Professional Documents
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vendee fail to pay; (2) cancel the sale upon the vendees failure to pay two
or more installments; (3) foreclose the chattel mortgage, if one has been
constituted on the property sold, upon the vendees 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) The three (3)
remedies are alternative and NOT cumulative. If the creditor chooses one
remedy, he cannot avail himself of the other two.
DECISION
SYLLABUS
NOCON, J.:
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 attorneys 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 plaintiffs 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,
Appellants Brief)."
"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
"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 rescission 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
attorneys fees;" 3
Defendants-appellants claim that for the use of the plaintiff-appellees
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 airconditioners 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 attorneys fees when plaintiffappellee never sought for attorneys 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 airconditioners 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 plaintiffappellee. Under the circumstances, the treatment of the installment
payments as rentals cannot be said to be unconscionable.
II
SO ORDERED.
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 defendantsappellants 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.
Carrying out the order of execution, the sheriff levied on the same
machineries and farm implements which had been bought by the spouses;
and later sold them at public auction to the highest bidder which turned
out to be the Southern Motors itself for the total sum of P10,000.
As its judgment called for much more, the Southern Motors subsequently
asked and obtained, an alias writ of execution; and pursuant thereto, the
provincial sheriff levied attachment on the Tajanlangits' rights and
interests in certain real properties with a view to another sale on
execution.
To prevent such sale, the Tajanlangits instituted this action in the Iloilo
court of first instance for the purpose among others, of annulling the alias
writ of execution and all proceedings subsequent thereto. Their two main
theories: (1) They had returned the machineries and farm implements to
the Southern Motors Inc., the latter accepted them, and had thereby settled
their accounts; for that reason, said spouses did not contest the action in
Civil Case No. 2942; and (2) as the Southern Motors Inc. had repossessed
the machines purchased on installment (and mortgaged) the buyers were
thereby relieved from further responsibility, in view of the Recto Law,
now article 1484 of the New Civil Code.
BENGZON, J.:
The case. Appellants seek to reverse the order of Hon. Pantaleon Pelayo,
Judge of the Iloilo court of first instance refusing to interfere with the
alias writ of execution issued in Civil Case No. 2942 pending in another
sala of the same court.
The facts. In April 1953 Amador Tajanlangit and his wife Angeles,
residents of Iloilo, bought, from the Southern Motors Inc. of Iloilo two
tractors and a thresher. In payment for the same, they executed the
promissory note Annex A whereby they undertook to satisfy the total
purchase price of P24,755.75 in several installments (with interest)
payable on stated dates from May 18, 1953 December 10, 1955. The note
The case was submitted for decision mostly upon a stipulation of facts.
Additional testimony was offered together with documentary evidence.
Everything considered the court entered judgment, saying in part;
The proceedings in Civil Case No. 2942 above referred to, were had in
the Court of First Instance (Branch 1) of the Province and of the City of
Iloilo. While this court (Branch IV) sympathizes with plaintiffs, it cannot
grant, in this action, the relief prayed for the complaint because courts of
similar jurisdiction cannot invalidate the judgments and orders of each
other. Plaintiffs have not pursued the proper remedy. This court is without
authority and jurisdiction to declare null and void the order directing the
issuance of aliaswrit of execution because it was made by another court
of equal rank and category (see Cabiao and Izquierdo vs. Del Rosario and
Lim, 44 Phil., 82-186).
(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. (New Civil Code.)
Appellants would invoke the last paragraph. But there has been no
foreclosure of the chattel mortgage nor a foreclosure sale. Therefore the
prohibition against further collection does not apply.
The plaintiffs reasonably brought the matter to the Court of Appeals, but
the latter forwarded the expediente, being of the opinion that the appeal
involved questions of jurisdiction and/or law
It is true that there was a chattel mortgage on the goods sold. But the
Southern Motors elected to sue on the note exclusively, i.e. to exact
fulfillment of the obligation to pay. It had a right to select among the three
remedies established in Article 1484. In choosing to sue on the note, it
was not thereby limited to the proceeds of the sale, on execution, of the
mortgaged good.2
"What is being sought in this present action" say appellants "is to prohibit
and forbid the appellee Sheriff of Iloilo from attaching and selling at
public auction sale the real properties of appellants because that is now
forbidden by our law after the chattels that have been purchased and duly
mortgagee had already been repossessed by the same vendor-mortgagee
and later on sold at public auction sale and purchased by the same at such
meager sum of P10,000."
In Southern Motors Inc. vs. Magbanua, (100 Phil., 155) a similar situation
arose in connection with the purchase on installment of a Chevrolet truck
by Magbanua. Upon the latter's default, suit on the note was filed, and the
truck levied on together with other properties of the debtor. Contending
that the seller was limited to the truck, the debtor obtained a discharge of
There are other points involved in the case, such as the authority of the
judge of one branch of a court of first instance to enjoin proceedings in
another branch of the same court. As stated, Judge Pelayo refused to
interfere on that ground. Appellants insist this was error on several counts.
We deem it unnecessary to deal with this procedural aspect, inasmuch as
we find that, on the merits, plaintiffs are not entitled to the relief
demanded.
vs.
THE HONORABLE INTERMEDIATE APPELLATE COURT and
INVESTOR'S FINANCE CORPORATIONrespondents.
ESCOLIN, J.:
The issue posed in this petition for review of the decision of the
respondent appellate court is whether 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.
The pertinent facts are summarized by the respondent appellate court as
follows:
On June 28, 1976, defendant spouses Restituto Nonato and Ester Nonato
purchased one (1) unit of Volkswagen Sakbayan from the People's Car,
Inc., on installment basis. To secure complete payment, the defendants
executed a promissory note (Exh. A or 1) and a chattel mortgage in favor
of People's Car, Inc, (Exh. B or 2). People's Car, Inc., assigned its rights
and interests over the note and mortgage in favor of plaintiff Investor's
Finance Corporation (FNCB) Finance). For failure of defendants to pay
two or more installments, despite demands, the car was repossessed by
plaintiff on March 20, 1978 (Exh. E or 4).
Despite repossession, plaintiff demanded from defendants that they pay
the balance of the price of the car (Exhs. F and C). Finally, on June 9,
1978, plaintiff filed before the Court of First Instance of Negros
Occidental the present complaint against defendants for the latter to pay
the balance of the price of the car, with damages and attorney's fees.
(Records, pp. 36-37)
In their answer, the spouses Nonato alleged by way of defense that when
the company repossessed the vehicle, it had, by that act, effectively
cancelled the sale of the vehicle. It is therefore barred from exacting
recovery of the unpaid balance of the purchase price, as mandated by the
After due hearing, the trial court rendered a decision in favor of the IFC
and against the Nonatos, as follows:
PREMISES CONSIDERED, the Court hereby renders judgment ordering
the defendant to pay to the plaintiff the amount of P 17,537.60 with
interest at the rate of 14% per annum from July 28, 1976 until fully paid,
10% of the amount due as attorney's fees, litigation expenses in the
amount of P 133.05 plus the costs of this suit. No pronouncement as to
other charges and damages, the same not having been proven to the
satisfaction of the Court. 1
It is not disputed that the respondent company had taken possession of the
car purchased by the Nonatos on installments. But while the Nonatos
maintain that the company had, by that act, exercised its option to cancel
the contract of sale, the company contends that the repossession of the
vehicle was only for the purpose of appraising its value and for storage
and safekeeping pending full payment by the Nonatos of the purchasing
price. The company thus denies having exercised its right to cancel the
sale of the repossessed car. The records show otherwise.
ATTY. PAMPLONA:
(2) Cancel the sale, should the vendee's failure to pay cover two or more
installments;
So that Mr. Witness, it is clear now that, per your receipt and your answer,
the company will not return the unit without paying a sum of money,
more particularly the balance of the account?
(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.
merely for the purpose of appraising its current value. The allegation is
untenable, for even after it had notified the Nonatos that the value of the
car was not sufficient to cover the balance of the purchase price, there was
no attempt at all on the part of the company to return the repossessed car,
Indeed, the acts performed by the corporation are wholly consistent with
the conclusion that it had opted to cancel the contract of sale of the
vehicle. It is thus barred from exacting payment from petitioners of the
balance of the price of the vehicle which it had already repossessed. It
cannot have its cake and eat it too.
SECOND DIVISION
G.R. No. L-39806 January 27, 1983
SO ORDERED.
LUIS RIDAD and LOURDES RIDAD, plaintiffs-appellees,
vs.
FILIPINAS INVESTMENT and FINANCE CORPORATION, JOSE
D. SEBASTIAN and JOSE SAN AGUSTIN, in his capacity as Sheriff,
defendants-appellants.
DE CASTRO, J:
Appeal from the decision of the Court of First Instance of Rizal, Branch I,
in Civil Case No. 9140 for annulment of contract, originally filed with the
Court of Appeals but was subsequently certified to this Court pursuant to
Section 3 of Rule 50 of the Rules of Court, there being no issue of fact
involved in this appeal.
chattel mortgage, Exhibit "C", to be null and void in so far as the taxicab
franchise and the used Chevrolet car of plaintiffs are concerned, and the
sale at public auction conducted by the City Sheriff of Manila concerning
said taxicab franchise, to be of no legal effect.1wph1.t The certificate
of sale issued by the City Sheriff of Manila in favor of Filipinas
Investment and Finance Corporation concerning plaintiffs' taxicab
franchise for P8,000 is accordingly cancelled and set aside, and the
assignment thereof made by Filipinas Investment in favor of defendant
Jose Sebastian is declared void and of no legal effect. (Record on Appeal,
p. 128).
From the foregoing judgment, defendants appealed to the Court of
Appeals which, as earlier stated, certified the appeal to this Court,
appellants imputing to the lower court five alleged errors, as follows:
Due to the failure of the plaintiffs to pay their monthly installments as per
promissory note, the defendant corporation foreclosed the chattel
mortgage extra-judicially, and at the public auction sale of the two Ford
Consul cars, of which the plaintiffs were not notified, the defendant
corporation was the highest bidder and purchaser. Another auction sale
was held on November 16, 1965, involving the remaining properties
subject of the deed of chattel mortgage since plaintiffs' obligation was not
fully satisfied by the sale of the aforesaid vehicles, and at the public
auction sale, the franchise of plaintiffs to operate five units of taxicab
service was sold for P8,000 to the highest bidder, herein defendant
corporation, which subsequently sold and conveyed the same to herein
defendant Jose D. Sebastian, who then filed with the Public Service
Commission an application for approval of said sale in his favor.
I
THE LOWER COURT ERRED IN DECLARING THE CHATTEL
MORTGAGE, EXHIBIT "C", NULL AND VOID.
II
THE LOWER COURT ERRED IN HOLDING THAT THE SALE AT
PUBLIC AUCTION CONDUCTED BY THE CITY SHERIFF OF
MANILA CONCERNING THE TAXICAB FRANCHISE IS OF NO
LEGAL EFFECT.
III
THE LOWER COURT ERRED IN SETTING ASIDE THE
CERTIFICATE OF SALE ISSUED BY THE CITY SHERIFF OF
MANILA IN FAVOR OF FILIPINAS INVESTMENT AND FINANCE
CORPORATION COVERING PLAINTIFFS' TAXICAB FRANCHISE.
IV
10
V
THE LOWER COURT (sic) IN NOT DECIDING THE CASE IN FAVOR
OF THE DEFENDANTS. Appellants' Brief, pp. 9 & 10)
From the aforequoted assignment of errors, the decisive issue for
consideration is the validity of the chattel mortgage in so far as the
franchise and the subsequent sale thereof are concerned.
Consequently, the lower court rightly declared the nullity of the chattel
mortgage in question in so far as the taxicab franchise and the used
Chevrolet car of plaintiffs are concerned, under the authority of the ruling
in the case of Levy Hermanos, Inc. vs. Pacific Commercial Co., et al., 71
Phil. 587, the facts of which are similar to those in the case at bar. There,
we have the same situation wherein the vendees offered as security for the
payment of the purchase price not only the motor vehicles which were
bought on installment, but also a residential lot and a house of strong
materials. This Court sustained the pronouncement made by the lower
court on the nullity of the mortgage in so far as it included the house and
lot of the vendees, holding that under the law, should the vendor choose to
foreclose the mortgage, he has to content himself with the proceeds of the
sale at the public auction of the chattels which were sold on installment
and mortgaged to him and having chosen the remedy of foreclosure, he
cannot nor should he be allowed to insist on the sale of the house and lot
of the vendees, for to do so would be equivalent to obtaining a writ of
(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.
Under the above-quoted article of the Civil Code, the vendor of personal
property the purchase price of which is payable in installments, has the
right, should the vendee default in the payment of two or more of the
agreed installments, to exact fulfillment by the purchaser of the
11
FIRST DIVISION
G.R. No. L-30583 October 23, 1982
EUTROPIO ZAYAS, JR., petitioner,
vs.
LUNETA MOTOR COMPANY and HONORABLE JUAN O.
12
P7,920.00
The motor vehicle was delivered to the petitioner who 1) paid the initial
payment in the amount of P1,006.82; and 2) executed a promissory note
in the amount of P7,920.00, the balance of the total selling price, in favor
of respondent Luneta Motor Company. The promissory note stated the
amounts and dates of payment of twenty-six installments covering the
P7,920.00 debt. Simultaneously with the execution of the promissory note
and to secure its payment, the petitioner executed a chattel mortgage on
the subject motor vehicle in favor of the respondent. After paying a total
amount of P3,148.00, the petitioner was unable to pay further monthly
installments prompting the respondent Luneta Motor Company to extrajudicially foreclose the chattel mortgage (Annex "A" to Answer, Original
Record, p. 10, supra). The motor vehicle was sold at public auction with
the respondent Luneta Motor Company represented by Atty. Leandro B.
Fernandez as the highest bidder in the amount of P5,000.00 (Annex "B"
to Answer, Original Record, p. 11, supra). Since the payments made by
petitioner Eutropio Zayas, Jr. plus the P5,000.00 realized from the
foreclosure of the chattel mortgage could not cover the total amount of the
promissory note executed by the petitioner in favor of the respondent
Luneta Motor Company, the latter filed Civil Case No. 165263 with the
City Court of Manila for the recovery of the balance of P1,551.74 plus
interests.
P7,500.00
Financing charge
P1,426.82
P8,926.82
Payable on Delivery
P1,006.82
13
Jr. admitted having executed the promissory note for the monthly
payments, on a Ford Thames vehicle bearing Engine No. 400E-127738
which he purchased from the Luneta Motor Company but he denied his
alleged outstanding liability of P1,551.74 plus interest thereon ... the said
obligation if there was any, had already been discharged either by
payment or by sale in public auction of the said motor vehicle as
evidenced by a Notice of Sale marked as Annex "A" and Certificate of
Sale marked as Annex "B"; (Answer, p. 7, Original Record). He alleged as
affirmative defenses, among others: 1) that the plaintiff has no cause of
action against him; and 2) that pursuant to Article 1484 of the New Civil
Code and the case of Pacific Commercial Co. v. De La Rama, (72 Phil.
380) his obligation per the promissory note was extinguished by the sale
at public auction of the motor vehicle, the subject of the chattel mortgage
which was executed by him in favor of the plaintiff as security for the
payment of said promissory note. (Answer, p. 8, Original Record)
plaintiff as the highest bidder thereof, citing the case of Ruperto G. Cruz
v. Filipinas Investmentdecided on May 27, 1968, G.R. No. L-24772 in
connection with Article 1484 of the Civil Code, and finding the same well
taken.
Let this case be dismissed without pronouncement as to costs.
Luneta Motor Company filed an "Urgent Motion for Reconsideration"
reiterating its stand that Article 1484 of the New Civil Code on sale of
personal property by installment was not applicable and that the contract
involving the parties was a mere case of an ordinary loan secured by
chattel mortgage. According to the plaintiff, the defendant executed the
promissory note and chattel mortgage to secure the plaintiff's interest for
having financed the purchase of the motor vehicle by the defendant from
the Escao Enterprises of Cagayan de Oro City, an entity entirely different
and distinct from the plaintiff corporation (p. 33, Original Record).
The court denied the motion for reconsideration for lack of merit.
Luneta Motor Company appealed the case to the Court of First Instance of
Manila where it was docketed as Civil Case No. 74381.
After several postponements, the case was set for hearing. As a result of
the non- appearance of the plaintiff and its counsel on the date set for
hearing, defendant Zayas, Jr. moved to have the case dismissed for lack of
interest on the part of the plaintiff. He also asked the court to allow him to
discuss the merits of his affirmative defense as if a motion to dismiss had
been filed. The issue raised and argued by the defendant was whether or
not a deficiency amount after the motor vehicle, subject of the chattel
mortgage, has been sold at public auction could still be recovered. Zayas
cited the case of Ruperto Cruz v. Filipinas Investment (23 SCRA
791).<re||an1w>
On Petition of counsel for the defendant for the dismissal of this case on
the ground that the defendant is no longer liable for the deficiency
judgment inas much as the chattel mortgage has been foreclosed, with the
After going over the pleadings in this case, more particularly the
14
complaint and the answer to the complaint filed with the City Court of
Manila, this Court is of the impression that the case at bar may not be
decided merely, as the City Court had done, on the question of law since
the presentation of evidence is necessary to adjudicate the questions
involved. WHEREFORE, this case is hereby remanded to the court of
origin for further proceedings. (pp. 82-83, Original Record)
maintains that the contract between the company and the petitioner was
only an ordinary loan removed from the coverage of Article 1484 of the
New Civil Code.
The respondent's arguments have no merit.
The Escao Enterprises of Cagayan de Oro City was an agent of Luneta
Motor Company. A very significant evidence which proves the nature of
the relationship between Luneta Motor Company and Escao Enterprises
is Annex "A. of the petitioner's OPPOSITION TO URGENT MOTION
FOR RECONSIDERATION. (Original Record, p. 36) Annex "A" is a
Certification from the cashier of Escano Enterprises on the monthly
installments paid by Mr. Eutropio Zayas, Jr. In the certification, the
promissory note in favor of Luneta Motor Company was specifically
mentioned. There was only one promissory note executed by Eutropio
Zayas, Jr. in connection with the purchase of the motor vehicle. The
promissory note mentioned in the certification refers to the promissory
note executed by Eutropio Zayas, Jr. in favor of respondent Luneta Motor
Company. Thus:
C E R T I F I C AT I O N
This is to certify that Mr. EUTROPIO ZAYAS, JR. has paid from us the
following, of his FORD THAMES BEARING Engine No. 400E-127738,
promissory note dated October 6, 1966. Viz:
15
DATE RECEIVED
AMOUNT
09998
October 5, 1966
P1,000.00
10064
242.00
10188
November 8, 1966
166.00
10355
December 12,1966
400.00
270.00
10536
10645
10704
10749
10132
February 1, 1967
February 27, 1967
March 13,1967
March 22, 1967
March 30,1967
60.00
100.00
100.00
60.00
100.00
10788
April 8, 1967
100.00
10795
100.00
10827
100.00
10934
100.00
10991
11105
May 26,1967
June 19,1967
100.00
150.00
P 3,148.00
ESCAO ENTERPRISES
(SGD.) EMELITA H. BACULIO
Cashier
16
17
VILLAMOR, J.:
Direct appeal on questions of law from the portion of the judgment of the
Court of First Instance of Manila, Branch XXII, in its Civil Case No.
66199, ordering the plaintiff to pay defendant Casiano Sapinoso the sum
of P1,250.00.
18
upon its filing of a bond for the seizure of the car and for its delivery to it;
that after hearing, the plaintiff be adjudged to have the rightful possession
and ownership of the car; that in default of delivery, the defendants be
ordered to pay the plaintiff the sum of P10,218.10 with interest, at 12%
per annum from April 18, 1966, until full payment of the said sum, as
well as an amount equivalent to 25% of the sum due as and for attorney's
fees and expenses of collection, and the costs of the suit. Plaintiff also
prayed for such other remedy as might be deemed just and equitable in
the premises.
dismissed and that the plaintiff be ordered to return the car to him. He
stated in his prayer that he would be very much willing to pay the car in a
compromise agreement between him and the plaintiff.
After trial, the court a quo, in its decision dated April 4, 1967, held that
defendant Sapinoso having failed to pay more than two (2) installments,
plaintiff-mortgagee acquired the right to foreclose the chattel mortgage,
which it could avail of as it has done in the present case by filing an
action of replevin to secure possession of the mortgaged car as a
preliminary step to the foreclosure sale contemplated in the Chattel
Mortgage Law; and that the foreclosure of the chattel mortgage and the
recovery of the unpaid balance of the price are alternative remedies which
may not be pursued conjunctively, so that in availing itself of its right to
foreclose the chattel mortgage, the plaintiff thereby renounced whatever
claim it may have had on the promissory note, and, therefore, the plaintiff
has no more right to the collection of the attorney's fees stipulated in the
promissory note, and should return to defendant Sapinoso the sum of
P1,250.00 which the plaintiff had received from the latter after having
filed the present case on July 22, 1966, and elected to foreclose the chattel
mortgage. The dispositive portion of the decision reads:
WHEREFORE, the Court finds that the plaintiff has the right to the
possession of the OPEL KADETT two-door station wagon Model 346491.5, with engine No.
10-0354333, and the delivery thereof to the plaintiff is hereby ratified and
confirmed but said party is sentenced to pay to the defendant the sum of
P1,250, with legal interest on P500 from August 22, 1966 and or P750
from September 27, 1966, until fully paid, without any pronouncement as
to costs.
In this appeal plaintiff-appellant claims that the court a quo erred in
ordering it to reimburse to defendant-appellee Sapinoso the sum of
P1,250.00 which the latter had paid. It contends that under Article 1484 of
the Civil Code it is the exercise, not the mere election, of the remedy of
foreclosure that bars the creditor from recovering the unpaid balance of
the debt; that what the said Article 1484 prohibits is "further action" to
collect payment of the deficiency after the creditor has foreclosed the
19
precluded from recovering the unpaid balance of the price although he has
filed an action of replevin for the purpose of extrajudicial foreclosure, or
if a mortgage creditor who has elected to foreclose but who subsequently
desists from proceeding with the auction sale, without gaining any
advantage or benefit, and without causing any disadvantage or harm to the
vendee-mortgagor, is not barred from suing on the unpaid account
(Radiowealth, Inc. vs. Lavin, et al., G.R. No. L-18563, April 27, 1963 [7
SCRA 804, 807]), there is no reason why a mortgage creditor should be
barred from accepting, before a foreclosure sale, payments voluntarily
tendered by the debtor-mortgagor who admits a subsisting indebtedness.
20
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
21
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...;
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
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
22
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.
(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:
23
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.
appellant.
WHEREFORE, the decision appealed from is modified, by ordering
plaintiff-appellee Felicidad Vda. de Reyes to reimburse to defendantappellant 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 defendant-appellant.
24
SECOND DIVISION
G.R. No. L-57552 October 10, 1986
LUISA F. MCLAUGHLIN, petitioner,
vs.
THE COURT OF APPEALS AND RAMON FLORES, respondents.
R.C. Domingo Jr. & Associates for private respondent.
FERIA, Actg. C.J.
This is an appeal by certiorari from the decision of the Court of Appeals,
the dispositive part of which reads as follows:
IN VIEW OF THE FOREGOING PREMISES, the petition for certiorari
and mandamus is hereby GRANTED and the Orders of respondent court
dated November 21 and 27 both 1980 are hereby nullified and set aside
and respondent Judge is ordered to order private respondent to accept
petitioner's Pacific Banking Corporation certified manager's Check No.
MC-A-000311 dated November 17, 1980 in the amount of P76,059.71 in
full settlement of petitioner's obligation, or another check of equivalent
kind and value, the earlier check having become stale.
On February 28, 1977, petitioner Luisa F. McLaughlin and private
respondent Ramon Flores entered into a contract of conditional sale of
real property. Paragraph one of the deed of conditional sale fixed the total
purchase price of P140,000.00 payable as follows: a) P26,550.00 upon the
execution of the deed; and b) the balance of P113,450.00 to be paid not
later than May 31, 1977. The parties also agreed that the balance shall
bear interest at the rate of 1% per month to commence from December 1,
1976, until the full purchase price was paid.
Republic of the Philippines
SUPREME COURT
Manila
On June 19, 1979, petitioner filed a complaint in the then Court of First
Instance of Rizal (Civil Case No. 33573) for the rescission of the deed of
conditional sale due to the failure of private respondent to pay the balance
25
that the latter pay the balance of P69,059.71 on or before October 31,
1980. This demand included not only the installment due on June 30,
1980 but also the installment due on December 31, 1980.
On November 14, 1980, the trial court granted the motion for writ of
execution.
That the parties are agreed that in the event the defendant (private
respondent) fails to comply with his obligations herein provided, the
plaintiff (petitioner) will be entitled to the issuance of a writ of execution
rescinding the Deed of Conditional Sale of Real Property. In such
eventuality, defendant (private respondent) hereby waives his right to
appeal to (from) the Order of Rescission and the Writ of Execution which
the Court shall render in accordance with the stipulations herein provided
for.
In an order dated November 27, 1980, the trial court granted petitioner's
ex-parte motion for clarification of the order of execution rescinding the
deed of conditional sale of real property.
26
applicable herein considering that in the latter case, there was a 20-day
delay in the payment of the obligation as compared to a 17-day delay in
the instant case.
As initially stated above, the appellate court nullified and set aside the
disputed orders of the lower court. In its decision, the appellate court
ruled in part as follows:
The issue here is whether respondent court committed a grave abuse of
discretion in issuing the orders dated November 21, 1980 and November
27,1980.
Furthermore, as held in the recent case of New Pacific Timber & Supply
Co., Inc. vs. Hon. Alberto Seneris, L-41764, December 19, 1980, it is the
accepted practice in business to consider a cashier's or manager's check as
cash and that upon certification of a check, it is equivalent to its
acceptance (Section 187, Negotiable Instrument Law) and the funds are
thereby transferred to the credit of the creditor (Araneta v. Tuason, 49
O.G. p. 59).
The general rule is that rescission will not be permitted for a slight or
casual breach of the contract, but only for such breaches as are substantial
and fundamental as to defeat the object of the parties in making the
agreement. (Song Fo & Co. vs. Hawaiian-Philippine Co., 47 Phil. 821)
In the New Pacific Timber & Supply Co., Inc. case, the Supreme Court
further held that the object of certifying a check is to enable the holder
thereof to use it as money, citing the ruling in PNB vs. National City Bank
of New York, 63 Phil. 711.
In aforesaid case, it was held that a delay in payment for a small quantity
of molasses, for some twenty days is not such a violation of an essential
condition of the contract as warrants rescission for non-performance.
In the New Pacific Timber case, it was also ruled that the exception in
Section 63 of the Central Bank Act that the clearing of a check and the
subsequent crediting of the amount thereof to the account of the creditor
is equivalent to delivery of cash, is applicable to a payment through a
certified check.
Considering that Flores had already paid P101,550.00 under the contract
to sell, excluding the monthly rentals paid, certainly it would be the height
of inequity to have this amount forfeited in favor McLaughlin. Under the
questioned orders, McLaughlin would get back the property and still keep
P101,550.00.
Petitioner contends that the appellate court erred in not observing the
provisions of Article No. 1306 of the Civil Code of the Philippines and in
having arbitrarily abused its judicial discretion by disregarding the penal
clause stipulated by the parties in the compromise agreement which was
the basis of the decision of the lower court.
27
Moreover, Section 49, Rule 130 of the Revised Rules of Court provides
that:
In case where less than two years of installments were paid, the seller
shall give the buyer a grace period of not less than sixty days from the
date the installment became due. If the buyer fails to pay the installments
due at the expiration of the grace period, the seller may cancel the
contract after thirty days from receipt by the buyer of the notice of the
cancellation or the demand for rescission of the contract by a notarial act.
28
provides that in order that the consignation of the thing (or sum) due may
release the obligor, it must first be announced to the persons interested in
the fulfillment of the obligation; and Article 1258 provides that
consignation shall be made by depositing the thing (or sum) due at the
disposal of the judicial authority and that the interested parties shall also
be notified thereof.
As the Court held in the case of Soco vs. Militante, promulgated on June
28, 1983, after examining the above-cited provisions of the law and the
jurisprudence on the matter:
Tender of payment must be distinguished from consignation. Tender is the
antecedent of consignation, that is, an act preparatory to the consignation,
which is the principal, and from which are derived the immediate
consequences which the debtor desires or seeks to obtain. Tender of
payment may be extrajudicial, while consignation is necessarily judicial,
and the priority of the first is the attempt to make a private settlement
before proceeding to the solemnities of consignation. (8 Manresa 325).
(123 SCRA 160,173)
29
SECOND DIVISION
SO ORDERED.
30
between petitioner and private respondents, under the following terms and
conditions:
1. The selling price of said 8,655 square meters of the subject property is
TWO MILLION EIGHT HUNDRED FIFTY SIX THOUSAND ONE
HUNDRED FIFTY PESOS ONLY (P2,856,150.00)
REGALADO, J.:
The main issues presented for resolution in this petition for review on
certiorari of the judgment of respondent Court of appeals, dated April 6,
1993, in CA-G.R. CV No. 347671 are (1) whether of not the "Exclusive
Option to Purchase" executed between petitioner Adelfa Properties, Inc.
and private respondents Rosario Jimenez-Castaeda and Salud Jimenez is
an option contract; and (2) whether or not there was a valid suspension of
payment of the purchase price by said petitioner, and the legal effects
thereof on the contractual relations of the parties.
2. On July 28, 1988, Jose and Dominador Jimenez sold their share
consisting of one-half of said parcel of land, specifically the eastern
portion thereof, to herein petitioner pursuant to a "Kasulatan sa Bilihan
ng Lupa."3 Subsequently, a "Confirmatory Extrajudicial Partition
Agreement"4 was executed by the Jimenezes, wherein the eastern portion
of the subject lot, with an area of 8,855 square meters was adjudicated to
Jose and Dominador Jimenez, while the western portion was allocated to
herein private respondents.
31
32
I
1. In view of the extended disquisition thereon by respondent court, it
would be worthwhile at this juncture to briefly discourse on the rationale
behind our treatment of the alleged option contract as a contract to sell,
rather than a contract of sale. The distinction between the two is important
for in contract of sale, the title passes to the vendee upon the delivery of
the thing sold; whereas in a contract to sell, by agreement the ownership
is reserved in the vendor and is not to pass until the full payment of the
price. In a contract of sale, the vendor has lost and cannot recover
ownership until and unless the contract is resolved or rescinded; whereas
in a contract to sell, title is retained by the vendor until the full payment of
the price, such payment being a positive suspensive condition and failure
of which is not a breach but an event that prevents the obligation of the
vendor to convey title from becoming effective. Thus, a deed of sale is
considered absolute in nature where there is neither a stipulation in the
deed that title to the property sold is reserved in the seller until the full
payment of the price, nor one giving the vendor the right to unilaterally
resolve the contract the moment the buyer fails to pay within a fixed
period. 15
There are two features which convince us that the parties never intended
to transfer ownership to petitioner except upon the full payment of the
purchase price. Firstly, the exclusive option to purchase, although it
provided for automatic rescission of the contract and partial forfeiture of
the amount already paid in case of default, does not mention that
petitioner is obliged to return possession or ownership of the property as a
consequence of non-payment. There is no stipulation anent reversion or
reconveyance of the property to herein private respondents in the event
that petitioner does not comply with its obligation. With the absence of
such a stipulation, although there is a provision on the remedies available
to the parties in case of breach, it may legally be inferred that the parties
never intended to transfer ownership to the petitioner to completion of
33
In effect, there was an implied agreement that ownership shall not pass to
the purchaser until he had fully paid the price. Article 1478 of the civil
code does not require that such a stipulation be expressly made.
Consequently, an implied stipulation to that effect is considered valid and,
therefore, binding and enforceable between the parties. It should be noted
that under the law and jurisprudence, a contract which contains this kind
of stipulation is considered a contract to sell.
Moreover, that the parties really intended to execute a contract to sell, and
not a contract of sale, is bolstered by the fact that the deed of absolute sale
would have been issued only upon the payment of the balance of the
purchase price, as may be gleaned from petitioner's letter dated April 16,
1990 16 wherein it informed private respondents that it "is now ready and
willing to pay you simultaneously with the execution of the corresponding
deed of absolute sale."
Secondly, it has not been shown there was delivery of the property, actual
or constructive, made to herein petitioner. The exclusive option to
purchase is not contained in a public instrument the execution of which
would have been considered equivalent to delivery. 17 Neither did
petitioner take actual, physical possession of the property at any given
time. It is true that after the reconstitution of private respondents'
certificate of title, it remained in the possession of petitioner's counsel,
Atty. Bayani L. Bernardo, who thereafter delivered the same to herein
petitioner. Normally, under the law, such possession by the vendee is to be
understood as a delivery.18 However, private respondents explained that
there was really no intention on their part to deliver the title to herein
petitioner with the purpose of transferring ownership to it. They claim that
Atty. Bernardo had possession of the title only because he was their
counsel in the petition for reconstitution. We have no reason not to believe
this explanation of private respondents, aside from the fact that such
contention was never refuted or contradicted by petitioner.
2. Irrefragably, the controverted document should legally be considered as
a perfected contract to sell. On this particular point, therefore, we reject
34
It cannot be gainsaid that the offer to buy a specific piece of land was
definite and certain, while the acceptance thereof was absolute and
without any condition or qualification. The agreement as to the object, the
price of the property, and the terms of payment was clear and welldefined. No other significance could be given to such acts that than they
were meant to finalize and perfect the transaction. The parties even went
beyond the basic requirements of the law by stipulating that "all expenses
including the corresponding capital gains tax, cost of documentary stamps
are for the account of the vendors, and expenses for the registration of the
deed of sale in the Registry of Deeds are for the account of Adelfa
properties, Inc." Hence, there was nothing left to be done except the
performance of the respective obligations of the parties.
A perusal of the contract in this case, as well as the oral and documentary
evidence presented by the parties, readily shows that there is indeed a
concurrence of petitioner's offer to buy and private respondents'
acceptance thereof. The rule is that except where a formal acceptance is
so required, although the acceptance must be affirmatively and clearly
made and must be evidenced by some acts or conduct communicated to
the offeror, it may be made either in a formal or an informal manner, and
may be shown by acts, conduct, or words of the accepting party that
clearly manifest a present intention or determination to accept the offer to
buy or sell. Thus, acceptance may be shown by the acts, conduct, or
words of a party recognizing the existence of the contract of sale. 30
The records also show that private respondents accepted the offer of
petitioner to buy their property under the terms of their contract. At the
time petitioner made its offer, private respondents suggested that their
transfer certificate of title be first reconstituted, to which petitioner
agreed. As a matter of fact, it was petitioner's counsel, Atty. Bayani L.
At any rate, the same cannot be considered a counter-offer for the simple
reason that petitioner's sole purpose was to settle the civil case in order
35
that it could already comply with its obligation. In fact, it was even
indicative of a desire by petitioner to immediately comply therewith,
except that it was being prevented from doing so because of the filing of
the civil case which, it believed in good faith, rendered compliance
improbable at that time. In addition, no inference can be drawn from that
suggestion given by petitioner that it was totally abandoning the original
contract.
More importantly, it will be noted that the failure of petitioner to pay the
balance of the purchase price within the agreed period was attributed by
private respondents to "lack of word of honor" on the part of the former.
The reason of "lack of word of honor" is to us a clear indication that
private respondents considered petitioner already bound by its obligation
to pay the balance of the consideration. In effect, private respondents were
demanding or exacting fulfillment of the obligation from herein petitioner.
with the arrival of the period agreed upon by the parties, petitioner was
supposed to comply with the obligation incumbent upon it to perform, not
merely to exercise an option or a right to buy the property.
There are clear distinctions between earnest money and option money,
viz.: (a) earnest money is part of the purchase price, while option money
36
ids the money given as a distinct consideration for an option contract; (b)
earnest money is given only where there is already a sale, while option
money applies to a sale not yet perfected; and (c) when earnest money is
given, the buyer is bound to pay the balance, while when the would-be
buyer gives option money, he is not required to buy. 39
erroneous assumption that the true agreement between the parties was a
contract of option. As we have hereinbefore discussed, it was not an
option contract but a perfected contract to sell. Verily, therefore, Article
1590 would properly apply.
Both lower courts, however, are in accord that since Civil Case No. 895541 filed against the parties herein involved only the eastern half of the
land subject of the deed of sale between petitioner and the Jimenez
brothers, it did not, therefore, have any adverse effect on private
respondents' title and ownership over the western half of the land which is
covered by the contract subject of the present case. We have gone over the
complaint for recovery of ownership filed in said case 41 and we are not
persuaded by the factual findings made by said courts. At a glance, it is
easily discernible that, although the complaint prayed for the annulment
only of the contract of sale executed between petitioner and the Jimenez
brothers, the same likewise prayed for the recovery of therein plaintiffs'
share in that parcel of land specifically covered by TCT No. 309773. In
other words, the plaintiffs therein were claiming to be co-owners of the
entire parcel of land described in TCT No. 309773, and not only of a
portion thereof nor, as incorrectly interpreted by the lower courts, did
their claim pertain exclusively to the eastern half adjudicated to the
Jimenez brothers.
The aforequoted characteristics of earnest money are apparent in the socalled option contract under review, even though it was called "option
money" by the parties. In addition, private respondents failed to show that
the payment of the balance of the purchase price was only a condition
precedent to the acceptance of the offer or to the exercise of the right to
buy. On the contrary, it has been sufficiently established that such
payment was but an element of the performance of petitioner's obligation
under the contract to sell. 40
II
1. This brings us to the second issue as to whether or not there was valid
suspension of payment of the purchase price by petitioner and the legal
consequences thereof. To justify its failure to pay the purchase price
within the agreed period, petitioner invokes Article 1590 of the civil Code
which provides:
Such being the case, petitioner was justified in suspending payment of the
balance of the purchase price by reason of the aforesaid vindicatory action
filed against it. The assurance made by private respondents that petitioner
did not have to worry about the case because it was pure and simple
harassment 42 is not the kind of guaranty contemplated under the
exceptive clause in Article 1590 wherein the vendor is bound to make
payment even with the existence of a vindicatory action if the vendee
should give a security for the return of the price.
37
that the contract to sell had been validly rescinded by private respondents.
The records of this case reveal that as early as February 28, 1990 when
petitioner caused its exclusive option to be annotated anew on the
certificate of title, it already knew of the dismissal of civil Case No. 895541. However, it was only on April 16, 1990 that petitioner, through its
counsel, wrote private respondents expressing its willingness to pay the
balance of the purchase price upon the execution of the corresponding
deed of absolute sale. At most, that was merely a notice to pay. There was
no proper tender of payment nor consignation in this case as required by
law.
In the case at bar, it has been shown that although petitioner was duly
furnished and did receive a written notice of rescission which specified
the grounds therefore, it failed to reply thereto or protest against it. Its
silence thereon suggests an admission of the veracity and validity of
private respondents' claim. 53 Furthermore, the initiative of instituting suit
was transferred from the rescinder to the defaulter by virtue of the
automatic rescission clause in the contract. 54 But then, the records bear
out the fact that aside from the lackadaisical manner with which petitioner
treated private respondents' latter of cancellation, it utterly failed to
seriously seek redress from the court for the enforcement of its alleged
rights under the contract. If private respondents had not taken the
initiative of filing Civil Case No. 7532, evidently petitioner had no
intention to take any legal action to compel specific performance from the
former. By such cavalier disregard, it has been effectively estopped from
seeking the affirmative relief it now desires but which it had theretofore
disdained.
38
SO ORDERED.
Narvasa, C.J., Puno and Mendoza, JJ., concur.
MELO, J.:p
The petition before us has its roots in a complaint for specific
performance to compel herein petitioners (except the last named, Catalina
Balais Mabanag) to consummate the sale of a parcel of land with its
improvements located along Roosevelt Avenue in Quezon City entered
into by the parties sometime in January 1985 for the price of
P1,240,000.00.
The undisputed facts of the case were summarized by respondent court in
this wise:
On January 19, 1985, defendants-appellants Romulo Coronel, et al.
(hereinafter referred to as Coronels) executed a document entitled
"Receipt of Down Payment" (Exh. "A") in favor of plaintiff Ramona
Patricia Alcaraz (hereinafter referred to as Ramona) which is reproduced
hereunder:
Republic of the Philippines
SUPREME COURT
Manila
P1,190,000.00 Balance
THIRD DIVISION
Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City,
the sum of Fifty Thousand Pesos purchase price of our inherited house
39
and lot, covered by TCT No. 119627 of the Registry of Deeds of Quezon
City, in the total amount of P1,240,000.00.
We bind ourselves to effect the transfer in our names from our deceased
father, Constancio P. Coronel, the transfer certificate of title immediately
upon receipt of the down payment above-stated.
For this reason, Coronels canceled and rescinded the contract (Exh. "A")
with Ramona by depositing the down payment paid by Concepcion in the
bank in trust for Ramona Patricia Alcaraz.
On April 25, 1985, the Coronels executed a Deed of Absolute Sale over
the subject property in favor of Catalina (Exh. "G"; Exh. "7").
2. The Coronels will cause the transfer in their names of the title of the
property registered in the name of their deceased father upon receipt of
the Fifty Thousand (P50,000.00) Pesos down payment;
On June 5, 1985, a new title over the subject property was issued in the
name of Catalina under TCT No. 351582 (Exh. "H"; Exh. "8").
3. Upon the transfer in their names of the subject property, the Coronels
will execute the deed of absolute sale in favor of Ramona and the latter
will pay the former the whole balance of One Million One Hundred
Ninety Thousand (P1,190,000.00) Pesos.
40
resolution.
On April 14, 1988, the case was submitted for resolution before Judge
Reynaldo Roura, who was then temporarily detailed to preside over
Branch 82 of the RTC of Quezon City. On March 1, 1989, judgment was
handed down by Judge Roura from his regular bench at Macabebe,
Pampanga for the Quezon City branch, disposing as follows:
The prayer contained in the instant motion, i.e., to annul the decision and
to render anew decision by the undersigned Presiding Judge should be
denied for the following reasons: (1) The instant case became submitted
for decision as of April 14, 1988 when the parties terminated the
presentation of their respective documentary evidence and when the
Presiding Judge at that time was Judge Reynaldo Roura. The fact that they
were allowed to file memoranda at some future date did not change the
fact that the hearing of the case was terminated before Judge Roura and
therefore the same should be submitted to him for decision; (2) When the
defendants and intervenor did not object to the authority of Judge
Reynaldo Roura to decide the case prior to the rendition of the decision,
when they met for the first time before the undersigned Presiding Judge at
the hearing of a pending incident in Civil Case No. Q-46145 on
November 11, 1988, they were deemed to have acquiesced thereto and
they are now estopped from questioning said authority of Judge Roura
after they received the decision in question which happens to be adverse
to them; (3) While it is true that Judge Reynaldo Roura was merely a
Judge-on-detail at this Branch of the Court, he was in all respects the
Presiding Judge with full authority to act on any pending incident
submitted before this Court during his incumbency. When he returned to
his Official Station at Macabebe, Pampanga, he did not lose his authority
to decide or resolve such cases submitted to him for decision or resolution
because he continued as Judge of the Regional Trial Court and is of coequal rank with the undersigned Presiding Judge. The standing rule and
supported by jurisprudence is that a Judge to whom a case is submitted for
decision has the authority to decide the case notwithstanding his transfer
to another branch or region of the same court (Sec. 9, Rule 135, Rule of
Court).
Coming now to the twin prayer for reconsideration of the Decision dated
March 1, 1989 rendered in the instant case, resolution of which now
pertains to the undersigned Presiding Judge, after a meticulous
examination of the documentary evidence presented by the parties, she is
convinced that the Decision of March 1, 1989 is supported by evidence
and, therefore, should not be disturbed.
(Rollo, p. 106)
A motion for reconsideration was filed by petitioner before the new
presiding judge of the Quezon City RTC but the same was denied by
41
SO ORDERED.
Quezon City, Philippines, July 12, 1989.
(Rollo, pp. 108-109)
Petitioners thereupon interposed an appeal, but on December 16, 1991,
the Court of Appeals (Buena, Gonzaga-Reyes, Abad Santos (P), JJ.)
rendered its decision fully agreeing with the trial court.
Hence, the instant petition which was filed on March 5, 1992. The last
pleading, private respondents' Reply Memorandum, was filed on
September 15, 1993. The case was, however, re-raffled to undersigned
ponenteonly on August 28, 1996, due to the voluntary inhibition of the
Justice to whom the case was last assigned.
The heart of the controversy which is the ultimate key in the resolution of
the other issues in the case at bar is the precise determination of the legal
significance of the document entitled "Receipt of Down Payment" which
was offered in evidence by both parties. There is no dispute as to the fact
that said document embodied the binding contract between Ramona
Patricia Alcaraz on the one hand, and the heirs of Constancio P. Coronel
on the other, pertaining to a particular house and lot covered by TCT No.
119627, as defined in Article 1305 of the Civil Code of the Philippines
which reads as follows:
42
Hence, We hold that the contract between the petitioner and the
respondent was a contract to sell where the ownership or title is retained
by the seller and is not to pass until the full payment of the price, such
payment being a positive suspensive condition and failure of which is not
a breach, casual or serious, but simply an event that prevented the
obligation of the vendor to convey title from acquiring binding force.
Art. 1479. 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 promissor if the promise is supported by
a consideration distinct from the price.
A contract to sell may thus be defined as a bilateral contract whereby the
prospective seller, while expressly reserving the ownership of the subject
property despite delivery thereof to the prospective buyer, binds himself
43
Moreover, unlike in a contract to sell, petitioners in the case at bar did not
merely promise to sell the properly to private respondent upon the
fulfillment of the suspensive condition. On the contrary, having already
agreed to sell the subject property, they undertook to have the certificate
of title changed to their names and immediately thereafter, to execute the
written deed of absolute sale.
Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City,
the sum of Fifty Thousand Pesos purchase price of our inherited house
and lot, covered by TCT No. 1199627 of the Registry of Deeds of Quezon
City, in the total amount of P1,240,000.00.
Thus, the parties did not merely enter into a contract to sell where the
sellers, after compliance by the buyer with certain terms and conditions,
promised to sell the property to the latter. What may be perceived from
the respective undertakings of the parties to the contract is that petitioners
had already agreed to sell the house and lot they inherited from their
father, completely willing to transfer full ownership of the subject house
and lot to the buyer if the documents were then in order. It just happened,
however, that the transfer certificate of title was then still in the name of
their father. It was more expedient to first effect the change in the
certificate of title so as to bear their names. That is why they undertook to
cause the issuance of a new transfer of the certificate of title in their
without any reservation of title until full payment of the entire purchase
price, the natural and ordinary idea conveyed is that they sold their
property.
When the "Receipt of Down Payment" is considered in its entirety, it
becomes more manifest that there was a clear intent on the part of
petitioners to transfer title to the buyer, but since the transfer certificate of
title was still in the name of petitioner's father, they could not fully effect
such transfer although the buyer was then willing and able to immediately
44
(Rollo, p. 16)
Article 1475, in correlation with Article 1181, both of the Civil Code,
plainly applies to the case at bench. Thus,
45
(Ibid.)
Petitioners also argue there could been no perfected contract on January
19, 1985 because they were then not yet the absolute owners of the
inherited property.
not aware that they set their own trap for themselves, for Article 1186 of
the Civil Code expressly provides that:
Art. 1186. The condition shall be deemed fulfilled when the obligor
voluntarily prevents its fulfillment.
Petitioners-sellers in the case at bar being the sons and daughters of the
decedent Constancio P. Coronel are compulsory heirs who were called to
succession by operation of law. Thus, at the point their father drew his last
breath, petitioners stepped into his shoes insofar as the subject property is
concerned, such that any rights or obligations pertaining thereto became
binding and enforceable upon them. It is expressly provided that rights to
the succession are transmitted from the moment of death of the decedent
(Article 777, Civil Code; Cuison vs. Villanueva, 90 Phil. 850 [1952]).
Be it also noted that petitioners' claim that succession may not be declared
unless the creditors have been paid is rendered moot by the fact that they
were able to effect the transfer of the title to the property from the
decedent's name to their names on February 6, 1985.
Art. 1187. The effects of conditional obligation to give, once the condition
has been fulfilled, shall retroact to the day of the constitution of the
obligation . . .
In obligation to do or not to do, the courts shall determine, in each case,
the retroactive effect of the condition that has been complied with.
Aside from this, petitioners are precluded from raising their supposed lack
of capacity to enter into an agreement at that time and they cannot be
allowed to now take a posture contrary to that which they took when they
entered into the agreement with private respondent Ramona P. Alcaraz.
The Civil Code expressly states that:
the rights and obligations of the parties with respect to the perfected
contract of sale became mutually due and demandable as of the time of
fulfillment or occurrence of the suspensive condition on February 6, 1985.
46
We do not agree with petitioners that there was a valid rescission of the
contract of sale in the instant case. We note that these supposed grounds
for petitioners' rescission, are mere allegations found only in their
responsive pleadings, which by express provision of the rules, are deemed
controverted even if no reply is filed by the plaintiffs (Sec. 11, Rule 6,
Revised Rules of Court). The records are absolutely bereft of any
supporting evidence to substantiate petitioners' allegations. We have
stressed time and again that allegations must be proven by sufficient
evidence (Ng Cho Cio vs. Ng Diong, 110 Phil. 882 [1961]; Recaro vs.
Embisan, 2 SCRA 598 [1961]. Mere allegation is not an evidence
(Lagasca vs. De Vera, 79 Phil. 376 [1947]).
47
There is thus neither factual nor legal basis to rescind the contract of sale
between petitioners and respondents.
With the foregoing conclusions, the sale to the other petitioner, Catalina
B. Mabanag, gave rise to a case of double sale where Article 1544 of the
Civil Code will apply, to wit:
Art. 1544. If the same thing should have been sold to different vendees,
the ownership shall be transferred to the person who may have first taken
possession thereof in good faith, if it should be movable property.
Should if be immovable property, the ownership shall belong to the
person acquiring it who in good faith first recorded it in Registry of
Property.
Should there be no inscription, the ownership shall pertain to the person
who in good faith was first in the possession; and, in the absence thereof
to the person who presents the oldest title, provided there is good faith.
Petitioner point out that the notice of lis pendensin the case at bar was
annoted on the title of the subject property only on February 22, 1985,
whereas, the second sale between petitioners Coronels and petitioner
Mabanag was supposedly perfected prior thereto or on February 18, 1985.
The idea conveyed is that at the time petitioner Mabanag, the second
buyer, bought the property under a clean title, she was unaware of any
adverse claim or previous sale, for which reason she is buyer in good
faith.
The record of the case shows that the Deed of Absolute Sale dated April
25, 1985 as proof of the second contract of sale was registered with the
Registry of Deeds of Quezon City giving rise to the issuance of a new
certificate of title in the name of Catalina B. Mabanag on June 5, 1985.
Thus, the second paragraph of Article 1544 shall apply.
48
SO ORDERED.
Narvasa, C.J., Davide, Jr. and Francisco, JJ., concur.
Panganiban, J., took no part.
49
EN BANC
That the above-mentioned Land Grant was segregated from the public
domain and given as an endowment to UP, an institution of higher
learning, to be operated and developed for the purpose of raising
additional income for its support, pursuant to Act 3608;
3. In the event that the payments called for in Nos. 1 and 2 of this
paragraph are not sufficient to liquidate the foregoing indebtedness of the
DEBTOR in favor of the CREDITOR, the balance outstanding after the
said payments have been applied shall be paid by the DEBTOR in full no
later than June 30, 1965;
xxx xxx xxx
50
5. In the event that the DEBTOR fails to comply with any of its promises
or undertakings in this document, the DEBTOR agrees without
reservation that the CREDITOR shall have the right and the power to
consider the Logging Agreement dated December 2, 1960 as rescinded
without the necessity of any judicial suit, and the CREDITOR shall be
entitled as a matter of right to Fifty Thousand Pesos (P50,000.00) by way
of and for liquidated damages;
That, on motion dated 12 April 1966 by ALUMCO and one Jose Rico, the
court, in an order dated 14 January 1967, declared petitioner UP in
contempt of court and, in the same order, directed Sta. Clara Lumber
Company, Inc., to refrain from exercising logging rights or conducting
logging operations in the concession.
That UP received the order of 25 February 1966 after it had concluded its
contract with Sta. Clara Lumber Company, Inc., and said company had
started logging operations.
The UP moved for reconsideration of the aforesaid order, but the motion
was denied on 12 December 1967.
Except that it denied knowledge of the purpose of the Land Grant, which
purpose, anyway, is embodied in Act 3608 and, therefore, conclusively
known, respondent ALUMCO did not deny the foregoing allegations in
the petition. In its answer, respondent corrected itself by stating that the
period of the logging agreement is five (5) years - not seven (7) years, as
it had alleged in its second amended answer to the complaint in Civil Case
No. 9435. It reiterated, however, its defenses in the court below, which
maybe boiled down to: blaming its former general manager, Cesar Guy, in
not turning over management of ALUMCO, thereby rendering it unable to
pay the sum of P219,382.94; that it failed to pursue the manner of
payments, as stipulated in the "Acknowledgment of Debt and Proposed
Manner of Payments" because the logs that it had cut turned out to be
rotten and could not be sold to Sta. Clara Lumber Company, Inc., under
its contract "to buy and sell" with said firm, and which contract was
referred and annexed to the "Acknowledgment of Debt and Proposed
Manner of Payments"; that UP's unilateral rescission of the logging
contract, without a court order, was invalid; that petitioner's supervisor
refused to allow respondent to cut new logs unless the logs previously cut
during the management of Cesar Guy be first sold; that respondent was
permitted to cut logs in the middle of June 1965 but petitioner's supervisor
51
stopped all logging operations on 15 July 1965; that it had made several
offers to petitioner for respondent to resume logging operations but
respondent received no reply.
due hearing, decide that the resolution of the contract was not warranted,
the responsible party will be sentenced to damages; in the contrary case,
the resolution will be affirmed, and the consequent indemnity awarded to
the party prejudiced.
The basic issue in this case is whether petitioner U.P. can treat its contract
with ALUMCO rescinded, and may disregard the same before any
judicial pronouncement to that effect. Respondent ALUMCO contended,
and the lower court, in issuing the injunction order of 25 February 1966,
apparently sustained it (although the order expresses no specific findings
in this regard), that it is only after a final court decree declaring the
contract rescinded for violation of its terms that U.P. could disregard
ALUMCO's rights under the contract and treat the agreement as breached
and of no force or effect.
In other words, the party who deems the contract violated may consider it
resolved or rescinded, and act accordingly, without previous court action,
but it proceeds at its own risk. For it is only the final judgment of the
corresponding court that will conclusively and finally settle whether the
action taken was or was not correct in law. But the law definitely does not
require that the contracting party who believes itself injured must first file
suit and wait for a judgment before taking extrajudicial steps to protect its
interest. Otherwise, the party injured by the other's breach will have to
passively sit and watch its damages accumulate during the pendency of
the suit until the final judgment of rescission is rendered when the law
itself requires that he should exercise due diligence to minimize its own
damages (Civil Code, Article 2203).
there is nothing in the law that prohibits the parties from entering into
agreement that violation of the terms of the contract would cause
cancellation thereof, even without court intervention. In other words, it is
not always necessary for the injured party to resort to court for rescission
of the contract.
52
Canonico, por el cual fragenti fidem, fides non est servanda. (Ss. de 4
Nov. 1958 y 22 Jun. 1959.) (Emphasis supplied).
In the light of the foregoing principles, and considering that the complaint
of petitioner University made out a prima faciecase of breach of contract
and defaults in payment by respondent ALUMCO, to the extent that the
court below issued a writ of preliminary injunction stopping ALUMCO's
logging operations, and repeatedly denied its motions to lift the
injunction; that it is not denied that the respondent company had profited
from its operations previous to the agreement of 5 December 1964
("Acknowledgment of Debt and Proposed Manner of Payment"); that the
excuses offered in the second amended answer, such as the misconduct of
its former manager Cesar Guy, and the rotten condition of the logs in
private respondent's pond, which said respondent was in a better position
to know when it executed the acknowledgment of indebtedness, do not
constitute on their face sufficient excuse for non-payment; and
considering that whatever prejudice may be suffered by respondent
ALUMCO is susceptibility of compensation in damages, it becomes plain
that the acts of the court a quo in enjoining petitioner's measures to
protect its interest without first receiving evidence on the issues tendered
by the parties, and in subsequently refusing to dissolve the injunction,
were in grave abuse of discretion, correctible by certiorari, since appeal
was not available or adequate. Such injunction, therefore, must be set
aside.
For the reason that the order finding the petitioner UP in contempt of
court has open appealed to the Court of Appeals, and the case is pending
therein, this Court abstains from making any pronouncement thereon.
53
On May 10, 1973, or almost six (6) years later, private respondent wrote
petitioner offering to update all his overdue accounts with interest, and
seeking its written consent to the assignment of his rights to a certain
Lourdes Dizon. He followed this up with another letter dated June 20,
FIRST DIVISION
54
IV
Whether respondent Presidential Executive Assistant committed grave
abuse of discretion in upholding the decision of respondent NHA holding
petitioners solidarily liable for the refund of the installment payments
made by respondent Nazario M. Dumpit thereby denying substantial
justice to the petitioners, particularly petitioner Onstott
On appeal to the Office of the President, upon the allegation that the NHA
Resolution was contrary to law (O.P. Case No. 1459), respondent
Presidential Executive Assistant, on May 2, 1980, affirmed the Resolution
of the NHA. Reconsideration sought by petitioners was denied for lack of
merit. Thus, the present petition wherein the following issues are raised:
6. That in case the BUYER falls to satisfy any monthly installment or any
other payments herein agreed upon, the BUYER shall be granted a month
of grace within which to make the payment of the t in arrears together
with the one corresponding to the said month of grace. -It shall be
understood, however, that should the month of grace herein granted to the
BUYER expire, without the payment & corresponding to both months
having been satisfied, an interest of ten (10%) per cent per annum shall be
charged on the amounts the BUYER should have paid; it is understood
further, that should a period of NINETY (90) DAYS elapse to begin from
the expiration of the month of grace hereinbefore mentioned, and the
BUYER shall not have paid all the amounts that the BUYER should have
paid with the corresponding interest up to the date, the SELLER shall
have the right to declare this contract cancelled and of no effect without
notice, and as a consequence thereof, the SELLER may dispose of the
lot/lots covered by this Contract in favor of other persons, as if this
contract had never been entered into. In case of such cancellation of this
Contract, all the amounts which may have been paid by the BUYER in
accordance with the agreement, together with all the improvements made
on the premises, shall be considered as rents paid for the use and
I
Whether notice or demand is not mandatory under the circumstances and,
therefore, may be dispensed with by stipulation in a contract to sell.
II
Whether petitioners may be held liable for the refund of the installment
payments made by respondent Nazario M. Dumpit.
III
Whether the doctrine of piercing the veil of corporate fiction has
application to the case at bar.
55
In other words, the party who deems the contract violated may consider it
resolved or rescinded, and act accordingly, without previous court action,
but it proceeds at its own risk.For it is only the final judgment of the
corresponding court that will conclusively and finally settle whether the
action taken was or was not correct in law. But the law definitely does not
require that the contracting party who believes itself injured must first file
suit and wait for a judgment before taking extrajudicial steps to protect its
interest. Otherwise, the party injured by the other's breach will have to
passively sit and watch its damages accumulate during the pendency of
the suit until the final judgment of rescission is rendered when the law
itself requires that he should exercise due diligence to minimize its own
56
In this case, private respondent has denied that rescission is justified and
has resorted to judicial action. It is now for the Court to determine
whether resolution of the contract by petitioners was warranted.
ART. 1385. Rescission creates the obligation to return the things which
were the object of the contract, together with their fruits, and the price
with its interest; consequently, it can be carried out only when he who
demands rescission can return whatever he may be obliged to restore.
Petitioner relies on Torralba vs. De los Angeles8 where it was held that
"there was no contract to rescind in court because from the moment the
petitioner defaulted in the timely payment of the installments, the contract
between the parties was deemed ipso facto rescinded." However, it should
be noted that even in that case notice in writing was made to the vendee of
the cancellation and annulment of the contract although the contract
entitled the seller to immediate repossessing of the land upon default by
the buyer.
Neither sham rescission take place when the things which are the object
of the contract are legally in the possession of third persons who did not
act in bad faith.
In this case, indemnity for damages may be demanded from the person
causing the loss.
The contention that private respondent had waived his right to be notified
under paragraph 6 of the contract is neither meritorious because it was a
contract of adhesion, a standard form of petitioner corporation, and
private respondent had no freedom to stipulate. A waiver must be certain
and unequivocal, and intelligently made; such waiver follows only where
liberty of choice has been fully accorded. 9 Moreover, it is a matter of
We come now to the third and fourth issues regarding the personal
liability of petitioner Onstott who was made jointly and severally liable
with petitioner corporation for refund to private respondent of the total
amount the latter had paid to petitioner company. It is basic that a
corporation is invested by law with a personality separate and distinct
from those of the persons composing it as wen as from that of any other
57
58