Case Summary (G.R. No. 141307)
Petitioner and Respondent
Petitioner: Alfonso L. Iringan
Respondents: Hon. Court of Appeals; Antonio Palao, represented by Felisa P. Delos Santos
Key Dates
• March 22, 1985 – Deed of Sale executed
• April 30 and December 31, 1985 – Deadlines for second and third installments
• July 18, 1985 – Palao’s notice of rescission by letter
• July 1, 1991 – Complaint for Judicial Confirmation of Rescission filed in RTC
• September 25, 1992 – RTC decision rescinding the contract and awarding damages
• April 30, 1997 – Court of Appeals decision affirming rescission but deleting attorney’s fee award
• September 26, 2001 – Supreme Court decision
Applicable Law
1987 Philippine Constitution; Civil Code of the Philippines:
• Article 1592 – Requirement of judicial or notarial notice before rescission in immovable property sales
• Article 1191 – Judicial invocation of rescission in reciprocal obligations
• Article 1144 – Ten-year prescription for actions on written contracts
• Article 1389 – Four-year prescription for actions to claim rescission of rescissible contracts
Procedural History
After Iringan defaulted on the second installment (paying only ₱40,000 of ₱140,000), Palao declared the contract rescinded by letter. Iringan sought reimbursement of sums paid. Negotiations failed. In 1991, Palao filed for Judicial Confirmation of Rescission and Damages in the RTC, which in 1992 affirmed rescission, ordered the defendants to vacate, awarded compensation for use (₱100,000 less half of amounts paid), moral damages (₱50,000), exemplary damages (₱10,000), attorney’s fees (₱50,000), and costs. The Court of Appeals in 1997 affirmed rescission and damages but deleted attorney’s fees.
Issues
- Whether the contract was validly rescinded
- Whether moral and exemplary damages were properly awarded
Analysis of Rescission
Article 1592 requires a judicial or notarial demand to effect rescission of an immovable property sale. A mere declaration by Palao was insufficient. However, Palao’s 1991 complaint for Judicial Confirmation of Rescission satisfied the judicial-demand requirement. Alternative notice via cross-claim suffices (Luzon Brokerage v. Maritime Building).
Prescription
Petitioner argued prescription under Article 1389 (four years for rescissible contracts). This action, however, is principal rescission under Articles 1191 and 1592, subject to the ten-year period of Article 1144. The 1991 suit, filed six ye
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Facts of the Case
- On March 22, 1985, Antonio Palao sold to Alfonso Iringan an undivided portion of Lot No. 992, Tuguegarao Cadastre (TCT No. T-5790), for P295,000.00, payable in three installments: P10,000.00 upon execution; P140,000.00 on or before April 30, 1985; and P145,000.00 on or before December 31, 1985.
- Iringan paid only P40,000.00 of the second installment when due.
- July 18, 1985: Palao sent a letter declaring the contract rescinded for non-payment and refusing further remittances.
- August 20, 1985: Iringan’s counsel did not oppose rescission but demanded reimbursement of P50,000.00 (cash received), P3,200.00 (engineer’s fee), P500.00 (attorney’s fee), plus interest on P53,700.00.
- January 10, 1986: Palao refused to reimburse.
- February 21, 1989: Iringan proposed either reimbursement of P50,000.00 or purchase of an equivalent land portion; Palao countered that Iringan owed P61,600.00 in arrear rentals.
- Negotiations failed.
- July 1, 1991: Palao filed before the RTC a Complaint for Judicial Confirmation of Rescission of Contract and Damages.
Procedural History
- RTC Branch I, Cagayan (Sept. 25, 1992):
• Affirmed rescission of the sale contract.
• Cancelled defendants’ adverse claim on TCT No. T-5790.
• Ordered defendants to vacate.
• Awarded P100,000.00 as reasonable compensation for use, less 50% of amounts paid; P50,000.00 moral damages; P10,000.00 exemplary damages; and P50,000.00 attorney’s fee, plus costs. - Court of Appeals (Apr. 30, 1997):
• Affirmed RTC decision except deleted the attorney