G.R. No. L-25885 January 31, 1972 J.B.L. Reyes, J.LUZON BROKERAGE CO., INC., vs.

MARITIME BUILDING CO., INC., AND MYERS BUILDING CO., INC.

April 1949 - Myers Bldg Co. entered into a Deed of Conditional Sale (DOCS) in favor of Maritime Bldg Co. over 3 parcels of land with improvements in Manila City for P1M. Maritime paid P50T upon execution. The balance was to be paid in monthly installments of P10T at 5% interest p.a. (later lowered to P5T at 5.5% p.a.). The parties agreed that:

o If Maritime defaults, the contract would be annulled at Myers' option. o All payments already made shall be forfeited. o Myers shall have the right to reenter the property and take possession.

If Maritime refuses to peacefully deliver the possession of the properties subject of this contract to the Myers in case of recission, a suit should be brought in court by the Myers to seek judicial declaration of rescission.

Maritime failed to pay the installment for March 1961. Maritime VP Schedler requested Myers President Parsons for a moratorium on the payments.

o Maritime's suspension of payment arose from an award of backwages in a Labor Case favor of members of the Luzon Labor Union. Schedler claims he is being sued for the backwages for which F.H. Myers, former majority stockholder of Luzon Brokerage, allegedly promised to indemnify him when Schedler bought F.H. Myers' stock.

o Parsons replied that the payments are addressed to Myers Bldg Co., not the estate of F.H. Myers, and Board of Directors refused to grant the moratorium.

May 16, 1961 - Myers made a demand upon Maritime for the unpaid installments. June 5, 1961 - Myers advised Maritime of the cancellation of the DOCS and demanded the return of the

property, holding Maritime liable for rentals at P10T monthly. Myers demanded from its lessee, Luzon Brokerage, the payment of monthly rentals of P10T + return of

the property. Luzon Brokerage, to avoid paying to the wrong party, filed an action for interpleader.o Myers filed a cross-claim, praying for judicial confirmation of its right to rescind.

CFI: Maritime committed breach by nonpayment. Myers is entitled to cancel the DOCS, forfeit the payments made, repossess the property, and collect the rentals thereof.

The decision says Myers appealed to the SC (Typo error? Maritime probably appealed).

W/N Maritime was guilty of breach (if yes, W/N in good faith) - Guilty of breach in bad faith.The non-payment of the installments designed to coerce Myers Bldg Co. into answering for an alleged promise of

the late F. H. Myers. Maritime cannot ignore the fact that whatever obligation F. H. Myers/ his estate had assumed was not, and could not have been, an obligation of the corporation, Myers Bldg Co. Hence, the breach was tainted with dolo or a "conscious and intentional design to evade the normal fulfillment of existing obligations" (Capistrano Vol. 3). Having acted in bad faith, Maritime is not entitled to ask the court to grant further time to make payment.

From another point of view, it is irrelevant whether Maritime's breach was casual or serious, for as pointed out in Manuel v. Rodriguez, in contracts to sell, the failure to pay in full is not a breach but simply an event that prevented the obligation of the vendor to convey title from acquiring binding force.

W/N Myers is entitled to extrajudicially rescind the DOCS - YESSC held in Lopez v. Commissioner of Customs that a judicial action for the rescission of a contract is

not necessary where the contract provides that it may be revoked and cancelled for violation of any of its terms. As further explained in UP v. de Los Angeles, the party who deems the contract violated may consider it resolved or rescinded without previous court action, but it proceeds at its own risk. For it is only the final judgment of the corresponding court that will conclusively and finally settle whether the action taken was or was not correct in law. But the law definitely does not require that the contracting party who believes itself injured must first file suit and wait for a judgment before taking extrajudicial steps to protect its interest.

Neither can Maritime invoke Civil Code Art. 1592 (where vendee in default can continue to make payments as long as no judicial/notarial demand for rescission has been made) because the cross-claim filed by Myers constitutes a judicial demand for rescission that satisfies the said article. Moreover, this is not an ordinary sale envisaged by Article 1592, transferring ownership simultaneously with the delivery of the real property sold, but one in which the vendor retained ownership of the immovable object of the sale, merely undertaking to convey it provided the buyer strictly complied with the terms of the contract. What Myers seeks is not really rescission and restoration of the parties to the status quo ante but enforcement of the provisions.