Short answer. No. Under Article 1484 of the Civil Code, once the seller forecloses the chattel mortgage on an item sold in installments, he has no further action to recover any unpaid balance of the price. A clause trying to keep that right alive is expressly declared void and cannot be enforced.
What the law says
he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void.
Civil Code, Article 1484 — Recto Law (Installment Sale of Personalty). Read the full provision →
Three remedies, and you must pick one
Article 1484 — often called the Recto Law — governs the sale of personal property payable in installments, such as a car or appliance bought on installment. When the buyer defaults, the seller may exact fulfillment of the obligation, cancel the sale if the default covers two or more installments, or foreclose the chattel mortgage on the thing sold if one was constituted and the default covers two or more installments. These are alternatives, not a menu to combine. The seller chooses one path; choosing to foreclose is a decision with a specific and deliberate consequence that the law fixes in the buyer's favour.
Foreclosure closes the door on the balance
The third remedy comes with a strict cut-off. Once the seller forecloses the chattel mortgage on the thing sold, the article says he shall have no further action against the purchaser to recover any unpaid balance of the price. Taking back and selling the item is treated as the seller's full satisfaction — even if the foreclosure sale brings in less than what is still owed, the seller cannot chase the buyer for the shortfall. This is the heart of the protection: a buyer who loses the item does not also remain saddled with the remaining debt. Foreclosure and a deficiency claim cannot be stacked on top of each other.
Why the clause in your contract is void
Sellers have long tried to escape this by writing a clause that preserves the right to collect the balance despite foreclosing. Article 1484 shuts that down in plain words: Any agreement to the contrary shall be void. The rule is mandatory, not a default the parties can bargain around. So a stipulation letting the seller foreclose and still pursue the unpaid balance has no legal effect — the buyer can invoke the article to defeat it regardless of what he signed. The law refuses to let the very protection it grants be waived away in the fine print, because that is exactly where such clauses tend to hide.
The limits of this protection
The bar applies to the foreclosure remedy in particular. If the seller instead chose to exact fulfillment of the obligation — suing on the price rather than seizing the item — different consequences follow, and the no-deficiency rule is tied to the foreclosure route. The protection also depends on the transaction genuinely being an installment sale of personal property secured by a chattel mortgage on the thing sold; arrangements dressed up as leases or other contracts may be scrutinised for what they really are. Because sellers sometimes structure deals to sidestep the Recto Law, a buyer facing a deficiency demand after repossession should have the contract examined by counsel.
Cases citing this provision
These Supreme Court decisions cite the provision above. We list them so you can read them yourself; the summaries of what each decided are not ours to give.
- PCI Leasing & Finance InC. vs. Giraffe-X Creative Imaging, Inc, G.R. No. 142618, July 12, 2007 — read the decision on LawPhil →
- Spouses Alfredo and Brigida Rosario vs. PCI Leasing and Finance Inc, G.R. No. 139233, November 11, 2005 — read the decision on LawPhil →
- Daniel L. Borbon II, et al. vs. Servicewide Specialists, et al, G.R. No. 106418, July 11, 1996 — read the decision on LawPhil →
- Equitable Savings Bank vs. Rosalinda C. Palces, G.R. No. 214752, March 9, 2016 — read the decision on LawPhil →