R.S TOMAS, INC., VS. RIZAL CEMENT COMPANY, INC.

FACTS

Petitioner and respondent entered into contract for the supply

of labor, materials and technical supervision aimed at providing
the power needs of the respondent. (J.O 212 / 213 / 214)
Petitioner agreed to perform job orders. Respondent agreed to
pay P2,944,000.00. Petitioner undertook to complete the said
projects within 120 days from the effectivity of the contract. Also,
it was agreed upon that petitioner would be liable to respondent
for liquidated damages of 29,440.00 per day of delay.
Respondent then made initial payment of 1,458,618.00. In a
letter petitioner requested for an extension of 75 days due to the
need to import some materials and also asked for price
adjustment of 255,000.00 to cover higher materials. Petitioner
then requested again for extension of another 75 days for the
completion of transformers due to failure of supplier to deliver
materials. Petitioner requested assistance by facilitation the
acquisition of materials and supplies needed to complete J.O
212 and 213 by direct paying suppliers. It also sought to back
out form J.O 214.

Respondent notified petitioner that they are going to terminate

the said contract and that they are demanding for the refund of
the amount already paid to the petitioner. Respondent sent
another demand letter for the payment of 1,472.000.00
pursuant to the performance bond issued. Respondent entered
into contract with Geostar Phil. For completion of the project for
a total consideration of P3,435,00.00. Respondent filed
Complaint for Sum of Money filed against respondent and
petitioner praying for payment of the following: 493,695.00 for
the down payment and advances – 2,550,945.00 amounts
incurred in excess of the cost of project; 294,000.00 liquidated
damages – plus interest and attorneys fee.
ISSUE: Should MCIAA reconvey the lot to petitioners?
Petitioner avert that the proximate cause of delay is the
RULING: Yes, there is resolutory condition and relate to Art
misrepresentation and bad faith of the respondent on the extend
1187
of the defects of the transformers that the coils were already
badly damaged and this discovery entail price adjustment and
additional time.

RTC rendered decision in favor of the petitioner.

On appeal respondent obtained favorable decision granted by

CA.

CA found that petitioner failed to prove that respondent made

fraudulent misinterpretation to induce the former. Petitioner was
given the opportunity to inspect the transformer before the bid
and that failure to avail such opportunity is inexcusable.

Hence, petitioner comes before the Court

ISSUE:

I. WON THERE WAS A BREACH OF CONRACT ON THE PART

OF THE PETITIONER
II. WON PETITIONER IS LIABLE FOR LIQUIDATED DAMAGES
AND THE COST BETWEEN RESPONDENT AND GEOSTAR
 HELD agreed upon in their contract, or rescind the contract and refund
the total payments made plus interest starting from their full
1. YES, petitioner failed, not only to perform its part on the contract payment.
on time but also in fact to complete the projects. Petitioner tried
to exempt itself from the consequences of the said breach by In their answer, petitioner alleged that the respondents
passing the fault to respondent. Clearly, petitioners could not were aware that the mother title had no technical description,
complete the project because it did not have the materials the subject lot was free from any liens or encumbrance, that the
needed and that it is in need of financial assistance. In contrary failure to deliver the title was beyond their control, because
to its representation that is was capable, competent, and duly petitioner’s petition for inscription of technical description was
licensed to handle the projects. As, contractor, petitioner had granted by the RTC, but was reversed by the CA, which caused
been remiss in its obligation to obtain as much information as the delay in the subdivision of property into individual lots with
possible on the actual condition of the subject. Petitioner is individual titles. The petitioner argued that article 1191 remains
guilty of breach of contract for: inapplicable because they are willing to comply with their
2. Violation by contractor of the terms and condition of the said obligation but were only prevented by circumstances beyond
contract their control.
3. Non-completion of work within time agreed upon
4. Institution of insolvency or receivership proceeding involving Thereafter, the HLURB-ENCRFO ruled in favor of the
contractor respondents stating that the petitioner’s failure to comply with
5. Other causes provided by law applicable to this contract their obligation constituted a substantial breach. The petitioner
 Breach of contract defined as the failure without legal reason to then appealed to the HLURB-BOC, OP, and CA but the decision
comply with the terms of contract. It is also defined as failure of the HLURB-ENCRFO was maintained.
without legal excuse, to perform any promise and which form ISSUE: WON SPS FAJARDO HAS THE RIGHT TO
the whole part of the contract. RESCIND.
2. Yes, petitioner is liable for liquidated damages in the amount HELD: Yes.
of 29,440.00 per day of delay.
The long delay in the performance of petitioner's obligation from
date of demand was unreasonable and unjustified. It cannot
ART 1191 therefore be denied that the petitioner substantially breached its
contract to sell with respondent which thereby accords the latter
CASE: the right to rescind the same pursuant to Article 1191 of the
Code.
GPI, ET AL VS SPS FAJARDO GR 201167 FEB 27, 2013

FACTS:
B. Effects of rescission
The respondents entered into a contract to sell, in
January 24, 1995, with the petitioners for the purchase of a 100 Rescission does not merely terminate the contract and release
square meter lot (subject lot for brevity), located in a subdivision the parties from further obligations to each other, but abrogates
project owned and developed by the petitioner. The subject lot the contract from its inception and restores the parties to their
is a portion of a bigger lot covered by a single title (mother title). original positions as if no contract has been made.31
Consequently, mutual restitution, which entails the return of the
In their contract, the respondent shall pay the purchase benefits that each party may have received as a result of the
price of P126, 000 within a 10-year period including interest at contract, is thus required.32 To be sure, it has been settled that
the rate of 9%. The petitioner, on the other hand, shall execute the effects of rescission as provided for in Article 1385 of the
a final deed of sale in favor of the respondents upon full Code are equally applicable to cases under Article 1191, to wit:
payment of the latter.
xxxx
Despite the full payment of the respondents in January
17, 2000, the petitioner failed, as agreed upon in their contract, Mutual restitution is required in cases involving rescission under
to execute the deed and to deliver the title and physical Article 1191.1âwphi1 This means bringing the parties back to
possession of the subject lot. their original status prior to the inception of the contract. Article
1385 of the Civil Code provides, thus:
Thereafter, the respondent filed a complaint before the
Housing and Land Use Regulatory Board-Expanded National ART. 1385. Rescission creates the obligation to return the
Capital Region Field Office for specific performance or things which were the object of the contract, together with their
rescission of contract with damages against the petitioners. fruits, and the price with its interest; consequently, it can be
carried out only when he who demands rescission can return
The respondents alleged that petitioner violated Sec 20 whatever he may be obligated to restore.
of PD957, failed to provide boundary marks for each lot and that
the mother title had no technical description, and that the Neither shall rescission take place when the things which are
mother title was even levied upon by the BSP without the the object of the contract are legally in the possession of third
former’s knowledge. Thus, the respondents pray that petitioner persons who did not act in bad faith.
be ordered to execute the deed and perform as to what was
In this case, indemnity for damages may be demanded from the the said Jukebox stock up and the coins which will be dropped
person causing the loss. will just be confiscated which will not give the selected music.

This Court has consistently ruled that this provision applies to

rescission under Article 1191:
Plaintiff responded that such problem with automatic
Since Article 1385 of the Civil Code expressly and clearly states phonograph is normal, and that they will instruct their personnel
that "rescission creates the obligation to return the things which to repair the same. The plaintiff further asked defendants,
were the object of the contract, together with their fruits, and the calling attention to paragraph 9 of the lease contract which gave
price with its interest," the Court finds no justification to sustain it the exclusive right to maintain an automatic phonograph in the
petitioners’ position that said Article 1385 does not apply to defendants' premises, the plaintiff asked the defendants to re-
rescission under Article 1191. x x x33 (Emphasis supplied; install its jukebox and remove the other one which the
citations omitted.) defendants had installed in their premises.

In this light, it cannot be denied that only GPI benefited from the As the defendants refused compliance with the contract, the
contract, having received full payment of the contract price plus plaintiff brought action in the Court.
interests as early as January 17, 2000, while Sps. Fajardo
remained prejudiced by the persisting non-delivery of the HELD:
subject lot despite full payment. As a necessary consequence, The power to rescind obligations is implied in reciprocal ones in
considering the propriety of the rescission as earlier discussed, case one of the obligors should not comply with what is
Sps. Fajardo must be able to recover the price of the property incumbent upon him. But it is equally settled that, in the absence
pegged at its prevailing market value consistent with the Court’s of a stipulation to the contrary, this power must be invoked
pronouncement in Solid Homes,34 viz: judicially; it cannot be exercised solely on a party's own
Indeed, there would be unjust enrichment if respondents Solid judgment that the other has committed a breach of the
Homes, Inc. & Purita Soliven are made to pay only the purchase obligation. Hence, as there is nothing in the contract of lease
price plus interest. It is definite that the value of the subject empowering the defendants to rescind it without resort to the
property already escalated after almost two decades from the courts, the defendants' action in unilaterally terminating the
time the petitioner paid for it. Equity and justice dictate that the contract is unjustified. Resolved in favor of plaintiff.
injured party should be paid the market value of the lot,
otherwise, respondents Solid Homes, Inc. & Purita Soliven
would enrich themselves at the expense of herein lot owners AGUSTINA LIQUETTE TAN V. C.A. & SPS. SINGSON
when they sell the same lot at the present market value. Surely,
such a situation should not be countenanced for to do so would G.R. No. 80479 July 28, 1989
be contrary to reason and therefore, unconscionable. Over time,
courts have recognized with almost pedantic adherence that
what is inconvenient or contrary to reason is not allowed in law. FACTS:
(Emphasis supplied.)

On this score, it is apt to mention that it is the intent of PD 957

to protect the buyer against unscrupulous developers, Petitioner: Agustina Tan
operators and/or sellers who reneged on their obligations.35
Private respondents: Sps Singsons
Thus, in order to achieve this purpose, equity and justice dictate
that the injured party should be afforded full recompense and
as such, be allowed to recover the prevailing market value of
the undelivered lot which had been fully paid for. Vinculum Juris: Contract of Sale

PHIL. AMUSEMENT ENTERPRISES INC., V. NATIVIDAD.

1. The seller, herein private respondents are the owner of
the subject house and lot, agreed to sell the same to the
FACTS: petitioner for P1,800,000 but was changed to P1,750,000.
Respondents rented this jukebox from petitioner. 2. Per agreement, the buyer will advance earnest money
of P200,000 to enable Singsons to secure the cancellation of
In their contract dated Jan. 6, 1961, they agreed that the
the mortgage and lien annotated on the title of the property and
duration of the lease shall be for the period of three (3) years
the balance of the price to be paid by Tan on June 21, 1984.
(renewable). That, in the event of damage by ordinary wear and
tear, the petitioner would supply parts and repair the same. 3. Tan was able to provide the P200,000 advance
payment while the Sps Singson, upon receipt of the amount,
But on July 17, 1961 Mariano Natividad wrote a letter to the
started paying their mortgage loan with the DBP to clear up the
plaintiff's branch office in Davao City advising the plaintiff to get
title of the subject property.
the Jukebox from them. In another letter sent to plaintiff`s main
office in Manila, Mariano reasoned that there are times when
4. DBP then executed a cancellation of mortgage, which It is a settled principle of law that rescission will not be permitted
was registered with the Registry of Property. Spouses also paid for a slight or casual breach of the contract but only for such
all the taxes due and in arrears on the property. breaches as are so substantial and fundamental as to defeat
the object of the parties in making the agreement.
5. The petitioner and her daughter Corazon with their
lawyer, Atty. Vicente Quitoriano, went to Baguio City to inquire In this case, as to the lot covered by TCT No. T-13826, it is true
about the status of the property and Singsons told her that the that as of June 25, 1984, the date set for the execution of the
DBP was taking some time processing their payments and final deed of sale, the mortgage lien in favor of DBP annotated
preparing the deed of cancellation of the mortgage. On that in the title has not yet been cancelled as it took DBP sometime
occasion, the parties agreed on an extension of 2 weeks for the in processing the papers relative thereto. However, just a few
execution of the deed of sale. days after, or on July 12, 1984, the cancellation of the DBP
mortgage was entered by the Register of Deeds and duly noted
6. Now, the version of the facts differed: on the title. Time not being of the essence in the agreement, a
a. According to the Petitioner: Alleged that she gave slight delay on the part of the private respondents in the
appellants spouses P200,000.00 upon their assurances that performance of their obligation, is not sufficient ground for the
they could transfer to her the house and lot she was buying from resolution of the agreement.
them free from any liens and encumbrances, including the
furnishings thereof and the adjacent lot being used as driveway,
on June 25, 1984, but that day had come and passed without G.R. No. 95641
defendants being able to make good their promise, therefore
they are entitled to rescind the contract. September 22, 1994

b. According to the Respondents: The petitioner asked for SANTOS B. AREOLA and LYDIA D. AREOLA vs. COURT OF
extension as they are not ready to pay the balance of APPEALS and PRUDENTIAL GUARANTEE AND
P1,550,000 and that the levy on execution has long been lifted, ASSURANCE, INC.
the mortgage indebtedness released, the portion of the public TOPIC: Consequences of Failure to Comply with Prestation
land used as driveway has long been awarded and fully paid for
the City of Baguio. In short, the title can now be transferred in NCC Article 1191. The power to rescind obligations is implied in
the petitioner upon execution of the contract of sale. reciprocal ones, in case one of the obligors should not comply
with what is incumbent upon him.
7. Before the respondents filed for action for specific
performance, the petitioner filed an action for recovery of sum The injured party may choose between the fulfillment and the
of money and damages. rescission of the obligation, with the payment of damages in
either case. He may also seek rescission, even after he has
ISSUE: chosen fulfillment, if the latter should become impossible.
WON THERE WAS SUBSTANTIAL BREACH BY THE The court shall decree the rescission claimed, unless there be
SPOUSES, MERITING RESCISSION OF THE CONTRACT? just cause authorizing the fixing of a period. This is understood
HELD: to be without prejudice to the rights of third persons who have
acquired the thing, in accordance with articles 1385 and 1388
and the Mortgage Law. (1124)

NO. FACTS:

That the power to rescind obligations is implied in reciprocal Petitioner-insured, Santos Areola, a lawyer from Dagupan City,
ones in case one of the obligors should not comply with what is bought, through the Baguio City branch of Prudential Guarantee
incumbent upon him is clear from a reading of the Civil Code and Assurance, Inc. (hereinafter referred to as Prudential), a
provisions. However, it is equally settled that, in the absence of personal accident insurance policy covering the one-year
a stipulation to the contrary, this power must be invoked period between noon of November 28, 1984 and noon of
judicially; it cannot be exercised solely on a party’s own November 28, 1985. Petitioner paid the premiums through the
judgment that the other has committed a breach of the Branch Manager Teofilo Malapit.
obligation. Where there is nothing in the contract empowering
the petitioner to rescind it without resort to the courts, the After 7 months, Prudential unilaterally cancelled the insurance
petitioner’s action in unilaterally terminating the contract in this policy on the ground that based on Company’s records, Areola
case is unjustified. failed to pay the insurance premiums.

The alleged breach of the obligation by the private respondents, A few days later, however, Prudential found out that Areola
which consists in a mere delay for a few days in clearing the title indeed paid the premiums but the Branch Manager, Lapitan
to the property, cannot be considered substantial enough to failed to remit the same. Thus, Prudential offered to reinstate
warrant rescission of the contract. the policy and even proposed to extend it up to December 17,
1985. Unfortunately, before the proposal was served, Areola
has already filed a complaint for breach of contract with
damages before the lower court.
In its Answer, respondent insurance company admitted that the that reinstatement being equivalent to fulfillment of its
cancellation of petitionerinsured's policy was due to the failure obligation, divests petitioner-insured of a rightful claim for
of Malapit to turn over the premiums collected, for which reason payment of damages. Such a claim finds no support in our laws
no official receipt was issued to him. However, it argued that, by on obligations and contracts.
acknowledging the inconvenience caused on petitioner-insured
and after taking steps to rectify its omission by reinstating the The nature of damages to be awarded, however, would be in
cancelled policy prior to the filing of the complaint, respondent the form of nominal damages contrary to that granted by the
insurance company had complied with its obligation under the RTC.
contract. Hence, it concluded that petitioner-insured no longer
has a cause of action against it. It insists that it cannot be held
liable for damages arising from breach of contract, having GR No. L- 39778
demonstrated fully well its fulfillment of its obligation.
Virgilio Siy Vs.
RTC decided in favor of Areola and awarded the payment of
damages. Court of Appeals, Segio Valdez and Virginia Valdez

CA reversed RTC’s decision. According to the Court of Appeals, September 13, 1985
respondent insurance company was not motivated by
Guttierez Jr J;
negligence, malice or bad faith in cancelling subject policy.
Rather, the cancellation of the insurance policy was based on
what the existing records showed, i.e., absence of an official
receipt issued to petitioner-insured confirming payment of Facts:
premiums. Hence, this appeal.
Spouses Valdez are the owners of the parcel of land
ISSUE: with a house constructed therein situated in Makati. There is no
dispute that the parties entered into a contract of sale regarding
WON Prudential’s reinstatement of the policy absolved it from the said property. The controversy arose from subsequent
damages. agreement executed by the parties.
WON Prudential is liable for damages for unilaterally cancelling The first agreement was the deed of conditional sale
the policy. whereby for and in consideration of P22,000, spouse Valdez as
vendors agreed to sell to Siy the said property. The sale was
RULINGS:
subject to the condition that immediately upon the approval of
NO, YES. CA ruling reversed and RTC’s ruling reinstated but the loan of Siy with SSS and its payment to Spouse Valdez, the
modified as to the amount of damages. Malapit's failure to remit Vendor shall execute deed of absolute sale in favor of the
the premiums he received cannot constitute a defense for Vendee. Subsequently, the parties execute three more
private respondent insurance company; no exoneration from contracts, the first contract provides that the respondent agreed
liability could result therefrom. The fact that private respondent to sell the property to the petitioner at 14,000 while the latter
insurance company was itself defrauded due to the anomalies must negotiate a loan with SSS in order to settle the amount
that took place in its Baguio branch office, such as the non- within a period of 30 days, it also provide for the payment of
accrual of said premiums to its account, does not free the same rentals of 50 a month until the date of final settlement and
from its obligation to petitioner Areola. Consequently, damages at a rate of 30 a day for each day of delay. The next
respondent insurance company is liable by way of damages for day, the parties execute another contract which was essentially
the fraudulent acts committed by Malapit that gave occasion to the same with the first agreement, the respondent did not agree
the erroneous cancellation of subject insurance policy. Its with the granting of another 30-day extension to the petitioner
earlier act of reinstating the insurance policy cannot obliterate and so torn it up. However, the respondent changed their mind
the injury inflicted on petitioner-insured. Respondent company after the mother of petitioner pleaded with them for another
should be reminded that a contract of insurance creates extension. Thus another contract come into being which
reciprocal obligations for both insurer and insured. Reciprocal provides that the full amount of 14,000 would be paid on or
obligations are those which arise from the same cause and in before 30th day from the date of execution of the contract and
which each party is both a debtor and a creditor of the other, the failure of the petitioner to settle his obligation within the
such that the obligation of one is dependent upon the obligation period shall make him liable for damages of 30 for every day of
of the other. delay.

Under the law governing reciprocal obligations, particularly the The last agreement entered into by parties which
second paragraph of Article 1191, the injured party, petitioner- provides that the respondent agreed to receive the partial
insured in this case, is given a choice between fulfillment or amount of 12,000 on the condition that the balance of 4,376 is
rescission of the obligation in case one of the obligors, such as completely paid 45 days after the date fixed by them and that
respondent insurance company, fails to comply with what is failure of the petitioner to pay the said balance on the agreed
incumbent upon him. However, said article entitles the injured time will entitle the respondent to damages of 20 for every day
party to payment of damages, regardless of whether he of delay until the said balance have been fully paid.
demands fulfillment or rescission of the obligation. Untenable
then is reinstatement insurance company's argument, namely,
 After the lapse of the 45-day deadline, the petitioner that after it had received notice that UP would rescind
failed to pay both the 12,000 which was supposed to be or terminate the logging agreement, ALUMCO executed an
received by the respondent upon the execution of the instrument, entitled "Acknowledgment of Debt and Proposed
agreement and the balance of 4,376. Thus, when the Manner of Payments," dated 9 December 1964, which was
petitioner’s loan from SSS was released, he requested the approved by the president of UP, which expressly states that,
respondent to sign the deed of absolute sale but the respondent upon default by the debtor ALUMCO, the creditor (UP) has “the
refused on the ground that the petitioner had already breached right and the power to consider the Logging Agreement as
their latest agreement. rescinded without the necessity of any judicial suit.”

Issue

Whether or not the respondent can rescind the contract ALUMCO continued its logging operations, but again incurred
of sale between them and the petitioner on the ground stated an unpaid account. On July 19, 1965, petitioner UP informed
above? respondent ALUMCO that it had, as of that date, considered as
rescinded and of no further legal effect the logging agreement
Ruling that they had entered in 1960. UP filed a complaint against
Yes, Article 1191 provides that the injured party may ALUMCO for the collection or payment of the herein before
choose between the fulfillment and rescission of the obligation, stated sums of money and it prayed for and obtained an order
with the payment of damages in either case. He may also seek for preliminary attachment and preliminary injunction restraining
rescission, even after he has chosen fulfillment, if the latter ALUMCO from continuing its logging operations in the Land
should become impossible. Grant. Respondent ALUMCO contended that it is only after a
final court decree declaring the contract rescinded for violation
In this case, the petitioner’s failure to pay the amount of its terms that U.P. could disregard ALUMCO's rights under
of 12,000 and the balance of 4,376 as stipulated in the contract the contract and treat the agreement as breached and of no
of sale within 45 days, the petitioner clearly committed a breach force or effect.
of contract which sufficiently and justly entitled the respondent
to ask rescission of the contract.

But the award of damage in the amount of 4,376 by the ISSUE: Whether or not petitioner U.P. can treat its
appellate court based on 30 per day of delay as a penalty clause contract with ALUMCO rescinded and may disregard the same
embodied in the agreement by the parties cannot be sustained, before any judicial pronouncement to that effect.
because this amount if part of the consideration that should be HELD: UP and ALUMCO had expressly stipulated in
paid by the petitioner. the "Acknowledgment of Debt and Proposed Manner of
Article 1191 only provide an option to the injured party Payments" that, upon default by the debtor ALUMCO, the
whether to choose the fulfillment of the contract or rescission of creditor (UP) has "the right and the power to consider, the
the contract, so the party cannot authorize to rescind the Logging Agreement as rescinded without the necessity of any
obligation and at the same time seek for its partial fulfillment. judicial suit." In connection with Article 1191 of the Civil Code,
the Court stated in Froilan vs. Pan Oriental Shipping Co that
“there is nothing in the law that prohibits the parties from
entering into agreement that violation of the terms of the
University of the Philippines v. De Los Angeles contract would cause cancellation thereof, even without court
intervention. In other words, it is not always necessary for the
G.R. No. L-28602 September 29, 1970
injured party to resort to court for rescission of the contract.”

It must be understood that the act of party in treating a contract

FACTS: On November 2, 1960, UP and ALUMCO as cancelled or resolved on account of infractions by the other
entered into a logging agreement under which the latter was contracting party must be made known to the other and is
granted exclusive authority, for a period starting from the date always provisional, being ever subject to scrutiny and review by
of the agreement to 31 December 1965, extendible for a further the proper court. If the other party denies that rescission is
period of five (5) years by mutual agreement, to cut, collect and justified, it is free to resort to judicial action in its own behalf, and
remove timber from the Land Grant, in consideration of payment bring the matter to court. Then, should the court, after due
to UP of royalties, forest fees, etc.; hearing, decide that the resolution of the contract was not
warranted, the responsible party will be sentenced to damages;
in the contrary case, the resolution will be affirmed, and the
consequent indemnity awarded to the party prejudiced.
That ALUMCO cut and removed timber therefrom but,
as of 8 December 1964, it had incurred an unpaid account of
P219,362.94, which, despite repeated demands, it had failed to
pay;
SANTOS VS. CA sale dated July 23, 1997 without the knowledge and consent of
petitioners. After which, a new title, i.e., TCT No. 62674, 20 to
GR. NO. 120820 the subject land was issued in the name of respondent Rowena.

FACTS: Santos spouses owned a house and lot in Better Living Due to foregoing, the petitioners prayed that: (1) the deed of
Subdivision, Paranaque which was mortgage in Rural Bank of sale dated July 23, 1997 be declared void ab initio (2) the
Salinas Inc. for a loan of P150k. The spouses offer to sell the subject land be reconveyed to petitioners ***
property to Carmen Caseda for P350K of P54k as
downpayment. Parties agreed with condition that Caseda will HELD:
pay the balance of the mortgage, the real state taxes, and the
electric water bills. The petition is granted. The contract to sell is rescissible
pursuant to ART. 1191.
Casedas complied with the conditions but when Santoses
seeing that Casedas lack the means to pay the remaining
installment and amortization of loan, they repossessed the The power to rescind obligations is implied in reciprocal
house and lot and so collected rentals. Casedas offered to pay
remaining balance but was not push through because Santoses ones, in case one of the obligors should not comply with what
wanted a higher price. Hence, Casedas praying Santoses to is incumbent upon him. [par.1]
execute final deed of conveyance over the property.

ISSUE: Whether there was a perfected contract of sale.

In the case at bar, respondent Rowena was in breach because,
HELD: No, in the absence of the transfer of ownership of the at the time the aforesaid deed of sale was executed on July 23,
property when it was not executed by the vendor in exchange 1997, the full price of the subject land was NOT YET FULLY
of the price paid, a contract of sale was not perfected as PAID. In computing the total amount paid by Rowena through
expressly provided under Article 1458. Transfer of ownership instalment, the court found that only P260,626.50 or 32.58% of
is essential element in the contract of sale, in its absence what the P800,000.00 purchase price was paid by Rowena.
transpired was “contract to sell” where in Ownership is reserved
by the vendor until full payment of the purchased price be made.
When the petitioner repossessed the disputed property for
Additionally, the court said that: As a general rule, "rescission
failure of private respondent to pay in full the purchased price
will not be permitted for a slight or casual breach of the contract,
they were merely enforcing the contract not rescinding it.
but only for such breaches as are substantial and fundamental
The SC granted the petition. as to defeat the object of the parties in making the agreement."
Rowena's act of transferring the title to the subject land in her
Summary: Casedas v santos rtc on was dismissed, CA name, without the knowledge and consent of petitioners and
reversed and set aside the RTC decision 1.granting plaintiff
appellant 90 days to pay the balance and obligations 2, ordering despite non-payment of the full price thereof, constitutes a
appeallee to restore possession of property to appellant. substantial and fundamental breach of the contract to sell.

SPS. TUMIBAY V. SPS. LOPEZ DOCTRINE:

In a contract to sell, the seller retains ownership of the property

until the buyer has paid the price in full. A buyer who covertly
FACTS: usurps the seller's ownership of the property prior to the full
payment of the price is in breach of the contract and the seller
Petitioners were the owners of the land subject to this case. On is entitled to rescission.
December 12, 1990, petitioners executed an SPA in favor of
Reynalda (Sister of Petitioner Aurora), to offer for sale the
subject land provided that the purchase price thereof should be
approved by Sps. Tumibay. Sometime in 1994, petitioners and
respondent Rowena Lopez (Daughter of Reynalda) agreed to
enter into an oral contract to sell over the subject land for the
price of P800,000.00 to be paid in 10 years through monthly
installments. Rowena paid first $1,000.00 to petitioner, followed
by 22 intermittent monthly instalments of $500.00 spanning
almost three years. After having paid a total of $10,000.00,
respondent Rowena called her mother, Reynalda, claiming that
she had already bought the subject land from petitioners. Using
the aforesaid SPA, Reynalda then transferred the title to the
subject land in respondent Rowena's name through a deed of
FRANCISCO vs. DEAC CONSTRUCTION rescind the contract to the extent that this is possible under the
circumstances.
G.R. No. 171312 February 4, 2008

The filing of a criminal case against respondent Dadula and the

Facts: subsequent filing of this civil case for rescission and damages
within a reasonable time after the Spouses Francisco had
learned that construction of their building commenced without
Spouses Francisco obtained the services of DEAC the necessary building permit and discovered that there were
Construction, Inc. to construct a 3-storey residential building on deviations from the building plan demonstrate the vigilance with
their lot located at Tondo, Manila for a contract price of P3.5M. which they guarded their rights.
As agreed upon, a down payment of P2,000,000.00 should be
paid upon signing of the contract of construction, and the
remaining balance of P1,500,000.00 was to be paid in two equal Article 1191 of the Civil Code provides that the power to rescind
installments: the first installment of P750,000.00 should be paid obligations is implied in reciprocal ones, in case one of the
upon completion of the foundation structure and the ground obligors should not comply with what is incumbent upon him.
floor, which amount would be used primarily for the construction The rescission referred to in this article, more appropriately
of the second floor to the roof deck while the final amount of referred to as resolution, is not predicated on injury to economic
P750,000.00 should be paid upon completion of the second interests on the part of the party plaintiff, but of breach of faith
floor up to the roof deck structure to defray the expenses by the defendant which is violative of the reciprocity between
necessary for finishing and completion of the building. the parties.19 The right to rescind may be waived, expressly or
impliedly.

The construction of the residential building commenced without

the necessary building permit. Because of this, the spouses Given the fact that the construction in this case is already 75%
Francisco were criminally charged with the violation of the complete, it is correct to order partial rescission only of the
National Building Code (PD 1096). To facilitate the approval of undelivered or unfinished portion of the construction. Equitable
the permit, the signatures of Guia Francisco were forged by considerations justify rescission of the portion of the obligation
DEAC’s representative. which had not been delivered.

The building inspector also observed, after periodic inspections TOPIC: ART 1192
of the construction site, that the contractor deviated on some
specifications from the approved plans. CASE: CAMUS VS PRICE INC. GR L-17858-9
JULY 18, 1962

The RTC ordered partial rescission since the subject building

was already 70% to 75% completed at the time of the FACTS: Camus and Price entered into a 10-year lease contract
proceedings. (April 1, 1951 to March 31, 1961), the former as the lessor and
the latter as the lessee, over a parcel of land with an area of
Issue: 1,700 square meters for a lawful business purpose.
WON partial rescission was properly ordered by the RTC? YES The lessor agreed to make the necessary filling, at his sole
Held: expense, within a year after signing of the contract, the vacant
portion of the lot along the river with an area of about 500 square
DEAC, to whom the obligation of securing the building permit meters, and to construct concrete stone walls with barbed wires.
pertained, should obviously have ensured compliance with the
requirements set forth by law. It should have informed the On the other hand, the lessee shall pay monthly rent, construct
Spouses that the building permit had not yet been issued factory building and warehouse, and that the buildings
especially that they had already received a substantial amount constructed shall be insured with a competent insurance
of money from the latter and had already started the company.
construction of the building. On January 19, 1954, the lessee filed an action for specific
performance against the lessor for the alleged failure of the
latter to comply with the terms in their lease contract. Three
Respondents’ mistake in identifying the exact location of the days after the filing of the lessee, the lessor filed an action for
property which led to the delay in the issuance of a building unlawful detainer against the lessee, allegedly due to the latter’s
permit and forgery of petitioner Guia Francisco’s signature on non-payment of rentals since February 16, 1953.
the building plan exhibits a proclivity for error and taking the
easy way out. The Spouses Francisco should be allowed to The Justice of the Peace court ruled in favor of the lessor,
ordering the lessee to vacate the premises. The lessor then filed
a motion for execution of the decision and was granted. Travel and was attended by a Margaret Mager. According to the
Thereafter, the lessee instituted certiorari proceedings. petitioner, they agreed to buy the said ticket after Mager
informed tham that there were no available seats at Amtrak, an
As submitted by the lessee, it was shown that the wall intercity passenger train service provider in the US. They were
constructed by the lessor is of “adobe” and has no barbed wire scheduled to leave for Newark on August 13, 1997 and return
fence and that the filled portion is lower by 40cm than the to San Diego on August 21, 1997.
average elevation of property. The lessor, however, admitted
his failure to make the filling and construction within the agreed Fernando requested Mager to reschedule the flight to
period. August 6, 1997, but Mager informed him that the flight to
Newark via Continental Airlines were already fully booked and
The cases filed by the parties were tried jointly in the RTC, and offered alternative flight by Frontier Air with a higher fare of 526
thus ordered the cancellation and return of the bond to the US dollar, Fernando requested for refund but Mager denied his
lessee, that lessee should insure the building and warehouse request as the ticket are non- refundable and the only option is
for P50, 000 within 1 month, and the lessor to fill up the low the re- issuance of new tickets within one year from the date the
portion of the leased premise within 6 months. The term of the ticket was originally issued.
lease was also fixed for 9 years, from compliance by the lessor
of his obligation. Fernando went to Greyhound station where he saw an
Amtrak station nearby and he made inquiries and he was told
Thereafter, the lessor appealed to the CA which later held that that there were seats available and he can travel anytime and
the contract shall be extinguished, but the parties were made to any day he pleased.
bear their own losses (art 1192). Subsequently, both parties
appealed. From Amtrak, he went to Mager and confronted the
same, telling her that she misled them into buying the tickets by
ISSUE: WON THE LAST SENTENCE OF ART 1192 misrepresenting that the Amtark was already fully booked.
SHALL BE APPLIED IN THIS CASE. Thus, he reiterated for demand of refund but Mager was firm
HELD: YES. that the ticket is non- refundable.

While it may be true that the duty imposed on the Lessor under Upon returning to the Philippines, he wrote a letter to
the contract, to increase the elevation of the low portion of the CAI demanding a refund and alleging Mager had deluded them
lot and erect thereon a concrete stone wall topped with barbed into purchasing the said tickets. But CAI, denied the said
wire was provided only to "facilitate or make use (by the Lessee) request and advised him that he may take the subject tickets
of the whole lot" — allegedly a subordinate and collateral anytime to any Continental ticketing location for re-issuance of
condition of the contract — it is not herein denied that such new tickets within 2 years and he may use the said ticket as a
condition was not complied with by the Lessor. And this form of payment for the purchased for another ticket with a re-
obligation matured in March, 1952. Even assuming, therefore, issuance fee.
that the Lessee's obligation to insure the building arose after the On June 17, 1999, he went to CAI ticketing office at
completion of the construction of the buildings in September, Makati, to have replaced to said tickets into a single round trip
1951, as the Lessor also defaulted in the performance of his ticket to LA, California under his name, but the ticketing office
corresponding duty, it cannot really be determined with informed him that the ticket of Lourdes was non- transferrable.
definiteness who of the parties committed the first infraction of Therefore, he cannot use that for the purchase of a ticket in his
the terms of the contract. Under the circumstances, the favor.
conclusion reached by the Court of Appeals, that the parties are
actually in pari delicto, must be sustained, and the contract
deemed extinguished, with the parties suffering their respective
losses.

GR No. 188288 Issue:

Spouses Fernando and Lourdes Viloria Vs. Whether or not the contract can be rescinded for a
slight or casual demand? So is CAI is allowed to refuse in
Continental Airlines, Inc. accepting the ticket of Lourdes for the purchase of a new ticket
for Fernando?
January 16, 2012

Reyes J;
Ruling

No, Article 1191 provides that the power to rescind

Facts: obligations is implied in reciprocal ones, in case the obligor
On 1997, Fernando and his Wife purchased a 2 round should not comply with what is incumbent upon him. The injured
trip ticket from San Diego California to Newark, New Jersey on party may choose between the fulfillment and the rescission of
Board Continental Airlines for 400 US Dollar each from Holiday the obligation, with the payment of damages in either case. He
may also seek rescission, even after he has chosen fulfillment, 2. the defendant Woodcraft Works, Ltd., entered into an
if the latter should become impossible. The court shall decree agreement with the plaintiff to purchase from the latter 300,000
the rescission claimed, unless there be a just cause authorizing board feet of Philippine round logs at P60.00 per thousand
the fixing of a period. board feet.

In this case, the CAI refused to apply the value of ticket 3. Due to bad weather conditions and the failure of the
of Lourdes for the Fernando’s purchase of a round trip ticket to defendant to send the necessary vessels to Dolores, Samar,
LA by arguing that the ticket is non- transferrable because the only 13,068 board feet of logs were delivered.
said ticket has written provision which state to the extent not in
conflict with the foregoing carriage and other services 4. the parties entered into a new contract. The previous
performed by each carrier are subject to: (a) provision contained one was cancelled, with the plaintiff waiving all his claims
in this ticket, carrier conditions of carriage and related thereunder. Certain advances which had been given by the
regulations which are made part hereof. defendant to the plaintiff, in the aggregate amount of P9,000.00,
were transferred to and considered as advances on the new
This provision in their ticket is ambiguous, they demand contract.
a certain condition and undertaking with its passengers that is
not clearly stipulated. 5. It was stipulated that the defendant would purchase
from the plaintiff 1,700,000 board feet of logs of the
But, the right to rescind is not absolute, as the general specifications stated in the contract — 1,300,000 board feet at
rule rescission of contract will not be permitted for a slight or P78.00 per thousand and the rest at P70.00. It was also agreed
casual breach. The endorsability of the ticket is not essential that the shipment was to be "before the end of July, but will not
part of the contract. commence earlier than April with the option to make partial
shipment depending on the availability of logs and vessels."
On the second issue, the CAI cannot refuse to apply
the value of Lourdes’ ticket as payment for Fernando’s 6. Of the quantity of logs agreed upon, only two
purchase of new ticket based on the vague provision on their shipments were made, one in March and the other in April,
ticket. CAI should exercise extraordinary diligence to inform its 1951, amounting to 333,832 board feet and 128,825 board feet,
passenger on the matter that their ticket is non- transferrable. respectively, or a total of 462,657 board feet.

The two parties were equally in default, hence non of 7. the plaintiff filed in the Court of First Instance of Leyte
them can seek judicial cancellation or resolution of the subject an action for rescission of the contract of January 22, 1951 and
contracts and they are therefore bound by their respective for recovery of damages in the sum of P155,000.00 by reason
obligation. As Article 1192 provides: of the defendant's failure to comply with its obligations.

In cases both parties have committed a breach of the 8. RTC - ordering the defendant to pay to the plaintiff for
obligation, the liability of the first infractor shall be equally actual damages suffered by the latter in the amount of
tempered by the courts. If it cannot be determined which the P145,623.03, plus the amount of P50,000.00 representing the
parties first violated the contract, the same shall be deemed plaintiff's actual loss of credit in the operation of his business,
extinguished and each shall bear his own damages. and, another sum of P5,000.00 as attorney's fees. The
defendant is likewise ordered to pay the costs
In this case, CAI’s liability for damages for its refusal to
accept Lourdes’ ticket for the purchase of Fernando’s round trip ISSUE: WHETHER OR NOT WOODCRAFT IS LIABLE.
ticket is offset by Spouse’s liability for their refusal to the pay the
amount which is not covered by the said tickets. But the contract HELD: YES
between them remains, the CAI is bound to issue new tickets The following circumstances show that it was appellant who
for a destination chosen by Spouses upon their surrender of the was obligated to furnish the vessel to receive the shipment of
subject tickets and the Spouses are obliged to pay whatever logs from appellee: (1) the provisions in the contract, particularly
amount is not covered by the value of the subject tickets. with respect to wharfage dues, demurrage and condition of the
G.R. No. L-18916 November 28, 1969 weather and of the ship's machinery, would have been of little
concern to appellant and would not have been imposed by it if
JOSE ABESAMIS, plaintiff-appellee, appellee were the one to furnish the vessel; (2)in the two
shipments of logs in March and April of 1961, the vessels were
vs. furnished by appellant;(3) in several telegraphic
WOODCRAFT WORKS, LTD., defendant-appellant communications between the parties, it was invariably appellee
who requested information as to the arrival of the vessels and it
was appellant who gave the information accordingly; and(4)
during the trial, it was appellant's witness who explained at
FACTS: length the failure of appellant to furnish the necessary vessels.
1. The plaintiff, doing business under the name "East Where the obligation is reciprocal and with a term,neither party
Samar Lumber Mills," was the owner of a timber concession and could demand performance nor incur in delay before the
sawmill located at Dolores, Samar. expiration of the term. In case of fortuitous event before the
expiration of the term,each party in such reciprocal obligation ISSUE:
bears his own loss.

Where appellant waived the benefit of the period by assuring

appellee that it would take delivery of the logs on June 25, 1951, Whether or not the parties agreed that the petitioner should
and appellee, on said date, was ready to comply with his part of have reasonable time to perform its part of the bargain
the obligation but appellant failed in its commitment, without any
satisfactory explanation for such failure, appellant should bear
the corresponding loss amounting to P7,685.26, representing RULING:
the value of appellee's logs lost while waiting for appellant's
vessel, the cost of rafting and other incidental expenses.

ON DAMAGES If the contract so provided, then there was a period fixed, a

“reasonable time;” and all that the court should have done was
By the end of July 1951 appellee had sufficient logs ready for to determine if that reasonable time had already elapsed when
shipment in accordance with the contract. But appellant, in spite suit was filed if it had passed, then the court should declare that
of the representations made by the former, failed to send a petitioner had breached the contract, as averred in the
vessel on the aforesaid date. There is no evidence that such complaint, and fix the resulting damages. On the other hand, if
failure was due to circumstances beyond appellant's control. As the reasonable time had not yet elapsed, the court perforce was
a result logs totalling 800,000 board feet were destroyed by bound to dismiss the action for being premature.
marine borers, causing a loss of P62,000.00, for which
appellant should be held liable.

The trial court sentenced appellant to pay P50,000.00 Article 1197 of the Civil Code involves a two-step process. The
representing appellee's loss of credit in the operation of his Court must first determine that “the obligation does not fix a
business. The decision does not say upon what evidence the period but from the nature and the circumstances it can be
award is based. Nor is there any attempt in appellee's brief to inferred that a period was intended”. The Court must then
justify the amount awarded. Actual or compensatory damages proceed to the second step, and decide what period was
must be established by clear evidence. In this case, other than “probably contemplated by the parties” So the Court cannot fix
a few letters of demand for payment of money accounts a period merely because in its opinion it is or should be
received by appellee from its creditors and presented as reasonable, but must set the time that the parties are shown to
exhibits, there is nothing to go upon, and the mere fact that such have intended.
demands were made does not necessarily prove loss of credit.
This item must therefore be eliminated.
In this connection, it is to be borne in mind that the contract
shows that the parties were fully aware that the land described
Araneta v. Philippine Sugar Estate Development Co. therein was occupied by squatters. As the parties must have
known that they could not take the law into their own hands, but
G.R. No. L-22558, 31 May 1967 must resort to legal processes in evicting the squatters, they
must have realized that the duration of the suits to be brought
would not be under their control nor could the same be
FACTS: determined in advance. The conclusion is thus forced that the
parties must have intended to defer the performance of the
obligations under the contract until the squatters were duly
evicted, as contended by the petitioner Gregorio Araneta, Inc.
J.M. Tuason & Co., Inc. through Gregorio Araneta, Inc. sold a
portion of their land to Philippine Sugar Estates Development
with a condition that the buyer will build a church in the said land
while the seller will construct a street within the property. The RADIOWEALTH FINANCE COMPANY vs. DEL ROSARIO
buyer had already finished building the church while the seller 335 SCRA 288
had failed to do the construction of the street in Northeast side
because a certain person was occupying its middle portion and
refused to vacate. FACTS:

Now the buyer filed a case in court contending that the seller Spouses Vicente & Maria Del Rosario jointly & severally
must evict the person occupying the property and finish the executed, signed and delivered in favor of Radiowealth Finance
construction. The seller now contends that the case was Company a promissory note for P138,948.
premature because it is without definite period. The lower court
then gave a two year period to seller to evict the squatter and to
construct the street.
Thereafter, respondents defaulted on the monthly installments.
Despite repeated demands, they failed to pay their obligation.
Petitioner filed a complaint for the collection of sum of money
before the RTC.

Trial court dismissed the complaint for the evidence presented

were merely hearsay.

CA reversed & remanded the case for further proceedings.

Petitioner claims that respondents are liable for the whole

amount of their debt and the interest thereon, after they
defaulted on the monthly installments. Respondents counter
that the installments were not yet due and demandable. They
theorize that the action for immediate enforcement of their
obligation is premature because its fulfillment is dependent on
the sole will of the debtor. Hence, they consider that the proper
court should first fix a period for payment, pursuant to Articles
1180 and 1197 of the Civil Code.

ISSUE:

WON the installments had already became due and

demandable? YES

HELD:

The act of leaving blank space the due date of the first
installment did not necessary mean that the debtors were
allowed to pay as & when they could. If this was the intention of
the parties, they should have so indicated in the promissory
note. However, it did not reflect any such intention.

While the specific date on which each installment would be due

was left blank, the note clearly provided that each installment
should be payable each month.

Furthermore, it also provided for an acceleration clause and a

late payment penalty, both of which showed the intention of the
parties that the installment should be paid at a definite date. Had
they intended that the debtors could pay as & when they could,
there would have been no need for these 2 clauses.

The installments had already became due & demandable is

bolstered by the fact that respondents started paying
installments on the promissory note. The obligation of the
respondents had matured & they clearly defaulted when their
checks bounced. Per the acceleration clause, the whole debt
became due one month after the date of the note because the
check representing their first installment bounced.