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FELIX GONZALES v. HEIRS OF THOMAS AND PAULA CRUZ, G.R. NO. 131784, SEPT. 16, 1999
FACTS:

On September 10, 1992, Mila Reyes (petitioner) filed a complaint for Rescission of Contract with Damages against Victoria Tuparan before the
RTC.

She alleged that, among others, that she was the registered owner of 1274 sq. m. residential and commercial lot located in Karuhatan, Valenzuela
City, and that on that property, she put up a three-storey commercial building known as RBJ building and a residential apartment building ; that
since 1990, she had been operating a drugstore and cosmetics store on the ground floor of RBJ Building where she also had been residing while
the other areas of the buildings including the sidewalks were being leased and occupied by tenants and street vendors.

December 1989, respondent leased from petitioner a space on the ground floor of RBJ Building for her pawnshop business for a monthly rental of
4,000.00php.

They became very close friends which led to respondent investing thousands of pesos in the petitioners financing/lending business from Feb. 7
1990 to May 27, 1990, with an interest rate of 6% per month.

June 20, 1988, petitioner morganged the subject real properties to the Farmers Savings Bank and Loan Bank, Inc. (FSL Bank) to secure a loan of
2 Million Pesos, payable in instalments.

Petitioner than decided to sell her real properties for at least 6.5 Million so she could liquidate her bank loan and finance her business.

As a gesture of friendship, respondent verbally offered to conditionally buy petitioners real properties for 4.2 Million payable on instalment basis
without interest and to assume the bank loan. To induce the petitioner to accept her offer, respondent offered the following conditions
/concessions.
1.

That the conditional sale will be cancelled if the plaintiff (petitioner) can find a buyer of said properties for the amount of 6.5 Million
within the next 3 months

2.

That the plaintiff would continue using the space occupied by her and drugstore and cosmetics store without any rentals for the
duration of the instalment payments;

3.

That there will be a lease for 15 years in favor of the plaintiff over the space for drugstore and cosmetics store at a monthly renal of
8000 after full payment of the stipulated instalment payments are made by the defendant;

4.

That the defendant will undertake the renewal and payment of the fire insurance policies on the 2 subject buildings following the
expiration of the then existing fire insurance policy of the plaintiff up to the time that plaintiff is fully paid of the total purchase price of
4.2 Million Pesos.

After petitioners verbal acceptance of all the conditions/concessions, both parties worked together to obtain FSL Banks approval for
respondent to assume her outstanding bank account.

On Nov. 26, 1990, the parties and FSL Bank executed the corresponding Deed of Conditional sale of Real Properties with Assumption of
Mortgage. Due to their close personal friendship and business relationship, both parties chose not to reduce into writing the other terms of
their agreement mentioned in par. 11 of the complaint.

Under the Deed of Conditional Sale of Real Properties with Assumption of Mortgage, respondent was bound to pay the petitioner a lump sum
of 1.2 Million pesos without interest as part of the purchase price in 3 fixed instalments as follows:
1.

200,000.00Php due Jan. 31, 1991

2.

200,000.00Php due June 30, 1991

3.

800,000.00Php due Dec. 31, 1991

Respondent, however, defaulted in the payment of her obligations, and paid in small amounts from time to time.

To compensate for the delay, respondent agreed to pay petitioner an interest of 6% per month.

As of Aug. 31, 1992, respondent had only paid 395,000.00 leaving a balance of 805,000Php as principal on the unpaid instalments and
466,893.25 as unpaid accumulated interests.

It was also averred that despite the existence of a prospective buyer, the petitioner consented to continuing their agreement due to the
respondents professing her friendship.

On March 19, 1992, the residential building was gutted by fire which caused the petitioner to lose rental income in the amount of 8,000.00Php
a month since April 1992 and respondent neglected to renew the fire insurance policy.

Since December 1990, respondent had taken possession of the subject real properties and had been continuously collecting and receiving
monthly rental income form the tenants of the buildings and vendors of the sidewalk.

On Sept. 2, 1992, respondent offered the amount of 715,000.00Php only payable on Sept. 7, 1992, as full payment of the purchase price of
the subject real properties and demanded the simultaneous execution of the corresponding deed of absolute sale.

Responded countered, among others, that the tripartite agreement erroneously designated by the petitioner as Deed of Conditional sale of real
Property with Assumption of Mortgage was actually a PURE AND ABSOLUTE CONTRACT OF SALE WITH A TERM PERIOD.

Respondent further averred that it could not be considered a conditional sale because the acquisition of contractual rights and the
performance of the obligation therein did not depend upon a future and uncertain event.

Respondent even stated that she successfully rescued the properties from a definite foreclosure by paying the assumed mortgage in the
amount of 2,278,078.13 plus interest and other finance charges.

Because of the above payment she was able to obtain a deed of cancellation of mortgage and secure a release of mortgage on the subject
real properties including petitioners ancestral residential property in Sta. Maria, Bulacan.

Petitioners claim for the balance of the purchase price of the subject real properties was baseless and unwarranted because the full amount
of the purchase price had already been paid, as she did pay more than 4.2 Million, the agreed purchase price of the real properties, and even
had introduced improvements worth more than 4.8 Million Pesos.

Respondent added that as a result of their business relationship, petitioner was able to obtain from her loan in the amount of 400,000.00Php
with interest and took several pieces of jewelry worth 120,000.00.

Petitioner also refused to pay the monthly rental of 20,000.00Php since Nov. 16, 1990 up to the present for the use and occupancy of the
ground floor of the building on the subject real property, thus, accumulating arrearages in the amount of 470,000.00 as of Oct. 1992.

RTC ruled against the respondent, and the CA affirmed the decision with modifications (the remedy of rescission cannot apply).

ISSUE/S:
W.O.N. the CA was correct in ruling that there was no legal basis for the rescission of the Deed of Conditional sale with Assumption of Mortgage.
HELD:

The petitioners arguments cannot hold. The petitioners contend:

1.

The subject deed of conditional sale is a reciprocal obligation whose outstanding characteristic is reciprocity arising from identity of
cause by virtue of which one obligation is correlative of the other.

2.

The petitioner was rescinding not enforcing the subject Deed of Conditional Sale pursuant to Art. 1191 of the NCC because of the
respondents refusal to pay the balance of the total purchase price.

3.

There was no slight or casual breach on the part of the respondent because she deliberately failed to comply with her contractual
obligation.

The court agreed with the ruling of the courts that the subject Deed of Conditional Sale with Assumption of Mortgage entered into by and
among the two parties and FSL Bank on November 26, 1990 is a contract to sell and not a contract of sale.

Based on the provisions of the Contract, the title and ownership of the subject properties remains with the petitioner until the respondent fully
pays the balance of the purchase price and the assumed mortgage obligation.

Accordingly, the petitioners obligation to sell the subject properties becomes demandable only upon the happening of the positive suspensive
condition, which is the respondents full payment of the purchase price. Without respondents full payment, there can be no breach of contract
to speak of because petitioner has no obligation yet to turn over the title.

Respondents failure to pay in full the purchase price is not the breach of contract contemplated under Art. 1191 of the NCC but rather just an
event that prevents the petitioner from being bound to convey title to the respondent.
1.

Sale, by its very nature is a consensual contract because it is perfected by mere consent. The essential elements of a contract of
sale are the following:

a)

Consent or meeting of the minds, that is , consent to transfer ownership in exchange for the price;

b)

Determinate subject matter; and

c)

Price certain in money or its equivalent.

Thus, the Court fully agrees with the CA when it resolved: Considering, however, the Deed of Conditional sale was not cancelled by Vendor
Reyes and that out fo the total purchase price of the subject property in the amount of 4.2 Million Pesos, the remaining unpaid balance of
Tuparan is only 805,000.00Php, a substantial amount of the purchase price has already been paid.

It is only right and just to allow Tuparan to pay the said unpaid balance of the purchase price to Reyes.

Rescission cannot be permitted because unless the parties stipulated it, rescission is allowed only when the breach of the contract is
substantial and fundamental to the fulfilment of the obligation. Whether the breach is slight or substantial is largely determined by the
attendant circumstances.

Finally, the court upholds the ruling of the courts below regarding the non-imposition of damages and attorneys fees. Aside from the
petitioners self-serving statements, there is not enough evidence on record to prove that respondent acted fraudulently and maliciously against
the petitioner.