FACTS: In August 1963, parents of plaintiffs (William Cole Sr. and Angelina Cole) entered into an agreement to buy and sell a parcel of land with spouses Angel Gregorio and Potenciana Casuga. Said lot was priced at P6,000 but P1,000 was paid in advance by Cole and the balance of P5,000 was to be paid in full after the preliminary survey of the land by a private surveyor for the purpose of ascertaining the exact size of the lot.
In the same month, Salanga, a land surveyor, was hired. He conducted a survey of the land on September 24 and October 7, 1963 and submitted his survey plans to the Bureau of Lands on June 22, 1964. Salanga left for the US. He received the approval only on June 29, 1965.
Cole Sr. wrote two demand letters to Salanga to speed up the process (October 20, 1964 and April 1, 1965).
William Cole Sr. died on April 12, 1965 Angel Gregorio died on June 3, 1965 Angelina Cole died on January 10, 1966
May 31, 1966 plaintiffs Cole found out that their parents had an unpaid balance on the subject property; they tried to pay off the balance but discovered that the property was transferred to Gregorios daughter, Josefina Hufano
Gregorios argument: When Cole discovered that the lot only contained an area of 23,408 square meters instead of 32,976 as stated in the Tax Declaration, Cole rescinded the contract and Gregorio returned the P1,000 advanced payment. Cole never took possession of the land nor registered it under their names.
ISSUE: W/N the rescission is valid HELD: NO. In the instant case, the Agreement to Buy and Sell constitutes a conditional obligation (Art. 1181) since it clearly stipulates that the balance will be paid AFTER a surveyor has ascertained the exact size of the subject property. The accomplishment, then, of said survey gives rise to the acquisition of rights by the contracting party (Cole) and the acquisition of said rights depends upon the results of the survey. (SUSPENSIVE OBLIGATION)
If the contract was really rescinded and the P1,000 returned to Cole a few days after the surveyor was hired, William Cole would not have written demand letters to Salanga to finish the survey. Furthermore, no receipt was presented by Potenciana proving their allegations.
The prescriptive period cannot be counted from the date of execution of the deed of promise to buy and sell where it was stipulated that the balance of the price shall be paid after the results of the land survey. According to the deed of promise to buy and sell, the balance of P5,000 of the purchase price of subject property was to be paid in full after the preliminary survey of the land by a private surveyor, for the purpose of verifying whether or not said parcel of land contains the same area as declared in the Tax declaration. Because of this stipulation, it cannot be said that the prescriptive period of the petitioners action begins on the date of they entered into the agreement.
JACINTO V KAPARAZ 209 SCRA 246 (1992)
FACTS: Petitioner Jacinto and respondent Kaparaz entered into an agreement in which Kaparaz agreed to sell and convey to Jacinto a parcel of land consisting of 600 square meters for a total amount of P1,800. Based on the agreement, Jacinto will pay P800 as down payment upon execution of the agreement and the balance of P1,000 shall be paid in 10 monthly installments at the rate of P100 to DBP (to take care of the existing loans Kaparaz had with the said bank) beginning May 10, 1966.
Paragraph 9 of the same agreement also stipulates that the final deed of absolute sale will be executed as soon as the estate of the Narcisa Kaparaz is settled but not later than March 31, 1967
Upon the execution of the agreement, Jacinto paid the down payment of P800 and was in placed in possession of the subject property.
Jacintos schedule of payment: 1 st payment: P400 paid to DBP under Domingo Kaparaz account 2 nd payment: P200 on November 29, 1966 3 rd payment: P300 on December 5, 1968 4 th payment: P200 on December 9, 1968
Kaparaz argument: the sale did not materialize because Jacinto failed to fulfill his promise to make timely payments of the stipulated price to DBP (and as a result, Kaparaz failed to secure the release of the mortgage on the said property). They moved for the dismissal of the case and the annulment of sale
ISSUE: W/N respondents are entitled to rescind the agreement HELD: NO. In a contract of sale, the non-payment of the price is a resolutory condition; as such, the remedy of the seller under Art. 1191 is to exact fulfillment or rescind the contract. However, if the object is an immovable property, said article must be read in consonance with Art. 1592: In the sale of immovable property, even though it may have been stipulated that upon failure to pay the price at the agreed upon the rescission of the contract shall of right take place, the vendee may pay even after the expiration of that 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 demand, the court may not grant him a new term.
In the instant case, Kaparaz did not complain about the delay of the payments nor rejected their application to their account. The claim that the payments were applied to a wrong account is untenable. There is nothing in the agreement that stipulates that the unpaid balance should be applied exclusively to the agricultural loan of Kaparaz.
Finally, the delay incurred by Jacinto was but a casual or slight breach of the agreement, which did not defeat the object of the parties in entering into the agreement. A mere breach does not justify rescission. The prompt payment of the monthly amortizations of the unpaid balance of P1,000 was not a condition precedent to the execution of the final deed of sale.
RUSTAN PULP V CA 214 SCRA 665 (1992) FACTS: Petitioner Rustan established a pulp and paper mill in Baloi, Lanao Del Norte in 1966. In March 1967, respondent Lluch (a supplier of pulp wood) proposed to supply raw material to the company. As a result, both parties executed a contract of sale in April 1968, whereby Rustan Pulp agrees to buy from Lluch pulp wood raw material at the price of P30 per cubic meter under the following conditions: 1. Rustan shall have the option to buy form other sellers who are equally qualified and are holding valid license to sell or dispose said material. Likewise, it shall not buy from any other seller whose pulp woods originated from Lluchs lumber and/or firewood 2. Lluch has the priority to supply materials 3. Rustan shall have the right to stop delivery of the said raw materials by the seller when supply becomes sufficient unless the need arises, in which case Lluch is to be given sufficient notice
In the installation of the plants facilities, the technical staff recommended other suppliers. But during the test run of the pulp mill, the machines had technical issues; as a result, the raw material piled up and the supplier of the machinery recommended stopping the deliveries. The suppliers were informed to stop delivers and the letter of similar advice was sent to the suppliers by the petitioners
Lluch sought to clarify the tenor of the letter as to whether stoppage of delivery or termination of the contract of sale was intended, but the query was not answered by Rustan. Meanwhile, Lluch and the other suppliers resumed deliveries after the series of talks between Romeo Vergara (resident manager of Rustan) A complaint for contractual breach was then filed. NOTE: Even after September 30, 1968 (when the letter advising the suppliers to stop delivery was sent), Rustan continued accepting raw materials from other suppliers ISSUE: W/N the stoppage of the deliveries was proper and valid
HELD: NO. Said stipulation in the contract suggests a condition solely dependent upon the will of the petitioners. A purely potestative imposition such as this must be removed from the contract without affecting the rest of the stipulations considering that the condition relates to the fulfillment of an already existing obligation and not to its inception.
It is a truism in legal jurisprudence that a condition which is both potestative and resolutory may be valid, even though the saving clause is left to the will of the obligor as in the case of Taylor vs. Uy Tieng Pao and Tan Liuan. However, in the Taylor case, the factual milieu (that the machinery to be installed in the factory did not arrive in Manila) which provided the condition for unilateral cancellation of the contract suggests that the proviso relates to the birth of the undertaking and not to the fulfillment of an existing obligation.
It is true that the contract talks about the petitioners prerogative but what diminishes the legal efficacy of such right is the condition attached to it, which is dependent exclusively on their will for which reason, the SC held that said stipulation is inoperative pursuant to Art. 1306. It is also very unlikely that the suspension of delivery was merely temporary since the nature of the suspension itself is conditioned upon the petitioners determination of the sufficiency of supplies at the plant.
Lastly, petitioners may not avail of Art. 1267 as they continued accepting deliveries from the suppliers. This conduct will estop Rustan from claiming that the breakdown of the machinery was an extraordinary obstacle to their compliance to the prestation.
AGCAOILI V GSIS 165 SCRA 484 (1988)
FACTS: GSIS approved the application of appellee Agcaoili for the purchase of a house and lot in the GSIS Housing Project in Marikina. Said application was subject to the conditions that he should immediately occupy said house failure to comply would mean revocation of his award. Agcaoili lost no time in occupying the house but he could not stay in it because the house was uninhabitable (no ceiling, stairs, double walling, lighting facilities, water connection, bathroom, toilet, kitchen, drainage). Agcaoili, then, asked a homeless friend (a certain Villanueva) to stay in the premises as a watchman, pending the completion of the construction of the house.
Subsequently, GSIS asked Agcaoili to pay monthly amortizations in the amount of P35.56 and other fees. Agcaoili paid the first monthly amortizations and incidental fees, but refused to make further payments until and unless GSIS completed the housing unit. Thereafter, GSIS cancelled the award and required Agcaoili to vacate the premise. The house and lot was consequently awarded to another applicant. Agcaoili, then, filed before the CFI an action for specific performance and damages. The CFI rendered in favor of Agcaoili. GSIS appealed said judgment.
GSIS argument: 1. Said unit was sold in the condition and state of completion, Agcaoili is deemed to have accepted the same in the condition he found it when he accepted the reward 2. Perfection of the contract of sale between GSIS and Agcaoili was conditioned upon the latters immediate occupancy of the house. Since Agcaoili failed to comply with this condition, no contract was perfected between them 3. Agcaoilis act of placing Villanueva as watchman over the premises without prior or subsequent knowledge or consent of GSIS was a repudiation on the part of Agcaoili of the award and a deprivation of GSIS of reasonable rental value of the property
ISSUE: W/N the cancellation by GSIS of the award in favor of Agcaoili just and proper
HELD: NO.It was the duty of the GSIS, as seller, to deliver the thing sold in a condition suitable for its enjoyment by the buyer for the purpose contemplated. There would be no sense to require the awardee to immediately occupy and live in a shell of a house, structure consisting only of four walls with openings, and a roof. GSIS had an obligation to deliver to Agcaoili a reasonably habitable dwelling in return for his undertaking to pay the stipulated price. Since GSIS did not fulfill that obligation, and was not willing to put the house in habitable state, it cannot invoke Agcaoilis suspension of payment of amortizations as cause to cancel the contract between them. It is axiomatic that In reciprocal obligations, neither party incurs in delay if the other does not comply in a proper manner with what is incumbent upon him.
The clause in the contract the Agcaoili is supposed to occupy said property presupposes that said property is inhabitable. Since GSIS did not fulfill that obligation, and was not willing to put the house in habitable state, it cannot invoke Agcaoilis suspension of payment of amortizations as cause to cancel the contract between them.
Likewise, GSIS cannot blame Agcaoili for the imprecision and vagueness of the contract since it was GSIS which caused the contract to come into being by its written acceptance of Agcaoilis offer to purchase. If there is any ambiguity in the said contract, it should be resolved against the one who prepared it (GSIS) contracts of adhesion.
UNIVERSITY OF THE PHILIPPINES V DE LOS ANGELES 35 SCRA 102 (1970) FACTS: On November 2, 1960, UP and ALUMCO entered into a logging agreement whereby ALUMCO was granted exclusive authority to cut, collect and remove timber from Land Grant beginning December 31, 1965, extendible for a period of 5 years by mutual agreement.
As of December 8, 1964, ALUMCO incurred an unpaid amount of P219,362.94 but despite repeated demands, it failed to pay. UP, then, sent a notice to terminate or rescind the logging agreement. Subsequently, ALUMCO executed an Acknowledgment of Debt and Proposed Manner of Payments on December 9, 1964 with the following stipulations: 3. In the event that the payments called for in Nos.1 and 2 of this paragraph are not sufficient to liquidate the foregoing indebtedness of the DEBTOR in favor of the CREDITOR, the balance outstanding after said payments have been applied shall be paid by the DEBTOR in full no later than June 30, 1965;
5. In the event that the debtor fails to comply with any of its promises, the Debtor agrees without reservation that Creditor shall have the right to consider the Logging Agreement rescinded, without the necessity of any judicial suit
ALUMCO continued its logging operations, but again incurred an unpaid account. On July 19,1965, UP informed ALUMCO that it had, as of that date, considered rescinded and of no further legal effect the logging agreement, and that UP had already taken steps to have another concessionaire take over the logging operation. ALUMCO filed a petition to enjoin UP from conducting the bidding. The lower court ruled in favor of ALUMCO, hence, this appeal.
ISSUE: W/N a court decree is necessary before UP can rescind the contract
HELD: YES. In the first place, UP and ALUMCO had expressly stipulated that upon default by the debtor, UP has the right and the power to consider the Logging Agreement of December 2, 1960 as rescinded without the necessity of any judicial suit. As to such special stipulation and in connection with Article 1191 of the Civil Code, the Supreme Court, stated in Froilan vs. Pan Oriental Shipping Co:
There is nothing in the law that prohibits the parties from entering into agreement that violation of the terms of the contract would cause cancellation thereof, even without court intervention. In other words, it is not always necessary for the injured party to resort to court for rescission of the contract.
The party who deems the contract violated may consider it resolved or rescinded, and act accordingly, without previous court action, but it proceeds at its own risk. For it is only the final judgment of the corresponding court that will conclusively and finally settle whether the action taken was or was not correct in law. But the law definitely does not require that the contracting party who believes itself injured must first file suit and wait for a judgment before taking extrajudicial steps to protect its interest. Otherwise, the party injured by the other's breach will have to passively sit and watch its damages accumulate during the pendency of the suit until the final judgment of rescission is rendered when the law itself requires that he should exercise due diligence to minimize its own damages (Civil Code, Article 2203). PALAY INC V CLAVE 124 SCRA 638 (1983) FACTS: In March 1965, petitioner Palay Inc (through its president Albert Onstott) and private respondent Nazario Dumpit entered into a contract to sell a parcel of land in Antipolo. The sale price was P23,300 with 9% interest per annum, payable with a down payment of P4,660 and monthly installments of P246.42 until fully paid. Said contract provided for automatic extrajudicial rescission upon default in payment of any monthly installment after the lapse of 90 days from the expiration of the grace period of one month, without need of notice and with forfeiture of all installments paid.
Dumpit paid the down payment and several installments amounting to P13,722.50 with the last payment made on December 5, 1967
In 1973, Dumpit wrote petitioner offering to update all his overdue accounts with interest and sought its written consent to the assignment of his rights to Lourdes Dizon. However, Palay Inc informed Dumpit that his contract to sell had long been rescinded pursuant to paragraph 6 of the contract and that the lot had already been resold.
Dumpit filed a complaint letter with NHA for reconveyance or refund. NHA rendered in favor of Dumpit, finding the rescission void in the absence of either judicial or notarial demand
ISSUE: W/N notice or demand is not mandatory under the circumstances and, therefore, may be dispensed with by stipulation in a contract to sell
HELD: As held in previous jurisprudence, the judicial action for rescission of a contract is not necessary where the contract provides that it may be revoked and cancelled for violation of any of its terms or conditions. However, there has to be at least a written notice sent to the defaulter informing him of the rescission, as stressed in the case of UP vs. Delos Angeles.
In Zulueta vs. Mariano, it was held that the extrajudicial rescission has legal effect where the other party does not oppose it. Reciprocal contracts may be made extrajudicially unless successfully impugned in court. If the debtor impugns the declaration, it shall be subject to judicial determination.
In this case, the resolution by petitioners is ineffective and inoperative against Dumpit for lack of notice of resolution. This is later emphasized in Section 3(b) of RA 6551 (An Act to Provide Protection to Buyers of Real Estate on Installment Payments).
The contention that Dumpit had waived his right to be notified pursuant to paragraph 6 of the contract is invalid due to the fact that the contract in question was a contract of adhesion, a standard form of Palay Inc which Dumpit had no freedom to stipulate. A waiver must be certain and unequivocal and intelligently made; such waiver follows only where liberty of choice has been fully accorded. Furthermore, it is a matter of public policy to protect buyers of real estate on installment payments against onerous and oppressive conditions such as waiver of notice.
On the issue of refund, Art. 1385 provides that: Rescission creates the obligation to return the things which were the object of the contract, together with their fruits, and the price with its interest; consequently, it can be carried out only when he who demands rescission can return whatever he may be obliged to restore. Neither sham rescission take place when the things which are the object of the contract are legally in the possession of third persons who did not act in bad faith. In this case, indemnity for damages may be demanded from the person causing the loss
As consequence of the resolution by Palay Inc, rights to the lot should be restored to Dumpit or the same should be replaced by another acceptable lot. Since the subject property had already been sold to a third person and there is no evidence that other lots are still available, Dumpit is entitled to the refund of the installments paid plus interest at 12% computed from the date of the institution of the action.
AGUSTINA LIQUETTE TAN V. C.A. & SPS. SINGSON 175 SCRA 657 (1989)
FACTS: Private respondents Singsons are the owners of a house and lot which were then for sale. Petitioner Tan together with her agent went to see said spouses at their residence regarding the property. After Singsons had shown Tan around the house and had conversation about the encumbrances and/or liens on the property, the parties finally agreed on the price of P1.8M, with Tan to advance earnest money of P200,000 to enable Singsons to secure the cancellation of the mortgage and lien annotated on the title of the property and the balance of the price to be paid by Tan on June 21, 1984. Forthwith, Tan handed to Singsons a check for P200,000.
In turn, appellants handed to appellee a xerox copy of the title and other papers pertaining to the property as well as an inventory of the furnishings of the house that are included in the sale. 3 days thereafter, Tan returned to Singsons' house together with her daughter Corazon and one Ines, to ask for a reduction of the price to P1.75M and Singson spouses agreed, and so another receipt entitled "Agreement" was signed by the parties.
The very same day that Singsons received the earnest money of P200k, they started paying their mortgage loan with the DBP to clear up the title of the subject property. DBP then executed a cancellation of mortgage, which was registered with the Registry of Property. Spouses also paid all the taxes due and in arrears on the property.
Appellee accompanied by her daughter Corazon and her lawyer, Atty. Vicente Quitoriano, went to Baguio City to inquire about the status of the property and Singsons told her that the DBP was taking some time processing their payments and preparing the deed of cancellation of the mortgage. On that occasion, the parties agreed on an extension of 2 weeks for the execution of the deed of sale. Here, the parties' respective versions on the matter parted ways. According to appellants, it was appellee who asked for the extension because she was not yet ready to pay the balance of P1.55M. On the other hand, appellee said that it was appellants who asked for it because the title of the property was not yet cleared. The court below believed appellee because on said date the DBP had not yet executed the deed of cancellation of mortgage, and no title has yet been issued for the driveway although already fully paid for.
Immediately, upon execution by the DBP of the deed of cancellation of mortgage, Singsons tried to contact Tan and/or her daughter Corazon to come to Baguio City for the formal execution of the deed of sale, but to no avail. Instead, appellants received a telegram from Atty. Quitoriano cancelling the sale and demanding the return of the P200,000 earnest money. Appellants countered with a letter of their lawyer, Atty. Tiofisto Rodes, calling on appellee to perform her part of the contract because "the title to the house and lot right now suffers no imperfection or doubt.
Tan then filed a case for recovery of sum of money with damages.
ISSUE: W/N there was substantial breach by the spouses, meriting rescission of the contract
HELD: NO. That 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 is clear from a reading of the Civil Code provisions. However, it is equally settled that, in the absence of a stipulation to the contrary, this power must be invoked judicially; it cannot be exercised solely on a party's own judgment that the other has committed a breach of the obligation. Where there is nothing in the contract empowering the petitioner to rescind it without resort to the courts, the petitioner's action in unilaterally terminating the contract in this case is unjustified.
Petitioner, in rescinding the sale, claims that a substantial breach of the obligation has been committed by the private respondents.
Nevertheless, the alleged breach of the obligation by the private respondents, which consists in a mere delay for a few days in clearing the title to the property, cannot be considered substantial enough to warrant rescission of the contract.
A thorough review of the records clearly indicates that private respondents had substantially complied with their undertaking of clearing the title to the property. It is a settled principle of law that rescission will not be permitted for a slight or casual breach of the contract but only for such breaches as are so substantial and fundamental as to defeat the object of the parties in making the agreement. A court, in determining whether rescission is warranted, must exercise its discretion judiciously considering that the question of whether a breach of a contract is substantial depends upon the attendant circumstances.
In this case, it is true that as of the date set for the execution of the final deed of sale, the mortgage lien in favor of DBP annotated in the title has not yet been cancelled as it took DBP some time in processing the papers relative thereto. However, just a few days after, the cancellation of the DBP mortgage was entered by the Register of Deeds and duly noted on the title. Time not being of the essence in the agreement, a slight delay on the part of the private respondents in the performance of their obligation, is not sufficient ground for the resolution of the agreement, more so when the delay was not totally attributable to them.
Inasmuch as the private respondents are ready, willing and able to comply with their obligation to deliver title to the property subject of the sale and had already demanded that petitioner pay the full amount of the purchase price, the petitioner must be considered as having incurred in delay. This conclusion is warranted by the clear provision of Article 1169 of the Civil Code.
In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. From the moment one of the parties fulfills his obligation, delay by the other begins. It is basic that the breach of a contract gives the aggrieved party under the law and even under general principles of fairness, the right to rescind the contract or to ask for specific performance. Petitioner having failed to comply with her obligation of paying the balance of the purchase price despite demands by private respondents, private respondents were clearly entitled to their counterclaim for specific performance, as correctly adjudged by the respondent court.
One final point, the decision of the respondent Court of Appeals ordered execution by private respondents of the absolute deed of sale conveying the subject property to petitioner and payment by petitioner of the balance of the purchase price immediately upon finality of such judgment. However, under the third paragraph of Article 1191 of the Civil Code, the Court is given a discretionary power to allow a period within which a person in default may be permitted to perform his obligation. Considering the huge amount of money involved in this sale, the Court, in the exercise of its sound discretion, hereby fixes a period of 90 days within which petitioner shall pay the balance of the purchase price amounting to Pl.55M plus interest thereon at the legal rate from finality of this judgment until fully paid. After such payment has been made, the private respondents are ordered to sign and execute the necessary absolute deed of sale in favor of petitioner.
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MARGARITA SURIA V IAC 151 SCRA 661 (1987)
FACTS: Respondents are the owners of a parcel of land. They entered into a contract denominated as DEED OF SALE WITH MORTGAGE, with herein petitioner Suria. They allege that the petitioners violated the terms and conditions of the contract by failing to pay the stipulated installments and in fact only one installment due in July 1975 (paid very late in the month of September, 1975) was made. Respondents claim that repeated verbal and written demands were made by them upon the petitioners for the payment of the installments, but petitioner for no justifiable reason failed to comply.
Petitioners filed a motion to dismiss complaint, alleging that respondents are not entitled to the subsidiary remedy of rescission because of the presence of remedy of foreclosure in the Deed of Sale with Mortgage
ISSUE: W/N rescission is proper
HELD: NO. The respondent court rejected the petitioners' reliance on paragraph (H) of the contract which grants to the vendors mortgagees the right to foreclose "in the event of the failure of the vendees-mortgagors to comply with any provisions of this mortgage." According to the appellate court, this stipulation merely recognizes the right of the vendors to foreclose and realize on the mortgage but does not preclude them from availing of other remedies under the law, such as rescission of contract and damages under Articles 1191 and 1170 of the Civil Code in relation to Republic Act No. 6552. The appellate court committed reversible error. Art. 1191 on reciprocal obligations is not applicable under the facts of this case.
RESOLUTION V. RESCISSION The rescission on account of breach of stipulations is not predicated on injury to economic interests of the party plaintiff but on the breach of faith by the defendant, that violates the reciprocity between the parties. It is not a subsidiary action, and Article 1191 may be scanned without disclosing anywhere that the action for rescission thereunder is subordinated to anything other than the culpable breach of his obligations by the defendant. This rescission is a principal action retaliatory in character, it being unjust that a party be held bound to fulfill his promises when the other violates his. As expressed in the old Latin aphorism: "Non servanti fidem, non est fides servanda," Hence, the reparation of damages for the breach is purely secondary.
On the contrary, in the rescission by reason of lesion or economic prejudice, the cause of action is subordinated to the existence of that prejudice, because it is the raison d 'etre as well as the measure of the right to rescind. Hence, where the defendant makes good the damages caused, the action cannot be maintained or continued, as expressly provided in Articles 1383 and 1384. But the operation of these two articles is limited to the cases of rescission for lesion enumerated in Article 1381 of the Civil Code of the Philippines, and does not apply to cases under Article 1191.
The petitioners' breach of obligations in this case is not with respect to the perfected contract of sale but in the obligations created by the mortgage contract. The remedy of rescission is not a principal action retaliatory in character but becomes a subsidiary one which by law is available only in the absence of any other legal remedy. (Art. 1384, Civil Code). Foreclosure here is not only a remedy accorded by law but, as earlier stated, is a specific provision found in the contract between the parties.
The petitioners are correct in citing this Court's ruling in Villaruel v. Tan King where we Stated: At the outset it must be said that since the subject-matter of the sale in question is real property, it does not come strictly within the provisions of article 1124 of the Civil 13
Code, but is rather subjected to the stipulations agreed upon by the contracting parties and to the provisions of Article 1504 of the Civil Code. The "pacto comisorio" of "ley comisoria" is nothing more than a condition subsequent of the contract of purchase and sale. Considered carefully, it is the very condition subsequent that is always attached to all bilateral obligations according to article 1124; except that when applied to real property it is not within the scope of said article 1124, and it is subordinate to the stipulations made by the contracting parties and to the provisions of the article on which we are now commenting" (article 1504).
Now, in the contract of purchase and sale before us, the parties stipulated that the payment of the balance of P1,000 was guaranteed by the mortgage of the house that was sold. This agreement has the two-fold effect of acknowledging indisputably that the sale had been consummated, so much so that the vendee was disposing of it by mortgaging it to the vendor, and of waiving the pacto comisorio, that is, the resolution of the sale in the event of failure to pay the P1,000 such waiver being proved by the execution of the mortgage to guarantee the payment, and in accord therewith the vendor's adequate remedy, in case of nonpayment, is the foreclosure of such mortgage.
There is, therefore, no cause for the resolution of the sale as prayed for by the plaintiff. His action, at all events, should have been one for the foreclosure of the mortgage, which is not the action brought in this case. Article 1124 of the Civil Code, as we have seen, is not applicable to this case.
A Simple Guide for Drafting of Conveyances in India : Forms of Conveyances and Instruments executed in the Indian sub-continent along with Notes and Tips