CASE DIGESTS FOR RECTO AND MACEDA LAW
Case # 1: Luneta Motor Company vs. Dimagiba
GR No. L-17061
Facts: Angel Dimagiba bought from the Luneta
Motor Company a truck for a price which was
compromised at P16,126.12 payable in 18
monthly installments to guarantee which he
executed a chattel mortgage on the same truck
on May 7, 1956, and as a further security
thereto on Natividad Noriel also executed on
the same date a chattel mortgage on another
truck which belonged to the latter. It also
appears that when Dimagiba failed to pay
several installments as he agreed in the
promissory note he executed to cover the price
of the truck he purchased, the company
instituted an action not only to recover the
balance of his obligation but to secure the
seizure of the two trucks mortgaged with a
prayer that the proceeds that may be realized
after the sale of said trucks be applied to the
payment of the judgment that may be rendered
in the case. Because of the vague nature of the
allegations contained in the complaint, as well
as in its prayer, the court a quo, as well as the
Court of Appeals, considered the action taken
as one of both replevin and foreclosure of
mortgage.
Issue: WON the scheme of the company is a
flagrant violation of Art. 1484 of the Civil Code.
Held: YES … As ruled by CFI which the CA
affirmed: While it is true that Exhibit “4” on its
face appears to be a compromise, there is no
question that by virtue of said compromise, the
truck of Angel Dimagiba was once more sold to
him on the installment plan by Luneta Motor
Co. and Angel was made to assume the balance
of the account including parts and tires all on
credit; the Court does not see that this being
the case, the case can be taken out of the
operation of Article 1484 of the New Civil
Code; the law is quite emphatic when it
declares that any agreement to the contrary
would be null and void; and the evidence
having established the fact that the
consideration of the two promissory notes,
Exhibits “G” to “I” were casings and inner
tubes also as the Court understands
incorporated into the truck and covered as
plaintiff itself alleges in paragraph 3 of its
complaint, in the chattel mortgage, Exhibit
“C”, the only effect should be as the Court
understands Art. 1484 that when plaintiff chose
to foreclose the chattel mortgage, it submitted
itself to the consequences of the law with the
result that having seized the truck of Angel
Dimagiba, it could no longer secure any
judgment for the balance of the account of
Angel and for the reason that Natividad was
only a mortgagor in the chattel mortgage to
guarantee the fulfillment of the first
promissory note, and her liability being only
secondary, neither should she be required
anymore to pay the balance due unto plaintiff
from Angel Dimagiba, so that the result would
be that with respect to the money liability
prayed for in the complaint, the same will have
to be a dismissal….
Said article prescribes three remedies which a
vendor may pursue in a contract of sale of
personal property the price of which is payable
in installments, to wit: (1) exact fulfillment of
the obligation; (2) cancel the sale; and (3)
foreclose the mortgage on the thing sold. If he
chooses the third remedy, the article provides
that he shall have no further action against the
purchaser to recover any unpaid balance of the
purchase price. It even adds that any
agreement to the contrary shall be void.
But in the instant case the vendor was not
content in choosing any of the three remedies,
but chose to avail itself of the first and third
remedies. More than that, plaintiff even went
to the extent of suing for replevin, in other
words, it filed an action containing three
remedies: to collect the purchase price, to
seize the property purchased, and to foreclose
the mortgage executed thereon. Plaintiff even
went to the extent of selling first the property
of Noriel, who is not the vendee, out of court,
and after doing so, it asked the court for
judgment in the balance. Such a scheme is not
only irregular but is a flagrant circumvention of
the prohibition of the law.
Case # 2: Southern Company vs. Moscoso
G.R. No. 14475
Facts:
Southern Motors sold to Moscoso one Chevrolet
truck on installment basis. Upon making a
downpayment, Moscoso executed a promissory
note representing the unpaid balance of the
purchase price. To secure payment, a chattel
mortgage was constituted on the truck in favor
of Southern Motors. Moscoso failed to pay 3
installments. Subsequently, Southern Motors
filed a complaint against him to recover the
unpaid balance of the promissory note. A writ
of attachment was issued. The Chevrolet truck
and a house and lot belonging to Moscoso were
attached by the sheriff. After attachment but
before the trial of the case, the Prov Sheriff
sold the truck at a public auction, Southern
Motors being the only bidder, purchased the
same. Trial court then rendered a decision
against Moscoso.
Arguments:
S. Motors: claims that in filing the complaint,
demanding payment of the unpaid balance of
the purchase price, it has availed of the first
remedy provided in said article i.e. to exact
fulfillment of the obligation (specific
performance)
Moscoso: contends that appellee had availed
itself of the third remedy viz, the foreclosure
of the chattel mortgage on the truck. He
submits that the matter should be looked at,
not by the allegations in the complaint, but by
the very effect and result of the procedural
steps taken and that appellee tried to
camouflage its acts by filing a complaint
purportedly to exact the fulfillment of an
obligation petition, in an attempt to
circumvent the provisions of Article 1484 of the
new Civil Code. He concludes that under his
theory, a deficiency judgment would be
without legal basis.
Issue:
What did S. Motors availed of under Art. 1484
of the Civil Code, the first remedy (Exact
fulfillment of the obligation) or the third
(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.)?
Held:
Manifestly, the appellee had chosen the first
remedy. The complaint is an ordinary civil
action for recovery of the remaining unpaid
balance due on the promissory note. The
plaintiff had not adopted the procedure or
methods outlined by Sec. 14 of the Chattel
Mortgage Law but those prescribed for ordinary
civil actions, under the Rules of Court. Had
appellee elected the foreclosure, it would not
have instituted this case in court; it would not
have caused the chattel to be attached under
Rule 59, and had it sold at public auction, in
the manner prescribed by Rule 39. That the
herein appellee did not intend to foreclose the
mortgage truck, is further evinced by the fact
that it had also attached the house and lot of
the appellant at San Jose, Antique.
The court perceived nothing unlawful or
irregular in appellee’s act of attaching the
mortgaged truck itself. Since herein appellee
has chosen to exact the fulfillment of the
appellant’s obligation, it may enforce
execution of the judgment that may be
favorably rendered hereon, on all personal and
real properties of the latter not exempt from
execution sufficient to satisfy such judgment. It
should be noted that a house and lot at San
Jose, Antique were also attached. No one can
successfully contest that the attachment was
merely an incident to an ordinary civil action.
Case # 3: Macondray vs. Eustaquio
G.R. No. 43683
FACTS: Eustaquio bought a De Soto car from
Macondray for which he executed a PN,
payable in installments, with a stipulation of
attorney’s fees, expenses for collection, and
other costs. It was secured by a chattel
mortgage over the said car. As usual Eustaquio
failed to pay, and Macondray foreclosed on the
mortgage. However, there remained a balance
of some P340 for which Macondray sues
Eustaquio. Macondray also contends that at
least the stipulated interests and attorney’s
fees must be claimable.
ISSUE: W/N Macondray may still claim the
interests and attorney’s fees stipulated
HELD: NO. If the seller avails of his right to
foreclose on the mortgage, he can no longer
bring an action against the buyer for the unpaid
balance—this includes all the obligations such
as attorney’s fees, stipulated interests,
expenses of collection and other costs.
Case # 4: Jestra Development and
Management Corporation vs. Daniel Ponce
Pacifico
G.R. No. 167452
Cancellation of the contract, under the law,
requires that the seller should extend the
buyer a grace period of at least 60 days from
the due date of the installment, and at the
end of the grace period, the seller shall furnish
the buyer with a notice of cancellation or
demand for rescission.
FACTS: Daniel Ponce Pacifico (Pacifico) signed
a Reservation Application with Fil-Estate
Marketing Association for the purchase of a
house and lot located at Paranaque, Metro
Manila and paid the reservation fee of
20,000.00. Under the Reservation Application,
upon fulfillment of the 30% down payment by
Pacifico, he will sign a contract to sell with the
owner and developer of the property which is
the JESTRA Development and Management
Corporation (Jestra).
Pacifico run out of funds to pay for the
property, and he requested to Jestra to
suspend payment. Jestra denied his request.
Pacifico filed a complaint before the Housing
and Land Use Regulatory Board (HLURB) against
Jestra 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 1998.
ISSUE:
Whether or not the act of Jestra in canceling
the contract to sell agreement with Pacifico is
valid
HELD:
R.A. 6552 was enacted to protect buyers of real
estate on installment against onerous and
oppressive conditions. In Fabrigas v. San
Francisco del Monte,Inc., the court described
the cancellation of the contract under Section
4 of R.A. 6552 as a two-step process. First, the
seller should extend the buyer a grace period
of at least 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 30 days from
the buyer‘s receipt thereof.
Pacifico admits that the first installment on the
70% balance of the purchase price was due on
January 5, 1998. He issued checks for it but
was dishonored due to insufficiency of funds.
Pacifico was notified of the dishonor of the
checks but he took no action, hence, 60 days
grace period lapsed. Pacifico made no further
payments thereafter. Instead, he requested for
suspension of payment.
Also, Pacifico admits that Jestra was justified
in canceling the contract to sell via the notarial
Notice of Cancellation which he received on
May 13, 1998 which took effect on June 12,
1998. Thus, the cancellation of the contract to
sell of Jestra is valid.
Case # 5: Olympia Housing vs. Panasiatic
Travel Corp.
G.R. No. 140468
(read the full case)
Case # 6: Lagandaon, et.al. vs. Court of
Appeals
G.R. No. 102526
(read the full case)