Beruflich Dokumente
Kultur Dokumente
MILA A. REYES ,
Petitioner,
Present:
- versus -
PERALTA,
ABAD, and
MENDOZA, JJ.
VICTORIA T. TUPARAN,
Respondent.
Promulgated:
June 1, 2011
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DECISION
MENDOZA, J.:
Subject of this petition for review is the February 13, 2009 Decision[1] of the
Court of Appeals(CA) which affirmed with modification the February 22, 2006
Decision[2] of the Regional Trial Court, Branch 172, Valenzuela City (RTC), in Civil
Case No. 3945-V-92, an action for Rescission of Contract with Damages.
On June 20, 1988, petitioner mortgaged the subject real properties to the
Farmers Savings Bank and Loan Bank, Inc. (FSL Bank) to secure a loan of
2,000,000.00 payable in installments. OnNovember 15, 1990, petitioners
outstanding account on the mortgage reached 2,278,078.13. Petitioner then
decided to sell her real properties for at least 6,500,000.00 so she could
liquidate her bank loan and finance her businesses. As a gesture of friendship,
respondent verbally offered to conditionally buy petitioners real properties for
4,200,000.00 payable on installment basis without interest and to assume the
bank loan. To induce the petitioner to accept her offer, respondent offered the
following conditions/concessions:
3. That there will be a lease for fifteen (15) years in favor of the
plaintiff over the space for drugstore and cosmetics store at a
monthly rental of only 8,000.00 after full payment of the stipulated
installment payments are made by the defendant;
On November 26, 1990, the parties and FSL Bank executed the
corresponding Deed of Conditional Sale of Real Properties with Assumption of
Mortgage. Due to their close personal friendship and business relationship, both
parties chose not to reduce into writing the other terms of their agreement
mentioned in paragraph 11 of the complaint. Besides, FSL Bank did not want to
incorporate in the Deed of Conditional Sale of Real Properties with Assumption of
Mortgage any other side agreement between petitioner and respondent.
On March 19, 1992, the residential building was gutted by fire which
caused the petitioner to lose rental income in the amount of 8,000.00 a month
since April 1992. Respondent neglected to renew the fire insurance policy on the
subject buildings.
Since December 1990, respondent had taken possession of the subject real
properties and had been continuously collecting and receiving monthly rental
income from the tenants of the buildings and vendors of the sidewalk fronting the
RBJ building without sharing it with petitioner.
Respondents Answer
Petitioners claim for the balance of the purchase price of the subject real
properties was baseless and unwarranted because the full amount of the
purchase price had already been paid, as she did pay more than 4,200,000.00,
the agreed purchase price of the subject real properties, and she had even
introduced improvements thereon worth more than 4,800,000.00. As the
parties could no longer be restored to their original positions, rescission could not
be resorted to.
On February 22, 2006, the RTC handed down its decision finding that
respondent failed to pay in full the 4.2 million total purchase price of the subject
real properties leaving a balance of 805,000.00. It stated that the checks and
receipts presented by respondent refer to her payments of the mortgage
obligation with FSL Bank and not the payment of the balance of 1,200,000.00.
The RTC also considered the Deed of Conditional Sale of Real Property with
Assumption of Mortgage executed by and among the two parties and FSL Bank a
contract to sell, and not a contract of sale. It was of the opinion that although the
petitioner was entitled to a rescission of the contract, it could not be permitted
because her non-payment in full of the purchase price may not be considered as
substantial and fundamental breach of the contract as to defeat the object of the
parties in entering into the contract.[4] The RTC believed that the respondents
offer stated in her counsels letter datedSeptember 2, 1992 to settle what she
thought was her unpaid balance of 751,000.00 showed her sincerity and
willingness to settle her obligation. Hence, it would be more equitable to give
respondent a chance to pay the balance plus interest within a given period of
time.
Finally, the RTC stated that there was no factual or legal basis to award
damages and attorneys fees because there was no proof that either party acted
fraudulently or in bad faith.
SO ORDERED.[5]
Ruling of the CA
SO ORDERED.[6]
ASSIGNMENT OF ERRORS
A.
THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED
ITS DISCRETION IN DISALLOWING THE OUTRIGHT RESCISSION OF THE
SUBJECT DEED OF CONDITIONAL SALE OF REAL PROPERTIES WITH
ASSUMPTION OF MORTGAGE ON THE GROUND THAT RESPONDENT
TUPARANS FAILURE TO PAY PETITIONER REYES THE BALANCE OF THE
PURCHASE PRICE OF 805,000.00 IS NOT A BREACH OF CONTRACT
DESPITE ITS OWN FINDINGS THAT PETITIONER STILL RETAINS
OWNERSHIP AND TITLE OVER THE SUBJECT REAL PROPERTIES DUE TO
RESPONDENTS REFUSAL TO PAY THE BALANCE OF THE TOTAL
PURCHASE PRICE OF 805,000.00 WHICH IS EQUAL TO 20% OF THE
TOTAL PURCHASE PRICE OF 4,200,000.00 OR 66% OF THE
STIPULATED LAST INSTALLMENT OF 1,200,000.00 PLUS THE
INTEREST THEREON. IN EFFECT, THE COURT OF APPEALS AFFIRMED
AND ADOPTED THE TRIAL COURTS CONCLUSION THAT THE
RESPONDENTS NON-PAYMENT OF THE 805,000.00 IS ONLY A SLIGHT
OR CASUAL BREACH OF CONTRACT.
B.
THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED
ITS DISCRETION IN DISREGARDING AS GROUND FOR THE RESCISSION
OF THE SUBJECT CONTRACT THE OTHER FRAUDULENT AND
MALICIOUS ACTS COMMITTED BY THE RESPONDENT AGAINST THE
PETITIONER WHICH BY THEMSELVES SUFFICIENTLY JUSTIFY A DENIAL
OF A GRACE PERIOD OF THIRTY (30) DAYS TO THE RESPONDENT
WITHIN WHICH TO PAY TO THE PETITIONER THE 805,000.00 PLUS
INTEREST THEREON.
C.
EVEN ASSUMING ARGUENDO THAT PETITIONER IS NOT
ENTITLED TO THE RESCISSION OF THE SUBJECT CONTRACT, THE COURT
OF APPEALS STILL SERIOUSLY ERRED AND ABUSED ITS DISCRETION IN
REDUCING THE INTEREST ON THE 805,000.00 TO ONLY 6% PER
ANNUM STARTING FROM THE DATE OF FILING OF THE COMPLAINT ON
SEPTEMBER 11, 1992 DESPITE THE PERSONAL COMMITMENT OF THE
D.
THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED
ITS DISCRETION IN THE APPRECIATION AND/OR MISAPPRECIATION OF
FACTS RESULTING INTO THE DENIAL OF THE CLAIM OF PETITIONER
REYES FOR ACTUAL DAMAGES WHICH CORRESPOND TO THE MILLIONS
OF PESOS OF RENTALS/FRUITS OF THE SUBJECT REAL PROPERTIES
WHICH RESPONDENT TUPARAN COLLECTED CONTINUOUSLY SINCE
DECEMBER 1990, EVEN WITH THE UNPAID BALANCE OF 805,000.00
AND DESPITE THE FACT THAT RESPONDENT DID NOT CONTROVERT
SUCH CLAIM OF THE PETITIONER AS CONTAINED IN HER AMENDED
COMPLAINT DATED APRIL 22, 2006.
E.
THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED
ITS DISCRETION IN THE APPRECIATION OF FACTS RESULTING INTO THE
DENIAL OF THE CLAIM OF PETITIONER REYES FOR THE 29,609.00
BACK RENTALS THAT WERE COLLECTED BY RESPONDENT TUPARAN
FROM THE OLD TENANTS OF THE PETITIONER.
F.
THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED
ITS DISCRETION IN DENYING THE PETITIONERS EARLIER URGENT
MOTION FOR ISSUANCE OF A PRELIMINARY MANDATORY AND
PROHIBITORY INJUNCTION DATED JULY 7, 2008 AND THE
G.
THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED
ITS DISCRETION IN DENYING THE PETITIONERS CLAIM FOR MORAL
AND EXEMPLARY DAMAGES AND ATTORNEYS FEES AGAINST THE
RESPONDENT.
In sum, the crucial issue that needs to be resolved is whether or not the CA
was correct in ruling that there was no legal basis for the rescission of the Deed of
Conditional Sale with Assumption of Mortgage.
The petitioner basically argues that the CA should have granted the
rescission of the subject Deed of Conditional Sale of Real Properties with
Assumption of Mortgage for the following reasons:
Finally, the petitioner asserts that her claim for damages or lost income as
well as for the back rentals in the amount of 29,609.00 has been fully
substantiated and, therefore, should have been granted by the CA. Her claim for
moral and exemplary damages and attorneys fees has been likewise
substantiated.
The respondent counters that the subject Deed of Conditional Sale with
Assumption of Mortgage entered into between the parties is a contract to sell and
not a contract of sale because the title of the subject properties still remains with
the petitioner as she failed to pay the installment payments in accordance with
their agreement.
Respondent echoes the RTC position that her inability to pay the full balance
on the purchase price may not be considered as a substantial and fundamental
breach of the subject contract and it would be more equitable if she would be
allowed to pay the balance including interest within a certain period of time. She
claims that as early as 1992, she has shown her sincerity by offering to pay a
certain amount which was, however, rejected by the petitioner.
Finally, respondent states that the subject deed of conditional sale explicitly
provides that the installment payments shall not bear any interest. Moreover,
petitioner failed to prove that she was entitled to back rentals.
The Courts Ruling
The Court agrees with the ruling of the courts below that the subject Deed
of Conditional Sale with Assumption of Mortgage entered into by and among the
two parties and FSL Bank on November 26, 1990 is a contract to sell and not a
contract of sale. The subject contract was correctly classified as a contract to sell
based on the following pertinent stipulations:
Based on the above provisions, the title and ownership of the subject
properties remains with the petitioner until the respondent fully pays the balance
of the purchase price and the assumed mortgage obligation. Thereafter, FSL Bank
shall then issue the corresponding deed of cancellation of mortgage and the
petitioner shall execute the corresponding deed of absolute sale in favor of the
respondent.
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Consistently, the Court handed down a similar ruling in the 2010 case
of Heirs of Atienza v. Espidol, [9] where it was written:
Regarding the right to cancel the contract for non-payment of
an installment, there is need to initially determine if what the parties
had was a contract of sale or a contract to sell. In a contract of sale,
the title to the property passes to the buyer upon the delivery of
the thing sold. In a contract to sell, on the other hand, the
ownership is, by agreement, retained by the seller and is not to
pass to the vendee until full payment of the purchase price. In the
contract of sale, the buyers non-payment of the price is a negative
Thus, the Court fully agrees with the CA when it resolved: Considering,
however, that the Deed of Conditional Sale was not cancelled by Vendor Reyes
(petitioner) and that out of the total purchase price of the subject property in the
amount of 4,200,000.00, the remaining unpaid balance of Tuparan (respondent)
is only 805,000.00, a substantial amount of the purchase price has already been
paid. It is only right and just to allow Tuparan to pay the said unpaid balance of
the purchase price to Reyes.[10]
Granting that a rescission can be permitted under Article 1191, the Court
still cannot allow it for the reason that, considering the circumstances, there was
only a slight or casual breach in the fulfillment of the obligation.
Unless the parties stipulated it, rescission is allowed only when the breach
of the contract is substantial and fundamental to the fulfillment of the obligation.
Whether the breach is slight or substantial is largely determined by the attendant
circumstances.[11] In the case at bench, the subject contract stipulated the
following important provisions:
c)
d)
2,000,000.00 outstanding balance of the mortgage
obligation as ofNovember 15, 1990 which is hereby assumed by the
Second Party.
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From the records, it cannot be denied that respondent paid to FSL Bank
petitioners mortgage obligation in the amount of 2,278,078.13, which formed
part of the purchase price of the subject property. Likewise, it is not disputed that
respondent paid directly to petitioner the amount of 721,921.87 representing
the additional payment for the purchase of the subject property. Clearly, out of
the total price of 4,200,000.00, respondent was able to pay the total amount of
3,000,000.00, leaving a balance of 1,200,000.00 payable in three (3)
installments.
Finally, the Court upholds the ruling of the courts below regarding the nonimposition of damages and attorneys fees. Aside from petitioners self-serving
statements, there is not enough evidence on record to prove that respondent
acted fraudulently and maliciously against the petitioner. In the case of Heirs of
Atienza v. Espidol,[13] it was stated: