Case Digest (G.R. No. 44671)
Facts:
- The case involves Macondray & Co., Inc. vs. Antonio E. Ruiz and Ernesto Cuisia.
- On January 21, 1932, Macondray sold a De Soto De Luxe Sedan to Ruiz for P3,572.
- Payment terms included P302 in cash and P3,270 through promissory notes by Ruiz and Ramon Borromeo.
- Ruiz mortgaged the automobile and made partial payments, reducing his debt to P2,246.18.
- On March 15, 1934, Ruiz and Cuisia executed a new promissory note for the remaining balance, excluding Borromeo, with a 12% interest rate.
- The mortgage on the automobile remained in effect.
- Defendants defaulted on some payments, leading to foreclosure of the mortgage.
- The sheriff sold the automobile for P500, leaving a balance owed of P1,696.20.
- Macondray filed a complaint against Ruiz and Cuisia, but the trial court ruled in favor of the defendants, citing novation and Act No. 4122.
- The plaintiff appealed, claiming misapplication of the law regarding novation.
Issue:
- (Unlock)
Ruling:
- The Supreme Court upheld the trial court's decision, affirming the novation of the original mortgage and promissory notes.
- The Court ruled that Act No. 4122 was applicable, preventing recovery of the balance owed after foreclosure.
- The Court f...(Unlock)
Ratio:
- The Supreme Court determined that the original contract was fully replaced by the new agreement executed on March 14, 1934.
- Under Article 1203 of the Civil Code, obligations can be modified by changing principal conditions or substituting a debtor.
- The new contract altered key terms, including parties and amounts owed, making the original obligations incompatible.
- The first mortgage was extinguished as the principal obligation was replaced by the new contract, which included a new promissory note and retained the mortgage.
- The Court affirmed the applicability of Act No. 4122, which restricts recovery of balances post-mortgage foreclosure, applicable to prop...continue reading
Case Digest (G.R. No. 44671)
Facts:
The case of Macondray & Co., Inc. vs. Antonio E. Ruiz and Ernesto Cuisia arose from a transaction that took place on January 21, 1932, when the plaintiff, Macondray & Co., Inc., sold an automobile, specifically a "De Soto De Luxe Sedan," to the defendant Antonio E. Ruiz for a total price of P3,572. The payment terms stipulated that Ruiz would pay P302 in cash, while the remaining balance of P3,270 would be settled through several promissory notes executed by Ruiz and Ramon Borromeo, who jointly and severally undertook the obligation to pay the amounts due on specified maturity dates. Ruiz subsequently mortgaged the automobile, formalizing the transaction with a deed of mortgage. Over time, Ruiz made partial payments, reducing his debt to P2,246.18.
On March 15, 1934, the parties entered into a new agreement that excluded Borromeo, wherein Ruiz and another defendant, Ernesto Cuisia, executed a new promissory note for the remaining balance of P2,246.18, with an interest rate of 12% per annum. The new contract maintained the existing mortgage on the automobile. Despite further payments, the defendants eventually defaulted on some installments, prompting the plaintiff to foreclose the mortgage. The sheriff sold the automobile at public auction for P500, and after deducting the sale proceeds and related expenses, the defendants owed the plaintiff P1,696.20.
To recover this amount, Macondray & Co., Inc. filed a complaint against Ruiz and Cuisia. However, the trial court ruled in favor of the defendants, absolving them of the complaint without costs. The court's rationale was that the original mortgage and promissory notes were novated by the subsequent agreement, and under Act No. 4122, the plaintiff coul...