G.R. No. 160322 ; August 24, 2011
PILIPINO TELEPHONE CORPORATION, Petitioner, vs. RADIOMARINE NETWORK (SMARTNET) PHILIPPINES, INC., Respondent.

FACTS

On December 12, 1996, petitioner Pilipino Telephone Corporation (Piltel) and respondent Radiomarine Network, Inc. (Smartnet) entered into a Contract to Sell involving a 3,500-square meter lot in Makati City (Valgoson Property) for ₱560 million. The payment terms were: (a) a down payment of ₱180 million on or before December 28, 1996; (b) credit of any outstanding payables Piltel would owe Smartnet from Piltel’s projected purchase of cellular phones and accessories from Smartnet between December 28, 1996, and April 30, 1997; and (c) payment of the remaining balance on or about April 30, 1997. The contract contained a rescission and forfeiture clause stating that if Smartnet failed to pay the full price within the stipulated period and within five days after a notice of delinquency, it would automatically forfeit 10% (₱18 million) of the down payment, and the contract would be without force and effect.
Smartnet paid the ₱180 million down payment. However, it failed to pay the ₱380 million balance when it fell due. On December 19, 1997, Piltel returned ₱50 million to Smartnet. Smartnet later demanded the return of the remaining ₱130 million, but Piltel did not comply.
On December 1, 1999, Smartnet filed a complaint for rescission or partial specific performance of the contract before the RTC of Makati. It alleged it withheld the balance because Piltel reneged on a separate commitment to purchase 300,000 cellular phone units from it. Piltel, in its answer, claimed the purchase agreement for phones was separate and only on a “best effort” basis.
On October 3, 2000, Smartnet filed a motion for partial summary judgment for the return of its down payment. The RTC granted the motion on November 13, 2000, ordering Piltel to return the ₱180 million, less the forfeited ₱18 million and the returned ₱50 million (net ₱112 million), plus interest. Piltel’s motion for reconsideration was denied.
Smartnet later withdrew its other causes of action, and the RTC granted execution pending appeal. Piltel filed a notice of appeal to the CA (docketed as CA-G.R. CV 71805). On June 11, 2003, the CA dismissed Piltel’s appeal, upholding the RTC’s grant of summary judgment, ruling that Smartnet’s failure to pay the balance ipso facto avoided the contract. Piltel’s motion for reconsideration was denied, prompting this petition.

ISSUE

Whether or not there are genuine issues of fact to be tried in this case, making the grant of summary judgment improper.

RULING

No, there are no genuine issues of fact. Summary judgment was proper.
A genuine issue of fact is one that requires the presentation of evidence, as distinguished from a sham or false issue. Summary judgment is proper when the facts as pleaded appear uncontested or undisputed.
The Court found no genuine factual issue. The core facts were established by the pleadings and the Contract to Sell itself. Smartnet failed to pay the balance of the purchase price on the stipulated date. This failure triggered the contract’s automatic rescission clause. Piltel’s argument that the rescission clause required it to first send a Statement of Account and a Notice of Delinquency was unavailing. The contract provision stated that Piltel “shall submit” a Statement of Account by April 20, 1997, to enable Smartnet to prepare the final payment. However, Smartnet’s failure to pay the balance by the due date (on or about April 30, 1997) occurred regardless of whether Piltel submitted the statement. The obligation to pay was not conditioned upon the submission of the statement; the clause only provided for an adjustment of the payment date if Piltel was delayed in submitting it. Smartnet’s fundamental breach was its failure to pay at all.
Since Smartnet failed to pay, the contract was rescinded by operation of law pursuant to Article 1592 of the Civil Code. The rescission clause in the contract, providing for automatic forfeiture of 10% of the down payment, was merely a confirmation of this legal consequence. With the contract rescinded, Smartnet was entitled to the return of its down payment, minus the forfeited amount as stipulated and the amount already returned. No trial was necessary to establish these facts, which were clear from the documents and pleadings. Therefore, the RTC correctly granted summary judgment, and the CA correctly affirmed it.