G.R. No. L-8172; August 23, 1913
E. C. MCCULLOUGH & COMPANY, plaintiff-appellee, vs. CARSON TAYLOR, ET AL., defendants-appellants.

FACTS

Carson Taylor sold chattels to Tuohy under a conditional sale contract dated January 25, 1911. The price was P750, with P150 paid upfront and the P600 balance due on or before May 25, 1911. The contract stipulated that title would remain with Taylor until full payment. Tuohy paid a total of P650, leaving P100 unpaid. E.C. McCullough & Co., a judgment creditor of Tuohy, levied upon the property on September 1, 1911. Taylor claimed ownership, and the levy was discharged when McCullough & Co. refused to post a bond. On September 6, 1911, McCullough & Co. levied upon Tuohy’s rights in the property under the same execution. The sheriff sold Tuohy’s rights at public auction, and McCullough & Co. purchased them for P26. McCullough & Co. then tendered the remaining P100 to Taylor and demanded delivery of the property. Taylor refused, arguing that Tuohy’s failure to pay the full price by May 25, 1911, extinguished all his rights to the property.

ISSUE

Whether Tuohy’s rights under the conditional sale contract were forfeited due to his failure to pay the full purchase price by the stipulated date, thereby preventing the sale of his interest at the execution sale.

RULING

No. The Supreme Court affirmed the lower court’s judgment ordering Taylor to deliver the property to McCullough & Co. upon payment of the P100 balance. The Court held that: (1) The contract did not contain an express forfeiture clause (lex commissoria) providing for reversion of the property and forfeiture of payments upon default. Forfeitures are strictly construed and not presumed. (2) Even assuming a forfeiture clause existed, Taylor waived it by accepting payments after the due date and allowing Tuohy to retain possession of the property past May 25, 1911, without taking steps to enforce forfeiture. This conduct indicated Taylor still recognized Tuohy’s right to perfect his title by paying the balance. (3) Tuohy’s interest in the property (his equity of redemption) was a leviable interest under Section 450 of the Code of Civil Procedure, which authorizes the sale of “any interest” of the judgment debtor. Therefore, the execution sale validly transferred Tuohy’s interest to McCullough & Co., who then had the right to pay the balance and acquire title.