117 SCRA 726


This is a petition for review by certiorari filed by Eutropio Zayas, Jr. to secure a reversal of the the respondent court’s orders which remanded Civil Case No. 74381 for further proceedings instead of affirming the City Court’s order of dismissal. The petitioner Eutropio Zayas, Jr. purchased on installment basis a motor vehicle described as One (1) Unit Ford Thames Freighter with PUJ Body, Engine No. 400E-127738 and Chassis No. 400E-127738 from Mr. Roque Escaño Enterprises in Cagayan de Oro City, dealer of respondent Luneta Motor Company.

The motor vehicle was delivered to the petitioner who (1) paid the initial payment in the amount of P1,006.82; and (2) executed a promissory note in the amount of P7,920.00, the balance of the total selling price in favor of respondent Luneta Motor Company. The promissory note stated the amounts and dates of payment of twenty-six installments covering the P7, 920.00 debts. Simultaneously with the execution of the promissory note and to secure its payment, the petitioner executed a chattel mortgage on the subject motor vehicle in favor of the respondent. After paying a total amount of P3, 148.03, the petitioner was unable to pay further monthly installments prompting the respondent Luneta Motor Company to extra-judicially foreclose the chattel mortgage. The motor vehicle was sold at public auction with the respondent Luneta Motor Company who was the highest bidder in the amount of P5,000.00 realized from the foreclose of the chattel mortgage which could not cover the total amount of the promissory note executed by the petitioner in favor of the respondent, the latter filed Civil Case No. 165263 with the City Court of Manila for the recovery of the balance of P1, 551.74 plus interest.

The City Court of Manila dismiss the case on the ground that the defendant is no longer liable for the deficiency judgment in as much as the chattel mortgage has been foreclosed, with the plaintiff as the highest bidder thereof, citing the case of Ruperto G. Crus vs. Filipinas Investment, decided on May 27, 1968, G.R. No. L-24772 in connection with Article 1484 of the Civil Code, and finding the same well taken. Luneta Motor Company filed an “Urgent Motion for Reconsideration” reiterating its stand that Article 1484 of the New Civil Code on sale of personal property by installment was not applicable and the contract involving the parties was a mere case of an ordinary loan secured by a mortgage.

The court denied the motion of reconsideration for lack of merit, hence, Luneta Motor Company appealed the case to the Court of First Instance of Manila, where the latter is of the impression that the case at bar may not be decided merely as the City Court had done , on the question of law since the presentation of evidence is necessary to adjudicate the questions involved.


Whether or not a deficiency amount after the motor vehicle, subject of the chattel mortgage, has been sold at the public auction still be recovered by respondent company.


No. Article 1484 of the New Civil Code provides;

Article 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:


(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.

In the instant case, respondent Luneta Motor Company maintains that the contract between the company and the petitioner was only an ordinary loan removed from the coverage of Article 1484 of the New Civil Code on the ground that the role of Luneta Motor Company was only to finance the purchase price of the motor vehicle and it has distinct and different identity of the Escaño Enterprises, Cagayan de Oro from which the petitioner Eutoprio Zayas, Jr. purchased the subject vehicle. The respondent’s arguments have no merit. Escaño Enterprises, a dealer of respondent Luneta Motor Company, was merely a collecting-agent as far as the purchase of the subject motor vehicle was concerned. The principal and agent relationship is clear. 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.

Wherefore, the instant petition is hereby granted.

*Case digest by Jelyn C. Ondong, JD-4 Andres Bonifacio Law School, SY 2019-2020