DELTA MOTOR SALES CORPORATION, PLAINTIFF-APPELLEE, VS. NIU KIM DUAN AND CHAN FUE ENG, DEFENDANTS-APPELLANTS.

Elevated to this Court by the Court of Appeals, in its Resolution
of May 20, 1982, on a pure question of law,^[1] is
the appeal therein by defendants-appellants, Niu Kim Duan and Chan Fue Eng
assailing the trial court’s decision promulgated on October 11, 1977,^[2]
which ordered them to pay plaintiff-appellee, Delta Motor Sales Corporation,
the amount of P6,188.29 with a­ 14% per annum interest which was due on the
three (3) “Daikin” air-conditioners defendants-appellants purchased from
plaintiff-appellee under a Deed of Conditional Sale, after the same was
declared rescinded by the trial court. They were likewise ordered to pay plaintiff-appellee P1,000.00 for and
as attorney’s fees.

The events which led to the filing of the case in the lower court
were summarized by the Court of Appeals, as follows:

“‘On July 5, 1975, the defendants purchased from the plaintiff
three (3) units of ‘DAIKIN’ air-conditioner all valued at P19,350.00 as
evidenced by the Deed of Conditional Sale, Exhibit A; that the aforesaid deed
of sale had the following terms and conditions:

‘(a) the defendants shall
pay a down payment of P774.00 and the balance of P18,576.00 shall [be] paid by
them in twenty four (24) installments; (b) the title to the properties
purchased shall remain with the plaintiff until the purchase price thereof is
fully paid; (c) if any two installments are not paid by the defendants on their
due dates, the whole of the principal sum remaining unpaid shall become due,
with interest at the rate of 14% per annum; and (d) in case of a suit, the
defendants shall pay an amount equivalent to 25% of the remaining unpaid
obligation as damages, penalty and attorney’s fees; that to secure the payment
of the balance of P18,576.00 the defendants jointly and severally executed in
favor of the plaintiff a promissory note, Exhibit C; that the three (3) air-conditioners
were delivered to and received by the defendants as shown by the delivery
receipt, Exhibit B; that after paying the amount of P6,966.00, the defendants
failed to pay at least two (2) monthly installments; that as of January 6,
1977, the remaining unpaid obligation of the defendants amounted to P12,920.08;
that statements of accounts were sent to the defendants and the plaintiff’s
collectors personally went to the former to effect collections but they failed
to do so; that because of the unjustified refusal of the defendants to pay
their outstanding account and their wrongful detention of the properties in
question, the plaintiff tried to recover the said properties extra-judicially
but it failed to do so; that the matter was later referred by the plaintiff to
its legal counsel for legal action; that in its verified complaint dated
January 28, 1977, the plaintiff prayed for the issuance of a writ of replevin,
which the Court granted in its Order dated February 28, 1977, after the
plaintiff posted the requisite bond; that on April 11, 1977, the plaintiff, by
virtue of the aforesaid writ, succeeded in retrieving the properties in
question; that as of October 3, 1977, the outstanding account of the defendants
is only in the amount of P6,188.29 as shown by the computation, Exhibit F,
after deducting the interests in arrears, cover charges, replevin bond
premiums, the value of the units repossessed and the like; and, that in view of
the failure of the defendants to pay their obligations, the amount of P6,966.00
which had been paid by way of installments were treated as rentals for the
units in question for two (2) years pursuant to the provisions of paragraph 5
of the Deed of Conditional Sale, Exhibit A.’ (pp. 5-7, Record; pp. 4-6,
Appellant’s Brief).”

As above-stated, the trial court ruled in favor of
plaintiff-appellee.

Defendants-appellants assail the Deed of Conditional Sale under
which they purchased the three (3) Daikin air-conditioners from
plaintiff-appellee as being contrary to law, morals, good custom, public order
or public policy. In particular, they
point to the contract’s paragraphs 5 and 7 as iniquitous, which paragraphs
state that:

“5. Should BUYER fail to pay any of the monthly
installments when due, or otherwise fail to comply with any of the terms and
conditions herein stipulated, this contract shall automatically become null and
void; and all sums so paid by BUYER by reason thereof shall be considered as
rental and the SELLER shall then and there be free to take possession thereof without
liability for trespass or responsibility for any article left in or attached to
the PROPERTY;

x x x  x x x

“7. Should SELLER rescind this contract for any
of the reasons stipulated in the preceding paragraph, the BUYER, by these
presents obligates himself to peacefully deliver the PROPERTY to the SELLER in
case of rescission, and should a suit be brought in court by the SELLER to seek
judicial declaration of rescissions and take possession of the PROPERTY, the
BUYER hereby obligates himself to pay all the expenses to be incurred by reason
of such suit and in addition to pay the sum equivalent to 25% of the remaining
unpaid obligation as damages, penalty and attorney’s fees;”^[3]

Defendants-appellants claim that for the use of the
plaintiff-appellee’s three air-conditioners, from July 5, 1975^[4]
to April 11,1977,^[5]
or for a period of about 22 months, they, in effect, paid rentals in the amount
of P6,429.92,^[6]
or roughly one-third (1/3) of the entire price of said air-conditioners which
was P19,350.00. They also complain that
for the said period the trial court is ordering them to pay P6,188.29 as the
balance due for the three air?conditioners repossessed. Defendants-appellants were likewise ordered
to pay P1,000.00 as attorney’s fees when plaintiff-appellee never sought for
attorney’s fees in its complaint. They
satirically pointed out that by putting “a few touches here and there, the same
units can be sold again to the next imprudent customer”^[7] by
plaintiff-appellee. Thus, enforcement
of the Deed of Conditional Sale will unjustly enrich plaintiff-appellee at the
expense of defendants-appellants.

I

Defendants-appellants cannot complain that their downpayment of
P774.00 and installment payments of P5,655.92^[8] were
treated as rentals — even though the total amount of P6,429.92 which they had
paid, approximates one-third (1/3) of the cost of the three (3)
air-conditioners. A stipulation in a
contract that the installments paid shall not be returned to the vendee is valid
insofar as the same may not be unconscionable under the circumstances is
sanctioned by Article 1486 of the New Civil Code.^[9] The
monthly installment payable by defendants-appellants was P774.00.^[10]
The P5,655.92 installment payments correspond only to seven (7) monthly
installments. Since they admit having
used the air-conditioners for twenty-two (22) months, this means that they did
not pay fifteen (15) monthly installments on the said air-conditioners and were
thus using the same FREE for said period — to the prejudice of
plaintiff-appellee. Under the
circumstances, the treatment of the installment payments as rentals cannot be
said to be unconscionable.

II

The vendor in a sale of personal property payable in installments
may exercise one of three remedies, namely, (1) exact the fulfillment of the
obligation, should the vendee fail to pay; (2) cancel the sale upon the
vendee’s failure to pay two or more installments; (3) foreclose the chattel
mortgage, if one has been constituted on the property sold, upon the vendee’s
failure to pay two or more installments. The third option or remedy, however, is subject to the limitation that
the vendor cannot recover any unpaid balance of the price and any agreement to
the contrary is void (Art. 1484)^[11]

The three (3) remedies
are alternative and NOT cumulative. If the creditor chooses one remedy, he
cannot avail himself of the other two.

It is not disputed that the plaintiff-appellee had taken
possession of the three air-conditioners, through a writ of replevin when
defendants-appellants refused to extra-judicially surrender the same. This was done pursuant to paragraphs 5 and 7
of its Deed of Conditional Sale when defendants-appellants failed to pay at
least two (2) monthly installments, so much so that as of January 6, 1977, the
total amount they owed plaintiff-appellee, inclusive of interest, was
P12,920,08.^[12] The case plaintiff-appellee filed was to
seek a judicial declaration that it had validly rescinded the Deed of
Conditional Sale.^[13]

Clearly, plaintiff-appellee chose the second remedy of Article
1484 in seeking enforcement of its contract with defendants-appellants. This is shown from the fact that its Exhibit
“F” which showed the computation of the outstanding account of defendants-
appellants as of October 3, 1977 took into account “the value of the units
repossessed.”^[14] Having done so, it is barred from exacting
payment from defendants-appellants of the balance of the price of the three
air-conditioning units which it had already repossessed. It cannot have its cake and eat it too.^[15]

WHEREFORE, the judgment of the trial court in Civil Case
No. 25578 is hereby SET ASIDE and the complaint filed by plaintiff-appellee
Delta Motor Sales Corporation is hereby DISMISSED. No costs.

SO ORDERED.

Narvasa, C.J., (Chairman), Padilla, Regalado, and Melo, JJ.,
concur.

^[1]
Ponente, Acting Presiding Justice Ramon G. Gaviola, Jr., concurred in by
Justices Serafin R. Cuevas and Juan A. Sison; Rollo, p. 30.

^[2]
Judge Leo D. Medialdea, former Court of First Instance of Rizal at Makati,
Branch XXXVI, Civil Case,
No. 25578.

^[3]
Record on Appeal, pp. 9, 10; Rollo, p. 14.

^[4]
Complaint, Civil Case No. 25578, p. 2; Rollo, p. 14.

^[5]
Decision, Civil Case No. 25578, p. 4; Rollo, p. 7.

^[6]
Appellants’ Brief, CA-G.R. No. 62715, p. 7; Rollo, p. 21.

^[7]
Ibid., p. 8; Rollo, p. 21.

^[8]
Ibid., p. 7; Rollo, p. 21.

^[9]
Art. 1486. In the cases referred to in two preceding articles, a stipulation
that the installments or rents paid shall not be returned to the vendee or
lessee shall be valid insofar as the same may not be unconscionable under the
circumstances.

^[10]
Balance of P18,576.00 divided by twenty-four (24) monthly installments.

^[11]
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.

^[12]
Paragraph No. 6, Complaint, Civil Case No. 25578; Rollo, p. 14.

^[13]
Roman Catholic Archbishop of Manila vs. Court of Appeals, 198 SCRA 300.

^[14]
Decision, Civil Case No. 25578, p. 4; Rollo, p. 7.

^[15]
Nonato vs. Intermediate Appellate Court, 140 SCRA 255.