CASE DIGEST MODEL.docx

Loyola, Juan Samuel Ismael A.

Maria Lachica v Gregorio Araneta Inc.

August 19, 1949

Paredes, J.

Petition: Appeal

Parties:

Maria Lachica - plaintiffs-appellees

Gregorio Araneta - defendants-appellants

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Gregorio Araneta, Inc. (through President Jose Araneta) offered for sale a parcel of land with the improvements thereon. This property was bought by Investment Corporation through Maria Lachica, the wife of the Esteban Sadang who was sales agent of defendant corporation.

The terms of the contract stated that the price was P20,000, of which P8,000 was to be paid in cash and the balance of P12,000 in installments of

P 1,000 on or before December 31, 1943

P 1,000 on or before December 31, 1944

P 10,000 on or before December 31, 1945.

What the parties signed was a contract of exact content as stated, which however omitted the words or before. Thus, it would appear that the payment of the installments would be on and not on or before the dates as specified.

The contract further added that this same property will be mortgaged to us to guarantee the unpaid balance, and the same will bear an interest of 8 percent per annum; said interest to be paid monthly in advance.

The terms were complied with, together with some resolved differences, until on Sept. 5, 1944, plaintiff Sadang went to see Araneta to pay the entire balance, including the interest thereon and ask for the cancellation of the mortgage, but Araneta refused to accept the tender of payment. Araneta gave as his reason for his non-acceptance that such payment was not in accordance with the terms of the deed of sale with mortgage.

Plaintiff, through counsel, deposited the sum (balance) supposed to be paid to Araneta with the CFI of Manila by way of consignation, and at the same time presented the complaint.

The defendant alleges that payment should be on the date specified, not before; the plaintiffs claim that such payment may be made on or before the date specified.

Issue:

(1) Whether or not Araneta Inc. should be compelled to accept the payment.

Ruling:

Yes. The contract does not prohibit if it is done before (p.5706, no. 2). A term is fixed and it is presumed to have been established for the benefit of the creditor as sell as that of the debtor, unless from its tenor or from other circumstances it should appear that the terms as established for the benefit of one or the other. (Art. 1127, now 1196 Civil Code). And the contract specifically provides that these periods of payment have been agreed for the benefit of the vendor and the vendee. Such mutual benefit has been interpreted to consist of the time granted a debtor to find means to comply with his obligation, and the fruits, such as interest, accruing to the creditor.

From the SC decision in Villaseor vs. Javellana, the only impediment to a debtor making payment before the term fixed, is the denial to the creditor of the benefits, such as interests, accruing to the later by reason of the fixed term. This, coupled with the fact that the contract did not prohibit payment before the fixed date, justifies the conclusion that under the terms signed, plaintiffs could do so. To hold otherwise, would be virtually compelling an obligor to assume an obligation later when he offers to, and could very well, discharge it earlier. The law should not be interpreted as to compel a debtor to remain so, when he is in a position to release himself.

Further, the acceleration clause in the contract signed by the parties state that in the event of defaults in payment of any amount due, either for capital or interest, the whole balance shall automatically become due and payable, and the vendor shall have the right to foreclose the mortgage in its entirety. While the clause is standard one contained in most mortgage deeds where the mortgage loan is payable in several installments, still we cannot escape the conclusion, derived from the clause itself, that payments may be made by the vendee before the dates stated in the contract .