G.R. No. 129107, September 26, 2001, 366 SCRA 41

FACTS:

Private respondent Antonio Palao sold to petitioner Alfonso Iringan, an undivided portion of Lot No. 992 of the Tuguegarao Cadastre, located at the Poblacion of Tuguegarao and covered by Transfer Certificate of Title No. T-5790. The parties executed a Deed of Sale] on the same date with the purchase price of P295,000.00,payable as follows:(a) P10,000.00 upon the execution of this instrument ;(b) P140,000.00 on or before April 30, 1985;(c) P145,000.00 on or before December 31, 1985.

When the second payment was due, Iringan paid only P40,000. Thus, Palao sent a letter to Iringan stating that he considered the contract as rescinded and that he would not accept any further payment considering that Iringan failed to comply with his obligation to pay the full amount of the second installment. Iringan through his counsel Atty. Hilarion L. Aquino, replied that they were not opposing the revocation of the Deed of Sale but asked for the reimbursement of the following amounts:(a) P50,000.00 cash received;(b) P3,200.00 geodetic engineers fee;(c) P500.00 attorneys fee;(d) the current interest on P53,700.00. In response, Palao sent a letter dated January 10, 1986 to Atty. Aquino, stating that he was not amenable to the reimbursements claimed by Iringan.

On February 21, 1989, Iringan, now represented by a new counsel Atty. Carmelo Z. Lasam, proposed that the P50,000 which he had already paid Palao be reimbursed or Palao could sell to Iringan, an equivalent portion of the land. Palao instead wrote Iringan that the latters standing obligation had reached P61,600, representing payment of arrears for rentals from October 1985 up to March 1989.[9] The parties failed to arrive at an agreement. On July 1, 1991, Palao filed a Complaint[10] for Judicial Confirmation of Rescission of Contract and Damages against Iringan and his wife.

ISSUE:

Whether or not the contract of sale was validly rescinded.

RULING:

Article 1592 of the Civil Code is the applicable provision regarding the sale of an immovable property. Article 1592. In the sale of immovable property, even though it may have been stipulated that upon failure to pay the price at the time agreed upon the rescission of the contract shall of right take place, the vendee may pay, even after the expiration of the period, as long as no demand for rescission of the contract has been made upon him either judicially or by a notarial act. After the demand, the court may not grant him a new term. Article 1592 requires the rescinding party to serve judicial or notarial notice of his intent to resolve the contract.

Article 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. The injured party may choose between the fulfillment and the rescission of the obligation, with payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible. The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period.

This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance with articles 1385 and 1388 and the Mortgage Law.

But in our view, even if Article 1191 were applicable, petitioner would still not be entitled to automatic rescission. In Escueta v. Pando, we ruled that under Article 1124 (now Article 1191) of the Civil Code, the right to resolve reciprocal obligations, is deemed implied in case one of the obligors shall fail to comply with what is incumbent upon him. But that right must be invoked judicially. The same article also provides: The Court shall decree the resolution demanded, unless there should be grounds, which justify the allowance of a term for the performance of the obligation. This requirement has been retained in the third paragraph of Article 1191, which states that the court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period.

Consequently, even if the right to rescind is made available to the injured party, the obligation is not ipso facto erased by the failure of the other party to comply with what is incumbent upon him. The party entitled to rescind should apply to the court for a decree of rescission.The right cannot be exercised solely on a party’s own judgment that the other committed a breach of the obligation.The operative act which produces the resolution of the contract is the decree of the court and not the mere act of the vendor. Since a judicial or notarial act is required by law for a valid rescission to take place, the letter written by respondent declaring his intention to rescind did not operate to validly rescind the contract.

 * Case digest by Leizel Lagare, LLB-1, Andres Bonifacio Law School, SY 2017-2018