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Hermanos v Gervacio

October 27, 1939 | Moran, J. | Appeal| Breach of contracts -> Meaning of Installment Sale
Plaintiff-appellee: Levy Hermanos, Inc.
Defendant-appellant: Lazaro Blas Gervacio
SUMMARY: Defendant bought car from plaintiff and made the first payment. Promisory note was
executed for the fulfillment of the payment of the balance; secured payment by mortgaging the subject
property. Defendant defaulted in payment, so plaintiff foreclosed mortgage; sued defendant for the
balance of the car. Court ruled for the plaintiff.
DOCTRINE: Art. 1454-A of the Civil Code, which bars plaintiff from recovering unpaid balance for the
property after foreclosure, only applies to sales on installment or those sales where the price is payable
in several installments
1. On Macrh 10, 1937, Hermanos sold a Packard
car to Gervacio. Gervacio made the initial
payment and executed a promisory note due on
June 15, 1937 for the balance of P2,400. To
secure payment, defendant executed a mortgage
on the car; he failed to pay on the maturity date
of the PN. Plaintiff foreclosed the mortgage and
the car was sold at a public auction, with
Hermanos as the highest bidder for P1,800.
2. Hermanos now seeks to collect payment of the
balance of P1,600 + interest.
3. Trial Court ruled for the defendant, applying
Art. 1454-A1 (from Act No. 4122) of the Civil Code,
which bars recovery of the unpaid balance once
the vendor has chosen to foreclose the mortgage.
WON contract between the parties is one of an
installment sale (or WON trial court correct in
applying Art. 1454-A) NO
HELD: Gervacio is sentenced to pay
plaintiff-appellant the sum of P1,600 with
interest at the rate of 12 per cent per
1 In a contract for the sale of personal property payable in
installments shall confer upon the vendor the right to cancel
the sale or foreclose the mortgage if one has been given on the
property, without reimbursement to the purchaser of the
installments already paid, if there be an agreement to this
However, if the vendor has chosen to foreclose the mortgage
he shall have no further action against the purchaser for the
recovery of any unpaid balance owing by the same and any
agreement to the contrary shall be null and void.

1. In order for the provisions of article 1454-A of
the Civil Code to apply, it must appear that there
was a contract for the sale of personal property
payable in installments and that there has been a
failure to pay two or more installments."
(Macondray and Co. vs. De Santos)
2. The contract between Hermanos and Gervacio
is a sale of personal property but not a sale on
installments. It is a straight term sale, in which
the balance, after payment of the initial sum,
should be paid in its totality at the time specified
in the promissory note. Act 4122 is only
applicable to a sale on installments - those sales
where the price is payable in several
3. Rationale: it is in the cases of installment sales
that partial payments consist in relatively small
amounts, constituting thus a great temptation for
improvident purchasers to buy beyond their
means. Such temptation does not arise from
straight term sales, because partial paymnets are
not so small.