576 Phil. 538
NACHURA, J.:
Sometime in April 1999, [petitioner] Religious of the Virgin Mary (RVM for brevity), acting through its local unit and specifically through Sr. Fe Enhenco, local Superior of the St. Mary's Academy of Capiz and [respondents] met to discuss the sale of the latter's property adjacent to St. Mary's Academy. Said property is denominated as Lot 159-B-2 and was still registered in the name of [respondents'] predecessor-in-interest, Manuel Laserna.Thereafter, respondents, armed with an undated Deed of Absolute Sale which they had signed, forthwith scheduled a meeting with VRM Balleque at the RVM Headquarters in Quezon City to finalize the sale, specifically, to obtain payment of the remaining balance of the purchase price in the amount of P4,999,500.00. However, VRM Balleque did not meet with respondents. Succeeding attempts by respondents to schedule an appointment with VRM Balleque in order to conclude the sale were likewise rebuffed.
In May of 1999, [respondent] Josephine Orola went to Manila to see the Mother Superior General of the RVM, in the person of Very Reverend Mother Ma. Clarita Balleque [VRM Balleque] regarding the sale of the property subject of this instant case.
A contract to sell dated June 2, 1999 made out in the names of herein [petitioner] and [respondents] as parties to the agreement was presented in evidence pegging the total consideration of the property at P5,555,000.00 with 10% of the total consideration payable upon the execution of the contract, and which was already signed by all the [respondents] and Sr. Ma. Fe Enhenco, R.V.M. [Sr. Enhenco] as witness.
On June 7, 1999, [respondents] Josephine Orola and Antonio Orola acknowledged receipt of RCBC Check No. 0005188 dated June 7, 1999 bearing the amount of P555,500.00 as 10% down payment for Lot 159-B-2 from the RVM Congregation (St. Mary's Academy of Cadiz [SMAC]) with the "conforme" signed by Sister Fe Enginco (sic), Mother Superior, SMAC.
[Respondents] executed an extrajudicial settlement of the estate of Trinidad Andrada Laserna dated June 21, 1999 adjudicating unto themselves, in pro indiviso shares, Lot 159-B-2, and which paved the transfer of said lot into their names under Transfer Certificate of Title No. T-39194 with an entry date of August 13, 1999.[4]
WHEREFORE, premises considered, judgment is hereby rendered in favor of the [respondents] and against the [petitioner].Dissatisfied, both parties filed their respective Notices of Appeal. The CA dismissed the respondents' appeal because of their failure to file an Appeal Brief. However, RVM's appeal, where respondents accordingly filed an Appellee's Brief, continued. Subsequently, the CA rendered judgment setting aside the RTC Decision, to wit:
- Dismissing the counterclaim;
- Ordering the rescission of the Contract to Sell, Exh. "E".
- Ordering the forfeiture of the downpayment of P555,500 in favor of the [respondents];
- Ordering [petitioner] corporation sole, the Superior General of the Religious of the Virgin Mary, to pay [respondents]:
a. P50,000.00 as exemplary damages;
b. P50,000.00 as attorney's fees.- Costs against the [petitioner].
WHEREFORE, with all the foregoing, the decision of the Regional Trial Court, Branch 15, Roxas City dated March 1, 2001 in [C]ivil [C]ase [N]o. V-7382 for Specific Performance or Rescission with Damages is hereby SET ASIDE and a new one entered GRANTING [respondents'] action for specific performance. [Petitioner RVM] [is] hereby ordered to pay [respondents] immediately the balance of the total consideration for the subject property in the amount of P4,999,500.00 with interest of 6% per annum computed from June 7, 2000 or one year from the downpayment of the 10% of the total consideration until such time when the whole obligation has been fully satisfied. In the same way, [respondents] herein are ordered to immediately deliver the title of the property and to execute the necessary documents required for the sale as soon as all requirements aforecited have been complied by [RVM]. Parties are further ordered to abide by their reciprocal obligations in good faith.In modifying the RTC Decision, the CA, albeit sustaining the trial court's finding on the existence of a perfected contract of sale between the parties, noted that the records and evidence adduced did not preponderate for either party on the manner of effecting payment for the subject property. In short, the CA was unable to determine from the records if the balance of the purchase price was due in two (2) years, as claimed by RVM, or, upon transfer of title to the property in the names of respondents, as they averred. Thus, the CA applied Articles 1383[5] and 1384[6] of the Civil Code which pronounce rescission as a subsidiary remedy covering only the damages caused.
All other claims and counterclaims are hereby dismissed for lack of factual and legal basis.
No pronouncement as to cost.
Art. 1191. The power to rescind obligations is impled in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him.Article 1191, as presently worded, speaks of the remedy of rescission in reciprocal obligations within the context of Article 1124 of the Old Civil Code which uses the term "resolution." The remedy of resolution applies only to reciprocal obligations[8] such that a party's breach thereof partakes of a tacit resolutory condition which entitles the injured party to rescission. The present article, as in the Old Civil Code, contemplates alternative remedies for the injured party who is granted the option to pursue, as principal actions, either a rescission or specific performance of the obligation, with payment of damages in each case. On the other hand, rescission under Article 1381 of the Civil Code, taken from Article 1291 of the Old Civil Code, is a subsidiary action, and is not based on a party's breach of obligation.
The injured party may choose between the 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.
The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period.
This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance with articles 1385 and 1388 and the Mortgage Law.
Art. 1381. The following contracts are rescissible:
(1) Those which are entered into by guardians whenever the wards whom they represent suffer lesion by more than one fourth of the value of the things which are the object thereof;
(2) Those agreed upon in representation of absentees, if the latter suffer the lesion state in the preceding number;
(3) Those undertaken in fraud of creditors when the latter cannot in any other manner collect the claims due them;
(4) Those which refer to things under litigation if they have been entered into by the defendant without the knowledge and approval of the litigants or of competent judicial authority;
(5) All other contracts specially declared by law to be subject to rescission.
I concur with the opinion penned by Mr. Justice Fred Ruiz Castro, but I would like to add that the argument of petitioner, that the rescission demanded by the respondent-appellee, Magdalo Francisco, should be denied because under Article 1383 of the Civil Code of the Philippines[,] rescission can not be demanded except when the party suffering damage has no other legal means to obtain reparation, is predicated on a failure to distinguish between a rescission for breach of contract under Article 1191 of the Civil Code and a rescission by reason of lesión or economic prejudice, under Article 1381, et seq. The rescission on account of breach of stipulations is not predicated on injury to economic interests of the party plaintiff but on the breach of faith by the defendant, that violates the reciprocity between the parties. It is not a subsidiary action, and Article 1191 may be scanned without disclosing anywhere that the action for rescission thereunder is subordinated to anything other than the culpable breach of his obligations by the defendant. This rescission is a principal action retaliatory in character, it being unjust that a party be held bound to fulfill his promises when the other violates his. As expressed in the old Latin aphorism: "Non servanti fidem, non est fides servanda." Hence, the reparation of damages for the breach is purely secondary.In the case at bench, although the CA upheld the RTC's finding of a perfected contract of sale between the parties, the former disagreed with the latter that fraud and bad faith were attendant in the sale transaction. The appellate court, after failing to ascertain the parties' actual intention on the terms of payment for the sale, proceeded to apply Articles 1383 and 1384 of the Civil Code declaring rescission as a subsidiary remedy that may be availed of only when the injured party has no other legal means to obtain reparation for the damage caused. In addition, considering the absence of fraud and bad faith, the CA felt compelled to arrive at a resolution most equitable for the parties. The CA's most equitable resolution granted respondents' prayer for specific performance of the sale and ordered RVM to pay the remaining balance of the purchase price, plus interest. It set aside and deleted the RTC's order forfeiting the downpayment of P555,500.00 in favor of, and payment of exemplary damages, attorney's fees and costs of suit to, respondents.
On the contrary, in the rescission by reason of lesión or economic prejudice, the cause of action is subordinated to the existence of that prejudice, because it is the raison d' etre as well as the measure of the right to rescind. Hence, where the defendant makes good the damages caused, the action cannot be maintained or continued, as expressly provided in Articles 1383 and 1384. But the operation of these two articles is limited to the cases of rescission for lesión enumerated in Article 1381 of the Civil Code of the Philippines, and does not apply to cases under Article 1191.
It is probable that the petitioner's confusion arose from the defective technique of the new Code that terms both instances as "rescission" without distinctions between them; unlike the previous Spanish Civil Code of 1889, that differentiated "resolution" for breach of stipulations from "rescission" by reason of lesión or damage. But the terminological vagueness does not justify confusing one case with the other, considering the patent difference in causes and results of either action.