Case Summary (G.R. No. L-50449)
Petitioner (Defendant-Appellant)
Philippine Acetylene Co., Inc., which executed a promissory note for P35,247.80 plus 12% annual interest and attorney’s fees, secured by a chattel mortgage over the vehicle, and later defaulted on nine consecutive installments.
Respondent (Plaintiff-Appellee)
Filinvest Credit Corporation, successor in interest to Alexander Lim and Filinvest Finance Corporation, holding all rights under the promissory note and chattel mortgage.
Key Dates
• October 30, 1971: Sale of vehicle and execution of promissory note and chattel mortgage.
• November 2, 1971: Assignment of notes and mortgage to Filinvest Finance Corporation.
• March 12, 1973: Appellant executes “Voluntary Surrender with Special Power of Attorney to Sell.”
• April 4 and May 8, 1973: Correspondence on unpaid taxes (P70,122.00) and offer to return vehicle.
• September 14, 1973: Filing of collection suit in the CFI of Manila.
• February 25, 1974: Decision by the Court of First Instance.
• March 22, 1979: Court of Appeals certifies appeal.
• January 30, 1982: Supreme Court renders final decision.
Applicable Law
• New Civil Code (pre-1987), particularly Article 1484 on remedies in installment sales.
• Articles 1232, 1245, and 1497 on modes of payment and delivery.
• Principles governing assignment of credits and warranties against liens and encumbrances.
Factual Background
Alexander Lim sold the vehicle to appellant for P55,247.80, P20,000 paid down and P35,247.80 payable in 34 monthly installments bearing 12% interest, secured by chattel mortgage. Lim assigned his rights to Filinvest Finance, which merged into Filinvest Credit Corporation. Appellant defaulted on nine installments.
Demand and Voluntary Surrender
Appellee’s counsel demanded full payment or return of the vehicle within five days. Appellant replied that it would surrender the vehicle “in full satisfaction” of its debt under Article 1484 of the Civil Code. The vehicle was delivered along with a document authorizing appellee to sell it.
Issue: Extinguishment of the Debt by Surrender
Appellant contended that surrender amounted to dation in payment (dacion en pago) novating and extinguishing the debt. It argued that delivery and appellee’s acceptance transferred ownership and discharged all obligations.
Analysis on Dation in Payment
The Court held that mere delivery does not effect dacion en pago absent clear consent and the essential elements of sale (consent, object, consideration). The “Voluntary Surrender with Special Power of Attorney to Sell” demonstrated that appellee was authorized only to sell on appellant’s behalf and apply proceeds to the debt, with appellant remaining owner and liable for any deficiency. No novation or transfer of ownership occurred.
Remedy of Foreclosure and Estoppel
A mortgagee’s mere recovery of possession does not preclude pursuing the unpaid balance; only foreclosure sale bars further action. Appellee’s abandonment of foreclosure did not estop it from demanding payment. Appellant’s estoppel
Case Syllabus (G.R. No. L-50449)
Procedural Background
- The case was certified to the Supreme Court by the Court of Appeals on purely questions of law arising from an appeal of the Court of First Instance of Manila, Branch XII.
- The CFI rendered judgment directing defendant-appellant to pay outstanding obligations, interest, attorney’s fees, and to surrender the mortgaged vehicle.
- The defendant-appellant appealed, raising five assignments of error distilled into two principal issues.
- The Supreme Court consolidated and resolved these issues in G.R. No. 50449 on January 30, 1982.
Facts
- On October 30, 1971, Philippine Acetylene Co., Inc. purchased a 1969 Chevrolet (Serial No. 136699Z303652) for ₱55,247.80 from Alexander Lim, paying ₱20,000 down and financing ₱35,247.80 over 34 monthly installments of ₱1,036.70 at 12% per annum, plus 25% attorney’s fees on unpaid balance.
- A chattel mortgage secured the promissory note. Lim assigned his rights to Filinvest Finance Corporation on November 2, 1971; Filinvest Finance merged into Filinvest Credit Corporation, the plaintiff-appellee.
- The defendant defaulted on nine successive installments. The appellee sent a demand letter giving the choice to pay in full or return the mortgaged vehicle within five days.
- The appellant replied by voluntarily surrendering the vehicle and executing a “Voluntary Surrender with Special Power of Attorney To Sell” on March 12, 1973.
- The appellee discovered unpaid taxes of ₱70,122.00 on the vehicle, informed appellant, and offered to return the vehicle, which appellant refused.
- On September 14, 1973, appellee filed an action for collection of money with damages; appellant answered, claiming extinguishment of obligation by s