67. Swire Realty Dev’t Corp. vs. Jayne Yu| G.R. No.

207133 | Mar 9, 2015

Nature of the Case: Recission of Contracts. Swire appeals to the decision of HLURB Board of
Commissioners. SC favors Yu, affirms CA’s decision

Facts: Respondent Yu and Petitioner Swire Realty Dev’t Corp (Swire) entered into a contract of sale
on July 25, 1995 covering a residential condo located in Palace of Makati for a total price of
P7,518371.80 payable in equal monthly instalments until Sept 24, 1997. Yu also purchased a parking
lot in the same building for P600,000. On Sept 24, 1997, YU paid the full purchase price of
P7,519,371.80 for the condo while making a DP of P20,000 for the parking lot. However, Swire failed
to complete the delivery of the unit on time. This prompted Yu to file a complaint for rescission of
contract with damages before HLURB.
HLRUB dismissed the complaint holding that the rescission is not permitted for slight or casual breach
of contract. This was appealed by Yu to the HLURB Board of commissioners in which it overturned
the lower body’s decision

Case was moved to the Office of the President (OP) which was also dismissed Swire’s petition. CA
affirmed the OP’s decision Hence, this case.

Issue: Whether Yu can enforce his right to rescind the contract in this case.

Ruling: Yes, Yu can rescind the contract of sale.

Article 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors
should not comply with what is incumbent upon him. The injured party may choose between the
fulfilment and the rescission of the obligation, with the payment of damages in either case. He may
also seek rescission, even after he has chosen fulfilment, if the latter should become impossible. The
court shall decree the rescission claimed unless there be just cause authorizing the fixing of a period.
This is understood to be without prejudice to the rights of third persons who have acquired the thing,
in accordance with Articles 1385 and 1388 and the Mortgage Law.

Basic is the rule that the right of rescission of a party to an obligation under Art. 1191 of the Civil
Code is predicated on a breach of faith by the other 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. When the obligor cannot comply with what is incumbent upon it, the obligee
may seek rescission and, in the absence of any just cause for the court to determine the period of
compliance, the court shall decree the rescission.
In the instant case, the CA aptly found that the completion date of the condominium unit was
November 1998 pursuant to License No. 97-12-3202 dated Nov 2, 1997 but was extended to
December 1999 as per License to Sell No. 99-05-3401 dated May 8, 1999. However, 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 report on the ocular inspection conducted on the subject condominium project and
subject unit shows that the amenities under the approved plan have not yet been provided as of
May 3, 2002, and that the subject unit has not been delivered to respondent as of Aug 28, 2002,
which is beyond the period of development of Dec 1999 under the license to sell. Incontrovertibly,
petitioner had incurred delay in the performance of its obligation amounting to breach of contract as
it failed to finish and deliver the unit to respondent within the stipulated period. The delay in the
completion of the project as well as of the delay in the delivery of the unit are breaches of statutory
and contractual obligations which entitle respondent to rescind the contract, demand a refund and
payment of damages.