G.R. No. C.A. No. 174 ; March 12, 1946
JOSE B. ESCUETA, plaintiff-appellee, vs. AQUILINO PANDO, defendant-appellant.

FACTS

On February 14, 1933, Eleuteria Magsarile, wife of plaintiff Jose B. Escueta, purchased three lots from defendant Aquilino Pando under an installment contract with a forfeiture clause. On May 28, 1934, Escueta filed a case (Civil Case No. 5863) to annul that contract and recover payments. The case was decided on June 19, 1935, based on a stipulation where Pando agreed to credit the P787.89 already paid to a new lot to be chosen by Escueta, who in turn agreed to choose a lot and sign a corresponding contract, with payments to begin on July 15, 1935. An alias writ of execution was issued on October 9, 1936. Escueta chose Lot No. 12, but refused to pay the overdue installments or sign the formal contract, demanding instead to pay the balance in a lump sum with a discount. The sheriff returned the writ unexecuted. The formal contract was never signed. On July 6, 1937, Pando sold Lot No. 12 to other parties. In 1940, Escueta sought another writ to compel the sale, but was informed all lots were sold. On April 7, 1941, Escueta filed the present action to recover the P787.89, arguing Pando had no right to sell the lots without court authority. Pando defended that he sold the lots in good faith after Escueta’s refusal to comply and invoked the original contract’s forfeiture clause.

ISSUE

Whether, upon the stated facts, the plaintiff is entitled to recover from the defendant the sum of P787.89 which was to be credited as part of the purchase price for a new lot.

RULING

Yes, the plaintiff is entitled to recover the sum. The original contract between Pando and Escueta’s wife was novated and extinguished by the June 19, 1935 agreement approved by the court. Under this new agreement, Pando was bound to credit the P787.89, and Escueta was bound to choose a lot, sign a formal contract, and begin payments. Escueta’s refusal to sign the contract or pay the installments did not automatically entitle Pando to retain the money as forfeiture. The forfeiture clause in the proposed contract form (Exhibit A) presupposed delivery of possession upon signing and payment of the first installment, which never occurred. Pando could not unilaterally rescind the agreement; under Article 1124 of the Civil Code, such resolution must be invoked judicially. Since Pando did not seek judicial resolution or prove actual damages from Escueta’s breach, there is no legal basis for him to retain the sum. The judgment ordering Pando to pay P787.89 is affirmed, but with the modification that legal interest shall run from April 7, 1941 (the filing date of the complaint), not from July 6, 1937.