G.R. No. L-67181 November 22, 1985
SPOUSES RESTITUTO NONATO and ESTER NONATO, petitioners, vs. THE HONORABLE INTERMEDIATE APPELLATE COURT and INVESTOR’S FINANCE CORPORATION, respondents.

FACTS

On June 28, 1976, petitioners Spouses Restituto and Ester Nonato purchased a Volkswagen Sakbayan from People’s Car, Inc. on an installment basis. They executed a promissory note and a chattel mortgage to secure payment. People’s Car, Inc. subsequently assigned its rights to respondent Investor’s Finance Corporation (IFC). The spouses defaulted on their installment payments, leading IFC to repossess the vehicle on March 20, 1978.
Despite the repossession, IFC demanded payment from the Nonatos for the unpaid balance of the purchase price. When the spouses refused, IFC filed a complaint in the Court of First Instance of Negros Occidental to recover the balance, plus damages and attorney’s fees. The Nonatos defended that IFC’s act of repossession constituted a cancellation of the sale under Article 1484 of the Civil Code, thereby barring any further action to recover the unpaid balance. The trial court ruled in favor of IFC, a decision affirmed by the Intermediate Appellate Court, prompting this petition.

ISSUE

Whether a vendor or its assignee, having repossessed a motor vehicle due to the buyer’s failure to pay two or more installments, can still demand payment of the balance of the purchase price.

RULING

No. The Supreme Court reversed the appellate court’s decision and dismissed IFC’s complaint. The governing law is Article 1484 of the Civil Code, which provides three alternative remedies for a vendor in an installment sale of personal property upon the vendee’s default in two or more installments: (1) exact fulfillment of the obligation; (2) cancel the sale; or (3) foreclose the chattel mortgage. These remedies are exclusive and the exercise of one bars the others.
The Court found that IFC had effectively exercised the option to cancel the sale through its acts of repossession. The receipt issued to the Nonatos explicitly stated the vehicle could be “redeemed” within fifteen days, implying permanent retention by IFC if not redeemed. Testimony from IFC’s own witness confirmed the company would not return the unit without full payment. IFC’s claim that repossession was merely for appraisal and safekeeping was untenable, as it never attempted to return the vehicle even after notifying the spouses of its insufficient value. Consequently, having chosen to cancel the sale via repossession, IFC was barred from simultaneously pursuing the alternative remedy of exacting payment for the unpaid balance. The law prevents a vendor from having both the sold property and the full purchase price.