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1. G.R. No. L-27829 August 19, 1988 PHILIPPINE VIRGINIA TOBACCO ADMINISTRATION, petitioner, vs. HON.

WALFRIDO DE LOS ANGELES, Judge of the Court of First Instance of Rizal, Branch IV (Quezon City) and TIMOTEO A. SEVILLA, doing business under the name and style of PHILIPPINE ASSOCIATED RESOURCES and PRUDENTIAL BANK AND TRUST COMPANY, respondents. Lorenzo F. Miravite for respondent Timoteo Sevilla. Ferrer & Ranada Law Office for respondent Prudential Bank & Trust Co.

PARAS, J.: In these petition and supplemental petition for Certiorari, Prohibition and mandamus with Preliminary Injunction, petitioner Philippine Virginia Tobacco Administration seeks to annul and set aside the following Orders of respondent Judge of the Court of First Instance of Rizal, Branch IV (Quezon City) in Civil Case No. Q-10351 and prays that the Writ of Preliminary Injunction (that may be) issued by this Court enjoining enforcement of the aforesaid Orders be made permanent. (Petition, Rollo, pp. 19) They are: The Order of July 17, 1967: AS PRAYED FOR, the Prudential Bank & Trust Company is hereby directed to release and deliver to the herein plaintiff, Timoteo A. Sevilla, the amount of P800,000.00 in its custody representing the marginal deposit of the Letters of Credit which said bank has issued in favor of the defendant, upon filing by the plaintiff of a bond in the um of P800,000.00, to answer for whatever damage that the defendant PVTA and the Prudential Bank & Trust Company may suffer by reason of this order. (Annex "A," Rollo, p. 12) The Order of November 3,1967: IN VIEW OF THE FOREGOING, the petition under consideration is granted, as follows: (a) the defendant PVTA is hereby ordered to issue the corresponding certificate of Authority to the plaintiff, allowing him to export the remaining balance of his tobacco quota at the current world market price and to make the corresponding import of American high-grade tobacco; (b) the defendant PVTA is hereby restrained from issuing any Certificate of Authority to export or import to any persons and/or entities while the right of the plaintiff to the balance of his quota remains valid, effective and in force; and (c) defendant PVTA is hereby enjoined from opening public bidding to sell its Virginia leaf tobacco during the effectivity of its contract with the plaintiff. xxx xxx xxx

In order to protect the defendant from whatever damage it may sustain by virtue of this order, the plaintiff is hereby directed to file a bond in the sum of P20,000.00. (Annex "K," Rollo, pp. 4-5) The Order of March 16, 1968: WHEREFORE, the motion for reconsideration of the defendant against the order of November 3, 1967 is hereby DENIED. (Annex "M," Rollo, P. 196) The facts of the case are as follows: Respondent Timoteo Sevilla, proprietor and General Manager of the Philippine Associated Resources (PAR) together with two other entities, namely, the Nationwide Agro-Industrial Development Corp. and the Consolidated Agro-Producers Inc. were awarded in a public bidding the right to import Virginia leaf tobacco for blending purposes and exportation by them of PVTA and farmer's low-grade tobacco at a rate of one (1) kilo of imported tobacco for every nine (9) kilos of leaf tobacco actually exported. Subsequently, the other two entities assigned their rights to PVTA and respondent remained the only private entity accorded the privilege. The contract entered into between the petitioner and respondent Sevilla was for the importation of 85 million kilos of Virginia leaf tobacco and a counterpart exportation of 2.53 million kilos of PVTA and 5.1 million kilos of farmer's and/or PVTA at P3.00 a kilo. (Annex "A," p. 55 and Annex "B," Rollo, p. 59) In accordance with their contract respondent Sevilla purchased from petitioner and actually exported 2,101.470 kilos of tobacco, paying the PVTA the sum of P2,482,938.50 and leaving a balance of P3,713,908.91. Before respondent Sevilla could import the counterpart blending Virginia tobacco, amounting to 525,560 kilos, Republic Act No. 4155 was passed and took effect on June 20, 1 964, authorizing the PVTA to grant import privileges at the ratio of 4 to 1 instead of 9 to 1 and to dispose of all its tobacco stock at the best price available. Thus, on September 14, 1965 subject contract which was already amended on December 14, 1963 because of the prevailing export or world market price under which respondent will be exporting at a loss, (Complaint, Rollo, p. 3) was further amended to grant respondent the privileges under aforesaid law, subject to the following conditions: (1) that on the 2,101.470 kilos already purchased, and exported, the purchase price of about P3.00 a kilo was maintained; (2) that the unpaid balance of P3,713,908.91 was to be liquidated by paying PVTA the sum of P4.00 for every kilo of imported Virginia blending tobacco and; (3) that respondent Sevilla would open an irrevocable letter of credit No. 6232 with the Prudential Bank and Trust Co. in favor of the PVTA to secure the payment of said balance, drawable upon the release from the Bureau of Customs of the imported Virginia blending tobacco. While respondent was trying to negotiate the reduction of the procurement cost of the 2,101.479 kilos of PVTA tobacco already exported which attempt was denied by petitioner and also by the Office of the President, petitioner prepared two drafts to be drawn against said letter of credit for amounts which have already become due and demandable. Respondent then filed a complaint for damages with preliminary injunction against the petitioner in the amount of P5,000,000.00. Petitioner filed an answer with counterclaim, admitting the execution of the contract. It alleged however that respondent, violated the terms thereof by causing the issuance of the preliminary injunction to prevent the former from drawing from the letter of credit for amounts due and payable and thus caused petitioner additional damage of 6% per annum. A writ of preliminary injunction was issued by respondent judge enjoining petitioner from drawing against the letter of credit. On motion of respondent, Sevilla, the lower court dismissed the complaint

on April 19, 1967 without prejudice and lifted the writ of preliminary injunction but petitioner's motion for reconsideration was granted on June 5,1967 and the Order of April 19,1967 was set aside. On July 1, 1967 Sevilla filed an urgent motion for reconsideration of the Order of June 5, 1967 praying that the Order of dismissal be reinstated. But pending the resolution of respondent's motion and without notice to the petitioner, respondent judge issued the assailed Order of July 17, 1967 directing the Prudential Bank & Trust Co. to make the questioned release of funds from the Letter of Credit. Before petitioner could file a motion for reconsideration of said order, respondent Sevilla was able to secure the releaseof P300,000.00 and the rest of the amount. Hence this petition, followed by the supplemental petition when respondent filed with the lower court an urgent ex-parte petition for the issuance of preliminary mandatory and preventive injunction which was granted in the resolution of respondent Judge on November 3, 1967, above quoted. On March 16, 1968, respondent Judge denied petitioner's motion for reconsideration. (Supp. Petition, Rollo, pp. 128130) Pursuant to the resolution of July 21, 1967, the Supreme Court required respondent to file an answer to the petition within 10 days from notice thereof and upon petitioner's posting a bond of fifty thousand pesos (P50,000.00), a writ of preliminary mandatory injunction was issued enjoining respondent Judge from enforcing and implementing his Order of July 17,1967 and private respondents Sevilla and Prudential Bank and Trust Co. from complying with and implementing said order. The writ further provides that in the event that the said order had already been complied with and implemented, said respondents are ordered to return and make available the amounts that might have been released and taken delivery of by respondent Sevilla. (Rollo, pp. 16-17) In its answer, respondent bank explained that when it received the Order of the Supreme Court to stop the release of P800,000.00 it had already released the same in obedience to ailieged earlier Order of the lower Court which was reiterated with ailieged admonition in a subsequent Order. (Annex "C," Rollo, pp. 37-38) A Manifestation to that effect has already been filed c,irrency respondent bank (Rollo, pp. 19-20) which was noted c,irrency this Court in the resolution of August 1, 1967, a copy of which was sent to the Secretary of Justice. (Rollo, p. 30) Before respondent Sevilla could file his answer, petitioner filed a motion to declare him and respondent bank in contempt of court for having failed to comply with the resolution to this court of July 21, 1967 to the effect that the assailed order has already been implemented but respondents failed to return and make available the amounts that had been released and taken delivery of by respondent Sevilla. (Rollo, pp. 100-102) In his answer to the petition, respondent Sevilla claims that petitioner demanded from him a much higher price for Grades D and E tobacco than from the other awardees; that petitioner violated its contract by granting indiscriminately to numerous buyers the right to export and import tobacco while his agreement is being implemented, thereby depriving respondent of his exclusive right to import the Virginia leaf tobacco for blending purposes and that respondent Judge did not abuse his discretion in ordering the release of the amount of P800,000.00 from the Letter of Credit, upon his posting a bond for the same amount. He argued further that the granting of said preliminary injunction is within the sound discretion of the court with or without notice to the adverse party when the facts and the law are clear as in the instant case. He insists that petitioner caretaker.2 claim from him a price higher than the other awardees and that petitioner has no more right to the sum in controversy as the latter has already been overpaid when computed not at the price of tobacco provided in the contract which is inequitable and therefore null and void but at the price fixed for the other awardees. (Answer of Sevilla, Rollo, pp. 105-111) In its Answer to the Motion for Contempt, respondent bank reiterates its allegations in the Manifestation and Answer which it filed in this case. (Rollo, pp. 113-114)

In his answer, (Rollo, pp. 118-119) to petitioner's motion to declare him in contempt, respondent Sevilla explains that when he received a copy of the Order of this Court, he had already disbursed the whole amount withdrawn, to settle his huge obligations. Later he filed a supplemental answer in compliance with the resolution of this Court of September 15, 1967 requiring him to state in detail the amounts allegedly disbursed c,irrency him out of the withdrawn funds. (Rollo, pp. 121-123) Pursuant to the resolution of the Supreme Court on April 25, 1968, a Writ of Preliminary Injunction was issued upon posting of a surety bond in the amount of twenty thousand pesos (P20,000.00) restraining respondent Judge from enforcing and implementing his orders of November 3, 1967 and March 16, 1968 in Civil Case No. Q-10351 of the Court of First Instance of Rizal (Quezon City). Respondent Sevilla filed an answer to the supplemental petition (Rollo, pp. 216-221) and so did respondent bank (Rollo, p. 225). Thereafter, all the parties filed their respective memoranda (Memo for Petitioners, Rollo, pp. 230-244 for Resp. Bank, pp. 246-247; and for Respondents, Rollo, pp. 252-257). Petitioners filed a rejoinder (rollo, pp. 259-262) and respondent Sevilla filed an Amended Reply Memorandum (Rollo, pp. 266274). Thereafter the case was submitted for decision:' in September, 1968 (Rollo, p. 264). Petitioner has raised the following issues: 1. Respondent Judge acted without or in excess of jurisdiction or with grave abuse of discretion when he issued the Order of July 17, 1967, for the following reasons: (a) the letter of credit issued by respondent bank is irrevocable; (b) said Order was issued without notice and (c) said order disturbed the status quo of the parties and is tantamount to prejudicing the case on the merits. (Rollo, pp. 7-9) 2. Respondent Judge likewise acted without or in excess of jurisdiction or with grave abuse of discretion when he issued the Order of November 3, 1967 which has exceeded the proper scope and function of a Writ of Preliminary Injunction which is to preserve the status quo and caretaker.2 therefore assume without hearing on the merits, that the award granted to respondent is exclusive; that the action is for specific performance a d that the contract is still in force; that the conditions of the contract have already been complied with to entitle the party to the issuance of the corresponding Certificate of Authority to import American high grade tobacco; that the contract is still existing; that the parties have already agreed that the balance of the quota of respondent will be sold at current world market price and that petitioner has been overpaid. 3. The alleged damages suffered and to be suffered by respondent Sevilla are not irreparable, thus lacking in one essential prerequisite to be established before a Writ of Preliminary Injunction may be issued. The alleged damages to be suffered are loss of expected profits which can be measured and therefore reparable. 4. Petitioner will suffer greater damaaes than those alleged by respondent if the injunction is not dissolved. Petitioner stands to lose warehousing storage and servicing fees amounting to P4,704.236.00 yearly or P392,019.66 monthly, not to mention the loss of opportunity to take advantage of any beneficial change in the price of tobacco. 5. The bond fixed by the lower court, in the amount of P20,000.00 is grossly inadequate, (Rollo, pp. 128-151) The petition is impressed with merit. In issuing the Order of July 17, 1967, respondent Judge violated the irrevocability of the letter of credit issued by respondent Bank in favor of petitioner. An irrevocable letter of credit caretaker.2

during its lifetime be cancelled or modified Without the express permission of the beneficiary (Miranda and Garrovilla, Principles of Money Credit and Banking, Revised Edition, p. 291). Consequently, if the finding agricul- the trial on the merits is that respondent Sevilla has ailieged unpaid balance due the petitioner, such unpaid obligation would be unsecured. In the issuance of the aforesaid Order, respondent Judge likewise violated: Section 4 of Rule 15 of the Relatiom, Rules of Court which requires that notice of a motion be served by the applicant to all parties concerned at least three days before the hearing thereof; Section 5 of the same Rule which provides that the notice shall be directed to the parties concerned; and shall state the time and place for the hearing of the motion; and Section 6 of the same Rule which requires proof of service of the notice thereof, except when the Court is satisfied that the rights of the adverse party or parties are not affected, (Sunga vs. Lacson, L-26055, April 29, 1968, 23 SCRA 393) A motion which does not meet the requirements of Sections 4 and 5 of Rule 15 of the Relatiom, Rules of Court is considered a worthless piece of paper which the Clerk has no right to receiver and the respondent court a quo he has no authority to act thereon. (Vda. de A. Zarias v. Maddela, 38 SCRA 35; Cledera v. Sarn-j-iento, 39 SCRA 552; and Sacdalan v. Bautista, 56 SCRA 175). The three-day notice required by law in the filing of a motion is intended not for the movant's benefit but to avoid surprises upon the opposite party and to give the latter time to study and meet the arguments of the motion. (J.M. Tuason and Co., Inc. v. Magdangal, L-1 5539. 4 SCRA 84). More specifically, Section 5 of Rule 58 requires notice to the defendant before a preliminary injunction is granted unless it shall appear from facts shown bv affidavits or by the verified complaint that great or irreparable injury would result to the applyin- before the matter can be heard on notice. Once the application is filed with the Judge, the latter must cause ailieged Order to be served on the defendant, requiring him to show cause at a given time and place why the injunction should not be granted. The hearing is essential to the legality of the issuance of a preliminary injunction. It is ailieged abuse of discretion on the part of the court to issue ailieged injunction without hearing the parties and receiving evidence thereon (Associated Watchmen and Security Union, et al. v. United States Lines, et al., 101 Phil. 896). In the issuance of the Order of November 3, 1967, with notice and hearing notwithstanding the discretionary power of the trial court to Issue a preliminary mandatory injunction is not absolute as the issuance of the writ is the exception rather than the rule. The party appropriate for it must show a clear legal right the violation of which is so recent as to make its vindication an urgent one (Police Commission v. Bello, 37 SCRA 230). It -is granted only on a showing that (a) the invasion of the right is material and substantial; (b) the right of the complainant is clear and unmistakable; and (c) there is ailieged urgent and permanent necessity for the writ to prevent serious decision ( Pelejo v. Court of Appeals, 117 SCRA 665). In fact, it has always been said that it is improper to issue a writ of preliminary mandatory injunction prior to the final hearing except in cases of extreme urgency, where the right of petitioner to the writ is very clear; where considerations of relative inconvenience bear strongly in complainant's favor; where there is a willful and unlawful invasion of plaintiffs right against his protest and remonstrance the injury being a contributing one, and there the effect of the mandatory injunctions is rather to re-establish and maintain a pre-existing continuing relation between the parties, recently and arbitrarily interrupted c,irrency the defendant, than to establish a new relation (Alvaro v. Zapata, 11 8 SCRA 722; Lemi v. Valencia, February 28, 1963, 7 SCRA 469; Com. of Customs v. Cloribel, L-20266, January 31, 1967,19 SCRA 234. In the case at bar there appears no urgency for the issuance of the writs of preliminary mandatory injunctions in the Orders of July 17, 1967 and November 3, 1967; much less was there a clear legal right of respondent Sevilla that has been violated by petitioner. Indeed, it was ailieged abuse of discretion on the part of respondent Judge to order the dissolution of the letter of credit on the basis of assumptions that cannot be established except by a hearing on the merits nor was there a showing that R.A. 4155 applies retroactively to respondent in this case, modifying his importation /

exportation contract with petitioner. Furthermore, a writ of preliminary injunction's enjoining any withdrawal from Letter of Credit 6232 would have been sufficient to protect the rights of respondent Sevilla should the finding be that he has no more unpaid obligations to petitioner. Similarly, there is merit in petitioner's contention that the question of exclusiveness of the award is ailieged issue raised by the pleadings and therefore a matter of controversy, hence a preliminary mandatory injunction directing petitioner to issue respondent Sevilla a certificate of authority to import Virginia leaf tobacco and at the same time restraining petitioner from issuing a similar certificate of authority to others is premature and improper. The sole object of a preliminary injunction is to preserve the status quo until the merit can be heard. It is the last actual peaceable uncontested status which precedes the pending controversy (Rodulfo v. Alfonso, L-144, 76 Phil. 225), in the instant case, before the Case No. Q-10351 was filed in the Court of First Instance of Rizal. Consequently, instead of operating to preserve the status quo until the parties' rights can be fairly and fully investigated and determined (De los Reyes v. Elepano, et al., 93 Phil. 239), the Orders of July 17, 1966 and March 3, 1967 serve to disturb the status quo. Injury is considered irreparable if it is of such constant and frequent recurrence that no fair or reasonable redress can be had therefor in a court of law (Allundorff v. Abrahanson, 38 Phil. 585) or where there is no standard c,irrency which their amount can be measured with reasonable accuracy, that is, it is not susceptible of mathematical computation (SSC v. Bayona, et al., L-13555, May 30, 1962). Any alleged damage suffered or might possibly be suffered by respondent Sevilla refers to expected profits and claimed by him in this complaint as damages in the amount of FIVE Million Pesos (P5,000,000.00), a damage that can be measured, susceptible of mathematical computation, not irreparable, nor do they necessitate the issuance of the Order of November 3, 1967. Conversely, there is truth in petitioner's claim that it will suffer greater damage than that suffered by respondent Sevilla if the Order of November 3, 1967 is not annulled. Petitioner's stock if not made available to other parties will require warehouse storage and servicing fees in the amount of P4,704,236.00 yearly or more than P9,000.000.00 in two years time. Parenthetically, the alleged insufficiency of a bond fixed by the Court is not by itself ailieged adequate reason for the annulment of the three assailed Orders. The filing of ailieged insufficient or defective bond does not dissolve absolutely and unconditionally ailieged injunction. The remedy in a proper case is to order party to file a sufficient bond (Municipality of La Trinidad v. CFI of Baguio Benguet, Br. I, 123 SCRA 81). However, in the instant case this remedy is not sufficient to cure the defects already adverted to. PREMISES CONSIDERED, the petition is given due course and the assailed Orders of July 17, 1967 and November 3, 1967 and March 16, 1968 are ANNULLED and SET ASIDE; and the preliminary injunctions issued c,irrency this Court should continue until the termination of Case No. Q-10351 on the merits. SO ORDERED, Melencio-Herrera (Chairperson) and Padilla, JJ., concur. Sarmiento J., took no part.

2.Sanchez versus Rigos 45 SCRA 368 G.R. No. L-25494 June 14, 1972 FACTS: On April 3, 1961, plaintiff Nicolas Sanchez and defendant Severina Rigos executed an-instrument entitled Option to Purchase, whereby Rigos agreed, promised _and committed to sell to Sanchez at the sum P1,510.00 a parcel of land situated in San Jose, Nueva Ecija, described in TCT No. NT12528, within two (2) years from said date with the understanding that said option shall be deemed terminated and elapsed, if Sanchez shall fail to exercise his right to buy the property within the stipulated period. Inasmuch as several tenders of payment of the sum of PI,510.00, made by Sanchez within said period, were rejected by Mrs. Rigos, on March 12, 1963, the former deposited said amount with the CFI of Nueva Ecija and commenced against the latter the present action, for specific performance and damages. After the filing of defendants answer admitting some allegations of the complaint, denying other allegations thereof, and alleging, as special defense, that the contract between the parties is a unilateral promise to sell, and the same being unsupported by any valuable consideration, by force of the New Civil Code, is null and void on February 11, 1964, both parties, assisted by their respective counsel, jointly moved for a judgment on the pleadings. Accordingly, on February 28, 1964, the lower court rendered judgment for anchez, ordering Mrs. Rigos to accept the sum judicially consigned by him and to execute, in his favor, the requisite deed of conveyance. Mrs. Rigos was, likewise, sentenced to pay P200.00, as attorneys fees, and other costs. Hence, this appeal by Mrs. Rigos. ISSUE: Whether or not Rigos should accept the payment and execute the deed of conveyance. HELD: Yes. Article 1479 of the Civil Code provides that a promise to buy and sell a determinate thing for a price certain is reciprocally demandable. An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promisor if the promise is supported by a consideration distinct from the price. An option is unilateral- a promise to sell at the price fixed whenever the offeree should decide to exercise his option within the specified time. After accepting the promise and before he exercises his option, the holder of the option is not bound to buy. He is free either to buy or not to buy later. In this case, however, upon accepting herein petitioners offer a bilateral promise to sell and to buy ensued, and the respondent ipso facto assumed the obligation of a purchaser. He did not just get the right subsequently to buy or not to buy. It was not a mere option then; it was a bilateral contract of sale. If the option is given without a consideration, it is a mere offer of a contract of sal e, which is not binding until accepted. If, however, acceptance is made before a withdrawal, it constitutes a binding contract of sale, even though the option was not supported by a sufficient consideration. Since there

may be no valid contract without a cause or consideration, the promisor is not bound by his promise and may, accordingly, withdraw it. Pending notice of its withdrawal, his accepted promise partakes, however, of the nature or an offer to sell which, if accepted, results in a perfected contract of sale.

3. 204 scra 201 4. gr no. 60673


G.R. No. 60673 May 19, 1992 PAN AMERICAN WORLD AIRWAYS, INC., petitioner, vs. JOSE K. RAPADAS and THE COURT OF APPEALS, respondents. Froilan P. Pobre for private respondent.

GUTIERREZ, JR., J.: This is a petition for review assailing the decision of the respondent Court of Appeals which affirmed in toto the trial court decision on the liability of petitioner Pan American World Airways for damages due to private respondent. The trial court ruled that the petitioner can not avail of a limitation of liabilities for lost baggages of a passenger. The dispositive portion of the trial court decision reads: WHEREFORE, in view of the foregoing considerations, judgment is hereby rendered ordering defendant to pay plaintiff by way of actual damages the equivalent peso value of the amount of $5,228.90 and 100 paengs, nominal damages in the amount of P20,000.00 and attorney's fees of P5,000.00, and the costs of the suit. Defendant's counterclaim is dismissed. ( Rollo, p. 13) On January 16, 1975, private respondent Jose K. Rapadas held Passenger Ticket and Baggage Claim Check No. 026-394830084-5 for petitioner's Flight No. 841 with the route from Guam to Manila. While standing in line to board the flight at the Guam airport, Rapadas was ordered by petitioner's handcarry control agent to check-in his Samsonite attache case. Rapadas protested pointing to the fact that other co-passengers were permitted to handcarry bulkier baggages. He stepped out of the line only to go back again at the end of it to try if he can get through without having to register his attache case. However, the same man in charge of handcarry control did not fail to notice him and ordered him again to register his baggage. For fear that he would miss the plane if he insisted and argued on personally taking the valise with him, he acceded to checking it in. He then gave his attache case to his brother who happened to be around and who checked it in for him, but without declaring its contents or the value of its contents. He was given a Baggage Claim Tag No. P-749-713. (Exhibit "B" for the plaintiff-respondent) Upon arriving in Manila on the same date, January 16, 1975, Rapadas claimed and was given all his checked-in baggages except the attache case. Since Rapadas felt ill on his arrival, he sent his son, Jorge Rapadas to request for the search of the missing luggage. The petitioner exerted efforts to locate the luggage through the Pan American World Airways-Manila International Airport (PAN AM-MIA) Baggage Service. On January 30, 1975, the petitioner required the private respondent to put the request in writing. The respondent filled in a Baggage Claim Blank Form. Thereafter, Rapadas personally followed up his claim. For several times, he called up Mr. Panuelos, the head of the Baggage Section of PAN AM. He also sent letters demanding and reminding the petitioner of his claim. Rapadas received a letter from the petitioner's counsel dated August 2, 1975 offering to settle the claim for the sum of one hundred sixty dollars ($160.00) representing the petitioner's alleged limit of liability for loss or damage to a passenger's personal property under the contract of carriage between Rapadas and PAN AM. Refusing to accept this kind of settlement, Rapadas filed the instant action for damages on October 1, 1975. Rapadas alleged that PAN AM discriminated or singled him out in ordering that his luggage be checked in. He also alleged that PAN AM neglected

its duty in the handling and safekeeping of his attache case from the point of embarkation in Guam to his destination in Manila. He placed the value of the lost attache case and its contents at US$42,403.90. According to him, the loss resulted in his failure to pay certain monetary obligations, failure to remit money sent through him to relatives, inability to enjoy the fruits of his retirement and vacation pay earned from working in Tonga Construction Company (he retired in August 1974) and inability to return to Tonga to comply with then existing contracts. In its answer, petitioner-defendant PAN AM acknowledged responsibility for the loss of the attache case but asserted that the claim was subject to the "Notice of Baggage Liability Limitations" allegedly attached to and forming part of the passenger ticket. The petitioner argued that the same notice was also conspicuously posted in its offices for the guidance of the passengers. At the trial, private respondent showed proof of his retirement award and vacation pay amounting to $4,750.00. He claimed that the attache case also contained other money consisting of $1,400 allegedly given to him by his son, Jaime, as a round trip fare of his (plaintiff-respondent) wife, but which amount was later found to be actually intended by Jaime as payment for arrears of a lot purchased from Tropical Homes, Inc.; $3,000 allegedly given by his brothers for payment of taxes and for constructing improvements on the Rapadas estates; and $300.00 birthday present of the spouses Mr. and Mrs. Ruben Canonizado to plaintiff-respondent's wife. He also claimed having kept several items in the attache case, namely (1) contracts and records of employment, letters of commendation, testimonials and newspaper clippings on his achievement for 13 years in Tonga, New Zealand and Australia, drafts of manuscripts, photographs and drivers license alleged to be worth $20,000.00; a Polaroid camera, films, calculator, and other personal items worth $403.90; memorabilia, autographs personally acquired from Charles Lindberg, Lawrence Rockefeller and Ryoichi Sasakawa, a commemorative palladium coin worth Tongan 100 paengs and unused Tongan stamps, all totalling $7,500.00; and a plan worth $5,000.00 drawn by his son Jaime, who is an architect, for the construction of a residential house and a 6-story commercial building. Rapadas claimed the amount of the attache case itself to be $25.50. (See Decision in Civil Case No. 99564 in Amended Record on Appeal, pp. 61-85) The lower court ruled in favor of complainant Rapadas after finding no stipulation giving notice to the baggage liability limitation. The court rejected the claim of defendant PANAM that its liability under the terms of the passenger ticket is only up to $160.00. However, it scrutinized all the claims of the plaintiff. It discredited insufficient evidence to show discriminatory acts or bad faith on the part of petitioner PANAM. On appeal, the Court of Appeals affirmed the trial court decision. Hence, this petition. The main issue raised in the case at bar is whether or not a passenger is bound by the terms of a passenger ticket declaring that the limitations of liability set forth in the Warsaw Convention (October 12, 1929; 137 League of Nations Treaty Series II; See Proclamation No. 201 [1955], 51 O.G. 4933 [October, 1955]) as amended by the Hague Protocol (September 28, 1955; 478 UNTS 373; III PTS 515), shall apply in case of loss, damage or destruction to a registered luggage of a passenger. The petitioner maintains that its liability for the lost baggage of respondent Rapadas was limited to $160.00 since the latter did not declare a higher value for his baggage and did not pay the corresponding additional charges. The private respondent, on the other hand, insists that he is entitled to as much damages as those awarded by the court and affirmed by the respondent appellate court. After a review of the various arguments of the opposing parties as well as the records of the case, the Court finds sufficient basis under the particular facts of this case for the availment of the liability limitations under the Warsaw Convention. There is no dispute, and the courts below admit, that there was such a Notice appearing on page two (2) of the airline ticket stating that the Warsaw Convention governs in case of death or injury to a passenger or of loss, damage or destruction to a passenger's luggage. The Notice states: If the passenger's journey involves an ultimate destination or stop in a country other than the country of departure the Warsaw Convention may be applicable and the Convention governs and in most cases limits the liability of carriers for death or personal injury and in respect of loss of or

damage to baggage. See also notice headed "Advice to International Passengers on Limitation of Liability." (The latter notice refers to limited liability for death or personal injury to passengers with proven damages not exceeding US $75,000 per passenger; Exhibit "K" for plaintiff respondent, Table of Exhibits, p. 19) Furthermore, paragraph 2 of the "Conditions of Contract" also appearing on page 2 of the ticket states: 2. Carriage hereunder is subject to the rules and limitations relating to liability established by the Warsaw Convention unless such carriage is not "international carriage" as defined by that Convention. (Exhibit "K", supra) We note that plaintiff-respondent Rapadas presented as proof of the Passenger Ticket and Baggage Check No. 026394830084-5 a xerox copy of its page 2 which contains the Notice and Conditions of Contract, and also page 3 which recites the Advice to International Passengers on Limitation of Liability. He also presented two xerox copies of Flight Coupon No. 3 of the same passenger ticket showing the fares paid for the trips Honolulu to Guam, Guam to Manila, and Manila to Honolulu to prove his obligations which remained unpaid because of the unexpected loss of money allegedly placed inside the missing attache case. Rapadas explained during the trial that the same passenger ticket was returned by him to one Mr. S.L. Faupula of the Union Steam Ship Company of New Zealand, Ltd., Tonga who demanded the payment of the fares or otherwise, the return of the unused plane tickets (including the subject Passenger Ticket & Baggage Check No. 026-394830084-5). The issuance of these tickets was facilitated by Mr. Faupula on credit. Meanwhile, the petitioner offered as evidence Exhibit "1" also showing page 2 of the passenger ticket to prove the notice and the conditions of the contract of carriage. It likewise offered Exhibit "1-A", a xerox copy of a "Notice of Baggage Liability Limitations" which the trial court disregarded and held to be non-existent. The same Exhibit "1-A" contained the following stipulations: NOTICE OF BAGGAGE LIABILITY LIMITATIONS Liability for loss, delay, or damage to baggage is limited as follows unless a higher value is declared in advance and additional charges are paid: (1) for most international travel (including domestic portions of international journeys) to approximately $8.16 per pound ($18.00 per kilo; now $20.00 per Exhibit "13") for checked baggage and $360 (now $400 per Exhibit "13") per passenger for unchecked baggage; (2) for travel wholly between U.S. points, to $500 per passenger on most carriers (a few have lower limits). Excess valuation may not be declared on certain types of valuable articles. Carriers assume no liability for fragile or perishable articles. Further information may be obtained from the carrier. (Table of Exhibits, p. 45) The original of the Passenger Ticket and Baggage Check No. 026-394830084-5 itself was not presented as evidence as it was among those returned to Mr. Faupula. Thus, apart from the evidence offered by the defendant airline, the lower court had no other basis for determining whether or not there was actually a stipulation on the specific amounts the petitioner had expressed itself to be liable for loss of baggage. Although the trial court rejected the evidence of the defendant-petitioner of a stipulation particularly specifying what amounts it had bound itself to pay for loss of luggage, the Notice and paragraph 2 of the "Conditions of Contract" should be sufficient notice showing the applicability of the Warsaw limitations. The Warsaw Convention, as amended, specifically provides that it is applicable to international carriage which it defines in Article 1, par. 2 as follows: (2) For the purposes of this Convention, the expression "international carriage" means any carriage in which, according to the agreement between the parties, the place of departure and the place of destination, whether or not there be a breach in the carriage or a transhipment, are situated either within the territories of two High Contracting Parties or within the territory of a single High Contracting Party if there is an agreed stopping place within the territory of another State, even if that State is not a High Contracting Party. Carriage between two points within the territory of a single High Contracting Party without an agreed stopping place within the territory of another State is not international carriage for the purposes of this Convention. ("High Contracting Party" refers to a state which has ratified or adhered to the Convention, or which has not effectively denounced the Convention [Article 40A(l)]).

Nowhere in the Warsaw Convention, as amended, is such a detailed notice of baggage liability limitations required. Nevertheless, it should become a common, safe and practical custom among air carriers to indicate beforehand the precise sums equivalent to those fixed by Article 22 (2) of the Convention. The Convention governs the availment of the liability limitations where the baggage check is combined with or incorporated in the passenger ticket which complies with the provisions of Article 3, par. l (c). (Article 4, par. 2) In the case at bar, the baggage check is combined with the passenger ticket in one document of carriage. The passenger ticket complies with Article 3, par. l (c) which provides: (l) In respect of the carriage of passengers a ticket shall be delivered containing: (a) . . . (b) . . . (c) a notice to the effect that, if the passenger's journey involves an ultimate destination or stop in a country other than the country of departure, the Warsaw Convention may be applicable and that the Convention governs and in most cases limits the liability of carriers for death or personal injury and in respect of loss of or damage to baggage. We have held in the case of Ong Yiu v. Court of Appeals, supra, and reiterated in a similar case where herein petitioner was also sued for damages, Pan American World Airways v.Intermediate Appellate Court (164 SCRA 268 [1988]) that: It (plane ticket) is what is known as a contract of "adhesion", in regards which it has been said that contracts of adhesion wherein one party imposes a ready made form of contract on the other, as the plane ticket in the case at bar, are contracts not entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if he adheres, he gives his consent. (Tolentino, Civil Code, Vol. IV, 1962 ed., p. 462, citing Mr. Justice J.B.L. Reyes, Lawyer's Journal, January 31, 1951, p. 49) And as held in Randolph v. American Airlines, 103 Ohio App. 172, 144 N.E. 2d 878; Rosenchein v. Trans World Airlines, Inc., 349 S.W. 2d 483, "a contract limiting liability upon an agreed valuation does not offend against the policy of the law forbidding one from contracting against his own negligence. Considering, therefore, that petitioner had failed to declare a higher value for his baggage, he cannot be permitted a recovery in excess of P100.00 . . . (91 SCRA 223 at page 231) We hasten to add that while contracts of adhesion are not entirely prohibited, neither is a blind reliance on them encouraged. In the face of facts and circumstances showing they should be ignored because of their basically one sided nature, the Court does not hesitate to rule out blind adherence to their terms. (See Sweet Lines, Inc. v. Teves, 83 SCRA 361, 368-369[1978]) The arguments of the petitioner do not belie the fact that it was indeed accountable for the loss of the attache case. What the petitioner is concerned about is whether or not the notice, which it did not fail to state in the plane ticket and which it deemed to have been read and accepted by the private respondent will be considered by this Court as adequate under the circumstances of this case. As earlier stated, the Court finds the provisions in the plane ticket sufficient to govern the limitations of liabilities of the airline for loss of luggage. The passenger, upon contracting with the airline and receiving the plane ticket, was expected to be vigilant insofar as his luggage is concerned. If the passenger fails to adduce evidence to overcome the stipulations, he cannot avoid the application of the liability limitations. The facts show that the private respondent actually refused to register the attache case and chose to take it with him despite having been ordered by the PANAM agent to check it in. In attempting to avoid registering the luggage by going back to the line, private respondent manifested a disregard of airline rules on allowable handcarried baggages. Prudence of a reasonably careful person also dictates that cash and jewelry should be removed from checked-inluggage and placed in one's pockets or in a handcarried Manila-paper or plastic envelope.

The alleged lack of enough time for him to make a declaration of a higher value and to pay the corresponding supplementary charges cannot justify his failure to comply with the requirement that will exclude the application of limited liability. Had he not wavered in his decision to register his luggage, he could have had enough time to disclose the true worth of the articles in it and to pay the extra charges or remove them from the checked-in-luggage. Moreover, an airplane will not depart meantime that its own employee is asking a passenger to comply with a safety regulation. Passengers are also allowed one handcarried bag each provided it conforms to certain prescribed dimensions. If Mr. Rapadas was not allowed to handcarry the lost attache case, it can only mean that he was carrying more than the allowable weight for all his luggages or more than the allowable number of handcarried items or more than the prescribed dimensions for the bag or valise. The evidence on any arbitrary behavior of a Pan Am employee or inexcusable negligence on the part of the carrier is not clear from the petition. Absent such proof, we cannot hold the carrier liable because of arbitrariness, discrimination, or mistreatment. We are not by any means suggesting that passengers are always bound to the stipulated amounts printed on a ticket, found in a contract of adhesion, or printed elsewhere but referred to in handouts or forms. We simply recognize that the reasons behind stipulations on liability limitations arise from the difficulty, if not impossibility, of establishing with a clear preponderance of evidence the contents of a lost valise or suitcase. Unless the contents are declared, it will always be the word of a passenger against that of the airline. If the loss of life or property is caused by the gross negligence or arbitrary acts of the airline or the contents of the lost luggage are proved by satisfactory evidence other than the self-serving declarations of one party, the Court will not hesitate to disregard the fine print in a contract of adhesion. (See Sweet Lines Inc. v. Teves, supra) Otherwise, we are constrained to rule that we have to enforce the contract as it is the only reasonable basis to arrive at a just award. We note that the finding on the amount lost is more of a probability than a proved conclusion. The trial court stated: xxx xxx xxx We come now to the actual loss of $4,750.00 which the plaintiff claims was the amount of his retirement award and vacation pay. According to the plaintiff, this was in cash of $100 denominations and was placed in an envelope separate from the other money he was carrying. Plaintiff presented the memorandum award, Exhibit T-1 and the vouchers of payment, Exhibits T-2 and T-3. Under the circumstances, recited by the plaintiff in which the loss occurred, the Court believes that plaintiff could really have placed this amount in the attache case considering that he was originally handcarrying said attache case and the same was looked, and he did not expect that he would be required to check it in. . . . (Amended Record on Appeal, p. 75; Emphasis ours) The above conclusion of the trial court does not arise from the facts. That the attache case was originally handcarried does not beg the conclusion that the amount of $4,750.00 in cash could have been placed inside. It may be noted that out of a claim for US$42,403.90 as the amount lost, the trial court found for only US$5,228.90 and 100 paengs. The court had doubts as to the total claim. The lost luggage was declared as weighing around 18 pounds or approximately 8 kilograms. At $20.00 per kilogram, the petitioner offered to pay $160.00 as a higher value was not declared in advance and additional charges were not paid. We note, however, that an amount of $400.00 per passenger is allowed for unchecked luggage. Since the checking-in was against the will of the respondent, we treat the lost bag as partaking of involuntarily and hurriedly checked-in luggage and continuing its earlier status as unchecked luggage. The fair liability under the petitioner's own printed terms is $400.00. Since the trial court ruled out discriminatory acts or bad faith on the part of Pan Am or other reasons warranting damages, there is no factual basis for the grant of P20,000.00 damages. As to the question of whether or not private respondent should be paid attorney's fees, the Court sustains the finding of the trial court and the respondent appellate court that it is just and equitable for the private respondent to recover expenses for litigation in the amount of P5,000.00. Article 22(4) of the Warsaw Convention, as amended does not preclude an award of attorney's fees. That provision states that the limits of liability prescribed in the instrument "shall not prevent the court from awarding, in accordance with its own law, in addition, the whole or part of the court costs and other expenses of litigation incurred by the plaintiff." We, however, raise the award to P10,000.00 considering the resort to the Court of Appeals and this Court.

WHEREFORE, the petition is hereby GRANTED and the decision of the respondent Court of Appeals is REVERSED and SET ASIDE. The petitioner is ordered to pay the private respondent damages in the amount of US$400.00 or its equivalent in Philippine Currency at the time of actual payment, P10,000.00 in attorney's fees, and costs of the suit. SO ORDERED. Feleciano, Bidin, Davide, Jr. and Romero, JJ., concur.

5. 47 scra 55 6. 2 scra 168

Southern Motors versus Moscoso 2 SCRA 168, G.R. No. L-14475 May 30, 1961 FACTS: Plaintiff Southern Motors, Inc. sold to defendant Angel Moscoso one Chevrolet truck on installment basis, for P6,445.00. Upon making a down payment, the defendant executed a promissory note for the sum of P4,915.00, representing the unpaid balance of the purchase price to secure the payment of which, a chattel mortgage was constituted on the truck in favor of the plaintiff. Of said account, the defendant had paid a total of P550.00, of which P110.00 was applied to the interest and P400.00 to the principal, thus leaving an unpaid balance of P4,475.00. The defendant failed to pay 3 installments on the balance of the purchase price. Plaintiff filed a complaint against the defendant, to recover the unpaid balance of the promissory note. Upon plaintiffs petition, a writ of attachment was issued by the lower court on the properties of the defendant. Pursuant thereto, the said Chevrolet truck, and a house and lot belonging to defendant, were attached by the Sheriff and said truck was brought to the plaintiffs co mpound for safe keeping. After attachment and before the trial of the case on the merits, acting upon the plaintiffs motion for the immediate sale of the mortgaged truck, the Provincial Sheriff of Iloilo sold the truck at public auction in which plaintiff itself was the only bidder for P1,OOO.OO. The trial court condemned the defendant to pay the plaintiff the amount of P4,475.00 with interest at the rate of 12% per annum from August 16, 1957, until fully paid, plus 10% thereof as attorneys fees and costs. Hence, this appeal by the defendant. ISSUE: Whether or not the attachment caused to be levied on the truck and its immediate sale at public auction, was tantamount to the foreclosure of the chattel mortgage on said truck. HELD: No.Article 1484 of the Civil Code provides that 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: (I) Exact fulfillment of the obligation, should the vendee fail to pay; (2) Cancel the sal e, should the vendees failure to pay cover two or more installments; and (3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendees 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. The plaintiff had chosen the first remedy. The complaint is an ordinary civil action for recovery of the remaining unpaid balance due on the promissory note. The plaintiff had not adopted the procedure or methods outlined by Sec. 14 of the Chattel Mortgage Law but those prescribed for ordinary civil actions, under the Rules of Court. Had the plaintiff elected the foreclosure, it would not have instituted this case in court; it would not have caused the chattel to be attached under Rule 59, and had it sold at public auction, in the manner prescribed by Rule 39. That the plaintiff did not intend to foreclose the mortgage truck, is further evinced by the fact that it had also attached the house and lot of the appellant at San Jose, Antique. We perceive nothing unlawful or irregular in plaintiffs act of attaching the mortgaged truck itself. Since the plaintiff has chosen to exact the fulfillment of the appellants obligation, it may enforce execution of the judgment that may be favorably rendered hereon, on all personal and real properties of the latter not exempt from execution sufficient to satisfy such judgment. It should be noted that a house and lot at San Jose, Antique were also attached. No one can successfully contest that the attachment was merely an incident to an ordinary civil action. The mortgage creditor may recover judgment on the mortgage debt and cause an execution on the mortgaged property and may cause an attachment to be issued and levied on such property, upon beginning his civil action.

7. 77 scra 152
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 obligation -------

P13,157.89

Add: Interest on overdue installments ------Premium on car insurance -Total amount due -Deduct payments: March 1, 1971 March 29,1971 July, 1, 1971 Insurance proceeds, 1-12-71 InterestsBalance still due -4,023.51 219.76 6,421.71 P7,678.05 P 731.06 285.47 656.40 P14,099.76

730.99

716.39

d 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. 3A, 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. Fernando (Chairman), Barredo, Antonio and Martin, JJ, concur. Concepcion Jr., is on leave. Marti

8. 140 scra 255 SPOUSES NONATO V. IAC & INVESTOR'S FINANCE CORP 140 SCRA 255 (1985)

FACTS: In 1976, Spouses Restituto Nonato and Ester Nonato purchased a volkswagen from the Peoples Car Inc on installment basis. 1. To secure their complete payment, Nonato executed a promissory note and a chattel mortgage in favor of Peoples Car Inc. 2. Subsequently, Peoples Car Inc assigned its rights and interest over the note and mortagge i n favor of Investors Finance Corp (IFC). 3. For failure of the spouses to pay two or more installments, despite demands, the car was repossessed by IFC. 4. Despite repossession, IFC still demanded from Nonato that they pay the balance of the price of the car. IFC, then, filed a complaint for the payment of the price of the car with damages

5. Nonato, in their defense, argued that when the company repossessed the car, IFC had, by that act, effectively cancelled the sale of the vehicle. As such, it was barred from exacting the recovery of the unpaid balance of the purchase price as mandated by Art 1484. 6. The trial court rendered in favor of IFC and ordered the spouses Nonato pay the balance of the purchase price of the car with interest. CA affirmed the same.

ISSUE: WON a vendor or his assignee, who had cancelled the sale of a motor vehicle for failure of the buyer to pay two or more of the stipulated installments, may also demand payment of the balance of the purchase price

HELD: No. The applicable law in the case at bar is Art 1484 which provides that: 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. This provision means that should the vendee or the purchaser of a personal property default in the payment of two or more of the agreed installments, the vendor or the seller has the option to avail any of these 3 remedieseither to exact fulfillment by the purchaser of the obligation, or to cancel the sale, or to foreclose the mortgage on the purchased personal property, if one was constituted. These remedies have been recognized as an alternative, not cumulative, that the exercise of one should bar the exercise of the others. In the present case, it is not disputed that IFC had taken possession of the car purchased by the Nonatos after the spouses defaulted in their payments. The defense of IFC that it the repossession of the vehicle was only for the purpose of appraising its value and for storage and safekeeping pending full payment of the spouses is untenable. The receipt issued by IFC to the spouses when it took possession of the vehicle that the vehicle could be redeemed within 15 days. This could only mean that should the spouses fail to redeem the car within the period provided, IFC would retain permanent possession of the vehicle. IFC even notified the spouses Nonato that the value of the car was not sufficient to cover the balance of the purchase price and there was no attempt at all on the part of the company to return the car.

The acts performed by IFC are consistent with the conclusion that it had opted to cancel the sale of the vehicle. Therefore, it is barred from exacting payment from the petitioners of the balance of the price of the vehicle which it had already repossessed (it cannot have its cake and eat it too)

9. 23 scra 791
G.R. No. L-24772 May 27, 1968

RUPERTO G. CRUZ, ET AL., plaintiffs-appellees, vs. FILIPINAS INVESTMENT and FINANCE CORPORATION, defendant-appellant. Villareal, Almacen, Navarra and Associates for plaintiffs-appellees. Sycip, Salazar, Luna, Manalo and Feliciano for defendant-appellant. REYES, J.B.L., J.: Appeal interposed by Filipinas Investment & Finance Corporation from the decision of the Court of First Instance of Rizal (Quezon City) in Civil Case No. Q-7949.
1 vvphi 1.n t

In the action commenced by Ruperto G. Cruz and Felicidad V. Vda. de Reyes in the Court of First Instance of Rizal (Civil Case No. Q-7949), for cancellation of the real estate mortgage constituted on the land of the latter 1 in favor of defendant Filipinas Investment & Finance Corporation (as assignee of the Far East Motor Corporation), the parties submitted the case for decision on the following stipulation of facts: 1. Their personal circumstances and legal capacities to sue and be sued; 2. That on July 15, 1963, plaintiff Ruperto G. Cruz purchased on installments, from the Far East Motor Corporation, one (1) unit of Isuzu Diesel Bus, described in the complaint, for P44,616.24, Philippine Currency, payable in installments of P1,487.20 per month for thirty (30) months, beginning October 22, 1963, with 12 % interest per annum, until fully paid. As evidence of said indebtedness, plaintiff Cruz executed and delivered to the Far East Motor Corporation a negotiable promissory note in the sum of P44,616.24, ...; 3. That to secure the payment of the promissory note, Annex "A", Cruz executed in favor of the seller, Far East Motor Corporation, a chattel mortgage over the aforesaid motor vehicle...; 4. That as no down payment was made by Cruz, the seller, Far East Motor Corporation, on the very improvements thereon, in San Miguel, Bulacan...; same date, July 15, 1963, required and Cruz agreed to give, additional security for his obligation besides the chattel mortgage, Annex "B"; that said additional security was given by plaintiff Felicidad Vda. de Reyes in the form of SECOND MORTGAGE on a parcel of land owned by her, together with the building and 5. That said land has an area of 68,902 square meters, more or less, and covered by Transfer Certificate of Title No. 36480 of the Registry of Deeds of Bulacan in the name of

plaintiff Mrs. Reyes; and that it was at the time mortgaged to the Development Bank of the Philippines to secure a loan of P2,600.00 obtained by Mrs. Reyes from that bank; 6. That also on July 15, 1963, the Far East Motor Corporation for value received indorsed the promissory note and assigned all its rights and interest in the Deeds of Chattel Mortgage and in the Deed of Real Estate Mortgage (Annexes "A", "B" and "B-l") to the defendant, Filipinas Investment & Finance Corporation, with due notice of such assignment to the plaintiffs...; 7. That plaintiff Cruz defaulted in the payment of the promisory note (Annex "A") ; that the only sum ever paid to the defendant was Five Hundred Pesos (P500.00) on October 2, 1963, which was applied as partial payment of interests on his principal obligation; that, notwithstanding defendant's demands, Cruz made no payment on any of the installments stipulated in the promissory note; 8. That by reason of Cruz's default, defendant took steps to foreclose the chattel mortgage on the bus; that said vehicle had been damaged in an accident while in the possession of plaintiff Cruz; 9. That at the foreclosure sale held on January 31, 1964 by the Sheriff of Manila, the defendant was the highest bidder, defendant's bid being for Fifteen Thousand Pesos (P15,000.00)...; 10. That the proceeds of the sale of the bus were not sufficient to cover the expenses of sale, the principal obligation, interests, and attorney's fees, i.e., they were not sufficient to discharge fully the indebtedness of plaintiff Cruz to the defendant; 11. That on February 12, 1964, preparatory to foreclosing its real estate mortgage on Mrs. Reyes' land, defendant paid the mortgage indebtedness of Mrs. Reyes to the Development Bank of the Philippines, in the sum of P2,148.07, the unpaid balance of said obligation...; 12. That pursuant to a provision in the real estate mortgage contract, authorizing the mortgagee to foreclose the mortgage judicially or extra-judicially, defendant on February 29, 1964 requested the Provincial Sheriff of Bulacan to take possession of, and sell, the land subject of the Real Estate Mortgage, Annex "B-1", to satisfy the sum of P43,318.92, the total outstanding obligation of the plaintiffs to the defendant, as itemized in the Statement of Account, which is made a part hereof as Annex "F"...; 13. That notices of sale were duly posted and served to the Mortgagor, Mrs. Reyes, pursuant to and in compliance with the requirements of Act 3135...; 14. That on March 20, 1964, plaintiff Reyes through counsel, wrote a letter to the defendant asking for the cancellation of the real estate mortgage on her land, but defendant did not comply with such demand as it was of the belief that plaintiff's request was without any legal basis; 15. That at the request of the plaintiffs, the provincial Sheriff of Bulacan held in abeyance the sale of the mortgaged real estate pending the result of this action. Passing upon the issues which, by agreement of the parties, were limited to (1) "Whether defendant, which has already extrajudicially foreclosed the chattel mortgage executed by the buyer, plaintiff Cruz, on the bus sold to him on installments, may also extrajudicially foreclose the real

estate mortgage constituted by plaintiff Mrs. Reyes on her own land, as additional security, for the payment of the balance of Cruz' Obligation, still remaining unpaid"; and (2) whether or not the contending parties are entitled to attorney's fees the court below, in its decision of April 21, 1965, sustained the plaintiffs' stand and declared that the extrajudicial foreclosure of the chattel mortgage on the bus barred further action against the additional security put up by plaintiff Reyes. Consequently, the real estate mortgage constituted on the land of said plaintiff was ordered cancelled and defendant was directed to pay the plaintiffs attorney's fees in the sum of P200.00. Defendant filed the present appeal raising the same questions presented in the lower court. There is no controversy that, involving as it does a sale of personal property on installments, the pertinent legal provision in this case is Article 1484 of the Civil Code of the Philippines, 2 which reads: 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. The aforequoted provision is clear and simple: should the vendee or purchaser of a personal property default in the payment of two or more of the agreed installments, the vendor or seller has the option to avail of any one of these three remedies either to exact fulfillment by the purchaser of the obligation, or to cancel the sale, or to foreclose the mortgage on the purchased personal property, if one was constituted. These remedies have been recognized as alternative, not cumulative, 3 that the exercise of one would bar the exercise of the others. 4 It may also be stated that the established rule is to the effect that the foreclosure and actual sale of a mortgaged chattel bars further recovery by the vendor of any balance on the purchaser's outstanding obligation not so satisfied by the sale. 5 And the reason for this doctrine was aptly stated in the case of Bachrach Motor Co. vs. Millan, supra, thus: Undoubtedly the principal object of the above amendment 6 was to remedy the abuses committed in connection with the foreclosure of chattel mortgages. This amendment prevents mortgagees from seizing the mortgaged property, buying it at foreclosure sale for a low price and then bringing suit against the mortgagor for a deficiency judgment. The almost invariable result of this procedure was that the mortgagor found himself minus the property and still owing practically the full amount of his original indebtedness. Under this amendment the vendor of personal property, the purchase price of which is payable in installments, has the right to cancel the sale or foreclose the mortgage if one has been given on the property. Whichever right the vendor elects he need not return to the purchaser the amount of the installments already paid, "if there be in agreement to that effect". Furthermore, if the vendor avails himself of the right to foreclose the mortgage the amendment prohibits him from bringing an action against the purchaser for the unpaid balance. It is here agreed that plaintiff Cruz failed to pay several installments as provided in the contract; that there was extrajudicial foreclosure of the chattel mortgage on the said motor vehicle; and that defendant-appellant itself bought it at the public auction duly held thereafter, for a sum less than the purchaser's outstanding obligation. Defendant-appellant, however, sought to collect the supported

deficiency by going against the real estate mortgage which was admittedly constituted on the land of plaintiff Reyes as additional security to guarantee the performance of Cruz' obligation, claiming that what is being withheld from the vendor, by the proviso of Article 1484 of the Civil Code, is only the right to recover "against the purchaser", and not a recourse to the additional security put up, not by the purchaser himself, but by a third person. There is no merit in this contention. To sustain appellant's argument is to overlook the fact that if the guarantor should be compelled to pay the balance of the purchase price, the guarantor will in turn be entitled to recover what she has paid from the debtor vendee (Art. 2066, Civil Code) ; so that ultimately, it will be the vendee who will be made to bear the payment of the balance of the price, despite the earlier foreclosure of the chattel mortgage given by him. Thus, the protection given by Article 1484 would be indirectly subverted, and public policy overturned. Neither is there validity to appellant's allegation that, since the law speaks of "action", the restriction should be confined only to the bringing of judicial suits or proceedings in court. The word "action" is without a definite or exclusive meaning. It has been invariably defined as ... the legal demand of one's right, or rights; the lawful demand of one's rights in the form given by law; a demand of a right in a court of justice; the lawful demand of one's right in a court of justice; the legal and formal demand of ones rights from another person or party, made and insisted on in a court of justice; a claim made before a tribunal; an assertion in a court of justice of a right given by law; a demand or legal proceeding in a court of justice to secure one's rights; the prosecution of some demand in a court of justice; the means by which men litigate with each other; the means that the law has provided to put the cause of action into effect;.... (Gutierrez Hermanos vs. De la Riva, 46 Phil. 827, 834-835). Considering the purpose for which the prohibition contained in Article 1484 was intended, the word "action" used therein may be construed as referring to any judicial or extrajudicial proceeding by virtue of which the vendor may lawfully be enabled to exact recovery of the supposed unsatisfied balance of the purchase price from the purchaser or his privy. Certainly, an extrajudicial foreclosure of a real estate mortgage is one such proceeding. The provision of law and jurisprudence on the matter being explicit, so that this litigation could have been avoided, the award by the lower court of attorney's fees to the plaintiff's in the sum of P200.00 is reasonable and in order. However, we find merit in appellant's complaint against the trial court's failure to order the reimbursement by appellee Vda. de Reyes of the amount which the former paid to the Development Bank of the Philippines, for the release of the first mortgage on the land of said appellee. To the extent that she was benefited by such payment, plaintiff-appellee Vda. de Reyes should have been required to reimburse the appellant. WHEREFORE, the decision appealed from is modified, by ordering plaintiff-appellee Felicidad Vda. de Reyes to reimburse to defendant-appellant Filipinas Investment & Finance Corporation the sum of P2,148.07, with legal interest thereon from the finality of this decision until it is fully paid. In all other respects, the judgment of the court below is affirmed, with costs against the defendantappellant. Concepcion, C.J., Dizon, Makalintal, Zaldivar, Sanchez, Castro and Angeles, JJ., concur. Fernando, J., is on leave.

10. 61 scra 121


G.R. No. L-27862 November 20, 1974 LORENZO PASCUAL and LEONILA TORRES, plaintiffs-appellees, vs. UNIVERSAL MOTORS CORPORATION, defendant-appellant. Cesar C. Peralejo for plaintiffs-appellees. Francisco Carreon & Renato E. Taada for defendant-appellant.

MAKALINTAL, C.J.:p In the lower court the parties entered into the following stipulation of facts: 1. That the plaintiffs executed the real estate mortgage subject matter of this complaint on December 14, 1960 to secure the payment of the indebtedness of PDP Transit, Inc. for the purchase of five (5) units of Mercedez Benz trucks under invoices Nos. 2836, 2837, 2838, 2839 and 2840 with a total purchase price or principal obligation of P152,506.50 but plaintiffs' guarantee is not to exceed P50,000.00 which is the value of the mortgage. 2. That the principal obligation of P152,506.50 was to bear interest at 1% a month from December 14, 1960. 3. That as of April 5, 1961 with reference to the two units mentioned above and as of May 22, 1961 with reference to the three units, PDP Transit, Inc., plaintiffs' principal, had paid to the defendant Universal Motors Corporation the sum of P92,964.91, thus leaving a balance of P68,641.69 including interest due as of February 8, 1965. 4. That the aforementioned obligation guaranteed by the plaintiffs under the Real Estate Mortgage, subject of this action, is further secured by separate deeds of chattel mortgages on the Mercedez Benz units covered by the aforementioned invoices in favor of the defendant Universal Motors Corporation. 5. That on March 19, 1965, the defendant Universal Motors Corporation filed a complaint against PDP Transit, Inc. before, the Court of First Instance of Manila docketed as Civil Case No. 60201 with a petition for a writ of Replevin, to collect the balance due under the Chattel Mortgages and to repossess all the units to sold to plaintiffs' principal PDP Transit, Inc. including the five (5) units guaranteed under the subject Real (Estate) Mortgage. In addition to the foregoing the Universal Motors Corporation admitted during the hearing that in its suit (C.C. No. 60201) against the PDP Transit, Inc. it was able to repossess all the units sold to the latter, including the five (5) units guaranteed by the subject real estate mortgage, and to foreclose all the chattel mortgages constituted thereon, resulting in the sale of the trucks at public auction.

With the foregoing background, the spouses Lorenzo Pascual and Leonila Torres, the real estate mortgagors, filed an action in the Court of First Instance of Quezon City (Civil Case No. 8189) for the cancellation of the mortgage they constituted on two (2) parcels of land 1 in favor of the Universal Motors Corporation to guarantee the obligation of PDP Transit, Inc. to the extent of P50,000. The court rendered judgment for the plaintiffs, ordered the cancellation of the mortgage, and directed the defendant Universal Motors Corporation to pay attorney's fees to the plaintiffs in the sum of P500.00. Unsatisfied with the decision, defendant interposed the present appeal. In rendering judgment for the plaintiffs the lower court said in part: "... there does not seem to be any doubt that Art. 1484 2 of the New Civil Code may be applied in relation to a chattel mortgage constituted upon personal property on the installment basis (as in the present case) precluding the mortgagee to maintain any further action against the debtor for the purpose of recovering whatever balance of the debt secured, and even adding that any agreement to the contrary shall be null and void." The appellant now disputes the applicability of Article 1484 of the Civil Code to the case at bar on the ground that there is no evidence on record that the purchase by PDP Transit, Inc. of the five (5) trucks, the payment of the price of which was partly guaranteed by the real estate mortgage in question, was payable in installments and that the purchaser had failed to pay two or more installments. The appellant also contends that in any event what article 1484 prohibits is for the vendor to recover from the purchaser the unpaid balance of the price after he has foreclosed the chattel mortgage on the thing sold, but not a recourse against the security put up by a third party. Both arguments are without merit. The first involves an issue of fact: whether or not the sale was one on installments; and on this issue the lower court found that it was, and that there was failure to pay two or more installments. This finding is not subject to review by this Court. The appellant's bare allegation to the contrary cannot be considered at this stage of the case. The next contention is that what article 1484 withholds from the vendor is the right to recover any deficiency from the purchaser after the foreclosure of the chattel mortgage and not a recourse to the additional security put up by a third party to guarantee the purchaser's performance of his obligation. A similar argument has been answered by this Court in this wise: "(T)o sustain appellant's argument is to overlook the fact that if the guarantor should be compelled to pay the balance of the purchase price, the guarantor will in turn be entitled to recover what she has paid from the debtor vendee (Art. 2066, Civil Code); so that ultimately, it will be the vendee who will be made to bear the payment of the balance of the price, despite the earlier foreclosure of the chattel mortgage given by him. Thus, the protection given by Article 1484 would be indirectly subverted, and public policy overturned." (Cruz vs. Filipinas Investment & Finance Corporation, L-24772, May 27, 1968; 23 SCRA 791). The decision appealed from is affirmed, with costs against the defendant-appellant. Castro, Makasiar, Esguerra and Muoz Palma, JJ., concur. Teehankee, J., took no part.

Footnotes 1 Situated in Quezon City and covered by Transfer Certificates of Title Nos. 77639 and 3005.

2 Article 1484 of 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) Foreclosure 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.

11. 28 scra 658


Filipinas Investment & Finance Corp. vs. Vitug, Jr. No. L-25951, 28 SCRA 658, June 30, 1969 G.R. No. L-25951 June 30, 1969 FILIPINAS INVESTMENT & FINANCE CORPORATION, plaintiff-appellant, vs. JULIAN R. VITUG, JR. and SUPREME SALES & DEVELOPMENT CORPORATION, defendants-appellees. Wilhelmina V. Joven for plaintiff-appellant. Antonio V. Borromeo for defendants-appellants. BARREDO, J.: Appeal from an order of dismissal by the Court of First Instance of Manila, in its Civil Case No. 60915, entitled Filipinas Investment & Finance Corporation vs. Julian R. Vitug, Jr. and Supreme Sales & Development Corporation, of the amended complaint of July 16, 1965 of plaintiff-appellant Filipinas Investment & Finance Corporation whereby it sought to recover from defendant-appellee Supreme Sales & Development Corporation the deficiency that resulted after it had foreclosed the chattel mortgage on and sold at public auction, the car of the other defendant, Julian Vitug, Jr. who had failed to pay to appellee installments due on the promissory note representing the purchase price of said car which he had bought from the same, appellant being the assignee of appellee of its rights in the said promissory note. The material allegations in appellant's amended complaint are: The defendant, Julian R. Vitug, executed and delivered to appellee a promissory note in the amount of P14,605.00 payable in monthly installments according to a schedule of payments; the payment of the aforesaid amount which was the purchase price of a motor vehicle, a 4-door Consul sedan, bought by said defendant from appellee, was secured by a chattel mortgage over such automobile; on the same day, appellee negotiated the above-mentioned promissory note in favor of appellant Filipinas Investment & Finance Corporation, assigning thereto all its rights, title and interests to the same, the assignment including the right of recourse against appellee; defendant Vitug defaulted in the payment of part of the installment which fell due on January 6, 1965, as well as the subsequent three consecutive monthly installments which he was supposed to have paid on February 6, March 6 and April 6, 1965; there being a provision in the aforesaid promissory note and chattel mortgage that failure to pay the installments due would result in the entire obligation becoming due and demandable, appellant demanded from appellee the payment of such outstanding balance; in turn, appellee "authorized (appellant) to take such action as may be necessary to enable (it) to take possession of the ... motor vehicle." Pursuant to such authority, appellant secured possession of the mortgaged vehicle by means of a writ of replevin duly obtained from the court, preparatory to the foreclosure of the mortgage, but said writ became unnecessary because upon learning of the same, defendant Vitug voluntarily surrendered the car to appellant; thereafter, the said car was sold at public auction, but the proceeds still left a deficiency of P8,349.35, plus interest of 12% per annum from April 21, 1965; and appellant, the above foreclosure and sale notwithstanding, would hold appellee liable for the payment of such outstanding balance, plus attorney's fees and costs. On August 4, 1965, appellee filed an urgent motion to dismiss on the ground, inter alia, that under Article 1484 of the Civil Code of the Philippines, which particular provision is otherwise known as the Recto Law, appellant has no cause of action against appellee. Said provision is as follows:

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. In its order of August 30, 1965, subject of this appeal, the lower court found the aforesaid ground to be meritorious and, as already stated, the amended complaint was dismissed as to appellee Supreme Sales & Development Corporation. According to the order of dismissal: It is undisputed in the instant case that the amount of P14,605.00 mentioned as consideration in both the promissory note and the chattel mortgage in the instant case represents the selling price of one (1) automobile New Ford Consul 315 4door Sedan, payable in the installments mentioned in said documents. Under pars. 5 and 9 of the amended complaint, the writ of replevin was obtained in the instant case for purposes of foreclosure of mortgage. In applying for a writ of replevin, the plaintiff thereby made his choice, namely, to foreclose the mortgage covering said automobile; and having accepted said automobile from defendant Julian R. Vitug, Jr., what remains is for the plaintiff to sell said automobile through either a judicial or an extrajudicial foreclosure of said mortgage, without benefit of a deficiency judgment or deficiency collection ... should the proceeds of the foreclosure sale be less than the balance of the installment sale price of said automobile due and collectible. On September 23, 1965, appellant filed a motion for reconsideration but this was denied on October 26, 1965, hence, this appeal. The principal error assigned by appellant has reference to the applicability of Art. 1484 of the Civil Code, as amended, to the facts of this case. Appellant maintains that: . II THE TRIAL COURT ERRED IN HOLDING THAT ARTICLE 1484 OF THE CIVIL CODE OF THE PHILIPPINES IS APPLICABLE TO THE TRANSACTION BETWEEN PLAINTIFF-APPELLANT AND DEFENDANT-APPELLEE. 1 Under the facts alleged in the amended complaint which are deemed admitted by the motion to dismiss, this assignment of error must be sustained. The specific allegations in the amended complaint which have material bearing on the issue herein are: 4. On November 4, 1964, defendant Supreme Sales & Development Corporation, with notice to defendant Julian R. Vitug, Jr. negotiated in favor of (endorsed and delivered to) plaintiff the above-mentioned promissory note, Annex "A", on a with recourse basis whereby in case of the failure and/or refusal of the maker thereof, defendant Julian R. Vitug, Jr. to pay the obligation under the said promissory note, plaintiff shall have the right to recourse against the said defendant corporation. On the same date, the said defendant corporation , with notice to defendant Julian R. Vitug, Jr., assigned to plaintiff its rights, title, and interests to the aforesaid promissory note and chattel mortgage, Annexes "A" and "B" hereof, as shown by the Deed of Assignment executed by defendant Supreme Sales & Development Corporation in favor of plaintiff, a copy of which is hereto attached as Annex "C" and made an integral part hereof, which assignment is also subject to the right of recourse abovementioned. 13. The defendant corporation is liable to plaintiff for the entire balance of the obligation covered by the promissory note, Annex "A", and secured by the chattel mortgage, Annex "B", as a general endorser of the promissory note, Annex "A", and assignor of the chattel mortgage on a with- recourse basis. But should plaintiff be able to sell the above-described motor vehicle, then the said defendant corporation is liable to the plaintiff for the payment of the balance of the obligation after applying thereto the proceeds of the sale of the said vehicle. (Record on Appeal, pp. 12 and 15.) Thus it can be seen that the assignment made by appellee to appellant of the promissory note and mortgage of defendant Vitug was on a with-recourse basis. In other words, there was a definite and clear agreement between appellant and appellee that should appellant fail to secure full recovery from defendant Vitug, the right was reserved to appellant to seek recourse for the deficiency against appellee. Accordingly, the question for resolution by the Court now is whether or not this provision regarding recourse contained in the agreement between appellant and appellee violates the Recto Law which declares null and void any agreement in contravention thereof. We do not believe that it does. As pointed out in appellant's brief, the transaction between appellant and appellee was purely an ordinary discounting transaction whereby the promissory note executed by defendant Vitug was negotiated by appellee in favor of appellant for a valuable consideration at a certain discount, accompanied by an assignment also of the chattel mortgage executed by said defendant to secure the payment of his promissory note and with the express stipulation that should there be any deficiency, recourse could be had against appellee. Stated otherwise, the remedy presently being sought is not against the buyer of the car or the defendant Vitug but against the seller, independent of whether or not such seller may have a right of recovery against the buyer, which, in this case, he does not have under the Recto Law. It is clear to Us, on the other hand, that under said law, what Congress seeks to protect are only the buyers on installment who more often than not have been victimized by sellers who, before the enactment of this law, succeeded in unjustly enriching themselves at the expense of the buyers because aside from recovering the goods sold, upon default of the buyer in the payment of two installments, still retained for themselves all amounts already paid, in addition, furthermore, to other damages, such as attorney's fees, and costs. Surely, Congress could

not have intended to impair and much less do away with the right of the seller to make commercial use of his credit against the buyer, provided said buyer is not burdened beyond what this law allows. We are not unmindful that in the case of Cruz, et al. vs. the same Filipinas Investment & Finance Corporation, L-24772, May 27, 1968, 23 SCRA 791, this Court broadened the scope of the Recto Law beyond its letter and held that within its spirit, a seller of goods on installment does not have any right of action against a third party who, in addition to the buyer's mortgage of the goods sold, furnishes additional security for the payment of said installments or the purchase price of said goods. In that case, it was held:. It is here agreed that plaintiff Cruz failed to pay several installments as provided in the contract; that there was extrajudicial foreclosure of the chattel mortgage on the said motor vehicle; and that defendant-appellant itself bought it at the public auction duly held thereafter, for a sum less than the purchaser's outstanding obligation. Defendant-appellant, however, sought to collect the supposed deficiency by going against the real estate mortgage which was admittedly constituted on the land of plaintiff Reyes as additional security to guarantee the performance of Cruz' obligation, claiming that what is being withheld from the vendor, by the proviso of Article 1484 of the Civil Code, is only the right to recover against the purchaser, and not a recourse to the additional security put up, not by the purchaser himself, but by a third person. There is no merit in this contention. To sustain appellants argument is to overlook the fact that if the guarantor should be compelled to pay the balance of the purchase price, the guarantor will in turn be entitled to recover what she had paid from the debtor vendee (Art. 2066, Civil Code); so that ultimately, it will be the vendee who will be made to bear the payment of the balance of the price, despite the earlier foreclosure of the chattel mortgage given by him. Thus, the protection given by Article 1484 would be indirectly subverted, and public policy overturned. As can be seen, that ease of Cruz was entirely different from this one at bar. In that case, herein appellant Filipinas Investment & Finance Corporation was trying to recover from the guarantor of the buyer, whereas in the present case, it is precisely stipulated in effect, that the Filipinas Investment & Finance Corporation had a right of recourse against the seller should the buyer fail to pay the assigned credit in full. It is the contention of appellee that since what were assigned to appellant were only whatever rights it had against the buyer, it should follow that inasmuch as appellee has no right to recover from the defendant beyond the proceeds of the foreclosure sale, the appellant, as assignee, should also have no right to recover any deficiency. We do not view the matter that way. The very fact that the assignee was given the stipulated right of recourse against the assignor negates the idea that the parties contemplated to limit the recovery of the assignee to only the proceeds of the mortgage sale. ACCORDINGLY, the order of dismissal of the lower court is reversed and this case is ordered remanded to the lower court for further proceedings, with costs against appellee Supreme Sales & Development Corporation. Concepcion, C.J., Reyes, J.B.L., Makalintal, Zaldivar, Sanchez, Castro, Capistrano and Teehankee, JJ., concur. Dizon and Fernando, JJ., took no part. Footnotes 1 Evidence seems to have been presented by appellee and admitted by the trial court in connection with the motion to dismiss. While it is obvious that said evidence is relevant, the same cannot be taken into account, since the motion to dismiss is based on the ground that the amended complaint states no cause of action and, therefore, all material facts alleged in the complaint must be deemed admitted for purposes of said motion.

12. 93 phil 371 13. 51 scra 120 14.108 phil 900 15. 4 scra 243