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Oblicon Digested Cases

Oblicon Digested Cases

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Categories:Types, Business/Law
Published by: Karen Cate Ilagan Pinto on Jul 05, 2012
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 Article 1191
Respondent-spouses Gil and Fernandina Galangobtained a loan from Fortune Savings and Loan Association to purchase a house and lot to securepayment, a real estate mortgage was thereforeconstituted on the said house and lot . In 1990, NHMFCpurchased the mortgage loan for P173,800. RespondentFernandina Galang authorized her atty-in-fact to sell thesubject house and lot. Petitioner Leticia Cannu agreed tobuy the property for P120,000 and to assume thebalance of the mortgage obligations with the NHMFCand with CERF Realty (developer of the property). Of the P120,000 full payments made by petitioner, abalance of P45,000 was left. A Deed of Sale with Assumption of Mortgage Obligation was entered into byand between respondent-spouses as vendors andpetitioners as vendees over the house and lot.Petitioners immediately took possession and occupiedthe house and lot.
The petitioners paid the “equity” or 
second mortgage to CERF Realty. Despite requestsfrom respondnents to pay the balance of P45,000 or inthe alternative to vacate the property in question,
petitioners refused to do so. Petitioner’s formal
assumption of mortgage was not approved by theNHMFC. Because of their failure to comply with their obligations, respondent Galang paid the remainingmortgage loan with NHMFC. Petitioners opposed therelease of TCT in favor of respondents insisting that thesubject property had already been sold to them.Consequently, NHMFC held in abeyance the release of said TCT. Thereupon, a complaint for specificperformance and damages was filed asking, amongother things, that petitioners be declared the owners of the property involved subject to reimbursements of theamount made by respondents in pre-terminating themortgage loan. In their counterclaim, they maintain thatthe acts of petitioners in not fully complying with their obligations, that is to pay the monthly amortizations withNHMFC, give rise to rescission of the Deed of Sale withcorresponding damages.
W/N the action for rescission is subsidiary.
The subsidiary character of the action for rescission applies to contracts enumerated in Art. 1381.The contract involved in the case is not one of thosementioned therein. The provision that applies in the caseat bar as Art. 1191 as there was violation of reciprocitybetween the parties.In the case at bar, the reciprocity between the partieswas violated when petitioners failed to fully pay thebalance of P45,000 to respondent-spouses and their failure to update their amortizations with the NHMFC.It is evident that the contract under consideration doesnot contain a provision authorizing its extrajudicialrescission in case one of the parties fails to comply withwhat is incumbent upon him. This being the case,respondents-spouses should have asked for judicialintervention to obtain a judicial declaration of rescission.But, considering that respondents-
spouses’ Answer with
Counterclaim seeks for the rescission of the Deed of Sale, it behooves the court to settle the matter once andfor all. Having found that petitioners seriously breachedthe contract, we, therefore, declare the same isrescinded in favor of respondents-spouses.There was no waiver on the part of petitioners todemand the rescission of the Deed of Sale. The fact therespondents-spouses accepted payments in installmentsdoes not constitute waiver on their part to exercise their right to rescind the deed of sale. It was only after petitioners stopped paying that respondents-spousesmoved to exercise their right to rescission when theypaid the outstanding balance of the mortgage loan withNHMFC. As a consequence of the rescission of the Deed of Sale,the parties should surrender whatever they may havereceived from the other. The parties should be restoredto their original situation.
Pagtalunan v. dela Cruz vda. de ManzanoFacts:
Patricio Pagtalunan, petitioner’s stepfather,
entered into a contract to sell with respondent, wife of 
former mechanic whereby the former agreedto sell and the latter to buy a house and lot. Theconsideration of P17,800 was agreed to be paid in the ff.manner: P1,500 as downpayment and the balance to bepaid in equal monthly installments of P150 until fullypaid. it was also stipulated in the contract that in case of default of paying the installments, the contract would beautomatically rescinded without need of judicialdeclaration and that all payments shall be considered asrentals for the use and occupation of the property.Petitioner claimed that respondent paid only P12,950.She allegedly stopped paying after Dec. 1979 without
any justification. Moreover, in a “
respondentborrowed P3,000 payable in one year either by lumpsum or by installments, failing which the balance of theloan would be added to the principal of the monthlyamortizations on the land. On the other hand,respondent alleged that she paid her monthlyinstallments religiously, until sometime in 1980 becauseshe and Patricio signed an agreement whereby he
consented to the suspension of respondent’s monthly
payments until Dec. 1981. Respondent did not deny thatshe still owed Patricio P5,650 but denied having
knowledge of the
. When Patricio and hiswife died, petitioner became their sole successor-in-interest pursuant to a waiver by the other heirs.
Respondent received a letter from petitioner’s counsel
demanding that she vacate the premises within 5 dayson the ground that her possession had become unlawful.
W/N the contract to sell was validly cancelled or rescinded under Sec 3 (b) of R.A. 6552.
R.A. 6552, otherwise known as the “RealtyInstallment Buyer Protection Act”, recognizes in
conditional sales of all kinds of real estate the right of theseller to cancel upon non-payment of an installment bythe buyer. However, the cancellation must be done inaccordance with Sec. 3 (b) of R.A. 6552, which requiresa notarial act of rescission and the refund of the buyer of the full payment of the cash surrender value of thepayments on the property. Actual cancellation of thecontract takes place after 30 days from receipt by thebuyer of the notice of cancellation or the demand for rescission of the contract by a notarial act upon fullpayment of the cash surrender value to the buyer.Based on the records of the case, the contract to sellwas not validly cancelled or rescinded under Sec 3 (b) of R.A. 6552.
The letter, which was written by petitioner’s counsel,
merely made formal demand upon respondent to vacatethe premises within 5 days from receipt thereof since
she had “long ceased to have any right to possess the
premises due to her failure to pay without justifiable
cause the installment payments.”
Clearly, the demandletter is not the same as the notice of cancellation or demand for rescission by a notarial act require by R.A.6552.In addition, the said act requires refund of the cashsurrender value of the payments on the property to thebuyer before cancellation of the contract. The provisiondoes not provide a diff. requirement for contracts to sellwhich allow possession of the property by the buyer upon execution of the contract like the instant case.Hence, petitioner cannot insist on compliance with therequirement by assuming that the cash surrender valuepayable to the buyer had been applied to rentals of theproperty after respondent failed to pay the installmentsdue. There being no valid cancellation of the contract tosell, respondent has the right to occupy the propertysubject of the contract to sell.
Macasaet v. R. Transport CorporationFacts:
R. Transport and Macasaet entered into a Deedof Sale with Assumption of Mortgage over 4 passenger buses whereby Macasaet undertook to pay theconsideration of P12M and assume the existingmortgage obligation on the said buses in favor of Phil.Hino Sales Corp. Accordingly, R. Transport delivered toMacasaet 2 passenger buses. Despite demands,however, Macasaet failed to pay the stipulatedpurchased price. This prompted R. Transport to file acomplaint seeking the issuance of a writ of replevin,praying for judgment declaring R. Transport as the lawfulowner and possessor of the passenger buses andordering Macasaet to remit the amount of P660,000representing the income generated by the 2 buses. Prior 
to the execution of the contract, “Special Trip Contract”
was entered into by the parties wherein it stipulated thatR. Transport would lease the 4 subject of the deed of sale to Macasaet for the sum of P10,000 a day per bus.For his defense, petitioner alleged that he had paidrespondent the full consideration of P12M and hadagreed to assume the mortgage obligation. He claimedownership over the 4 buses. He further contented thathe had already remitted P120,000 to respondent aspartial payment of the mortgage obligation. Petitioner admitted that he had been earning at least P7,000 per day on each bus. For his counterclaim, he prayed for thereturn of the bus units seized and the immediate deliveryof the other 2 units, as well as payment for damages.
W/N respondent has the right to rescind or cancel
the deed of sale in view of petitioner’s failure to pay
stipulated consideration.
The CA erred in stating that the deed of salewas not perfected, for it was. There was noconsummation though. However, the rescission or resolution of the deed of sale is in order.Being a consensual contract, sale is perfected at themoment there is a meeting of minds upon the thingwhich is the object of the contract and upon the price.From that moment, the parties may reciprocally demandperformance, subject to the provisions of the lawgoverning the form of contracts. A perfected contract of sale imposes reciprocal obligations on the partieswhereby the vendor obligates himself to transfer theownership of and to deliver a determinate thing to thebuyer who, in turn, is obligated to pay a price certain inmoney or its equivalent. Failure of either party to complywith his obligation entitles the other to rescission as thepower to rescind is implied in reciprocal obligations. Applying these legal precepts to the case at bar, we holdthat respondent has the right to rescind or cancel the
deed of sale in view of petitioner’s failure to
paystipulated consideration.Non-payment of the purchase price of propertyconstitutes a very good reason to rescind a sale for itviolates the very essence of the contract of sale. While itis preferable that respondent instead should have filedan action to resolve or cancel the deed as the right to doso must be invoked judicially, this shortcoming wascured when the complaint itself made out a case for rescission or resolution for failure of petitioner to complywith his obligation to pay the full purchase price.
 As previously noted, petitioner did not pay the fullpurchase price as stipulated in the contract whereasrespondent complied with its obligation when it deliveredthe 2 buses. A necessary consequence of rescission isrestitution with payment of damages under Art. 1191. Also, corollary to the rescission of the contract of sale isthe recovery of possession of the object thereof. Thus,
petitioner’s possession over the subject buses became
unlawful when upon demand for return, he wrongfullyretained possession over the same. As to damages, a party is entitled only up to suchcompensation for the pecuniary loss that he has dulyproven. Since the amount of damages was foundedmerely on speculations, we return to the provisions of the Special Trip Contract wherein the rental is fixed atP10,000 a day per bus. This duly executed contract waspresented, marked and formally offered in evidence. Thefact that Macasaet voluntarily signed the contractevinced his acquiescence to its terms, particularly theamount of rentals.
PLRA v. CAFacts:
Sometime in 1989, 12 principal retirees of PLRAorganized and registered with the SEC the PRAMAI. In1994, Atty. Collado, a principal retiree of PLRA,registered with the SEC another association, thePRAMA. After its incorporation, PRAMA executed
several MOAs with PLRA’s short
-listed banks to promote
the bank’s services among PRAMA members who werePLRA’s principal retirees
. In the MOAs, the banksagreed to pay PRAMA a marketing fee of ½ of 1% of the
total outstanding balance of the principal retirees’
deposits in the listed banks. In 1995, PLRA issued aresolution requiring PLRA principal retirees to becomePRAMA members. The resolution provided that PLRAwould collect the annual membership fees. WhenPRAMA transferred offices, PLRA remitted to PRAMAthe membership fees it collected from 1997 to 2000, allduly acknowledged and receipted by PRAMA.Subsequently, after collecti
ng PRAMA’s annual
membership fees since 1996, PLRA sent PRAMa aletter to the effect that it would continue to collect
PRAMA’s membership fees for a 5% service fee based
on total collections effective Jan. 2000. Thereafter, somederogatory remarks were leveled against PLRA byPRAMA, promptng PLRA to communicate its objectionsto PRAMA. In a meeting, the officers of PLRA andPRAMA tried to iron out their differences such asdiscrepancies in their respective records on the number of principal retirees and the actual annual membershipfee collections. PRAMA claimed that about 40% of itsmember-retirees had not paid their annual membershipdues. An account was sent by PRAMA to reconcile therecords of the member-retirees with the remittances toPRAMA, but said accountant complained she was notgiven all the records. Due to the discrepancies of their records, exchanges of letters between PRAMA andPLRA ensued. PLRA accused PRAMA of sowing seeds
of discontent and suspicion among PLRA’s pri
ncipalretirees, and of breach of the MOA. PLRA referred therescission of the MOA to the OGCC, which opined thatPLRA through its board of trustees could unilaterallyrescind the MOA. Consequently, the board resolved toterminate the MOA. Then, PRAMA instituted aComplaint for Specific Performance with Prayer for Preliminary Injunction against PLRA alleging that thetermination of the MOA was illegal and PLRA had yet toremit all membership fee collections covering 1996 to2000.
the courts may interfere with PLRA’s
decision to rescind in the exercise of its managementprerogatives.
Petitioner is mistaken to say that the courts
cannot interfere with the decision of corporation’s
officers and boards of trustees, nor can a party not beallowed to unilaterally rescind an agreement. The right torescind is provided for in Art. 1191:
power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. xxx The court shall decree the rescissionclaimed, unless there be just cause authorizing the fixing 
of a period.” 
Thus, even if a provision providing for a right to rescindis not in the agreement, a party may still rescind acontract should one obligor fail to comply with itsobligations.While PLRA may have the right to rescind the MOA,treat the contract as cancelled, and communicate therescission to PRAMA, the cancellation of the MOA is stillsubject to judicial scrutiny, should the cancellation becontested and brought to court.In
UP v. de los Angeles:
the party who deems thecontract violated may consider it resolved or rescinded,and act accordingly, without previous court action, but it 
 proceeds at its own risk. For it is only the final  judgment of the corresponding court that will and finally settles whether the action taken was or wasnot correct in law.
the instant case, PRAMA judicially questioned theunilateral rescission by PLRA, and the TC still has todetermine whether the unilateral rescission was justified.PLRA is wrong to say that the courts may not interferewith its decision to rescind in the exercise of itsmanagement prerogatives.
 Uniwide Holdings, Inc. v. Jandecs TransportationCo., Inc.Facts:
Petitioner Uniwide Holdings and respondentJandecs Transportation entered into a contract of 
“Assignment of Leasehold Rights” under which the latter was to operate food and snack stalls at petitioner’s
Uniwide Coastal Mall. The contract was for a period of 18 yrs. For a consideration of P2.4M. Respondent paid

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