Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 157493 February 5, 2007

RIZALINO, substituted by his heirs, JOSEFINA, ROLANDO and FERNANDO, ERNESTO, LEONORA, BIBIANO,
JR., LIBRADO and ENRIQUETA, all surnamed OESMER, Petitioners,
vs.
PARAISO DEVELOPMENT CORPORATION, Respondent.

DECISION

CHICO-NAZARIO, J.:

Before this Court is a Petition for Review on Certiorari under Rule 45 of the 1997 Revised Rules of Civil Procedure seeking to
reverse and set aside the Court of Appeals Decision1 dated 26 April 2002 in CA-G.R. CV No. 53130 entitled, Rizalino, Ernesto,
Leonora, Bibiano, Jr., Librado, Enriqueta, Adolfo, and Jesus, all surnamed Oesmer vs. Paraiso Development Corporation, as
modified by its Resolution2 dated 4 March 2003, declaring the Contract to Sell valid and binding with respect to the undivided
proportionate shares of the six signatories of the said document, herein petitioners, namely: Ernesto, Enriqueta, Librado, Rizalino,
Bibiano, Jr., and Leonora (all surnamed Oesmer); and ordering them to execute the Deed of Absolute Sale concerning their 6/8
share over the subject parcels of land in favor of herein respondent Paraiso Development Corporation, and to pay the latter the
attorney’s fees plus costs of the suit. The assailed Decision, as modified, likewise ordered the respondent to tender payment to the
petitioners in the amount of ₱3,216,560.00 representing the balance of the purchase price of the subject parcels of land.

The facts of the case are as follows:

Petitioners Rizalino, Ernesto, Leonora, Bibiano, Jr., Librado, and Enriqueta, all surnamed Oesmer, together with Adolfo Oesmer
(Adolfo) and Jesus Oesmer (Jesus), are brothers and sisters, and the co-owners of undivided shares of two parcels of agricultural
and tenanted land situated in Barangay Ulong Tubig, Carmona, Cavite, identified as Lot 720 with an area of 40,507 square meters
(sq. m.) and Lot 834 containing an area of 14,769 sq. m., or a total land area of 55,276 sq. m. Both lots are unregistered and
originally owned by their parents, Bibiano Oesmer and Encarnacion Durumpili, who declared the lots for taxation purposes under
Tax Declaration No. 34383(cancelled by I.D. No. 6064-A) for Lot 720 and Tax Declaration No. 34374 (cancelled by I.D. No.
5629) for Lot 834. When the spouses Oesmer died, petitioners, together with Adolfo and Jesus, acquired the lots as heirs of the
former by right of succession.

Respondent Paraiso Development Corporation is known to be engaged in the real estate business.

Sometime in March 1989, Rogelio Paular, a resident and former Municipal Secretary of Carmona, Cavite, brought along
petitioner Ernesto to meet with a certain Sotero Lee, President of respondent Paraiso Development Corporation, at Otani Hotel in
Manila. The said meeting was for the purpose of brokering the sale of petitioners’ properties to respondent corporation.

Pursuant to the said meeting, a Contract to Sell5 was drafted by the Executive Assistant of Sotero Lee, Inocencia Almo. On 1
April 1989, petitioners Ernesto and Enriqueta signed the aforesaid Contract to Sell. A check in the amount of ₱100,000.00,
payable to Ernesto, was given as option money. Sometime thereafter, Rizalino, Leonora, Bibiano, Jr., and Librado also signed the
said Contract to Sell. However, two of the brothers, Adolfo and Jesus, did not sign the document.

On 5 April 1989, a duplicate copy of the instrument was returned to respondent corporation. On 21 April 1989, respondent
brought the same to a notary public for notarization.

In a letter6 dated 1 November 1989, addressed to respondent corporation, petitioners informed the former of their intention to
rescind the Contract to Sell and to return the amount of ₱100,000.00 given by respondent as option money.
Respondent did not respond to the aforesaid letter. On 30 May 1991, herein petitioners, together with Adolfo and Jesus, filed a
Complaint7 for Declaration of Nullity or for Annulment of Option Agreement or Contract to Sell with Damages before the
Regional Trial Court (RTC) of Bacoor, Cavite. The said case was docketed as Civil Case No. BCV-91-49.

During trial, petitioner Rizalino died. Upon motion of petitioners, the trial court issued an Order,8 dated 16 September 1992, to
the effect that the deceased petitioner be substituted by his surviving spouse, Josefina O. Oesmer, and his children, Rolando O.
Oesmer and Fernando O. Oesmer. However, the name of Rizalino was retained in the title of the case both in the RTC and the
Court of Appeals.

After trial on the merits, the lower court rendered a Decision9 dated 27 March 1996 in favor of the respondent, the dispositive
portion of which reads:

WHEREFORE, premises considered, judgment is hereby rendered in favor of herein [respondent] Paraiso Development
Corporation. The assailed Contract to Sell is valid and binding only to the undivided proportionate share of the signatory of this
document and recipient of the check, [herein petitioner] co-owner Ernesto Durumpili Oesmer. The latter is hereby ordered to
execute the Contract of Absolute Sale concerning his 1/8 share over the subject two parcels of land in favor of herein
[respondent] corporation, and to pay the latter the attorney’s fees in the sum of Ten Thousand (₱10,000.00) Pesos plus costs of
suit.

The counterclaim of [respondent] corporation is hereby Dismissed for lack of merit. 10

Unsatisfied, respondent appealed the said Decision before the Court of Appeals. On 26 April 2002, the appellate court rendered a
Decision modifying the Decision of the court a quo by declaring that the Contract to Sell is valid and binding with respect to the
undivided proportionate shares of the six signatories of the said document, herein petitioners, namely: Ernesto, Enriqueta,
Librado, Rizalino, Bibiano, Jr., and Leonora (all surnamed Oesmer). The decretal portion of the said Decision states that:

WHEREFORE, premises considered, the Decision of the court a quo is hereby MODIFIED. Judgment is hereby rendered in
favor of herein [respondent] Paraiso Development Corporation. The assailed Contract to Sell is valid and binding with respect to
the undivided proportionate share of the six (6) signatories of this document, [herein petitioners], namely, Ernesto, Enriqueta,
Librado, Rizalino, Bibiano, Jr., and Leonora (all surnamed Oesmer). The said [petitioners] are hereby ordered to execute the
Deed of Absolute Sale concerning their 6/8 share over the subject two parcels of land and in favor of herein [respondent]
corporation, and to pay the latter the attorney’s fees in the sum of Ten Thousand Pesos (₱10,000.00) plus costs of suit. 11

Aggrieved by the above-mentioned Decision, petitioners filed a Motion for Reconsideration of the same on 2 July 2002. Acting
on petitioners’ Motion for Reconsideration, the Court of Appeals issued a Resolution dated 4 March 2003, maintaining its
Decision dated 26 April 2002, with the modification that respondent tender payment to petitioners in the amount of
₱3,216,560.00, representing the balance of the purchase price of the subject parcels of land. The dispositive portion of the said
Resolution reads:

WHEREFORE, premises considered, the assailed Decision is hereby modified.1awphi1.net Judgment is hereby rendered in favor
of herein [respondent] Paraiso Development Corporation. The assailed Contract to Sell is valid and binding with respect to the
undivided proportionate shares of the six (6) signatories of this document, [herein petitioners], namely, Ernesto, Enriqueta,
Librado, Rizalino, Bibiano, Jr., and Leonora (all surnamed Oesmer). The said [petitioners] are hereby ordered to execute the
Deed of Absolute Sale concerning their 6/8 share over the subject two parcels of land in favor of herein [respondent] corporation,
and to pay the latter attorney’s fees in the sum of Ten Thousand Pesos (₱10,000.00) plus costs of suit. Respondent is likewise
ordered to tender payment to the above-named [petitioners] in the amount of Three Million Two Hundred Sixteen Thousand Five
Hundred Sixty Pesos (₱3,216,560.00) representing the balance of the purchase price of the subject two parcels of land. 12

Hence, this Petition for Review on Certiorari.

Petitioners come before this Court arguing that the Court of Appeals erred:

I. On a question of law in not holding that, the supposed Contract to Sell (Exhibit D) is not binding upon petitioner
Ernesto Oesmer’s co-owners (herein petitioners Enriqueta, Librado, Rizalino, Bibiano, Jr., and Leonora).

II. On a question of law in not holding that, the supposed Contract to Sell (Exhibit D) is void altogether considering
that respondent itself did not sign it as to indicate its consent to be bound by its terms. Moreover, Exhibit D is really a
unilateral promise to sell without consideration distinct from the price, and hence, void.
Petitioners assert that the signatures of five of them namely: Enriqueta, Librado, Rizalino, Bibiano, Jr., and Leonora, on the
margins of the supposed Contract to Sell did not confer authority on petitioner Ernesto as agent to sell their respective shares in
the questioned properties, and hence, for lack of written authority from the above-named petitioners to sell their respective shares
in the subject parcels of land, the supposed Contract to Sell is void as to them. Neither do their signatures signify their consent to
directly sell their shares in the questioned properties. Assuming that the signatures indicate consent, such consent was merely
conditional. The effectivity of the alleged Contract to Sell was subject to a suspensive condition, which is the approval of the sale
by all the co-owners.

Petitioners also assert that the supposed Contract to Sell (Exhibit D), contrary to the findings of the Court of Appeals, is not
couched in simple language.

They further claim that the supposed Contract to Sell does not bind the respondent because the latter did not sign the said contract
as to indicate its consent to be bound by its terms. Furthermore, they maintain that the supposed Contract to Sell is really a
unilateral promise to sell and the option money does not bind petitioners for lack of cause or consideration distinct from the
purchase price.

The Petition is bereft of merit.

It is true that the signatures of the five petitioners, namely: Enriqueta, Librado, Rizalino, Bibiano, Jr., and Leonora, on the
Contract to Sell did not confer authority on petitioner Ernesto as agent authorized to sell their respective shares in the questioned
properties because of Article 1874 of the Civil Code, which expressly provides that:

Art. 1874. When a sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing;
otherwise, the sale shall be void.

The law itself explicitly requires a written authority before an agent can sell an immovable. The conferment of such an authority
should be in writing, in as clear and precise terms as possible. It is worth noting that petitioners’ signatures are found in the
Contract to Sell. The Contract is absolutely silent on the establishment of any principal-agent relationship between the five
petitioners and their brother and co-petitioner Ernesto as to the sale of the subject parcels of land. Thus, the Contract to Sell,
although signed on the margin by the five petitioners, is not sufficient to confer authority on petitioner Ernesto to act as their
agent in selling their shares in the properties in question.

However, despite petitioner Ernesto’s lack of written authority from the five petitioners to sell their shares in the subject parcels
of land, the supposed Contract to Sell remains valid and binding upon the latter.

As can be clearly gleaned from the contract itself, it is not only petitioner Ernesto who signed the said Contract to Sell; the other
five petitioners also personally affixed their signatures thereon. Therefore, a written authority is no longer necessary in order to
sell their shares in the subject parcels of land because, by affixing their signatures on the Contract to Sell, they were not selling
their shares through an agent but, rather, they were selling the same directly and in their own right.

The Court also finds untenable the following arguments raised by petitioners to the effect that the Contract to Sell is not binding
upon them, except to Ernesto, because: (1) the signatures of five of the petitioners do not signify their consent to sell their shares
in the questioned properties since petitioner Enriqueta merely signed as a witness to the said Contract to Sell, and that the other
petitioners, namely: Librado, Rizalino, Leonora, and Bibiano, Jr., did not understand the importance and consequences of their
action because of their low degree of education and the contents of the aforesaid contract were not read nor explained to them;
and (2) assuming that the signatures indicate consent, such consent was merely conditional, thus, the effectivity of the alleged
Contract to Sell was subject to a suspensive condition, which is the approval by all the co-owners of the sale.

It is well-settled that contracts are perfected by mere consent, upon the acceptance by the offeree of the offer made by the offeror.
From that moment, the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the
consequences which, according to their nature, may be in keeping with good faith, usage and law. To produce a contract, the
acceptance must not qualify the terms of the offer. However, the acceptance may be express or implied. For a contract to arise,
the acceptance must be made known to the offeror. Accordingly, the acceptance can be withdrawn or revoked before it is made
known to the offeror.13

In the case at bar, the Contract to Sell was perfected when the petitioners consented to the sale to the respondent of their shares in
the subject parcels of land by affixing their signatures on the said contract. Such signatures show their acceptance of what has
been stipulated in the Contract to Sell and such acceptance was made known to respondent corporation when the duplicate copy
of the Contract to Sell was returned to the latter bearing petitioners’ signatures.

As to petitioner Enriqueta’s claim that she merely signed as a witness to the said contract, the contract itself does not say so.
There was no single indication in the said contract that she signed the same merely as a witness. The fact that her signature
appears on the right-hand margin of the Contract to Sell is insignificant. The contract indisputably referred to the "Heirs of
Bibiano and Encarnacion Oesmer," and since there is no showing that Enriqueta signed the document in some other capacity, it
can be safely assumed that she did so as one of the parties to the sale.

Emphasis should also be given to the fact that petitioners Ernesto and Enriqueta concurrently signed the Contract to Sell. As the
Court of Appeals mentioned in its Decision,14 the records of the case speak of the fact that petitioner Ernesto, together with
petitioner Enriqueta, met with the representatives of the respondent in order to finalize the terms and conditions of the Contract to
Sell. Enriqueta affixed her signature on the said contract when the same was drafted. She even admitted that she understood the
undertaking that she and petitioner Ernesto made in connection with the contract. She likewise disclosed that pursuant to the
terms embodied in the Contract to Sell, she updated the payment of the real property taxes and transferred the Tax Declarations
of the questioned properties in her name.15 Hence, it cannot be gainsaid that she merely signed the Contract to Sell as a witness
because she did not only actively participate in the negotiation and execution of the same, but her subsequent actions also reveal
an attempt to comply with the conditions in the said contract.

With respect to the other petitioners’ assertion that they did not understand the importance and consequences of their action
because of their low degree of education and because the contents of the aforesaid contract were not read nor explained to them,
the same cannot be sustained.

We only have to quote the pertinent portions of the Court of Appeals Decision, clear and concise, to dispose of this issue. Thus,

First, the Contract to Sell is couched in such a simple language which is undoubtedly easy to read and understand. The terms of
the Contract, specifically the amount of ₱100,000.00 representing the option money paid by [respondent] corporation, the
purchase price of ₱60.00 per square meter or the total amount of ₱3,316,560.00 and a brief description of the subject properties
are well-indicated thereon that any prudent and mature man would have known the nature and extent of the transaction
encapsulated in the document that he was signing.

Second, the following circumstances, as testified by the witnesses and as can be gleaned from the records of the case clearly
indicate the [petitioners’] intention to be bound by the stipulations chronicled in the said Contract to Sell.

As to [petitioner] Ernesto, there is no dispute as to his intention to effect the alienation of the subject property as he in fact was
the one who initiated the negotiation process and culminated the same by affixing his signature on the Contract to Sell and by
taking receipt of the amount of ₱100,000.00 which formed part of the purchase price.

xxxx

As to [petitioner] Librado, the [appellate court] finds it preposterous that he willingly affixed his signature on a document written
in a language (English) that he purportedly does not understand. He testified that the document was just brought to him by an 18
year old niece named Baby and he was told that the document was for a check to be paid to him. He readily signed the Contract
to Sell without consulting his other siblings. Thereafter, he exerted no effort in communicating with his brothers and sisters
regarding the document which he had signed, did not inquire what the check was for and did not thereafter ask for the check
which is purportedly due to him as a result of his signing the said Contract to Sell. (TSN, 28 September 1993, pp. 22-23)

The [appellate court] notes that Librado is a 43 year old family man (TSN, 28 September 1993, p. 19). As such, he is expected to
act with that ordinary degree of care and prudence expected of a good father of a family. His unwitting testimony is just divinely
disbelieving.

The other [petitioners] (Rizalino, Leonora and Bibiano Jr.) are likewise bound by the said Contract to Sell. The theory adopted by
the [petitioners] that because of their low degree of education, they did not understand the contents of the said Contract to Sell is
devoid of merit. The [appellate court] also notes that Adolfo (one of the co-heirs who did not sign) also possess the same degree
of education as that of the signing co-heirs (TSN, 15 October 1991, p. 19). He, however, is employed at the Provincial Treasury
Office at Trece Martirez, Cavite and has even accompanied Rogelio Paular to the Assessor’s Office to locate certain missing
documents which were needed to transfer the titles of the subject properties. (TSN, 28 January 1994, pp. 26 & 35) Similarly, the
other co-heirs [petitioners], like Adolfo, are far from ignorant, more so, illiterate that they can be extricated from their obligations
under the Contract to Sell which they voluntarily and knowingly entered into with the [respondent] corporation.

The Supreme Court in the case of Cecilia Mata v. Court of Appeals (207 SCRA 753 [1992]), citing the case of Tan Sua Sia v. Yu
Baio Sontua (56 Phil. 711), instructively ruled as follows:

"The Court does not accept the petitioner’s claim that she did not understand the terms and conditions of the transactions because
she only reached Grade Three and was already 63 years of age when she signed the documents. She was literate, to begin with,
and her age did not make her senile or incompetent. x x x.

At any rate, Metrobank had no obligation to explain the documents to the petitioner as nowhere has it been proven that she is
unable to read or that the contracts were written in a language not known to her. It was her responsibility to inform herself of the
meaning and consequence of the contracts she was signing and, if she found them difficult to comprehend, to consult other
persons, preferably lawyers, to explain them to her. After all, the transactions involved not only a few hundred or thousand pesos
but, indeed, hundreds of thousands of pesos.

As the Court has held:

x x x The rule that one who signs a contract is presumed to know its contents has been applied even to contracts of illiterate
persons on the ground that if such persons are unable to read, they are negligent if they fail to have the contract read to them. If a
person cannot read the instrument, it is as much his duty to procure some reliable persons to read and explain it to him, before he
signs it, as it would be to read it before he signed it if he were able to do and his failure to obtain a reading and explanation of it is
such gross negligence as will estop from avoiding it on the ground that he was ignorant of its contents."16

That the petitioners really had the intention to dispose of their shares in the subject parcels of land, irrespective of whether or not
all of the heirs consented to the said Contract to Sell, was unveiled by Adolfo’s testimony as follows:

ATTY. GAMO: This alleged agreement between you and your other brothers and sisters that unless everybody will agree, the
properties would not be sold, was that agreement in writing?

WITNESS: No sir.

ATTY. GAMO: What you are saying is that when your brothers and sisters except Jesus and you did not sign that agreement
which had been marked as [Exhibit] "D", your brothers and sisters were grossly violating your agreement.

WITNESS: Yes, sir, they violated what we have agreed upon. 17

We also cannot sustain the allegation of the petitioners that assuming the signatures indicate consent, such consent was merely
conditional, and that, the effectivity of the alleged Contract to Sell was subject to the suspensive condition that the sale be
approved by all the co-owners. The Contract to Sell is clear enough. It is a cardinal rule in the interpretation of contracts that if
the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its
stipulation shall control.18 The terms of the Contract to Sell made no mention of the condition that before it can become valid and
binding, a unanimous consent of all the heirs is necessary. Thus, when the language of the contract is explicit, as in the present
case, leaving no doubt as to the intention of the parties thereto, the literal meaning of its stipulation is controlling.

In addition, the petitioners, being owners of their respective undivided shares in the subject properties, can dispose of their shares
even without the consent of all the co-heirs. Article 493 of the Civil Code expressly provides:

Article 493. Each co-owner shall have the full ownership of his part and of the fruits and benefits pertaining thereto, and he may
therefore alienate, assign or mortgage it, and even substitute another person in its enjoyment, except when personal rights are
involved. But the effect of the alienation or the mortgage, with respect to the co-owners, shall be limited to the portion which
may be allotted to him in the division upon the termination of the co-ownership. [Emphases supplied.]

Consequently, even without the consent of the two co-heirs, Adolfo and Jesus, the Contract to Sell is still valid and binding with
respect to the 6/8 proportionate shares of the petitioners, as properly held by the appellate court.
Therefore, this Court finds no error in the findings of the Court of Appeals that all the petitioners who were signatories in the
Contract to Sell are bound thereby.

The final arguments of petitioners state that the Contract to Sell is void altogether considering that respondent itself did not sign it
as to indicate its consent to be bound by its terms; and moreover, the Contract to Sell is really a unilateral promise to sell without
consideration distinct from the price, and hence, again, void. Said arguments must necessarily fail.

The Contract to Sell is not void merely because it does not bear the signature of the respondent corporation. Respondent
corporation’s consent to be bound by the terms of the contract is shown in the uncontroverted facts which established that there
was partial performance by respondent of its obligation in the said Contract to Sell when it tendered the amount of ₱100,000.00
to form part of the purchase price, which was accepted and acknowledged expressly by petitioners. Therefore, by force of law,
respondent is required to complete the payment to enforce the terms of the contract. Accordingly, despite the absence of
respondent’s signature in the Contract to Sell, the former cannot evade its obligation to pay the balance of the purchase price.

As a final point, the Contract to Sell entered into by the parties is not a unilateral promise to sell merely because it used the word
option money when it referred to the amount of ₱100,000.00, which also form part of the purchase price.

Settled is the rule that in the interpretation of contracts, the ascertainment of the intention of the contracting parties is to be
discharged by looking to the words they used to project that intention in their contract, all the words, not just a particular word or
two, and words in context, not words standing alone.19

In the instant case, the consideration of ₱100,000.00 paid by respondent to petitioners was referred to as "option money."
However, a careful examination of the words used in the contract indicates that the money is not option money but earnest
money. "Earnest money" and "option money" are not the same but distinguished thus: (a) earnest money is part of the purchase
price, while option money is the money given as a distinct consideration for an option contract; (b) earnest money is given only
where there is already a sale, while option money applies to a sale not yet perfected; and, (c) when earnest money is given, the
buyer is bound to pay the balance, while when the would-be buyer gives option money, he is not required to buy, but may even
forfeit it depending on the terms of the option.20

The sum of ₱100,000.00 was part of the purchase price. Although the same was denominated as "option money," it is actually in
the nature of earnest money or down payment when considered with the other terms of the contract. Doubtless, the agreement is
not a mere unilateral promise to sell, but, indeed, it is a Contract to Sell as both the trial court and the appellate court declared in
their Decisions.

WHEREFORE, premises considered, the Petition is DENIED, and the Decision and Resolution of the Court of Appeals dated 26
April 2002 and 4 March 2003, respectively, are AFFIRMED, thus, (a) the Contract to Sell is DECLARED valid and binding
with respect to the undivided proportionate shares in the subject parcels of land of the six signatories of the said document, herein
petitioners Ernesto, Enriqueta, Librado, Rizalino, Bibiano, Jr., and Leonora (all surnamed Oesmer); (b) respondent
is ORDERED to tender payment to petitioners in the amount of ₱3,216,560.00 representing the balance of the purchase price for
the latter’s shares in the subject parcels of land; and (c) petitioners are further ORDERED to execute in favor of respondent the
Deed of Absolute Sale covering their shares in the subject parcels of land after receipt of the balance of the purchase price, and to
pay respondent attorney’s fees plus costs of the suit. Costs against petitioners.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-43821 May 26, 1977

INDUSTRIAL FINANCE CORPORATION, petitioner,

vs.
HON. PEDRO A. RAMIREZ, Judge of the Court of First instance of Manila, and CONSUELO ALCOBA, respondents.

C. R. Sanchez Law Office for petitioner.

Salva, Carballo & Associates for respondent Consuelo Alcoba.

AQUINO, J.:

On December 4, 1970 Arnaldo Dizon sold to Consuelo Alcoba his 1966 model Chevrolet car for P13,157.89, payable in eighteen
monthly installments, which were secured by a chattel mortgage on the car.

On that same date, Dizon assigned for ten thousand pesos to Industrial Finance Corporation all his rights and interest in the
chattel mortgage. Consuelo Alcoba defaulted in the payment of the first four installments. Because of that default and by virtue of
the acceleration clause in the promissory note forming part of the mortgage, the whole obligation became due and demandable.

As of February 27, 1972 Consuelo Alcoba owed Industrial Finance Corporation the sum of P7,678.05 computed as follows (Exh.
D):

Principal P13,157.89
obligation
--------

Add:
Interest
on
overdue

installments ------- 285.47

Premium 656.40
on car
insurance
--

Total amount due -- P14,099.76

Deduct
payments:

March 1, P 731.06
1971 -
 March 730.99
29,1971 -

July, 1, 716.39
1971 -

Insurance
proceeds,

1-12-71 4,023.51

Interests- 219.76 6,421.71

Balance still due -- P 7,678.05

vvvvvvvvv

On November 20, 1971, or less than a year after Industrial Finance Corporation had discounted Consuelo Alcoba's promissory,
note to Dizon, the corporation sued her in the Court of First Instance of Manila (Civil Case No. 85583). The complaint, a printed
form used by the corporation in collection cases, is denominated "replevin with damages".

It is necessary to scrutinize the allegations of the complaint because of the controversy between the parties as to whether, by
means of that complaint, Industrial Finance Corporation sought to foreclose the chattel mortgage as contemplated in article 1484
of the Civil Code, formerly Act No. 4122, otherwise known as the Recto Installment Sales Law.

It is necessary to scrutinize the allegations of the complaint because of the controversy between the parties whether, by means of
that complaint, Industrial Finance Corporation sought to foreclose the chattel mortgage as contemplated in article 1484 of the
Civil Code, formerly Act No. 4122, otherwise known as the Recto Installment Sale Law.

In its complaint Industrial Finance Corporation prayed for alternative reliefs. The main objective of its complaint was recovery of
the mortgaged car by means of a writ of replevin. It submitted a redelivery bond. Undoubtedly, the mortgagee-assignee wanted to
foreclose extrajudicially the chattel mortgage but, before it could do so, the sheriff had to seize the car by means of the
provisional remedy of an order for the delivery of personal property.

Industrial Finance Corporation prayed that, if the car could not be recovered by means of replevin, then Consuelo Alcoba should
be ordered to pay the corporation the sum of P11,083.38, plus twelve percent interest per annum, damages, and attorney's fees in
the sum of P2,770.85. There was no prayer for the foreclosure of the mortgage, a relief that should be invoked if the complaint
had been filed under section 8, Rule 68 of the Rules of Court.

Consuelo Alcoba in her answer merely pleaded that Industrial Finance Corporation "waived the recovery" of the car by accepting
the sum of P4,228.67. She did not state what that amount represented. It was the amount paid on January 12, 1972 by the
Malayan Insurance Co., Inc., as insurer of the mortgaged car, to Industrial Finance Corporation. As indicated in the computation
set forth above, the corporation applied that amount to the partial payment of Consuelo Alcoba's obligation. The record does not
show why the insurance company paid that amount to Industrial Finance Corporation.

Consuelo Alcoba's lawyer, after making reference to the corporation's acceptance of the sum of P4.228.68, incoherently pleaded
that the corporation chose to "pursue the remaining balance of the loan extrajudicially".

The lower court issued the writ of replevin. But the sheriff was not able to seize the mortgaged car. Consequently, there was no
extrajudicial foreclosure of the mortgage since, for that purpose, possession of the car by the sheriff is necessary (Bachrach
Motor Co. vs. Summers, 42 Phil. 3).

Consuelo Alcoba did not appear at the pre-trial. She was declared in default. On the basis of the corporation's evidence, the trial
court rendered judgment, ordering her to pay the corporation the sum of P7,678.05, plus twelve percent interest per annum from
the filing of the complaint. No attorney's fees were awarded by the trial court maybe because the corporation paid only ten
thousand pesos for a vote valued at P13,157.89.

Consuelo Alcoba did not appeal. That judgment became final and executory. On September 27, 1973, or long after the judgment
had become final, she paid Industrial Finance Corporation the sum of P2,000. The lower court issued writs of execution. The
writs were returned unsatisfied.

A second alias writ of execution was issued. The sheriff was able to levy upon the mortgaged car which was then in the
possession of the Aco Motor Service of Dagupan City. At the execution sale held on April 25, 1974 Industrial Finance
Corporation bought the mortgaged car for P4,000 (Exh. 3-A, p. 72, Expedients).

However, in order to take possession of the car, the corporation had to pay P4,250 to the Aco Motor Service to satisfy its lien for
the repair and storage of the car.

The corporation contended that, because of that payment, it sustained a loss of P250 in the execution sale. It asked for a third
alias writ of execution in order to satisfy the balance of Consuelo Alcoba's obligation which, together with the 12% interest, it
computed at P11,300.92 as of September 26, 1975.

Consuelo Alcoba opposed the motion for a third alias writ of execution. The lower court in its order of March 2, 1976 denied the
motion for a third alias writ of execution. It treated the execution sale as a "virtual foreclosure of the chattel mortgage" which,
although not beneficial to the mortgagee, Industrial Finance Corporation, barred it from recovering the deficiency under article
1484.

That order of denial is assailed by the corporation in the instant certiorari case. The lower court relied on Filipinos Investment &
Finance Corporation vs. Ridad, L- 27645, November 28, 1969, 30 SCRA 564. In the Ridad case, the mortgagee of a car, the
price of which was payable in installments, filed a replevin suit against the mortgagor with an alternative prayer for the recovery
of the unpaid price in case the car could not be seized. The car was actually seized. The mortgage was extrajudicially foreclosed.
The trial court rendered judgment against the mortgagor only for P300 as attorney's fees and P163.65 as expenses of foreclosure.
There was no judgment for the balance of the mortgage debt.

The mortgagors in the Ridad case appealed to this Court. They contested the correctness of the judgment for P463.65 as
attorney's fees and expenses for foreclosure.

This Court held that the mortgagors should pay the mortgagee attorney's fees and expenses of foreclosure because while the
mortgagors should be protected against the capacity of the mortgagees, the law should not be construed as depriving the
mortgagee of "protection against perverse mortgagors" (Castro, J, in Ridad case).

It is obvious that the facts of the Ridad case are materially different from the facts of the instant case. Here, there was no
extrajudicial foreclosure of the mortgage. Consuelo Alcoba, the mortgagee, acted perversely in not surrendering the mortgaged
car to the corporation and in preventing extrajudicial foreclosure. Had she complied with the writ of replevin, then the
corporation could have foreclosed the mortgage and, in that event, she would not be liable for any deficiency.

But she violated the mortgage by removing the car from her residence at 3 Gladiola Street, Roxas District, Quezon City. She did
not comply with the stipulation that, upon her default, the car should be delivered, on demand, to the mortgagee in Manila.

The corporation's action was for specific performance or fulfillment of the obligation and not for judicial foreclosure Consuelo
Alcoba's payment of P2,000 on account of the money judgment against her signified that she acquiesced in the action for specific
performance. She cannot now be heard to say that the judgment resulting from that action could not be enforced because the
mortgagees had opted for foreclosure of the mortgage. The Civil Code provides.

ART. 1484. In a contract of sale of personal property the price of which is payable in installments, the vendor
may exercise any of the following remedies:

(1) Exact fulfillment of the obligation, should the vendee fail to pay;

(2) Cancel the sale, should the vendee's failure to pay cover two or more installments;
 (3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's failure
to pay cover two or more installments. In this case, 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. (1454-A-a).

According to article 1484, it is only when there has been a foreclosure that the mortgagor is not liable for any deficiency.

In this case, there was no foreclosure. The mortgagee evidently chose the remedy of specific performance. It levied upon the car
by virtue of an execution and not as an incident of a foreclosure proceeding. It is entitled to an alias writ of execution for the
portion of the judgment that has not been satisfied.

The rule is that in installment sales, if the action instituted is for specific performance and the mortgaged property is subsequently
attached and sold, the sale thereof does not amount to a foreclosure of the mortgage. Hence, the seller-creditor is entitled to a
deficiency judgment (Southern Motors, Inc. vs. Moscoso, 112 Phil. 94).

WHEREFORE, the trial court's order denying the motion for a third writ of execution is reversed and set aside. Costs against
respondent Consuelo Alcoba.

SO ORDERED.