G.R. No. L-25885 - Luzon Brokerage Co., Inc. vs. Maritime Building Co., Inc.

Luzon Brokerage Co., Inc. (plaintiff/appellee) filed an interpleader lawsuit against Maritime Building Co., Inc. (appellant/defendant) and Myers Building Co., Inc. (defendant/appellee).
Myers Building Co., Inc. was the vendor and Maritime Building Co., Inc. was the vendee under a Deed of Conditional Sale dated April 30, 1949, involving the Cristobal Property.
Luzon Brokerage leased the property from Maritime.
The contract stipulated:

Total purchase price: P1,000,000.00: P50,000 down payment and P950,000 payable in monthly installments with interest.
Title remains with Myers until full payment of the purchase price.
Failure to pay installments automatically voids the contract and converts payments into rentals.

Maritime paid installments totaling P973,000 (principal and interest) up to February 1961, leaving a balance of about P315,300.65 unpaid.

Maritime requested a moratorium on monthly payments from March to December 1961 citing unusual expenses; Myers refused.
Without receiving demand due to non-delivery, Maritime suspended payments for March, April, and May 1961, referencing an alleged indemnity promise by the late F.H. Myers regarding labor claims against Luzon Brokerage.
Myers formally demanded payment on May 16, 1961, but the letter was not received by Maritime.
On June 5, 1961, Myers unilaterally declared cancellation of the Deed due to non-payment and demanded possession.
Luzon Brokerage, uncertain about to whom to pay rentals, filed an interpleader suit depositing monthly rentals with the court.
Subsequent letters revealed Maritime’s willingness to deposit unpaid installments in trust or escrow pending resolution of labor claims involving the Myers estate, but Myers consistently refused acceptance of conditional deposits.

The labor claims originated from wage liabilities of Luzon Brokerage for services during World War II.
The late F.H. Myers allegedly agreed to indemnify Schedler (owner of Maritime), but no formal claims were filed in Myers’ estate prior to its closure.
Myers Building Co., Inc. disclaimed any obligation related to the indemnity, asserting the corporate personality separate from F.H. Myers or his estate.

Myers filed a cross-claim to enforce cancellation and recover possession citing default in payment.
Maritime denied bad faith, asserted suspension was due to negotiations and proposed conditional payment in trust.
Issues of leasing without consent were raised but not pressed.
The lower court and the Supreme Court (majority) ruled against Maritime, holding breach in bad faith and upholding cancellation.
Justice Barredo dissented, arguing no breach occurred without demand and that Maritime acted in good faith.

Whether Maritime’s suspension of installment payments for March to May 1961 constituted a breach of contract, and if such breach was in bad faith (dolo) or mere negligence (culpa).
Whether the contract is a mere "promise to sell" or a perfected "sale" with a suspensive condition on full payment affecting transfer of title.
Whether Myers could unilaterally cancel or resolve the contract without judicial or notarial demand, in light of Article 1504 (Old Civil Code) / Article 1592 (New Civil Code).
Whether the stipulation converting all prior payments into rentals upon default was a valid penalty or should be equitably reduced.
Whether Maritime’s offer to deposit unpaid installments in trust or escrow was equivalent to payment or substantial compliance.
Whether the interpleader case filed by Luzon Brokerage was proper under the circumstances.