Vasquez v Ayala Corporation

GR No. 149734
Tinga, J.:
FACTS:
On April 23, 1981, spouses Vasquez entered into a MOA with Ayala Corp. with Ayala buying from
the Vazquez spouses all of the latter's shares of stock in Conduit Development, Inc. The main asset was
a property in Ayala Alabang which was then being developed by Conduit under a development plan
where the land was divided into Villages 1, 2 and 3. The development was then being undertaken by G.P.
Construction and Development Corp. Under the MOA, Ayala was to develop the entire property, less
what was defined as the "Retained Area". This "Retained Area" was to be retained by the Vazquez
spouses. The area to be developed by Ayala was called the "Remaining Area". In this "Remaining Area"
were 4 lots adjacent to the "Retained Area" and Ayala agreed to offer these lots for sale to the spouses at
the prevailing price at the time of purchase. After the execution of the MOA, Ayala caused the suspension
of work on Village 1 of the project. Ayala then received a letter from Lancer General Builder Corp. in
which the latter was claiming a certain amount as subcontractor. G.P. Construction not being able to
reach an amicable settlement with Lancer, Lancer sued G.P. Construction, Conduit and Ayala in the
court. G.P. Construction and Lancer both tried to enjoin Ayala from undertaking the development of the
property. The suit was terminated only on 1987. Taking the position that Ayala was obligated to sell the 4
lots adjacent to the "Retained Area" within 3 years from the date of the MOA, the Vasquez spouses sent
several "reminder" letters of the approaching so-called deadline. However, no demand after 1984, was
ever made by the Vasquez spouses for Ayala to sell the 4 lots. On the contrary, one of the letters signed
by their authorized agent categorically stated that they expected development of Phase 1 to be completed
3 years from the settlement of the legal problems with the previous contractor. By early 1990, Ayala
finished the development of the vicinity. The 4 lots were then offered to be sold to the Vasquez spouses
at the prevailing price in 1990. This was rejected by the Vasquez spouses who wanted to pay at 1984
prices, thereby leading to the suit below.

ISSUE:
Whether or not respondent incurred default or delay in the fulfillment of its obligation.

HELD:
No. In order that the debtor may be in default it is necessary that the following requisites be
present: (1) that the obligation be demandable and already liquidated; (2) that the debtor delays
performance; and (3) that the creditor requires the performance judicially or extrajudicially. Under Article
1193 of the Civil Code, obligations for whose fulfillment a day certain has been fixed shall be demandable
only when that day comes. However, no such day certain was fixed in the MOA. Petitioners, therefore,
cannot demand performance after the 3 year period fixed by the MOA for the development of the first
phase of the property since this is not the same period contemplated for the development of the subject
lots. Since the MOA does not specify a period for the development of the subject lots, petitioners should
have petitioned the court to fix the period in accordance with Article 1197 of the Civil Code. As no such
action was filed by petitioners, their complaint for specific performance was premature, the obligation not
being demandable at that point. Accordingly, Ayala Corp. cannot likewise be said to have delayed
performance of the obligation. Even assuming that the MOA imposes an obligation on Ayala Corp. to
develop the subject lots, within 3 years from date thereof, Ayala Corp. could still not be held to have been
in delay since no demand was made by petitioners for the performance of its obligation. Moreover, the
letters were mere reminders and not categorical demands to perform. These letters were sent before the
obligation could become legally demandable. More importantly, petitioners waived the 3 year period as
evidenced by their agent's letter to the effect that petitioners agreed that the 3 year period should be
counted from the termination of the case filed by Lancer.
EQUATORIAL V. MAYFAIR- Sale of Land
While execution of a public instrument of sale is recognized by law as equivalent to the delivery of the
thing sold, such constructive or symbolic delivery is merely presumptive. It is nullified by the failure of the
vendee to take actual possession of the land sold.

FACTS:
Carmelo & Bauermann, Inc. owned a land, together with two 2-storey buildings at Claro M. Recto
Avenue, Manila, and covered by TCT No. 18529.

On June 1, 1967, Carmelo entered into a Contract of Lease with Mayfair Theater Inc. fpr 20 years. The
lease covered a portion of the second floor and mezzanine of a two-storey building with about 1,610
square meters of floor area, which respondent used as Maxim Theater.

Two years later, on March 31, 1969, Mayfair entered into a second Lease with Carmelo for another
portion of the latter’s property this time, a part of the second floor of the two-storey building, and two store
spaces on the ground floor. In that space, Mayfair put up another movie house known as Miramar
Theater. The Contract of Lease was likewise for a period of 20 years.

Both leases contained a clause giving Mayfair a right of first refusal to purchase the subject properties.
Sadly, on July 30, 1978 - within the 20-year-lease term -- the subject properties were sold by Carmelo to
Equatorial Realty Development, Inc. for eleven million smackers, without their first being offered to
Mayfair.

As a result of the sale of the subject properties to Equatorial, Mayfair filed a Complaint before the
Regional Trial Court of Manila for the recission of the Deed of Absolute Sale between Carmelo and
Equatorial, specific performance, and damages. RTC decided for Carmelo and Equatorial. Tsk tsk.
CA reversed and ruled for Mayfair. The SC denied a petition questioning the CA decision. What
happened is that the contract did get rescinded, Equatorial got its money back and asserted that Mayfair
have the right to purchase the lots for 11 million bucks.

Decision became final and executory, so Mayfair deposited with the clerk the 11M (less 847grand
withholding) payment for the properties (Carmelo somehow disappeared).
Meanwhile, on Sept 18, 1997, barely five months after Mayfair submitted its Motion for Execution,
Equatorial demanded from Mayfair backrentals and reasonable compensation for the Mayfair’s continued
use of the subject premises after its lease contracts expired. Remember that Mayfair was still occupying
the premises during all this hullabaloo.
ISSUE:
Whether or not Equatorial was the owner of the subject property and could thus enjoy the fruits and
rentals.

HELD:NO.
Nor right of ownership was transferred from Carmelo to Equatorial since there was failure to deliver the
property to the buyer. Compound this with the fact that the sale was even rescinded.

The court went on to assert that rent is a civil fruit that belonged to the owner of the property producing it
by right of accession. Hence, the rentals that fell due from the time of the perfection of the sale to
petitioner until its rescission by final judgment should belong to the owner of the property during that
period.

We remember from SALES that in a contract of sale, “one of the contracting parties obligates himself to
transfer ownership of and to deliver a determinate thing and the other to pay therefor a price certain in
money or its equivalent.”

Ownership of the thing sold is a real right, which the buyer acquires only upon delivery of the thing to him
“in any of the ways specified in articles 1497 to 1501, or in any other manner signifying an agreement that
the possession is transferred from the vendor to the vendee.” This right is transferred, not by contract
alone, but by tradition or delivery. There is delivery if and when the thing sold “is placed in the control and
possession of the vendee.”

While execution of a public instrument of sale is recognized by law as equivalent to the delivery of the
thing sold, such constructive or symbolic delivery is merely presumptive. It is nullified by the failure of the
vendee to take actual possession of the land sold.

For property to be delivered, we need two things. Delivery of property or title, and transfer of control or
custody to the buyer.

Possession was never acquired by the petitioner. It therefore had no rights to rent.
Mendoza vs. David [SALES] case digest

G.R. No. 147575. October 22, 2004

FACTS:
Petitioner ordered 3 sets of furniture and issued specifications to respondent for P185,650.00. A down
payment of85,650 pesos has been paid. Upon delivery, petitioner rejected it because of inferior material
and quality and thereby asked for a refund. Respondent ignored it and demanded for the balance of
P100,000.00. He reclaimed the said furniture. Respondent David retrieved the said furniture due to non
payment of the balance.Thus, petitioner’s complaint herein stands: the CA, who dismissed her case,
erred since the transaction was by description or by sample (who avers that the said that the delivered
materials were supposed to match bulk goods.)
ISSUE:
Whether or not the transaction between the parties was that of a sale by description or by sample.

RULING:
Neither. The court clarified that:

In a sale by sample, the standard of quality a small quantity is exhibited by the seller as a fair specimen of
the bulk, which is not present and there is no opportunity to inspect or examine the same.

In a sale by description, a seller’s description of the goods which is made part of the basis of the
transaction creates a warranty that the goods will conform to that description.

In the present case, the sale was not considered by sample because it does not constitute an agreement
to correspond with a certain pattern. There is no agreement to replicate the goods in respondent David’s
furniture store. It is also not by description because it would require the seller to be the one who would
give the description. In this case it was the buyer. Clearly, this is a “made to order” sale.
MAGNA FINANCIAL SERVICES GROUP vs COLARINA Case Digest
G.R. No. 158635, December 9, 2005
MAGNA FINANCIAL SERVICES GROUP, INC., Petitioner, vs. ELIAS COLARINA, Respondent.

Facts: Elias Colarina bought on installment from Magna Financial Services Group, Inc., one (1) unit
of Suzuki Multicab. After making a down payment, Colarina executed a promissory note for the
balance of P229,284.00 payable in thirty-six (36) equal monthly installments at P6,369.00 monthly.
Colarina failed to pay the monthly amortization beginning January 1999, accumulating an unpaid
balance of P131,607.00.

Magna Financial Services Group, Inc. filed a Complaint for Foreclosure of Chattel Mortgage with
Replevin.

RTC ruled in favour of Magna Financial but CA reserved it.

Issue: WON Magna Financial can foreclose the mortgage at the same time exact specific
performance.

Held: No. Article 1484, paragraph 3, provides that if the vendor has availed himself of the right to
foreclose the chattel mortgage, “he shall have no further action against the purchaser to recover any
unpaid balance of the purchase price. Any agreement to the contrary shall be void.”

Extrajudicial foreclosure, as chosen by the petitioner, is attained by causing the mortgaged property
to be seized by the sheriff, as agent of the mortgagee, and have it sold at public auction in the
manner prescribed by Section 14 of Act No. 1508, or the Chattel Mortgage Law. This rule governs
extrajudicial foreclosure of chattel mortgage.

In sum, since the petitioner has undeniably elected a remedy of foreclosure under Article 1484(3) of
the Civil Code, it is bound by its election and thus may not be allowed to change what it has opted
for nor to ask for more.

WHEREFORE, premises considered, the instant petition is DENIED for lack of merit and the
decision of the Court of Appeals dated 21 January 2003 is AFFIRMED. Costs against petitioner.
 SECOND DIVISION

[G.R. No. 125347. June 19, 1997.]

EMILIANO RILLO, Petitioner, v. COURT OF APPEALS and CORB REALTY INVESTMENT,

CORP., Respondents.

Antonio E . Dollete and Associates for Petitioner.

Rodolfo G. Pulanco for Private Respondent.

SYLLABUS

1. CIVIL LAW; CONTRACT; SALE; RESCISSION OF AN OBLIGATION; NOT APPLICABLE IN CONTRACT TO

SELL. — The contract between the parties is not an absolute conveyance of real property but a contract to
sell. In a contract to sell real property on installments, the full payment of the purchase price is a positive
suspensive condition, the failure of which is not considered a breach, casual or serious, but simply an event
which prevented the obligation of the vendor to convey title from acquiring any obligatory force. (Roque v.
Lapuz, 96 SCRA 741 (1980); Bricktown Development Corporation v. Amor Tierra Development Corp 239
SCRA 126 (1994). The transfer of ownership and title would occur after full payment of the purchase price.
We held in Luzon Brokerage Co., Inc. v. Maritime Building Co., Inc., 46 SCRA 381, 388 (1972), that there
can be no rescission of an obligation that is still nonexistent, the suspensive condition not having happened.

2. ID.; ID.; ID.; R.A. No. 6552 (MACEDA LAW); NATURE THEREOF. — Known as the Maceda Law, R.A. No.
6552 recognizes in conditional sales of all kinds of real estate (industrial, commercial, residential) the right
of the seller to cancel the contract upon non-payment of an installment by the buyer, which is simply an
event that prevents the obligation of the vendor to convey title from acquiring binding force. [Luzon
Brokerage Co., Inc. v. Maritime Building Co., Inc. 86 SCRA 305 (1978] It also provides the right of the buyer
on installments in case he defaults in the payment of succeeding installments, viz: (1) Where he has paid at
least two years of installments," (a) To pay, without additional interest, the unpaid installments due within
the total grace period earned by him, which is hereby fixed at the rate of one month grace period for every
one year of installment payments made: Provided, That this right shall be exercised by the buyer only once
in every five years of the life of the contract and its extensions, if any. (b) If the contract is cancelled, the
seller shall refund to the buyer the cash surrender value of the payments on the property equivalent to fifty
per cent of the total payments made and, after five years of installments, an additional five per cent every
year but not to exceed ninety per cent of the total payments made: Provided, That the actual cancellation of
the contract shall take place after cancellation or the demand for rescission of the contract by a notarial act
and upon full payment of the cash surrender value to the buyer. Down payments, deposits or options on the
contract shall be included in the computation of the total number of installments made." (2) Where he has
paid less than two years in installments, "Sec. 4 * * * 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 cancellation or the demand for rescission of the contract by a notarial act."cralaw virt ua1aw li bra ry

3. ID.; ID.; NOVATION; TAKES PLACE ONLY WHEN THE OLD AND THE NEW OBLIGATIONS ARE
INCOMPATIBLE; NOT PRESENT IN CASE AT BAR. — Article 1292 of the Civil Code provides that "In order
that an obligation may be extinguished by another which substitutes the same, it is imperative that it be so
declared in unequivocal terms, or that the old and the new obligations be on every point incompatible with
each other." Novation is never presumed. Parties to a contract must expressly agree that they are
abrogating their old contract in favor of a new one. In the absence of an express agreement, novation takes
place only when the old and the new obligations are incompatible on every point. In the case at bar, the
parties executed their May 12, 1989 "compromise agreement" precisely to give life to their "Contract to
Sell." It merely clarified the total sum owed by petitioner RILLO to private respondent CORB REALTY with
the view that the former would find it easier to comply with his obligations under the Contract to Sell. In
fine, the "compromise agreement" can stand together with the Contract to Sell.

DECISION

PUNO, J.:

This is an appeal under Rule 45 of the Rules of Court to set aside the decision 1 of the Court of Appeals in
CA G.R. CV No. 39108 cancelling the "Contract to Sell" between petitioner Emiliano Rillo and private
respondent Corb Realty Investment Corporation. It also ordered Rillo to vacate the premises subject of the
contract and Corb Realty to return 50% of P158,184.00 or P79,092.00 to Rillo.

The facts of the case are the following: chan rob1e s virtual 1aw l ibra ry

On June 18, 1985, petitioner Rillo signed a "Contract To Sell of Condominium Unit" with private respondent
Corb Realty Investment Corporation. Under the contract, CORB REALTY agreed to sell to RILLO a 61.5
square meter condominium unit located in Mandaluyong, Metro Manila. The contract price was P150,000.00,
one half of which was paid upon its execution, while the balance of P75,000.00 was to be paid in twelve (12)
equal monthly installments of P7,092.00 beginning July 18, 1985. It was also stipulated that all outstanding
balance would bear an interest of 24% per annum; the installment in arrears would be subject to liquidated
penalty of 1.5% for every month of default from due date. It was further agreed that should petitioner
default in the payment of three (3) or four (4) monthly installments, forfeiture proceedings would be
governed by existing laws, particularly the Condominium Act. 2

On July 18, 1985, RILLO failed to pay the initial monthly amortization. On August 18, 1985, he again
defaulted in his payment. On September 20, 1985, he paid the first monthly installment of P7,092.00. On
October 2, 1985, he paid the second monthly installment of P7,092.00. His third payment was on February
2, 1986 but he paid only P5,000.00 instead of the stipulated P7,092.00. 3

On July 20, 1987 or seventeen (17) months after RILLO’s last payment, CORB REALTY informed him by
letter that it is cancelling their contract due to his failure to settle his accounts on time. CORB REALTY also
expressed its willingness to refund RILLO’s money. 4

CORB REALTY, however, did not cancel the contract for on September 28, 1987, it received P60,000.00 from
petitioner. 5

RILLO defaulted again in his monthly installment payment. Consequently, CORB REALTY informed RILLO
through letter that it was proceeding to rescind their contract. 6 In a letter dated August 29, 1988, it
requested RILLO to come to its office and withdraw P102,459.35 less the rentals of the unit from July 1,
1985 to February 28, 1989. 7 Again the threatened rescission did not materialize. A "compromise" was
entered into by the parties on March 12, 1989, which stipulated the following: jg c:chan roble s.com. ph

"1. Restructure Outstanding Balance Down to P50,000.00

"2. Payment @ P2,000.00/Month @ 18% (Eighteen Percent) -Monthly- To Compute No. of Installments

"3. To Pay Titling Plus Any Real Estate Tax Due

"4. Installments to start April 15, 1989." 8

Rillo once more failed to honor their agreement. RILLO was able to pay P2,000.00 on April 25, 1989 and
P2,000.00 on May 15, 1989. 9

On April 3, 1990, CORB REALTY sent RILLO a statement of accounts which fixed his total arrears, including
interests and penalties, to P155,129.00. When RILLO failed to pay this amount, CORB REALTY filed a
complaint 10 for cancellation of the contract to sell with the Regional Trial Court of Pasig.

In his answer to the complaint, RILLO averred, among others, that while he had already paid a total of
P149,000.00, CORB REALTY could not deliver to him his individual title to the subject property; that CORB
REALTY could not claim any right under their previous agreement as the same was already novated by their
new agreement for him to pay P50,000.00 representing interest charges and other penalties spread through
twenty-five (25) months beginning April 1989; and that CORB REALTY’s claim of P155,129.99 over and
above the amount he already paid has no legal basis. 11 chanrob lesvi rtua llawlib ra ry:red

At the pre-trial, the parties stipulated that RILLO’s principal outstanding obligation as of March 12, 1989 was
P50,000.00 and he has paid only P4,000.00 thereof and that the monthly amortization of P2,000.00 was to
bear 18% interest per annum based on the unpaid balance. The issues were defined as: (1) whether or not
CORB REALTY was entitled to a rescission of the contract; and (2) if not, whether or not RILLO’s current
obligation to CORB REALTY amounts to P62,000.00 only inclusive of accrued interests. 12

The Regional Trial Court held that CORB REALTY cannot rescind the "Contract to Sell" because petitioner did
not commit a substantial breach of its terms. It found that RILLO substantially complied with the "Contract
to Sell" by paying a total of P154,184.00. It ruled that the remedy of CORB REALTY is to file a case for
specific performance to collect the outstanding balance of the purchase price.

CORB REALTY appealed the aforesaid decision to public respondent Court of Appeals assigning the following
errors, to wit: jgc:c hanro bles. com.ph

"THE TRIAL COURT ERRED IN DISREGARDING OTHER FACTS OF THE CASE, INCLUDING THE FACT THAT
THE CONTRACT TO SELL, AS NOVATED, CREATED RECIPROCAL OBLIGATIONS ON BOTH PARTIES;

"THE TRIAL COURT ERRED IN DISREGARDING ARTICLE 1191 OF THE CIVIL CODE;

"THE TRIAL COURT ERRED IN RENDERING JUDGMENT BY SIMPLY DISREGARDING THE CASE OF ROQUE V.
LAPUZ, 96 SCRA 744, AND WITHOUT INDICATING THE APPLICABLE LAW ON THE CASE.

"THE TRIAL COURT ERRED IN RENDERING A DECISION WHICH DID NOT COMPLETELY DISPOSE OF THE
CASE." cralaw virt ua1aw lib ra ry

The respondent Court of Appeals reversed the decision. It ruled: (1) that rescission does not apply as the
contract between the parties is not an absolute conveyance of real property but is a contract to sell; (2) that
the Condominium Act (Republic Act No. 4726, as amended by R.A. 7899) does not provide anything on
forfeiture proceedings in cases involving installment sales of condominium units, hence, it is Presidential
Decree No. 957 (Subdivision and Condominium Buyers Protective Decree) which should be applied to the
case at bar. Under Presidential Decree No. 957, the rights of a buyer in the event of failure to pay
installment due, other than the failure of the owner or developer to develop the project, shall be governed
by Republic Act No. 6552 or the REALTY INSTALLMENT BUYER PROTECTION ACT also known as the Maceda
Law (enacted on September 14, 1972). The dispositive portion of its Decision states: jgc:chan roble s.com.p h

"WHEREFORE, the decision appealed from is hereby SET ASIDE. The Contract to Sell is hereby declared
cancelled and rendered ineffective. Plaintiff-Appellant is hereby ordered to return 50% of P158,184.00 or
P79,092.00 to appellee who is hereby ordered to vacate the subject premises.

"SO ORDERED." 13

Hence, this appeal with the following assignment of errors: jgc:chan roble s.com. ph

"THE HONORABLE COURT OF APPEALS SERIOUSLY AND GRAVELY ERRED IN HOLDING AND DECIDING THAT
RESCISSION IS THE PROPER REMEDY ON A PERFECTED AND CONSUMMATED CONTRACT;

"THE HONORABLE COURT OF APPEALS SERIOUSLY AND GRAVELY ERRED IN NOT HOLDING AND DECIDING
THAT THE OLD CONSUMMATED CONTRACT HAS BEEN SUPERSEDED BY A NEW, SEPARATE, INDEPENDENT
AND SUBSEQUENT CONTRACT BY NOVATION." cralaw virtua 1aw lib rary

The petition is without merit.

The respondent court did not err when it did not apply Articles 1191 and 1592 of the Civil Code on rescission
to the case at bar. The contract between the parties is not an absolute conveyance of real property but a
contract to sell. In a contract to sell real property on installments, the full payment of the purchase price is a
positive suspensive condition, the failure of which is not considered a breach, casual or serious, but simply
an event which prevented the obligation of the vendor to convey title from acquiring any obligatory force."
14 The transfer of ownership and title would occur after full payment of the purchase price. We held in
Luzon Brokerage Co., Inc. v. Maritime Building Co., Inc. 15 that there can be no rescission of an obligation
that is still non-existent, the suspensive condition not having happened.

Given the nature of the contract of the parties, the respondent court correctly applied Republic Act No.
6552. Known as the Maceda Law, R.A. No. 6552 recognizes in conditional sales of all kinds of real estate
(industrial, commercial, residential) the right of the seller to cancel the contract upon non-payment of an
installment by the buyer, which is simply an event that prevents the obligation of the vendor to convey title
from acquiring binding force. 16 It also provides the right of the buyer on installments in case he defaults in
the payment of succeeding installments, viz: chan rob1e s virtual 1aw l ibra ry

(1) Where he has paid at least two years of installments,

"(a) To pay, without additional interest, the unpaid installments due within the total grace period earned by
him, which is hereby fixed at the rate of one month grace period for every one year of installment payments
made: Provided, That this right shall be exercised by the buyer only once in every five years of the life of
the contract and its extensions, if any.

(b) If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of the payments
on the property equivalent to fifty per cent of the total payments made and, after five years of installments,
an additional five per cent every year but not to exceed ninety per cent of the total payments made:
Provided, That the actual cancellation of the contract shall take place after cancellation or the demand for
rescission of the contract by a notarial act and upon full payment of the cash surrender value to the buyer.

Down payments, deposits or options on the contract shall be included in the computation of the total
number of installments made." cralaw virt ua1aw li bra ry

(2) Where he has paid less than two years in installments,

"Sec. 4. . . . 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 cancellation or
the demand for rescission of the contract by a notarial act." cralaw virtua 1aw lib rary

Petitioner RILLO paid less than two years in installment payments, hence, he is only entitled to a grace
period of not less than sixty (60) days from the due date within which to make his installment payment.
CORB REALTY, on the other hand, has the right to cancel the contract after thirty (30) days from receipt by
RILLO of the notice of cancellation. Hence, the respondent court did not err when it upheld CORB REALTY’s
right to cancel the subject contract upon repeated defaults in payment by RILLO.

Petitioner further contends that the contract to sell has been novated by the parties agreement of March 12,
1989. The contention cannot be sustained. Article 1292 of the Civil Code provides that "In order that an
obligation may be extinguished by another which substitutes the same, it is imperative that it be so declared
in unequivocal terms, or that the old and the new obligations be on every point incompatible with each
other." Novation is never presumed. 17 Parties to a contract must expressly agree that they are abrogating
their old contract in favor of a new one. 18 In the absence of an express agreement, novation takes place
only when the old and the new obligations are incompatible on every point. 19 In the case at bar, the
parties executed their May 12, 1989 "compromise agreement" precisely to give life to their "Contract to
Sell." It merely clarified the total sum owed by petitioner RILLO to private respondent CORB REALTY with
the view that the former would find it easier to comply with his obligations under the Contract to Sell. In
fine, the "compromise agreement" can stand together with the Contract to Sell.

Nevertheless, we do not agree with the respondent Court so far as it ordered private respondent CORB
REALTY to refund 50% of P158,184.00 or P79,092.00 to petitioner RILLO. Under Republic Act No. 6552, the
right of the buyer to a refund accrues only when he has paid at least two (2) years of installments. In the
case at bar, RILLO has paid less than two (2) years in installments, hence, he is not entitled to a refund.

IN VIEW WHEREOF, the decision appealed from is AFFIRMED with the MODIFICATION that the refund of
50% P158,184.00 or P79,092.00 made in favor of petitioner Emiliano Rillo is deleted. No costs.
De La Cruz v Asian Consumer
Topic: Sale of Movables - NCC 1484 - 1486

Doctrine: In this jurisdiction, the three (3) remedies provided for in the "Recto Law" are alternative and not
cumulative; the exercise of one would preclude the other remedies. Consequently, should the vendee-mortgagor
default in the payment of two or more of the agreed installments, the vendor-mortgagee has the option to avail of
any of these three (3) remedies: either to exact fulfillment of the obligation, to cancel the sale, or to foreclose the
mortgage on the purchased chattel, if one was constituted.

Facts:

Spouses Romulo de la Cruz and Delia de la Cruz, and one Daniel Fajardo, petitioners, purchased on installment
basis one (1) truck from Benter Motor Sales Corporation (BENTER for brevity). To secure payment, they executed
in favor of BENTER a chattel mortgage over the vehicle 1 and a promissory note payable in thirty (30) monthly
installments of P9,412.00. On the same date, BENTER assigned its rights and interest over the vehicle in favor of
private respondent Asian Consumer and Industrial Finance Corporation (ASIAN for brevity).

Pets defaulted on more than two (2) installments. Thereafter, notwithstanding the demand letter of ASIAN,
petitioners failed to settle their obligation.

By virtue of a petition for extrajudicial foreclosure of chattel mortgage, the sheriff attempted to repossess the
vehicle but was unsuccessful because of the refusal of the son of petitioner, Rolando de la Cruz to surrender the
same. Hence, the return of the sheriff that the service was not satisfied.

Romulo de la Cruz brought the vehicle to the office of ASIAN and left it there where it was inventoried and
inspected.

ASIAN filed an ordinary action with the court a quo for collection of the balance of P196,152.99 of the purchase
price, plus liquidated damages and attorney's fees.

TC: pro- ASIAN

CA: Affirmed TC

". . . no extrajudicial foreclosure of chattel mortgage ever transpired in the case at bar. Undoubtedly, plaintiff had
first chosen to extrajudically foreclose the mortgage, but this did not materialize through no fault of plaintiff, as
defendant refused to surrender the Hino truck.”

"Though the remedy of foreclosure was first chosen, this remedy however proved ineffectual due to no fault of
plaintiff. Therefore, plaintiff may exercise other remedies such as exact fulfillment of the obligation and thereafter
recover the deficiency. This is the essence of the rule of alternative remedies under Article 1484."

Petitioners take exception. While they do not dispute that where the mortgagee elects the remedy of foreclosure
which, according to them, includes the option to sell in a public or private sale, commences and pursues it, and in
consideration of which he also performs everything that is incumbent upon him to do to implement the
foreclosure they nevertheless insist that he should not later be allowed to change course midway in the process,
abandon the foreclosure and shift to other remedies such as collection of the balance, especially after having
recovered the mortgaged chattel from them and while retaining possession thereof.

Issue: Whether or not a chattel mortgagee, after opting to foreclose the mortgage but failing afterwards to sell the
property at public auction, may still sue to recover the unpaid balance of the purchase price.

Held: Yes.

It is not disputed that the instant case is covered by the so-called "Recto Law", now Art. 1484 of the New Civil
Code, which provides:

"In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise
any of the following remedies: (1) Exact fulfillment of the obligation, should the vendee fail to pay; (2) Cancel the
sale, should the vendee's failure to pay cover two or more installments; (3) Foreclose the chattel mortgage on the
thing sold, if one has been constituted, should the vendee's failure to pay cover two or more installments. In this
case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any
agreement to the contrary shall be void."

In this jurisdiction, the three (3) remedies provided for in the "Recto Law" are alternative and not cumulative; the
exercise of one would preclude the other remedies. Consequently, should the vendee-mortgagor default in the
payment of two or more of the agreed installments, the vendor-mortgagee has the option to avail of any of these
three (3) remedies: either to exact fulfillment of the obligation, to cancel the sale, or to foreclose the mortgage on
the purchased chattel, if one was constituted.

The records show that ASIAN initiated a petition for extrajudicial foreclosure of the chattel mortgage. But the
sheriff failed to recover the motor vehicle. It was not until 10 October 1984, or almost a month later that
petitioners delivered the unit to ASIAN. The action to recover the balance of the purchase price was instituted.

It is thus clear that while ASIAN eventually succeeded in taking possession of the mortgaged vehicle, it did not
pursue the foreclosure of the mortgage as shown by the fact that no auction sale of the vehicle was ever
conducted.

In the case before Us, there being no actual foreclosure of the mortgaged property, ASIAN is correct in resorting to
an ordinary action for collection of the unpaid balance of the purchase price.
SOUTHERN MOTORS, INC. vs. MOSCOSO

2 SCRA 168G.R. No. L-14475, May 30, 1961

FACTS:

Plaintiff Southern Motors, Inc. sold to defendant Angel Moscoso one Chevrolet truck on installment
basis,for P6,445.00. Upon making a down payment, the defendant executed a promissory note for the
sum of P4,915.00, representing the unpaid balance of the purchase price to secure the payment of
which, achattel mortgage was constituted on the truck in favor of the plaintiff. Of said account, the
defendant hadpaid a total of P550.00, of which P110.00 was applied to the interest and P400.00 to the
principal, thusleaving an unpaid balance of P4,475.00. The defendant failed to pay 3 installments on the
balance of thepurchase price.Plaintiff filed a complaint against the defendant, to recover the unpaid
balance of the promissory note.Upon plaintiff's petition, a writ of attachment was issued by the lower
court on the properties of thedefendant. Pursuant thereto, the said Chevrolet truck, and a house and lot
belonging to defendant, wereattached by the Sheriff and said truck was brought to the plaintiff's
compound for safe keeping. Afterattachment and before the trial of the case on the merits, acting upon
the plaintiff's motion for theimmediate sale of the mortgaged truck, the Provincial Sheriff of Iloilo sold
the truck at public auction inwhich plaintiff itself was the only bidder for P1,OOO.OO. The trial court
condemned the defendant to paythe plaintiff the amount of P4,475.00 with interest at the rate of 12%
per annum from August 16, 1957,until fully paid, plus 10% thereof as attorneys fees and costs. Hence,
this appeal by the defendant.

ISSUE:

Whether or not the attachment caused to be levied on the truck and its immediate sale at public
auction,was tantamount to the foreclosure of the chattel mortgage on said truck.

HELD:

No.Article 1484 of the Civil Code provides that in a contract of sale of personal property the price of
which ispayable in installments, the vendor may exercise any of the following remedies: (I) Exact
fulfillment of the obligation, should the vendee fail to pay; (2) Cancel the sale, should the vendee's
failure to pay covertwo or more installments; and (3) Foreclose the chattel mortgage on the thing sold, if
one has beenconstituted, should the vendee's failure to pay cover two or more installments. In this case,
he shall haveno further action against the purchaser to recover any unpaid balance of the price. Any
agreement to thecontrary shall be void.The plaintiff had chosen the first remedy. The complaint is an
ordinary civil action for recovery of theremaining unpaid balance due on the promissory note.
Olympia Housing, Inc. vs Panasiatic Travel Corp.
395 scra 298

Facts:

Olympia Housing, Inc. agreed to sell a condominium

unit to Ma. Nelida Galvez-Ycasiano for P2,340,000 payable
in installments of P33,657.40 per month and schedule of
payments were also agreed on. Pursuant to the contract,
defendant made a deposit of P100,000 and 50% down
payment on the dates agreed. She made several
payments in cash and thru cash credit memos issued by
plaintiff representing plane tickets bought from Panasiatic
Travel Corp, owned by Ma. Nelida. When defendant failed
to pay installments which amounted to P1,924,345.52
even after demand, plaintiff allegedly rescinded the
contract by a Notarial Act of Rescission.

Issue:

whether or not the contract to sell executed in favor

of respondent buyer had been validly cancelled or
rescinded

Held:

no cancellation took place. The notarial rescission

was not sent to respondents prior to the institution of the
case for reconveyance but merely served on respondents
by way of an attachment to the complaint. In any case, a
notarial rescission, standing alone, could not have
invalidly effected the cancellation of the contract. RA 6552
(Realty Installment Buyer Protection Act) states that any
cancellation must be done in conformity with the
requirements therein prescribed.
In addition to the
notarial act of rescission, the seller is required to refund to
the buyer the cash surrender value of the payments on
the property. The actual cancellation of the contract can
only be deemed to take place upon the expiry of a 30day
period following the receipt by the buyer of the notice of
cancellation or demand for rescission by a notarial act and
the full payment of the cash surrender value.