Professional Documents
Culture Documents
CA
July 11, 2001| Panganibal, J. | Effect: Mutual Restitution
PETITIONER: Sps. Mariano Velarde and Avelina Velarde
RESPONDENT: David Raymundo and George Raymundo
SUMMARY: The Raymundos executed a Deed of Sale with Assumption of Mortgage and, in relation to
this, the Velardes executed an Undertaking. BPI, the mortgage bank, denied the assumption of
mortgage. After this, the Velardes stopped paying the Raymundos debt with the bank. But aside from
stopping payment of the loan, the Velardes also stopped paying for the purchase price of the property.
This prompted the Raymundos to rescind the contract, which the Velardes contested because they
offered to pay the purchase price one month after it was due. The Court applied Article 1191 ruled that
despite such offer, the rescission was valid because the mere offer to pay or promise to pay does not
translate to an actual fulfillment of their obligation. Moreover, when they offered to pay, they also
imposed new conditions upon the Raymundos. As a result of rescission, the Court ruled that there should
be mutual restitution the Raymundos will have to return initial payment of the purchase price and the
mortgage payments to the Velardes, and the Velardes will have to return ownership of the land to the
Raymundos.
DOCTRINE: Rescission creates the obligation to return the object of the contract. It can be carried out
only when the one who demands rescission can return whatever he may be obliged to restore. To rescind
is to declare a contract void at its inception and to put an end to it as though it never was. It is not
merely to terminate it and release the parties from further obligations to each other, but to abrogate it
from the beginning and restore the parties to their relative positions as if no contract has been made.
FACTS
1. David Raymundo is the absolute and registered
owner of a parcel of land, together with a house
and other improvements thereon, located in
Dasmarinas Village, Makati. George Raymundo,
Davids father negotiated with Avelina and Mariano
Velarde for the sale of said propery, which was,
however, under lease.
ISSUES:
1. W/N there was a breach of the contract - YES
2. W/N rescission was proper - YES
RATIO:
1. The Velardes did not merely stop paying the
mortgage obligations; they also failed to pay the
balance of the purchase price. As admitted by both
parties, their agreement mandated that the
Velardes should pay the purchase price balance of
P1.8 million in case the request to assume the
mortgage would be disapproved. Thus, upon receipt
of banks disapproval of assumption of mortgage,
they should have paid the balance of P1.8 million.
Instead, they sent a letter offering to make such
payment only upon the fulfilment of certain
conditions not originally agreed upon in the
contract of sale.