Ang v. Court of Appeals
REITERATIONFacts
The Antecedents: Petitioners Ernesto and Rosalinda Ang owned three parcels of land in Quezon City. They negotiated the sale of these properties to private respondent Lee Chuy Realty Corporation. On December 4, 1979, private respondent issued a P50,000.00 check as down payment, transmitting it with a receipt detailing the terms: P1,600,000.00 total price, sellers to clear the property of occupants within December 1979, execution of deed of absolute sale and payment of P750,000.00 upon clearing, with the balance of P800,000.00 payable within 45 days thereafter. Petitioners encashed the check but returned a different receipt they prepared, which omitted the agreed price but retained other terms, including the clearing of the property and payment schedule. Procedural History: On January 12, 1980, petitioners demanded payment of the balance by January 24, 1980, threatening cancellation. Private respondent replied on January 25, 1980, stating they were ready to perform but petitioners had not cleared the property. On March 3, 1980, private respondent demanded a refund of the down payment due to petitioners' failure to comply and withdrawal from the sale. Private respondent filed a collection suit on May 9, 1980. The trial court ruled in favor of petitioners, awarding them damages. Both parties appealed. The Court of Appeals reversed the trial court, ordering petitioners to refund the down payment with interest and attorney's fees, finding petitioners breached the agreement. The Petition: Petitioners seek review of the Court of Appeals' decision, raising the issue of which party breached the agreement.
Issue(s)
Whether petitioners breached the contract of sale. Whether the breach committed by petitioners warrants the rescission of the contract. Whether petitioners are liable to refund the down payment with legal interest.
Ruling
The Supreme Court affirmed the decision of the Court of Appeals, holding that petitioners breached the agreement and are liable to refund the P50,000.00 down payment with legal interest.
Ratio Decidendi
On Whether petitioners breached the contract of sale: The Court found that petitioners breached the agreement. This was evidenced by their failure to clear the subject property of occupants and obstructions within December 1979 as stipulated. Furthermore, petitioners entered into an "Agreement of Purchase or Sale" with Dolora Chua on December 3, 1979, one day before receiving the down payment from private respondent, and binding themselves to deliver the property to Chua. This constituted "double-dealing" and a breach of their commitment to private respondent. The Court also noted that petitioners refused to proceed with the sale to private respondent unless the purchase price was increased from P1,600,000.00 to P2,340,000.00 without the consent of private respondent, which is a serious breach. On Whether the breach committed by petitioners warrants the rescission of the contract: While acknowledging that a breach of reciprocal obligations generally gives the power to rescind, the Court emphasized that rescission is not permitted for a slight or casual breach. It must be substantial and fundamental, defeating the object of the agreement. The Court found that petitioners' failure to clear the property was not an essential condition but an incidental undertaking. However, the subsequent refusal to proceed with the sale at the agreed price and the act of selling the property to another party constituted a serious breach that warranted rescission. The Court stated, "when petitioners refused to proceed with the sale unless private respondent agreed to pay the higher price of P2,340,000.00, the petitioners thereby committed a serious breach of the agreement." Moreover, their inability to perform due to selling the property to Dolora Chua was another breach. On Whether petitioners are liable to refund the down payment with legal interest: As a consequence of the rescission of the contract of sale due to petitioners' serious breach, the parties are to be restored to their original situation. Therefore, petitioners are liable to refund the P50,000.00 down payment received from private respondent. The Court ordered that this refund should include legal interest computed from the date of the extrajudicial demand made on March 3, 1980, consistent with jurisprudence.
Main Doctrine
A serious breach of contract, such as refusing to proceed with the sale unless the purchase price is increased without the consent of the buyer, or selling the property to another after a perfected contract of sale, warrants rescission of the contract. However, rescission is not permitted for a slight or casual breach.