Paguyo vs Astorga

Facts: Petitioners, Spouses Domingo Paguyo and Lourdes Paguyo were the owners of a 5-storey
building located at corner Makati Avenue and Valdez Streets, Makati City.
Meanwhile, Armas Family is the third party owner of the lot where the Paguyo Building stand
was subject for civil case which have been decided by the RTC Makati Branch 57 settling in a
compromise agreement with a prescribed amount for the consideration of its ownership in
favour of the Paguyo spouses.
On November 29 1988, Lourdes Paguyo entered in an agreement with Pierre Astorga for the
sale of the former’s property (5 storey building) including the lot to be purchase from the
Armases. This move was done in order to raise fund needed to be paid for the Armases’ lot. On
the same date, the petitioner received P50,000 as earnest money for the sale of her property.
Unfortunately, despite of the full financial support given by the respondents, the petitioner
failed to acquire the lot in question.
On December 12 1988, the petitioner asked for and were given another P50,000 by the
respondents to which was badly needed by the former to finance their construction business.
Eventually, proposed the separate sale of the building in question while the effort to purchase
the lot is on-going and the respondents were assured of its success.
On January 5, 1989, the parties executed four documents namely; Deed of Absolute Sale, Deed
of Real Estate Mortgage, Mutual Understanding, and Deed of Assignment of Rights and
Interest. Pursuant to their agreement particularly in Mutual understanding, the respondent
filed for the ejectment case before the MTC where they obtained favourable decision.
On October 1989, petitioners filed for the recession of their agreement on the contention that
the respondents led them to the wrong belief the respondents will advance the amount needed
by the petitioner to be paid for the Armases but instead the respondents stopped the said
payment. Respondents in their answer as gleaned from the agreements that their original
purpose was the purchase of the building and the lot which it stands. They added that at that
time , the petitioners are in dire need of the amount to finance their construction business and
the balance to the Armases. It was on July 1989 when the petitioner asked the respondents to
execute the check amounting to P917,470.00 for the final execution of the Deed of Conveyance
of the lot. However, the respondent stopped the payment of check upon knowing that the
petitioners have no rights over the lot in question which was already transferred to the Bacani
spouses.
The RTC dismissed the complaint of the petitioners dated April 21 1994. The CA also affirmed
the decision of the lower court. The Supreme Court affirmed the decision of the appellate court
with modifications on the amounts of damages and attorney’s fee.
ISSUE:
Whether or not the petitioners could rescind the agreement by claiming as the injured party or
party on a disadvantage.
HOLDING:
No. Neither does the fact that the subject contracts have been prepared by respondents ipso
facto entail that their validity and legality be strictly interpreted against them. Petitioner
Lourdes Paguyo’s insinuation that she was disadvantaged will not hold.
True, Article 24 of the New Civil Code provides that “(i)n all contractual, property or other
relations, when one of the parties is at a disadvantage on account of his moral dependence,
ignorance, indigence, mental weakness, tender age or other handicap, the courts must be
vigilant for his protection.”
Thus, the validity and/or enforceability of the impugned contracts will have to be determined
by the peculiar circumstances obtaining in each case and the situation of the parties concerned.
Here, petitioner Lourdes Paguyo, being not only cultured but a person with great business
acumen as well, cannot claim to be the weaker or disadvantaged party in the subject contract
so as to call for a strict interpretation against respondents. More importantly, the parties herein
went through a series of negotiations before the documents were signed and executed.