G.R. No. 82040, 27 August 1991
FACTS:
On July 15, 1977, private respondents Manuel Cuady and Lilia Cuady obtained from Supercars, Inc. a credit of P39,574.80, which amount covered the cost of one unit of Ford Escort 1300, four-door sedan. Said obligation was evidenced by a promissory note executed by private respondents in favor of Supercars, Inc., obligating themselves to pay the latter or order the sum of P39,574.80, inclusive of interest at 14% per annum, payable on monthly installments of P1,098.00 starting August 16, 1977, and on the 16th day of the next 35 months from September 16, 1977 until full payment thereof. There was also stipulated a penalty of P10.00 for every month of late installment payment. To secure the faithful and prompt compliance of the obligation under the said promissory note, the Cuady spouses constituted a chattel mortage on the aforementioned motor vehicle. On July 25, 1977, Supercars, Inc. assigned the promissory note, together with the chattel mortgage, to B.A. Finance Corporation. The Cuadys paid a total of P36,730.15 to the B.A. Finance Corporation, thus leaving an unpaid balance of P2,344.65 as of July 18, 1980. In addition thereto, the Cuadys owe B.A. Finance Corporation P460.00 representing penalties or surcharges for tardy monthly.
On April 18, 1980, the aforementioned motor vehicle figured in an accident and was badly damaged. The unfortunate happening was reported to the B.A. Finance Corporation and to the insurer, Zenith Insurance Corporation. The Cuadys asked the B.A. Finance Corporation to consider the same as a total loss, and to claim from the insurer the face value of the car insurance policy and apply the same to the payment of their remaining account and give them the surplus thereof, if any. But instead of heeding the request of the Cuadys, B.A. Finance Corporation prevailed upon the former to just have the car repaired. Not long thereafter, however, the car bogged down. The Cuadys wrote B.A. Finance Corporation requesting the latter to pursue their prior instruction of enforcing the total loss provision in the insurance coverage. When B.A. Finance Corporation did not respond favorably to their request, the Cuadys stopped paying their monthly installments on the promissory note.
On June 29, 1982, in view of the failure of the Cuadys to pay the remaining installments on the note, B.A. Finance Corporation sued them in the Regional Trial Court of Manila, Branch 43, for the recovery of the said remaining installments, but the court ruled in favor of the Cuadys,
ISSUE:
Whether or not BA Finance Corporation is bound by its acceptance to carry out the agency and is liable for damages, which through its non-performance the Cuadys, as the principal may suffer.
RULING:
The court affirmed the decision of the Court of Appeals in favor of the Cuadys.
B.A. Finance Corporation was deemed subrogated to the rights and obligations of Supercars, Inc. when the latter assigned the promissory note, together with the chattel mortgage constituted on the motor vehicle in question in favor of the former. Consequently, B.A. Finance Corporation is bound by the terms and conditions of the chattel mortgage executed between the Cuadys and Supercars, Inc. Under the deed of chattel mortgage, B.A. Finance Corporation was constituted attorney-in-fact with full power and authority to file, follow-up, prosecute, compromise or settle insurance claims; to sign execute and deliver the corresponding papers, receipts and documents to the Insurance Company as may be necessary to prove the claim, and to collect from the latter the proceeds of insurance to the extent of its interests, in the event that the mortgaged car suffers any loss or damage. In granting B.A. Finance Corporation the aforementioned powers and prerogatives, the Cuady spouses created in the formers’ favor an agency. Thus, under Article 1884 of the Civil Code of the Philippines, B.A. Finance Corporation is bound by its acceptance to carry out the agency, and is liable for damages which, through its non-performance, the Cuadys, the principal in the case at bar, may suffer.
*Case digest by Jelyn C. Ondong, JD – 4, Andres Bonifacio College, SY 2019 – 2020