BA Finance Corporation v. Court of Appeals
REITERATIONFacts
The Antecedents: Private respondents Manuel and Lilia Cuady obtained a credit of P39,574.80 from Supercars, Inc. for a Ford Escort, evidenced by a promissory note payable in installments, secured by a chattel mortgage on the vehicle. Supercars, Inc. assigned the note and mortgage to petitioner BA Finance Corporation (BA Finance). The Cuadys paid P36,730.15, leaving a balance of P2,344.65 plus P460.00 in penalties. BA Finance, as assignee, obtained insurance coverage for the vehicle with Zenith Insurance Corporation, with loss payable to BA Finance. The vehicle was damaged in an accident on April 18, 1980. The Cuadys requested BA Finance to claim the insurance proceeds as a total loss and apply it to their outstanding account, returning any surplus. BA Finance insisted on repairing the car. After the repairs, the car became unusable. The Cuadys again requested BA Finance to pursue the total loss claim, but BA Finance did not respond favorably, leading the Cuadys to stop paying installments. Procedural History: BA Finance sued the Cuadys for the unpaid balance. The trial court dismissed the complaint. The Court of Appeals affirmed the dismissal. BA Finance's motion for reconsideration was denied. The Petition: BA Finance filed a petition for review on certiorari, seeking to reverse the Court of Appeals' decision, arguing that its failure to enforce the total loss provision did not extinguish the unpaid balance and that the trial court committed grave abuse of discretion.
Issue(s)
Whether BA Finance Corporation waived its right to collect the unpaid balance on the promissory note due to its failure to enforce the total loss provision in the insurance coverage of the mortgaged motor vehicle. Whether the trial court committed grave abuse of discretion in denying petitioner's motion for postponement and in considering the evidence adduced ex-parte by the private respondents.
Ruling
The petition is devoid of merit. The decision of the Court of Appeals affirming the dismissal of the complaint is affirmed.
Ratio Decidendi
On the issue of waiver and failure to enforce insurance claim: The Court held that BA Finance Corporation, as the assignee of the chattel mortgage, was subrogated to the rights and obligations of Supercars, Inc. and was bound by the terms of the chattel mortgage. Under the deed, BA Finance was constituted as an attorney-in-fact with full power to file, follow-up, compromise, or settle insurance claims and collect proceeds to the extent of its interest. By accepting this agency, BA Finance became bound under Article 1884 of the Civil Code to carry out the agency and was liable for damages suffered by the principals (Cuadys) due to its non-performance. The Court found that the Cuadys suffered pecuniary loss when BA Finance refused to pursue the insurance claim for the total loss of the vehicle, which had been rendered useless by faulty repairs. The Court agreed with the appellate court that it was unjust and inequitable to require the mortgagors to pay the balance when the mortgagee's failure to avail of the insurance money caused the non-payment. On the alleged grave abuse of discretion: The Court ruled that the issue of grave abuse of discretion by the trial court in denying the motion for postponement and considering ex-parte evidence was raised for the first time on appeal. It is axiomatic that issues not raised and/or ventilated in the trial court, let alone in the Court of Appeals, cannot be raised for the first time on appeal, as it would be offensive to the basic rules of fair play, justice, and due process.
Main Doctrine
A mortgagee, constituted as attorney-in-fact under a chattel mortgage, is bound by its acceptance to carry out the agency and is liable for damages which the principal may suffer through its non-performance, such as failing to pursue a valid insurance claim for the mortgaged property.