ABELARDO VALARAO,
GLORIOSA VALARAO AND CARLOS VALARAO, PETITIONERS, VS. COURT OF APPEALS AND
MEDEN A. ARELLANO.
Article 1592 of the Civil Code applies only to contracts of sale, and not to contracts to sell or conditional sales where title passes to the vendee only upon full payment of the purchase price. Furthermore, in order to enforce the automatic forfeiture clause in a deed of conditional sale, the vendors have the burden of proving a contractual breach on the part of the vendee.
Article 1592 of the Civil Code applies only to contracts of sale, and not to contracts to sell or conditional sales where title passes to the vendee only upon full payment of the purchase price. Furthermore, in order to enforce the automatic forfeiture clause in a deed of conditional sale, the vendors have the burden of proving a contractual breach on the part of the vendee.
Facts:
"On September 4, 1987, spouses Abelardo and Gloriosa Valarao, thru their son Carlos Valarao as their attorney-in-fact, sold to [Private Respondent] Meden Arellano under a Deed of Conditional Sale a parcel of land situated in the District of Diliman, Q.C., covered by TCT No. 152879 with an area of 1,504 square meters, for the sum of THREE MILLION TWO HUNDRED TWENTY FIVE THOUSAND PESOS (P3,225,000.00) payable under a schedule of payment stated therein.
"In the same Deed of Conditional Sale, the [private respondent] vendee obligated herself to encumber by way of real estate mortgage in favor of [petitioners] vendors her separate piece of property with the condition that upon full payment of the balance of P2,225,000.00, the said mortgage shall become null and void and without further force and effect.
"It
was further stipulated upon that should the vendee fail to pay three (3)
successive monthly installments or any one year-end lump sum payment within the
period stipulated, the sale shall be considered automatically rescinded without
the necessity of judicial action and all payments made by the vendee shall be
forfeited in favor of the vendors by way of rental for the use and occupancy of
the property and as liquidated damages. All improvements introduced by the
vendee to the property shall belong to the vendors without any right of
reimbursement.
"[Private
respondent] appellant alleged that as of September , 1990, she had already paid
the amount of [t]wo [m]illion [t]wenty-[e]ight [t]housand (P2,028,000.00)
[p]esos, although she admitted having failed to pay the installments due in
October and November, 1990. Petitioner, however, [had] tried to pay the
installments due [in] the said months, including the amount due [in] the month
of December, 1990 on December 30 and 31, 1990, but was turned down by the
vendors-[petitioners] thru their maid, Mary Gonzales, who refused to accept the
payment offered. [Private respondent] maintains that on previous occasions, the
same maid was the one who [had] received payments tendered by her. It appears
that Mary Gonzales refused to receive payment allegedly on orders of her
employers who were not at home.
"[Private respondent] then reported the matter to, and sought the help of, the local barangay officials. Efforts to settle the controversy before the barangay proved unavailing as vendors-[petitioners] never appeared in the meetings arranged by the barangay lupon.
"[Private respondent] tried to get in touch with [petitioners] over the phone and was able to talk with [Petitioner] Gloriosa Valarao who told her that she [would] no longer accept the payments being offered and that [private respondent] should instead confer with her lawyer, a certain Atty. Tuazon. When all her efforts to make payment were unsuccessful, [private respondent] sought judicial action by filing this petition for consignation on January 4, 1991.
"On the other hand, vendors-[petitioners], thru counsel, sent [private respondent] a letter dated 4 January 1991 notifying her that they were enforcing the provision on automatic rescission as a consequence of which the Deed of Conditional Sale [was deemed] null and void, and xxx all payments made, as well as the improvements introduced on the property, [were] thereby forfeited. The letter also made a formal demand on the [private respondent] to vacate the property should she not heed the demand of [petitioners] to sign a contract of lease for her continued stay in the property .
"[Private respondent] then reported the matter to, and sought the help of, the local barangay officials. Efforts to settle the controversy before the barangay proved unavailing as vendors-[petitioners] never appeared in the meetings arranged by the barangay lupon.
"[Private respondent] tried to get in touch with [petitioners] over the phone and was able to talk with [Petitioner] Gloriosa Valarao who told her that she [would] no longer accept the payments being offered and that [private respondent] should instead confer with her lawyer, a certain Atty. Tuazon. When all her efforts to make payment were unsuccessful, [private respondent] sought judicial action by filing this petition for consignation on January 4, 1991.
"On the other hand, vendors-[petitioners], thru counsel, sent [private respondent] a letter dated 4 January 1991 notifying her that they were enforcing the provision on automatic rescission as a consequence of which the Deed of Conditional Sale [was deemed] null and void, and xxx all payments made, as well as the improvements introduced on the property, [were] thereby forfeited. The letter also made a formal demand on the [private respondent] to vacate the property should she not heed the demand of [petitioners] to sign a contract of lease for her continued stay in the property .
Issues:
I.whether
the requirement of a judicial demand or a notarial act has been fulfilled.
"II
Whether the automatic forfeiture clause is valid and binding between the
parties."
"III Whether the action for consignation may prosper without actual deposit [in court] of the amount due xxx [so as] to produce the effect of payment."
"III Whether the action for consignation may prosper without actual deposit [in court] of the amount due xxx [so as] to produce the effect of payment."
Ruling:
1.
Art. 1592 of the new Civil
Code (Art. 1504 of the old Civil Code) requiring demand by suit or notarial act
in case the vendor of realty wants to rescind does not apply to a contract to
sell or promise to sell, where title remains with the vendor until" full
payment of the price.
In the present case, the
Deed of Conditional Sale is of the same nature as a saleoninstallment or a contract
to sell, which is not covered by Article 1592.
Petitioners-vendors
unmistakably reserved for themselves the title to the property until full
payment of the purchase price by the vendee. Clearly, the agreement was not a
deed of sale, but more in the nature of a contract to sell or of a sale on
installments.[13] Even after the
execution of the Deed of Conditional Sale, the Torrens Certificate of Title
remained with and in the name of the vendors.
II.
As a
general rule, a contract is the law between the parties.[15] Thus, "from the moment the contract is
perfected, the parties are bound not only to the fulfillment of what has been
expressly stipulated but also to all consequences which, according to their
nature, may be in keeping with good faith, usage and law."[16] Also, "the stipulations of the
contract being the law between the parties, courts have no alternative but to
enforce them as they were agreed [upon] and written, there being no law or
public policy against the stipulated forfeiture of payments already made."[17] However, it must be shown that private
respondent-vendee failed to perform her obligation, thereby giving
petitioners-vendors the right to demand the enforcement of the contract.
We concede the validity of the automatic forfeiture clause, which deems any previous payments forfeited and the contract automatically rescinded upon the failure of the vendee to pay three successive monthly installments or any one yearend lump sum payment. However, petitioners failed to prove the conditions that would warrant the implementation of this clause.
It is clear that petitioners were not justified in refusing to accept the tender of payment made by private respondent on December 30 and 31, 1990. Had they accepted it on either of said dates, she would have paid all three monthly installments due. In other words, there was no deliberate failure on her part to meet her responsibility to pay.[18] The Court takes note of her willingness and persistence to do so, and, petitioners cannot now say otherwise. The fact is: they refused to accept her payment and thus have no reason to demand the enforcement of the automatic forfeiture clause. They cannot be rewarded for their own misdeed.
Because their maid had received monthly payments in the past,[19] it is futile for petitioners to insist now that she could not have accepted the aforementioned tender of payment, on the ground that she did not have a special power of attorney to do so. Clearly, they are estopped from denying that she had such authority. Under Article 1241 of the Civil Code, payment through a third person is valid "[I]f by the creditor's conduct, the debtor has been led to believe that the third person had authority to receive the payment."
III.
It would be inequitable to allow the forfeiture of the amount of more than two million pesos already paid by private respondent, a sum which constitutes two thirds of the total consideration. Because she did make a tender of payment which was unjustifiably refused, we hold that petitioners cannot enforce the automatic forfeiture clause of the contract.
We concede the validity of the automatic forfeiture clause, which deems any previous payments forfeited and the contract automatically rescinded upon the failure of the vendee to pay three successive monthly installments or any one yearend lump sum payment. However, petitioners failed to prove the conditions that would warrant the implementation of this clause.
It is clear that petitioners were not justified in refusing to accept the tender of payment made by private respondent on December 30 and 31, 1990. Had they accepted it on either of said dates, she would have paid all three monthly installments due. In other words, there was no deliberate failure on her part to meet her responsibility to pay.[18] The Court takes note of her willingness and persistence to do so, and, petitioners cannot now say otherwise. The fact is: they refused to accept her payment and thus have no reason to demand the enforcement of the automatic forfeiture clause. They cannot be rewarded for their own misdeed.
Because their maid had received monthly payments in the past,[19] it is futile for petitioners to insist now that she could not have accepted the aforementioned tender of payment, on the ground that she did not have a special power of attorney to do so. Clearly, they are estopped from denying that she had such authority. Under Article 1241 of the Civil Code, payment through a third person is valid "[I]f by the creditor's conduct, the debtor has been led to believe that the third person had authority to receive the payment."
III.
It would be inequitable to allow the forfeiture of the amount of more than two million pesos already paid by private respondent, a sum which constitutes two thirds of the total consideration. Because she did make a tender of payment which was unjustifiably refused, we hold that petitioners cannot enforce the automatic forfeiture clause of the contract.
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