G.R. No. 133803 September 16, 2005
BIENVENIDO M. CASIÑO, JR., Petitioner, vs. THE COURT OF APPEALS and OCTAGON REALTY DEVELOPMENT CORPORATION, Respondent.

FACTS

Respondent Octagon Realty Development Corporation filed a complaint for rescission of contract and damages against petitioner Bienvenido M. Casiño, Jr. The parties had entered into a contract for the supply and installation of narra wood parquet for a condominium project. Respondent alleged that after paying a 40% downpayment, petitioner delivered only a portion of the materials and incurred delay in delivering the remainder, misrepresented his qualifications, and lacked funds to complete the work. Respondent was compelled to engage another contractor to finish the project.
Petitioner admitted the contract but claimed the terms were modified. He contended that respondent failed to prepare the work area suitably, preventing him from complying with the delivery schedule, and failed to pay his subsequent billings. Petitioner argued that it was respondent who breached the contract and that the extrajudicial rescission was void.

ISSUE

Whether the Court of Appeals erred in affirming the trial court’s decision which upheld the validity of the rescission of the contract by respondent and the award of damages.

RULING

The Supreme Court denied the petition and affirmed the appellate court’s decision. The legal logic rests on the finding that petitioner was guilty of breach of contract, which justified respondent’s rescission. Rescission is permitted under Article 1191 of the Civil Code when one of the obligors fails to comply with his obligation. The Court found petitioner’s defenses unmeritorious. The claim of modification was unsupported by evidence, and his failure to complete the delivery and installation constituted substantial breach. Respondent validly exercised its right to rescind extrajudicially, as the contract did not stipulate a judicial proceeding for rescission, and petitioner was notified of the rescission.
Concerning damages, the Court upheld the award for actual damages representing the cost incurred by respondent in engaging a new contractor to complete the work. This is in accordance with Articles 2199 and 2200 of the Civil Code, which allow recovery for pecuniary loss duly proved. The cost differential between the original contract price and the new contract price was a natural and proximate result of petitioner’s breach. The award of attorney’s fees was also sustained, as respondent was compelled to litigate due to petitioner’s breach. The findings of fact by the lower courts, being supported by evidence, are binding and conclusive.