Layug v IAC

Layug v IAC: Mojica DOCTRINE: Even in residential properties, RA 6552 recognizes and reaffirms the vendor’s right to cancel the con tract to sell upon breach and non-payment of the stipulated instalments. The one who fails to pay the rest of the instalments as agreed upon is left only to a right to a refund of the cash surrender value of the payments on the property equivalent to 50% of the total paymen ts already made. FACTS 1) Gabuya brought a suit against Layug for annulment of the contract and for recovery of damages because Layug failed to pay the rest of the instalments for the purchase of 12 lots in Iligan City (agreed to cost P120,000 payable in three yearly instalments). Layug only paid the first 2 installments (P80,000) and failed to pay the last instalment of P40,000. 2) The TC ruled in favour of Gabuya. This was affirmed by the CA. 3) Layug is relying on the stipulation in the contract a) granting him, as vendee, a 30days grace period within which to pay any yearly instalment not paid within the time fixed therefor, and b) declaring him liable, in the event of his failure to pay within the grace period, “for interest at the legal rate.” He argues that the stipulation indicates that rescission was not envisioned as a remedy against a failure to pay instalments and that such failure was not a ground for abrogating the contract but merely generated liability for interest at legal rate…” ISSUE Whether or not Gabuya had the right to rescind the contract and should this happen, whether Layug should be entitled to get back the ENTIRE amount he already paid? HELD Yes Gabuya could rescind the contract. No, Layug should not be entitled to the entire amount he already paid. The SC: The grace period clause should be read conjointly with the stipulation on rescission, and in such a manner as to give full effect. The patent and logical import of both provisions, taken together, is that when the vendee fails to pay any instalment on its due date, he becomes entitled to a grace period of 30 days to cure default by paying the amount of the instalment plus interest, but that if he should still fail to pay within the grace period, then rescission of the con tract takes place.

Layug cannot be permitted to claim that all his payments should be credited to him in their entirety without regard whatever to the damages his default might have caused to Gabuya. R.A. 6552 governs sales of real estate on installments. It recognizes the vendor's right to cancel such contracts upon failure of the vendee to comply with the terms of the sale, but imposes, chiefly for the latter's protection, certain conditions thereon. We have had occasion to rule that "even in residential properties the Act" recognizes and reaffirms the vendor's right to cancel the contract to sell upon breach and nonpayment of the stipulated installments. ..." The law provides inter alia that "in all transactions or contracts involving the sale or financing of real estate on installment payments, including residential condominium apartments, ..., 15 where the buyer has paid at least two years of installments , the buyer is entitled to the following rights in case he defaults in the payment of succeeding installments: [Grace Period] (a) To pay, without additional interest, the unpaid installments due within the total grace period earned by him which is hereby fixed at the rate of one month grace period for every year of installment payments made : Provided , That this right shall be exercised by the buyer only once in every five years of the life of the contract and its extensions, if any; [Refund of "Cash Surrender Value"] (b) If the con tract is cancelled, the seller shall refund to the buyer the cash surrender value of the payments on the property equivalent to fifty percent of the total payments made and, after five years of installments , an additional five per cent every year but not to exceed ninety per cent of the total payments made; Provided, That the actual cancellation of the contract shall take place after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act and upon full payment of the cash surrender value to the buyer. In the case at bar, Layug had paid two (2) annual installments of P40,000.00 each. He is deemed therefore, in the words of the law, to have "paid at least two years of installments." He therefore had a grace period of "one month .. for every year of installment payments made," or two (2) months (corresponding to the two years of installments paid) within which to pay the final installment. He has thus been left only with the right to a refund of the " cash surrender value of the payments on the property equivalent to fifty percent of the total payments made ," or P40,000.00 (i.e., ½ of the total payments of P80,000.00). Such refund will be the operative act to make effective the cancellation of the contract by Gabuya, conformably with the terms of the law.

South v CA: Mojica

3) The respondent argues: that the deed restrictions is a valid limitation on the petitioner’s right of ownership. Even assuming that the deed restrictions amounted to a limitation on petitioner’s use and enjoyment over the subject properties, the same was voluntarily entered into with the petitioner’s consent.

DOCTRINE: The deed restrictions is a valid agreement freely and voluntarily agreed upon between the petitioner and the private respondent. When an agreement has been forged, such contract becomes the law between the parties and each one is bound to comply therewith.

ISSUE

FACTS

HELD

1) Respondent Makati Commercial Estate Association Inc (formerly Ayala Commercial Estate Association) is an association of all real estate owners and long term lessees of parcels of land located in the Makati commercial area. Pursuant to its Articles of Incorporation, the members of private respondent are assessed association dues annually, subject to penalty and interest in case of default.

Yes. Petitioner is BOUND.

By virtue of two duly notarized deeds of absolute sale, South Pachem Development (petitioner), purchased from Ayala Corporation two adjoining parcels of land in Legaspi Village, Makati. In the deed of restrictions (duly annotated in the titles of the property and annexed to the two deeds), it was provided that “… The Association will also provide for and coll ect assessments which will constitute a lien on the property, junior only to liens of the Government for taxes and to voluntary mortgages for sufficient consideration entered into in good faith provided that schools, churches, and other religious institutions and buildings for public use are exempt from the payment of association dues.” 2) Petition er stopped paying its association dues, including the interest and penalty to the respondent because the respondent was not really performing the services it promised to perform- the collection of garbage, maintenance of roads and ensuring the peace and order situation of the area. It also claimed that the payment of association for 47 years amounts to perpetual imposition upon a member of the respondent as an association, which therefore makes it illegal. According to the petitioner, the imposition of the 47 years constitutes a restriction on its right to enjoy and dispose of the property under the Civil Code (Art 428) as the non-payment of association dues would constitute a lien on the property. Petition er also insists that since the parties had no deliberate intent to cl othe the respondent with the authority to impose fees for a period of 47 years at the time the con tract was executed, it cannot make such imposition which partakes of a stipulation pour autrui.

Whether or not the petitioner was bound by the deed restrictions even though the same may restrict the petitioner’s right of ownership?

The deed restrictions, duly annotated on the titles was incorporated in the con tract of sale. The deed restrictions provided, among others that a buyer or his successor in interest automatically becomes a member of the respondent as an association and enjoined compliance with its rules and regulations for the security, maintenance, beautification and general welfare of the land owners. Assessments collected by the respondent would constitute a lien on the subject property. The deed restrictions is a valid agreement freely and voluntarily agreed upon between the petition er and the private respondent. When an agreement has been forged, such contract becomes the law between the parties and each one is bound to comply therewith. Petitioner’s acceptan ce of the terms of the contract without any dissent raises the presumption that all the terms therein were brought to its knowledge and duly agreed upon. It is thus estopped from denying that it had assented to the terms. With regards to the 47 years imposition, the SC held that this was valid. The assessments coll ected by the respondent would constitute a lien on the properties of the petitioner. Nowhere can it be inferred that there was a stipulation pour autrui in favour the respondent. The requisites of a stipulation pour autrui were not satisfied. The requisites of a stipulation pour autrui or a stipulation in favour of a third person are: 1) there must be a stipulation in favour of a third person, 2) the stipulation must be a part, not the whole, of the contract, 3) the contracting parties must have clearly and deliberately conferred a favour upon a third person, not a mere incidental benefit or interest, and 4) the third person must have communicated his acceptance to the obligor before its revocation and 5) neither of the contracting parties bear legal representation or authorization of the third party. Here, they did not exist. A mere incidental benefit or interest of a person is not sufficient. The contracting parties must have clearly and deliberately conferred a favour upon a third person.

Petitioner also claims that the contract was a contract of adhesion and curtailed its freedom to enter into contracts. The SC ruled that the party who adheres to the contract was free to reject it entirely.