G.R. No. L-12342; August 3, 1918
A. A. ADDISON, plaintiff-appellant, vs. MARCIANA FELIX and BALBINO TIOCO, defendants-appellees.

FACTS:
On June 11, 1914, plaintiff A. A. Addison sold four parcels of land to defendant Marciana Felix (with her husband Balbino Tioco’s consent) via a public instrument. Felix paid a down payment of P3,000, with the balance payable in installments. The contract stipulated that Felix would deliver 25% of the land’s products to Addison from the time she took possession until a Torrens title was issued in her favor. It also contained a clause allowing Felix to rescind the contract within one year from the date of the issuance of her certificate of title.

Addison failed to deliver possession of the lands. When attempting to designate the parcels, he could only identify two, and more than two-thirds of those were in the adverse possession of a third party (Juan Villafuerte) who claimed ownership. Addison admitted Felix would need to litigate to gain possession. Felix applied for land registration to facilitate a survey, but the proceedings were later dismissed.

Addison sued to collect the first installment of P2,000 due on July 15, 1914, and interest. Felix, in her answer, sought rescission of the contract, refund of the P3,000 with interest, and damages due to Addison’s failure to deliver the land. The trial court rescinded the contract and ordered Addison to return the P3,000 with 10% interest. Addison appealed.

ISSUE:
Whether the contract of sale should be rescinded due to the vendor’s (Addison’s) failure to deliver the thing sold.

RULING:
Yes, the contract is rescinded. The Supreme Court affirmed the trial court’s judgment, albeit on different legal grounds.

The trial court erroneously based rescission on the contractual clause allowing rescission within one year after title issuance, a condition that had not yet occurred (as no title was issued). However, the Court found proper legal grounds for rescission under the Civil Code.

The vendor has an obligation to deliver the thing sold. While the execution of a public instrument is generally equivalent to delivery (tradition), this symbolic delivery is only effective if the vendor has such control over the property that its material delivery could be made at the time of sale. Here, the symbolic delivery was ineffective because a substantial portion of the land was in the hostile possession of a third party claiming ownership, thereby preventing the vendee from taking material possession and enjoyment of the property. The contract’s terms, particularly the stipulation for sharing products from the moment of possession, presupposed that Felix would have material possession pending title issuance.

Since Addison failed to fulfill his obligation to deliver the land, Felix was entitled to demand rescission of the sale and a refund of the price paid under Articles 1506 and 1124 of the Civil Code. The interest due on the refundable amount is the legal interest (6% per annum), not the conventional interest stipulated in the contract, as the rescission is legal, not conventional.

DISPOSITIVE:
The contract is rescinded. Plaintiff A. A. Addison is ordered to return the P3,000 to Marciana Felix, with legal interest at 6% per annum from the date of the filing of the complaint until full payment. Costs against appellant.