CORTES vs.

CA

G.R. No. 126083 July 12, 2006

DOCTRINE: A contract of sale gives rise to reciprocal obligation of the parties. Considering that their
obligation was reciprocal, performance thereof must be simultaneous. The mutual inaction of Cortes and the
Corporation therefore gave rise to a compensation morae or default on the part of both parties because
neither has completed their part in their reciprocal obligation. This mutual delay of the parties cancels out the
effects of default, such that it is as if no one is guilty of delay. Hence, rescission is not proper and the parties
must comply with their respective obligation.

FACTS: Villa Esperanza Corp entered into a contract of sale over a lot in Paranaque, Manila with Antonio
Cortes for a purchase price of P3.7 M, the Corp being the buyer. The parties agreed that upon the execution
of the deed of absolute sale, P2,200,000 shall be paid to the vendor less all the advances paid by the vendee
and that the unpaid balance is payable within one year from the date of execution. Said Deed was retained by
Cortes for notarization.

Subsquently, the Corporation filed for specific performance seeking to compel Cortes to deliver the TCTs and
the original copy of the Deed of Absolute Sale. According to the Corporation, despite its readiness and ability
to pay the purchase price, Cortes refused delivery of the sought documents , to which Cortes claimed
otherwise.

RTC rendered a decision rescinding the sale having failed to pay in full the amount of P2.2M despite Cortes'
delivery of the Deed of Absolute Sale and the TCTs, rescission of the contract is proper. The Corporation
contended that the trial court failed to consider their agreement that it would pay the balance of the down
payment when Cortes delivers the TCTs.

On appeal, the Court of Appeals reversed the decision and found that the parties agreed that the Corporation
will fully pay the balance of the down payment upon Cortes' delivery of the three TCTs to the Corporation.
The records show that no such delivery was made, hence, the Corporation was not remiss in the performance
of its obligation and therefore justified in not paying the balance.

ISSUE: Whether or not there is delay in the performance of the parties' obligation that would justify the
rescission of the contract of sale.

RULING: YES, both parties were in delay contemplating compensation morae. Records show that
the true intention of the parties is to deliver the TCTs of the subject lots upon the full payment of P2,200,000.
Considering that their obligation was reciprocal, performance thereof must be simultaneous. The mutual
inaction of Cortes and the Corporation therefore gave rise to a compensation morae or default
on the part of both parties because neither has completed their part in their reciprocal
obligation. Cortes is yet to deliver the original copy of the notarized Deed and the TCTs, while the
Corporation is yet to pay in full the agreed down payment of P2,200,000.00. This mutual delay of the parties
cancels out the effects of default, such that it is as if no one is guilty of delay.

There is no doubt that the contract of sale in question gave rise to a reciprocal obligation of the parties.
Reciprocal obligations are those which arise from the same cause, and which each party is a debtor and a
creditor of the other, such that the obligation of one is dependent upon the obligation of the other. They are
to be performed simultaneously, so that the performance of one is conditioned upon the simultaneous
fulfillment of the other.

Under Article 1169 of the Civil Code, from the moment one of the parties fulfills his obligation, delay by the
other begins. Since Cortes did not perform his part, the provision of the contract requiring the Corporation to
pay in full the down payment never acquired obligatory force.

The Court of Appeals correctly ordered the parties to perform their respective obligation in the contract of
sale, i.e., for Cortes to, among others, deliver the necessary documents to the Corporation and for the latter
to pay in full, not only the down payment, but the entire purchase price. And since the Corporation did not
question the Court of Appeal's decision and even prayed for its affirmance, its payment should rightfully
consist not only of the amount of P987,000.00, representing the balance of the P2,200,000.00 down payment,
but the total amount of P2,487,000.00, the remaining balance in the P3,700,000.00 purchase price.