G.R. No. L-24772, 27 May 1968, 23 SCRA 791


Plaintiff Ruperto G. Cruz purchased on installments, from the Far East Motor Corporation, one (1) unit of Isuzu Diesel Bus for P44,616.24 payable in installments of P1,487.20 per month for thirty (30) months with 12 % interest per annum, until fully paid. As evidence of said indebtedness, plaintiff Cruz executed and delivered to the Far East Motor Corporation a negotiable promissory note in the sum of P44,616.24. That to secure the payment of the promissory note, Cruz executed in favor of the seller a chattel mortgage over the aforesaid motor vehicle. the seller required and Cruz agreed to give, additional security for his obligation besides the chattel mortgage. The said additional security was given by plaintiff Felicidad Vda. de Reyes in the form of SECOND MORTGAGE on a parcel of land owned by her, together with the building which was at the time mortgaged to the DBP to secure a loan obtained by Mrs. Reyes from the bank. The seller then indorsed the promissory note and assigned all its rights and interest in the Deeds of Chattel Mortgage and in the Deed of Real Estate Mortgage to the defendant, Filipinas Investment & Finance Corporation, with due notice of such assignment to the plaintiffs.

Cruz defaulted in the payment of the promisory note. The defendant then took steps to foreclose the chattel mortgage on the bus which had been damaged in an accident while in the possession of plaintiff Cruz. The proceeds of the sale of the bus were not sufficient to cover the expenses of sale, the principal obligation, interests, and attorney’s fees. Defendant then moved to extrajudicially foreclose the real estate mortgage constituted by plaintiff Mrs. Reyes on her own land, as additional security, for the payment of the balance of Cruz’ Obligation.


Whether defendant, which has already extrajudicially foreclosed the chattel mortgage executed by the buyer, plaintiff Cruz, on the bus sold to him on installments, may also extrajudicially foreclose the real estate mortgage constituted by plaintiff Mrs. Reyes on her own land, as additional security, for the payment of the balance of Cruz’ Obligation, still remaining unpaid.


There is no controversy that, 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 of the Philippines, which reads:
ART. 1484. 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:

(1) Exact fulfillment of the obligation, should the vendee fail to pay;
(2) Cancel the sale, should the vendee’s failure to pay cover two or more installments;
(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.

The aforequoted provision is clear and simple: should the vendee or purchaser of a personal property default in the payment of two or more of the agreed installments, the vendor or seller has the option to avail of any one of these three remedies — either to exact fulfillment by the purchaser of the obligation, or to cancel the sale, or to foreclose the mortgage on the purchased personal property, if one was constituted. These remedies have been recognized as alternative, not cumulative, that the exercise of one would bar the exercise of the others. It may also be stated that the established rule is to the effect that the foreclosure and actual sale of a mortgaged chattel bars further recovery by the vendor of any balance on the purchaser’s outstanding obligation not so satisfied by the sale.

It is here agreed that plaintiff Cruz failed to pay several installments as provided in the contract; that there was extrajudicial foreclosure of the chattel mortgage on the said motor vehicle; and that defendant-appellant itself bought it at the public auction duly held thereafter, for a sum less than the purchaser’s outstanding obligation. Defendant-appellant, however, sought to collect the supported deficiency by going against the real estate mortgage which was admittedly constituted on the land of plaintiff Reyes as additional security to guarantee the performance of Cruz’ obligation, claiming that what is being withheld from the vendor, by the proviso of Article 1484 of the Civil Code, is only the right to recover “against the purchaser”, and not a recourse to the additional security put up, not by the purchaser himself, but by a third person.

There is no merit in this contention. To sustain appellant’s argument is to overlook the fact that if the guarantor should be compelled to pay the balance of the purchase price, the guarantor will in turn be entitled to recover what she has paid from the debtor vendee (Art. 2066, Civil Code); so that ultimately, it will be the vendee who will be made to bear the payment of the balance of the price, despite the earlier foreclosure of the chattel mortgage given by him. Thus, the protection given by Article 1484 would be indirectly subverted, and public policy overturned.

Neither is there validity to appellant’s allegation that, since the law speaks of “action”, the restriction should be confined only to the bringing of judicial suits or proceedings in court. Considering the purpose for which the prohibition contained in Article 1484 was intended, 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 purchase price from the purchaser or his privy. Certainly, an extrajudicial foreclosure of a real estate mortgage is one such proceeding.

*Case digest by Legine S. Ramayla, JD – 4, Andres Bonifacio College, SY 2019 – 2020