interest at the rate of 14% per
annum: and (d) in case of a suit, the defendants shall pay an amount
equivalent to 25% of the remaining unpaid obligation as damages, penalty
and attorneys fees; that to secure the payment of the balance of
P18,576.00 the defendants jointly and severally executed in favor of the
plaintiff a promissory note, Exhibit C; that the three (3) air-conditioners
were delivered to and received by the defendants as shown by the delivery
receipt, Exhibit B; that after paying the amount of P6,966.00, the
defendants failed to pay at least two (2) monthly installments; that as of
2. REMEDIES OF THE VENDOR IN A SALE OF PERSONAL

PROPERTY PAYABLE IN INSTALLMENTS; REMEDIES ARE
ALTERNATIVE AND NOT CUMULATIVE. The vendor in a sale of
personal property payable in installments may exercise one of three
remedies, namely, (1) exact the fulfillment of the obligation, should the
vendee fail to pay; (2) cancel the sale upon the vendees failure to pay two
or more installments; (3) foreclose the chattel mortgage, if one has been
constituted on the property sold, upon the vendees failure to pay two or
more installments. The third option or remedy, however, is subject to the
limitation that the vendor cannot recover any unpaid balance of the price
and any agreement to the contrary is void (Art. 1484) The three (3)
remedies are alternative and NOT cumulative. If the creditor chooses one
12
January 6, 1977, the remaining unpaid obligation of the defendants

amounted to P12,920.08; that statements of accounts were sent to the
defendants and the plaintiffs collectors personally went to the former to
effect collections but they failed to do so; that because of the unjustified
refusal of the defendants to pay their outstanding account and their
wrongful detention of the properties in question, the plaintiff tried to
recover the said properties extra-judicially but it failed to do so; that the
matter was later referred by the plaintiff to its legal counsel for legal
action; that in its verified complaint dated January 28, 1977, the plaintiff
prayed for the issuance of a writ of replevin, which the Court granted in
its Order dated February 28, 1977, after the plaintiff posted the requisite
bond; that on April 11, 1977, the plaintiff, by virtue of the aforesaid writ,
succeeded in retrieving the properties in question: that as of October 3,
1977, the outstanding account of the defendants is only in the amount of
P6,188.29 as shown by the computation, Exhibit F, after deducting the
interests in arrears, cover charges, replevin bond premiums, the value of
the units repossessed and the like; and, that in view of the failure of the
defendants to pay their obligations, the amount of P6,966.00 which had
been paid by way of installments were treated as rentals for the units in
question for two (2) years pursuant to the provisions of paragraph 5 of the
Deed of Conditional Sale, Exhibit A. (pp. 5-7, Record; pp. 4-6,
Appellants Brief)."
x
x
x
"7. Should SELLER rescind this contract for any of the reasons stipulated
in the preceding paragraph, the BUYER, by these presents obligates
himself to peacefully deliver the PROPERTY to the SELLER in case of
rescission, and should a suit be brought in court by the SELLER to seek
judicial declaration of rescission and take possession of the PROPERTY,
the BUYER hereby obligates himself to pay all the expenses to be
incurred by reason of such suit and in addition to pay the sum equivalent
to 25% of the remaining unpaid obligation as damages, penalty and
attorneys fees;" 3
Defendants-appellants claim that for the use of the plaintiff-appellees
three air-conditioners, from July 5, 1975 4 to April 11, 1977, 5 or for a
period of about 22 months, they, in effect, paid rentals in the amount of
P6,429,92, 6 or roughly one-third (1/3) of the entire price of said airconditioners which was P19,350.00. They also complain that for the said
period the trial court is ordering them to pay P6,188.29 as the balance due
for the three air-conditioners repossessed. Defendants-appellants were
likewise ordered to pay P1,000.00 as attorneys fees when plaintiffappellee never sought for attorneys fees in its complaint. They satirically
pointed out that by putting "a few touches here and there, the same units
can be sold again to the next imprudent customer" 7 by plaintiff-appellee.
Thus, enforcement of the Deed of Conditional Sale will unjustly enrich
plaintiff-appellee at the expense of defendants-appellants.
As above-stated, the trial court ruled in favor of Plaintiff-Appellee.

Defendants-appellants assail the Deed of Conditional Sale under which
they purchased the three (3) Daikin air-conditioners from plaintiffappellee as being contrary to law, morals, good custom, public order or
public policy. In particular, they point to the contracts paragraphs 5 and 7
as iniquitous, which paragraphs state that:
I
Defendants-appellants cannot complain that their downpayment of
P774.00 and installment payments of P5,655.92 8 were treated as rentals
even though the total amount of P6,429,92 which they had paid,
approximates one-third (1/3) of the cost of the three (3) air-conditioners.
A stipulation in a contract that the installments paid shall not be returned
to the vendee is valid insofar as the same may not be unconscionable
under the circumstances is sanctioned by Article 1486 of the New Civil
Code. 9 The monthly installment payable by defendants-appellants was
P774.00. 10 The P5,655.92 installment payments correspond only to
seven (7) monthly installments. Since they admit having used the air-
"5. Should BUYER fail to pay any of the monthly installments when due,
or otherwise fail to comply with any of the terms and conditions herein
stipulated, this contract shall automatically become null and void and all
sums so paid by BUYER by reason thereof shall be considered as rental
and the SELLER shall then and there be free to take possession thereof
without liability for trespass or responsibility for any article left in or
attached to the PROPERTY:
13
conditioners for twenty-two (22) months, this means that they did not pay
fifteen (15) monthly installments on the said air-conditioners and were
thus using the same FREE for said period to the prejudice of plaintiffappellee. Under the circumstances, the treatment of the installment
payments as rentals cannot be said to be unconscionable.
already repossessed. It cannot have its cake and eat it too.

WHEREFORE, the judgment of the trial court in Civil Case No. 25578 is
hereby SET ASIDE and the complaint filed by plaintiff-appellee Delta
Motor Sales Corporation is hereby DISMISSED. No costs.
II
SO ORDERED.
The vendor in a sale of personal property payable in installments may

exercise one of three remedies, namely, (1) exact the fulfillment of the
obligation, should the vendee fail to pay; (2) cancel the sale upon the
vendees failure to pay two or more installments; (3) foreclose the chattel
mortgage, if one has been constituted on the property sold, upon the
vendees failure to pay two or more installments. The third option or
remedy, however, is subject to the limitation that the vendor cannot
recover any unpaid balance of the price and any agreement to the contrary
is void (Art. 1484)
Narvasa, C.J., Padilla, Regalado and Melo, JJ., concur.
The three (3) remedies are alternative and NOT cumulative. If the creditor
chooses one remedy, he cannot avail himself of the other two.
It is not disputed that the plaintiff-appellee had taken possession of the
three air-conditioners, through a writ of replevin when defendantsappellants refused to extra-judicially surrender the same. This was done
pursuant to paragraphs 5 and 7 of its Deed of Conditional Sale when
defendants-appellants failed to pay at least two (2) monthly installments,
so much so that as of January 6, 1977, the total amount they owed
plaintiff-appellee, inclusive of interest, was P12,920.08. 12 The case
plaintiff-appellee filed was to seek a judicial declaration that it had validly
rescinded the Deed of Conditional Sale.
Clearly, plaintiff-appellee chose the second remedy of Article 1484 in
seeking enforcement of its contract with defendants-appellants. This is
shown from the fact that its Exhibit "F" which showed the computation of
the outstanding account of defendants-appellants as of October 3, 1977
took into account " the value of the units repossessed. " Having done so,
it is barred from exacting payment from defendants-appellants of the
balance of the price of the three air-conditioning units which it had
14

SUPREME COURT
Manila
EN BANC
G.R. No. L-10789
Carrying out the order of execution, the sheriff levied on the same
machineries and farm implements which had been bought by the spouses;
and later sold them at public auction to the highest bidder which turned
out to be the Southern Motors itself for the total sum of P10,000.
May 28, 1957
As its judgment called for much more, the Southern Motors subsequently
asked and obtained, an alias writ of execution; and pursuant thereto, the
provincial sheriff levied attachment on the Tajanlangits' rights and
interests in certain real properties with a view to another sale on
execution.
AMADOR TAJANLANGIT, ET AL., plaintiff-appellants,

vs.
SOUTHERN MOTORS, INC., ET AL., defendants-appellees.
To prevent such sale, the Tajanlangits instituted this action in the Iloilo
court of first instance for the purpose among others, of annulling the alias
writ of execution and all proceedings subsequent thereto. Their two main
theories: (1) They had returned the machineries and farm implements to
the Southern Motors Inc., the latter accepted them, and had thereby settled
their accounts; for that reason, said spouses did not contest the action in
Civil Case No. 2942; and (2) as the Southern Motors Inc. had repossessed
the machines purchased on installment (and mortgaged) the buyers were
thereby relieved from further responsibility, in view of the Recto Law,
now article 1484 of the New Civil Code.
Almacen and Almacen for appellants.

Diosdado Garingalao for appellees.
BENGZON, J.:
The case. Appellants seek to reverse the order of Hon. Pantaleon Pelayo,
Judge of the Iloilo court of first instance refusing to interfere with the
alias writ of execution issued in Civil Case No. 2942 pending in another
sala of the same court.
The facts. In April 1953 Amador Tajanlangit and his wife Angeles,
residents of Iloilo, bought, from the Southern Motors Inc. of Iloilo two
tractors and a thresher. In payment for the same, they executed the
promissory note Annex A whereby they undertook to satisfy the total
purchase price of P24,755.75 in several installments (with interest)
payable on stated dates from May 18, 1953 December 10, 1955. The note
stipulated that if default be made in the payment of interest or of any
installment, then the total principal sum still unpaid with interest shall at
once become demandable etc. The spouse failed to meet any installment.
Wherefore, they were sued, in the above Civil Case No. 2942, for the
amount of the promissory note. 1 The spouses defaulted, and the court,
after listening to the Southern Motors' evidence entered Judgment for it in
the total sum of P24,755.75 together with interest at 12 per cent, plus 10
per cent of the total amount due as attorney's fees and costs of collection.
For answer, the company denied the alleged "settlement and

understanding" during the pendency of civil case No. 2949. It also denied
having repossessed the machineries, the truth being that they were
attached by the sheriff and then deposited by the latter in its shop for
safekeeping, before the sale at public auction.
The case was submitted for decision mostly upon a stipulation of facts.
Additional testimony was offered together with documentary evidence.
Everything considered the court entered judgment, saying in part;
The proceedings in Civil Case No. 2942 above referred to, were had in the
Court of First Instance (Branch 1) of the Province and of the City of
Iloilo. While this court (Branch IV) sympathizes with plaintiffs, it cannot
grant, in this action, the relief prayed for the complaint because courts of
similar jurisdiction cannot invalidate the judgments and orders of each
15
other. Plaintiffs have not pursued the proper remedy. This court is without
authority and jurisdiction to declare null and void the order directing the
issuance of aliaswrit of execution because it was made by another court
of equal rank and category (see Cabiao and Izquierdo vs. Del Rosario and
Lim, 44 Phil., 82-186).
(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. (New Civil Code.)
WHEREFORE, judgement is hereby rendered dismissing the complaint

with costs against plaintiffs costs against plaintiffs. Let the writ of
preliminiary injunction issued on August 26, 1954, be lifted.
Appellants would invoke the last paragraph. But there has been no
foreclosure of the chattel mortgage nor a foreclosure sale. Therefore the
prohibition against further collection does not apply.
The plaintiffs reasonably brought the matter to the Court of Appeals, but
the latter forwarded the expediente, being of the opinion that the appeal
involved questions of jurisdiction and/or law
At any rate it is the actual sale of the mortgaged chattel in accordance

with section 14 Act No. 1508 that would bar the creditor (who chooses to
foreclose) from recovering any unpaid balance. (Pacific Com. Co.vs. De
la Rama, 72 Phil. 380.) (Manila Motor Co. vs. Fernandez, 99 Phil., 782.).
Discussion. Appellants' brief elaborately explains in the nine errors

assigned, their original two theories although their "settlement" idea
appears to be somewhat modified.
It is true that there was a chattel mortgage on the goods sold. But the
Southern Motors elected to sue on the note exclusively, i.e. to exact
fulfillment of the obligation to pay. It had a right to select among the three
remedies established in Article 1484. In choosing to sue on the note, it
was not thereby limited to the proceeds of the sale, on execution, of the
mortgaged good.2
"What is being sought in this present action" say appellants "is to prohibit
and forbid the appellee Sheriff of Iloilo from attaching and selling at
public auction sale the real properties of appellants because that is now
forbidden by our law after the chattels that have been purchased and duly
mortgagee had already been repossessed by the same vendor-mortgagee
and later on sold at public auction sale and purchased by the same at such
meager sum of P10,000."
In Southern Motors Inc. vs. Magbanua, (100 Phil., 155) a similar situation
arose in connection with the purchase on installment of a Chevrolet truck
by Magbanua. Upon the latter's default, suit on the note was filed, and the
truck levied on together with other properties of the debtor. Contending
that the seller was limited to the truck, the debtor obtained a discharge of
the other properties. This court said:
"Our law" provides,

ART. 1484. In a contract of sale of personal property the price of which is
payable in installments, the vendor may exercise of the following
remedies:
By praying that the defendant be ordered to pay the sum of P4,690

together with the stipulated interest at 12% per annum from 17 March
1954 until fully paid, plus 10 per cent of the total amount due as attorney's
fees and cost of collection, the plaintiff acted to exact the fulfillment of
the obligation and not to foreclosethe mortgage on the truck. . . .
(1) 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;
As the plaintiff has chosen to exact the fulfillment of the defendant's
16
obligation, the former may enforce execution of the judgement rendered

in its favor on the personal and real properties of the latter not exempt
from execution sufficient to satisfy the judgment. That part of the
judgement depriving the plaintiff of its right to enforce judgment against
the properties of the defendant except the mortgaged truck and
discharging the writ of attachment on his other properties is erroneous.
(Emphasis ours.)
Judgment. The decision dismissing the complaint, is affirmed, with costs

against appellants. So ordered.
Padilla, Montemayor, Reyes, A., Bautista Angelo, Labrador, Concepcion,
Reyes, J.B.L. and Endencia, JJ., concur.
Concerning their second theory, settlement or cancellation

appellants allege that the very implements sold "were duly returned" by
them, and "were duly received and accepted by the said vendormortgagee". Therefore they argue, "upon the return of the same chattels
and due acceptance of the same by the vendor-mortgagee, the conditional
sale is ipso facto cancelled, with the right of the vendor-mortgagee to
appropriate whatever downpayment and posterior monthly installments
made by the purchaser as it did happen in the present case at bar."
The trouble with the argument is that it assumes that acceptance of the
goods by the Southern Motors Co, with a view to "cancellation" of the
sale. The company denies such acceptance and cancellation, asserting the
goods, were deposited in its shop when the sheriff attached them in
pursuance of the execution. Its assertion is backed up by the sheriff, of
whose credibility there is no reason to doubt. Anyway this cancellation or
settlement theory may not be heeded now, because it would contravene
the decision in Civil Case No. 2942 above-mentioned it would show
the Tajanlangits owned nothing to Southern Motors Inc. Such decision is
binding upon them, unless and until they manage to set it aside in a proper
proceeding and this is not it.
There are other points involved in the case, such as the authority of the
judge of one branch of a court of first instance to enjoin proceedings in
another branch of the same court. As stated, Judge Pelayo refused to
interfere on that ground. Appellants insist this was error on several counts.
We deem it unnecessary to deal with this procedural aspect, inasmuch as
we find that, on the merits, plaintiffs are not entitled to the relief
demanded.
17
cancelled the sale of a motor vehicle for failure of the buyer to pay two or
more of the stipulated installments, may also demand payment of the
balance of the purchase price.
The pertinent facts are summarized by the respondent appellate court as
follows:
On June 28, 1976, defendant spouses Restituto Nonato and Ester Nonato
purchased one (1) unit of Volkswagen Sakbayan from the People's Car,
Inc., on installment basis. To secure complete payment, the defendants
executed a promissory note (Exh. A or 1) and a chattel mortgage in favor
of People's Car, Inc, (Exh. B or 2). People's Car, Inc., assigned its rights
and interests over the note and mortgage in favor of plaintiff Investor's
Finance Corporation (FNCB) Finance). For failure of defendants to pay
two or more installments, despite demands, the car was repossessed by
plaintiff on March 20, 1978 (Exh. E or 4).
Despite repossession, plaintiff demanded from defendants that they pay
the balance of the price of the car (Exhs. F and C). Finally, on June 9,
1978, plaintiff filed before the Court of First Instance of Negros
Occidental the present complaint against defendants for the latter to pay
the balance of the price of the car, with damages and attorney's fees.
(Records, pp. 36-37)

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-67181 November 22, 1985
In their answer, the spouses Nonato alleged by way of defense that when
the company repossessed the vehicle, it had, by that act, effectively
cancelled the sale of the vehicle. It is therefore barred from exacting
recovery of the unpaid balance of the purchase price, as mandated by the
provisions of Article 1484 of the Civil Code.
SPOUSES RESTITUTO NONATO and ESTER NONATO,

petitioners,
vs.
THE HONORABLE INTERMEDIATE APPELLATE COURT and
INVESTOR'S FINANCE CORPORATIONrespondents.
After due hearing, the trial court rendered a decision in favor of the IFC
and against the Nonatos, as follows:
ESCOLIN, J.:
PREMISES CONSIDERED, the Court hereby renders judgment ordering
the defendant to pay to the plaintiff the amount of P 17,537.60 with
interest at the rate of 14% per annum from July 28, 1976 until fully paid,
The issue posed in this petition for review of the decision of the
respondent appellate court is whether a vendor, or his assignee, who had
18
10% of the amount due as attorney's fees, litigation expenses in the

amount of P 133.05 plus the costs of this suit. No pronouncement as to
other charges and damages, the same not having been proven to the
satisfaction of the Court. 1
It is not disputed that the respondent company had taken possession of the
car purchased by the Nonatos on installments. But while the Nonatos
maintain that the company had, by that act, exercised its option to cancel
the contract of sale, the company contends that the repossession of the
vehicle was only for the purpose of appraising its value and for storage
and safekeeping pending full payment by the Nonatos of the purchasing
price. The company thus denies having exercised its right to cancel the
sale of the repossessed car. The records show otherwise.
On appeal, the respondent appellate court affirmed the j judgment.

Hence, this petition for review on certiorari.
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 receipt issued by the respondent company to the Nonatos when it

took possession of the vehicle states that the vehicle could be redeemed
within fifteen [151 days. 3 This could only mean that should petitioners
fail to redeem the car within the aforesaid period by paying the balance of
the purchase price, the company would retain permanent possession of the
vehicle, as it did in fact. This was confirmed by Mr. Ernesto Carmona, the
company's witness, who testified, to wit:
ATTY. PAMPLONA:
installments;
So that Mr. Witness, it is clear now that, per your receipt and your answer,
the company will not return the unit without paying a sum of money,
more particularly the balance of the account?
The applicable law in the case at bar, involving as it does a sale of

personal property on installment, is Article 1484 of the Civil Code which
provides:
the contrary shall be void.
WITNESS: Yes, sir. 4

Respondent corporation further asserts that it repossessed the vehicle
merely for the purpose of appraising its current value. The allegation is
untenable, for even after it had notified the Nonatos that the value of the
car was not sufficient to cover the balance of the purchase price, there was
no attempt at all on the part of the company to return the repossessed car,
The meaning of the aforequoted provision has been repeatedly enunciated

in a long line of cases. Thus: "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. 2
Indeed, the acts performed by the corporation are wholly consistent with
the conclusion that it had opted to cancel the contract of sale of the
vehicle. It is thus barred from exacting payment from petitioners of the
balance of the price of the vehicle which it had already repossessed. It
cannot have its cake and eat it too.
19
WHEREFORE, the judgment of the appellate court in CA-G.R. No.

69276-R is hereby set aside and the complaint filed by respondent
Investors Finance Corporation against petitioner in Civil Case No. 13852
should be, as it is hereby, dismissed. No costs.
Manila
SECOND DIVISION
G.R. No. L-39806 January 27, 1983
SO ORDERED.
LUIS RIDAD and LOURDES RIDAD, plaintiffs-appellees,

vs.
FILIPINAS INVESTMENT and FINANCE CORPORATION, JOSE
D. SEBASTIAN and JOSE SAN AGUSTIN, in his capacity as Sheriff,
defendants-appellants.
Concepcion, Jr. (Chairman), Abad Santos, Cuevas and Alampay, JJ.,

concur.
Osmundo Victoriano for plaintiffs-appellees.

Wilhelmina V. Joven for defendant-appellants.
DE CASTRO, J:
Appeal from the decision of the Court of First Instance of Rizal, Branch I,
in Civil Case No. 9140 for annulment of contract, originally filed with the
Court of Appeals but was 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.
The materials facts of the case appearing on record may be stated as
follows: On April 14, 1964, plaintiffs purchased from the Supreme Sales
arid Development Corporation two (2) brand new Ford Consul Sedans
complete with accessories, for P26,887 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
mortgage not only on the two vehicles purchased but also on another car
(Chevrolet) 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 of the plaintiffs, the vendor assigned

SUPREME COURT
20
its rights, title and interest to the above-mentioned promissory note and
chattel mortgage to defendant Filipinas Investment and Finance
Corporation.
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 court five alleged errors, as follows:
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 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 auction sale
was held on November 16, 1965, involving the remaining properties
subject of the deed of chattel mortgage since plaintiffs' obligation was not
fully 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 the highest bidder, herein defendant
corporation, which subsequently sold and conveyed the same to herein
defendant Jose D. Sebastian, who then filed with the Public Service
Commission an application for approval of said sale in his favor.
I
THE LOWER COURT ERRED IN DECLARING THE CHATTEL
MORTGAGE, EXHIBIT "C", NULL AND VOID.
II
THE LOWER COURT ERRED IN HOLDING THAT THE SALE AT
PUBLIC AUCTION CONDUCTED BY THE CITY SHERIFF OF
MANILA CONCERNING THE TAXICAB FRANCHISE IS OF NO
LEGAL EFFECT.
III
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 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 basis of the
documentary evidence adduced by the parties during the pre-trial
conference. Thereafter, the lower court rendered judgment as follows:
THE LOWER COURT ERRED IN SETTING ASIDE THE

CERTIFICATE OF SALE ISSUED BY THE CITY SHERIFF OF
MANILA IN FAVOR OF FILIPINAS INVESTMENT AND FINANCE
CORPORATION COVERING PLAINTIFFS' TAXICAB FRANCHISE.
IV
IN VIEW OF THE ABOVE CONSIDERATIONS, this Court declares the

chattel mortgage, Exhibit "C", to be null and void in so far as the taxicab
franchise and the used 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 effect.1wph1.t The certificate
of sale issued by the City Sheriff of Manila in favor of Filipinas
Investment and Finance Corporation concerning plaintiffs' taxicab
franchise for P8,000 is accordingly cancelled and set aside, and the
assignment thereof made by Filipinas Investment in favor of defendant
Jose Sebastian is declared void and of no legal effect. (Record on Appeal,
p. 128).
THE LOWER COURT ERRED IN DECLARING VOID AND OF NO

LEGAL EFFECT THE ASSIGNMENT OF THE TAXICAB
FRANCHISE MADE BY FILIPINAS INVESTMENT AND FINANCE
CORPORATION IN FAVOR OF DEFENDANT.
V
THE LOWER COURT (sic) IN NOT DECIDING THE CASE IN FAVOR
OF THE DEFENDANTS. Appellants' Brief, pp. 9 & 10)
21
From the aforequoted assignment of errors, the decisive issue for

consideration is the validity of the chattel mortgage in so far as the
franchise and the subsequent sale thereof are concerned.
the mortgagor-buyer would find himself without the property and still
owing practically the full amount of his original indebtedness. 4
In the instant case, defendant corporation elected to foreclose its mortgage
upon default by the plaintiffs in the payment of the agreed installments.
Having chosen to foreclose the chattel mortgage, and bought the
purchased vehicles at the public auction as the highest bidder, it submitted
itself to the consequences of the law as 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 as well as the
payment of the unpaid balance.
The resolution of said issue is unquestionably governed by the provisions

of Article 1484 of the Civil Code which states:
Art. 1484. In a contract of sale of personal property the price of which is
payable in installments, the vendor may exercise y of the following
remedies:
Consequently, the lower court rightly declared the nullity of the chattel
mortgage in question in so far as the taxicab franchise and the used
Chevrolet car of plaintiffs are concerned, under the authority of the ruling
in the case of Levy Hermanos, Inc. vs. Pacific Commercial Co., et al., 71
Phil. 587, the facts of which are similar to those in the case at bar. There,
we have the same situation wherein the vendees offered as 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. This Court sustained the pronouncement made by the lower
court on the nullity of 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 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 of foreclosure, he
cannot nor should he be allowed to insist on the sale of the house 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 from those which were sold on installment. This would
indeed be contrary to public policy and the very spirit and purpose of the
law, limiting the vendor's right to foreclose the chattel mortgage only on
the thing sold.
installments;
Under the above-quoted article of the Civil Code, the vendor of personal
property the purchase price of which is payable in installments, has the
right, should the vendee default in the payment of two or more of the
agreed installments, 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. 1 Whichever right the
vendor elects, he cannot avail of the other, these remedies being
alternative, not cumulative. 2 Furthermore, if the vendor avails himself of
the right to foreclose his mortgage, the law prohibits him from further
bringing an action against the vendee for the purpose of recovering
whatever balance of the debt secured not satisfied by the foreclosure sale.
3
The precise purpose of the law is to prevent mortgagees from seizing the
mortgaged property, buying it at foreclosure sale for a low price and then
bringing suit against the mortgagor for a deficiency judgment, otherwise,
In the case of Cruz v. Filipinos Investment & Finance Corporation, 23

SCRA 791, this Court ruled that the vendor of personal property sold on
the installment basis is precluded, after foreclosing the chattel mortgage
22
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. Consequently,
the additional mortgage was ordered cancelled. Said ruling was reiterated
in the case of Pascual v. Universal Motors Corporation, 61 SCRA 121. 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.
IN VIEW HEREOF, the judgment appealed from is hereby affirmed, with

costs against the appellants.
SO ORDERED.
Makasiar (Chairman), Aquino, Concepcion, Jr., Guerrero, Abad Santos
and Escolin, JJ., concur.

SUPREME COURT
Manila
Reliance on the ruling in Southern Motors, inc. v. Moscoso, 2 SCRA 168,

that in sales 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 of the mortgage, hence, the seller
creditor is entitled to a deficiency judgment, does not for the stand of the
appellants for that case is entirely different from the case at bar. In that
case, the vendor has availed of the first remedy provided by Article 1484
of the Civil Code, i.e., to exact fulfillment of the obligation whereas in the
present case, the remedy availed of was foreclosure of the chattel
mortgage.
FIRST DIVISION
G.R. No. L-30583 October 23, 1982
EUTROPIO ZAYAS, JR., petitioner,
vs.
LUNETA MOTOR COMPANY and HONORABLE JUAN O.
REYES, Presiding Judge of the Court of First Instance of Manila,
Branch XXI, respondents.
The foregoing disposition renders superfluous a determination of the

other issue raised by the parties as to the validity of the auction sale, in so
far as the franchise of plaintiffs is concerned, which sale had been
admittedly held without any notice to the plaintiffs.
Pantaleon Z. Salcedo for petitioner.

Leandro B. Fernandez for respondents.
23
GUTIERREZ, JR., J.:
payment in the amount of P1,006.82; and 2) executed a promissory note

in the amount of P7,920.00, the balance of the total selling price, in favor
of respondent Luneta Motor Company. The promissory note stated the
amounts and dates of payment of twenty-six installments covering the
P7,920.00 debt. Simultaneously with the execution of the promissory note
and to secure its payment, the petitioner executed a chattel mortgage on
the subject motor vehicle in favor of the respondent. After paying a total
amount of P3,148.00, the petitioner was unable to pay further monthly
installments prompting the respondent Luneta Motor Company to extrajudicially foreclose the chattel mortgage (Annex "A" to Answer, Original
Record, p. 10, supra). The motor vehicle was sold at public auction with
the respondent Luneta Motor Company represented by Atty. Leandro B.
Fernandez as the highest bidder in the amount of P5,000.00 (Annex "B"
to Answer, Original Record, p. 11, supra). Since the payments made by
petitioner Eutropio Zayas, Jr. plus the P5,000.00 realized from the
foreclosure of the chattel mortgage could not cover the total amount of the
promissory note executed by the petitioner in favor of the respondent
Luneta Motor Company, the latter filed Civil Case No. 165263 with the
City Court of Manila for the recovery of the balance of P1,551.74 plus
interests.
Eutropio Zayas, Jr., filed this petition for review by certiorari to secure a
reversal of the respondent court's orders which remanded Civil Case No.
74381 for further proceedings instead of affirming the city court's order of
dismissal,
The petitioner Eutropio Zayas, Jr, purchased on installment basis a motor
vehicle described as ONE (1) UNIT FORD THAMES FREIGHTER
W/PUJ BODY with Engine No. 400E-127738 and Chassis No. 400E127738 from Mr. Roque Escao of the Escao Enterprises in Cagayan de
Oro City, dealer of respondent Luneta Motor Company, under the
following terms and conditions:
Selling price
P7,500.00
Financing charge
P1,426.82
Total Selling Price
P8,926.82
Payable on Delivery
P1,006.82
Payable in 24 months at 12% interest per

annum
Luneta Motor Company alleged in its complaint that defendant Eutropio

Zayas, Jr. executed a promissory note in the amount of P7,920.00 in its
favor; that out of the P7,920.00, Eutropio Zayas, Jr. had paid only
P6,368.26 plus interest up to the date of the sale at public auction of the
motor vehicle; that the balance of P1,551.74 plus interest of 12% thereon
from that date had already become due and payable but despite repeated
demands to pay the same, Eutropio Zayas, Jr., refused and failed to pay.
In his answer with affirmative defenses and counterclaim, Eutropio Zayas,
Jr. admitted having executed the promissory note for the monthly
payments, on a Ford Thames vehicle bearing Engine No. 400E-127738
which he purchased from the Luneta Motor Company but he denied his
alleged outstanding liability of P1,551.74 plus interest thereon ... the said
obligation if there was any, had already been discharged either by
payment or by sale in public auction of the said motor vehicle as
evidenced by a Notice of Sale marked as Annex "A" and Certificate of
Sale marked as Annex "B"; (Answer, p. 7, Original Record). He alleged as
P7,920.00
The motor vehicle was delivered to the petitioner who 1) paid the initial
24
affirmative defenses, among others: 1) that the plaintiff has no cause of

action against him; and 2) that pursuant to Article 1484 of the New Civil
Code and the case of Pacific Commercial Co. v. De La Rama, (72 Phil.
380) his obligation per the promissory note was extinguished by the sale
at public auction of the motor vehicle, the subject of the chattel mortgage
which was executed by him in favor of the plaintiff as security for the
payment of said promissory note. (Answer, p. 8, Original Record)
Luneta Motor Company filed an "Urgent Motion for Reconsideration"

reiterating its stand that Article 1484 of the New Civil Code on sale of
personal property by installment was not applicable and that the contract
involving the parties was a mere case of an ordinary loan secured by
chattel mortgage. According to the plaintiff, the defendant executed the
promissory note and chattel mortgage to secure the plaintiff's interest for
having financed the purchase of the motor vehicle by the defendant from
the Escao Enterprises of Cagayan de Oro City, an entity entirely different
and distinct from the plaintiff corporation (p. 33, Original Record).
In its Reply, Luneta Motor Company denied the applicability of Article

1484 of the Civil Code ... for the simple reason that the contract involved
between the parties is not one for a sale on installment" (Reply, p. 13,
Original Record).
The court denied the motion for reconsideration for lack of merit.
Luneta Motor Company appealed the case to the Court of First Instance of
Manila where it was docketed as Civil Case No. 74381.
After several postponements, the case was set for hearing. As a result of
the non- appearance of the plaintiff and its counsel on the date set for
hearing, defendant Zayas, Jr. moved to have the case dismissed for lack of
interest on the part of the plaintiff. He also asked the court to allow him to
discuss the merits of his affirmative defense as if a motion to dismiss had
been filed. The issue raised and argued by the defendant was whether or
not a deficiency amount after the motor vehicle, subject of the chattel
mortgage, has been sold at public auction could still be recovered. Zayas
cited the case of Ruperto Cruz v. Filipinas Investment (23 SCRA
791).<re||an1w>
After various incidents, the respondent court issued an order which, in

part, reads:
This is an appeal taken by plaintiff from the order of the City Court of
Manila, dismissing its complaint on the ground that the defendant is no
longer liable for the deficiency judgment inasmuch as the chattel
mortgage has been foreclosed, with the plaintiff as the highest bidder
thereof, in line with the ruling of the Supreme Court in the case of
Ruperto G. Cruz v. Filipinas Investment (G.R. No. L24772) in connection
with Article 1484 of the Civil Code.
Acting on the motion, the city court issued an Order:

On Petition of counsel for the defendant for the dismissal of this case on
the ground that the defendant is no longer liable for the deficiency
judgment inas much as the chattel mortgage has been foreclosed, with the
plaintiff as the highest bidder thereof, citing the case of Ruperto G. Cruz
v. Filipinas Investmentdecided on May 27, 1968, G.R. No. L-24772 in
connection with Article 1484 of the Civil Code, and finding the same well
taken.
xxx xxx xxx

After going over the pleadings in this case, more particularly the
complaint and the answer to the complaint filed with the City Court of
Manila, this Court is of the impression that the case at bar may not be
decided merely, as the City Court had done, on the question of law since
the presentation of evidence is necessary to adjudicate the questions
involved. WHEREFORE, this case is hereby remanded to the court of
origin for further proceedings. (pp. 82-83, Original Record)
Let this case be dismissed without pronouncement as to costs.
25
Hence, this petition.
Motor Company. A very significant evidence which proves the nature of

the relationship between Luneta Motor Company and Escao Enterprises
is Annex "A. of the petitioner's OPPOSITION TO URGENT MOTION
FOR RECONSIDERATION. (Original Record, p. 36) Annex "A" is a
Certification from the cashier of Escano Enterprises on the monthly
installments paid by Mr. Eutropio Zayas, Jr. In the certification, the
promissory note in favor of Luneta Motor Company was specifically
mentioned. There was only one promissory note executed by Eutropio
Zayas, Jr. in connection with the purchase of the motor vehicle. The
promissory note mentioned in the certification refers to the promissory
note executed by Eutropio Zayas, Jr. in favor of respondent Luneta Motor
Company. Thus:
Petitioner Eutropio Zayas, Jr. now maintains::

That Respondent Court of First Instance erred:
1. IN HOLDING THAT THE QUESTION OF LAW CANNOT BE
DECIDED SINCE PRESENTATION OF EVIDENCE IS NECESSARYREGARDING THE QUESTION OF RECOVERY OF THE
DEFICIENCY AMOUNT IN A CHATTEL MORTGAGE AFTER
SELLING IT IN A PUBLIC AUCTION;
2. IN ORDERING THE REMAND OF THE CASE TO THE CITY
COURT FOR FURTHER PROCEEDINGS TAKEN BY THE
RESPONDENT FROM THE CITY COURT TO THE COURT OF FIRST
INSTANCE, BRANCH XXI, MANILA; and
C E R T I F I C AT I O N
This is to certify that Mr. EUTROPIO ZAYAS, JR. has paid from us the
following, of his FORD THAMES BEARING Engine No. 400E-127738,
promissory note dated October 6, 1966. Viz:
3. IN NOT DISMISSING THE APPEAL TAKEN BY THE PRIVATE

RESPONDENT FROM THE CITY COURT TO THE COURT OF FIRST
INSTANCE.
The main defense of respondent Luneta Motor Company is that Escano
Enterprises, Cagayan de Oro City from which petitioner Eutropio Zayas,
Jr. purchased the subject motor vehicle was a distinct and different entity;
that the role of Luneta Motor Company in the said transaction was only to
finance the purchase price of the motor vehicle; and that in order to
protect its interest as regards the promissory note executed in its favor, a
chattel mortgage covering the same motor vehicle was also executed by
petitioner Eutropio Zayas, Jr. In short, respondent Luneta Motor Company
maintains that the contract between the company and the petitioner was
only an ordinary loan removed from the coverage of Article 1484 of the
New Civil Code.
The respondent's arguments have no merit.
The Escao Enterprises of Cagayan de Oro City was an agent of Luneta
26
ESCAO O.R No.
DATE RECEIVED
AMOUNT
09998
October 5, 1966
P1,000.00
10064
October 20, 1966
242.00
10188
November 8, 1966
166.00
10355
December 12,1966
400.00
LMC C.R. #40031
January 19, 1967
270.00
10536
10645
10704
10749
10132
February 1, 1967
February 27, 1967
March 13,1967
March 22, 1967
March 30,1967
60.00
100.00
100.00
60.00
100.00
10788
April 8, 1967
100.00
10795
April 11, 1967
100.00
10827
April 18, 1967
100.00
10934
May 10, 1967
100.00
(3) Foreclose the chattel ;mortgage on the thing sold, if one has been
10991
11105
May 26,1967
June 19,1967
100.00
150.00
P 3,148.00

ESCAO ENTERPRISES
(SGD.) EMELITA H. BACULIO
Cashier
xxx xxx xxx

... the established rule is to the effect that the foreclosure and actual sale
of a mortgaged chattel bars further recovery by the vendor of any balance
on the purchaser's outstanding obligation not so satisfied by the sale. And
the reason for this doctrine was aptly stated in the case of Bachrach
Motor Co. vs. Millan, supra, thus:
Escano Enterprises, a dealer of respondent Luneta Motor Company, was

merely a collecting-agent as far as the purchase of the subject motor
vehicle was concerned. The principal and agent relationship is clear.
But even assuming that the "distinct and independent entity" theory of the
private respondent is valid, the nature of the transaction as a sale of
personal property on installment basis remains. When, therefore, Escao
Enterprises, assigned its rights vis-a-vis the sale to respondent Luneta
Motor Company, the nature of the transaction involving Escano
Enterprises and Eutropio Zayas, Jr. did not change at all. As assignee,
respondent Luneta Motor Company had no better rights than assignor
Escao Enterprises under the same transaction. The transaction would still
be a sale of personal property in installments covered by Article 1484 of
the New Civil Code. To rule otherwise would pave the way for subverting
the policy underlying Article 1484 of the New Civil Code, on the
foreclosure of chattel mortgages over personal property sold on
installment basis.
Undoubtedly the principal object of the above amendment was to remedy

the abuses committed in connection with the foreclosure of chattel
mortgages. This amendment prevents mortgagees from seizing the
bringing suit against the mortgagor for a deficiency 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 that 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. (Cruz v.
Filipinas Investment & Finance Corporation, 23 SCRA 791)

payable in installments, the vendor may exercise any of the following
remedies:
Our findings and conclusions are borne out by the records available to the
respondent court. There was no necessity for the remand of records to the
city court for the presentation of evidence on the issue raised in the case.
xxx xxx xxx

xxx xxx xxx
27
WHEREFORE, the instant petition is hereby granted. The orders

remanding the case to the court of origin and denying the motion for
reconsideration of the Court of First Instance of Manila, Branch XXI
issued in Civil Case No. 74381 are annulled. Accordingly, the Court of
First Instance of Manila, Branch XXI is directed to dismiss the appeal in
Civil Case No. 74381. The Order of the City Court of Manila dismissing
the complaint in Civil Case No. 165263 is affirmed.
SO ORDERED.
Teehankee (Chairman), Melencio-Herrera, Plana, Vasquez and Relova,
JJ., concur.
28
promissory note, Sapinoso executed in favor of Northern Motors, Inc. a

chattel mortgage on the car. The mortgage contract provided, among
others, that upon default by the mortgagor in the payment of any part of
the principal or interest due, the mortgagee may elect any of the following
remedies: (a) sale of the car by the mortgagee; (b) cancellation of the
contract of sale; (c) extrajudicial foreclosure; (d) judicial foreclosure; (e)
ordinary civil action to exact fulfillment of the mortgage contract. It was
further stipulated that "[w]hichever remedy is elected by the mortgagee,
the mortgagor expressly waives his right to reimbursement by the
mortgagee of any and all amounts on the principal and interest already
paid by him."

SUPREME COURT
Manila
EN BANC
G.R. No. L-28074 May 29, 1970

Sapinoso failed to pay the first installment of P361.00 due on July 5,
1965, and the second, third, fourth and fifth installments of P351.00 each
due on the 5th day of August, September, October and November, 1965,
respectively. Several payments were, however, made by Sapinoso, to wit:
P530.52 on November 21, 1965, P480.00 on December 21, 1965, and
P400.00 on April 30, 1966. The first and third payments aforesaid were
applied to accrued interest up to April 17, 1966, while the second payment
was applied partly (P158.10) to interest, and partly (P321.90) to the
principal, thereby reducing the balance unpaid to P10,218.10.
NORTHERN MOTORS, INC., plaintiff-appellant,

vs.
CASIANO SAPINOSO and "JOHN DOE", defendants-appellees.
Sycip, Salazar, Luna, Manalo & Feliciano for plaintiff-appellant.
David F. Barrera for defendants-appellees.
VILLAMOR, J.:
The vendee-mortgagor having failed to make further payments, Northern

Motors, Inc. filed the present complaint on July 22, 1966, against
Sapinoso and a certain person whose name, identity and address were still
unknown to the plaintiff, hence denominated in the complaint as "John
Doe." In its complaint, Northern Motors, Inc. stated that it was availing
itself of the option given it under the mortgage contract of extrajudicially
foreclosing the mortgage, and prayed that a writ of replevin be issued
upon its filing of a bond for the seizure of the car and for its delivery to it;
that after hearing, the plaintiff be adjudged to have the rightful possession
and ownership of the car; that in default of delivery, the defendants be
ordered to pay the plaintiff the sum of P10,218.10 with interest, at 12%
per annum from April 18, 1966, until full payment of the said sum, as
well as an amount equivalent to 25% of the sum due as and for attorney's
fees and expenses of collection, and the costs of the suit. Plaintiff also
prayed for such other remedy as might be deemed just and equitable in the
premises.
Direct appeal on questions of law from the portion of the judgment of the
Court of First Instance of Manila, Branch XXII, in its Civil Case No.
66199, ordering the plaintiff to pay defendant Casiano Sapinoso the sum
of P1,250.00.
The facts of this case are as follows:
On June 4, 1965, Casiano Sapinoso purchased from Northern Motors, Inc.
an Opel Kadett car for the price of P12,171.00, making a down payment
and executing a promissory note for the balance of P10,540.00 payable in
installments with interest at 12% per annum, as follows: P361.00 on July
5, 1965, and P351.00 on the 5th day of each month beginning August,
1965, up to and including December, 1967. To secure the payment of the
29
Subsequent to the commencement of the action, but before the filing of

his answer, defendant Sapinoso made two payments on the promissory
note, the first on August 22, 1966, for P500.00, and the second on
September 27, 1966, for P750.00. In the meantime, on August 9, 1966,
upon the plaintiff's filing of a bond, a writ of replevin was issued by the
court. On October 20, 1966, copies of the summons, complaint and
annexes thereto were served on defendant Sapinoso by the sheriff who
executed the seizure warrant by seizing the car from defendant Sapinoso
on the same date, and turning over its possession to the plaintiff on
October 25, 1966.
Mortgage Law; and that the foreclosure of the chattel mortgage and the
recovery of the unpaid balance of the price are alternative remedies which
may not be pursued conjunctively, so that in availing itself of its right to
foreclose the chattel mortgage, the plaintiff thereby renounced whatever
claim it may have had on the promissory note, and, therefore, the plaintiff
has no more right to the collection of the attorney's fees stipulated in the
promissory note, and should return to defendant Sapinoso the sum of
P1,250.00 which the plaintiff had received from the latter after having
filed the present case on July 22, 1966, and elected to foreclose the chattel
mortgage. The dispositive portion of the decision reads:
On November 12, 1966, defendant Sapinoso filed an answer admitting the

allegations in the complaint with respect to the sale to him of the car, the
terms thereof, the execution of the promissory note and of the chattel
mortgage contract, and the options open to the plaintiff under the said
contract. He alleged, however, that he had paid the total sum of
P4,230.52, leaving a balance of only P5,987.58; that upon demand he
immediately surrendered the possession of the car to the plaintiff's
representative; and that the value of the car was only about P5,000.00,
and not P10,000.00 as alleged in the complaint. As special defenses the
said defendant alleged that he failed to pay the installments due because
the car was defective, and the plaintiff failed to have it fixed although he
had repeatedly called the plaintiff's attention thereto, hence, the defendant
had to procrastinate in his payments in order to move the plaintiff to
repair the car; and that although the car could not be used, he paid
P700.00 to the plaintiff upon the latter's assurance that the car would be
fixed, but that instead of having the car fixed, the plaintiff, in bad faith,
filed the present complaint. The defendant prayed that the complaint be
dismissed and that the plaintiff be ordered to return the car to him. He
stated in his prayer that he would be very much willing to pay the car in a
compromise agreement between him and the plaintiff.
WHEREFORE, the Court finds that the plaintiff has the right to the
possession of the OPEL KADETT two-door station wagon Model 346491.5, with engine No.
10-0354333, and the delivery thereof to the plaintiff is hereby ratified and
confirmed but said party is sentenced to pay to the defendant the sum of
P1,250, with legal interest on P500 from August 22, 1966 and or P750
from September 27, 1966, until fully paid, without any pronouncement as
to costs.
In this appeal plaintiff-appellant claims that the court a quo erred in
ordering it to reimburse to defendant-appellee Sapinoso the sum of
P1,250.00 which the latter had paid. It contends that under Article 1484 of
the Civil Code it is the exercise, not the mere election, of the remedy of
foreclosure that bars the creditor from recovering the unpaid balance of
the debt; that what the said Article 1484 prohibits is "further action" to
collect payment of the deficiency after the creditor has foreclosed the
mortgage; and that in paying plaintiff-appellant the sum of P1,250.00
before defendant-appellee Sapinoso filed his answer, and in not filing a
counterclaim for the recovery thereof, the said defendant-appellee in
effect renounced whatever right he might have had to recover the said
amount.
After trial, the court a quo, in its decision dated April 4, 1967, held that
defendant Sapinoso having failed to pay more than two (2) installments,
plaintiff-mortgagee acquired the right to foreclose the chattel mortgage,
which it could avail of as it has done in the present case by filing an
action of replevin to secure possession of the mortgaged car as a
preliminary step to the foreclosure sale contemplated in the Chattel
The appeal is meritorious.

In issuing a writ of replevin, and, after trial, in upholding plaintiffappellant's right to the possession of the car, and ratifying and confirming
30
its delivery to the said plaintiff-appellant, the court below correctly

considered the action as one of replevin to secure possession of the
mortgaged vehicle as a preliminary step to this foreclosure sale
contemplated in Section 14 of Act No. 1508 (Bachrach Motor Co. vs.
Summers, 42 Phil., 3; Seo vs. Pestolante, G.R. No. L-11755, April 23,
1958). The said court however erred in concluding that the legal effect of
the filing of the action was to bar plaintiff-appellant from accepting
further payments on the promissory note. That the ultimate object of the
action is the foreclosure of the chattel mortgage, is of no moment, for it is
the fact of foreclosure and actual sale of the mortgaged chattel that bar
further recovery by the vendor of any balance on the purchaser's
outstanding obligation not satisfied by the sale. (Manila Motor Co., Inc.
vs. Fernandez, 99 Phil., 782, 786; Bachrach Motor Co. vs. Millan, 61
Phil., 409; Manila Trading & Supply Co. vs. Reyes, 62 Phil. 461, 471;
Cruz et al. vs. Filipinas Investment & Finance Corporation, G.R. No. L24772, May 27, 1968 [23 SCRA 791, 796].) In any event, what Article
1484(3) prohibits is "further action against the purchaser to recover any
unpaid balance of the price;" and although this Court has construed the
word "action" in said Article 1484 to mean "any judicial or extrajudicial
proceeding by virtue of which the vendor may lawfully be enabled to
exact recovery of the supposed unsatisfied balance of the purchase price
from the purchaser or his privy" (Cruz, et al. vs. Filipinas Investment &
Finance Corporation, supra), there is no occasion at this stage to apply the
restrictive provision of the said article, because there has not yet been a
foreclosure sale resulting in a deficiency. The payment of the sum of
P1,250.00 by defendant-appellee Sapinoso was a voluntary act on his part
and did not result from a "further action" instituted by plaintiff-appellant.
If the mortgage creditor, before the actual foreclosure sale, is not
precluded from recovering the unpaid balance of the price although he has
filed an action of replevin for the purpose of extrajudicial foreclosure, or
if a mortgage creditor who has elected to foreclose but who subsequently
desists from proceeding with the auction sale, without gaining any
advantage or benefit, and without causing any disadvantage or harm to the
vendee-mortgagor, is not barred from suing on the unpaid account
(Radiowealth, Inc. vs. Lavin, et al., G.R. No. L-18563, April 27, 1963 [7
SCRA 804, 807]), there is no reason why a mortgage creditor should be
barred from accepting, before a foreclosure sale, payments voluntarily
tendered by the debtor-mortgagor who admits a subsisting indebtedness.
PREMISES CONSIDERED, the judgment appealed from is modified by

setting aside the portion thereof which orders plaintiff-appellant to pay
defendant-appellee Sapinoso the sum of P1,250.00, with costs in this
instance against the said defendant-appellee.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Fernando
and Teehankee, JJ., concur.
Barredo, J., concurs in the result.
Castro, J., is on leave.
31
latter 1 in favor of defendant Filipinas Investment & Finance Corporation

(as assignee of the Far East Motor Corporation), the parties submitted the
case for decision on the following stipulation of facts:
1. Their personal circumstances and legal capacities to sue and be sued;
2. That on July 15, 1963, plaintiff Ruperto G. Cruz purchased on
installments, from the Far East Motor Corporation, one (1) unit of Isuzu
Diesel Bus, described in the complaint, for P44,616.24, Philippine
Currency, payable in installments of P1,487.20 per month for thirty (30)
months, beginning October 22, 1963, with 12 % interest per annum, until
fully paid. As evidence of said indebtedness, plaintiff Cruz executed and
delivered to the Far East Motor Corporation a negotiable promissory note
in the sum of P44,616.24, ...;

SUPREME COURT
Manila
3. That to secure the payment of the promissory note, Annex "A", Cruz
executed in favor of the seller, Far East Motor Corporation, a chattel
mortgage over the aforesaid motor vehicle...;
EN BANC
G.R. No. L-24772
May 27, 1968
4. That as no down payment was made by Cruz, the seller, Far East Motor
Corporation, on the very improvements thereon, in San Miguel,
Bulacan...; same date, July 15, 1963, required and Cruz agreed to give,
additional security for his obligation besides the chattel mortgage, Annex
"B"; that said additional security was given by plaintiff Felicidad Vda. de
Reyes in the form of SECOND MORTGAGE on a parcel of land owned
by her, together with the building and
RUPERTO G. CRUZ, ET AL., plaintiffs-appellees,

vs.
FILIPINAS INVESTMENT and FINANCE CORPORATION,
defendant-appellant.
Villareal, Almacen, Navarra and Associates for plaintiffs-appellees.
Sycip, Salazar, Luna, Manalo and Feliciano for defendant-appellant.
5. That said land has an area of 68,902 square meters, more or less, and
covered by Transfer Certificate of Title No. 36480 of the Registry of
Deeds of Bulacan in the name of plaintiff Mrs. Reyes; and that it was at
the time mortgaged to the Development Bank of the Philippines to secure
a loan of P2,600.00 obtained by Mrs. Reyes from that bank;
REYES, J.B.L., J.:

Appeal interposed by Filipinas Investment & Finance Corporation from
the decision of the Court of First Instance of Rizal (Quezon City) in Civil
Case No. Q-7949.1vvphi1.nt
6. That also on July 15, 1963, the Far East Motor Corporation for value
received indorsed the promissory note and assigned all its rights and
interest in the Deeds of Chattel Mortgage and in the Deed of Real Estate
In the action commenced by Ruperto G. Cruz and Felicidad V. Vda. de

Reyes in the Court of First Instance of Rizal (Civil Case No. Q-7949), for
cancellation of the real estate mortgage constituted on the land of the
32
Mortgage (Annexes "A", "B" and "B-l") to the defendant, Filipinas

Investment & Finance Corporation, with due notice of such assignment to
the plaintiffs...;
13. That notices of sale were duly posted and served to the Mortgagor,
Mrs. Reyes, pursuant to and in compliance with the requirements of Act
3135...;
7. That plaintiff Cruz defaulted in the payment of the promisory note

(Annex "A") ; that the only sum ever paid to the defendant was Five
Hundred Pesos (P500.00) on October 2, 1963, which was applied as
partial payment of interests on his principal obligation; that,
notwithstanding defendant's demands, Cruz made no payment on any of
the installments stipulated in the promissory note;
14. That on March 20, 1964, plaintiff Reyes through counsel, wrote a
letter to the defendant asking for the cancellation of the real estate
mortgage on her land, but defendant did not comply with such demand as
it was of the belief that plaintiff's request was without any legal basis;
15. That at the request of the plaintiffs, the provincial Sheriff of Bulacan
held in abeyance the sale of the mortgaged real estate pending the result
of this action.
8. That by reason of Cruz's default, defendant took steps to foreclose the

chattel mortgage on the bus; that said vehicle had been damaged in an
accident while in the possession of plaintiff Cruz;
Passing upon the issues which, by agreement of the parties, were limited
to (1) "Whether defendant, which has already extrajudicially
foreclosed the chattel mortgage executed by the buyer, plaintiff Cruz, on
the bus sold to him on installments, may also extrajudicially foreclose the
real estate mortgage constituted by plaintiff Mrs. Reyes on her own land,
as additional security, for the payment of the balance of Cruz' Obligation,
still remaining unpaid"; and (2) whether or not the contending parties are
entitled to attorney's fees the court below, in its decision of April 21,
1965, sustained the plaintiffs' stand and declared that the extrajudicial
foreclosure of the chattel mortgage on the bus barred further action
against the additional security put up by plaintiff Reyes. Consequently, the
real estate mortgage constituted on the land of said plaintiff was ordered
cancelled and defendant was directed to pay the plaintiffs attorney's fees
in the sum of P200.00. Defendant filed the present appeal raising the same
questions presented in the lower court.
9. That at the foreclosure sale held on January 31, 1964 by the Sheriff of
Manila, the defendant was the highest bidder, defendant's bid being for
Fifteen Thousand Pesos (P15,000.00)...;
10. That the proceeds of the sale of the bus were not sufficient to cover
the expenses of sale, the principal obligation, interests, and attorney's fees,
i.e., they were not sufficient to discharge fully the indebtedness of
plaintiff Cruz to the defendant;
11. That on February 12, 1964, preparatory to foreclosing its real estate
mortgage on Mrs. Reyes' land, defendant paid the mortgage indebtedness
of Mrs. Reyes to the Development Bank of the Philippines, in the sum of
P2,148.07, the unpaid balance of said obligation...;
There is no controversy that, involving as it does a sale of personal

property on installments, the pertinent legal provision in this case is
Article 1484 of the Civil Code of the Philippines, 2 which reads:
12. That pursuant to a provision in the real estate mortgage contract,

authorizing the mortgagee to foreclose the mortgage judicially or extrajudicially, defendant on February 29, 1964 requested the Provincial
Sheriff of Bulacan to take possession of, and sell, the land subject of the
Real Estate Mortgage, Annex "B-1", to satisfy the sum of P43,318.92, the
total outstanding obligation of the plaintiffs to the defendant, as itemized
in the Statement of Account, which is made a part hereof as Annex "F"...;

remedies:
33
agreement to that effect". Furthermore, if the vendor avails himself of the

right to foreclose the mortgage the amendment prohibits him from
bringing an action against the purchaser for the unpaid balance.
installments;
It is here agreed that plaintiff Cruz failed to pay several installments as

provided in the contract; that there was extrajudicial foreclosure of the
chattel mortgage on the said motor vehicle; and that defendant-appellant
itself bought it at the public auction duly held thereafter, for a sum less
than the purchaser's outstanding obligation. Defendant-appellant,
however, sought to collect the supported deficiency by going against the
real estate mortgage which was admittedly constituted on the land of
plaintiff Reyes as additional security to guarantee the performance of
Cruz' obligation, claiming that what is being withheld from the vendor, by
the proviso of Article 1484 of the Civil Code, is only the right to recover
"against the purchaser", and not a recourse to the additional security put
up, not by the purchaser himself, but by a third person.
The aforequoted provision is clear and simple: 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 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, 3 that the exercise of one
would bar the exercise of the others. 4 It may also be stated that the
established rule is to the effect that the foreclosure and actual sale of a
mortgaged chattel bars further recovery by the vendor of any balance on
the purchaser's outstanding obligation not so satisfied by the sale. 5 And
the reason for this doctrine was aptly stated in the case of Bachrach
Motor Co. vs. Millan, supra, thus:
There is no merit in this contention. To sustain appellant's argument 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 (Art. 2066, Civil
Code) ; so that 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 Article
1484 would be indirectly subverted, and public policy overturned.
Undoubtedly the principal object of the above amendment 6 was to

remedy the abuses committed in connection with the foreclosure of
chattel mortgages. This amendment prevents mortgagees from seizing the
purchaser the amount of the installments already paid, "if there be in
Neither is there validity to appellant's allegation that, since the law speaks
of "action", the restriction should be confined only to the bringing of
judicial suits or proceedings in court.
The word "action" is without a definite or exclusive meaning. It has been
invariably defined as
... the legal demand of one's right, or rights; the lawful demand of one's
rights in the form given by law; a demand of a right in a court of justice;
the lawful demand of one's right in a court of justice; the legal and formal
demand of ones rights from another person or party, made and insisted on
34
in a court of justice; a claim made before a tribunal; an assertion in a court

of justice of a right given by law; a demand or legal proceeding in a court
of justice to secure one's rights; the prosecution of some demand in a
court of justice; the means by which men litigate with each other; the
means that the law has provided to put the cause of action into effect;....
(Gutierrez Hermanos vs. De la Riva, 46 Phil. 827, 834-835).
Fernando, J., is on leave.
Considering the purpose for which the prohibition contained in Article

1484 was intended, the word "action" used therein may be construed as
referring to any judicial or extrajudicial proceeding by virtue of which the
vendor may lawfully be enabled to exact recovery of the supposed
unsatisfied balance of the purchase price from the purchaser or his privy.
Certainly, an extrajudicial foreclosure of a real estate mortgage is one
such proceeding.
The provision of law and jurisprudence on the matter being explicit, so
that this litigation could have been avoided, the award by the lower court
of attorney's fees to the plaintiff's in the sum of P200.00 is reasonable and
in order.
However, we find merit in appellant's complaint against the trial court's
failure to order the reimbursement by appellee Vda. de Reyes of the
amount which the former paid to the Development Bank of the
Philippines, for the release of the first mortgage on the land of said
appellee. To the extent that she was benefited by such payment, plaintiffappellee Vda. de Reyes should have been required to reimburse the
appellant.
WHEREFORE, the decision appealed from is modified, by ordering
plaintiff-appellee Felicidad Vda. de Reyes to reimburse to defendantappellant Filipinas Investment & Finance Corporation the sum of
P2,148.07, with legal interest thereon from the finality of this decision
until it is fully paid. In all other respects, the judgment of the court below
is affirmed, with costs against the defendant-appellant.
Concepcion, C.J., Dizon, Makalintal, Zaldivar, Sanchez, Castro and
Angeles, JJ., concur.
35
VITUG, J.:p
From the decision of the Court of Appeals in CA-G.R. CV No. 30693
which affirmed that of the Regional Trial Court, NCJR, Branch 39,
Manila, in Civil Case No. 85-29954, 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 fees, the
instant appeal was interposed.
The appellate court adopted the factual findings of the court a quo, to wit:
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 among others as follows:
PROMISSORY NOTE
Acct. No. 115008276
Makati, Metro Manila,
Philippines
December 7, 1984
SUPREME COURT
Manila
"P122,856.00
"For value received (installment price of the chattel/s purchased), I/We
jointly and severally promised to pay Pangasinan Auto Mart, Inc. or order,
at its office at NMI Bldg., Buendia Avenue, Makati, MM the sum of One
Hundred Twenty Two Thousand Eight Hundred Fifty Six only
(P122,856.00), Philippine Currency, to be payable without need or notice
or demand, in installments of the amounts following and at the dates
hereinafter set forth, to wit: P10,238.00 monthly for Twelve (12) months
due and payable on the 7th day of each month starting January, 1985,
provided that at a late payment charge of 3% per month shall be added on
each unpaid installment from due date thereof until fully paid.
FIRST DIVISION
G.R. No. 106418 July 11, 1996
DANIEL L. BORBON II AND FRANCISCO L. BORBON,
petitioners,
vs.
SERVICEWIDE SPECIALISTS, INC. & HON. COURT OF
APPEALS, respondents.
xxx xxx xxx
36
"It is further agreed that if upon such default, attorney's services are
availed of, an 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 attorney's fees plus an additional
sum equivalent to twenty five percent (25%) of the 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
Rules of Court.
(illegible) (illegible)

"PAY TO THE ORDER OF
FILINVEST CREDIT CORPORATION
without recourse, notice, presentment and
demand waived
"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 jurisdiction of the proper court either in the City of
Manila or in the province, municipality or city where the branch of the
holder hereof is located.
PANGASINAN AUTO MART, INC.

BY:
"Acceptance by the holder thereof of payment of any installment or any

part hereof of payment of any installment or any part thereof after due
dated (sic) shall not be considered as extending the time for the payment
or any of the conditions 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.
(S/T) K.N. DULCE

Dealer"
To secure the Promissory Note, the defendants executed a Chattel
mortgage (Exh. B) on
"One (1) Brand new 1984 Isuzu
KCD 20 Crew Cab (Conv.)
Serial No. KCD20D0F 207685
Key No. 5509
"Maker:
(S/t) DANIEL L. BORBON, II
Address: 14 Colt St., Rancho Estate I,
Concepcion Dos, Marikina, MM
(Exhs. A and B, p. 2 tsn, September 10, 1985)
(S/t) FRANCISCO BORBON
The rights of Pangasinan Auto mart, Inc. was later assigned to Filinvest
Credit Corporation on December 10, 1984, with notice to the defendants
(Exh. C, p. 10, Record).
Address: 73 Sterling Life Home

Pamplona, Las Pias, MM
On March 21, 1985, Filinvest Credit Corporation assigned all its rights,
interest and title over the Promissory Note and the chattel mortgage to the
plaintiff (Exh. D; p. 3, tsn, Sept. 30, 1985).
WITNESSES
37
Art. 1169, N.C.C.) 1
The promissory note stipulates that the installment of P10,238.00 monthly

should be paid on the 7th day of each month starting January 1985, but
the defendants failed to comply with their obligation (p. 3, tsn, Sept. 30,
1985).
In sustaining the decision of the court a quo, the appellate court ruled that
the petitioners could 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.
Because the defendants did not pay their monthly installments, Filinvest
demanded from the defendants the payment of their installments due in
January 29, 1985 by telegram (Exh. E; pp. 3-4, tsn, Sept. 30, 1985).
In their appeal to this Court, petitioners merely seek a modification of the

decision of the appellate court insofar as it has upheld the court a quo in
the award of liquidated damages and attorney's fees in favor of private
respondent. Petitioners invoke the provisions of Article 1484 of the Civil
Code which reads:
After the accounts were assigned to the plaintiff, the plaintiff attempted to
collect 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, 1985).
Art. 1484. In a contract of sale of personal property the price of which is

remedies:
For their defense, the defendants claim that what they intended to buy
from Pangasinan Auto mart was a jeepney type Isuzu K. C. Cab. The
vehicle they bought was not delivered (pp. 11-12, tsn, Oct. 17, 1985).
Instead, through misinterpretation 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.
(assignor) told the defendants that their available stock is an Isuzu Cab
but minus the rear body, which the defendants agreed to deliver with 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).
installments;
(3) Foreclose the chattel mortgage or the thing sold, if one has been
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 court. the defendants argue that an asignee stands in the
place of an assignor which, to the mind of the court, is correct. The
asignee exercise all the rights of the assignor (Gonzales vs. Rama
Plantation Co., C.V. 08630, Dec. 2, 1986).
The remedies under Article 1484 of the Civil Code are not cumulative but
alternative and exclusive, 2 which means, as so held in Nonato vs.
Intermediate Appellate Court and Investor's Finance Corporation, 3 that
The defendants further claim that they are not in default of their
obligation because the Pangasinan Auto Mart was first guilty of not
fulfilling its obligation in the contract. the defendants claim that neither
party incurs delay if the other does not comply with his obligation. (citing
. . . 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
38
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 on e would bar the exercise of the others. 4
The parties here concede that the action for replevin has been instituted
for the 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 affirmance by the appellate court of
the awards made by the court a quo of liquidated damages and attorney's
fees to private respondent. Petitioners hold that under 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
the contrary (would be) void.
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, 5 and the
seller-mortgagee is deemed to have renounced any right thereto. 6 A
contrario, in the event of the seller-mortgagee first seeks, instead, the
enforcement of the additional mortgages, guarantees or other security
arrangements, he must be then be held to have lost by waiver or nonchoice 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.
The argument is aptly made. In Macondray & Co. vs. Eustaquio, 9 we

have said that the phrase "any unpaid balance" can only mean the
deficiency judgment to which the mortgagee may be entitled to when the
proceeds from the auction sale are insufficient to cover the "full amount
of the secured obligations which . . . include interest on the principal,
attorney's fees, expenses of collection, and the costs." In sum, we have
observed that the legislative intent is not to merely limit the proscription
of any further action to the "unpaid balance of the principal" but, as so
later ruled in Luneta Motor Co. vs. Salvador, 10 to all other claims that
may be likewise be called in for in the accompanying promissory note
against the buyer-mortgagor or his guarantor, including costs and
attorney's fees.
In ordinary alternative obligations, a mere choice categorically an

unequivocally made and then communicated by the person entitled to
exercise the option concludes the parties. The creditor may not thereafter
exercise any other option, unless the chosen alternative proves to be
innefectual or unavailing due to no fault on his part. This rule, in essence,
is the difference between alternative obligations, 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. For instance, in one of the remedies expressed in Article 1484 of
the Civil Code, it is only when there has been a foreclosure of the chattel
mortgage that the vendee-mortgagor would be permitted to escape from a
deficiency liability. Thus, if the case is one for specific performance, even
when this action is selected after the vendee has refused to surrender the
mortgaged property to permit an extrajudicial foreclosure, that property
may still be levied on execution and an alias writ may be issued if the
proceeds thereof are insufficient to satisfy the judgment
credit. 7 So, 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-mortgagee would have the effect of a
foreclosure.
In Filipinas Investment & Finance Corporation vs. Ridad 11 while we

reiterated and expressed our agreement on the basic philosophy behind
Article 1484, we stressed, nevertheless, that the protection given to the
buyer-mortgagor should not be 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, where the
mortgagor unjustifiably refused to surrender the chattel subject of the
mortgage upon failure of two or more installments, or if he concealed the
chattel to place it beyond the reach of the mortgagee, that thereby
constrained the latter to seek court relief, the expenses incurred for the
prosecution of the case, such as attorney's fees, could rightly be awarded.
Private respondent bewails the instant petition in that petitioners have
failed to specifically raise the issue on liquidated damages and attorney's
39
fees stipulated in the actionable documents. In several cases, we have

ruled that as long as the questioned items bear relevance and close
relation to those specifically raised, the interest of justice would dictate
that they, too, must be considered and resolved and that the rule that only
theories raised in the initial proceedings may be taken up by a party
thereto on appeal should only refer to independent, not concomitant
matters, to support or oppose the cause of action. 12
SUPREME COURT
Manila
Given the circumstances, we must strike down the award for liquidated
damages made by the court a quobut we uphold the grant of attorney's
fees which we, like the appellate court, find it 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.
EN BANC
G.R. No. L-43683
July 16, 1937
MACONDRAY AND CO., INC., plaintiff-appellant,

vs.
URBANO EUSTAQUIO, defendant-appellee.
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 costs.
Jose Agbulos for appellant.

Urbano Eustaquio in his own behalf.
Padilla, Bellosillo, Kapunan and Hermosisima, Jr., JJ., concur
IMPERIAL, J.:
This is an appeal taken by the plaintiff corporation from the judgment of
the Court of First Instance of Manila dismissing its complaint, without
costs.
The plaintiff brought the action against the defendant to obtain the
possession of an automobile mortgaged by the latter, and to recover the
balance owing upon a note executed by him, the interest thereon,
attorney's fees, expenses of collection, and the costs. The defendant was
duly summoned, but he failed to appear or file his answer, wherefore he
was declared in default and the appealed judgment was rendered
accordingly.
40
The plaintiff sold the defendant a De Soto car, Sedan, for the price of
which, P595, he executed in its favor the note of May 22, 1934. Under
this note, the defendant undertook to pay the car in twelve monthly
installments, with 12 percent interest per annum, and likewise agreed that,
should he fail to pay any monthly installment together with interest, the
remaining installment would become due and payable, and the defendant
shall pay 20 per cent upon the principal owning as attorney's fees,
expenses of collection which the plaintiff might incur, and the costs. To
guarantee the performance of his obligation under the note, the defendant
on the same date mortgaged the purchased car in favor of the plaintiff,
and bound himself under the same conditions stipulated in the note
relative to the monthly installments, interest, attorney's fees, expenses of
collection, and costs. The mortgage deed was registered on June 11, 1934,
in the office of the register of deeds of the Province of Rizal. On the 22d
of the same month, the defendant paid P43.75 upon the first installment,
and thereafter failed to pay any of the remaining installments. In
accordance with the terms of the mortgage, the plaintiff called upon the
sheriff to take possession of the car, but the defendant refused to yield
possession thereof, whereupon, the plaintiff brought the replevin sought
and thereby succeeded in getting possession of the car. The car was sold
at public auction to the plaintiff for P250, the latter incurring legal
expenses in the amount of P10.68, According to the liquidation filed by
the plaintiff, the defendant was still indebted in the amount of P342.20,
interest at 12 per cent from November 20, 1934, P110.25 as attorney's
fees, and the costs.
latter to adduce his evidence in support of his allegation as an

indispensable condition before final judgment could be given in his favor.
Nor could it be interpreted as an admission by the defendant that the
plaintiff's causes of action find support in the law or that latter is entitled
to the relief prayed for. (Chaffin vs. Mac Fadden, 41 Ark., 42; Johnson vs.
Peirce, 12 Ark., 599; Mayden vs. Johnson, 59 Ga., 105; Peo. vs. Rust, 292
Ill., 412; Madison County vs. Smith, 95 Ill., 328; Keen vs. Krempel, 166
Ill. A., 253.) For these reason, we hold that the defendant did not waive
the applicant by the court of Act No. 4122, and that the first assignment of
error is untenable.
II. The plaintiff contends in its second assignment of error that Act No.
4122 is invalid because it takes property without due process of law,
denies the equal protection of the laws, and impairs the obligations of
contract, thereby violating the provisions of section 3 of the Act of the
United States Congress of August 29, 1916, known as the Jones Law. This
is not the first time that the constitutionality of the said law has been
impugned for like reasons. In Manila Trading and Supply Co. vs. Reyes
(64 Phil. 461), the validity of the said law was already passed upon when
it was questioned for the same reason here advanced. In resolving the
question in favor of the validity of the law, we then held: "2. Liberty of
contract, class legislation, and equal protection of the laws. The
question of the validity of an act is solely one of constitutional power.
Questions of expediency, of motive or of results are irrelevant.
Nevertheless it is not improper to inquire as to the occasion for the
enactment of a law. The legislative purpose thus disclosed can then serve
as a fit background for constitution inquiry.
I. The plaintiff's first assignment of error is addressed to the appealed

judgment in so far as it applied Act No. 4122 and dismissed the
complaint, notwithstanding the fact that the defendant waived his rights
under said law by not making any appearance, by having been declared in
default, by not interposing any special defense, and not asking for any
positive relief.
Judge Moran in fact instances had the following to say relative to the
reason for the enactment of Act No. 4122:
"Act No. 4122 aims to correct a social and economic evil, the inordinate
love for luxury of those who, without sufficient means, purchase personal
effects, and the ruinous practice of some commercial houses of
purchasing back the goods sold for a nominal price besides keeping a part
of the price already paid and collecting the balance, with stipulated
interest, costs, and attorney's fees. For instance, a company sells a truck
Under section 128 of our Civil Procedure, the judgment by default against
a defendant who has neither appeared nor filed his answer does not imply
a waiver of right except that of being heard and of presenting evidence in
his favor. It does not imply admission by the defendant of the facts and
causes of action of the plaintiff, because the codal section requires the
41
for P6,500. The purchaser makes a down payment of P500, the balance to
be paid in twenty-four equal installments of P250 each. Pursuant to the
practice before the enactment of Act No. 4122, if the purchaser fails to
pay the first two installments, the company takes possession of the truck
and has it sold at public auction at which sale it purchases the truck for a
nominal price, at most P500, without prejudice to its right to collect the
balance of P5,500, plus interest, costs. and attorney's fees. As a
consequence, the vendor does not only recover the goods sold, used
hardly two months perhaps with only slight wear and tear, but also
collects the entire stipulated purchase price, probably swelled up fifty per
cent including interest, costs, and attorney's fees. This practice is worse
than usurious in many instances. And although, of course, the purchaser
must suffer the consequences of his imprudence and lack of foresight, the
chastisement must not be to the extent of ruining him completely and, on
the other hand, enriching the vendor in a manner which shocks the
conscience. The object of the law is highly commendable. As to whether
or not the means employed to do away with the evil above mentioned are
arbitrary will be presently set out."
"In other words, under this amendment, 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" (Bachrach Motor Co. vs. Millan [1935]. 61
Phil., 409.).
Public policy having thus had in view the objects just outlined, we should
next examine the law to determine if notwithstanding that policy, it
violates any of the constitutional principles dealing with the three general
subjects here to be considered.
In an effort to enlighten us, our attention has been directed to certain
authorities, principally one coming from the state of Washington and
another from the State of Oregon. For reason which will soon appear we
do not think that either decision is controlling.
In 1897, an Act was passed in the State of Washington which provided
"that in all proceedings for the foreclosure of mortgages hereafter
executed or on judgments rendered upon the debt thereby secured the
mortgagee or assignee shall be limited to the property included in the
mortgage." It was held by a divided court of three to two that the statute
since limiting the right to enforce a debt secured by mortgage to the
property mortgaged whether realty or chattles, was an undue restraint
upon the liberty of a citizen to contract with respect to his property right.
But as is readily apparent, the Washington law and the Philippine law are
radically different in phraseology and in effect. (Dennis vs. Moses [1898],
40 L. R. A., 302.)
In a case which reached this court, Mr. Justice Goddard, interpreting Act
No. 4122, made the following observations:
"Undoubtedly the principal object of the above amendment was to remedy
the abuses committed in connection with the foreclosure of chattel
mortgages. This amendment prevents mortgagees from seizing the
purchaser the amount of the full installment already paid, "if there be an
agreement to that effect." Furthermore, if the vendor avails himself of the
right from foreclose the mortgage this amendment prohibits him from
bringing an action against the purchaser for the unpaid balance."
In Oregon, in a decision of a later date, an Act abolishing deficiency

judgment upon the foreclosure of mortgages to secure the unpaid balance
of the purchase price of real property was unanimously sustained by the
Supreme Court of that State. The importance of the subject matter in that
jurisdiction was revealed by the fact that four separate opinions were
prepared by the justices participating, in one of which Mr. Justice Johns,
shortly thereafter to become a member of this court, concurred. However,
it is but fair state that one of the reasons prompting the court to uphold the
law was the financial depression which had prevailed in that State. While
42
in the Philippines the court take judicial notice of the stringency of

finance that presses upon the people we have no reason to believe that this
was the reason which motivated the enactment of Act 4122. (Wright vs.
Wimberley [1919], 184 Pac., 740.)
In the Philippines, the Chattel Mortgage Law did not expressly provide
for a deficiency judgment upon the foreclosure of a mortgage. Indeed, it
required decisions of this court to authorize such a procedure. (Bank of
the Philippine Island vs. Olutanga Lumber Co., [1924], 47 Phil., 20;
Manila Trading and Supply Co. vs. Tamaraw Plantation Co., supra.) But
the practice became universal enactment regarding procedure. To a certain
extent the Legislature has now disauthorized this practice, but has left a
sufficient remedy remaining.
While we are on the subject of the authority, we may state that we have
examined all of those obtainable, including some of recent date but have
not been enlightened very much because as just indicated, they concerned
different state of facts and different laws. We gain the most help from the
case of Bronzon vs. Kinzie ([1843], 1 How., 311), decided by the
Supreme Court of the United State. It had under consideration a law
passed in the State of Illinois, which provide that the equitable estate of
the mortgagor should not be extinguished for twelve months after sale on
decree, and which prevented any sale of the mortgaged property unless
two-thirds of the amount at which the property had been valued by
appraisers should be bid therefor. The court, by Mr. Chief Justice Taney
declared: "Mortgages made since the passage of these laws must
undoubtedly be governed by them; for every State has power to describe
the legal and equitable obligation of a contract to be made and executed
within it jurisdiction. It may exempt any property it thinks proper from
sale for the payment of a debt; and may imposed such conditions and
restriction upon the creditor as its judgment and policy may dictate. And
all future contracts would be subject to such provisions; and they would
be obligatory upon the parties in the provisions; and they would be
obligatory upon the parties in the courts of the United States, as well as in
those of the state."
Three remedies are available to the vendor who has sold personal property
on the installment plan. (1) He may elect to exact the fulfillment of the
obligation. (Bachrach Motor Co. vs. Milan, supra.) (2) If the vendee shall
have failed to pay two or more installments, the vendor may cancel the
sale. (3) If the vendee shall have failed to pay two or more installments,
the vendor may foreclose the mortgage, if one has been given on the
property. The basis of the first option is the Civil Code. The basis of the
last two option is Act No. 4122, amendatory of the Civil Code. And the
proviso to the right to foreclose is, that if the vendor has chosen this
remedy, he shall have no further action against the purchaser for the
recovery of any unpaid balance owing by the same. In other words, as we
see it, the Act does no more than qualify the remedy.
Most constitutional issues are determined by the court's approach to them.
The proper approach in cases of this character should be to resolve all
presumptions in favor of the validity of an act in the absence of a clear
conflict between it and the constitution. All doubts should be resolved in
its favor.
As we understand it, parties have no vested right in particular remedies or

modes of procedure, and the legislature may change existing remedies or
modes of procedure without impairing the obligation of contracts,
provided an efficacious remedy for enforcement. But changes in the
remedies available for the enforcement of a mortgage may not, even when
public policy is invoked as an excuse, be pressed so far as to cut down the
security of a mortgage without moderation or reason or in a spirit of
oppression. (Brotherhood of American Yeoman vs. Manz [1922], 206
Pac., 403; Oshkosh Waterworks Co. vs. Oshkosh [1908], 187 U. S., 437;
W. B. Worthen Co. vs. Kavanaugh [1935], 79 U. S. Supreme Court
Advance Opinions, 638.)
The controlling purpose of Act No. 4122 is revealed to be to close the

door to abuses committed in connection with the foreclosure of chattel
mortgages when sales were payable in installments. The public policy,
obvious from the statute, was defined and established by legislative
authority. It is for the courts to perpetuate it.
We are of the opinion that the Legislative may change judicial methods
and remedies for the enforcement of contracts, as it has done by the
enactment of Act No. 4122, without unduly interfering with the obligation
43
of the contract, without sanctioning class legislation, and without a denial

of the equal protection of the laws. We rule that Act No. 4122 is valid and
enforceable. As a consequence, the errors assigned by the appellant are
overruled, and the judgment affirmed, the costs of this instance to be
taxed against the losing party.
85; U. S. vs. Navarro, 19 Phil., 134; De Jesus vs. City of Manila, 29 Phil.,
73; Borromeo vs. Mariano, 41 Phil., 322; People vs. Concepcion, 44 Phil.,
126.) Were it the intention of the Legislature to limit its meaning to the
unpaid balance of the principal, it would have so stated. We hold,
therefore, that the assignment of error is untenable.
In his brief counsel for the plaintiff advances no new arguments which
have not already been considered in theReyes case, and we see no reason
for reaching a different conclusion now. The law seeks to remedy an evil
which the Legislature wished to suppress; this legislative body has power
to promulgate the law; the law does not completely deprive vendors on
the installment basis of a remedy, but requires them to elect among three
alternative remedies; the law, on the other hand, does not completely
exonerate the purchasers, but only limits their liabilities and, finally, there
is no vested right when a procedural law is involved, wherefore the
Legislature could enact Act No. 4122 without violating the aforesaid
organic law.
In view of the foregoing, the appealed judgment is affirmed, with the

costs of this instance to the plaintiff and appellant. So ordered.
Avancea, C.J., Villa-Real, Abad Santos, Diaz, Laurel and Concepcion,
JJ., concur.
III. In its last assignment of error plaintiff contends that, even granting
that Act No. 4122 is valid, the court should have ordered the defendant to
pay at least the stipulated interest, attorney's fees, and the costs. This
question involves the interpretation of the pertinent portion of the law,
reading: "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." This paragraph, as its language shows, refers to
the mortgage contract executed by the parties, whereby the purchaser
mortgages the chattel sold to him on the installment basis in order to
guarantee the payment of its price, and the words "any unpaid balance"
should be interpreted as having reference to the deficiency judgment to
which the mortgagee may be entitled where, after the mortgaged chattel is
sold at public auction, the proceeds obtained therefrom are insufficient to
cover the full amount of the secured obligations which, in the case at bar
as shown by the note and by the mortgage deed, include interest on the
principal, attorney's fees, expenses of collection, and the costs. The
fundamental rule which should govern the interpretation of laws is to
ascertain the intention and meaning of the Legislature and to give effect
thereto. (Sec. 288, Code of Civil Procedure; U. S. vs. Toribio, 15 Phil.,

SUPREME COURT
Manila
EN BANC
G.R. No. L-27645
November 28, 1969
FILIPINAS INVESTMENT & FINANCE CORPORATION, plaintiffappellee,

vs.
LOURDES V. RIDAD and LUIS RIDAD, defendants-appellants.
Osmundo R. Victoriano for defendants-appellants.
44
Emilio B. Saunar for plaintiff-appellee.
When the case was called for pre-trial, the CFI advanced the opinion that
there was no need for the parties to adduce evidence and that the case
could be decided on the basis of the pleadings submitted by the parties.
CASTRO, J.:
The trial court on September 5, 1966, rendered judgment for the appellee,
as follows:
Appeal by the spouses Lourdes V. Ridad and Luis Ridad from the
decision of the Court of First Instance of Manila in civil case 64288, a
replevin suit, awarding to the appellee Filipinas Investment and Finance
Corporation the amount of P163.65 representing actual expenses and
P300 as attorney's fees.
As stated in the pre-trial order of this Court dated May 27, 1966, the only
issue remaining to be resolved is whether the plaintiff is entitled to
receive P500.00 as attorney's fees and P163.65 for expenses incurred by
the plaintiff in the seizure of the car which was the object of the chattel
mortgage executed by the defendants in favor of the plaintiff.
The spouses Ridad bought from the Supreme Sales & Development
Corporation, the appellee's assignor-in-interest, a Ford Consul sedan for
the total price of P13,371.40. The sum of P1,160 was paid on delivery, the
balance of P12,211.50 being payable in twenty-four equal monthly
installments, with interest at 12% per annum, secured by a promissory
note and a chattel mortgage on the car executed on March 19, 1964. The
spouses thereafter failed to pay five consecutive installments on a
remaining balance of P5,274.53. On October 13, 1965 the appellee
instituted a replevin suit in the city court of Manila for the seizure of the
car (par. 7 of the complaint alleged "unjustifiable failure and refusal of the
defendants . . . to surrender possession of the . . . motor vehicle for the
purpose of foreclosure"), or the recovery of the unpaid balance in case
delivery could not be effected. The car was then seized by the sheriff of
Manila and possession thereof was awarded to the appellee. During the
progress of the case, the appellee instituted extrajudicial foreclosure
proceedings, as a result of which, on December 22, 1965, the car was sold
at public auction with the appellee as the highest bidder and purchaser.
Upon consideration of the circumstances of the case, the court holds that
the plaintiff is entitled to recover the amount of P163.65 which represents
the expenses incurred by the plaintiff in the seizure of the car involved in
this case.
Considering that the plaintiff had recovered the car involved in the case
while it is still in the lower court, and considering further that the
defendants did not resist the case and the only question said defendants
raised before this court is the amount of attorney's fees, the court in the
exercise of its equitable jurisdiction reduces the attorney's fees granted to
the plaintiff by the lower court to P300.00.
In this appeal, the appellants contend that the trial court erred: (1) in
rendering a decision which does not state the facts and the law on which it
is based; (2) in condemning the appellants to pay P300 for attorney's fees
and P163.65 for expenses incurred in the seizure of the car which was the
object of the chattel mortgage executed by them in favor of the appellee;
and (3) in not dismissing the appellee's complaint.
Meanwhile, in view of the failure of the defendants-spouses to appear at

the scheduled hearing of the case, allegedly due to non-receipt of the
summons, they were declared in default. The default judgment ordered
them to pay to the appellee the sum of P500 as attorney's fees, and
P163.65 representing actual expenses relative to the seizure of the car,
plus costs.
1. We uphold the appellee's contention that the disputed decision of the

lower court complies substantially with the requirements of law because it
referred to the pre-trial order it issued on May 27, 1966 which contains
substantial findings of facts. For although settled is the doctrine that a
Their motion to set aside his order of default and the decision having been
denied, they appealed to the Court of First Instance of Manila.
45
decree with absolutely nothing to support it is a nullity, the law, however,

merely requires that a decision state the "essential ultimate facts upon
which the court's conclusion is drawn." 1 There being an express reference
to the pre-trial order, the latter must be considered and taken as forming
part of the decision. The claim, therefore, that the judgment clearly
transgresses the legal precept2 because it does not state the facts of the
case and the law on which it is based and hence, is a nullity, finds no
justification here.
institute the same on account of the appellants' unjustifiable failure and

refusal to comply with the former's demands.
The appellee further argues that the award of attorney's fees and the costs
of suit together with expenses incurred, was stipulated both in the
promissory note and chattel mortgage contract; that even in the absence of
such stipulation, the award of attorney's fees is discretionary on the part of
the court pursuant to par. 2, art. 2208, new Civil Code; and that the said
award could likewise be made by the lower court on the basis of the
general prayer in the complaint for the award of whatever relief that the
lower court may deem just and equitable in the premises.
2. The appellants theorize that the action of the appellee is for the
payment of the unpaid balance of the purchase price with a prayer for
replevin. When, therefore, the appellee seized the car, extrajudicially
foreclosed the mortgage, had the vehicle sold, and bought the same at
public auction as the highest bidder, it thereby renounced any and all
rights which it might have under the promissory note as well as the
payment of the unpaid balance, and, consequently, what it would
otherwise be entitled under and by virtue of the present action, including
attorney's fees and costs of suit, pursuant to article 1484 of the new Civil
Code.
It is true that the present action is one for replevin, but because it
culminated in the foreclosure of the chattel mortgage and the sale of the
car at public auction, it is our view that the provisions of art. 1484 of the
Civil Code (Recto Law) must govern the resolution of the issue here
presented.
This article recites that
On the other hand, the appellee maintains that it is entitled to an award of

attorney's fees and actual expenses and costs of suit by virtue of the
unjustifiable failure and refusal of the appellants to comply with their
obligations (one of which is the surrender of the chattel to the mortgagee
upon the latter's demand), contending that what is prohibited in art. 1484,
par. 3 of the new Civil Code relied upon by the appellants is the recovery
of the unpaid balance of the purchase price by means of an action other
than a suit for replevin; that Luneta Motor Co. vs. Salvador, et al., (L13373, July 26, 1960) is inapplicable to the present case because the
remedy sought in that case was in the conjunctive and not in the
alternative, such that, necessarily, when the appellee therein foreclosed
the mortgage on the motor vehicle during the progress of the action, the
other action for a sum of money had to be dismissed since the same could
not prosper as it would constitute a separate action for the recovery of the
unpaid balance contemplated in article 1484; and that in the present case,
however, the court awarded attorney's fees, costs of suit and expenses
incurred in relation to the seizure of the motor vehicle by virtue of the
writ of replevin in the same action because the appellee was compelled to
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:
installments;
This article was reproduced from the old art. 1454-A, which in turn was
inserted by Act 4122 (Recto Law). "Three remedies are available to the
46
vendor who has sold personal property on the installment plan: (1) He
may elect to exact the fulfillment of the obligation. (Bachrach Motor Co.
vs. Millan, 61 Phil. 409) (2) If the vendee shall have failed to pay two or
more installments, the vendor may cancel the sale. (3) If the vendee shall
have failed to pay two or more installments, the vendor may foreclose the
mortgage, if one has been given on the property. The basis of the first
option is the Civil Code. The basis of the last two options is Act 4122
(inserted in the Spanish Civil Code as art. 4154-A and now reproduced in
arts. 1484 and 1485), amendatory of the Civil Code. And the proviso to
the right to foreclose is that if the vendor has chosen this remedy, he shall
have no further action against the purchaser for the recovery of any
unpaid balance owing by the same. In other words, as we see it, the Act
does no more than qualify the remedy."3
expenses of collection, and costs. The mortgage deed was registered on

June 11, 1934, in the office of the register of deeds of the Province of
Rizal. On the 22nd of the same month, the defendant paid P43.75 upon
the first installment, and thereafter failed to pay any of the remaining
installments. In accordance with the terms of the mortgage, the plaintiff
called upon the sheriff to take possession of the car, but the defendant
refused to yield possession thereof, whereupon, the plaintiff brought the
replevin sought and thereby succeeded in getting possession of the car.
The car was sold at public auction to the plaintiff for P250, the latter
incurring legal expenses in the amount of P10.68. According to the
liquidation filed by the plaintiff, the defendant was still indebted in the
amount of P342.20, interest at 12 per cent from November 20, 1934,
P110.25 as attorney's fees, and the costs.
The legal issue which is the core of the controversy in the case at bar was
resolved in Macondray & Co. vs. Eustaquio,4 as follows:
xxx
xxx
xxx
In its last assignment of error plaintiff contends that even granting that
Act No. 4122 is valid, the court should have ordered the defendant to pay
at least the stipulated interest, Attorney's fees and the costs. This question
involves the interpretation of the pertinent portion of the law, reading:
"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." This paragraph, as its language shows, refers to
the mortgage contract executed by the parties, whereby the purchaser
mortgages the chattel sold to him on the installment basis in order to
guarantee the payment of its price, and the words "any unpaid balance"
should be interpreted as having reference to the deficiency judgment to
which the mortgagee may be entitled where, after the mortgaged chattel is
sold at public auction, the proceeds obtained therefrom are insufficient to
cover the full amount of the secured obligations which, in the case at bar
as shown by the note and by the mortgage deed, include interest on the
principal, attorney's fees, expenses of collection, and the costs. The
fundamental rule which should govern the interpretation of laws is to
ascertain the intention and meaning of the Legislature and to give effect
thereto. (Sec. 288, Code of Civil Procedure; U.S. vs. Toribio, 15 Phil. 85;
U.S. vs. Navarro, 19 Phil. 134; De Jesus vs. City of Manila, 29 Phil. 73;
Borromeo vs. Mariano, 41 Phil. 322; People vs. Concepcion, 44 Phil.
The plaintiff brought the action against the defendant to obtain the
possession of an automobile mortgaged by the latter, and to recover the
balance owing upon a note executed by him, the interest thereon,
attorney's fees, expenses of collection, and the costs. The defendant was
duly summoned, but he failed to appear or file his answer, wherefore, he
was declared in default and the appealed judgment was rendered
accordingly.
The plaintiff sold to the defendant a De Soto car, Sedan, for the price of
which, P595, he executed in its favor the note of May 22, 1934. Under
this note, the defendant undertook to pay the car in twelve monthly
installments, with 12 per cent interests per annum, and likewise agreed
that, should he fail to pay any monthly installment together with interest,
the remaining installments would become due and payable, and the
defendant shall pay 20 per cent upon the principal owing as attorney's
fees, expenses of collection which the plaintiff might incur, and the costs.
To guarantee the performance of his obligations under the note, the
defendant on the same date mortgaged the purchased car in favor of the
plaintiff, and bound himself under the same conditions stipulated in the
note relative to the monthly installments, interest, attorney's fees,
47
126.) Were it the intention of the Legislature to limit its meaning to the
unpaid balance of the principal, it would have so stated. We hold,
therefore, that the assignment of error is untenable. (emphasis supplied)
themselves at the expense of the buyers, because aside from recovering

the goods sold, upon default of the buyer in the payment of two
installments, still retained for themselves all amounts already paid, and in
addition, were adjudged entitled to damages, such as attorney's fees,
expenses of litigation and costs. Congress could not have intended to
impair much less do away with, the right of the seller to make commercial
use of his credit against the buyer, provided the buyer is not burdened
beyond what this law allows.7
In other words, under this amendment as above interpreted, in all

proceedings for the foreclosure of a chattel mortgage, executed on chattels
which have been sold on the installment plan, the mortgagee is limited to
the property mortgaged5 and is not entitled to attorney's fees and costs of
suit.
It would appear from the emphasis and precision of the language

employed in the decisions already adverted to that in no instance
whatsoever may the mortgagee recover from the mortgagor any amount
or sum after the foreclosure of the mortgage, for, as we understand it, the
philosophy of the Recto Law is that the underprivileged mortgagors must
be afforded full protection against the rapacity of the mortgagees.
In a subsequent case where the vendor in a sale of personal property in

installments, upon failure of the vendee to pay his obligations, the vendor
commenced, through court action, to recover the unpaid balance of the
purchase price, but later, during the progress of the action, foreclosed the
chattel mortgage constituted on the property, attorney's fees and costs of
suit were denied to the vendor. There the Supreme Court held:
But while we unconditionally concur in, and give our approval to, the
basic philosophy of the Recto Law, we view with no small amount of
circumspection the implication, necessarily drawn from the above
discussion, that the mortgagee is not entitled to protection against
perverse mortgagors. Where the mortgagor plainly refuses to deliver the
chattel subject of the mortgage upon his failure to pay two or more
installments, or if he conceals the chattel to place it beyond the reach of
the mortgagee, what then is the mortgagee expected to do? It is part of
conventional wisdom and the rule of law that no man can take the law
into his own hands; so it is not to be supposed that the Legislature
intended that the mortgagee should wrest or seize the chattel forcibly from
the control and possession of the mortgagor, even to the extent of using
violence which is unwarranted in law. Since the mortgagee would enforce
his rights through the means and within the limits delineated by law, the
next step in such situations being the filing of an action for replevin to the
end that he may recover immediate possession of the chattel and,
thereafter, enforce his rights in accordance with the contractual
relationship between him and the mortgagor as embodied in their
agreement, then it logically follows as a matter of common sense, that the
necessary expenses incurred in the prosecution by the mortgagee of the
action for replevin so that he can regain possession of the chattel, should
be borne by the mortgagor. Recoverable expenses would, in our view,
Paragraph 3 of the above-quoted provision (article 1484, new Civil Code)

is clear that foreclosure of the chattel mortgage and recovery of the
unpaid balance of the price are alternative remedies and may not be
pursued conjunctively. It appearing in the case at bar that the vendor had
already foreclosed the chattel mortgage constituted on the property and
had taken possession thereof, the lower court acted rightly in dismissing
the complaint filed for the purpose of recovering the unpaid balance of the
purchase price. By seizing the truck and foreclosing the mortgage at the
progress of the suit, the plaintiff renounced whatever claim it may have
had under the promissory note, and consequently, he has no more cause of
action against the promisor and the guarantor. And he has no more right
either to the costs and the attorney's fees that would go with the suit.
This might be considered a reiteration of the ruling in Macondray.
A scrutiny of the doctrine enunciated in the above-cited cases will reveal
that its ultimate and salutary purpose is to prevent the vendor from
circumventing the Recto Law. Congress sought to protect the buyers on
installment who more often than not have been victimized by sellers who,
before the enactment of this law, succeeded in unjustly enriching
48
include expenses properly incurred in effecting seizure of the chattel and

reasonable attorney's fees in prosecuting the action for replevin. And we
declare that in this case before us, the amounts awarded by the court a
quo to the mortgagee (appellee) are reasonable.
To the extent that our pronouncement here conflicts with the ruling
announced and followed in the cases hereinbefore discussed, the latter
must be considered pro tanto qualified.
ACCORDINGLY, the judgment a quo is affirmed. No costs.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez,
Fernando, Teehankee and Barredo, JJ.,concur.
49
SUPREME COURT
Manila
were two (2) separate documents denominated Disclosure Statements of

Loan/Credit Transaction (Single Payment or Installment Plan) 3 that
GIRAFFE also executed for each of the leased equipment. These
disclosure statements inter alia described GIRAFFE, vis--vis the two
aforementioned equipment, as the "borrower" who acknowledged the "net
proceeds of the loan," the "net amount to be financed," the "financial
charges," the "total installment payments" that it must pay monthly for
thirty-six (36) months, exclusive of the 36% per annum "late payment
charges." Thus, for the Silicon High Impact Graphics, GIRAFFE agreed
to pay P116,878.21 monthly, and for Oxberry Cinescan, P181.362.00
monthly. Hence, the total amount GIRAFFE has to pay PCI LEASING for
36 months of the lease, exclusive of monetary penalties imposable, if
proper, is as indicated below:
FIRST DIVISION
G.R. No. 142618
July 12, 2007
PCI LEASING AND FINANCE, INC., Petitioner,

vs.
GIRAFFE-X CREATIVE IMAGING, INC., Respondent.
DECISION
GARCIA, J.:
P116,878.21 @ month (for the Silicon High

Impact Graphics) x 36 months =
On a pure question of law involving the application of Republic Act

(R.A.) No. 5980, as amended by R.A. No. 8556 in relation to Articles
1484 and 1485 of the Civil Code, petitioner PCI Leasing and Finance,
Inc. (PCI LEASING, for short) has directly come to this Court via this
petition for review under Rule 45 of the Rules of Court to nullify and set
aside the Decision and Resolution dated December 28, 1998 and February
15, 2000, respectively, of the Regional Trial Court (RTC) of Quezon City,
Branch 227, in its Civil Case No. Q-98-34266, a suit for a sum of money
and/or personal property with prayer for a writ of replevin, thereat
instituted by the petitioner against the herein respondent, Giraffe-X
Creative Imaging, Inc. (GIRAFFE, for brevity).
P 4,207,615.56
-- PLUS-P181,362.00 @ month (for the Oxberry

Cinescan) x 36 months =
Total Amount to be paid by GIRAFFE

(or the NET CONTRACT AMOUNT)
P 6,529,032.00
P 10,736,647.56
By the terms, too, of the Lease Agreement, GIRAFFE undertook to remit

the amount of P3,120,000.00 by way of "guaranty deposit," a sort of
performance and compliance bond for the two equipment. Furthermore,
the same agreement embodied a standard acceleration clause, operative in
the event GIRAFFE fails to pay any rental and/or other accounts due.
The facts:
On December 4, 1996, petitioner PCI LEASING and respondent
GIRAFFE entered into a Lease Agreement,1whereby the former leased out
to the latter one (1) set of Silicon High Impact Graphics and accessories
worthP3,900,00.00 and one (1) unit of Oxberry Cinescan 6400-10 worth
P6,500,000.00. In connection with this agreement, the parties
subsequently signed two (2) separate documents, each denominated as
Lease Schedule.2 Likewise forming parts of the basic lease agreement
A year into the life of the Lease Agreement, GIRAFFE defaulted in its
monthly rental-payment obligations. And following a three-month default,
PCI LEASING, through one Atty. Florecita R. Gonzales, addressed a
formal pay-or-surrender-equipment type of demand letter 4 dated February
50
24, 1998 to GIRAFFE.
Recto Law. The cited articles respectively provide:
The demand went unheeded.

remedies:
Hence, on May 4, 1998, in the RTC of Quezon City, PCI LEASING

instituted the instant case against GIRAFFE. In its complaint, 5 docketed in
said court as Civil Case No. 98-34266 and raffled to Branch 227 6 thereof,
PCI LEASING prayed for the issuance of a writ of replevin for the
recovery of the leased property, in addition to the following relief:
installments;
2. After trial, judgment be rendered in favor of plaintiff [PCI LEASING]

and against the defendant [GIRAFFE], as follows:
the contrary shall be void. (Emphasis added.)
a. Declaring the plaintiff entitled to the possession of the subject

properties;
b. Ordering the defendant to pay the balance of rental/obligation in the
total amount of P8,248,657.47 inclusive of interest and charges thereon;
ART. 1485. The preceding article shall be applied to contracts purporting

to be leases of personal property with option to buy, when the lessor has
deprived the lessee of the possession or enjoyment of the thing.
c. Ordering defendant to pay plaintiff the expenses of litigation and cost

of suit. (Words in bracket added.)
It is thus GIRAFFEs posture that the aforequoted Article 1484 of the

Civil Code applies to its contractual relation with PCI LEASING because
the lease agreement in question, as supplemented by the schedules
documents, is really a lease with option to buy under the companion
article, Article 1485. Consequently, so GIRAFFE argues, upon the seizure
of the leased equipment pursuant to the writ of replevin, which seizure is
equivalent to foreclosure, PCI LEASING has no further recourse against
it. In brief, GIRAFFE asserts in its Motion to Dismiss that the civil
complaint filed by PCI LEASING is proscribed by the application to the
case of Articles 1484 and 1485, supra, of the Civil Code.
Upon PCI LEASINGs posting of a replevin bond, the trial court issued a
writ of replevin, paving the way for PCI LEASING to secure the seizure
and delivery of the equipment covered by the basic lease agreement.
Instead of an answer, GIRAFFE, as defendant a quo, filed a Motion to
Dismiss, therein arguing that the seizure of the two (2) leased equipment
stripped PCI LEASING of its cause of action. Expounding on the point,
GIRAFFE argues that, pursuant to Article 1484 of the Civil Code on
installment sales of personal property, PCI LEASING is barred from
further pursuing any claim arising from the lease agreement and the
companion contract documents, adding that the agreement between the
parties is in reality a lease of movables with option to buy. The given
situation, GIRAFFE continues, squarely brings into applicable play
Articles 1484 and 1485 of the Civil Code, commonly referred to as the
In its Opposition to the motion to dismiss, PCI LEASING maintains that

its contract with GIRAFFE is a straight lease without an option to buy.
Prescinding therefrom, PCI LEASING rejects the applicability to the suit
of Article 1484 in relation to Article 1485 of the Civil Code, claiming
51
that, under the terms and conditions of the basic agreement, the
relationship between the parties is one between an ordinary lessor and an
ordinary lessee.
petitioner, R.A. No. 5980 defines and authorizes its existence and
business.
The recourse is without merit.
In a decision7 dated December 28, 1998, the trial court granted

GIRAFFEs motion to dismiss mainly on the interplay of the following
premises: 1) the lease agreement package, as memorialized in the contract
documents, is akin to the contract contemplated in Article 1485 of the
Civil Code, and 2) GIRAFFEs loss of possession of the leased equipment
consequent to the enforcement of the writ of replevin is "akin to
foreclosure, the condition precedent for application of Articles 1484
and 1485 [of the Civil Code]." Accordingly, the trial court dismissed Civil
Case No. Q-98-34266, disposing as follows:
R.A. No. 5980, in its original shape and as amended, partakes of a

supervisory or regulatory legislation, merely providing a regulatory
framework for the organization, registration, and regulation of the
operations of financing companies. As couched, it does not specifically
define the rights and obligations of parties to a financial leasing
arrangement. In fact, it does not go beyond defining commercial or
transactional financial leasing and other financial leasing concepts. Thus,
the relevancy of Article 18 of the Civil Code which reads:
WHEREFORE, premises considered, the defendant [GIRAFFE] having

relinquished any claim to the personal properties subject of replevin
which are now in the possession of the plaintiff [PCI LEASING], plaintiff
is DEEMED fully satisfied pursuant to the provisions of Articles 1484
and 1485 of the New Civil Code. By virtue of said provisions, plaintiff is
DEEMED estopped from further action against the defendant, the plaintiff
having recovered thru (replevin) the personal property sought to be
payable/leased on installments, defendants being under protection of said
RECTO LAW. In view thereof, this case is hereby DISMISSED.
Article 18. - In matters which are governed by special laws, their

deficiency shall be supplied by the provisions of this [Civil] Code.
Petitioner foists the argument that the Recto Law, i.e., the Civil Code
provisions on installment sales of movable property, does not apply to a
financial leasing agreement because such agreement, by definition, does
not confer on the lessee the option to buy the property subject of the
financial lease. To the petitioner, the absence of an option-to-buy
stipulation in a financial leasing agreement, as understood under R.A. No.
8556, prevents the application thereto of Articles 1484 and 1485 of the
Civil Code.
With its motion for reconsideration having been denied by the trial court
in its resolution of February 15, 2000,8petitioner has directly come to this
Court via this petition for review raising the sole legal issue of whether or
not the underlying Lease Agreement, Lease Schedules and the Disclosure
Statements that embody the financial leasing arrangement between the
parties are covered by and subject to the consequences of Articles 1484
and 1485 of the New Civil Code.
We are not persuaded.

The Court can allow that the underlying lease agreement has the earmarks
or made to appear as a financial leasing,9 a term defined in Section 3(d) of
R.A. No. 8556 as -
As in the court below, petitioner contends that the financial leasing

arrangement it concluded with the respondent represents a straight lease
covered by R.A. No. 5980, the Financing Company Act, as last amended
by R.A. No. 8556, otherwise known as Financing Company Act of 1998,
and is outside the application and coverage of the Recto Law. To the
a mode of extending credit through a non-cancelable lease contract under

which the lessor purchases or acquires, at the instance of the lessee,
machinery, equipment, office machines, and other movable or
immovable property in consideration of the periodic payment by the
52
lessee of a fixed amount of money sufficient to amortize at least seventy

(70%) of the purchase price or acquisition cost, including any incidental
expenses and a margin of profit over an obligatory period of not less than
two (2) years during which the lessee has the right to hold and use the
leased property but with no obligation or option on his part to purchase
the leased property from the owner-lessor at the end of the lease contract.
purchase contract; .;"
In its previous holdings, however, the Court, taking into account the
following mix: the imperatives of equity, the contractual stipulations in
question and the actuations of parties vis--vis their contract, treated
disguised transactions technically tagged as financing lease, like here, as
creating a different contractual relationship. Notable among the Courts
decisions because of its parallelism with this case is BA Finance
Corporation v. Court of Appeals 10 which involved a motor vehicle.
Thereat, the Court has treated a purported financial lease as actually a sale
of a movable property on installments and prevented recovery beyond the
buyers arrearages. Wrote the Court in BA Finance:
In the case at bench, xxx. [T]he term of the contract [over a motor
vehicle] was for thirty six (36) months at a "monthly rental"
(P1,689.40), or for a total amount of P60,821.28. The contract also
contained [a] clause [requiring the Lessee to give a guaranty deposit in the
amount of P20,800.00] xxx
The foregoing provisions indicate no less than a mere financing scheme

extended by a financing company to a client in acquiring a motor vehicle
and allowing the latter to obtain the immediate possession and use thereof
pending full payment of the financial accommodation that is given.
After the private respondent had paid the sum of P41,670.59, excluding
the guaranty deposit of P20,800.00, he stopped further payments. Putting
the two sums together, the financing company had in its hands the amount
of P62,470.59 as against the total agreed "rentals" of P60,821.28 or an
excess of P1,649.31.
The transaction involved is one of a "financial lease" or "financial

leasing," where a financing company would, in effect, initially purchase a
mobile equipment and turn around to lease it to a client who gets, in
addition, an option to purchase the property at the expiry of the lease
period. xxx.
xxx
xxx
The respondent appellate court considered it only just and equitable for
the guaranty deposit made by the private respondent to be applied to his
arrearages and thereafter to hold the contract terminated. Adopting the
ratiocination of the court a quo, the appellate court said:
xxx
xxx In view thereof, the guaranty deposit of P20,800.00 made by the

defendant should and must be credited in his favor, in the interest of
fairness, justice and equity. The plaintiff should not be allowed to unduly
enrich itself at the expense of the defendant. xxx This is even more
compelling in this case where although the transaction, on its face, appear
ostensibly, to be a contract of lease, it is actually a financing agreement,
with the plaintiff financing the purchase of defendant's automobile .
The Court is constrained, in the interest of truth and justice, to go into this
aspect of the transaction between the plaintiff and the defendant with
all the facts and circumstances existing in this case, and which the court
must consider in deciding the case, if it is to decide the case according to
all the facts. xxx.
The pertinent provisions of [RA] 5980, thus implemented, read:

"'Financing companies,' are primarily organized for the purpose of
extending credit facilities to consumers either by leasing of motor
vehicles, and office machines and equipment, and other movable
property."
"'Credit' shall mean any loan, any contract to sell, or sale or contract of
sale of property or service, under which part or all of the price is
payable subsequent to the making of such sale or contract; any rental-
53
xxx
xxx
xxx
4. Recover all rentals for the remaining term of the lease had it not been
cancelled, as additional penalty;
Considering the factual findings of both the court a quo and the appellate
court, the only logical conclusion is that the private respondent did opt, as
he has claimed, to acquire the motor vehicle, justifying then the
application of the guarantee deposit to the balance still due and obligating
the petitioner to recognize it as an exercise of the option by the private
respondent. The result would thereby entitle said respondent to the
ownership and possession of the vehicle as the buyer thereof. We,
therefore, see no reversible error in the ultimate judgment of the appellate
court.11 (Italics in the original; underscoring supplied and words in bracket
added.)
5. Recovery of any and all amounts advanced by PCI LEASING for

GIRAFFEs account xxx;
6. Recover all expenses incurred in repossessing, removing, repairing and
storing the property; and,
7. Recover all damages suffered by PCI LEASING by reason of the
default.
In addition, Sec. 6.1 of the Lease Agreement states that the guaranty
deposit shall be forfeited in the event the respondent, for any reason,
returns the equipment before the expiration of the lease.
In Cebu Contractors Consortium Co. v. Court of Appeals, 12 the Court

viewed and thus declared a financial lease agreement as having been
simulated to disguise a simple loan with security, it appearing that the
financing company purchased equipment already owned by a capitalstrapped client, with the intention of leasing it back to the latter.
At bottom, respondent had paid the equivalent of about a years lease

rentals, or a total of P3,510,372.00, more or less. Throw in the guaranty
deposit (P3,120,000.00) and the respondent had made a total cash outlay
ofP6,630,372.00 in favor of the petitioner. The replevin-seized leased
equipment had, as alleged in the complaint, an estimated residual value of
P6,900.000.00 at the time Civil Case No. Q-98-34266 was instituted on
May 4, 1998. Adding all cash advances thus made to the residual value of
the equipment, the total value which the petitioner had actually obtained
by virtue of its lease agreement with the respondent amounts to
P13,530,372.00 (P3,510,372.00 + P3,120,000.00 + P6,900.000.00 =
P13,530,372.00).
In the present case, petitioner acquired the office equipment in question

for their subsequent lease to the respondent, with the latter undertaking to
pay a monthly fixed rental therefor in the total amount of P292,531.00, or
a total of P10,531,116.00 for the whole 36 months. As a measure of good
faith, respondent made an up-front guarantee deposit in the amount of
P3,120,000.00. The basic agreement provides that in the event the
respondent fails to pay any rental due or is in a default situation, then the
petitioner shall have cumulative remedies, such as, but not limited to, the
following:13
The acquisition cost for both the Silicon High Impact Graphics equipment
and the Oxberry Cinescan was, as stated in no less than the petitioners
letter to the respondent dated November 11, 1996 14 approving in the
latters favor a lease facility, was P8,100,000.00. Subtracting the
acquisition cost of P8,100,000.00 from the total amount, i.e.,
P13,530,372.00, creditable to the respondent, it would clearly appear that
petitioner realized a gross income of P5,430,372.00 from its lease
transaction with the respondent. The amount of P5,430,372.00 is not yet a
1. Obtain possession of the property/equipment;

2. Retain all amounts paid to it. In addition, the guaranty deposit may be
applied towards the payment of "liquidated damages";
3. Recover all accrued and unpaid rentals;
54
final figure as it does not include the rentals in arrears, penalties thereon,
and interest earned by the guaranty deposit.
agreements are still largely imposed unilaterally by the financing

companies. In other words, these agreements are usually one-sided in
favor of such companies. A perusal of the lease agreement in question
exposes the many remedies available to the petitioner, while there are
only the standard contractual prohibitions against the respondent. This is
characteristic of standard printed form contracts.
As may be noted, petitioners demand letter 15 fixed the amount of

P8,248,657.47 as representing the respondents "rental" balance which
became due and demandable consequent to the application of the
acceleration and other clauses of the lease agreement. Assuming, then,
that the respondent may be compelled to pay P8,248,657.47, then it would
end up paying a total of P21,779,029.47 (P13,530,372.00 + P8,248,657.47
=P21,779,029.47) for its use - for a year and two months at the most - of
the equipment. All in all, for an investment of P8,100,000.00, the
petitioner stands to make in a years time, out of the transaction, a total of
P21,779,029.47, or a net of P13,679,029.47, if we are to believe its
outlandish legal submission that the PCI LEASING-GIRAFFE Lease
Agreement was an honest-to-goodness straight lease.
There is more. In the adverted February 24, 1998 demand letter 17 sent to
the respondent, petitioner fashioned its claim in the alternative: payment
of the full amount of P8,248,657.47, representing the unpaid balance for
the entire 36-month lease period or the surrender of the financed asset
under pain of legal action. To quote the letter:
Demand is hereby made upon you to pay in full your outstanding balance
in the amount of P8,248,657.47 on or before March 04, 1998 OR to
surrender to us the one (1) set Silicon High Impact Graphics and one (1)
unit Oxberry Cinescan 6400-10
A financing arrangement has a purpose which is at once practical and

salutary. R.A. No. 8556 was, in fact, precisely enacted to regulate
financing companies operations with the end in view of strengthening
their critical role in providing credit and services to small and medium
enterprises and to curtail acts and practices prejudicial to the public
interest, in general, and to their clienteles, in particular.16 As a regulated
activity, financing arrangements are not meant to quench only the thirst
for profit. They serve a higher purpose, and R.A. No. 8556 has made that
abundantly clear.
We trust you will give this matter your serious and preferential attention.
(Emphasis added).
Evidently, the letter did not make a demand for the payment of the
P8,248,657.47 AND the return of the equipment; only either one of the
two was required. The demand letter was prepared and signed by Atty.
Florecita R. Gonzales, presumably petitioners counsel. As such, the use
of "or" instead of "and" in the letter could hardly be treated as a simple
typographical error, bearing in mind the nature of the demand, the amount
involved, and the fact that it was made by a lawyer. Certainly Atty.
Gonzales would have known that a world of difference exists between
"and" and "or" in the manner that the word was employed in the letter.
We stress, however, that there is nothing in R.A. No. 8556 which defines
the rights and obligations, as between each other, of the financial lessor
and the lessee. In determining the respective responsibilities of the parties
to the agreement, courts, therefore, must train a keen eye on the attendant
facts and circumstances of the case in order to ascertain the intention of
the parties, in relation to the law and the written agreement. Likewise, the
public interest and policy involved should be considered. It may not be
amiss to state that, normally, financing contracts come in a standard
prepared form, unilaterally thought up and written by the financing
companies requiring only the personal circumstances and signature of the
borrower or lessee; the rates and other important covenants in these
A rule in statutory construction is that the word "or" is a disjunctive term

signifying dissociation and independence of one thing from other things
enumerated unless the context requires a different interpretation.18
In its elementary sense, "or", as used in a statute, is a disjunctive article
55
indicating an alternative. It often connects a series of words or

propositions indicating a choice of either. When "or" is used, the various
members of the enumeration are to be taken separately.19
installment as one of lease to prevent the ownership of the object of the

sale from passing to the vendee until and unless the price is fully paid. As
this Court noted in Vda. de Jose v. Barrueco:21
The word "or" is a disjunctive term signifying disassociation and

independence of one thing from each of the other things enumerated.20
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 resorted 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 the bargain, in the transfer of title to the
lessee.
The demand could only be that the respondent need not return the
equipment if it paid the P8,248,657.47 outstanding balance, ineluctably
suggesting that the respondent can keep possession of the equipment if it
exercises its option to acquire the same by paying the unpaid balance of
the purchase price. Stated otherwise, if the respondent was not minded to
exercise its option of acquiring the equipment by returning them, then it
need not pay the outstanding balance. This is the logical import of the
letter: that the transaction in this case is a lease in name only. The socalled monthly rentals are in truth monthly amortizations of the price of
the leased office equipment.
In another old but still relevant case of U.S. Commercial v. Halili, 22 a

lease agreement was declared to be in fact a sale of personal property by
installments. Said the Court:
On the whole, then, we rule, as did the trial court, that the PCI LEASINGGIRAFFE lease agreement is in reality a lease with an option to purchase
the equipment. This has been made manifest by the actions of the
petitioner itself, foremost of which is the declarations made in its demand
letter to the respondent. There could be no other explanation than that if
the respondent paid the balance, then it could keep the equipment for its
own; if not, then it should return them. This is clearly an option to
purchase given to the respondent. Being so, Article 1485 of the Civil
Code should apply.
. . . There can hardly be any question that the so-called contracts of lease
on which the present action is based were veritable leases of personal
property with option to purchase, and as such come within the purview of
the above article [Art. 1454-A of the old Civil Code on sale of personal
property by installment]. xxx
Being leases of personal property with option to purchase as contemplated
in the above article, the contracts in question are subject to the provision
that when the lessor in such case "has chosen to deprive the lessee of the
enjoyment of such personal property," "he shall have no further action"
against the lessee "for the recovery of any unpaid balance" owing by the
latter, "agreement to the contrary being null and void."
The present case reflects a situation where the financing company can
withhold and conceal - up to the last moment - its intention to sell the
property subject of the finance lease, in order that the provisions of the
Recto Law may be circumvented. It may be, as petitioner pointed out, that
the basic "lease agreement" does not contain a "purchase option" clause.
The absence, however, does not necessarily argue against the idea that
what the parties are into is not a straight lease, but a lease with option to
purchase. This Court has, to be sure, long been aware of the practice of
vendors of personal property of denominating a contract of sale on
In choosing, through replevin, to deprive the respondent of possession of

the leased equipment, the petitioner waived its right to bring an action to
recover unpaid rentals on the said leased items. Paragraph (3), Article
1484 in relation to Article 1485 of the Civil Code, which we are
56
hereunder re-reproducing, cannot be any clearer.
we would witness a situation where even if the respondent surrendered the

equipment voluntarily, the petitioner can still sue upon its claim. This
would be most unfair for the respondent. We cannot allow the petitioner
to renege on its word. Yet more than that, the very word "or" as used in
the letter conveys distinctly its intention not to claim both the unpaid
balance and the equipment. It is not difficult to discern why: if we add up
the amounts paid by the respondent, the residual value of the property
recovered, and the amount claimed by the petitioner as sued upon herein
(for a total of P21,779,029.47), then it would end up making an instant
killing out of the transaction at the expense of its client, the respondent.
The Recto Law was precisely enacted to prevent this kind of aberration.
Moreover, due to considerations of equity, public policy and justice, we
cannot allow this to happen.Not only to the respondent, but those
similarly situated who may fall prey to a similar scheme.

remedies:
xxx
xxx
xxx
ART. 1485. The preceding article shall be applied to contracts purporting
to be leases of personal property with option to buy, when the lessor has
deprived the lessee of the possession or enjoyment of the thing.
WHEREFORE, the instant petition is DENIED and the trial courts

decision is AFFIRMED.
Costs against petitioner.
As we articulated in Elisco Tool Manufacturing Corp. v. Court of

Appeals,23 the remedies provided for in Article 1484 of the Civil Code are
alternative, not cumulative. The exercise of one bars the exercise of the
others. This limitation applies to contracts purporting to be leases of
personal property with option to buy by virtue of the same Article 1485.
The condition that the lessor has deprived the lessee of possession or
enjoyment of the thing for the purpose of applying Article 1485 was
fulfilled in this case by the filing by petitioner of the complaint for a sum
of money with prayer for replevin to recover possession of the office
equipment.24 By virtue of the writ of seizure issued by the trial court, the
petitioner has effectively deprived respondent of their use, a situation
which, by force of the Recto Law, in turn precludes the former from
maintaining an action for recovery of "accrued rentals" or the recovery of
the balance of the purchase price plus interest. 25
SO ORDERED.
CANCIO C. GARCIA
Associate Justice
The imperatives of honest dealings given prominence in the Civil Code

under the heading: Human Relations, provide another reason why we
must hold the petitioner to its word as embodied in its demand letter. Else,
57

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-26578 January 28, 1974
LEGARDA HERMANOS and JOSE
LEGARDA, petitioners,
vs.
FELIPE SALDAA and COURT OF APPEALS (FIFTH
DIVISION) * respondents.
Manuel Y. Macias for petitioners.
Mario E. Ongkiko for private respondent.
TEEHANKEE, J.:
The Court, in affirming the decision under review of the Court
of Appeals, which holds that the respondent buyer of two small
residential lots on installment contracts on a ten-year basis who
has faithfully paid for eight continuous years on the principal
alone already more than the value of one lot, besides the larger
stipulated interests on both lots, is entitled to the conveyance of
one fully paid lot of his choice, rules that the judgment is fair
and just and in accordance with law and equity.
The action originated as a complaint for delivery of two parcels
of land in Sampaloc, Manila and for execution of the
58
corresponding deed of conveyance after payment of the balance

still due on their purchase price. Private respondent as plaintiff
had entered into two written contracts with petitioner Legarda
Hermanos as defendant subdivision owner, whereby the latter
agreed to sell to him Lots Nos. 7 and 8 of block No. 5N of the
subdivision with an area of 150 square meters each, for the sum
of P1,500.00 per lot, payable over the span of ten years divided
into 120 equal monthly installments of P19.83 with 10% interest
per annum, to commence on May 26, 1948, date of execution of
the contracts. Subsequently, Legarda Hermanos partitioned the
subdivision among the brothers and sisters, and the two lots
were among those allotted to co-petitioner Jose Legarda who
was then included as co-defendant in the action.
paid more than the stipulated purchase price of P1,500.00 for

one lot.
Almost five years later, on February 2, 1961 just before the
filing of the action, respondent wrote petitioners stating that his
desire to build a house on the lots was prevented by their failure
to introduce improvements on the subdivision as "there is still no
road to these lots," and requesting information of the amount
owing to update his account as "I intend to continue paying the
balance due on said lots."
Petitioners replied in their letter of February 11, 1961 that as
respondent had failed to complete total payment of the 120
installments by May, 1958 as stipulated in the contracts to sell,
"pursuant to the provisions of both contracts all the amounts paid
in accordance with the agreement together with the
improvements on the premises have been considered as rents
paid and as payment for damages suffered by your failure," 2 and
"Said cancellation being in order, is hereby confirmed."
It is undisputed that respondent faithfully paid for eight

continuous years about 95 (of the stipulated 120) monthly
installments totalling P3,582.06 up to the month of February,
1956, which as per petitioners' own statement of account,
Exhibit "1", was applied to respondent's account (without
distinguishing the two lots), as follows:
From the adverse decision of July 17, 1963 of the trial court
sustaining petitioners' cancellation of the contracts and
dismissing respondent's complaint, respondent appellate court on
appeal rendered its judgment of July 27, 1966 reversing the
lower court's judgment and ordering petitioners "to deliver to the
plaintiff possession of one of the two lots, at the choice of
defendants, and to execute the corresponding deed of
conveyance to the plaintiff for the said lot," 3 ruling as follows:
To interests P1,889.78
To principal 1,682.28
Total P3,582.06 1
It is equally undisputed that after February, 1956 up to the filing
of respondent's complaint in the Manila court of first instance in
1961, respondent did not make further payments. The account
thus shows that he owed petitioners the sum of P1,317.72 on
account of the balance of the purchase price (principal) of the
two lots (in the total sum of P3,000.00), although he had
During the hearing, plaintiff testified that he suspended

payments because the lots were not actually delivered to him, or
could not be, due to the fact that they were completely under
59
water; and also because the defendants-owners failed to make

improvements on the premises, such as roads, filling of the
submerged areas, etc., despite repeated promises of their
representative, the said Mr. Cenon. As regards the supposed
cancellation of the contracts, plaintiff averred that no demand
has been made upon him regarding the unpaid installments, and
for this reason he could not be declared in default so as to entitle
the defendants to cancel the said contracts.
Hence, the present petition for review, wherein petitioners insist

on their right of cancellation under the "plainly valid written
agreements which constitute the law between the parties" as
against "the broad principles of equity and justice" applied by
the appellate court. Respondent on the other hand while adhering
to the validity of the doctrine of the Caridad Estates
cases 5 which recognizes the right of a vendor of land under a
contract to sell to cancel the contract upon default, with
forfeiture of the installments paid as rentals, disputes its
applicability herein contending that here petitioners-sellers were
equally in default as the lots were "completely under water" and
"there is neither evidence nor a finding that the petitioners in fact
cancelled the contracts previous to receipt of respondent's
letter."6
The issue, therefore, is: Under the above facts, may defendants
be compelled, or not, to allow plaintiff to complete payment of
the purchase price of the two lots in dispute and thereafter to
execute the final deeds of conveyance thereof in his favor?
xxx xxx xxx
The Court finds that the appellate court's judgment finding that
of the total sum of P3,582.06 (including interests of P1,889.78)
already paid by respondent (which was more than the value of
two lots), the sum applied by petitioners to the principal alone in
the amount of P1,682.28 was already more than the value
of one lot of P1,500.00 and hence one of the two lots as chosen
by respondent would be considered asfully paid, is fair and just
and in accordance with law and equity.
Whether or not plaintiffs explanation for his failure to pay the

remaining installments is true, considering the circumstances
obtaining in this case, we elect to apply the broad principles
of equity and justice. In the case at bar, we find that the plaintiff
has paid the total sum of P3,582.06 including interests, which is
even more than the value of the two lots. And even if the sum
applied to the principal alone were to be considered, which was
of the total ofP1,682.28, the same was already more than the
value of one lot, which is P1,500.00. The only balance due on
both lots was P1,317.72, which was even less than the value of
one lot. We will consider as fully paid by the plaintiff at least
one of the two lots, at the choice of thedefendants. This is more
in line with good conscience than a total denial to the plaintiff of
a little token of what he has paid the defendant Legarda
Hermanos. 4
As already stated, the monthly payments for eight years made by

respondent were applied to his account without specifying or
distinguishing between the two lots subject of the two
agreements under petitioners' own statement of account, Exhibit
"1". 7 Even considering respondent as having defaulted after
February 1956, when he suspended payments after the 95th
installment, he had as of the already paid by way
of principal (P1,682.28) more than the full value of one lot
(P1,500.00). The judgment recognizing this fact and ordering the
60
conveyance to him of one lot of his choice while also

recognizing petitioners' right to retain the interests of P1,889.78
paid by him for eight years on both lots, besides
the cancellation of the contract for one lot which thus reverts to
petitioners, cannot be deemed to deny substantial justice to
petitioners nor to defeat their rights under the letter and spirit of
the contracts in question.
recover as though there had been a strict and complete

fulfillment, less damages suffered by the obligee,'" and "that in
the interest of justice and equity, the decision appealed from may
be upheld upon the authority of Article 1234 of the Civil Code." 9
The Court's doctrine in the analogous case of J.M. Tuason & Co.
Inc. vs. Javier 8 is fully applicable to the present case, with the
respondent
at
bar
being
granted lesser benefits,
sinceno rescission of contract was therein permitted. There,
where the therein buyer-appellee identically situated as herein
respondent buyer had likewise defaulted in completing the
payments after having religiously paid the stipulated monthly
installments for almost eight years and notwithstanding that the
seller-appellant had duly notified the buyer of the rescission of
the contract to sell, the Court upheld the lower court's
judgment denying judicial confirmation of the rescission and
instead granting the buyer an additional grace period of sixty
days from notice of judgment to pay all the installment
payments in arrears together with the stipulated 10% interest per
annum from the date of default, apart from reasonable attorney's
fees and costs, which payments, the Court observed, would have
the plaintiff-seller "recover everything due thereto, pursuant to
its contract with the defendant, including such damages as the
former may have suffered in consequence of the latter's default."
Makalintal, C.J., Castro, Makasiar, Esguerra and Muoz Palma,

JJ., concur.
ACCORDINGLY, the appealed judgment of the appellate court

is hereby affirmed. Without pronouncement as to costs.
LEGARDA VS. SALDAA

G.R. No. L-26578, January 28, 1974
FACTS: Saldaa had entered into two written contracts with Legarda, a
subdivision owner, whereby Legarda agreed to sell to him two of his lots
for 1,500 per lot, payable over a span of 10 years on 120 monthly
installments with 10% interest per annum. Saldaa paid for eight
consecutive years but did not make any further payments due to Legardas
failure to make the necessary improvement on the said lot which was
promised by their representative, the said Mr. Cenon. Saldaa already
paid a total of Php3,582.06. The statement of account shows that Saldaa
paid Php1,682.28 of the principal and Php1,889.78 for the interest. It did
not distinguish which of the two said lots was paid. Petitioner, then,
rescinded the contract based on the stipulation of the contract that
payments made by respondent shall be considered as rentals and any
In affirming, the Court held that "Regardless, however, of the

propriety of applying said Art. 1592 thereto, We find that
plaintiff herein has not been denied substantial justice, for,
according to Art. 1234 of said Code: 'If the obligation has
been substantially performed in good faith, the obligor may
61
improvements made shall be forfeited in favor of the petitioner. The lower

court ruled sustaining
petitioners cancellation of contract. So respondent appealed and
judgment was reversed in favor of the respondent ordering petitioners to
deliver to plaintiff one of the two lots at the choice of the defendant and
execute the deed of conveyance. Hence this petition.
Jordan M. Pizarras, Respondent.
ISSUE: Was the cancellation of the sale of contract valid?
On June 5, 1996, Daniel Ponce Pacifico (Pacifico) signed a Reservation

Application1 with Fil-Estate Marketing Association for the purchase of a
house and lot located at Lot 28, Block 3, Phase II, Jestra Villas, Barangay
La Huerta, Municipality of Paraaque, Metro Manila (the property), and
paid the reservation fee of P20,000.
DECISION
CARPIO MORALES, J.:
RULING: No, even though it was stipulated that failure to complete the
payment would result to the cancellation of the contract, it was still not
valid. As clearly shown in the statement of account, Saldaa was able to
pay one of the two said lots. Under Article 1234 of the New Civil Code,
if the obligation has been substantially performed in good faith, the
obligor may recover as though there had been a strict and complete
fulfillment, less damages suffered by the obligee. Hence, under the
authority of Article 1234 of the New Civil Code, Saladaa is entitled to
one of the two lots of his choice and the interest paid shall be forfeited in
favor of the petitioners
Under the Reservation Application, the total purchase price of the

property was P2,500,000, and the down payment equivalent to 30% of the
purchase price or P750,000 was to be paid interest-free in six monthly
installments due every fifth of the month starting July 1996 until
December 1996. As the P20,000 reservation fee formed part of the down
payment, the monthly installment on the down payment was fixed at
P121,666.66.
Also under the Reservation Application, upon full payment of the 30%
down payment by Pacifico, he was to sign a contract to sell with the
owner and developer of the property, Joprest Development and
Management Corporation (now Jestra Development and Management
Corporation, hereafter Jestra). And the 70% balance on the purchase price
or P1,750,000 was to be payable in 10 years, to bear interest at 21% per
annum, at a monthly installment of P34,982.50. When the payment of the
installments on the 70% balance should commence, the Reservation
Application was silent.

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 167452
January 30, 2007
Unable to comply with the schedule of payments, Pacifico requested

Jestra to allow him to make periodic payments on the down payment "in
an amount that he could afford," to which Jestra acceded provided that
late payment penalties/surcharges2 are paid.
JESTRA DEVELOPMENT AND MANAGEMENT

CORPORATION, Petitioner,
vs.
DANIEL PONCE PACIFICO, represented by his attorney-in-fact
With still a remaining balance of P260,000 on the down payment,
62
Pacifico and Jestra executed on March 6, 1997, Contract to Sell No. 833
over the property. The said contract was silent on the unsettled balance on
the down payment.
balance be restructured" in light of the "present business condition."

By November 27, 1997, Pacifico had fully paid the 30% down payment,
and by December 4, 1997, he had paid a total of P846,600, P76,600 of
which Jestra applied as penalty charges for the belated settlement of the
down payment.
Under the Contract to Sell, Pacifico should have had on November 5,

1996, or one month prior to the deadline stated under the Reservation
Application, fully paid the 30% down payment, and that the 120 monthly
installments for the 70% balance or P1,750 should have had commenced
on December 7, 1996, viz:
By letter of December 11, 1997, Jestra, through counsel, sent Pacifico a

final demand for the payment ofP444,738.885 representing the total of 11
installments due on the 70% balance of the purchase price, inclusive of
21% interest per annum and add-on interest at the rate of P384.81 per day,
counted from January 7, 1997. Further, Jestra demanded the payment of
P73,750 representing "penalties for the [belated settlement of the] down
payment." And it reminded Pacifico that "as provided in Section 5 of the
said contract, [Jestra] reserves its right to automatically cancel or rescind
the same on account of [his] failure/refusal to comply with the terms
thereof."6
SECTION 2. TERMS OF PAYMENT. The PURCHASER agrees to pay

the aforecited purchase price [of P2,500,000.00] in the following manner,
namely:
2.1 The total amount of SEVEN HUNDRED FIFTY THOUSAND
PESOS ONLY (P750,000.00) Philippine Currency as down payment on or
before November 5, 1996.
Pacifico later requested Jestra, by letter of November 12, 1997, for a

restructuring of his unsettled obligation. His request was granted on the
condition that the interest for the period from December 1996 to
November 1997 amounting to P224,396.37 would be added to the 70%
balance on the purchase price; and that Pacifico issue 12 postdated checks
beginning each year to cover his amortization payments.
2.2 The balance of ONE MILLION SEVEN HUNDTED FIFTY

THOUSAND PESOS ONLY (P1,750,00.00), Philippine Currency, shall
be paid in One Hundred Twenty (120) equal monthly installments at
THIRTY FOUR THOUSAND NINE HUNDRED EIGHT THREE
PESOS ONLY (P34,983.00) Philippine Currency, to commence on
December 7, 1996, with interest at the rate of Twenty One Percent (21%)
per annum. The PURCHASER shall issue One Hundred Twenty (120)
postdated checks in favor of the OWNER/DEVELOPER for each of the
monthly installments, which checks shall be delivered to the latter upon
signing of this CONTRACT. The PURCHASER shall be subject to the
pre-qualification requirements of COCOLIFE for the Mortgage
Redemption Insurance (MRI) and the Building Insurance on the UNIT.
Interest re-pricing shall be effected on the 6th Year, to commence on
December 7, 2001.
In light of the restructured scheme, the monthly amortization on the 70%

balance was from P34,982.50 increased to P39,468, to commence on
January 5, 1998.
Pacifico thus issued to Jestra 12 postdated Security Bank checks to cover
his monthly amortizations from January to December 1998. The checks
for January and February 1998 were, however, dishonored due to
insufficiency of funds.7
x x x x (Underscoring supplied)
By letter of March 24, 1998, Pacifico informed Jestra that due to sudden
financial difficulties, he was suspending payment of his obligation during
By letter4 of November 12, 1997, Pacifico requested Jestra that "the
63
By Decision12 of March 15, 2000, the Housing and Land Use Arbiter held
Jestra liable for failure to comply with Section 3 of Republic Act (RA)
No. 6552 (Realty Installment Buyer Protection Act) requiring payment by
the seller of the cash surrender value of the buyers payments and Section
17 of Presidential Decree No. 957 (REGULATING THE SALE OF
SUBDIVISION LOTS AND CONDOMINIUMS, PROVIDING
PENALTIES FOR VIOLATIONS THEREOF) requiring it to register the
Contract to Sell in the Office of the Register of Deeds.
the 10-month period, and that he wanted to dispose of the property to

recover his investment.8 And he requested that the postdated checks he
issued be returned to him.
Jestra, by letter9 of March 31, 1998, denied Pacificos request to suspend
payment and for the return of the postdated checks. It, however, gave him
until April 15, 1998 to sell the property failing which it warned him that it
would be constrained to re-open it for sale.
The Arbiter found that while Pacifico had paid a total amount of P846,600
which is "more or less equivalent to 24 monthly installments under the
contract to sell . . . wherein the monthly amortization is P34,983,"13 he
could no longer demand the delivery of the property, its title having
already been transferred in the name of another buyer.
Thereafter, Jestra sent Pacifico a notarial Notice of Cancellation, dated

May 1, 1998, notifying him that it was, within 30 days after his receipt
thereof, exercising its right to cancel the Contract to Sell. Pacifico
received the notice on May 13, 1998.
In a separate move, Jestra through its Credit and Collection Manager sent
Pacifico a letter dated May 27, 1998, demanding payment of the total
amount of P209,377.75 covering monthly amortizations from January 30
to May 30, 1998 inclusive of penalties. And it gave him until June 1, 1998
to settle his account, failing which the Contract to Sell would be
automatically cancelled and it would re-open the property for sale.10
Thus the Arbiter disposed:

WHEREFORE, premises considered, judgment is hereby rendered in
favor of the complainant and ordering respondent:
1. To pay and/or reimburse to the complainant the total payments made
amounting to Eight Hundred Forty Six Thousand Six Hundred Pesos
(P846,600.00) with interest thereon at twelve percent (12%) per annum to
be computed from the filing of the complaint on 24 February 1999 until
fully paid; and
On February 24, 1999, Pacifico filed a complaint before the Housing and
Land Use Regulatory Board (HLURB) against Jestra, docketed as
HLURB Case No. REM-122499-10378, claiming that despite his full
payment of the down payment, Jestra failed to deliver to him the property
within 90 days as provided in the Contract to Sell dated March 6, 1997,
and Jestra instead sold the property to another buyer in October of 1998.11
2. To pay complainant the amount of Fifty Thousand Pesos (P50,000.00)

as damages and attorneys feesplus the costs of litigation.14 (Underscoring
supplied)
Pacifico further claimed in his complaint that upon learning of the double
sale, he, through his lawyer, demanded that Jestra deliver the property to
him but it failed to do so without just and valid cause.
On appeal, the Board of Commissioners of the HLURB modified the

decision of the Arbiter by deleting the award of P50,000 damages and
ordering Jestra to pay P20,000 as attorneys fees and P10,000
administrative fine for failure to register the Contract to Sell in the Office
of the Register of Deeds.
Pacifico thus prayed that, among others things, judgment be rendered

declaring the second sale a nullity, ordering Jestra to deliver the property
to him and to pay him P11,000 a month from July 1997 until delivery.
64
By Resolution of January 27, 2003, the HLURB Board of Commissioners

denied15 Jestras motion for reconsideration.
SECTION 3. In all transactions or contracts involving the sale or

financing of real estate on installment payments, including residential
condominium apartments but excluding industrial lots, commercial
buildings and sales to tenants under Republic Act Numbered Thirty-eight
hundred forty-four, as amended by Republic Act Numbered Sixty-three
hundred eighty-nine, where the buyer has paid at least two years of
installments, the buyer is entitled to the following rights in case he
defaults in the payment of succeeding installments:
By Order16 of December 9, 2003, the Office of the President (OP), to

which the case was elevated, adopted "by reference the findings of facts
and conclusions of law" contained in the HLURB Board Resolution of
January 27, 2003. And by Order17 dated March 18, 2004, it denied Jestras
motion for reconsideration.
(a) To pay, without additional interest, the unpaid installments due within
the total grace period earned by him which is hereby fixed at the rate of
one month grace period for every one year of installment payments made:
Provided, That this right shall be exercised by the buyer only once in
every five years of the life of the contract and its extensions, if any.
On Jestras petition for review under Rule 43 of the Rules of Court, the
Court of Appeals (CA), by Decision18dated January 31, 2005, affirmed the
Orders of the OP.
Its motion for reconsideration having been denied by CA Resolution 19 of
March 16, 2005, Jestra (hereafter petitioner) comes before this Court on a
petition for review, faulting the appellate court for:
(b) If the contract is cancelled, the seller shall refund to the buyer the cash
surrender value of the payments on the property equivalent to fifty per
cent of the total payments made, and, after five years of installments, an
additional five per cent every year but not to exceed ninety per cent of the
total payments made: Provided, That the actual cancellation of the
contract shall take place after thirty days from receipt by the buyer of the
notice of cancellation or the demand for rescission of the contract by a
notarial act and upon full payment of the cash surrender value to the
buyer.
I. . . . adopting the OPs conclusion that penalty payments should be

included in computing the total number of installment payments made by
a buyer (in relation to the payment of a cash surrender value upon
cancellation of a contract to sell) in spite of its exclusion from the items to
be included in computing the two (2) years installment payments as
provided in RA 6552
II. . . . adopting the OPs conclusion that petitioner failed to deliver
possession of the subject property to respondent upon his full payment of
the downpayment [sic] and that petitioners act of canceling the contract
to sell was unconscionable despite being allowed under RA 6552.
Down payments, deposits or options on the contract shall be included in

the computation of the total number of installment payments made.
As the records indicate, the total payments made by Pacifico (hereafter
respondent) amounted to P846,600. The appellate court, in concluding
that respondent paid at least two years of installments, adopted the
formula used by the HLURB by dividing the amount of P846,600 by the
monthly amortization of P34,983 to thus result to a quotient of 24.2
months.
RA No. 6552 was enacted to protect buyers of real estate on installment

against onerous and oppressive conditions. While the seller has under the
Act the option to cancel the contract due to non-payment of installments,
he must afford the buyer a grace period to pay them and, if at least two
years installments have already been paid, to refund the cash surrender
value of the payments. Thus Section of the Act provides:
Petitioner contests the computation, however. It claims that the amount of

P76,600 represents penalty payment and is a separate item to answer for
65
its lost income as a seller due to the delay in the payment 20 of the 30%
down payment. It thus submits that the amount of P76,600 does not form
part of the purchase price and should thus be excluded in determining the
total number of installments made.
As respondent failed to pay at least two years of installments, he is not,

under above-quoted Section 3 of RA No. 6552, entitled to a refund of the
cash surrender value of his payments. What applies to the case instead is
Section 4 of the same law, viz:
Petitioner likewise claims that the proper divisor is not P34,983 but
P39,468 since the parties agreed to restructure the amortizations owing to
respondents inability to comply with the schedule of payments
previously agreed upon in the Contract to Sell, and that if respondents
total payments less the penalty is to be divided byP39,468, the total
installments paid would only cover 19.5 months, hence, it was not obliged
under RA No. 6552 to pay the cash surrender value of such total
payments.
SECTION 4. In case where less than two years of installments were paid,
the seller shall give the buyer a grace period of not less than sixty days
from the date the installment became due.
This Court finds that neither of the parties computations is in order.
In Fabrigas v. San Francisco del Monte, Inc.,21 this Court described the
cancellation of the contract under Section 4 as a two-step process. First,
the seller should extend the buyer a grace period of at least sixty (60) days
from the due date of the installment. Second, at the end of the grace
period, the seller shall furnish the buyer with a notice of cancellation or
demand for rescission through a notarial act, effective thirty (30) days
from the buyer's receipt thereof.
If the buyer fails to pay the installments due at the expiration of the grace
period, the seller may cancel the contract after thirty days from receipt by
the buyer of the notice of cancellation or the demand for rescission of the
contract by a notarial act. (Underscoring supplied)
The total purchase price of the property is P2,500,000. As provided in the

Reservation Application, the 30% down payment on the purchase price or
P750,000 was to be paid in six monthly installments of P121,666.66.
Under the Contract to Sell, the 70% balance of P1,750,000.00 on the
purchase price was to be paid in 10 years through monthly installments of
P34,983, which was later increased to P39,468 in accordance with the
agreement to restructure the same.
Respondent admits that under the restructured scheme, the first

installment on the 70% balance of the purchase price was due on January
5, 1998. While he issued checks to cover the same, the first two were
dishonored due to insufficiency of funds.
While, under the above-quoted Section 3 of RA No. 6552, the down

payment is included in computing the total number of installment
payments made, the proper divisor is neither P34,983 nor P39,468, but
P121,666.66, the monthly installment on the down payment.
While respondent was notified of the dishonor of the checks, he took no

action thereon, hence, the 60 days grace period lapsed. Respondent made
no further payments thereafter. Instead, he requested for suspension of
payment and for time to dispose of the property to recover his investment.
The P750,000 down payment was to be paid in six monthly installments.

If the down payment of P750,000 is to be deducted from the total
payment of P846,600, the remainder is only P96,600. Since respondent
was able to pay the down payment in full eleven (11) months after the last
monthly installment was due, and the sum of P76,600 representing
penalty for delay of payment is deducted from the remaining P96,600,
only a balance of P20,000 remains.
Respondent admits that petitioner was justified in canceling the contract

to sell via the notarial Notice of Cancellation which he received on May
13, 1998. The contract was deemed cancelled 22 30 days from May 13,
1998 or on June 12, 1998.
66
WHEREFORE, the petition is GRANTED. The assailed Decision and

Resolution dated January 31, 2005 and March 16, 2005 of the Court of
Appeals are hereby REVERSED and SET ASIDE. The complaint of
respondent, Daniel Ponce Pacifico, is DISMISSED.1avvphi1.net
SO ORDERED.
CONCHITA CARPIO MORALES
Associate Justice

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-57552 October 10, 1986
LUISA F. MCLAUGHLIN, petitioner,
vs.
THE COURT OF APPEALS AND RAMON FLORES, respondents.
R.C. Domingo Jr. & Associates for private respondent.
FERIA, Actg. C.J.
This is an appeal by certiorari from the decision of the Court of Appeals,
the dispositive part of which reads as follows:
IN VIEW OF THE FOREGOING PREMISES, the petition for certiorari
67
and mandamus is hereby GRANTED and the Orders of respondent court

dated November 21 and 27 both 1980 are hereby nullified and set aside
and respondent Judge is ordered to order private respondent to accept
petitioner's Pacific Banking Corporation certified manager's Check No.
MC-A-000311 dated November 17, 1980 in the amount of P76,059.71 in
full settlement of petitioner's obligation, or another check of equivalent
kind and value, the earlier check having become stale.
December 5, 1979 until the obligation is duly paid, for the use of the
property subject matter of the deed of conditional sale.
Paragraphs 6 and 7 of the Compromise Agreement further state:
That the parties are agreed that in the event the defendant (private
respondent) fails to comply with his obligations herein provided, the
plaintiff (petitioner) will be entitled to the issuance of a writ of execution
rescinding the Deed of Conditional Sale of Real Property. In such
eventuality, defendant (private respondent) hereby waives his right to
appeal to (from) the Order of Rescission and the Writ of Execution which
the Court shall render in accordance with the stipulations herein provided
for.
On February 28, 1977, petitioner Luisa F. McLaughlin and private

respondent Ramon Flores entered into a contract of conditional sale of
real property. Paragraph one of the deed of conditional sale fixed the total
purchase price of P140,000.00 payable as follows: a) P26,550.00 upon the
execution of the deed; and b) the balance of P113,450.00 to be paid not
later than May 31, 1977. The parties also agreed that the balance shall
bear interest at the rate of 1% per month to commence from December 1,
1976, until the full purchase price was paid.
That in the event of execution all payments made by defendant (private

respondent) will be forfeited in favor of the plaintiff (petitioner) as
liquidated damages.
On June 19, 1979, petitioner filed a complaint in the then Court of First
Instance of Rizal (Civil Case No. 33573) for the rescission of the deed of
conditional sale due to the failure of private respondent to pay the balance
due on May 31, 1977.
On October 15, 1980, petitioner wrote to private respondent demanding

that the latter pay the balance of P69,059.71 on or before October 31,
1980. This demand included not only the installment due on June 30,
1980 but also the installment due on December 31, 1980.
On December 27, 1979, the parties submitted a Compromise Agreement

on the basis of which the court rendered a decision on January 22, 1980.
In said compromise agreement, private respondent acknowledged his
indebtedness to petitioner under the deed of conditional sale in the
amount of P119,050.71, and the parties agreed that said amount would be
payable as follows: a) P50,000.00 upon signing of the agreement; and b)
the balance of P69,059.71 in two equal installments on June 30, 1980 and
December 31, 1980.
On October 30, 1980, private respondent sent a letter to petitioner

signifying his willingness and intention to pay the full balance of
P69,059.71, and at the same time demanding to see the certificate of title
of the property and the tax payment receipts.
Private respondent states on page 14 of his brief that on November 3,
1980, the first working day of said month, he tendered payment to
petitioner but this was refused acceptance by petitioner. However, this
does not appear in the decision of the Court of Appeals.
As agreed upon, private respondent paid P50,000.00 upon the signing of

the agreement and in addition he also paid an "escalation cost" of
P25,000.00.
On November 7, 1980, petitioner filed a Motion for Writ of Execution

alleging that private respondent failed to pay the installment due on June
1980 and that since June 1980 he had failed to pay the monthly rental of P
Under paragraph 3 of the Compromise Agreement, private respondent

agreed to pay one thousand (P l,000.00) pesos monthly rental beginning
68
l,000.00. Petitioner prayed that a) the deed of conditional sale of real

property be declared rescinded with forfeiture of all payments as
liquidated damages; and b) the court order the payment of Pl,000.00 back
rentals since June 1980 and the eviction of private respondent.
In aforesaid case, it was held that a delay in payment for a small quantity
of molasses, for some twenty days is not such a violation of an essential
condition of the contract as warrants rescission for non-performance.
In Universal Food Corp. vs. Court of Appeals, 33 SCRA 1, the Song Fo
ruling was reaffirmed.
On November 14, 1980, the trial court granted the motion for writ of
execution.
In the case at bar, McLaughlin wrote Flores on October 15, 1980

demanding that Flores pay the balance of P69,059.71 on or before
October 31, 1980. Thus it is undeniable that despite Flores' failure to
make the payment which was due on June 1980, McLaughlin waived
whatever right she had under the compromise agreement as incorporated
in the decision of respondent court, to demand rescission.
On November 17, 1980, private respondent filed a motion for

reconsideration tendering at the same time a Pacific Banking Corporation
certified manager's check in the amount of P76,059.71, payable to the
order of petitioner and covering the entire obligation including the
installment due on December 31, 1980. However, the trial court denied
the motion for reconsideration in an order dated November 21, 1980 and
issued the writ of execution on November 25, 1980.
xxx xxx xxx
In an order dated November 27, 1980, the trial court granted petitioner's
ex-parte motion for clarification of the order of execution rescinding the
deed of conditional sale of real property.
It is significant to note that on November 17, 1980, or just seventeen (17)

days after October 31, 1980, the deadline set by McLaughlin, Flores
tendered the certified manager's check. We hold that the Song Fo ruling is
applicable herein considering that in the latter case, there was a 20-day
delay in the payment of the obligation as compared to a 17-day delay in
the instant case.
On November 28, 1980, private respondent filed with the Court of

Appeals a petition for certiorari and prohibition assailing the orders dated
November 21 and 27, 1980.
Furthermore, as held in the recent case of New Pacific Timber & Supply
Co., Inc. vs. Hon. Alberto Seneris, L-41764, December 19, 1980, it is the
accepted practice in business to consider a cashier's or manager's check as
cash and that upon certification of a check, it is equivalent to its
acceptance (Section 187, Negotiable Instrument Law) and the funds are
thereby transferred to the credit of the creditor (Araneta v. Tuason, 49
O.G. p. 59).
As initially stated above, the appellate court nullified and set aside the
disputed orders of the lower court. In its decision, the appellate court
ruled in part as follows:
The issue here is whether respondent court committed a grave abuse of
discretion in issuing the orders dated November 21, 1980 and November
27,1980.
In the New Pacific Timber & Supply Co., Inc. case, the Supreme Court
further held that the object of certifying a check is to enable the holder
thereof to use it as money, citing the ruling in PNB vs. National City Bank
of New York, 63 Phil. 711.
The general rule is that rescission will not be permitted for a slight or
casual breach of the contract, but only for such breaches as are substantial
and fundamental as to defeat the object of the parties in making the
agreement. (Song Fo & Co. vs. Hawaiian-Philippine Co., 47 Phil. 821)
69
In the New Pacific Timber case, it was also ruled that the exception in
Section 63 of the Central Bank Act that the clearing of a check and the
subsequent crediting of the amount thereof to the account of the creditor
is equivalent to delivery of cash, is applicable to a payment through a
certified check.
"recognizes and reaffirms the vendor's right to cancel the contract to sell
upon breach and non-payment of the stipulated installments but requires a
grace period after at least two years of regular installment payments ... . "
(86 SCRA 305, 329)
On the other hand, private respondent also invokes said law as an
expression of public policy to protect buyers of real estate on installments
against onerous and oppressive conditions (Section 2 of Republic Act No.
6552).
Considering that Flores had already paid P101,550.00 under the contract
to sell, excluding the monthly rentals paid, certainly it would be the height
of inequity to have this amount forfeited in favor McLaughlin. Under the
questioned orders, McLaughlin would get back the property and still keep
P101,550.00.
Section 4 of Republic Act No. 6552 which took effect on September 14,
1972 provides as follows:
Petitioner contends that the appellate court erred in not observing the
provisions of Article No. 1306 of the Civil Code of the Philippines and in
having arbitrarily abused its judicial discretion by disregarding the penal
clause stipulated by the parties in the compromise agreement which was
the basis of the decision of the lower court.
In case where less than two years of installments were paid, the seller
shall give the buyer a grace period of not less than sixty days from the
date the installment became due. If the buyer fails to pay the installments
due at the expiration of the grace period, the seller may cancel the
contract after thirty days from receipt by the buyer of the notice of the
cancellation or the demand for rescission of the contract by a notarial act.
We agree with the appellate court that it would be inequitable to cancel

the contract of conditional sale and to have the amount of P101,550.00 (P
l48,126.97 according to private respondent in his brief) already paid by
him under said contract, excluding the monthly rentals paid, forfeited in
favor of petitioner, particularly after private respondent had tendered the
amount of P76,059.71 in full payment of his obligation.
Section 7 of said law provides as follows:

Any stipulation in any contract hereafter entered into contrary to the
provisions of Sections 3, 4, 5 and 6, shall be null and void.
In the analogous case of De Guzman vs. Court of Appeals, this Court

sustained the order of the respondent judge denying the petitioners'
motion for execution on the ground that the private respondent had
substantially complied with the terms and conditions of the compromise
agreement, and directing the petitioners to immediately execute the
necessary documents transferring to the private respondent the title to the
properties (July 23, 1985, 137 SCRA 730). In the case at bar, there was
also substantial compliance with the compromise agreement.
The spirit of these provisions further supports the decision of the appellate
court. The record does not contain the complete text of the compromise
agreement dated December 20, 1979 and the decision approving it.
However, assuming that under the terms of said agreement the December
31, 1980 installment was due and payable when on October 15, 1980,
petitioner demanded payment of the balance of P69,059.71 on or before
October 31, 1980, petitioner could cancel the contract after thirty days
from receipt by private respondent of the notice of cancellation.
Considering petitioner's motion for execution filed on November 7, 1980
as a notice of cancellation, petitioner could cancel the contract of
conditional sale after thirty days from receipt by private respondent of
Petitioner invokes the ruling of the Court in its Resolution of November

16, 1978 in the case of Luzon Brokerage Co., Inc. vs. Maritime Building
Co., Inc., to the effect that Republic Act 6552 (the Maceda Law)
70
said motion. Private respondent's tender of payment of the amount of

P76,059.71 together with his motion for reconsideration on November 17,
1980 was, therefore, well within the thirty-day period grants by law..
On September 1, 1986, the Court issued the following resolution

Considering the allegation in petitioner's reply brief that the Manager's
Check tendered by private respondent on November 17, 1980 was
subsequently cancelled and converted into cash, the Court RESOLVED to
REQUIRE the parties within ten (10) days from notice to inform the
Court whether or not the amount thereof was deposited in court and
whether or not private respondent continued paying the monthly rental of
P1,000.00 stipulated in the Compromise Agreement.
The tender made by private respondent of a certified bank manager's

check payable to petitioner was a valid tender of payment. The certified
check covered not only the balance of the purchase price in the amount of
P69,059.71, but also the arrears in the rental payments from June to
December, 1980 in the amount of P7,000.00, or a total of P76,059.71. On
this point the appellate court correctly applied the ruling in the case of
New Pacific Timber & Supply Co., Inc. vs. Seneris (101 SCRA 686, 692694) to the case at bar.
In compliance with this resolution, both parties submitted their respective

manifestations which confirm that the Manager's Check in question was
subsequently withdrawn and replaced by cash, but the cash was not
deposited with the court.
Moreover, Section 49, Rule 130 of the Revised Rules of Court provides
that:
According to Article 1256 of the Civil Code of the Philippines, if the

creditor to whom tender of payment has been made refuses without just
cause to accept it, the debtor shall be released from responsibility by the
consignation of the thing or sum due, and that consignation alone shall
produce the same effect in the five cases enumerated therein; Article 1257
provides that in order that the consignation of the thing (or sum) due may
release the obligor, it must first be announced to the persons interested in
the fulfillment of the obligation; and Article 1258 provides that
consignation shall be made by depositing the thing (or sum) due at the
disposal of the judicial authority and that the interested parties shall also
be notified thereof.
An offer in writing to pay a particular sum of money or to deliver a

written instrument or specific property is, if rejected, equivalent to the
actual production and tender of the money, instrument, or property.
However, although private respondent had made a valid tender of
payment which preserved his rights as a vendee in the contract of
conditional sale of real property, he did not follow it with a consignation
or deposit of the sum due with the court. As this Court has held:
The rule regarding payment of redemption prices is invoked. True that
consignation of the redemption price is not necessary in order that the
vendor may compel the vendee to allow the repurchase within the time
provided by law or by contract. (Rosales vs. Reyes and Ordoveza, 25 Phil.
495.) We have held that in such cases a mere tender of payment is enough,
if made on time, as a basis for action against the vendee to compel him to
resell. But that tender does not in itself relieve the vendor from his
obligation to pay the price when redemption is allowed by the court. In
other words, tender of payment is sufficient to compel redemption but is
not in itself a payment that relieves the vendor from his liability to pay the
redemption price. " (Paez vs. Magno, 83 Phil. 403, 405)
As the Court held in the case of Soco vs. Militante, promulgated on June
28, 1983, after examining the above-cited provisions of the law and the
jurisprudence on the matter:
Tender of payment must be distinguished from consignation. Tender is the
antecedent of consignation, that is, an act preparatory to the consignation,
which is the principal, and from which are derived the immediate
consequences which the debtor desires or seeks to obtain. Tender of
payment may be extrajudicial, while consignation is necessarily judicial,
and the priority of the first is the attempt to make a private settlement
71
before proceeding to the solemnities of consignation. (8 Manresa 325).

(123 SCRA 160,173)
WHEREFORE, the decision of the Court of Appeals is AFFIRMED with

the following modifications:
In the above-cited case of De Guzman vs. Court of Appeals (137 SCRA

730), the vendee was released from responsibility because he had
deposited with the court the balance of the purchase price. Similarly, in
the above-cited case of New Pacific Timber & Supply Co., Inc. vs. Seneris
(101 SCRA 686), the judgment debtor was released from responsibility by
depositing with the court the amount of the judgment obligation.
(a) Petitioner is ordered to accept from private respondent the Metrobank

Cashier's Check No. CC 004233 in her favor in the amount of P76,059.71
or another certified check of a reputable bank drawn in her favor in the
same amount;
(b) Private respondent is ordered to pay petitioner, within sixty (60) days
from the finality of this decision, the rentals in arrears of P l,000.00 a
month from January 1, 1981 until full payment thereof; and
In the case at bar, although as above stated private respondent had

preserved his rights as a vendee in the contract of conditional sale of real
property by a timely valid tender of payment of the balance of his
obligation which was not accepted by petitioner, he remains liable for the
payment of his obligation because of his failure to deposit the amount due
with the court.
(c) Petitioner is ordered to execute a deed of absolute sale in favor of

private respondent over the real property in question upon full payment of
the amounts as provided in paragraphs (a) and (b) above. No costs.
SO ORDERED.
In his manifestation dated September 19, 1986, private respondent states

that on September 16, 1980, he purchased a Metrobank Cashier's Check
No. CC 004233 in favor of petitioner Luisa F. McLaughlin in the amount
of P76,059.71, a photocopy of which was enclosed and marked as Annex
"A- 1;" but that he did not continue paying the monthly rental of
Pl,000.00 because, pursuant to the decision of the appellate court,
petitioner herein was ordered to accept the aforesaid amount in full
payment of herein respondent's obligation under the contract subject
matter thereof.
Fernan, Alampay, Gutierrez, Jr. and Paras, JJ., concur.
However, inasmuch as petitioner did not accept the aforesaid amount, it

was incumbent on private respondent to deposit the same with the court in
order to be released from responsibility. Since private respondent did not
deposit said amount with the court, his obligation was not paid and he is
liable in addition for the payment of the monthly rental of Pl,000.00 from
January 1, 1981 until said obligation is duly paid, in accordance with
paragraph 3 of the Compromise Agreement. Upon full payment of the
amount of P76,059.71 and the rentals in arrears, private respondent shall
be entitled to a deed of absolute sale in his favor of the real property in
question.
72

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Republic of the Philippines

April 11, 1906

PEDRO ROMAN, plaintiff-appellant,

Counsel for plaintiff on November 5 amended his complaint and alleged

Defendant also denied the other allegations of the complaint inconsistent

purchase it and who was unable to do so on account of failure on the part

A sale shall be considered perfected and binding as between vendor and

Ownership is not considered transmitted until the property is actually

When the sale is made by means of a public instrument the execution

The judgment of the court below is affirmed and the complaint is

Arellano, C.J., Mapa, Johnson, Carson and Willard, JJ., concur.

set of American Jurisprudence, General Index, consisting of 4 volumes,

Republic of the Philippines

April 30, 1965

LAWYERS COOPERATIVE PUBLISHING COMPANY, plaintiffappellee,

Defendant, in his answer, pleaded force majeure as a defense. He alleged

Paredes, Poblador, Cruz and Nazareno for plaintiff-appellee.

BAUTISTA ANGELO, J.:

before us by virtue of a certification issued by that Court that the case

Appellant bought from appellee one set of American Jurisprudence,

WHEREFORE, the decision appealed from is modified by eliminating

FORCE MAJEURE DEFENSE FAILS

Tabora made a partial payment of P300.00, leaving a balance of

case of fortuitous event.

Perfecto A. Tabora(buyer) bought from the Lawyers Cooperative

NOT PRESENT IN THIS CASE

The obligation is pecuniaryin nature, and the obligor bound himself to

LAWYERS COOPERATIVE PUBLISHING COMPANY V. PERFECTO

WHEREFORE, the decision appealed from is modified by eliminating

It was provided in the contract that "title to and ownership of the

Republic of the Philippines

October 27, 1939

LEVY HERMANOS, INC., plaintiff-appellant,

Defendant failed to pay the note it its maturity. Wherefore, plaintiff

Defendant admitted the allegations of the complaint, and with this

Judgment is reversed, and the defendant-appellee is hereby sentenced to

Avancea, C.J., Villa-Real, Imperial, Diaz and Concepcion, JJ., concur.

Francisco C. Bonoan for Plaintiff-Appellee.

remedy, he cannot avail himself of the other two.

Agapito M. Joaquin, for Defendants-Appellants.

1. CIVIL LAW; SALES; TREATMENT OF THE INSTALLMENT

2. REMEDIES OF THE VENDOR IN A SALE OF PERSONAL

January 6, 1977, the remaining unpaid obligation of the defendants

As above-stated, the trial court ruled in favor of Plaintiff-Appellee.

already repossessed. It cannot have its cake and eat it too.

The vendor in a sale of personal property payable in installments may

Narvasa, C.J., Padilla, Regalado and Melo, JJ., concur.

Republic of the Philippines

May 28, 1957

AMADOR TAJANLANGIT, ET AL., plaintiff-appellants,

Almacen and Almacen for appellants.

For answer, the company denied the alleged "settlement and

WHEREFORE, judgement is hereby rendered dismissing the complaint

At any rate it is the actual sale of the mortgaged chattel in accordance

Discussion. Appellants' brief elaborately explains in the nine errors

"Our law" provides,

By praying that the defendant be ordered to pay the sum of P4,690

As the plaintiff has chosen to exact the fulfillment of the defendant's

obligation, the former may enforce execution of the judgement rendered

Judgment. The decision dismissing the complaint, is affirmed, with costs

Concerning their second theory, settlement or cancellation

Republic of the Philippines

SPOUSES RESTITUTO NONATO and ESTER NONATO,

10% of the amount due as attorney's fees, litigation expenses in the