Filinvest Credit Corp.

vs CA
FACTS:
Defendants-appellees, spouses Edilberto and Marciana Tadiaman, a 10-wheeler Izusu
cargo truck from Jordan Enterprises in installments. Said spouses executed a promissory note
for P196,680.00 payable in 24 monthly installments in favor of Jordan Enterprises and a Chattel
Mortgage over the motor vehicle purchased to secure the payment of the promissory note.
Jordan Enterprises, Inc. assigned its rights and interests over the said instruments to Filinvest
Finance and Leasing Corporation, which in turn assigned them to plaintiff-appellant Filinvest
Credit Corporation.
When the Tadiamans defaulted in the payment of the installments due on the
promissory note, Filinvest filed an action for replevin and damages against them with the court
below. A writ of replevin was issued, and the truck was seized in the province of Isabela, by
persons who represented themselves to be special sheriffs of the court, but who turned out to
be employees of the plaintiff-appellant. The truck as was brought by such persons all the way
back to Metro Manila.
Thereafter, defendant spouses filed a counterbond, and the lower court ordered the
return of the truck. This was not immediately implemented because the defendant spouses
were met with delaying tactics of the plaintiff-appellant, and when they finally recovered the
truck, they found the same to be "cannibalized".
HELD:

Replevin is, of course, the appropriate action to recover possession preliminary to the
extrajudicial foreclosure of a chattel mortgage. Filinvest did in fact institute such an action and
obtained a writ of replevin. And, by filing it, Filinvest admitted that it cannot acquire possession
of the mortgaged vehicle in an orderly or peaceful manner. Accordingly, it should have left the
enforcement of the writ in accordance with Rule 60 of the Rules of Court which it had
voluntarily invoked.
Upon the default by the mortgagor in his obligations, Filinvest, as a mortgagee, had
the right to the possession of the property mortgaged preparatory to its sale in a public
12
auction. However, for employing subterfuge in seizing the truck by misrepresenting its
employees as deputy sheriffs and then hiding and cannibalizing it, Filinvest committed bad
faith in violation of Article 19 of the Civil Code which provides: Every person must, in the
exercise of his rights and in the performance of his duties, act with justice, give everyone his
due, and observe honesty and good faith.
In common usage, good faith is ordinarily used to describe that state of mind
denoting honesty of purpose, freedom from intention to defraud, and, generally speaking,
means being faithful to one's duty or obligation. 13 It consists of the honest intention to abstain
from taking an unconscionable and unscrupulous advantage of another.
Industrial Finance Corp vs Ramirez
FACTS:
On December 4, 1970 Arnaldo Dizon sold to Consuelo Alcoba his 1966 model Chevrolet car for
P13,157.89, payable in eighteen monthly installments, which were secured by a chattel
mortgage on the car.
On that same date, Dizon assigned for ten thousand pesos to Industrial Finance Corporation all
his rights and interest in the chattel mortgage. Consuelo Alcoba defaulted in the payment of
the first four installments. Because of that default and by virtue of the acceleration clause in
the promissory note forming part of the mortgage, the whole obligation became due and
demandable.
On November 20, 1971, or less than a year after Industrial Finance Corporation had discounted
Consuelo Alcoba's promissory, note to Dizon, the corporation sued her in the Court of First
Instance of Manila (Civil Case No. 85583). The complaint, a printed form used by the
corporation in collection cases, is denominated "replevin with damages".

ISSUE: whether, by means of that complaint, Industrial Finance Corporation sought to foreclose
the chattel mortgage as contemplated in article 1484 of the Civil Code, formerly Act No. 4122,
otherwise known as the Recto Installment Sale Law.
HELD:
The corporation's action was for specific performance or fulfillment of the obligation and not for
judicial foreclosure Consuelo Alcoba's payment of P2,000 on account of the money judgment
against her signified that she acquiesced in the action for specific performance. She cannot
now be heard to say that the judgment resulting from that action could not be enforced
because the mortgagees had opted for foreclosure of the mortgage.
According to article 1484, it is only when there has been a foreclosure that the mortgagor is
not liable for any deficiency.
In this case, there was no foreclosure. The mortgagee evidently chose the remedy of specific
performance. It levied upon the car by virtue of an execution and not as an incident of a
foreclosure proceeding. It is entitled to an alias writ of execution for the portion of the
judgment that has not been satisfied.
The rule is that in installment sales, if the action instituted is for specific performance and the
mortgaged property is subsequently attached and sold, the sale thereof does not amount to a
foreclosure of the mortgage. Hence, the seller-creditor is entitled to a deficiency judgment
Industrial Finance Corp vs Tobias
FACTS: On June 16, 1968, respondent Castor Tobias bought on installment one (1) Dodge truck
from Leelin Motors, Inc. To answer for his obligation he executed a promissory note in favor of
the latter, for the sum of P29.070.28 payable in thirty-six (36) equal installments with interest
at the rate of 12% per annum payable in the amounts and dates indicated in said promissory
note. 1 To secure payment of the promissory note, respondent Tobias executed in favor of
Leelin Motors, Inc. a chattel mortgage on the Dodge truck.
On June 19, 1969, Leelin Motors, Inc. indorsed the promissory note and assigned the chattel
mortgage to petitioner Industrial Finance Corporation. As a consequence respondent Tobias
paid six (6) installments on the promissory note directly to the petitioner Industrial Finance
Corporation the last of which was made on February 19, 1970. 2
On May 14, 1970, the petitioner's counsel wrote to respondent Tobias the following letter:
Dear Mr. Tobias:
demand is- hereby made upon you to pay the amount of P25,249.65 on or before May 24, 1970
or to surrender within the same period
On May 27, 1970, respondent Tobias wrote petitioner's counsel the following letter:
Dear Sir:
I am now voluntarily and willingly surrendering said truck
Upon learning that the truck met an accident, petitioner decided not to get the truck anymore
from Leelin Motors, Inc.
On February 16, 1971, petitioner filed in the Court of First Instance of Manila an action against
respondent Tobias to recover the unpaid balance of the promissory note
ISSUE: Whether the respondent Court of Appeals erred in affirming the dismissal of the
complaint of the petitioner in the lower court by not considering his right as an unpaid vendor
of the truck in question under Art. 1484 of the New Civil Code
HELD:
The remedies provided for in Art. 1484 are considered alternative, not cumulative 9 such that
the exercise of one would bar the exercise by the others. 10 Here, petitioner has not cancelled
the sale, nor has it exercised the remedy of foreclosure. Foreclosure, judicial or extra-judicial,
presupposes something more than a mere demand to surrender possession of the object of the
mortgage. 11 Since the petitioner has not availed itself of the remedy of cancelling the sale of
the truck in question or of foreclosing the chattel mortgage on said truck, petitioner is still free
to avail of the remedy of exacting fulfillment ' of the obligation of respondent Tobias

To hold the petitioner in estoppel, it must be shown that when it gave the respondent the
choice of either paying the balance of the purchase price or of surrending the truck, it had
already knowledge of the accident and the consequent damage to the truck. In the present
case petitioner claims it had no knowledge of the accident 13 when it gave the respondent the
choice of either paying the balance of the promissory note or of surrendering the truck.
It is claimed by respondent Tobias that he has surrendered the truck to petitioner in his letter
dated May 27, 1970. But the alleged surrender was ineffectual as far as the petitioner is
concerned because petitioner could not take possession of the truck in question as it was in the
custody of Leelin Motors, Inc., which had a mechanic's lien over it. Even respondent Tobias
cannot expect petitioner to accept the term of surrender because aside from the fact that the
truck being surrendered met an accident petitioner was not satisfied with the repair of the
finished portion of the truck in question. Petitioner therefore was justified refusing to accept
such surrender and in bringing suit to recover the balance of the purchase price.
Bicol Savings & Loan vs. Guinhawa
HELD:
In a number of cases, We already held that if in an extrajudicial foreclosure of a chattel
mortgage a deficiency exists, an independent civil action may be instituted for the recovery of
said deficiency. If the mortgagee has foreclosed the mortgage judicially, he may ask for the
execution of the judgment against any other property of the mortgagor for the payment of the
balance. To deny to the mortgagee the right to maintain an action to recover the deficiency
after foreclosure of the chattel mortgage would be to overlook the fact that the chattel
mortgage is only given as a security and not as payment for the debt in case of failure of
payment. (Bank of the Philippine Islands vn Olutanga Lumber Co., 47 Phil. 20; Manila Trading &
Supply Co. v. Tamaraw Plantation Co., 47 Phil. 513.)
The case of Pascual, as cited by the respondent court, is not applicable in this instant case
because it was a case of sale on installment, where after foreclosure of the units the plaintiff
guarantors who had likewise executed a real estate mortgage of up to P50,000, cannot be held
answerable anymore for the deficiency. The conclusion therefore reached by the lower court
was erroneous because in the case at bar, the obligation contracted by the principal debtor
(Depositario) with a solidary co-maker (private respondent herein), was one of loan secured by
a chattel mortgage, executed by the principal debtor, and not a sale where the price is payable
on installments and where a chattel mortgage on the thing sold was constituted by the buyer
and, further, the obligation to pay the installments having been guaranteed by another.
People vs Agoncillo
FACTS: Agoncillo was charged of executing a second mortgage on some property under an
existing chattel mortgage, without securing the consent of the prior mortgagee. He was found
guilty of violation of Par. 2 of art. 319 of the RPC
ISSUE: WON defendant is liable for executing the 2 nd mortgage
HELD: there is nothing to defendants contention that only sale and pleadge and not the second
mortgage of mortgaged properties are contemplated in Art. 319. In the Spanish text of RPC,
which is controlling as this was the text approved by the Legislature, the word hipoteca and
not prenda or pledge is used. Art. 319 therefore applies to second mortgages.
However, defendants appeal is meritorious. It was held that in offenses consisting of
selling or disposing of mortgaged property it is essential that there be a valid and subsisting
mortgage. The chattel mortgage in question is obviously not valid because: 1.) it does not
appear in a notarial document; 2.) it is not accomplished by the indispensable affidavit of good
faith; and 3.) it is not recorded in the CM Register.

Dy, Jr. vs. CA

HELD:
we see no reason why Wilfredo Dy, as the chattel mortgagor can not sell the subject tractor.
There is no dispute that the consent of Libra Finance was obtained in the instant case. In a
letter dated August 27, 1979, Libra allowed the petitioner to purchase the tractor and assume
the mortgage debt of his brother. The sale between the brothers was therefore valid and
binding as between them and to the mortgagee, as well.
actual delivery of the subject tractor could not be made. However, there was constructive
delivery already upon the execution of the public instrument pursuant to Article 1498 and upon
the consent or agreement of the parties when the thing sold cannot be immediately transferred
to the possession of the vendee.
While it is true that Wilfredo Dy was not in actual possession and control of the subject tractor,
his right of ownership was not divested from him upon his default. Neither could it be said that
Libra was the owner of the subject tractor because the mortgagee can not become the owner
of or convert and appropriate to himself the property mortgaged.
There is no showing that Libra Finance has already foreclosed the mortgage and that it was the
new owner of the subject tractor. Undeniably, Libra gave its consent to the sale of the subject
tractor to the petitioner. It was aware of the transfer of rights to the petitioner.
The sale of the subject tractor was consummated upon the execution of the public instrument
on September 4, 1979. At this time constructive delivery was already effected. Hence, the
subject tractor was no longer owned by Wilfredo Dy when it was levied upon by the sheriff in
December, 1979. Well settled is the rule that only properties unquestionably owned by the
judgment debtor and which are not exempt by law from execution should be levied upon or
sought to be levied upon. For the power of the court in the execution of its judgment extends
only over properties belonging to the judgment debtor.
GSIS vs. CA
ISSUE: Whether after the judicial foreclosure of a real estate mortgage and the confirmation of
the sale, the trial court may grant or fix another period for the redemption of the foreclosed
property by the assignee of the mortgagors equity of redemption.
HELD: There is no right of redemption from a judicial foreclosure sale after the confirmation of
the sale, except those granted by banks or banking institutions as provided by the General
Banking Act
Since the GSIS is not a bank or banking institution, its mortgage is covered by the general rule
that there is no right of redemption after the judicial foreclosure sale has been confirmed.
Hence, Judge Numeriano Estenzo exceeded his jurisdiction and acted with grave abuse of
discretion in granting the respondent, MTIDC, another one-year period to redeem the Bacaling
properties over the opposition of petitioner GSIS as mortgagee- purchaser thereof at the public
sale. His orders dated January 19, 1976 and February 12, 1976 are null and void.
Cruz vs. Lee
ISSUE: whether a person who takes a pawn tickets in pledge is bound to renew the ticket from
time to time, by the payment of interest, or premium, as required by the pawnbroker, until the
rights of the pledgor are finally foreclosed.
HELD:
An ordinary pawn ticket is a document by virtue of which the property in the thing pledged
passes from hand to hand by mere delivery of the ticket; and the contract of the pledge is,
therefore, absolvable to bearer. It results that one who takes a pawn ticket in pledge acquires

domination over the pledge; and it is the holder who must renew the pledge, if it is to be kept
alive
Article 1867 contemplates that the pledgee may have to undergo expenses in order to prevent
the pledge from being lost; and this expenses the pledgee is entitled to recover from the
pledgor. From this it follows that were, in a case like this, the pledge is lost by the failure of the
pledgee to renew the loan, he is liable for the resulting damage.
The duty to use the diligence of a good father of the family in caring for the pledge subsists as
long as the pledge article remains in the power of the pledgee.
US vs. Kelayco 32 phil 619

Since the pledged shares in this case are not subject to redemption, the Court of Appeals had
no business invoking and applying the inexistent right of redemption. We cannot thus agree
that the consigned payments should be treated with liberality, or somehow construed as
having been made in the exercise of the right of redemption. We also must reject the appellate
courts declaration that the buyer of at the public auction is not ipso facto rendered the
owner of the auctioned shares, since the debtor enjoys the one-year redemptive period to
redeem the property. Obviously, since there is no right to redeem personal property, the rights
of ownership vested unto the purchaser at the foreclosure sale are not entangled in any
suspensive condition that is implicit in a redemptive period.
WHEREFORE, the petition is GRANTED.

FACTS:
ISSUE:
HELD:

Southern Motors vs. Moscoso

People vs. Mata

FACTS:
ISSUE:
HELD:
Paray vs. Rodriguez
Facts:
Respondents were the owners, in their respective personal capacities, of shares of stock in a
corporation known as the Quirino-Leonor-Rodriguez Realty Inc.Respondents secured by way of
pledge of some of their shares of stock to petitioners Bonifacio and Faustina Paray (Parays)
the payment of certain loan obligations.
When the Parays attempted to foreclose the pledges on account of respondents failure to pay
their loans, respondents filed complaints which sought the declaration of nullity of the pledge
agreements.
Respondents consign to RTC which they interpreted as redemption.
Notwithstanding the consignations, the public auction took place as scheduled, with petitioner
Vidal Espeleta successfully bidding the amount of P6,200,000.00 for all of the pledged shares.
Issue:
WON Petitioners were authorized to refuse as they did the tender of payment since they were
undertaking the auction sale pursuant to the final and executory decision in Civil Cases.
Held:
Yes. it must be clarified that the subject sale of pledged shares was an extrajudicial sale,
specifically a notarial sale, as distinguished from a judicial sale as typified by an execution sale.
Under the Civil Code, the foreclosure of a pledge occurs extrajudicially, without intervention by
the courts. All the creditor needs to do, if the credit has not been satisfied in due time, is to
proceed before a Notary Public to the sale of the thing pledged.
In this case, petitioners attempted as early as 1980 to proceed extrajudicially with the sale of
the pledged shares by public auction. However, extrajudicial sale was stayed with the filing of
Civil Cases No. R-20120 and 20131, which sought to annul the pledge contracts. The final and
executory judgment in those cases affirmed the pledge contracts and disposed.

FACTS:
Plaintiff Southern Motors, Inc. sold to defendant Angel Moscoso one Chevrolet truck on
installment basis, for P6,445.00. Upon making a down payment, the defendant executed a
promissory note for the sum of P4,915.00, representing the unpaid balance of the purchase
price to secure the payment of which, a chattel mortgage was constituted on the truck in favor
of the plaintiff. Of said account, the defendant had paid a total of P550.00, of which P110.00
was applied to the interest and P400.00 to the principal, thus leaving an unpaid balance of
P4,475.00. The defendant failed to pay 3 installments on the balance of the purchase price.
Plaintiff filed a complaint against the defendant, to recover the unpaid balance of the
promissory note. Upon plaintiffs petition, a writ of attachment was issued by the lower court
on the properties of the defendant. Pursuant thereto, the said Chevrolet truck, and a house and
lot belonging to defendant, were attached by the Sheriff and said truck was brought to the
plaintiffs compound for safe keeping. After attachment and before the trial of the case on the
merits, acting upon the plaintiffs motion for the immediate sale of the mortgaged truck, the
Provincial Sheriff of Iloilo sold the truck at public auction in which plaintiff itself was the only
bidder for P1,OOO.OO. The trial court condemned the defendant to pay the plaintiff the amount
of P4,475.00 with interest at the rate of 12% per annum from August 16, 1957, until fully paid,
plus 10% thereof as attorneys fees and costs. Hence, this appeal by the defendant.
ISSUE:
Whether or not the attachment caused to be levied on the truck and its immediate sale at
public auction, was tantamount to the foreclosure of the chattel mortgage on said truck.
HELD:
No.Article 1484 of the Civil Code provides that in a contract of sale of personal property the
price of which is payable in installments, the vendor may exercise any of the following
remedies: (I) Exact fulfillment of the obligation, should the vendee fail to pay; (2) Cancel the
sale, should the vendees failure to pay cover two or more installments; and (3) Foreclose the
chattel mortgage on the thing sold, if one has been constituted, should the vendees failure to
pay cover two or more installments. In this case, he shall have no further action against the
purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be
void.
The plaintiff had chosen the first remedy. The complaint is an ordinary civil action for recovery
of the remaining unpaid balance due on the promissory note. The plaintiff had not adopted the
procedure or methods outlined by Sec. 14 of the Chattel Mortgage Law but those prescribed for
ordinary civil actions, under the Rules of Court. Had the plaintiff elected the foreclosure, it
would not have instituted this case in court; it would not have caused the chattel to be
attached under Rule 59, and had it sold at public auction, in the manner prescribed by Rule 39.
That the plaintiff did not intend to foreclose the mortgage truck, is further evinced by the fact
that it had also attached the house and lot of the appellant at San Jose, Antique.
We perceive nothing unlawful or irregular in plaintiffs act of attaching the mortgaged truck
itself. Since the plaintiff has chosen to exact the fulfillment of the appellants obligation, it may
enforce execution of the judgment that may be favorably rendered hereon, on all personal and
real properties of the latter not exempt from execution sufficient to satisfy such judgment. It

should be noted that a house and lot at San Jose, Antique were also attached. No one can
successfully contest that the attachment was merely an incident to an ordinary civil action. The
mortgage creditor may recover judgment on the mortgage debt and cause an execution on the

mortgaged property and may cause an attachment to be issued and levied on such property,
upon beginning his civil action.