A. SOUTHERN MOTORS, INC. vs. MOSCOSO

2 SCRA 168G.R. No. L-14475, May 30, 1961

FACTS:

Plaintiff Southern Motors, Inc. soldto defendant Angel Moscoso one Chevrolet truckon installment basis,for P6,445.00. Upon making a down payment, the defendant executed a promissory note for the sum ofP4,915.00, representing the unpaid balance of the purchase price to secure the payment of which, achattel mortgage was constituted on the truck in favor of the plaintiff.Of said account, the defendant hadpaid a total of P550.00, of which P110.00 was applied to the interest and P400.00 to the principal, thusleaving an unpaid balance of P4,475.00. The defendant failed to pay 3 installments on the balance of thepurchase price.Plaintiff filed a complaint against the defendant, to recover the unpaid balance of the promissory note.Upon plaintiff's petition, a writ of attachment was issued by the lower court on the properties of thedefendant. Pursuant thereto, the said Chevrolet truck, and a house and lot belonging to defendant, wereattached by the Sheriff and said truck was brought to the plaintiff's compound for safe keeping. Afterattachment and before the trial of the case on the merits, acting upon the plaintiff's motion for theimmediate sale of the mortgaged truck, the Provincial Sheriff of Iloilo sold the truck at public auction inwhich plaintiff itself was the only bidder for P1,OOO.OO. The trial court condemned the defendant to paythe plaintiff the amount of P4,475.00 with interest at the rate of 12% per annum from August 16, 1957,until fully paid, plus 10% thereof as attorneys fees and costs. Hence, this appeal by the defendant.

ISSUE:

Whether or not the attachment caused to be levied on the truck and its immediate sale at public auction,was tantamount to the foreclosure of the chattel mortgage on said truck.

HELD:

No.Article 1484 of the Civil Code provides that in a contract of sale of personal property the price of which ispayable in installments, the vendor may exercise any of the following remedies: (I) Exact fulfillment ofthe obligation, should the vendee fail topay; (2) Cancel thesale, should the vendee's failure to pay cover two or more installments; and (3) Foreclose the chattel mortgage on the thing sold, if one has beenconstituted, should the vendee's failure to pay cover two or more installments. In this case, he shall haveno further action against the purchaser to recover any unpaid balance of the price. Any agreement to thecontrary shall be void.The plaintiff had chosen the first remedy. The complaint is an ordinary civil action for recovery of theremaining unpaid balance due on the promissory note. The plaintiff had not adopted the procedure ormethods outlined by Sec. 14 of the Chattel Mortgage Law but those prescribed for ordinary civil actions,under the Rules of Court. Had the plaintiff elected the foreclosure, it would not have instituted this casein court; it would not have caused the chattel to be attached under Rule 59, and had it sold at publicauction, in the manner prescribed by Rule 39. That the plaintiff did not intend to foreclose the mortgagetruck, is further evinced by the fact that it had also attached the house and lot of the appellant at SanJose, Antique.We perceive nothing unlawful or irregular in plaintiff's act of attaching the mortgaged truck itself. Sincethe plaintiff has chosen to exact the fulfillment of the appellant's obligation, it may enforce execution ofthe judgment that may be favorably rendered hereon, on all personal and real properties of the latter notexempt from execution sufficient to satisfy suchjudgment. It should be noted that a house and lot at SanJose, Antique were also attached. No one can successfully contest that the attachment was merely anincident to an ordinary civil action. The mortgage creditor may recover judgment on the mortgage debtand cause an execution on the mortgaged property and may cause an attachment to be issued andlevied on such property, upon beginning his civil action.

B. Pascual vs. Universal Motors Corp.

61 SCRA 121; November 1974

FACTS:

Plaintiff-appellee spouses Lorenzo Pascual and Leonila Torres (spouses Pasqual) executed the real estate mortgage subject matter of this complaint on December 14, 1960 to secure the payment of the indebtedness of PDP Transit, Inc. (PDP Trans.) for the purchase of 5 units of Mercedes Benz trucks, with a total purchase price or principal obligation of P152,506.50 which was to bear interest at 1% per month starting that day, but the plaintiffs' guarantee is not to exceed P50,000.00 which is the value of the mortgage. The PDP Trans., as the spouses Pasqual's principal, paid to defendant-appellant Universal Motors Corporation (Universal Motors) the sum of P92,964.91 on April 5, 1961 for two of the five Mercedes Benz trucks and on May 22, 1961 for the remaining three, thus leaving a balance of P68,641.69 including interest due on February 8, 1965.

On March 19, 1965, Universal Motors filed this complaint with the CFI of Manila against the PDP Trans. to collect the balance due under the Chattel Mortgages and to repossess all the units sold to PDP Trans. as the spouse Pascuals principal, including the 5 units guaranteed under the subject Real (Estate) Mortgage. During the hearinbg, Universal Motors admitted that it was able to repossess all the units sold to the latter, including the 5 units guaranteed by the subject real estate mortgage, and to foreclose all the chattel mortgages constituted thereon, resulting in the sale of the trucks at public auction. As the real estate mortgagors, the spouses Pascual filed an action with the CFI of Quezon City for the cancellation of the mortgage they constituted on 2 parcels of land in favor of the Universal Motors to guarantee the obligation of PDP Trans. to the amount of P50,000. The said CFI rendered judgment in favor of the spouses Pascual and ordered the cancellation of the mortgage.

ISSUE:

Was Article 1484 of the New Civil Code applicable in the case at bar?

COURT RULING:

The Supreme Court affirmed the lower courts decision. Appellant Universal Motors argues that Article 1484 is not applicable to the case at bar because there is no evidence on record that the purchase by PDP Trans. of the 5 trucks was payable in installments and that the PDP Trans. had failed to pay two or more installments. Universal Motors also contends that what Article 1484 prohibits is for the vendor to recover from the purchaser the unpaid balance of the price after he has foreclosed the chattel mortgage on the thing sold, but not a recourse against the security put up by a third party.

The Supreme Court concluded to the contrary, saying that the first issue was whether or not the sale was one on installments. The lower court found that it was, and that there was failure to pay two or more installments, a finding which is not subject to review by the Supreme Court.

The next contention is that what article 1484 withholds from the vendor is the right to recover any deficiency from the purchaser after the foreclosure of the chattel mortgage, and not a recourse to the additional security put up by a third party to guarantee the purchaser's performance of his obligation. But the Supreme Court to sustain this argument of the appellant would be to indirectly subvert and public policy overturn the protection given by Article 1484.

C. FILINVEST CREDIT CORPORATION vs. COURT OF APPEALS

G.R. No. 82508 September 29, 1989

Facts:

Spouses Sy Bang were engaged in the sale of gravel produced from crushed rocks and used for construction purposes. In order to increase their production, they looked for a rock crusher which Rizal Consolidated Corporation then had for sale. A brother of Sy Bang, went to inspect the machine at the Rizal Consolidateds plant site. Apparently satisfied with the machine, the private respondents signified their intent to purchase the same.

Since he does not have the financing capability, Sy Bang applied for financial assistance from Filinvest Credit Corporation. Filinvest agreed to extend financial aid on the following conditions: (1) that the machinery be purchased in the petitioners name; (2) that it be leased with option to purchase upon the termination of the lease period; and (3) that Sy Bang execute a real estate mortgage as security for the amount advanced by Filinvest. A contract of lease of machinery (with option to purchase) was entered into by the parties whereby they to lease from the petitioner the rock crusher for two years. The contract likewise stipulated that at the end of the two-year period, the machine would be owned by Sy Bang.

3 months from the date of delivery, Sy Bang claiming that they had only tested the machine that month, sent a letter-complaint to the petitioner, alleging that contrary to the 20 to 40 tons per hour capacity of the machine as stated in the lease contract, the machine could only process 5 tons of rocks and stones per hour. They then demanded that the petitioner make good the stipulation in the lease contract. Sy Bang stopped payment on the remaining checks they had issued to the petitioner.

As a consequence of the non-payment, Filinvest extrajudicially foreclosed the real estate mortgage.

Issue:

WON the real transaction was lease or sale? SALE ON INSTALLMENTS.

Held:

The real intention of the parties should prevail. The nomenclature of the agreement cannot change its true essence, i.e., a sale on installments. It is basic that a contract is what the law defines it and the parties intend it to be, not what it is called by the parties. It is apparent here that the intent of the parties to the subject contract is for the so-called rentals to be the installment payments. Upon the completion of the payments, then the rock crusher, subject matter of the contract, would become the property of the private respondents. This form of agreement has been criticized as a lease only in name.

Sellers desirous of making conditional sales of their goods, but who do not wish openly to make a bargain in that form, for one reason or another, have frequently resorted to the device of making contracts in the form of leases either with options to the buyer to purchase for a small consideration at the end of term, provided the so-called rent has been duly paid, or with stipulations that if the rent throughout the term is paid, title shall thereupon vest in the lessee. It is obvious that such transactions are leases only in name. The so-called rent must necessarily be regarded as payment of the price in installments since the due payment of the agreed amount results, by the terms of bargain, in the transfer of title to the lessee.

Indubitably, the device contract of lease with option to buy is at times resorted to as a means to circumvent Article 1484, particularly paragraph (3) thereof.Through the set-up, the vendor, by retaining ownership over the property in the guise of being the lessor, retains, likewise, the right to repossess the same, without going through the process of foreclosure, in the event the vendee-lessee defaults in the payment of the installments. There arises therefore no need to constitute a chattel mortgage over the movable sold. More important, the vendor, after repossessing the property and, in effect, canceling the contract of sale, gets to keep all the installments-cum-rentals already paid.

Even if there was a contract of sale, Filinvest is still not liable because Sy Bang is presumed to be more knowledgeable, if not experts, on the machinery subject of the contract, they should not therefore be heard now to complain of any alleged deficiency of the said machinery. It was Sy Bang who was negligent, not Filinvest. Further, Sy Bang is precluded to complain because he signed a Waiver of Warranty.

D. Ridad v. Filipinas Investment and Finance Corp G.R. No. L-49580. January 17, 1983

The vendor of personal property sold on the installment basis is precluded, after foreclosing the chattel mortgage on the thing sold from having a recourse against the additional security put up by a third party to guarantee the purchasers performance of his obligation on the theory that to sustain the same would overlook the fact that if the guarantor should be compelled to pay the balance of the purchase price, said guarantor will in turn be entitled to recover what he has paid from the debtor-vendee, and ultimately it will be the latter who will be made to bear the payment of the of the balance of the price, despite the earlier foreclosure of the chattel mortgage given by him, thereby indirectly subverting the protection given the latter.

Facts:

The spouses Ridad purchased from the Supreme Sales Development Corporation two (2) brand new Ford Consul Sedans complete with accessories. To secure payment thereof, plaintiffs executed on the same date a promissory note covering the purchase price and a deed of chattel mortgage not only on the two vehicles purchased but also on another car (Chevrolet) and their franchise or certificate of public convenience granted by the defunct Public Service Commission for the operation of a taxi fleet with Filipinas Investment.

Due to the failure of the plaintiffs to pay their monthly installments as per promissory note, Filipinas Investment foreclosed on the chattel mortgage on the Ford Consul Sedans. The foreclosure sale had a deficiency. Consequently, the corporation foreclosed the mortgage constituted on the (Chevrolet) and their franchise or certificate of public convenience.

Issue: Whether Filipinas Investment is precluded from foreclosing the second mortgage to recover the deficiency on the first mortgage

Held:

No. The vendor of personal property sold on the installment basis is precluded, after foreclosing the chattel mortgage on the thing sold from having a recourse against the additional security put up by a third party to guarantee the purchasers performance of his obligation on the theory that to sustain the same would overlook the fact that if the guarantor should be compelled to pay the balance of the purchase price, said guarantor will in turn be entitled to recover what he has paid from the debtor-vendee, and ultimately it will be the latter who will be made to bear the payment of the of the balance of the price, despite the earlier foreclosure of the chattel mortgage given by him, thereby indirectly subverting the protection given the latter.

If the vendor under such circumstance is prohibited from having a recourse against the additional security for reasons therein stated, there is no ground why such vendor should not likewise be precluded from further extrajudicially foreclosing the additional security put up by the vendees themselves, as in the instant case, it being tantamount to a further action 5 that would violate Article 1484 of the Civil Code, for then is actually no between an additional security put up by the vendee himself and such security put up by a third party insofar as how the burden would ultimately fall on the vendee himself is concerned

E.

F. LEOVILLO C. AGUSTIN, petitioner, vs. COURT OF APPEALS and FILINVEST FINANCE CORP., respondents.R E S O L U T I O N

FRANCISCO, J.:

This is an appeal by certiorari from the decision of respondent Court of Appeals in CA-G.R. No. 24684[1] which affirmed the order of Regional Trial Court, Branch 40, Manila, in Civil Case No. 84804.[2]

The dispute stemmed from an unpaid promissory note dated October 28, 1970, executed by petitioner Leovillo C. Agustin in favor of ERM Commercial for the amount of P43,480.80. The note was payable in monthly installments[3] and secured by a chattel mortgage over an Isuzu diesel truck,[4] both of which were subsequently assigned to private respondent Filinvest Finance Corporation.[5] When petitioner defaulted in paying the installments, private respondent demanded from him the payment of the entire balance or, in lieu thereof, the possession of the mortgaged vehicle. Neither payment nor surrender was made. Aggrieved, private respondent filed a complaint with the Regional Trial Court of Manila, Branch 26 (RTC Branch 26) against petitioner praying for the issuance of a writ of replevin or, in the alternative, for the payment of P32,723.97 plus interest at the rate of 14% per annum from due date until fully paid.[6] Trial ensued and, thereafter, a writ of replevin was issued by RTC Branch 26. By virtue thereof, private respondent acquired possession of the vehicle. Upon repossession, the latter discovered that the vehicle was no longer in running condition and that several parts were missing which private respondent replaced. The vehicle was then foreclosed and sold at public auction.

Private respondent subsequently filed a supplemental complaint claiming additional reimbursement worth P8,852.76 as value of replacement parts[7] and for expenses incurred in transporting the mortgaged vehicle from Cagayan to Manila. In response, petitioner moved to dismiss the supplemental complaint arguing that RTC Branch 26 had already lost jurisdiction over the case because of the earlier extra-judicial foreclosure of the mortgage. The lower court granted the motion and the case was dismissed.[8] Private respondent elevated the matter to the appellate court, docketed as CA-G.R. No. 56718-R, which set aside the order of dismissal and ruled that repossession expenses incurred by private respondent should be reimbursed.[9] This decision became final and executory, hence the case was accordingly remanded to the Regional Trial Court of Manila, Branch 40 (RTC Branch 40) for reception of evidence to determine the amount due from petitioner.[10] After trial, RTC Branch 40 found petitioner liable for the repossession expenses, attorney's fees, liquidated damages, bonding fees and other expenses in the seizure of the vehicle in the aggregate sum of P18,547.38. Petitioner moved for reconsideration. Acting thereon, RTC Branch 40 modified its decision by lowering the monetary award to P8,852.76, the amount originally prayed for in the supplemental complaint.[11] Private respondent appealed the case with respect to the reduction of the amount awarded. Petitioner, likewise, appealed impugning the trial courts order for him to pay private respondent P8,852.76, an amount over and above the value received from the foreclosure sale. Both appeals were consolidated and in CA- G.R. No. 24684, the modified order of RTC Branch 40 was affirmed. Petitioner filed a motion for reconsideration, but to no avail[12] Hence, this petition for review on certiorari.

Petitioner contends that the award of repossession expenses to private respondent as mortgagee is "contrary to the letter, intent and spirit of Article 1484[13] of the Civil Code".[14] He asserts that private respondents repossession expenses have been amply covered by the foreclosure of the chattel mortgage, hence he could no longer be held liable. The arguments are devoid of merit.

Petitioners contentions, we note, were previously rejected by respondent court in its decision in CA-G.R. No. 56718-R the dispositive portion of which provides as follows:

"WHEREFORE, the order dismissing the case is hereby set aside and the case is remanded to the lower court for reception of evidence of `expenses properly incurred in effecting seizure of the chattel (and) of recoverable attorney's fees in prosecuting the action for replevin' as `repossession expenses' prayed for in the supplemental complaint, without pronouncement as to costs."[15]

which ruling has long acquired finality. It is clear, therefore, that the appellate court had already settled the propriety of awarding repossession expenses in favor of private respondent. The remand of the case to RTC Branch 40 was for the sole purpose of threshing out the correct amount of expenses and not for relitigating the accuracy of the award. Thus, the findings of RTC Branch 40, as affirmed by the appellate court in CA-G.R. No. 24684, was confined to the appreciation of evidence relative to the repossession expenses for the query or issue passed upon by the respondent court in CA-G.R. No. 56718-R (propriety of the award for repossession expenses) has become the law of the case. This principle is defined as a term applied to an established rule that when an appellate court passes on a question and remands the cause to the lower court for further proceedings, the question there settled becomes the law of the case upon subsequent appeal.[16] Having exactly the same parties and issues, the decision in the former appeal (CA-G.R. No. 56718-R) is now the established and controlling rule. Petitioner may not therefore be allowed in a subsequent appeal (CA-G.R. No. 24684) and in this petition to resuscitate and revive formerly settled issues. Judgment of courts should attain finality at some point in time, as in this case, otherwise, there will be no end to litigation.

At any rate, even if we were to brush aside the law of the case doctrine we find the award for repossession expenses still proper. In Filipinas Investment & Finance Corporation v. Ridad,[17] the Court recognized an exception to the rule stated under Article 1484(3) upon which petitioner relies. Thus:

x x x Where the mortgagor plainly refuses to deliver the chattel subject of the mortgage upon his failure to pay two or more installments, or if he conceals the chattel to place it beyond the reach of the mortgagee, what then is the mortgagee expected to do? x x x It logically follows as a matter of common sense, that the necessary expenses incurred in the prosecution by the mortgagee of the action for replevin so that he can regain possession of the chattel, should be borne by the mortgagor. Recoverable expenses would, in our view, include expenses properly incurred in effecting seizure of the chattel and reasonable attorneys fees in prosecuting the action for replevin.[18]

Anent the denial of the award for attorneys fees, we find the same in order. The trial court, as well as respondent court, found no evidence to support the claim for attorney's fees which factual finding is binding on us.[19] We find no compelling reason, and none was presented, to set aside this ruling.

ACCORDINGLY, the petition is DENIED for lack of merit, and the decision of the Court of Appeals is hereby AFFIRMED in toto.

SO ORDERED.

Narvasa, C.J. (Chairman), Davide, Jr., Melo, and Panganiban, JJ., concur.

G. Fiestan vs. Court of Appeals, and Developmentt Bank of the Philippines

185 SCRA 751 ; May 1990

FACTS:

For failure of petitioner spouses Dionisio Fiestan and Juanita Arconada (spouses Fiestan) to pay their mortgage indebtedness to respondent Development Bank of the Philippines (DBP), the latter was able to acquire at a public auction sale on August 6, 1979 the parcel of land (Lot No. 2-B covered by TCT No. T-13218) that the spouses Fiestan owned in Ilocos Sur after extrajudicial foreclosure of said property. The Provincial Sheriff issued a certificate of sale that same day which was registered on September 28 in the Office of the Register of Deeds of Ilocos Sur. Earlier, or on September 26, spouses Fiestan also executed a Deed of Sale in favor of DBP which was likewise registered on September 28, 1979. When spouses Fiestan failed to redeem their parcel of land within the 1 year period which expired on September 28, 1980, the Register of Deeds cancelled their title over the subject property and issued TCT No. T-19077 to DBP upon the latters duly executed affidavit of consolidation of ownership.

On April 13, 1982, the DBP sold the lot to Francisco Peria, so the Register of Deeds of Ilocos Sur cancelled DBPs title over said property and issued TCT No. T-19229 to Perias name, who later secured a tax declaration for said lot and accordingly paid the taxes due thereon. He thereafter mortgaged said lot to the PNB-Vigan Branch as security for his loan of P115,000.00. Since the spouses Fiestan were still in possession of the property, the Provincial Sheriff ordered them to vacate the premises, but instead of leaving, they filed a complaint in the RTC of Vigan, Ilocos Sur for annulment of sale, mortgage and cancellation of transfer certificates of title against the DBP-Laoag City, PNB-Vigan Branch, Ilocos Sur, Francisco Peria and the Register of Deeds of Ilocos Sur.

The lower court dismissed said complaint, declaring valid the extrajudicial foreclosure sale of the mortgaged property in favor of the DBP and its subsequent sale to Francisco Peria as well as the real estate mortgage constituted in favor of PNB-Vigan. The Court of Appeals likewise affirmed said decision. The spouses Fiestan herein seek to annul the extrajudicial foreclosure sale of the mortgaged property on the ground that the Provincial Sheriff conducted the foreclosure without first effecting a levy on said property before selling the same at the public auction sale.

ISSUE:

Who has the right to acquire by purchase the subject property?

COURT RULING:

In denying the petition, the Supreme Court reiterated that the formalities of a levy, which the Provincial Sheriff of Ilocos Sur allegedly failed to comply with, are not basic requirements before an extrajudicially foreclosed property can be sold at public auction. The spouses Fiestan insisted that what prevails over the case are par. (2) of Article 1491 and par. (7) of Article 1409 of the Civil Code which prohibits agents from acquiring by purchase, even at a public or judicial auction either in person or through the mediation of another, the property whose administration or sale may have been entrusted to them unless the consent of the principal has been given. However, the Supreme Court ruled that the power to foreclose is not an ordinary agency that contemplates exclusively the representation of the principal by the agent but is primarily an authority conferred upon the mortgagee for the latter's own protection, as provided under Section 5 of Act No 3135, as amended, which is a special law that must prevail over the Civil Code which is a general law. Even in the absence of statutory provision, there is authority to hold that a mortgagee, and in this case the DBP, may purchase at a sale under his mortgage to protect his own interest or to avoid a loss to himself by a sale to a third person at a price below the mortgage debtQ