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39 Ridad V Filipinas Investment and Finance Corp., GR No. L - 39806, 27 January 1983
39 Ridad V Filipinas Investment and Finance Corp., GR No. L - 39806, 27 January 1983
Facts:
Plaintiffs purchased from the Supreme Sales and Development Corporation, two brand new Ford Consul Sedans
complete with accessories for 26K, payable in 24 monthly installments. For security of payment, plaintiffs executed a
promissory note and chattel mortgage on the two vehicles purchased, another car (Chevrolet) and plaintiff’s franchise or
certificate of public convenience for the operation of a taxi fleet. As a result, vendor assigned its rights, title and interest to
the promissory note and chattel mortgage to defendant Filipinas Corp.
Plaintiffs however failed to play their monthly installments which led to the foreclosure of the chattel mortgage extra-
judicially, at the public auction, the two ford consuls were sold to defendant being the highest bidder without notifying the
plaintiffs.
Another sale was held for the remaining properties since the sale of the two ford consuls were not enough to satisfy
plaintiff’s obligation. The plaintiff’s franchise to operate five units of taxicab units were sole to defendant corporation which
was conveyed to Jose Sebastian.
Plaintiffs Defendant
Filed an action for annulment of contract
RTC: Declared the chattel mortgage on the taxicab franchise and the Chevrolet car null and void. Hence, there was no
transfer being there was no legal effect.
Issue: Is the chattel mortgage in so far as the franchise and the subsequent sale to Jose Sebastian valid?
The case is governed by the provisions of Article 1484 of the Civil Code where 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:
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.
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. This Court sustained the pronouncement made by the
lower court on the nullity, 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.
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 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.