Title
Jison vs. Court of Appeals
Case Decision Date
G.R. No. L-45349 Aug 15, 1988
The court upholds the validity of the contract rescission and forfeiture of
payments made by the petitioners, but reduces the amount forfeited to 50% due
to iniquity, based on the provisions of the Civil Code and the principle of
reducing penalties when the principal obligation is partly or irregularly complied
with.
Case Digest (G.R. No. L-45349)
Comprehensive
Facts:
In the case of Jison v. Court of Appeals, petitioners Newton Jison and Salvacion I. Jison
entered into a Contract to Sell with respondent Robert O. Phillips & Sons, Inc. for a lot
located in Victoria Valley Subdivision, Antipolo, Rizal. The contract price was set at
P55,000.00, with an annual interest rate of 8%, payable in installments. The petitioners
made a down payment of P11,000.00 on October 20, 1961, and subsequently paid
monthly installments of P533.85 from October 27, 1961, to May 8, 1965. However, due to
their failure to construct a house on the lot as stipulated in the contract, a penalty clause
was triggered, increasing their monthly amortization to P707.24. The petitioners missed
several payments in 1966 and 1967, leading to a letter from the respondent on April 6,
1967, notifying them of the contract's cancellation. The petitioners attempted to tender
payment on April 19, 1967, but the respondent refused it. Consequently, the petitioners
filed a complaint for specific performance with the Court of First Instance of Rizal on
May 4, 1967. The trial court dismissed their complaint, upheld the contract's cancellation,
and forfeited all payments made. The Court of Appeals affirmed this decision, prompting
the petitioners to appeal to the Supreme Court.
Issue:
1. Did the petitioners substantially comply with the terms of their agreement with the
respondent?
2. Was the automatic rescission of the contract and the rejection of the petitioners'
payments by the respondent valid and just?
3. Was the forfeiture of all previous payments made by the petitioners lawful and fair?
Ruling:
1. The Supreme Court upheld the validity of the contract's rescission.
2. The Court ruled that the cancellation was effective despite the lack of a notarial act,
as the petitioners received sufficient notice.
3. The Court found the forfeiture of the entire amount paid (P47,312.64) to be iniquitous
and reduced it to fifty percent (50%) of the amount already paid, or P23,656.32.
Ratio:
The Supreme Court reasoned that the rescission of the contract was valid due to the
petitioners' repeated delinquency in paying the installments. The Court highlighted that
the notice of cancellation was sufficient under the law applicable at the time, as R.A. No.
6552 was not yet effective. The Court found the forfeiture of the entire amount paid to be
excessively punitive and iniquitous, especially since the respondent would regain
possession of the lot and could resell it. The reduction of the forfeited amount to fifty
percent was deemed fair, aligning with provisions in the Civil Code (Art. 2227 and Art.
1229) that allow for the equitable reduction of liquidated damages and penalties when
they are unconscionable or when the principal obligation has been partly or irregularly
complied with. The decision also referenced previous jurisprudence, including Palay,
Inc. v. Clave and Makati Development Corp. v. Empire Insurance Co., to support the
reduction of penalties in cases of partial compliance.
