Friday, January 9, 2009

Pascual vs. Universal Motors Corp.


Pascual vs. Universal Motors Corp.
61 SCRA 121
November 1974

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 Pascual’s 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 court’s 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.