Equitable Savings Bank v. Rosalinda Places, G.R. No. 214752, March 09, 2016

FACTS:

On August 15, 2005, respondent purchased a Hyundai Starex GRX Jumbo through a loan granted by petitioner in the amount of P1,196,100. In connection therewith, respondent executed a Promissory' Note with Chattel Mortgage in favor of petitioner, stating that: (a) respondent shall pay petitioner the aforesaid amount in 36-monthly installments of P33,225.00 per month, beginning September 18, 2005 and every 18th of the month thereafter until full payment of the loan; (b) respondent's default in paying any installment renders the remaining balance due and payable; and (c) respondent's failure to pay any installments shall give petitioner the right to declare the entire obligation due and payable and may likewise, at its option, foreclose this mortgage; or file an ordinary civil action for collection and/or such other action or proceedings as may be allowed under the law.

From September 18, 2005 to December 21, 2006, respondent paid the monthly installment of P33,225.00 per month. However, she failed to pay the monthly installments in January and February 2007, thereby triggering the acceleration clause contained in the Promissory Note with Chattel Mortgage and prompting petitioner to send a demand letter dated February 22, 2007 to compel respondent to pay the remaining balance of the loan in the amount of P664,500. As the demand went unheeded, petitioner filed on March 7, 2007 the instant Complaint for Recovery of Possession with Replevin with Alternative Prayer for Sum of Money and Damages against respondent before the RTC, praying that the court a quo: (a) issue a writ of replevin ordering the seizure of the subject vehicle and its delivery to petitioner; or (b) in the alternative as when the recovery of the subject vehicle cannot be effected, to render judgment ordering respondent to pay the remaining balance of the loan, including penalties, charges, and other costs appurtenant thereto.

Pending respondent's answer, summons and a writ of replevin were issued and served to her personally on April 26, 2007, and later on, a Sheriffs Return dated May 8, 2007 was submitted as proof of the implementation of such writ.

In her defense, while admitting that she indeed defaulted on her installments for January and February 2007, respondent nevertheless insisted that she called petitioner regarding such delay in payment and spoke to a bank officer, a certain Rodrigo Dumagpi, who gave his consent thereto. Respondent then maintained that in order to update her installment payments, she paid petitioner the amounts of P70,000 on March 8, 2007 and P33,000 on March 20, 2007, or a total of P103,000. Despite the aforesaid payments, respondent was surprised when petitioner filed the instant complaint, resulting in the sheriff taking possession of the subject vehicle.

The RTC ruled in petitioner's favor and, accordingly, confirmed petitioner's right and possession over the subject vehicle and ordered respondent to pay the former the amount of P15,000 as attorney's fees as well as the costs of suit.

The CA affirmed the RTC ruling with modification: (a) ordering petitioner to return the amount of P103,000 to respondent; and (b) deleting the award of attorney's fees in favor of petitioner for lack of sufficient basis. It held that while respondent was indeed liable to petitioner under the Promissory Note with Chattel Mortgage, petitioner should not have accepted respondent's late partial payments in the aggregate amount of P103,000. In this regard, the CA opined that by choosing to recover the subject vehicle via a writ of replevin, petitioner already waived its right to recover any unpaid installments, pursuant to Article 1484 of the Civil Code. As such, the CA concluded that respondent is entitled to the recovery of the aforesaid amount.

 

ISSUE:

Whether the CA correctly ordered petitioner to return to respondent the amount of P103,000 representing the latter's late installment payments

 

RULING:

In this case, there was no vendor-vendee relationship between respondent and petitioner. A judicious perusal of the records would reveal that respondent never bought the subject vehicle from petitioner but from a third party, and merely sought financing from petitioner for its full purchase price. In order to document the loan transaction between petitioner and respondent, a Promissory Note with Chattel Mortgage dated August 18, 2005 was executed wherein, inter alia, respondent acknowledged her indebtedness to petitioner in the amount of P1,196,100 and placed the subject vehicle as a security for the loan. Indubitably, a loan contract with the accessory chattel mortgage contract - and not a contract of sale of personal property in installments - was entered into by the parties with respondent standing as the debtor-mortgagor and petitioner as the creditor-mortgagee. Therefore, the conclusion of the CA that Article 1484 finds application in this case is misplaced, and thus, must be set aside.

The Promissory Note with Chattel Mortgage subject of this case expressly stipulated, among others, that: (a) monthly installments shall be paid on due date without prior notice or demand; (b) in case of default, the total unpaid principal sum plus the agreed charges shall become immediately due and payable; and (c) the mortgagor's default will allow the mortgagee to exercise the remedies available to it under the law. In light of the foregoing provisions, petitioner is justified in filing his Complaint before the RTC seeking for either the recovery of possession of the subject vehicle so that it can exercise its rights as a mortgagee, i.e., to conduct foreclosure proceedings over said vehicle; or in the event that the subject vehicle cannot be recovered, to compel respondent to pay the outstanding balance of her loan. Since it is undisputed that petitioner had regained possession of the subject vehicle, it is only appropriate that foreclosure proceedings, if none yet has been conducted/concluded, be commenced in accordance with the provisions of Act No. 1508, otherwise known as "The Chattel Mortgage Law," as intended. Otherwise, respondent will be placed in an unjust position where she is deprived of possession of the subject vehicle while her outstanding debt remains unpaid, either in full or in part, all to the undue advantage of petitioner - a situation which law and equity will never permit.

Further, there is nothing in the Promissory Note with Chattel Mortgage that bars petitioner from receiving any late partial payments from respondent. If at all, petitioner's acceptance of respondent's late partial payments in the aggregate amount of P103,000 will only operate to reduce her outstanding obligation to petitioner from P664,500 to P561,500. Such a reduction in respondent's outstanding obligation should be accounted for when petitioner conducts the impending foreclosure sale of the subject vehicle. Once such foreclosure sale has been made, the proceeds thereof should be applied to the reduced amount of respondent's outstanding obligation, and the excess of said proceeds, if any, should be returned to her.