G.R. No. 158026; April 23, 2008
DORIE ABESA NICOLAS, petitioner, vs. DEL-NACIA CORPORATION, respondent.

FACTS

Petitioner Dorie Abesa Nicolas and her late husband entered into a Land Purchase Agreement with respondent Del-Nacia Corporation for a parcel of land. The contract stipulated a down payment and monthly amortizations at 18% interest per annum. It contained an automatic rescission clause: upon failure to pay any installment for over 60 days after a grace period, the contract would be cancelled, all payments forfeited as rent and damages, and the buyer obligated to vacate. After her husband’s death, petitioner defaulted on multiple monthly amortizations. Del-Nacia sent a notice to pay with a 60-day grace period, which petitioner failed to heed. Consequently, Del-Nacia notarially cancelled the contract and later sent petitioner a check representing the computed “cash surrender value” of her payments, which she received but did not encash. Petitioner filed a complaint for unfair business practice with the HLURB, arguing the automatic rescission and forfeiture clauses were penal and unconscionable.

ISSUE

Whether the automatic rescission and forfeiture clauses in the Land Purchase Agreement are valid and enforceable.

RULING

Yes, the clauses are valid and enforceable. The Supreme Court affirmed the Court of Appeals’ decision dismissing the petition. The legal logic rests on the principle of obligatory force of contracts under Article 1159 of the Civil Code. The terms of the agreement, including the automatic cancellation and forfeiture provisions, were clear, voluntary, and not contrary to law, morals, good customs, public order, or public policy. The Court found the stipulated 18% interest and 12% penalty interest were not excessive or unconscionable, as they were agreed upon by the parties. The contract explicitly provided for a 60-day grace period, which Del-Nacia accorded to petitioner before effecting rescission. The subsequent tender of a check for the “cash surrender value,” though not legally required under the forfeiture clause, demonstrated a degree of accommodation, not a waiver of contractual rights. The Court emphasized that parties are bound by the consequences of their voluntary agreements, and financial disadvantage arising from a contract does not excuse non-compliance. The HLURB’s finding that the forfeiture was iniquitous was reversed, as the stipulated liquidated damages were deemed valid and not subject to reduction by the courts under the circumstances.