Pilipino Telephone Corp. vs. Radiomarine Network
G.R. No. 160322 (August 24, 2011)
Facts:
On December 11, 1996, Pilipino Telephone Corporation (Piltel) expressed its willingness to purchase 300,000 units of various brands of cellular phones and accessories from Radiomarine Network, Inc. (Smartnet) on a best-effort basis. The following day, Piltel and Smartnet entered into a contract for the sale of a 3,500-square meter lot in Makati City, known as the Valgoson Property, for a total consideration of P560 million. Smartnet was to pay Piltel a down payment of P180 million, with the remaining balance of P380 million to be settled partly through set-off against the obligations arising from the cellular phone purchase.
The contract stipulated that the down payment was due by December 28, 1996, and that any outstanding payables from Piltel to Smartnet for the cellular phones delivered between the down payment date and April 30, 1997, would be credited against the purchase price. The remaining balance was to be paid on or about April 30, 1997, contingent upon Piltel submitting a Statement of Account by April 20, 1997. A rescission and forfeiture clause was included, stating that failure to pay the full price within the stipulated period would result in the forfeiture of 10% of the down payment and the contract becoming void.
Smartnet failed to pay the P380 million balance by the due date. On December 19, 1997, Piltel returned P50 million of the down payment to Smartnet. Smartnet later requested the return of the remaining P130 million, which Piltel did not return. On December 1, 1999, Smartnet filed a complaint against Piltel for rescission of the contract or partial specific performance, alleging that it withheld payment due to Piltel's failure to fulfill its commitment to purchase cellular phones.
In its answer, Piltel contended that the cellular phone purchase agreement was not part of the contract for the sale of the Valgoson Property and that Smartnet could not rescind the contract due to its own failure to pay. Piltel sought full payment for the property and claimed damages.
On October 3, 2000, Smartnet filed a motion for partial summary judgment for the return of its down payment. The Regional Trial Court (RTC) granted this motion on November 13, 2000, ordering Piltel to return P112 million, after deducting the forfeited amount and a cash advance. Piltel's motion for reconsideration was denied.
Subsequently, Smartnet withdrew its remaining causes of action and sought execution of the judgment. Piltel filed a special civil action for certiorari with the Court of Appeals, which was dismissed. Piltel then appealed to the Supreme Court.
Legal Issues:
The primary legal issue was whether there were genuine issues of fact to be tried, which would preclude the granting of summary judgment. Specifically, the court needed to determine if Smartnet's failure to pay the balance of the purchase price constituted automatic rescission of the contract and whether Piltel was obligated to return the down payment.
Arguments:
Smartnet's Position: Smartnet argued that Piltel's failure to fulfill its commitment to purchase cellular phones justified its withholding of payment and that it was entitled to rescind the contract and recover its down payment. Smartnet maintained that the contract's rescission and forfeiture clause was applicable due to Piltel's breach.
Piltel's Position: Piltel contended that the agreement to purchase cellular phones was not part of the contract for the sale of the Valgoson Property and that Smartnet's failure to pay the balance of the purchase price resulted in automatic rescission of the contract. Piltel argued that Smartnet could not rescind the contract without fulfilling the conditions outlined in the rescission clause.
Court's Decision and Legal Reasoning:
The Supreme Court affirmed the Court of Appeals' decision, holding that there were no genuine issues of fact to be tried. The Court noted that both parties admitted the existence of the contract and Smartnet's failure to pay the balance. The Court emphasized that the rescission and forfeiture clause became operative due to Smartnet's nonpayment, which automatically voided the contract.
The Court reasoned that Piltel's partial return of the down payment indicated its recognition of the contract's rescission. Piltel was estopped from denying the rescission based on the claim that it had not sent a statement of account or notice of delinquency, as these requirements had become academic due to Smartnet's default.
The Court clarified that Smartnet's nonpayment did not constitute an act of rescission but rather an event that rendered the contract void. Consequently, Piltel could not demand full payment, and Smartnet could not claim title to the property without having paid the purchase price.
The Court upheld the imposition of 12% interest on the judgment amount, consistent with previous rulings on similar cases.
Significant Legal Principles Established:
- Summary Judgment: A genuine issue of fact requires the presentation of evidence; if the facts are uncontested, summary judgment is appropriate.
- Automatic Rescission: In a contract to sell, failure to pay the purchase price results in automatic rescission, releasing the seller from the obligation to sell.
- Estoppel: A party may be estopped from denying the consequences of a rescission if it has partially complied with the terms of the rescission.
- Interest on Judgments: The imposition of legal interest on judgment amounts is governed by established jurisprudence.