Movido vs. Pastor

Rescission is not justified where the buyer's failure to pay installments is excused by the seller's prior failure to perform an obligation essential to determining the purchase price, and when two simultaneous contracts are executed, they must be construed together, with the specific stipulations prevailing over the general.

Valentin Movido and Luis Reyes Pastor entered into two agreements on December 6, 1993, for the sale of a parcel of land in Dasmariñas, Cavite. The kasunduan sa bilihan ng lupa set the general terms: the sale of 21,000 sq. m. out of a 22,731 sq. m. lot at ₱400/sq. m., payable in installments, with Movido obligating himself to survey the property to segregate the excluded 1,731 sq. m. portion before the last payment. The kasunduan provided specific adjustments: if a Napocor power line traversed the lot, the purchase price would be reduced to ₱200/sq. m. beyond a 15-meter distance from the center line, and the area within 15 meters would not be paid for. Movido also undertook to cause the survey of the property to determine the portion affected by the power line.

• The Contracts: On December 6, 1993, the parties executed two documents: (1) the kasunduan sa bilihan ng lupa, which covered the sale of 21,000 sq. m. at ₱400/sq. m. for a total of ₱8.4 million, payable in eight installments, and required Movido to survey the property to exclude the 1,731 sq. m. portion before the last payment; and (2) the kasunduan, which stipulated that if a Napocor power line traversed the property, the price would be reduced to ₱200/sq. m. beyond 15 meters from the center line, and the area within 15 meters would be excluded from payment.
• Partial Performance: Pastor paid ₱5 million of the total purchase price.
• The Dispute: Movido claimed Pastor defaulted on the 7th and 8th installments, constituting a material breach that warranted rescission. Movido insisted the survey was conditioned on the payment of the 7th installment.
• Demand for Survey: Pastor expressed willingness to pay the balance but demanded that Movido first cause the survey of the property to determine the exact portion affected by the Napocor power line, which would dictate the final purchase price. Movido refused the demand.

• Priority of the General Contract: Petitioner maintained that the kasunduan was executed first, making the kasunduan sa bilihan ng lupa the final agreement that fixed the purchase price at ₱8.4 million regardless of the power line.
• Right to Rescind: Petitioner argued that Pastor’s failure to pay the 7th and 8th installments constituted a material breach, giving him the right to rescind the contract and forfeit 50% of the amounts already paid.

• Obligation to Survey: Respondent countered that Movido was obligated under both agreements to cause the survey of the property to determine the exact purchase price, particularly the portion affected by the Napocor power line.
• Impossibility of Determining Balance: Respondent argued that he was ready and willing to pay the balance but could not do so with certainty until the survey was conducted to ascertain the exact amount due.

• Contract Interpretation: Whether the order of execution of the two agreements determines the rights and obligations of the parties.
• Rescission: Whether respondent’s failure to pay the 7th and 8th installments constituted a material breach warranting rescission of the contract.

• Contract Interpretation: The order of execution is immaterial because both contracts were executed and notarized on the same day. Both agreements must be read together to give effect to the parties' intentions, forming a single contract pertaining to the sale of the land. Under the principle of specialibus derogat generalibus, the kasunduan, which pertains to the specific matter of the power line, constitutes an exception to the general provisions of the kasunduan sa bilihan ng lupa.
• Rescission: Rescission was not justified. The breach was not substantial or fundamental. Respondent was not in default because no demand for payment was ever made by petitioner. Furthermore, petitioner's own failure to perform his obligation to survey the property—a prerequisite to determining the exact purchase price—prevented him from invoking rescission. The survey was not conditioned on the payment of any installment; it could have been done anytime after the execution of the agreement.

• Rescission — Rescission is allowed only when the breach is so substantial and fundamental as to defeat the object of the parties in entering into the contract. A party who has himself breached the contract cannot properly invoke the right to rescind.
• Specialibus derogat generalibus — Special provisions prevail over general ones. When two agreements are executed on the same day pertaining to the same subject matter, the agreement referring to a specific matter constitutes an exception to the general provisions of the other.
• Interpretation of Simultaneous Contracts — Contracts executed on the same day must be interpreted together, attributing to doubtful stipulations the sense that results from all of them taken jointly. Their proper construction must be one that gives effect to all.

• "Rescission is only allowed when the breach is so substantial and fundamental as to defeat the object of the parties in entering into the contract."
• "Indeed, taken together, the two agreements actually constitute a single contract pertaining to the sale of a land to respondent by petitioner. Their stipulations must therefore be interpreted together, attributing to the doubtful ones that sense that may result from all of them taken jointly."
• "Under both the kasunduan sa bilihan ng lupa and the kasunduan, petitioner undertook to cause the survey of the property in order to determine the portion excluded from the sale, as well as the portion traversed by the Napocor power line. Despite repeated demands by respondent, however, petitioner failed to perform his obligation. Thus, considering that there was a breach on the part of petitioner (and no material breach on the part of respondent), he cannot properly invoke his right to rescind the contract."

• Song Fo & Co. v. Hawaiian-Philippine Co., 47 Phil. 821 (1925) — Cited as controlling authority for the principle that rescission is only allowed when the breach is substantial and fundamental as to defeat the object of the parties in making the contract.

• Article 1374, Civil Code — Stipulations of contracts are interpreted together, attributing to doubtful ones the sense resulting from all of them taken jointly. Applied to construe the two simultaneous agreements as a single contract.
• Section 12, Rule 130, Rules of Court — Provides that special provisions prevail over general ones (specialibus derogat generalibus). Applied to hold that the kasunduan (specific) prevails over the kasunduan sa bilihan ng lupa (general).

Presbitero J. Velasco, Jr., Antonio Eduardo B. Nachura, Diosdado M. Peralta, Jose C. Mendoza