G.R. No. 76518 July 13, 1990
IRENE P. RELUCIO, petitioner, vs. ZEIDA B. BRILLANTE-GARFIN and COURT OF APPEALS, respondents.
FACTS:
On 22 October 1979, private respondent Zeida B. Brillante-Garfin filed a complaint in the lower court for specific performance with damages against petitioner Irene P. Relucio, to compel the latter to: (a) execute, in compliance with the Contract to Buy and Sell in question, a final deed of sale in favor of the former over two (2) residential subdivision lots in the Mariano Village Subdivision, Naga City; and (b) construct paved roads on the northern and southern sides of the lots, as "necessary facilities, improvements, infrastructures and other forms of development of the subdivision area."
Private respondent alleged that a. the lots, which have a total contract price of P10,800.00, have already been paid for, as she had already paid P200.00 as down payment, and had subsequently completed payment of 128 equal monthly installments of P89.45 each amounting to P11,450.00; b. that as the law allows the charging of interest only as monetary interest or as compensatory interest, none of which have obtained in her case, as she had never incurred in delay in the payment of installments due, the stipulated interest of six percent (6%) per annum on the outstanding balance is null and void; and c. that the amount of 650.00 representing overpayment be returned to her.
Petitioner resisted the complaint, maintaining that private respondent, contrary to the latter's allegations, is obliged to pay interest on the installment payments of the unpaid outstanding balance even if paid on their "due dates" per schedule of payments; that private respondent had actually been in arrears in the amount of P4,269.40, representing such interest as of June 1979, which therefore entitled petitioner to cancel the contract in question. Petitioner then prayed for judicial affirmance of her Notarial Notice of Cancellation over the said contract in question.
DECISION OF LOWER COURTS: * ordered petitioner: To execute a deed of absolute sale. * court of appeal: affirmed lower court.
ISSUES AND RULING:
(1) WON respondent is correct in saying that as the law allows the charging of interest only as monetary interest or as compensatory interest, none of which have obtained in her case, as she had never incurred in delay in the payment of installments due, the stipulated interest of six percent (6%) per annum on the outstanding balance is null and void
NO, an installment sale has implied interest. The installment price is almost always higher than the cash price and this is a valid stipulation for the parties. For the vendor, upon receiving the full cash price, could have deposited that amount in a bank, for instance, and earned interest income which at six percent (6%) per year and for fifteen (15) years, would precisely total P5,501.00 (the difference between the installment price of P16,101.00 — and the cash price of P10,600.00) To suppose, as private respondent argues, that mere prompt payment of the monthly installments as they fell due would obviate application of the interest charge of six percent (6%) per annum, is to ignore that simple economic fact. That economic fact is, of course, recognized by law, which authorizes the payment of interest when contractually stipulated for by the parties 4 or when implied in recognized commercial custom or usage.
(2) whether or not private respondent has fully paid the stipulated price in the contract so as to be entitled lawfully to demand the execution of a deed of absolute sale in her favor. This issue in turn will depend on the question of whether or not petitioner may validly charge interest on installment payments, notwithstanding that private respondent had been prompt in her monthly payments; and
NO, it has not yet been fully paid. The respondent should pay a total of 16,101 and not 10,600 or 10,800 only.
Examination of the record shows that the questioned Contract to Buy and Sell the subdivision lots provided for payment by private respondent of the sum of P200.00 as downpayment, and that "the balance [of P10,600.00] shall be paid in 180 monthly installments at P89.45 per month, including interest rate at six percent (6%) per annum, until the purchase price is fully paid." This stipulation clearly specified that an interest charge of six percent (6%) per annum was included in the monthly installment price: private respondent could not have helped noticing that P89.45 multiplied by 180 monthly installments equals P16,101.00, and not P10,600.00. The contract price of P10,800.00 may thus be seen to be the cash price of the subdivision lots.
That economic fact is, of course, recognized by law, which authorizes the payment of interest when contractually stipulated for by the parties 4 or when implied in recognized commercial custom or usage.
Vendor and vendee are legally free to stipulate for the payment of either the cash price of a subdivision lot or its installment price. Should the vendee opt to purchase a subdivision lot via the installment payment system, he is in effect paying interest on the cash price, whether the fact and rate of such interest payment is disclosed in the contract or not.
(3) whether or not petitioner's notice of cancellation was valid and effective.
NO. Despite private respondent's failure to fully pay the stipulated price of the two lots in question, petitioner, however, could not validly rescind the contract not being lawfully entitled to do so. Petitioner failed to rebut private respondents' allegations that the former had failed to introduce required improvements in the subdivision; the former's bare allegation that the improvements have already been donated to the city government was not accepted by the trial court. Section 23 of Presidential Decree No. 957, otherwise known as The Subdivision and Condominium Buyers' Protective Decree, provides:
Section 23. Non-forfeiture of Payments. — No installment payment made by the buyer in a subdivision or condominium project for the lot or unit he contracted to buy shall be forfeited in favor of the owner or developer when the buyer, after due notice to the owner or developer desists front further payment due to the failure of the owner or developer to develop the subdivision or condominium project according to the approved plans and within the time limit for complying with the same. Such buyer may, at his option, be reimbursed the total amount paid. . . (Emphasis supplied)
In this respect, the trial court was correct in holding that petitioner could not rescind the contract. As the law vests upon the buyer the option to demand reimbursement of the total amount paid, or to wait for further development of the subdivision, private respondent who opted for the latter alternative by waiting for the proper development of the site, may not be ousted from the subdivision.
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