GR 139523; (May, 2005) (Digest)
G.R. No. 139523 ; May 26, 2005
SPS. FELIPE AND LETICIA CANNU, petitioners, vs. SPS. GIL AND FERNANDINA GALANG AND NATIONAL HOME MORTGAGE FINANCE CORPORATION, respondents.
FACTS
Respondents-spouses Galang owned a house and lot mortgaged to NHMFC. Through an attorney-in-fact, they agreed to sell the property to petitioners-spouses Cannu for P120,000.00, with the Cannus assuming the outstanding mortgage. A Deed of Sale with Assumption of Mortgage was executed. The Cannus paid P75,000.00, took possession, and made several payments directly to NHMFC. They failed, however, to pay the remaining P45,000.00 balance of the purchase price to the Galangs.
Despite demands, the Cannus refused to pay the balance or vacate. The Galangs then fully paid their mortgage loan to NHMFC. The Cannus opposed the release of the title and filed a Complaint for Specific Performance and Damages, seeking to be declared owners subject to reimbursing the Galangs for the loan pre-termination payment.
ISSUE
Whether petitioners-spouses Cannu have a cause of action for specific performance to be declared owners of the property.
RULING
No. The Supreme Court denied the petition and affirmed the dismissal of the complaint. The legal logic is anchored on the petitioners’ breach of contract and lack of a perfected assignment of the mortgage. The contract of sale between the parties was subject to a resolutory condition. The Cannus’ failure to pay the P45,000.00 balance constituted a substantial breach, giving the Galangs the right to rescind the contract. Rescission is permitted under Article 1191 of the Civil Code when one party fails to comply with their obligation.
Furthermore, the assumption of mortgage was not perfected. NHMFC never approved the Cannus as substitute debtors, a requirement under Article 1293 of the Civil Code for a valid novation by change of debtor. Payments made by the Cannus to NHMFC did not constitute approval but were merely accepted as payments from the original mortgagor, the Galangs. Thus, no privity of contract was created between the Cannus and NHMFC. Having breached their own obligation and lacking any right as approved assignees, the Cannus had no cause of action to compel specific performance or claim ownership. Their remedy was limited to possibly recovering the payments they made, subject to the rules on legal compensation for damages suffered by the Galangs.