Case Summary (G.R. No. 47774)
Petitioner
Magdalena Estate, Inc. executed Contract SJ-639 to sell lots Nos. 28 and 29, Block 1, Parcel 9 of the San Juan Subdivision, Rizal, for ₱7,953, payable in 120 equal monthly installments.
Respondent
Louis J. Myrick signed a promissory note for the entire purchase price, with an acceleration clause providing that upon two months’ default all unpaid balance and accrued interest at 9% per annum would become immediately due, plus 10% attorneys’ fees.
Key Dates
• January 2, 1928 – Sale contract and promissory note executed.
• May 2, 1930 – First missed installment.
• October 4, 1930 – Last payment made, installment of May 2 unpaid.
• December 14, 1932 – Vendor’s letter “cancelled” the contract and declared all payments forfeited.
• July 22, 1936 – Respondent filed suit for ₱2,596.08 with legal interest.
• January 31, 1939 – CFI of Albay ruled for respondent.
• August 23, 1940 – Court of Appeals affirmed, adjusting interest computation.
• March 14, 1941 – Supreme Court decision.
Applicable Law
• 1935 Philippine Constitution (operative at decision date)
• Civil Code of the Philippines:
– Article 1124 (implied power to resolve reciprocal obligations upon default)
– Article 1295 (restitution following resolution)
• Code of Civil Procedure (section 333, estoppel against inconsistent positions)
Factual Background
Myrick paid installments totaling ₱2,596.08 but defaulted after May 2, 1930. Over two years later, the vendor’s president notified him that the contract was “cancelled,” demanded no further payments, and treated prior payments as forfeited. Myrick made no reply and was not solicited for additional installments. In 1936 he sued to recover the sums paid, with interest and costs.
Procedural History
The Court of First Instance of Albay granted Myrick judgment for ₱2,596.08 plus legal interest from December 14, 1932, and costs. The Court of Appeals affirmed but recalculated interest from the filing of the complaint. Magdalena Estate filed a petition for certiorari to question both the effectiveness of the cancellation and the award of restitution.
Issues
- Whether the December 14, 1932 letter operated to resolve (“cancel”) the contract despite lack of mutual agreement or judicial decree.
- Whether the vendor could forfeit payments without express contractual authorization.
- Whether the vendor, having led the purchaser to believe the contract was ended, could later deny that cancellation.
Legal Analysis
• Contract Interpretation: The letter’s clear, unambiguous language manifested an unequivocal intent to resolve the agreement. Testimony by the vendor’s president that “cancelled” was a mistake was held to be an afterthought, and the Court of Appeals’ finding on this point was conclusive.
• Implied Power to Resolve: Under Civil Code Article 1124, a bilateral contract with reciprocal obligations may be resolved upon one party’s failure to perform, even absent an express forfeiture clause.
• Estoppel: Having declared the contract cancelled, taken possession of the lots,
Case Syllabus (G.R. No. 47774)
Facts of the Case
- On January 2, 1928, Magdalena Estate, Inc. (“vendor”) and Louis J. Myrick (“vendee”) executed Contract of Sale No. SJ-639 for lots Nos. 28 and 29, Block 1, Parcel 9, San Juan Subdivision, Rizal.
- Total purchase price was P 7,953, payable in 120 equal monthly installments of P 96.39 each, due on the 2nd day of every month.
- Simultaneously, the vendee signed a promissory note covering the full price, containing a default clause: if any payment remained in arrears for more than two months, the entire unpaid balance (plus accrued interest at 9% per annum) would immediately become due and collectible, and the maker would pay 10% of the total as attorneys’ fees.
- The vendee made payments totaling P 2,596.08; the last payment was made on October 4, 1930, though the May 2, 1930 installment was already unpaid.
- On December 14, 1932, the vendor’s president notified the vendee that, due to his default, the contract was “cancelled as of that date,” all prior payments were forfeited, and the vendor reclaimed absolute ownership of the lots.
- The vendee did not reply, and the vendor made no further demands for installment payments thereafter.
Procedural History
- July 22, 1936: Myrick filed suit in the Court of First Instance of Albay, seeking recovery of P 2,596.08 with legal interest from the filing of the complaint, plus costs.
- September 7, 1936: Magdalena Estate, Inc. answered with a general denial and counterclaimed for enforcement of the balance due under SJ-639, with interest and attorneys’ fees.
- January 31, 1939: The trial court rendered judgment ordering the vendor to pay the vendee P 2,596.08 with legal interest from December 14, 1932 until paid, and costs; the counterclaim was dismissed.
- August 23, 1940: The Court of Appeals (CA-G.R. No. 5073) affirmed the judgment, modifying only