SPOUSES NONATO V. IAC & INVESTOR'S FINANCE CORP 140 SCRA 255 (1985)

FACTS: In 1976, Spouses Restituto Nonato and Ester Nonato purchased a volkswagen from the People’s Car Inc on installment basis.

1.      To secure their complete payment, Nonato executed a promissory note and a chattel mortgage in favor of People’s Car Inc.

2.      Subsequently, People’s Car Inc assigned its rights and interest over the note and mortagge in favor of Investor’s Finance Corp (IFC).

3.      For failure of the spouses to pay two or more installments, despite demands, the car was repossessed by IFC.

4.      Despite repossession, IFC still demanded from Nonato that they pay the balance of the price of the car. IFC, then, filed a complaint for the payment of the price of the car with damages

5.      Nonato, in their defense, argued that when the company repossessed the car, IFC had, by that act, effectively cancelled the sale of the vehicle. As such, it was barred from exacting the recovery of the unpaid balance of the purchase price as mandated by Art 1484.

6.      The trial court rendered in favor of IFC and ordered the spouses  Nonato pay the balance of the purchase price of the car with interest. CA affirmed the same.

ISSUE: WON a vendor or his assignee, who had cancelled the sale of a motor vehicle for failure of the buyer to pay two or more of the stipulated installments, may also demand payment of the balance of the purchase price

HELD: No. The applicable law in the case at bar is Art 1484 which provides that:

In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise any of the following remedies:

(1)   Exact fulfillment of the obligation, should the vendee fail to pay;

(2)   Cancel the sale, should the vendee's failure to pay cover two or more installments;

(3)   Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's failure to pay cover two or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void.

This provision means that should the vendee or the purchaser of a personal property default in the payment of two or more of the agreed installments, the vendor or the seller has the option to avail any of these 3 remedies—either to exact fulfillment by the purchaser of the obligation, or to cancel the sale, or to foreclose the mortgage on the purchased personal property, if one was constituted. These remedies have been recognized as an alternative, not cumulative, that the exercise of one should bar the exercise of the others.

In the present case, it is not disputed that IFC had taken possession of the car purchased by the Nonatos after the spouses defaulted in their payments. The defense of IFC that it the repossession of the vehicle was only for the purpose of appraising its value and for storage and safekeeping pending full payment of the spouses is untenable. The receipt issued by IFC to the spouses when it took possession of the vehicle that the vehicle could be redeemed within 15 days. This could only mean that should the spouses fail to redeem the car within the period provided, IFC would retain permanent possession of the vehicle. IFC even notified the spouses Nonato that the value of the car was not sufficient to cover the balance of the purchase price and there was no attempt at all on the part of the company to return the car.

The acts performed by IFC are consistent with the conclusion that it had opted to cancel the sale of the vehicle. Therefore, it is barred from exacting payment from the petitioners of the balance of the price of the vehicle which it had already repossessed (it cannot have its cake and eat it too)