Diego Rapanut v. The Court of Appeals

Summary

This case involves a contractual dispute over the interpretation of payment obligations under a deed of conditional sale with mortgage. Petitioner Diego Rapanut and private respondent Susan Flunker executed contracts for the sale of land with monthly installment payments and 10% annual interest on the remaining balance. After petitioner made regular payments for four years, private respondent attempted to rescind the contracts, claiming the payments should have been applied first to accrued interest under Article 1253 of the Civil Code, leaving substantial unpaid principal installments. The Supreme Court reversed the lower courts, ruling that the contract terms should be interpreted to allow interest to be added to the principal and paid through continued installments. The Court found that private respondent's acceptance of payments for four years without demanding separate interest payments constituted a waiver of her right to rescission, establishing important precedent on contract interpretation and creditor waiver through conduct.