Luzon Brokerage Co. v. Maritime Building Co.

FACTS:

In Manila, Myers owned 3 parcels of land w/ improvements and entered into a contract
called a Deed of Conditional Sale with Maritime Building for P1million.
They agreed on the manner of payment (initial payment of P 50,000.00 upon execution
of contract and installment of P5,000.00 per month and the interest of 5 & 1/2 per annum
until fully paid).

In the contract it was stipulated that in case of failure of buyer to pay any of the
installments, the contract will be annulled at the option of the seller and all payments
made by the buyer is forfeited.

Maritime paid the monthly installments but failed to pay the monthly installment of
March.
VP of Maritime wrote to Pres of Myers requesting for a moratorium on the monthly
payment of the installments because the company was undergoing financial problems.
Myers refused.
For the months of March, April, and May, Maritime failed to pay and did not heed the
demand of Myers.
Myers wrote Maritime cancelling the Deed of Conditional Sale

Myers demanded return of possession of properties

Held Maritime liable for use and occupation amounting to P10k per month
In the meantime, Luzon Brokerage was leasing the property from Maritime.
Myers demanded from Luzon the payment of monthly rentals of P10k
Myers also demanded surrender of property.
While actions and cross-claims between Myers and Maritime were happening, the
contract between Maritime and Luzon was extended for 4more years.
Turns out, Maritimes suspension of its payments to Myers Corp arose from a previous
event between Schedler (who controlled Maritime) when Schedler purchased FH
Myerss stock in Luzon Brokerage company. (This indemnification is for the award of
backwages by the CIR)
And so, Schedler advised Myers corp that Maritime is withholding payments to Myers
corp in order to offset the liability when Myersheirs failed to honor the indemnity
agreement.
The court ruled Maritime in breach of contract.
ISSUE:
1. Whether or not there has been a breach of contract on the part of Maritime?
2. Can Myers extra judicially terminate the contract?
HELD:
1. Yes.
The non-payment of the installments designed to coerce Myers Bldg Co. into answering for an
alleged promise of the late F. H. Myers. Maritime cannot ignore the fact that whatever obligation
F. H. Myers/ his estate had assumed was not, and could not have been, an obligation of the
corporation, Myers Bldg Co. Hence, the breach was tainted with dolo or a "conscious and

intentional design to evade the normal fulfillment of existing obligations. Having acted in bad
faith, Maritime is not entitled to ask the court to grant further time to make payment. From
another point of view, it is irrelevant whether Maritime's breach was casual or serious, for as
pointed out in Manuel v. Rodriguez, in contracts to sell, the failure to pay in full is not a breach
but simply an event that prevented the obligation of the vendor to convey title from acquiring
binding force.
2. Yes.
Maritimes contract with Myers is not the ordinary sale contemplated in NCC 1592 (transferring
ownership simultaneously with the delivery of the real property sold, but one in which the vendor
retained ownership of the immovable object of the sale, merely undertaking to convey it
provided the buyer strictly complied with the terms of the contract)
The distinction between contracts of sale and contract to sell with reserved title has been
recognized by this Court in repeated decisions 2 upholding the power of promisors under
contracts to sell in case of failure of the other party to complete payment, to extrajudicially
terminate the operation of the contract, refuse conveyance and retain the sums or installments
already received, where such rights are expressly provided for, as in the case at bar.
Neither can Maritime invoke Civil Code Art. 1592 (where vendee in default can continue to make
payments as long as no judicial/notarial demand for rescission has been made) because the
cross-claim filed by Myers constitutes a judicial demand for rescission that satisfies the said
article. Moreover, this is not an ordinary sale envisaged by Article 1592, transferring ownership
simultaneously with the delivery of the real property sold, but one in which the vendor retained
ownership of the immovable object of the sale, merely undertaking to convey it provided the
buyer strictly complied with the terms of the contract. What Myers seeks is not really rescission
and restoration of the parties to the
status quo ante but enforcement of the provisions.