Cruz vs. Filipinas Investment & Finance Corp., 23 SCRA 791

FACTS: Petitioner Ruperto Cruz purchased on installments one (1) unit of Isuzu Diesel bus from Far East Motors. Petitioner issued a promissory note as evidence of his indebtedness to Far East Motors. To secure such promissory note, chattel mortgage was instituted on the said vehicle. Since no down payment was made by Cruz, an additional security was required by Far East Motors. The additional security was given by plaintiff Felicidad de Reyes over her land which at the time was mortgaged to DBP. Later, Far East Motors assigned all its rights and interests to the Deed of Chattel Mortgage and Deed of Real Estate Mortgage to respondent, with due notice of assignment to the petitioners. Subsequently, petitioner defaulted on the promissory note so respondent foreclosed the chattel mortgage on the bus. However, the proceeds from the chattel mortgage were insufficient to discharge fully the indebtedness. Preparatory to extra-judicially foreclosing the real estate mortgage on Reyes’ land, defendant paid DBP her unpaid balance. Petitioner Reyes sent a letter demanding cancellation of her real estate mortgage, but defendant did not heed so the former instituted a suit against the latter for cancellation of said real estate mortgage. RTC sustained petitioner and declared that the extrajudicial foreclosure of the chattel mortgage on the bus barred further action against the additional security put up by Reyes. It ruled that there is no controversy involving as it does a sale of personal property on installments, the pertinent legal provision in this case is Article 1484 of the Civil Code.

ISSUE: Whether or not the action referred in Art. 1484 is confined only to those actions where there is a judicial suit or proceeding in court.

HELD: No, the “action” referred to in Art. 1484 is not limited to judicial suits or proceedings. The word ‘action’ is without a definite or exclusive meaning. It has invariably been defined as: “…the legal demand of one’s right, or rights; …the lawful demand of one’s right in a court of justice; …the legal and formal demand of one’s rights from another person or party, made and insisted on in a court of justice; …a claim made before a tribunal; …an assertion in a court of justice of a right given by law; …a demand or legal proceeding in a court of justice to secure one’s rights; …the prosecution of some demand in a court of justice; …the means by which men litigate with each other; …the means that the law has provided to put the cause of action into effect;…” Considering the purpose for which the prohibition contained in Article 1484, 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 purchasing price form the purchaser or his privy. Certainly, an extrajudicial foreclosure of a real estate mortgage is one such proceeding.

Digest Credit:  Irvin Henson S. Ilog


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