Suria v. IAC G.R.

L-73893 June 30, 1987

I. Parties Margarita Suria & Gracia R. Joven, petitioners Hon. Intermediate Appellate Court, Hon. Jose Mar Garcia (Presiding Judge of the RTC of Laguna, Branch XXIV, Bian, Laguna), respondentcourt/public respondent Spouses Herminio A. Crispin & Natividad C. Crispin, private respondents Spouse Crispin (owner of a parcel of land) and petitioners entered into a contract (DEED OF SALE WITH MORTGAGE). II. Prior Proceedings Private-respondents filed a complaint before the RTC for rescission of contract & damages. Petitioners filed a motion to dismiss, trial court denied the motion. Petitioners then filed a motion for reconsideration in the Intermediate Appellate Courtsaid motion was also denied. Hence, this PETITION for certiorari to review the decision of the Courts of Appeals. Theories of the Parties Petitioners: That private respondents are not entitled to the subsidiary remedy of rescission because of the presence of remedy of foreclosure in the Deed of Sale of Mortgage. Respondents: That they have the right rescind the contract since petitioners violated the terms & conditions of the contract by failing to pay the stipulated installments. Objectives Petitioners: To honor the remedy of foreclosure as stipulated in the Deed of Sale of Mortgage. Respondents: To rescind the contract and be paid with damages.

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Key Facts Spouses Crispin being the owner of a parcel of land entered into a DEED OF SALE with MORTGAGE (which contains a stipulation that grants to the vendors mortgagees the right to foreclose in the event of the failure of the vendees-mortgagors to comply with any provisions of this mortgage), with herein petitioner. However, petitioners paid only one installment. All others remained unsettled. And despite repeated demands, petitioners failed to comply. Spouses Crispin then filed a complaint for rescission of contract and damages. Meanwhile, petitioners offered to pay all outstanding balance under the Deed of Sale with mortgage. But the spouses Crispin rejected the offer. Petitioners then moved to dismiss the spouses complaint on the ground that spouses Crispin is not entitled to subsidiary remedy of rescission because of the presence of the remedy of foreclosure. Issue Is the subsidiary & equitable remedy of rescission available in the presence of a remedy of foreclosure in the light of the express provision of Article 1383 of the Civil Code that: The action for rescission is subsidiary; it cannot be instituted except when the party suffering damage has no other legal means to obtain reparation for the same? Ruling No, the subsidiary & equitable remedy of rescission is not available in this case. Art. 1191 on reciprocal obligations is not applicable under the facts of this case. Moreover, Art. 1383 of the Civil Code provides that the action for rescission is subsidiary. It cannot be instituted except when the party suffering damage has no other legal means to obtain reparation from the same.
The vendee-mortgagors breach of obligation is not with respe ct to the perfected contract. The remedy is not a principal action retaliatory in character, but becomes a subsidiary one which by law is available only in the absence of any other legal remedy. (Art. 1384, Civil Code). Foreclosure here is not only a remedy accorded by law but is a specific provision found in the contract between the parties. In the contract of purchase and sale, the parties stipulated that

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the payment of the price was guaranteed by the mortgage of the property sold. This agreement has the two-fold effect of: (1) acknowledging indisputably that the sale has been consummated, so much so that the vendee-mortgagor was disposing of it by mortgaging it to the vendor; and (2) waiving the pacto comisorio, i.e., the resolution of the sale in the event of failure to pay the purchase price, such waiver being proved by the execution of the mortgage to guarantee the payment, and in accord therewith the vendors adequate remedy, in case of non -payment, is the foreclosure of mortgage. There is no cause for the resolution of the sale as prayed for by the vendor-mortgagee. His action should have been one for the foreclosure of the mortgage, which is not the action in this case. Article 1191 is not applicable in this case, since the subject matter of the sale is real property. It does not come strictly within the provisions of Art. 1191, but is rather subjected to the stipulations agreed upon by the contracting parties and to the provisions of Art. 1592 of the Civil Code. The petitioners have offered to pay all past due accounts. Considering the lower purchasing value of the peso in terms of prices of real estate today, the respondents are correct in stating they have suffered losses. However, they are also to blame for trusting persons who could not or would not comply with their obligations in time. They could have foreclosed on the mortgage immediately when it fell due instead of waiting all these years while trying to enforce the wrong remedy. The pacto comisorio of ley comisoria is nothing more than a condition subsequent of the contract of purchase and sale. Considered carefully, it is the very condition subsequent that is always attached to all bilateral obligations according to Art. 1191; except that when applied to real property it is not within the scope of said Art.1191, and it is subordinate to the stipulations made by the contracting parties and to the provisions Art. 1592.
VIII. Ratio Decidendi Civil Law; Sale; In a deed of sale with mortgage, the relationship between the parties is no longer one of buyer and seller but of a mortgagor and a mortgagee because the contract of sale has been perfected and consummated.By the contract of sale, the vendor obligates himself to transfer the ownership of and to deliver a determinate thing to the buyer, who in turn, is obligated to pay a price certain in money or its equivalent (Art. 1458, Civil Code). From the respondents own arguments, we note that they have fully complied with their part of the reciprocal obligation, As a matter of fact, they have already parted with the title as evidenced by the transfer certificate of title in the petitioners name as of June 27, 1975. The buyer, in turn, fulfilled his end of the bargain when he executed the deed of mortgage. The payments on an installment basis secured by the execution of a mortgage took the place of a cash payment. In other words, the relationship between the parties is no longer one of buyer and seller because the contract of sale has been perfected and consummated. It is already one of a mortgagor and a mortgagee. In consideration of the petitioners promise to pay on installment basis the sum they owe the respondents, the latter have accepted the mortgage as security for the obligation. Same; Same; Same; In case of breach of obligation, rescission is not a principal action but a subsidiary one available only in the absence of any other legal remedy. The petitioners breach of obligations is not with respect to the perfected contract of sale but in the obligations created by the mortgage contract. The remedy of rescission is not a principal action retaliatory in character but becomes a subsidiary one which by law is available only in the absence of any other legal remedy. (Art. 1384, Civil Code). Foreclosure here is not only a remedy accorded by law but, is a specific provision found in the contract between the parties. IX. Disposition The petition is hereby GRANTED. The Intermediate Appellate Courts decision/resolution are REVERSED and SET ASIDE. The petitioners are ordered to pay the balance of their indebtedness under the Deed of Absolute Sale with Mortgage with legal interests from the second installment until fully paid, failing which the respondents may resort to foreclosure.