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Purchase by installment is a common mode of acquiring properties particularly chattels such as cars and appliances. Also common is a provision in the contract, which usually takes the form of a Deed of Conditional Sale, that if the buyer fails to pay any of the installments when due or otherwise fail to comply with any of the terms and conditions stipulated therein, the said Deed shall automatically be rescinded and become null and void and all sums so paid by the buyer shall be forfeited and considered as rental. Supposing as some readers ask, the seller invokes this provision in the Deed of Conditional Sale and takes back the items sold, can it still exact payment of the balance of the purchase price? This is answered in this case of Nardy.

Nardy purchased from an appliance manufacturer three units of air conditioner valued at P45,000.00. The Deed of Conditional Sale he signed provides that: (1) Nardy shall pay a down payment of P4,500.00 and the balance in 24 installments; (2) title to the properties shall remain with the seller until the purchase price is fully paid; (3) if any two installments are not paid when due, or Nardy otherwise fails to comply with any of the terms and conditions stipulated thereon, the whole principal sum shall become due and the said sale shall automatically be rescinded and become null and void and all sums paid forfeited and considered as rentals. After signing this Deed, as well as a promissory note to secure the payment of the balance, the three air conditioners were delivered.

Nardy paid only for seven months and thereafter failed to pay anymore. Efforts were made by the seller to collect but to no avail. Finally after 22 months, the seller was forced to file a suit in court because Nardy not only failed to pay but also refused to let go of the air conditioners. The seller asked that the sale be rescinded and that Nardy return the air conditioners and pay the balance of the purchase price under the Deed of Conditional Sale. The court immediately granted repossession of the units to the seller and after trial rescinded the sale but still ordered Nardy to pay the balance of the purchase price after deducting the value of units repossessed. Was the lower court correct?

No. In sale by installment, the seller has three remedies in case buyer fails to pay the installment, namely: (1) exact fulfillment of the obligation; (2) cancel the sale; (3) foreclose on the chattel mortgage of the property sold if one has been constituted [Art. 1484, Civil Code]. If the seller chooses one remedy, he cannot avail himself of the other two. In this case, the seller chose the second remedy which was to rescind the sale. This is clear from the fact that it had taken possession of the three air conditioners and it took into account the value of the units repossessed when it made a computation of the outstanding account of Nardy. Having done so, it is banned from exacting payment from Nardy of the balance of the price of the units it has already repossessed. It cannot have its cake and eat it too. Nardy’s case is similar to the ruling in the case of Delta Mortor Sales vs. Niu Kim Duan, 213 SCRA 259.

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