G.R. No. L-25885. January 31, 1972 (Case Brief / Digest)

### Title: Luzon Brokerage Co., Inc. vs. Maritime Building Co., Inc. and Myers Building Co., Inc.

### Facts:
This case revolves around an action for interpleading initiated by Luzon Brokerage Co., Inc. (plaintiff) due to conflicting claims made by Maritime Building Co., Inc., and Myers Building Co., Inc., over payments related to leased properties.

The chain of events started on April 30, 1949, when Myers Building Co., Inc., sold three parcels of land along with improvements to Bary Building Co., Inc. (later known as Maritime Building Co., Inc.) for PHP 1,000,000.00. An initial payment was made with the agreement that the balance would be settled in monthly installments alongside a 5% annual interest, later revised to PHP 5,000.00 monthly with 5.5% interest.

Maritime consistently paid until February 1961 but encountered financial difficulties, leading to a failed payment in March 1961. Despite a request for a moratorium, Myers Building Co., Inc. declined and subsequently demanded the unpaid installments on May 16, 1961, eventually leading to the cancellation of the deed of conditional sale and demand for possession of the properties on June 5, 1961.

In this light, Luzon Brokerage Co., Inc., finding itself in uncertainty regarding to whom it should pay the rentals, filed an interpleader action against both Maritime Building Co., Inc. and Myers Building Co., Inc., depositing the contested rentals in court.

### Issues:
1. Whether the Maritime Building Co., Inc. breached the contract by failing to pay the installments.
2. Whether Myers Building Co., Inc. was entitled to cancel the contract extrajudicially.
3. Whether the interpleader action filed by Luzon Brokerage Co., Inc. was appropriate under the circumstances.

### Court’s Decision:
The Supreme Court held that Maritime Building Co., Inc. indeed breached the contract by failing to continue the monthly payments as stipulated. The Court found that Maritime’s deliberate non-payment was intended to force Myers Building Co., Inc. into settling a separate unrated liability. Consequently, Myers was within its rights to cancel the contract extrajudicially, given the explicit provision in the contract allowing for such action without need for judicial decree, especially when Maritime failed to vacate the property voluntarily.

Furthermore, the Supreme Court found the interpleader action filed by Luzon Brokerage Co., Inc. to be valid and justified since Luzon faced real uncertainty as to whom the rentals should be paid, reflective of its position to avoid wrongful payment amidst the dispute between Maritime and Myers.

### Doctrine:
The case reaffirms the doctrine that parties to a contract must act in good faith and that non-compliance of contractual obligations entitles the aggrieved party to seek rescission or resolution of the contract. It also holds that extrajudicial resolution of contracts is permissible under Philippine law when the contract itself provides for such a mechanism and that interpleader is a suitable remedy when a stakeholder faces conflicting claims.

### Class Notes:
– Essential elements of breach of contract, including the necessity for parties to act in good faith.
– Validity and enforceability of contractual provisions allowing for extrajudicial termination of contracts.
– Appropriateness of interpleader actions in situations of uncertainty on part of a stakeholder due to conflicting claims.

**Legal Statutes Cited:**
– Civil Code of the Philippines, particularly regarding contracts, obligations, and breach thereof.
– The principle that judicial action for the rescission of a contract is not necessary where the contract provides for its revocation upon violation of its terms.

### Historical Background:
The case reflects the legal complexities arising from conditional sales agreements and the importance of clear contract terms, especially regarding payment obligations and the right to cancel the agreement. It underscores the judiciary’s role in upholding contractual agreements and ensuring justice by considering historical contractual relationships and the conduct of parties in fulfilling their obligations.


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