G.R. No.

171076 August 1, 2012

GOLDLOOP PROPERTIES INC., Petitioner,
vs.
GOVERNMENT SERVICE INSURANCE SYSTEM, Respondent.

Facts:
The petitioner Goldloop Properties executed a Memorandum of Agreement (MOA) with
the respondent Government Service Insurance System (GSIS) undertaking the
construction of a condominium on the parcel of land and the renovation of the façade of
Philcomcen Building at its own expense, both owned by the GSIS, with the terms of
their agreement stating that the petitioner will pay GSIS for the land in eight installments
and the parties will share for the profits of every condominium sold with a certain
percentage.
Goldloop then performed the preparatory works, such as selling the condominiums but
was not able to proceed because the building permits was not yet been approved and
there were still accrued real property taxes that were unpaid.
After some time, Goldloop received a letter from GSIS to rescind the MOA and Goldloop
replied that the work stoppage was caused of the pending approval of the building
permits.
Despite this, GSIS sent a notice of rescission stating that Goldloop still have pending
obligations under their MOA which prompted Goldloop to file a complaint with the RTC
contending that it had begun with the preparatory works and such MOA should not be
rescinded.
RTC granted in favor of Goldloop,and thus GSIS appealed with the CA that it had the
right to rescind the contract for failure of Goldloop to comply with the obligation as
stated in the MOA, which the CA granted in favor of the GSIS.

Issue/s:
Whether or not the Memorandum of Agreement may be rescinded?

Held:
Yes, the Court ruled that GSIS have every right to rescind the contract under the terms
of the MOA for which the parties may validly stipulate the unilateral rescission of their
contract.
It is the duty of both parties to surrender whatever amount received or property to part
with, wherein Goldloop should return to GSIS the possession and control of the property
subject of their agreements while GSIS should reimburse Goldloop whatever amount it
had received from the latter by reason of the MOA and the Addendum.
The Court also held that rescission constitute a mutual restitution of the things pursuant
to Article 1191 of the Civil Code, where in case both parties have committed a breach of
the obligation,the liability of the first infractor shall be equitably tempered by the courts.
If it cannot be determined which of the parties first violated the contract, the same shall
be deemed extinguished, and each shall bear his own damages.
In the case at bar, the first infractor cannot be determined, prompting the Court to order
Goldloop to surrender possession of the land to the GSIS and that Goldloop should be
reimbursed for the amount of expenses plus the return of the machineries, equipment
and materials in the premises of the lot.