Photo from Pexels | Ivan Samkov
The following post does not create a lawyer-client relationship between Alburo Alburo and Associates Law Offices (or any of its lawyers) and the reader. It is still best for you to engage the services of a lawyer or you may directly contact and consult Alburo Alburo and Associates Law Offices to address your specific legal concerns, if there is any.
Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE:
Article 1378 of the Labor Code of the Philippines provides that in cases of doubt in the interpretation of onerous contracts, the interpretation should be made in a way that is fair for the parties involved. In this case, the seller was allowed to retain partial payments as just compensation for the buyer’s use of the property even after the contract has been cancelled.
The case of spouses Godinez v. spouses Norman concerns the retention of partial payments made after having failed to pay the full price for a leased property whose contract has been cancelled. The RTC and CA ruled that the payments must be returned. However, the SC overturned these decisions determining that the reasonable rental for the property should be 13.1% of the purchase price. Therefore, the spouses Godinez were able to retain US$22,925 and the amount of US$17,075 was returned to the spouses Norman.
The case of Spouses Godinez vs. Spouses Norman concerns the partial payments made by the Spouses Norman for a property contract that has been cancelled. Spouses Godinez agreed for the Spouses Norman to lease their property for US$175,000 making several payments. However, the spouses Norman failed to pay their remaining balance which led for the Spouses Godinez to retain their partial payments. The regional trial court ruled in favor of spouses Norman ordering the spouses Godinez to return the US$40,000 in full as there was no clause in the contract pertaining to forfeiture of payments. The Court of Appeals (CA) supported this decision on the grounds that the spouses Norman hadn’t fully taken possession of the property.
The spouses Godinez appealed and argued that the CA misapplied previous rulings citing the case of Olivarez v. Castillo, where the seller was allowed to keep partial payments as compensation for the buyer’s use of the property even if the buyer hadn’t paid the full price. Further arguing that the spouses Norman had in fact taken possession of the property by moving in furniture, groceries and even having their caretaker occupy the premises. Having resolved the procedural issues of the case, the Court now resolves the substantive issues raised by the spouses Godinez’s claims. Substantively, the court agreed with the petitioners’ argument. The court ruled that the partial payments made by the spouses Norman should be considered as reasonable compensation for the use of the property of the petitioners.
The court ruled that there were no grounds to award damages or honor attorney’s fees as the contract had been cancelled due to the spouses Norman’s failure to pay the full price as agreed upon. Moreso, there was no evidence that would suggest that their request for the return of partial payments had been made in bad faith. The Supreme Court (SC) then overturned the decisions of the lower courts and ruled in favor of both the spouses Godinez and spouses Norman. That the spouses Norman were entitled for the return of the partial payments made amounting to US$17,075 while the spouses Godinez can keep the US$22,925 deemed as a reasonable compensation for the use of their property.
Related Articles:
- Distinguishing Contract of Sale from Contract to Sell
- Essentials of Special Power of Attorney (SPA) to Sell Real Property
Click here to subscribe to our newsletter
Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding legal services, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/ 0917-5772207/ 09778050020.
All rights reserved.
