G.R. No. 137557 ; October 30, 2000
DEVELOPMENT BANK OF THE PHILIPPINES, petitioner, vs. HON. COURT OF APPEALS and SPOUSES NILO and ESPERANZA DE LA PEÑA, respondents.

FACTS

Petitioner Development Bank of the Philippines (DBP) sold a parcel of land to respondent spouses under a Deed of Conditional Sale for P207,000.00. The contract stipulated a down payment and a balance payable in six years on a semi-annual amortization plan at 18% interest per annum, with the first amortization of P23,126.14 due six months from execution. The spouses made various payments totaling P289,600.00, constructed a house, and introduced improvements. When they later requested the execution of a Deed of Absolute Sale, DBP informed them of an outstanding balance exceeding P221,000.00, comprising principal, regular interest, additional interest, and penalty charges, and threatened to rescind the sale.
The spouses filed a complaint for specific performance and damages with a prayer for injunction. The Regional Trial Court dismissed the complaint, stating the spouses still owed P54,200.00 in interest, but made the preliminary injunction permanent. The Court of Appeals affirmed with modification, deleting the award of attorney’s fees. DBP elevated the case, arguing both courts erred in their construction of the contract and in upholding the permanent injunction.

ISSUE

The core issues are: (1) Whether the Court of Appeals correctly interpreted the ambiguous amortization provision in the Deed of Conditional Sale; and (2) Whether the issuance of a permanent injunction against DBP was proper.

RULING

The Supreme Court affirmed the Court of Appeals with modification on the interest rate. On the first issue, the Court upheld the appellate court’s interpretation. The contract was one of adhesion, prepared solely by DBP. The provision specifying the semi-annual amortization amounts was ambiguous, as it only stated the first amortization and the six-year period. Applying the rule that ambiguities in a contract of adhesion are construed strictly against the party that drafted it, the Court held that the manner and amount of semi-annual payments were at the option of the vendees, subject only to paying the full balance within six years. The spouses’ substantial payments, which exceeded the principal, demonstrated good faith and substantial compliance.
On the second issue, the Court sustained the injunction. The trial court’s finding that only a modest sum for interest remained due established that the spouses’ right to the property was nearly vested. Rescission by DBP and a subsequent sale to a third party would cause irreparable injury, as the spouses would lose their payments and improvements without adequate remedy. The injunction was necessary to preserve the status quo and prevent a moot and academic resolution of the case. The Court, however, modified the interest computation, reducing the additional interest on past due amortizations to 10% per annum.