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LEGARDA VS. SALDAÑA

G.R. No. L-26578, January 28, 1974

FACTS: Saldaña had entered into two written contracts with Legarda, a subdivision owner, whereby Legarda agreed to sell to him two of his lots for 1,500 per lot, payable over a span of 10 years on 120 monthly installments with 10% interest per annum. Saldaña paid for eight consecutive years but did not make any further payments due to Legarda’s failure to make the necessary improvement on the said lot which was promised by their representative, the said Mr. Cenon. Saldaña already paid a total of Php3,582.06. The statement of account shows that Saldaña paid Php1,682.28 of the principal and Php1,889.78 for the interest. It did not distinguish which of the two said lots was paid. Petitioner, then, rescinded the contract based on the stipulation of the contract that payments made by respondent shall be considered as rentals and any improvements made shall be forfeited in favor of the petitioner. The lower court ruled sustaining
petitioner’s cancellation of contract. So respondent appealed and judgment was reversed in favor of the respondent ordering petitioners to deliver to plaintiff one of the two lots at the choice of the defendant and execute the deed of conveyance. Hence this petition.

ISSUE: Was the cancellation of the sale of contract valid?

RULING: No, even though it was stipulated that failure to complete the payment would result to the cancellation of the contract, it was still not valid. As clearly shown in the statement of account, Saldaña was able to pay one of the two said lots. Under Article 1234 of the New Civil Code, “if the obligation has been substantially performed in good faith, the obligor may recover as though there had been a strict and complete fulfillment, less damages suffered by the obligee”. Hence, under the authority of Article 1234 of the New Civil Code, Saladaña is entitled to one of the two lots of his choice and the interest paid shall be forfeited in favor of the petitioners

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