1. REMEDIAL LAW; PLEADING AND PRACTICE: ANSWER PLEADING GOOD FAITH RAISES ISSUE OF GOOD FAITH OR BAD FAITH; INSTANT CASE. — Where in the instant case Maritime. in its answer to the cross-claim of Myers Building Co., Inc., specifically pleaded good faith as an affirmative defense, and hence, placed its good or bad faith in issue, its pretense that its bad faith as not alleged nor put in issue in the pleading is incorrect. Anyway, whether a party acted in good faith or bad faith, in admittedly non-performing its part of a bargain, is a conclusion of law drawn by the Court from the circumstances proved in the case.

2. CIVIL LAW; OBLIGATIONS AND CONTRACTS; PAYMENT OR PERFORMANCE; CLAIM OF SUBSTANTIAL PERFORMANCE IN GOOD FAITH, NO BASIS. — It cannot be claimed that Maritime’s obligation had been substantially performed in good faith. Maritime was obligated to make monthly payments to Myers Building Co. under its contract, until the price of the building was paid in full and yet it repeatedly refused to do so, on the pretext that the late F. H. Myers had obligated himself to indemnify Edmund Schedler from the labor claims against the Luzon Stevedoring Co., that Myers had sold to Schedler in a totally separate contract. As noted in the main decision. F. H. Myers was not the vendor Myers Building corporation; moreover he had already died and his estate had been closed without Schedler or Maritime having filed any contingent claim before closure of the estate proceedings, as required by Revised Rule 88. The claims of Schedler or Maritime were, therefore, already barred, even assuming that there was any truth to the alleged promise of the late Myers. which is not supported by any reliable evidence. And even then. the claim was at the most payable by the heirs of F. H. Myers, but not by the Myers Corporation, which had no duty to assume the guarantee.

3. ID.; ID.; ID.; INTENTIONAL NON-PAYMENT CONSTITUTES DOLO. — In the instant case, Maritime’s non-payment for March, April and May, 1961, due to the corporation, was intentional and deliberate non-performance, designed to extrajudicially force Myers corporation to grant the moratorium originally solicited and rejected, thus constituting dolo (in the performance, in solvendo) and not mere culpa or negligence.

4. ID.; ID.; ID.; OBLIGATION NOT SUBSTANTIALLY PERFORMED. — Nor is it admissible as movant Maritime contends, that there had been substantial performance by it where at the time it suspended its payments for March-May, 1961, there was a balance of P319,300.65 on the principal of its obligation, plus interest, i. e., nearly. 1/3 of the original indebtedness.

5. ID.; ID.; ID.; OFFER TO PAY IN TRUST OR ESCROW NOT CONSIDERED PAYMENT. — As to the offer to deposit the payments due in trust or in escrow, it cannot be considered payment since it was a conditional tender, and would have left the creditor (Myers corporation) unable to make use of the money rightfully due to it.

6. ID.; ID.; ARTICLE 1191 OF CIVIL CODE NOT APPLICABLE. — Movant Maritime’s insistence upon the application to the present case of Art. 1191 of the Civil Code of the Philippines (tacit resolutory condition in reciprocal obligations) studiously ignores the fact that Myers’ obligation to convey the property was expressly made subject to a suspensive (precedent) condition of the punctual and full payment of the balance of the purchase price.

7. ID.; ID.; ENFORCEMENT AND NOT RESCISSION OF CONTRACT WHERE STIPULATED CONDITION PRECEDENT NOT FULFILLED. — Where the express stipulations make it crystal clear as in this case that the full payment of the price (through the punctual performance of the monthly payments) was a condition precedent to the execution of the final sale and to the transfer of the property from Myers to Maritime; so that there was to be no actual sale until and unless full payment was made and it is uncontroverted that none was here made, in seeking the ouster of Maritime for failure to pay the price as agreed upon, Myers was not rescinding (or more properly, resolving) the contract, but precisely enforcing it according to its express terms.

8. ID.; ID.; SUIT FOR JUDICIAL DECLARATION OF NON-EXISTENCE OF OBLIGATION WHERE CONDITION PRECEDENT STIPULATED IN CONTRACT WAS NOT COMPLIED WITH. — In its suit Myers was not seeking restitution to it of the ownership of the thing sold (since it was never disposed of), such restoration being the logical consequence of the fulfillment of a resolutory condition, express or implied (article 1190); neither was it seeking a declaration that its obligation to sell was extinguished. What is sought was a judicial declaration that because the suspensive condition (full and punctual payment) had not been fulfilled, its obligation to sell to Maritime never arose or never became effective and, therefore, it (Myers) was entitled to repossess the property object of the contract, possession being a mere incident to its right of ownership.

9. ID.; ID.; PENALTY; FORFEITURE OF PAYMENTS MADE PLEA FOR REDUCTION THEREOF WITHOUT JUSTIFICATION IN INSTANT CASE. — Where Maritime intentionally risked the penalty by deliberately refusing to make the monthly payments and trying to inject into its contract with Myers corporation the totally unconnected personal promise of F. H. Myers to indemnify it for eventual liability to the Luzon Labor Union, and trying to extrajudicially force Myers corporation to assume responsibility for such liability; that it acted with dolo or bad faith and is not in a position to invoke the benefits of article 1234 of the Civil Code; and that its loss of the forfeited payments was more than balanced by the rentals it received from the Luzon Brokerage as lessee of the building for the corresponding periods, at a rate double the monthly payments required of Maritime under its contract with Myers, there is no justification for reduction of the stipulated forfeiture of the monthly payments already made.

10. ID.; ID.; ARTICLE 1592 OF CIVIL CODE INAPPLICABLE WHERE JUDICIAL DEMAND FOR RESCISSION WAS MADE. — Where the answer filed by Myers in the court below to the Luzon Brokerage’s complaint for interpleader constituted in effect a judicial demand for rescission of the contract of sale, and for repossession of the real estate sold, Maritime cannot demand further time to pay under Article 1592 of the New Civil Code and must conform to the rescission of the contract and the surrender of the premises, with all the consequences stipulated in the original contract.

11. ID.; ID.; ARTICLE 1592 PREVAILS OVER ARTICLE 1198, CIVIL CODE. — Article 1592 of the Civil Code of the Philippines is specifically applicable to sales of real property and controls the general principles expressed by Article 1198 on reciprocal obligations.

RESOLUTION ON MOTION TO RECONSIDER

REYES, J.B.L., J.:

Appellant Maritime Building Co., Inc. moves to reconsider this Court’s decision of 31 January 1972, a on several grounds that will be taken up seriatim.



Maritime contends that it was error for this Court to hold that its action in "suspending payments to Myers corporation of the installments for March to May, 1961, was a breach of the contract tainted with fraud or malice (dolo) as distinguished from mere negligence (culpa) . . . and therefore incompatible with good faith."cralaw virtua1aw library

(a) It is argued that Maritime’s bad faith was not alleged nor put in issue in the pleadings.

This pretense is incorrect: movant Maritime, in its answer to the cross-claim of Myers Building Co., Inc., specifically pleaded good faith as an affirmative defense in paragraphs 4, 11, 13 and 14 of its answer to the cross-claim of Myers (Record on Appeal, pages 118, 120, 121, 122), and hence, placed its good or bad faith in issue. Anyway, whether a party acted in good faith or bad faith, in admittedly non-performing its part of a bargain, is a conclusion of law drawn by the Court from the circumstances proved in the case.

b) The facts as narrated in the decision and revealed by the proof clearly show that as early as 24 March 1961, Maritime had requested a "suspension" or "moratorium" in its monthly payments until the close of 1961, allegedly because "we are encountering some unusual expenses with the warehouses" (Exhibit "A-Myers"), but this request was turned down on 29 March 1961 by the Myers Corporation advising George Schedler, the son of Edmund Schedler, main stockholder of Maritime, that his request "can not be granted as I have specific instructions from the Board (of Myers Co.) not to agree to any suspension of payments under any condition’ (Exhibit "5-Myers"). This refusal is referred to in Edmund Schedler’s letter of 7 April 1961 (Exhibit "11-Maritime"). Notwithstanding Myers Corporation’s categorical refusal to agree to a suspension or moratorium, and after Myers had called its attention to the violation of the contract (Exhibit "11-A"), Schedler, on behalf of Maritime, insisted on suspending its payments, alleging for the first time that the late F. H. Myers had "agreed to indemnify and hold me harmless from the Luzon Labor Union claims which are in litigation" and giving notice that "my wife and I intend to withhold any further payments to the Myers Building Co. or Estate . . .." This intention was reiterated in the letter Exhibit 12-Maritime, wherein it was added that "if the Myers people will deposit in trust with Mr. C. Parsons 25,000 pesos to cover my costs to date, I will then deposit with Mr. Parsons in trust 15,000 pesos for March, April and May . . ."cralaw virtua1aw library

c) We can not see how it can now be claimed that Maritime’s obligation had been substantially performed in good faith. Maritime was obligated to make monthly payments to Myers Building Co. under its contract, until the price of the building was paid in full and yet it repeatedly refused to do so, on the pretext that the late F. H. Myers had obligated himself to indemnify Edmund Schedler from the labor claims against the Luzon Stevedoring Co., that Myers had sold to Schedler in a totally separate contract. As noted in the main decision, F. H. Myers was not the vendor Myers Building corporation; moreover, he had already died and his estate had been closed without Schedler or Maritime having filed any contingent claim before closure of the estate proceedings, as required by Revised Rule 88. The claims of Schedler or Maritime were, therefore, already barred, even assuming that there was any truth to the alleged promise of the late Myers, which is not supported by any reliable evidence. And even then, the claim was at the most payable by the heirs of F. H. Myers, but not by the Myers corporation, which had no duty to assume the guarantee. Plainly, the non-payment for March, April and May, 1961, due to the corporation, was intentional and deliberate non-performance, designed to extrajudicially force Myers corporation to grant the moratorium originally solicited and rejected, thus constituting, as held in the main decision, dolo (in the performance, in solvendo) and not mere culpa or negligence. x

Castan, Der. Civil, Vol. 3, 7th Ed., page 129, quotes with approval Pair