Servicewide Specialists, Inc. v. Honorable Intermediate Appellate Court
REITERATIONFacts
The Antecedents: Respondent Galicano Siton purchased a vehicle from Car Traders Philippines, Inc., making a downpayment and executing a promissory note for the balance, which included advance interests and insurance premiums. As security, Siton executed a chattel mortgage over the vehicle. The credit was subsequently assigned to Filinvest Credit Corporation and then to petitioner Servicewide Specialists, Inc. Siton sold the mortgaged vehicle to respondent Justiniano de Dumo, who assumed the installment payments. Siton and de Dumo were advised verbally by an officer of Filinvest Credit Corporation that the verbal information about the sale would suffice and that it would be more convenient to keep the account in Siton's name. Procedural History: Petitioner filed an action for replevin or sum of money against Siton and "John Doe" (later identified as de Dumo), alleging failure to pay installments due November 2, 1981, December 2, 1981, and January 2, 1982. De Dumo answered, admitting possession and asserting he had religiously paid the installments. The Regional Trial Court (RTC) denied the writ of replevin, ordered the defendants to pay the remaining balance jointly and severally by installments, deemed the chattel mortgage to cover the obligation, ordered reimbursement for insurance premium payments, and denied other claims. The Intermediate Appellate Court (IAC) affirmed the RTC decision in toto. The Petition: Petitioner seeks reversal of the IAC decision, arguing that the sale between Siton and de Dumo was void, that petitioner was not bound by the unnotarized deed of sale, that no demand was made on de Dumo, that the writ of replevin should have been issued, and that de Dumo should have been notified about submitting insurance policies and redeeming a rubber check.
Issue(s)
Whether the sale of the mortgaged vehicle between Siton and de Dumo was valid despite the absence of the mortgagee's written consent; whether petitioner and its predecessors-in-interest are bound by the sale between Siton and de Dumo; and whether the mortgagee was obligated to make demands on de Dumo for payment. Whether the petitioner was entitled to a Writ of Replevin. Whether the appellate court erred in ruling that petitioner was obliged to inform de Dumo about insurance policies and to demand redemption of a dishonored check. Whether private respondents were in default in their payments. Whether the purchase of the car by de Dumo extinguished Siton's liability as the original debtor. Whether Siton and de Dumo are jointly or solidarily liable.
Ruling
The petition is GRANTED. The assailed decision of the Court of Appeals is REVERSED and SET ASIDE. A new judgment is entered ordering respondents Galicano Siton and Justiniano de Dumo, jointly, to pay petitioner Servicewide Specialists, Incorporated the total sum of the remaining unpaid balance on the promissory note with interest at fourteen percent per annum from January 25, 1982, until fully paid, as well as stipulated attorney's fees and liquidated damages, and to reimburse petitioner the sum of P 3,859.90 for premium payments on the insurance policies over the subject vehicle. Costs are against private respondents.
Ratio Decidendi
On the validity of the sale, petitioner's binding obligation, and the mortgagee's obligation to make demands: The Court held that the absence of the mortgagee's written consent to the sale of the mortgaged property affects not the validity of the sale itself, but only the penal liability of the mortgagor and the binding effect of the sale on the mortgagee. However, in this case, the Court found that there was an implied acceptance by the petitioner and its predecessor of the transfer of ownership to de Dumo, evidenced by their acceptance of payments made through de Dumo's personal checks. This conduct, coupled with the advice given by Filinvest's credit lawyer, led the Court to conclude that petitioner was bound by the sale under the doctrine of estoppel. The Court noted that petitioner itself admitted de Dumo's obligation by naming him as a defendant and seeking joint and several liability. The mortgagee was not obligated to make demands on de Dumo for payment, as the acceptance of payments from de Dumo implied acceptance of the transfer. On the entitlement to a Writ of Replevin: The Court ruled that the petitioner was not entitled to a writ of replevin because it had chosen the alternative remedy of exacting fulfillment of the obligation by praying for the payment of the remaining unpaid sums. Article 1484 of the Civil Code provides that the remedies of exacting fulfillment, canceling the sale, or foreclosing the mortgage are alternative and mutually exclusive. By seeking payment, the petitioner waived the remedy of foreclosure, which is a prerequisite for replevin in this context. The Court cited Luneta Motor Company vs. Dimagiba to support the principle that a scheme combining these remedies is irregular and a circumvention of the law. On the obligation to inform about insurance and demand redemption: The appellate court erred in imposing obligations on the petitioner regarding insurance policies and demanding redemption of a dishonored check, as these issues were not properly raised or supported by evidence. On the default of private respondents: The Court found merit in the petitioner's argument that the appellate court erred in ignoring evidence of default. The Court noted that the checks issued by de Dumo for the November, December 1981, and January 1982 installments were dishonored and it was not shown that they were subsequently replaced and cashed. Under Article 1249 of the Civil Code, the delivery of mercantile documents produces the effect of payment only when they are cashed. The burden of proving extinguishment of the debt by payment rests on the debtor. Therefore, the installments were deemed unpaid, and the total unpaid balance became due and demandable without need of demand, as stipulated in the promissory note. On the effect of de Dumo's purchase on Siton's liability: The purchase of the car by de Dumo did not extinguish Siton's liability as the original debtor, as there was no showing that Siton was released from his responsibility, which would constitute novation. The acceptance of payments from de Dumo merely resulted in the addition of debtors, not novation, allowing the creditor to enforce the obligation against both. On the liability of Siton and de Dumo: The Court affirmed the joint liability of Siton and de Dumo. The Court cited several cases, including Straight vs. Hashell, to support the principle that without agreement for solidarity, the original and new debtors are considered obligated jointly.
Main Doctrine
The remedies provided under Article 1484 of the Civil Code (exact fulfillment, cancellation of sale, or foreclosure of mortgage) are alternative and mutually exclusive; a vendor cannot avail of more than one remedy simultaneously. Acceptance of payments from a third party who assumed the obligation, without a clear release of the original debtor, results in the addition of debtors, not novation.