G.R. No. L-26490 June 30, 1970
SALVADORA G. GARCIA and PACIFICO C. GARCIA, petitioners, vs. THE HONORABLE COURT OF APPEALS, MIGUEL SOCCO, and PURA SOCCO, respondents.

FACTS

On October 14, 1959, spouses Miguel R. Socco and Pura Varona (respondents) sold a three-story house and lot in Malate, Manila, to spouses Pacifico Garcia and Salvadora Garcia (petitioners). The purchase price was P65,000.00, consisting of a cash portion and the assumption by the petitioners of the respondents’ mortgage debt of P20,074.13 to the Development Bank of the Philippines (DBP). The petitioners made various payments, including P18,766.80 to the second mortgagee (General Financing Corporation) and P7,011.53 to the DBP to update the mortgage account. A balance of P12,147.54 was admitted by the respondents as having been received by them. The DBP’s real estate department later approved the assumption of mortgage on May 5, 1960. However, unbeknownst to the petitioners, the DBP’s legal department had initiated extrajudicial foreclosure proceedings on August 5, 1959, prior to the sale. This foreclosure proceeded, and the property was sold at public auction to the DBP on November 17, 1959. The petitioners, after discovering this, subsequently acquired the property from the DBP by conditional sale on October 27, 1960. The respondents filed an action for rescission of the contract of sale, alleging the petitioners’ failure to pay a retained P2,000.00 and failure to immediately assume the mortgage. The trial court dismissed the complaint. The Court of Appeals reversed the trial court, decreeing rescission and awarding moral damages and attorney’s fees to the respondents.

ISSUE

Whether the Court of Appeals erred in finding facts that warranted the rescission of the contract of sale, specifically: (1) that the petitioners retained P2,000.00 of the purchase price and refused to pay it to the respondents, and (2) that the petitioners did not immediately assume the mortgage debt to the DBP.

RULING

The Supreme Court reversed the decision of the Court of Appeals and reinstated the judgment of the trial court. The Court held that the factual findings of the Court of Appeals were manifestly mistaken and based on a misapprehension of facts, justifying a review. The evidence irrefutably established that: (1) The P2,000.00 was paid to Leviste & Co., the respondents’ agent, and was included in the P38,016.57 cash consideration acknowledged as received by the respondents in the deed of sale. The respondents further admitted receiving the final balance of P12,147.54 after all computations. (2) The petitioners immediately assumed the mortgage obligation by paying the DBP P7,011.53 to update the account on October 16, 1959, which payments were accepted. The foreclosure occurred due to a lack of coordination between the DBP’s legal and real estate departments, and because the respondents failed to inform the petitioners of the pending foreclosure proceedings at the time of the sale. The petitioners committed no breach of their obligations. Consequently, there was no legal ground for rescission, and the award of moral damages and attorney’s fees was without basis.