FACTS: Hacienda Benito, Inc. (petitioner's predecessor-in- interest) as vendor, and private respondents, Jose W. Diokno and Carmen I. Diokno, as vendees executed a Contract to Sell over a parcel of land in Victoria Valley Subdivision in Antipolo, Rizal, subject to terms and conditions as stipulated. At vendees’ failure to pay, vendor sent several demands for the former to settle arrearages, requests for extensions were give, further demand was again given several times, until a Notice of rescission was given to Carmen Diokno after she informed the Corp that she wanted an audience with the Pres. b/c she had a prospective buyer of the property.
Thus, private respondents filed 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. Petitioner filed an Answer with counterclaim for damages in the form of attorney's fees, claiming that Contract to Sell has been automatically rescinded or cancelled by virtue of private respondents' failure to pay the installments due in the contract under the automatic rescission clause. 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, NCC. CA affirmed.
ISSUE: WON the Contract to Sell was rescinded or cancelled, under the automatic rescission clause contained therein. HELD: We find the petition meritless. While it is true 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."
CENTRAL BANK VS. CA (1985)
Facts: Islands Savings Bank approved the loan application of Tolentino for P80,000. To secure the loan, Tolentino executed a REM on his 100-hectare land. Only P17,000 was released by the Bank, for w/c Tolentino executed a PN payable w/in 3 years. The balance was not released. In 1965, the Monetary Board of the Central Bank issued Reso.No. 1049 prohibiting the Bank fr. doing business in RP. The Bank filed an application for extrajudicial FREM vs. Tolentino for non-payment of the PN. In turn, Tolentino filed an action for injunction, specific performance or rescission, alleging that the Bank failed to fulfill its obligation to lend the balance of P63,000.
Issues: W/N Tolentino can compel specific performance. WON Tolentino is entitled to rescission.
Held: NO. The agreement is a loan agreement, w/c is a reciprocal obligation. In reciprocal obligations, the obligation or promise of each party is the consideration for that of the other; & when one party has performed or is ready & willing to perform his part of the contract, the other party who has not performed or is not ready & willing to perform incurs in delay. The promise of Tolentino to pay was the consideration for the obligation of the Bank to furnish the P80,000. When Tolentino executed a real estate mortgage, he signified his willingness to pay the loan. From such date, the obligation of the Bank to furnish the P80,000 accrued. The Bank’s delay started in 1965, lasted for 3 years or when the Monetary Board issued Resolution No. 967 in 1968, w/c prohibited the Bank fr. doing further business.
Resolution No. 1049 cannot interrupt the default of the Bank in releasing the P63,000 bec. said resolution merely prohibited the Bank fr. making new loans. Since the Bank was in default in fulfilling its reciprocal obligation under the loan agreement, Tolentino may choose between specific performance or rescission w/ damages in either case. But since the Bank is now prohibited fr. doing further business, the Court cannot grant specific performance. Rescission is the only alternative remedy left. However, rescission is only for the P63,000 balance, bec. the bank is in default only insofar as such amount is concerned.
The promissory note gave rise to Tolentino’s reciprocal obligation to pay the P17,000 loan when it falls due. Art. 1192 provides that in case both parties have committed a breach of their reciprocal obligations, the liability of the first infractor shall be equitably tempered by the Court. The liability of the Bank for damages in not furnishing the entire loan is offset by the liability of Tolentino for damages, in the form of penalties & surcharges for not paying his overdue P17,000 debt.