FIRST DIVISION
[ G.R. No. 106418, July 11, 1996 ]DANIEL L. BORDON II v. SERVICEWIDE SPECIALISTS +
DANIEL L. BORDON II AND FRANCISCO L. BORBON, PETITIONERS, VS. SERVICEWIDE SPECIALISTS, INC. & HON. COURT OF APPEALS, RESPONDENTS.
D E C I S I O N
DANIEL L. BORDON II v. SERVICEWIDE SPECIALISTS +
DANIEL L. BORDON II AND FRANCISCO L. BORBON, PETITIONERS, VS. SERVICEWIDE SPECIALISTS, INC. & HON. COURT OF APPEALS, RESPONDENTS.
D E C I S I O N
VITUG, J.:
From the decision of the Court of Appeals in CA-G.R. CV No. 30693 which affirmed that of the Regional Trial Court, NCJR, Branch 39, Manila, in Civil Case No. 85-29954, confirming the disputed possession of a motor vehicle in favor of private respondent and
ordering the payment to it by petitioners of liquidated damages and attorney's fees, the instant appeal was interposed.
The appellate court adopted the factual findings of the court a quo, to wit:
"The plaintiff's evidence shows among others that on December 7, 1984, defendants Daniel L. Borbon and Francisco Borbon signed a promissory note (Exh. A) which states among others as follows:
In their appeal to this Court, petitioners merely seek a modification of the decision of the appellate court insofar as it has upheld the court a quo in the award of liquidated damages and attorney's fees in favor of private respondent. Petitioners invoke the provisions of Article 1484 of the Civil Code which reads:
In ordinary alternative obligations, a mere choice categorically and unequivocally made and then communicated by the person entitled to exercise the option concludes the parties. The creditor may not thereafter exercise any other option, unless the chosen alternative proves to be ineffectual or unavailing due to no fault on his part. This rule, in essence, is the difference between alternative obligations, on the one hand, and alternative remedies, upon the other hand, where, in the latter case, the choice generally becomes conclusive only upon the exercise of the remedy. For instance, in one of the remedies expressed in Article 1484 of the Civil Code, it is only when there has been a foreclosure of the chattel mortgage that the vendee-mortgagor would be permitted to escape from a deficiency liability. Thus, if the case is one for specific performance, even when this action is selected after the vendee has refused to surrender the mortgaged property to permit an extrajudicial foreclosure, that property may still be levied on execution and an alias writ may be issued if the proceeds thereof are insufficient to satisfy the judgment credit.[7] So, also, a mere demand to surrender the object which is not heeded by the mortgagor will not amount to a foreclosure,[8] but the repossession thereof by the vendor-mortgagee would have the effect of foreclosure.
The parties here concede that the action for replevin has been instituted for the foreclosure of the vehicle in question (now in the possession of private respondent). The sole issue raised before us in this appeal is focused on the legal propriety of the affirmance by the appellate court of the awards made by the court a quo of liquidated damages and attorney's fees to private respondent. Petitioners hold that under Article 1484 of the Civil Code, aforequoted, the vendor-mortgagee or its assignees loses any right "to recover any unpaid balance of the price" and any "agreement to the contrary (would be) void."
The argument is aptly made. In Macondray & Co. vs. Eustaquio[9] we have said that the phrase "any unpaid balance" can only mean the deficiency judgment to which the mortgagee may be entitled to when the proceeds from the auction sale are insufficient to cover the "full amount of the secured obligation which x x x include interest on the principal, attorney's fees, expenses of collection, and costs." In sum, we have observed that the legislative intent is not to merely limit the proscription of any further action to the "unpaid balance of the principal" but, as so later ruled in Luneta Motor Co. vs. Salvador,[10] to all other claims that may likewise be called for in the accompanying promissory note against the buyer-mortgagor or his guarantor, including costs and attorney's fees.
In Filipinas Investment & Finance Corporation vs. Ridad[11] while we reiterated and expressed our agreement on the basic philosophy behind Article 1484, we stressed, nevertheless, that the protection given to the buyer-mortgagor should not be considered to be without circumscription or as being preclusive of all other laws or legal principles. Hence, borrowing from the examples made in Filipinas Investment, where the mortgagor unjustifiably refused to surrender the chattel subject of the mortgage upon failure of two or more installments, or if he concealed the chattel to place it beyond the reach of the mortgagee, that thereby constrained the latter to seek court relief, the expenses incurred for the prosecution of the case, such as attorney's fees, could rightly be awarded.
Private respondent bewails the instant petition in that petitioners have failed to specifically raise the issue on liquidated damages and attorney's fees stipulated in the actionable documents. In several cases, we have ruled that as long as the questioned items bear relevance and close relation to those specifically raised, the interest of justice would dictate that they, too, must be considered and resolved and that the rule that only theories raised in the initial proceedings may be taken up by a party thereto on appeal should only refer to independent, not concomitant matters, to support or oppose the cause of action.[12]
Given the circumstances, we must strike down the award for liquidated damages made by the court a quo but we uphold the grant of attorney's fees which we, like the appellate court, find to be reasonable. Parenthetically, while the promissory note may appear to have been a negotiable instrument, private respondent, however, clearly cannot claim unawareness of its accompanying documents so as to thereby gain a right greater than that of the assignor.
WHEREFORE, the appealed decision is MODIFIED by deleting therefrom the award for liquidated damages; in all other respects the judgment of the appellate court is AFFIRMED. No cost.
SO ORDERED.
Padilla (Chairman), Bellosillo, Kapunan, and Hermosisima, Jr., JJ., concur.
[1] Rollo, pp. 88-92.
[2] The rule applies to lease-purchase contracts of personal property. See Article 1485; also Filinvest Credit Corp. vs. Court of Appeals, 178 SCRA 188; Servicewide Specialist vs. IAC, 174 SCRA 80.
[3] 140 SCRA 255.
[4] At pp. 257-258.
[5] Zeyas vs. Luneta Motors, 117 SCRA 726.
[6] Ridad vs. Filipinas Investment & Finance Corporation, 120 SCRA 246.
[7] Industrial Finance Corp. vs. Ramirez, 77 SCRA 152.
[8] See Industrial Finance Corporation vs. Tobias, 78 SCRA 28.
[9] 64 Phil. 446.
[10] 108 Phil. 1037.
[11] 141 Phil. 237.
[12] Bank of America vs. Court of Appeals, 228 SCRA 357.
The appellate court adopted the factual findings of the court a quo, to wit:
"The plaintiff's evidence shows among others that on December 7, 1984, defendants Daniel L. Borbon and Francisco Borbon signed a promissory note (Exh. A) which states among others as follows:
"'PROMISSORY NOTEIn sustaining the decision of the court a quo, the appellate court ruled that petitioners could not avoid liability under the promissory note and the chattel mortgage that secured it since private respondent took the note for value and in good faith.
Acct. No. 115008276
Makati, Metro Manila,
Philippines
December 7, 1984
'P122,856.00
'For value received (installment price of the chattel/s purchased), I/We jointly and severally promised to pay Pangasinan Auto Mart, Inc. or order, at its office at NMI Bldg. Buendia Avenue, Makati, MM the sum of One Hundred Twenty Two Thousand Eight Hundred Fifty Six only (P122,856.00), Philippine Currency, to be payable without need of notice or demand, in installments of the amounts following and at the dates hereinafter set forth, to wit: P10,238.00 monthly for Twelve (12) months due and payable on the 7 day of each month starting January, 1985, provided that a late payment charge of 3% per month shall be added on each unpaid installment from due date thereof until fully paid.
'xxx xxx xxx
'It is further agreed that if upon such default, attorney's services are availed of, an additional sum equal to twenty five percent (25%) of the total sum due thereon, which shall not be less than five hundred pesos, shall be paid to the holder hereof for attorney's fees plus an additional sum equivalent to twenty five percent (25%) of the total sum due which likewise shall not be less than five hundred pesos for liquidated damages, aside from expenses of collection and the legal costs provided for in the Rules of Court.
'It is expressly agreed that all legal actions arising out of this note or in connection with the chattel(s) subject hereof shall only be brought in or submitted to the jurisdiction of the proper court either in the City of Manila or in the province, municipality or city where the branch of the holder hereof is located.
'Acceptance by the holder hereof of payment of any installment or any part thereof after due dated (sic) shall not be considered as extending the time for the payment or any of the installments aforesaid or as a modification of any of the conditions hereof. Nor shall the failure of the holder hereof to exercise any of its right under this note constitute or be deemed as a waiver of such rights.
'Maker:
(S/t) DANIEL L. BORBON, II
Address: 14 Colt St., Rancho Estate I, Concepcion Dos, Marikina, MM
(S/t) FRANCISCO BORBON
Address: 73 Sterling Life Home Pamplona, Las Piñas, MM
"WITNESSES
(illegible) (illegible)
'PAY TO THE ORDER OF
FILINVEST CREDIT CORPORATION
without recourse, notice, presentment and demand waived
PANGASINAN AUTO MART, INC.
BY:
(S/T) K.N. DULCE
Dealer'
"To secure the Promissory Note, the defendants executed a Chattel Mortgage (Exh. B) on
'One (1) Brand new 1984 Isuzu
KCD 20 Crew Cab (Conv.)
Serial No. KC20D0F 207685
Key No. 5509
(Exhs. A and B, p. 2 tsn, September 10, 1985)
"The rights of Pangasinan Auto Mart, Inc. was later assigned to Filinvest Credit Corporation on December 10, 1984, with notice to the defendants (Exh. C, p. 10, Record).
"On March 21, 1985, Filinvest Credit Corporation assigned all its rights, interest and title over the Promissory Note and the chattel mortgage to the plaintiff (Exh. D; p. 3, tsn, Sept. 30, 1985).
"The promissory note stipulates that the installment of P10,238.00 monthly should be paid on the 7th day of each month starting January 1985, but the defendants failed to comply with their obligation (p. 3, tsn, Sept. 30, 1985).
"Because the defendants did not pay their monthly installments, Filinvest demanded from the defendants the payment of their installments due on January 29, 1985 by telegram (Exh. E; pp. 3-4, tsn, Sept. 30, 1985).
"After the accounts were assigned to the plaintiff, the plaintiff attempted to collect by sending a demand letter to the defendants for them to pay their entire obligation which, as of March 12, 1985, totaled P185,257.80 (Exh. H; pp. 3-4, tsn, Sept. 30, 1985).
"For their defense, the defendants claim that what they intended to buy from Pangasinan Auto Mart was a jeepney type Isuzu K. C. Cab. The vehicle that they bought was not delivered (pp. 11-12, tsn, Oct. 17, 1985). Instead, through misrepresentation and machination, the Pangasinan Motor, Inc. delivered an Isuzu crew cab, as this is the unit available at their warehouse. Later the representative of Pangasinan Auto Mart, Inc. (assignor) told the defendants that their available stock is an Isuzu Cab but minus the rear body, which the defendants agreed to deliver with the understanding that the Pangasinan Auto Mart, Inc. will refund the defendants the amount of P10,000.00 to have the rear body completed (pp. 12-34, Exhs. 2 to 3-3A).
"Despite Communications with the Pangasinan Auto Mart, Inc., the latter was not able to replace the vehicle until the vehicle delivered was seized by order of this court. The defendants argue that an assignee stands in the place of an assignor which, to the mind of the court, is correct. The assignee exercise all the rights of the assignor (Gonzales vs. Rama Plantation Co., C.V. 08630, Dec. 2, 1986).
"The defendants further claim that they are not in default of their obligation because the Pangasinan Auto Mart was first guilty of not fulfilling its obligation in the contract. The defendants claim that neither party incurs delay if the other does not comply with his obligation. (citing Art. 1169, N.C.C.)"[1]
In their appeal to this Court, petitioners merely seek a modification of the decision of the appellate court insofar as it has upheld the court a quo in the award of liquidated damages and attorney's fees in favor of private respondent. Petitioners invoke the provisions of Article 1484 of the Civil Code which reads:
"ART. 1484. In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise any of the following remedies:The remedies under Article 1484 of the Civil Code are not cumulative but alternative and exclusive,[2] which means, as so held in Nonato vs. Intermediate Appellate Court and Investor's Finance Corporation,[3] that -
"(1) Exact fulfillment of the obligation, should the vendee fail to pay;
"(2) Cancel the sale, should the vendee's failure to pay cover two or more installments;
"(3) Foreclose the chattel mortgage or the thing sold, if one has been constituted, should the vendee's failure to pay cover two or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void."
"x x x Should the vendee or purchaser of a personal property default in the payment of two or more of the agreed installments, the vendor or seller has the option to avail of any of these three remedies - either to exact fulfillment by the purchaser of the obligation, or to cancel the sale, or to foreclose the mortgage on the purchased personal property, if one was constituted. These remedies have been recognized as alternative, not cumulative, that the exercise of one would bar the exercise of the others."[4]When the seller assigns his credit to another person, the latter is likewise bound by the same law. Accordingly, when the assignee forecloses on the mortgage, there can be no further recovery of the deficiency,[5] and the seller-mortgagee is deemed to have renounced any right thereto.[6] A contrario, in the event the seller-mortgagee first seeks, instead, the enforcement of the additional mortgages, guarantees or other security arrangements, he must then be held to have lost by waiver or non-choice his lien on the chattel mortgage of the personal property sold by any mortgaged back to him, although, similar to an action for specific performance, he may still levy on it.
In ordinary alternative obligations, a mere choice categorically and unequivocally made and then communicated by the person entitled to exercise the option concludes the parties. The creditor may not thereafter exercise any other option, unless the chosen alternative proves to be ineffectual or unavailing due to no fault on his part. This rule, in essence, is the difference between alternative obligations, on the one hand, and alternative remedies, upon the other hand, where, in the latter case, the choice generally becomes conclusive only upon the exercise of the remedy. For instance, in one of the remedies expressed in Article 1484 of the Civil Code, it is only when there has been a foreclosure of the chattel mortgage that the vendee-mortgagor would be permitted to escape from a deficiency liability. Thus, if the case is one for specific performance, even when this action is selected after the vendee has refused to surrender the mortgaged property to permit an extrajudicial foreclosure, that property may still be levied on execution and an alias writ may be issued if the proceeds thereof are insufficient to satisfy the judgment credit.[7] So, also, a mere demand to surrender the object which is not heeded by the mortgagor will not amount to a foreclosure,[8] but the repossession thereof by the vendor-mortgagee would have the effect of foreclosure.
The parties here concede that the action for replevin has been instituted for the foreclosure of the vehicle in question (now in the possession of private respondent). The sole issue raised before us in this appeal is focused on the legal propriety of the affirmance by the appellate court of the awards made by the court a quo of liquidated damages and attorney's fees to private respondent. Petitioners hold that under Article 1484 of the Civil Code, aforequoted, the vendor-mortgagee or its assignees loses any right "to recover any unpaid balance of the price" and any "agreement to the contrary (would be) void."
The argument is aptly made. In Macondray & Co. vs. Eustaquio[9] we have said that the phrase "any unpaid balance" can only mean the deficiency judgment to which the mortgagee may be entitled to when the proceeds from the auction sale are insufficient to cover the "full amount of the secured obligation which x x x include interest on the principal, attorney's fees, expenses of collection, and costs." In sum, we have observed that the legislative intent is not to merely limit the proscription of any further action to the "unpaid balance of the principal" but, as so later ruled in Luneta Motor Co. vs. Salvador,[10] to all other claims that may likewise be called for in the accompanying promissory note against the buyer-mortgagor or his guarantor, including costs and attorney's fees.
In Filipinas Investment & Finance Corporation vs. Ridad[11] while we reiterated and expressed our agreement on the basic philosophy behind Article 1484, we stressed, nevertheless, that the protection given to the buyer-mortgagor should not be considered to be without circumscription or as being preclusive of all other laws or legal principles. Hence, borrowing from the examples made in Filipinas Investment, where the mortgagor unjustifiably refused to surrender the chattel subject of the mortgage upon failure of two or more installments, or if he concealed the chattel to place it beyond the reach of the mortgagee, that thereby constrained the latter to seek court relief, the expenses incurred for the prosecution of the case, such as attorney's fees, could rightly be awarded.
Private respondent bewails the instant petition in that petitioners have failed to specifically raise the issue on liquidated damages and attorney's fees stipulated in the actionable documents. In several cases, we have ruled that as long as the questioned items bear relevance and close relation to those specifically raised, the interest of justice would dictate that they, too, must be considered and resolved and that the rule that only theories raised in the initial proceedings may be taken up by a party thereto on appeal should only refer to independent, not concomitant matters, to support or oppose the cause of action.[12]
Given the circumstances, we must strike down the award for liquidated damages made by the court a quo but we uphold the grant of attorney's fees which we, like the appellate court, find to be reasonable. Parenthetically, while the promissory note may appear to have been a negotiable instrument, private respondent, however, clearly cannot claim unawareness of its accompanying documents so as to thereby gain a right greater than that of the assignor.
WHEREFORE, the appealed decision is MODIFIED by deleting therefrom the award for liquidated damages; in all other respects the judgment of the appellate court is AFFIRMED. No cost.
SO ORDERED.
Padilla (Chairman), Bellosillo, Kapunan, and Hermosisima, Jr., JJ., concur.
[1] Rollo, pp. 88-92.
[2] The rule applies to lease-purchase contracts of personal property. See Article 1485; also Filinvest Credit Corp. vs. Court of Appeals, 178 SCRA 188; Servicewide Specialist vs. IAC, 174 SCRA 80.
[3] 140 SCRA 255.
[4] At pp. 257-258.
[5] Zeyas vs. Luneta Motors, 117 SCRA 726.
[6] Ridad vs. Filipinas Investment & Finance Corporation, 120 SCRA 246.
[7] Industrial Finance Corp. vs. Ramirez, 77 SCRA 152.
[8] See Industrial Finance Corporation vs. Tobias, 78 SCRA 28.
[9] 64 Phil. 446.
[10] 108 Phil. 1037.
[11] 141 Phil. 237.
[12] Bank of America vs. Court of Appeals, 228 SCRA 357.