MOBIL OIL PHILIPPINES, INC., PLAINTIFF-APPELLANT, VS. RUTH R. DIOCARES, ET AL., DEFENDANTS-APPELLEES.

It may very well be, as noted by jurists of repute, that to stress
the element of a promise as the basis of contracts is to acknowledge the
influence of natural law.^[1]
Nonetheless, it does not admit of doubt that whether under the civil law or the
common law, the existence of a contract is unthinkable without one’s word being
plighted.  So the New Civil Code
provides:  “A contract is a meeting
of minds between two persons whereby one binds himself, with respect to the
other, to give something or to render some service.”^[2]
So it is likewise under American law. 
Thus:  “A contract is a
promise or a set of promises for the breach of which the law gives a remedy, or
the performance of which the law in some way recognizes as a duty.”^[3]

The law may go further and require that certain formalities be
executed. Thus, for a mortgage to be validly constituted, “it is
indispensable, * * *, that the document in which it appears be recorded in the
Registry of Property.” The same codal provision
goes on:  “If the instrument is not
recorded, the mortgage is nevertheless binding between the parties.”^[4]

The question before us in this appeal from a lower court
decision, one we have to pass upon for the first time, is the effect, if any,
to be given to a mortgage contract admittedly not registered, only the parties
being involved in the suit.  The lower
court was of the opinion that while it “created a personal, obligation
[it] did not establish a real estate mortgage.”^[5]
It did not decree foreclosure therefor.  Plaintiff-appellant appealed.  We view the matter differently and reverse
the lower court.

The case for the plaintiff, Mobil Oil Philippines, Inc., now
appellant, was summarized in the lower court order of February 25, 1966, subject of this appeal.  Thus: 
“In its complaint plaintiff alleged that on Feb. 9, 1965 defendants
Ruth R. Diocares and Lope T. Diocares
entered into a contract of loan and real estate mort­gage wherein the plaintiff
extended to the said defendants a loan of P45,000.00; that said defendants also
agreed to buy from the plaintiff on cash basis their petroleum requirements in
an amount of not less than 50,000 liters per month; that the said defendants
will pay to the plaintiff 9-1/2% per annum on the diminishing balance of the
amount of their loan; that the defendants will repay the said loan in monthly
installments of P950.88 for a period of five (5) years from February 9, 1965;
that to secure the performance of the foregoing obligation they executed a
first mortgage on two parcels of land covered by Transfer Certificates of Title
Nos. T-27136 and T-27946, both issued by the Register of Deeds of Bacolod City.  The
agreement further provided that in case of failure of the defendants to pay any
of the installments due and pur­chase their petroleum requirements in the
minimum amount of 50,000 liters per month from the plaintiff, the latter has
the right to foreclose the mortgage or recover the payment of the entire
obligation or its remaining unpaid balance; that in case of foreclosure the
plaintiff shall be entitled to 12% of the indebtedness as damages and
attorney’s fees.  A copy of the loan and
real estate mortgage contract executed between the plaintiff and the defendants
is attached to the complaint and made a part thereof.  The com­plaint further alleges that the
defendant paid only the amount of P1,901.76 to the plaintiff, thus leaving a
balance of P43,098.24, excluding interest, on their indebtedness. The said
defendants also failed to buy on cash basis the minimum amount of petroleum
which they agreed to purchase from the plaintiff.  The plaintiff, therefore, prayed that the
defendants be ordered to pay the amount of P43,098.24, with interest at 9-1/2%
per annum from the date it fell due, and in default of such payment that the
mortgaged properties be sold and the proceeds applied to the payment of
defendants’ obligation.”^[6]

Defendants, Ruth R. Diocares and Lope
T. Diocares, now appellees,
admitted their indebtedness as set forth above, denying merely the alleged
refusal to pay, the truth, according to them, being that they sought for an
extension of time to do so, inasmuch as they were not in a position to comply
with their obligation.  They further set
forth that they did request plaintiff to furnish them with the statement of
accounts with the view of paying the same on installment basis, which request
was, however, turned down by the plaintiff.

Then came a motion from the plaintiff for a judgment on the
pleadings, which motion was favorably acted on by the lower court.  As was stated in the order appealed
from:  “The answer of the defendants
dated October 21, 1965 did
not raise any issue.  On the contrary,
said answer admitted the material allegations of the complaint. The plaintiff
is entitled to a judgment on the pleadings.”^[7]

As to why the foreclosure sought by plaintiff was denied, the
lower court order on appeal reads thus: 
“The Court cannot, how­ever, order the foreclosure of the mortgage
of properties, as prayed for, because there is no allegation in the complaint
nor does it appear from the copy of the loan and real estate mortgage contract
attached to the complaint that the mortgage had been registered.  The said loan agreement although binding
among the parties merely created a personal obligation but did not establish a
real estate mortgage.  The document
should have been registered.  (Art. 2125,
Civil Code of the Phil.)”^[8]
The dispositive portion is thus limited to ordering
defendants “to pay the plaintiff the account of P43,098.24, with interest
at the rate of 9-1/2% per annum from the date of the filing of the complaint
until fully paid, plus the amount of P2,000.00 as attorneys’ fees, and the
costs of the suit.”^[9]

Hence this appeal, plaintiff-appellant assigning as errors the
holding of the lower court that no real estate mortgage was established and its
consequent refusal to order the foreclosure of the mortgaged properties.  As set forth at the outset, we find the
appeal meritorious.  The lower court
should not have held that no real estate mortgage was established and should
have ordered its foreclosure.

The lower court predicated its inability to order the fore­closure
in view of the categorical nature of the opening sentence of the governing
article^[10]
that it is indispensable, “in order that a mortgage may be validly
constituted, that the document in which it appears be recorded in the Registry
of Property.” Not that it ignored the succeeding sentence:  “If the instrument is not recorded, the
mortgage is nevertheless binding between the parties.” Its conclusion,
however, is that what was thus created was merely “a personal obligation
but did not establish a real estate mortgage.”

Such a conclusion does not commend itself for approval.  The codal provision
is clear and explicit.  Even if the
instrument were not recorded, “the mortgage is nevertheless binding
between the parties.” The law cannot be any clearer.  Effect must be given to it as written.  The mortgage subsists; the parties are
bound.  As between them, the mere fact
that there is as yet no compliance with the requirement that it be recorded
cannot be a bar to fore­closure.

A contrary conclusion would manifest less than full respect to
what the codal provision ordains.  The liability of the mortgagor is therein
explicitly recognized.  To hold, as the
lower court did, that no foreclosure would lie under the circumstances would be
to render the provision in question nugatory. 
That we are not allowed to do. 
What the law requires in unambigous language
must be lived up to.  No interpretation
is needed, only its application, the un­disputed facts calling for it.^[11]

Moreover to rule as the lower court did would be to show less
than fealty to the purpose that animated the legislators in giving expression
to their will that the failure of the instrument to be recorded does not result
in the mortgage being any the less “binding between the parties.” In the
language of the Report of the Code Commission: 
“In article [2125] an additional provision is made that if the
instrument of mortgage is not recorded, the mortgage, is nevertheless binding
between the parties.” ^[12]
We are not free to adopt then an interpretation, even assuming that the codal provision lacks the forthrightness and clarity that
this particular norm does and therefore requires construction, that would
frustrate or nullify such legislative objective.

Nor is the reason difficult to discern why such an exception
should be made to the rule that is indispensable for a mortgage to be validly
constituted that it be recorded.  Equity
so demands, and justice is served.  There
is thus full acknowledgment of the binding effect of a promise, which must be
lived up to otherwise the freedom a contracting party is supposed to possess
becomes meaningless.  It could be said of
course that to allow foreclosure in the absence of such a formality is to
offend against the demands of jural symmetry.  What is “indispensable” may be
dispensed with.  Such an objection is far
from fatal.  This would not be the first
time when logic yields to what is fair and what is just. To such an
overmastering requirement, law is not immune.

WHEREFORE, the lower court order of February 25, 1966 is
affirmed with the modification that in default of the payment of the above
amount of P43,028.94 with interests at the rate of 9-1/2% per annum from the
date of the filing of the complaint, that the mortgage be foreclosed with the
properties subject thereof being sold and the proceeds of the sale applied to
the payment of the amounts due the plaintiff in accordance with law.  With costs against defendants-appellees.

Concepcion, C.J., Dizon,
Makalintal, Zaldivar,
Sanchez, Ruiz Castro, Capistrano, Teehankee, and Barredo, JJ., concur.

Reyes, JBL, J., on official
trip.

^[1]
Cohen and Cohen, Readings in Jurisprudence and Legal Philosophy, p. 102 (1951),
citing Chief Justice Marshall in Sturges v. Crowninshield, 4 Wheat 122 (1819) and Chief Justice Taney
in Charles River Bridge v. Warren Bridge, 11 Pet. 420 (1837).

^[2]
Art. 1305, The New Civil Code.

^[3]
American Law Institute, Restatement of the Law on Contracts, p. 1 (1932).

^[4]
Art. 2125 of the New Civil Code provides: 
“In addition to the requisites stated in article 2085, it is
indispensable, in order that a mortgage may be validly constituted, that the
document in which it appears be recorded in the Registry of Property.  If the instrument is not recorded, the
mortgage is nevertheless binding between the parties.”

^[5]
Order of the lower court, Record on Appeal, p. 24.

^[6] Ibid,
pp. 21-23.

^[7] Ibid,
p. 24.

^[8] Ibid,
p. 24.

^[9] Ibid,
p. 25.

^[10]
Article 2125, New Civil Code.

^[11]
Cf. People v. Mapa, 20 SCRA 1164 (1967);
Pacific Oxygen & Acetylene Co. v. Central Bank, 22 SCRA 917 (1968); Dequito v. Lopez, 22 SCRA 1352 (1968); Padilla v.
City of Pasay,
23 SCRA 1349 (1968); Garcia v. Vasquez, 27 SCRA 505 (1969) and La Perla Cigar. & Cigarette Factory v. Capapas, L-27948 & 28001-11, July 31, 1969.

^[12]
Report of the Code Commission, at p. 158 (1948).