INSTALLMENT SALES LAW

(Recto Law)

What is the Installment Sales Law?

Comm only kno wn as the Re cto Law. It is em bodied in Art. 1484 of the NCC which provi des for the rem edies of a seller in the
contracts of sale of personal prop erty b y installm ents.

Note: Art. 1484 of the NCC i ncorpo rates the p rovisions of Act No. 4122 passed by the Philippine Legislat ure on Dec. 9, 1939,
known as the "Installment Sales Law" or the "Recto Law ," which then amended Art. 1454 of the Civil Code of 18 89.

To what does the Recto Law apply?

This law covers contracts of sale of personal pro pert y by installm ents (Act No. 4122). It is also applied to contracts purpor ting
to be le ases of pe rsonal pro perty with option t o bu y, when the l essor has deprived t he lessee of the possession or enjoym ent
of the thing. (PCI Le asing a nd Finance Inc. v. Giraffe -X Creative Im aging, Inc., G.R. No. 142618, July 12, 2007)

What are the alternative remedies in case of sale of

personal property in installments?
1. Specific Perform ance: Exact fulfillm ent should the buyer fail to pay

Gene ral Ru le: If availe d of, the unp aid selle r cannot anym ore choose other rem edies;

Exce ption: if after choosin g, it has becom e im possible, rescission m ay be pursued

2. Rescission: Cancel the sale if buye r fails to pay 2 or m ore installm ents Deem ed chosen when:

a. Notice of rescission is sent

b. Takes possession of subject m atter of sale

c. Files action for rescission

3. Foreclosure: Foreclose o n chattel m ortgage if buyer f ails to pay 2 or m ore installm ents

Gene ral Ru le: Actual foreclo sure is necessary to bar rec overy of balance - E xt ent of barring effect: purchase pric e

Exce ption: Mortg ago r refuse s to deliver p ro pert y to effect foreclosure; expenses incurred in attorneys fees, etc.

REALTY INSTALLMENT BUYER ACT- (Maceda

Law )

What is the Realty Installment Buyer Act?

Comm only kno wn as the “Maceda La w .” It is em bodied in R.A. 6552 which provides for certain protection to part icular buyers
of rea l estate p ayable on installm ents. The la w d eclares as "public polic y to protect buyers of real estate on i nstallm ent pa ym ents
against on ero us and op pressive con ditions.

Note: The pu rp ose of the la w is to protect buyers in installment against oppressive conditions.

What are the transactions/sale covered by the

Maceda Law?
The la w in vol ves the sale of imm ovables on installm ent (Maceda Law, R.A. 6552).

1. Covera ge: Resid ential Re al Estate (Villanue va, p. 431)

2. Exclude:

a. Industrial lots

b. Comm ercial buildings (and com m ercial lots by im plication)

c. Sale to tenants under agra ria n la ws

What are the rights granted to buyers?

1. Buyer p aid at le ast 2 years installm ent

a. Pay without interest the balance within g race peri od of 1 m onth for every year of installm ent paym ent. Grace period to be
e xe rcised once e very 5 yea rs.

b. W hen no paym ent – cancelled; bu yer entitle d to 50% of what he has paid + 5% for every year but not exceeding 90% of
paym ents m ade

Note: Cancell ation to b e effe cted 30 days from n otice & upon pay ment of cash surrender value.

2. Buyer p aid less than 2 ye ars installm ent

a. Grace period is not le ss than 60 days from due dat e

b. Cancellation if failure to pay w/in 60 da ys grace

c. 30 days notice before final cancellation

Note: buyer can still pay w/in the 30 days period with interest.

-IM P LI E D W A R R A N TIE S -

What are implied warranties?

W arranties deem ed included in a ll contracts of sale by operati on of law. (A rt. 1547)

1. W arranty that selle r has ri ght to sell – refers to consumm ation stage. Not applicable to sheriff, auctioneer, m ortgagee, pl edge

2. W arranty a gainst e viction Requisites:

a. Buyer is Evicted in wh ole or in part from the subject m atter of sale

b. Final Judgm ent

c. Basis of eviction is a right Prior to sale o r act im putable to seller

d. Seller has been Summoned in the suit for eviction at the instance of buyer; or m ade 3rd party defend ant through 3rd party
com plaint brought b y bu ye r

e. No wai ver on the pa rt of the buyer Note: For eviction – disturbance in law is required and not just trespass in fact.

3. W arranty a gainst encum brances (n on -app are nt) Requi sites:

a. imm ovable sol d is encum bered with n on -‐ apparent burden or servitude not mentioned in the agreem ent

b. nature of n on -‐ ap parent servit ude or b urd en is such that it m ust be presum ed that the buyer would not have acquired it
had he bee n a wa re the reof

Exce ption: wa rranty not ap pl icable wh en n on -app arent burden or servitude is recorded in the Registry of Property – unless there
is expressed warrant y that the thing is free from all burdens & encum brances

4. W arranty a gainst Hid den Defects Requisites:

a. Defect is im portant or Serious

i. The thing sold is un fit for the use which it is intended

ii. Dim inishes its fitness for such use or to such an extent that the buyer woul d not have acquired it had he been aware
there of

b. Defect is Hidde n

c. Defect Exists at the tim e of the sale

 d. Buyer gives Notice of the defect to the seller within reasonable tim e

e. Action for rescission or red uction of the price is brought withi n the proper peri od

i. 6 m onths – from delivery of the thin g sold

ii. W ithin 40 da ys – from the delivery in case of anim als

f. There m ust be No wai ver of wa rra nty o n the part of the buyer .

When is implied warranty not applicable?

1. “As is and wh ere is” sale

2. Sale of second han d articl e s

3. Sale by vi rtue of a utho rity in fact or la w

4. Sale at public auction fo r ta x deli nqu ency

What are the effects of waiver of an implied warranty?

1. Seller in ba d faith & there is wai ver a gai nst eviction – void

2. W hen buyer w/o kno wl ed ge of a particular risk, m ade general renunciation of warranty – is not a waiver but m erely lim its
liability of seller i n case of eviction

3. W hen buyer with kno wl ed ge of risk of eviction assum ed its consequences & m ade a waiver – seller not liabl e (applicabl e onl y
to waiver of wa rranty a gai nst eviction)

REM EDIES OF AN UNP AI D SELLER

W hat are the rem edies of an Unpai d Seller?

I. Ordinary

1. Action for Price Exe rcised when:

a. owne rship has passed to buye r;

b. price is payable on a day certa in

c. goods cannot rea dily b e resold fo r reaso nabl e pric e and Art. 1596 is inapplicable

2. Action for Dam ages – In case of wron gful ne glect or refusal by the buyer to accept or pay for the thi ng sold

II. Special 1. Possessory Lie n – Seller not bound to deliver if buyer has not paid him the price. It is exercisabl e onl y in following
circumstances:

a. goods sold witho ut stipulatio n as to credit

b. goods sold on credit b ut term of credit has e xpired

c. buyer becom es insolvent Note: W hen part of goods delivere d, m ay still exercise right on goods undeli vered

2. Stoppage i n Transitu

Requisites:

a. Insolvent bu ye r

b. Seller m ust Surren der the neg otiable docum ent of title, if any

c. Seller m ust bear the Expe nses of delive ry of the goods after the exe rcise of the right.

d. Seller m ust either actually take possession of the goods sold or give Notice of his claim to the carrier or other person i n
possession

e. Goods m ust be in Tra nsit

f. Unpaid selle r

3. Special Right to Resell th e Goods E xe rcised whe n:

 a. Goods are perishable,

b. Stipulated the ri ght of resale in case of defa ult, or

c. Buyer in defau lt for un reason able tim e

4. Special Right to Rescind Requisites:

a. Exp ressly stipulate d O R buyer is in defa ult for unreas onable tim e

b. Notice needed to be gi ven b y selle r to buyer

Note: Ownership of g oods al ready with buyer b ut seller may still rescind; ownership is destroyed even without court intervent ion
but in ord ina ry sale, need to go to court.

Option Money vs. Earnest Money

OP TI ON M ON E Y

What is the effect of failure to determine the price?

1. W her e c o nt r ac t i s e x ec u to r y – i n ef fe c ti v e

2. W her e t h e t hi ng ha s b e en d el i v e r ed to a nd ap p ro p ri at e d b y t h e b u ye r – t h e b u ye r m u s t p a y a re as o n abl e pr i c e t he r ef o re N o t e : T h e f i x i n g of
th e pr i c e c a nn ot b e l ef t t o th e d i s c re ti on o f on e of th e p ar t i es . H o w e v e r, i f t h e p ri c e f i x e d b y o ne o f t h e p a rt i e s i s a c c ep t ed b y t h e ot h er , t h e
s al e i s p e rf ec te d .

What is an option money?

T he di s ti nc t c o ns i d er at i o n i n c a s e of a n o pt i o n c o nt r ac t. It do es no t f o rm p ar t of t h e pu rc h as e p ri c e he nc e , i t c a n no t be r ec ov e r ed i f t h e bu ye r
di d no t c o n ti nu e w i t h t he s al e.

When is payment considered option money?

P a ym e nt i s c on s i de r e d op ti on m on e y w h e n i t i s gi v e n as a s e pa r at e a n d di s t i nc t c o ns i d e ra t i o n f r om t he p u rc h as e p ri c e. C o n s i d e ra t i on i n a n
op ti on c o nt r ac t m a y b e a n yt hi n g o r u nd e rt ak i n g o f v al u e.

EARNEST MONEY
What is an earnest money or “arras”?
T hi s i s t h e m o ne y gi v e n t o t he s el l e r b y th e p r os p ec t i v e b u ye r t o s h o w t ha t t he l at t e r i s t r ul y i nt e re s t ed i n b u yi n g t he pr o p e r t y, a n d i t s a i m i s
to b i n d t he b a rg ai n. (P i ne d a, p . 75 )

What is the effect of giving an earnest money?

It fo rm s p a rt of t he p u rc h as e pr i c e w hi c h m a y b e de d uc te d f r o m t h e t o t a l pr i c e. I t al s o s e rv es as a p r oo f of t he p e rf ec t i o n o f t h e c o nt r ac t of
s al e. T h e r ul e i s n o m or e t h an a d i s pu t abl e p re s um pt i o n an d p re v a i l s o nl y i n t h e ab s en c e of c on t ra r y o r r e bu t t a bl e e v i de nc e . (P N B v C A , 2 6 2
S C R A 4 6 4, 1 9 96 )

N o te : Op ti o n mo n ey ma y b ec o m e e ar n es t mo n ey i f t h e p ar t i es s o a gr e e.

When is payment considered an earnest money?

W hen t h e pa ym e n t c o ns ti t u te s a s pa rt o f t he p u rc ha s e pr i c e. H en c e , i n c a s e w h en t h e s al e di d n ot h a pp e n, i t m u s t b e r et ur n ed t o t he pr os p ec t i v e
bu ye r .

Subject Matter and Parties to a Contract of Sale

SUBJECT MATTER OF SALE
What may be objects of sale?
1. E xisting Goods – owned/ pos s es s ed by s el l er at the ti m e of perf ec t i o n

2. F u t ur e G o o d s – go o ds t o be m an uf a c t ur e d, r ai s e d, a c q ui r ed b y s e l l er a f t er p e rf ec t i on o f t h e c o nt r ac t o r w h o s e a c q ui s i t i o n b y s e l l e r d ep e n ds
up o n a c on ti ng e nc y ( A r t. 14 6 2)

N o te : S al e o f f u tu r e g oo ds i s v a l i d o nl y as a n e x e c u t or y c o nt r ac t t o b e f ul f i l l ed b y t h e a c q ui s i t i o n & d el i v er y of go o ds s pe c i f i e d.

3. S a l e o f U n d i vi de d I n t er e s t or S h ar e

a. S ol e o w n er m a y s el l a n u nd i v i d ed i nt e re s t . (A rt. 14 6 3) E x . A f ra c t i o n o r p er c e nt a g e of s u c h p r op e rt y

b. S al e of a n u nd i v i d ed s h a re i n a s p ec i fi c m as s of f un gi bl e g oo ds m ak e s t h e b u ye r a c o - o w ne r o f t h e e nt i r e m as s i n p r op o rt i o n t o t h e
am o u nt h e b ou g ht . (A rt . 1 46 4 )

c . A c o -‐ o w n er c an n ot s el l m or e t ha n hi s s h a re ( Y t ur r al de v . C A )

4. S a l e o f T hi n g s i n Li t ig a ti o n

a. S al e of th i n gs u nd e r l i ti ga ti o n i s r e s c i s s i bl e i f e n te r ed i n t o b y t h e d ef en d an t , wi t h o ut t h e a pp r ov al of t he l i t i g an t s o r t h e c o ur t (A r t . 1 38 1 )

b. N o r es c i s s i on i s al l o w ed w h er e t he t hi n g i s l e g al l y i n t h e p os s e s s i o n of a 3r d p e rs on w h o di d n ot a c t ed i n b ad f ai t h .

5. T h i n gs s u b je c t t o R e s ol u t o r y C o n d it i o n.

E x. T hi n gs a c q ui r ed u n d er l eg al o r c o n v e nt i o n al ri g ht o f r ed em p t i o n , or s u bj ec t t o r es e rv a t r o nc al . (A r t . 1 4 65 )

6. I n d et er m i n a te Q u a n ti t y o f S u bj e ct M a t ter

T he f ac t t ha t th e q u an ti t y i s n ot d et e rm i n a te s h al l n ot be an ob s t ac l e t o t h e e x i s t e nc e o f t he c on t ra c t p r ov i d ed i t i s p os s i b l e t o d et erm i n e t he
s am e, wi th o ut n e ed of a n e w c o nt r ac t . (A rt . 1 34 9 )

PARTIES TO A CONTRACT OF SALE

What is the status of the following contracts of sale?
1. T h a t e nt er e d i nt o b y m i n or s :

a. Me r el y v oi da bl e, s u bj ec t t o a nn ul m e nt o r r ati fi c a ti o n

b. A c t i o n fo r a nn ul m e nt c a n n ot be i ns t i t ut e d b y th e p er s on w h o i s c a pa c i t a t e d s i nc e he i s di s qu al i f i e d f rom al l e gi ng t h e i nc a pa c i t y of t h e pe rs o n
w i t h w h om h e c o nt ra c t s ( w i t h p ar ti al r es ti tu ti on i n s o fa r a s t h e m i n or i s b en e f i t e d) w h er e ne c e s s ar i e s a re s ol d a n d d el i v e r e d t o a m i n o r o r
ot h er p e rs o n w i t ho u t c a p ac i t y t o ac t, h e m us t p a y a r e as o na bl e p ri c e (A rt . 1 48 9 )

2. S a l e b y & b et w ee n s p o u se s ( Ar t . 14 9 0 ) :

a. Status of prohibited sales between spouses:

Ge n er al R ul e: N ul l a n d v oi d

E xc ep ti on : In c a s e o f s a l e b e t w ee n s po us e s :

i . W he n a s e p ar at i o n o f p ro p er t y w a s ag r ee d u p on i n th e m a rri ag e s et t l em e nt s ; o r

i i . W hen th e re ha s b ee n a j u di c i al s e p a ra ti on o f p ro p e rt y a g r ee d u po n b et w e e n t h em R e a s o ns :

A . P r ev en t d ef r au di n g c r e di t o rs

B . A v o i d s i t ua ti on w he r e d om i n an t s p o us e t ak es a dv a nt a ge o v er t h e w e ak e r s p o us e

C . A v oi d c i r c um v e nt i o n o n p ro hi bi t i o n o f do n ati o n b et w e e n s p o u s e s

b. C o n tr a c t o f s al e wi t h 3r d p ar t ie s :

Ge n er al R ul e: U n d er t h e l a w o n s al es , i t w o ul d s e em t h at a s p o u s e m a y, w i t ho u t t h e c o ns en t o f t he ot h er s p o us e, en t e r i nt o s al e s t r a ns ac t i on s
i n t he r e gu l a r o r n orm al p u rs ui t of t he i r pr of es s i on , v oc ati o n o r t r a de . (i n r el a t i o n w i t h A rt . 7 3, F am i l y C od e )

E xc ep ti on : E v e n w h en t he p ro p er t y r eg i m e pr e v a i l i ng w a s t h e c on j u g al pa rt n e rs hi p o f g ai ns , t h e S up r em e C o u r t h el d t he s a l e b y t h e hu s ba n d
of a c o nj u gal p r op e rt y wi th o ut th e c o ns e nt of t he w i f e i s v oi d , n ot m e re l y v o i d a bl e u n de r A r t . 12 4 of t he F am i l y C o de s i nc e t h e r e s ul t i n g
c o nt r ac t l ac k o ne o f th e e s s e nti al el em en ts o f fu l l c o ns e nt . (G ui an g v . C A , G . R . N o. 1 2 51 7 2, J u ne 26 , 1 99 8 )

3. B e tw e e n C om m o n L a w S p o u se s - al s o nu l l a n d v oi d. I n C a l i m l i m - C a n ul l as v . Fo rt u n, t h e C o ur t d e c i d e d t h at s al e b e t w ee n c om m o n l a w
s p o us es i s n ul l a n d v oi d be c a u s e A rt . 14 9 0 p r o hi b i t s s al es be t w e en s po us e s t o p r ev e nt t h e e x e rc i s e o f u n d ue i n f l ue nc e b y o ne s po us e ov e r
th e ot he r , a s w el l a s t o pr o te c t th e i ns ti t u ti o n of m a rr i a g e. T h e pr o hi bi t i o n ap pl i e s t o a c o up l e l i v i ng as h us b an d a nd w i f e w i t h ou t t h e be n ef i t
of m ar ri a ge , ot he r w i s e, th e c o n di t i o n of th os e i nc u r re d gu i l t w o ul d t ur n o ut t o b e b et t er t h a n t h os e i n l eg al u ni on . ( C a l i m l i m -C a nu l l as v . Fo r t u n,
et . al . , G.R . N o . L -‐ 5 74 9 9, J un e 22 , 19 8 4 ) B ut w h e n th e r egi s t er e d pr o pe r t y h as b ee n c o n v e y ed s ub s eq u en t l y t o a t hi r d - p a rt y b u ye r i n g oo d
fai th and for v al ue, then rec onv e y an c e i s no l ong er av ai l abl e t o c om m on -‐ l aw s pous e -‐ s el l er, s i nc e under t he T orrens s ys t em ev ery b u ye r
ha s a ri g ht t o r el y u p on t h e ti t l e o f hi s i m m e di a te s el l e r. ( C r u z v . C A , G . R . N o. 1 2 0 12 2, N ov . 6, 19 9 7)

Perfection Of A Contract To Sell

I n O es me r , J r ., e t al . v . P a rai s o D e v . C o r p. , G. R . N o . 1 57 4 93 , F e br u ar y 5, 2 0 07 , a c o nt r ac t t o s el l w as e n t e r ed i nt o b y t he o w ne r s of a r ea l
pr o pe r t y. T h e y af fi x e d t h ei r s i g na t ur es b ut c o nt e s t ed i t s v al i di t y l at e r c on t en di n g t ha t t h ei r c o - o w n e r h a d n o w ri t t e n a ut h o ri t y t o s el l t he
pr o pe r t y, he nc e , th e y c o nt en d e d th at t h e c o nt r ac t t o s el l w as n ot v al i d. I s t h e c on t e n t i o n c or r e c t ? W h y?

Held: No. it is true that the co-owners did not authorize the other co-owner to sell.

T he l a w i ts el f e x p l i c i tl y r e qu i r es a w ri tt e n au th o ri t y be f or e an a ge n t c a n s el l a n i m m ov ab l e . T h e c o nf e rm e nt o f s uc h a n a u t h o ri t y s h o ul d b e i n
w ri ti ng , i n a s c l e a r a n d pr ec i s e t erm s a s po s s i bl e. It i s w o rt h no t i n g t ha t pe t i t i o n er s ’ s i g n at u re s ar e f o u nd i n t h e C o nt r ac t t o S el l . T h e C o nt ra c t
i s a bs ol ut el y s i l e nt o n t h e e s t a bl i s hm en t of an y pri n c i p al - ag e n t r el at i o ns hi p a s t h e s al e o f t h e s u bj ec t p a rc el s o f l a n d. T h us , t h e C o nt ra c t t o
S el l , al th o ug h s i g n ed on t h e m ar gi n b y th e o t he r c o - o w n e rs i s n ot s u f f i c i en t t o c o nf e r a ut h or i t y o n t he ot h er t o a c t a s t he i r ag e nt i n s e l l i n g
th ei r s h a re s i n t he pr o pe r ti e s i n q u es t i o n.

D es pi t e t h e c o - o w n e r’ s l a c k of wri tt e n au th o ri t y f r om t h e f i v e p et i t i on e rs t o s el l t h ei r s h ar e s i n t h e s u bj ec t pa rc el s o f l a nd , t h e s u p po s e d
C o nt r ac t t o S e l l r em ai n s v al i d a nd bi n di n g u po n t he l at te r. A l l t he c o -o w n e rs s i g ne d t he do c um en t .

T he r ef or e , a w ri t te n a ut ho ri t y i s n o l o ng e r n e c e s s ar y i n or d er t o s e l l t h ei r s h ar es i n t he s ub j ec t pa rc el s o f l a nd b ec a us e, b y a f f i x i ng t h e i r
s i g n at u re s on t he C o nt ra c t t o S el l , t h e y w e r e n ot s e l l i ng t h ei r s ha r es t hr o ug h a n ag e nt b ut , r at he r , t h e y w e r e s el l i ng t he s a m e di r ec t l y a nd i n
th ei r o w n ri g ht .

It i s w e l l -s et tl ed th at c on tr a c ts ar e pe r fe c t e d b y m e re c o n s e nt , up o n t h e a c c ep t an c e b y t h e of f e re e of t h e of f e r m a d e b y t h e o f f er o r. F r om t h a t
m om e nt , th e p ar ti es a r e bo u nd n ot o nl y t o t he f ul fi l l m en t of w h at h as b e e n e x p r e s s l y s t i pu l at e d bu t al s o t o al l t he c o ns eq ue n c e s w hi c h ,
ac c o r di ng t o t h ei r na tu r e, m a y b e i n k e e pi n g w i t h g o od f ai t h, u s ag e a nd l a w. T o p r od uc e a c o nt r ac t , t h e ac c ep t a n c e m us t n ot q u al i f y t h e t e rm s
of t h e of fe r . H o w e v e r , th e a c c e pt a nc e m a y b e e x p r es s o r i m pl i ed . F o r a c on t ra c t t o a ri s e , t h e ac c e pt a nc e m us t b e m a de k n o w n t o t h e o f f er o r.
A c c or di n gl y, th e a c c ep t an c e c a n b e w i t hd r a w n o r r ev ok ed be f o re i t i s m ad e k no w n t o t he o f f e r or . (J a rd i n e D av i es , I n c . v . C A , 38 9 P h i l . 2 0 4

In th e c a s e a t b a r, th e C o nt r ac t to S el l w as p er fe c t e d w he n t h e c o -o w n e rs c o ns e nt e d t o t h e s al e t o t h e b u ye r of t h ei r s h a re s i n t h e s u bj ec t
pa rc el s of l a nd b y a ffi x i ng th ei r s i g n at u re s o n th e s ai d c o nt r ac t . S uc h s i g n at ur e s s ho w t h ei r a c c ep t a nc e of w h a t h as b ee n s t i pu l a t e d i n t h e
C o nt r ac t t o S el l a n d s u c h a c c e pt a nc e w as m a d e k n o w n t o b u y er w he n t he d u pl i c a t e c op y of t he C on t ra c t t o S el l w a s re t ur n e d t o t he l a t t e r
be a ri ng pe ti t i o n er ’ s s i gn a tu r es .

Op ti on Mo n e y D i s ti n gu i s he d F r o m E a r ne s t Mo ne y

On c e m o re , t h e S C i n O es me r , et al . v . P a r ai s o D e v . C o r p. , G . R . N o . 1 5 74 9 3, F eb r u ar y 5 , 20 0 7, h ad t he oc c as i o n t o d i s t i n g ui s h e ar n es t
m on e y f r om op ti on m o n e y. It s a i d th a t ea r n es t m o n e y a n d o pt i o n m on e y a r e n ot t h e s am e bu t d i s t i n gu i s he d t hu s : ( a ) e ar n es t m on e y i s pa r t of
th e p u rc h as e p ri c e , w hi l e o p ti o n m o n e y i s t he m o ne y g i v en as a di s t i nc t c o n s i d e r at i o n f or a n o p t i o n c o nt r ac t ; ( b ) e a r ne s t m on e y i s gi v e n o nl y
w h er e t he r e i s al r ea d y a s al e , w hi l e o pti o n m on e y ap pl i e s t o a s al e no t ye t p e rf ec t e d; an d ( c ) w he n e a rn es t m o ne y i s gi v e n, t h e b u ye r i s b ou n d
t o p a y t h e b al a n c e , w hi l e w h en t he w ou l d - be bu ye r gi v es o pt i o n m on e y, h e i s n ot r e qu i r e d t o bu y, b u t m a y ev e n f o r f e i t i t d e p en di n g o n t h e
te rm s o f th e o pt i o n.

E QU I T AB LE M O R TG A GE

What is an equitable mortgage?

On e w hi c h l ac k s t he pr o p er f o r m al i t i e s , f o rm o r w o r ds o r o t he r r eq ui s i t e s p re s c ri be d b y l a w f or a m o rt ga g e, bu t s ho w s t h e i nt e nt i o n of t h e
pa r ti e s to m ak e t h e p ro p er t y s u bj ec t of t he c o nt ra c t as s ec ur i t y f or a de bt an d c on t a i n s n ot hi ng i m p os s i bl e or c o nt ra r y t o l a w

What are the essential requisites of equitable

mortgage?
1. P a r ti es e nt e re d i n t o a c o nt r a c t of s al e

2. T h ei r i n te nt i o n w as t o s e c u r e a n e x i s ti n g d e bt b y w a y of a m or t ga g e.

W hat i s t h e ru l e o n t he pr es um p ti o n o f a n eq ui ta bl e m o rt g ag e ?

A s al e w i t h c o n v e nt i o n al r ed em pti o n i s d eem e d to b e a n e qu i t a bl e m or t g a g e i n a n y o f t h e f ol l o w i n g c as es : (A rt . 16 0 2)

1. P r i c e of t h e s al e wi th ri g h t t o r e pu rc h as e i s u nu s ual l y In a d e q ua t e

2. S e l l er R em a i n s i n p os s e s s i o n as l es s e e o r ot h er w i s e
3. U pon or after the expi rati on of the ri ght to repurc ha s e A not her i ns t r um ent ext endi ng t he peri od of redem pt i on or grant i ng a new peri od i s
e x ec ut e d

4. P u r c h as e r R e ta i n s fo r hi m s e l f a pa r t of t h e pu rc h as e p ri c e

5. S e l l er b i n ds hi m s el f t o p a y t h e T a x es o n t he t hi n g s ol d

6. In a n y ot h e r c as e w h er e th e re al i n te n ti o n of t he p ar t i es i s t ha t t h e t r an s a c t i o n s h al l S e c u r e t h e p a ym e nt of a d eb t or t he pe r f o rm a n c e of
an y ot h er ob l i g a ti on .

7. A r t. 16 0 2 s h al l a l s o a pp l y t o a c o nt r ac t p ur p or ti ng t o b e a n A bs ol ut e s a l e . (A rt . 1 60 4 )

N o te : In c as e o f d ou bt i n d et er m i ni ng w h et he r i t i s eq ui t a bl e m or t g a ge or s al e a r et r o ( wi t h ri gh t of re p ur c h a s e ); i t s h al l b e c o ns t ru e d as
eq ui ta bl e m o rt g ag e.

Remedy is reformation.
A n e q ui t a bl e m o rt g ag e i s o ne w hi c h al th o ug h l ac k i n g i n s om e f orm al i t y, o r f orm or w o r ds , o r ot he r re q ui s i t es dem a nd e d b y a s t at ut e ,
ne v er th el es s re v e al s t h e i nt e nti on o f t h e pa r ti e s to c ha r ge r e al pr o pe r t y as s ec ur i t y f o r a d e bt , an d c o n t ai n s n o t h i n g i m p os s i b l e o r c o nt ra r y t o
law.

Conventional Redemption and Legal

Redemption
C ON V E N TI ON A L R E D E M P T IO N

What is conventional redemption?

S el l e r re s e rv e d th e ri g ht to r e p ur c h a s e t hi ng s ol d c o up l e d w i t h o bl i ga t i o n t o r et ur n p ri c e of t h e s al e, e x p e ns es o f c o nt r ac t & ot h er l e gi t i m a t e
pa ym e n ts a n d t he n ec es s a r y & us ef ul e x p en s e s m a de o n t he t h i n g s ol d N o t e : R i g ht t o re p ur c h as e m u s t be re s er v e d at t h e t i m e o f p e rf ec t i o n
of s al e. (P i n e da , p. 33 3 )

LEGAL REDEMPTION
What is legal redemption?
It i s t h e ri gh t t o b e s u b ro g at e d up o n t he s am e t e rm s a n d c o n di t i o ns s t i p ul a t ed i n t h e c o nt ra c t , i n t h e pl ac e o f o n e w h o a c q ui r es t h e t hi n g b y
pu rc h as e o r b y d a ti on i n p a ym e nt o r b y ot h er t r an s a c ti o n w h e re b y o w n e rs hi p i s t r a ns m i t t e d b y on e ro u s t i t l e .

What are the instances of legal redemption?

1. S a l e of a c o -‐ o w n e r of h i s s ha r e to a s t ra n ge r (A rt . 1 62 0 )

2. W hen a c re di t o r ot h er i nc or p or e al ri g ht i n l i ti ga ti o n i s s ol d ( A rt . 1 63 4 )

3. S a l e of a n h ei r of h i s h er e di t ar y ri g hts t o a s tr a ng e r (A rt . 10 88 )

4. S a l e of a dj ac e nt r u ral l an d s no t e x c ee di n g 1 h ec t a re (A r t . 1 62 1 )

5. S a l e of a dj ac e nt s m a l l u rb a n l a nd s b ou g ht m e re l y f or s p ec ul a t i o n (A rt . 1 62 2 )

What is the period of redemption?

1. N o p eri o d a gr e ed up o n – 4 y ea rs f r om da t e of c o nt ra c t

2. W hen t he r e i s a gr e em e nt – s ho ul d n ot e x c e ed 10 ye a r s ; b ut i f i t e x c e e d ed , v a l i d onl y f or t he f i rs t 1 0 ye a r s .

3. W hen p er i o d t o re d e em ha s e x pi re d & th e re h a s be e n a p r ev i o us s ui t o n t he na t u r e of t h e c o nt r ac t – s e l l e r s t i l l h as 3 0 da ys f rom f i n al

j u dgm e nt o n th e b as i s t ha t c o n t ra c t w as a s al e w i t h p ac to de r e t r o:

R a ti o n al e: n o r e dem pti o n d ue t o e rr o ne o us b el i e f t h at i t i s eq ui t a bl e m or t ga g e w hi c h c a n b e e x t i n g ui s h ed b y p a yi n g t he l oa n.

4. W he n p e ri od h as e x pi re d & s el l er al l o w e d th e pe ri o d o f r e d e m pt i o n t o e x p i r e – s el l e r i s a t f a ul t f or n ot ha v i ng e x e rc i s ed hi s ri gh t s s o s h o ul d
no t b e g ra nt e d a n e w p e ri od

N o te : T en d er of p a ym e nt i s s uf f i c i en t b ut i t i s n o t i n i ts el f a p a y m en t t h at re l i e v es t he s el l e r f r o m hi s l i a bi l i t y t o p a y t h e re d em p t i o n p ri c e .
When does period of redemption begin to run?
1. R i gh t of l eg al p r e -‐ em pti o n or r e dem pt i o n s hal l be e x e r c i s ed wi t h i n 3 0 d a ys f r om w ri t t e n no t i c e b y t h e b u ye r – d e e d of s al e n ot t o be
re c o r d ed i n R e gi s t r y o f P r op e rt y u nl e s s a c c om p a ni ed b y af f i da v i t t ha t b u ye r ha s gi v e n n ot i c e t o r ed em p t i o ne rs

2. W hen t he r e i s ac t ual k n o wl e d ge , n o n ee d t o gi v e w r i t te n n ot i c e ; pe ri o d of r e d em p t i o n b e gi ns t o ru n f rom a c t u al k n o w l e d g e

SALES – PD 957 Effect of absence of certificate

of registration or license to sell by the HLURB
I n S p s . C o C hi e n v . S ta . L u c i a R e al t y & D e v ., I nc . , et al . , G . R . N o . 1 6 20 9 0, J a n ua r y 3 1, 2 00 7 ( P u no , J ), t h e re w a s a s al e o f a re al t y b ut t h e re
w as a c o nt en ti o n t h at t he s al e i s v oi d fo r l a c k of p ri o r c e rt i f i c a t e of r e gi s t r at i o n a nd l i c e ns e t o s el l b y t h e H LU R B . I s t he c on t e nt i o n c o r re c t ?
W hy?

H el d: N o . P . D . 9 57 i s a l a w t h a t s eek s to r eg ul a te th e s a l e of s ub di v i s i o n l ot s an d c o nd om i ni u m s i n v i e w of t h e i nc r e as i n g n u m be r o f i n c i d e nt s
w h er ei n “r e al es ta te s ub di v i s i o n o w n er s , de v el op e rs , o p er at o rs , an d / o r s el l e rs h av e re n eg e d o n t he i r r ep r es e nt at i o ns a nd o bl i g at i o ns t o p ro v e d
an d m ai nt ai n pr o pe rl y” t h e b a s i c r eq ui r em e nt s an d am e ni t i e s , as w e l l as “ re p o rt s o f al ar m i ng m a g ni t u de … of s w i n dl i n g a nd f ra u du l e nt
m ani p ul ati o ns pe r p et ra t ed b y u ns c r u pu l o us s u b di v i s i o n a nd c o nd om i ni um s el l er s a n d o p er at o r s . ” A s s uc h , P . D . 9 5 7 r e qu i r es t he r eg i s t r at i o n
no t j us t o f t he d ev el o pe rs , s el l er , b r ok e rs an d /o r o w ne rs o f t h e p r oj ec t b ut al s o of t h e pr oj e c t i t s el f . U p o n t h e r e gi s t r at i o n o f t he p roj e c t , a
l i c en s e t o s el l m us t b e o bt ai ne d pr i o r t o t he s al e o f t he s u bd i v i s i on l ot s o r c on d om i n i um un i t s t h er ei n. T he l a w al s o p r ov i d es f o r t h e s us pe n s i o n
an d re v o c ati o n o f t he r eg i s t r ati on a nd l i c en s e i n c e r tai n i ns t a n c e s , as w el l as t h e pr oc e d ur e t o b e ob s e rv e d i n t he ev e nt t h e r eo f . Fi n al l y, t h e
l a w p r ov i d es f o r adm i ni s t r ati v e f i n es a n d ot h er p e na l ti es i n c a s e o f v i o l a t i on of , or n o n - c om pl i a n c e wi t h i t s p ro v i s i o ns .

A r e v i e w o f th e r el ev a nt p r ov i s i on s o f P .D . 9 57 re v e al s t h at w hi l e t h e l a w pe n al i z e s t he s el l i n g o f s ub di v i s i o n l o t s an d c o n d om i ni um
un i ts wi th o ut p ri or i s s u a nc e o f a C e rti fi c at e of R eg i s t r ati o n an d Li c e ns e t o S el l b y t h e H LU R B , i t d o es n ot pr o v i de t h a t t h e ab s en c e t he r eo f
w i l l a ut om a ti c al l y r en d e r a c o nt ra c t , ot h er w i s e v a l i dl y e nt e re d , v o i d . T he p e n al t y i m po s ed b y t h e d ec re e i s t he g e ne r al p en al t y p ro v i de d f or
th e v i ol a ti o n of a n y o f i ts p r ov i s i on s . It i s w el l -s e ttl e d i n t h i s j u ri s di c t i o n t h a t t h e c l ea r l a n gu a ge of t he l a w s h al l pr ev ai l . T hi s pr i n c i pl e
pa r ti c ul ar l y e nj oi ns s t ri c t c om p l i an c e w i t h pr ov i s i o ns of l a w w hi c h ar e p e n al i n n at u re , o r w he n a p e nal t y i s p r ov i d ed f o r t h e v i o l at i o n t h er e of .
W i th r e ga r d t o P .D . 9 5 7, no th i n g t he r ei n p ro v i de s f or th e nul l i f i c a t i o n of a c o n t r ac t t o s el l i n t h e e v e nt t h a t t h e s el l e r, at t h e t i m e t h e c o nt r ac t
w as e nt er e d i n t o, di d n ot p o s s e s s a c e rti fi c a te of re gi s t r at i o n a nd l i c en s e t o s el l . A bs en t a n y s pe c i f i c s a nc t i o n pe rt ai ni n g t o t h e v i ol at i o n o f
th e qu es ti o n e d pr ov i s i o ns (S ec s . 4 a n d 5) , t h e g e n er al p en al t i es p ro v i de d i n t h e l a w s h al l b e ap pl i e d. T h e g e n er al p en al t i es f or t he v i o l at i o n
of a n y p r o v i s i o ns i n P .D . 9 57 a re pr ov i d e d fo r i n S ec ti on s 3 8 an d 3 9. A s c a n e a rl y b e s ee n i n t h e a f o r e qu ot e d p ro v i s i o ns , t h e s am e d o no t
i nc l u d e th e n ul l i fi c a ti on o f c o n tr ac ts t ha t a re o t he r w i s e v al i d l y e nt e re d.

T he r e qui r em e n ts of S ec ti o n 4 a nd 5 o f P .D . 95 7 d o no t g o i nt o t h e v a l i d i t y o f t h e c on t ra c t , s uc h t h a t t h e ab s en c e t h e re of w o u l d
au t om a ti c al l y r en d er t h e c o nt r a c t n ul l a n d v oi d . It i s r at h er m or e o f an adm i ni s t r at i v e c o nv e ni en c e i n o rd e r t o a l l o w f o r a m or e ef f ec t i v e
re g ul ati o n of i nd us tr y. W hi l e i t i s t he i n t en t of t h e pr o hi bi t i o n i n S e c t i o n 5 of P . D . 9 5 7 “t o pr e v e nt c as es o f s wi n dl i n g an d f ra u du l e nt
m ani p ul ati o ns p e rp et r at e d b y u ns c r u pu l o us s ub di v i s i o n a nd c o nd om i ni um s el l e r s a n d op e ra t o rs ” an d t o e ns u r e t h at “ pe n al t i e s b e i m p os e d o n
fr a ud ul e nt pr ac ti c e s a n d m a ni pu l at i o ns c om m i tt e d i n c o n ne c t i o n t h er e w i t h ”, s uc h do es n ot ob t ai n i n t hi s c a s e , a s i t i s u n di s p ut e d t ha t t h e t i t l e
to t h e s u bj ec t p ro p er t y h a s b ee n av ai l a bl e f or m o r e th a n a ye a r , an d t h e E a gl e R i d g e p ro j e c t w as a l m o s t 1 0 0% c om pl et e d, b e f or e S p o us es C o
C hi e n d ec i d ed to ha v e th e C o nt ra c t de c l ar e d v oi d to s e ek a r ef un d o f t h ei r do w n p a ym en t . C o n t r a r y t o S p o us es C o C hi en ’ s b a r e al l e g at i o n o f
ba d f ai th o n th e pa rt of th e p ri v a te re s p o nd e nt s , t h e C ou r t of A p pe al s f ou n d t ha t a t t he t i m e t h e C o nt r ac t t o S el l w a s e x e c u t ed , t he a ppl i c at i o ns
fo r th e C er ti f i c ati o n a nd t h e Li c en s e w e re al r e a d y p en di n g w i t h t he H LU R B b ut w e r e o nl y i s s ue d s e v e r al m o nt hs t h er e af t e r. Mo re i m po rt a nt l y,
w h en S p o us e C o C h i e n r ec ei v e d no ti c e of t he a v a i l a bi l i t y of t he t i t l e t o t h e s u bj ec t pr o pe rt y, t h e p ri v at e r es po n de n t s h ad l o ng s i nc e b ee n
i s s ue d t h e C er ti f i c at e a n d Li c e n s e . It w as i n f ac t S p o us es C o C hi en w h o, i ns t e a d o f p a yi n g t he ba l a nc e as r e qu i r e d i n t h e c on t r ac t , s o ug ht t o
re n eg o ti at e t h e s am e, a nd f ai l i n g t h er ei n , s o ug ht t o nu l l i f y t h e c on t ra c t a ye a r an d a h al f a f t e r n ot i c e t h at t h e t i t l e t o t h e s u bj ec t p ro p er t y, f r ee
fr om a n y l i en s an d e nc um br a nc e, w as al r e ad y av ai l a bl e fo r d el i v e r y.

On e of t h e p u rp os e s o f P . D . 9 57 i s t o di s c o ur a ge a nd p re v e n t u ns c r u pu l o u s o w n er s , d e v el o pe r s , ag e nt s a nd s e l l e r s f ro m r e ne gi n g o n
th ei r o bl i g ati o ns an d r e p re s e nt ati o ns t o t h e d et ri m en t o f i n n o c e nt pu r c h as e rs . T h e l a w m a n da t es H LU R B t o c l os e r e gu l a t e , s u p er v i s e an d
m oni t or t h e r eal es ta te i n du s t r y , pa r ti c ul ar l y r es i d e nti al de v e l o pm e nt s s u c h as s u bdi v i s i o n s an d c o n dom i ni um p r oj e c t s . T o t hi s e n d, P . D . 9 5 7
pr ov i d e s f or th e i s s ua nc e , s us pe n s i o n, re v oc ati o n a n d e v e n t h e ou t ri g h t d e ni a l o f r e gi s t ra t i on a n d l i c e ns e t o de v e l o p er s , a ge nt s an d t h e p r oj ec t
i ts el f , as w el l as p en al ti es f or t h e n on -c om pl i an c e w i t h th e r eq ui rem e nt s pr ov i d e d t h e re i n . I t d o e s no t , h o w ev e r, p r ov i d e f o r t he nu l l i f i c at i o n of
a c on tr ac t, du e t o t h e l a c k o f r eg i s t r at i o n a n d l i c e ns e a t t h e m om e nt of e x e c ut i o n, w hi c h i n t hi s c as e w a s t he r e af t e r u n di s p u t e dl y i s s ue d b y
H LU R B . A s c o r r ec t l y a v e r r ed b y r es p o nd e nt A l s o ns , t he re q ui re m en t f or re gi s t ra t i on an d l i c e ns e i s p ri m ar i l y d i re c t ed at pr ev e n t i n g f r au d ul en t
s c hem es f r om b ei ng p er p et r at e d o n t h e p ub l i c w h o s eek t o h av e t he i r o w n a b od e . N o f r a ud h a s b ee n a l l eg e d, m u c h l e s s pr ov en , b y S p o us es
C o C hi e n i n t h e pr es e nt c a s e . T he l a c k of c er ti f i c at e an d re gi s t ra t i on , wi t ho ut m o re , w hi l e p en al i z ed u nd e r t h e l a w , i s n ot i n an d of i t s el f
s u ffi c i en t to re n de r a c on t ra c t v oi d. S uc h a d ef i c i e nc y, h o w ev er , t o g et h er wi t h ot h er r el ev a nt f ac t o rs m a y b e du l y c on s i de r e d i n n ul l i f yi n g a
c o nt r ac t, s ho ul d th e c i rc um s ta n c e s s o d em a n d.

3 k i n ds o f es to p p e l .

T h er e a r e g en e ra l l y t h re e k i n ds o f es to p pe l : ( 1 ) es t o pp el i n p ai s ; ( 2) e s t o pp el b y d ee d ; an d ( 3 ) es t o p pe l b y l ac h e s . I n t h e f i rs t
c l a s s i fi c a ti on , a p e rs on i s c o n s i d er e d i n e s t o pp el i f b y h i s c o n du c t , r ep r es e nt at i o ns or a dm i s s i o ns or s i l en c e w h en he ou g ht t o s p e ak ou t ,
w h et h er i n te n ti o n al l y o r th r ou g h c ul p ab l e n eg l i ge nc e , “ c a u s e s a no t he r t o b el i ev e c e rt ai n f ac t s t o e x i s t an d s u c h o t h e r r i g ht f ul l y re l i es an d ac t s
on s uc h be l i ef, a s a c o ns eq u e n c e of w hi c h h e w o ul d b e p re j u di c e d i f t h e f o rm e r i s pe rm i t t ed t o d en y t h e e xi s t e nc e of s u c h f ac t s . ” E s t o p p el b y
de e d, on th e ot he r ha n d, oc c u r s w h e n a pa r t y t o a d ee d a n d h i s p ri v i e s a re p re c l ud e d f rom de n yi n g a n y m at e ri a l f ac t s t at e d i n t he s ai d de e d
as ag ai ns t t he ot h er p ar t y a n d hi s pr i v i es . E s to p p el b y l a c h e s i s c on s i de r ed an e qu i t ab l e es t o pp el w h e rei n a p er s on w h o f ai l ed o r n eg l e c t e d
to as s e r t a ri g ht fo r an u n re as o n ab l e a nd u n e x pl ai ne d l e ng t h o f t i m e i s p r es um e d t o h av e a b a nd o ne d o r o t h e r wi s e d ec l i n e d t o a s s e rt s u c h ri g ht
an d c an n ot l at er on s e ek t o e n f o rc e th e s am e , to t h e pr ej u di c e o f t h e ot h er pa rt y, w h o ha s n o n o t i c e o r k n o wl e d ge t h at t he f o rm e r w o ul d as s er t
s u c h ri gh ts an d w ho s e c o n di t i o n h a s s o c h a ng e d t ha t t he l at t er c a n no t , wi t ho ut i nj u r y o r pr ej u di c e , b e r es t o r ed t o hi s f o rm e r s t a t e s . ( P l ac e w e l l
In te r na ti on al S e rv i c e s C or p. v . Ir e ne o B . C am ot e, G.R . N o. 1 6 99 7 3, J u ne 2 6, 2 0 0 6; H ei rs o f E ul al i o R ag u a v . C o u rt o f A p p e al s , G . R . N o s .
88 5 21 - 2 2 an d 8 9 36 6 -6 7 , J a n ua r y 3 1 , 2 00 0 ).

B i ndi n g ef f ec t of c on tr a c ts .
 It i s wel l -s ettl e d that the term s of a c ontrac t hav e t he f orc e of l aw bet wee n t he part i es . A s s uc h, t he t erm s t hereof s hal l gov ern t he i r
re l a ti on s h i p , ri g h ts a nd o bl i g ati on s i n c o nn e c ti o n wi th t he s am e. O bl i ga t i on s ar i s i n g f rom c on t r ac t s s h o ul d b e c om pl i e d wi t h i n go o d f ai t h .
U nl es s t he s ti p ul ati o ns i n t h e c o nt r ac t a re c o n tr a r y t o l a w , m or al s , go o d c us t om s , pu bl i c o r de r or pu bl i c pol i c y, t h e s am e ar e bi ndi n g a s
be t w e en th e pa rt i e s . (R om e o G . R o x a s , et al . v . A n to ni o d e Z u z u ar r eg ui , e t al . , G . R . N os . 1 52 0 72 a nd 1 52 1 04 , J a nu a r y 3 1 , 2 00 6 ). I n t h e
i ns ta n t c as e , as p re v i ou s l y d i s c us s e d, t he C o nt ra c t t o S el l b et w e en S po us e s C o C hi e n an d p r i v a t e r e s p o nd e nt S t a. L uc i a a n d A l s on s h as al l
th e e s s en ti al r e qu i s i te s o f a v al i d a n d bi n di ng c o nt r ac t . w hi l e t he r e i s n o n -c om pl i a nc e wi t h t h e r eq ui r em e nt s i n S ec t i on 4 a n d 5 o f P . D . 9 5 7
du e t o t h e l a c k of t h e C er ti f i c at e a n d Li c e n s e at t h e m om en t o f e x ec u t i on , s uc h d ef ec t d o es n ot af f e c t t h e i n t ri ns i c v a l i di t y o f t h e c on t r ac t ,
pa r ti c ul ar l y i n th i s c a s e w he r ei n th e s ai d C e rt i fi c a t e a n d Li c e ns e ha v e b e en i s s u e d p ri o r t o t h e dem a nd f or t he p a ym en t of t h e ba l a nc e of t he
pu rc h as e p ri c e a n d th e p r oj e c t i s al m o s t 1 0 0% c om pl et e a n d op er a t i o n al .

Effect of failure develop subdivision within one year from the issuance of license.
I n Z a mo r a R e al ty D e v . C or p. v . Of fi c e of t he P r es i d en t , e t al . , G . R . N o. 1 65 7 2 4, N ov em be r 2, 2 00 6 , t h er e w as pu rc h as e of a
s u b di v i s i on p ro p er t y. T h e b u ye r n ot i fi e d t he s e l l er th at i t w as s u s p e nd i n g pa ym e nt d ue t o i t s f ai l u r e t o d ev el o p, he n c e , t he s el l er s e w e d a
no ti c e o f c a nc el l a ti o n b y n ot a ri al ac t. T h e b u ye r as s a i l ed t h e c an c el l at i o n w hi c h w as af f i rm e d up t o t he C A .

B ef o re t he S C , i t ra i s ed t h e i s s ue o f w h et h er t he b u ye r v i ol at e d t h e c o n t r ac t w h e n he s us p en d ed t he p a ym e nt of t he m o nt hl y
am o rt i z ati o ns d u e to t h e i nc om p l et e d ev el o pm e nt . It w as

H el d: N o , th e re w as no v i ol at i o n. U nd e r P D 9 5 7, t he s el l e r i s o bl i g ed t o d ev el o p t h e s ub di v i s i o n, o t he r wi s e, t he bu ye r h a s t h e r i g h t t o s u s pe n d
pa ym e n t an d t he onl y r eq ui r em en t u nd e r th e l a w i s t o gi v e d u e n ot i c e t o t h e o w ne r o r d e v el o p er of t he b u ye r’ s i nt e nt i o n t o s u s p e nd p a ym e nt .

T he c o nt en ti on t h at t h e w ri tt e n n oti c e w as b el a te dl y s en t i s n ot c or r ec t s i nc e t h e re w as a v e rb al n ot i c e t o s us p en d p a ym en t .

T he l a w d o es n ot s p ec i fi c al l y pr ov i d e th e f o rm o f no t i c e t o be gi v en t o t he o w n e r/ de v e l o pe r. C on s i de ri n g t h e p u rp os e of t h e l a w a n d
th e e v i l s ou g ht t o b e p r ev en t ed , a v e r ba l n oti c e of t h e i n t e nt i o n t o s u s p e nd rem i t t a nc e of pa y m en t i s s uf f i c i e nt . S u c h a ho l d i ng i s c o ns i s t e nt
w i t h t h e r ul i n g i n F r an c e l R ea l t y C or p. v . S y c i p , G .R . N o. 1 5 4 68 4 , S e p t em b er 8, 2 0 05 , 46 9 S C R A 42 4 , w he r e t h e r e qu i r em e nt of a n H LU R B
c l e a ra n c e u nd e r S ec ti o n 2 3, R u l e V I o f t h e R ul es Im pl em en t i ng P . D . N o. 9 57 b ef o re t he b u ye r of a s u b di v i s i on l o t or a h om e c o ul d l a w f ul l y
w i t hh ol d m o nt hl y pa ym e nt s w a s d ec l a r ed v oi d. It w a s e x pl ai ne d :

x x x T o r eq ui r e c l e ar a nc e f r om t he H L U R B b ef o re s t o pp i n g pa ym e nt w o ul d n ot be i n k eep i n g w i t h t h e i nt en t of t h e l a w t o p ro t e c t
i n no c e n t b u ye r of l ot s o r h om e s f rom s c hem i n g s u b di v i s i o n d ev el op e rs . T o gi v e f ul l e f f ec t t o s uc h i n t en t , i t w o ul d b e f i t t i n g t o t re a t t h e r i g h t
to s to p p a ym en t t o be i m m edi a t el y e ff e c ti v e up o n gi v i n g d u e n ot i c e t o t he o w ne r o r d ev el o pe r o r u po n f i l i n g a c om p l a i n t b ef o r e t h e H L U R B
ag ai ns t t h e er ri ng d ev el o pe r. S uc h c o u rs e o f ac t i o n w o ul d be w i t h o ut pr ej u di c e t o t he s ub s eq u en t d e t e rm i na t i o n o f i t s pr o pr i e t y a nd
c o ns e qu e nc es , s h o ul d th e s us p en s i on of p a ym e nt s u bs eq u en t l y b e f o un d i m p r o pe r. (T am a yo v . H ua n g, G . R . N o . 1 64 1 36 , J a nu a r y 2 5 , 2 00 6,
48 0 S C R A 15 6 ; F ra nc el R e al t y C o rp . v . S yc i p) .

Purpose of PD 957.
P .D . N o. 9 5 7 w as e n a c t ed wi th n o ot h er e n d i n v i e w t ha n t o p r ov i d e a pr o t e c t i v e m a n t l e o v e r h el pl es s c i t i z e ns w h o m a y f a l l pr e y t o
th e m a ni p ul a ti on s a n d m a c h i n at i o ns of un s c ru p ul ou s s u bdi v i s i o n a n d c on d om i n i um s el l e rs . (E u ge ni o v . D ri l on , 3 2 2 P h i l . 1 12 ( 19 9 6) ) . I t w a s
i s s ue d i n th e w ak e of n um e r ou s re p or ts t ha t m a n y r e al e s t a t e s ub di v i s i o n o w ne r s , de v el o p e rs , op e ra t or s a n d/ o r s el l e r h av e r e n e g ed o n t h ei r
re p re s en ta ti on s a n d o bl i ga ti on s to p r ov i d e a n d m ai nt ai n p ro p e r l y s u b di v i s i on ro a ds , d ra i n a ge , s e w er a g e, w at e r s ys t em s , l i g ht i n g s ys t em s , an d
ot h er b as i c r e qu i r em e n ts f o r t h e h e al t h an d s a fe t y of h om e a n d l ot bu ye r s . (C as a Fi l i pi n a R e al t y C o rp . v . O f f i c e of t he P r es . , 3 1 1 P h i l . 1 70
(1 9 95 ) ).

T h e bu ye r j u s t l y w i t hh el d t h e pa ym e nt o f am o rt i z at i o n of t h e s u bj ec t l ot , a nd s el l er ’ s u ni l a t e r al c a nc el l a t i o n o f t h e c o nt r ac t t o s el l
c a n no t b e s u s t ai ne d. C o ns eq u e ntl y, t h e c o nt r ac t t o s el l s t i l l s u bs i s t e d.

Option to suspend payment or demand for

reimbursement given to buyer.
In c as e t he d e v el o p er of a s u bd i v i s i on o r c on d om i ni u m f ai l s i n i t s obl i g a t i o n u n de r S ec t i o n 2 0 o f P . D . N o , 9 57 , S e c t i on 23 o f t he l a w
gi v es t he b u ye r t h e op ti on t o de m an d re i m b u rs em e nt o f t h e t o t a l am ou nt p ai d, o r t o w a i t f o r f u r t he r d ev el opm e nt of t he s ub di v i s i o n, a nd w h e n
th e b u ye r op ts f o r t h e l a tt e r al t er n ati v e, he m a y s u s p e nd p a ym en t o f i ns t al l m e nt s u n t i l s uc h t i m e t ha t t he o w n e r o r d ev el o pe r ha d f ul f i l l e d i t s
ob l i ga ti on t o hi m . (T am a yo v . H ua n g) .

It i s t h us c l ea r t h a t t h e l a w p ro v i de s t w o r em e di es i n c a s e o f i nc om pl e t e d ev el o pm e n t o f t h e s u bd i v i s i on p ro j e c t : ( 1 ) re i m b ur s em e nt
of t he t ot al am ou nt p ai d , i nc l u di ng am o rti z a ti on i nt er e s t b ut e x c l u di ng d el i n qu e nc y i nt e re s t s , w i t h i n t er es t t h e re o n at t he l e g al ra t e; o r (2 ) f o r
th e bu ye r t o s us p en d am or ti z a ti on p a ym e nt s u n ti l th e c om pl et i o n of t h e p ro j e c t . T h e s e r em e di e s a r e av ai l a bl e t o t h e p ro s p ec t i v e bu ye r t o g i v e
ef fe c t t o th e l a w ’ s i nt en t to pr ot ec t t h e b u ye r s fr om a bu s i v e o w ne rs / de v e l o p er s of s u bd i v i s i o n s . I n c as es o f i n c om pl et e de v el o pm e nt , i t i s t he
de v el o p er w h o i s th e o n e at f au l t, a s i t w o ul d t he n h av e v i ol at e d i t s p r om i s e t o t h e p ro s p e c t i v e b u ye r s t o pr o v i d e t he ne c e s s a r y f ac i l i t i e s i n
th e s ub di v i s i o n . T h e a g gri e v e d pa r t y, th e re f or e, i s t h e p ro s pe c t i v e b u ye r b ec a us e o f t h e n o n - f ul f i l l m en t o f t he d ev el op e r’ s c o m m i t m e nt . A s
s u c h , i t i s b ut l ogi c al th a t t h e o pti o n i s gi v e n t o th e p ro s pe c t i v e b u ye r , n ot t o t he d e v e l o p er .

In t ho s e c as e s c i t e d, t h e S C h el d s i n c e t h er e h ad be e n no v al i d s ub s t i t ut i o n b y t he hei r s o f t h e d ec e as ed p a rt y, t he r ef o r e t h e j u d gm e nt
c a n no t b e m a d e b i n di n g u p on t hem . In t hi s c as e n ot o nl y t h e he i r s o f t h e pl ai nt i f f i n t er p os e n o o bj ec t i on t o t he j u ri s di c t i o n o f t he c o u rt ov e r
th ei r p e rs o ns ; t he y a r e a c t u al l y c l ai m i ng a nd em br ac i n g s uc h j ur i s di c t i on . I n d oi n g s o, t h e i r w ai v e r i s n ot ev e n m e r el y i m pl i ed ( b y t h ei r
pa r ti c i p ati o n i n t he a p p eal of s ai d D ec i s i o n) , b ut e x p r es s b y t he i r e x p l i c i t e s p o us al of s uc h v i e w i n b ot h t he C ou r t of A p p e a l s a n d i n t he
S u pr em e C o ur t.

T hu s , l a c k o f j ur i s di c ti on o v e r t he p e rs on , b ei n g s ubj e c t t o w ai v e r, i s a p er s o n al d ef e n s e w h i c h c a n o nl y b e as s e rt e d b y t h e pa rt y w h o
c a n th e re b y w ai v e i t b y s i l e nc e.

Spirit behind rule on substitution of parties.

 It al s o pays to l ook i nto the s pi ri t behi nd the general rul e requi ri ng a f orm al s ubs t i t ut i o n of hei rs . T he underl yi n g pri nc i pl e i s not re a l l y
be c au s e s ub s ti tu ti o n o f hei r s i s a j ur i s di c ti on al r e qui r em e n t , bu t b ec a us e no n -c om p l i a n c e t he r e w i t h re s u l t s i n t he u n de ni a bl e v i ol at i o n of t h e
ri gh t t o d ue p ro c e s s of t h os e w ho , t ho u g h n ot du l y n o ti fi e d o f t h e p r oc ee di n gs , a re s u bs t an t i a l l y a f f ec t e d b y t h e d ec i s i on r en de r ed t h e re i n .
(V da . d e S al a z a r v . C A , 32 0 P hi l . 7 37 (1 9 9 7) ). S uc h v i ol at i o n o f d u e p r oc es s c a n o nl y b e as s er t ed b y t h e p er s on s w h o s e ri g h t s ar e c l ai m e d t o
ha v e be e n v i ol a t ed , n am el y th e he i r s to w h om t h e a dv er s e j u dg m en t i s s o u gh t t o be en f o rc e d.

C a re s h o ul d , h o w ev e r, b e t ak e n i n ap pl yi ng t h e f or e go i n g c o nc l u s i on s . I n P e o pl e v . Fl or e nd o , 7 7 P hi l . 1 6 ( 1 9 46 ) i t w a s he l d t h at t h e
pr oc e e di n g s th at t o ok p l a c e af te r th e d e at h of t h e p ar t y a r e v o i d , i t w a s h el d t h at q u es t i on e d t h e v al i di t y of t h e d ec i s i on , c l ai m i n g i t t o be v oi d
fo r fa i l ur e t o c om pl y w i th t h e r e qu i r em en t of s u bs t i t uti o n u nd e r S ec . 1 6, R ul e 3 of t h e R ul es of C o ur t . T h e y c i t ed t h e r ul i ng i n V da . d e H a b er e r
v . C A , G .R . N o. 4 2 6 99 a n d 42 7 0 9, Ma y 2 6 , 19 8 1, 1 0 4 S C R A 5 34 , a n d F e rr e ri a v . V d a. d e G o n za l es , 1 04 P h i l . 1 4 3 (1 9 58 ) , w h er e t h e S C r ul ed :

“T h us , i t h as b e en h el d t h at w h e n a p a rt y d i e s i n a n ac t i o n t h a t s ur v i v e s a n d no o r d er i s i s s u ed b y t h e c ou r t f o r t he ap p e ar a nc e of
th e l eg al r ep r es e nt ati v e o r o f t h e h ei rs of t he d ec ea s ed i n s u bs t i t u t i on o f t he d ec ea s ed , a n d a s a m a t t er o f f ac t n o s u bs t i t u t i o n ha s e v en b ee n
ef fe c t e d, th e tri al h el d b y th e c ou r t wi th o ut s uc h l e g al r ep r es e nt at i v es o r h ei rs a n d t h e j ud gm en t re n de r e d a f t e r s uc h t ri al a r e nul l a n d v oi d
be c au s e t h e c o u rt a c q ui r ed n o j u ri s di c ti o n ov e r t h e p er s o n s of t he l eg al r e pr e s e nt a t i v es o r o f t he h ei rs up o n w h om t h e t ri al an d j u d gm e n t
w o ul d b e bi ndi n g.

In t he p re s en t c as e, t h er e ha d be e n no c o u rt or d e r f o r t he l e g al re p re s e n t a t i v e of t h e d ec e as e d t o a p p ea r, n or h ad an y s uc h l e gal
re p re s en ta ti v e a pp e ar e d i n c ou r t t o b e s u bs ti t ut e d f o r t he d ec e a s e d; n ei t h er h ad t he c om pl ai na n t e v e n pr oc u re d t h e ap p oi nt m e n t o f s uc h l eg al
re p re s en ta ti v e o f t h e de c e as e d , i nc l u di ng a p pel l a nt , ev e r as k ed t o be s ub s t i t ut e d f o r t h e de c e as e d. A s a re s ul t , no v al i d s ub s t i t ut i o n w as
ef fe c t e d, c o ns eq u en tl y, t h e c o u rt ne v e r a c qu i r e d j u ri s di c t i o n o v e r a p pe l l a n t f o r t h e p u rp os e o f m ak i n g h e r a p a rt y t o t h e c as e a n d m ak i n g
de c i s i o n bi n di ng up o n he r , ei t h er pe rs o na l l y o r a s a r ep r es e nt at i v e of t he es t a t e o f h er de c e a s e d m ot h er . ”

T he S C h o w ev e r r ul e d t h at un l i k e j ur i s di c ti on ov e r t h e s ub j e c t m at t e r w hi c h i s c on f e rr e d b y l a w a n d i s n ot s u bj ec t t o t he di s c re t i on
of th e p ar ti es ( Zam o ra v . C A , G .R . N o . 78 2 06 , Ma r c h 1 9, 1 99 0 , 18 3 S C R A 2 79 ) , j uri s di c t i on ov e r t h e p e rs o n o f t h e p a rt i e s t o t h e c as e m a y b e
w ai v e d ei t he r e x p r es s l y o r i m pl i ed l y. Im pl i e d w ai v er c om e s i n t he f o rm of ei t he r v o l u nt a r y a p p ea r an c e or a f ai l u r e t o o bj ec t . ( Ma ni l a R ai l r oa d
C o . v . A tt o rn e y - G en e ra l , 2 0 P hi l . 5 23 ( 1 91 1 )) .

In t er e s t a n d L o an

W hen th e o bl i ga ti on i s br e ac h ed , an d i t c o ns i s t s i n t h e p a ym en t of a s um o f m o n e y, i . e . , a l o an o r f o r be a r an c e o f m o n e y, t h e i nt e re s t
du e s ho ul d b e t ha t w hi c h m a y h av e b ee n s ti pul a te d i n w ri t i ng . F ur t h e rm o r e, t h e i n t e r es t du e s ha l l i t s el f e ar n l eg al i nt e re s t f r o m t he t i m e i t i s
j u di c i al l y d em an d ed . In t h e a bs en c e of s ti p ul ati o n, t h e r at e of i nt e re s t s h al l be 12 % p er a nn um t o b e c om pu t e d f r om d ef a ul t , i . e. , f rom j ud i c i al
or e x tr aj u di c i al dem a nd un d er a nd s u bj ec t to t h e p ro v i s i o n s of A rt i c l e 1 1 69 of t he C i v i l C o d e. ( E us e bi o - C a l d e ro n v . P e op l e , G . R . N o. 1 5 84 9 5,
Oc to b er 2 1 , 20 0 4, 4 4 1 S C R A 1 3 7; E a s t e rn S hi ppi n g Li n es , I nc . v . C A , G . R . N o . 97 4 12 , J u l y 1 2, 1 9 94 , 23 4 S C R A 78 ; G ar c i a v . T hi o , G . R . N o.
15 4 87 8 , Ma r c h 16 , 2 00 7 ).

INTEREST – LOAN
E as te r n S h i p pi n g te ac he s t ha t, w i t h r e s p ec t t o a n a w a rd of i n t e r es t i n t h e c o nc ep t o f ac t u al an d c om pe ns a t o r y d am a ge s , i nt e r es t o n
th e am o u nt o f dam ag e s a w ar d e d m a y b e i m po s e d at t h e di s c r e t i o n of t h e C o ur t at t he r at e of 6% pe r a nn um f o r a b re a c h o f a n ob l i g a t i on n o t
c o ns ti t u ti n g a l oa n o r fo r be a r an c e o f m on e y. N o i nt e re s t , ho w e v e r, s ha l l b e a dj u d g ed o n u nl i q ui da t e d c l ai m s or d am ag es e x c ep t w h e n o r un t i l
th e dem a nd c an b e es t ab l i s h ed w i t h re as o n abl e c er ta i n t y. W her e t h e dem a nd i s e s t ab l i s h ed wi t h re as o n abl e c e r t a i n t y , t h e i nt e r es t s h al l b eg i n
to r u n f r om t h e t i m e t he c l ai m i s m a d e j u di c i al l y o r e x tr aj u di c i a l l y. B u t w h e n s u c h c er t ai n t y c a nn o t be r e as on a bl y e s t a bl i s h e d at t h e t i m e t he
dem a nd i s m a d e, t he i nt e re s t s ha l l b eg i n t o r un o nl y f r om t h e da t e t h e j u dgm e nt o f t h e c o u rt i s m a d e. (E a s t er n S h i p pi n g Li ne s , I n c . v . C o ur t
of A pp e al s , s up r a n ot e 2 2 at 9 6, s e e al s o B i e s t er b os v . C ou rt o f A p p e al s , G . R . no . 1 5 25 2 9, 22 S e pt em b e r 2 0 03 , 4 11 S C R A 3 9 6, 4 0 6 -4 0 7;
H ei rs of Ig n ac i a A gu i l a r -R e ye s v . S p o us es Mi j ar es , 4 57 P hi l . 1 20 , 1 4 0 (2 0 03 ) ).

I n E a s t e rn S hi pp i n g , t he C o ur t w e n t o n to s t at e t h a t w h en t h e j u d gm e nt of t h e c o u rt a w a r di ng a s um o f m o ne y b ec om e s f i na l an d
e x ec ut o r y, t he r at e o f l eg al i nt e re s t , w he th e r t h e o bl i g ati o n w as i n t he f o rm of a l o a n o r f o rb e ar an c e o f m o ne y o r ot he r w i s e, s h al l be 1 2% p e r
an n um fr om s uc h fi n al i t y u n ti l i t s s a ti s fa c t i o n, thi s i n t er i m pe ri o d b ei ng de em ed t o be b y t h en a n e qu i v al en t t o a f o rb e ar a nc e o f c re di t . (E as t e rn
S hi pp i n g Li ne s , In c . v . C ou r t o f A pp e al s , s u pr a no te 2 2. R ei t e ra t ed i n A l me d a v . C a ri ñ o , 4 43 P hi l . 1 8 2, 19 2 (2 0 03 ); B i e s t e r bo s v . C ou rt of
A p pe al s , s u p ra .; V i c e nt e v . P l a nt e rs D e v e l o pm e n t B ank , 4 4 4 P hi l . 30 9, 3 2 3 - 3 2 4 ( 2 00 3 ); S o l i d H om es , I nc . v . IA C , e t al . , G . R . N o. 7 42 6 9;
N ov em be r 2 7, 20 0 6) .

United Planters Sugar Milling, Inc. v. CA, et al., G.R.

No. 126890
N ov em be r 2 8, 20 0 6

(4 ) On t he p a ym en t of i nt e re s t , t he 1 2% r at e i s a p pl i ed on l y w h e n t he o bl i g at i o n br e ac h ed c on s i s t s i n t h e p a ym en t o f a s um of m on e y,
i .e ., f or b e ar a nc e of m o n e y, i n th e ab s en c e o f a s ti p ul ati o n. O t h e r wi s e t h e ap pl i c ab l e r at e i s 6% pe r a n nu m . U p on t h e f i n al i t y o f t hi s r ul i ng , t h e
ra t e of i nt er es t s h al l be 12% pe r a nn u m fo r t he en ti re j ud gm en t , un t i l i t s s a t i s f ac t i o n.

IN TE R E S T – L O A N

I n F ri as v . Fl o ra S an D i eg o -S i s o n , G .R . N o . 1 55 2 23 , A p ri l 3 , 20 0 7, t h er e w a s a c on t r ac t of s al e ov er a re al p r op e rt y f o r P 3, 0 00 , 0 0 0. 0 0.
It w as s t i p ul at e d t h at th e bu ye r h a s a p er i o d of s i x ( 6) m o nt h s t o n o t i f y t h e o w n e r o f hi s i n t en t i on t o b u y, ot h er w i s e, t he a m ou nt s hal l b e
c o ns i d e re d a s a l o a n p a ya b l e w i thi n s i x ( 6 ) m o nt hs . T h e pr os p e c t i v e bu ye r di d n ot d ec i d e t o b u y, h e nc e, h e n ot i f i e d t he o w n er t ha t t h e am ou nt
w as c on s i de r ed a s a l o a n p a ya bl e wi th i n s i x ( 6) m o nt hs . T h e r e w as n o p a ym e nt d es pi t e d em an d , h e nc e, a c om pl ai n t f o r s u m of m o n e y w a s
fi l ed . T h e pr ov i s i o n re f er ri n g to th e t w o p er i o ds of s i x (6 ) m o nt h s be c am e t he c o nt ro v e r s y. T h e C A i nt e rp r et e d t h e p hr a s e t h us :

“T he i r a g re em e n t s p eak s o f t w o ( 2 ) p e ri od s of s i x m o nt h s e ac h . T h e f i r s t s i x -m on t h p e ri od w as gi v e n t o pl ai nt i f f - a pp el l e e (r e s p on d en t )
to m ak e up he r m i n d w he th e r or no t t o pu r c h as e d ef e n da nt - a pp el l a nt ’ s ( p et i t i on e r’ s ) p r op e rt y. T h e s e c on d s i x -m on t h p eri o d w a s gi v e n t o
de f en d an t - a p pel l a n t to p a y th e P 2 m i l l i on l o an i n t he e v en t t h a t pl ai nt i f f -a p p el l ee de c i de d n ot t o b u y t h e s u bj ec t p r op e rt y i n w h i c h c a s e i nt e re s t
w i l l b e c h a r ge d “f o r th e l as t s i x m on th s o nl y” , re fe r ri ng t o t he s e c o n d s i x -m o nt h p e ri od . T hi s m e an s t h a t no i nt e re s t wi l l b e c h ar ge d f or t h e f i r s t
s i x -m o nt h pe ri o d w h i l e a pp el l e e w as m ak i n g u p h er m i n d w h e t h er t o bu y t h e pr o p er t y, b ut onl y f o r t h e s ec o nd p er i o d o f s i x m on t hs a f t e r t he
appel l ee had dec i ded not to buy the propert y. T hi s i s the m eani ng of t he phras e “f or t he l as t s i x m ont hs onl y” . C ert ai nl y, t h ere i s not hi ng i n
th ei r a g re em en t t h at s u g ge s t s t ha t i nt e re s t w i l l be c ha r ge d f o r s i x m o nt hs o nl y ev e n i f i t t ak e s d ef e nd a nt -a p p el l an t a n et e rn i t y t o p a y t he l o a n. ”

T he a gr e em e nt th a t t h e am o un t g i v en s h al l b e ar c om p ou n de d b ank i nt er es t f o r t h e l a s t s i x m o nt hs o nl y, i . e. , re f e r ri ng t o t h e s ec o n d
s i x -m o nt h pe ri o d, do e s n ot m ea n t ha t i nt e re s t w i l l no t l on g er b e c ha r ge d af t e r t h e s ec o nd s i x - m on t h p er i o d s i n c e s u c h s t i p ul a t i o n w as m a de
on t he l o gi c a l an d re a s o n ab l e e x p ec ta ti on t ha t s u c h am ou n t w o ul d b e p ai d wi t h i n t he d at e s t i p u l at e d. C o n s i d e ri ng t ha t pe t i t i o n er f ai l ed t o pa y
th e am ou n t gi v e n w hi c h u n d er th e Mem or a nd um o f A g r eem e nt s ha l l b e c on s i d er e d as a l o a n, t h e m on e t a r y i nt e r es t f o r t he l as t s i x m on t h s
c o nti n u ed t o ac c ru e u nti l ac tu al p a ym e nt o f t h e l o a ne d am ou n t .

T he p a ym e nt o f re g ul a r i nt e r es t c o ns t i t ut es t h e pr i c e o r c o s t o f t h e us e o f m on e y a n d t hu s , u n t i l t h e p ri nc i p al s um du e i s r et u rn e d t o
th e c r ed i t or , re g ul ar i n te r es t c o nti n ue s t o ac c r u e s i nc e th e de b t o r c o nt i n ue s t o us e s uc h pr i n c i pa l am o un t . (S t a t e I n v es t m e nt H o us e, I n c . v .
C o ur t of A p p ea l s , G .R . N o. 9 06 76 , J u ne 1 9, 1 9 91 , 19 8 S C R A 39 0 , 3 9 8) . I t h as be e n he l d t ha t f or a d e bt or t o c o nt i n ue i n p o s s es s i o n of t h e
pr i n c i pa l o f t h e l oa n an d to c on t i n ue t o u s e t he s am e af te r t h e m at ur i t y o f t h e l oa n w i t ho u t p a y m en t o f t h e m o n et a r y i n t e r es t , w o ul d c o ns t i t ut e
un j u s t e n ri c hm en t o n t h e p ar t of t he d e bt o r at t h e e x p en s e of t h e c r e di t o r.