RECISSION FOR BREACH OF OBLIGATION TO DELIVER

Case Name: Estelita Villamar vs. Balbino Mangaoil G.R. No.: G.R. No. 188661 Date: April 11, 2012

FACTS: The petitioner Villamar, the registered owner of the property, entered into an agreement with the respondent Mangaoil to purchase and sale a parcel of land. The terms in their agreement includes the down payment of P 185,000 pesos, which will be for the payment of a loan secured from the Rural Bank of Cauayan so that it will be withdrawn and released from the bank and that a deed of absolute sale will be executed in favor of the respondent Mangaoil which was complied by the parties. Consequently, the respondent Mangaoil informed the petitioner that he will withdraw from the agreement for the land was not yet free from encumbrances as there were still tenants who were not willing to vacate the land without giving them back the amount that they mortgaged the land.

Also, the petitioner failed and refused, despite repeated demands, to handover the Certificate of Title. Then, the respondent Mangaoil demanded the refund of the down payment that he had secured with the petitioner and filed a complaint with the RTC to rescind the contract of sale. In the response of the petitioner, she averred that she had already complied with the obligations and caused the release of the mortgaged land and the delivery of the Certificate of Title will be facilitated by a certain Atty. Pedro C. Antonio. The respondent insisted that he can rescind the contract for the petitioner had failed to deliver the Certificate of Title. The RTC and the CA dismissed the complaints for upon the deed of absolute sale, there was already a valid and constructive delivery.

ISSUE: 1) Whether or not the failure of delivery of the Certificate of Title will constitute rescission of the contract?

2) Whether or not the execution of the deed of sale of real property is equivalent to a valid and constructive delivery?

HELD:

1) No, the Court held that the failure of the petitioner to comply with the obligation to deliver to the respondent the possession of the property and the certificate of the title. Based on Article 1191 of the New Civil Code of the Philippines, it is clear that “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 respondent cannot be deprived of his right to demand for rescission in view of the petitioner’s failure to abide with item nos. 2 and 3 of the agreement. This remains true notwithstanding the absence of express stipulations in the agreement indicating the consequences of breaches which the parties may commit. To hold otherwise would render Article 1191 of the NCC as useless.

2) The execution of the deed of absolute sale does not constitute a constructive delivery for this case falls under to the exception since a mere presumption and not conclusive delivery was created as the respondent failed to take material possession of the subject property. A person who does not have actual possession of the thing sold cannot transfer constructive possession by the execution and delivery of a public instrument. Thus, the respondent can rescind the contract. The petition was denied and the petitioner is bound return the down payment plus interest to the respondent