Bustamante vs Rosel November 29, 1999 PARDO, J.: Facts: 1.

Norma Rosel entered into a loan agreement wit Natalia Bustamante and er late usband !smael ". Bustamante #or t e amount o# P1$$,$$$ #or t e %eriod o# 2 &ears wit interest o# 1'( a. b. 2. 0. 2. and to guarant& %a&ment, %utting as )ollateral *$ s+m in)lusive o# t e a%artment, o# t e said land t at i# borrowers #ail to %a&, lender as an o%tion to bu& t e )ollateral #or 2$$,

- en loan was to mature, .%ouses Rosel %ro%osed to bu& at a %re/set %ri)e o# 2$$, Bustamante re#used and re+uested #or e1tension o# time to %a& t e loan. a. o##ered to sell anot er residential lot wit t e %rin)i%al loan %lus interest as down%a&ment. .%ouses re#used to e1tend t e %a&ment o# t e loan and a))e%t t e lot as it was o))u%ied b& s+uatters and Bustamante and er usband were not t e owners but mere land develo%ers entitled to subdivision s ares or )ommission i# and w en t e& develo%ed at least 132 o# t e subdivision area.

4. 6. *. '. 9.

Bustamante tendered %a&ment o# t e loan w i) t e .%ouses re#used to a))e%t a. insisting on Bustamante5s signing o# a %re%ared deed o# absolute sale o# t e )ollateral .%ouses Rosel #iled wit R7" a )om%laint #or s%e)i#i) %er#orman)e wit )onsignation against t e .%ouses Bustamante. .%ouses Rosel sent a demand letter as,ing Bustamante to sell t e )ollateral %ursuant to t e o%tion to bu& embodied in t e loan agreement. 8owever, Bustamante #iled wit R7" a %etition #or )onsignation, and de%osited t e amount o# P140,$$$ wit t e "it& 7reasurer. Bustamante still re#used and t e baranga& )on)iliation #ailed a. b. a. b. so .%ouses )onsigned t e amount o# P2*,4$$ wit t e 7" .%ouses )onsidered t e %rin)i%al loan o# P1$$, and interest o# P42, so leaving a balan)e o# 2*.4, denied %ra&er #or t e e1e)ution o# t e Deed o# .ale to )onve& t e )ollateral ordered Bustamante to %a& t e loan wit interest )ounted #rom due date until time w en Bustamante de%osited t e amount wit t e "it& 7reasurer.

1$. 7" ruled and

11. .%ouses a%%ealed and "A reversed a. b. ). ordering Bustamante to a))e%t t e amount o# P2*, de%osited wit t e "ler, o# "ourt and Bustamante to e1e)ute t e Deed o# .ale Bustamante are allowed to wit draw t e P140, de%osited b& t em

12. 8en)e, Petition B9.7A:AN7;: t at t e real intention o# t e %arties to t e loan was to %ut u% t e )ollateral as guarantee similar to an e+uitable mortgage a))ording to Arti)le 16$2 o# t e "ivil "ode. .PO9.;. RO.;<: t at t e agreement between t e %arties was not a sale wit rig t o# re/%ur) ase, but a loan wit interest at 1'( %er annum #or a %eriod o# two &ears and i# %etitioner #ails to %a&, t e res%ondent was given t e rig t to %ur) ase t e %ro%ert& or a%artment #or P2$$,$$$.$$, w i) is not )ontrar& to law, morals, good )ustoms, %ubli) order or %ubli) %oli)&. Issue: -ON Bustamante #ailed to %a& t e loan at its maturit& date and w et er t e sti%ulation in t e loan )ontra)t was valid and en#or)eable= Bustamante did not #ail to %a& and .ti%ulation was void Held: Bustamante did not #ail to %a& and .ti%ulation was void Ratio: 7 e loan was due #or %a&ment on :ar) 1, 19'9.

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On said date, Bustamante tendered %a&ment to settle t e loan w i) t e .%ouses re#used to a))e%t, insisting t at Bustamante sell to t em t e )ollateral o# t e loan. - en .%ouses re#used to a))e%t %a&ment, Bustamante )onsigned t e amount wit t e trial )ourt.

7 ere was eagerness #rom t e .%ouses to a)+uire t e %ro%ert& given as )ollateral to guarantee t e loan. 7 e sale o# t e )ollateral is an obligation wit a sus%ensive )ondition. o o !t is de%endent u%on t e a%%ening o# an event, wit out w i) t e obligation to sell does not arise. .in)e t e event did not o))ur, .%ouses do not ave t e rig t to demand #ul#illment o# Bustamante>s obligation, es%e)iall& w ere t e same would not onl& be disadvantageous to Bustamante but would also un?ustl& enri) t e .%ouses )onsidering t e inade+uate )onsideration @P2$$,$$$.$$A #or a *$ s+uare meter %ro%ert& situated at "ongressional Avenue, BueCon "it&.

On .%ouses argument t at )ontra)ts as t e #or)e o# law between t e )ontra)ting %arties and must be )om%lied wit in good #ait . o o 7 ere are, e1)e%tions to t e rule, s%e)i#i)all& Arti)le 10$6 o# t e "ivil "ode Art. 10$6. 7 e )ontra)ting %arties ma& establis su) sti%ulations, )lauses, terms and )onditions as t e& ma& deem )onvenient, %rovided t e& are not )ontrar& to law, morals, good )ustoms, %ubli) order, or %ubli) %oli)&

.ti%ulation o# t e %arties reveals an intention o# t e )reditor to a)+uire t e %ro%ert& given as se)urit& #or t e loan. 7 is is embra)ed in t e )on)e%t o# %a)tum )ommissorium, w i) is %ros)ribed b& law. 7 e elements o# %a)tum )ommissorium are as #ollows: o o @1A t ere s ould be a %ro%ert& mortgaged b& wa& o# se)urit& #or t e %a&ment o# t e %rin)i%al obligation, and @2A t ere s ould be a sti%ulation #or automati) a%%ro%riation b& t e )reditor o# t e t ing mortgaged in )ase o# non/%a&ment o# t e %rin)i%al obligation wit in t e sti%ulated %eriod.

A signi#i)ant tas, in )ontra)t inter%retation is t e as)ertainment o# t e intention o# t e %arties and loo,ing into t e words used b& t e %arties to %ro?e)t t at intention. 7 e intent to a%%ro%riate t e %ro%ert& given as )ollateral in #avor o# t e )reditor @.PO9.;.A a%%ears to be evident, #or t e debtor @B9.7A:AN7;A is obliged to dis%ose o# t e )ollateral at t e %re/agreed )onsideration amounting to %ra)ti)all& t e same amount as t e loan. !n e##e)t, t e )reditor a)+uires t e )ollateral in t e event o# non/%a&ment o# t e loan. o o 7 is is wit in t e )on)e%t o# %a)tum )ommissorium. .u) sti%ulation is void.