GR 133208; (July, 2006) (Digest)
G.R. No. 133208 ; July 31, 2006
LAURENCIO C. RAMEL, SOCORRO B. RAMEL and RENE LEMAR B. RAMEL, petitioners, vs. DANIEL AQUINO and GUADALUPE ABALAHIN, respondents. BENJAMIN AQUINO and VIRGINIA AQUINO, respondents-Intervenors.
FACTS
Petitioners agreed to purchase 8.2030 hectares from respondent Daniel Aquino’s mortgaged land. The oral agreement stipulated petitioners would assume the P85,543.00 mortgage with the Development Bank of the Philippines (DBP) and pay respondents a P25,000.00 balance. Petitioners gave earnest money and made partial payments totaling P24,800.00 to respondents and paid P23,097.00 to DBP. They took possession and introduced improvements. Petitioners later restructured the DBP loan. Subsequently, respondents, claiming petitioners breached the agreement by failing to fully assume the loan by a certain date, revoked the sale. They paid DBP P72,703.06 to settle the loan, which they later withdrew. Petitioners then fully paid the DBP loan amounting to P108,216.00.
ISSUE
Whether the oral contract of sale was validly rescinded by the respondents.
RULING
The Supreme Court affirmed the lower courts’ finding that the contract was validly rescinded. The legal logic rests on the application of Article 1191 of the Civil Code on rescission of reciprocal obligations. The Court found petitioners failed to comply with their principal obligation to assume the mortgage loan in full within the period agreed upon by the parties. While the exact deadline was disputed, petitioners’ act of restructuring the loan with DBP without respondents’ consent constituted a breach. Loan restructuring materially altered the terms of the original mortgage obligation petitioners agreed to assume, changing the amortization schedule and extending the payment period. This alteration prejudiced respondents, who needed the title released for a claim against the NIA. This breach gave respondents the right to rescind the contract. Rescission creates mutual restitution. Thus, respondents must return the payments received (P24,800.00), and petitioners must return possession of the land. Since petitioners had already paid the DBP loan in full (P108,216.00) to prevent foreclosure, which inured to respondents’ benefit as owners, respondents were also ordered to reimburse this amount. The Court deleted the offsetting of claims for improvements and fruits for lack of evidence.