MAGNA, VILLOSTAS, ATIENZA --case digest by Dennis T. Batocael

Magna Financial vs. Colarina, G.R. No. 158635

December 9, 2005

Facts:

Respondent bought a Multicab from petitioner. To secure the obligation, respondent executed a promissory note and a chattel mortgage of the vehicle in favor of the petitioner. Respondent then defaulted in payment. Petitioner filed a complaint for foreclosure of chattel mortgage with replevin. A writ of replevin was issued and the vehicle was turned over to Magna financial. The trial court and RTC decided in favor of petitioner and ordered respondent to pay the unpaid balance and foreclose the chattel mortgage. The Court of Appeals reversed the decision.

Issue:

Whether MFS can avail of the two remedies, payment of unpaid balance and foreclosure of chattel mortgage?

Held:

No. Petitioner, having elected the foreclosure of chattel mortgage, is not entitled to be paid the balance even though it did not actually foreclose the chattel mortgage. Article 1484, paragraph 3, provides that if the vendor has availed himself of the right to foreclose the chattel mortgage, he shall have no further action against the purchaser to recover any unpaid balance of the purchase price. Any agreement to the contrary shall be void. In other words, in all proceedings for the foreclosure of chattel mortgages executed on chattels which have been sold on the installment plan, the mortgagee is limited to the property included in the mortgage. The petitioner’s prayer contains two remedies, payment of unpaid balance and foreclosure of chattel mortgage. Such a scheme is not only irregular but is a flagrant circumvention of the prohibition of the law. By praying for the foreclosure of the chattel, Magna Financial Services Group, Inc. renounced whatever claim it may have under the promissory note.

Villostas vs. CA, 210 SCRA 490, G.R. No. 96271
June 26, 1992

FACTS:
Petitioner Villostas and her husband placed an order for one unit of water purifier from private respondent’s Electrolux sales agents. Private respondent’s sales agents assured petitioner of the very special features of their brand of water purifier. On September 13, 1986, an Electrolux Aqua Guard Water purifier was delivered and installed at petitioner’s residence. Petitioner signed the Sales Order and the Contract of Sale with Reservation of Title in October 1986. A warranty certificate was issued by private respondent which provides that the product will perform efficiently for one full year from date of original purchase. The purchase of said unit was on installment basis under which petitioner would pay the amount of P16,190.00 in 20 monthly installments of P635.00 a month. However, after two (2) weeks, petitioner verbally complained about the impurities, dirtiness and bad odor coming out of the unit. Thus, private respondent Electrolux changed the filter of the unit. Petitioner complained for the second and third time when dirty water still came out of the water purifier after the replacement of the filter. It was on the third complaint of petitioner when the service technician gave advise that the filter should be changed every six (6) months costing about P300.00 which was considered to be uneconomical by the former.

On December 9, 1986, petitioner sent a letter to the private respondent’s branch manager stating therein her complaint that the actual performance of the carbon filter was only for a month instead of the private respondent’s claim that the replacement of such filter will be only once every six (6) months. The petitioner, citing the above incident as uneconomical, decided to return the unit and demand a refund for the amount paid. Electrolux’s branch manager offered to change the water purifier with another brand or any of its appliances of the unit in her favor. Petitioner did not accept it as she was disappointed with the original unit which did not perform as warranted.

ISSUE:
Whether or not the petitioner is entitled to rescind the contract on the basis of a violation of the warranty of the article delivered by the respondent.

HELD:

Yes. At the time the Electrolux Aqua Guard water purifier was delivered and installed at petitioner Villostas’ residence a Warranty Certificate was issued by private respondent Electrolux which provides that the product will perform efficiently for one full year from date of original purchase.

It clearly expresses warranty regarding the efficiency of the water purifier. On this regard, while it is true that Article 1571 of the Civil Code provides for a prescriptive period of six months for a redhibitory action, a cursory reading of the ten preceding articles to which it refers will reveal that said rule may be applied only in case of implied warranties. The present case involves one with an express warranty.

HEIRS OF PAULINO ATIENZA versus DOMINGO P. ESPIDOL

G.R. No. 180665, Aug. 11,2010

Facts:

This case is about the legal consequences when a buyer in a contract to sell on installment fails to make the next payments that he promised.

On August 12, 2002 the Atienzas and respondent Domingo P. Espidol entered into a contract called Kasunduan sa Pagbibili ng Lupa na may Paunang-Bayad (contract to sell land with a down payment) covering the property. They agreed on a price, payable in three installments.

When the Atienzas demanded payment of the second installment of P1,750,000.00 in December 2002, however, respondent Espidol could not pay it. Claiming that Espidol breached his obligation, on February 21, 2003 the Atienzas filed a complaint for the annulment of their agreement with damages before the Regional Trial Court (RTC)of Cabanatuan City in a Civil Case.

Issue:

Whether or not the Atienzas were entitled to the cancellation of the contract to sell they entered into with respondent Espidol on the ground of the latter’s failure to pay the second installment when it fell due.

Held:

The Court declares the Kasunduan sa Pagbibili ng Lupa na may Paunang-Bayad between petitioner Heirs of Paulino Atienza and respondent Domingo P. Espidol dated August 12, 2002 cancelled and the Heirs’ obligation under it non-existent. Regarding the right to cancel the contract for non-payment of an installment, there is need to initially determine if what the parties had was a contract of sale or a contract to sell. In a contract of sale, the title to the property passes to the buyer upon the delivery of the thing sold. In a contract to sell, on the other hand, the ownership is, by agreement, retained by the seller and is not to pass to the vendee until full payment of the purchase price. In the first place, since Espidol failed to pay the installment on a day certain fixed in their agreement, the Atienzas can afterwards validly cancel and ignore the contract to sell because their obligation to sell under it did not arise. Since the suspensive condition did not arise, the parties stood as if the conditional obligation had never existed.