Esguerra v.

CA

Facts:
EsguerraboughtatruckfromGAMIoninstallments.Tosecurethe
payment,achattelmortgagewasexecutedbyEsguerra.Later,Esguerrafailedto
pay2installements.ConsequentlyGAMIfiledanactionforforeclosureofthe
chattelmortgage.AgentsofGAMI,impersonatedsheriffsandtookthesaidtruck
whileitwasinthepossessionofEsguerrasdriver,CarlitoPadua;andthesame
hadremainedinthepossessionofGAMI,notwithstandingdemandsforitsreturn
byEsguerra.

EsguerrafiledacomplaintwiththethenCourtofFirstInstanceofCavite,Branch
IV,TagaytayCitytorecoversaidtruckandfordamages.Esguerraalleged,among
others,thatduetohisfailuretopaytheinstallmentsdue,theagentsofGAMI,Jose
TinoandSamuelDore,representingthemselvesasdeputysheriffsandwithuseof
force,threatsandintimidation,seizedthecargotruckinquestionfromhisdriver,
CarlitoPadua,whileunloadinggravelandsandinPasayCity;andthatdespite
repeateddemands,GAMIrefusedandfailedtoreturnthesame.GAMI,etal.filed
theiranswerwithacounterclaim,allegingasaffirmativedefensethattheplaintiff
gavehisconsenttothetakingofthetruckbytheagentsofthecorporationon
conditionthathebeallowedtorecoveritspossessionuponpaymentofhisback
accounts.

Issue:Whether or not the mortgagee-vendor of the personal property

sold on installments is legally obligated to foreclose the chattel
mortgage and sell the chattel subject thereof at public auction in case
the mortgagor-vendee defaults in the payment of the agreed
installments.

Ruling:

Yes,the mortgagee-vendor of the personal property sold on

installments is legally obligated to foreclose the chattel mortgage and
sell the chattel subject thereof at public auction in case the mortgagor-
vendee defaults in the payment of the agreed installments.

ThetakingofEsguerrastruckwithoutproceedingtosellthesameatpublic
auctionappropriatingthesameinpaymentofEsguerrasindebtednessisnot
lawful.However,therespondentappellatecourtdidnoterrinholdingthatwhile
themortgageecantakepossessionofthechattel,suchtakingdidnotamounttothe

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foreclosureofthemortgage.Otherwisestated,thetakingofEsguerrastruck
withoutproceedingtothesaleofthesameatpublicauction,butinstead,
appropriatingthesameinpaymentofEsguerrasindebtedness,isnotlawful.As
clearlystatedinthechattelmortgagecontract,theexpresspurposeofthetakingof
themortgagedpropertyistosellthesameand/orforeclosethemortgage
constitutedthereoneitherjudiciallyorextrajudiciallyandthereby,liquidatethe
indebtednessinaccordancewithlaw.

Astipulationinacontractofsaleregardingautomaticappropriation
amountstopactumcommissorium,andisthereforenullandvoid.Morethanthat,
evenifsuchautomaticappropriationofthecargotruckinquestioncanbeinferred
fromorbecontemplatedundertheaforesaidmortgagecontract,suchstipulation
wouldbepactumcommissoriumwhichisexpresslyprohibitedbyArticle2088of
theCivilCodeandtherefore,nullandvoid.Thethreeremediesofthevendorin
casethevendeedefaultsunderArt.1484arealternativeandcannotbeexercised
simultaneouslyorcumulativelybythevendorcreditor.Havingoptedtoforeclose
thechattelmortgage,respondentGAMIcannolongercancelthesale.Thethree
remediesofthevendorincasethevendeedefaults,inacontractofsaleofpersonal
propertythepriceofwhichispayableininstallmentunderArticle1484ofthe
CivilCode,arealternativeandcannotbeexercisedsimultaneouslyor
cumulativelybythevendorcreditor.InCruzvs.FilipinasInvestmentandFinance
Corporation(23SCRA791,[1968]),theSupremeCourtconstruingArticle1484
oftheCivilCode,held:Shouldthevendeeorpurchaserofapersonalproperty
defaultinthepaymentoftwoormoreoftheagreedinstallments,thevendoror
sellerhastheoptiontoavailofanyoneofthesethree.