People's Industrial and Commercial Corporation v. Court of Appeals
REITERATIONFacts
The Antecedents: Private respondent Mar-ick Investment Corporation (Mar-ick) is the owner of a subdivision. On May 29, 1961, Mar-ick entered into six (6) agreements with petitioner People's Industrial and Commercial Corporation (PICC) to sell six subdivision lots. These agreements contained a provision (No. 9) stipulating automatic cancellation of the contract, nullity, and forfeiture of payments as rentals, without need for notice or judicial declaration, should the buyer fail to pay installments within 120 days from the due date. PICC paid only the down payment and eight installments, failing to fully pay the purchase price even after ten years. Procedural History: Mar-ick sent demand letters to PICC protesting encroachment on several lots and demanding removal or payment of rentals. After negotiations, a new contract to sell for seven lots was drafted but not signed. Mar-ick received checks from PICC as down payment for this new contract but did not encash them. On July 12, 1984, Mar-ick filed a complaint for accion publiciana de posesion against PICC and its president, seeking possession of the lots, payment of rentals, attorney's fees, and damages. The Regional Trial Court (RTC) ruled that the original agreements were validly cancelled under provision No. 9, finding no perfected new contract. The RTC ordered PICC to return the lots and pay rentals, attorney's fees, and costs, with deductions for prior payments. The Court of Appeals (CA) affirmed the RTC decision. PICC's motion for reconsideration was denied. The Petition: PICC filed a petition for review on certiorari with the Supreme Court, raising issues of jurisdiction, the existence of a perfected contract in 1983, the validity of a right-of-way grant, and justification for rentals and attorney's fees.
Issue(s)
Whether the lower court had jurisdiction over the subject matter in light of Republic Act No. 6552 and Presidential Decree No. 1344. Whether there was a perfected and enforceable contract of sale in October 1983 that modified the earlier contracts. Whether there was a valid grant of right of way involving Lot No. 2 in favor of petitioner. Whether there was justification for the grant of rentals and the award of attorney's fees.
Ruling
The Supreme Court denied the petition and affirmed the decision of the Court of Appeals. The Court held that the original contracts to sell were validly cancelled under their own terms. The subsequent laws cited by the petitioner were not applicable retroactively. The Court found no perfected new contract in 1983 due to a lack of meeting of the minds on essential terms. The issue of right of way was not sufficiently proven. The award of rentals and attorney's fees was justified.
Ratio Decidendi
On the issue of jurisdiction: The Court ruled that PICC was estopped from questioning the jurisdiction of the lower court, having actively participated in the proceedings without raising the issue until its motion for reconsideration before the CA. Furthermore, the laws cited by PICC (P.D. Nos. 957 and 1344, and R.A. No. 6552) were not yet in effect when the contracts were cancelled in 1971. As these laws do not provide for retroactive application, they could not govern the cancellation of the 1961 contracts. The Court emphasized that laws are generally prospective in application unless expressly stated otherwise, as per Article 4 of the Civil Code. The cancellation was based on a stipulation in the original contracts, which the parties voluntarily agreed to. On the existence of a perfected contract in 1983: The Court found that while there were negotiations and a draft contract to sell for seven lots, a perfected contract did not materialize. The parties failed to reach a meeting of the minds on essential terms, specifically the number of lots to be included, as PICC claimed Lot No. 2 was intended as a right of way and not for sale. PICC's failure to sign the draft contract and its subsequent inaction, including the failure to tender payment for installments or make a consignation, prevented the perfection of the contract. The Court reiterated that in contracts to sell, payment involves both tender and consignation to extinguish the obligation, not merely tender of payment. On the validity of the grant of right of way: The Court found no need to extensively discuss this issue. It noted that the documentary evidence presented by PICC indicated that the alleged right of way on an unidentified property was granted in 1961 to a different entity (W. Ick & Sons, Inc. and Julian Martinez) and later endorsed to PICC. The Court did not find sufficient basis to establish a valid grant of right of way in favor of PICC concerning Lot No. 2 within the context of the case. On the justification for rentals and attorney's fees: The Court affirmed the lower courts' findings that the payments made by PICC under the cancelled 1961 agreements should be considered rentals, as stipulated in provision No. 9 of the contracts and supported by law (Article 1486 of the Civil Code). PICC had occupied and utilized the lots for its factories, making it not unconscionable to charge rentals. The award of attorney's fees was also justified under Article 2208 of the Civil Code, as Mar-ick was compelled to litigate to protect its valid claim due to PICC's rejection of demands and unjustified refusal to settle.
Main Doctrine
Contracts to sell, which contain a stipulation for automatic cancellation upon failure to pay installments within a specified period, are validly rescinded extrajudicially if the buyer does not oppose the cancellation. Subsequent laws on real estate sales, not expressly retroactive, do not apply to cancellations that occurred prior to their enactment. The payments made under such cancelled contracts may be considered rentals, especially if the buyer continues to occupy the property.