VILLALVA vs RCBC

GR NO. 165661
ARTICLE 22
UNJUST ENRICHMENT
Facts:
In June 1993, petitioner spouses issued forty-eight (48) checks totaling P547,392.00 to cover
installment payments due on promissory notes executed in favor of Toyota, Quezon Avenue (TQA) for
the purchase of a 93 Toyota Corolla. The promissory noteswere secured by a Chattel Mortgage
executed by the petitioner spouses on the vehiclein favor of TQA. Under the Deed of Chattel Mortgage,
petitioner spouses were to insure the vehicle against loss or damage by accident, theft and fire, and
endorse and deliver the policies to the mortgagor. The promissory notes and chattel mortgage were
assigned t o R i z a l C o m m e r c i a l B a n k i n g C o r p o r a t i o n ( R C B C ) , t h e n f u r t h e r
a s s i g n e d t o R C B C savings bank, the respondent in this case. The petitioners were able to comply
with the mortgage requirement on insurance until 1996. In 1997, they failed to deliver a copy of the
insurance policy to the respondent. As a consequence, the respondent had the mortgaged vehicle
insured and paid Php 14,523.36 insurance premium, which was later cancelled due to the insurance
obtained by the petitioners. RCBC was reimbursed by Php 10,939.86 by the insurance company. In
1999, respond dent sent a letter of demand to the petitioners amounting to Php 12,361.02 allegedly for
unpaid obligations on the mortgage and demanded that the petitioner surrender the vehicle.
Thepetitioners ignored the demand letter for as per their claim, they have fully paid their obligations.
The remaining amount was due to the insurance obtained by therespondent. The respondent filed a
complaint for Recovery of Possession with Replevin. The municipal trial court and regional trial court
ruled in favor of Villalva, however the Court of Appeals reversed the decision and ordered the
petitioners to pay the difference between the premium paid by RCBC against what they were able to
reimburse from the insurance company. The motion for reconsideration was dismissed by the CA,
hence the petition for review in this court.
Issue:
Whether the petitioners failed to comply with their obligation to insure the subject vehicle under the
Deed of Chattel Mortgage?
Held:
We hold that petitioners did not default in the performance of their obligation. As a rule, demand is
required before a party may be consideredin default. However, demand by a creditor is not necessary in
order that delay may exist: (1) when the obligation or the law expressly so declares; (2) when from the
nature and the circumstances of the obligation i t a p p e a r s t h a t t h e d e s i g n a t i o n o f t h e t i m e
w h e n t h e t h i n g i s t o b e d e l i v e r e d o r t h e service is to be rendered was a controlling motive
for the establishment of the contract; or (3) when demand would be useless, as when the obligor has
rendered it beyond hispower to perform. None of the exceptions are present in this case.