1.

POWER COMMERCIAL INDUSTRIAL vs COURT OF APPEALS

FACTS:

On January 31, 1979, petitioner entered into a contract of sale with assumption of mortgage over
612 sq. m. parcel of land located in Makati City with the Sps. Quiambao. Said land will be used
as petitioner’s office space and warehouse. The parties agreed that the amount of P108,000 will
be paid by the petitioner as down payment, while the balance of P295,000 will be paid upon the
execution of the contract. The petitioner likewise assumed the existing mortgage of the subject
land in the amount of P79,145.77, as part of the purchase price, in favour of PNB. On June 1,
1979, Sps. Quiambao mortgaged again the subject land to PNB to guarantee a loan of P145,000.
Payment of the loan was assumed by the petitioner. A Deed of Absolute Sale With Assumption
of Mortgage was executed on June 26, 1979 between the parties, a copy of which was submitted
to PNB with a formal application for assumption of the mortgage by the petitioner.

However, on February 15, 1980, PNB informed Sps. Quiambao that since petitioner failed to
submit the necessary documents for the approval of the latter’s application for assumption of
mortgage, the same was considered withdrawn; hence, the outstanding balance of P145,000 was
deemed fully due and demandable, and must be settled within 15 days from notice.

Petitioner paid PNB the total amount of P62,163.59 which was applied to the outstanding loan. A
letter was also sent by the petitioner to PNB demanding that as buyers and new owners of the
subject property, mortgage and title over the same shall be transferred in their names, and that all
people occupying the same shall be evicted therefrom immediately. PNB, in return, requested
petitioner to settle its obligation.

An action for rescission and damages was then filed by the petitioner against Sps. Quiambao
before the RTC of Pasig. Petitioner likewise demanded the return of its payments made in favour
of PNB on the ground of non-approval of its assumption of mortgage. During the pendency of
the case, PNB foreclosed the mortgage and the subject property was awarded in favour of PNB
during public auction. Hence, an amended complaint was filed impleading PNB as party
defendant.

The trial court ruled in favour of the petitioner, but was reversed by the CA.

ISSUES:

a. Whether or not there was a substantial breach of the contract between the parties
warranting rescission.

b. Whether or not there was a “mistake in payment” made by petitioner, obligating PNB to
return such payment.
RULING:

a. The court ruled in the negative.

There was no stipulation in the contract imposing a condition or an obligation to Sps. Quiambao
to eject the lessees from the subject property. Absent any provision therefor, it cannot be said
that it was the parties’ intention to make its nonfulfillment a ground for rescission. As a rule,
rescission was sought on the ground that either of the parties in the contract had failed to fulfil
their obligations. Hence, rescission is not proper absent any provision in the contract obligating
the parties to perform a certain act.

Likewise, rescission is not allowed on the ground that Sps. Quiambao failed to deliver the lot in
favour of the petitioner. The facts of the case had shown that a Deed of Absolute Sale With
Assumption of Mortgage was executed by Sps. Quiambao in favour of the petitioner. Execution
of the deed of sale is deemed equivalent to delivery which authorizes the buyer to use it as proof
of its ownership.

b. The court ruled in the negative.

The quasi-contract of solutio indebiti is based on the principle that no one shall enrich himself
unjustly at the expense of another. In the present case, there is no unjust enrichment since
payment of the loan to PNB was an obligation assumed by the petitioner under the contract of
sale it entered into with Sps. Quiambao. Petitioner was under obligation to pay the amortizations
on the mortgage to PNB.