G.R. L-42283, March 18, 1985, 135 SCRA 323
Ursula and Tomas Calasanz sold a piece of land to Buenaventura Angeles and Teofila Juani covered by a contract to sell. Angeles paid a down payment upon the execution of the contract and started paying the balance in monthly installments for nine years with only a few remaining installments left to pay. Although Calasanz accepted late payments before, Angeles was now five months late. Calasanz demanded payment of past due accounts, but did not receive any. Eventually, Calansanz canceled the said contract and Angeles asked for reconsideration, but was denied.
A provision in the contract to sell gave Calasanz the right to cancel the contract and consider the amounts paid as rent for the property. However, the lower court ruled that the contract was not validly canceled and ordered Calasanz to execute a final Deed of Sale in favor of Angeles.
Was the contract to sell validly canceled?
No. The act of a party in treating a contract as canceled or resolved on account of infractions by the other must be made known to the other and is always provisional, being ever subject to scrutiny and review by the proper court. If the other party denies that rescission is justified, it is free to bring the matter to court. Then, should the court decide that the resolution of the contract was not warranted, the responsible party will be sentenced to damages; in the contrary case, the resolution will be affirmed and indemnity awarded to the party prejudiced.
The right to rescind the contract for non-performance of one of its stipulations is not absolute. The general rule is that rescission of a contract will not be permitted for a slight or casual breach, but only for such substantial and fundamental breach as would defeat the very object of the parties in making the agreement. The question of whether a breach of a contract is substantial depends upon the attendant circumstances.
The breach of the contract alleged by Calasanz is so slight considering that Angeles had already paid monthly installments for almost nine years. In only a short time, the entire obligation would have been paid.
To mitigate the unilateral act of Calasanz in cancelling the contract, Article 1234 of the Civil Code provides that: If the obligation has been substantially performed in good faith, the obligor may recover as though there had been a strict and complete fulfillment, less damages suffered by the obligee.
* Case digest by Immanuel Granada, LLB-1, Andres Bonifacio Law School, SY 2017-2018