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Nolasco V

1) The case involved a contract to sell land where the buyers sought to rescind due to financial difficulties and sought return of payments made. 2) Under Philippine law, a contract can be rescinded if one party is in substantial breach of their obligations. However, the courts found that the sellers' failure to transfer title did not constitute a substantial breach. 3) While the sellers did not fulfill an obligation to transfer title, the contract allowed the buyers to undertake this transfer themselves if the sellers failed to do so. Therefore, the object of the contract was not defeated by the sellers' actions. The petition was thus partially granted.

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817 views

Nolasco V

1) The case involved a contract to sell land where the buyers sought to rescind due to financial difficulties and sought return of payments made. 2) Under Philippine law, a contract can be rescinded if one party is in substantial breach of their obligations. However, the courts found that the sellers' failure to transfer title did not constitute a substantial breach. 3) While the sellers did not fulfill an obligation to transfer title, the contract allowed the buyers to undertake this transfer themselves if the sellers failed to do so. Therefore, the object of the contract was not defeated by the sellers' actions. The petition was thus partially granted.

Uploaded by

Cher
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Nolasco v.

Cuerpo
G.R. No. 210215, December 9, 2015

Facts:
On July 22, 2008, petitioners and respondents entered into a Contract to Sell over a parcel
of land located in Rodriguez, Rizal. The subject contract provides that: (a) the consideration for the
sale is P33,155,000.00 payable as follows: down payment in the amount of P11,604,250.00
inclusive of the amount of P2,000,000.00 previously paid by respondents as earnest
money/reservation fee, and the remaining balance of P21,550,750.00 payable in 36 monthly
instalments, each in the amount of P598,632.00 through postdated checks; (b) in case any of the
checks is dishonored, the amounts already paid shall be forfeited in petitioners’ favor, and the latter
shall be entitled to cancel the subject contract without judicial recourse in addition to other
appropriate legal action; (c) respondents are not entitled to possess the subject land until full
payment; (d) petitioners shall transfer the title over the subject land from a certain Edilberta N.
Santos to petitioners’ names, and, should they fail to do so, respondents may cause the said
transfer and charge the costs incurred against the monthly amortizations; and (e) upon full
payment of the purchase price, petitioners shall transfer title over the subject land to respondents.
However, respondents sent petitioners a letter dated November 7, 2008 seeking to rescind the
subject contract on the ground of financial difficulties. They also sought the return of the P12, 202,
882.00 they had paid to petitioners. As their letter went unheeded, respondents filed the instant
complaint for rescission before the RTC.
In their defence, petitioners countered that respondents’ act is a unilateral cancellation of the
subject contract as the former did not consent to it. Moreover, financial difficulties is not among the
grounds provided by law to effect a valid rescission.
On March 1, 2010, the RTC ruled in favor of respondents. The CA affirmed the RTC’s ruling.
Aggrieved, petitioners moved for reconsideration, which was denied. Hence, this petition

Issue:
Whether or not the CA is correct in affirming the decision of the trial court.

Held:
In reciprocal obligations, either party may rescind — or more appropriately, resolve — the
contract upon the other party’s substantial breach of the obligation/s he had assumed thereunder.
This is expressly provided for in Article 1191 of the Civil Code which states:
Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the
obligors should not comply with what is incumbent upon him. The injured party may choose
between the fulfillment and the rescission of the obligation, with the payment of damages in either
case. He may also seek rescission, even after he has chosen fulfilment, if the latter should become
impossible. The court shall decree the rescission claimed, unless there be just cause authorizing the
fixing of a period.
In the instant case, both the RTC and the CA held that petitioners were in substantial breach
of paragraph 7 of the subject contract as they did not cause the transfer of the property to their
names from one Edilberta N. Santos within 90 days from the execution of said contract.
The courts a quo are mistaken.
For a contracting party to be entitled to rescission in accordance with Article 1191 of the Civil
Code, the other contracting party must be in substantial breach of the terms and conditions of their
contract. A substantial breach of a contract, unlike slight and casual breaches thereof, is a
fundamental breach that defeats the object of the parties in entering into an agreement. Here, it
cannot be said that petitioners’ failure to undertake their obligation under paragraph 7 defeats the
object of the parties in entering into the subject contract, considering that the same paragraph
provides respondents contractual recourse in the event of petitioners’ nonperformance of the
aforesaid obligation, that is, to cause such transfer themselves in behalf and at the expense of
petitioners.

The petition is partially granted.

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