LAW ON SALES CASE DIGEST
FILINVEST CREDIT CORP. VS. PHIL. ACETYLENE, CO., INC., 
111 SCRA 421 (JANUARY 30, 1982)

TOPIC/DOCTRINE

It is the fact of foreclosure and actual sale of the mortgaged chattel that bar the recovery by the vendor of any balance of the purchaser’s outstanding obligation not satisfied by the sale. 

FACTS

            The Philippine Acetylene Co., Inc., defendant-appellant, purchased from one Alexander Lim, a motor vehicle, for P55,247.80 with a down payment of P20,000.00 and the balance of P35,247.80 payable, under the terms and conditions of the promissory note, at a monthly installment of P1,036.70 for thirty-four (34) months. As security for the payment of said promissory note, the appellant executed a chattel mortgage over the same motor vehicle in favor of said Alexander Lim. 

            Subsequently, Alexander Lim assigned to the Filinvest Finance Corporation all his rights, title, and interests in the promissory note and chattel mortgage by virtue of a Deed of Assignment.

            Appellant failed to comply with the terms and conditions set forth in the promissory note and chattel mortgage since it had defaulted in the payment of nine successive installments. Appellee then sent a demand letter. whereby its counsel demanded “that you (appellant) remit the aforesaid amount in full in addition to stipulated interest and charges or return the mortgaged property. Accordingly, the mortgaged vehicle was returned to the appellee. 

            On April 4, 1973, appellee wrote a letter to the appellant informing the latter that appellee cannot sell the motor vehicle as there were unpaid taxes on the said vehicle in the sum of P70,122.00. Appellee, in a letter, offered to deliver back the motor vehicle to the appellant but the latter refused to accept it, so appellee instituted an action for collection of a sum of money with damages in the Court of First Instance of Manila. In its answer, the appellant, while admitting the material allegations of the appellee’s complaint, avers that the appellee has no cause of action against it since its obligation towards the appellee was extinguished when in compliance with the appellee’s demand letter, it returned the mortgaged property to the appellee.

ISSUE

Whether Filinvest Credit Corp. 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 the fact of foreclosure and actual sale of the mortgaged chattel that bar the recovery by the vendor of any balance of the purchaser’s outstanding obligation not satisfied by the sale. If the vendor desisted, on his own initiative, from consummating the auction sale, such resistance was a timely disavowal of the remedy of foreclosure, and the vendor can still sue for specific performance. 

        This is exactly what happened in the instant case.