McLaughlin v.

CA
Case Reference No., Date

FACTS:
Petitioner Luisa F. McLaughlin and private respondent Ramon Flores entered into a contract of
Conditional Sale of Real Property. Paragraph one of the deed of conditional sale fixed the total
purchase price of P140,000.00 payable as follows: a) P26,550.00 as downpayment; and b) the balance of
P113,450.00 to be paid not later than May 31, 1977.
On June 19, 1979, Luisa filed a complaint in the Rizal CFI for the rescission of the deed of
conditional sale due to Flores failure to pay the balance already due. On December 27, 1979, the
parties submitted a Compromise Agreement in which the parties agreed that the amount due would be
payable as follows: a) P50,000.00 upon signing of the agreement; and b) the balance of P69,059.71 in
two equal installments on June 30, 1980 and December 31, 1980.
On October 15, 1980, Luisa wrote to Flores demanding that the latter pay the balance of
P69,059.71 on or before October 31, 1980. This demand included not only the installment due on June
30, 1980 but also the installment due on December 31, 1980.
Flores asserted that on November 3, 1980, he tendered payment to Luisa but this was refused
acceptance by Luisa. However, this does not appear in the decision of the Court of Appeals.
On November 7, 1980, Luisa filed a Motion for Writ of Execution alleging that Flores failed to
pay the installment due on June 1980 and that since June 1980, he had failed to pay the monthly rental
of P 1,000.00. Luisa prayed that the deed of conditional sale of real property be declared rescinded
with forfeiture of all payments as liquidated damages and Flores be evicted. The trial court granted
the motion for writ of execution.
Flores filed a motion for reconsideration tendering at the same time a Pacific Banking
Corporation certified manager's check in the amount of P76,059.71, payable to the order of petitioner
and covering the entire obligation including the installment due on December 31, 1980. However, the
trial court denied the motion and issued the writ of execution on November 25, 1980.
In an order, the trial court granted petitioner's ex-parte motion for clarification of the order of
execution, rescinding the deed of conditional sale of real property.
On November 28, 1980, private respondent filed with the Court of Appeals a petition for
certiorari and prohibition, assailing the orders dated November 21 and 27, 1980. The CA nullified the
orders of the lower court, holding that the general rule is that rescission will not be permitted for a
slight or casual breach of the contract, but only for such breaches as are substantial and fundamental as
to defeat the object of the parties in making the agreement. (Song Fo & Co. vs. Hawaiian-Philippine Co.,
47 Phil. 821)
In the case at bar, McLaughlin wrote Flores on October 15, 1980 demanding that Flores pay the
balance of P69,059.71 on or before October 31, 1980. Thus it is undeniable that despite Flores' failure
to make the payment which was due on June 1980, McLaughlin waived whatever right she had under
the compromise agreement as incorporated in the decision of respondent court, to demand rescission.

ISSUE: WON the contract?


RULING:
Section 4 of Republic Act No. 6552 further supports the decision of the appellate court. Section
4 provides that:
In case where less than two years of installments were paid, the seller shall give the
buyer a grace period of not less than sixty days from the date the installment became due. If the
buyer fails to pay the installments due at the expiration of the grace period, the seller may
cancel the contract after thirty days from receipt by the buyer of the notice of the cancellation
or the demand for rescission of the contract by a notarial act.
Here, assuming that under the terms of said agreement, the December 31, 1980 installment was
due and payable when Luisa demanded (October 15, 1980) that the balance of P69,059.71 be paid on or
before October 31, 1980. Luisa, then, could cancel the contract after thirty days from receipt by Flores of
the notice of cancellation. Considering Luisas motion for execution filed on November 7, 1980 as a
notice of cancellation, Luisa could cancel the contract of conditional sale after thirty days from receipt
by Flores of said motion. Flores tender of payment of the amount of P76,059.71 together with his
motion for reconsideration on November 17, 1980 was, therefore, well within the thirty-day period
granted by law.
Nonetheless, although Flores had preserved his rights as a vendee in the contract of conditional
sale of real property by a timely valid tender of payment of the balance of his obligation which was not
accepted by petitioner, he remains liable for the payment of his obligation because of his failure to
deposit the amount due with the court.