Today is Tuesday, February 20, 2018

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

July 24, 2013

L and LOURDES BONROSTRO, Petitioners,

nd CONSTANCIA LUNA, Respondents.

DECISION

.:

se is the Court of Appeals' (CA) disquisition on the matter of interest.

Nameal and Lourdes Bonrostro (spouses Bonrostro) assail through this Petition for Review on Certiorari1 the April 15, 2005 D
56414 which affirmed with modifications the April 4, 1997 Decision3 of the Regional Trial Court (RTC) of Quezon City, Bra
5. They likewise question the CA April17, 2006 Resolution4 denying their motion for partial reconsideration.

Factual Antecedents

Constancia Luna (Constancia), as buyer, entered into a Contract to Sell5 with Bliss Development Corporation (Bliss) involvin
Block 26 of New Capitol Estates in Diliman, Quezon City. Barely a year after, Constancia, this time as the seller, entered int
Lourdes Bonrostro (Lourdes) concerning the same property under the following terms and conditions:

e stipulated price of ₱1,250,000.00 shall be paid by the VENDEE to the VENDOR in the following manner:

(a) ₱200,000.00 upon signing x x x the Contract To Sell,

(b) ₱300,000.00 payable on or before April 30, 1993,

(c) ₱330,000.00 payable on or before July 31, 1993,

 (d) ₱417,000.00 payable to the New Capitol Estate, for 15 years at ₱6,867.12 a month,

x In the event the VENDEE fails to pay the second installment on time, the VENDEE will pay starting May 1, 1993 a 2% in
000.00 monthly. Likewise, in the event the VENDEE fails to pay the amount of ₱630,000.00 on the stipulated time, this CON
ikewise be deemed cancelled and rescinded and x x x 5% of the total contract price of ₱1,250,000.00 shall be deemed forfeit
DOR. Unpaid monthly amortization shall likewise be deducted from the initial down payment in favor of the VENDOR.7

e execution of the said second contract, the spouses Bonrostro took possession of the property. However, except for the ₱200
led to pay any of the stipulated subsequent amortization payments.

Ruling of the Regional Trial Court

, Constancia and her husband, respondent Juan Luna (spouses Luna), filed before the RTC a Complaint8 for Rescission of Co
Bonrostro praying for the rescission of the contract, delivery of possession of the subject property, payment by the latter of the
moral and exemplary damages, litigation expenses and attorney’s fees.

Compulsory Counterclaim,9 the spouses Bonrostro averred that they were willing to pay their total balance of ₱630,000.00 t
m them a 60-day extension to pay the same.10 However, during the time that they were ready to pay the said amount in the las
d her lawyer, Atty. Arlene Carbon (Atty. Carbon), did not show up at their rendezvous. On November 24, 1993, Lourdes sent
r desire to pay the balance, but received no response from the latter. Claiming that they are still willing to settle their obligati
t the court fix the period within which they can pay the spouses Luna.

ro likewise belied that they were not paying the monthly amortization to New Capitol Estates and asserted that on November
of New Capitol Estates, the amount of ₱46,303.44. Later during trial, Lourdes testified that Constancia instructed Bliss not to
ne as evidenced by her March 4, 1993 letter12 to Bliss.

e RTC rendered its Decision13 focusing on the sole issue of whether the spouses Bonrostro’s delay in their payment of the ins
of their obligation under the contract warranting rescission. The RTC ruled that the delay could not be considered a substantia
ested for an extension within which to pay; (2) was willing and ready to pay as early as the last week of October 1993 and ev
November 24, 1993; (3) gave Constancia a down payment of ₱200,000.00; and, (4) made payment to Bliss.

on of the said Decision reads:

ew of the foregoing, judgment is hereby rendered as follows:

claring the Contract to Sell executed by the plaintiff Constancia and defendant Lourdes with respect to the house and lot loca
ew Capitol Estates, Diliman, Quezon City to be in force and effect. And that Lourdes Bonrostro must remain in the possessio

dering the defendants to pay plaintiffs within 60 days from receipt of this decision the sum of ₱300,000.00 plus an interest of
1993 to November 1993.

dering the defendants to pay plaintiffs within sixty (60) days from receipt of this decision the sum of ₱330,000.00 plus an int
h from July 1993 to November 1993.

dering the defendants to reimburse plaintiffs the sum of ₱214,492.62 which plaintiffs paid to Bliss Development Corporation

s to Cost.
Reconsideration15 was likewise denied in an Order16 dated July 15, 1997, the spouses Luna appealed to the CA.17

Ruling of the Court of Appeals

April 15, 2005, the CA concluded that since the contract entered into by and between the parties is a Contract to Sell, rescissio
he subject contract being specifically a contract to sell a real property on installment basis, it is governed by Republic Act No
n 4 of which states:

less than two years of installment were paid, the seller shall give the buyer a grace period of not less than sixty days from th
ue.

ay the installments due at the expiration of the grace period, the seller may cancel the contract after thirty days from receipt b
n or the demand for rescission of the contract by a notarial act. (Emphases supplied)

ile the spouses Luna sent the spouses Bonrostro letters20 rescinding the contract for non-payment of the sum of ₱630,000.00,
d and effective cancellation under the Maceda Law since they were made within the 60-day grace period and were not notari
being no cancellation effected in accordance with the procedure prescribed by law, the contract therefore remains valid and s

d the RTC’s finding that Lourdes was ready to pay her obligation on November 24, 1993.

odified the RTC Decision with respect to interest, viz:

s a need to modify the appealed decision insofar as (i) the interest imposed on the sum of ₱300,000.00 is only for the period A
the interest imposed on the sum of ₱330,000.00 is 2% per month and is only for the period July 1993 to November 1993; (iii
nt of ₱214,492.62 which was paid by Constancia to BLISS in behalf of Lourdes x x x

nterest shall be due unless it has been expressly stipulated in writing’ (Art. 1956, Civil Code). However, the contract does not
payment of the sum of ₱330,000.00 to Constancia and the monthly amortizations to BLISS.

rdes had incurred x x x delay in the performance of her obligations, she should pay (i) interest at the rate of 2% per month on
ay 1, 1993 until fully paid and (ii) interest at the legal rate on the amounts of ₱330,000.00 and ₱214,492.62 from the date of
97 date of the appealed decision, respectively) until the same are fully paid x x x21

e portion of the said Decision:

ppealed decision is AFFIRMED with the MODIFICATIONS that paragraphs 2, 3, and 4 of its dispositive portion shall now

dering the defendants to pay plaintiffs the sum of ₱300,000.00 plus interest thereon at the rate of 2% per month from May 1,

dering the defendants to pay plaintiffs the sum of ₱330,000.00 plus interest thereon at the legal rate from August 1, 1993 unt

dering the defendants to reimburse plaintiffs the sum of ₱214,492.62, which plaintiffs paid to Bliss Development Corporatio
n at the legal rate from filing of the complaint until fully reimbursed.

longer assailed the ruling. On the other hand, the spouses Bonrostro filed a Partial Motion for Reconsideration23 questioning
ions. The CA, however, denied for lack of merit the said motion in a Resolution24 dated April 17, 2006.
or Review on Certiorari.

Issue

s case is whether the CA correctly modified the RTC Decision with respect to interests.

The Parties’ Arguments

he RTC under paragraphs 2 and 3 of the dispositive portion of its Decision ordered the spouses Bonrostro to pay the spouses
erest of 2% per month from April 1993 to November 1993 and ₱330,000.00 plus interest of 2% per month from July 1993 to
modified these by reckoning the payment of the 2% interest on the ₱300,000.00 from May 1, 1993 until fully paid and by im
₱330,000.00 reckoned from August 1, 1993 until fully paid.

ro harp on the factual finding of the RTC, as affirmed by the CA, that Lourdes was willing and ready to pay her obligation as
etter to Atty. Carbon. They also assert that the sending of the said letter constitutes a valid tender of payment on their part. H
sessed any interest subsequent to the date of the said letter. Neither should they be ordered to pay interest on the amount of ₱
ons paid by the spouses Luna to Bliss. They point out that it was Constancia who prevented them from fulfilling their obligat
he instructed Bliss not to accept payment from them.25

n the other hand, aver that the November 24, 1993 letter of Lourdes is not equivalent to tender of payment since the mere sen
ion to pay, without the accompanying payment, cannot be considered a valid tender of payment. Also, if the spouses Bonrost
pay at that time and assuming that the spouses Luna indeed refused to accept payment, the former should have resorted to co
tization, the spouses Luna explain that under the parties’ Contract to Sell, Lourdes was to assume Constancia’s balance to Bl
n in order to avoid the cancellation of the earlier Contract to Sell entered into by Constancia with Bliss.26 However, since Lou
spouses Luna were constrained to pay the amortization. They thus assert that reimbursement to them of the said amount with
eason of such payment, the spouses Bonrostro were spared from the interests and penalties which would have been imposed
ed unpaid.

Our Ruling

erit.

ro’s reliance on the RTC’s factual finding that Lourdes was willing and ready to pay on November 24, 1993 is misplaced.

TC in resolving the Complaint focused on the sole issue of whether the failure of spouses Bonrostro to pay the installments o
330,000.00 on July 31, 1993 is a substantial breach of their obligation under the contract as to warrant the rescission of the sa

ion of the evidence testimonial and documentary, the Court believes that the defendants’ delay in the payment of the two inst
ant rescission of contract. Although, the defendant failed to pay the two installments in due time, she was able to communica
sting for an extension of two months within which to pay the installments. In fact, on November 24, 1993 defendant informe
ready to pay the installments and the money is ready for pick-up. However, plaintiff did not bother to get or pick-up the mon
ery prejudicial on the part of the defendant if the contract to sell be rescinded considering that she made a downpayment of ₱
ation to the Bliss Development Corporation. In fact, the defendant testified that she is willing and ready to pay the balance in
93.

pinion that the delay in the payment of the balance of the purchase price of the house and lot is not so substantial as to warran
he question of whether a breach of contract is substantial depends upon the attendant circumstance. x x x28
 ved at the above-quoted conclusion based on its mistaken premise that rescission is applicable to the case. Hence, its determi
breach. As may be recalled, however, the CA, in its assailed Decision, found the contract between the parties as a contract to
tallment basis, and as such categorically declared rescission to be not the proper remedy. This is considering that in a contrac
suspensive condition, failure of which is not a breach of contract warranting rescission under Article 119129 of the Civil Cod
he supposed seller from being bound to convey title to the supposed buyer.30 Also, and as correctly ruled by the CA, Article 1
al property on installment since they are governed by the Maceda Law.31

h to speak of in case of non-payment of the purchase price in a contract to sell, as in this case, the RTC’s factual finding that
bligation – a conclusion arrived at in connection with the said court’s determination of whether the non-payment of the purch
erms of the contract was a substantial breach warranting rescission – therefore loses significance. The spouses Bonrostro’s re
s misplaced. They cannot invoke their readiness and willingness to pay their obligation on November 24, 1993 as an excuse f
ond the said date.

ro are liable for interest on the installments due from the date of default until fully paid.

ro assert that Lourdes’ letter of November 24, 1993 amounts to tender of payment of the remaining balance amounting to ₱6
orth, accrual of interest should be suspended.

s the manifestation by the debtor of a desire to comply with or pay an obligation. If refused without just cause, the tender of
of the obligation to pay but only after a valid consignation of the sum due shall have been made with the proper court."32 "Co
amount with a judicial authority in accordance with rules prescribed by law, after the tender of payment has been refused or
render direct payment to the creditor impossible or inadvisable."33

without more, produces no effect."34 "To have the effect of payment and the consequent extinguishment of the obligation to
f tender of payment and consignation."35

nder of payment on interest, noted civilist Arturo M. Tolentino explained as follows:

yment is made in such a form that the creditor could have immediately realized payment if he had accepted the tender, follow
to deposit the means of payment in court by way of consignation, the accrual of interest on the obligation will be suspended
n the tender of payment is not accompanied by the means of payment, and the debtor did not take any immediate step to mak
spended from the time of such tender. x x x x36 (Emphasis supplied)

er merely states Lourdes’ willingness and readiness to pay but it was not accompanied by payment. She claimed that she mad
y. Carbon reminding the latter to collect her payment, but, neither said lawyer nor Constancia came to collect the payment. A
ok no further steps to effect payment. They did not resort to consignation of the payment with the proper court despite knowl
nt of the installments on the agreed date would make them liable for interest thereon. The spouses Bonrostro erroneously assu
excuse them from paying interest. Their claimed tender of payment did not produce any effect whatsoever because it was not
lowed by consignation. Hence, it did not suspend the running of interest. The spouses Bonrostro are therefore liable for inter
date of default until full payment of the sums of ₱300,000.00 and ₱330,000.00.

ro are likewise liable for interest on the amount paid by the spouses Luna to Bliss as amortization.

ro want to be relieved from paying interest on the amount of ₱214,492.62 which the spouses Luna paid to Bliss as amortizati
by the latter from fulfilling such obligation. They invoke Art. 1186 of the Civil Code which provides that "the condition shal
untarily prevents its fulfillment."

inds Art. 1186 inapplicable to this case. The said provision explicitly speaks of a situation where it is the obligor who volunt
dition. Here, Constancia is not the obligor but the obligee. Moreover, even if this significant detail is to be ignored, the mere
condition or the mere placing of ineffective obstacles to its compliance, without actually preventing fulfillment is not sufficie
186.37 Two requisites must concur for its application, to wit: (1) intent to prevent fulfillment of the condition; and, (2) actual p

is undisputed that Constancia indeed instructed Bliss on March 4, 1994 not to accept payment from anyone but her, there is n
ed the instruction of Constancia as to actually prevent the spouses Bonrostro from making payments to Bliss. There is no sho
d letter, the spouses Bonrostro attempted to make payment to and was refused by Bliss. Neither was there a witness presented
the instruction contained in Constancia’s letter. While Bliss’ Project Development Officer, Mr. Ariel Cordero, testified durin
m his testimony regarding this except for the fact that Bliss received the said letter.39 In view of these, the spouses Luna coul
bstacle as to actually prevent the spouses Bonrostro from making amortization payments to Bliss.

ere are telling circumstances which militate against the spouses Bonrostro’s claimed keenness to comply with their obligatio
he execution of the contract in January 1993, they immediately took possession of the property but failed to make amortizatio
ths or on November 18, 1993 that they made payments to Bliss in the amount of ₱46,303.44.40 Whether the same covers prev
not clear as the receipt does not indicate the same41 and per Statement of Account42 as of March 8, 1994 issued by Bliss, the
bruary to November 1993 in the total amount of ₱78,271.69 remained outstanding. There was also no payment made of the am
d January 4, 199443 before the filing of the Complaint on January 11, 1994.

ouses Luna, it is understandable that they paid the amortizations due.1âwphi1 The assumption of payment of the monthly am
obligations of the spouses Bonrostro under their contract with the spouses Luna precisely to avoid the cancellation of the ear
ith Bliss. But as the spouses Bonrostro failed in this obligation, the spouses Luna were constrained to pay Bliss to avoid the a
of the spouses Luna proved to be even more beneficial to the spouses Bonrostro as the cancellation of the Contract to Sell be
lt in the cancellation of the subsequent Contract to Sell between Constancia and Lourdes. Also, the spouses Bonrostro were r
uld have been imposed by Bliss if the monthly amortizations covered by the said payment remained unpaid. The Statements
that each monthly amortization is due on or before the fourth day of every month and a penalty equivalent to 1/10th of 1% p
yments made after due date. That translates to 3% monthly or 36% per annum rate of interest, three times higher than the 12%
posed by the CA.

situation is that the spouses Luna are constrained to part with their money while the spouses Bonrostro, despite being remiss
rtization, are relieved from paying higher penalties at the expense of the former. This is aside from the fact that the spouses B
of the subject property and are enjoying the beneficial use thereof. Under the circumstances and considering that the spouse
complying with their obligation to pay the amortizations due from February 1993 to January 1995 for which the spouses Lu
A correctly ordered the reimbursement to the latter of the said amount with interest. "Delay in the performance of an obligati
e, when a party to a contract incurs delay, the other party who performs his part of the contract suffers damages thereby."46 A
sly suffered damages brought about by the failure of the spouses Bonrostro to comply with their obligation on time. "And, sa
ges take the form of interest x x x."47

f the Civil Code, "if the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the indemnity
o the contrary, shall be the payment of the interest agreed upon, and in the absence of stipulation, the legal interest x x x." Th
t in case of delay in the payment of amortization, the CA thus correctly imposed interest at the legal rate which is now 12% p

Petition for Review on Certiorari is DENIED and the assailed Decision dated April 15, 2005 and the Resolution dated April 1
R. CV No. 56414 are AFFIRMED.

CASTILLO
 ANTONIO T. CARPIO
Associate Justice
Chairperson

ARTURO D. BRION JOSE PORTUGAL PEREZ

Associate Justice Associate Justice

ESTELA M. PERLAS-BERNABE
Associate Justice

ATTESTATION

usions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the

PIO

CERTIFICATION

3, Article VITI of the Constitution and the Division Chairperson's Attestation, I certify that the conclusions in the above Dec
on before the case was assigned to the writer of the opinion of the Court's Division.

S P. A. SERENO

o, pp. 8-23.

rollo, pp. 69-78; penned by Associate Justice Edgardo P. Cruz and concurred in by Presiding Justice Romeo A. Brawner and
C. Mendoza (now a member of this Court).

ords, pp. 300-302; penned by Judge Angel V. Colet.

rollo, pp. 101-103; penned by Associate Justice Edgardo P. Cruz and concurred in by Associate Justices Noel G. Tijam and V

ords, pp. 8-13.

t 14.

t 1-7.

t 56-60.
 Letter of Lourdes dated August 18, 1993, id. at 63.

at 64.

at 224. It states as follows:

xxxx

This is to formally inform you of my previous verbal notice that I have not authorized anyone to negotiate and pay in my be
Block 26 Lot 19 New Capitol Estates Project.

Any alleged authority is a forgery or a result of a misrepresentation.

Please communicate with the undersigned in the event anyone pretends to negotiate on the said unit.

Very truly yours,

Sgd.
CONSTANCIA LUNA

at 300-302.

at 302.

at 303-310.

at 327-328.

Notice of Appeal, id. at 329-330.

rollo, pp. 69-78.

o known as the Realty Installment Buyer Protection Act.

ed August 2, 1993, records, p.147; dated September 16, 1993, id. at 149-151; dated November 15, 1993, id. 152-153.

rollo, p. 77.

at 77-78.

at 79-88.

at 101-103.

ords, p. 224.

cle 8.01 of the Contract to Sell entered into by Constancia with Bliss provides:

In the event the BUYER fails to pay any installment [when] due or fails to pay all installments and interests in arrears at the
grace period when such grace period is available to the BUYER, or otherwise fails to comply with any of the terms and con
 contract, the SELLER may, at its sole option, cause the cancellation of this contract by giving the buyer a notice of cancella
rescission of the contract without need of judicial action. x x x (Id. at 10.)

relevant portion of the RTC Decision, id. at 301.

1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with wh

The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in
also seek rescission, even after he has chosen fulfillment, if the latter should become impossible.

The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period.

xxxx

es v. Tuparan, G.R. No. 188064, June 1, 2011, 650 SCRA 283, 296.

SIDERIO, JURADO P., Comments and Jurisprudence on Obligations and Contracts, Twelfth Revised Edition, 2010, pp. 138

andale Sportsline Inc. v. The Good Development Corporation, G.R. No. 164521, December 18, 2008, 574 SCRA 625, 634.

LENTINO, ARTURO, M., Commentaries and Jurisprudence on the Civil Code of the Philippines, Volume IV, 1973, p. 305.

andale Sportsline Inc. v. The Good Development Corporation, supra.

co v. Court of Appeals, G.R. No. 151903, October 9, 2009, 603 SCRA 108, 119.

ra note 32 at 306.

at 155.

TSN dated June 8, 1995, pp. 1-26.

ords, p. 65.

said receipt indicates "PAYMENT ACCEPTED w/o PREJUDICE W/ THE TERMS & CONDITIONS OF COMPROMISE
ED NOV. 27 ’91 in CIVIL CASE # 52992 BDC VS. LUNA"

ords, p. 80.

ed March 3, 1994, id. at 80 and January 30, 1995, id. at 159.

wood Industries, Inc. v. D.M. Consunji, Inc., 442 Phil. 203, 212 (2002).

- Arellano Law Foundation