POWER COMMERCIAL and INDUSTRIAL CORPORATION v.
COURT OF APPEALS name in order for them to undertake the necessary steps to remove the
Obligations of the seller | June 20, 1997 | Panganiban, J.
Nature of Case: Petition for Review
Digest maker: Caringal
SUMMARY: Petitioner company bought a parcel of land from respondent spouses. Along
with the transfer of the title, petitioner also assumed the existing mortgage on the land to
PNB. After the Deed of Absolute Sale with Assumption of Mortgage was executed,
petitioner started paying the balance of the mortgage to PNB. However, PNB subsequently
denied the application for assumption of mortgage. Furthermore, petitioner could not take
possession of the land because there were lessees living on said land. Petitioner moved to
rescind the sale and recover the payments given to PNB. The Court held that there was no
substantial breach to warrant rescission. This is due to the fact that there was no stipulation
in the contract requiring the respondent to eject the current occupants. Also, there was a
symbolic delivery of the property when ownership was transferred through execution of a
public document which can only be prevented if vendor did not have control over the thing
sold. Lastly, there was no mistake of payment to PNB because it was stipulated in the
contract that petitioner will assume the mortgage to PNB.
DOCTRINE: Symbolic delivery, a form of constructive delivery where ownership is
transferred through execution of a public document can, be prevented if the vendor does
not possess control over the thing sold.
FACTS:
 January 31, 1979- Power Commercial and Industrial Development
Corporation(Petitioner) entered into a contract of sale with spouses Reynaldo and
Angelita R. Quiambao(Respondents).
 The contract involved a 612-sq. m. parcel of land located at San Antonio Village,
Makati.
 The parties agreed that petitioner would pay respondents P108,000.00 as down
payment and the balance of P295,000.00 upon execution of the deed of transfer of the
title over the property. Also, petitioner assumed, as part of the purchase price, the
existing mortgage on the land, in which he paid P79,145.77 to PNB as full satisfaction
thereof.
 June 1, 1979-Respondent spouses mortgaged again said land to PNB to guarantee a
loan of P145,000.00, P80,000.00 of which was paid to respondent spouses.
 June 26, 1979-The parties executed a Deed of Absolute Sale with Assumption of
Mortgage. On the same date, Mrs. C.D. Constantino, then General Manager of
petitioner-corporation, submitted to PNB said deed with a formal application for
assumption of mortgage.
 February 15-1980-PNB informed respondent spouses that, for petitioner’s failure to
submit the papers necessary for approval pursuant to the former’s letter date January
15, 1980, the application for assumption of mortgage was considered withdrawn; that
the outstanding balance of P145,000.00 was deemed fully due and demandable; and
that said loan was to be paid in full within fifteen (15) days from notice.
 June 24, 1980 and December 23, 1980- Petitioner paid PNB P41,880.45 and P20,283.14
respectively to be applied to the outstanding loan.
 December 23, 1980- PNB received a letter from petitioner which says:
o There are people who are currently in physical occupancy of the lot.
o Petitioner want to remove said people
o In order to do so, they request that the assumption of mortgage be given
favorable consideration and that the mortgage title be transferred in their
current occupants
o It was their understanding that the lot was free and clear of problems of this
nature and that the previous owner would be responsible for the removable
of the people.
 February 19, 1982-PNB sent petitioner a letter saying:
o The loan given to respondent, which was assumed by the petitioner was
last renewed on December 24, 1980 and is to mature on June 4, 1981.
o A review of the records show what the loan has been past due from last
maturity.
o Petitioner should remit payments to cover interest, charges, and at least
part of the principal.
 March 17, 1982-Petitoner filed a civil case against respondent spouses for rescission
and damages before the RTC of Pasig. In reply to PNB’s February 19 letter, petitioner
demanded the return of the payments it had made on the ground that its assumption
of mortgage was never approved.
 May 31, 1983-While the case was pending, the mortgage was foreclosed. The
property was subsequently bought by P NB during the public auction.
 July 12, 1990-RTC ruled that the failure of respondents spouses to deliver actual
possession to petitioner entitled the latter to rescind the sale, and PNB was obliged to
return the payments made by petitioner.
 CA reversed the trial court. The deed of sale between the parties did not obligate the
respondents to eject the lessees from the land as a condition of the sale, nor was the
occupation thereof by said lessees a violation of the warranty against eviction. Hence,
there was no substantial breach to justify the rescission.
ISSUE/S & RATIO:
1. WON there was a substantial breach of the contract between the parties warranting
rescission – NO
Conspicuous Absence of an Imposed Condition
The failure or respondents to eject the lessees from the lot in
question and to deliver actual and physical possession thereof cannot be
considered a breach of a condition.
First of all, such “failure” was not stipulated as a condition,
whether resolutory or suspensive, in the contract. Secondly, its effects
and consequences were not specified.
By his own admission, Anthony Powers, General-Manager of
petitioner-corporation, did not ask the corporation’s lawyers to stipulate in
the contract that respondents were guaranteeing the ejectment of said
occupants, because there was already a proviso in said deed of sale that the
sellers were guaranteeing the peaceful possession by the buyer of the land
in question. Any obscurity in a contract, if the above-quoted provision can
be so described, must be construed against the party who caused it, herein
petitioner-corporation.
If the parties intended to impose on respondent spouses the
obligation to eject tenants from the lot sold, it should have included a
provision in the contract stipulating the same.
 Effective Symbolic Delivery

Although most authorities consider transfer of ownership as the

primary purpose of sale, delivery remains an indispensable requisite as our
law does not admit the doctrine of transfer of property by mere consent. As
provided in the Civil Code, delivery can either be actual or constructive.
Symbolic delivery is a form of constructive delivery where ownership is
transferred through execution of a public document. Its efficacy can,
however, be prevented if the vendor does not possess control over the
thing sold. The key word is control, not possession. In this case, the lot
has been placed under the control of the petitioner and prior physical
delivery or possession is not legally required and the execution of the
deed of sale is deemed equivalent to delivery.

2. WON there was a “mistake in payment” made by petitioner, obligating PNB to

return such payments. – NO

Solutio Indebiti does not apply in this case because petitioner was under
obligation to pay the amortizations on the mortgage under the contract of sale and
the deed of real estate mortgage.

Even if PNB disapproved its assumption of mortgage, the payment of the

loan by petitioner was a condition clearly imposed by the contract of sale.

RULING: Petition DENIED, there is no substantial breach to justify the rescission of the contract and
the return of the payments made.