No. 46306 – LEVY HERMANOS, INC., plaintiff and appellant, vs. LAZARO BLAS GERVACIO, defendant and appellee.
MORAN, J.
Rule Synopsis
Sale with initial payment and balance payable via execution of a PN is not one of installment that will place the transaction within the purview of then Art. 1454-A.
Facts
Levy Hermanos sold a car to Gervavio. The latter made and initial payment and executed a PN for the balance. The PN was secured by a mortgage on the car. Gervacio failed to pay the PN on maturity. Hermanos foreclosed the mortgage, whereby he emerged as the highest bidder for P800.
Hermanos brought an action to collect the deficiency of P1,600.
Gervacio, as defense, raised the provision of Act. No. 4122, inserting Art. 1454-A to the Civil Code, barring the recovery of deficiency in case of a foreclosure sale of personal property sold and payable on installments.
The lower court ruled in favor of Gervacio. The SC reversed.
Issue
May Levy Hermanos recover the deficiency from the foreclosure sale?
Ruling and Discussion
Yes. Levy Hermanos may recover the deficiency from the foreclosure sale.
For Art. 1454-A to apply, two requisites must concur: (a) that there was a contract for the sale of personal property payable in installments; and (b) that there has been a failure to pay two or more installments.
In the case at bar, the first requirement was not present, i.e. while the sale was for a personal property, it is not payable on installment but on a straight term with the balance payable in the period stipulated in the PN after payment of the initial sum. Thus, it does not fall within the coverage of Art. 1454-A.
Reason behind Art. 1454-A. It is aimed at those sales where price is payable in several installments “constituting thus a great temptation for improvident purchasers to buy beyond their means.” These terms deem to place purchasers off their guard and delude them to a miscalculation of their ability to pay.
Such temptation, according to the Court, is not present in this case.
Dispositive
Judgment reversed.