228 - Bricktown v.

Amor-Tierra
MITIGATION OF DAMAGES [ARTs. 1192, 2203 - 2204, & 2214 - 2215]

BRICKTOWN DEVELOPMENT CORP. (its new corporate name MULTINATIONAL

REALTY DEVELOPMENT CORPORATION) and MARIANO Z. VERALDE, petitioners,
vs. AMOR TIERRA DEVELOPMENT CORPORATION and the HON. COURT OF
APPEALS, respondents.
G.R. No. 112182, December 12, 1994
Reduction/mitigation of interest by setting reckoning period to finality of judgment due to equity

However, the Court finds it not equitable to adjudge any interest payment by Bricktown on the amount to
be refunded, to be computed from judicial demand [but from the date of the finality of judgment as seen in
the disposition]. This is to prevent Amor Tierra from totally freeing itself from its own breach.

FACTS:
Petitioner corporation Bricktown Development Corp., hereinafter “Bricktown”, entered as
the seller in a contract to sell involving residential lots in Paranaque with Amor Tierra
Development Corporation, hereinafter “Amor Tierra”. The valuation of these lots covering
82,888 sqm amountedd to P21,639,875. The two parties agreed on a payment scheme,
to wit:

1. March 31, 1981 – Downpayment of P2,200,000;

2. June 30, 1981 – P3,209,967.75;
3. December 31, 1981 – P4,729,906.25; and
4. Payment of Mortgage to PS Bank or payment through cash h- P11,500,000.

The parties also executed a Supplemental Agreement wherein Amor Tierra will pay 21%
interest on the balance of the downpayment, and pay P390,369.37 for the interest paid
by Bricktown to update the bank loan with PS Bank for the period of February to March
1981.

However, Amor Tierra was only able to pay P1,334,000. Despite this, Bricktown and
Amor Tierra continued with the negotiation despite the suspension of further
payments by the latter.

Bricktown subsequently issued a Notice of Cancellation for Amor Tierra’s failure to pay
the second installment of the payment scheme which became due at June 30, 1981.
Bricktown also advised Amor Tierra that non-payment thirty days from the receipt
of the notice will result to the actual cancellation of the contract to sell.

However, after the passage of several months, Amor Tierra demanded a refund of the
total payments of P2,455,000 with interest, or an assignment of unencumbered residential
lots corresponding to the amount already paid instead of paying. It subsequently filed a
suit after Bricktown’s refusal to the demand.

TORTS - ATTY. LUANSING

3E 2021 - 2022
228 - Bricktown v. Amor-Tierra
MITIGATION OF DAMAGES [ARTs. 1192, 2203 - 2204, & 2214 - 2215]

The RTC ruled that the contract to sell and the Supplemental Agreement are rescinded.
It ordered Bricktown to return the payments by Amor Tierra with 12% interest from
judicial demand or the time the complaint was filed. The same decision was affirmed
upon appeal to the CA.

ISSUE(S):

1. Whether or not the contracts to sell were validly rescinded by Bricktown. [YES]
2. Whether or not the amounts that were already remitted by Amor Tierra were
rightly forfeited by Bricktown. [NO]

RULING:

1. Yes, the contracts to sell were validly rescinded.

The cancellation of the contracts to sell by Bricktown accords with the contractual
covenants of the parties. Such cancellation must be respected. It should also be
noted 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.

2. No, the forfeiture by Bricktown of payments already made to it is

unconscionable. Furthermore, the interest arising from the payment of
refunds to Amor Tierra must be reckoned from the date of finality of
judgment.

Indeed, Bricktown still acted within its legal right to declare the contracts to sell
rescinded or cancelled considering the peculiar circumstances wherein the parties
continued to negotiate despite Amor Tierra’s suspension of payments. It would be
unconscionable to sanction the forfeiture by Bricktown of payments made to it by
Amor Tierra.

The relationship between parties in any contract must always be characterized and
punctuated by good faith and fair dealing. Judging from what the lower courts have
said, Bricktown falls within that standard.

However, the Court finds it not equitable to adjudge any interest payment by
Bricktown on the amount to be refunded, to be computed from judicial
demand [but from the date of the finality of judgment as seen in the

TORTS - ATTY. LUANSING

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228 - Bricktown v. Amor-Tierra
MITIGATION OF DAMAGES [ARTs. 1192, 2203 - 2204, & 2214 - 2215]

disposition]. This is to prevent Amor Tierra from totally freeing itself from its
own breach.

WHEREFORE, the appealed decision is AFFIRMED insofar as it declares valid

the cancellation of the contracts in question but MODIFIED by ordering the
refund by petitioner corporation of P1,334,443.21 with 12% interest per annum
to commence only, however, from the date of finality of this decision until
such refund is effected. No costs.

ADDITIONAL NOTES:

1. As summarized by ATTY. CALLEJA: The SC held that the forfeiture was

unconscionable because Bricktown led Amor Tierra to believe that there will be a
new arrangement as a result of their continued negotiation.

On the other hand, the interest of the refund was mitigated or reduced by its
imposition only from the finality of the judgment of rescission [instead from
the time of judicial demand of the refund] Amor Tierra committed a breach of
the contract to sell when it even barely covered to pay the complete the
downpayment,

TORTS - ATTY. LUANSING

3E 2021 - 2022