Almira vs Court of Appeals

GR No. 115966
March 20, 2003
Topic: Article 1191 Rescission of Contract
FACT:
Petitioners are the wife and the children of the late Julio Garcia who inherited from
his mother, Ma. Alibudbud, a portion of a 90,655 square meter property
denominated as lot 1642 of the Sta. Rosa Estate in Brgy. Caingin Sta.Rosa Laguna.
The lot was co-owned and registered in the names of three persons with the
following shares: Vicente de Guzman (1/2), Enrique Hemedes(1/4) and Francisco
Alibudbud, the father of Ma. Alibudbud (1/4). Although there was no separate title in
the name of Julio Garcia, there were tax declaration in his name to the intent of his
grandfathers share covering the area of 21460square meter. On July 5, 1984,
petitioner as heirs of Julio Garcia, and respondent Federico Brines entered a
Kasunduan ng Pagbibilihan (Kasunduan for Brevity) over the 21460 square meter
portion for the sum of P150.000.00. Respondent paid P65, 000.00 upon execution of
the contract while the balance of P85,000.00 was made payable within six (6)
months from the date of the execution of the instrument. The time of the execution
of the kasunduan, petitioners allegedly informed respondent that TCT No. RT-1076
was in the possession of their cousin, Conchila Alibudbud, who having bought
Vicente de Guzmans shares, owned the bigger portion of lot 1642. This standing
notwithstanding, respondent willingly entered into the Kasunduan provided that the
full payment of the purchase price will be made upon delivery to him of the title.
Respondent took possession of the property subject of the Kasunduan and made
various payments to petitioners amounting to P58500.00. However upon failure of
petitioner to deliver to him a separate title to the property in the name of Julio
Garcia he refused to make further payments, prompting petitioner to file a civil
action before the RTC for a rescission of the Kasunduan, return by respondent to
petitioner of the possession of the subject parcel of land, and payment by
respondent of damages in favor of petitioners.
ISSUE
Whether or not the petitioner may rescind the Kasunduan pursuant to Article 1191
of the Civil Code for the failure of respondent to give full payment of the balance of
the purchase price.
HELD:
NO, the right of the parties are governed by the terms and the nature of the
contract they entered. Hence, although the nature of the Kasunduan was never
places in dispute by both parties, it is necessary to ascertain whether the
Kasunduan is a contract to sell or a contract of Sale.
Although both parties have consistency referred to the Kasunduan as a contract to
Sell, a careful reading of the provision of the Kasunduan reveals that it is a contract
of Sale. A deed of sale is absolute in nature in the absence of any stipulation
reserving title to the vendor until full payment of the purchase price. The delivery of

a separation title in the name of Julio Garcia was a condition imposed on

respondents obligation to pay the balance of the purchase price. It was not a
condition imposed in the perfection of the contract of Sale. The rescission will not
prosper since the power to rescind is only given to the injured party. The injured
party is the party who has faithfully fulfilled his obligation.
In the case at bar, the petitioners were not ready, willing and able to comply with
their obligation to deliver a separate title in the name of Julio Garcia to respondent
therefore, they are not in a position to ask for rescission. Failure to comply with a
condition imposed on the performance of an obligation gives the other party the
option either to refuse to proceed with the sale or to waive the condition under Art
1545 of the civil code. Hence it is the respondent who has the option.

Central Bank of the Philippines vs. Court of Appeals

139 SCRA 46
October 3, 1985
FACT:
Tolentino made a loan from Island Savings Bank secured by a mortgage. The Bank
did not release the whole amount but only a portion thereof. Later, the Bank
experienced liquidity problems and the Monetary Board of Central Bank prohibited it
from making new loans and much later, from doing business in the Philippines.
Thereafter, the Acting Superintendent of Central Bank took charge of its assets.
Upon expiration of the loan term, the Bank filed extrajudicial foreclosure of the
mortgage.
ISSUE:
Whether or not there a perfected contract of loan when only a portion of the amount
was delivered?
HELD:
Tolentino made a loan from Island Savings Bank secured by a mortgage. The Bank
did not release the whole amount but only a portion thereof. Later, the Bank
experienced liquidity problems and the Monetary Board of Central Bank prohibited it
from making new loans and much later, from doing business in the Philippines.
Thereafter, the Acting Superintendent of Central Bank took charge of its assets.
Upon expiration of the loan term, the Bank filed extrajudicial foreclosure of the
mortgage. Was there a perfected contract of loan when only a portion of the amount
was delivered?

Palma Gil vs. Court of Appeals

GR No. 127706
September 12, 2003
FACT:
Concepcion Palma Gil, and her sister, Nieves Palma Gil, married to Angel Villarica,
were the co-owners of a parcel of commercial land with an area of 829 square
meters in Davao City. The spouses Angel and Nieves Villarica had constructed a twostorey commercial building on the property. On October 13, 1953, Concepcion filed
a complaint against her sister Nieves with the then Court of First Instance of Davao
City for specific performance, to compel the defendant to cede and deliver to her an
undivided portion of the said property with an area of 256.2 square meters. After
due proceedings, the court rendered judgment on April 7, 1954 in favor of
Concepcion, ordering the defendant to deliver to the plaintiff an undivided portion of
the said property with an area of 256.2 square meters. Nieves appealed to the Court
of Appeals which affirmed the assailed decision. The court issued a writ of
execution. Nieves, however, refused to execute the requisite deed in favor of her
sister. On April 27, 1956, the court issued an order authorizing ex-officio Sheriff
Eriberto Unson to execute the requisite deed of transfer to the plaintiff over an
undivided portion of the property with a total area of 256.2 square meters. Instead
of doing so, the sheriff had the property subdivided into four lots namely, Lot 59-C1, with an area of 218 square meters; Lot 59-C-2, with an area of 38square meters;
Lot 59-C-3, with an area of 14 square meters; and Lot 59-C-4,with an area of 560
square meters, all covered by a subdivision plan. The sheriff thereafter executed a
Deed of Transfer to Concepcion over Lot 59-C-1 and Lot59-C-2 with a total area of
256.2 square meters. On October 24, 1956, Concepcion executed a deed of
absolute sale over Lot 59-C-1 in favor of Iluminada Pacetes for a purchase price of
P21,600.00 upon which P7,500.00 is to be paid upon signing of the contract and the
balance of P14,100.00 to be paid upon delivery of the Title. On March 16, 1966,
spouses Iluminada Pacetes and Agapito Pacetes executed a deed of absolute sale
over the disputed lots in favor Constancio Maglana. And on April 22, 1980, Maglana
executed a deed of sale in favor of Emilio Matulac for the purchase price of
P150,000.00. And on August 4, 1959, Concepcion died, leaving all her obligations to
her heirs including the petitioners. On June 11, 1993, the trial court rendered
judgment in favor of the defendants. The trial court ruled that this Court had
affirmed, in G.R. No. 85538and G.R. No. L-60690, the sales of the property from
Concepcion Palma Gil to Iluminada Pacetes, then to Constancio Maglana and to
Emilio Matulac; hence, the trial court was barred by the rulings of the Court. The
plaintiffs appealed to the Court of Appeals which affirmed the latters decision.
ISSUE:

Whether or not the trial court erred in not declaring the sale of the properties in
question from Iluminada Pacetes to Constancio Maglana, then from Constancio
Maglana to Emilio Matulac NULL and VOID for there was delay incurred by
Concepcion in not delivering the Title of the subject lands to Pacetes.
HELD:
Article 1191 in tandem with Article 1592 of the New Civil Code are central to the
issues at bar. Under the last paragraph of Article 1169 of the New Civil Code, in
reciprocal obligations, neither party incurs in delay if the other does not comply or is
not ready to comply in a proper manner with what is incumbent upon him. From the
moment one of the parties fulfills his obligation, delay in the other begins. Thus,
reciprocal obligations are to be performed simultaneously so that the performance
of one is conditioned upon the simultaneous fulfillment of the other. The right of
rescission of a party to an obligation under Article 1191of the New Civil Code is
predicated on a breach of faith by the other party that violates the reciprocity
between them. The petitioners therefore, as successors-in-interest of the vendor,
are not the injured parties entitled to a rescission of the deed of absolute sale. It
was Concepcions heirs, including the petitioners, who were obliged to deliver to the
vendee a certificate of title over the property under the latters name, free from all
liens and encumbrances within 120 days from the execution of the deed of absolute
sale on October 24, 1956, but had failed to comply with the obligation.
Furthermore, the consignation by the vendee of the purchase price of the property
is sufficient to defeat the right of the petitioners to demand for a rescission of the
said deed of absolute sale. The petition for review was denied for lack of merit.

Castillo Vda. De Mistica vs. Naguiat

GR No. 137909
December 11, 2003
FACT:
Eulalio Mistica, predecessor-in-interest of herein petitioner, is the owner of the
parcel of land which was leased to respondent Bernardinio Naguiat. Mistica entered
into a contract to sell with respondent over a portion of the aforementioned lot
containing an area of 200 square meters. This agreement was reduced to writing in
a document. Pursuant to said agreement, respondent gave a down payment of
P2,000. He made another partial payment of P1,000 on February 8, 1980. He failed
to make any payments thereafter. Mistica died sometime in October 1986.On
December 4,1991, petitioner filed a complaint for rescission alleging, among others
that the failure and refusal of respondent to pay the balance of the purchase price
constitute a violation of the contract which established her to rescind the same.
That respondent have been in possession of the subject matter, should be ordered
to vacate and surrender possession of the same.
Petitioner claims that she is entitled to rescind the Contract under Article 1191 of
the Civil Code, because respondents committed a substantial breach when they did
not pay the balance of the purchase price within the ten-year period. She further
avers that the proviso on the payment of interest did not extend the period to pay.
To interpret it in that way would make the obligation purely potestative and, thus,
void under Article 1182 of the Civil Code.
ISSUE:
Whether or not the Honorable Court of Appeals erred in the application of Art. 1191
of the New Civil Code, as it ruled that there is no breach of obligation in spite of the
lapse of the stipulated period and the failure of the private respondents to pay.
HELD:

NO. The failure of respondent to pay the value of the purchase price within ten (10)
years from execution of the deed did not amount to a substantial breach. In the
agreement, it was stipulated that payment could be made even after ten (10) years
from execution provided that the vendee paid 12% interest. The stipulation of the
parties constitute the law between them, thus court have no alternative but to
enforce them as agreed upon and written. Moreover, it is undisputed that during the
ten-year period, petitioner and her deceased husband never made any demand for
the balance of the purchase price. Petitioner even refused the payment tendered by
respondents during her husbands funeral, thus showing that she was not exactly
blameless for the lapse of the ten-year period. Had she accepted the tender,
payment would have been made well within the agreed period.
Thus, the Supreme Court ruled that the Court of Appeals did not commit an error in
deciding this issue.

Cordero et. al vs. FS Management & Development Corp.

GR No. 167213
October 31, 2006
FACT:
Petitioner entered into a contract to sell with respondent F.S. Management and
Development Corporation, over a five (5) parcel of land located in Nasugbu,
Batangas. A portion of the contract states that title will be transferred by the
owner to the buyer upon complete payment of the purchase price.
Pursuant to the terms and conditions of the contract to sell, respondent paid earnest
money in the amount of P500,000 on October 27, 1994.5 She likewise paid
P1,000,000 on June 30, 1995 and another P1,000,000 on July 6, 1995. No further
payments were made thereafter.
Sometime in 1996, petitioners thus sent respondent a demand letter informing the
latter that they were revoking/canceling the contract to sell and were treating the
payments already made as payment for damages suffered as a result of the breach
of contract. Respondent ignored the demand. Hence, petitioner files a complaint for
rescission of contract with damages alleging respondent failed to comply with its
obligations under the contract to sell and that consequently petitioners are entitled
to rescind the contract to sell as well as demand the payment of damages.
In its answer, respondent alleged that petitioners have no cause of action
considering that they were the first to violate the contract to sell by preventing
access to the properties despite payment of P2.5 Million Pesos and their refusal to
execute the final contract of sale was due to the willingness of another buyer to pay
a higher price.
ISSUE:

Whether or not an action for rescission is proper for respondents failure to pay its
obligation.
HELD:
No. Under a contract to sell, the seller retains title to the thing to be sod until the
purchaser fully pays the agreed purchase price. The full payment is a positive
suspensive condition, the non-fulfillment of which is not a breach of contract but
merely an event that prevents the seller from conveying title to the purchaser. The
non-payment of the purchase price renders the contract to sell ineffective and
without force and effect.
Since the obligation of seller did not arise because of the failure of buyer to fully
pay the purchase price, Article 1191 of the Civil Code would have no application,
where rescission is not available.