Luzon Brokerage v. Maritime Building
In 1949, Myers Building Company entered into a Conditional Contract of Sale with Maritime Building Co. over three (3) parcels of land for 1,000,000php – 50k of which was paid at the execution of the contract and the remaining 950k to be paid in equal monthly installments of 10k which was eventually reduced to 5k per month.
The contract stipulated that upon failure of Maritime to pay any installment or commission of a violation of the terms and conditions of the contract, the previous payments shall be appropriated by Myers and the contract shall be null and void without any need of resorting to any judicial action. Subsequently, Maritime leased the lots to Luzon Brokerage.
In March 1961, Maritime failed to pay the installment. Thus, it sent a letter of request to Myers for a moratorium of the payments until the end of the year stating that Maritime has been experiencing difficulties. However, Myers denied the request. Despite the denial, Maritime failed to pay the installments.
Myers then demanded that the Maritime vacate the said property which the latter did not comply with. So Myers filed an action to recover the possession of the property.
Maritime states that the non-payment of the installment does not constitute a breach of contract upon its part and that Myers cannot extrajudicially rescind the contract. Further, it relied on Art 1592 of the Civil Code which states that
ART. 1592. In the sale of immovable property, even though it may have been stipulated that upon failure to pay the price at the time agreed upon the rescission of the contract shall of right take place, the vendee may pay, even after the expiration of the period, as long as no demand for rescission of the contract has been made upon him either judicially or by a notarial act. After the demand, the court may not grant him a new term.
Whether or not Myers can extra-judicially rescind the Conditional Contract of Sale
Yes. A judicial action for the rescission of a contract is not necessary where the contract provides that it may revoked and cancelled for violation of any of its terms and conditions.
Further, it is erroneous on the part of Maritime to argue that Article 1592 is applicable. The contract entered into by the parties is a Conditional Contract of Sale. The aforementioned provision is only applicable on contracts of sale which transfers the ownership of the property upon the delivery of the thing sold.
In this case, the parties contemplated a conditional contract of sale which reserved the ownership upon the vendor until the full payment of the purchase price.