BARCOMA, Diana Mae C.

ACC 216 / 11:00 AM – 12:00 PM

Prof. Ignacio August 04, 2019

CASE DIGEST

SWIRE REALTY DEVELOPMENT CORPORATION, PETITIONER, VS.

JAYNE YU, RESPONDENT

G.R. No. 207133

March 9. 2015

TOPIC: Rescissible Contracts

FACTS

Respondent Jayne Yu and petitioner Swire Realty Development Corporation

entered into a Contract to sell covering one residential condominium unit in Makati
city, as well as a parking spot in the said condominium. However, despite the
respondent’s full payment of the purchase price, its interest, as well as the down
payment for the parking slot, the petitioner failed to complete and deliver the subject
unit on time. Hence, the respondent filed a Complaint for Rescission of Contract with
Damages before HLURB Expanded National Capital Region Field Office (ENCRFO),
until it reached the HLURB Board of Commissioners, Court of Appeals and Supreme
Court.

ISSUE

WHETHER OR NOT RESCISSION OF THE CONTRACT IS PROPER IN

THE INSTANT CASE

RULINGS

Decision of the HLURB-ENCRFO

The HLURB-ENCRFO dismissed the respondent’s complaint, which disposed

the case as follows: (1) to finish the subject unit (2) to pay the respondent the
following: compensatory damages in the unit, moral damages and attorney fees.
BARCOMA, Diana Mae C. ACC 216 / 11:00 AM – 12:00 PM
Prof. Ignacio August 04, 2019
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.

Decision of the HLURB Board of Commissioners

The HLURB Board of Commissioners reversed the former ruling, declaring

the rescission of the contract and directing petitioner to pay respondent’s attorney
fees as well as administrative fines.

At the time of the ocular inspection conducted by the HLURB ENCRFO, the
unit was not yet completely finished as the kitchen cabinets and fixtures were not yet
installed and the agreed amenities were not yet available. The delay for the
completion of the project in accordance with the license to sell also renders the
petitioners liable for the payment of the administrative fine.

Decision of Court of Appeals

The CA affirmed the ruling HLURB Board of Commissioners.

The CA found it apparent that the petitioner has indeed committed delay in
the performance of the obligation, which is to finish and deliver the subject unit to the
respondent within the stipulated period. This results to a breach of contract made by
the petitioner.

Decision of Supreme Court

The Supreme Court affirmed the ruling of the CA, with modification for the
amount of moral damages to be paid by the petitioners.

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. The court shall decree the rescission if the
breach is found without just cause. The delays in the completion of the project as
well as in the delivery of the unit are breaches of statutory and contractual
obligations which entitle the respondent to rescind the contract, demand a refund,
and payment of damages.