Bonrostro vs. Luna

In a contract to sell real property on installment, the Maceda Law (Republic Act No. 6552) governs the cancellation procedure, not Article 1191 of the Civil Code; payment of the price is a positive suspensive condition, the failure of which prevents the seller from being bound to convey title but does not constitute a breach warranting rescission.

In 1992, Constancia Luna acquired a house and lot from Bliss Development Corporation under a Contract to Sell. In January 1993, Constancia, as seller, entered into a Contract to Sell with Lourdes Bonrostro involving the same property for ₱1,250,000.00, payable in installments including assumption of Constancia's outstanding balance with Bliss. The spouses Bonrostro took possession after paying ₱200,000.00 but defaulted on subsequent payments due in April and July 1993. Constancia Luna instructed Bliss not to accept payments from third parties. The spouses Bonrostro sent a letter on November 24, 1993 expressing willingness to pay the balance, but made no further payment or consignation. On January 11, 1994, the spouses Luna filed a Complaint for Rescission of Contract and Damages.

• The Contract to Sell: In January 1993, Constancia Luna (seller) and Lourdes Bonrostro (buyer) executed a Contract to Sell for a house and lot (Lot 19, Block 26, New Capitol Estates, Diliman, Quezon City) for ₱1,250,000.00. The terms required: (a) ₱200,000.00 upon signing; (b) ₱300,000.00 on or before April 30, 1993; (c) ₱330,000.00 on or before July 31, 1993; and (d) assumption of the remaining balance payable to New Capitol Estates for 15 years at ₱6,867.12 monthly. The contract stipulated that failure to pay the ₱300,000.00 second installment on time would incur 2% monthly interest from May 1, 1993, and that failure to pay the ₱630,000.00 total would result in automatic cancellation and forfeiture of 5% of the contract price.
• Default and Alleged Tender: The spouses Bonrostro paid only the ₱200,000.00 down payment and immediately took possession of the property. They failed to pay the April and July 1993 installments. They claimed to have sought a 60-day extension and alleged readiness to pay in October 1993, but Constancia Luna and her counsel, Atty. Arlene Carbon, allegedly failed to appear at the designated rendezvous. On November 24, 1993, Lourdes Bonrostro sent a letter to Atty. Carbon expressing readiness to pay the balance and requesting pickup of the money; however, neither actual payment nor consignation with the court followed.
• Payments to Developer and Prevention Allegations: On November 18, 1993, the spouses Bonrostro paid Bliss Development Corporation ₱46,303.44. However, per Bliss's Statement of Account dated March 8, 1994, unpaid monthly amortizations from February to November 1993 remained outstanding. Constancia Luna had written Bliss on March 4, 1993 instructing Bliss not to accept payments from anyone but her, allegedly to prevent the Bonrostros from fulfilling their obligation to assume the mortgage.
• Trial Court Findings: The RTC found that the delay in payment was not substantial enough to warrant rescission, noting Lourdes' request for extension, her November 24, 1993 letter expressing readiness to pay, the ₱200,000.00 down payment, and the partial payment to Bliss.

• Tender of Payment: The spouses Bonrostro maintained that Lourdes' letter dated November 24, 1993 constituted a valid tender of payment of the ₱630,000.00 balance. They argued that the factual finding of the RTC and CA—that Lourdes was willing and ready to pay as of that date—should suspend the accrual of interest subsequent to November 24, 1993.
• Prevention of Fulfillment: They asserted that Constancia Luna's instruction to Bliss not to accept payments from them prevented them from fulfilling their obligation to pay the monthly amortizations. They invoked Article 1186 of the Civil Code, arguing that the condition (payment of amortizations) should be deemed fulfilled because the obligee voluntarily prevented its fulfillment.
• Interest on Reimbursement: They contested the imposition of interest on the ₱214,492.62 paid by the spouses Luna to Bliss, arguing that they were prevented from making these payments themselves and therefore should not bear the burden of interest.

• No Valid Tender: The spouses Luna countered that the mere sending of a letter expressing intention to pay, without accompanying actual payment, does not constitute valid tender of payment. They argued that if the Bonrostros were truly ready to pay and the Luna spouses refused acceptance, the Bonrostros should have resorted to consignation pursuant to Articles 1256 and 1257 of the Civil Code.
• Applicability of the Maceda Law: They argued that the contract being a contract to sell of real property on installment, Republic Act No. 6552 (the Maceda Law) applies, specifically Section 4 which requires a notarial act of rescission after a 60-day grace period, rendering Article 1191 inapplicable.
• Damages by Delay: They maintained that the payment of amortizations to Bliss was necessitated by the Bonrostros' default, which saved the latter from higher penalties (3% monthly or 36% per annum) and cancellation of the contract. The reimbursement of these amounts with interest was proper because the Bonrostros were in delay and the Luna spouses suffered damages by being constrained to part with their money while the Bonrostros retained possession and use of the property.

• Tender of Payment and Suspension of Interest: Whether the letter dated November 24, 1993 constituted a valid tender of payment that suspended the accrual of interest on the unpaid installments.
• Interest on Reimbursed Amortizations: Whether the spouses Bonrostro are liable to pay interest on the amount of ₱214,492.62 reimbursed to the spouses Luna for amortizations paid to Bliss Development Corporation.
• Applicability of Article 1186: Whether Article 1186 of the Civil Code applies to excuse the spouses Bonrostro from paying interest on the amortizations.

• Nature of the Contract and Applicable Law: The contract is a contract to sell, specifically of real property on installment basis, governed by Republic Act No. 6552 (the Maceda Law), not Article 1191 of the Civil Code. In a contract to sell, payment of the price is a positive suspensive condition; failure to pay is not a breach warranting rescission but merely an event preventing the seller from being bound to convey title. Consequently, the RTC's finding that the delay was not "substantial" under Article 1191 loses significance, and the spouses Bonrostro cannot invoke their alleged readiness to pay on November 24, 1993 to avoid interest liability.
• Invalid Tender of Payment: A mere manifestation of willingness to pay, unaccompanied by the actual means of payment and not followed by consignation, does not constitute valid tender of payment. Pursuant to Tolentino's Commentaries and jurisprudence, interest accrual is suspended only when the tender is made in such form that the creditor could immediately realize payment, followed by a prompt attempt to deposit the means of payment by way of consignation. Here, the November 24, 1993 letter was not accompanied by actual payment, and no consignation was effected despite knowledge that non-payment would incur interest. Thus, the spouses Bonrostro remain liable for interest on the ₱300,000.00 (at 2% per month from May 1, 1993) and on the ₱330,000.00 (at the legal rate from August 1, 1993) until full payment.
• Liability for Interest on Reimbursed Amortizations: Article 1186 is inapplicable because Constancia Luna is the obligee, not the obligor, and there was no actual proof that Bliss heeded her instruction to refuse payments so as to effectively prevent the Bonrostros from paying. Moreover, the spouses Luna suffered damages by being constrained to pay the amortizations to prevent cancellation of the master contract with Bliss, an act that relieved the Bonrostros from higher penalties and preserved their possessory rights. Under Article 2209 of the Civil Code, delay in the payment of a sum of money warrants the payment of legal interest as indemnity for damages in the absence of stipulation to the contrary. The CA correctly imposed interest at the legal rate (12% per annum) on the ₱214,492.62 from the filing of the complaint until full reimbursement.

• Contract to Sell Distinguished from Contract of Sale — In a contract to sell, ownership is retained by the seller until the buyer makes full payment, which is a positive suspensive condition. Non-payment does not constitute a breach under Article 1191 of the Civil Code but merely prevents the seller's obligation to transfer title from arising. This distinction determines the applicable remedial procedures, particularly the inapplicability of rescission under Article 1191 and the applicability of the Maceda Law to sales of real property on installment.
• Tender of Payment and Consignation — Tender of payment is the manifestation by the debtor of a desire to comply with an obligation. To produce the effect of payment and extinguish the obligation, tender must be accompanied by consignation of the sum due with the proper court after refusal or impossibility of direct payment. Tender alone, without consignation, produces no legal effect.
• Effect of Tender on Interest Accrual — The accrual of interest on an obligation is suspended from the date of tender only if: (1) the tender is made in such form that the creditor could have immediately realized payment if accepted; and (2) the tender is followed by a prompt attempt to deposit the means of payment in court by way of consignation. Absent these concurrent acts, interest continues to run from the date of default.
• Article 1186: Voluntary Prevention of Fulfillment — The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment. Two requisites must concur: (1) intent to prevent the fulfillment of the condition; and (2) actual prevention of compliance. Mere intention or placing ineffective obstacles without actual prevention is insufficient; the provision does not apply where the party preventing fulfillment is the obligee rather than the obligor.
• Interest as Damages for Delay — Under Article 2209 of the Civil Code, if the obligation consists in the payment of a sum of money and the debtor incurs delay, the indemnity for damages shall be the payment of interest agreed upon, or in the absence of stipulation, the legal interest. Delay in performance is looked upon with disfavor as it causes damage to the performing party.

• "Tender of payment 'is the manifestation by the debtor of a desire to comply with or pay an obligation. If refused without just cause, the tender of payment will discharge the debtor of the obligation to pay but only after a valid consignation of the sum due shall have been made with the proper court.'" — Defining tender of payment and establishing its relationship to consignation as necessary for discharge.
• "Tender of payment, without more, produces no effect." — Emphasizing that tender alone does not extinguish the obligation or suspend interest.
• "To have the effect of payment and the consequent extinguishment of the obligation to pay, the law requires the companion acts of tender of payment and consignation." — Stating the dual requirement for extinguishment of monetary obligations.
• "When a tender of payment is made in such a form that the creditor could have immediately realized payment if he had accepted the tender, followed by a prompt attempt of the debtor to deposit the means of payment in court by way of consignation, the accrual of interest on the obligation will be suspended from the date of such tender." — Articulating the specific conditions under which interest accrual is suspended.
• "The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment." — Citing Article 1186 of the Civil Code and noting its inapplicability where the party preventing fulfillment is the obligee rather than the obligor, and where no actual prevention occurred.

• Reyes v. Tuparan, G.R. No. 188064, June 1, 2011 — Cited for the distinction between a contract to sell and a contract of sale, specifically that in a contract to sell, payment is a positive suspensive condition and non-payment does not constitute a breach under Article 1191.
• Allandale Sportsline Inc. v. The Good Development Corporation, G.R. No. 164521, December 18, 2008 — Cited for the definition of tender of payment and the rule that tender without consignation produces no effect.
• Cinco v. Court of Appeals, G.R. No. 151903, October 9, 2009 — Cited for the principle that tender and consignation are companion acts required for extinguishment of obligation.
• Arwood Industries, Inc. v. D.M. Consunji, Inc., 442 Phil. 203 (2002) — Cited for the principle that delay in performance is looked upon with disfavor and warrants damages in the form of interest.

• Article 1186, Civil Code — Provides that the condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment. The Court held this inapplicable because Constancia Luna was the obligee, not the obligor, and there was no actual prevention of payment to Bliss.
• Article 1191, Civil Code — Provides for the power to rescind reciprocal obligations. The Court held this inapplicable to contracts to sell of real property on installment, which are governed by the Maceda Law.
• Article 1956, Civil Code — Provides that no interest shall be due unless it has been expressly stipulated in writing. The CA applied this to deny the 2% interest on the ₱330,000.00 where no written stipulation existed, imposing instead the legal rate.
• Article 2209, Civil Code — Provides that if the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the indemnity for damages shall be the payment of interest agreed upon, or in the absence of stipulation, the legal interest. Applied to justify interest on the reimbursed amortizations.
• Section 4, Republic Act No. 6552 (Maceda Law / Realty Installment Buyer Protection Act) — Governs the cancellation of contracts to sell real property on installment where less than two years of installments were paid, requiring a grace period of not less than sixty days and cancellation by notarial act.

Antonio T. Carpio (Chairperson) Arturo D. Brion Jose Portugal Perez Estela M. Perlas-Bernabe