Industrial Finance Corp. v. Ramirez, G.R. No.

L-43821, 26 May 1977

Aquino, J.

Facts:

Arnaldo Dizon sold his Chevrolet car to Consuelo Alcoba, payable in eighteen monthly installments, with the car
serving as collateral through a chattel mortgage. Concurrently, Dizon transferred all his rights and interest in the
chattel mortgage to Industrial Finance Corporation. When Alcoba failed to pay the first four installments, the
acceleration clause in the promissory note triggered, making the entire obligation immediately due and
demandable. Industrial Finance Corporation, in its complaint, sought alternative reliefs. Its primary aim was to
repossess the mortgaged car through a writ of replevin, backed by a redelivery bond. The mortgagee-assignee
intended to proceed with the extrajudicial foreclosure of the chattel mortgage, necessitating the sheriff's seizure of
the car through an order for the delivery of personal property. The lower court granted the writ of replevin,
allowing the sheriff to take possession of the car. This action effectively prevented the extrajudicial foreclosure of
the mortgage, as possession by the sheriff is a prerequisite. Alcoba did not contest the judgment, making it final
and executory. Subsequently, 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, Industrial Finance Corporation
acquired the car for P4,000. However, to secure possession, the corporation had to pay P4,250 to Aco Motor
Service to settle its lien for car repair and storage. The corporation argued that due to this payment, it suffered a
loss of P250 in the execution sale. It requested a third alias writ of execution to cover the remaining balance of
Consuelo Alcoba’s obligation, including the 12% interest, which it calculated at P11,300.92.

Issue/s:

Whether or not Consuelo Alcoba is liable for any deficiency.

Held:

The mortgagors should pay the deficiency. 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.

The Civil Code provides that 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.

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