Luis Ribad vs Filipinas Investment and Finance Corp G.R. No. L-39806, January 27, 1983

Luis Ribad vs Filipinas Investment and Finance Corp
G.R. No. L-39806, January 27, 1983
120 SCRA 246


Facts:

On April 14, 1964, plaintiffs purchased from the Supreme Sales arid Development Corporation two (2) brand new Ford Consul Sedans complete with accessories, for P26,887 payable in 24 monthly installments. 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 plaintiffs' franchise or certificate of public convenience granted by the defunct Public Service Commission for the operation of a taxi fleet. Then, with the conformity of the plaintiffs, the vendor assigned its rights, title and interest to the above-mentioned promissory note and chattel mortgage to defendant Filipinas Investment and Finance Corporation.



Due to the failure of the plaintiffs to pay their monthly installments as per promissory note, the defendant corporation foreclosed the chattel mortgage extra-judicially, and at the public auction sale of the two Ford Consul cars, of which the plaintiffs were not notified, the defendant corporation was the highest bidder and purchaser. Another auction sale was held on November 16, 1965, involving the remaining properties subject of the deed of chattel mortgage since plaintiffs' obligation was not fully satisfied by the sale of the aforesaid vehicles, and at the public auction sale, the franchise of plaintiffs to operate five units of taxicab service was sold for P8,000 to the highest bidder, herein defendant corporation, which subsequently sold and conveyed the same to herein defendant Jose D. Sebastian, who then filed with the Public Service Commission an application for approval of said sale in his favor.



On February 21, 1966, plaintiffs filed an action for annulment of contract before the Court of First Instance of Rizal, Branch I, with Filipinas Investment and Finance Corporation, Jose D. Sebastian and Sheriff Jose San Agustin, as party-defendants. By agreement of the parties, the case was submitted for decision in the lower court on the basis of the documentary evidence adduced by the parties during the pre-trial conference. Thereafter, the lower court declared the chattel mortgage to be null and void in so far as the taxicab franchise and the used Chevrolet car of plaintiffs are concerned, and the sale at public auction conducted by the City Sheriff of Manila concerning said taxicab franchise, to be of no legal effect.



Issue:

The validity of the chattel mortgage in so far as the franchise and the subsequent sale thereof are concerned.



Ruling:

The resolution of said issue is unquestionably governed by the provisions of Article 1484 of the Civil Code.

The precise purpose of the law is to prevent mortgagees from seizing the mortgaged property, buying it at foreclosure sale for a low price and then bringing suit against the mortgagor for a deficiency judgment, otherwise, the mortgagor-buyer would find himself without the property and still owing practically the full amount of his original indebtedness.


The lower court rightly declared the nullity of the chattel mortgage in question in so far as the taxicab franchise and the used Chevrolet car of plaintiffs are concerned, under the authority of the ruling in the case of Levy Hermanos, Inc. vs. Pacific Commercial Co., et al., 71 Phil. 587, the facts of which are similar to those in the case at bar. There, we have the same situation wherein the vendees offered as security for the payment of the purchase price not only the motor vehicles which were bought on installment, but also a residential lot and a house of strong materials. This Court sustained the pronouncement made by the lower court on the nullity of the mortgage in so far as it included the house and lot of the vendees, holding that under the law, should the vendor choose to foreclose the mortgage, he has to content himself with the proceeds of the sale at the public auction of the chattels which were sold on installment and mortgaged to him and having chosen the remedy of foreclosure, he cannot nor should he be allowed to insist on the sale of the house and lot of the vendees, for to do so would be equivalent to obtaining a writ of execution against them concerning other properties which are separate and distinct from those which were sold on installment. This would indeed be contrary to public policy and the very spirit and purpose of the law, limiting the vendor's right to foreclose the chattel mortgage only on the thing sold.


Costs against the appellants.