Manila
EN BANC
G.R. No. L-25885 August 18, 1972
LUZON BROKERAGE CO., INC., plaintiff-appellee,
vs.
MARITIME BUILDING CO., INC. and MYERS BUILDING CO., INC., defendants, MARITIME BUILDING CO., INC., defendant-appellant.
RESOLUTION ON MOTION TO RECONSIDER
REYES J.B.L., J.:
Appellant Maritime Building Co., Inc. moves to reconsider this Court's decision of 31 January 1972,aon several grounds that will be taken up seriatim.
I
Maritime contends that it was error for this Court to hold that its action in "suspending payments to Myers corporation of the installments for March to May, 1961, was a breach of the contract tainted with fraud or malice (dolo) as distinguished from mere negligence (culpa) ... and therefore incompatible with good faith."
(a) It is argued that Maritime's bad faith was not alleged nor put in issue in the pleadings.ᇈWᑭHIL
This pretense is incorrect: movant Maritime, in its answer to the cross-claim Myers Building Co., Inc., specifically pleaded good faith as an affirmative defense in paragraphs 4, 11, 13 and 14 of its answer to the cross-claim of Myers (Record on Appeal, pages 118, 120, 121, 122), and hence, placed its good or bad faith in issue. Anyway, whether a party acted in good faith or bad faith, in admittedly non-performing its part of a bargain, is a conclusion of law drawn by the Court from the circumstances proved in the case.
b) The facts as narrated in the decision and revealed by the proof clearly show that as early as 24 March 1961, Maritime had requested a "suspension" or "moratorium" in its monthly payments until the close of 1961, allegedly because "we are encountering some unusual expenses with the warehouses" (Exhibit "A-Myers"), but this request was turned down on 29 March 1961 by the Myers Corporation advising George Schedler, the son of Edmund Schedler, main stockholder of Maritime, that his request "can not be granted as I have specific instructions from the Board (of Myers Co.) not to agree to any suspension of payments under any condition" (Exhibit "5-Myers"). This refusal is referred to in Edmund Schedler's letter of 7 April 1961 (Exhibit "11-Maritime"). Notwithstanding Myers Corporation's categorical refusal to agree to a suspension or moratorium, and after Myers had called its attention to the violation of the contract (Exhibit "11-A"), Schedler, on behalf of Maritime, insisted on suspending its payments alleging for the first time that the late F. H. Myers had "agreed to indemnify and hold me harmless from the Luzon Labor Union claims which are in litigation" and giving notice that "my wife and I intend to withhold any further payments to the Myers Building Co. or Estate ...". This intention was reiterated in the letter Exhibit 12-Maritime, wherein it was added that "if the Myers people will deposit in trust with Mr. C. Parsons 25,000 pesos to cover my costs to date, I will then deposit with Mr. Parsons in trust 15,000 pesos for March, April and May ...".
c) We can not see how it can now be claimed that Maritime's obligation had been substantially performed in good faith. Maritime was obligated to make monthly payments to Myers Building Co. under its contract, until the price of the building was paid in full and yet it repeatedly refused to do so, on the pretext that the late F. H. Myers had obligated himself to indemnify Edmund Schedler from the labor claims against the Luzon Stevedoring Co., that Myers had sold to Schedler in a totally separate contract. As noted in the main decision, F. H. Myers was not the vendor Myers Building corporation; moreover, he had already died and his estate had been closed without Schedler or Maritime having filed any contingent claim before closure of the estate proceedings, as required by Revised Rule 88, The claims of Schedler or Maritime were, therefore, already barred, even assuming that there was any truth to the alleged promise of the late Myers, which is not supported by any reliable evidence. And even then, the claim was at the most payable by the heirs of F. H. Myers, but not by the Myers corporation, which had no duty to assume the guarantee. Plainly, the non-payment for March, April and May, 1961, due to the corporation, was intentional and deliberate non-performance, designed to extrajudicially force Myers corporation to grant the moratorium originally solicited and rejected, thus constituting, as held in the main decision, dolo (in the performance, in solvendo) and not mere culpa or negligence. x
Casta'n Der. Civil, Vol. 3, 7th Ed., page 129, quotes with approval Pairo's Teoria de Obligaciones on this point:
Aunque nuestro Codigo civil no de la nocion del dolo como causa de incumplimiento de la obligacion se ajusta en realidad a ese criterio doctrinal, que puede encontrar un apoyo en el texto del art. 1.107. Como observa Diaz Pairo, en dicho precepto se contrapone el deudor de buena fe y el deudor por dolo, a resultando asi que este ultimo es el deudor de mala fe, y para la existencia de esta no hace falta la intencion de perjudicar o de dañar, bastando infringir de modo voluntario el deber juridico que pesa sobre el deudor a sabiendas, es decir, conscientemente. Esa voluntariedad y conciencia tornan doloso el incomplimiento, aunque, como es posible, el deudor no haya tenido intencion de perjudicar o de dañar al acreedor, contando, lo que no es raro, con que sobrevengan hechos que le permitan satisfacer mas tarde su obligacion. (Teoria, t. 1, pag. 116). (Emphasis supplied )
d) Nor is it admissible, as movant contends, that there had been substantial performance by it or that the offer to deposit in trust the missing amounts were equivalent to payment. When Maritime suspended its payments for March-May, 1961, there was a balance of P319,300.65 on the principal of its obligation, plus interest, i.e., nearly 1/3 of the original indebtedness. And as to the offer to deposit the payments due in trust or in escrow, it can not be considered payment since it was a conditional tender, and would have left the creditor (Myers corporation) unable to make use of the money rightfully due to it. This Court, in Philippine National Bank vs. Relativo, et al., 92 Phil. 203, has ruled that a tender to be valid must be unconditional; and even then, a tender alone is not a mode of extinguishing obligations, unless followed by consignation.
Furthermore, for Myers to accept the proposed deposit of the monthly payments in trust or escrow would be equivalent to an admission on its part of the validity or truthfullness of Maritime's claim and of Myers Corporation's liability for an obligation of an individual stockholder. Nor is there any justification on record to warrant the disregard of the corporate personality of Myers Building Corporation inthe present case.
II
Movant Maritime's insistence upon the application to the present case of Art. 1191 of the Civil Code of the Philippines (tacit resolutory condition in reciprocal obligations) studiously ignores the fact that Myers obligation to convey the property was expressly made subject to a suspensive (precedent) condition of the punctual and full payment of the balance of the purchase price.1 This is apparent from clauses (d) and (i) of the contract of sale (Record on Appeal, pages 64, 67).
(d) It is hereby agreed, covenanted and stipulated by the between the parties hereto that the Vendor will execute and deliver to the Vendee a definite or absolute deed of sale upon the full payment by the Vendee of the unpaid balance of the purchase price hereinabove stipulated; that should the Vendee fail to pay any of the monthly installments, when due, or otherwise fail to comply with any of the terms and conditions herein stipulated, then this deed of Condition Sale shall automatically and without any further formality, become null and void, and all sums so paid by the Vendee by reason 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.
x x x x x x x x x
( i ) Title to the properties subject of this contract remains with the Vendor and shall pass to, and be transferred in the name of the Vendee only upon complete payment of the full price above agreed upon. (Emphasis supplied)
It is well to emphasize here the express stipulations (paragraph d) that —
... the Vendor (Myers) will execute and deliver to the Vendee a definite and absolute deed of sale upon full payment by the Vendee of the unpaid balance of the purchase price ...
as well as that (paragraph i of the deed of sale) —
Title to the properties subject to this contract remains with the Vendor and shall pass to and be transferred in the name of the Vendee only upon the complete payment of the full price above agreed upon.
make it crystal clear that the full payment of the price (through the punctual performance of the monthly payments) was a condition precedent to the execution of the final sale and to the transfer of the property from Myers to Maritime; so that there was to be no actual sale until and unless full payment was made.2 It is uncontroverted that none was here made. The upshot of all these stipulations is that in seeking the ouster of Maritime for failure to pay the price as agreed upon, Myers was not rescinding (or more properly, resolving) the contract, but precisely enforcing it according to its express terms. In its suit Myers was not seeking restitution to it of the ownership of the thing sold (since it was never disposed of), such restoration being the logical consequence of the fulfillment of a resolutory condition, express or implied (article 1190); neither was it seeking a declaration that its obligation to sell was extinguished. What it sought was a judicial declaration that because the suspensive condition (full and punctual payment) had not been fulfilled, its obligation to sell to Maritime never arose or never became effective and, therefore, it (Myers) was entitled to repossess the property object of the contract, possession being a mere incident to its right of ownership. It is elementary that, as stated, by Castan, —
b) Si la condicion suspensiva Ilega a faltar, la obligacion se tiene por no existente, y el acreedor pierde todo derecho, incluso el de utilizar las medidas conservativas. (3 Castan, Derecho Civil, 7a Ed., p. 107). (Also Puig Peña, Der. Civ., T. IV (1), p. 113)
Movant Maritime's failure to take into account the fact that Myers' promise to sell was subject to a suspensive condition (not to a suspensive period) renders all its discussion about bilateral or reciprocal contracts and the application of Articles 1198 and 1592 of the Civil Code of the Philippines (both of which deal with rescission or resolution of contractual obligation), with consequent mutual restitution,1 a pure academic exercise without applicability to the case at bar.
Similarly, there is no point in discussing whether or not Maritime's breach of contract was casual or serious, since the issue here is whether the suspensive condition (of paying P5,000.00 monthly until full price is paid) was or was not fulfilled, and it is not open to dispute that the stipulated suspensive condition was left unaccomplished through the deliberate actions of movant Maritime. The stubborn fact is that there can be no rescission or resolution of an obligation as yet non-existence because the suspensive condition did not happen.
Resolving identical arguments, as those of Maritime, this Court ruled in Manuel vs. Rodriguez, 109 Phil. 9-10, as follows:
... Plaintiff-appellant, however, argues (Errors I-IV; VI; VIII) that the Payatas Subdivision had no right to cancel the contract, as there was no demand by suit or notarial act, as provided by Article 1504 of the Old Code (Art. 1592, N. C. C.). This is without merit, because Article 1504 requiring demand by suit or notarial act in case the vendor or realty wants to rescind, does not apply to a contract to sell or promise to sell, where title remains with the vendor until fulfillment to a positive suspensive condition, such as full payment of the price (Caridad Estates vs. Santero, 71 Phil. 114, 121; Albea vs. Inquimboy, 86 Phil. 476; 47 Off. Gaz. Supp. 12, p. 131; Jocson vs. Capitol Subdivision Inc., et al., L-6573, February 28, 1955; Miranda vs. Caridad Estates, L-2077 and Aspuria vs. Caridad Estates, L-2121, October 3, 1950).
The contention of plaintiff-appellant that Payatas Subdivision Inc. had no right to cancel the contract as there was only a "casual breach" is likewise untenable.ℒαwρhi৷ In contracts to sell, where ownership is retained by the seller and is not to pass until the full payment of the price, such payment, as we said, is a positive suspensive condition, the failure of which is not a breach, casual or serious, but simply an event that prevented the obligation of the vendor to convey title from acquiring binding force, in accordance with Article 1177 of the Old Civil Code. To argue that there was only a casual breach is to proceed from the assumption that the contract is one of absolute sale, where non-payment is a resolutory condition, which is not the case.
The foregoing quotation is the best refutation of Maritime's contention that the ruling is obiter when in fact it passed on issues tendered on appeal.ℒαwρhi৷
The stipulations of the contract being the law between the parties, Courts have no alternative but to enforce them as they were agreed and written, there being no law or public policy against the stipulated forfeiture of payments already made (Manila Racing Club vs. Manila Jockey Club, 69 Phil. 57).
III
Maritime also pleads that as the stipulated forfeiture of the monthly payments already made is in fact a penalty, and the same should be equitably reduced. We find no justification for such reduction for the following reasons:
a) Maritime intentionally risked the penalty by deliberately refusing to make the monthly payments for March to May 1961, and trying to inject into its contract with Myers corporation the totally unconnected personal promise of F. H. Myers to indemnify it for eventual liability to the Luzon Labor Union, allegedly made on the occasion of the sale of the Luzon Brokerage to E. Schedler by F. H. Myers, and trying to extrajudicially force Myers corporation to assume responsibility for such liability;
b) Under Article 1234 of the present Civil Code, an obligation must be substantially performed in good faith, for such performance to stand in lieu of payment; Maritime, on the contrary, acted with dolo or bad faith, and is not in a position to invoke the benefits of the article.
c) Maritime's loss of the forfeited payments was more than balanced by the rentals it received from the Luzon Brokerage as lessee of the building for the corresponding periods, at a rate double the monthly payments required of Maritime under its contract with Myers.
IV
Even granting that the contract is a plain sale of real property with deferred payment of the price, as contended by movant Maritime, its position will not be imposed. By Article 1592 of the Civil Code of the Philippines,
though it may have been stipulated that upon the failure to pay the price at the time agreed upon, the rescission of the contract shall of right take place, the vendee may pay, even 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 demand, the Court may not grant him a new term.
It has been pointed out in the main decision that the answer filed by Myers in the court below to the Luzon Brokerage's complaint for interpleader constituted in effect a judicial demand for rescission of the contract of sale, and for repossession of the real estate sold. Hence, Maritime can not demand further time to pay, and must conform to the rescission of the contract and the surrender of the premises, with all the consequences stipulated in the original contract.
Being an article specifically applicable to sales of real property, this Article 1592 controls the general principles expressed by Article 1198 on reciprocal obligations.
The lack of merit of Maritime's procedural objections have been demonstrated in the main decision and there is no point in reiterating what was there stated.
WHEREFORE, the motion for reconsideration is denied.
Concepcion, C.J., Castro, Teehankee and Makasiar, JJ., concur.
Makalintal, J., concurs in the result.
Fernando and Esguerra, JJ., took no part.
Footnotes
a 43 SCRA, page 93.
x Maritime's bad faith is further confirmed by Schedler's letter to his counsel informing the latter that the attorneys in the United States were trying to reopen the closed Myers estate to be able to file a contingent claim therein. And yet he was already seeking to burden Myer's Corporation with that very obligation.
1 "El repetido convenio de no quedar transferido al comprador el dominio completo de la cosa hasta el completo pago del precio envuelve sustancialmente una verdadera condicion suspensiva" (TS Sent. 11 March 1929) (Emphasis supplied).
"El vendedor por razon de esta reserva solo transmite y disfrute de la cosa entregada mietras el precio no sea totalmente entregado (TS. sent. 6 March 1906)."
2 V. Articles 1190 and 1385, Civil Code of the Philippines.
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