No. L-28074 – NORTHERN MOTORS, INC., plaintiff-appellant, vs. CASIANO SAPINOSO and “JOHN DOE”, defendants-appellees.
VILLAMOR, J.
Rule Summary
For the seller to be barred to recover the unpaid balance of the purchase price under the Recto Law, there must be an actual foreclosure sale.
Facts
Casiano Sapinoso (buyer) bought a car from Northern Motors, Inc. (seller) for P12k, paying P2k down payment and executing a promissory note of the P10k balance. The note was secured by a mortgage on the car. It also provided the seller with alternative remedies in case of default, namely: 1) sale of the car by mortgagee; 2) cancellation of the sale contract; 3) foreclosure of the mortgage – judicial or extra-judicial; and 4) ordinary civil action to exact fulfillment of the obligation. The buyer eventually defaulted in more than two installments. Thus, the seller filed an action before the court praying, among others, that a writ of replevin be issued to obtain possession of the car, preparatory for the exercise of option under the mortgage contract to extrajudicially foreclose the chattel. After filing of the action, the buyer made payments to the note for P1,250. After which, the seller obtained possession of the car by virtue of the writ of replevin issued by the court. In his answer, the buyer, among other, alleged that the car was defective and that he had to delay payments to have it repaired. He also signified a willingness to enter into a compromise agreement.
The CFI ruled that the seller had the right to possess the subject car, but ordered it to return to the buyer the P1,250 paid by the latter after the commencement of the present action by the seller. It ruled that since the seller opted to foreclose the mortgage on the subject chattel, it can no longer recover the unpaid balance on the note.
The SC modified CFI’s decision and held that the seller is not bound to reimburse the buyer for amounts paid after commencement of the action.
Issue
Was the buyer entitled to a reimbursement of the amounts paid on the note subsequent to the seller’s commencement of the present action?
Ruling and Discussion
No. The buyer was not entitled to a reimbursement.
It is the fact of foreclosure and actual sale of the mortgaged chattel that bar further recovery by the vendor of any balance on the purchaser’s outstanding obligation not satisfied by the sale. In this case, there has not yet been a foreclosure sale resulting in a deficiency.
The mere filing of an action as one of replevin to secure the possession of the mortgaged vehicle as a preliminary step to the foreclosure does not bar the seller from accepting further payments on the promissory note. Such payment was made voluntarily by the buyer and does not result from a “further action,” as prohibited by Art. 1484(3). There is no reason why a mortgage creditor should be barred from accepting, before a foreclosure sale, payments voluntarily tendered by the debtor-mortgagor who admits a subsisting indebtedness.
Dispositive
Judgment modified.