On April 30, 1949, the defendant Myers Building Co. entered into a Deed of Conditional Sale, in favor of Maritime Building Co. over 3 parcels of land with improvements in Manila City for P1M. Maritime paid P50, 000.00 upon execution. The balance was to be paid in monthly instalments of P10, 000.00 at 5% interest per annum (later lowered to P5, 000.00 at 5.5% interest per annum). The parties further agreed that: a. If Maritime defaults, the contract would be annulled at Myers’ option; b. All payments already made shall be forfeited; and c. Myers shall have the right to re-enter the property and take possession. Moreover, if Maritime refuses to peacefully deliver the possession of the properties subject of this contract to the Myers in case of rescission, a suit should be brought in court by the Myers to seek judicial declaration of rescission.
Unfortunately, Maritime failed to pay the installment for March 1961, for which the Vice-President, George Schedler,of the Maritime Building Co., Inc., wrote a letter to the President of Myers, Mr. C. Parsons, requesting for a moratorium on the monthly payment of the installments until the end of the year 1961, for the reason that the said company was encountering difficulties in connection with the operation of the warehouse business. Consequently, on May 1961, Myers made a demand upon Maritime for the unpaid installments; also, Myers advised Maritime of the cancellation of the Deed of Conditional Sale and demanded the return of the property, holding Maritime liable for rentals at P10, 000.00 monthly. Myers thereafter demanded from its lessee, Luzon Brokerage, to avoid paying to the wrong party, filed an action for interpleader. After the filing of this action, the Myers Building Co., Inc. in its answer filed a cross-claim against the Maritime Building Co., Inc. praying for the confirmation of its right to cancel the said contract.
Whether or not Myers Company is entitled to extra-judicially rescind the Deed of Conditional Sale.
YES. The Court held in Lopez v. Commissioner of Customs that a judicial action for the rescission of a contract is not necessary where the contract provides that it may be revoked and cancelled for violation of any of its terms. As further explained in UP v. de los Angeles, the party who deems the contract violated may consider it resolved or rescinded without previous court action, but it proceeds at its own risk. For it is only the final judgment of the corresponding court that will conclusively and finally settle whether the action taken was or was not correct in law. But the law definitely does not require that the contracting party who believes itself injured must first file suit and wait for a judgment before taking extrajudicial steps to protect its interest.
Neither can Maritime invoke Civil Code Art. 1592 (where vendee in default can continue to make payments as long as no judicial/notarial demand for rescission has been made) because the cross-claim filed by Myers constitutes a judicial demand for rescission that satisfies the said article.
Digest Credit: Rhymee Lanuzo