VILLALVA vs. RCBC SAVINGS BANK G.R. NO.

165661 August 28, 2006 FACTS: The petitioners in this case are spouses, Mario and Corazon Villalva. They issued 48 checks amounting to P547, 392.00 to cover installment payments due on promissory notes executed in favor of Toyota, Quezon Avenue (TQA) for the purchase of a 1993 Toyota Corolla. The promissory notes were secured by a Chattel Mortgage executed by the petitioners on the vehicle in favor of TQA. Under the Deed of Chattel Mortgage, petitioners were to insure the vehicle against loss or damage by accident, theft and fire. They are to endorse and deliver the policies to the mortgagee, which is the respondent, RCBC Savings Bank. On June 22, 1993, promissory notes and chattel mortgage were assigned to Rizal CommercialBanking Corporation (RCBC). They were later assigned by RCBC to RCBC Savings Bank. Allthe 48 checks issued by the petitioner were encashed by the respondent. From August 14, 1996 to August 14, 1997, petitioners procured the necessary insurance but did not deliver the same to the respondent until January 17, 1997. As a consequence, respondent had the mortgaged vehicle insured for the period of October 21, 1996 to October 21, 1997 and paid an insurance premium worth P14, 523.36. The insurance policy obtained by the respondent was later cancelled due to the insurance policy secured by petitioners over the mortgaged vehicle. And so the respondent was reimbursed P10, 939.86 by the Malayan Insurance Company since the amount paid by the respondent exceeded by P3, 583.50. On February 10, 1999, the respondent sent a letter of demand to the petitioners for the amount of P12, 361.02 representing unpaid obligations on the promissory notes and mortgage as of January 31, 1999. And theydemanded that petitioners surrender the mortgaged vehicle withinfive days from notice. The petitioners ignored the demand letter. On April 5, 1999, the respondent filed a complaint for recovery of possession with replevin with the Metropolitan Trial Court of Pasay City in order for them to get the Toyota Corolla car. Two weeks later, the respondent caused the enforcement of a a writ of replevin and recovered the car.On June 18, 1999, the petitioners filed their answer with compulsory counterclaim for moral damages, exemplary damages, and attorneys fees. They assert that they insured the mortgaged vehicle and complied with the Deed for Chattel Mortgage. The MTC rendered a decision in favor of petitioners and ordered

respondent to pay the former P100,000 in moral damages, P50,000 in exemplary damages, P25,000 in attorneys fees, and the costs and expenses of litigation. Respondent filed a motion for reconsideration and it was denied. The respondent then appealed the decision to the Regional Trial Court of Pasay City. The RTC affirmed the judgment of the MTC. The respondent filed a petition for review with the Court of Appeals assailing the decision of the RTC. The CA reversed the decision of the RTC and ordered the petitioners to pay the respondent the amount of P3, 583.50 within 30 days of the finality of the decision and issued a writ of replevin with regard to the mortgaged vehicle. The petitioners filed a motion for reconsideration and it was denied. Thus, they filed a petition for certiorari. According to the petitioners, the CA erred when it failed to recognize the two pieces of evidence: an acknowledgement receipt which shows that the premium for the second insurance policy has been refunded to the respondent, and an endorsement by the Malayan Insurance Company which shows that the petitioners delivered the required insurance policy to the respondent. On the other hand, the respondents contend that the CA did not make reversible errors and that setting aside its decision would result in the unjust enrichment of the petitioners. ISSUES: Whether the petitioners failed to comply with their obligation to insure the vehicle under the Deed of Chattel Mortgage. Whether or not the petitioners unjustly enriched themselves. RULING: Petition was granted. The decision of the Court of Appeals and its resolution are reversed and set aside. The resolution of the Metropolitan Trial Court and the decision of the Regional Trial Court were reinstated. The petitioners had not failed to comply or defaulted on the their obligation to insure the mortgaged vehicle under the Deed of Chattel Mortgage. For the second issue, the petitioners were not enriched when the respondent obtained insurance coverage for the mortgaged vehicle as the petitioners had already obtained the required insurance coverage for the vehicle.

PRINCIPLES/DOCTRINE OF LAW:

As a rule, demand is required before a party may be considered in default. The respondent failed to demand that petitioners should comply with their obligation to secure insurance coverage for the mortgaged vehicle. The respondents right to pay the insurance premium over the mortgaged vehicle has not been established. Enrichment consists of every patrimonial, physical or moral advantage, so long as it isappreciable in money. It may also take the form of avoidance of expenses and other indispensable reductions in the patrimony of a person or even prevention of a loss or injury.