G.R. No. L-41555. July 27, 1977
INDUSTRIAL FINANCE CORPORATION, PETITIONER, VS. CASTOR TOBIAS, RESPONDENT.
MARTIN, J.:
This is a petition for review of the decision of the Court of
Appeals* in CA-G.R. No. 53916, entitled “Industrial
Finance Corporation vs. Castor Tobias”, affirming that of the Court of
First Instance of Manila, with a slight modification.
On June 16, 1968,
respondent Castor Tobias bought on installment one (1) Dodge truck from Leelin Motors, Inc.
To answer for his obligation he executed a promissory note in favor of
the latter, for the sum of P29,070.28 payable in thirty-six (36) equal
installments with interest at the rate of 12% per annum payable in the amounts
and dates indicated in said promissory note.[1]
To secure payment of the promissory
note, respondent Tobias executed in favor of Leelin
Motors, Inc. a chattel mortgage on the Dodge truck.
On June 19, 1969, Leelin
Motors, Inc. indorsed the promissory note and assigned the chattel mortgage to
petitioner Industrial Finance Corporation.
As a consequence respondent Tobias paid six (6) installments on the
promissory note directly to the petitioner Industrial Finance Corporation the
last of which was made on February 19,
1970.[2]
On May 14, 1970,
the petitioner’s counsel wrote to respondent Tobias the following letter:
“x
x x
Dear Mr. Tobias:
My client, the
INDUSTRIAL FINANCE CORPORATION, has referred to me for appropriate legal
action your account with it (LCI-690) which is in arrears in the amount of
P4,254.65 and a balance of P25,249.65 as of May 16, 1970. In
view of your default in the payment of your installments due pursuant to the
Promissory Note and Chattel Mortgage you executed in favor of Leelin Motors, Inc. and assigned to Industrial Finance
Corporation, demand is hereby made upon you to pay the amount of P25,249.65 on
or before May 24, 1970 or to surrender within the same period the following
described personalty:
One (1) Unit 1969 Motor Vehicle Dodge
D-600 FFC 197 “WB”
Engine No. CPC-4007
Serial No. 1589070794
otherwise, the corresponding action will
be filed against you plus damages and attorney’s fees.
Please consider this a final demand.
Very truly yours,
C.R. SANCHEZ LAW OFFICE
SGD. CATALINO R. SANCHEZ .”[3]
At the time the foregoing letter was written,
respondent Tobias was in arrear in the payment of more than two (2)
installments.[4]
On May 27, 1970,
respondent Tobias wrote petitioner’s counsel the following letter:
“Dear Sir:
This is in response to your letter of
demand dated May 14, 1970
asking me to surrender Dodge Truck with engine no. CPC-4007 Serial No.
1589070794. I am now voluntarily and
willingly surrendering said truck due to the ff. reasons:
1. That said truck has been with Leelin
Motors ever since the later part of February when it met an accident.
2. That there is too much
delay in the repair of said truck because until now the truck is not yet
completely finished.
3. That upon seeing said
truck, I am not satisfied with the repair of the finished portions.
I am now giving full authority to your client Industrial Finance
Corporation to get said truck at Leelin Motors, Inc.
I am hoping that due to the ff. good reasons my name will not be
blacklisted in your credit division.
Very truly yours,
Castor Tobias”[5]
Upon learning that the truck met an
accident, petitioner decided not to get the truck anymore from Leelin Motors, Inc.
On February 16, 1971,
petitioner filed in the Court of First Instance of Manila an action against
respondent Tobias to recover the unpaid balance of the promissory note. The lower court dismissed the complaint on
the ground that “(I)nasmuch as the defendant
voluntarily and willingly surrendered the truck and gave the Industrial Finance
Corporation full authority to get said truck from Leelin
Motors, Inc. (Exhibit 2) pursuant to the demand to surrender (Exhibit B) the
defendant complied with the demands of the plaintiff.”[6]
On appeal, the Court of Appeals affirmed the decision of the
lower court dismissing the complaint of petitioner Industrial Finance
Corporation but modifying the same by ordering respondent Tobias to pay the
cost of repairs of the damaged truck in the amount of P5,396.78 plus interest.
The main thrust of the petitioner’s argument is that the
respondent Court of Appeals erred in affirming the dismissal of the complaint
of the petitioner in the lower court by not considering his right as an unpaid
vendor of the truck in question under Art. 1484 of the New Civil Code.[7]
Petitioner claims that under Art. 1484 of the New Civil Code, an unpaid vendor
may choose any of the remedies provided therein and that as an unpaid vendor,
it has chosen to exact fulfillment of the obligation for failure of the vendee to pay. Respondent Tobias, however, claims that
petitioner is estopped to insist on its claim on the
balance of the promissory note when it demanded the return or surrender of the
truck in its letter of May 14, 1970, to which demand, respondent acceded in his
letter dated May 27, 1970.
The claim of respondent cannot be sustained. Art. 1484 is clear that “should the
vendee or purchaser of a personal property be in default in the payment of two
or more of the agreed installments, the vendor or seller has the option to
either exact fulfillment 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.[8]
Since the case involves the sale of personal property on installments Art. 1484
of the Civil Code should apply. The
remedies provided for in Art. 1484 are considered alternative, not cumulative[9]
such that the exercise of one would bar the exercise by the others.[10]
Here, petitioner has not cancelled the sale, nor has it exercised the remedy of
foreclosure. Foreclosure, judicial or
extrajudicial, presupposes something more than a mere demand to surrender
possession of the object of the mortgage.[11]
Since the petitioner has not availed itself of the remedy of cancelling the sale of the truck in question or of
foreclosing the chattel mortgage on said truck, petitioner is still free to
avail of the remedy of exacting fulfillment of the obligation of respondent
Tobias, the vendee of the truck in question.
In Radiowealth
Inc. vs. Lavin,[12] the facts of which are similar to the
present case, the issue was “whether the plaintiff is precluded to press
for collection of an account secured by a chattel mortgage, after it shall have
informed the defendants of its intention to foreclose said mortgage, and the
voluntary acceptance of such step (foreclosure) by defendant mortgagor,”
the Supreme Court ruled in favor of the plaintiff mortgagee. Said the Court:
“The contract being a sale of machinery payable in
installments, the applicable provision of law is Article 1484 of the Civil
Code, which gives the vendor the option
to exercise any one of the alternative remedies therein mentioned: exact fulfillment of the obligation, cancel
the sale, or foreclose the chattel mortgage.
But the vendor-mortgagor in the present case desisted, on its own
initiative, from consummating the auction sale, without gaining any advantage
or benefit, and without causing any disadvantage or harm to the
vendees-mortgagees. The least that could
be said is that such desistance of the plaintiff from proceeding with auction
sale was a timely disavowal that cancelled and rendered useless its previous
choice to foreclose; its acts, being extrajudicial, brought no trouble upon any
court, and were harmless to the defendants.
For this reason, the plaintiff can not be considered as having “exercised”
(the Code uses the word “exercise”) the remedy of foreclosure because
of its incomplete implementation, and, therefore, the plaintiff is not barred
from suing on unpaid account.”
In effect this ruling answers the issue
of estoppel raised by respondent Tobias. Besides, to hold the petitioner raised in estoppel, it must be shown that when it gave the respondent
the choice of either paying the balance of the purchase price or of
surrendering the truck, it had already knowledge of the accident and the
consequent damage to the truck. In the
present case petitioner claims it had no knowledge of the accident[13]
when it gave the respondent the choice of either paying the balance of the
promissory note or of surrendering the truck.
It is hard to believe that petitioner would make such offer to
respondent either to pay the balance on the promissory note or to surrender the
truck in question if it knew that the truck has had an accident. The more plausible thing it would have asked
the respondent is to ask for the balance on the promissory note. Besides the allegation of petitioner that it
had no knowledge of the accident is a negative allegation and needs no evidence
to support it, not being an essential part of the statement of the right on
which the cause of action is founded.[14]
It is therefore the respondent Tobias who has the burden of disproving the claim of petitioner that he
has no knowledge of the accident when it made the offer to respondent either to
pay the balance on the promissory note or to surrender the truck. Respondent failed in this.
It is claimed by respondent Tobias that he has surrendered the
truck to petitioner in his letter dated May
27, 1970. But the alleged
surrender was ineffectual as far as the petitioner is concerned because petitioner
could not take possession of the truck in question as it was in the custody of Leelin Motors, Inc. which had a mechanic’s lien over
it. Even respondent Tobias cannot expect
petitioner to accept the term of surrender because aside from the fact that the
truck being surrendered met an accident petitioner was not satisfied with the
repair of the finished portion of the truck in question. Petitioner therefore was justified in
refusing to accept such surrender and in bringing suit to recover the balance
of the purchase price.
IN VIEW OF THE FOREGOING, the judgment of the respondent
Court of Appeals and of the lower court are hereby set aside and a new one
rendered ordering respondent Tobias to pay petitioner the balance of the
purchase price of the truck in question in the amount of P27,210.77 plus legal
rate of interest from the time of the filing of the complaint. Costs against the respondent.
SO ORDERED.
Teehankee, (Chairman), Makasiar, Muñoz Palma, and Guerrero, JJ., concur.
Fernandez, J., no part.
* Ninth Division, composed of
Justices Fernandez, Plana and Escolin.
[1]
Record on Appeal, pp. 5-6.
[2]
Record on Appeal, p. 38; Respondent’s Brief, p. 3, par. 4.
[3]
Petitioner’s Brief, pp. 11-12.
[4]
Petitioner’s Reply Brief, pp. 2-3.
[5]
Petitioner’s Brief, pp. 12-13.
[6]
Record on Appeal, p. 68.
[7]
Article 1484. In a contract of sale of
personal property the price of which is payable in installments, the vendor may
exercise any one of the following remedies:
(1) Exact fulfillment of the obligation,
should the vendee fail to pay;
(2) Cancel the sale, should the
vendee’s failure to pay cover two or more installments;
(3) 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.
[8]
Cruz vs. Filipinas Investment and Finance Co., 23 SCRA 791.
[9]
Radiowealth, Inc. vs. Lavin
117 Phil. 805; Cruz vs. Filipinas Investment and Finance Co., supra.
[10]
Pacific Commercial Co. vs. De la Rama, 72
Phil. 380.
[11]
See Rule 68, Revised Rules of Court and Sec. 14, Act 1508 (The Chattel Mortgage
Law); Manila Motor Co. vs. Fernandez, 99 Phil. 782.
[12]
supra.
[13]
Petition, p. 4.
[14]
Sec. 1, Rule 131.