Villaruel v. Tan King
REITERATIONFacts
The Antecedents: On April 14, 1918, Crispulo Villaruel (Villaruel) and Tan King (Tan King) entered into a contract wherein Villaruel agreed to sell two sublots of the San Lazaro Estate, with two structures thereon, to Tan King for P2,700. Tan King paid P1,000 at the time of the execution of the document and bound himself to pay the remaining P1,000 within one year, extendable for another year. To secure the payment of the P1,000 balance, the property was transferred to Villaruel in special and voluntary mortgage, which would subsist until the P1,000 was fully paid. Tan King was prohibited from selling or mortgaging the property without Villaruel's consent. As Tan King would not pay interest on the P1,000, Villaruel agreed to use and occupy house No. 216 of Calle Bambang, Manila, without paying rent until the debt was fully paid. Tan King retained the right to collect the monthly rent of P4 for the annex. The contract stipulated a P200 penalty for attorney's fees and judicial expenses if judicial proceedings were necessary to enforce payment. Procedural History: The plaintiff, Villaruel, filed an action for the resolution of the sale due to Tan King's failure to pay the P1,000 balance. Villaruel prayed for the return of the P1,700 paid by Tan King and for P100 in damages. Tan King denied the allegations, asserting ownership and claiming that Villaruel refused to accept the P1,000 balance, which he had deposited with the Court of First Instance. Tan King also filed a counterclaim for damages, alleging Villaruel's continued possession of the premises despite notice to vacate, and for the value of merchandise taken by Villaruel. The trial court resolved the sale, ordered Villaruel to return P1,700 to Tan King, denied damages to Villaruel, and awarded costs against Tan King. The Petition: The defendant-appellant, Tan King, appealed the trial court's decision, assigning errors concerning the resolution of a consummated sale and the failure to order Villaruel to vacate the premises and pay rentals.
Issue(s)
Whether the sale of real property, with a stipulation for resolution upon non-payment of the balance, is subject to pacto comisorio. Whether the plaintiff, as vendor, properly exercised the right to resolve the sale. Whether the defendant, as vendee, properly tendered payment of the balance of the purchase price. Whether the plaintiff is liable for damages and rentals for his continued occupation of the premises.
Ruling
The Supreme Court reversed the judgment of the lower court. It absolved the defendant from the complaint and ordered the plaintiff to accept the deposited amount, pay expenses for the deposit, pay the remaining balance of the purchase price with legal interest, vacate the premises, and pay rentals and the value of merchandise taken.
Ratio Decidendi
On the nature of the sale and pacto comisorio: The Court held that the sale of real property is governed by Article 1504 of the Civil Code, not Article 1124, and is subject to the stipulations agreed upon by the parties. The contract explicitly stipulated that the P1,000 balance was secured by a special and voluntary mortgage of the property sold. This act of mortgaging the property to the vendor indisputably acknowledged the consummation of the sale. Furthermore, the execution of the mortgage to guarantee payment served as a waiver of the pacto comisorio, which would otherwise allow for the resolution of the sale in case of non-payment. The vendor's adequate remedy in such a scenario would be the foreclosure of the mortgage, not the resolution of the sale. On the proper exercise of the right to resolve the sale: Even assuming that the mortgage did not constitute a waiver of the pacto comisorio, the Court found that the plaintiff, Villaruel, failed to properly exercise the right to resolve the contract. Article 1504 of the Civil Code provides that even if resolution is stipulated ipso facto upon default, the vendee may still pay even after the expiration of the period, at any time before demand for payment has been made either by suit or by notarial act. The records showed that Villaruel did not serve judicial or notarial notice upon Tan King of his intent to resolve the contract before filing the action. Instead, Tan King had deposited the balance of the purchase price with the court, which Villaruel refused to accept. On the tender of payment by the vendee: The Court acknowledged that the conclusion of the lower court that the defendant did not offer payment before or on the day of expiration was supported by the evidence. However, this default did not grant the plaintiff the right to demand resolution of the sale, as explained above. The defendant's subsequent deposit of the P1,000 balance with the court, after deducting the value of merchandise taken by the plaintiff, constituted a valid tender of payment, especially since the plaintiff had refused to accept it earlier and had not made a proper demand for resolution. On the plaintiff's continued occupation and damages: The Court found that Villaruel was occupying the property under the contract, in consideration of the interest on the P1,000 balance, and had the right to do so until the debt was paid. However, upon the deposit of the P1,000 balance with the court on May 21, 1920, Villaruel's right to occupy the premises ceased. The Court also noted that the plaintiff's claim for damages of P100 was not proven. Conversely, the defendant's counterclaim for rentals at P30 per month for Villaruel's continued occupation from May 21, 1920, and for the value of merchandise taken (P47.77), was deemed reasonable and supported by the evidence. The Court ordered Villaruel to vacate the premises and pay the accrued rentals and the value of the merchandise.
Main Doctrine
In the sale of real property, even if it is stipulated that resolution shall take place ipso facto upon default of payment, the vendee may still pay even after the expiration of the period, provided it is before demand for payment has been made either by suit or by notarial act. The execution of a special mortgage to guarantee the payment of the balance of the purchase price implies a consummated sale and a waiver of the pacto comisorio.