G.R. No. L-3404 April 2, 1951
ANGELA I. TUASON, plaintiff-appellant, vs. ANTONIO TUASON, JR., and GREGORIO ARANETA, INC., defendants-appellees.

FACTS

In 1941, Angela I. Tuason, Nieves Tuason de Barreto, and Antonio Tuason, Jr. owned an undivided one-third share each in a parcel of land in Sampaloc, Manila. Nieves, unable to secure partition, sold her share to Gregorio Araneta, Inc. The three co-owners (Angela, Antonio, and Araneta, Inc.) then entered into a “Memorandum of Agreement” (Exh. 6) dated June 30, 1941, to subdivide, improve, and sell the property, with Araneta, Inc. financing the development and receiving 50% of gross sales, and the remaining 50% divided equally among the three co-owners. Atty. J. Antonio Araneta, who acted as attorney-in-fact and lawyer for Angela and Antonio, was also a director of Araneta, Inc. at the time. The contract was to remain in force until all lots were sold and proceeds collected, and included a right of first refusal among co-owners for any sale of shares. In 1944, Angela revoked Atty. Araneta’s powers. In 1946, alleging breach of contract and abuse of powers by Araneta, Inc., Angela notified the company of her rescission and demanded partition. She filed a complaint for partition and her share of proceeds. The trial court dismissed her complaint.

ISSUE

Whether the “Memorandum of Agreement” (Exh. 6) should be declared null and void or rescinded, and whether partition of the property should be ordered.

RULING

The Supreme Court affirmed the trial court’s decision, upholding the validity of the contract and denying rescission and partition. The Court found that: (1) The terms of Exh. 6 were substantially similar to another contract (Exh. “L”) presented to Angela, and she had opportunity to review them; (2) Atty. J. Antonio Araneta committed no breach of trust, as he made full disclosure; (3) Araneta, Inc. substantially complied with its contractual obligations, having spent significant sums on improvements and generated substantial sales proceeds, and any failures to submit documents were due to Angela’s refusal to accept them; (4) Rescission is not warranted for slight or casual breaches, but only for substantial ones that defeat the contract’s object; (5) The contract effectively created a partnership to dissolve the co-ownership by selling the property, and thus Article 400 of the Civil Code (on maintaining co-ownership by agreement for up to ten years) was not directly applicable; and (6) From a practical standpoint, as 97.5% of the property had already been sold, the partnership was near dissolution, and partition would be contrary to the parties’ agreement to sell the property and divide the proceeds.