G.R. No. L-57552 October 10, 1986
LUISA F. MCLAUGHLIN, petitioner, vs. THE COURT OF APPEALS AND RAMON FLORES, respondents.

FACTS

Petitioner Luisa F. McLaughlin and private respondent Ramon Flores entered into a contract of conditional sale of real property. The balance of the purchase price was not paid by the agreed date, leading McLaughlin to file a complaint for rescission. The parties subsequently entered into a Compromise Agreement, which was approved by the court as a judgment. The agreement stipulated a new payment schedule for the balance, provided for monthly rentals from Flores, and stated that failure to comply would entitle McLaughlin to a writ of execution for rescission with forfeiture of all prior payments as liquidated damages.
Flores failed to pay the installment due on June 30, 1980. On October 15, 1980, McLaughlin demanded payment of the entire remaining balance by October 31, 1980. On October 30, Flores signified his intention to pay the full balance but requested to see certain documents. On November 17, 1980, after McLaughlin had already filed a Motion for Writ of Execution which the trial court granted, Flores filed a motion for reconsideration and tendered a certified manager’s check covering the full outstanding obligation, including the installment not yet due. The trial court denied the motion and issued the writ of execution, ordering rescission and forfeiture.

ISSUE

Whether the Court of Appeals correctly nullified the trial court’s orders granting rescission and execution, despite Flores’s failure to pay on the stipulated date under the Compromise Agreement.

RULING

Yes, the Supreme Court affirmed the Court of Appeals’ decision, albeit with modifications. The legal logic centers on the principle that rescission is not a remedy for a slight or casual breach but is warranted only for substantial and fundamental breaches that defeat the object of the agreement. Here, Flores’s delay in paying the June 30, 1980 installment was deemed not a fundamental breach for several reasons. First, McLaughlin’s subsequent demand letter of October 15, which set a new deadline of October 31 for full payment, effectively waived her immediate right to seek rescission for the June default. Second, Flores made a valid tender of payment via a certified manager’s check for the full amount on November 17, which was only 17 days after the new deadline set by McLaughlin herself. This tender, though refused, preserved Flores’s rights as a vendee.
However, the Supreme Court modified the appellate decision because a mere tender of payment, without subsequent consignation or deposit of the sum with the court after refusal, does not extinguish the obligation. Since Flores did not consign the amount, his obligation to pay remained, and he was additionally liable for the accrued monthly rentals as stipulated in the Compromise Agreement from the time payment was due. The Court thus ordered McLaughlin to accept the payment, ordered Flores to pay the arrears in rentals, and upon full payment, directed McLaughlin to execute a deed of absolute sale. Rescission and forfeiture were deemed too harsh a penalty for the delay under the circumstances.