Roman vs.

Grimalt
FACTS: In between the 13th to the 23d of June, 1904, petitioner Pedro Roman, the owner, and
respondent Andres Grimalt, the purchaser, verbally agreed upon the sale of the schooner Santa
Marina. In his letter on June 23, Grimalt agreed to buy the vessel and offered to pay in three
installments of P500 each on July 15, September 15, and November 15, provided the title papers
to the vessel were in proper form. The title of the vessel, however, was in the name of one
Paulina Giron and not in the name of Roman as the alleged owner. Roman promised to perfect his
title to the vessel, but failed so the papers he presented did not show that he was the owner of
the vessel. On June 25, 1904, the vessel sank in the Manila harbor during a severe storm, even
before Roman was able to produce for Grimalt the proper papers showing that the former was in
fact the owner of the vessel in question and not Paulina Giron. As a result, Grimalt refused to pay
the purchase price when Roman made a demand on June 30, 1904.
On July 2, 1904, Roman filed this complaint in the CFI of Manila, which found that the parties had
not arrived at a definite understanding, and later dismissed said complaint.
ISSUE: Who should bear the risk of loss?
COURT RULING: The Supreme Court affirmed the decision of the lower court and declared Roman
as the one who should bear the risk of lost because there was no actual contract of sale. If no
contract of sale was actually executed by the parties, the loss of the vessel must be borne
by its owner and not by a party who only intended to purchase it and who was unable to
do so on account of failure on the part of the owner to show proper title to the vessel and thus
enable them to draw up the contract of sale. Grimalt was under no obligation to pay the price of
the vessel, the purchase of which had not been concluded. The conversations between the
parties and the letter Grimalt had written to Roman did not establish a contract sufficient in itself
to create reciprocal rights between the parties.
PUBLISHING COMPANY VS. PERFECTO
FACTS: On May 3, 1955, Perfecto Tabora bought from Lawyers Cooperative Publishing Company
one complete set of American jurisprudence, in an installment basis amounting to Php 1,682.40,
including freight charges. He made a partial payment of Php 300.00. The books were then
delivered on May 15, 1955. However, on that same day, a big fire broke out, which destroyed the
buildings, including the law office and library of Tabora. When Tabora reported the incident to the
company, they replied in good will and sent him free books.
Subsequently, Tabora failed to pay the installments agreed upon, even when demanded
by them. So the company filed a case to recover the balance plus 25 percent of the amount due
as damages. Tabora used force majeure as a defense. He contended that since the loss was due
to fortuitous event he cannot be held liable for the loss. The court ruled in favor of the company.
So Tabora took the case to the Court of Appeals, which later modified the decision, eliminating
the portion that referred to liquidated damages.
ISSUE: W/N Tabora be exempted from liability because of fortuitous event?
RULING: No. Though it was agreed that the title of the ownership of the books should remain with
the seller until the purchase price shall have been fully paid, it was also expressly agreed upon
that the loss or damage after delivery shall be borne by the buyer. In pursuance of the
contract, the ownership of the goods has been retained by the seller merely to secure
performance by the buyer of his obligation. Moreover, the goods were at the buyers risk from the
time of the delivery.
LEVY V. GERVACIO
Facts: Levy Hermanos, Inc., sold to defendant Lazaro Blas Gervacio, a Packard car. Defendant,
after making the initial payment, executed a promissory note for the balance of P2,400, payable

on or before June 15, 1937, with interest at 12 per cent per annum, and to secure the payment of
the note, he mortgaged the car to the plaintiff. Defendant failed to pay the note at its maturity;
wherefore, plaintiff foreclosed the mortgage and the car was sold at public auction, at which
plaintiff was the highest bidder for P800. The present action is for the collection of the balance of
P1,600 and interest.
The lower court applied the provisions of Act No. 4122, inserted as articles 1454-A of the Civil
Code, and rendered judgment in favor of the defendant. Plaintiff appealed.
ISSUE: W/N Levy can still collect the balance.
Ruling: Yes.
Article
1454-A:.com.ph
"In a contract for the sale of personal property payable in installments, failure to pay two or more
installments shall confer upon the vendor the right to cancel the sale or foreclose the mortgage if
one has been given on the property, without reimbursement to the purchaser of the installments
already
paid,
if
there
be
an
agreement
to
this
effect.
"However, if the vendor has chosen to foreclose the mortgage he shall have no further action
agaist the purchaser for the recovery of any unpaid balance owing by the same, and any
agreement to the contrary shall be null and void.
In Macondray & Co. v. De Santos (33 Off. Gaz., 2170), we held that "in order to apply the
provisions of article 1454-A of the Civil Code it must appear that there was a contract for the sale
of personal property payable in installments and that there has been a failure to pay two or more
installments." The contract, in the instant case, while a sale of personal property, is not, however,
one on installments, but on straight term, in which the balance, after payment of the initial sum,
should be paid in its totality at the time specified in the promissory note. The transaction is not,
therefore, the one contemplated in Act No. 4122 and accordingly the mortgagee is not bound by
the prohibition therein contained as to its right to the recovery of the unpaid balance.

DELTA MOTOR SALES CORP. V. NIU KIM DUAN

FACTS: Niu Kim Duan purchased from Delta Motors 3 air conditioning units. Niu paid the
downpayment, the balance payable in 24 installments. Title to the property remained with Delta
until the payment of the full purchase price. Under the agreement, failure to pay 2 monthly
installments makes the obligation entirely due and demandable. The units were delivered, Niu
failed to pay. Thus, Delta filed a complaint for Replevin and applied the installments paid by Niu
as rentals; Niu contends that the contractual stipulations are unconscionable.
ISSUE: W/N DELTA can still exact the balance of the price, even after exercising their right to
rescind.
RULING: The vendor in a sale of personal property payable in installments may exercise one of
three remedies, namely, (1) exact the fulfillment of the obligation, should the vendee fail to pay;
(2) cancel the sale upon the vendees failure to pay two or more installments; (3) foreclose the
chattel mortgage, if one has been constituted on the property sold, upon the vendees failure to
pay two or more installments. The third option or remedy, however, is subject to the limitation
that the vendor cannot recover any unpaid balance of the price and any agreement to the
contrary
is
void
(Art.
1484)
11
The three (3) remedies are alternative and NOT cumulative. If the creditor chooses one remedy,
he cannot avail himself of the other two.ch
The case plaintiff-appellee filed was to seek a judicial declaration that it had validly rescinded the
Deed
of
Conditional
Sale.
13

Clearly, plaintiff-appellee chose the second remedy of Article 1484 in seeking enforcement of its
contract with defendants-appellants.
Having done so, it is barred from exacting payment from defendants-appellants of the balance of
the price of the three air-conditioning units which it had already repossessed.
TAJANLANGIT v SOUTHERN MOTORS
FACTS: Tajanlangit bought 2 tractors and a thresher from Southern Motors. They executed a
promissory note in payment thereof; it contained an acceleration clause. Tajanlangit failed to pay
any of the stipulated installments. Thus, Southern Motors sued him on the PN. The sheriff levied
upon the properties of Tajanlangit (same machineries) and sold them at a public auction to satisfy
the debt. Southern Motors now prayed for execution. Tajanlangit sought to annul the writ of
executionclaiming that since Southern Motors repossessed the machineries (mortgaged), he
was therefore relieved from liability on the balance of the purchase price.
ISSUE: W/N Tajanlangit is relieved from his obligation to pay
HELD:

NO.

"Our

law"

provides,

"ART. 1484. In a contract of sale of personal property the price of which is payable in installments,
the vendor may exercise any of the following remedies:chanrob1es virtual 1aw library
(1)

Exact

fulfillment

of

the

obligation,

should

the

vendee

fail

to

pay;

(2) Cancel the sale, should the vendees failure to pay cover two or more installments;
(3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the
vendees failure to pay cover two or more installments. In this case, he shall have no further
action against the purchaser to recover any unpaid balance of the price. Any agreement to the
contrary
shall
be
void."
(New
Civil
Code.)
Appellants would invoke the last paragraph. But there has been no foreclosure of the chattel
mortgage nor a foreclosure sale. Therefore the prohibition against further collection does not
apply.
It is true that there was a chattel mortgage on the goods sold. But the Southern Motors elected to
sue on the note exclusively, i.e. to exact fulfillment of the obligation to pay. It had a right to select
among the three remedies established in Article 1484. In choosing to sue on the note, it was not
thereby limited to the proceeds of the sale, on execution, of the mortgaged good.
SPOUSES NONATO V. IAC & INVESTOR'S FINANCE CORP 140 SCRA 255 (1985)
FACTS: In 1976, Spouses Restituto Nonato and Ester Nonato purchased a volkswagen from the
Peoples Car Inc on installment basis.
1.
To secure their complete payment, Nonato executed a promissory note and a chattel
mortgage in favor of Peoples Car Inc.
2.
Subsequently, Peoples Car Inc assigned its rights and interest over the note and mortagge
in favor of Investors Finance Corp (IFC).
3.
For failure of the spouses to pay two or more installments, despite demands, the car was
repossessed by IFC.
4.
Despite repossession, IFC still demanded from Nonato that they pay the balance of the
price of the car. IFC, then, filed a complaint for the payment of the price of the car with damages
5.
Nonato, in their defense, argued that when the company repossessed the car, IFC had, by
that act, effectively cancelled the sale of the vehicle. As such, it was barred from exacting the
recovery of the unpaid balance of the purchase price as mandated by Art 1484.
6.
The trial court rendered in favor of IFC and ordered the spouses Nonato pay the balance of
the purchase price of the car with interest. CA affirmed the same.

ISSUE: WON a vendor or his assignee, who had cancelled the sale of a motor vehicle for failure of
the buyer to pay two or more of the stipulated installments, may also demand payment of the
balance of the purchase price
HELD: No. The applicable law in the case at bar is Art 1484 which provides that:
In a contract of sale of personal property the price of which is payable in installments, the vendor
may exercise any of the following remedies:
(1) Exact fulfillment of the obligation, should the vendee fail to pay;
(2) Cancel the sale, should the vendee's failure to pay cover two or more installments;
(3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the
vendee's failure to pay cover two or more installments. In this case, he shall have no further
action against the purchaser to recover any unpaid balance of the price. Any agreement to the
contrary shall be void.
This provision means that should the vendee or the purchaser of a personal property default in
the payment of two or more of the agreed installments, the vendor or the seller has the option to
avail any of these 3 remedieseither to exact fulfillment by the purchaser of the obligation, or to
cancel the sale, or to foreclose the mortgage on the purchased personal property, if one was
constituted. These remedies have been recognized as an alternative, not cumulative, that the
exercise of one should bar the exercise of the others.
In the present case, it is not disputed that IFC had taken possession of the car purchased by the
Nonatos after the spouses defaulted in their payments. The defense of IFC that it the
repossession of the vehicle was only for the purpose of appraising its value and for storage and
safekeeping pending full payment of the spouses is untenable. The receipt issued by IFC to the
spouses when it took possession of the vehicle that the vehicle could be redeemed within 15
days. This could only mean that should the spouses fail to redeem the car within the period
provided, IFC would retain permanent possession of the vehicle. IFC even notified the spouses
Nonato that the value of the car was not sufficient to cover the balance of the purchase price and
there was no attempt at all on the part of the company to return the car.
The acts performed by IFC are consistent with the conclusion that it had opted to cancel the sale
of the vehicle. Therefore, it is barred from exacting payment from the petitioners of the balance
of the price of the vehicle which it had already repossessed
Ridad v. Filinvest and Finance Corporation, 120 SCRA 246 (1983)
FACTS:
- On April 14, 1964, plaintiffs purchased from the Supreme Sales arid Development Corporation two (2) brand
newFord Consul Sedans complete with accessories, for P26,887 payable in 24 monthl
y installments. To securepayment thereof, plaintiffs executed on the same date a promissory note
covering the purchase price and a deed of chattel mortgage not only on the two vehicles purchased but also on
another car (Chevrolet) and plaintiffs' franchiseor certificate of public convenience granted by the
defunct Public Service Commission for the operation of a taxi fl eet. Then, with the
conformity of the plaintiff s, the vendor assigned its rights, title and interest to the
above-mentioned promissory note and chattel mortgage to defendant Filipinas Investment and Finance
Corporation.-Due to the failure of the plaintiff s to pay their monthly installments as per
promissory note, the defendantcorporation foreclosed the chattel mortgage extra-judicially,
and at the public auction sale of the two Ford Consulcars, of which the plaintiffs were not notified,
the defendant corporation was the highest bidder and purchaser. Another auction
sale was held on November 16,
1965, involving the remaining
properties subject of the deed
of chattel mortgage since plaintiffs' obligation was not fully satisfied by the sale of the aforesaid
vehicles, and at thepublic auction sale, the franchise of plaintiffs to operate five units of taxicab
service was sold for P8,000 to thehighest bidder, herein defendant corporation, which subsequently sold and
conveyed the same to herein defendantJose D. Sebastian, who then filed with the Public Service Commission an
application for approval of said sale in hisfavor.-On February 21, 1966, plaintiffs filed an action for annulment of
contract before the Court of First Instance of Rizal,Branch I, with Filipinas Investment and Finance
Corporation, Jose D. Sebastian and Sheriff Jose San Agustin, asparty-defendants.

TC:
- Court declared the chattel mortgage, to be null and void in so far as the taxicab franchise and the used
Chevroletcar of plaintiffs are concerned, and the sale at public auction conducted by the City Sheriff of Manila
concerning saidtaxicab franchise, to be of no legal effect. The certificate of sale issued by the City
Sheriff of Manila in favor of Filipinas Investment and Finance Corporation concerning plaintiffs'
taxicab franchise for P8,000 is accordinglycancelled and set aside, and the assignment thereof
made by Filipinas Investment in favor of defendant JoseSebastian is declared void and of no legal effect.
CA certified the case to SC.ISSUE:
-Whether or not the vendor of personal property sold on installments basis is precluded, after foreclosing the
chattelmortgage on the thing sold, from having recourse against the additional security by the mortgagor.
HELD:
-The vendor of personal property the purchase price of which is payable in installments, has the
right, should the vendee default in the payment of two or more of the agreed installments, to exact fulfillment
by the purchaser of theobligation, or to cancel the sale, or to foreclose the mortgage on the
purchased personal property, if one was constituted. Whichever right the vendor elects, he
cannot avail of the other, these remedies being alternative, not cumulative. Furthermore, if the
vendor avails himself of the right to foreclose his mortgage, the law prohibits him from further
bringing an action against the vendee for the purpose of recovering whatever balance of the debt
secured not satisfied by the foreclosure sale. The precise purpose of the law is to prevent mortgagees from
seizingthe mortgaged property, buying it at foreclosure sale for a low price and then bringing suit against the
mortgagor for a deficiency judgment, otherwise, the mortgagor-buyer would find himself without
the property and still owing practically the full amount of his original indebtedness.-In the instant case,
defendant corporation elected to foreclose its mortgage upon default by the plaintiffs in
thepayment of the agreed installments. Having chosen to foreclose the chattel mortgage, and
bought the purchased vehicles at the public auction as the highest bidder, it submitted itself to the
consequences of the law as specificallymentioned, by which it is deemed to have renounced any and
all rights which it might otherwise have under thepromissory note and the chattel mortgage as well as the
payment of the unpaid balance.-Consequently, the lower court rightly declared the nullity of the chattel mortgage
in question in so far as the taxicabfranchise and the used Chevrolet car of plaintiffs are concerned
Zayas, Sr. v. Luneta Motor Company, 117 SCRA 726 (1982)
FACTS:
- Eutropio Zayas, Jr. purchased on installment basis a Ford Thames Freighter with PUH Body (Engine 400E127738and Chassis 400E-127738) from Mr. Roque Escao of the Escao Enterprises in Cagayan de
Oro City, dealer of Luneta Motor Company.
The motor vehicle was delivered to the Zayas who paid the initial payment in, and executed a promissory note
for the balance of the total selling price, in favor of Luneta Motor Company. The promissory note
stated the amountsand dates of payment of 26 installments. Simultaneously with the execution of the
promissory note and to secure itspayment, Zayas executed a chattel mortgage on the subject motor vehicle in
favor of Luneta Motors.-Zayas was unable to pay further monthly installments prompting the Luneta Motors to
extrajudicially foreclose thechattel mortgage. The motor vehicle was sold at public auction with the Luneta Motors
represented by Atty. LeandroB. Fernandez as the highest bidder.Since the payments made by Zayas plus
the proceeds realized from the foreclosure of the chattel mortgage couldnot cover the total amount of
the promissory note executed by Zayas in favor of the respondent Luneta Motors, thelatter filed an avtion for the
recovery of the balance plus interests.-The City Court affirmed by CFI dismissed the complaint.-Luneta Motor
Company appealed the case to the CFI. After various incidents, the CFI issued an order remandingthe case to
the court of origin for further proceedings at it is in the opinion that the City Court should have
notdecided the case merely on the question of law since the presentation of evidence is
necessary to adjudicate thequestions involved. Hence, the petition for review by certiorari filed by Zayas.
ISSUE:
-Whether or not the assignee in the interest of the mortgagee can still recover the deficiency
amount of the motor vehicle subject of the chattel mortgage which has been sold at public auction.
HELD:
- Article 1484 of the New Civil Code, on the foreclosure of chattel mortgages over
personal property sold oninstallment basis, provides that In a contract of sale of
personal property the price of which is payable ininstallments, the vendor may exercise
any of the following remedies: (3) Foreclose the chattel ,mortgage on thething sold, if one has

been constituted, should the vendees failure to pay cover two or more installments. In this case,
he shall have no further action against the purchaser to recover any unpaid balance
of the price. Anyagreement to the contrary shall be void.-The foreclosure and actual sale of
a mortgaged chattel bars further recovery by the vendor of any balance on thepurchasers
outstanding obligation not so satisfied by the sale. The prohibition applies to the assignee in interes of the
mortgagee.
Northern Motors V. Sapinoso
Facts: Respondent Casiano Sapinoso purchased from petitioner Northern Motors an Opel Kadett car for P12,171
making a downpayment and executing a promissory note for the balance of P10,540 payable in
installments
To secure the payment of the note, Sapinoso executed in favor of Northern Motors a chattel mortgage on the car;
the mortgage provided among others that upon Sapinosos default in payment of any part of the principal or
interest, Northern Motors may elect any of the ff. remedies (a) sale of the car by Northern (b) cancellation of the
sale to Sapinoso (c) extrajudicial foreclosure (d) ordinary civil action for fulfillment of the mortgage contract;
additionally, whichever remedy is chosen, Sapinoso waives his right to reimbursement of any and all amounts on
the principal and interest already paid
Sapinoso failed to pay the first 5 installments due from August-November 1965; he made payments though on
November and December and on April the next year but failed to make subsequent payments
Northern Motors filed a complaint stating that it was availing of the option of extrajudically foreclosing the
mortgage and prayed that (a) a writ of replevin be issued upon its filing of a bond (b) it be declared to have the
rightful possession of the car (c) in default of delivery, Sapinoso be ordered to pay the balance with interest
Subsequent to the commencement of the action but before filing of his answer, Sapinoso made 2 payments
amounting to P1,250 on the promissory note; in the meantime, a writ of replevin was issued and the car was
turned over to Northern Motors
Sapinoso claimed that he withheld payments because the car was defective and Northern Motors failed to fix it
despite his repeated demands
TRIAL COURT RULING
Northern Motors had the right to foreclose the chattel mortgage with Sapinoso failing to pay more than 2
installments
However, the foreclosure and the recovery of unpaid balance are alternative remedies which may not be pursued
conjunctively; Northern Motors thereby renounced whatever claim it had on the promissory note
Ordered Northern Motors to return of the P1,250 which it had received from Sapinoso after filing the case and
electing to foreclose
ISSUE: W/N as under Article 1484 of the Civil Code,21 plaintiff Northern Motors is barred from recovering unpaid
balance of the debt having elected to foreclose on the chattel mortgage.
NO.
HELD: In issuing the writ of replevin and upholding after trial the right to possession of the car by Northern
Motors, the court below correctly considered the action as one of replevin to secure possession of the car as
preliminary step to a foreclosure sale
The court below however erred in concluding that the legal effect of the action was to bar Northern Motors from
accepting further payments on the promissory note
It is the fact of foreclosure and actual sale of the mortgaged chattel that bars further recovery by the vendor of
any balance on the vendees outstanding obligation not satisfied by the sale
In the present case, there is no occasion to apply the restrictive provision of Article 1484 as there has not yet
been a foreclosure sale resulting in a deficiency
A mortgage creditor before the actual foreclosure sale is not precluded from recovering the unpaid balance
although he has filed for replevin for the purpose of extrajudicial foreclosure
Also, a mortgage creditor who has elected to foreclose but subsequently desists from proceeding with the
auction sale without gaining any advantage and without causing any disadvantage to the mortgagor is not barred
from suing on the unpaid account
And as applicable here, a mortgage creditor is not barred from accepting before a foreclosure sale payments
voluntarily tendered by the debtor-mortgagor who admits indebtedness.

Borbon II v. Servicewide specialist, 258 SCRA 634 (1996)

FACTS:
-Daniel Borbon and Francisco Borbon purchased from Pangasinan AutoMart Inc. Brand new 1984
Isuzu KCD 20crew cab and signed a promissory note payable in 12 monthly installments.-To secure the

promissory note, the Borbons executed a chattel mortgage over the vehicle.-The right of Pangasinan Automart Inc
was later assigned to Filinvest Credit Corporation with notice to the Borbons.-FCC in turn assigned all its
rights, interest
and title over the
promissory note and
the chattel mortgage toSevicewide Specialists.-When the Borbons failed to comply with
their obligation, Servicewide Specialist filed an action for replevin for theforeclosure of the mortgage
property.-The Borbons claimed that they were not in default because Pangasinan Automart delivered a vehicle
different fromwhat they have intended to buy and despite communication, the latter was not able to replace the
vehicle until it wasseized by the court.-Sustaining the decision of the court a quo, the
appellate court upheld the award of liquidated damages and attorneys fees in favor of
Servicewide Specialists.
HELD:
-The remedies under Article 1484 of the Civil Code are not cumulative but alternative and exclusive, which Should
the vendee or purchaser of a personal property default in the payment of two or moreof the
agreed installments, the vendor or seller has the option to avail of any of these three remedies
either to exact fulfillment by the purchaser of the obligation, or to cancel the sale, or to foreclose
themortgage on the
purchased
personal
property,
if one
was constituted. These remedies have beenrecognized as alternative, not cumulative, that the
exercise of one would bar the exercise of the others."-When the seller assigns his credit to another
person, the latter is likewise bound by the same law. Accordingly,when the assignee forecloses on
the mortgage, there can be no further recovery of the deficiency, and the seller-mortgagee is
deemed to have renounced any right thereto. A
contrario
, in the event the seller-mortgagee first seeks,instead, the enforcement of the additional mortgages, guarantees or
other security arrangements, he must then beheld to have lost by waiver or non-choice his lien on the
chattel mortgage of the personal property sold by anymortgaged back to him, although, similar to an
action for specific performance, he may still levy on it.-In ordinary alternative obligations, a mere choice
categorically and unequivocally made and then communicated bythe person entitled to exercise the option
concludes the parties. The creditor may not thereafter exercise any other option, unless the chosen alternative
proves to be ineffectual or unavailing due to no fault on his part. This rule, inessence, is the difference
between alternative obligations, on the one hand, and alternative remedies, upon theother
hand, where, in the latter case, the choice generally becomes conclusive only upon
the exercise of theremedy. For instance, in one of the remedies expressed in Article 1484 of the Civil Code, it
is only when there hasbeen a foreclosure of the chattel mortgage that the vendeemortgagor would be permitted to escape from a deficiency liability. Thus, if the case is one
for specific performance, even when this action is selected after thevendee has refused to
surrender the mortgaged property to permit an extrajudicial foreclosure, that property maystill be
levied on execution and an alias writ may be issued if the proceeds thereof are insufficient to
satisfy the judgment credit. So, also, a mere demand to surrender the object which is not
heeded by the mortgagor will notamount to a foreclosure, but the repossession thereof by the vendormortgagee would have the effect of foreclosure
means,that -

LEGARDA VS. SALDAA

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

FACTS: Saldaa 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. Saldaa paid for eight
consecutive years but did not make any further payments due to Legardas failure to make the
necessary improvement on the said lot which was promised by their representative, the said Mr.
Cenon. Saldaa already paid a total of Php3,582.06. The statement of account shows that
Saldaa 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
petitioners 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, Saldaa 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, Saladaa is entitled
to one of the two lots of his choice and the interest paid shall be forfeited in favor of the
petitioners