GR 157318; (August, 2006) (Digest)
G.R. No. 157318 August 9, 2006
Generoso V. Villanueva and Raul C. Villanueva, Jr., Petitioners, vs. Estate of Gerardo L. Gonzaga/Ma. Villa Gonzaga, in her capacity as Administratrix, Respondents.
FACTS
The parties executed a Memorandum of Agreement (MOA) whereby petitioners agreed to purchase specific lots from the respondent estate. The MOA stipulated that petitioners would pay the purchase price in installments, with the final payment due “upon the approval by the PNB of the release of the lots.” It further obligated the respondent to execute a deed of sale upon such release. Petitioners paid 60% of the price and introduced improvements. When petitioners requested to use the lots, respondent refused, demanding full payment first. Respondent later informed petitioners that PNB had approved the release, subject to conditions including court approval of the sale and payment of certain amounts. Petitioners, in turn, demanded that respondent first produce clean titles before they would pay the balance. Respondent refused this demand and subsequently rescinded the MOA.
ISSUE
Whether the respondent estate had the right to rescind the MOA based on petitioners’ failure to pay the balance of the purchase price.
RULING
No, the respondent had no right to rescind. The Supreme Court ruled that petitioners’ obligation to pay the final installment was not yet due. The MOA clearly made the final payment contingent on the condition “upon the approval by the PNB of the release of the lots.” The PNB letter presented by respondent showed only a conditional approval, subject to further requirements like court sanction. This did not constitute the absolute release contemplated by the contract. Since the suspensive condition was not fulfilled, petitioners’ duty to pay the balance did not arise. Petitioners’ demand for clean titles was a valid insistence on respondent’s reciprocal obligation to deliver the lots free from encumbrance, which respondent failed to perform. In a reciprocal obligation like a contract of sale, rescission is not permitted where the party demanding it is itself guilty of breach. The respondent, being unable to effect an absolute release from the mortgage, was not in a position to demand payment or to rescind the contract. Therefore, the rescission was invalid.