FIRST DIVISION
[G.R. No. 231299. August 27, 2020.]
REYNALDO T. ROCA, JR., petitioner, vs. WARSUN CIMAFRANCA, respondent.
NOTICE
Sirs/Mesdames :
Please take notice that the Court, First Division, issued a Resolution datedAugust 27, 2020 which reads as follows:
"G.R. No. 231299 — REYNALDO T. ROCA, JR., petitioner, versusWARSUN CIMAFRANCA, respondent.
This resolves the Petition for Review 1 filed by Reynaldo T. Roca, Jr. under Rule 45 of the Rules of Court assailing the Decision 2 dated August 31, 2016 and Resolution 3 dated March 22, 2017 of the Court of Appeals (CA) — Cebu in CA-G.R. CEB-CV No. 05800. The CA affirmed the Decision 4 dated October 2, 2015 of the Regional Trial Court, Branch 38, Dumaguete City in Civil Case No. 2013-14826 dismissing Roca's complaint for specific performance and rescinding the Deed of Absolute Sale and Supplemental Agreement executed by the parties on October 3, 2012.
ANTECEDENTS
On October 3, 2012, Roca and Warsun Cimafranca, representative of the heirs of Belen Cimafranca, entered into a Deed of Absolute Sale 5 for the purchase of a parcel of land covered by Transfer Certificate of Title No. 13467. On even date, the parties executed a Supplemental Agreement 6 embodying the terms and conditions of the payment of the P85,000,000.00 consideration, as follows:
2. The Vendor [Cimafranca] was already partially paid the amount of Three Million (PHP3,000,000.00) Pesos, Philippine Currency as shown by the Deed of Absolute Sale by Installment dated April 19, 2012 x x x.
3. The Vendee [Roca] upon execution of this document paid additional amount of Twelve Million (PHP12,000,000.00) Pesos, Philippine Currency receipt of which is hereby acknowledge[d] by the Vendor [Cimafranca]. The Vendor shall institute legal measures and remedies appropriate for clearing the premises from all illegal occupants.
4. The Vendee [Roca] shall issue a crossed check in the amount of Fifteen Million (PHP15,000,000.00) Pesos dated December 15, 2012 upon execution of this document which shall be redeemed in cash. Upon compliance of this obligation, the Vendor [Cimafranca] shall process and cause the transfer of the title in the name of the Vendee, clear the area from other occupants, and the land is deemed delivered to the Vendee. In the event the Vendee is unable to pay the herein Fifteen Million (PHP15,000,000.00) Pesos, the Vendee allows (Special Power of Attorney) the Vendor to sell the property to other buyer(s) provided that during the sale, the partial payments by the Vendee shall be reimbursed plus 2% of said amount. A Special Power of Attorney is hereto attached. The crossed check shall not be encashed.
5. The amount of FORTY FIVE MILLION (PHP45,000,000.00) PESOS, Philippine Currency, shall be paid by the Vendee [Roca] through RCBC (financial assistance by the bank [Letter of Guarantee] and whatever the bank should require pertaining to documentations the Vendor [Cimafranca] shall cooperate with the Vendee) or from other sources provided the Vendee is the titled owner, the land is cleared from all illegal occupants, and Vendee is in actual possession of the entire property.
6. The balance in the amount of TEN MILLION (PHP10,000,000.00) PESOS, Philippine Currency (covered by a check) shall be paid within Thirty Months at PHP333,333[.]33 monthly from the date the Vendee [Roca] is the titled owner, the land is cleared from occupants, and Vendee in actual possession of the property. Said check will be given upon the signing of this document together with the following collaterals offered, x x x. 7 (Emphasis in the original.)
Roca claimed that after delivery of the crossed check, Cimafranca reneged on his obligation under paragraph 4 of the Supplemental Agreement to transfer the title of the property in his name and to clear the area of illegal occupants. Thus, Roca filed a complaint for specific performance with the trial court to compel Cimafranca to perform his obligations under the contract.
In his defense, Cimafranca argued that Roca should first redeem the crossed check and pay him P15,000,000.00 in cash. Cimafranca claimed that when he tried to deposit the check, the bank refused to accept it due to insufficiency of funds. For failure to pay the second installment covered by the crossed check, Cimafranca filed a counterclaim praying for rescission of the Deed of Absolute Sale and the Supplemental Agreement.
On October 2, 2015, the trial court dismissed the complaint and held that it was incumbent upon Roca to first cash the crossed check before Cimafranca can be compelled to fulfill his obligation under the contract. Roca's failure to pay the cash equivalent of the crossed check constituted a breach that entitled Cimafranca to rescind the deed and the supplemental agreement. The trial court disposed:
WHEREFORE, in view of the foregoing, for failure of the plaintiff [Roca] to prove his case by preponderance of evidence, the complaint is hereby ordered DISMISSED. Judgement is hereby rendered in favor of the defendant [Cimafranca]. The Deed of Sale, dated October 3, 2012, between the plaintiff and defendant, notarized by Atty. Edwin Abil and recorded in his notarial register as Document Number 224, Page Number 46, Book XXIX, Series of 2012, and the Supplemental Agreement, dated October 3, 2012, between the plaintiff and defendant, notarized by Atty. Edwin Abil and recorded in his notarial register as Document Number 225, Page Number 46, XXIX, Series of 2012, are hereby ordered RESCINDED.
The defendant is hereby ordered to return to the plaintiff the amount of Fifteen Million Pesos (P15,000,000.00) plus interest of Two Percent (2%) per annum, the rate of interest agreed upon by the parties, from the date this decision becomes final and executory, until full payment.
SO ORDERED. 8 (Emphasis in the original.)
On appeal, the CA ruled that the complaint for specific performance was premature because the positive suspensive condition, i.e. encashment of the check, was not yet complied with. Cimafranca cannot be required to perform his reciprocal obligation under paragraph 4 of the Supplemental Agreement until Roca pays him the cash equivalent of the crossed check. Instead, it was Roca who was guilty of violating their agreement when he failed to redeem the check and pay the second installment. Thus, the trial court correctly granted Cimafranca's counterclaim seeking for the rescission of the two contracts. The dispositive portion of the decision reads:
WHEREFORE, the instant appeal is DENIED. The 2 October 2015 Decision of the Regional Trial Court of Dumaguete City, Branch 38 in Civil Case No. 2013-14826 is hereby AFFIRMED in toto.
SO ORDERED. 9 (Emphasis in the original.)
The CA denied Roca's motion for reconsideration 10 and supplement to the motion for reconsideration 11 on March 22, 2017. 12
Hence, this petition.
Roca insists that he may legally compel Cimafranca to comply with his obligation under the Supplemental Agreement because he has fully complied with his undertakings under the contract, particularly, issuing the crossed check for the second installment and securing the necessary funds and securities for the balance. Roca points out that the two contracts were executed on October 3, 2012, hence, the deadline for the payment of taxes is or on or before November 3, 2012. To construe paragraph 4 of the Supplemental Agreement that Roca shall first cash the crossed check (which was dated December 15, 2012) before Cimafranca may process the titling of the property in his name is to assume that Cimafranca knowingly agreed to incur penalties relative to the transfer of title of the property. Further, rescission is not applicable as a remedy because the parties stipulated in the supplemental agreement that in case of non-payment of the second installment, Cimafranca may sell the property to other buyers. Further, the breach, if at all, is a mere slight breach that does not warrant the rescission of contracts.
In his Comment, 13 Cimafranca counters that their contract requires Roca to first pay the P15,000,000.00 covered by the crossed check in cash before he can be obligated to transfer the title of the property in Roca's name. Also, the parties actually specified rescission as a remedy when they stipulated in the Supplemental Agreement that the seller may offer the subject property for sale to others in case of failure of the buyer to pay the second installment.
RULING
The petition is bereft of merit.
An action for specific performance is the remedy to demand the exact performance of a contract in the specific form in which it was made, or according to the precise terms agreed upon by a party bound to fulfill it. 14 Evidently, before the remedy of specific performance is availed of, there must first be a breach of the contract. 15
Paragraph 4 of the Supplemental Agreement reads:
4. The Vendee [Roca] shall issue a crossed check in the amount of Fifteen Million (PHP15,000,000.00) Pesos dated December 15, 2012 upon execution of this document which shall be redeemed in cash. Upon compliance of this obligation, the Vendor [Cimafranca] shall process and cause the transfer of the title in the name of the Vendee, clear the area from other occupants, and the land is deemed delivered to the Vendee. In the event the Vendee is unable to pay the herein Fifteen Million (PHP15,000,000.00) Pesos, the Vendee allows (Special Power of Attorney) the Vendor to sell the property to other buyer(s) provided that during the sale, the partial payments by the Vendee shall be reimbursed plus 2% of said amount. A Special Power of Attorney is hereto attached. The crossed check shall not be encashed. 16 (Emphasis supplied.)
Indeed, mere issuance of a crossed check for the second installment payment of P15,000,000.00 is not sufficient compliance. The check must be redeemed and the cash equivalent thereof tendered. This is evident in the last sentence of paragraph 4 that "[t]he crossed check shall not be encashed." Along these lines, Roca cannot compel Cimafranca to perform his obligation to process and cause the transfer of the title of the property in his name and to clear the area of illegal occupants without first complying with his obligation to retrieve the check and give P15,000,000.00 to Cimafranca. To be sure, the payment of P15,000,000.00 is a condition precedent to the performance by Cimafranca of his undertakings under the Supplemental Agreement. Thus, the CA correctly ruled that the complaint for specific performance filed by Roca was premature because there was no breach of contract yet committed by Cimafranca. On the contrary, it was Roca who did not perform his correlative obligation of paying the contract price in the manner agreed upon.
A breach of contract may give rise to an action for specific performance or rescission of contract. 17 Rescission of contract under Article 1191 18 of the Civil Code is a remedy available to the oblige when the obligor cannot comply with what is incumbent upon him. It is predicated on a breach of faith by the other party who violates the reciprocity between them. 19 In this case, Roca failed to take back the crossed check and pay the cash equivalent of P15,000,000.00. Roca violated the very essence of reciprocity in the contract that consequently gave rise to Cimafranca's right to rescind the same.
Roca claims that rescission is not available as a remedy because the parties expressly stipulated for a remedy in case of non-payment of the second installment. He insists that rescission is only allowed in the absence of any other legal remedy. And, if at all, the breach is not substantial that warrants the rescission of contracts.
We cannot subscribe to the opinion of Roca.
The general rule is that rescission will not be permitted for a slight or casual breach. 20 Unless otherwise stipulated by the parties, rescission is allowed only when the breach of the contract is substantial and fundamental as would defeat the very object of the parties in making the agreement. 21
Contrary to the claim of Roca, the parties expressly empowered Cimafranca to rescind the sale in case of breach. Paragraph 4 of the Supplemental Agreement provides that "[i]n the event [Roca] is unable to pay the x x x (Php15,000,000.00), [Roca] allows x x x [Cimafranca] to sell the property to other buyer(s) provided that during the sale, the partial payments by the Vendee shall be reimbursed plus 2% of said amount." 22 This provision of the contract allowing Cimafranca to offer the property for sale to other interested parties, subject to the condition that payments already made by Roca shall be returned plus interest, is the very essence of rescission. It abrogates the contract from its inception and requires the mutual restitution of the benefits received. 23
In all, we find no reason to depart from the findings and conclusions of the CA and the trial court.
FOR THESE REASONS, the petition is DENIED. The Decision dated August 31, 2016 and Resolution dated March 22, 2017 of the Court of Appeals-Cebu in CA-G.R. CEB-CV No. 05800 are AFFIRMED.
SO ORDERED."
By authority of the Court:
(SGD.) LIBRADA C. BUENADivision Clerk of Court
by:
MARIA TERESA B. SIBULODeputy Division Clerk of Court
Footnotes
1.Rollo, pp. 9-26.
2.Id. at 30-38; penned by Associate Justice Germano Francisco D. Legaspi, with the concurrence of Executive Justice Gabriel T. Ingles and Associate Justice Marilyn B. Lagura-Yap.
3.Id. at 58-59.
4.Id. at 61-68; penned by Presiding Judge Cenon Voltaire B. Repollo.
5.Id. at 69-70.
6.Id. at 71-72.
7.Id.
8.Rollo, p. 68.
9.Id. at 37.
10.Id. at 39-45.
11.Id. at 46-54.
12.Supra note 3.
13.Rollo, pp. 160-174.
14.Sps. Pajares v. Remarkable Laundry & Dry Cleaning, 806 Phil. 39 (2017).
15.San Miguel Properties, Inc. v. Sec. Perez, et al., 717 Phil. 244 (2013).
16.Rollo, p. 31.
17.Hirakawa v. Lopzcom Realty Corp., G.R. No. 213230, December 5, 2019.
18. Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him.
The injured party may choose between fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission even after he has chosen fulfillment, if the latter should become impossible.
xxx xxx xxx
19.Sps. Velarde v. Court of Appeals, 413 Phil. 360 (2001).
20.Del Castillo Vda. de Mistica v. Spouses Naguiat, 463 Phil. 434 (2003); Universal Food Corp. v. CA, et al., 144 Phil. 1 (1970); Phil. Amusement Enterprises, Inc. v. Natividad, et al., 128 Phil. 320 (1967).
21.Del Castillo Vda. de Mistica v. Spouses Naguiat, supra.
22.Rollo, p. 71.
23.ASB Realty Corp. v. Ortigas & Co. Ltd. Partnership, 775 Phil. 262 (2015).