Case Summary (G.R. No. 210215)
Petitioners
Rogelio S. Nolasco, Nicanora N. Guevara, Leonarda N. Elpedes, heirs of Arnulfo S. Nolasco, and Remedios M. Nolasco, represented by Elenita M. Nolasco.
Respondents
Celerino S. Cuerpo, Joselito Encabo, Joseph Ascutia, and Domilo Lucenario.
Key Dates
• July 22, 2008 – Execution of the Contract to Sell.
• November 7, 2008 – Respondents’ letter seeking rescission for financial difficulties.
• November 21, 2008 – Filing of complaint for rescission in RTC.
• March 1, 2010 – RTC Decision ordering rescission and refund.
• June 17, 2013 – CA Decision affirming RTC.
• November 19, 2013 – CA Resolution denying reconsideration.
• December 9, 2015 – Supreme Court Decision.
Applicable Law
1987 Philippine Constitution; Civil Code of the Philippines (Articles 1191 on rescission of reciprocal obligations; Articles 1385 and 1388 on third-party rights in rescission).
Facts of the Contract to Sell
• Total consideration: ₱33,155,000, with a down payment of ₱11,604,250 (including ₱2,000,000 earnest money) and 36 monthly installments of ₱598,632 via post-dated checks.
• Clause on dishonored checks: forfeiture of payments and cancellation without judicial recourse.
• No possession until full payment.
• Paragraph 7: Petitioners to transfer title from Edilberta N. Santos to themselves within 90 days, failing which respondents may do so and charge costs against future amortizations.
• Title transfer to respondents upon full payment.
Lower Courts’ Rulings
RTC (Branch 81, Quezon City) found petitioners’ failure to effect title transfer within 90 days a substantial breach, rescinded the contract under Civil Code Article 1191, and ordered return of payments and post-dated checks. The CA affirmed, holding that petitioners’ breach justified rescission and that forfeiture clauses were improper under the circumstances.
Issue Before the Court
Whether petitioners’ failure to comply with paragraph 7 of the Contract to Sell constituted a substantial breach justifying rescission under Article 1191 of the Civil Code and whether respondents were entitled to the return of all payments.
Court’s Analysis on Rescission
Under Article 1191, a reciprocal contract may be rescinded for the other party’s substantial breach—defined as a fundamental violation defeating the contract’s object. Slight or casual breaches do not warrant resolution.
Court’s Determination on Paragraph 7
Although petitioners did not complete the title transfer within 90 days, paragraph 7 expressly provided respondents the right to effect the transfer at petitioners’ expense. This contractual alternative remedied non-performance and prese
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Procedural History
- Petition for review on certiorari filed before the Supreme Court, assailing:
- Decision of the Court of Appeals dated June 17, 2013
- Resolution of the Court of Appeals dated November 19, 2013
- These CA rulings affirmed the Regional Trial Court (RTC) of Quezon City, Branch 81 Decision dated March 1, 2010 in Civil Case No. Q-08-63860
- RTC ordered rescission of the Contract to Sell and return of all payments and post-dated checks
- Petitioners appealed to the CA; CA denied reconsideration in November 2013
- Core issue before the Supreme Court: correctness of CA’s affirmance of rescission and restitution
Facts
- On July 22, 2008, parties executed a Contract to Sell covering a 165,775-sqm parcel in Barangay San Isidro, Rodriguez, Rizal (OCT No. 152)
- Key contractual provisions:
- Total price of ₱33,155,000; down payment ₱11,604,250 (including ₱2,000,000 earnest money)
- Balance ₱21,550,750 payable in 36 monthly post-dated checks of ₱598,632 each
- Dishonored check → forfeiture of payments and automatic cancellation right of sellers
- No possession by buyers until full payment
- Sellers to transfer title from Edilberta N. Santos to their names within 90 days, or buyers may do so at sellers’ expense
- Upon full payment, final transfer of title to respondents
- On November 7, 2008, respondents wrote to rescind the contract for financial difficulties and demanded return of ₱12,202,882 paid
- Petitioners ignored the letter; respondents filed complaint for rescission on November 21, 2008
- Petitioners defended that respondents’ unilateral cancellation lacked legal ground and financial difficulty is not a statutory ground for rescission
- Petitioners declared in default at pre-trial for failure to file a brief; respondents presented evidence ex parte
RTC Decision (March 1, 2010)
- Ordered:
- Rescission o