Case Digest: Pilipinas Banks vs IAC, G.R. No. 67881

Pilipinas Banks vs IAC, GR No. 67881, June 30, 1987

Subject: Obligations and Contracts

FACTS

Hacienda Benito, Inc. (Hacienda) as vendor and Jose W. Diokno and Carmen Diokno (Diokno) as vendees executed a Contract to Sell over a parcel of land with an area of 5,936 square meters of the Victoria Valley Subdivision in Antipolo, Rizal on monthly installments subject to an automatic rescission clause, subjecting the contract to automatic rescission upon failure of the vendee to pay when due, three or more consecutive installments as stipulated therein. During the contract, Hacienda sent a series of notices to Diokno reminding their arrearages/balances to which they partially complied. As the Dioknos sent a letter expressing to fully settle their obligation after two years from the last reminder, Hacienda informed them that the contract has been rescinded subject to the automatic rescission clause of their contract, and Diokno is liable in default, citing article 1189 of the Civil Code. However, Diokno argues that such clause has now been inapplicable due to the waiver of such right after execution of several notices of the obligation.

ISSUE

Whether or not the Contract to Sell was rescinded or cancelled, under the automatic rescission clause contained therein.

RULING

No, the contract to sell was not rescinded or cancelled under the automatic recission clause contained in the contract.

Under Article 1382, payments made in a state of insolvency for obligations to whose fulfillment the debtor could not be compelled at the time they were effected, are also rescissible.

In this case, SC reiterated among other things that a contractual provision allowing "automatic rescission" (without prior need of judicial rescission, resolution or cancellation) is VALID, the remedy of one who feels aggrieved being to go to Court for the cancellation of the rescission itself, in case the rescission is found unjustified under the circumstances. It is a clear WAIVER of the stipulated right of "automatic rescission," as evidenced by the many extensions granted private respondents by the petitioner.