BRICKTOWN DEVELOPMENT CORP. and MARIANO Z. VERALDE VS.

AMOR TIERRA
DEVELOPMENT CORPORATION and the HON. COURT OF APPEALS

FACTS: Bricktown Development Corporation, represented by its President and co-petitioner Mariano Z.
Velarde, executed two Contracts to Sell in favor of Amor Tierra Development Corporation, represented in
these acts by its Vice-President, Moises G. Petilla, covering a total of 96 residential lots at the Multinational
Village Subdivision, La Huerta, Paraaque, Metro Manila.

The total price of P21,639,875.00 was stipulated to be paid by private respondent in such amounts and
maturity dates, as follows: P2,200,000.00 on 31 March 1981; P3,209,968.75 on 30 June 1981;
P4,729,906.25 on 31 December 1981; and the balance of P11,500,000.00 to be paid by means of an
assumption by private respondent of petitioner corporation's mortgage liability to the Philippine Savings
Bank or, alternately, to be made payable in cash. On date, March 31, 1981, the parties executed a
Supplemental Agreement, providing that private respondent would additionally pay to petitioner corporation
the amounts of P55,364.68, or 21% interest on the balance of down payment for the period from 31 March
to 30 June 1981, and of P390,369.37 representing interest paid by petitioner corporation to the Philippine
Savings Bank in updating the bank loan for the period from 01 February to 31 March 1981.

Private respondent was only able to pay petitioner corporation the sum of P1,334,443.21. However, the
parties continued to negotiate for a possible modification of their agreement, but nothing conclusive
happened. And on October 12, 1981, petitioners counsel sent private respondent a Notice of Cancellation
of Contract because of the latters failure to pay the agreed amount.

Several months later, private respondents counsel, demanded the refund of private respondent's various
payments to petitioner corporation, allegedly "amounting to P2,455,497.71," with interest within fifteen days
from receipt of said letter, or, in lieu of a cash payment, to assign to private respondent an equivalent
number of unencumbered lots at the same price fixed in the contracts. When the demand was not heeded,
Amor Tierra filed an action with the court a quo which rendered a decion in its favor. The decision of the
lower court was affirmed in toto by the Court of Appeals. Hence, this petition.

ISSUE:
1. Whether or not the contract was properly rescinded.
2. Whether or not Bricktown properly forfeited the payments of Amor Tierra.
RULING: The contract between Bricktown and Amor Tierra was validly rescinded because of the failure of
the latter to pay the agreed amounts stipulated in the contract on the proper date even after the sixty-days
grace period. Furthermore, the records showed that private respondent corporation paid less than the
amount agreed upon. The Supreme Court also added that such cancellation must be respected. It may also
be noteworthy to add that in a contract to sell, the non-payment of the purchase price can prevent the
obligation to convey title from acquiring any obligatory force.

On the second issue, the Supreme Court ruled that since the private respondent did not actually possessed
the property under the contract, the petitioner is then ordered to return to private respondent the amount
remitted. However, to adjudge any interest payment by petitioners on the amount to be thus refunded,
private respondent should not be allowed to totally free itself from its own breach.

EDCA PUBLISHING VS. SANTOS

FACTS: The movable property in this case consists of books, which were bought from EDCA by an impostor
who sold it to SANTOS. EDCA Publishing sold to a person identifying himself as Professor Jose Cruz who
placed an order by telephone with the former for 406 books, payable on delivery. EDCA prepared the
corresponding invoice and delivered the books as ordered, for which Cruz issued a personal check. On
October 7, 1981, Cruz then sold the 120 of the books to Leonor Santos who asked for verification, and was
then showed the invoice for the books.
Meanwhile, EDCA having become suspicious over a second order placed by Cruz even before clearing of
his first check, made inquiries with the De la Salle College where he had claimed to be a dean and was
informed that there was no such person in its employ. Further verification revealed that Cruz had no more
account or deposit with the Philippine Amanah Bank, against which he had drawn the payment check.
EDCA then went to the police, which set a trap and arrested Cruz. Investigation disclosed his real name as
Tomas de la Pea and his sale of 120 of the books he had ordered from EDCA to the private respondents.

ISSUE: Whether or not EDCA PUBLISHINGAND DISTRIBUTING CORP was unlawfully deprived of the
property?

HELD: NO
Santos was a good faith buyer after taking steps to verify the identity of the seller. When she was showed
the invoice, she reasonably believed that he was a legitimate seller. With regard to unlawful deprivation,
EDCA was not unlawfully deprived of the property by mere failure of consideration. There was already a
perfected contract of sale. Proof was even substantiated when EDCA gave the invoice as proof of payment
upon delivery of the books. This did not amount to unlawful taking, because by the delivery of EDCA to
Cruz, ownership of the books already transferred to him.
It would certainly be unfair now to make the SANTOSES bear the prejudice sustained by EDCA as a result
of its own negligence. We cannot see the justice in transferring EDCA's loss to the SANTOSES who had
acted in good faith, and with proper care, when they bought the books from Cruz.

OCAMPO VS. CA
FACTS: Two (2) documents, an "Agreement to Sell Real Property" and a "Contract to Sell," covering the
same parcel of land were executed by a seller in favor of two (2) different buyers. Both buyers now assert
against each other a better title to the property.chanroblesvirtualawlibrarychanrobles Tolosa and Ocampo
(represented by Borres) entered into an "Agreement to Sell Real Property" 3whereby Tolosa "sells, cedes
and transfers" the land to Ocampo in consideration of P25,000.00, P12,500.00 of which was paid upon
signing of the deed and the balance to be due within six (6) months thereafter. Paragraph 4 of the contract
provides that "immediately upon complete payment of the purchase price . . . by the VENDEE, the VENDOR
. . . agrees to execute and deliver unto the VENDEE whatever pertinent document or documents necessary
to implement this sale and to transfer title to the VENDEE."chan Subject property is mortgaged the land
to the Philippine Veterans Bank and had the encumbrance annotated on his certificate of title Before the
six-month period to complete the payment of the purchase price expired, Ocampo paid but only the total of
P16,700.00. 4Nevertheless Tolosa accepted her subsequent late payments amounting to P3,900.00.
Upon learning of the mortgage lien, Ocampo caused her adverse claim to be annotated on Tolosas
certificate of title Later on, Tolosa sought the cancellation of Ocampos adverse claim and presented her
with two options, namely, a refund of payments made, or a share from the net proceeds if sold to a third
party. Subsequently, Tolosa and Magdalena S. Villaruz executed a "Contract to Sell" 9whereby Tolosa
"sells, cedes, transfers, and conveys" to Villaruz the same land in consideration of P94,300.00. The amount
of P15,000.00 was to be paid upon execution and the balance upon cancellation of all liens and
encumbrances from the certificate of title. The contract stipulated the immediate conveyance of the physical
possession of the land to Villaruz, although no deed of definite sale would be delivered to her unless the
price was fully paid. Tolosa wrote Ocampo offering to reimburse her what she paid provided she would
sign a document canceling her adverse claim. Failing to convince Ocampo, Tolosa filed a petition in the
Court of First Instance of Iloilo to cancel the adverse claim of Ocampo. The petition was however denied
but Tolosa was able to get a favourable decision in another branch of the court. The contract of sale
between Tolosa and Villaruz was registered and a new title in the name of Villaruz was eventually issued.
Aggrived Ocampo filed a third party complaint against Villaruz RTC decided in favour of Ocampo
declaring the agreement between Talosa and Villaruz as null and void and ordered Tolosa to execute the
corresponding Deed of Sale in favour of Ocampo. CA reversed RTC s decision upholding the agreement
between Tolosa and Villaruz, hence, this appeal. The appellate court upheld the sale in favor of Villaruz on
the theory that the 21 April 1975 agreement of Tolosa and Ocampo was merely a contract to sell. It claimed
that in the absence of a deed of absolute sale in favor of Ocampo, in relation to par. 4 of the contract, Tolosa
retained ownership over the land and validly conveyed the same to
Villaruz.chanroblesvirtualawlibrarychanrobles
ISSUE: WON Tolosa has the right to rescind the contract entered between him and Ocampo.
RULING: NO. CA decision reversed and set aside and RTC ruling reinstated The agreement between
Tolosa and Ocampo dated 21 April 1975 although titled "Agreement to Sell Real Property" was a perfected
contract of absolute sale. Paragraph 4 pertains to the undertaking of the seller to execute and deliver to the
buyer any document deemed necessary by law to implement the sale and transfer title since the parties
were unsure of what documents were pertinent. If the intent was for the seller to retain ownership and
possession of the land through non-delivery of certain documents unless the price be fully paid, par. 4 alone
should be inutile; it should have been complemented with a proviso that the sale would not be implemented
nor the title considered transferred unless another document specifically for said purpose be first executed
and delivered to the buyer. In this regard, no right to retain ownership and possession of the land pending
full payment of the price can be inferred from the fact that no delivery was made to Ocampo. The failure of
the buyer to pay the price in full within a fixed period does not, by itself, bar the transfer of the ownership or
possession, 19much less dissolve the contract of sale. Under Art. 1592 of the Civil Code, the failure of
Ocampo to complete her payment of the purchase price within the stipulated period merely accorded Tolosa
the option to rescind the contract of sale upon judicial or notarial demand.obles virtual law library However,
the letter of 2 August 1977 claimed to have been sent by Tolosa to Ocampo rescinding the contract of sale
was defective because it was not notarized and, more importantly, it was not proven to have been received
by Ocampo. hanrobles Likewise, Civil Case No. 12163 could not be considered a judicial demand under
Art. 1592 of the Civil Code because it did not pray for the rescission of the contract. Although the complaint
sought the cancellation of Ocampos adverse claim on Tolosas OCT and for the refund of the payments
made, these could not be equivalent to a rescission. Even assuming arguendo that Civil Case No. 12163
was a valid judicial demand, rescission is not granted as a matter of course. Before Civil Case No. 12163
was filed on 7 October 1977, Ocampo not only paid Tolosa a total of P20,600.00 but also discharged
Tolosas mortgage debt in the amount of P4,453.41. Had not Tolosa ordered the Philippine Veterans Bank
to return the mortgage debt payment by Ocampo, the purchase price would have been deemed fully paid.
Tolosa, on the other hand, is now precluded from raising the issue of late payments. His unqualified
acceptance of payments after the six-month period expired constitutes waiver of the period and, hence, of
the ground to rescind under Art. 1592. In any case, however, the breach on the part of Ocampo was only
slight if not outweighed by the bad faith of Tolosa in reneging in his own prestations, hence, judicial
rescission of the contract cannot be justified. Angeles v. Calasanz. While the contract dated 3 June 1977
in favor of Villaruz is also a contract of sale, that of Ocampo should prevail pursuant to Art. 1544 of the Civil
code on double sales. While Villaruz may have registered his contract or came into possession ahead of
Ocampo, Villaruz was never in good faith since Ocampo already had her adverse claim annotated on
Tolosas title before the sale between Tolosa and Villaruz.

SOUTHERN MOTORS INC VS. MOSCOSO

FACTS: In June 1957, plaintiff-appellee, Southern Motors, Inc. (Southern Motors) sold to defendant-
appellant Angel Moscoso one Chevrolet truck, on installment basis, for P6,445.00. Upon making a down
payment, the defendant executed a promisory 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 Southern Motors. Of the P4,915,00, defendant was only able to pay a total of P550.00,
which P110.00 was applied to the interest up to August 15, and P400.00 to the principal, thus leaving an
unpaid balance of P4,475.00. The defendant failed to pay 3 more installments on the balance of the
purchase price.
In November 1957, the Southern Motors filed a complaint against the Moscoso to recover the unpaid
balance of the promissory note, and the lower court issued a writ of attachment on Moscosos properties.
The Sheriff of San Jose, Antique, attach the Chevrolet truck, as well as a house and lot belonging to
Moscoso, and said truck was brought to the Southern Motors compound in Iloilo City for safe keeping. The
Provincial Sheriff of Iloilo sold the said truck on January 2, 1958 at a public auction in which Southern
Motors itself was the only bidder for P1,000.00. In March 1958, the trial court condemned the defendant
Moscoso to pay the plaintiff Southern Motors the unpaid balance of P4,475.00 with interest at the rate of
12% per annum from August 16, 1957, until fully paid. While Southern Motors claims that in filing the
complaint, demanding payment of the unpaid balance of the purchase price, it has availed of the first
remedy provided in Article 1484 of the new Civil Code i.e. to exact fulfillment of the obligation (specific
performance), Mosocoso, on the other hand, contends that Southern Motors had availed itself of the third
remedy viz, the foreclosure of the chattel mortgage on the truck.
ISSUE: Which remedy under the Civil Code did the vendor Southern Motors avail?

COURT RULING: The Supreme Court, in affirming the decision of the lower court, found that there is
nothing unlawful or irregular in appellee Southern Motors's act of attaching the mortgaged truck itself.
Since it has chosen to exact the fulfillment of the appellant Moscoso's obligation, Southern Motors may
enforce execution of the judgment that may be favorable to it, on all personal and real properties of the
latter not exempt from execution sufficient to satisfy such judgment. No one can successfully contest that
the attachment of a house and lot at San Jose, Antique was merelly an incident to all ordinary civil action.
(Sections 1 & 11, Rule 59; sec. 16 Rule 39.) 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.

SPOUSES NONATO V. IAC & INVESTOR'S FINANCE CORP

FACTS: In 1976, Spouses Restituto Nonato and Ester Nonato purchased a volkswagen from the Peoples
Car Inc on installment basis.
1. To secure their complete payment, Nonato executed a promissory note and a chattel mortgage in
favor of Peoples Car Inc.
2. Subsequently, Peoples Car Inc assigned its rights and interest over the note and mortagge in favor
of Investors Finance Corp (IFC).
3. For failure of the spouses to pay two or more installments, despite demands, the car was repossessed
by IFC.
4. Despite repossession, IFC still demanded from Nonato that they pay the balance of the price of the
car. IFC, then, filed a complaint for the payment of the price of the car with damages
5. Nonato, in their defense, argued that when the company repossessed the car, IFC had, by that act,
effectively cancelled the sale of the vehicle. As such, it was barred from exacting the recovery of the unpaid
balance of the purchase price as mandated by Art 1484.
6. The trial court rendered in favor of IFC and ordered the spouses Nonato pay the balance of the
purchase price of the car with interest. CA affirmed the same.

ISSUE: WON a vendor or his assignee, who had cancelled the sale of a motor vehicle for failure of the
buyer to pay two or more of the stipulated installments, may also demand payment of the balance of the
purchase price

HELD: No. The applicable law in the case at bar is Art 1484 which 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:
(1) Exact fulfillment of the obligation, should the vendee fail to pay;
(2) Cancel the sale, should the vendee's failure to pay cover two or more installments;
(3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's
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.
This provision means that should the vendee or the purchaser of a personal property default in the payment
of two or more of the agreed installments, the vendor or the seller has the option to avail any of these 3
remedieseither to exact fulfillment by the purchaser of the obligation, or to cancel the sale, or to foreclose
the mortgage on the purchased personal property, if one was constituted. These remedies have been
recognized as an alternative, not cumulative, that the exercise of one should bar the exercise of the others.

In the present case, it is not disputed that IFC had taken possession of the car purchased by the Nonatos
after the spouses defaulted in their payments. The defense of IFC that it the repossession of the vehicle
was only for the purpose of appraising its value and for storage and safekeeping pending full payment of
the spouses is untenable. The receipt issued by IFC to the spouses when it took possession of the vehicle
that the vehicle could be redeemed within 15 days. This could only mean that should the spouses fail to
redeem the car within the period provided, IFC would retain permanent possession of the vehicle. IFC even
notified the spouses Nonato that the value of the car was not sufficient to cover the balance of the purchase
price and there was no attempt at all on the part of the company to return the car.

The acts performed by IFC are consistent with the conclusion that it had opted to cancel the sale of the
vehicle. Therefore, it is barred from exacting payment from the petitioners of the balance of the price of the
vehicle which it had already repossessed (it cannot have its cake and eat it too)

RIDAD V. FILIPINAS INVESTMENT AND FINANCE CORP

The vendor of personal property sold on the installment basis is precluded, after foreclosing the
chattel mortgage on the thing sold from having a recourse against the additional security put up by
a third party to guarantee the purchasers performance of his obligation on the theory that to sustain
the same would overlook the fact that if the guarantor should be compelled to pay the balance of
the purchase price, said guarantor will in turn be entitled to recover what he has paid from the
debtor-vendee, and ultimately it will be the latter who will be made to bear the payment of the of the
balance of the price, despite the earlier foreclosure of the chattel mortgage given by him, thereby
indirectly subverting the protection given the latter.

Facts: The spouses Ridad purchased from the Supreme Sales Development Corporation two (2) brand
new Ford Consul Sedans complete with accessories. To secure payment thereof, plaintiffs executed on the
same date a promissory note covering the purchase price and a deed of chattel mortgage not only on the
two vehicles purchased but also on another car (Chevrolet) and their franchise or certificate of public
convenience granted by the defunct Public Service Commission for the operation of a taxi fleet with Filipinas
Investment.

Due to the failure of the plaintiffs to pay their monthly installments as per promissory note, Filipinas
Investment foreclosed on the chattel mortgage on the Ford Consul Sedans. The foreclosure sale had a
deficiency. Consequently, the corporation foreclosed the mortgage constituted on the (Chevrolet) and their
franchise or certificate of public convenience.

Issue: Whether Filipinas Investment is precluded from foreclosing the second mortgage to recover the
deficiency on the first mortgage
Held: No. The vendor of personal property sold on the installment basis is precluded, after foreclosing the
chattel mortgage on the thing sold from having a recourse against the additional security put up by a third
party to guarantee the purchasers performance of his obligation on the theory that to sustain the same
would overlook the fact that if the guarantor should be compelled to pay the balance of the purchase price,
said guarantor will in turn be entitled to recover what he has paid from the debtor-vendee, and ultimately it
will be the latter who will be made to bear the payment of the of the balance of the price, despite the earlier
foreclosure of the chattel mortgage given by him, thereby indirectly subverting the protection given the
latter.

If the vendor under such circumstance is prohibited from having a recourse against the additional security
for reasons therein stated, there is no ground why such vendor should not likewise be precluded from
further extrajudicially foreclosing the additional security put up by the vendees themselves, as in the instant
case, it being tantamount to a further action 5 that would violate Article 1484 of the Civil Code, for then is
actually no between an additional security put up by the vendee himself and such security put up by a third
party insofar as how the burden would ultimately fall on the vendee himself is concerned.

BORBON II v SERVICEWIDE SPECIALISTS INC. - DINGLASAN

FACTS: Daniel and Francisco Borbon issued a PN in favor of Pangasinan Auto Mart for the purchase of
certain chattels. It was secured by a chattel mortgage. The rights under the note were assigned to Filinvest,
which later assigned said rights to Servicewide. The Borbons failed to pay, thus the mortgages were
foreclosed. The Borbons aver that the seller delivered chattels not strictly in accord with their instructions;
nonetheless, they cannot evade liability because the notes have passed to holders for value and in good
faith. The trial court sustained the foreclosure but awarded liquidated damages and attorneys fees in
addition to the proceeds of the auction sale.

ISSUE: W/N it was proper for the trial court to award liquidated damages and attorneys fees in addition
to the proceeds of the auction sale

HELD: NO. First, when a person assigns credits to another, the latter is bound under the same law; thus,
Art. 1484 is equally applicable. In case of foreclosure, the legislative intent is not merely to limit the
proscription to collecting the unpaid balance of the debt but also to other claims including costs of litigation
and attorneys fees. That being the case, the SC struck down the award of liquidated damages, but
considering the facts of the case, the award of attorneys fees is reasonable and sustained.

Note.In a contract of sale of personal property payable in installments the mere fact that the vendor
secures possession of the unpaid articles through an attachment does not necessarily mean that it would
resort to a foreclosure of the mortgage. (Palma vs. Court of Appeals, 232 SCRA 714 [1994]) Borbon II vs.
Servicewide Specialists, Inc., 258 SCRA 634, G.R. No. 106418 July 11, 1996

PASCUAL VS. UNIVERSAL MOTORS CORP.

FACTS: Plaintiff-appellee spouses Lorenzo Pascual and Leonila Torres (spouses Pasqual) executed the
real estate mortgage subject matter of this complaint on December 14, 1960 to secure the payment of the
indebtedness of PDP Transit, Inc. (PDP Trans.) for the purchase of 5 units of Mercedes Benz trucks, with
a total purchase price or principal obligation of P152,506.50 which was to bear interest at 1% per month
starting that day, but the plaintiffs' guarantee is not to exceed P50,000.00 which is the value of the
mortgage. The PDP Trans., as the spouses Pasqual's principal, paid to defendant-appellant Universal
Motors Corporation (Universal Motors) the sum of P92,964.91 on April 5, 1961 for two of the five Mercedes
Benz trucks and on May 22, 1961 for the remaining three, thus leaving a balance of P68,641.69 including
interest due on February 8, 1965.
On March 19, 1965, Universal Motors filed this complaint with the CFI of Manila against the PDP Trans. to
collect the balance due under the Chattel Mortgages and to repossess all the units sold to PDP Trans. as
the spouse Pascuals principal, including the 5 units guaranteed under the subject Real (Estate) Mortgage.
During the hearinbg, Universal Motors admitted that it was able to repossess all the units sold to the latter,
including the 5 units guaranteed by the subject real estate mortgage, and to foreclose all the chattel
mortgages constituted thereon, resulting in the sale of the trucks at public auction. As the real estate
mortgagors, the spouses Pascual filed an action with the CFI of Quezon City for the cancellation of the
mortgage they constituted on 2 parcels of land in favor of the Universal Motors to guarantee the obligation
of PDP Trans. to the amount of P50,000. The said CFI rendered judgment in favor of the spouses Pascual
and ordered the cancellation of the mortgage.

ISSUE: Was Article 1484 of the New Civil Code applicable in the case at bar?

COURT RULING: The Supreme Court affirmed the lower courts decision. Appellant Universal Motors
argues that Article 1484 is not applicable to the case at bar because there is no evidence on record that
the purchase by PDP Trans. of the 5 trucks was payable in installments and that the PDP Trans. had failed
to pay two or more installments. Universal Motors also contends that what Article 1484 prohibits is for the
vendor to recover from the purchaser the unpaid balance of the price after he has foreclosed the chattel
mortgage on the thing sold, but not a recourse against the security put up by a third party.

The Supreme Court concluded to the contrary, saying that the first issue was whether or not the sale was
one on installments. The lower court found that it was, and that there was failure to pay two or more
installments, a finding which is not subject to review by the Supreme Court.

The next contention is that what article 1484 withholds from the vendor is the right to recover any deficiency
from the purchaser after the foreclosure of the chattel mortgage, and not a recourse to the additional
security put up by a third party to guarantee the purchaser's performance of his obligation. But the Supreme
Court to sustain this argument of the appellant would be to indirectly subvert and public policy overturn the
protection given by Article 1484.

MAGNA FINANCIAL VS. COLARINA

Facts: Respondent bought a Multicab from petitioner. To secure the obligation, respondent executed a
promissory note and a chattel mortgage of the vehicle in favor of the petitioner. Respondent then defaulted
in payment. Petitioner filed a complaint for foreclosure of chattel mortgage with replevin. A writ of replevin
was issued and the vehicle was turned over to Magna financial. The trial court and RTC decided in favor
ofpetitioner and ordered respondent to pay the unpaid balance and foreclose the chattel mortgage. The
Court of Appeals reversed the decision.

Issue: Whether MFS can avail of the two remedies, payment of unpaid balance and foreclosure of chattel
mortgage?

Held: No. Petitioner, having elected the foreclosure of chattel mortgage, is not entitled to be paid the
balance even though it did not actually foreclose the chattel mortgage. Article 1484, paragraph 3, provides
that if the vendor has availed himself of the right to foreclose the chattel mortgage, he shall have no further
action against the purchaser to recover any unpaid balance of the purchase price. Any agreement to the
contrary shallbe void. In other words, in all proceedings for the foreclosure of chattel mortgages executed
on chattels which have been sold on the installment plan, the mortgagee is limited to the property included
in the mortgage. The petitioners prayer contains two remedies, payment of unpaid balance and foreclosure
of chattel mortgage. Such a scheme is not only irregular but is a flagrant circumvention of the prohibition of
the law. By praying for the foreclosure of the chattel, Magna Financial Services Group, Inc. renounced
whatever claim it may have under the promissory note.
FILIPINAS INVESTMENT VS VITUG JR., AND SUPREME SALES AND DEVELOPMENT
Doctrine
- Under Art 1484 of the Civil Code, the vendor may only exercise in the alternative the following
remedies: a.) exact fulfillment of the obligation; b.) cancel the sale in case the failure to pay covers
two or more installments and c.) foreclose the chattel mortgage in case one has been executed
over the personalty involved in the case.
- However, the provision can admit of some exceptions as in the present case, where it has been
expressly stipulated in the assignment that recourse may be had against the seller should the buyer
fail to pay for the balance of the obligation.

Facts
Respondent Vitug bought a four-door Consul sedan for Php 14,605. He executed a promissory
note providing for monthly installment payment and at the same time constituted a chattel mortgage over
the vehicle. On the same day he assigned his negotiated the promissory note in favor of herein petitioner
Filipinas Investment, assigning thereto all his rights, including a right of recourse against co-defendant
Supreme Sales.

Vitug predictably failed to pay for the car, and petitioner applied for a writ of replevin, but this was
negated when Vitug voluntarily surrendered the vehicle. The car was sold in public auction but the proceeds
left a balance of Php 8, 349.35, which petitioner now wishes to collect from co-defendant Supreme Sales.

Issue
1.) WON petitioner can collect on the balance from Supreme Sales despite the provision of the Recto
Law (Art 1484)?

Held
1.) YES. The transaction between appellant and appellee was purely an ordinary discounting transaction
whereby the promissory note executed by defendant Vitug was negotiated by appellee in favor of appellant
for a valuable consideration at a certain discount, accompanied by an assignment also of the chattel
mortgage executed by said defendant to secure the payment of his promissory note and with the express
stipulation that should there be any deficiency, recourse could be had against appellee. Stated otherwise,
the remedy presently being sought is not against the buyer of the car or the defendant Vitug but
against the seller, independent of whether or not such seller may have a right of recovery against
the buyer, which, in this case, he does not have under the Recto Law.

OLYMPIA HOUSING, INC., petitioner, vs. PANASIATIC TRAVEL CORPORATION and MA. NELIDA
GALVEZ-YCASIANO, respondents.

The petition for review on certiorari before the Court assails the decision, promulgated on 11 June 1999,
and the resolution, promulgated on 14 October 1999, of the Court of Appeals in CA-G.R. CV Case No.
53516.

The case originated from a complaint for Recovery of Possession (Accion Publiciana) filed by Olympia
Housing, Inc., against Panasiatic Travel Corporation, Maria Nelida Ycasiano and the latters husband. The
object in litigation is a condominium unit sold at the price of P2,340,000.00 payable on installments at the
rate of P33,657.40 per month.

On the basis of the facts encapsulated by the trial court, it would appear that

On August 8, 1984, plaintiff and defendant Ma. Nelida Galvez-Ycasiano entered into a Contract to Sell,
whereby the former agreed to sell to the latter condominium unit no. D-12, comprising an area of 160.50
square meters, more or less, situated on the ground floor of Olympia Condominium located at Makati, Metro
Manila, covered by Condominium Certificate of Title No. 6711, for the agreed price of P2,340,000.00
payable in installments of P33,657.40 per month.

The schedule of payments [were] as follows:

Date Particulars Amount

July 17, 1984 Reservation/Deposit P100,000.00

July 19, 1984 50% Down payment P1,070,000.00

Balance of 50% payable in sixty (60) monthly installments at 24% per annum base on diminishing balance.

Monthly amortization to commence on Sept. 17,

1984.........................................P33,657.40/month

Interest of 2% is included in regular monthly amortization, past due amortization shall bear interest of 2%
per month plus penalty charge of 2% per month.

Pursuant to the Contract to Sell, defendant Ma. Nelida Galvez-Ycasiano made a reservation/deposit in the
amount of P100,000.00 on July 17, 1984 and 50% down payment in the amount of P1,070,000.00 on July
19, 1984.

Defendants made several payments in cash and thru credit memos issued by plaintiff representing plane
tickets bought by plaintiff from defendant Panasiatic Travel Corp., which is owned by defendant Ma. Nelida
Galvez-Ycasiano, who credited/offset the amount of the said plane tickets to defendants account due to
plaintiff.

Plaintiff alleged that far from complying with the terms and conditions of said Contract to Sell, defendants
failed to pay the corresponding monthly installments which as of June 2, 1988 amounted to P1,924,345.52.
Demand to pay the same was sent to defendant Ma. Nelida Galvez-Ycasiano, but the latter failed to settle
her obligation.

For failure of defendant to pay her obligation plaintiff allegedly rescinded the contract by a Notarial Act of
Rescission.

At present, the subject condominium unit is being occupied by defendant Panasiatic Travel Corp., hence
the suit for Recovery of Possession (Accion Publiciana) with prayer for attorneys fees, exemplary damages
and reasonable rentals for the unit from July 28,1988 at the rate of P32,100.00 per month until the
condominium unit is finally vacated.

Defendant Ma. Nelida Galvez-Ycasiano, while admitting the existence of the contract to sell, interposed the
defense that she has made substantial payments of the purchase price of the subject condominium unit
amounting to P1,964,452.82 in accordance with the provisions of the contract to sell; that she decided to
stop payment of the purchase price in the meantime because of substantial differences between her and
the plaintiff in the computation of the balance of the purchase price.

xxx xxx xxx

Evidence adduced by plaintiff such as the statement of account of defendant Ma. Nelida Galvez-Ycasiano
(Exh. C) has been established by plaintiffs witness, Mrs. Isabelita Rivera, which indeed shows that on
several occasions defendant either failed to pay on time or was completely in default in the payment of the
monthly installment of the subject condominium unit.

It can be deduced from said documentary evidence that defendant should start paying the installment on
September 17, 1984, but defendant paid on September 21, 1984 the amount of P51,238.00 thru credit
memo. Witness claimed that a credit memo is a document issued by Olympia Housing Inc. to Panasiatic
Travel Corp. for the amount of ticket purchased instead of paying in cash they just issued credit memo in
order that it would be offset on the monthly amortization due to Olympia Housing Corp. She claimed that
they based it on the invoice that they [were] sending them.

Witness further claimed that since the amount due was only P33,657.40 what she did to the excess of
P51,238.00 was to apply it to the next installment. The next installment was due on October 12, 1984 in the
amount of P26,158.00 representing the excess. It was paid thru credit memo no. 031 on October 17, 1984.
In fact, there was still an excess of P10,081.20. The third installment was due on November 17, 1984.
Defendant made partial payment because the excess payment of P10,081.20 was applied to the third
installment. The 4th installment was due on December 17, 1984; the defendant did not pay instead she
paid On January 9, 1985 the amount of P51,619.08 in cash per O.R. No. 295. Before this payment on
January 9, 1985 defendant owed plaintiff P59,931.81 based on the amortization. The basis [was] the unpaid
amortization due and payable plus 2% interest and 2% penalty charges per month. After payment, the
amount due was P8,312.73. The 5th installment was due on January 17, 1985. No payment was made on
the 6th, 7th 8th installments which were due on January, February, March, April 17, 1985 respectively. The
9th installment was due on May 17, 1985, it was not paid. Defendant made a payment on June 1985 for
P33,231.90 in cash per O.R. No. 439. The next payment was made on June 8, 1985 for P25,574.59. After
these two payments, there was still an outstanding amount due of P32,552.44. No payment was made on
the 10th and 11th installments. The next payment was made on July 24, 1985 for P60,000.00. After this
payment the outstanding amount due was P43,881.76. She made payment on August 16, 1985 for
P30,067.00 thru credit memo no. 045. After this payment the outstanding amount due was P15,160.46.
She did not on the 12th installment, instead she paid on August 28, 1985 for P26,043.00 thru credit memo
no. 046. After this payment the outstanding amount due was P23,511.07. She did not pay on the 13th
installment, instead she paid on October 10, 1985 for P20,830.00 thru credit memo no. 006. After this
payment the outstanding amount due was P38,728.61. She did not pay on the 14th installment, instead
payment was made on November 10, 1985 for P16,212.00 thru credit memo no. 010. After this payment
the outstanding amount due was P58,851.83. No payments were made on the 15th, 16th and 17th
installments. She paid on January 30, 1986 for P33,657.40 in cash per O.R. No. 842. After this payment
the outstanding balance was P138,233.23. No payment was made on the 18th and 19th installment which
fell due on February 17 and March 17, 1986. The next payment was made on April 15, 1986 for P25,263.23.
After this payment the outstanding balance was P198,425.88. She did not pay for six (6) consecutive
months from April 17 to September 17, 1986 corresponding to the 20th up to the 25th installment. The next
payment was made on October 14, 1986 for P82,780.33 in cash per O.R. No. 1628. After this payment the
outstanding amount due was P350,712.73. The 26th and 27th installments were not paid. She paid on
November 24, 1986 for P134,629.60. After this payment the outstanding balance was P306,306.66.
Witness claimed that the basis for the computation was the unpaid amortization due payable for the
particular period plus 2% interest and 2% penalty charge per month. In computing the interest she used the
simple method. The 28th up to the 31st installments were not paid. The next payment was made on April
30, 1987 for P22,213.00 thru credit memo no. 134. After this payment the outstanding balance was
P471,317.60. The basis for this computation is the unpaid amortization due plus 2% interest and 2% penalty
charge per month. The 33rd, 34th and 35th installments were not paid. The next payment was made on
July 22, 1987 for P19,752.00 thru credit memo no. 146. After this payment the outstanding balance was
P664,822.78. The 36th and 37th installments were not paid.[1]

On 31 January 1995, the Regional Trial Court, Branch V, of Makati City ruled thusly-

WHEREFORE, premises considered, judgment is hereby rendered as follows:

1. As the complaint has been prematurely filed without complying with the mandate of Republic Act No.
6552, the complaint is hereby dismissed;

2. That the obligation of defendant Maria Nelida Galvez Ycasiano has now become due and demandable,
said defendant is hereby ordered to pay the sum of P4,007,473.49 as of November 30, 1994 plus 18%
interest per annum, computed from 1 December 1994, but within sixty days from receipt of a copy of this
decision;

3. Upon payment thereof, for plaintiff to issue the corresponding certificate of title in favor of defendant;

4. In the event that said amount in full is not paid including the current amount due including the interest
sans penalties, then immediately thereafter, without necessity of demand, the defendants must vacate the
premises and all payments will be charged as rentals to the property.

No award of damages and attorneys fees for any parties is being adjudged.

No costs.[2]

Thereupon, respondents tendered the amount of P4,304,026.53 to petitioner via Metrobank Cashiers
Check No. CC008857. Petitioner refused to accept the payment, constraining respondents to consign at
the disposal of the court a quo the check on 26 April 1995. In an order, dated 05 June 1996, the check was
allowed to be substituted by another cashiers check payable to the Clerk of Court of the Makati Regional
Trial Court. Complying with yet another court order of 04 January 1996, respondents deposited the amount
of P4,304,026.53 with the Land Bank of the Philippines and subsequently submitted to the court the
corresponding bank book as well as the banks verification.

Meanwhile, both parties appealed the judgment of the trial court. In its now questioned decision of 11 June
1999, the appellate court sustained the trial court.

The denial of the motion for reconsideration prompted petitioner to file the instant petition for review on
certiorari, raising the following assignment of errors, to wit:

THE COURT OF APPEALS ACTED IN A MANNER NOT IN ACCORD WITH LAW AND APPLICABLE
JURISPRUDENCE OF THE SUPREME COURT WHEN IT FAILED AND/OR REFUSED TO RULE UPON
THE EFFECT OF THE FILING OF THE COMPLAINT AND THE NOTARIAL ACT OF RESCISSION
ATTACHED THERETO VIS--VIS THE REQUIREMENTS OF R.A. 6552.

II

THE COURT OF APPEALS ACTED IN A MANNER NOT IN ACCORD WITH LAW AND APPLICABLE
JURISPRUDENCE OF THE SUPREME COURT IN REFUSING TO DECREE THE RESCISSION OF THE
SUBJECT CONTRACT TO SELL ON THE GROUND THAT PETITIONER FAILED TO PAY THE CASH
SURRENDER VALUE PRIOR TO THE FILING OF THE COMPLAINT.

III

THE COURT OF APPEALS ERRED IN AFFIRMING THE TRIAL COURTS DECISION ALLOWING
RESPONDENT YCASIANO TO PAY ON HER ALREADY-DEFAULTED OBLIGATIONS AND, UPON
SUCH PAYMENT, ORDERING PETITIONER TO ISSUE THE CERTIFICATE OF TITLE TO HER.[3]

Respondents, upon the other hand, would insist that the petition should be held devoid of merit considering
that: first, the issues raised in the petition would strike at fundamentally factual questions beyond the
province of a petition for review on certiorari with this Court; second, there was no valid rescission of the
contract to sell on account of the failure of petitioner to give notice of rescission by notarial act, a requisite
laid down in Republic Act No. 6552; third, the oft-invoked Layug vs. IAC[4] case would scarcely find
application, it being a case for annulment of contract, not one for the recovery of possession; fourth, no
effective rescission had taken place on account of the failure of petitioner to pay the cash surrender value,
conformably with the terms of the law; and fifth, there being no valid rescission, the contract remained valid
and subsisting, still thereby obligating respondents to pay the outstanding balance of the purchase price.

In its Reply Brief, petitioner asseverated that, while not categorically made, the Court, in Layug,[5] had held
to be sufficiently anchored, nevertheless, an action for judicial rescission even if no notarial act of rescission
was priorly executed and the non-payment of the cash surrender value before the filing of the complaint.[6]
Moreover, petitioner argued that while the complaint before the trial court was denominated as one for
recovery of possession, the suit could still be considered as a case for judicial rescission considering that
the issue of whether or not it was entitled to recover possession over the property subject matter of the
contract to sell would require, for its resolution, passing upon the initial issue of whether or not the contract
was in fact rescinded by virtue of a notarial act.[7]

The petition must be denied.

The action for reconveyance filed by petitioner was predicated on an assumption that its contract to sell
executed in favor of respondent buyer had been validly cancelled or rescinded. The records would show
that, indeed, no such cancellation took place at any time prior to the institution of the action for
reconveyance. What had been sent by petitioner to respondent was a letter, dated 02 June 1988, that read:

02 June 1988

MS. NELIDA GALVEZ

Pan Asiatic Travel Corp.
3rd Floor, S & L Building
Roxas Boulevard, Manila
Dear Ms. Galvez:

We have sent you many letters in the past asking you to update your payments in accordance with the
terms of our Contract to Sell dated August 25, 1984 as follows:

Purchase Price, Unit No. D-12 P2,340,000.00

Terms of Payment:
- July 17, 1984, Reservation/
Deposit 100,000.00
- July 19, 1984, 50%
Down payment 1,070,000.00
- balance payable in 60
monthly installments with
24% p.a. interest on
diminishing balance.
Monthly payments to commence
Sept. 12, 1984 33,657.04/month
Note: Past due payments to bear interest of 2% per month plus penalty charge of 2% per month.

You are in default and your overdue account now stands as follows:

Purchase Price P2,340,000.00

Add: Interest on monthly

Amortizations 849,444.00
P3,189,444.00
Add: Interest and penalties
on overdues (Refer
to Exh. A) 679,002.34
P3,868,446.34
Less: Payments (Refer
To Exh. B) 1,944,100.82
TOTAL DUE AND DEMANDABLE P1,924,345.52
===========
Unless we receive payment in full within 30 days after service of this notice upon you, our Contract to Sell
shall be cancelled and/or rescinded.

Please give this matter its due attention.

Very truly yours,

(Sgd.) Illegible
(Type) FELIX H. LIMCAOCO, JR.
President[8]
As so aptly observed by the courts below, the foregoing communication to the buyer merely demanded
payment within thirty (30) days from receipt thereof with the threat that if the demand were not heeded, the
contract would forthwith be cancelled or rescinded. Nor did the appellate court erroneously ignore the
notarial rescission attached to the complaint for reconveyance. Apparently, the so-called notarial rescission
was not sent to respondents prior to the institution of the case for reconveyance but merely served on
respondents by way of an attachment to the complaint. In any case, a notarial rescission, standing alone,
could not have invalidly effected, in this case, the cancellation of the contract.

As the trial court elaborated in this case:

A careful study of the evidence presented does not show a notice of cancellation or the demand for
rescission of the contract by a notarial act. The plaintiff appears to be claiming that the June 2, 1988 letter
is a notice of cancellation or a demand for rescission of the contract by a notarial act. This could not be
what the law contemplates. It should be a notice of cancellation or demand for rescission of the contract by
notarial act.

Further, the law requires also full payment of the cash surrender value to the buyer but there is no evidence
adduced by the plaintiff that they delivered to the defendant the cash surrender value. Admittedly, no such
full payment of the cash surrender value to the defendant was made. A mere promise to return is not what
the law contemplates.[9]

The governing law is Republic Act No. 6552, otherwise known as the Realty Installment Buyer Protection
Act, which has become effective since 16 September 1972. Republic Act No. 6552 is a special law
governing transactions that involve, subject to certain exceptions, the sale on installment basis of real
property.[10] The law has been enacted mainly to protect buyers of real estate on installment payments
against onerous and oppressive conditions.[11] Section 3 of the statute provides:

Sec. 3. In all transactions or contracts involving the sale or financing of real estate on installment payments,
including residential condominium apartments but excluding industrial lots, commercial buildings and sales
to tenants under Republic Act Number Thirty-eight hundred forty-four as amended by Republic Act
Numbered Sixty three hundred eighty-nine, where the buyer has paid at least two years of installments, the
buyer is entitled to the following rights in case he defaults in the payment of succeeding installments:

a) To pay without additional interest, the unpaid installments due within the total grace period earned by
him, which is hereby fixed at the rate of one month grace period for every one year of installment payments
made: Provided, That this right shall be exercised by the buyer only once in every five years of the life of
the contract and its extensions, if any.
b) If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of the payments
on the property equivalent to fifty per cent of the total payments made and, after five years of installments,
an additional five per cent every year but not to exceed ninety per cent of the total payments made:
Provided, That the actual cancellation of the contract shall take place after thirty days from receipt by the
buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act and upon
full payment of the cash surrender value to the buyer.

Down payments, deposits or options on the contract shall be included in the computation of the total number
of installments made.

The enactment recognizes the right of the seller to cancel the contract but any such cancellation must be
done in conformity with the requirements therein prescribed.[12] In addition to the notarial act of rescission,
the seller is required to refund to the buyer the cash surrender value of the payments on the property.[13]
The actual cancellation of the contract can only be deemed to take place upon the expiry of a 30-day period
following the receipt by the buyer of the notice of cancellation or demand for rescission by a notarial act
and the full payment of the cash surrender value.

The Court agrees with petitioner that it is not precluded from going to the court to demand judicial rescission
in lieu of a notarial act of rescission. This much must be recognized. Thus, in Layug vs. Intermediate
Appellate Court[14] the Court has ruled that a demand for rescission by notarial act would appear to be
merely circuitous, consequently superfluous, with the filing by the seller of an action for annulment of
contract and for recovery of damages. Unfortunately for petitioner, it would be incorrect to apply Layug to
the instant case. Layug is basically an action for annulment of contract, a kindred concept of rescission,
whereas the instant case before the Court is one for recovery of possession on the thesis of a prior
rescission of the contract covering the property.[15] Not only is an action for reconveyance conceptually
different from an action for rescission but that, also, the effects that flow from an affirmative judgment in
either case would be materially dissimilar in various respects. The judicial resolution of a contract gives rise
to mutual restitution which is not necessarily the situation that can arise in an action for reconveyance.
Additionally, in an action for rescission (also often termed as resolution), unlike in an action for
reconveyance predicated on an extrajudicial rescission (rescission by notarial act), the Court, instead of
decreeing rescission, may authorize for a just cause the fixing of a period.[16]

Nor should a party in litigation be permitted to freely and substantially change the theory or the cause of
action of his case[17] that, otherwise, can put to undue disadvantage the other party by not being accurately
and timely apprised of what he is up against. The character of an action is determined from the issues
raised by the complaint, from the nature of the right or grievance asserted, and from the relief sought in the
complaint.[18] A change of theory can result in grave alteration of the stand theretofore taken by the parties,
and a court must not thereafter take it upon itself to assume its own position on, or the factual and legal
considerations of, the case.

WHEREFORE, all premises considered, the instant petition is DENIED and the appealed decision is
AFFIRMED. No costs.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Ynares-Santiago, Carpio and Azcuna, JJ., concur.