Case Digest: Spouses Velarde vs Court of Appeals, GR. No. 108346

Spouses Mariano Z. Velarde and Avelina D. Velarde vs Court of Appeals, David A. Raymundo and George Raymundo, GR. No. 108346, July 11, 2001

Subject: Obligations and Contracts

FACTS

Private Respondent David Raymundo, the registered owner of a house and lot located at Makati City, and George Raymundo, David’s father, executed a Deed of Sale with Assumption of Mortgage with Mariano and Avelina Velarde, petitioners.

Pursuant to saif agreement, the the subject property, mortgaged to BPI for the amount of P1,800,000.00 was conveyed to the Velardes for the amount of P800.00. Velardes undertake to assume the payment of the aforesaid mortgage and upon violation in any of the terms, the downpayment of P800,000.00 shall be forfeited in favor of David Raymundo whom shall resume total and complete ownership and possession of the property sold.

Vendors paid the bank (BPI) for three (3) months until they were advised that the Application of Assumption of Mortgage was denied. This prompted them not to make any further payment.

Raymundos wrote the petitioners informing the non-fulfillment of the obligations. Velardo, thru counsel responded that they are willing to pay in cash the balance subject to several conditions. Raymundos sent a notarial notice of cancellation/rescission of the Deed of Sale. Verlardes filed a complaint before the RTC of Makati.

RTC rendered a decission directing Verlarde to proceed with the sale and to pay the balance of P1,800,000.00 to Raymundos whom were ordered to execute a deed of absolute sale, surrendring the property to Velarde. Raymundo appealed to CA.

CA set aside RTC’s decision and contract was properly rescinded. Rescission was justified upon Velarde’s failure to pay the agreed price.

ISSUE

Whether or not rescission of the contract by private respondent is justified.

RULING

Yes, rescission of the contract by private respondent is justified.

Under the law (Art 1191), the power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. The injured party may choose between fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission even after he has chosen fulfillment. If the latter should become impossible.

In this case, the right of rescission of a party to an obligation under the law is predicated on a breach of faith by the other party who violates the reciprocity between them. When the obligor cannot comply with what is incumbent upon it, the oblige may seek rescission and, in the absence of any just cause for the court to determine the period of compliance, the court shall decree the rescission. Private respondents validly exercised their right to rescind the contract, because of the failure of petitioners to comply with their obligation to pay the balance of the purchase price. Petitioners violated the very essence of reciprocity in the contract of sale, a violation that consequently gave rise to private respondent’s right to rescind the same in accordance with law.