G.R. No. 95511 . January 30, 1992.
SPOUSES VICENTE & SALOME DE LEON, petitioners, vs. THE COURT OF APPEALS and SPOUSES MANUEL & PRISCILLA FRANCO, respondents.

FACTS

Petitioners-spouses De Leon and respondents-spouses Franco entered into an Agreement on March 7, 1982, wherein the Francos advanced P50,000 to the De Leons to secure government certificates for a house and lot. The Agreement stipulated that upon completion of these obligations, the parties would execute a Contract to Sell for P530,000, payable in installments. On May 11, 1982, while Vicente de Leon was hospitalized, the parties signed a Contract to Sell. The Francos paid an additional P100,000, acknowledged as a downpayment, bringing total advances to P150,000. The contract set a total purchase price of P530,000, with monthly installments of P20,000 payable at the vendees’ (Francos’) residence. It included an automatic rescission clause for failure to pay three successive installments.
The De Leons filed an action for rescission, claiming the Francos defaulted on the September to November 1982 installments. The Francos countered that they were always ready to pay, but the De Leons failed to collect at the stipulated place. The trial court dismissed the complaint, finding the Francos not in default because the De Leons did not make a valid demand by going to the designated place for payment. The Court of Appeals affirmed this finding.

ISSUE

Whether the Court of Appeals erred in affirming the trial court’s ruling that the private respondents were not in default, thereby precluding rescission of the Contract to Sell.

RULING

The Supreme Court denied the petition and upheld the ruling that the Francos were not in default. The legal logic rests on the principle that for a party to be in default, there must be a demand, judicial or extrajudicial, unless the law or contract expressly declares otherwise. The Contract to Sell stipulated that installment payments “shall be payable” at the vendees’ residence. This stipulation fixed the place of payment, making it the vendor’s obligation to collect there to constitute a valid demand for payment.
The trial court’s factual findings, affirmed by the Court of Appeals, showed that the De Leons, except for two instances, never went to the Francos’ residence to collect the installments from August 1982 onward. Conversely, the Francos demonstrated willingness to pay by preparing receipts and attempting to contact the De Leons. Since the vendors did not perform the act required by the contract to initiate payment (i.e., collecting at the specified place), the vendees’ obligation to pay did not become due. Therefore, no default occurred, and the automatic rescission clause could not be triggered. The Supreme Court is bound by these factual findings absent any showing of arbitrariness.