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10/1/2016

10/1/2016 G.R.No.112182 TodayisSaturday,October01,2016

G.R.No.112182

TodayisSaturday,October01,2016

10/1/2016 G.R.No.112182 TodayisSaturday,October01,2016
10/1/2016 G.R.No.112182 TodayisSaturday,October01,2016

G.R.No.112182December12,1994

RepublicofthePhilippines

SUPREMECOURT

Manila

THIRDDIVISION

BRICKTOWNDEVELOPMENTCORP.(itsnewcorporatenameMULTINATIONALREALTYDEVELOPMENT

CORPORATION)andMARIANOZ.VERALDE,petitioners,

vs.

AMORTIERRADEVELOPMENTCORPORATIONandtheHON.COURTOFAPPEALS,respondents.

Tabaquero,DelaTorre,Simando&Associatesforpetitioners.

Robles,Ricafrente&AguirreLawFirmforprivaterespondent.

VITUG,J.:

Acontract,onceperfected,hastheforceoflawbetweenthepartieswithwhichtheyareboundtocomplyingood

faithandfromwhichneitheronemayrenegewithouttheconsentoftheother.Theautonomyofcontractsallows

thepartiestoestablishsuchstipulations,clauses,termsandconditionsastheymaydeemappropriateprovided

onlythattheyarenotcontrarytolaw,morals,goodcustoms,publicorderorpublicpolicy.Thestandardnormin

theperformanceoftheirrespectivecovenantsinthecontract,aswellasintheexerciseoftheirrightsthereunder,

isexpressedinthecardinalprinciplethatthepartiesinthatjuridicalrelationmustactwithjustice,honestyand

goodfaith.

Thesebasictenets,onceagain,taketheleadintheinstantcontroversy.

Privaterespondentremindsusthatthefactualfindingsofthetrialcourt,sustainedbytheCourtofAppeals,should beconsideredbindingonthisCourtinthispetition.Weconcedetothisremindersince,indeed,thereappearsto be no valid justification in the case at bench for us to take an exception from the rule. We shall, therefore, momentarilyparaphrasethesefindings.

On 31 March 1981, Bricktown Development Corporation (herein petitioner corporation), represented by its Presidentandco­petitionerMarianoZ.Velarde,executedtwoContractstoSell(Exhs."A"and"B")infavorof Amor Tierra Development Corporation (herein private respondent), represented in these acts by its Vice­

President,MoisesG.Petilla,coveringatotalof96residentiallots,situatedattheMultinationalVillageSubdivision,

La Huerta, Parañaque, Metro Manila, with an aggregate area of 82,888 square meters. The total price of

P21,639,875.00wasstipulatedtobepaidbyprivaterespondentinsuchamountsandmaturitydates,asfollows:

P2,200,000.00on31March1981;P3,209,968.75on30June1981;P4,729,906.25on31December1981;and

the balance of P11,500,000.00 to be paid by means of an assumption by private respondent of petitioner corporation'smortgageliabilitytothePhilippineSavingsBankor,alternatively,tobemadepayableincash.On even date,31 March 1981,the partiesexecuted a SupplementalAgreement(Exh."C"),providing thatprivate

respondentwouldadditionallypaytopetitionercorporationtheamountsofP55,364.68,or21%interestonthe

balanceofdownpaymentfortheperiodfrom31Marchto30June1981,andofP390,369.37representinginterest

paidbypetitionercorporationtothePhilippineSavingsBankinupdatingthebankloanfortheperiodfrom01

Februaryto31March1981.

PrivaterespondentwasonlyabletopaypetitionercorporationthesumofP1,334,443.21(Exhs."A"to"K").Inthe

meanwhile,however,thepartiescontinuedtonegotiateforapossiblemodificationoftheiragreement,although

nothingconclusivewouldappeartohaveultimatelybeenarrivedat.

Finally,on12October1981,petitionercorporation,throughitslegalcounsel,sentprivaterespondenta"Noticeof

CancellationofContract"(Exh."D")onaccountofthelatter'scontinuedfailuretopaytheinstallmentdue30June

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1981 and the interest on the unpaid balance of the stipulated initial payment. Petitioner corporation advised

privaterespondent,however,thatit(privaterespondent)stillhadtherighttopayitsarrearageswithin30days

fromreceiptofthenotice"otherwisetheactualcancellationofthecontract(would)takeplace."

Severalmonthslater,oron26September1983,privaterespondent,throughcounsel,demanded(Exh."E")the

refund of private respondent's various payments to petitioner corporation, allegedly "amounting to

P2,455,497.71,"withinterestwithinfifteendaysfromreceiptofsaidletter,or,inlieuofacashpayment,toassign

toprivaterespondentanequivalentnumberofunencumberedlotsatthesamepricefixedinthecontracts.The demand,nothavingbeenheeded,privaterespondentcommenced,on18November 1983,itsactionwiththe courtaquo. 1

Followingthereceptionofevidence,thetrialcourtrendereditsdecision,thedispositiveportionofwhichread:

Inviewofalltheforegoing,judgmentisherebyrenderedasfollows:

1. Declaring the Contracts to Sell and the Supplemental Agreement (Exhibits "A", "B" and "C")

rescinded;

2. Ordering the [petitioner] corporation, Bricktown Development Corporation, also known as

MultinationalRealtyDevelopmentCorporation,toreturntothe[privaterespondent]theamountof OneMillionThreeHundredThirtyFourThousandFourHundredForty­ThreePesosandTwenty­One Centavos (P1,334,443.21) with interest at the rate of Twelve (12%) percent per annum, starting

November18,1983,thedatewhenthecomplaintwasfiled,untiltheamountisfullypaid;

3. Ordering the [petitioner] corporation to pay the [private respondent] the amount ofTwenty­five

Thousand(P25,000.00)Pesos,representingattorney'sfees;

4.Dismissing[petitioner's]counterclaimforlackofmerit;and

5.Withcostsagainstthe[petitioner]corporation.

SOORDERED. 2

Onappeal,theappellatecourtaffirmedintotothetrialcourt'sfindingsandjudgment.

Intheirinstantpetition,petitionerscontendthattheCourtofAppealshaserredinrulingthat—

(1) By petitioners' acts, conduct and representation, they themselves delayed or prevented the performanceofthecontractstosellandthesupplementalagreementandwerethusestoppedfrom cancellingthesame.

(2)Petitionerswerenojustifiedinresolvingthecontractstosellandthesupplementalagreement.

(3)Thecancellationofthecontractrequiredapositiveactonthepartofpetitionersgivingprivate

respondentthesixty(60)daygraceperiodprovidedinthecontractstosell;and

(4) In not holding that the forfeiture of the P1,378,197.48 was warranted under the liquidated damagesprovisionsofthecontractstosellandthesupplementalagreementandwasnotiniquitous norunconscionable.

The core issueswould reallycome down to (a) whether or notthe contractsto sellwere validlyrescinded or cancelledbypetitionercorporationand,intheaffirmative,(b)whetherornottheamountsalreadyremittedby privaterespondentundersaidcontractswererightlyforfeitedbypetitionercorporation.

Admittedly, the terms of payment agreed upon by the parties were not met by private respondent. Of a total

sellingpriceofP21,639,875.00,privaterespondentwasonlyabletoremitthesumofP1,334,443.21whichwas

evenshortofthestipulatedinitialpaymentofP2,200,000.00.Noadditionalpayments,itwouldseem,weremade.

Anoticeofcancellationwasultimatelymademonthsafterthelapseofthecontractedgraceperiod.Paragraph15

oftheContractstoSellprovidedthusly:

15.ShouldthePURCHASERfailtopaywhendueanyoftheinstallmentsmentionedinstipulationNo.

1above,theOWNERshallgrantthepurchaserasixty(60)­daygraceperiodwithinwhichtopaythe

amount/sdue,andshouldthePURCHASERstillfailtopaythedueamount/swithinthe60­daygrace

period,thePURCHASERshallhavetherighttoex­partecancelorrescindthiscontract,provided,

however,thattheactualcancellationorrescissionshalltakeeffectonlyafterthelapseofthirty(30)

daysfromthedateofreceiptbythePURCHASERofthenoticeofcancellationofthiscontractorthe demandforitsrescissionbyanotarialact,andthereafter,theOWNERshallhavetherighttoresell the lot/s subject hereof to another buyer and allpayments made, together with allimprovements

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introduced on the aforementioned lot/s shall be forfeited in favor of the OWNER as liquidated damages,andinthisconnection,thePURCHASERobligatesitselftopeacefullyvacatetheaforesaid lot/swithoutnecessityofnoticeordemandbytheOWNER. 3

Agraceperiodisaright,notanobligation,ofthedebtor.Whenunconditionallyconferred,suchasinthiscase, thegraceperiodiseffectivewithoutfurtherneedofdemandeithercallingforthepaymentoftheobligationorfor honoringtheright.Thegraceperiodmustnotbelikenedtoanobligation,thenon­paymentofwhich,underArticle

1169oftheCivilCode,wouldgenerallystillrequirejudicialorextrajudicialdemandbefore"default"canbesaidto

arise. 4

Verily,inthecaseatbench,thesixty­daygraceperiodunderthetermsofthecontractstosellbecameipsofacto operative from the moment the due payments were not met at their stated maturities. On this score, the

provisionsofArticle1169oftheCivilCodewouldfindnorelevancewhatsoever.

Thecancellationofthecontractstosellbypetitionercorporationaccordswiththecontractualcovenantsofthe parties,andsuchcancellationmustberespected.Itmaybenoteworthytoaddthatinacontracttosell,the non­paymentofthepurchaseprice(whichisnormallytheconditionforthefinalsale)canpreventtheobligationto

conveytitlefromacquiringanyobligatoryforce(Roquevs.Lapuz,96SCRA741;Agustinvs.CourtofAppeals,

186SCRA375).

The forfeiture of the payments thus far remitted under the cancelled contracts in question, given the factual findingsof both the trialcourt and the appellate court, must be viewed differently. While clearlyinsufficient to justifyaforeclosureoftherightofpetitionercorporationtorescindorcancelitscontractswithprivaterespondent, theseriesofeventsandcircumstancesdescribedbysaidcourtstohaveprevailedintheinterim betweenthe parties,however,warrantsomefavorableconsiderationbythisCourt.

Petitionersdonotdenythefactthattherehasindeedbeenaconstantdialoguebetweenthepartiesduringthe

periodoftheirjuridicalrelation.Concededly,thenegotiationsthattheyhavepursuedstrictlydidnotresultinthe

novation,eitherextinctiveormodificatory,ofthecontractstosell;nevertheless,thisCourtisunabletocompletely

disregardthefollowingfindingsofboththetrialcourtandtheappellatecourt.Saidthetrialcourt:

It has been duly established through the testimony of plaintiff's witnesses Marcosa Sanchez and Vicente Casasthat there were negotiationsto enter into another agreement between the parties,

afterMarch31,1981.ThefirstnegotiationtookplacebeforeJune30,1981,whenMoisesPetillaand

RenatoDragon,Vice­Presidentandpresident,respectively,oftheplaintiffcorporation,togetherwith MarcosaSanchez,wenttotheofficeofthedefendantcorporationandmadesomeproposalstothe latter, thru its president, the defendant Mariano Velarde. They told the defendant Velarde of the plaintiff'srequestforthedivisionofthelotstobepurchasedintosmallerlotsandthebuildingoftown housesorsmallerhousesthereinasthesekindsofhousescanbesoldeasilythanbigones.Velarde replied that subdivision owners would not consent to the building of small houses. He, however, made two counter­proposals, to wit: that the defendant corporation would assign to the plaintiff a number of lots corresponding to the amounts the latter had already paid, or that the defendant corporationmaysellthecorporationitself,togetherwiththeMultinationalVillageSubdivision,andits otherproperties,totheplaintiffandthelatter'ssistercompaniesengagedintherealestatebusiness. Thenegotiationsbetweenthepartieswentonforsometimebutnothingdefinitewasaccomplished. 5

Foritspart,theCourtofAppealsobserved:

Weagreewiththecourtaquothatthereis,therefore,reasonablegroundtobelievethatbecauseof the negotiations between the parties, coupled with the fact that the plaintiff never took actual possession of the properties and the defendants did not also dispose of the same during the pendencyofsaidnegotiations,theplaintiffwasledtobelievethatthepartiesmayultimatelyenter intoanotheragreementinplaceofthe"contractstosell."Therewas,evidently,nomaliceorbadfaith on the part of the plaintiff in suspending payments. On the contrary, the defendants not only contributed,buthadconsentedtothedelayorsuspensionofpayments.Theydidnotgivetheplaintiff acategoricalanswerthattheircounter­proposalswillnotmaterialize. 6

Infine,whilewemustconcludethatpetitionercorporationstillactedwithinitslegalrighttodeclarethecontractsto sellrescindedorcancelled,considering,nevertheless,thepeculiarcircumstancesfoundtobeextantbythetrial court, confirmed by the Court of Appeals, it would be unconscionable, in our view, to likewise sanction the forfeiture by petitioner corporation of payments made to it by private respondent. Indeed, in the opening statementofthisponencia,wehaveintimatedthattherelationshipbetweenpartiesinanycontractmustalways becharacterizedandpunctuatedbygoodfaithandfairdealing.Judgingfromwhatthecourtsbelowhavesaid, petitionersdidfallwellbehindthatstandard.Wedonotfinditequitable,however,toadjudgeanyinterestpayment bypetitionersontheamounttobethusrefunded,computedfromjudicialdemand,for,indeed,privaterespondent shouldnotbeallowedtototallyfreeitselffromitsownbreach.

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WHEREFORE,theappealeddecisionisAFFIRMEDinsofarasitdeclaresvalidthecancellationofthecontractsin

questionbutMODIFIEDbyorderingtherefundbypetitionercorporationofP1,334,443.21with12%interestper

annumtocommenceonly,however,fromthedateoffinalityofthisdecisionuntilsuchrefundiseffected.Nocosts.

SOORDERED.

Bidin,RomeroandMelo,JJ.,concur.

Feliciano,J.,isonleave.

#Footnotes

1Rollo,pp.39­41.

2Rollo,p.41.

3Rollo,p.82.

4Art.1169.Thoseobligedtodeliverortodosomethingincurindelayfromthetimetheobligee

judiciallyorextrajudiciallydemandsfromthemthefulfillmentoftheirobligation.

However,thedemandbythecreditorshallnotbenecessaryinorderthatdelaymayexist:

(1)Whentheobligationorthelawexpresslysodeclares;or

(2)Whenfromthenatureandthecircumstancesoftheobligationitappearsthatthedesignationof

thetimewhenthethingistobedeliveredortheserviceistoberenderedwasacontrollingmotivefor

theestablishmentofthecontract;or

(3)Whendemandwouldbeuseless,aswhentheobligorhasrendereditbeyondhispowerto

perform.

Inreciprocalobligations,neitherpartyincursindelayiftheotherdoesnotcomplyorisnotreadyto

complyinapropermannerwithwhatisincumbentuponhim.Fromthemomentoneoftheparties

fulfillshisobligation,delaybytheotherbegins.

5Rollo,pp.43­44.

6Rollo,p.44.

TheLawphilProject­ArellanoLawFoundation

6 Rollo ,p.44. TheLawphilProject­ArellanoLawFoundation