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BRICKTOWN DEVT CORP v.

AMOR TIERRA DEVT CORP A contract, once perfected, has the force of law between the parties with
which they are bound to comply in good faith and from which neither one may
FACTS: renege without the consent of the other. The autonomy of contracts allows the
parties to establish such stipulations, clauses, terms and conditions as they may
Petitioner Bricktown Development Corporation, represented by its President deem appropriate provided only that they are not contrary to law, morals, good
and co-petitioner Mariano Velarde, executed two Contracts to sell in favor of customs, public order or public policy. The standard norm in the performance of their
respondent Amor Tierra Development Corporation, represented by its vice president respective covenants in the contract, as well as in the exercise of their rights
Moises Petilla, covering a total of 96 residential lots. The total price of thereunder, is expressed in the cardinal principle that the parties in that juridical
relation must act with justice, honesty and good faith
P21,639,875.00 was stipulated to be paid by private respondent in such amounts and
maturity dates, as follows: P2,200,000.00 on 31 March 1981; P3,209,968.75 on 30
June 1981; P4,729,906.25 on 31 December 1981; and the balance of P11,500,000.00 EDCA PUBLISHING and DISTRIBUTING CORP v. SANTOS
to be paid by means of an assumption by private respondent of petitioner
corporation's mortgage liability to the Philippine Savings Bank or, alternatively, to be FACTS:
made payable in cash. Private respondent was only able to pay petitioner corporation A person identifying himself as Professor Jose Cruz placed an order by
telephone with the EDCA for 406 books, payable on delivery. EDCA prepared the
the sum of P1,334,443.21. In the meanwhile, however, the parties continued to
corresponding invoice and delivered the books as ordered, for which Cruz issued a
negotiate for a possible modification of their agreement, although nothing conclusive personal check covering the purchase price. Cruz sold 120 of the books to private
would appear to have ultimately been arrived at. Finally, on 12 October 1981, respondent Leonor Santos who, after verifying the seller's ownership from the
petitioner corporation, through its legal counsel, sent private respondent a "Notice of invoice he showed her, paid him the purchase price. Meanwhile, EDCA having
Cancellation of Contract" on account of the latter's continued failure to pay the become suspicious over a second order placed by Cruz even before clearing of his
installment due. Petitioner corporation advised private respondent, however, that it first check, made inquiries with the De la Salle College where he had claimed to be a
still had the right to pay its arrearages within 30 days from receipt of the notice dean and was informed that there was no such person in its employ. Further
verification revealed that Cruz had no more account or deposit with the Philippine
"otherwise the actual cancellation of the contract (would) take place."
Amanah Bank, against which he had drawn the payment check. EDCA then went to
the police, which set a trap and arrested Cruz. Investigation disclosed his real name
as Tomas de la Pea and his sale of 120 of the books he had ordered from EDCA to
ISSUE:
the private respondents. EDCA sought the assistance of the police, which forced their
Whether a grace period is a right or an obligation.
way into the store of the private respondents and threatened Leonor Santos with
prosecution for buying stolen property. They seized the 120 books without warrant
HELD:
and thereafter turned them over to the petitioner. Private respondents sued for
A grace period is a right, not an obligation, of the debtor. When
recovery of the books after demand for their return was rejected by EDCA.
unconditionally conferred, such as in this case, the grace period is effective without
further need of demand either calling for the payment of the obligation or for
ISSUE:
honoring the right. The grace period must not be likened to an obligation, the non-
Whether the petitioner has been unlawfully deprived of the books because
payment of which, under Article 1169 of the Civil Code, would generally still require
the check issued by the impostor in payment therefor was dishonored.
judicial or extrajudicial demand before "default" can be said to arise.
HELD:
The cancellation of the contracts to sell by petitioner corporation accords
NO. Ownership in the thing sold shall not pass to the buyer until full
with the contractual covenants of the parties, and such cancellation must be
payment of the purchase only if there is a stipulation to that effect. Otherwise, the
respected. It may be noteworthy to add that in a contract to sell, the non-payment of
rule is that such ownership shall pass from the vendor to the vendee upon the actual
the purchase price (which is normally the condition for the final sale) can prevent the
or constructive delivery of the thing sold even if the purchase price has not yet been
obligation to convey title from acquiring any obligatory force.
paid. Actual delivery of the books having been made, Cruz acquired ownership over
the books which he could then validly transfer to the private respondents. The fact
that he had not yet paid for them to EDCA was a matter between him and EDCA and
did not impair the title acquired by the private respondents to the books.
Non-payment only creates a right to demand payment or to rescind the ISSUE:
contract, or to criminal prosecution in the case of bouncing checks. But absent the Whether or not Tolosa has the right to rescind the contract entered
stipulation above noted, delivery of the thing sold will effectively transfer ownership between him and Ocampo.
to the buyer who can in turn transfer it to another.
HELD:
NO. The failure of the buyer to pay the price in full within a fixed period
OCAMPO v. CA does not, by itself, bar the transfer of the ownership or possession, much less
dissolve the contract of sale. The agreement between Tolosa and Ocampo was a
FACTS: perfected contract of absolute sale wherein Tolosa forthwith sold, ceded and
Severino Tolosa and Pilar T. Ocampo entered into an "Agreement to Sell Real transferred the land to Ocampo. Under Art. 1592 of the Civil Code, the failure of
Property" whereby Tolosa sells the parcel of land to Ocampo in consideration of Ocampo to complete her payment of the purchase price within the stipulated period
P25,000.00, where half was paid upon signing of the deed and the balance to be due merely accorded Tolosa the option to rescind the contract of sale upon judicial or
within six months thereafter. Before the six-month period to complete the payment notarial demand. However, the letter claimed to have been sent by Tolosa to
of the purchase price expired, Ocampo failed to complete his payment. Nevertheless Ocampo rescinding the contract of sale was defective because it was not notarized
Tolosa accepted her subsequent late payments. Meanwhile, the subject property was and, more importantly, it was not proven to have been received by Ocampo. Tolosa,
involved in a boundary dispute. Upon learning of the mortgage lien, Ocampo caused on the other hand, is precluded from raising the issue of late payments. His
her adverse claim to be annotated on Tolosas certificate of title. Tolosa sought the unqualified acceptance of payments after the 6-month period expired constitutes
cancellation of Ocampos adverse claim and presented her with two options, namely, waiver of the period, and hence of the ground to rescind under Article 1592 of the
a refund of payments made, or a share from the net proceeds if sold to a third party. Civil Code. The breach on the part of Ocampo was only slight, if not outweighed by
Ocampo expressed to pay the balance of the purchase price, should Tolosa be ready the bad faith of Tolosa in reneging in his own prestations, hence, judicial rescission of
to deliver to her the deed of absolute sale and the owners duplicate for purposes of the contract cannot be justified. While the contract in favor of Villaruz is also a
registration. Subsequently, Tolosa and Magdalena S. Villaruz executed a "Contract to contract of sale, that of Ocampo should prevail pursuant to Article 1544 of the Civil
Sell" whereby Tolosa sold to Villaruz the same land in consideration of P94,300.00. Code on double sales. While Villaruz may have registered his contract or came into
The amount of P15,000.00 was to be paid upon execution and the balance upon possession ahead of Ocampo, Villaruz was not in good faith since Ocampo already
cancellation of all liens and encumbrances from the certificate of title. The contract had her adverse claim annotated on Tolosas title before the sale between Tolosa and
stipulated the immediate conveyance of the physical possession of the land to Villaruz.
Villaruz, although no deed of definite sale would be delivered to her unless the price
was fully paid. The contract noted the supposed judicial termination of the boundary
dispute over the land. Tolosa wrote Ocampo offering to reimburse her what she paid SOUTHERN MOTORS INC. v. MOSCOSO
provided she would sign a document canceling her adverse claim. Failing to convince
Ocampo, Tolosa filed a petition to cancel the adverse claim of Ocampo, which was FACTS:
later denied. Tolosa succeeded in securing from another branch of the court the Plaintiff Southern Motors, Inc. sold to defendant Angel Moscoso one
cancellation of the adverse claims of Ocampo without notice to her. This paved the Chevrolet truck on installment basis, for P6,445.00. Upon making a down payment,
way for the registration of the contract of sale of Villaruz and the subsequent the defendant executed a promissory note for the sum of P4,915.00, representing
issuance of a Transfer Certificate of Title in her name which canceled the Original the unpaid balance of the purchase price to secure the payment of which, a chattel
Certificate of Title of Tolosa. Ocampo filed a third party complaint against Villaruz. mortgage was constituted on the truck in favor of the plaintiff. Of said account, the
defendant had paid a total of P550.00, of which P110.00 was applied to the interest
The trial court ruled in favor of Ocampo, declaring the agreement between and P400.00 to the principal, thus leaving an unpaid balance of P4,475.00. The
Tolosa and Villaruz as null and void and ordered Tolosa to execute the corresponding defendant failed to pay 3 installments on the balance of the purchase price .Plaintiff
Deed of Sale in favor of Ocampo. The Court of Appeals reversed the trial courts filed a complaint against the defendant, to recover the unpaid balance of the
decision, hence, this appeal. promissory note. Upon plaintiff's petition, a writ of attachment was issued by the
lower court on the properties of the defendant. Pursuant thereto, the said Chevrolet
truck, and a house and lot belonging to defendant, were attached by the Sheriff and
said truck was brought to the plaintiff's compound for safe keeping. After attachment
and before the trial of the case on the merits, acting upon the plaintiff's motion for
the immediate sale of the mortgaged truck, the Provincial Sheriff of Iloilo sold the
truck at public auction in which plaintiff itself was the only bidder for P1,OOO.OO. NONATO v. IAC
The trial court condemned the defendant to pay the plaintiff the amount of
P4,475.00 with interest at the rate of 12% per annum from August 16, 1957,until fully FACTS:
paid, plus 10% thereof as attorneys fees and costs. Hence, this appeal by the Nonato spouses purchased from Peoples Car a Volkswagen car. They issued
defendant. a Promissory Note with chattel mortgage. Peoples Car thereafter assigned its rights
to the note to Investors Finance. The Nonatos defaulted, thus Investors Finance
ISSUE: repossessed the car and demanded the payment of the balance of the purchase
Whether or not the attachment caused to be levied on the truck and its price.
immediate sale at public auction, was tantamount to the foreclosure of the chattel
mortgage on said truck. ISSUE:
Whether or not Investors Finance may still demand for the payment of
HELD: the balance when it repossessed the car.
No. Article 1484 of the Civil Code provides that in a contract of sale of
personal property the price of which is payable in installments, the vendor may HELD:
exercise any of the following remedies: (I) Exact fulfilment of the obligation, should NO. The remedies contemplated under Art. 1484 are in the ALTERNATIVE
the vendee fail to pay; (2) Cancel the sale, should the vendee's failure to pay cover not cumulative. Investors Finance in effect cancelled the sale and it cannot now claim
two or more installments; and (3) Foreclose the chattel mortgage on the thing sold, if the balance of the purchase price. When it took possession of the car, it gave the
one has been constituted, should the vendee's failure to pay cover two or more spouses 15 days to redeem the car. This could mean that their failure to do so would
installments. In this case, he shall have no further action against the purchaser to constrain the company to retain the permanent possession of the car. There was no
recover any unpaid balance of the price. Any agreement to the contrary shall be void. attempt at all the return the car thus, it is untrue that the same was retained
The plaintiff had chosen the first remedy. The complaint is an ordinary civil action for merely for appraisal
recovery of the remaining unpaid balance due on the promissory note. The plaintiff
had not adopted the procedure or methods outlined by Sec. 14 of the Chattel
Mortgage Law but those prescribed for ordinary civil actions, under the Rules of RIDAD v. FILIPINAS INVESTMENT and FINANCE CORP.
Court. Had the plaintiff elected the foreclosure, it would not have instituted this case
in court; it would not have caused the chattel to be attached under Rule 59, and had FACTS:
it sold at public auction, in the manner prescribed by Rule 39. That the plaintiff did
not intend to foreclose the mortgage truck, is further evinced by the fact that it had Plaintiffs purchased from the Supreme Sales arid Development Corporation
also attached the house and lot of the appellant at San Jose, Antique. We perceive two (2) brand new Ford Consul Sedans complete with accessories payable in 24
nothing unlawful or irregular in plaintiff's act of attaching the mortgaged truck itself. monthly installments. To secure payment thereof, plaintiffs executed a promissory
Since the plaintiff has chosen to exact the fulfilment of the appellant's obligation, it note covering the purchase price and a deed of chattel mortgage not only on the two
may enforce execution of the judgment that may be favorably rendered hereon, on
vehicles purchased but also on another car (Chevrolet) and plaintiffs' franchise or
all personal and real properties of the latter not exempt from execution sufficient to
satisfy such judgment. It should be noted that a house and lot at San Jose, Antique certificate of public convenience for the operation of a taxi fleet. With the conformity
were also attached. No one can successfully contest that the attachment was merely of the plaintiffs, the vendor assigned its rights, title and interest to the above-
an incident to an ordinary civil action. The mortgage creditor may recover judgment mentioned promissory note and chattel mortgage to defendant Filipinas Investment
on the mortgage debt and cause an execution on the mortgaged property and may and Finance Corporation.
cause an attachment to be issued and levied on such property, upon beginning his
civil action. Plaintiffs failed to pay their monthly installments, hence, 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 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 to the highest bidder, herein defendant corporation, which
subsequently sold and conveyed the same to herein defendant Jose D. Sebastian, Pangasinan Motor, Inc. delivered an Isuzu crew cab, as this is the unit available at
who then filed with the Public Service Commission an application for approval of said their warehouse.
sale in his favor.
In sustaining the decision of the court a quo, the appellate court ruled that
ISSUE: petitioners could not avoid liability under the promissory note and the chattel
Whether Filipinas Investment is precluded from foreclosing the second mortgage that secured it since private respondent took the note for value and in
mortgage to recover the deficiency on the first mortgage good faith.

HELD: Petitioners seek a modification of the decision of the appellate court insofar
No. The vendor of personal property sold on the installment basis is as it has upheld the court a quo in the award of liquidated damages and attorney's
precluded, after foreclosing the chattel mortgage on the thing sold from having a fees in favor of private respondent. Petitioners invoke that under Article 1484 of the
recourse against the additional security put up by a third party to guarantee the Civil Code, the vendor-mortgagee or its assignees loses any right "to recover any
purchasers performance of his obligation on the theory that to sustain the same unpaid balance of the price" and any "agreement to the contrary (would be) void.
would overlook the fact that if the guarantor should be compelled to pay the balance
of the purchase price, said guarantor will in turn be entitled to recover what he has ISSUE:
paid from the debtor-vendee, and ultimately it will be the latter who will be made to Whether the affirmance by the appellate court of the awards made by the
bear the payment of the of the balance of the price, despite the earlier foreclosure of court a quo of liquidated damages and attorney's fees to private respondent is
the chattel mortgage given by him, thereby indirectly subverting the protection given proper.
the latter.
HELD:
If the vendor under such circumstance is prohibited from having a recourse The court strikes down the award for liquidated damages but uphold the
against the additional security for reasons therein stated, there is no ground why grant of attorneys fees. When the assignee forecloses the mortgage, there can be no
such vendor should not likewise be precluded from further extrajudicially foreclosing further recovery of the deficiency and the seller-mortgagee is deemed to have
the additional security put up by the vendees themselves, as in the instant case, it renounced any right thereto. Under Art. 1484 of the Civil Code, the vendor
being tantamount to a further action that would violate Article 1484 of the Civil Code, mortgagee or its assignees losses any right to recover any unpaid balance of the price
for then is actually no between an additional security put up by the vendee himself and any agreement to the contrary is void. Any unpaid balance can only mean the
and such security put up by a third party insofar as how the burden would ultimately deficiency judgment to which mortgagee may be entitled to when the proceeds form
fall on the vendee himself is concerned the auction sale are insufficient to recover the full amount of the secured obligation
which include interest on the principal, attorneys fees, expenses of collection and
costs.
BORBON II v. SERVICEWIDE
Where the mortgagor unjustifiably refused to surrender the chattel subject
FACTS: of the mortgage upon failure of two or more installments, or if he concealed the
Defendants Daniel Borbon and Francisco Borbon signed a promissory note in chattel to place it beyond the reach of the mortgagee, that thereby constrained the
favor of Pangasinan Auto Mart, Inc. amounting to P122,856.00 payable in equal latter to seek court relief, the expenses incurred for the prosecution of the case, such
monthly installments for 12 months. To secure the Promissory Note, the defendants as attorney's fees, could rightly be awarded
executed a Chattel Mortgage of his brand new car. The rights of Pangasinan Auto
Mart was assigned to Filinvest Credit Corporation (Filinvest). Filinvest later on
assigned all its rights, interest and title over the Promissory Note and the chattel
mortgage to the plaintiff Servicewide Specialists, Inc. Defendants did not pay their
monthly installments, thus, Filinvest attempted to collect by sending a demand letter
to the defendants for them to pay their entire obligation.

For their defense, the defendants claim that what they intended to buy from
Pangasinan Auto Mart was a jeepney type Isuzu K. C. Cab. The vehicle that they
bought was not delivered. Instead, through misrepresentation and machination, the
LORENZO PASCUAL and LEONILA TORRES v. UNIVERSAL MOTORS CORPORATION MAGNA FINANCIAL SERVICES GROUP v. COLARINA

FACTS: FACTS:
Plaintiff-appellee spouses Lorenzo Pascual and Leonila Torres (spouses Elias Colarina bought from petitioner a Suzuki Multicab payable on
Pasqual) executed a real estate mortgage on December 14, 1960 to secure the installments and secured by an integrated promissory note and a deed of chattel
payment of the indebtedness of PDP Transit, Inc. (PDP Trans.) for the purchase of 5 mortgage. Upon respondents default in payment, petitioner filed a complaint for
units of Mercedes Benz trucks, with a total purchase price or principal obligation of Foreclosure of the Chattel Mortgage with Replevin. Colarina then voluntarily
P152,506.50 which was to bear interest at 1% per month starting that day, but the surrendered the physical possession of the vehicle. Failing to answer within the
plaintiffs' guarantee is not to exceed P50,000.00 which is the value of the mortgage. reglementary period, the MTC ordered respondent to pay petitioner the unpaid
PDP Trans., as the spouses Pasqual's principal, paid to defendant-appellant Universal balance of the vehicles purchase price. This was affirmed by the RTC. The CA, on the
Motors Corporation (Universal Motors) the sum of P92,964.91 on April 5, 1961 for other hand, reversed and set aside the decisions of the lower courts granting the
two of the five Mercedes Benz trucks and on May 22, 1961 for the remaining three, payment of the unpaid balance for being inconsistent with petitioners complaint for
thus leaving a balance of P68,641.69 including interest due on February 8, 1965. foreclosure.

On March 19, 1965, Universal Motors filed a complaint with the CFI of ISSUE:
Manila against the PDP Trans. to collect the balance due under the Chattel Mortgages Whether or not the foreclosure of mortgage, as an exercise of the 3rd
and to repossess all the units sold to PDP Trans. as the spouse Pascuals principal, remedy in Article 1484, is in nature an action for sum of money with execution of the
including the 5 units guaranteed under the subject Real (Estate) Mortgage. During the security.
hearing, Universal Motors admitted that it was able to repossess all the units sold to
the latter, including the 5 units guaranteed by the subject real estate mortgage, and HELD:
to foreclose all the chattel mortgages constituted thereon, resulting in the sale of the No. A Contract of chattel mortgage is in the nature of a conditional sale of
trucks at public auction. As the real estate mortgagors, the spouses Pascual filed an personal property given as a security for the payment of a debt, or the
action with the CFI of Quezon City for the cancellation of the mortgage they performance of some other obligation specified therein, the condition being that the
constituted on 2 parcels of land in favor of the Universal Motors to guarantee the sale shall be void upon the seller paying to the purchaser a sum of money or doing
obligation of PDP Trans. to the amount of P50,000. The said CFI rendered judgment in some other act named. If the condition is performed according to its terms, the
favor of the spouses Pascual and ordered the cancellation of the mortgage. mortgage and sale immediately become void, and the mortgage is thereby divested
of his title. But in case of nonpayment, foreclosure is one of the alternative remedies
ISSUE: available to a mortgagee. Since the petitioner has undeniably elected a remedy of
Whether or not, as contended by the Universal Motors, Article 1484 foreclosure under Article 1484(3) of the Civil Code, it is bound by its election and thus
prohibits the vendor from recovering from the purchaser the unpaid balance of the may not be allowed to change what it has opted for nor to ask for more.
price after he has foreclosed the chattel mortgage on the thing sold, but not a
recourse against the security put up by a third party Petitioner, having elected the foreclosure of chattel mortgage, is not entitled
to be paid the balance even though it did not actually foreclose the chattel mortgage.
Article 1484, paragraph 3, provides that if the vendor has availed himself of the right
HELD: to foreclose the chattel mortgage, he shall have no further action against the
No. To sustain Universal Motors argument would be to overlook the fact purchaser to recover any unpaid balance of the purchase price. Any agreement to the
that if the guarantor should be compelled to pay the balance of the purchase price, contrary shall be void. In other words, in all proceedings for the foreclosure of chattel
the guarantor will in turn be entitled to recover what she has paid from the debtor mortgages executed on chattels which have been sold on the installment plan, the
vendee (Art. 2066, Civil Code); so that ultimately, it will be the vendee who will be mortgagee is limited to the property included in the mortgage. The petitioners
made to bear the payment of the balance of the price, despite the earlier foreclosure prayer contains two remedies, payment of unpaid balance and foreclosure of chattel
of the chattel mortgage given by him. Thus, the protection given by Article 1484 mortgage. Such a scheme is not only irregular but is a flagrant circumvention of the
would be indirectly subverted, and public policy overturned. prohibition of the law. By praying for the foreclosure of the chattel, petitioner
renounced whatever claim it may have under the promissory note.
FILIPINAS INVESTMENT v. VITUG, JR. HELD:
No. As pointed out in appellant's brief, the transaction between appellant
FACTS: and appellee was purely an ordinary discounting transaction whereby the promissory
The defendant, Julian R. Vitug, executed and delivered to appellee a note executed by defendant Vitug was negotiated by appellee in favor of appellant
promissory note in the amount of P14,605.00 payable in monthly installments for a valuable consideration at a certain discount, accompanied by an assignment
according to a schedule of payments; the payment of the aforesaid amount which also of the chattel mortgage executed by said defendant to secure the payment of his
was the purchase price of a motor vehicle, a 4-door Consul sedan, bought by said promissory note and with the express stipulation that should there be any deficiency,
defendant from appellee, was secured by a chattel mortgage over such automobile; recourse could be had against appellee. Stated otherwise, the remedy presently
being sought is not against the buyer of the car or the defendant Vitug but against
on the same day, appellee negotiated the above-mentioned promissory note in favor
the seller, independent of whether or not such seller may have a right of recovery
of appellant Filipinas Investment & Finance Corporation, assigning thereto all its
against the buyer, which, in this case, he does not have under the Recto Law. It is
rights, title and interests to the same, the assignment including the right of recourse clear to Us, on the other hand, that under said law, what Congress seeks to protect
against appellee; defendant Vitug defaulted in the payment of part of the installment are only the buyers on installment who more often than not have been victimized by
which fell due on January 6, 1965, as well as the subsequent three consecutive sellers who, before the enactment of this law, succeeded in unjustly enriching
monthly installments which he was supposed to have paid on February 6, March 6 themselves at the expense of the buyers because aside from recovering the goods
and April 6, 1965; there being a provision in the aforesaid promissory note and sold, upon default of the buyer in the payment of two installments, still retained for
themselves all amounts already paid, in addition, furthermore, to other damages,
chattel mortgage that failure to pay the installments due would result in the entire
such as attorney's fees, and costs. Surely, Congress could not have intended to impair
obligation becoming due and demandable, appellant demanded from appellee the and much less do away with the right of the seller to make commercial use of his
payment of such outstanding balance; in turn, appellee "authorized (appellant) to credit against the buyer, provided said buyer is not burdened beyond what this law
take such action as may be necessary to enable (it) to take possession of the ... motor allows.
vehicle." Pursuant to such authority, appellant secured possession of the mortgaged
vehicle by means of a writ of replevin duly obtained from the court, preparatory to The very fact that the assignee was given the stipulated right of recourse
the foreclosure of the mortgage, but said writ became unnecessary because upon against the assignor negates the idea that the parties contemplated to limit the
recovery of the assignee to only the proceeds of the mortgage sale. Accordingly, the
learning of the same, defendant Vitug voluntarily surrendered the car to appellant;
order of dismissal of the lower court is reversed and this case is ordered remanded to
thereafter, the said car was sold at public auction, but the proceeds still left a the lower court for further proceedings, with costs against appellee Supreme Sales &
deficiency of P8,349.35, plus interest of 12% per annum from April 21, 1965; and Development Corporation
appellant, the above foreclosure and sale notwithstanding, would hold appellee liable
for the payment of such outstanding balance, plus attorney's fees and costs
OLYMPIA HOUSING, INC. v. PANASIATIC TRAVEL CORPORATION
On August 4, 1965, appellee filed an urgent motion to dismiss on the
ground, inter alia, that under Article 1484 of the Civil Code of the Philippines, which FACTS:
particular provision is otherwise known as the Recto Law, appellant has no cause of The case originated from a complaint for Recovery of Possession (Accion
action against appellee. In its order of August 30, 1965, subject of this appeal, the Publiciana) filed by Olympia Housing, Inc., against Panasiatic Travel Corporation,
lower court found the aforesaid ground to be meritorious and, as already stated, the Maria Nelida Ycasiano and the latter's husband. The object in litigation is a
amended complaint was dismissed as to appellee Supreme Sales & Development condominium unit sold at the price of P2,340,000.00 payable on installments at the
Corporation. On September 23, 1965, appellant filed a motion for reconsideration but rate of P33,657.40 per month.
this was denied on October 26, 1965, hence, this appeal.
On August 8, 1984, plaintiff and defendant Ma. Nelida Galvez-Ycasiano
ISSUE: entered into a Contract to Sell, whereby the former agreed to sell to the latter
Whether or not the provision regarding recourse contained in the condominium unit no. D-12, comprising an area of 160.50 square meters, more or
agreement between appellant and appellee violates the Recto Law (Art. 1484 of the less, situated on the ground floor of Olympia Condominium located at Makati, Metro
Civil Code) which declares null and void any agreement in contravention thereof. Manila. Pursuant to the Contract to Sell, defendant Ma. Nelida GalvezYcasiano made
a reservation/deposit in the amount of P100,000.00 on July 17, 1984 and 50% down
payment in the amount of P1,070,000.00 on July 19, 1984. Defendants made several
payments in cash and thru credit memos issued by plaintiff representing plane tickets served on respondents by way of an attachment to the complaint. In any case, a
bought by plaintiff from defendant Panasiatic Travel Corp., which is owned by notarial rescission, standing alone, could not have invalidly effected, in this case,
defendant Ma. Nelida Galvez-Ycasiano, who credited/offset the amount of the said the cancellation of the contract.
plane tickets to defendant's account due to plaintiff. Plaintiff alleged that far from
complying with the terms and conditions of said Contract to Sell, defendants failed to The governing law is Republic Act No. 6552, otherwise known as the "Realty
pay the corresponding monthly installments which as of June 2, 1988 amounted to Installment Buyer Protection Act," which has become effective since 16 September
P1,924,345.52. Demand to pay 1972. Republic Act No. 6552 is a special law governing transactions that involve,
the same was sent to defendant Ma. Nelida Galvez-Ycasiano, but the latter failed to subject to certain exceptions, the sale on installment basis of real property. The law
settle her obligation. For failure of defendant to pay her obligation plaintiff allegedly has been enacted mainly "to protect buyers of real estate on installment payments
rescinded the contract by a Notarial Act of Rescission. against onerous and oppressive conditions."

On 31 January 1995, the Regional Trial Court, Branch V, of Makati City ruled The enactment recognizes the right of the seller to cancel the contract but
that the obligation of defendant Maria Nelida Galvez Ycasiano has now become due any such cancellation must be done in conformity with the requirements therein
and demandable, said defendant is hereby ordered to pay the sum of P4,007,473.49 prescribed. In addition to the notarial act of rescission, the seller is required to refund
as of November 30, 1994 plus 18% interest per annum, computed from 1 December to the buyer the cash surrender value of the payments on the property. The actual
1994, but within sixty days from receipt of a copy of this decision. Thereupon, cancellation of the contract can only be deemed to take place upon the expiry of a
respondents tendered the amount of P4,304,026.53 to petitioner via Metrobank 30-day period following the receipt by the buyer of the notice of cancellation or
Cashier's Check No. CC008857. Petitioner refused to accept the payment, demand for rescission by a notarial act and the full payment of the cash surrender
constraining respondents to consign at the disposal of the court a quo the check on value.
26 April 1995. In an order, dated 05 June 1996, the check was allowed to be
substituted by another cashier's check payable to the Clerk of Court of the Makati
Regional Trial Court. Complying with yet another court order of 04 January 1996,
respondents deposited the amount of P4,304,026.53 with the Land Bank of the
Philippines and subsequently submitted to the court the corresponding bank book as
well as the bank's verification. Meanwhile, both parties appealed the judgment of the
trial court. In its now questioned decision of 11 June 1999, the appellate court
sustained the trial court. Hence, this appeal

ISSUE:
Whether or not there was valid rescission of the contract to sell on account
of the failure of petitioner to give notice of rescission by notarial act, a requisite laid
down in Republic Act No. 6552 and failure of petitioner to pay the cash surrender
value.

HELD:
No. The action for reconveyance filed by petitioner was predicated on an
assumption that its contract to sell executed in favor of respondent buyer had been
validly cancelled or rescinded. The records would show that, indeed, no such
cancellation took place at any time prior to the institution of the action for
reconveyance. As so aptly observed by the courts below, the foregoing
communication to the buyer merely demanded payment within thirty (30) days from
receipt thereof with the threat that if the demand were not heeded, the contract
would forthwith be cancelled or rescinded. Nor did the appellate court erroneously
ignore the "notarial rescission" attached to the complaint for reconveyance.
Apparently, the so-called "notarial rescission" was not sent to respondents prior to
the institution of the case for reconveyance but merely

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