G.R. No. L-23788; May 16, 1969
UNIVERSAL MOTORS CORPORATION, plaintiff-appellee, vs. DY HIAN TAT, ET AL., defendants, DY HIAN TAT, defendant-appellant.

FACTS

Plaintiff-appellee Universal Motors Corporation sold a Mercedes-Benz Diesel truck on installments to defendant-appellant Dy Hian Tat, with a chattel mortgage constituted on the vehicle. The appellant defaulted in payment. Appellee filed an action for replevin (Civil Case No. 55211) in the Court of First Instance of Manila, praying for possession of the truck or, alternatively, payment of the unpaid balance of P37,221.22, plus attorney’s fees and costs. The court issued a writ of replevin, and possession of the truck was delivered to the appellee. The parties submitted the case for decision based on a stipulation of facts, wherein the appellant admitted the material allegations of the complaint and that the appellee was entitled to possession of the chattel. The sole issue submitted was whether the appellee was entitled to the 25% attorney’s fees and costs of collection as stipulated in the chattel mortgage contract. The trial court rendered judgment confirming the appellee’s right of possession and title to the truck and ordering the appellant to pay attorney’s fees of P9,305.30. The appellant appealed directly, assigning as error the award of attorney’s fees, contending it violated Article 1484 of the Civil Code.

ISSUE

Whether the award of attorney’s fees to the vendor (appellee) is contrary to Article 1484 of the Civil Code, given that the vendor recovered the mortgaged vehicle through an action for replevin.

RULING

The Supreme Court affirmed the trial court’s decision, holding that Article 1484 of the Civil Code does not apply. The Court ruled that the action filed by the appellee was one for replevin under Rule 60 of the Rules of Court to recover possession of the chattel, and not an action for judicial foreclosure of a chattel mortgage under Rule 68. The mere recovery of possession through replevin does not constitute foreclosure; foreclosure requires a sale at public auction. Since there was no showing that the appellee had foreclosed or was causing the sale of the truck at public auction, the third remedy under Article 1484 (foreclosure) was not elected. Consequently, the prohibition against recovering any unpaid balance (which would include attorney’s fees as part of the claim beyond the property) following foreclosure did not apply. The award of stipulated attorney’s fees, being in the nature of liquidated damages and not shown to be iniquitous, was valid and required no further proof of actual incurrence.