Roman Catholic Archbishop vs.
CA/RIETA
Facts:
The spouses Eusebio de Castro and Martina
Rieta executed a deed of donation in favor
of  Roman Catholic Archbishop of Manila
covering a parcel of land located at Kawit,
Cavite.
The deed of donation allegedly provides
that the donee shall not dispose or sell the
property within a period of one hundred
(100) years from the execution of the deed
of donation, otherwise a violation of such
condition would render ipso facto null and
void the deed of donation and the property
would revert to the estate of the donors.
While still within the prohibitive period to
dispose the property,  Roman Catholic
Bishop of Imus executed a deed of absolute
sale of the property in favor of petitioners
Florencio and Soledad C. Ignao.
Florencio Ignao and Soledad C. Ignao filed
a motion to dismiss based on the grounds
that (1) Roman Catholic Bishop of Imus,
have no legal capacity to sue; and (2) the
complaint states no cause of action.
Roman Catholic Archbishop of Manila
likewise filed a motion to dismiss on the
ground that he is not a real party in interest
and, therefore, the complaint does not
state a cause of action against him.
The trial court dismissed the complaint on
the ground that the cause of action has
prescribed.
Private respondents thereafter appealed to
the Court of Appeals raising the issues on
(a) whether or not the action for rescission
of contracts (deed of donation and deed of
sale) has prescribed; and (b) whether or
not the dismissal of the action for
rescission of contracts (deed of donation
and deed of sale) on the ground of
prescription carries with it the dismissal of
the main action for reconveyance of real
property.
CA held that action has not yet
prescribed.
Issue: Has the cause of action already
prescribed? NO.
Held:
In this case The deed of donation involved
herein expressly provides for automatic
reversion of the property donated in case of
violation of the condition therein, hence a
judicial declaration revoking the same is
not necessary.
Donation, as a mode of acquiring
ownership, results in an effective transfer
of title over the property from the donor to
the donee. Once a donation is accepted, the
donee becomes the absolute owner of the
property donated. Although the donor may
impose certain conditions in the deed of
donation, the same must not be contrary to
law, morals, good customs, public order
and public policy. In this case, the
condition imposed in the deed of donation
constitutes a patently unreasonable and
undue restriction on the right of the donee
to dispose of the property donated, which
right is an indispensable attribute of
ownership. Such a prohibition against
alienation, in order. to be valid, must not be
perpetual or for an unreasonable period of
time.
The prohibition in the deed of donation
against the alienation of the property for an
entire century, being an unreasonable
denial of an integral attribute of ownership,
should be declared as an illegal or
impossible condition within the
contemplation of Article 727 of the Civil
Code. Consequently, such condition shall be
considered as not imposed. No reliance may
accordingly be placed on said prohibitory
paragraph in the deed of donation.

Cupino v. Pacific Rehouse
Facts :
The Ascano entered into a Deed of Conditional
Sale with Pacific Rehouse Corporation
(Pacific). Wherein Pacific Rehouse was obliged
to purchase from the Ascanos a parcel of land
located in General Trias, Cavite.
Following the terms of the Deed of Conditional
Sale, Pacific paid a down payment leaving a
balance to be paid upon the fulfillment of
certain conditions, namely: (1) the completion
of all documents necessary for the transfer of
the certificate of title of the land; (2) the
vendors (the Ascanos) shall guarantee
removal of the tenants, squatters and other
occupants on the land, with the disturbance
compensation to said tenants to be paid by
vendors; and (3) submission by vendors to
Pacific of the Affidavit of Non-Tenancy and the
land operation transfer documents.
In the latter part of March 1995, Pacific,
opened a savings account with the Capitol
Bank in the names of petitioners, and
deposited the amount of P1,005,180.11 Pacific
then informed petitioners of the deposit and
that "they were authorized to withdraw the
same at [their] convenience."12 redarclaw
Thereafter, Pacific learned that petitioners
were negotiating the sale of the property with
other buyers for a higher consideration. As a
result, Pacific effected an annotation of an
adverse claim on the property's title.
Pacific filed a Complaint for Cancellation of
Contract, Sum of Money and Damages before
the RTC. Before pre-trial, Pacific discovered
that petitioners had withdrawn the amount it
had deposited with Capitol Bank of General
Trias.
Petitioners further alleged that in October
2004, the parties had executed an Addendum
to Deed of Conditional Sale,19 with item "2" of
the original deed amendedRTC rendered a
decision cancelling the contract and the
addendum to it entered into by the parties.
The CA held that rescission was not warranted
in this case. It ruled that petitioners "were
clearly the ones who failed in their obligation
under the contract."28 Pacific then is
the injured party entitled to choose between
rescission of the contract and fulfillment of the
obligation. Pacific chose the latter, as stated in
their Amended Complaint for specific
performance.
Issue: WON the CA justified in ordering
specific performance, instead of rescission of
contract.
Held:
Article 1191 par. 1 of the Civil Code states:
The power to rescind obligations is implied
in reciprocal ones, in case one of the
obligors should not comply with what is
incumbent upon him. The injured party may
choose between fulfillment and the
rescission of the obligation, with payment of
damages in either case. He may also seek
rescission, even after he has chosen
fulfillment, if the latter should become
impossible.
The Deed of Conditional Sale clearly spells
out the obligations of each party. Based on
the allegations of the parties and the
findings of the lower courts, Pacific has
already partially fulfilled its obligation while
petitioners have not.
The obligation of petitioners under the Deed
of Conditional Sale is to "guarantee removal
of tenants" and not merely to pay
disturbance compensation. It is an
undertaking specifically given to petitioners
under the Deed of Conditional Sale,
considering that Pacific is not yet the owner
of the property and will have no personality
to evict the property's present occupants.
Petitioners failed to fulfill this obligation, as
well as the obligation to deliver the
necessary documents to complete the sale.
As previously held by the Court, “the injured
party is the party who has faithfully fulfilled
his obligation or is ready and willing to
perform his obligation.” From the foregoing,
it is clear that Pacific is the injured party,
entitled to elect between rescinding of the
contract and exacting fulfillment of the
obligation. It has opted for the remedy of
specific performance, as embodied in its
Amended Complaint.
Moreover, rescission must not be allowed in
favor of petitioners, since they themselves
failed to perform their obligations under the
Deed of Conditional Sale.
Boysaw v Interphil Promotions
Facts :
Solomon Boysaw (P), signed with Interphil
Promotions, Inc. (D), a contract to engage
Gabriel "Flash" Elorde in a boxing contest
for the junior lightweight championship of
the world. Thereafter, Interphil (D) signed
Gabriel "Flash" Elorde to a similar
agreement—that is, to engage Boysaw in a
title fight.
The managerial rights over Boysaw (P) was
assigned and eventually reassigned to
Alfredo Yulo, Jr. (P) without the consent of
Interphil (D) in violation of their contract.
When informed of the change, Interphil (D)
referred the matter to the Games and
Amusement Board culminating to a decision
by the board to approve a new date for the
match. Yulo (P) protested against the new
date even when another proposed date was
within the 30-day allowable
postponements.
Boysaw (P) and Yulo (P) filed for breach of
contract when the fight contemplated in
the original boxing contract did not
materialize.
Issue: Whether or not the offending party in
a reciprocal obligation may compel the other
party for specific performance? No.
Held: No. Article 1191 of the Civil Code
states that “the power to rescind obligations
is implied, in reciprocal ones, in case one of
the obligors should not comply with what is
incumbent upon him.
In this case, the contract was violated by
Boysaw (P) when, without the approval or
consent of Interphil (D), he fought a boxing
match in Las Vegas. Another violation was
the assignment and transfer of the
managerial rights over Boysaw (P) without
the knowledge or consent of Interphil (D).
While the contract imposed no penalty for
such violation, this does not grant any of
the parties the unbridled liberty to breach it
with impunity. Our law on contracts
recognizes the principle that actionable
injury inheres in every contractual breach.
Article 1170 of the Civil Code provides that
“those who in the performance of their
obligations are guilty of fraud, negligence or
delay, and those who in any manner
contravene the terms thereof, are liable for
damages.”
The court rationalized that The contract in
question gave rise to reciprocal obligations.
Reciprocal obligations are those which arise
from the same cause, and in which each
party is a debtor and a creditor of the other,
such that the obligation of one is dependent
upon the obligation of the other. They are to
be performed simultaneously, so that the
performance of one is conditioned upon the
simultaneous fulfillment of the other.
The power to rescind is given to the injured
party. Where the plaintiff is the party who
did not perform the undertaking which he
was bound by the terms of the agreement
to perform, he is not entitled to insist upon
the performance of the contract by the
defendant, or recover damages by reason of
his own breach.
Under the law, when a contract is unlawfully
novated by an applicable and unilateral
substitution of the obligor by another, the
aggrieved creditor is not bound to deal with
the substitute. However, from the evidence,
it is clear that the Interphil (D), instead of
availing themselves of the options given to
them by law of rescission or refusal to
recognize the substitute obligor, really
wanted to postpone the fight date owing to
an injury that Elorde sustained in a recent
bout. That Interphil had justification to
renegotiate the original contract,
particularly the fight date is undeniable from thereby negating the very purpose for which it
the facts. Under the circumstances, was executed. Perforce, the petitioner has the
Interphil's desire to postpone the fight date option either to enforce the Kasunduang Pag-
could neither be unlawful nor unreasonable. aayos, or to regard it as rescinded and insist
upon his original demand, in accordance with
Miguel v Montanez the provision of Article 2041 of the Civil Code.
Having instituted an action for collection of
Facts: sum of money, the petitioner obviously chose
to rescind the Kasunduang Pag-aayos.  As
Jerry Montanez secured a loan payable in one such, it is error on the part of the CA to rule
(1) year, or until February 1, 2002, from the that enforcement by execution of said
petitioner. The respondent gave as collateral agreement is the appropriate remedy under
his house and lot located, Bagumbong, the circumstances.
Caloocan City.

Due to the respondent's failure to pay the

loan, the petitioner filed a complaint against
the respondent before the Lupong
Tagapamayapa  of Barangay San Jose,
Rodriguez, Rizal.

The parties entered into a Kasunduang Pag-

aayos wherein the respondent agreed to pay
his loan in installments, and in the event the
house and lot given as collateral is sold, the
respondent would settle the balance of the
loan in full. However, the respondent still
failed to pay, and thereafter, the Lupong
Tagapamayapa issued a certification to file
action in court in favor of the petitioner.

On April 7, 2005, the petitioner filed before

the Metropolitan Trial Court, a complaint for
Collection of Sum of Money.

The MeTC rendered a Decision in favour of the

Miguel.

The RTC affirmed the MeTC Decision.

The CA assailed Decision of the RTC

Issue: Whether or not a complaint for sum of

money is the proper remedy for the petitioner,
notwithstanding the Kasunduang Pag-aayos

Held:

In the instant case, the respondent did not

comply with the terms and conditions of
the Kasunduang Pag-aayos. Such non-
compliance may be construed as repudiation
because it denotes that the respondent did
not intend to be bound by the terms thereof,
 under the contract and treat the agreement
as breached and of no force or effect.

Issue: Whether or not petitioner U.P. can

treat its contract with ALUMCO rescinded
and may disregard the same before any
UP v Delos Angeles
judicial pronouncement to that effect.
Held: UP and ALUMCO had expressly
Facts:
stipulated in the "Acknowledgment of Debt
UP and ALUMCO entered into a logging
and Proposed Manner of Payments" that,
agreement under which the latter was
upon default by the debtor ALUMCO, the
granted exclusive authority, for a period
creditor (UP) has "the right and the power
starting from the date of the agreement to
to consider, the Logging Agreement as
31 December 1965, extendible for a further
rescinded without the necessity of any
period of five (5) years by mutual
judicial suit." In connection with Article
agreement, to cut, collect and remove
1191 of the Civil Code, the Court stated in
timber from the Land Grant, in
Froilan vs. Pan Oriental Shipping Co
consideration of payment to UP of royalties,
that “there is nothing in the law that
forest fees, etc.;
prohibits the parties from entering into
agreement that violation of the terms of the
ALUMCO cut and removed timber but, as of
contract would cause cancellation thereof,
8 December 1964, it had incurred an unpaid
even without court intervention. In other
account of P219,362.94, which, despite
words, it is not always necessary for the
repeated demands, it had failed to pay;
injured party to resort to court for rescission
of the contract.”
After it had received notice that UP would
rescind or terminate the logging agreement,
It must be understood that the act of party
ALUMCO executed an instrument, entitled
in treating a contract as cancelled or
"Acknowledgment of Debt and Proposed
resolved on account of infractions by the
Manner of Payments," which was approved
other contracting party must be made
by the president of UP, which expressly
known to the other and is always provisional
states that, upon default by the debtor
being ever subject to scrutiny and review by
ALUMCO, the creditor (UP) has “the right
the proper court. If the other party denies
and the power to consider the Logging
that rescission is justified, it is free to resort
Agreement as rescinded without the
to judicial action in its own behalf, and bring
necessity of any judicial suit.”
the matter to court. Then, should the court,
after due hearing, decide that the resolution
ALUMCO continued its logging operations,
of the contract was not warranted, the
but again incurred an unpaid account. On
responsible party will be sentenced to
July 19, 1965, petitioner UP informed
damages; in the contrary case, the
respondent ALUMCO that it had, as of that
resolution will be affirmed, and the
date, considered as rescinded and of no
consequent indemnity awarded to the party
further legal effect the logging agreement
prejudiced.
that they had entered in 1960. UP filed a
complaint against ALUMCO for the collection
or payment

Respondent ALUMCO contended that it is

only after a final court decree declaring the
contract rescinded for violation of its terms
that U.P. could disregard ALUMCO's rights

Vda. de Mistica v Sps. Naguiat
Facts: - Eulalio Mistica, Fidela’s predecessor-
in-interest, is the owner of a parcel of land
in Bulacan. A portion thereof was leased to
Bernardino Naguiat (Naguiat) sometime in
1970.
- On 5 April 1979, Eulalio entered into a
contract to sell with Naguiat over a portion
of the aforementioned lot
This agreement was reduced to writing in a
document entitled Kasulatan sa
Pagbibilihan.
18,000 will be paid within 10 years from the
perfection of the agreement. If not complied
12% interest
Naguiat gave a downpayment and made a
partial payments. Thereafter failed to make
any payments.
Eulalio Mistica died sometime in October
1986.
On 4 December 1991, Fidela filed a
complaint for rescission alleging: that
Naguiats’ failure and refusal to pay the
balance of the purchase price constitutes a
violation of the contract which entitles her
to rescind the same.
Naguiats contended that the contract cannot
be rescinded on the ground that it clearly
stipulates that in case of failure to pay the
balance as stipulated, a yearly interest of
12% is to be paid. Naguiat likewise alleged
that sometime in October 1986, during
Eualalio’s wake, he offered to pay the
remaining balance to Fidela but the latter
refused and hence, there is no breach or
violation committed by them and no
damages could yet be incurred by the late
Eulalio, his heirs or assigns pursuant to the
said document.
RTC disallowed rescission. CA affirmed. It
held that the conclusion of the ten-year
period was not a resolutory term, because
the Contract had stipulated that payment
with interest of 12% could still be made if
Naguiats failed to pay within the period.
Fidela did not disprove the allegation of
Naguiats that they had tendered payment of
the balance of the purchase price during her
husband's funeral, which was well within the
ten-year period. Moreover, rescission would
be unjust to Naguiats, because they had
already transferred the land title to their
names. The proper recourse, the CA held,
was to order them to pay the balance of the
purchase price, with 12% interest.
Before SC, Fidela claimed that she is
entitled to rescind the Contract under
A1191, because Naguiats committed a
substantial breach when they did not pay
the balance of the purchase price within the
10-year period.
Issue: WON there is a breach of
obligation that warrants rescission
under A1191
NO. The transaction between Eulalio and
Naguiats, as evidenced by the Kasulatan,
was clearly a Contract of Sale. A deed of
sale is considered absolute in nature when
there is neither a stipulation in the deed
that title to the property sold is reserved to
the seller until the full payment of the price;
nor a stipulation giving the vendor the right
to unilaterally resolve the contract the
moment the buyer fails to pay within a fixed
period.
In a contract of sale, the remedy of an
unpaid seller is either specific performance
or rescission. Under A1191, the right to
rescind an obligation is predicated on the
violation of the reciprocity between parties,
brought about by a breach of faith by one of
them. Rescission, however, is allowed only
where the breach is substantial and
fundamental to the fulfillment of the
obligation.
Naguiats’ failure to pay the balance of the
purchase price within 10 years from the
execution of the Deed did not amount to a
substantial breach. In the Kasulatan, it was
stipulated that payment could be made even
after ten years from the execution of the
Contract, provided the vendee paid 12
percent interest. The stipulations of the
contract constitute the law between the
parties; thus, courts have no alternative but
to enforce them as agreed upon and
written.
Moreover, it is undisputed that during the
ten-year period, Fidela and her deceased
husband never made any demand for the
balance of the purchase price. Fidela even
refused the payment tendered by Naguiats
during her husband's 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.
NOTES: The issuance of a certificate of title
in favor of Naguiats does not determine
whether Fidela is entitled to rescission.
Fil-Estate Golf and Development, Inc.
vs. Vertex Sales and Trading, Inc
Facts:
FEGDI is the developer of the Forest Hill
Golf and Country Club and in consideration
of its financing support, FEGDI was issued
several shares of stock of Forest Hill.
FEGDI’s Forest Hills stocks were later sold
to, RSACC (a third party), which prior to full
payment sold the shares to Vertex
(respondent).
17 months after the sale and after the full
payment of Vertex, the share remained in
the name of FEGDI.
Vertex made a final demand which
remained unheeded, thus a complaint for
rescission (with damages) against FEGDI,
FELI and Forest Hill was filed, alleging that
they defaulted in their obligations as sellers.
During the pendency of this case, a
certificate of stock was issued in Vertex’s
name but the latter refused to accept it.
Position of Petitioner - FEGDI argued that
the delay cannot be considered a substantial
breach because Vertex was unequivocally
recognized as a shareholder of Forest Hills.
Position of Respondent - Vertex alleged that
the fulfillment of its obligation to pay the
purchase price called into action the
petitioners’ reciprocal obligation to deliver
the stock certificate. Since there was delay
in the issuance of a certificate for more than
three years, then it should be considered a
substantial breach warranting the rescission
of the sale.
Issue: W/N the delay in the issuance of
stock certificate can be considered a
substantial breach as to warrant
rescission of the contract of sale.
Held:
YES, delay in issuance constitute a
substantial breach because physical delivery
is necessary to transfer ownership of stocks.
In this case, Vertex fully paid the purchase
price by February 1999 but the stock
certificate was only delivered on January
2002 after Vertex filed an action for
rescission against FEGDI.
FEGDI clearly failed to deliver the stocks
within a reasonable time. This was a
substantial breach of their contract that
entitles Vertex the right to rescind the sale
under Article 1191 of the Civil Code.
The sale is not considered consummated
due to the issuance of the certificates. It
does not suffice because the law requires a
specific form to transfer ownership.
Mutual restitution is required in cases
involving rescission under Article 1191 of
the Civil Code as to bring back the parties to
their original situation, prior to the inception
of the contract.
Swire Realty vs Jane Yu
Facts: Jane Yu entered into a contract to
sell with Swire Realty Development
Corporation covering one residential
condominium unit And a parking slot.
[September 24, 1997] Yu paid the complete
amount of the unit and P20,000 for the
parking. Petitioner failed to complete and
deliver the subject unit on time.
Yu filed a complaint for Rescission of
Contract with Damages before the HLURB
[October 19, 2004] HLURB ENCRFO
dismissed Yu’s complaint. Ruling that
rescission is not permitted for slight or
casual breach of the contract but only for
such breaches as are substantial and
fundamental as to defeat the object of the
parties in making the agreement.
Yu elevated the complaint to HLURB Board
of Commissioners. Reversing the decision of
the ENCRFO.
Petitioner moved for reconsideration, but
denied by the HLURB BOC.
Petitioner appealed to the Office of the
President but was denied.
After a Motion for Reconsideration, OP
overturned its previous ruling.
Yu now sought for reconsideration at the
CA, but was denied.
Issue: WON rescission of a contract is
proper in herein case.
Held: Yes. The SC ruled in favor of Yu.
Citing Article 1191 of the Civil Code. Basic is
the rule that the right of rescission of a
party to an obligation under Art. 1191 is
predicated on a breach of faith by the party
who violates the reciprocity between them.
The breach contemplated in the said
provision is the obligor’s failure to comply
with an existing obligation. When the obligor
cannot comply with what is incumbent upon
it, the oblige may seek rescission and, in
the absence of any just cause for the court
to determine the period of compliance, the
court shall decree the rescission.
In the instant case, the CA found that the
completion date of the unit was November
1998. From an ocular inspection of the
HLURB ENCRFO, the unit was still
incomplete. From the foregoing, it is evident
that the amenities under the approved plan
have not yet been provided as of May 3,
2002, and that the subject unit has not
been delivered to respondent as of August
28, 2002, which is beyond the period of
development of December 1999. The
petitioner has incurred delay in the
performance of its obligation amounting to
breach of contract. The delay in the
completion of the project as well as the
delay in the delivery of the unit are
breaches of statutory and contractual
obligations which entitle Yu to rescind the
contract, demand a refund, and payment of
damages.
 Meanwhile, the Sanchezes found out that
Garcia/TSEI were selling townhouses
situated in the property. So they informed
the HLURB, the City Building Official and the
RD in Quezon City, of the illegal
constructions being made thereon. The
HLURB issued a Cease and Decease Order
enjoining Garcia / TSEI from further
developing and selling the townhouses.
Such orders were left unheeded. In fact,
Garcia were already able to sell many of the
units to different individuals and entities,
and even mortgaged the property.
Consequently, the Sanchezes filed before
the RTC a complaint for rescission,
restitution and damages with TRO.The
BPI vs Sanchez
purchasers and mortgagee who are the
intervenors in this case were found by the
Facts:
court to be in bad faith. On the other hand,
the Sanchezes were held to be in good faith
The Sanchezes entered into an agreement
and not negligent.
with Garcia to sell ftheir parcel of land. They
agreed that Garcia shall pay the purchase
Issue: W/N rescission of the contract was
price in cash once the property is vacated.
barred by the subsequent transfer of the
property
The Sanchezes entrusted to Garcia the
owner’s copy of TCT because it was agreed
No. Under Article 1191 of the Civil Code,
that he shall take care of all the
rescission is available to a party in a
documentations necessary for the
reciprocal obligation where one party fails to
transaction. Immediately after the property
comply with it. As an exception to this rule,
was vacated, Garcia took possession and
Article 1385 provides that rescission shall
began constructing townhouses thereon
not take place if the subject matter of the
without the Sanchezes’ knowledge and
prior agreement is already in the hands of a
consent. While these developments were
third party who did not act in bad faith.
ongoing, Garcia failed to pay the purchase
price. Subsequently, the Sanchezes were
Here, the failure of Garcia/TSEI to pay the
given six checks representing the amount of
consideration for the sale of the property
the purchase price. Four of these checks
entitled the Sanchezes to rescind the
were postdated, thus further delaying their
Agreement. And in view of the finding that
overdue payment. To properly document
the intervenors acted in bad faith in
the check payments, they made an
purchasing the property from Garcia, the
agreement stipulating that if one of the
subsequent transfer in their favor did not
checks were dishonored, the Sanchezes
and cannot bar rescission.
may rescind the contract.

The last two checks were dishonored, so the

Sanchezes rescinded the contract and
demanded from Garcia the return of the
TCT. However, Garcia refused to return the
documents and vacate the property.

Velarde vs. CA
Facts:
David Raymundo (respondent) is the absolute
and registered owner of a parcel of land, which
was under mortgage.
Raymundo’s father negotiated with Avelina and
Mariano Velarde (petitioners) for the sale of the
parcel of land, and A Deed of Sale with
Assumption of Mortgage was executed in favor
of the Velardes.
Part of the consideration of the sale was the
downpayment of P800,000 and the Velardes
assumption to pay the mortgage obligations of
the property in the amount of 1,800,000.00 in
favor of the Bank of the Philippine Islands.
And while their application for the assumption of
the mortgage obligations is not yet approved by
the mortgagee bank, they agreed to pay the
mortgage obligations on the property with the
bank in the name of Mr. David Raymundo.
It was further stated in an undertaking
agreement that “in the event that the Velardes
violate any of the terms and conditions of the
said Deed of Assumption of Mortgage, they agree
that the downpayment, plus all the payments
made with the BPI on the mortgage loan, shall be
forfeited in Favor of Mr. Raymundo, as and by
way of liquidated damages, w/out necessity of
notice or any judicial declaration to that effect, and
Mr. Raymundo shall resume total
and complete ownership and possession of
the property, and the sale shall be deemed
automatically cancelled”, signed by the Velardes.
Pursuant to said agreements, the Velardes paid
BPI the monthly interest loan for three months
but stopped in paying the mortgage when informed
that their application for the assumption of
mortgage was not approved.
Raymundo wrote the Velardes, informing them that
their non-payment to the mortgagee bank
constituted non-performance of their obligation.
The Velardes responded and advised the vendor
that they were willing to pay provided that Mr.
Raymundo:
(1) delivers actual possession of the property to them
(2) causes the release of title and mortgage from the BPI
and make the title available and free from any liens and
encumbrances
(3) executes an absolute deed of sale in their favor free
from any liens and encumbrances not later than Jan. 21,
1987.
Raymundo sent the Velardes a notarial notice of
cancellation/recission of the intended sale of the
subject property, due to the latter’s of the subject
property allegedly due to the latter’s, Failure to comply
with the terms and conditions Velardes filed a
complaint against Raymundo for specific
performance, nullity of cancellation, writ of possession
and damages.
Issue: Whether the rescission of contract made by
Reymundo is valid.
HELD: Yes. There is a breach of contract because the
Velardes did not merely stop paying the mortgage
obligations but they also failed to pay the balance
purchase price. (1,800,000)
Their conditional offer by the Velardes cannot take the
place of actual payment as would discharge the
obligation of the buyer under contract of sale.
Mr. Raymundo’s source of right to rescind the contract is
Art. 1191 of the Civil Code predicated on a breach of
faith by the other party who violates the reciprocity
between them. Moreover, the new obligations as
preconditions to the performance of the Velardes own
obligation were repudiation of an existing obligation,
which was legally due and demandable under thedate of issuance of the building
contract of sale. permit.
The breach committed by the Velardes was the non-April 1999,Buenviaje formally demanded
performance of a reciprocal obligation. The mutualthe immediate completion and delivery of
restitution is required to bring back the parties to theirUnit 5, to which Jebson cited the 1997
original situation prior to the inception of the contract.financial crisis as the reason for the delay.
The initial payment and the mortgage payments
advanced by Velarde should be returned by privateOn May 27, 2002, Buenviaje filed before the
respondents, lest the latter unjustly enriched at theHLURB Regional Field Office a Complaint
expense of the other. Rescission creates the obligationfor Specific Performance with Damages
to return the obligation of contract. To rescind, is toand Attorney's Fees, against
declare a contract void at its inception and to put an endJebson,Bañez, and Sps. Salonga
to it as though it never was.The decision of the CA is(respondents).
affirmed with modification that Reymundo is ordered to
return to Velarde, the amount they have received inConsequently filed for the rescission of
advanced payment. the subject CTS, and the return of all
payments made thereunder, with interest
at 24% per annum (p.a.), as well as the
house and lot, and golf
share pursuant to the
swapping arrangement.
Buenviaje v SPS Salonga
Issue: Whether or not rescission is
Facts: proper

On May 29, 1997, Jebson, entered into a Held: Yes Specific performance and
Joint Venture Agreement(JVA) with Sps. "rescission" (more accurately referred to
Salonga. Under the JVA, Sps. Salonga, who as resolution) are alternative remedies
owned three (3) parcels of land situated in available to a party who is aggrieved by a
Tagaytay City, agreed for Jebson to counter-party's breach of a reciprocal
construct ten (10) high-end single obligation. This is provided for in Article 1191
detached residential units. of the Civil Code,

They likewise assumed to subdivide the
property into individual titles upon which
Jebson shall assume the liability to pay
their mortgage loan with the Metropolitan
Bank and Trust Company.
On June 9, 1997, Jebson entered into a
Contract to Sell (subject CTS) with
Buenviaje over Unit 5 without the
conformity of Sps. Salonga. Out of the
purchase price, P7,800,000.00 was paid
through a swapping arrangement.
However, despite full payment of the
contract price, Jebsonwas unable to
complete Unit 5 in violation of its
contractual stipulation to finish the same
within twelve (12) months from the
The injured party may choose between
the fulfillment and the rescission of the
obligation, with the payment of damages
in either case. He may also seek
rescission, even after he has chosen
fulfillment, if the latter should become
impossible.
In this case, the HLURB-BOC, the OP, and the
CA all pointed out that Buenviaje primarily
prayed for the remedy of specific performance
- i.e., the completion of Unit 5, the subdivision
of Sps. Salonga's property into individual lots
per unit, and the tum-over of Unit 5 as well as
the subdivided lot portion allocated to such
unit to him and only prayed for the remedy of
rescission as an alternative remedy. 54 Thus, it
remains apparent that as between the two
remedies made available to him, Buenviaje,
had, in fact, chosen the remedy of specific
performance and therefore, ought to be bound
by the choice he had made. To add, "[t]he
fundamental rule is that reliefs granted a
litigant are limited to those specifically prayed
for in the complaint; other reliefs prayed for
may be granted only when related to the
specific prayer(s) in the pleadings and
supported by the evidence on record. In this
case the lower tribunals could hardly be
faulted for granting the proper relief in
accordance with what Buenviaje himself had
claimed.
Relatedly, it is observed that Buenviaje's
alternative prayer for resolution is textually
consistent with that portion of Article 1191 of
the Civil Code which states that an injured
party "may also seek rescission, even after he
has chosen fulfillment, if the latter should
become impossible." Nevertheless, the
impossibility of fulfillment was not sufficiently
demonstrated in the proceedings conducted in
this case.
Wellex v U-Land Airlines Co. Ltd.
Facts:
Wellex and U-land entered into a by selling these shares of stock of
Memorandum of Agreement (MOA) by virtue
of which as provided they both agreed to
develop a long-term business relationship
through the creation of joint interest in (1)
airline operations and (2) property
development projects in the Philippines. The
MOA would be implemented through (1) the
acquisition of shares by the U-Land from the
Wellex, of the shares of stocks of APC and
PEC ; (2) by another joint development
agreement between U-Land and PEC; (3)
Option for U-Land to acquire shares of ESB.
Part of the agreement provides that within
40 days from the date of said agreement
unless extended by mutual agreement, U-
Land and WELLEX shall execute a Share
Holder Purchase Agreement (SHPA)
covering the acquisition by U-Land of the
APIC and PEC shares.
Wellex and U-Land agreed that if they were
unable to agree on the terms of the SPHA
and the joint development agreement within
40 days from the signing, then the first MOA
would cease to be effective. And if in case
no agreements were executed, the parties
would be released from their respective
undertakings, except that Wellex would be
required to refund within three days the
funding given by U-Land for their
development projects. If Wellex was unable
to refund the amount to U-Land, then U-
Land would have the right to recover on the
PEC shares that would be delivered to it.
The 40-day period lapsed. Wellex and U-
Land were not able to enter into any SHPA
although drafts were exchanged between
the two Despite the absence of a SHPA, U-
Land remitted to Wellex $7.5 Million Dollars
which was acknowledged by Wellex.
According to Wellex, the parties agreed to
enter into a security arrangement. If the
sale of the shares of stock failed to push
through, the partial payments or
remittances U-Land made were to be
secured by these shares of stock and
parcels of land. This meant that U-Land
could recover the amount it paid to Wellex
60,770,000 and 72,601,000 and land titles
or using them to generate income. Despite
these transactions, Wellex and U-Land still
failed to enter into the SHPA and the Joint
Development Agreement. So 10 months
after the last formal communication
between the two parties, U-Land demanded
the refund for the amount it remitted.
Due to failure of Wellex to heed the
demand, U-Land filed a complaint for
rescission of the First Memorandum of
Agreement and damages against Wellex.
Issue: Whether or not U-Land is
praying for rescission or resolution
under Art.1191, and not rescission
under Article 1381.
Held: The Court ruled that rescission under
1191 and not under 1381, is proper in this
case.
For Article 1191 to be applicable, there must
be reciprocal prestations as distinguished
from mutual obligations between or among
the parties. A prestation is the object of an
obligation, and it is the conduct required by
the parties to do or not to do, or to give.
Parties may be mutually obligated to each
other, but the prestations of these
obligations are not necessarily reciprocal.
The reciprocal prestations must necessarily
emanate from the same cause that gave
rise to the existence of the contract.
Reciprocity arises from identity of cause,
and necessarily the two obligations are
created at the same time.
The failure of one of the parties to comply
with its reciprocal prestation allows the
wronged party to seek the remedy of
Art.1191. The injured party is entitled to
rescission or resolution under Art. 1191, and
even the payment of damages. It is a
principal action precisely because it is a
violation of the original reciprocal
prestation.
transferring or alienating property that can
be used to satisfy the obligation of the
debtor to the creditor.
There is no allegation of fraud for purposes
of evading obligations to other creditors.
The actions of the parties involving the
terms of the First Memorandum of
Agreement do not fall under any of the
enumerated contracts that may be subject
of rescission.
Moreover, the desire of both parties to enter
into a share purchase agreement that could
allow both parties to expand their respective
airline operations in the Philippines and
other neighboring countries give raise to a
reciprocal prestation,
Hence, respondent U-Land correctly sought
the principal relief of rescission or resolution
under Article 1191.

Article 1381 and 1383, on the other hand,

pertain to rescission where creditors or even
third persons not privy to the contract can
file an action due to lesion or damage as a
result of the contract. When a party seeks
the relief of rescission as provided in Article
1381, there is no need for reciprocal
prestations to exist between or among the
parties. All that is required is that the
contract should be among those
enumerated in Article 1381 for the contract
to be considered rescissible.

Unlike Article 1191, rescission under Art.

1381 must be a subsidiary action because of
Article 1383.

Contrary to petitioner Wellex’s argument,

this is not rescission under Article 1381 of
the Civil Code. This case does not involve
prejudicial transactions affecting guardians,
absentees, or fraud of creditors.

Article 1381(3) pertains in particular to a

series of fraudulent actions on the part of
the debtor who is in the process of