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July 6, 1999| Ynares-Santiago | Reciprocal Obligations)

PETITIONER: Jaime Ong


RESPONDENT: CA, Spouses Miguel Robles and Alejandro Robles
SUMMARY: Petitioner Jaime Ong entered in an Agreement of Purchase and Sale with Spouses Robles for
two parcels of land. Petitioner failed to pay the full initial payment and the checks issued to pay for the
remaining balance were dishonored due to insufficient funds. Spouses seek rescission of the Agreement.
DOCTRINE:
Rescission as contemplated in Art. 1191 of Civil Code is applicable only in obligors failure to comply with
an obligation already extant. It is not applicable during a failure for the fulfillment of a condition to
render an obligation binding.
FACTS:
1. Petitioner Ong and Respondent Spouses Robles entered
into an Agreement of Purchase and Sale on two parcels
of land for P2 Million.
2. It is stipulated that:
a. P600K will serve as Initial Payment to comprise:
i. P103.5K (at that time already paid to
Spouses) plus P496.5K (to be paid to
BPI to settle an outstanding loan of
Respondent Spouses Robles
b. P1.4 Million Balance to be paid in 4 equal
quarterly installments.
c. Upon execution of the Agreement, Respondent
Spouses are to deliver to the Petitioner the
parcels of land plus the improvements (including
Ricemill and Piggery)
d. Upon the payment of the total purchase prices
by Petitioner Ong, Respondent Spouses are to
deliver Deed of Sale and free and clear from all
liens and encumbrances.
3. After the execution, Petitioner took possession of the said
parcel of lands plus the improvements.
4. However, Petitioner failed to pay the remaining Balance
since the 4 checks issued were dishonored when the same
were presented. Furthermore, Petitioner was only able to
pay P393.6K of the P496.5 supposedly to be deposited
directly to BPI.
5. BPI then threatened to foreclose the Respondent Spouses
mortgage prompting them to sell three transformers of the
Rice Mill to settle the outstanding obligation with
Petitioners knowledge and conformity.
6. Petitioner also allowed Respondent Spouses to operate the
Rice Mill while petitioner continued to be in possession
of the two parcels of land.
7. Respondent Spouses subsequently sought for the return of
the properties prompting them to file a complaint for
rescission in the RTC.
8. RTC granted Petitioner and affirmed by CA.
ISSUE (TOPIC): Whether or not the contract entered into
by the parties may be validly rescinded under Art. 1191 of
the Civil Code? - NO

RULING: CA decision AFFIRMED.


RATIO:
1. Art. 1380 is a remedy granted by law to contractinig
parties and even 3rd persons to secure reparations of
damage caused to them by contract. Said contract, even
valid, produces lesion or pecuniary damage. This remedy
is a subsidiary action limited to cases of rescission for
lesion.
2. Art. 1191 refers to rescission to reciprocal obligation
where the obligation arise from the same ause and which
each party is debtor and creditor. Performance of one is
conditioned on the performance of the other. This is the
principal action based on breach of party.
3. Said Agreement between Petitioner and Respondent
Spouses do not fall within Art. 1380.
4. But! Art. 1191 is also inapplicable. The Agreement is in a
nature of a Contract to Sell and not a Contract of Sale.
a. In Contract to Sell, ownership is reserved in the
vendor and not passed to the vendee until full
payment of the purchase price.
b. For Contract of Sale the title is passed to the
vendee upon delivery of the thing sold.
5. In Contract to Sell, the payment to the purchase price is a
POSITIVE SUSPENSIVE CONDITION where failure
of which is not breach but a situation which prevents the
obligation of the vendor to covey title from acquiring
obligatory force.
a. In Contract of Sale, its remedy is Rescission
(Art. 1191)
6. Here, Respondents Spouses were bound to deliver a
DEED OF ABSOLUTE SALE AND CLEAN TITLE
subject to the suspensive condition of the full payment of
the purchase price. Its non-fulfillment renders the
Contract to Sell ineffective.
a. Breach contemplated in Art. 1191 is Obligors
failure to comply with an obligation already
extant, not a failure of a condition to render
binding that obligation.
7. The Agreement may be set aside but not due to the breach
of Petitioner but for his failure to complete the payment.
ISSUE: Whether the parties had novated their original contract
as to the manner of payment?

RATIO:
1. Novation could not also be appreciated as theorized by
Petitioner. Novation cannot be presumed and must be
expressly stipulated by parties or impliedly derived from
the irreconcilable difference between the old and new
obligation.
2. Records show that the parties never intended to novate
their previous agreement. Here, the sale of the
Transformers from the Rice Mill was to credit Petitioners
unfulfilled obligation.
3. Petitioner also builder in bad faith on the building of
improvements.

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