G.R. No. 76518 , July 13, 1990
IRENE P. RELUCIO, petitioner, vs. ZEIDA B. BRILLANTE-GARFIN and COURT OF APPEALS, respondents.

FACTS

Private respondent Zeida Brillante-Garfin filed a complaint for specific performance against petitioner Irene Relucio to compel the execution of a deed of sale for two subdivision lots and the construction of roads as stipulated. She alleged full payment of the P10,800.00 contract price through a down payment and 128 monthly installments of P89.45, totaling P11,450.00. She contended the stipulated 6% annual interest was void as she was never in delay, and sought a refund of her P650.00 overpayment. Petitioner resisted, asserting that interest on the outstanding balance was due even if installments were paid on time. She claimed private respondent was in arrears for such interest, justifying her cancellation of the contract via a Notarial Notice.
The trial court ordered petitioner to execute the deed of sale, construct the required roads, return the P650.00 excess with interest, and pay attorney’s fees. The Court of Appeals affirmed this decision. Petitioner elevated the case to the Supreme Court, arguing her right to rescind due to private respondent’s refusal to pay the monthly installments.

ISSUE

The primary issue is whether private respondent fully paid the stipulated price, entitling her to demand a deed of sale. This hinges on the validity of charging interest on installment payments despite prompt monthly payments. A secondary issue is the validity of petitioner’s notice of cancellation.

RULING

The Supreme Court granted the petition, set aside the Court of Appeals’ decision, and rendered a new judgment. The Court ruled that the interest charge was valid. The contract stipulated a balance of P10,600.00 payable in 180 monthly installments of P89.45 “including interest rate at six percent (6%) per annum.” The total installment sum (P89.45 x 180 = P16,101.00) inherently included interest, compensating the vendor for financing the sale over 15 years. The P10,800.00 was the cash price, not the sum receivable after 15 years of installments. Economically, money received presently is worth more than the same sum received in fragments over a long period. The law permits stipulated interest, and such installment sales, where the price includes an interest component for the deferred payment scheme, are lawful and customary. Therefore, prompt payment does not negate the interest obligation; it is built into the installment price.
Consequently, private respondent had not fully paid the purchase price as she stopped payments, disputing the valid interest component. Petitioner’s notice of cancellation, however, was ineffective. As a subdivision developer, petitioner is mandated under P.D. No. 957 to develop the subdivision. Her failure to construct the promised roads constituted a prior breach, barring her from rescinding the contract for the buyer’s subsequent default. The Court ordered petitioner to complete the necessary subdivision improvements. Private respondent was ordered to resume installment payments, subject to her right to seek recourse if petitioner fails her obligations. Petitioner must execute the deed of sale only upon full payment of the purchase price as per the contract.