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1) Antonio Palao sold a portion of land to Alfonso Iringan through a deed of sale in 1985. Iringan failed to fully pay the second installment amounting to P105,000 by December 1985, paying only P40,000.
2) In July 1985, Palao sent a letter rescinding the contract of sale due to Iringan's failure to comply. Iringan did not oppose rescission but demanded reimbursement for amounts paid.
3) The parties were unable to reach an agreement. In 1991, Palao filed a case for judicial confirmation of rescission of contract and damages against Iringan. The RTC and CA both ruled in favor of Palao
1) Antonio Palao sold a portion of land to Alfonso Iringan through a deed of sale in 1985. Iringan failed to fully pay the second installment amounting to P105,000 by December 1985, paying only P40,000.
2) In July 1985, Palao sent a letter rescinding the contract of sale due to Iringan's failure to comply. Iringan did not oppose rescission but demanded reimbursement for amounts paid.
3) The parties were unable to reach an agreement. In 1991, Palao filed a case for judicial confirmation of rescission of contract and damages against Iringan. The RTC and CA both ruled in favor of Palao
1) Antonio Palao sold a portion of land to Alfonso Iringan through a deed of sale in 1985. Iringan failed to fully pay the second installment amounting to P105,000 by December 1985, paying only P40,000.
2) In July 1985, Palao sent a letter rescinding the contract of sale due to Iringan's failure to comply. Iringan did not oppose rescission but demanded reimbursement for amounts paid.
3) The parties were unable to reach an agreement. In 1991, Palao filed a case for judicial confirmation of rescission of contract and damages against Iringan. The RTC and CA both ruled in favor of Palao
No. 129107 September 26, 2001 • When the second payment was due, Iringan paid only P40,000. • Because of this, July 18, 1985, Palao sent a letter to Iringan stating DOCTRINE: Art. 1191. The power to rescind obligations is implied that he considered the contract as rescinded and that he would not in reciprocal ones, in case one of the obligors should not comply with accept any further payment considering that Iringan failed to comply what is incumbent upon him. with his obligation to pay the full amount of the second installment. The injured party may choose between the fulfillment and the • Iringan, through his counsel, Atty. Aquino, did not oppose the rescission of the obligation, with the payment of damages in either revocation of the Deed of Sale but asked for reimbursement for the case. He may also seek rescission, even after he has chosen following amounts: fulfillment, if the latter should become impossible. • (a) P50,000.00 cash received by you; The court shall decree the rescission claimed, unless there be just • (b) P3,200.00 geodetic engineers fee; cause authorizing the fixing of a period. • (c) P500.00 attorneys fee; This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance with Articles • (d) the current interest on P53,700.00 1385 and 1388 and the Mortgage Law. (1124) • Palao sent a letter to Atty. Aquino saying that he is not amenable to the reimbursements claimed by Iringan. Recit Ready: • On February 21, 1989, Iringan, now represented by a new counsel Atty. Lasam, proposed that the P50,000 which he had already paid FACTS: Palao be reimbursed or Palao could sell to Iringan, an equivalent portion of the land. • This case assails the decision of the CA which affirmed the decision of the RTC and deleting the award of attorney’s fees. • Palao instead wrote Iringan that the latters standing obligation had reached P61,600, representing payment of arrears for rentals from • On March 22, 1985, private respondent Antonio Palao sold to petitioner Alfonso Iringan, an undivided portion of Lot No. 992 October 1985 up to March 1989. of the Tuguegarao Cadastre, located at the Poblacion of • The parties failed to arrive an agreement. Tuguegarao. • On July 1, 1991, Palao filed a Complaint for Judicial Confirmation • The parties executed a Deed of Sale[2] on the same date with of Rescission of Contract and Damages against Iringan and his wife. the purchase price of P295,000.00, payable as follows: • In their Answer, the spouses alleged that the contract of sale was a • P10,000.00 upon the execution of this instrument, and for this consummated contract, hence, the remedy of Palao was for purpose, the vendor acknowledges having received the said collection of the balance of the purchase price and not amount from the vendee as of this date; rescission. Besides, they said that they had always been ready and willing to comply with their obligations in accordance with said • P140,000.00 on or before April 30, 1985; contract. • The RTC ruled in favor of Palao and affirmed the recission of the provides that rescission is without prejudice to the rights of third persons contract, with the dispositive of the ruling as follows: who have acquired the thing, in accordance with Article 1385 of the Civil Code. In turn, Article 1385 states that rescission cannot take place • WHEREFORE, the Court finds that the evidence preponderates in when the things which are the object of the contract are legally in the favor of the plaintiff and against the defendants and judgment is possession of third persons who did not act in bad faith. hereby rendered as follows: In the present case, the mortgaged properties had already been • (a) Affirming the rescission of the contract of sale; foreclosed. They were already sold to the highest bidder at a public auction. We recognize that transferees pendente lite are proper, but not • (b) Cancelling the adverse claim of the defendants annotated at the indispensable, parties in this case, as they would, in any event, be bound back of TCT No. T-5790; by the judgment against Planters Bank. However, the respondents did • (c) Ordering the defendants to vacate the premises; not overcome the presumption that the buyers bought the foreclosed properties in good faith. The spouses Lopez did not cause the annotation • (d) Ordering the defendants to pay jointly and severally the sum of of notice of lis pendens at the back of the title of the mortgaged lot. P100,000.00 as reasonable compensation for use of the property Moreover, the respondents did not adduce any evidence that would show minus 50% of the amount paid by them; and to pay P50,000.00 as that the buyers bought the property with actual knowledge of the moral damages; P10,000.00 as exemplary damages; and pendency of the present case. Furthermore, the spouses Lopez’s failure P50,000.00 as attorneys fee; and to pay the costs of suit. to pay the overdue loan made them parties in default, not entitled to rescission under Article 1191 of the Civil Code. • The CA affirmed the decision, hence this petition for review. Planters Bank and the spouses Lopez undertook reciprocal obligations when they entered into a loan agreement. In reciprocal obligations, the ISSUEs: obligation or promise of each party is the consideration for that of the 1. Whether or not the contract of sale was validly rescinded. other. The mere pecuniary inability of one contracting party to fulfill an engagement does not discharge the other contracting party of the 2. Whether or not the award of moral and exemplary damages is obligation in the contract. Planters Bank’s slight breach does not excuse proper. the spouses Lopez from paying the overdue loan in the amount of HELD: P3,500,000.00. 1. Yes. Planters Bank indeed incurred in delay by not complying with its obligation to make further loan releases. Its refusal to release the Petition Granted, CA is reversed. remaining balance, however, was merely a slight or casual breach as shown below. In other words, its breach was not sufficiently fundamental to defeat the object of the parties in entering into the loan agreement. The well-settled rule is that rescission will not be permitted for a slight or casual breach of the contract. The question of whether a breach of contract is substantial depends upon the attending circumstances. Even assuming that Planters Bank substantially breached its obligation, the fourth paragraph of Article 1191 of the Civil Code expressly