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Unformatted text preview: bject of the chattel mortgage.
It is the contention of B.A. Finance Corporation that even if it failed to enforce the total loss provision in the
insurance policy of the motor vehicle subject of the chattel mortgage, said failure does not operate to
extinguish the unpaid balance on the promissory note, considering that the circumstances obtaining in the
case at bar do not fall under Article 1231 of the Civil Code relative to the modes of extinguishment of
On the other hand, the Cuadys insist that owing to its failure to enforce the total loss provision in the
insurance policy, B.A. Finance Corporation lost not only its opportunity to collect the insurance proceeds on
the mortgaged motor vehicle in its capacity as the assignee of the said insurance proceeds pursuant to the
memorandum in the insurance policy which states that the "LOSS: IF ANY, under this policy shall be
payable to BA FINANCE CORP., as their respective rights and interest may appear" (Rollo, p. 91) but also
the remaining balance on the promissory note.
HELD: The petition is devoid of merit.
B.A. Finance Corporation was deemed subrogated to the rights and obligations of Supercars, Inc. when the
latter assigned the promissory note, together with the chattel mortgage constituted on the motor vehicle in
question in favor of the former. Consequently, B.A. Finance Corporation is bound by the terms and
conditions of the chattel mortgage executed between the Cuadys and Supercars, Inc. Under the deed of
chattel mortgage, B.A. Finance Corporation was constituted attorneyinfact with full power and authority to
file, followup, prosecute, compromise or settle insurance claims; to sign execute and deliver the
corresponding papers, receipts and documents to the Insurance Company as may be necessary to prove
the claim, and to collect from the latter the proceeds of insurance to the extent of its interests, in the event
that the mortgaged car suffers any loss or damage. In granting B.A. Finance Corporation the aforementioned
powers and prerogatives, the Cuady spouses created in the former's favor an agency. Thus, under Article
1884 of the Civil Code of the Philippines, B.A. Finance Corporation is bound by its acceptance to carry out
the agency, and is liable for damages which, through its nonperformance, the Cuadys...
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This document was uploaded on 03/11/2014.
- Fall '14