G.R. No. 32908, November 28, 1930
KAPISANAN BANAHAW, INC., plaintiff-appellant, vs. JUAN DEJARME and CANDIDA ALVERO, defendants-appellees.

FACTS

Kapisanan Banahaw, Inc. (plaintiff) leased a parcel of land to spouses Juan Dejarme and Candida Alvero (defendants) under a contract dated August 26, 1927. The contract stipulated an annual rent of P2,160, payable semi-annually in advance within the first fifteen days of each semester. It also granted the defendants an option to purchase the property after one year. A clause provided that breach of any condition would revoke the option to purchase and allow the plaintiff to recover possession.

The plaintiff filed an action for rescission of the lease contract and recovery of possession, alleging that the defendants were in default for: (1) late payment of the rental for the third semester (paid on September 16, 1928, allegedly 11 days late based on plaintiff’s reckoning), (2) failure to pay the rental for the fourth semester when it fell due in March 1929, and (3) breaches such as non-payment of taxes and gathering of immature coconuts.

The defendants countered that their payments were timely based on the correct computation of the semestral periods. They also asserted that for the fourth semester, the plaintiff, on March 10, 1929, informed them that the period for payment had lapsed and that payment would not be accepted, thereby excusing a formal tender.

The trial court denied the petition for rescission and absolved the defendants.

ISSUE

Whether the defendants’ alleged breaches of the lease contract, particularly the late payment of rentals, justify its rescission.

RULING

No, the rescission of the contract is not justified.

1. On the Alleged Default in Rental Payments: The Supreme Court clarified the computation of semestral periods. Based on the contract’s context, the first semester began on September 1, 1927. Consequently, the rental for the third semester (September 1, 1928 to February 28, 1929) was due by September 15, 1928. The defendants paid on September 16, 1928, which was only one day late, not eleven as claimed by the plaintiff. For the fourth semester, the plaintiff’s refusal to accept payment on March 10, 1929, excused the defendants from making a formal tender. Therefore, the defendants were never in legal default for non-payment of rent.

2. On the Discretion to Allow Rescission: Even assuming there was a minor delay in payment, rescission is not an absolute right. Under Article 1124 of the Civil Code, the court has discretionary power to deny rescission for slight or casual breaches and may instead fix a period for the debtor to comply. Rescission is warranted only for substantial and fundamental breaches that defeat the object of the contract. A one-day delay in rental payment is not such a substantial breach.

3. On Other Alleged Breaches: The Court found the trial court’s discussion sufficient and agreed that the alleged breaches concerning tax payments and gathering of immature coconuts did not constitute grounds for rescission prejudicial to the plaintiff.

The judgment of the trial court absolving the defendants was affirmed. Costs were imposed on the appellant.