CASE DIGEST: Macondray & Co. Inc. v. Eusatquio

 

MACONDRAY & CO., INC., plaintiff and appellant, vs. URBANO EUSTAQUIO, defendant and appellee
G.R. No. 43683            |          July 16, 1937

FACTS:

The plaintiff sold the defendant a De Soto car, Sedan, for P595, he executed in its favor a note on May 22, 1934. Under this note, the defendant undertook to pay the car in 12 monthly installments, with 12% interest per annum, and likewise agreed that, should he fail to pay any monthly installment together with interest, the remaining installments would become due and payable, and the defendant shall pay 20% upon the principal. To guarantee the performance of his obligations under the note, the defendant on the same date mortgaged the purchased car in favor of the plaintiff, and bound himself under the same conditions stipulated in the note. Defendant paid P43.75 upon the first installment, and thereafter failed to pay any of the remaining installments. In accordance with the terms of the mortgage, the plaintiff called upon the sheriff to take possession of the car, but the defendant refused to yield possession thereof, whereupon, the plaintiff brought the replevin sought and thereby succeeded in getting possession of the car. The car was sold at public auction to the plaintiff for P250. According to the liquidation filed by the plaintiff, the defendant was still indebted in the amount of P342.20, interest at 12 per cent from November 20, 1934, P110.25 as attorney's fees, and the costs.

The plaintiff contends that Act No. 4122 (Recto Law) is invalid because it takes property without due process of law, denies the equal protection of the laws and impairs the obligations of contract.

ISSUE:

Whether or not Recto Law is invalid

RULING:

Act No. 4122 aims to correct a social and economic evil, the inordinate love for luxury of those who, without sufficient means, purchase personal effects, and the ruinous practice of some commercial houses of purchasing back the goods sold for a nominal price besides keeping a part of the price already paid and collecting the balance, with stipulated interest, costs, and attorney's fees.

'Undoubtedly the principal object of the above amendment was to remedy the abuses committed in connection with the foreclosure of chattel mortgages. This amendment prevents mortgagees from seizing the mortgaged property, buying it at foreclosure sale for a low price and then bringing suit against the mortgagor for a deficiency judgment. The almost invariable result of this procedure -was that the mortgagor found himself minus the property. and still owing practically the full amount of his original indebtedness. Under this amendment the vendor of personal property, the purchase price of which is payable in installments, has the right to cancel the sale or foreclose the mortgage if one has been given on the property. Whichever right the vendor elects he need not return to the purchaser the amount of the installments already paid, "if there be an agreement to that effect." Furthermore, if the vendor avails himself of the right to foreclose the mortgage this amendment prohibits him from bringing an action against the purchaser f or the unpaid balance"

ln other words, under this amendment, 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.

Three remedies are available to the vendor who has sold personal property on the installment plan. (1) He may elect to exact the fulfilment of the obligation.  (2) If the vendee shall have failed to pay two or more installments, the vendor may cancel the sale. (3) If the vendee shall have faiIed to pay two or more installments, the vendor may : " :.. mortgage, if one has been given on the propand - the first option is the Civil Code. The : - the last last two options is Act No. 4122, amending the Civil Code. And the proviso to the right to foreclose is that if the vendor has chosen this remedy, he shall have no further action against the purchaser for the recovery of any unpaid balance owing by the same. In other words, the Act does no more than qualify the remedy.