G.R. No. L-24772 Case Digest

G.R. No. L-24772 May 27, 1968

Ruperto G. Cruz, et al., plaintiffs-appellees

vs Filipinas Investment and Finance Corporation, defendant-appellant

Ponente: Reyes

Facts:

This is an appeal by Filipinas from the decision of the CFI of Rizal. In the action of Cruz for the cancellation of the real estate mortgage constituted on the land of Cruz in favor of Filipinas, the parties submitted the case for decision on the following facts:

Cruz purchased on instalments a diesel bus with a promissory note to the Far East Motor Corporation. To secure the promissory note, Cruz executed in favor of the Motor Corporation a chattel mortgage. Since there was no down payment made, Motor Corporation required Cruz to give additional security by which was given in the form of second mortgage on a parcel of land and building owned by Felicidad Reyes.Later, Cruz defaulted on the payment of the promissory note in spite of the demands. Because of default, defendant foreclose the chattel mortgage. The proceeds of the sale of the bus were not sufficient to cover the expenses of sale, principal obligation, interest and attorney's fees. Leading to the foreclosure of the land owned by Mrs. Reyes. Mrs. Reyes then on March 20, 1964 wrote a letter to Filipinas asking for the cancellation of the real estate mortgage on her land, but defendant did not comply with such.

Issues: (1) Whether Filipinas may foreclose the real estate mortgage.

Held:

should the vendee or purchaser of a personal property default in the payment of two or more of the agreed instalments, the vendor or seller has the option to avail of any one of these three remedies — either to exact fulfilment 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. 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.

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.

WHEREFORE, the decision appealed from is modified, by ordering plaintiff-appellee Felicidad Vda. de Reyes to reimburse to defendant-appellant 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.