11 December 2003, 418 SCRA 73


Eulalio Mistica, predecessor-in-interest of herein petitioner, is the owner of a parcel of land, a portion thereof was leased to respondent Bernardino Naguiat. The two thereafter entered into a contract to sell over the subject property. Pursuant to said agreement, respondent gave a downpayment and made another partial payment, however, he failed to make any payments thereafter. Eulalio Mistica died and was survived by his wife, the petitioner who then filed a complaint for rescission alleging that that the failure and refusal of respondents to pay the balance of the purchase price constitutes a violation of the contract which entitles her to rescind the same; that respondents have been in possession of the subject portion and they should be ordered to vacate and surrender possession of the same to petitioner.

Respondents contended that the contract cannot be rescinded on the ground that it clearly stipulates that in case of failure to pay the balance as stipulated, a yearly interest of 12% is to be paid. Respondent Bernardino Naguiat likewise alleged that sometime during the wake of the late Eulalio Mistica, he offered to pay the remaining balance to petitioner but the latter refused and hence, there is no breach or violation committed by them and no damages could yet be incurred by the late Eulalio Mistica, his heirs or assigns pursuant to the said document.

The lower court disallowed the rescission which the CA affirmed. Hence, the petition. Disallowing rescission, the CA held that respondents did not breach the Contract of Sale. It explained that the conclusion of the ten-year period was not a resolutory term, because the Contract had stipulated that payment — with interest of 12 percent — could still be made if respondents failed to pay within the period. According to the appellate court, petitioner did not disprove the allegation of respondents that they had tendered payment of the balance of the purchase price during her husband’s funeral, which was well within the ten-year period.


Whether petitioner is entitled to rescind the contract.


No, petitioner cannot rescind the contract.

The transaction between Eulalio Mistica and respondents, as evidenced by the Kasulatan, was clearly a Contract of Sale. A deed of sale is considered absolute in nature when there is neither a stipulation in the deed that title to the property sold is reserved to the seller until the full payment of the price; nor a stipulation giving the vendor the right to unilaterally resolve the contract the moment the buyer fails to pay within a fixed period.

In a contract of sale, the remedy of an unpaid seller is either specific performance or rescission. Under Article 1191 of the Civil Code, the right to rescind an obligation is predicated on the violation of the reciprocity between parties, brought about by a breach of faith by one of them. Rescission, however, is allowed only where the breach is substantial and fundamental to the fulfillment of the obligation.

In the present case, the failure of respondents to pay the balance of the purchase price within ten years from the execution of the Deed did not amount to a substantial breach. In the Kasulatan, it was stipulated that payment could be made even after ten years from the execution of the Contract, provided the vendee paid 12 percent interest. The stipulations of the contract constitute the law between the parties; thus, courts have no alternative but to enforce them as agreed upon and written.13cräläwvirtualibräry.

Moreover, it is undisputed that during the ten-year period, petitioner and her deceased husband never made any demand for the balance of the purchase price. Petitioner even refused the payment tendered by respondents during her husbands funeral, thus showing that she was not exactly blameless for the lapse of the ten-year period. Had she accepted the tender, payment would have been made well within the agreed period.

*Case digest by Rezeile S. Morandarte, JD – 4, Andres Bonifacio College, SY 2019–2020