1/19/2016 G.R.No.

108346

TodayisTuesday,January19,2016

RepublicofthePhilippines
SUPREMECOURT
Manila

THIRDDIVISION

G.R.No.108346July11,2001

SpousesMARIANOZ.VELARDEandAVELINAD.VELARDE,petitioners,
vs.
COURTOFAPPEALS,DAVIDA.RAYMUNDOandGEORGERAYMUNDO,respondents.

PANGANIBAN,J.:

A substantial breach of a reciprocal obligation, like failure to pay the price in the manner prescribed by the
contract,entitledtheinjuredpartytorescindtheobligation.Rescissionabrogatesthecontractfromitsinception
andrequiresamutualrestitutionofbenefitsreceived.

TheCase

BeforeusisaPetitionforReviewonCertiorari1questioningtheDecision2oftheCourtofAppeals(CA)inCAGR
CVNo.32991datedOctober9,1992,aswellasitsResolution3 dated December 29, 1992 denying petitioner's
motionforreconsideration.4

ThedispositiveportionoftheassailedDecisionreads:

"WHEREFORES the Order dated May 15, 1991 is hereby ANNULLED and SET ASIDE and the Decision
dated November 14, 1990 dismissing the [C]omplaint is RESINSTATED. The bonds posted by plaintiffs
appelleesanddefendantsappellantsareherebyRELEASED."5

TheFacts

Thefactualantecedentsofthecase,asfoundbytheCA,areasfollows:

"x x x. David Raymundo [herein private respondent] is the absolute and registered owner of a parcel of
land, together with the house and other improvements thereon, located at 1918 Kamias St., Dasmarias
Village,MakatiandcoveredbyTCTNo.142177.DefendantGeorgeRaymundo[hereinprivatepetitioners]
isDavid'sfatherwhonegotiatedwithplaintiffsAvelinaandMarianoVelarde[hereinpetitioners]forthesale
ofsaidproperty,whichwas,however,underlease(Exh.'6',p.232,RecordofCivilCaseNo.15952).

"On August 8, 1986, a Deed of Sale with Assumption of Mortgage (Exh. 'A' Exh. '1', pp. 1112, Record)
was executed by defendant David Raymundo, as vendor, in favor of plaintiff Avelina Velarde, as vendee,
withthefollowingtermsandconditions:

'xxxxxxxxx

'That for and in consideration of the amount of EIGHT HUNDRED THOUSAND PESOS
(P800,000.00),Philippinecurrency,receiptofwhichinfullisherebyacknowledgedbytheVENDOR
from the VENDEE, to his entire and complete satisfaction, by these presents the VENDOR hereby
SELLS,CEDES,TRANSFERS,CONVEYSANDDELIVERS,freelyandvoluntarily,withfullwarrantyof
alegalandvalidtitleasprovidedbylaw,untotheVENDEE,herheirs,successorsandassigns,the
parcel of land mentioned and described above, together with the house and other improvements
thereon.

'That the aforesaid parcel of land, together with the house and other improvements thereon, were
mortgaged by the VENDOR to the BANK OF THE PHILIPPINE ISLANDS, Makati, Metro Manila to
secure the payment of a loan of ONE MILLION EIGHT HUNDRED THOUSAND PESOS
(P1,800,000.00),Philippinecurrency,asevidencedbyaRealEstateMortgagesignedandexecuted
bytheVENDORinfavorofthesaidBankofthePhilippineIslands,on_____andwhichRealEstate
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MortgagewasratifiedbeforeNotaryPublicforMakati,_____,asDoc.No.______,PageNo._____,
BookNo.___,Seriesof1986ofhisNotarialRegister.

'That as part of the consideration of this sale, the VENDEE hereby assumes to pay the mortgage
obligations on the property herein sold in the amount of ONE MILLION EIGHT HUNDRED
THOUSAND PESOS (P1,800,000.00), Philippine currency, in favor of Bank of Philippine Islands, in
thenameoftheVENDOR,andfurtheragreestostrictlyandfaithfullycomplywithallthetermsand
conditionsappearingintheRealEstateMortgagesignedandexecutedbytheVENDORinfavorof
BPI,includinginterestsandotherchargesforlatepaymentleviedbytheBank,asifthesamewere
originallysignedandexecutedbytheVENDEE.

'Itisfurtheragreedandunderstoodbythepartieshereinthatthecapitalgainstaxanddocumentary
stamps on the sale shall be for the account of the VENDOR whereas, the registration fees and
transfertaxthereonshallbetheaccountoftheVENDEE.'(Exh.'A',pp.1112,Record).'

"On the same date, and as part of the abovedocument, plaintiff Avelina Velarde, with the consent of her
husband,Mariano,executedanUndertaking(Exh.'C',pp.1314,Record).'

'xxxxxxxxx

'Whereas,asperdeedofSalewithAssumptionofMortgage,IpaidMr.DavidA.Raymundothesum
of EIGHT HUNDRED THOUSAND PESOS (P800,000.00), Philippine currency, and assume the
mortgage obligations on the property with the Bank of the Philippine Islands in the amount of ONE
MILLION EIGHT HUNDRED THOUSAND PESOS (P1,800,000.00), Philippine currency, in
accordancewiththetermsandconditionsoftheDeedofRealEstateMortgagedated_____,signed
andexecutedbyMr.DavidA.RaymundowiththesaidBank,acknowledgedbeforeNotaryPublicfor
Makati,_____,asDoc.No._____,PageNo._____,BookNo._____,Seriesof1986ofhisNotarial
Register.

'WHEREAS, while my application for the assumption of the mortgage obligations on the property is
not yet approved by the mortgagee Bank, I have agreed to pay the mortgage obligations on the
property with the Bank in the name of Mr. David A. Raymundo, in accordance with the terms and
conditionsofthesaidDeedofRealEstateMortgage,includingallinterestsandotherchargesforlate
payment.

'WHEREAS,thisundertakingisbeingexecutedinfavorofMr.DavidA.Raymundo,forpurposesof
attesting and confirming our private understanding concerning the said mortgage obligations to be
assumed.

'NOW,THEREFORE,forandinconsiderationoftheforegoingpremises,andtheassumptionofthe
mortgage obligations of ONE MILLION EIGHT HUNDRED THOUSAND PESOS (P1,800,000.00),
Philippine currency, with the bank of the Philippine Islands, I, Mrs, Avelina D, Velarde with the
consent of my husband, Mariano Z. Velardo, do hereby bind and obligate myself, my heirs,
successorsandassigns,tostrictlyandfaithfullycomplywiththefollowingtermsandconditions:

'1.Thatuntilsuchtimeasmyassumptionofthemortgageobligationsonthepropertypurchasedis
approvedbythemortgageebank,theBankofthePhilippineIslands,Ishallcontinuetopaythesaid
loaninaccordancewiththetermsandconditionsoftheDeedofRealEstateMortgageinthenameof
Mr.DavidA.Raymundo,theoriginalMortgagor.

'2. That, in the event I violate any of the terms and conditions of the said Deed of Real Estate
Mortgage, I hereby agree that my downpayment of P800,000.00, plus all payments made with the
Bank of the Philippine Islands on the mortgage loan, shall be forfeited in favor of Mr. David A.
Raymundo, as and by way of liquidated damages, without necessity of notice or any judicial
declaration to that effect, and Mr. David A. Raymundo shall resume total and complete ownership
andpossessionofthepropertysoldbywayofDeedofSalewithAssumptionofMortgage,andthe
same shall be deemed automatically cancelled and be of no further force or effect, in the same
mannerasit(the)samehadneverbeenexecutedorenteredinto.

'3. That I am executing the Undertaking for purposes of binding myself, my heirs, successors and
assigns,tostrictlyandfaithfullycomplywiththetermsandconditionsofthemortgageobligationswith
theBankofthePhilippineIslands,andthecovenants,stipulationsandprovisionsofthisUndertaking.

'That,DavidA.Raymundo,thevendorofthepropertymentionedandidentifiedabove,[does]hereby
confirm and agree to the undertakings of the Vendee pertinent to the assumption of the mortgage
obligationsbytheVendeewiththeBankofthePhilippineIslands.(Exh.'C',pp.1314,Record).'

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"ThisundertakingwassignedbyAvelinaandMarianoVelardeandDavidRaymundo.

"ItappearsthatthenegotiatedtermsforthepaymentofthebalanceofP1.8millionwasfromtheproceeds
of a loan that plaintiffs were to secure from a bank with defendant's help. Defendants had a standing
approvedcreditlinewiththeBankofthePhilippineIslands(BPI).Thepartiesagreedtoavailofthis,subject
toBPI'sapprovalofanapplicationforassumptionofmortgagebyplaintiffs.PendingBPI'sapprovalo[f]the
application, plaintiffs were to continue paying the monthly interests of the loan secured by a real estate
mortgage.

"Pursuant to said agreements, plaintiffs paid BPI the monthly interest on the loan secured by the
aforementionedmortgageforthree(3)monthsasfollows:September19,1986atP27,225.00October20,
1986atP23,000.00andNovember19,1986atP23,925.00(Exh.'E','H'&'J',pp.15,17and18,Record).

"OnDecember15,1986,plaintiffswereadvisedthattheApplicationforAssumptionofMortgagewithBPI,
wasnotapproved(Exh.'J',p.133,Record).Thispromptedplaintiffsnottomakeanyfurtherpayment.

"OnJanuary5,1987,defendants,thrucounsel,wroteplaintiffsinformingthelatterthattheirnonpayment
tothemortgagebankconstitute[d]nonperformanceoftheirobligation(Exh.'3',p.220,Record).

"InaLetterdatedJanuary7,1987,plaintiffs,thrucounsel,responded,asfollows:

'This is to advise you, therefore, that our client is willing to pay the balance in cash not later than
January 21, 1987 provided: (a) you deliver actual possession of the property to her not later than
January 15, 1987 for her immediate occupancy (b) you cause the re lease of title and mortgage
fromtheBankofP.I.andmakethetitleavailableandfreefromanyliensandencumbrancesand(c)
youexecuteanabsolutedeedofsaleinherfavorfreefromanyliensorencumbrancesnotlaterthan
January21,1987.'(Exhs.'k','4',p.223,Record).

"On January 8, 1987 defendants sent plaintiffs a notarial notice of cancellation/rescission of the intended
saleofthesubjectpropertyallegedlyduetothelatter'sfailuretocomplywiththetermsandconditionsof
theDeedofSalewithAssumptionofMortgageandtheUndertaking(Exh.'5',pp.225226,Record)."6

Consequently, petitioners filed on February 9, 1987 a Complaint against private respondents for specific
performance,nullityofcancellation,writofpossessionanddamages.ThiswasdocketedasCivilCaseNo.15952
attheRegionalTrialCourtofMakati,Branch149.ThecasewastriedandheardbythenJudgeConsueloYnares
Santiago(nowanassociatejusticeofthisCourt),whodismissedtheComplaintinaDecisiondatedNovember14,
1990.7Thereafter,petitionersfiledaMotionforReconsideration.8

Meanwhile,thenJudgeYnaresSantiagowaspromotedtotheCourtofAppealsandJudgeSalvadorS.A.Abad
Santos was assigned to the sala she vacated. In an Order dated May 15, 1991,9 Judge Abad Santos granted
petitioner'sMotionforReconsiderationanddirectedthepartiestoproceedwiththesale.Heinstructedpetitioners
topaythebalanceofP1.8milliontoprivaterespondentswho,inturn,wereorderedtoexecuteadeedofabsolute
saleandtosurrenderpossessionofthedisputedpropertytopetitioners.

PrivaterespondentsappealedtotheCA.

RulingoftheCourtofAppeal

TheCAsetasidetheOrderofJudgeAbadSantosandreinstatedthenJudgeYnaresSantiago'searlierDecision
dismissing petitioners' Complaint. Upholding the validity of the rescission made by private respondents, the CA
explaineditsrulinginthiswise:

"IntheDeedofSalewithAssumptionofMortgage,itwasstipulatedthat'aspartoftheconsiderationofthis
sale,theVENDEE(Velarde)'wouldassumetopaythemortgageobligationonthesubjectpropertyinthe
amountofP1.8millioninfavorofBPIinthenameoftheVendor(Raymundo).Sincethepricetobepaidby
the Vendee Velarde includes the downpayment of P800,000.00 and the balance of Pl.8 million, and the
balanceofPl.8millioncannotbepaidincash,VendeeVelarde,aspartoftheconsiderationofthesale,had
toassumethemortgageobligationonthesubjectproperty.Inotherwords,theassumptionofthemortgage
obligation is part of the obligation of Velarde, as vendee, under the contract. Velarde further agreed 'to
strictlyandfaithfullycomplywithallthetermsandconditionsappearingintheRealEstateMortgagesigned
andexecutedbytheVENDORinfavorofBPIxxxasifthesamewereoriginallysignedandexecutedby
the Vendee. (p. 2, thereof, p. 12, Record). This was reiterated by Velarde in the document entitled
'Undertaking' wherein the latter agreed to continue paying said loan in accordance with the terms and
conditionsoftheDeedofRealEstateMortgageinthenameofRaymundo.Moreover,itwasstipulatedthat
intheeventofviolationbyVelardeofanytermsandconditionsofsaiddeedofrealestatemortgage,the
downpayment of P800,000.00 plus all payments made with BPI or the mortgage loan would be forfeited
andthe[D]eedof[S]alewith[A]ssumptionof[M]ortgagewouldtherebybeCancelledautomaticallyandof
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noforceandeffect(pars.2&3,thereof,pp1314,Record).

"Fromthese2documents,itisthereforeclearthatpartoftheconsiderationofthesalewastheassumption
by Velarde of the mortgage obligation of Raymundo in the amount of Pl.8 million. This would mean that
Velarde had to make payments to BPI under the [D]eed of [R]eal [E]state [M]ortgage the name of
Raymundo. The application with BPI for the approval of the assumption of mortgage would mean that, in
caseofapproval,paymentofthemortgageobligationwillnowbeinthenameofVelarde.Andintheevent
saidapplicationisdisapproved,Velardehadtopayinfull.ThisisallegedandadmittedinParagraph5of
theComplaint.MarianoVelardelikewiseadmittedthisfactduringthehearingonSeptember15,1997(p.
47,t.s.n.,September15,1987seealsopp.1626,t.s.n.,October8,1989).Thisbeingthecase,thenon
paymentofthemortgageobligationwouldresultinaviolationofthecontract.And,uponVelarde'sfailureto
paytheagreedprice,the[n]Raymundomaychooseeitheroftwo(2)actions(1)demandfulfillmentofthe
contract,or(2)demanditsrescission(Article1191,CivilCode).

"The disapproval by BPI of the application for assumption of mortgage cannot be used as an excuse for
Velarde'snonpaymentofthebalanceofthepurchaseprice.Asborneoutbytheevidence,Velardehadto
payinfullincaseofBPI'sdisapprovaloftheapplicationforassumptionofmortgage.WhatVelardeshould
havedonewastopaythebalanceofP1.8million.Instead,VelardesentRaymundoaletterdatedJanuary
7,1987(Exh.'K','4')whichwasstronglygivenweightbythelowercourtinreversingthedecisionrendered
by then Judge YnaresSantiago. In said letter, Velarde registered their willingness to pay the balance in
cashbutenumerated3newconditionswhich,tothemindofthisCourt,wouldconstituteanewundertaking
ornewagreementwhichissubjecttotheconsentorapprovalofRaymundo.These3conditionswerenot
among those previously agreed upon by Velarde and Raymundo. These are mere offers or, at most, an
attempt to novate. But then again, there can be no novation because there was no agreement of all the
partiestothenewcontract(Garcia,Jr.vs.CourtofAppeals,191SCRA493).

"It was likewise agreed that in case of violation of the mortgage obligation, the Deed of Sale with
AssumptionofMortgagewouldbedeemed'automaticallycancelledandofnofurtherforceandeffect,asif
the same had never been executed or entered into.' While it is true that even if the contract expressly
providedforautomaticrescissionuponfailuretopaytheprice,thevendeemaystillpay,hemaydosoonly
foraslongasnodemandforrescissionofthecontracthasbeenmadeuponhimeitherjudiciallyorbya
notarial act (Article 1592, Civil Code). In the case at bar, Raymundo sent Velarde notarial notice dated
January 8, 1987 of cancellation/rescission of the contract due to the latter's failure to comply with their
obligation. The rescission was justified in view of Velarde's failure to pay the price (balance) which is
substantialandfundamentalastodefeattheobjectofthepartiesinmakingtheagreement.Asadvertedto
above, the agreement of the parties involved a reciprocal obligation wherein the obligation of one is a
resolutory condition of the obligation of the other, the nonfulfillment of which entitles the other party to
rescindthecontract(Songcuanvs.IAC,191SCRA28).Thus,thenonpaymentofthemortgageobligation
by appellees Velarde would create a right to demand payment or to rescind the contract, or to criminal
prosecution (Edca Publishing & Distribution Corporation vs. Santos, 184 SCRA 614). Upon appellee's
failure,therefore,topaythebalance,thecontractwasproperlyrescinded(Ruizvs.IAC,184SCRA720).
Consequently,appelleesVelardehavingviolatedthecontract,theyhavelosttheirrighttoitsenforcement
andhence,cannotavailoftheactionforspecificperformance(Voysawvs.InterphilPromotions,Inc.,148
SCRA635)."10

Hence,thisappeal.11

TheIssues

Petitioners,intheirMemorandum,12interposethefollowingassignmentoferrors:

"I.

TheCourtofAppealserredinholdingthatthenonpaymentofthemortgageobligationresultedinabreach
ofthecontract.

"II

TheCourtofAppealserredinholdingthattherescission(resolution)ofthecontractbyprivaterespondents
wasjustified.

"III

The Court of Appeals erred in holding that petitioners' January 7, 1987 letter gave three 'new conditions'
constitutingmereoffersoranattempttonovatenecessitatinganewagreementbetweentheparties."

TheCourt'sRuling
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ThePetitionispartiallymeritorious.

FirstIssue:

BreachofContract

Petitioneraverthattheirnonpaymentofprivaterespondents'mortgageobligationdidnotconstituteabreachof
contract,consideringthattheirrequesttoassumetheobligationhadbeendisapprovedbythemortgageebank.
Accordingly, payment of the monthly amortizations ceased to be their obligation and, instead, it devolved upon
privaterespondentsagain.

However,petitionersdidnotmerelystoppayingthemortgageobligationstheyalsofailedtopaythebalanceof
the purchase price. As admitted by both parties, their agreement mandated that petitioners should pay the
purchasepricebalanceofP1.8milliontoprivaterespondentsincasetherequesttoassumethemortgagewould
bedisapproved.Thus,onDecember15,1986,whenpetitionersreceivednoticeofthebank'sdisapprovaloftheir
applicationtoassumerespondents'mortgage,theyshouldhavepaidthebalanceoftheP1.8millionloan.

Insteadofdoingso,petitionerssentalettertoprivaterespondentsofferingtomakesuchpaymentonlyuponthe
fulfillment of certain conditions not originally agreed upon in the contract of sale. Such conditional offer to pay
cannottaketheplaceofactualpaymentaswoulddischargetheobligationofabuyerunderacontractofsale.

Inacontractofsale,thesellerobligatesitselftotransfertheownershipofanddeliveradeterminatethings,and
thebuyertopaythereforapricecertaininmoneyoritsequivalent.13

Private respondents had already performed their obligation through the execution of the Deed of Sale, which
effectivelytransferredownershipofthepropertytopetitionerthroughconstructivedelivery.Priorphysicaldelivery
orpossessionisnotlegallyrequired,andtheexecutionoftheDeedofSaleisdeemedequivalenttodelivery.14

Petitioners, on the other hand, did not perform their correlative obligation of paying the contract price in the
manneragreedupon.Worse,theywantedprivaterespondentstoperformobligationsbeyondthosestipulatedin
thecontractbeforefulfillingtheirownobligationtopaythefullpurchaseprice.

SecondIssue

ValidityoftheRescission

Petitionerslikewiseclaimthattherescissionofthecontractbyprivaterespondentswasnotjustified,inasmuchas
theformerhadsignifiedtheirwillingnesstopaythebalanceofthepurchasepriceonlyalittleoveramonthfrom
thetimetheywerenotifiedofthedisapprovaloftheirapplicationforassumptionofmortgage.Petitionersalsoaver
that the breach of the contract was not substantial as would warrant a rescission. They cite several cases15 in
whichthisCourtdeclaredthatrescissionofacontractwouldnotbepermittedforaslightorcasualbreach.Finally,
theyarguethattheyhavesubstantiallyperformedtheirobligationingoodfaith,consideringthattheyhavealready
madetheinitialpaymentofP800,000andthree(3)monthlymortgagepayments.

Aspointedoutearlier,thebreachcommittedbypetitionerswasnotsomuchtheirnonpaymentofthemortgage
obligations,astheirnonperformanceoftheirreciprocalobligationtopaythepurchasepriceunderthecontractof
sale.Privaterespondents'righttorescindthecontractfindsbasisinArticle1191oftheCivilCode,whichexplicitly
providesasfollows:

"Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors
shouldnotcomplywithwhatisincumbentuponhim.

Theinjuredpartymaychoosebetweenfulfillmentandtherescissionoftheobligation,withthepaymentof
damages in either case. He may also seek rescission even after he has chosen fulfillment, if the latter
shouldbecomeimpossible."

TherightofrescissionofapartytoanobligationunderArticle1191oftheCivilCodeispredicatedonabreachof
faith by the other party who violates the reciprocity between them.16 The breach contemplated in the said
provisionistheobligor'sfailuretocomplywithanexistingobligation.17Whentheobligorcannotcomplywithwhat
is incumbent upon it, the obligee may seek rescission and, in the absence of any just cause for the court to
determinetheperiodofcompliance,thecourtshalldecreetherescission.18

Inthepresentcase,privaterespondentsvalidlyexercisedtheirrighttorescindthecontract,becauseofthefailure
of petitioners to comply with their obligation to pay the balance of the purchase price. Indubitably, the latter
violatedtheveryessenceofreciprocityinthecontractofsale,aviolationthatconsequentlygaverisetoprivate
respondent'srighttorescindthesameinaccordancewithlaw.

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True,petitionersexpressedtheirwillingnesstopaythebalanceofthepurchasepriceonemonthafteritbecame
due however, this was not equivalent to actual payment as would constitute a faithful compliance of their
reciprocal obligation. Moreover, the offer to pay was conditioned on the performance by private respondents of
additionalburdensthathadnotbeenagreeduponintheoriginalcontract.Thus,itcannotbesaidthatthebreach
committedbypetitionerswasmerelyslightorcasualaswouldprecludetheexerciseoftherighttorescind.

Misplacedispetitioners'relianceonthecases19theycited,becausethefactualcircumstancesinthosecasesare
notanalogoustothoseinthepresentone.InSongFotherewas,onthepartofthebuyer,onlyadelayoftwenty
(20)daystopayforthegoodsdelivered.Moreover,thebuyer'soffertopaywasunconditionalandwasaccepted
bytheseller.

InZepeda,thebreachinvolvedamereoneweekdelayinpayingthebalanceof1,000whichwasactuallypaid.

In Tan, the alleged breach was private respondent's delay of only a few days, which was for the purpose of
clearingthetitletothepropertytherewasnoreferencewhatsoevertothenonpaymentofthecontractprice.

In the instant case, the breach committed did not merely consist of a slight delay in payment or an irregularity
suchbreachwouldnotnormallydefeattheintentionofthepartiestothecontract.Here,petitionersnotonlyfailed
topaytheP1.8millionbalance,buttheyalsoimposeduponprivaterespondentsnewobligationsaspreconditions
to the performance of their own obligation. In effect, the qualified offer to pay was a repudiation of an existing
obligation,whichwaslegallydueanddemandableunderthecontractofsale.Hence,privaterespondentswere
leftwiththelegaloptionofseekingrescissiontoprotecttheirowninterest.

MutualRestitution

RequiredinRescission

Asdiscussedearlier,thebreachcommittedbypetitionerswasthenonperformanceofareciprocalobligation,not
a violation of the terms and conditions of the mortgage contract. Therefore, the automatic rescission and
forfeitureofpaymentclausesstipulatedinthecontractdoesnotapply.Instead,CivilCodeprovisionsshallgovern
andregulatetheresolutionofthiscontroversy.

Considering that the rescission of the contract is based on Article 1191 of the Civil Code, mutual restitution is
requiredtobringbackthepartiestotheiroriginalsituationpriortotheinceptionofthecontract.Accordingly,the
initialpaymentofP800,000andthecorrespondingmortgagepaymentsintheamountsofP27,225,P23,000and
P23,925(totalingP874,150.00)advancedbypetitionersshouldbereturnedbyprivaterespondents,lestthelatter
unjustlyenrichthemselvesattheexpenseoftheformer.

Rescissioncreatestheobligationtoreturntheobjectofthecontract.Itcanbecarriedoutonlywhentheonewho
demandsrescissioncanreturnwhateverhemaybeobligedtorestore.20Torescindistodeclareacontractvoid
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
partiesfromfurtherobligationstoeachother,buttoabrogateitfromthebeginningandrestorethepartiestotheir
relativepositionsasifnocontracthasbeenmade.21

ThirdIssue

AttempttoNovate

In view of the foregoing discussion, the Court finds it no longer necessary to discuss the third issue raised by
petitioners. Suffice it to say that the three conditions appearing on the January 7, 1987 letter of petitioners to
privaterespondentswerenotpartoftheoriginalcontract.Bythattime,itwasalreadyincumbentupontheformer
to pay the balance of the sale price. They had no right to demand preconditions to the fulfillment of their
obligation,whichhadbecomedue.

WHEREFORE,theassailedDecisionisherebyAFFIRMEDwiththeMODIFICATIONthatprivaterespondentsare
orderedtoreturntopetitionerstheamountofP874,150,whichthelatterpaidasaconsequenceoftherescinded
contract,withlegalinterestthereonfromJanuary8,1987,thedateofrescission.Nopronouncementastocosts.

SOORDERED. 1 w p h i1 .n t

Melo,Vitug,andSandovalGutierrez,JJ.,concur.

Footnotes:

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1Rollo,pp.3753.

2Rollo,pp.6878.PennedbyJusticeReginaG.OrdoezBenitezandconcurredinbyJusticesGloriaC.
Paras(Divisionchairman)andEduardoG.Montenegro(member).

3Rollo,p.81.

4Rollo,pp.2133.

5CADecision,p.11Rollo,p.20.

6Rollo,pp.6873.

7Records,pp.280284.

8Records,pp.285293.

9Records,pp.339341.

10Rollo,pp.7578.

11 To eradicate its backlog of old cases, the Court m Februry 27, 2001 resolved to redistribute long
pendingcasestojusticeswhohadnobacklog,andwhowerethustaskedtoprioritizethem.Consequently,
thiscasewasraffledandassignedtotheundersignedponenteforstudyandreport.

12Rollo,p.227.

13Coronelv.CA,263SCRA15,October7,1996.

14PowerCommercialandIndustrialCorp.v.CA,274SCRA597,June20,1997.

15SongFo&Co.v.HawaiianPhilippineCo.,47Phil.821,September16,1925Tanv.CourtofAppeals,
175SCRA656,July28,1989andZepedav.CourtofAppeals,216SCRA293,December9,1992.

16Uyv.CourtofAppeals,314SCRA69,September9,1999Romeov.CourtofAppeals,250SCRA223,
November23,1995.

17Chengv.Genato,300SCRA722,December29,1998.

18CentralPhilippineUniversityv.CourtofAppeals,246SCRA511,July17,1995.

19Seefootnote15.

20 Co v. Court of Appeals, 312 SCRA 528, August 17,1999. Vitug, Compendium of Civil Law and
Jurisprudence,1993reviseded.,p.556.

210campov.CourtofAppeals,233SCRA551,June30,1994.

TheLawphilProjectArellanoLawFoundation

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