Spouses Restituto Nonato and Ester Nonato v. Intermediate Appellate Court and Investor's Finance Corporation
REITERATIONFacts
The Antecedents: Spouses Restituto Nonato and Ester Nonato purchased a Volkswagen Sakbayan on installment from People's Car, Inc. They executed a promissory note and a chattel mortgage to secure payment. People's Car, Inc. assigned its rights to Investor's Finance Corporation (IFC). For failure to pay two or more installments, IFC repossessed the vehicle on March 20, 1978. Procedural History: Despite repossession, IFC demanded payment of the balance of the purchase price. IFC subsequently filed a complaint against the Nonatos for the unpaid balance, damages, and attorney's fees. The spouses Nonato argued that the repossession effectively cancelled the sale, barring IFC from demanding the balance, pursuant to Article 1484 of the Civil Code. The trial court ruled in favor of IFC, ordering the Nonatos to pay the balance, interest, and attorney's fees. The appellate court affirmed the trial court's decision. The Petition: The spouses Nonato filed a petition for review on certiorari, questioning whether a vendor who cancelled the sale for non-payment of installments can still demand the balance of the purchase price.
Issue(s)
Whether the repossession of the motor vehicle by the vendor's assignee, for failure of the vendees to pay two or more installments, constitutes a cancellation of the sale barring the vendor from demanding the unpaid balance of the purchase price. Whether the vendor, or its assignee, who cancelled the sale of a motor vehicle for failure of the buyer to pay two or more of the stipulated installments, may also demand payment of the balance of the purchase price.
Ruling
The judgment of the appellate court is set aside, and the complaint filed by respondent Investors Finance Corporation against the petitioners is dismissed. No costs.
Ratio Decidendi
On the issue of whether repossession constitutes cancellation barring demand for the balance: The Court held that the acts performed by the corporation were wholly consistent with the conclusion that it had opted to cancel the contract of sale of the vehicle. The receipt issued by the respondent company to the Nonatos when it took possession of the vehicle stated that the vehicle could be redeemed within fifteen days. This implies that should the petitioners fail to redeem the car within the said period by paying the balance of the purchase price, the company would retain permanent possession of the vehicle, which it did. This action is confirmed by the testimony of the company's witness, who stated that the company would not return the unit without payment of the balance. The Court found the corporation's assertion that repossession was merely for appraisal untenable, especially since no attempt was made to return the repossessed car even after notifying the Nonatos that its value was insufficient to cover the balance. Therefore, the repossession, coupled with the subsequent actions and lack of intent to return the vehicle, constituted a cancellation of the sale. On the issue of whether a vendor who cancelled the sale can demand the balance: The Court reiterated the principle under Article 1484 of the Civil Code, which provides three alternative remedies for a vendor when the vendee fails to pay two or more installments: (1) exact fulfillment of the obligation; (2) cancel the sale; or (3) foreclose the chattel mortgage. The Court emphasized that these remedies are alternative, not cumulative, meaning the exercise of one bars the exercise of the others. By repossessing the vehicle and retaining it permanently, the respondent company effectively cancelled the sale. Consequently, it is barred from exacting payment from the petitioners of the balance of the price of the vehicle, as it cannot simultaneously cancel the sale and demand the unpaid balance. The Court concluded that the respondent corporation cannot have its cake and eat it too.
Main Doctrine
When a vendor of personal property on installment cancels the sale due to the vendee's failure to pay two or more installments, the vendor is barred from demanding payment of the unpaid balance of the purchase price, as the remedies provided under Article 1484 of the Civil Code are alternative and not cumulative.