BRICKTOWN DEV’T CORP v.
AMOR TIERRA DEV’T CORP A contract, once perfected, has the force of law between the parties with
FACTS:
Petitioner Bricktown Development Corporation, represented by its President
and co-petitioner Mariano Velarde, executed two Contracts to sell in favor of
respondent Amor Tierra Development Corporation, represented by its vice president
Moises Petilla, covering a total of 96 residential lots. The total price of
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
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
made payable in cash. Private respondent was only able to pay petitioner corporation
the sum of P1,334,443.21. In the meanwhile, however, the parties continued to
negotiate for a possible modification of their agreement, although nothing conclusive
would appear to have ultimately been arrived at. Finally, on 12 October 1981,
petitioner corporation, through its legal counsel, sent private respondent a "Notice of
Cancellation of Contract" on account of the latter's continued failure to pay the
installment due. Petitioner corporation advised private respondent, however, that it
still had the right to pay its arrearages within 30 days from receipt of the notice
"otherwise the actual cancellation of the contract (would) take place."
ISSUE:
Whether a grace period is a right or an obligation.
HELD:
A grace period is a right, not an obligation, of the debtor. When
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
honoring the right. The grace period must not be likened to an obligation, the non-
payment of which, under Article 1169 of the Civil Code, would generally still require
judicial or extrajudicial demand before "default" can be said to arise.
The cancellation of the contracts to sell by petitioner corporation accords
with the contractual covenants of the parties, and such cancellation must be
respected. It may be noteworthy to add that in a contract to sell, the non-payment of
the purchase price (which is normally the condition for the final sale) can prevent the
obligation to convey title from acquiring any obligatory force.
which they are bound to comply in good faith and from which neither one may
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
deem appropriate provided only that they are not contrary to law, morals, good
customs, public order or public policy. The standard norm in the performance of their
respective covenants in the contract, as well as in the exercise of their rights
thereunder, is expressed in the cardinal principle that the parties in that juridical
relation must act with justice, honesty and good faith
EDCA PUBLISHING and DISTRIBUTING CORP v. SANTOS
FACTS:
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
corresponding invoice and delivered the books as ordered, for which Cruz issued a
personal check covering the purchase price. Cruz sold 120 of the books to private
respondent Leonor Santos who, after verifying the seller's ownership from the
invoice he showed her, paid him the purchase price. Meanwhile, EDCA having
become suspicious over a second order placed by Cruz even before clearing of his
first check, made inquiries with the De la Salle College where he had claimed to be a
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
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 Peña and his sale of 120 of the books he had ordered from EDCA to
the private respondents. EDCA sought the assistance of the police, which forced their
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
and thereafter turned them over to the petitioner. Private respondents sued for
recovery of the books after demand for their return was rejected by EDCA.
ISSUE:
Whether the petitioner has been unlawfully deprived of the books because
the check issued by the impostor in payment therefor was dishonored.
HELD:
NO. Ownership in the thing sold shall not pass to the buyer until full
payment of the purchase only if there is a stipulation to that effect. Otherwise, the
rule is that such ownership shall pass from the vendor to the vendee upon the actual
or constructive delivery of the thing sold even if the purchase price has not yet been
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
contract, or to criminal prosecution in the case of bouncing checks. But absent the
stipulation above noted, delivery of the thing sold will effectively transfer ownership
to the buyer who can in turn transfer it to another.
OCAMPO v. CA
FACTS:
Severino Tolosa and Pilar T. Ocampo entered into an "Agreement to Sell Real
Property" whereby Tolosa sells the parcel of land to Ocampo in consideration of
P25,000.00, where half was paid upon signing of the deed and the balance to be due
within six months thereafter. Before the six-month period to complete the payment
of the purchase price expired, Ocampo failed to complete his payment. Nevertheless
Tolosa accepted her subsequent late payments. Meanwhile, the subject property was
involved in a boundary dispute. Upon learning of the mortgage lien, Ocampo caused
her adverse claim to be annotated on Tolosa’s certificate of title. Tolosa sought the
cancellation of Ocampo’s adverse claim and presented her with two options, namely,
a refund of payments made, or a share from the net proceeds if sold to a third party.
Ocampo expressed to pay the balance of the purchase price, should Tolosa be ready
to deliver to her the deed of absolute sale and the owner’s duplicate for purposes of
registration. Subsequently, Tolosa and Magdalena S. Villaruz executed a "Contract to
Sell" whereby Tolosa sold to Villaruz the same land in consideration of P94,300.00.
The amount of P15,000.00 was to be paid upon execution and the balance upon
cancellation of all liens and encumbrances from the certificate of title. The contract
stipulated the immediate conveyance of the physical possession of the land to
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
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
later denied. Tolosa succeeded in securing from another branch of the court the
cancellation of the adverse claims of Ocampo without notice to her. This paved the
way for the registration of the contract of sale of Villaruz and the subsequent
issuance of a Transfer Certificate of Title in her name which canceled the Original
Certificate of Title of Tolosa. Ocampo filed a third party complaint against Villaruz.
The trial court ruled in favor of Ocampo, declaring the agreement between
Tolosa and Villaruz as null and void and ordered Tolosa to execute the corresponding
Deed of Sale in favor of Ocampo. The Court of Appeals reversed the trial court’s
decision, hence, this appeal.
ISSUE:
Whether or not Tolosa has the right to rescind the contract entered
between him and Ocampo.
HELD:
NO. The failure of the buyer to pay the price in full within a fixed period
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
perfected contract of absolute sale wherein Tolosa forthwith sold, ceded and
transferred the land to Ocampo. Under Art. 1592 of the Civil Code, the failure of
Ocampo to complete her payment of the purchase price within the stipulated period
merely accorded Tolosa the option to rescind the contract of sale upon judicial or
notarial demand. However, the letter claimed to have been sent by Tolosa to
Ocampo rescinding the contract of sale was defective because it was not notarized
and, more importantly, it was not proven to have been received by Ocampo. Tolosa,
on the other hand, is precluded from raising the issue of late payments. His
unqualified acceptance of payments after the 6-month period expired constitutes
waiver of the period, and hence of the ground to rescind under Article 1592 of the
Civil Code. The breach on the part of Ocampo was only slight, if not outweighed by
the bad faith of Tolosa in reneging in his own prestations, hence, judicial rescission of
the contract cannot be justified. While the contract in favor of Villaruz is also a
contract of sale, that of Ocampo should prevail pursuant to Article 1544 of the Civil
Code on double sales. While Villaruz may have registered his contract or came into
possession ahead of Ocampo, Villaruz was not in good faith since Ocampo already
had her adverse claim annotated on Tolosa’s title before the sale between Tolosa and
Villaruz.
SOUTHERN MOTORS INC. v. MOSCOSO
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, a chattel
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
and P400.00 to the principal, thus leaving an unpaid balance of P4,475.00. The
defendant failed to pay 3 installments on the balance of the purchase 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 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 People’s Car a Volkswagen car. They issued
defendant. a Promissory Note with chattel mortgage. People’s 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
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
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
also attached the house and lot of the appellant at San Jose, Antique. We perceive
nothing unlawful or irregular in plaintiff's act of attaching the mortgaged truck itself.
Since the plaintiff has chosen to exact the fulfilment of the appellant's obligation, it
may enforce execution of the judgment that may be favorably rendered hereon, on
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
were also attached. No one can successfully contest that the attachment was merely
an incident to an ordinary civil action. The mortgage creditor may recover judgment
on the mortgage debt and cause an execution on the mortgaged property and may
cause an attachment to be issued and levied on such property, upon beginning his
civil action.