SECOND DIVISION

[G.R. No. L-67881. June 30, 1987.]

PILIPINAS BANK as Successor-In-Interest Of And/Or In substitution to, The

DECISION

PARAS, J.:

This is an appeal by certiorari from the Decision 1 of the respondent court dated May 31, 1984 in CA-
G.R. CV No. 67205 entitled "Jose W. Diokno and Carmen I. Diokno, Plaintiffs-Appellees, v. The
Manufacturers Bank and Trust Company, Defendant-Appellant" which affirmed the decision 2 of the
Court of First Instance of Rizal (Pasig Branch XXI) in Civil Case No. 19660, the dispositive portion of
which reads: jgc:chanrobles.com.ph

"WHEREFORE, judgment is rendered in favor of the plaintiffs and against the defendant, ordering the
defendant Manufacturers Bank & Trust Company: jgc:chanrobles.com.ph

"1. To deliver to the plaintiffs the parcel of land described in Contract to Sell No. VV-18-(a) in the total
area of 5,936 square meters and to execute in their favor the necessary deed of absolute sale
therefor;

"2. To pay the sum of P556,160.00 less the amount due on the contract (i.e., the unpaid installments
from December, 1966 until the contract would have been fully paid together with interest thereon up
to March 25, 1974) with legal interest on said balance from April 22, 1974 until the same is fully paid;

"3. P50,000.00 by way of moral damages;

"4. P50,000.00 by way of exemplary damages;

"5. Ten per cent (10%) of the judgment by way of attorney’s fees; and

"6. Costs of suit.

SO ORDERED." (Rollo, pp. 14-15)

The following are the undisputed facts of the case: chanrob1es virtual 1aw library

1. On April 18, 1961, Hacienda Benito, Inc. (petitioner’s predecessor-in-interest) as vendor, and
private respondents, as vendees executed Contract to Sell No. VV-18 (a) (Exh. A) over a parcel of
land with an area of 5,936 square meters of the Victoria Valley Subdivision in Antipolo, Rizal, subject
to the following terms and conditions, among others, relevant to this petition: chanrob1es virtual 1aw library

(a) The total contract price for the entire 5,936 square-meter-lot was P47,488.00;

(b) Of the total sum, an amount of P12,182.00 was applied thereto so as to reduce the balance on the
principal to P35,306.00;

(c) The aforesaid balance, together with the stipulated interest of 6% per annum, was to be paid over
a period of 8-1/2 years starting on May 1, 1961 at a monthly installment of P446.10 until fully paid -
although this monthly installment was later adjusted to the higher amount of P797.86, starting on
April 1, 1965;

(d) Upon complete payment by the vendee of the total price of the lot the vendor shall execute a deed
of sale in favor of the vendee;

(e) The contract shall be considered automatically rescinded and cancelled and of no further force and
effect upon failure of the vendee to pay when due, three or more consecutive installments as
stipulated therein or to comply with any of the terms and conditions thereof, in which case the vendor
shall have right to resell the said parcel of land to any person interested, forfeiting payments made by
the vendee as liquidated damages.

2. On July 27, 1965, petitioner sent to private respondents a Statement of Account (Exh. F-1)
requesting remittance of installment arrears showing partial payments for the month of April 1965
and May 1965 and complete default for June, July and August, 1965;

3. Likewise, on August 31, 1965, petitioner sent to private respondents another Statement of Account
with the additional entries of interests and the incoming installment for September, 1965;

4. In partial compliance with the aforesaid Statements of Account, private respondents paid on
September 3, 1965 the sum of P1,397.00 which answers for the installments for the months of June
1965 to August 1965;

5. On March 17, 1967, petitioner sent private respondents a simple demand letter showing a
delinquency in their monthly amortizations for 19 months (Exh. 9);

6. On April 17, 1967, petitioner again sent private respondents a demand letter showing total
arrearages of 20 months as of April 1965, but this time advising that unless they up-date their
installment payments, petitioner shall be constrained to avail of the automatic rescission clause (Exh.
10);

7. On May 17, 1967, private respondents made a partial payment of P2,000.00 with the request for
an extension of 60 days from May 17, 1967 within which to up-date their account (Exh. 10-a);

8. On July 17, 1967, private respondents wrote a letter to petitioner asking another extension of sixty
(60) days to pay all their arrearages and update their payments under Contract No. VV-18 (a);

9. On September 18, 1967, private respondents paid P5,000.00 as partial payment and requested an
extension of another 30 days from September 18, 1967 within which to update their account (Exh.
10-c);

10. On October 19, 1967, however, private respondents failed to update their arrearages and did not
request for any further extension of time within which to update their account;

11. After almost three (3) years, or on July 16, 1970, private respondents wrote a letter to petitioner
requesting for a Statement of Account as of date in arrears and interests (Exh. 10-d), to which
petitioner made a reply on July 22, 1970 (Exh. 11);

12. On May 19, 1971, petitioner wrote a letter to private respondents, reminding them of their
balance which will be due on the 31st instant (Exh. J);

13. More than two (2) years from May 19, 1971 or on July 5, 1973, private respondents wrote a letter
to petitioner expressing their desire to fully settle their obligation, requesting for a complete
statement of all the balance due including interests;

14. On March 14, 1974, private respondents wrote a letter reiterating their request in their letter
dated July 5, 1973, which has not been complied with despite several follow-ups (Exh. O);

15. On March 25, 1974, private respondent Carmen I. Diokno went to see the Chairman of petitioner’s
Board of Directors on the matter informing him that she had a buyer who was ready to purchase the
property,

16. On March 27, 1974, petitioner wrote a letter to private respondents, informing them that the
contract to sell had been rescinded/cancelled by a notarial act, to which letter was annexed a
"Demand for Rescission of Contract" notarized on March 25, 1974 (Exh. 12);

17. In view of the foregoing, private respondents filed a Complaint for Specific Performance with
Damages to compel petitioner to execute a deed of sale in their favor, and to deliver to them the title
of the lot in question.

18. Petitioner filed an Answer with counterclaim for damages in the form of attorney’s fees, claiming
that Contract to Sell No. VV-18(a) has been automatically rescinded or cancelled by virtue of private
respondents’ failure to pay the installments due in the contract under the automatic rescission clause.

19. After trial, the lower court rendered a decision in private respondents’ favor, holding that
petitioner could not rescind the contract to sell, because: (a) petitioner waived the automatic
rescission clause by accepting payment on September 1967, and by sending letters advising private
respondents of the balances due, thus, looking forward to receiving payments thereon; (b) in any
event, until May 18, 1977 (when petitioner made arrangements for the acquisition of additional 870
square meters) petitioner could not have delivered the entire area contracted for, so, neither could
private respondents be liable in default, citing Art. 1189 of the New Civil Code. (Decision, pp. 141-
148, Amended Record on Appeal).

Said decision was affirmed on appeal.

Hence, this Petition For Review on Certiorari, raising the main issue of whether or not the Contract to
Sell No. VV-18(a) was rescinded or cancelled, under the automatic rescission clause contained therein.
We find the petition meritless. While it is true that in the leading case of Luzon Brokerage Co., Inc. v.
Maritime Building Co., Inc. and Myers Building Co., 43 SCRA 93 the Supreme Court reiterated among
other things that a contractual provision allowing "automatic rescission" (without prior need of judicial
rescission, resolution or cancellation) is VALID, the remedy of one who feels aggrieved being to go to
Court for the cancellation of the rescission itself, in case the rescission is found unjustified under the
circumstances, still in the instant case there is a clear WAIVER of the stipulated right of "automatic
rescission," as evidenced by the many extensions granted private respondents by the petitioner. In all
these extensions, the petitioner never called attention to the proviso on "automatic rescission." cralaw virtua1aw library

WHEREFORE the assailed decision is hereby AFFIRMED but the actual damages are hereby reduced to
P250,000.00 (the profit private respondents could have earned had the land been delivered to them
at the time they were ready to pay all their arrearages) minus whatever private respondents still owe
the petitioner (with the stipulated 6% annual interest up to March 25, 1974) as a result of the
contract.

SO ORDERED.

Fernan (Chairman), Gutierrez, Jr., Padilla and Cortes, JJ., concur.

Bidin J., no part., I participated in the appealed decision of the Court of Appeals.

Endnotes:

1. Penned by Justice Porfirio V. Sison concurred in by Justices Abdulwahid A. Bidin,

2. Penned by Judge Gregorio G. Pineda.