Industrial Finance Corp. v. Ramirez, 77 SCRA 152


On December 4, 1970 Arnaldo Dizon sold to Consuelo Alcoba his 1966 model Chevrolet car for P13,157.89, payable in eighteen monthly installments, which were secured by a chattel mortgage on the car. On that same date, Dizon assigned for ten thousand pesos to Industrial Finance Corporation all his rights and interest in the chattel mortgage. Alcoba defaulted in the payment of the first four installments. Because of that default and by virtue of the acceleration clause in the promissory note forming part of the mortgage, the whole obligation became due and demandable. In its complaint Industrial Finance Corporation prayed for alternative reliefs. The main objective of its complaint was recovery of the mortgaged car by means of a writ of replevin. It submitted a redelivery bond. Undoubtedly, the mortgagee-assignee wanted to foreclose extrajudicially the chattel mortgage but, before it could do so, the sheriff had to seize the car by means of the provisional remedy of an order for the delivery of personal property. The lower court issued the writ of replevin. Consequently, there was no extrajudicial foreclosure of the mortgage since, for that purpose, possession of the car by the sheriff is necessary (Bachrach Motor Co. vs. Summers, 42 Phil. 3). Consuelo Alcoba did not appeal. That judgment became final and executory. The sheriff was able to levy upon the mortgaged car which was then in the possession of the Aco Motor Service of Dagupan City. At the execution sale held on April 25, 1974 Industrial Finance Corporation bought the mortgaged car for P4,000 (Exh. 3-A, p. 72, Expedients). However, in order to take possession of the car, the corporation had to pay P4,250 to the Aco Motor Service to satisfy its lien for the repair and storage of the car. The corporation contended that, because of that payment, it sustained a loss of P250 in the execution sale. It asked for a third alias writ of execution in order to satisfy the balance of Consuelo Alcoba’s obligation which, together with the 12% interest, it computed at P11,300.92


Did Consuelo, mortgagor, have to pay the balance of her obligation?


Yes. The mortgagors should pay the deficiency. The corporation’s action was for specific performance or fulfillment of the obligation and not for judicial foreclosure Consuelo Alcoba’s payment of P2,000 on account of the money judgment against her signified that she acquiesced in the action for specific performance. The Civil Code provides that it is only when there has been a foreclosure that the mortgagor is not liable for any deficiency. In this case, there was no foreclosure. The mortgagee evidently chose the remedy of specific performance. It levied upon the car by virtue of an execution and not as an incident of a foreclosure proceeding. The rule is that in installment sales, if the action instituted is for specific performance and the mortgaged property is subsequently attached and sold, the sale thereof does not amount to a foreclosure of the mortgage. Hence, the seller-creditor is entitled to a deficiency judgment

Digest Credit: Mac Burdeos Camposuelo


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