G.R. No. L-12457; January 22, 1919
SERVILLANO AQUINO, plaintiff-appellee, vs. EMETERIO TAÑEDO, defendant-appellant.

FACTS:
On May 5, 1913, Servillano Aquino purchased several parcels of land from Emeterio Tañedo for P45,000. Aquino paid P10,000 upon execution of the contract, with the balance payable in installments. He took possession of the lands and collected their fruits. On March 28, 1914, the parties executed a new contract rescinding the original sale. Aquino returned the lands and the related documents to Tañedo. Instead of returning the P10,000, Tañedo executed a promissory note acknowledging a debt of P12,000 to Aquino (P10,000 principal and P2,000 as interest for one year). Tañedo later paid the P2,000 interest. When Aquino demanded payment of the P10,000, Tañedo refused, leading Aquino to file an action for collection. The court, in a prior case (Civil Case No. 792), merely fixed a three-month period for Tañedo to pay the P10,000. In the present action, Aquino seeks payment of the P10,000. Tañedo, in his counterclaim, demands P6,791.75 from Aquino, representing the value of the fruits collected from the lands during his possession from May 5, 1913, to March 28, 1914.

ISSUE:
Is Aquino obligated to return to Tañedo the fruits he collected from the lands during his possession under the rescinded contract of sale?

RULING:
No. The Supreme Court affirmed the lower court’s judgment absolving Aquino from Tañedo’s counterclaim. The Court held that:
1. The rescission effected by the parties was not the legal rescission under Article 1295 of the Civil Code, which applies only to rescissible contracts under Articles 1291 and 1292. Instead, it was a mutual agreement to dissolve the contract. Therefore, Article 1295, which requires the return of fruits upon rescission, is inapplicable.
2. The written rescission contract contained no stipulation for Aquino to return the fruits. The presumption that a written instrument contains all the terms of the agreement prevails, and Tañedo failed to prove by preponderant evidence any separate verbal agreement to that effect.
3. Tañedo’s payment of interest (the P2,000) pertained to the period after the rescission, not for the period of Aquino’s possession. Thus, there was no reciprocal obligation for Aquino to return the fruits for that earlier period.
4. Aquino was a possessor in good faith during his possession of the land by virtue of a valid contract of sale. Under Article 451 of the Civil Code, a possessor in good faith is entitled to the fruits received. Consequently, he had no obligation to return them.
5. Considerations of equity also favored Aquino, as the record indicated he incurred expenses for the land’s improvement, making the fruits collected reasonably equivalent to one year’s interest on the P10,000 he had paid.

The Court ordered Tañedo to pay Aquino the P10,000 debt.