ZULUETA VS.

MARIANO

111 SCRA 206

FACTS:

Petitioner Jose C. Zulueta is the registered owner of a residential house and lot situated within
the

Antonio Subdivision, Pasig, Rizal. On November 6, 1964, petitioner Zulueta and private
respondent Lamberto Avellana, a movie director, entered into a "Contract to Sell" the aforementioned
property for P75,000.00 payable in twenty years with respondent buyer assuming to pay a down
payment of 5,000.00 and a monthly installment of P630.00 payable in advance before the 5th day of
the corresponding month, starting with December, 1964 – WITH FURTHER SPECIFIC STIPULATIONS
IN CASE OF BREACH OF SUCH contract.

Avellana occupied the property but title remained with petitioner Zulueta. Upon the
allegation that respondent had failed to comply with the monthly amortizations stipulated in the
contract, despite demands to pay and to vacate the premises, and that thereby the contract was
converted into one of lease, petitioner commenced an ejectment suit against respondent before the
MTC-Pasig. Respondent controverted by contending that the Municipal Court had no jurisdiction
over the nature of the action as it involved the interpretation and/or rescission of the contract; and
made some affirmative defenses and counterclaim. Lower court found in favor of plaintiff, and asked
defendant to vacate and pay back rentals, etc. CA reversed and ruled against the Justice of the
Municipal Court finding the case as one of interpretation and rescission of contract because the
contract to sell was converted to contract of lease. MR denied.

ISSUE:

WON the original contract to sell was rescinded due to the automatic rescission clause in the
contract, thus the case was unlawful detainer cognizable by the MTC or one of judicial rescission of
contract cognizable by then CFI.

HELD:

Thus, the basic issue is not possession but one of rescission or annulment of a contract, which
is beyond the jurisdiction of the Municipal Court to hear and determine.

A violation by a party of any of the stipulations of a contract on agreement to sell real property
would entitle the other party to resolved or rescind it. An allegation of such violation in a detainer
suit may be proved by competent evidence. And if proved a justice of the peace court might make a
finding to that effect, but it certainly cannot declare and hold that the contract is resolved or
rescinded. It is beyond its power so to do. And as the illegality of the possession of realty by a party
to a contract to sell is premised upon the resolution of the contract, it follows that an allegation and
proof of such violation, a condition precedent to such resolution or rescission, to render unlawful the
possession of the land or building erected thereon by the party who has violated the contract, cannot
be taken cognizance of by a justice of the peace court xxx .
 True, the contract between the parties provided for extrajudicial rescission. This has legal
effect, however, where the other party does not oppose it. Where it is objected to, a judicial
determination of the issue is still necessary.

A stipulation entitling one party to take possession of the land and building if the other party
violates the contract does not ex proprio vigore confer upon the former the right to take possession
thereof if objected to without judicial intervention and' determination.

But while respondent Judge correctly ruled that the Municipal Court had no jurisdiction over
the case and correctly dismissed the appeal, he erred in assuming original jurisdiction, in the face of
the objection interposed by petitioner. Section 11, Rule 40, leaves no room for doubt on this point:

Section 11. Lack of jurisdiction. A case tried by an inferior court without jurisdiction over the
subject matter shall be dismissed on appeal by the Court of First Instance. But instead of dismissing
the case, the Court of First Instance may try the case on the merits, if the parties therein file their
pleadings and go to trial without any objection to such jurisdiction.

There was no other recourse left for respondent Judge, therefore, except to dismiss the
appeal.

If an inferior court tries a case without jurisdiction over the subject-matter on appeal, the
only authority of the CFI is to declare the inferior court to have acted without jurisdiction and dismiss
the case, unless the parties agree to the exercise by the CFI of its original jurisdiction to try the case
on the merits.

The foregoing premises considered, petitioner's prayer for a Writ of Execution of the
judgment of the Municipal Court of Pasig must perforce to be denied.

PALAY VS. CLAVE

124 SCRA 638

Topic: Remedies for Breach of Obligations

FACTS:

On March 28, 1965, petitioner Palay, Inc., through its President, Albert Onstott executed in
favor of private respondent, Nazario Dumpit, a Contract to Sell a parcel of Land (Lot No. 8, Block IV)
of the Crestview Heights Subdivision in Antipolo, Rizal, with an area of 1,165 square meters, - covered
by TCT No. 90454, and owned by said corporation. The sale price was P23,300.00 with 9% interest
per annum, payable with a downpayment of P4,660.00 and monthly installments of P246.42 until
fully paid.

Paragraph 6 of the contract provided for automatic extrajudicial rescission upon default in
payment of any monthly installment after the lapse of 90 days from the expiration of the grace period
of one month, without need of notice and with forfeiture of all installments paid.

Respondent Dumpit paid the downpayment and several installments amounting to

P13,722.50. The last payment was made on December 5, 1967 for installments up to September 1967.

On May 10, 1973, or almost six (6) years later, private respondent wrote petitioner offering
to update all his overdue accounts with interest, and seeking its written consent to the assignment
of his rights to a certain Lourdes Dizon. He followed this up with another letter dated June 20, 1973
reiterating the same request. Replying petitioners informed respondent that his Contract to Sell had
long been rescinded pursuant to paragraph 6 of the contract, and that the lot had already been resold.

Questioning the validity of the rescission of the contract, respondent filed a letter complaint
with the National Housing Authority (NHA) for reconveyance with an alternative prayer for refund.
NHA ruled in favor of Dumpit (private respondent).

The petitioner appealed to the Office of the President but the latter affirmed the decision of
the NHA.

ISSUE:

Whether or not there is a valid rescission.

RULING:

No. Well settled is the rule, as held in previous jurisprudence, that judicial action for the
rescission of a contract is not necessary where the contract provides that it may be revoked and
cancelled for violation of any of its terms and conditions. However, even in the cited cases, there was
at least a written notice sent to the defaulter informing him of the rescission. In other words,
resolution of reciprocal contracts may be made extra judicially unless successfully impugned in
Court. If the debtor impugns the declaration, it shall be subject to judicial determination.
 In this case, private respondent has denied that rescission is justified and has resorted to
judicial action. It is now for the Court to determine whether resolution of the contract by petitioners
was warranted.

We hold that resolution by petitioners of the contract was ineffective and inoperative against
private respondent for lack of notice of resolution, as held in the U.P. vs. Angeles case, supra

The contention that private respondent had waived his right to be notified under paragraph
6 of the contract is neither meritorious because it was a contract of adhesion, a standard form of
petitioner corporation, and private respondent had no freedom to stipulate. A waiver must be certain
and unequivocal, and intelligently made; such waiver follows only where liberty of choice has been
fully accorded.

As a consequence of the resolution by petitioners, rights to the lot should be restored to

private respondent or the same should be replaced by another acceptable lot. However, considering
that the property had already been sold to a third person and there is no evidence on record that
other lots are still available, private respondent is entitled to the refund of installments paid plus
interest at the legal rate of 12% computed from the date of the institution of the action