CASE DIGEST: AGUSTIN VS CA AND LABRADOR DEVELOPMENT CORPORATION

SPS. EDUARDO AND ANN AGUSTIN, petitioners,

VS

HON. COURT OF APPEALS AND LABRADOR DEVELOPMENT CORPORATION, respondents

G.R. No. 84751 [June 6, 1990]

Facts of the Case:

Labrador Development Corporation (LADECO), a subdivision developer, agreed to sell a parcel of land covered under TCT No. 277209 to Spouses Agustin on a package deal together with a residential house yet to be constructed thereon for the sum of P202, 980.00. Aside from payment of equity and for the down payment and balance, P160,000.00 was to be funded through a Pag-Ibig Fund loan to be applied by the spouses. They further agreed that failure to comply with any or all of the above stipulations shall ipso facto cancel the contract and if title has been transferred already, such shall revert to LADECO.

A deed of sale over the lot was executed in favor of spouses Agustin. The latter applied for a P160,000.00 housing loan with the First Summa Savings and Mortgage Bank as an accredited financing institution. The bank required them to fulfill some conditions needed for the approval of the loan amount. While LADECO sought to enforce the contractual stipulations, the spouses sought time to buy the property. The latter failed to make payment thus the private respondent demanded for reconveyance through institution of a civil case for reconveyance and damages. The trial court ruled in favor of LADECO. On appeal, the decision was affirmed by the respondent court but with the deletion of the award of exemplary damages.

Issue:

            Whether or not there was a vaild rescission in the present case, which would justify the action for reconveyance.

Ruling of the Court:

 Petitioners were already barred from questioning the validity of the cancellation of the contract to sell by their acquiescence thereto. Their acceptance and encashment of the checks representing the total amount paid by them to private respondent as equity, coupled by their failure to object or file an action, despite due notice, to question the validity of the extrajudicial cancellation of said contract and to ask for specific performance for more than one year, clearly show that they assented to the same.

Furthermore, after receiving the check refunding their equity payment incident to the reconveyance desired by private respondents, petitioners, disregarding the original agreement of the parties, offered to purchase anew the property in question to which private respondent agreed. This novatory agreement, however, was not consummated as petitioners again failed to raise and pay the purchase price despite two 30-day extensions. They never at that juncture questioned the propriety of the rescission and reconveyance desired by private respondent. Obviously, extrajudicial rescission produces legal effects where the other party does not oppose it.The non-fulfillment by petitioners of their obligation to pay, which is a suspensive condition to the obligation of private respondent to sell and deliver the house and lot, rendered the contract to sell and the subsequent contract executed pursuant thereto ineffective and without force and effect.