Case Summary (G.R. No. L-25951)
Background Facts
Julian R. Vitug, Jr. executed a promissory note for ₱14,605.00, which was secured by a chattel mortgage on a four-door Consul sedan purchased from Supreme Sales & Development Corporation. Following Vitug's default on multiple payments, Supreme Sales assigned the promissory note and chattel mortgage to Filipinas Investment & Finance Corporation. Subsequently, after obtaining a writ of replevin, the vehicle was voluntarily surrendered, auctioned, and sold, leaving a deficiency of ₱8,349.35, plus interest.
Procedural History
On August 4, 1965, Supreme Sales filed a motion to dismiss the complaint based on Article 1484 of the Civil Code, referred to as the Recto Law, which precludes sellers from pursuing deficiency judgments under certain conditions. The trial court granted this motion, leading to the dismissal of the appellant's complaint against Supreme Sales. Filipinas Investment filed a motion for reconsideration, which the court denied, prompting this appeal.
Legal Framework and Arguments
At the core of the appeal is the interpretation of Article 1484 of the Civil Code. This provision allows a seller to foreclose a chattel mortgage and precludes them from seeking further recovery if the buyer defaults on two or more installment payments. The trial court concluded that the remedy sought by the appellant was barred by this provision, as their pursuit of the deficiency judgment was deemed an impermissible action against the appellee following the foreclosure.
Filipinas Investment contended that Article 1484 does not apply to their situation, asserting that the assignment of the promissory note and chattel mortgage was made on a "with-recourse" basis. Therefore, in the event of default by Vitug, the appellant retained the right to pursue recovery against Supreme Sales.
Analysis
The Supreme Court found merit in the appellant's argument, emphasizing that the assignment of the promissory note was not merely a transfer of rights but included a clear agreement for recourse against Supreme Sales should Vitug default. This agreement allows recourse to the seller and differentiates the circumstances from those typically protected under the Recto Law.
The Recto Law's essential purpose is to protect buyers in installment agreements; however, it does not extend to transactions where rights of recourse are explicitly stated between a seller and an assignee.
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Case Overview
- The case involves an appeal from the Court of First Instance of Manila regarding the dismissal of the amended complaint filed by Filipinas Investment & Finance Corporation against Julian R. Vitug, Jr. and Supreme Sales & Development Corporation.
- The complaint sought recovery of a deficiency after the foreclosure and sale of a car that Vitug purchased through a promissory note, which was assigned to the appellant.
Background of the Case
- On November 4, 1964, Vitug executed a promissory note for P14,605.00, securing the payment with a chattel mortgage on a 4-door Consul sedan.
- The promissory note was assigned to Filipinas Investment & Finance Corporation on a with-recourse basis, meaning that if Vitug defaulted, the Corporation could pursue the seller for any unpaid balance.
- Vitug defaulted on the payments due on January 6, February 6, March 6, and April 6 of 1965.
- Following the default, a writ of replevin was obtained, but the vehicle was voluntarily surrendered by Vitug before the writ was executed.
- The car was sold at public auction, resulting in a deficiency of P8,349.35, which the appellant sought to collect from the appellee.
Legal Provisions Involved
- The dismissal