Rosario Nakagawa vs. Timeshare Realty Corporation

[SEC-SICD * CASE NO. 10-98-6135. May 25, 2000.] ROSARIO NAKAGAWA , plaintiff, vs . TIMESHARE REALTY CORPORATION , defendant . Civil Law ; contracts ; case at bar . It is well-settled that contracts when freely entered into by the parties are accorded great respect and often regarded as the law insofar as the contracting parties are concerned. So that when the contract is worded as to put one of the contracting parties to a disadvantage, the court or any other agency or tribunal, as the formal interpreter of the law, will not hesitate to step in. . . . The Contract of Timeshare Purchase Agreement as well as its appended Purchase Agreement Contract Condition is the law between herein plaintiff and defendant as it embodies their agreement for the purchase of a timeshare account in Laguna de Boracay. CDScaT Same ; contracts of adhesion ; must be construed against the corporation . A contract of adhesion has been defined as one drafted only by one party, usually the corporation, and is sought to be accepted or adhered to by the other party. Such contracts are called contracts of adhesion because the only participation of the other party is the signing of his signature or his adhesion thereto. . . . Its terms must therefore be construed against the corporation . . .. Same ; same, same . The unwary should be protected by the strong arms of the law against clever and scheming individuals and entities. Not a few have been beguiled and drawn into various contractual relations without being fully aware of the consequences of their actions. Others, though seemingly fully versed with the nature of their obligations, nevertheless fall into the trap in anticipation of great financial rewards or even minor comforts that their contracts might bring them. So that if one reason or another, the other party is mislead into entering a. transaction with another on account of the latter's insistence, and the former is put to a great disadvantage, the other cannot use between them as shield. D E C I S I O N The Preliminary Conference of this case was scheduled on February 29, 2000 at 2:00 o'clock in the afternoon. It was however called into session at 2:30 o'clock in the afternoon after giving time for counsel of defendant to arrive. Due to the absence of counsel for defendant in the aforesaid Preliminary Conference, defendant is considered to be in default which entitle plaintiff to judgment based on her complaint pursuant to Section 3, Rule V of the New Rules of Procedure of the Commission. Hence, this decision. As culled from the records of the case, the relevant facts are as follows: Sometime in August of 1997, defendant TIMESHARE REALTY CORPORATION (TIMESHARE), representing itself to the agent and marketer of Hutchinson & Co. Trust Company Limited (HUTCHINSON), a corporation organized and existing, in accordance with the laws of England and Wales, offered to sell plaintiff a timeshare at Laguna de Boracay for the sum of US Dollars, TEN THOUSAND NINE HUNDRED ($10,900.00). Plaintiff purchased the said timeshare account paying a down payment of US$3,270.00 which is equivalent to 32% of the total contract price of US$10,900.00. Due to the sharp decline of the peso against the US Dollar, plaintiff was forced to send a Notice of Cancellation of the Purchase Agreement with demand to refund the amount paid as down payment. (Annex "G", Complaint) Defendant failed to comply. TCIEcH Thus, plaintiff filed the instant complaint. It is well-settled that contracts when freely entered into by the parties are accorded great respect and often regarded as the law insofar to as the contracting parties are concerned. So that when the contract is worded as to put one of the contracting parties to a disadvantage, the court or any other agency or tribunal, as the formal interpreter of the law, will not hesitate to step in. In the case at bar, the Contract of Timeshare Purchase dated August 9, 1997 (Annex "D") as well as its Appended Purchase Agreement Contract Condition (Annex "E") is the law between herein plaintiff and defendant as it embodies their agreement for the purchase of a timeshare account in Laguna de Boracay. Plaintiff in proving the merits of her case invokes paragraph 6 of the aforementioned Purchase Agreement Contract Conditions which provides as follows: "6. It is understood that this Contract is legally binding and cannot be reversed, cancelled, or rescinded at any time, except by written consent of both parties or otherwise in accordance with the terms of this Contract ." (Emphasis Ours) Perforce, the Agreement itself provides for a mode by which the same may be revoked and/or cancelled by the parties. It must be emphasized that plaintiff did not immediately took her predicament to the Commission, it was only when defendant refused her demand for a refund of her investment that she filed the instant case. Plaintiff's letter dated February 20, 1998 (Annex "G") explicitly asking for the cancellation of the Contract for timeshare Purchase dated August 9, 1997 as well as for the refund of the amount paid as loan payment was executed pursuant to the above-cited provision. Had the defendant heeded the said letter of plaintiff, then there would have been no need for the filing of this case as the aforementioned contract would have been rescinded as early as that time. Defendant, on the other hand, should have complied with the paragraph 7 of the Purchase Agreement Contract Condition by sending a letter to the plaintiff asking her to pay the balance of the purchase price when the same fall due preparatory to the forfeiture of the payment made by plaintiff. Thus, "7. In the event of the Purchaser failing to make payments due within 7 days of being given written notice to that effect. . ." Records do not show that defendant notified plaintiff to make the money payments in accordance with the aforequoted provision. Plaintiff was merely exercising her right pursuant to the terms of the contract for by the explicit provision thereof, it can be rescinded provided it bears the mutual assent of the parties thereto. Hence, if only defendant heeded plaintiff's valid demand, the instant matter would have been put to rest. Forfeiting the amount of US$3,370.00 and at the same time rendering the contract null and void will constitute unjust enrichment on the part of the defendant and/or its foreign principal. It should be borne in mind that plaintiff did not derive any material benefit from the said contract. On the contrary, defendant obviously had been benefited by the payment of plaintiff of the said amount considering that the same was effected as early as 1997. The peculiar circumstances surrounding the execution of the Contract for Timeshare Purchase dated August 9, 1997 between the parties cast doubt on the integrity of the transaction between them. Plaintiff signed the agreement simultaneous with the payment of 30% of the purchase price of US$10,900.00 on the very day that she was offered to purchase the timeshare. Clearly, the haste in effecting the transaction without giving plaintiff ample time to think about the consequences of her action is an indication of the fact that plaintiff was merely lured into entering into the said contract with defendant. cSHIaA It is noteworthy that the contract sought to be rescinded in the case at bar is one which can be considered as a contract of adhesion, the validity of which has been put to several tests in a long line of cases decided by the Supreme Court. A contract of adhesion has been defined as one drafted only by one party, usually the corporation, and is sought to be accepted or adhered to by the other party." (Sweet Lines, Inc. vs. Teves, G.R. No. L-37750, May 19, 1978). Such contracts are called contracts of adhesion because the only participation of the other party is the signing of his signature or his adhesion thereto. ( supra ) There is no question that the subject contract is one of adhesion, because the entire contract has been drafted by the defendant. The only participation of the plaintiff is when she signed the same and paid the down payment of 30% of the purchase price. Inasmuch as the subject contract is one of adhesion, its terms must therefore be construed against the corporation in accordance with the doctrine laid down by the Supreme Court in Buenaventura Angeles vs. Ursula Torres Calasanz, G.R. No. L-42283, March 18, 1985. Hence, Thus, "The contract to sell; being a contract of adhesion, must be construed against the party causing it. We agree with the observation of the plaintiff-appellee to the effect that the terms of a contract must be interpreted against the party who drafted the same, especially where such interpretation will help effect justice to buyers who, after having invested a big amount of money, are now sought to be deprived of the same thru the prayed application of a contract clever in phraseology, condemnable in its lopsidedness and injurious in its entirety is most unfair to the buyers." (emphasis Ours) The unwary should be protected by the strong arms of the law against clever and scheming individuals and entities. Not a few have been beguiled and drawn into various contractual relations without being fully aware of the consequences of their actions. Others, though seemingly fully versed with the nature of their obligations, nevertheless fall into the trap in anticipation of great financial rewards or even minor comforts that their contracts might bring them. So that if for one reason or another, the other party is misled into entering a transaction with another on account of the latter's insistence, and the former is put to a great disadvantage, the other cannot use between them the contract between them as a shield. WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiff as follows: 1. The Contract for Timeshare Purchase dated August 9, 1997 is rescinded or cancelled; and 2. Defendant is ordered to return to the plaintiff the sum of US$3,270 or its peso equivalent plus interest at twelve percent (12%) per annum computed from the date of the filing of their complaint until the amount is fully paid. SO ORDERED. City of Mandaluyong, Philippines. May 25, 2000. (SGD.) MARIANO S. BACALLA, JR. Hearing Officer