RECTO LAW article 1484

Applicable to:

I. Sale of Personal Property on Installments- purchase price is payable in installments

Note: if the purchase price is payable on a 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 a sale on installments.
II. Contracts purporting to be leased with option to buy- contracts of lease of personal
property with option to buy, when the lessor has deprived the lessee of the possession or
enjoyment of the thing. There must be a stipulation granting the lessee the option to
purchase the property for small consideration at the end of the term, provided that the
rents are duly paid. If the rent has been paid throughout the term, title shall be vested to
the lessee. The rents paid shall be regarded as payment of the price in instalment.

Alternative remedies of the vendor:

1. Exact fulfilment of the obligation, when vendee fails to pay

2. Cancel the sale, when vendee fails to pay/ cover two or more instalments
3. Foreclose the chattel mortgage on the thing sold, if one has been constituted, when vendee fails
to pay/ cover two or more instalments
Note: The remedy is alternative, not cumulative. Choice of remedy becomes conclusive only upon
exercise of remedy.

Application:

1. Sales of personal

Rules on the vendor’s remedies:

1. If vendor elected fulfilment or specific performance

 Mere act of filing an action for collection operates as a waiver of the mortgagee-creditor’s is
deemed to have elected a remedy, as a result, waiver of the others necessarily arise.
 Filing of BP Bldg. 22 does not bar foreclosure because it is not a collection suit (Sps. Torres v.
Medina) the intention of the law is to make the mere act of issuing worthless checks malum
prohibitum and that the damage or prejudice to the offended party is not a requisite for
conviction.

However, in the case of Chieng v. Sps Santos, the filing of BP 22 case is equivalent to the
filing of a collection suit for the recovery of the mortgage-loan which, pursuant to the rule on
the alternative remedy of collection and foreclosure. The civil action for the recovery of the
amount dishonoured checks is impliedly instituted in criminal case for violation of BP 22 (Rule
111, RoC).Hence, the implied institution of the civil action in the criminal case is, in effect, a
collection suit or suit for the recovery of the mortgage-debt.
  An action for recovery of possession with replevin as provisional remedy preparatory to
foreclosure is not an action for collection much less for foreclosure. But if the action for replevin
culminated in the foreclosure of the chattel mortgage and sale of personal property at public
auction, rule on alternative remedy (article 1484) applies.

2. If vendor elected cancellation or rescission of the contract

 Vendor may not recover the balance of the price
 Stipulation on the forfeiture of installments paid or rentals shall be valid provided that it is not
unconscionable under the circumstances.
3. If vendor elected foreclosure of chattel mortgage
 Prohibited from recovering “unpaid balance” , Bachrach Motor Co. v Millan
 Vendor cannot foreclose other security constituted by third party mortgagors because if the
guarantor should be compelled to pay balance of the purchase price, the guarantor will in turn
be entitled to recover what he has paid from the debtor-vendee. The vendor-mortgagee is
therefore barred from recovering not only the balance of the price, but also the interest on
principal, attorney’s fees, expenses of collection and the costs of the suit. (Exception: Mortgagor
plainly refuses to deliver the chattel subject upon failure to pay two or more instalments, or if
he conceals the chattel, placing it beyond the reach of the mortgagee. Thus, forcing the
mortgagee to resort to action for replevin, mortgagee shall be allowed to recover reasonable
expenses)
 a mere demand to surrender the object which is not heeded by the mortgagor will not amount
to foreclosure, the repossession effects the foreclosure-juris

MACEDA LAW RA 6552

Applicability: Contracts of sale of real estate on instalment payments, including residential

condominium, apartments but excluding industrial lots, commercial buildings and sales to tenants

Rights of the parties

- dependent on the length of instalment payments that the buyer has made
1. Buyer has paid LESS THAN TWO YEARS OF INSTALLMENTS
a. Buyer is entitled to a grace period of 60 days from the date the installments became due
b. If buyer fails to pay the instalments at the end of the grace period, the seller may cancel the
contract after 30 days from receipt by the buyer of the (requisite) notice of the cancellation
or demand rescission of the contract by a notarial act.

In Olympia Housing, Inc. v Panasia Travel Corp. - vendor may go to court to demand judicial
rescission in lieu of a notarial act.

2. Buyer has paid AT LEAST TWO YEARS OF INSTALLAMENTS

a. Buyer is entitled to a grace period of one month for every year of instalment payments. But
this right may be exercised once in every five years of the life of the contract and its
extensions, if any.
b. After the lapse of the grace period, the seller may cancel the contract, provided that (TWIN
REQUIREMENTS):
B1. Seller pays the buyer the cash surrender value of the payments, equivalent to 50% of the
total payments and
-after five years of instalments, an additional 5% of every year but not exceeding 90% of the
total payments made
B2. Seller furnishes the buyer a notice of cancellation or demand for rescission of the
contract by notarial act (takes place after 30 days from receipt by the buyer of the notice).

Note: Failure to comply with the Twin Requirements for valid and effective cancellation shall
result into the contract remaining to be valid and effective.