G.R. No. L-24772. May 27, 1968 (Case Brief / Digest)

### Title:
**Ruperto G. Cruz et al. vs. Filipinas Investment & Finance Corporation: A Case on the Limitations of Remedies under Article 1484 of the Civil Code**

### Facts:
This case began when Ruperto G. Cruz purchased an Isuzu Diesel Bus from the Far East Motor Corporation, funded by installments secured through a chattel mortgage over the bus and a real estate mortgage on a parcel of land owned by Felicidad Vda. de Reyes as additional security. The purchase price was set at P44,616.24, with installments starting October 22, 1963. Due to Cruz’s failure to fulfill payment obligations, both mortgages were eventually assigned to Filipinas Investment & Finance Corporation (the defendant-appellant).

Cruz defaulted on the payments, leading to the extrajudicial foreclosure of the chattel mortgage and an intended foreclosure of the real estate mortgage by the defendant. In response, Cruz and Reyes filed an action in the Court of First Instance of Rizal to cancel the real estate mortgage, asserting that the foreclosure of the chattel mortgage barred further actions against the additional security (Reyes’ land). The lower court sided with Cruz and Reyes, prompting the defendant to appeal to the Supreme Court, raising the same questions about the permissible scope of remedies under Article 1484 of the Civil Code.

### Procedural Posture:
The legal journey began with the filing of the case in the Court of First Instance of Rizal by Cruz and Reyes against the Filipinas Investment & Finance Corporation, seeking to cancel the real estate mortgage. After the lower court ruled in favor of Cruz and Reyes, the defendant appealed the decision, leading to the involvement of the Supreme Court to resolve the appeal and the legal questions it presented.

### Issues:
1. Whether the extrajudicial foreclosure of a chattel mortgage precludes a vendor from pursuing additional securities provided by a third party for the unpaid balance of the debtor’s obligation.
2. The appropriateness of awarding attorney’s fees to the plaintiffs.
3. Whether Reyes should reimburse the Filipinas Investment for payments made to clear the first mortgage with the Development Bank of the Philippines.

### Court’s Decision:
The Supreme Court held that the vendor who chose to foreclose the chattel mortgage cannot pursue other securities for the unpaid balance, affirming the protection intended by Article 1484 of the Civil Code. It established that using a third person’s property as additional security does not escape this limitation as recovering from the guarantor essentially burdens the principal debtor indirectly. Thus, the foreclosure of the chattel mortgage satisfies the vendor’s remedy, barring further action against the additional real estate mortgage.

However, the Court found merit in the appellant’s argument regarding the reimbursement of payments made to the Development Bank of the Philippines for releasing the first mortgage on Reyes’ land, amending the lower court’s decision to require Reyes to reimburse the appellant.

### Doctrine:
The Supreme Court reinforced the doctrine under Article 1484 of the Civil Code that a vendor’s decision to foreclose a chattel mortgage following a debtor’s default on installment payments precludes the pursuit of any unpaid balance through alternative remedies. Additionally, securities provided by third parties as supplemental guarantee are encompassed within the purview of “action” against the purchaser, hence covered by the article’s limitation.

### Class Notes:
– **Article 1484**: Offers vendors three mutually exclusive remedies in response to a vendee’s payment default on a personal property installment sale.
– **Chattel Mortgage Foreclosure Bars Further Actions**: Foreclosing a chattel mortgage precludes the vendor from taking further legal or extrajudicial actions to recover any unpaid balance from the purchaser.
– **Implications for Guarantors**: The use of additional security provided by third parties does not circumvent the protections granted to purchasers under Article 1484, as any resultant obligation would ultimately impact the purchaser.
– **Reimbursement for Benefit**: A party benefiting from payment made towards clearing an existing mortgage has the obligation to reimburse the payer, correlating to the equitable principle of unjust enrichment.

### Historical Background:
The pertinent legal provisions and the case’s resolution highlight the Philippine legal system’s attempt to mitigate the abuses associated with chattel mortgage foreclosures and balance the interests of vendors and purchasers in installment sales. The decision emphasizes the protective intent of the law towards debtors, reflecting broader policy considerations against harsh recovery practices.


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