G.R. No. L-50449 - Filinvest Credit Corp. vs. Philippine Acetylene Co., Inc.

On October 30, 1971, Philippine Acetylene Co., Inc. (appellant) bought a 1969 Chevrolet (Serial No. 136699Z303652) from Alexander Lim for ₱55,247.80, paying ₱20,000 down and a balance of ₱35,247.80 under a promissory note (Exh. B) payable over 34 monthly installments of ₱1,036.70 at 12% per annum interest and 25% attorney’s fees.
To secure payment, appellant executed a chattel mortgage (Exh. C) on the vehicle in Lim’s favor.

On November 2, 1971, Lim assigned his rights under the promissory note and chattel mortgage to Filinvest Finance Corporation (Exh. D).
After a merger, Filinvest Finance Corporation’s rights were further assigned to Filinvest Credit Corporation (appellee) (Exh. A), which fully financed the unpaid balance to Lim.

Appellant defaulted on nine consecutive installments. Appellee’s counsel sent a demand letter (Exh. 1) requiring payment or return of the vehicle within five days.
Appellant replied (Exh. 2) electing to “return the mortgaged property … in full satisfaction” under Article 1484 of the Civil Code and delivered the vehicle along with a “Voluntary Surrender with Special Power of Attorney To Sell” (Annex C).

On April 4, 1973, appellee informed appellant of unpaid vehicle taxes amounting to ₱70,122.00 and demanded arrears plus accruing interest of ₱4,232.21 by April 9, 1973 (Exh. H).
On May 8, 1973, appellee offered to redeliver the vehicle, which appellant refused (Exh. I).
Appellee sued on September 14, 1973, for collection of money with damages in the CFI of Manila (Civil Case No. 91932). Appellant answered, claiming (a) extinguishment of debt by voluntary surrender (dacion en pago), and (b) breach of warranty on unpaid taxes by original vendor.

The CFI rendered judgment directing appellant to pay ₱22,227.81 plus 12% interest from complaint filing, 15% attorney’s fees; and ordering mutual delivery/acceptance of the vehicle in its delivered condition (save ordinary wear and tear).
Appellant appealed to the Court of Appeals, which certified the case to the Supreme Court as a purely legal question.

Whether appellant’s return of the mortgaged vehicle to appellee constituted dacion en pago, extinguishing its unpaid-price obligation under Article 1484 of the Civil Code.
Whether appellee’s acceptance of the vehicle estopped it from demanding payment.

Whether appellant could impute to appellee the original vendor’s warranty breach regarding ₱70,122.00 unpaid taxes on the vehicle.
Whether appellee, as assignee of Lim’s rights, assumed the corresponding burdens and warranties under the assignment agreement.