GR 119745; (June, 1997) (Digest)
G.R. No. 119745 June 20, 1997
POWER COMMERCIAL AND INDUSTRIAL CORPORATION, petitioner, vs. COURT OF APPEALS, SPOUSES REYNALDO and ANGELITA R. QUIAMBAO and PHILIPPINE NATIONAL BANK, respondents.
FACTS
Petitioner Power Commercial & Industrial Development Corporation entered into a Deed of Absolute Sale With Assumption of Mortgage with respondent spouses Reynaldo and Angelita Quiambao on June 26, 1979, covering a parcel of land in Makati. Petitioner paid a down payment and assumed the existing mortgage on the land with respondent Philippine National Bank (PNB), paying P79,145.77 in full satisfaction thereof. The deed contained a warranty of title and peaceful possession but was subject to the existing mortgage. Petitioner applied to PNB for assumption of the mortgage. Subsequently, petitioner discovered that the lot was occupied by lessees and demanded that the spouses eject them. The spouses failed to do so. PNB later informed the spouses that petitioner’s application for assumption was considered withdrawn due to failure to submit necessary papers. Petitioner made two payments to PNB on the loan. On March 17, 1982, petitioner filed a case against the spouses for rescission and damages. PNB later foreclosed the mortgage. The trial court ruled in favor of petitioner, ordering rescission of the sale, the return of the down payment by the spouses, and the return of the mortgage payments by PNB. The Court of Appeals reversed this decision, dismissing the complaint.
ISSUE
1. Whether the seller’s failure to eject the lessees from the lot is a ground for rescission of the contract of sale with assumption of mortgage.
2. Whether the mortgagee (PNB) is obligated to return the amortization payments made by the buyer who assumed the mortgage.
RULING
1. No, the seller’s failure to eject the lessees is not a ground for rescission. The deed of sale did not stipulate the ejectment of the lessees as a condition, whether resolutory or suspensive. The warranty of “peaceful possession” referred to defending title against lawful claims, not guaranteeing physical vacancy. The presence of lessees did not constitute a violation of the warranty against eviction, as they were not asserting a right superior to the buyer’s. The breach was not substantial enough to warrant rescission.
2. No, PNB is not obligated to return the payments. Petitioner’s payments to PNB were made in compliance with its obligation under the contract of sale to assume the mortgage. There was no “mistake in payment” giving rise to solutio indebiti, as the payments were made voluntarily and in pursuance of a valid obligation. PNB’s application of the payments to the outstanding loan was proper, and there was no unjust enrichment.