Luneta Motor v. Salvador, 108 Phil 1037

Facts:

On May 11, 1955, the Luneta Motor Company sold a Reo Truck, for P16,995.00, on installment basis, to Maximino Salvador. Five days later, after having made a down payment of P1,001.00, the purchaser, jointly and severally with one Angel Dimagiba, executed in favor of the seller a promissory for P15,984.00 to cover the balance of the purchase price, payable in eighteen (18) monthly installments, with interest at the rate of 12% per annum. On the same day, the purchaser also executed in favor of the seller a chattel mortgage on the property to secure payment of the said balance. For alleged failure on the part of the purchaser to pay the installments, the Luneta Motor Company, on September 9, 1955, filed with the Court of First Instance of Manila a complaint against the vendee Maximino Salvador, Angel Dimagiba and John Doe, praying for the seizure of the truck, for the confirmation of the company’s possession and ownership thereto, and that defendants be ordered to pay the unpaid balance of the purchase price, plus interests, attorney’s fees and costs. By virtue of a writ of seizure, the truck subject of the action was, on behalf of the plaintiff, seized on December 19, 1955. On May 10, 1957, the plaintiff sold the truck at public auction and itself bought the truck. As a consequence, the defendant Dimagiba on November 20, 1957 filed a motion to dismiss the complaint on the ground that the plaintiff has no more case against him, the said plaintiff having already foreclosed the chattel mortgage upon the property.

Issue:

May the complaint may be dismissed upon the foreclosure of the mortgage?

Held:

Section 1484 of the New Civil Code provides: In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise any of the following remedies: xxx (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. Paragraph 3 of the above-quoted provision is clear that foreclosure of the chattel mortgage and recovery of the unpaid balance of the price are alternative remedies and may not be pursued conjunctively. It appears that the vendor had already foreclosed the chattel mortgage constituted on the property and had taken possession thereof, the lower court acted rightly in dismissing the complaint filed for the purpose of recovering the unpaid balance of the purchase price. By seizing the truck and foreclosing the mortgage at the progress of the suit, the plaintiff renounced whatever claim it may have had under the promissory note, and consequently, it has no more cause of action against the promissor and the guarantor.

Digest Credit: Mac Burdeos Camposuelo

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