GR 94563; (March, 1991) (Digest)
G.R. No. 94563 ; March 5, 1991
MEYNARDO C. POLICARPIO and LOURDES POLICARPIO, petitioners, vs. HONORABLE COURT OF APPEALS, EVELYN Q. CATABAS, ROMULO Q. CATABAS and CLEMENTE CATABAS, respondents.
FACTS
Petitioners-spouses Policarpio and private respondents Catabas executed a Contract to Sell on November 25, 1983, for a property at P270,000. The contract stipulated that the balance of P260,000, to be sourced from a PAG-IBIG loan, must be paid on or before the first week of December 1983; failure would automatically annul the contract, with a return of the downpayment. The buyers failed to pay on time, but the sellers did not return the P10,000 downpayment. The buyers continued making partial payments totaling P75,000, which the sellers accepted. On April 9, 1984, the parties executed a Deed of Absolute Sale, and the sellers delivered possession to the buyers. The buyers later filed for specific performance, alleging their loan was approved but required the title in their name, which the sellers refused to transfer, allegedly to demand a higher price.
ISSUE
Whether the Contract to Sell was automatically rescinded upon the vendees’ failure to pay the balance on the stipulated date, thereby nullifying the subsequent Deed of Absolute Sale and the buyers’ right to specific performance.
RULING
No. The Supreme Court reversed the Court of Appeals and reinstated the trial court’s decision, with modifications on damages. The legal logic is that the automatic rescission clause in the Contract to Sell was deemed waived by the vendors’ subsequent conduct. By accepting partial payments after the default deadline without returning the downpayment, and by subsequently executing a Deed of Absolute Sale and delivering possession, the petitioners-spouses effectively abandoned the automatic cancellation clause and consented to a modification of the original agreement. This series of voluntary acts constituted a mutual departure from the original terms, giving rise to a new agreement. Consequently, the private respondents were entitled to specific performance to compel the transfer of title upon payment of the remaining balance. The Court, however, reduced the moral damages awarded to the vendors to P15,000 and deleted the awards for exemplary damages and attorney’s fees for lack of sufficient legal basis.