GR 214752; (March, 2016) (Digest)
G.R. No. 214752 . March 09, 2016.
EQUITABLE SAVINGS BANK (NOW BDO UNIBANK, INC.), PETITIONER, VS. ROSALINDA C. PALCES, RESPONDENT.
FACTS
Respondent Rosalinda Palces purchased a vehicle through a loan from petitioner Equitable Savings Bank, secured by a Promissory Note with Chattel Mortgage. The contract contained an acceleration clause, making the entire balance due upon default in any installment. Respondent defaulted on her January and February 2007 payments. Petitioner sent a demand letter for the full balance and subsequently filed a Complaint for Recovery of Possession with Replevin with an Alternative Prayer for Sum of Money. A writ of replevin was issued, and the vehicle was seized.
Pending her answer, respondent made late payments totaling ₱103,000.00 in March 2007 to update her account. The Regional Trial Court (RTC) ruled in favor of the bank, confirming its right to the vehicle due to respondent’s default. The RTC held that since the vehicle was seized via replevin, the bank’s alternative money claim was extinguished. The Court of Appeals (CA) affirmed but modified the decision, ordering the bank to return the ₱103,000.00 to respondent.
ISSUE
Whether the Court of Appeals correctly ordered petitioner to return the ₱103,000.00 installment payments made by respondent after the filing of the replevin suit.
RULING
Yes, the Court of Appeals was correct. The Supreme Court affirmed the CA’s order for reimbursement. The legal logic hinges on the application of Article 1484 of the Civil Code and the election of remedies doctrine. The Chattel Mortgage Law and established jurisprudence provide that a mortgagee has three mutually exclusive remedies against a defaulting mortgagor: (1) exact fulfillment of the obligation, (2) foreclosure of the mortgage, or (3) recovery of the chattel. The filing of the action for replevin constitutes a clear and definitive election of the third remedy—recovery of the chattel.
By choosing replevin, petitioner waived its right to collect the unpaid debt. Consequently, it had no right to accept and retain the late installment payments made by respondent after it had already initiated the action to recover the vehicle itself. Allowing the bank to keep the payments while also taking the collateral would constitute unjust enrichment and violate the protective spirit of Article 1484, which is designed to prevent precisely such double recovery. Therefore, the amounts paid after the election of remedy must be returned to the mortgagor.