G.R. No. 73893. June 30, 1987
MARGARITA SURIA AND GRACIA R. JOVEN, PETITIONERS, VS. HON. INTERMEDIATE APPELLATE COURT, HON. JOSE MAR GARCIA (PRESIDING JUDGE OF THE RTC OF LAGUNA, BRANCH XXIV, BINAN, LAGUNA),…
GUTIERREZ, JR., J.:
This is a petition for
review on certiorari of the decision of the Court of Appeals dismissing
for lack of merit the petition for certiorari filed therein.
As factual background, we
quote from the Court of Appeals’ decision:
“The factual and procedural antecedents of this case may be
briefly stated as follows:
“On June 20, 1983, private-respondents filed a complaint
before the Regional Trial Court of
Laguna, Branch XXIV, for rescission of contract and damages, alleging among others:
‘1. x x
x
‘2. That on March 31,
1975, plaintiffs being the owners of a parcel of land situated at Barrio San
Antonio, San Pedro, Laguna, entered into a contract denominated as DEED OF SALE
WITH MORTGAGE, with herein defendants, a true copy of said contract (which is
made an integral part hereof) is hereto attached as ANNEX “A”;
‘3. x
x x
‘4. That the defendants violated the terms and conditions of
the contract by failing to pay the stipulated installments and in fact only one
installment due in July 1975 (paid very late in the month of September, 1975)
was made all the others remaining unsettled to the present time;
‘5. That repeated verbal
and written demands were made by plaintiff upon the defendants for the payment
of the installments, some of said written demands having been made on September
24, 1981, February 7, 1982, February 24, 1983, March 13, 1983, and April 12, 1983, but defendants for no justifiable
reason failed to comply with the demands of plaintiffs;
‘6. x x x’
“On November 14,
1983, petitioners filed their answer with counterclaim.
“On July 16, 1984,
petitioners filed a motion to dismiss complaint, alleging that:
‘1. That plaintiffs are not
entitled to the subsidiary remedy of rescission because of the
presence of remedy of foreclosure in the Deed of Sale
with Mortgage (Annex “A”, Complaint);
‘2. That, assuming arguendo that rescission were a proper remedy, it is
apparent in the face of the Complaint that the plaintiffs failed to comply with
the requirements of law, hence the rescission was ineffective, illegal, null
and void, and invalid.’
“On July 26, 1984,
private-respondents filed their opposition to the above motion.
“In the meantime, on August
6, 1984, petitioners formally offered to pay private-respondents
all the outstanding balance under the Deed of Sale with
Mortgage, which offer was rejected by private-respondents on August 7, 1984.
“On November 26,
1984, the respondent-Court denied the motion to dismiss. The order reads:
‘Defendants through counsel filed a Second Motion to Dismiss dated
July 24, 1984 based on an affirmative defense raised in their answer, that is,
that the complaint fails to state a cause of action for rescission against
defendants because (1) – plaintiffs are not entitled to the subsidiary remedy
of rescission because of the presence of the remedy of foreclosure in the Deed
of Sale with Mortgage (Annex “A”, Complaint) and (2) – assuming arguendo that rescission were a proper remedy, it is
apparent from the face of the Complaint that the plaintiffs failed to comply
with the requirements of law, hence the rescission was ineffective, illegal,
null and void, and invalid.
‘After a careful perusal of the allegations of the complaint
considered in the light of existing applicable law and jurisprudence touching
on the matters in issue, and mindful of the settled rule that in a motion to
dismiss grounded on lack of cause of action the allegations of the complaint
must be assumed to be true, the Court finds and holds that the motion to
dismiss dated July 24, 1984 filed by defendants lacks merit and therefore
denied the same.
‘SO ORDERED.’
“On January 31, 1985,
petitioners filed a motion for reconsideration to which private-respondents
filed their opposition on February 11,
1985. On February 19, 1985, petitioners filed
their reply.
“On March 13, 1985,
the respondent-Court denied the motion for reconsideration. The order reads in part:
‘x x x
‘Perusing the grounds invoked by the defendants in their Motion
for Reconsideration and Reply as well as the objections raised by plaintiffs in
their opposition, and it appearing
that in its Order dated November 26, 1984, the Court has sufficiently, althou (sic) succinctly stated its reason for denying the motion to dismiss
dated July 16, 1984, that is, for lack of merit, the Court finds no overriding
reason or justification from the grounds invoked in the said Motion for
Reconsideration for it to reconsider, change, modify, or set aside its Order
dated November 26, 1984. The Court still
believes that the two (2) grounds invoked by defendants in their Motion to Dismiss dated July
16, 1984 are not meritorious when considered in the light of
prevailing law and jurisprudence
and the hypothetically admitted allegations of the complaint, and for that
reason it denied the motion to dismiss in its said order of November 26, 1984.
The instant Motion for Reconsideration is therefore denied for lack
of merit.” (Pp. 29-32, Rollo)
The questions raised by petitioner are as follows:
I
“IN A DEED OF SALE,
WHICH IS COUPLED WITH A MORTGAGE TO SECURE PAYMENT OF THE BALANCE OF THE
PURCHASE PRICE, MAY THE SELLER RESORT TO THE REMEDY OF RESCISSION UNDER ARTICLE
1191 OF THE CIVIL CODE WHICH PROVIDES FOR THE SUBSIDIARY AND EQUITABLE REMEDY
OF RESCISSION IN CASE OF BREACH OF RECIPROCAL OBLIGATIONS?
Otherwise stated,
“IS THE SUBSIDIARY AND EQUITABLE REMEDY OF RESCISSION
AVAILABLE IN THE PRESENCE OF A REMEDY OF FORECLOSURE IN THE LIGHT OF THE
EXPRESS PROVISION OF ARTICLE 1383 OF THE CIVIL CODE THAT: ‘THE ACTION FOR RESCISSION IS SUBSIDIARY; IT
CANNOT BE INSTITUTED EXCEPT WHEN THE PARTY SUFFERING DAMAGE HAS NO OTHER LEGAL
MEANS TO OBTAIN REPARATION FOR THE SAME’?
xxx xxx xxx
II
“MAY THE SELLER LEGALLY DEMAND RESCISSION OF THE DEED OF SALE
WITH MORTGAGE WITHOUT OFFERING TO RESTORE TO THE BUYER WHAT HE HAS PAID, AS
REQUIRED BY ARTICLE 1385, OR COMPLYING WITH THE REQUIREMENTS OF THE MACEDA LAW
(REPUBLIC ACT 6552) GRANTING THE BUYER A GRACE PERIOD TO PAY WITHOUT INTEREST,
AND, IN CASE OF CANCELLATION IN CASE THE BUYER STILL COULD NOT PAY WITHIN THE
GRACE PERIOD, REQUIRING THE SELLER TO ORDER PAYMENT OF THE CASH SURRENDER VALUE
BEFORE THE CANCELLATION MAY LEGALLY TAKE EFFECT (SEC. 3[b], LAST PAR., REP. ACT
6552)?
The petition was denied in a minute resolution on June 13, 1986 but was given due
course on September 29, 1986
on a motion for reconsideration.
The petition is impressed with merit.
The respondent court rejected the petitioners’ reliance on
paragraph (H) of the contract which grants to the vendors-mortgagees the right
to foreclose “in the event of the failure of the vendees-mortgagors to
comply with any provisions of this mortgage.” According to the appellate
court, this stipulation merely recognizes the right of the vendors to foreclose and realize on the
mortgage but does not preclude them from availing of other remedies under the
law, such as rescission of contract and damages under Articles 1191 and 1170 of
the Civil Code in relation to Republic Act No. 6552.
The appellate court committed reversible error. As will be explained later, Art. 1191 on
reciprocal obligations is not applicable under the facts of this case. Moreover, Art. 1383 of the Civil Code
provides:
“The action for rescission is subsidiary; it cannot be instituted except when the
party suffering damage has no other legal means to obtain reparation for the
same.”
The concurring opinion of Justice J.B.L. Reyes in Universal
Food Corp. v. Court of Appeals
(33 SCRA 22) was cited by the appellate court.
In that case, Justice J.B.L. Reyes explained:
xxx xxx xxx
“x x x The rescission on account of breach of stipulations is not
predicated on injury to economic interests of the party plaintiff but on the
breach of faith by the defendant, that violates
the reciprocity between the parties. It is not a subsidiary action, and Article
1191 may be scanned without disclosing anywhere that the action for rescission thereunder is subordinated to anything other than the culpable
breach of his obligations by the defendant.
This rescission is a principal action retaliatory in character,
it being unjust that a party be held bound to fulfill his promises when the other violates his. As expressed in the old Latin aphorism: ‘Non servanti fidem, non
est fides servanda.’ Hence,
the reparation of damages for the breach is purely secondary.
“On the contrary, in the rescission by reason of lesion or
economic prejudice, the cause of action is subordinated to the existence of that
prejudice, because it is the raison d ‘etre as well as the measure of the right to rescind. Hence, where the defendant makes good the
damages caused, the action cannot be maintained or continued, as expressly
provided in Articles 1383 and 1384. But
the operation of these two articles is limited to the cases of rescission for
lesion enumerated in Article 1381 of the Civil Code of the Philippines,
and does not apply to cases under Article 1191.
“It is probable that the petitioner’s confusion arose from
the defective technique of the new Code that terms both instances as ‘rescission’
without distinctions between them; unlike the previous Spanish Civil Code of
1889, that differentiated ‘resolution’ for breach of stipulations from
‘rescission’ by reason of lesion or damage.
But the terminological vagueness does not justify confusing one case
with the other, considering the patent difference in causes and results of
either action.”
According to the private respondents, the applicable law is
Article 1191 of the Civil Code which provides:
“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 the 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 he
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.”
There is no dispute that the parties entered into a contract of
sale as distinguished from a contract to sell.
By the contract of sale, the vendor obligates himself to transfer
the ownership of and to deliver a determinate thing to the buyer, who in turn,
is obligated to pay a price certain in money or its equivalent (Art. 1458, Civil Code). From the respondents’ own arguments, we note
that they have fully complied with their part of the reciprocal
obligation. As a matter of fact, they
have already parted with the title as evidenced by the transfer certificate of title in the petitioners’ name as of June 27, 1975.
The buyer, in turn, fulfilled his end of the bargain when he
executed the deed of mortgage. The
payments on an installment basis secured by the execution of a mortgage took
the place of a cash payment. In other
words, the relationship between the parties is no longer one of buyer and
seller because the contract of sale has
been perfected and consummated. It is already one of a mortgagor and a
mortgagee. In consideration of the petitioners’ promise to pay on installment basis the sum they owe
the respondents, the latter have accepted
the mortgage as security for the
obligation.
The situation in this case is, therefore, different from that envisioned in the cited opinion of Justice J.B.L.
Reyes. The petitioners’ breach of obligations is not with respect to the perfected contract of sale but in the
obligations created by the mortgage contract. The remedy of rescission is not a principal
action retaliatory in character but becomes a subsidiary one which by law is
available only in the absence of any other legal remedy. (Art. 1384, Civil Code).
Foreclosure here is not
only a remedy accorded by law
but, as earlier stated, is a specific provision found in the contract between
the parties.
The petitioners are correct in citing this Court’s ruling in Villaruel v. Tan King (43 Phil. 251) where we stated:
“At the outset it must
be said that since the subject-matter of the sale in question is real property, it does not come
strictly within the provisions of article 1124 of the Civil Code, but is rather
subjected to the stipulations agreed upon
by the contracting parties and to the provisions of article 1504 of the
Civil Code.
“The ‘pacto comisorio‘
or ‘ley comisoria‘ is
nothing more than a condition subsequent of the contract of purchase and sale.
Considered carefully, it is
the very condition subsequent that is always attached to all bilateral obligations according to article 1124; except that when applied to
real property it is not within the scope of said article 1124, and it is
subordinate to the stipulations made by the contracting parties and to the
provisions of the article on which we are now commenting’ (article 1504). (Manresa,
Civil Code, volume 10, page 286, second edition.)
“Now, in the contract of purchase and sale before us, the
parties stipulated that the payment of the balance of one thousand pesos (P1,000) was guaranteed by the mortgage of the house that was
sold. This agreement has the two-fold
effect of acknowledging indisputably that the sale had been consummated, so
much so that the vendee was disposing of it by mortgaging it to the vendor, and
of waiving the pacto comisorio, that is, the resolution of the sale in the
event of failure to pay the one thousand pesos (P1,000) such waiver being
proved by the execution of the mortgage to guarantee the payment, and in accord
therewith the vendor’s adequate remedy, in case of nonpayment, is the foreclosure
of such mortgage. (at
pp. 255-256)
xxx xxx xxx
“There is, therefore, no cause for the resolution of the sale
as prayed for by the plaintiff. His
action, at all events, should have been one for the foreclosure of the
mortgage, which is not the action brought in this
case.
“Article 1124 of the Civil Code, as we have seen, is not
applicable to this case. Neither is the
doctrine enunciated in the case of Ocejo, Perez
& Co. v. International Banking Corporation (37 Phil., 631), which plaintiff
alleges to be applicable, because that principle has reference to the sale of
personal property.” (at p. 257)
The petitioners have offered to pay all past due accounts. Considering the lower purchasing value of the
peso in terms of prices of real estate today, the respondents are correct in
stating they have suffered losses.
However, they are also to blame for trusting persons who could not or
would not comply with their obligations in time. They could have foreclosed on the mortgage
immediately when it fell due instead of waiting all these years while trying to
enforce the wrong remedy.
WHEREFORE, the petition is hereby GRANTED. The Intermediate Appellate Court’s decision
dated November 8, 1985 and the resolutions dated December 6, 1985 and February
28, 1986 are REVERSED and SET ASIDE. The
petitioners are ordered to pay the balance of their indebtedness under the Deed
of Absolute Sale with Mortgage with legal interests from the second installment
due on October 24, 1975
until fully paid, failing which the respondents may resort to foreclosure.
SO ORDERED.
Fernan, (Chairman), Paras, Padilla, Bidin, and Cortes, JJ., concur.