Bonrostro v. Luna
REITERATIONFacts
The Antecedents: Respondent Constancia Luna entered into a Contract to Sell with Bliss Development Corporation (Bliss) for a house and lot. Subsequently, Constancia, as seller, entered into another Contract to Sell with petitioner Lourdes Bonrostro for the same property. The agreed price was ₱1,250,000.00, payable in installments. The contract stipulated a 2% monthly interest on ₱300,000.00 if the second installment was not paid on time, and a 5% forfeiture of the total price if the ₱630,000.00 was not paid on time, leading to cancellation and rescission. Spouses Bonrostro took possession upon execution of the contract but failed to pay subsequent amortizations after the initial down payment of ₱200,000.00. Procedural History: Spouses Luna filed a Complaint for Rescission of Contract and Damages against spouses Bonrostro. The Regional Trial Court (RTC) ruled that the delay in payment was not a substantial breach, declared the contract in force, and ordered defendants to pay the outstanding amounts with specified interests. Spouses Luna appealed to the Court of Appeals (CA). The CA affirmed the contract's validity but modified the interest rates and periods, holding that rescission was not the proper remedy under the Maceda Law. The CA denied spouses Bonrostro's motion for partial reconsideration. The Petition: Spouses Bonrostro filed a Petition for Review on Certiorari, questioning the CA's disquisition on the matter of interest.
Issue(s)
Whether the Court of Appeals correctly modified the Regional Trial Court Decision with respect to interests. Whether the spouses Bonrostro's letter dated November 24, 1993, constituted a valid tender of payment that would suspend the accrual of interest. Whether the spouses Bonrostro are liable for interest on the amount paid by spouses Luna to Bliss Development Corporation for amortizations.
Ruling
The Supreme Court denied the Petition for Review on Certiorari, affirming the Decision and Resolution of the Court of Appeals. The Court held that the spouses Bonrostro are liable for the stipulated interests on the unpaid installments and for interest on the amount reimbursed to spouses Luna for amortizations paid to Bliss Development Corporation.
Ratio Decidendi
On the modification of interest by the Court of Appeals: The Court found the spouses Bonrostro's reliance on the RTC's factual finding of willingness to pay on November 24, 1993, to be misplaced. The RTC's conclusion on substantial breach was based on a mistaken premise that rescission was applicable. However, the CA correctly ruled that the contract was a Contract to Sell governed by the Maceda Law, where rescission under Article 1191 is not the proper remedy for non-payment. In a contract to sell, non-payment is an event that prevents the seller from conveying title, not a breach warranting rescission. Therefore, the RTC's factual finding regarding readiness to pay lost its significance in the context of rescission, and the spouses Bonrostro could not use this readiness to escape liability for interest beyond that date. On whether the letter of November 24, 1993, constituted a valid tender of payment: The Court held that the letter merely expressed willingness and readiness to pay but was not accompanied by actual payment. To suspend the accrual of interest, a tender of payment must be followed by consignation of the sum due with the proper court if refused. The spouses Bonrostro took no further steps to effect payment after sending the letter and did not resort to consignation. Therefore, their claimed tender of payment produced no effect and did not suspend the running of interest from the date of default. On liability for interest on amortizations paid to Bliss: The Court found Article 1186 of the Civil Code inapplicable because it requires the obligor to voluntarily prevent the fulfillment of the condition, whereas Constancia Luna was the obligee. Furthermore, there was no showing that Bliss actually heeded Constancia's instruction not to accept payments, nor was there proof that the spouses Bonrostro attempted to pay Bliss and were refused. The Court noted that the spouses Bonrostro failed to make amortization payments for extended periods, and the payment made by spouses Luna was necessary to avoid cancellation of the contract and higher penalties from Bliss. Thus, the spouses Luna were constrained to pay, and the spouses Bonrostro were liable for reimbursement of this amount with legal interest, as they were in delay and had caused damages to the spouses Luna.
Main Doctrine
In a contract to sell, non-payment of the purchase price does not constitute a breach of contract warranting rescission under Article 1191 of the Civil Code, but rather an event that prevents the seller from being bound to convey title. Sales of real property on installment are governed by the Maceda Law. A mere letter expressing willingness to pay does not constitute a valid tender of payment; it must be accompanied by actual payment or followed by consignation to suspend the accrual of interest.