1191 – RESOLUTION/RESCISSION Ruling:
1. The Court held that Ortigas could not validly
ASB Realty Corp. vs. Ortigas and Company rescind the Deed of Sale against ASB.
Limited Partnership
G.R. No. 202947 Ratio:
Based on the foregoing, Ortigas' complaint was
Facts:
predicated on Article 1191 of the Civil Code, which
provides: Article 1191. The power to rescind obligations
The case involves ASB Realty Corporation as the
is implied in reciprocal ones, in case one of the obligors
petitioner and Ortigas & Company Limited Partnership
should not comply with what is incumbent upon him.
as the respondent. The events leading to the case
began on June 29, 1994, when Ortigas entered into a
The injured party may choose between the fulfillment
Deed of Sale with Amethyst Pearl Corporation for a
and the rescission of the obligation, with the payment
parcel of land measuring 1,012 square meters located
of damages in either case. He may also seek
in Barrio Oranbo, Pasig City, for the amount of PhP
rescission, even after he has chosen fulfillment, if the
2,024,000.
latter should become impossible.
The Deed of Sale included specific covenants,
The court shall decree the rescission claimed, unless
conditions, and restrictions regarding the use and
there be just cause authorizing the fixing of a period.
development of the property, including stipulations on
the type of construction, submission of plans, and
This is understood to be without prejudice to the rights
completion timelines. The property was subsequently
of third persons who have acquired the thing, in
transferred to ASB Realty Corporation on December 28,
accordance with articles 1385 and 1388 and the
1996, through a Deed of Assignment in Liquidation,
Mortgage Law.
which stated that the property was transferred free
from any liens or encumbrances except those duly
Rescission under Article 1191 of the Civil Code is
annotated on the title.
proper if one of the parties to the contract commits a
substantial breach of its provisions. It abrogates the
On July 7, 2000, Ortigas filed a complaint for specific
contract from its inception and requires the mutual
performance against ASB in the Regional Trial Court
restitution of the benefits received;53 hence, it can be
(RTC) of Pasig City, alleging that ASB violated the
carried out only when the party who demands
terms of the Deed of Sale by constructing commercial
rescission can return whatever he may be obliged to
structures and failing to submit building plans or
restore.
complete construction within the stipulated time.
Considering the foregoing, Ortigas did not have a
The RTC dismissed Ortigas's complaint on December
cause of action against the petitioner for the
14, 2009, ruling that Ortigas was guilty of laches for
rescission of the Deed of Sale.
not enforcing the restrictions against Amethyst before
the property was transferred to ASB. Ortigas appealed
The petitioner was not privy to the Deed of Sale
to the Court of Appeals (CA), which initially affirmed
because it was not the party obliged thereon. Not
the RTC's decision on September 6, 2011. However,
having come under the duty not to violate any
after Ortigas filed a motion for reconsideration, the CA
covenant in the Deed of Sale when it purchased the
issued an amended decision on January 9, 2012,
subject property despite the annotation on the title, its
reversing the earlier ruling and ordering the
failure to comply with the covenants in the Deed of
reconveyance of the property to Ortigas. ASB then filed
Sale did not constitute a breach of contract that gave
a petition for review to the Supreme Court.
rise to Ortigas' right of rescission. It was rather
Amethyst that defaulted on the covenants under the
Issues:
Deed of Sale; hence, the action to enforce the
1. Did Ortigas validly rescind the Deed of Sale
provisions of the contract or to rescind the contract
due to the failure of Amethyst and its
should be against Amethyst. In other words, rescission
assignee, ASB, to fulfill the covenants under
could not anymore take place against the petitioner
the Deed of Sale?
once the subject property legally came into the
juridical possession of the petitioner, who was a third
party to the Deed of Sale.
