Tabitha Erlinda Ma. Pas A.

Peña 174062

Rosencor Development Corporation and Rene Joaquin, petitioners vs.

Paterno Inquing, Irene Guillermo, Federico Bantugan,
Fernando Magbanua and Liza Tiangco, respondents
G.R. No. 140479. March 8, 2001.
Defective Contracts - Rescission

FACTS:

1. Paterno Inquing, Irene Guillermo, Frederico Bantugan, Fernando Magbanua and Liza Tiangco,
(respondents) averred that they have been—since 1971—the lessees of a two-story residential
apartment owned by Sps. Faustino and Cresencia Tiangco.
2. When the Sps. Tianco died, the management of the leased property was adjudicated to their heirs
as represented by Eufrocina de Leon; the said heirs allegedly promised preemptive right to purchase
to the respondents.
3. In June 1990, the respondents received a letter from Atty. Erlinda Aguila, demanding that they
vacate the premises as the building was subject for demolition, but they refused.
4. Subsequently, in October 1990, the respondents received a letter from de Leon, offering to sell
them the property for Php 2 million; in their answer, the respondents countered de Leon’s offer by
offering to buy the property for half the price—de Leon did not respond to the counter-offer.
5. Months later, Rene Joaquin, Vice-President of Rosencor Development Corporation (Rosencor),
came to the property, introducing himself as the new owner.
6. Shortly thereafter, the respondents once again received a letter from Atty. Aguila, demanding that
they vacate the premises, followed by another from de Leon, advising them that the said heirs had
already sold the property to Rosencor.
7. The respondents later on received a copy of the Deed of Absolute Sale between Rosencor and de
Leon; they later on discovered that the sale took place in September 1990, a month earlier than de
Leon’s offer—As such, they filed an action for the rescission of the Deed of Absolute Sale between
de Leon and Rosencor.

ISSUE:

Whether or not the rescission of the Deed of Absolute Sale was proper

RULING:

No. Under the Civil Code, rescission shall not take place when the things which are the object of
the contract are legally in the possession of third persons who did not act in bad faith—Good faith
is always presumed unless contrary to the evidence is adduced. In this case, there was no showing
that respondents notified Rosencor of their right of first refusal after they received the said letter
regarding the sale of the leased property. Although the facts show that de Leon recognized the
respondents’ right of first refusal, she did so through a letter only on her behalf and not on behalf
of the petitioners; as such, it is apparent that the petitioners were not aware of such right like de
Leon, thereby making the latter the only party in bad faith. Therefore, the abovementioned points
considered, the rescission of the Deed of Sale was not proper.

DISPOSITIVE:

WHEREFORE, premises considered, the decision of the Court of Appeals dated June 25, 1999 is
REVERSED and SET ASIDE. The Decision dated May 13, 1996 of the Quezon City Regional
Trial Court, Branch 217 is hereby REINSTATED insofar as it dismisses the action for rescission
of the Deed of Absolute Sale dated September 4, 1990 and orders the payment of monthly
rentals of P1,000.00 per month reckoned from May 1990 up to the time respondents
leave the premises.