Rapanut v. CA

Rapanut v. CA Summary: Rapanut (before balding) and Susan Flunker entered into a contract of sale with mortgage. Flunker (even if she fails all the time) decided to sell her property in Pasay. It was to be paid on installments. Rapanut has been paying the !! per month installments until a letter was received received was sent to him by Flunker"s counsel informing him that for his failure to pay the monthly installments plus #!$ per #!$ per annum interest on the balance and rescinding the contract. R%& and &' ruled in favor of Flunker. Flunker. %he trial court and the appellate court agreed with private respondents theory that the above payments should be applied to the unpaid accrued interest (#!$ per (#!$ per annum on annum on the balance) for the years #*+ to #* totalling P#!,++.#*, pursuant to 'rticle #- of the &ivil &ode of the Philippines. /01 this is correct. 1ope. ' liberal interpretation interpretation of the contracts in 2uestion is that at the end of each year, all payments made shall be deducted from the principal obligation. %he #!$ interest on the balance is then added to whatever remains of the principal. %hereafter, %hereafter, petitioner shall pay the monthly installments on the stipulated dates. In other words, the interest due are added to and paid like the remaining balance of the principal. %hus, we must rule that the parties intended that petitioner pay the monthly installments at predetermined predetermined dates, until the full amount, consisting of the purchase price and the interests on the balance, is paid. Signi3cant is the fact that private respondent accepted the payments petitioner religiously made for four years. Private respondent respondent cannot rely on the clause in the contract stating that no demand is necessary to e4plain her silence for four years as to the #!$ interest, as such clause refers to the P!!.!! monthly installments. 'fter pondering on the meaning of 'rticle #-, we reach the conclusion that in a contract involving installment payments with interest chargeable chargeable against the remaining balance of the obligation, it is the duty of the creditor to inform of the amount of interest that falls due and that he is applying the installment payments to cover said interest. 5therwise, 5therwise, the creditor cannot apply the payments pa yments to the interest and then hold the debtor in default for non6payment of installments on the principal.

FACTS (A2014) ( A2014) 5n 1ovember -, #*, petitioner and private respondent e4ecuted e4ecuted a 7eed of &onditional Sale with 8ortgage. 9nder the contract, private

respondent agreed to sell to petitioner a parcel of land in San Rafael, Pasay &ity, payable in monthly installments of P!!.!! to be paid not later than the 3fth day of every month and in semi6annual installments of P#,!!!.!! to be paid on :une ! and 7ecember # of every year, ;with an interest of #!% per annum on the remaining balance until the full amount is paid; In 'pril #*+, petitioner and private respondent entered into a Supplemental 'greement with the following stipulations< /=>R>'S, the ?>175R085R%@'@>> is willing to sell said portion of her lots to the ?>17>>085R%@'@5R for a total price of PA,B*.!!  payable in monthly installments of P500.00 with an interest of 10% per annum on the remaining balance until the full amount  is paid. Payments of the monthly installments of P!!.!! shall be made not later than the 3fth day of every month without need of demand starting :anuary, #*+. Failure to pay any of the monthly installments when due for three months, shall be suCcient cause for rescission of this contract and all payments made shall be applied as corresponding rentals. Petitioner, thus, had been making the P!!.!! monthly installment payments until he received a letter dated February #, #! from private respondent s counsel informing him that for his failure to pay the monthly installments plus #!$ per annum interest on the balance, the 7eed of &onditional Sale with 8ortgage and the Supplemental 'greement were rescinded ;as of receipt hereof,; and that payments made were considered rentals. %he letter further demanded that petitioner vacate the premises within # days from receipt thereof. Respondent 3led a complaint against petitioner in the Regional %rial &ourt of Pasay &ity for rescission of the 7eed of &onditional Sale with 8ortgage and Supplemental 'greement which the court granted.  %he controversial provision in the Supplemental 'greement reads< ;. . . the ?>175R085R%@'@>> is willing to sell said portion of her lot to the ?>17>>085R%@'@5R for a total price of PA,B*.!!  payable in monthly installments of P500.00 with an interest of 10% per annum on the remaining balance until the full amount is paid; Private respondents view is that the #!$ interest must be paid every year and posits that the P!!.!! monthly installments include the #!$ interest.

Issue:

/01 the #!$ interest must be paid every year and the P!!.!! paid by petitioner monthly inludes the #!$ interest.

Held: 'fter pondering on the meaning of 'rticle #-, we reach the conclusion that in a contract involving installment payments with interest chargeable against the remaining balance of the obligation, it is the duty of the creditor to inform of the amount of interest that falls due and that he is applying the installment payments to cover said interest. 5therwise, the creditor cannot apply the payments to the interest and then hold the debtor in default for non6payment of installments on the principal. ' liberal interpretation of the contracts in 2uestion is that at the end of each year, all payments made shall be deducted from the principal obligation. The 10 !nterest "n the #alan$e !s then added t" %hatever rema!ns "& the pr!n$!pal. %hereafter, petitioner shall pay the monthly installments on the stipulated dates. In other words, the !nterest due are added t" and pa!d l!'e the rema!n!n #alan$e "& the pr!n$!pal. %hus, we must rule that the parties intended that petitioner pay the monthly installments at predetermined dates, until the full amount, consisting of the purchase price and the interests on the balance, is paid. Signi3cant is the fact that private respondent accepted the payments petitioner religiously made for four years. Private respondent cannot rely on the clause in the contract stating that no demand is necessary to e4plain her silence for four years as to the #!$ interest, as such clause refers to the P!!.!! monthly installments. >ven granting as acceptable private respondents theory that the monthly amortiDations shall 3rst be applied to the payment of the interests, we must still rule for petitioner.  %he contracts provided for private respondents right of rescission which may be e4ercised upon petitioners failure to pay installments for three months. Private respondents failure to e4ercise her right of rescission after petitioners alleged default constitutes a waiver of such right. =er continued acceptance of the installment payments places her in estoppel.