G.R. No. 201167 ; February 27, 2013
GOTESCO PROPERTIES, INC., JOSE C. GO, EVELYN GO, LOURDES G. ORTIGA, GEORGE GO, and VICENTE GO, Petitioners, vs. SPOUSES EUGENIO and ANGELINA FAJARDO, Respondents.

FACTS

Respondent-spouses Fajardo entered into a Contract to Sell with petitioner Gotesco Properties, Inc. (GPI) for a subdivision lot. They fully paid the purchase price by January 2000. Despite full payment and subsequent demands, GPI failed to execute the final deed of sale and deliver the corresponding certificate of title and physical possession of the lot. The spouses filed a complaint with the HLURB for specific performance or rescission with damages, alleging GPI violated PD 957 by failing to develop the subdivision and provide necessary facilities. They also noted the mother title lacked a technical description and had been levied upon.
Petitioners argued the delay was beyond their control, citing a legal dispute over the inscription of the technical description on the title, which was initially granted by the RTC but reversed by the CA. They contended they were willing to comply but were prevented by these circumstances, making rescission under Article 1191 of the Civil Code inapplicable. They also claimed the adverse levy by the BSP, annotated after the contract, had been settled.

ISSUE

Whether respondents have the right to rescind the Contract to Sell and be entitled to a refund.

RULING

Yes, respondents have the right to rescind. The Court affirmed the rulings of the HLURB, Office of the President, and Court of Appeals, with modification on the refund amount. In a contract to sell, the seller’s obligation to deliver the title is simultaneous and reciprocal to the buyer’s full payment. Section 25 of PD 957 mandates the subdivision developer to transfer the title upon full payment. GPI’s failure to do so for over six years after full payment constituted a substantial breach, warranting rescission.
The Court rejected GPI’s defense of circumstances beyond its control. The legal obstacles regarding the technical description were of GPI’s own making, stemming from its failure to properly implead parties and prove ownership in the registration case. A party cannot invoke fortuitous events to excuse non-performance when the event could have been foreseen or was due to its own negligence. Consequently, respondents are entitled to rescind. Following the precedent in Solid Homes v. Tan, the refund should be based on the current market value of the property, not just the amount paid, to prevent unjust enrichment due to the developer’s delay. The individual corporate officers were correctly held solidarily liable as the act complained of was done in their official capacity.