PILIPINAS BANK AS SUCCESSOR-IN-INTEREST OF AND/OR IN SUBSTITUTION TO, THE MANUFACTURERS BANK AND TRUST COMPANY, PETITIONER-APPELLANT, VS. INTERMEDIATE APPELLATE COURT (FOURTH CI…

This is an appeal by certiorari from the Decision^[1]
of the respondent court dated May 31, 1984 in CA-G.R. CV No. 67205 entitled
“Jose W. Diokno and Carmen I. Diokno, plaintiffs-appellees, vs.
The Manufacturers Bank and Trust Company, defendant-appellant” which
affirmed the decision^[2]
of the Court of First Instance of Rizal (Pasig Branch XXI) in Civil Case No. 19660, the dispositive portion of which reads:

“WHEREFORE, judgment is rendered in favor of the plaintiffs
and against the defendant, ordering the defendant Manufac­turers Bank &
Trust Company:

“1.     To deliver to the
plaintiffs the parcel of land described in Contract to Sell No. VV-18-(a) in
the total area of 5,936 square meters and to execute in their favor the
necessary deed of absolute sale therefor;

“2.     To pay the sum of
P556,160.00 less the amount due
on the contract (i.e., the un­paid installments from December, 1966 until the
contract would have been fully paid toge­ther with interest thereon up to March 25, 1974) with legal interest
on said balance from April 22, 1974
until the same is fully paid;

“3.     P50,000.00 by way of
moral damages;

“4.     P50,000.00 by way of
exemplary damages;

“5.     Ten per cent (10%) of
the judgment by way of attorney’s fees; and

“6.  Costs of suit.

SO ORDERED”

(Rollo pp.
14-15)

The following are the
undisputed facts of the case:

1. On April 18, 1961, Hacienda Benito, Inc. (peti­tioner’s
predecessor-in-interest) as vendor, and private respondents, as vendees
executed Contract to Sell No. VV-18 (a) (Exh. A) over
a parcel of land with an area of 5,936 square meters of the Victoria Valley
Subdivision in Antipolo, Rizal,
subject to the following terms and conditions, among others, relevant to this
petition:

(a)  
The total contract price for the
entire 5,936 square-meter-lot was P47,488.00;

(b)   Of the total sum, an amount of P12,182.00 was applied thereto so as to
reduce the balance on the principal to P35,306.00;

(c)   The aforesaid balance, together with the stipu­lated interest of 6% per
annum, was to be paid over a period of 8-1/2 years starting on May 1, 1961 at a
monthly installment of P446.10 until fully paid–although this monthly
installment was later adjusted to the higher amount of P797.86, starting on
April 1, 1965;

(d)   Upon complete payment by the vendee of the total price of the lot the
vendor shall execute a deed of sale in favor of the vendee;

(e)   The contract shall be considered automatically rescinded and cancelled
and of no further force and effect upon failure of the vendee  to
pay when due, three or more consecutive installments
as stipulated therein or to comply with any of the terms and conditions
thereof, in which case the vendor shall have right to resell the said parcel of
land to any person interested, forfeiting payments made by the vendee as
liquidated damages.

2.  On July 27, 1965, petitioner sent to private
respondents a Statement of Account (Exh. F-1)
requesting remittance of installment arrears showing partial payments for the
month of April 1965 and May 1965 and
complete default for June, July and August, 1965;

3.  Likewise, on August 31, 1965, petitioner sent to
private respondents another Statement of Account with the ad­ditional entries of interests and the incoming
installment for September, 1965;

4.  In partial compliance
with the aforesaid Statements of Account, private respondents paid on September 3, 1965 the sum of P1,397.00
which answers for the installments for the months of June 1965 to August 1965;

5.  On March 17, 1967, petitioner sent private res­pondents
a simple demand letter showing a delinquency in their monthly amortizations for
19 months (Exh. 9);

6.  On April 17, 1967,
petitioner again sent private respondents a demand letter showing total arrearages
of 20 months as of April 1965, but this time advising that un­less they up-date
their installment payments, petitioner shall be constrained to avail of the
automatic rescission clause (Exh. 10);

7.  On May 17, 1967, private
respondents made a partial payment of P2,000.00 with the request for an
extension of 60 days from May 17, 1967 within which to up-date their account (Exh. 10-a);

8.  On July 17, 1967, private respondents wrote a letter
to petitioner asking another extension of sixty (60) days to pay all their
arrearages and update their payments under Contract No. VV-18(a);

9.  On September 18, 1967,
private respondents paid P5,000.00 as partial payment and requested an
extension of another 30 days from September 18, 1967 within which to up-date their account (Exh.
10-c);

10. On October 19, 1967,
however, private respondents failed to update their arrearages and did not
request for any further extension of time within which to update their account;

11. After almost three (3) years, or on July 16, 1970, private
respondents wrote a letter to petitioner requesting for a Statement of Account
as of date in arrears and interests (Exh. 10-d), to
which petitioner made a reply on July 22, 1970 (Exh.
11);

12. On May 19, 1971,
petitioner wrote a letter to private respondents, reminding them of their
balance which will be due on the 31st instant (Exh.
J);

13. More than two (2) years from May 19, 1971 or on July 5, 1973, private respondents wrote a letter to peti­tioner
expressing their desire to fully settle their obli­gation, requesting for a
complete statement of all the balance due including interests;

14. On March 14, 1974, private respondents
wrote a letter reiterating their request in their letter dated July 5, 1973, which has not been
complied with despite several follow-ups (Exh. O);

15. On March 25, 1974, private respondent Carmen I. Diokno went to see the Chairman of petitioner’s Board of
Directors on the matter informing him that she had a buyer who was ready to
purchase the property;

16. On March 27, 1974, petitioner wrote a letter to private
respondents, informing them that the contract to sell had been
rescinded/cancelled by a notarial act, to which
letter was annexed a “Demand for Rescission of Contract” notarized on
March 25, 1974 (Exh. 12);

17. In view of the foregoing, private respondents filed a
Complaint for Specific Performance with Damages to compel petitioner to execute
a deed of sale in their favor, and to deliver to them the title of the lot in
question.

18.           Petitioner
filed an Answer with counterclaim for damages in the form of attorney’s fees,
claiming that Contract to Sell No. VV-18 (a) has been automatically rescinded
or can­celled by virtue of private respondents’ failure to pay the installments
due in the contract under the automatic rescis­sion clause.

19.           After trial,
the lower court rendered a decision in private respondents’ favor, holding that
petitioner could not rescind the contract to sell, because:

(a)  petitioner waived the automatic rescission
clause by accepting payment on September 1967, and by sending letters
advising  private respondents of the
balances due, thus, looking forward to receiving payments thereon;

(b)  in any event, until May 18, 1977 (when petitioner made arrangements
for the acquisition of additional 870 square meters) petitioner could not have
delivered the entire area contracted for, so, neither could private respondents
be liable in default, citing Art. 1189 of the New Civil Code.  (Decision pp. 141-148, Amended Record on Appeal).

Said decision was
affirmed on appeal.

Hence, this Petition For
Review on Certiorari, raising the main issue of whether or not the
Contract to Sell No. VV-18(a) was rescinded or cancelled, under the automatic
rescis­sion clause contained therein.

We find the petition meritless.  While it
is true that in the leading case of Luzon Brokerage Co., Inc. vs. Maritime
Building Co., Inc. and Myers Building Co., 43 SCRA 93 the Supreme Court
reiterated among other things that a contractual provision allowing
“automatic rescission” (without prior need of judicial rescission,
resolution or 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, still in the instant
case there is 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”.

WHEREFORE the assailed decision is hereby AFFIRMED but the actual damages are
hereby reduced to P250,000.00 (the profit private respondents could have earned
had the land been delivered to them at the time they were ready to pay all
their arrearages) minus whatever private respondents still owe the petitioner
(with the stipulated 6% annual interest up to March 25, 1974) as a result of
the contract.

SO ORDERED.

Fernan, (Chairman), Gutierrez, Jr.,
Padilla, and Cortes, JJ., concur.

Bidin, J., no part. I participated in the appealed decision of the Court of
Appeals.

^[1]
Penned by Justice Porfirio V. Sison
concurred in by Justices Abdulwahid A. Bidin, Marcelino R. Veloso, and Desiderio P. Jurado.

^[2]
Penned by Judge Gregorio G. Pineda.