VIRGILIO SIY v. CA, GR No.

L-39778, 1985-09-13

Facts:

The private respondents, spouses Valdez are the owners of a parcel of land containing an area of 155 square
meters, more or less, and the house constructed thereon, situated at No. 333 Jefferson Street, Makati, and
covered by Transfer Certificate of Title No. 32718 of the Registry of Deeds of Rizal. There is no dispute that the
petitioner and private respondents entered into a contract of sale regarding the said property. The controversy,
however, stemmed from subsequent agreements executed by the parties.

The first agreement entered into by the petitioner and private respondents was the Deed of Conditional Sale (Exh.
A) whereby for and in consideration of P22,000.00, the private respondents as vendors agreed to sell to the
petitioner as vendee the lot covered by TCT No. 32718 with all the improvements thereon. The sale was subject to
the condition that immediately upon the approval of the petitioner's loan with the Social Security System (SSS) and
its payment to the respondents, the vendor shall execute the deed of absolute sale in favor of the vendee.

The petitioner applied for a loan with the SSS, through the Home Financing Commission (HFC). Since the property
in question was mortgaged to the Government Service Insurance System (GSIS), the HFC requested both parties to
execute a Deed of Sale with Assumption of Mortgage (Exh. G) which they did, stating among others that the
respondents sell, transfer, and convey to the petitioner the property for and in consideration of the sum of
P22,000.00, of which P6,400.00 (representing the amount allegedly incurred by the petitioners for improvements
on said property) had been paid and the balance of P15,600.00 payable upon approval of the petitioners loan with
the SSS.

In reality, however, the respondents had not received a single centavo from the petitioner at the time.
Subsequently, the parties executed three more contracts. The first contract (Exh. I) which was executed more than
one month after Exhibit A provided that the respondents agreed to sell the property to the petitioner at
P14,000.00 while the latter must negotiate a loan with the SSS in order to settle the amount within a period of
thirty days from March 17, 1963. The contract also provided for the payment of rentals by the petitioner at P50.00
a month from March 1, 1963 until the date of final settlement and damages at the rate of P30.00 a day for each
day of delay. The next day, another contract was executed by the parties which was essentially the same as Exh.
"1". Respondent Virginia Valdez explained that she did not agree with the granting of another thirty-day extension
to the petitioner and so Exh. "1" was torn up. However, the respondents changed their... minds after the mother of
the petitioner pleaded with them for another extension. Thus, Exh. "2" came into being. It provided that the full
amount of P14,000.00 would be paid on or before the 30th day from the date of the execution of the contract and
that failure of the... petitioner to settle his obligation within that period shall make him liable for damages at
P30.00 for every day of delay.

The last agreement entered into by the parties, (Exh. 5), provided among others, that the respondents agreed to
receive the partial amount of P12,000.00 on the condition that the balance of P4,376.00 is completely paid forty-
five days after the date fixed by them and that failure of the petitioner to pay the said balance on the agreed time
will entitle the respondents to damages at P20.00 for every day of delay until said balance shall have been fully
paid.

Within the forty-five (45) days deadline, however, the petitioner failed to pay both the P12,000.00 which was
supposed to be received by the respondents upon the execution of the agreement, (Exh. 5) and the balance of
P4,376.00. Thus, when the petitioner's loan with the SSS was... finally ready for release, he requested the
respondents to sign the deed of absolute sale and other papers required by the SSS but the latter refused on the
ground that the petitioner had already breached their latest agreement (Exh. 5). The petitioner filed an action for...
specific performance with writ of preliminary mandatory injunction seeking to compel the respondents to execute
the deed of absolute sale of the property and other such documents required by the SSS for the immediate release
of the approved loan.
Issues:

WHETHER OR NOT THE COURT OF APPEALS ERRED IN SUSTAINING THE TRIAL COURT IN ORDERING THE
RESCISSION OF THE AGREEMENT (EXHIBIT 5) AND THE PAYMENT OF DAMAGES AND ATTORNEY'S FEES.

Ruling:.

We, therefore, hold that the appellate court did not commit grave abuse of discretion in upholding the trial court's
jurisdiction when it rendered the second decision.

by failing to pay the amount of P12,000.00 and the balance of P4,376.00 as stipulated in the contract within the
forty-five (45) days period, the petitioner clearly committed a breach of contract which sufficiently and justly
entitled the respondents to ask... for the rescission of the contracts.

It is evident, in the case at bar, that the respondents chose to rescind the contracts after the petitioner repeatedly
failed to pay not only the balance but the... initial amount as downpayment in consideration of which the contracts
or agreements were executed.

As a matter of fact, the petitioner later asked the SSS to cancel his loan application. He thereby abandoned his own
claim for specific performance. Therefore, the appellate court... correctly affirmed the rescission of the above-
mentioned contracts. It also correctly affirmed the payment of attorney's fees. While the petitioner may not have
acted in bad faith in filing his complaint, still the payment of attorney's fees is warranted in this case because of...
the environmental circumstances which compelled the respondents to litigate for the protection of their interests.

It is evident from the motion that the amount of P4,376.00 awarded by the appellate court as damages is mainly
based on "P30.00 per day of delay" penalty clause embodied in the agreement marked Exhibit "1". Enforcement of
the clause on daily penalties now would result in... excessive damages considering that the agreement was entered
into way back in 1963. Moreover, the P2,000.00 represents part of the purchase price of the sale which was
already rescinded.

Under Article 1191 of the Civil Code, "the injured party may choose between the fulfillment and rescission of the
obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen
fulfullment, if the latter should become impossible x x... x." The law, however, does not authorize the injured party
to rescind the obligation and at the same time seek its partial fulfillment under the guise of recovering damages.

The appellate court, therefore, erred in including both the penalty clause and the part of the purchase price in the
computation of damages. There is no question that the petitioner must pay damages for the use of the house and
lot until he vacates the premises. The petitioner... and his family have lived in the respondents' house all these
years without paying either the price he obligated himself to pay or the monthly rentals he agreed to pay as early
as 1963. At the very least, the petitioner should pay P50.00 monthly rentals with legal interest from March, 1963.

WHEREFORE, the decision appealed from is MODIFIED in that the award of damages in the amount of P4,376.00 is
set aside. The petitioner is ordered to vacate the disputed property and to pay FIFTY PESOS (P50.00) as monthly
rentals with interest at the legal rate from March,... 1963 up to the time he and his successors-in-interest vacate
the property in question. In all other respects, the decision is AFFIRMED
PEDRO MOLINA v. COURT OF APPEALS, et al.

398 SCRA 97 (2003)

If prior to the execution of the impugned Deed, a party signed receipts under which he acknowledged receiving
sums of money as payment for his property, which receipts were worded in the vernacular and could not have been
mistaken or misunderstood for anything else other than as evidence of the sale of his property, the transaction
indicated was one of sale on installment.

More than four years after petitioner Pedro Molina (Molina) executed the Deed of Sale conveying his share of the
property to his sister Felisa, Molina executed another Deed of Absolute Sale in  lieu of the first deed covering the
same share in favor of Felisa‘s son respondent Margarito Flores and his wife Nerisa Herrera.

Molina filed an action for reformation of instrument and/or annulment of document and title with reconveyance
and damages before the Regional Trial Court (RTC) of Cavite, alleging that the Deed of Absolute Sale does
not express the true will of the parties. The RTC ruled in favor of Molina and ordered the annulment of the Deed of
Absolute Sale.

Margarito and Nerisa appealed to the Court of Appeals which reversed the RTC‘s decision and dismissed the
complaint of Molina.

ISSUE:

Whether the parties intended the Deed of Absolute Sale in favor of Flores and Herrera to be an absolute sale or an
equitable mortgage

HELD:

For the presumption of an equitable mortgage to arise under Art. 1602, two (2) requisites must concur: (a) that the
parties entered into a contract denominated as a contract of sale, and (b) that their intention was to secure an
existing debt by way of a mortgage. In the case at bar, the second requisite is conspicuously absent. That the
alleged loan was received by Molina in installments of P1,000.00 per month for ten months or a total of
P10,000.00 in fact indicates that the transaction was not one of a loan but of sale on installment.

Molina argues that assuming arguendo that a contract of sale was entered into, it was not consummated as the
entire purchase price was not paid. Assuming that to be so albeit, by the Deed in question Molina acknowledged
receipt of the P8,000.00 purchase price, it does not by itself bar the transfer of the ownership or possession of the
property, much less dissolve the contract of sale. The contract remains but the payment of the price is a
resolutory condition, and the remedy of the seller is to exact fulfillment or, in case of a substantial breach, to
rescind the contract under Article 1191 of the Civil Code.

That Molina, prior to the execution of the impugned Deed, signed receipts under which he acknowledged receiving
sums of money as payment for his property, which receipts were worded in the vernacular and could not have
been mistaken or misunderstood for anything else other than as evidence of the sale of his property, seals the case
against him. It confirms this Court‘s earlier observation that the transaction indicated was one of sale on
installment.
VICENTE LIM v. CA, GR No. 118347, 1996-10-24

Facts:

Private respondent Liberty Luna is the owner of a piece of land located at the corner of G. Araneta Avenue and
Quezon Avenue in Quezon City. On September 2, 1988 private respondent sold the land to petitioners Vicente and
Michael Lim for P3,547,600.00.

As prepared by petitioners' broker, Atty. Rustico Zapata of the Zapata Realty Company, the receipt embodying the
agreement[1]... read as follows:

3. The seller assumes full responsibility to eject the squatters/occupants within a period of sixty (60) days
from the date of receipt of the earnest money; and in case the seller shall fail in her commitment to eject
the squatters/occupants within said period, the seller shall refund to the buyer this sum of P200,000.00
[plus another sum of ONE HUNDRED THOUSAND (P100,000.00) PESOS as liquidated damages];

Private respondent Luna failed to eject the squatters from the land despite her alleged efforts to do so.

On January 17, 1989, the parties met at the office of Edmundo Kaimo to negotiate a price increase to facilitate the
ejectment of the squatters. After a few days, private respondent tried to return the earnest money alleging her
failure to eject the squatters.

She claimed that as a result of her failure to remove the squatters from the land, the contract of sale ceased to
exist and she no longer had the obligation to sell and deliver her property to petitioners.

The appellate court described the sale in this case as a "contract with a conditional obligation" whereby the private
respondent's obligation to sell and deliver and the petitioners' obligation to pay the balance of the purchase price
depended on the fulfillment of the condition that the squatters be removed within 60 days.

Issues:

The first question is whether as a result of private respondent's failure to eject the squatters from the land,
petitioners, as the Court of Appeals ruled, lost the right to demand that the land be sold to them.

Ruling:

SC hold that they did not and that the appellate court erred in holding otherwise.  The agreement, as quoted,
shows a perfected contract of sale.

Indeed, the earnest money given is proof of the perfection of the contract.  As Art. 1482 of the Civil Code states,
"Whenever earnest money is given in a contract of sale, it shall be considered as part of the price and as proof of
the perfection of the contract."

Private respondent Luna contends that as the condition of ejecting the squatters was not met, she no longer has an
obligation to proceed with the sale of her lot.

Private respondent fails to distinguish between a condition imposed on the perfection of the contract and a
condition imposed on the performance of an obligation.

Failure to comply with the first condition results in the failure of a contract, while failure to comply with the second
condition only gives the other party the option either to... refuse to proceed with the sale or to waive the
condition.
In this case, there is already a perfected contract.  The condition was imposed only on the performance of the
obligation.

Hence, petitioners have the right to choose whether to demand the return of P200,000.00 which they have paid as
earnest money or to proceed with the sale.  They have chosen to proceed with the sale and private respondent
cannot refuse to do so.

Deiparine v. CA (1993)

Petitioners: ERNESTO DEIPARINE, JR.

Respondents: CA, CESARIO CARUNGAY AND ENGR. NICANOR TRINIDAD

Ponente: CRUZ

Topic: Remedies for Breach

SUMMARY: (1-2 sentence summary of facts, issue, ratio and ruling)

FACTS:

- Spouses Carungay entered into a contract with Deiparine for the construction of a 3-story dormitory in Cebu.
Carungays agreed to pay P970,000.00, inclusive of contractor's fee, and Deiparine bound himself to erect the
building "in strict accordance to plans and specifications." Trinidad, a civil engineer, was designated as Carungays’
representative, with powers of inspection and coordination with the contractor.

- Deiparine began construction on Sep. 1, 1982, even before Trinidad sent him on Nov. 6, 1982 the “General
Conditions and Specifications”, which prescribed 3000 psi (pounds per square inch) as the minimum acceptable
compressive strength of the building.

- Trinidad reported to Carungay that Deiparine had been deviating from the plans and specifications, thus
impairing the strength and safety of the building. On September 25, 1982, Carungay ordered Deiparine to first
secure approval from him before pouring cement. This order was not heeded, prompting Carungay to send
Deiparine another memorandum complaining that the "construction works are faulty and done haphazardly ...
mainly due to lax supervision coupled with ... inexperienced and unqualified staff." This memorandum was also
ignored.

- The parties agreed to conduct cylinder tests to ascertain if the structure thus far built complied with safety
standards. Carungay suggested core testing. Deiparine was reluctant at first but in the end agreed. He even
promised that if the tests should show total failure, or if the failure should exceed 10%, he would shoulder all
expenses; otherwise, the tests should be for the account of Carungay.

- The tests failed, meaning that the building was structually defective.

- Carungays then filed a complaint before RTC for the rescission of the construction contract and for damages.

- Both RTC and CA ruled for Carungays.

- Deiparine insists that the construction agreement does not specify any compressive strength for the structure nor
does it require that the same be subjected to any kind of stress test. Therefore, since he did not breach any of his
covenants under the agreement, the courts below erred in rescinding the contract.

- Deiparine also challenges the application by the lower courts of Art.1191 in rescinding the construction
agreement. His position is that the applicable rules are Art. 1385 and 1725.
ISSUES:

 WON Deiparine was guilty of breach

o NO. There were two sets of specifications, the first is a general summary of the construction
materials for the loan application of Carungays. The second laid down the specifications and
requirements of the construction of the building. In his testimony, Deiparine declared that when
the contract was signed, it was understood that the plans and specifications would be given to
him by Trinidad later. Deiparine thus admitted that the plans and specifications referred, to in
the construction agreement were not the first Specifications but the General Conditions and
Specifications submitted by Trinidad in November 1982. This second set of specifications
required a structural compressive strength of 3,000 psi. It completely belies Deiparine's
contention that no compressive strength of the dormitory was required.
o From the testimony of Eduardo Logarta, Deiparine’s project engineer, Deiparine told them to
ignore the specific orders or instructions of Carungays.
o Furthermore, Deiparine is not an engineer nor an architect but a master mariner, the supervisor
of construction Eduardo Logarta was only a 3rd year student of civil engineer, his understudy had
not passed the board yet, and the project engineer, Nilo Paglinawan, only entered the site 2
months after construction began.
o Deiparine also avers that the contract does not also require any kind of test to be done on the
structure and that, test or no test, he has not violated the agreement. Nevertheless, he subjected
the building to a cylinder test just to convince Carungay that the unfinished dormitory was
structurally sound.
o A cylinder test is done by taking samples from fresh concrete, placing them in a cylinder mold
and allowing them to harden for a maximum of 28 days, following which they are subjected to
compression to determine if the cement mixture to be poured conforms to accepted standards in
construction. Carungay was not satisfied with the results of the cylinder test because they were
inconsistent and could easily be falsified by the simple expedient of replacing the samples with a
good mixture although a different mixture had been used in the actual pouring. Consequently,
Carungay requested core testing, a more reliable procedure because the specimens obtained by
extracting concrete from the hardened existing structure would determine its actual strength.
The core test is less prone to manipulation than the cylinder test because the samples in the
former are taken from the building which is already standing.
o Deiparine vehemently refused to go along with the core test, insisting that the results of the
cylinder test earlier made were conclusive enough to prove that the building was structurally
sound. What was the real reason for this refusal? The only logical explanation would be that
Deiparine was not sure that the core test would prove favorable to him.
o All these constitute a substantial violation of the contract correctible by judicial rescission.
 WoN Art. 1191 applies
o YES. Art. 1385 states: Rescission creates the obligation to return the things which were the
object of the contract, together with their fruits, and the price with its interest; consequently,
it can be carried out only when he who demands rescission can return whatever he may be
obliged to restore.
o A1725 provides that in a contract for a piece of work: The owner may withdraw at will from the
construction of the work, although it may have been commenced, indemnifying the contractor
for all the latter's expenses, work, and the usefulness which the owner may obtain therefrom,
and damages.
o Deiparine seems to be confused over the right of rescission, which is used in two different
contexts in the Civil Code.
o Under the law on contracts, there are what are called "rescissible contracts" which are
enumerated in Art. 1381 thus:
 (1) Those which are entered into by guardians whenever the wards whom they
represent suffer lesion by more than one-fourth of the value of the things which are the
object thereof;
 (2) Those agreed upon in representation of absentees, if the latter suffer the lesion
stated in the preceding number;
 (3) Those undertaken in fraud of creditors when the latter cannot in any other manner
collect the claims due them;
 (4) Those which refer to things under litigation if they have been entered into by the
defendants without the knowledge and approval of the litigants or of competent judicial
authority;
 (5) All other contrasts specially declared by law to be subject to rescission.
o Art. 1385 deals with the rescission of the contracts enumerated above, which do not include
the construction agreement in question.
o The construction contract falls squarely under Art. 1191 because it imposes upon Deiparine the
obligation to build the structure and upon the Carungays the obligation to pay for the project
upon its completion. Art. 1191, unlike Article 1385, is not predicated on economic prejudice to
one of the parties but on breach of faith by one of them that violates the reciprocity between
them. The violation of reciprocity between Deiparine and the Carungay spouses, to wit, the
breach caused by Deiparine's failure to follow the stipulated plans and specifications, has given
the Carungay spouses the right to rescind or cancel the contract.
o Article 1725 cannot support the Deiparine's position either, for this contemplates a voluntary
withdrawal by the owner without fault on the part of the contractor, who is therefore entitled
to indemnity, and even damages, for the work he has already commenced. There is no such
voluntary withdrawal in the case at bar. On the contrary, Carungays have been constrained to
ask for judicial rescission because of the Deiparine's failure to comply with the terms and
conditions of their contract.
o While the stress test was not required in any of the contract documents, conducting the test was
the only manner by which the owner could determine if the contractor had been faithfully
complying with his prestations under their agreement. Furthermore, both parties later agreed in
writing that the core test should be conducted. When the structure failed under this test,
Carungays were left with no other recourse than to rescind their contract.
Velarde vs. Court of Appeals (361 SCRA 57)

14JAN

FACTS:
The private respondent executed a Deed of Sale with Assumption of Mortgage, with a balance of P1.8 million, in
favor of the petitioners. Pursuant to said agreements, plaintiffs paid the bank (BPI) for three (3) months until they
were advised that the Application for Assumption of Mortgage was denied. This prompted the plaintiffs not to
make any further payment. Private respondent wrote the petitioners informing the non-fulfillment of the
obligations. Petitioners, thru counsel responded that they are willing to pay in cash the balance subject to several
conditions. Private respondents sent a notarial notice of cancellation/rescission of the Deed of Sale. Petitioners
filed a complaint which was consequently dismissed by an outgoing judge but was reversed by the assuming judge
in their Motion for Reconsideration. The Court of Appeals reinstated the decision to dismiss.

ISSUE:
Whether or not there is a substantial breach of contract that would entitle its rescission.

RULING:
YES. Article 1191 of the New Civil Code applies. The breach committed did not merely consist of a slight delay in
payment or an irregularity; such breach would not normally defeat the intention of the parties to the contract.
Here, petitioners not only failed to pay the P1.8 million balance, but they also imposed upon private respondents
new obligations as preconditions to the performance of their own obligation. In effect, the qualified offer to pay
was a repudiation of an existing obligation, which was legally due and demandable under the contract of sale.
Hence, private respondents were left with the legal option of seeking rescission to protect their own interest.

CAMPO ASSETS CORP. VS. CLUB X.O. Company

Alma Arambulo used to operate a food and entertainment business establishment situated at Pasay City pursuant
to a memorandum of agreement executed on January 15, 1991 between her husband and herein petitioner, which
had a contract of lease with the owner of the subject premises.

Arambulo renewed the memorandum of agreement with petitioner and the former agreed to pay a guaranteed
monthly income of P88,000.00 every 15th day of the month and the agreement was co-terminus with the contract
of lease between petitioner and the owner of the premises. Sometime in June 1994, Arambulo and
Chan York Gui entered into a partnership agreement for the operation of Club X.O. Disco. The partnership was
registered as Club X. O. Company with the Securities and Exchange Commission. Club X. O. operated the business
and introduced improvements thereon. On January 13, 1996 or thereabout, Campo Assets took possession of the
club's premises, claiming that Arambulo had abandoned the premises and that the re-taking was pursuant to
Paragraph VI of the Memorandum of Agreement between Arambulo and Campo Assets,
which reads:

"VI. In case the premises shall be deserted or vacated before the expiration of this Agreement, the FIRST PARTY
shall have the right to enter the same as the agent of the SECOND PARTY either by force or otherwise, without
being liable to any prosecution thereof, and the FIRST PARTY shall furthermore have the option to retake and
operate the business itself or relet the same as agent of the SECOND PARTY to receive guaranteed P88,000.00
monthly income therefrom, and to apply the same to the payment of the guaranteed income due hereunder
holding the SECOND PARTY liable for any deficiency, without prejudice to any right of action against the SECOND
PARTY."
In April 1996, Club X.O. Company filed a complaint for forcible entry in the Metropolitan Trial Court of Pasay City to
recover possession of the premises. After trial, the MTC dismissed the case for lack of merit. On appeal, the
Regional Trial Court affirmed in toto the questioned decision. Undaunted, herein private respondent filed a
petition for review in the Court of Appeals. The appellate court reversed the decision of the lower court ruling that
the private respondent had a cause of action against petitioner as the respondent had prior possession of the
premises at the time petitioner took over the property. ECDHIc

Hence, this petition.

Issue:
whether Paragraph VI of the Memorandum of Agreement is "void for
being against public order". Petitioner contends that the Court of Appeals overlooked the fact that the trial court
made a factual finding that the premises had been actually abandoned by Arambulo. Campo Assets then argues
that since the leased property was already abandoned, no force was necessary and none was employed in taking
over said premises.

Ruling:
The Supreme Court found the petition meritorious. The Court ruled that the forcible entry case against petitioner
must fail because respondent Club X.O. is not even a privy to the contract of lease between Arambulo and
petitioner. Certainly, in filing the case of forcible entry against petitioner, Club X.O. cannot claim a better right than
that of the lessee, Arambulo who had already lost her right to retake possession when she abandoned the leased
property. The assailed decision was set aside and reversed and the decision of Regional Trial Court was reinstated.

The Court declared that the stipulation is in the nature of a resolutory condition and that such a contractual
provision is "not illegal, there being nothing in the law proscribing such an agreement".

In the case at bar, we find that although Paragraph VI of the Memorandum of

Agreement employs the prefatory words "in case the premises shall be deserted or vacated before the expiration
of the Agreement," which would restrict the operation of the clause to situations wherein the premises are in fact
vacated already, and would therefore imply that the re-entry with the use of force if at all, is against property only,
the stipulation would not proscribe re-taking by use of force against persons despite the fact that the premises are
still in the actual possession of another, albeit under a questioned right.

Moreover, there is no requirement of notice before re-entry. Jurisprudence supports the view that when parties to
a contract expressly reserve an option to terminate or rescind a contract upon the violation of a resolutory
condition, notice of resolution must be given to the other party when such right is exercised. WHEREFORE, this
instant petition is granted.
PNCC vs. Mars Construction Enterprises, Inc.

Facts:
Mars Construction Enterprises, Inc., herein respondent, entered into subcontract
with CDCP now PNCC, herein petitioner, to supply the latter approximately seventy thousand (70,000) cubic
meters of aggregates consisting of washed sand, washed 3/4" gravel, washed 1-1/2" gravel and sub-base.

The contract provided a default clause that if respondent failed to deliver, petitioner could procure them from
other sources. The agreement was amended to the effect that the delivery of 70,000 cubic meters of concrete
aggregates should consist of approximately 17,500 cubic meters of washed sand, approximately 17,500 cubic
meters of washed .75-inch gravel, 35,000 cubic meters of washed 1.5-inch gravel, and "sub-base 2" minus crusher
run.
Petitioner, on several occasions, purchased concrete aggregates from other suppliers at additional cost which
respondent paid pursuant to their default clause. After delivery of 8,162.43 cubic meters of washed 1.5-inch
gravel, PNCC refused delivery of 17,000 cubic meters of washed 1-1/2" gravel.

Hence, the action for breach of contract was filed by respondent against petitioner. The trial court rendered
judgment in favor of respondent for breach of contract by its refusal to accept the 17,000 cubic meters of washed
1.5-inch gravel from the respondent. It found that the amendment made the agreement ambiguous because the
quantity of "sub-base 2" minus crusher run was not specified. It ruled that the quantities specified in the
amendment were the minimum quantities which must be delivered by respondent to petitioner which had
ordered more than that specified in the agreement. The CA affirmed the ruling of the trial court. Hence, this
petition.

Issue:
"i. The honorable Court of Appeals . . . decided that PNCC was compelled to
accept the delivery of the 17,000 cubic meters of washed 1-1/2" gravel
which is not in accord with law and jurisprudence.

Ruling:

The Supreme Court held that the various stipulations in a contract should be
interpreted together and ambiguous ones should be so construed as conform to the sense that would result if all
the provisions are comprehended jointly; that doubts in contracts should be settled in favor of the greatest
reciprocity of interests; that a contract cannot be cancelled or rescinded unilaterally by a contracting party on
account of infractions by the other party; and that judicial action is necessary for its rescission in order to afford
the other party an opportunity to be heard and to determine if the rescission was proper.

Also, the contract specifically provided that if the respondent failed to deliver the required aggregates, the
petitioner could procure them from other sources so as not to jeopardize the entire construction project. The
records reveal that on
several occasions, petitioner purchased concrete aggregates from other suppliers. 15 Pursuant to Paragraph 3 of
Amendment 2, petitioner imposed penalties for the incremental cost of procuring materials from other sources,
which respondent willingly paid in the sum of P1,577,000. Since petitioner was already compensated for
respondent's defaults, such defaults cannot be considered as a substantial breach that justified the rescission of
the Contract and the refusal to accept the questioned delivery. Furthermore, when the petitioner exercised its
options in case of delay or default on the part of the respondent, the former waived its right to rescind and was
thus estopped from rescinding the Contract by reason of such short delivery.

DBP vs. CA

Facts:
Petitioner DBP sold to private respondents by virtue of a Deed of Conditional Sale a parcel of land in Bulacan.
Respondents made regular payments to petitioner DBP. Of their principal obligation in the amount of P207,000.00,
private respondents, although sometimes delayed on dates stipulated for payment, have already paid
P289,600.00. Thus, private respondents went to the DBP to ask for the execution of a Deed of Absolute Sale and
for the issuance of the title to the property. DBP, however, informed respondents that there was still a balance of
P221,867.85 and demanded from respondents payment of this amount, otherwise, it would rescind the sale.
Respondents filed a complaint against petitioner DBP for specific performance and damages with injunction. The
RTC enjoined DBP from rescinding the sale and from selling the land to interested buyers. After trial, the RTC
declared permanent the writ of preliminary injunction issued in favor of respondents and ordered respondent
spouses to pay petitioner the amount of P54,200.00. The CA affirmed with modification the RTC decision.

On appeal, the SC found the penalty charges imposed for respondents' delayed payments which amounted to
P221,867.85 unconscionable, and thereby reduced the same. The SC also held that petitioner has no right to
rescind the sale because there was no substantial breach since respondents made regular payments to comply
with their obligation; and that respondents are entitled to an injunction, otherwise, respondents would have lost
what they have paid for and any right they may have acquired over the property if petitioner rescinds the sale and
sells the land to other buyers.

There was no substantial breach in the performance of private respondents' obligation. Article 1191 of the Civil
Code provides that "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 . . ." Rescission of a contract will not be permitted for a slight or
casual breach, but only such substantial and fundamental breach as would defeat the very object of the parties in
making the agreement. Private respondents made regular payments to petitioner DBP. Their fault consisted only of
their failure to pay the installments on the dates stipulated in the contract, for which they were charged additional
interests and penalty charges. In the second place, private respondents stopped their
payments to the DBP only after they had paid P289,600.00 because of their belief that they had already complied
with their obligation to petitioner. Lastly, notwithstanding private respondents' delay in paying the amortizations,
petitioner DBP unqualifiedly accepted the payments made by them. Hence, petitioner lost its right to rescind the
sale on the basis of such late payments.

Goldenrod Inc. vs. Court of Appeals (299 SCRA 141)

FACTS:
 Barreto realty owns 43 parcels of land in Quiapo Manila, which they mortgaged in UCPB. Respondent sold the
property to Goldenrod who in turn paidP1M earnest money and promise to pay Barreto’s debt to UCPB.
Respondent caused 2 land titles to the property.Petitioner was not able to pay UCPB and the latter did not agree
for and extension.
Hence, petitioner rescinded the contact and demanded the return of the earnest money.
Respondent did not oppose the recession but did not gave the earnest money. They even sold the first lot to
Asiaworld Trade Center and the other lot to UCPB for payment of their mortgage.
 ISSUE:
WON respondent should return the earnest money of the petitioner.
HELD:
Earnest money is a part of payment of a sale. Rescission creates the obligation to return the things which were the
object of the contract together with their fruits and interest. Since the respondent did not oppose the extra-
judicial rescission, they should return the earnest money of the petitioner. It would be most inequitable if
respondentBarretto Realty would be allowed to retain petitioner’s payment of P1,000,000.00 and at the same time
appropriate the proceeds of the second sale made to another.
Doctrine:
PRICE ON FORCED SALES DISTINGUISHED FROM PRICE ON ORDINARY SALES
In ordinary sales, by reasons of equity, a transaction may be invalidated on the ground of inadequacyof price. In
forced sales, as when a sale is made at a public auction, the owner has the right to redeem.When there is a right to
redeem, inadequacy of price is immaterial because judgment debtor canbetter acquire the property or also sell his
right to redeem and thus recover the loss he claims to havesuffered by reason of the price obtained from the
auction sale.