Uy & Sons v. Valbueco
REITERATIONFacts
The Antecedents: Petitioner Manuel Uy & Sons, Inc. (vendor) executed two Conditional Deeds of Sale with respondent Valbueco, Incorporated (vendee) for parcels of land in Teresa, Rizal. The deeds stipulated that ownership would not pass until full payment of the purchase price and included terms regarding payment schedules, interest, mortgage releases, and eviction of occupants. Respondent paid partial amounts and some installments. Petitioner released some mortgages and facilitated the surrender of occupants. However, respondent suspended further payments, citing dissatisfaction with petitioner's compliance with its obligations. Petitioner sent a notice of rescission on March 17, 1978. Procedural History: Respondent filed a Complaint for specific performance and damages on November 28, 1994, which was dismissed without prejudice on January 15, 1996, due to the counsel's failure to attend the pre-trial. Respondent filed a second Complaint on March 16, 2001. The Regional Trial Court (RTC) dismissed the complaint, finding that petitioner had validly rescinded the contracts. The Court of Appeals (CA) reversed the RTC decision, reinstating the complaint and directing petitioner to execute deeds of absolute sale upon respondent's payment of the balance, holding that the rescission was invalid due to improper service of notice. The Petition: Petitioner seeks review of the CA decision, arguing that the CA erred in reversing the RTC decision, compelling execution of the sale despite admitted non-payment, rewarding respondent who breached the contract, and annulling the notarial rescission.
Issue(s)
Whether the Court of Appeals gravely erred in reversing the RTC decision and reinstating the complaint when it was allegedly prescribed and the court lacked jurisdiction. Whether the Court of Appeals gravely erred in compelling petitioner to execute a final deed of absolute sale despite respondent's admitted non-payment of the balance, and whether the Court of Appeals erred in granting the reliefs prayed for when respondent allegedly breached the contract. Whether the Court of Appeals committed grave injustice by penalizing petitioner for exercising its legal right and rewarding respondent who breached the contract. Whether the Court of Appeals gravely erred in annulling the notarial rescission when it was not an issue raised in the pleadings or during trial. Whether the action for specific performance has prescribed. Whether R.A. No. 6552 (Maceda Law) is applicable.
Ruling
The petition is GRANTED. The Decision of the Court of Appeals is REVERSED and SET ASIDE. The Decision of the Regional Trial Court dismissing the case is REINSTATED.
Ratio Decidendi
On the issue of prescription and jurisdiction: The Court held that the action has prescribed. The Conditional Deeds of Sale were executed on November 29, 1973, with payments due by November 15, 1974. Under Article 1144 of the Civil Code, actions based upon a written contract must be brought within ten years from the time the right of action accrues. The respondent filed the complaint on March 16, 2001, which is beyond the ten-year prescriptive period. The Court noted that while the defense of prescription was raised for the first time before the Supreme Court, it could be resolved as both parties had the opportunity to ventilate their positions, and the facts demonstrating the lapse of the prescriptive period were apparent from the record. The Court found the petitioner's contention regarding improper venue to be without merit, as both parties had stipulated in the Conditional Deeds of Sale that any litigation shall be filed in the courts of Manila. The Court also implicitly affirmed the jurisdiction of the RTC of Manila by proceeding to resolve the merits of the case. On the issue of specific performance and breach of contract: Given the valid rescission and the admitted non-payment by the respondent, the Court held that respondent was not entitled to specific performance. The non-fulfillment of the suspensive condition (full payment) prevented the obligation to sell from arising. The respondent's failure to pay the balance due since 1974 constituted a breach of contract, and the petitioner was within its rights to rescind the contract. On the issue of penalizing the petitioner: The Court's decision does not explicitly address this issue as a separate point. The overall ruling favors the petitioner by recognizing the validity of the rescission and denying specific performance to the respondent. On the validity of the rescission: The Court found that the Court of Appeals erred in holding that the rescission was invalid. While the initial notice of rescission dated March 17, 1978, was sent to a wrong address, the respondent was deemed to have received notice of the rescission when it was furnished with petitioner's Answer to its first Complaint filed in 1994. This Answer included copies of the written notice and the notarial acts of rescission. The respondent attached these same notices to its Reply in the second complaint, thereby admitting receipt and knowledge of the rescission. Therefore, the rescission was validly made. On the issue of prescription: The Court held that the action has prescribed. The Conditional Deeds of Sale were executed on November 29, 1973, with payments due by November 15, 1974. Under Article 1144 of the Civil Code, actions based upon a written contract must be brought within ten years from the time the right of action accrues. The respondent filed the complaint on March 16, 2001, which is beyond the ten-year prescriptive period. On the applicability of R.A. No. 6552 (Maceda Law): The Court reiterated that R.A. No. 6552 applies to contracts to sell on installment. However, Section 4 of the law, which applies when less than two years of installments were paid, requires the seller to give a grace period and then cancel the contract after thirty days from receipt of the buyer of the notice of cancellation or demand for rescission by notarial act. Since the Court found that the rescission was validly made and acknowledged by the respondent, the contract was effectively cancelled.
Main Doctrine
An action for specific performance based on a written contract, where the cause of action accrued in 1974, is barred by prescription if filed in 2001, as it falls outside the ten-year prescriptive period under Article 1144 of the Civil Code. Furthermore, a notice of notarial rescission, even if initially sent to a wrong address, is deemed validly served if the buyer subsequently receives a copy of the seller's answer to a prior complaint which includes said notices, thereby acknowledging receipt and making the rescission effective.