GR 134241; (August, 2003) (Digest)
G.R. No. 134241 ; August 11, 2003
DAVID REYES (Substituted by Victoria R. Fabella), petitioner, vs. JOSE LIM, CHUY CHENG KENG and HARRISON LUMBER, INC., respondents.
FACTS
Petitioner David Reyes and respondent Jose Lim entered into a Contract to Sell a parcel of land for P28 million, with a P10 million down payment. The balance was due on or before March 8, 1995, contingent upon the vacation of the tenant, respondent Harrison Lumber, from the property. The contract stipulated a 4% monthly penalty on the down payment if the tenant failed to vacate by the deadline. Reyes alleged Lim connived with the tenant to delay vacation to accumulate penalties. Lim countered that Reyes refused to meet to execute the final deed and, crucially, sold the property to a third party, Line One Foods Corporation, on March 1, 1995. Lim filed an Amended Answer praying for cancellation of the contract and a writ of preliminary attachment. The trial court denied the attachment but, upon Lim’s motion, ordered Reyes to deposit the P10 million down payment with the court. Reyes challenged this order via certiorari, but the Court of Appeals dismissed his petition, prompting this review.
ISSUE
Whether the trial court gravely abused its discretion in ordering Reyes to deposit the P10 million down payment with the court during the pendency of the action for annulment of contract.
RULING
The Supreme Court denied the petition and affirmed the Court of Appeals. The trial court did not commit grave abuse of discretion; it properly exercised its equity jurisdiction. The provisional remedies under the Rules of Court were inapplicable here, as Lim’s prayer was for contract cancellation (rescission), not a money claim recoverable by attachment. The legal logic rests on Article 1385 of the Civil Code, which mandates that a party demanding rescission must be able to return what he received. By selling the property to a third party, Reyes rendered himself potentially incapable of returning the down payment, which would be a prerequisite for any rescission in his favor. The deposit order was a conservatory measure to ensure the fund’s availability pending final judgment, protecting Lim’s interest without prejudging the case’s merits. It was a valid exercise of the court’s inherent power to grant ancillary reliefs necessary to enforce substantive rights and prevent a situation where Reyes, having sold the property, might also dissipate the down payment, thereby frustrating the principles of restitution and unjust enrichment. The order did not automatically award the money to Lim but merely secured it for the eventual execution of the court’s final decision.