Suria v. Intermediate Appellate Court
REITERATIONFacts
The Antecedents: Private respondents filed a complaint for rescission of contract and damages against petitioners, alleging breach of a Deed of Sale with Mortgage executed on March 31, 1975. Petitioners allegedly failed to pay stipulated installments, despite repeated verbal and written demands. Procedural History: Petitioners filed a motion to dismiss, arguing that rescission under Article 1191 was not the proper remedy due to the presence of the foreclosure remedy in the contract and under law, and that rescission was subsidiary under Article 1383. They also argued that rescission was ineffective due to non-compliance with legal requirements. The Regional Trial Court (RTC) denied the motion to dismiss. Petitioners' motion for reconsideration was also denied. The Court of Appeals dismissed their petition for certiorari. The Petition: Petitioners sought review of the Court of Appeals' decision, raising issues on the availability of rescission under Article 1191 in the presence of a foreclosure remedy and non-compliance with Article 1385 and the Maceda Law.
Issue(s)
Whether rescission under Article 1191 of the Civil Code is available when the contract contains a stipulation for foreclosure and such remedy is available. Whether rescission is a proper remedy when the seller has not complied with the requirements of Article 1385 of the Civil Code or the Maceda Law (R.A. 6552).
Ruling
The petition is GRANTED. The decision of the Intermediate Appellate Court is REVERSED and SET ASIDE. Petitioners are ordered to pay the balance of their indebtedness under the Deed of Absolute Sale with Mortgage with legal interests from October 24, 1975, until fully paid. Failure to do so will allow respondents to resort to foreclosure.
Ratio Decidendi
On the availability of rescission under Article 1191 in the presence of a foreclosure remedy: The Supreme Court held that rescission under Article 1191 of the Civil Code is not applicable in this case. The Court clarified that Article 1191 pertains to rescission due to breach of faith, which is a principal action. However, Article 1383 of the Civil Code explicitly states that the action for rescission is subsidiary and cannot be instituted except when the party suffering damage has no other legal means to obtain reparation. In this case, the Deed of Sale with Mortgage contained a specific stipulation granting the vendors the right to foreclose in case of default. This foreclosure remedy, being explicitly provided in the contract and recognized by law, precluded the availability of rescission under Article 1191. The Court emphasized that the relationship between the parties had evolved from buyer-seller to mortgagor-mortgagee, and the remedy for breach of the mortgage obligation should be foreclosure, not rescission of the sale. On compliance with Article 1385 and the Maceda Law: The Court found that the sellers' attempt to rescind the contract without complying with the requirements of Article 1385 of the Civil Code (restoring what has been paid) or the Maceda Law (R.A. 6552) was improper. The Maceda Law provides specific protections for buyers in installment real estate transactions, including a grace period for payment and requirements for cancellation. The Court noted that the sellers had waited for many years before attempting to enforce the wrong remedy, and that they could have foreclosed on the mortgage immediately when it fell due. The Court also acknowledged that while the sellers may have suffered losses due to the depreciation of the peso, they were also to blame for not pursuing the appropriate legal remedy promptly.
Main Doctrine
In a Deed of Sale with Mortgage, where the seller has a specific remedy of foreclosure provided in the contract and by law, the remedy of rescission under Article 1191 of the Civil Code is not available as it is a subsidiary remedy that can only be availed of when there is no other legal means to obtain reparation for the damage suffered. Furthermore, the Maceda Law (R.A. 6552) provides specific protections for buyers in installment real estate transactions, which must be complied with.