G.R. No. L-55982 and G.R. No. L-69589, June 18, 1987
IRENE P. MARIANO (now RELUCIO), petitioner, vs. FRANCISCO M. BAUTISTA, ENRIQUE ALPANO, and THE HONORABLE COURT OF APPEALS, respondents.

FACTS

Petitioner Irene Mariano (Relucio) and respondent Francisco Bautista entered into a “Contract of Joint Venture” on May 1, 1972, to establish a memorial park. Mariano contributed a 15-hectare land, while Bautista provided capital and undertook development. The contract stipulated profit-sharing from gross receipts and the formation of a management company, Sto. Nino Memorial Park, Inc. Bautista advanced P40,000 to Mariano, deductible from her future share. After operations began, Mariano filed a complaint (Civil Case No. 7926) in the Court of First Instance (CFI) of Camarines Sur for rescission and accounting, alleging Bautista failed to remit her share of gross receipts. The CFI ruled in favor of Mariano, ordering rescission and awarding her monetary claims. During the appeal, the CFI issued a Writ of Execution Pending Appeal, leading to a sheriff’s sale of properties.

ISSUE

The core legal issue, consolidated from two petitions, was whether the Court of Appeals correctly modified the CFI’s judgment on the merits of the rescission case and properly set aside the execution pending appeal.

RULING

The Supreme Court dismissed G.R. No. L-55982 as moot and academic and effectively upheld the Court of Appeals’ decisions. In G.R. No. L-69589, the Court of Appeals had modified the CFI’s ruling. The appellate court found that Bautista’s failure to render an accounting and remit shares, while a breach, was not so grave as to warrant rescission of the entire joint venture agreement. Rescission is a drastic remedy permitted only when the breach is substantial and fundamental to the contract. The Court of Appeals held that the breaches were not of such nature, and the contract’s primary purpose—developing and operating the memorial park—remained viable. Thus, it deleted the rescission order. Instead, it affirmed Bautista’s liability for Mariano’s unpaid share of receipts and the return of her capital contribution, offset by the P40,000 advance. The legal logic centers on the principle that not every contractual breach justifies rescission; the breach must be central to the agreement. Since the venture was operational and the breaches were remediable through an accounting and payment of sums due, rescission was improper. The Court of Appeals’ modification stood, and the Supreme Court denied further review, rendering the ancillary issue of execution pending appeal moot.