Article 1191

Laperal vs. Solid Homes, Inc.

GR No. 130913

June 21, 2005

Garcia, J.:

Facts:

Filipinas Golf Sales and Development Corporation, predecessor-in-interest of Filipinas Golf and CountryClub, Inc., represented by its then President, Oliverio Laperal, entered into a Development and Management Agreement with respondent Solid Homes, Inc., a registered subdivision developer, involving several parcelsof land owned by Laperal and FGSDC. Under the terms and conditions of the aforementioned Agreement and the Supplement, respondent undertook to convert at its own expense the land subject of the agreement into a first-class residential subdivision, in consideration of which respondent will get 45% of the lot titles of the saleable area in the entire project. The aforementioned Agreement was cancelled by the parties, and, inlieu thereof, two contracts identically denominated Revised Development and Management Agreement were entered into by respondent with the two successors-in-interest of FGSDC. Unlike the original agreement, both Revised Agreements omitted the obligation of petitioners Laperal and FGCCI to make available torespondent Solid Homes, Inc. the owners duplicate copies of the titles covering the subject parcels of land. It appears, however, that even as the Revised Agreements already provided for the non-surrender of the owners duplicate copies of the titles, respondent persisted in its request for the delivery thereof .Then, petitioners served on respondent notices of rescission of the Revised Agreements with a demand to vacate the subject properties and yield possession thereof to them.

Issue:

Whether the termination of the Revised Agreement and Addendum, because of the contractual breachcommitted by respondent Solid Homes, carried with it the effect provided under Article 1385 of the New Civil Code.

Ruling:

Mutual restitution is required in cases involving rescission under Article 1191. Since Article 1385 of the CivilCode expressly and clearly states that rescission creates the obligation to return the things which were the object of the contract, together with their fruits, and the price with its interest, the Court finds no justification to sustain petitioners position that said Article 1385 does not apply to rescission under Article 1191.As a consequence of the resolution by petitioners, rights to the lot should be restored to private respondent or the same should be replaced by another acceptable lot. Applying the clear language of the law and the consistent jurisprudence on the matter, therefore, the Court rules that rescission under Article 1191 in the present case, carries with it the corresponding obligation of restitution.

Fallo:

The petition is hereby granted. Accordingly, the assailed decision and resolution of the Court of Appeals are reversed and set side and the decision dated December 19, 1991 of the Regional Trial Court is reinstated. No pronouncement as to costs.