G.R. No. 75364 November 23, 1988 The Trial Court's judgment went against Layug.

The Trial Court's judgment went against Layug. It declared the contract of conditional sale
cancelled, and forfeited in Gabuya's favor all payments made by Layug, considering them as
ANTONIO LAYUG, petitioner, rentals for the 12 lots for the period from the perfection of the contract in 1978 to June 11, 1981,
vs. besides requiring him to pay attorney's fees.   The judgment was, on appeal, affirmed by the
3

INTERMEDIATE APPELLATE COURT and RODRIGO GABUYA, respondents. Court of Appeals, except that it made the application of the forfeited payments, as rentals,
extend up to the date of its decision: August 30, 1985.  4

Francisco Ma. Garcia for petitioner.

The Appellate Court overruled Layug's claim that the contract had not fixed the date for the
Moises F. Dalisay, Sr. for private respondent. payment of the third and last installment and consequently, he could not be considered to have
defaulted in the payment thereof. A reading of the contract immediately makes possible the
determination of the due dates of each yearly installment intended by the parties; the first, on
October 4, 1978, the date of execution of the contract; the second, after 12 months or 1 year
"from the signing of the contract/agreement," or on October 5, 1979, and the third, or last, after
NARVASA, J.: "24 months from ... (such) signing," or on October 5, 1980." That it was so understood by Layug
is established by the evidence. As observed by the Court of Appeals, when Layug "paid the first
Involved in the appellate proceedings at bar is a contract for the purchase on installments by Antonio Layug of twelve (12) lots owned
by Rodrigo Gabuya, situated at Barrio Bara-as, Iligan City. The contract, entered into on October 4, 1978, set the price for the lots at (second, actually) yearly installment of P40,000.00 on January 24, 1980, or three (3) months and
P120,000.00 payable in three (3) yearly installments, viz: twenty (20) days beyond October 4, 1979, he paid an additional amount of P800.00 as interest. If
he did not agree that the first (second) installment was due on October 4, 1979, it puzzles Us
1. P40,000.00, Philippine Currency, upon the signing of this agreement/contract. why he had to pay an additional amount of P800.00 which was included in the receipt, Exhibit
'6'." 
5

2. Another P40,000.00 after twelve (12) months or one year from the signing of
the contract/agreement. Correctly overruled, too, was Layug's other claim that there was some doubt as to the amount of
the balance of his obligation—by his computation he only owed P30,000.00, since there was an
3. The balance of P40,000.00 after 24 months or two years from the signing of advance payment of P10,000.00 made by him for which he should be credited—and this had to
the contract/agreement. be first resolved before his obligation to pay the last installment could be exigible. The Court of
Appeals declared this to be but a lame excuse for his delinquency; the P10,000.00 was in truth
The contract also provided for the automatic cancellation of the contract and forfeiture of all part payment of the first installment of P40,000.00; for had it been otherwise, the document of
installments thus far paid, which would be considered as rentals for the use of the lots, to wit: sale would have reflected it as a separate and distinct payment from the first installment of
P40,000.00 paid upon the signing of the agreement; but Layug subscribed to the contract without
asking for its revision. According to the Court of Appeals, "If the theory of the defendant-
... (S)hould the vendee fail to pay any of the yearly installments when due or
appellant that the P10,000.00 was separate and distinct from the down payment of P40,000.00,
otherwise fail to comply with any of the terms and conditions herein stipulated,
then the balance as set forth in subpars. 2 and 3 quoted above should have been
then this deed of conditional sale shall automatically and without any further
(correspondingly amended, e.g.,) P35,000.00 each, or a total of P70,000.00 for both
formality, become null and void, and all sums so paid by the vendee by reason
installments, instead of P40,000.00 per installment, or a total of P80,000.00."  6

thereof, shall be considered as rentals and the vendor shall then and there be
free to enter into the premises, take possession thereof or sell the properties to
any other party.  1
Prescinding from the well established and oft applied doctrine that the findings of fact of the
Court of Appeals are conclusive and generally binding even on this Court,   nothing in the record
7

has been brought to our attention to justify modification, much less reversal, of those findings.
Layug paid the first two annual installments, totalling P80,000.00. But he failed to pay the last
installment of P40,000.00, which fell due on October 5, 1980. Gabuya made several informal
demands for payment; and when all these proved unavailing, he made a formal written demand Petitioner adverts to the stipulation in his contract (a) granting him, as vendee, a "30 days grace
therefor under date of April 18, 1981 which was sent to and received by Layug by registered period within which to pay" any yearly installment not paid within the time fixed therefor, and (b)
mail. When this, too, went unheeded, Gabuya finally brought suit in the Court of First Instance of declaring him liable, in the event of his failure to pay within the grace period, "for interest at the
Lanao del Norte for the annulment of his contract with Layug and for the recovery of damages. 2
legal rate." He argues that the stipulation indicates that rescission was not envisioned as a
remedy against a failure to pay installments; such failure was not ground for abrogating the
contract but merely generated liability for interest at the legal rate. The argument is and makes possible the grant of some measure of relief to him under the circumstances of the
unimpressive. It would negate the explicit provision that the failure to pay any of the yearly case.
installments when due (or to comply with any other covenant) would automatically render the
contract null and void. The stipulations of a contract shall be interpreted together, the law R.A. 6552 governs sales of real estate on installments. It recognizes the vendor's right to cancel
says,   attributing to the doubtful ones that sense which may result from all of them taken jointly.
8
such contracts upon failure of the vendee to comply with the terms of the sale, but imposes,
The grace period clause should be read conjointly with the stipulation on rescission, and in such chiefly for the latter's protection, certain conditions thereon. We have had occasion to rule that
a manner as to give both full effect. It is apparent that there is no such inconsistency between "even in residential properties the Act" recognizes and reaffirms the vendor's right to cancel the
the two as would support a hypothesis that one cannot be given effect without making the other contract to sell upon breach and nonpayment of the stipulated installments. ..."  13

a dead letter. The patent and logical import of both provisions, taken together, is that when the
vendee fails to pay any installment on its due date, he becomes entitled to a grace period of 30 The law provides inter alia   that "in all transactions or contracts involving the sale or financing of
14

days to cure that default by paying the amount of the installment plus interest; but that if he real estate on installment payments, including residential condominium apartments, ...,   where
15

should still fail to pay within the grace period, then rescission of the contract takes place. It was the buyer has paid at least two years of installments, the buyer is entitled to the following rights
for the judicial affirmation of this plain proposition that the private respondent instituted the in case he defaults in the payment of succeeding installments:
original action for annulment which has given rise to this appeal.
[Grace Period]
Layug posits that, at the very least, he is entitled to a conveyance of at least 8 of the 12 lots
subject of the conditional sale, on the theory that since the total price of the 12 lots was
(a) To pay, without additional interest, the unpaid installments due within the total
P120,000.00, each lot then had a value of P10,000.00 and, therefore, with his P80,000.00, he
grace period earned by him which is hereby fixed at the rate of one month grace
had paid in full the price for 8 lots. In support, he invokes our earlier rulings in Legarda
period for every year of installment payments made: Provided , That this right
Hermanos v. Saldaña   and Calasanz v. Angeles.   The cited precedents are however
9 10

shall be exercised by the buyer only once in every five years of the life of the
inapplicable. In Legarda Hermanos, the contract of sale provided for payment of the price of two
contract and its extensions, if any;
(2) subdivision lots at P1,500.00 each, exclusive of interest, in 120 monthly installments, and at
time of default, the buyer had already paid P3,582.00, inclusive of interest; and in Calasanz, the
agreement fixed a price of P3,720.00 with interest at 7% per annum, and at time of default, the [Refund of "Cash Surrender Value"]
buyer had paid installments totaling P4,533.38, inclusive of interest. Upon considerations of
justice and equity and in light of the general provisions of the civil law, we resolved in Legarda (b) If the contract is cancelled, the seller shall refund to the buyer the cash
Hermanos to direct the conveyance of one of the lots to the buyer since he had already paid surrender value of the payments on the property equivalent to fifty percent of the
more than the value thereof, and in Calasanz, to disallow cancellation by the seller and direct total payments made and, after five years of installments, an additional five per
transfer of title to the buyer upon his payment of the few installments yet unpaid. In both said cent every year but not to exceed ninety per cent of the total payments made;
cases, we strove to equitably allocate the benefits and losses between the parties to preclude Provided, That the actual cancellation of the contract shall take place after thirty
undue enrichment by one at the expense of the other; and by this norm, Layug cannot be days from receipt by the buyer of the notice of cancellation or the demand for
permitted to claim that all his payments should be credited to him in their entirety, without regard rescission of the contract by a notarial act and upon full payment of the cash
whatever to the damages his default might have caused to Gabuya. surrender value to the buyer.

It is not however possible, in any event, to apply the rulings in Legarda In the case at bar, Layug had paid two (2) annual installments of P40,000.00 each. He is
Hermanos and Calasanz to the case at bar; i.e., to resort to principles of equity and the general deemed therefore, in the words of the law, to have "paid at least two years of installments." He
provisions of the Civil Code in resolution of the controversy. That was done in the cited cases therefore had a grace period of "one month .. for every year of installment payments made," or
because there was at then no statute specifically governing the situation. It was not so as two (2) months (corresponding to the two years of installments paid) from October 5, 1980 within
regards the instant case. At the time of the execution of the contract in question, and the breach which to pay the final installment. That he made no payment within this grace period is plain from
thereof, there was a statute already in force and applicable thereto, Republic Act No. the evidence. He has thus been left only with the right to a refund of the "cash surrender value of
6552.   This statute makes unnecessary if not indeed improper, a resort to analogous provisions
11 the payments on the property equivalent to fifty percent of the total payments made," or
of the Civil Code. It also precludes a resort to principles of equity it being axiomatic that where P40,000.00 (i.e., ½ of the total payments of P80,000.00). Such refund will be the operative act
<äre||anº•1àw> 

there is an adequate remedy at law available to the parties, equity should not come into to make effective the cancellation of the contract by Gabuya, conformably with the terms of the
play.   And it allows a mitigation of the impact of the stringent contractual provisions on Layug
12
law. The additional formality of a demand on Gabuya's part for rescission by notarial act would a) SEVEN HUNDRED THOUSAND PESOS (P700,000.00) as
appear, in the premises, to be merely circuitous and consequently superfluous. down payment, to be paid by Odyssey as follows:

WHEREFORE, the decision of the Court of Appeals is AFFIRMED particularly in so far as it (i) ONE HUNDRED THOUSAND (P100,000.00)
authorizes and sanctions the cancellation by private respondent Gabuya of his contract of sale PESOS upon signing of this Contract;
with petitioner Layug, but is MODIFIED only in the sense that such cancellation shall become
effective and fully operative only upon payment to the latter's satisfaction of the "cash surrender (ii) TWO HUNDRED THOUSAND PESOS
value" of his payments, in the sum of P40,000.00. No costs. (P200,000.00), sixty (60) days from and after the
date of this Contract. The said amount shall be
G.R. No. 107992 October 8, 1997 covered by a check postdated sixty (60) days after
the date of this Contract issued and delivered by
ODYSSEY PARK, INC., petitioner, Odyssey to Bancom upon the signing of this
vs. Contract; and
HONORABLE COURT OF APPEALS and UNION BANK OF THE PHILIPPINES, respondents.
(iii) FOUR HUNDRED THOUSAND PESOS
(P400,000.00), ninety (90) days from and after the
date of this Contract. The said amount shall be
VITUG, J.: covered by a check postdated ninety (90) days
after the date of this Contract issued and
Assailed in the instant petition for review on certiorari is the decision, dated 07 September 1992, delivered by Odyssey to Bancom upon signing of
of the Court of Appeals affirming that of the Regional Trial Court, Branch 152, of Pasig, Metro this Contract.
Manila, which has adjudged the contract to sell entered into between petitioner and private
respondent as having been validly rescinded. b) The balance of TWO MILLION EIGHT HUNDRED
THOUSAND PESOS (P2,800,000.00) shall be paid by Odyssey
The Court adopts the factual findings, hereunder narrated, of the appellate court: to Bancom within a period of three (3) years by twelve (12) equal
quarterly amortizations of P298,346.08 each, inclusive of the
interest and service charge set forth in Section 3 hereof, the first
1. On November 4, 1981, Bancom Development Corporation and plaintiff- amortization to become due and payable four (4) months and
appellant Odyssey Park, Inc., entered into a Contract to Sell (Exhibit B-1), fifteen (15) days after the date of this Contract, and the
whereby the former agreed to sell to the latter the parcel of land with an area of succeeding amortizations at the end of each quarter thereafter
8,499 square meters situated in Baguio City and the structure constructed until the balance of the purchase price of the Property is paid in
thereon identified as the Europa Clubhouse. full.

2. Subsequently on February 11, 1982, in a document entitled "Separate Deed of 4. It was also agreed in Section 5 of the Contract to Sell that:
Conveyance" (Annex F of the Affidavit of Carmelito A. Montano, pages 152-154
of the Record), Bancom confirmed and acknowledged that it has ceded,
transferred and conveyed in favor of defendant-appellee Union Bank all the Sec. 5: In the event Odyssey fails to pay any portion of the
rights, title and interest it has over the property. purchase price of the Property or the interest and service charge
thereon as and when it falls due, or otherwise fails to comply with
or violate any of the provisions of this Contract, Bancom may at
3. The purchase price of P3,500,000.00 was, per Section 2 of the Contract to its absolute discretion cancel and rescind this Contract and
Sell, agreed to be paid as follows: declare the same as null, void and no further force and effect by
serving on Odyssey a written notice of cancellation and
rescission thirty (30) days in advance.
In the event this Contract is cancelled and rescinded as provided 8. On the same date, January 4, 1982, Bancom, through its
in this Section, all the amounts which the Odyssey may have paid Senior Vice-President, wrote Europa Condominium Villas, Inc. a
to Bancom pursuant to and in accordance with this Contract shall letter, Exhibit H, explaining that the Europa Center and the parcel
be forfeited in favor of Bancom as rentals for the use and of land on which it is built are not part of the Europa
occupancy of the Property and as penalty for the breach and Condominium Villas, Inc.
violation of this Contract. Furthermore, all the improvements
which Odyssey may have introduced on the Property shall form 9. On March 29, 1983, defendant-appellee Union Bank wrote
part thereof and belong to Bancom without right of plaintiff-appellant Odyssey Park, Inc., a letter (Annexes F, F-1 of
reimbursements to Odyssey; Provided, that Bancom may at its the Supportive Affidavit of Nicefero S. Agaton, pp. 317-318 of the
absolute discretion instead require Odyssey to remove such record) demanding payment of the overdue account of
improvements from the Property at expense of Odyssey. P2,193,720.91, inclusive of interest and service charges,
otherwise the contract to sell would be cancelled and rescinded;
5. On November 26, 1981, twenty-two (22) days after the
execution of the contract plaintiff-appellant paid the amount of 10. On April 12, 1983, plaintiff-appellant Odyssey wrote
P100,000.00. Other payments, also beyond the stipulated period, defendant-appellee Union Bank a letter (Annex F-2 of the
(see Odyssey Park, Inc., Statement of Application of Payment, Supportive Affidavit of Nicefero S. Agaton, pp. 319-320 of the
Annex A of the Supportive Affidavit of Nicefero S. Agaton, p. 309 record) proposing a manner of settlement which defendant-
of the record) in the total sum of P110,000.00 were made as appellee Union Bank answered (Annex F-3, p. 321 of the record)
follows: asking for more details of the proposal. The series of
communications led to the drafting of a Memorandum of
September 22, 1982 P20,000.00 Agreement (Exhibit N) which was not, however, signed by the
April 13, 1983 10,000.00 parties.
April 30, 1983 10,000.00
July 20, 1983 50,000.00 11. On January 6, 1984, defendant-appellee Union Bank, through
September 19, 1983 20,000.00. counsel, wrote plaintiff-appellant Odyssey Park, Inc., a letter
(Exhibit O) formally rescinding and/or cancelling the contract to
6. On December 23, 1981, Mr. Vicente A. Araneta, President of sell and demanding that plaintiff-appellant vacate and peaceably
Europa Condominium Villas, Inc., wrotes defendant-appellee surrender possession of the premises.
Union Bank, a letter, Exhibit E, stating that the Europa Center
was reported to prospective buyers as well as government 12. On or about August 20, 1984, for failure of plaintiff-appellant
authorities as part of common areas and amenities under the to vacate, defendant-appellee filed a case for illegal detainer and
condominium concept of selling to the public and for that reason damages (Exhibit P).
wants to make it of record that Europa Condominium Villas, Inc.,
questions the propriety of the contract to sell. 13. On July 5, 1988, plaintiff-appellant filed this case for
"Declaration of the Nullity of the Rescission of the Contract to Sell
7. On January 4, 1982, plaintiff-appellant Odyssey Park, Inc., With Damages".  (Emphasis ours.)
1

through its Chairman of the Board, Mr. Carmelito A. Montano,

wrote Bancom Development Corp. a letter, Exhibit F, stating that After the trial, the lower court rendered judgment in favor of private respondent, declaring the
it acknowledges receipt of a copy of the letter-protest from the Contract to Sell of 04 November 1981 to have been properly rescinded; dismissing the complaint
Europa Condominium Villas, Inc., and that in the meantime that for being frivolous and unfounded; and ordering the plaintiff to pay the defendant P300,000.00 by
there is a question on the propriety of the sale, it is way of attorney's fees and litigation expenses. The judgment, as so heretofore stated, was
stopping/withholding payments of the amortization. affirmed by respondent appellate court.
Its motion for reconsideration having been denied on 22 November 1992, petitioner corporation condominium apartments, excluded are industrial lots, commercial buildings and
seasonably filed the present petition questioning the decision of the appellate court. sales to tenants under R.A. 3844 as amended. The property subject of the
contract to sell is not a residential condominium apartment. Even on the basis of
The Court rules for affirmance of the appealed decision. the letter of Mr. Vicente A. Araneta, Exhibit E, the building is merely "part of
common areas and amenities under the Condominium concept of selling to the
The issues raised by petitioner which generally are factual in nature and previously taken up by public". The property subject of the contract to sell is more of a commercial
the appellate court cannot in this instance be freely examined all over again. It is not the function building.4

of the Supreme Court to analyze and to weigh anew the evidence already passed upon by the
Court of Appeals. The authority of this Court is confined to correcting errors of law, if any, that Neither would Article 1191 of the Civil Code govern. Article 1191, in full, provides:
might have been committed below.  Absent the recognized exceptions, which are not here
2

extant, factual findings of the Court of Appeals are conclusive. Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case
one of the obligors should not comply with what is incumbent upon him.
Hardly, in this case, can it be said that there was no basis at all for debunking the contention of
petitioner to the effect that because Europa Condominium Villas, Inc., had questioned the right of The injured party may choose between the fulfillment and the rescission of the
Bancom to sell the property, petitioner thereby was enfranchised to suspend or withhold obligation, with the payment of damages in either case. He may also seek
payment to Bancom. Respondent appellate court, seconding the findings of the trial court, rescission, even after he has chosen fulfillment, if the latter should become
quoted the latter; thus: impossible.

First, the title of Union Bank over the property (TCT No. T-33725) is clear without The Court shall decree the rescission claimed, unless there be just cause
any encumbrance or adverse claim. Second, Europa condominium Villas, Inc. authorizing the fixing of a period.
has not earnestly questioned Bancom's right to sell. If Europa is in earnest, it
should have filed the necessary action in Court to protect its right to a valuable This is understood to be without prejudice to the rights of third persons who have
property. Third, Europa would not have offered to buy the property from Bancom acquired the thing, in accordance with articles 1385 and 1388 and the Mortgage
for P6 Million if it was claiming ownership over it. Fourth, the letters which plaintiff Law.
claim to be proof of Europa's persistence in questioning Bancom's right to sell the
property do not really question Bancom's right to do so but are actually money In a contract to sell, the payment of the purchase price is a positive suspensive condition, the
claims of Europa Condominium Villas, Inc. against Odyssey for unpaid water bills failure of which is not a breach, casual or serious, but a situation that prevents the obligation of
and other services rendered by Europa. 3
the vendor to convey title from acquiring an obligatory force.  The breach contemplated in Article
5

1191 of the Code is the obligor's failure to comply with an obligation already extant, not a failure
The only real legal issue, it appears to the Court, is whether or not the rescission of the contract of a condition to render binding that obligation. In any event, the failure of petitioner to even
to sell by private respondent accords with the requirements of Republic Act ("R.A.") No. 6552, complete the downpayment stipulated in the contract to sell puts petitioner corporation far from
also known as "An Act to Protect Buyers of Real Estate on Installment Payments" which, good stead in urging that there has been substantial compliance with the contract to sell within
petitioner insists, requires a cancellation or rescission of the contract by means of a notarial act. the meaning of Article 1191 of the Code.
A mere letter (dated 06 January 1984), or short of such a notarial act, according to petitioner,
would be utterly deficient. So, too, must Article 1592 of the Civil Code be held inapplicable. This law states:

Unfortunately for petitioner, the invocation of Republic Act No. 6552 is misplaced. This law, Art. 1592. In the sale of immovable property, even though it may have been
which normally applies to the sale or financing of real estate on installment payments, excludes stipulated that upon failure to pay the price at the time agreed upon the
"industrial lots, commercial buildings, and sales to tenants under R.A. No. 3844." The appellate rescission of the contract shall of right take place, the vendee may pay, even
court has thus aptly said: after the expiration of the period, as long as no demand for rescission of the
contract has been made upon him either judicially or by a notarial act. After the
While the law applies to all transactions or contracts involving the sale or demand, the court may not grant him a new term.
financing of real estate on installment payments, including residential
 It is clear that the above provisions contemplate neither a conditional sale nor a contract
to sell but an absolute sale.
6

What must instead be held to rule in the case at bar is the agreement of the parties themselves.
Section 5 of their contract to sell reads:

Sec. 5: In the event Odyssey fails to pay any portion of the purchase price of the
Property or the interest and service charge thereon as and when it falls due, or
otherwise fails to comply with or violate any of the provisions of this Contract,
Bancom may at its absolute discretion cancel and rescind this Contract and
declare the same as null, void and no further force and effect by serving on
Odyssey a written notice of cancellation and rescission thirty (30) days in
advance.

In the event this Contract is cancelled and rescinded as provided in this Section,
all the amounts which the Odyssey may have paid to Bancom pursuant to and in
accordance with this Contract shall be forfeited in favor of Bancom as rentals for
the use and occupancy of the Property and as penalty for the breach and
violation of this Contract. Furthermore, all the improvements which Odyssey may
have introduced on the Property shall form part thereof and belong to Bancom
without right of reimbursements to Odyssey; Provided, that Bancom may at its
absolute discretion instead require Odyssey to remove such improvements from
the Property at expense of Odyssey. 7

It is a familiar doctrine in the law on contracts that the parties are bound by the
stipulations, clauses, terms and conditions they have agreed to,  the only limitation being
8

that these stipulations, clauses, terms and conditions are not contrary to law, morals,
public order or public policy.  Not being repugnant to any legal proscription, the
9

agreement entered into by the parties herein involved must be respected and held to be
the law between them.

WHEREFORE, the decision appealed from is AFFIRMED in toto. Costs against petitioner.

SO ORDERED.