G.R. No. 250321, February 03, 2021
JOVIL CONSTRUCTION AND EQUIPMENT CORPORATION, PETITIONER, VS. SPS. CLARISSA SANTOS MENDOZA AND MICHAEL ERIC V. MENDOZA, RESPONDENTS. [G.R. No. 250343] SPS. CLARISSA MENDOZA AND MICHAEL ERIC V. MENDOZA, PETITIONERS, VS. JOVIL CONSTRUCTION AND EQUIPMENT CORPORATION, RESPONDENT.

FACTS

Jovil Construction and Equipment Corporation (JCEC) and Spouses Clarissa Santos Mendoza and Michael Eric V. Mendoza (Spouses Mendoza) entered into a Contract to Sell involving six parcels of land in Montalban, Rizal. JCEC paid P5.6 million of the P11,318,260.00 purchase price and took possession to develop a housing project. However, a group claiming ownership under Benjamin Catalino disturbed JCEC’s possession. Spouses Mendoza obtained a writ of preliminary injunction from the RTC of San Mateo, Rizal against Catalino. Due to the disturbance, JCEC suspended further payments and requested a renegotiation of the contract terms, resulting in the dishonor of its postdated checks. Spouses Mendoza then sent a Notice of Cancellation of Contract and demanded payment of accrued interest. JCEC filed a Complaint for Specific Performance with Damages to compel delivery of the titles. The Regional Trial Court (RTC) dismissed JCEC’s complaint, confirmed the contract’s cancellation, and ordered Spouses Mendoza to return 50% of the payments received (after deducting a computed interest), pursuant to a forfeiture clause. Both parties appealed. The Court of Appeals (CA) affirmed the RTC’s decision. Both parties filed Petitions for Review before the Supreme Court.

ISSUE

1. Whether the Court of Appeals committed reversible error in affirming the cancellation/termination of the Contract to Sell.
2. Whether the Court of Appeals erred in affirming the ruling that JCEC was not liable for punitive interest from the time of demand until full payment.

RULING

The Supreme Court denied both petitions, affirming the CA’s decision.
1. On the cancellation of the contract: The agreement was a contract to sell, where full payment is a suspensive condition. JCEC’s failure to pay the balance in full prevented the obligation to convey title from arising. While JCEC’s initial suspension of payment due to the disturbance was justified, its refusal to pay became unjustified after the RTC issued the injunction order restoring peaceful possession and after Spouses Mendoza demanded payment. Therefore, Spouses Mendoza’s cancellation of the contract was valid, subject to the contractual forfeiture of 50% of payments received.
2. On the punitive interest: The Court agreed with the lower courts that JCEC’s initial suspension of payment was justified, and thus it could not be penalized with interest for that period. Furthermore, upon the contract’s cancellation on April 16, 2001, there was no longer an outstanding balance upon which punitive interest could accrue. The obligation that remained was for Spouses Mendoza to return 50% of the payments, not to pay a purchase price balance.
The Court upheld the CA’s modification of the RTC’s computation, ordering Spouses Mendoza to reimburse JCEC the sum of P2,628,452.20, with legal interest of 6% per annum from the finality of the decision until fully paid.