(61) Pilipinas Bank v. IAC, GR 67881, June 30, 1987 [Per J.

Paras, Second Division]

Issue: Wheher or not the Contract to sell was rescinded, under the automatic rescission clause of the
Contract between the parties
Digest:
Hacienda Benito, Inc. (Hacienda) as vendor and Jose W. Diokno and Carmen Diokno (Diokno) as vendees
executed a Contract to Sell over a parcel of land on monthly installments subject to an automatic rescission
clause, subjecting the contract to automatic rescission upon failure of the vendee to pay when due, three or
more consecutive installments as stipulated therein. During the contract, Hacienda sent a series of notices
to Diokno reminding their arrearages/balances to which they partially complied. As the Dioknos sent a
letter expressing to fully settle their obligation after two years from the last reminder, Hacienda informed
them that the contract has been rescinded subject to the automatic rescission clause of their contract, and
Diokno is liable in default, citing article 1189 of the Civil Code. However, Diokno argues that such clause
has now been inapplicable due to the waiver of such right after execution of several notices of the obligation.

I. What have we learned about the topic?

DOCTRINE: A contractual provision allowing “automatic rescission” (without prior need of judicial
rescission, resolution and cancellation) is VALID, the remedy of one who feels aggrieved being to go
to Court for the cancellation of the rescission itself, in case the rescission is found unjustified under the
circumstances.

II. What does the case teach us?

Wheher or not the Contract to sell was rescinded, under the automatic rescission clause of the
Contract between the parties
No, the contract has not been rescinded due to the automatic rescission clause. As iterated by the Supreme
Court in case of Luzon Brokerage Co., Inc. vs. Maritime Building Co., Inc., “Automatic rescission (without
prior need of judicial rescission, resolution and cancellation) is VALID, the remedy of one who feels
aggrieved being to go to Court for the cancellation of the rescission itself, in case the rescission is found
unjustified under the circumstances. Here, it is clear that such rescission is unjustified since Hacienda has
clearly waived of the stipulated right of automatic rescission, as evidenced by the many notices and
extensions given to Diokno. There was a clear WAIVER of the stipulated right of "automatic rescission",
as evidenced by the many extensions granted private respondents by the petitioner. In all these extensions,
the petitioner never called attention to the proviso on "automatic rescission".