LAW ON SALES CASE DIGEST
DE LA CRUZ VS. ASIAN CONSUMER AND INDUSTRIAL FINANCE CORP., 
214 SCRA 103 (SEPTEMBER 18, 1992)

TOPIC/DOCTRINE

If the vendor desisted, on his own initiative, from consummating the auction sale, such desistance was a timely disavowal of the remedy of foreclosure and the vendor can still sue for specific performance.”

FACTS

The spouses Romulo de la Cruz and Delia de la Cruz, and one Daniel Fajardo, petitioners, purchased on installment basis one (1) unit Hino truck from Benter Motor Sales Corporation (BENTER for brevity). To secure payment, they executed in favor of BENTER a chattel mortgage over the vehicle and a promissory note for P282,360.00 payable in thirty (30) monthly installments of P9,412.00. On the same date, BENTER assigned its rights and interest over the vehicle in favor of private respondent Asian Consumer and Industrial Finance Corporation (ASIAN for brevity).  Although petitioners initially paid some installments they subsequently defaulted on more than two (2) installments.

On 10 October 1984, the petitioner Romulo de la Cruz brought the vehicle to the office of ASIAN and left it there where it was inventoried and inspected. While ASIAN eventually succeeded in taking possession of the mortgaged vehicle, it did not pursue the foreclosure of the mortgage as shown by the fact that no auction sale of the vehicle was ever conducted.

On 27 November 1984, ASIAN filed an ordinary action with the court a quo for collection of the balance of P196,152.99 of the purchase price. After trial, the court below rendered judgment in favor of ASIAN. On appeal, the Court of Appeals affirmed the judgment.

ISSUE

Whether a chattel mortgagee, after opting to foreclose the mortgage but failing afterward to sell the property at public auction, may still sue to recover the unpaid balance of the purchase price.

RULING

            The court held in the affirmative.

            The court held that it is worth noting that it is the fact of foreclosure and actual sale of the mortgaged chattel that bar recovery by the vendor of any balance of the purchaser’s outstanding obligation not satisfied by the sale (New Civil Code, par. 3, Article 1484). If the vendor desisted, on his own initiative, from consummating the auction sale, such desistance was a timely disavowal of the remedy of foreclosure, and the vendor can still sue for specific performance.”

            Applying this to the case, the court held that there is no actual foreclosure of the mortgaged property, ASIAN is correct in resorting to an ordinary action for collection of the unpaid balance of the purchase price.