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Republic of the Philippines


G.R. No. 97347 July 6, 1999
JAIME G. ONG, petitioner,
ALEJAN$RO M. ROBLES,respondents.

efore us is a petition for revie! on certiorari fro" the #ud$"ent rendered b% the &ourt
of 'ppeals !hich, e(cept as to the a!ard of e(e"plar% da"a$es, affir"ed the decision
of the Re$ional Trial &ourt of )ucena &it%, ranch *+, settin$ aside the ,'$ree"ent of
Purchase and Sale, entered into b% herein petitioner and private respondent spouses in
&ivil &ase No. -./-..1âwphi1.nêt
On Ma% 0+, 01-2, petitioner 3ai"e On$, on the one hand, and respondent spouses
Mi$uel 4. Robles and 'le#andra Robles, on the other hand, e(ecuted an ,'$ree"ent of
Purchase and Sale, respectin$ t!o parcels of land situated at arrio Puri, San 'ntonio,
5ue6on. The ter"s and conditions of the contract read7,
0. That for and in consideration of the a$reed purchase price of T8O MI))ION P9SOS
:P;,+++,+++.++<, Philippine currenc%, the "ode and "anner of pa%"ent is as follo!s7
'. The initial pa%"ent of SI= >?NDR9D T>O?S'ND P9SOS :P*++,+++.++< as
verball% a$reed b% the parties, shall be bro@en do!n as follo!s7
0. P0+2,A11.10 shall be paid, and as alread% paid b% the BUYER to theSELLERS on
March ;;, 01-2, as stipulated under the Certification of undertaking dated March ;;,
01-2 and covered b% a chec@ of even date.
;. That the su" of PA1*,.++.+1 shall be paid directl% b% the BUYER to the an@ of
Philippine Islands to ans!er for the loan of the SELLERS !hich as of March 0., 01-2
a"ounted to P.2B,20+.0+, and for the interest that "a% accrued :sic< fro" March 0.,
01-2, up to the ti"e said obli$ation of theSELLERS !ith the said ban@ has been
settled, provided ho!ever that the a"ount in e(cess of PA1*,.++.+1, shall be
char$eable fro" the ti"e deposit of the SELLERS !ith the aforesaid ban@.
. That the balance of ON9 MI))ION FO?R >?NDR9D T>O?S'ND :P0,A++,+++.++<
P9SOS shall be paid b% the BUYER to the SELLERS in four :A< eCual Cuarterl%
install"ents of T>R99 >?NDR9D FIFTD T>O?S'ND P9SOS :P2.+,+++.++<, the first
to be due and pa%able on 3une 0., 01-2, and ever% Cuarter thereafter, until the !hole
a"ount is full% paid, b% these presents pro"ise to sell to said ?D9R the t!o :;<
parcels of a$ricultural land includin$ the rice "ill and the pi$$er% !hich are the "ost
notable i"prove"ents thereon, situated at aran$a% Puri, San 'ntonio 5ue6on, . . .
;. That upon the pa%"ent of the total purchase price b% the BUYER the SELLERS bind
the"selves to deliver to the for"er a $ood and sufficient deed of sale and conve%ance
for the described t!o :;< parcels of land, free and clear fro" all liens and
2. That i""ediatel% upon the e(ecution of this docu"ent, the SELLERS shall deliver,
surrender and transfer possession of the said parcels of land includin$ all the
i"prove"ents that "a% be found thereon, to the BUYER, and the latter shall ta@e over
fro" the SELLER the possession, operation, control and "ana$e"ent of the RI&9MI))
and PIEE9RD found on the aforesaid parcels of land.
A. That all pa%"ents due and pa%able under this contract shall be effected in the
residence of theSELLERS located at aran$a% Puri, San 'ntonio, 5ue6on unless
another place shall have been subseCuentl% desi$nated b% both parties in !ritin$.
((( ((( (((
On Ma% 0., 01-2, petitioner On$ too@ possession of the sub#ect parcels of land
to$ether !ith the pi$$er%, buildin$, rice"ill, residential house and other i"prove"ents
Pursuant to the contract the% e(ecuted, petitioner paid respondent spouses the su" of
b% depositin$ it !ith the ?nited &oconut Planters an@. SubseCuentl%,
petitioner deposited su"s of "one% !ith the an@ of Philippine Islands :PI<,
accordance !ith their stipulation that petitioner pa% the loan of respondents !ith PI.
To ans!er for his balance of P0,A++,+++.++ petitioner issued four :A< post/dated Metro
an@ chec@s pa%able to respondent spouses in the a"ount of P2.+,++++.++ each,
na"el%7 &hec@ No. 0.BB+- dated 3une 0., 01-2,
&hec@ No. 0.BB+1 dated Septe"ber
0., 01-2,
&hec@ No. 0.BB0+ dated Dece"ber 0., 01-2
and &hec@ No. 0.BB00
dated March 0., 01-A.
8hen presented for pa%"ent, ho!ever, the chec@s !ere
dishonored due to insufficient funds. Petitioner pro"ised to replace the chec@s but
failed to do so. To "a@e "atters !orse, out of the PA1*,.++.++ loan of respondent
spouses !ith the an@ of the Philippine Islands, !hich petitioner, as per a$ree"ent,
should have paid, petitioner onl% "ana$ed to dole out no "ore than P212,*B1.*+.
8hen the ban@ threatened to foreclose the respondent spousesF "ort$a$e, the% sold
three transfor"ers of the rice "ill !orth P.0,A00.++ to pa% off their outstandin$
obli$ation !ith said ban@, !ith the @no!led$e and confor"it% of petitioner.
in return, voluntaril% $ave the spouses authorit% to operate the rice "ill.
>e, ho!ever,
continued to be in possession of the t!o parcels of land !hile private respondents !ere
forced to use the rice "ill for residential purposes.
On 'u$ust ;, 01-., respondent spouses, throu$h counsel, sent petitioner a de"and
letter as@in$ for the return of the properties. Their de"and !as left unheeded, so, on
Septe"ber ;, 01-., the% filed !ith the Re$ional Trial &ourt of )ucena &it%, ranch *+, a
co"plaint for rescission of contract and recover% of properties !ith da"a$es. )ater,
!hile the case !as still pendin$ !ith the trial court, petitioner introduced "a#or
i"prove"ents on the sub#ect properties b% constructin$ a co"plete fence "ade of
hollo! bloc@s and e(pandin$ the pi$$er%. These pro"pted the respondent spouses to
as@ for a !rit of preli"inar% in#unction.
The trial court $ranted the application and
en#oined petitioner fro" introducin$ i"prove"ents on the properties e(cept for
On 3une 0, 01-1 the trial court rendered a decision, the dispositive portion of !hich
reads as follo!s7
IN VI98 OF T>9 FOR9EOINE, #ud$"ent is hereb% rendered7
a< Orderin$ that the contract entered into b% plaintiff spouses Mi$uel 4. Robles and
'le#andra M. Robles and the defendant, 3ai"e On$ captioned ,'$ree"ent of Purchase
and Sale,, "ar@ed as 9(hibit ,', set asideG
b< Orderin$ defendant, 3ai"e On$ to deliver the t!o :;< parcels of land !hich are the
sub#ect "atter of 9(hibit ,', to$ether !ith the i"prove"ents thereon to the spouses
Mi$uel 4. Robles and 'le#andro M. RoblesG
c< Orderin$ plaintiff spouses, Mi$uel Robles and 'le#andra Robles to return to 3ai"e
On$ the su" of PA1B,0B1..0G
d< Orderin$ defendant 3ai"e On$ to pa% the plaintiffs the su" of P0++,+++.++ as
e(e"plar% da"a$esG and
e< Orderin$ defendant 3ai"e On$ to pa% the plaintiffs spouses Mi$uel 4. Robles and
'le#andra Robles the su" of P;+,+++.++ as attorne%Fs fees and liti$ation e(penses.
The "otion of the plaintiff spouses Mi$uel 4. Roles and 'le#andra Robles for the
appoint"ent of receivership is rendered "oot and acade"ic.
Fro" this decision, petitioner appealed to the &ourt of 'ppeals, !hich affir"ed the
decision of the Re$ional Trial &ourt but deleted the a!ard of e(e"plar% da"a$es. In
affir"in$ the decision of the trial court, the &ourt of 'ppeals noted that the failure of
petitioner to co"pletel% pa% the purchase price is a substantial breach of his obli$ation
!hich entitles the private respondents to rescind their contract under 'rticle 0010 of the
Ne! &ivil &ode. >ence, the instant petition.
't the outset, it "ust be stated that the issues raised b% the petitioner are $enerall%
factual in nature and !ere alread% passed upon b% the &ourt of 'ppeals and the trial
court. Ti"e and a$ain, !e have stated that it is not the function of the Supre"e &ourt to
assess and evaluate all over a$ain the evidence, testi"onial and docu"entar%,
adduced b% the parties to an appeal, particularl% !here, such as in the case at bench,
the findin$s of both the trial court and the appellate court on the "atter coincide. There
is no co$ent reason sho!n that !ould #ustif% the court to discard the factual findin$s of
the t!o courts belo! and to superi"pose its o!n.
The onl% pertinent le$al issues raised !hich are !orth% of discussion are :0< !hether
the contract entered into b% the parties "a% be validl% rescinded under 'rticle 0010 of
the Ne! &ivil &odeG and :;< !hether the parties had novated their ori$inal contract as
to the ti"e and "anner of pa%"ent.
Petitioner contends that 'rticle 0010 of the Ne! &ivil &ode is not applicable since he
has alread% paid respondent spouses a considerable su" and has therefore
substantiall% co"plied !ith his obli$ation. >e cites 'rticle 02-2 instead, to the effect
that !here specific perfor"ance is available as a re"ed%, rescission "a% not be
resorted to.
' discussion of the aforesaid articles is in order.
Rescission, as conte"plated in 'rticles 02-+, et seq., of the Ne! &ivil &ode, is a
re"ed% $ranted b% la! to the contractin$ parties and even to third persons, to secure
the reparation of da"a$es caused to the" b% a contract, even if this should be valid, b%
restoration of thin$s to their condition at the "o"ent prior to the celebration of the
It i"plies a contract, !hich even if initiall% valid, produces a lesion or a
pecuniar% da"a$e to so"eone.
On the other hand, 'rticle 0010 of the Ne! &ivil &ode refers to rescission applicable to
reciprocal obli$ations. Reciprocal obli$ations are those !hich arise fro" the sa"e
cause, and in !hich each part% is a debtor and a creditor of the other, such that the
obli$ation of one is dependent upon the obli$ation of the other.
The% are to be
perfor"ed si"ultaneousl% such that the perfor"ance of one is conditioned upon the
si"ultaneous fulfill"ent of the other. Rescission of reciprocal obli$ations under 'rticle
0010 of the Ne! &ivil &ode should be distin$uished fro" rescission of contracts under
'rticle 02-2. 'lthou$h both presuppose contracts validl% entered into and subsistin$
and both reCuire "utual restitution !hen proper, the% are not entirel% identical.
8hile 'rticle 0010 uses the ter" ,rescission,, the ori$inal ter" !hich !as used in the
old &ivil &ode, fro" !hich the article !as based, !as ,resolution.
, Resolution is a
principal action !hich is based on breach of a part%, !hile rescission under 'rticle 02-2
is a subsidiar% action li"ited to cases of rescission for lesion under 'rticle 02-0 of the
Ne! &ivil &ode, !hich e(pressl% enu"erates the follo!in$ rescissible contracts7
0. Those !hich are entered into b% $uardians !henever the !ards !ho" the%
represent suffer lesion b% "ore than one fourth of the value of the thin$s !hich are the
ob#ect thereofG
;. Those a$reed upon in representation of absentees, if the latter suffer the lesion
stated in the precedin$ nu"berG
2. Those underta@en in fraud of creditors !hen the latter cannot in an% "anner collect
the clai"s due the"G
A. Those !hich refer to thin$s under liti$ation if the% have been entered into b% the
defendant !ithout the @no!led$e and approval of the liti$ants or of co"petent #udicial
.. 'll other contracts speciall% declared b% la! to be sub#ect to rescission.
Obviousl%, the contract entered into b% the parties in the case at bar does not fall under
an% of those "entioned b% 'rticle 02-0. &onseCuentl%, 'rticle 02-2 is inapplicable.
Ma% the contract entered into bet!een the parties, ho!ever, be rescinded based on
'rticle 0010H
' careful readin$ of the partiesF ,'$ree"ent of Purchase and Sale, sho!s that it is in
the nature of a contract to sell, as distin$uished fro" a contract of sale. In a contract of
sale, the title to the propert% passes to the vendee upon the deliver% of the thin$ soldG
!hile in a contract to sell, o!nership is, b% a$ree"ent, reserved in the vendor and is
not to pass to the vendee until full pa%"ent of the purchase price.
In a contract to
sell, the pa%"ent of the purchase price is a positive suspensive condition, the failure of
!hich is not a breach, casual or serious, but a situation that prevents the obli$ation of
the vendor to conve% title fro" acCuirin$ an obli$ator% force.
Respondents in the case at bar bound the"selves to deliver a deed of absolute sale
and clean title coverin$ the t!o parcels of land upon full pa%"ent b% the bu%er of the
purchase price of P;,+++,+++.++. This pro"ise to sell !as sub#ect to the fulfill"ent of
the suspensive condition of full pa%"ent of the purchase price b% the petitioner.
Petitioner, ho!ever, failed to co"plete pa%"ent of the purchase price. The non/
fulfill"ent of the condition of full pa%"ent rendered the contract to sell ineffective and
!ithout force and effect. It "ust be stressed that the breach conte"plated in 'rticle
0010 of the Ne! &ivil &ode is the obli$orFs failure to co"pl% !ith an
Failure to pa%, in this instance, is not even a breach but "erel% an event
!hich prevents the vendorFs obli$ation to conve% title fro" acCuirin$ bindin$
>ence, the a$ree"ent of the parties in the case at bench "a% be set aside, but
not because of a breach on the part of petitioner for failure to co"plete pa%"ent of the
purchase price. Rather, his failure to do so brou$ht about a situation !hich prevented
the obli$ation of respondent spouses to conve% title fro" acCuirin$ an obli$ator% force.
Petitioner insists, ho!ever, that the contract !as novated as to the "anner and ti"e of
8e are not persuaded. 'rticle 0;1; of the Ne! &ivil &ode states that, ,In order that an
obli$ation "a% be e(tin$uished b% another !hich substitutes the sa"e, it is i"perative
that it be so declared in uneCuivocal ter"s, or that the old and the ne! obli$ations be
on ever% point inco"patible !ith each other.,
Novation is never presu"ed, it "ust be proven as a fact either b% e(press stipulation
of the parties or b% i"plication derived fro" an irreconcilable inco"patibilit% bet!een
the old and the ne! obli$ation.
Petitioner cites the follo!in$ instances as proof that
the contract !as novated7 the retrieval of the transfor"ers fro" petitionerFs custod%
and their sale b% the respondents to M9R')&O on the condition that the proceeds
thereof be accounted for b% the respondents and deducted fro" the price of the
contractG the ta@e/over b% the respondents of the custod% and operation of the rice
"illG and the continuous and re$ular !ithdra!als b% respondent Mi$uel Robles of
install"ent su"s per vouchers :9(hs. ,-, to ,AB,< on the condition that these
install"ents be credited to petitionerFs account and deducted fro" the balance of the
purchase price.
&ontrar% to petitionerFs clai", records sho! that the parties never even intended to
novate their previous a$ree"ent. It is true that petitioner paid respondents s"all su"s
of "one% a"ountin$ to PA-,*-+.++, in contravention of the "anner of pa%"ent
stipulated in their contract. These install"ents !ere, ho!ever, ob#ected to b%
respondent spouses, and petitioner replied that these represented the interest of the
principal a"ount !hich he o!ed the".
Records further sho! that petitioner a$reed
to the sale of M9R')&O transfor"ers b% private respondents to pa% for the balance
of their subsistin$ loan !ith the an@ of Philippine Islands. PetitionerFs letter of
authori6ation reads7
((( ((( (((
?nder this authorit%, it is "utuall% understood that !hatever pa%"ent received fro"
M9R')&O as pa%"ent to the transfro"ers !ill be considered as partial pa%"ent of the
undersi$nedFs obli$ation to Mr. and Mrs. Mi$uel 4. Robles.
The sa"e !ill be utili6ed as partial pa%"ent to e(istin$ loan !ith the an@ of Philippine
It is also "utuall% understood that this pa%"ent to the an@ of Philippine Islands !ill be
rei"bursed to Mr. and Mrs. Mi$uel 4. Robles b% the undersi$ned. I9"phasis
It should be noted that !hile it !as. a$reed that part of the purchase price in the su" of
PA1*,.++.++ !ould be directl% deposited b% petitioner to the an@ of Philippine Islands
to ans!er for the loan of respondent spouses, petitioner onl% "ana$ed to deposit
P212,*B1.*+. 8hen the ban@ threatened to foreclose the properties, petitioner
apparentl% could not even raise the su" needed to forestall an% action on the part of
the ban@. &onseCuentl%, he authori6ed respondent spouses to sell the three :2<
transfor"ers. >o!ever, althou$h the parties a$reed to credit the proceeds fro" the
sale of the transfor"ers to petitionerFs obli$ation, he !as supposed to rei"burse the
sa"e later to respondent spouses. This can onl% "ean that there !as never an
intention on the part of either of the parties to novate petitionerFs "anner of pa%"ent.
Petitioner contends that the parties verball% a$reed to novate the "anner of pa%"ent
!hen respondent spouses proposed to operate the rice "ill on the condition that the%
!ill account for its earnin$s. 8e find that this is unsubstantiated b% the evidenced on
the record. The tenor of his letter dated 'u$ust 0;, 01-A to respondent spouses, in fact,
sho!s that petitioner had a ,little "isunderstandin$, !ith respondent spouses !ho" he
!as evidentl% tr%in$ to appease b% authori6in$ the" to continue te"poraril% !ith the
operation of the rice "ill. &learl%, !hile petitioner "i$ht have !anted to novate the
ori$inal a$ree"ent as to his "anner of pa%"ent, the records are bereft of evidence that
respondent spouses !illin$l% a$reed to "odif% their previous arran$e"ent.
In order for novation to ta@e place, the concurrence of the follo!in$ reCuisites is
indispensable7 :0< there "ust be a previous valid obli$ationG :;< there "ust be an
a$ree"ent of the parties concerned to a ne! contractG :2< there "ust be the
e(tin$uish"ent of the old contractG and :A< there "ust be the validit% of the ne!
The aforesaid reCuisites are not found in the case at bench. The
subseCuent acts of the parties hardl% de"onstrate their intent to dissolve the old
obli$ation as a consideration for the e"er$ence of the ne! one. 8e repeat to the point
of triteness, novation is never presu"ed, there "ust be an e(press intention to novate.
's re$ards the i"prove"ents introduced b% petitioner to the pre"ises and for !hich he
clai"s rei"burse"ent, !e see no reason to depart fro" the rulin$ of the trial court and
the appellate court that petitioner is a builder in bad faith. >e introduced the
i"prove"ents on the pre"ises @no!in$ full% !ell that he has not paid the consideration
of the contract in full and over the vi$orous ob#ections of respondent spouses.
Moreover, petitioner introduced "a#or i"prove"ents on the pre"ises even !hile the
case a$ainst hi" !as pendin$ before the trial court.
The a!ard of e(e"plar% da"a$es !as correctl% deleted b% the &ourt of 'ppeals in as
"uch as no "oral, te"perate, liCuidated or co"pensator% da"a$es in addition to
e(e"plar% da"a$es !ere a!arded.
8>9R9FOR9, the decision rendered b% the &ourt of 'ppeals is hereb% 'FFIRM9D
!ith the MODIFI&'TION that respondent spouses are ordered to return to petitioner
the su" of PA-,*-+.++ in addition to the a"ounts alread% a!arded. &osts a$ainst