HEIRS OF GAITE VS THE PLAZA INC.

G.R. No. 177685 January 26, 2011

FACTS:
On July 16, 1980, The Plaza, Inc. (The Plaza), a corporation engaged in the
restaurant business, through its President, Jose C. Reyes, entered into a contract
with Rhogen Builders (Rhogen), represented by Ramon C. Gaite, for the construction
of a restaurant building in Greenbelt, Makati, Metro Manila for the price of
P7,600,000. On July 28, 1980, The Plaza paid P1,155,000 down payment to Gaite
and soon after Rhogen commenced construction of the restaurant building. 2
Months later, Engineer Angelito Z. Gonzales, the Acting Building Official of the
Municipality of Makati, ordered Gaite to cease and desist from continuing with the
construction of the building for violation of The National Building Code.
The Plazas Project Manager Architect Roberto evaluated the Progress Billing and
Tayzon stated that
actual jobsite assessment showed that the finished works fall short of Rhogens
claimed percentage of
accomplishment and Rhogen was entitled to only P32,684.16 and not P260,649.91
being demanded by Rhogen. On the same day, Gaite notified Reyes that he is
suspending all construction works until Reyes and the Project Manager cooperate to
resolve the issue he had raised to address the problem.
Gaite informed The Plaza that he is terminating their contract based on the
Contractors Right to Stop
Work or Terminate Contracts as provided for in the General Conditions of the
Contract and demanded the payment of P63,058.50 representing the work that has
already been completed by Rhogen. Reyes also informed Gaite that The Plaza will
continue the completion of the structure utilizing the services of a competent
contractor but will charge Rhogen for liquidated damages as stipulated in Article VIII
of the Contract The Plaza filed a civil case for breach of contract, sum of money and
damages against Gaite and FGU in the Court of First Instance (CFI) of Rizal. The RTC
Makati rendered its decision granting in favor of the Plaza against Gaite. The Court
of Appeals affirmed such decision with modification.
ISSUE:
Whether or not the Rhogen had factual or legal basis to terminate the General
Construction Contract.
HELD:
The construction contract between Rhogen and The Plaza provides for reciprocal
obligations

whereby the latters obligation to pay the contract price or progress billing is
conditioned on the formers
specified performance. Pursuant to its contractual obligation, The Plaza furnished
materials and paid the agreed down payment. Rhogen, having breached the
contractual obligation it had expressly assumed specifically to comply with all laws
was already at fault. Respondent The Plaza, on the other hand, was justified in
withholding payment on
Rhogen
s first progress billing. Upon the facts duly established, Rhogen committed a serious
breach of its contract with The Plaza, which justified the latter in terminating the
contract. Article 1170 of the Civil Code provides that those who in the performance
of their obligations are guilty of fraud, negligence or delay and those who in any
manner contravene the tenor thereof are liable for damages. Petition DENIED

G.R. No. 188064, June 01 2011

MILA A. REYES , Petitioner, VS. VICTORIA T. TUPARAN, Respondent.

MENDOZA, J.:
Mila A. Reyes (petitioner) filed a complaint for Rescission of Contract with Damages
against Victoria T. Tuparan (respondent) before the RTC.In her Complaint, petitioner
alleged, among others, that she was the registered owner of a 1,274 square meter
residential and commercial lot located in Karuhatan, Valenzuela City, and covered
by TCT No. V-4130.

Petitioner mortgaged the subject real properties to the Farmers Savings Bank and
Loan Bank, Inc. (FSL Bank) to secure a loan. Petitioner then decided to sell her real
properties so she could liquidate her bank loan and finance her businesses. As a
gesture of friendship, respondent verbally offered to conditionally buy petitioner's
real properties.

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.

Respondent, however, defaulted in the payment of her obligations on their due

dates. Instead of paying the amounts due in lump sum on their respective maturity
dates, respondent paid petitioner in small amounts from time to time.

Respondent countered, among others, that the tripartite agreement erroneously

designated by the petitioner as a Deed of Conditional Sale of Real Property with
Assumption of Mortgage was actually a pure and absolute contract of sale with a
term period. It could not be considered a conditional sale because the acquisition of
contractual rights and the performance of the obligation therein did not depend
upon a future and uncertain event.

Respondent further averred that she successfully rescued the properties from a
definite foreclosure by paying the assumed mortgage plus interest and other
finance charges.

The RTC handed down its decision finding that respondent failed to pay in full the
total purchase price of the subject real properties. It stated that the checks and
receipts presented by respondent refer to her payments of the mortgage obligation
with FSL Bank. 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.

The CA rendered its decision affirming with modification the RTC Decision.The CA
agreed with the RTC that the contract entered into by the parties is a contract to sell
but ruled that the remedy of rescission could not apply because the respondent's
failure to pay the petitioner the balance of the purchase was not a breach of
contract, but merely an event that prevented the seller (petitioner) from conveying
title to the purchaser (respondent).

ISSUE: Whether the agreement is a contract to sell and not a contract of sale.

HELD: YES.

CIVIL LAW: Contract to sell versus contract of sale

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 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.

Accordingly, the petitioner's obligation to sell the subject properties becomes

demandable only upon the happening of the positive suspensive condition, which is
the respondent's full payment of the purchase price. Without respondent's full
payment, there can be no breach of contract to speak of because petitioner has no
obligation yet to turn over the title. Respondent's failure to pay in full the purchase
price is not the breach of contract contemplated under Article 1191 of the New Civil
Code but rather just an event that prevents the petitioner from being bound to
convey title to the respondent.

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."

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.

Out of the P1,200,000.00 remaining balance, respondent paid on several dates the
first and second installments of P200,000.00 each. She, however, failed to pay the
third and last installment of P800,000.00 due on December 31, 1991. Nevertheless,
on August 31, 1992, respondent, through counsel, offered to pay the amount of
P751,000.00, which was rejected by petitioner for the reason that the actual
balance was P805,000.00 excluding the interest charges.

Considering that out of the total purchase price of P4,200,000.00, respondent has
already paid the substantial amount of P3,400,000.00, more or less, leaving an
unpaid balance of only P805,000.00, it is right and just to allow her to settle, within

a reasonable period of time, the balance of the unpaid purchase price. The Court
agrees with the courts below that the respondent showed her sincerity and
willingness to comply with her obligation when she offered to pay the petitioner the
amount of P751,000.00.