Palma Gil vs. Court of Appeals

A party who has not complied with their own reciprocal obligation cannot seek rescission of the contract under Article 1191 of the Civil Code. Furthermore, the failure to implead all compulsory heirs of a deceased party renders the action void for lack of indispensable parties, depriving the trial court of authority to act not only as to the absent parties but also as to those present.

Concepcion Palma Gil and her sister Nieves Palma Gil were co-owners of a parcel of commercial land in Davao City. Concepcion successfully sued Nieves for specific performance to compel the delivery of a 256.2-square-meter portion. When Nieves refused to execute the deed, the sheriff subdivided the property and executed a Deed of Transfer to Concepcion over Lots 59-C-1 and 59-C-2. On October 24, 1956, Concepcion sold Lot 59-C-1 to Iluminada Pacetes for P21,600, with P7,500 paid as downpayment and the P14,100 balance payable upon the delivery of the certificate of title in the vendee's name. Concepcion bound herself to secure the title in her name within 120 days. Concepcion died intestate on August 4, 1959, without having transferred the title. Her heirs similarly failed to effect the transfer. Iluminada Pacetes subsequently consigned part of the balance with the court in 1977 and independently secured the title in her own name in 1978. The property was later sold to Constancio Maglana and then to Emilio Matulac.

• Co-ownership and Specific Performance: Concepcion Palma Gil and Nieves Palma Gil co-owned Lot 59-C. Concepcion sued Nieves for specific performance to obtain a 256.2-square-meter portion. The court ruled in Concepcion's favor, and when Nieves refused to execute the deed, the sheriff subdivided the lot and executed a Deed of Transfer to Concepcion over Lots 59-C-1 and 59-C-2.
• Sale to Iluminada Pacetes: Concepcion sold Lot 59-C-1 to Iluminada Pacetes for P21,600. The vendee paid P7,500 upon signing, with the P14,100 balance due upon the delivery of the certificate of title in the vendee's name. Concepcion obligated herself to secure the title in her name within 120 days. Pending full payment, the vendee was entitled to collect rentals from the property.
• Vendor's Failure to Transfer Title: Concepcion died intestate on August 4, 1959, without transferring the title to Iluminada. Her heirs, including the petitioners, also failed to deliver the title despite the lapse of eighteen years.
• Vendee's Actions and Subsequent Transfers: On August 8, 1977, Iluminada consigned P11,983 with the court as payment for the balance. She subsequently filed a petition to secure the owner's duplicate of the title and, on May 9, 1978, managed to obtain TCT No. 61514 in her name. The Pacetes spouses sold the lots to Constancio Maglana on March 16, 1966, who then sold them to Emilio Matulac on April 22, 1980.
• Suit for Cancellation: Three of Concepcion's surviving heirs (Perla Palma Gil, Vicente Hizon, Jr., and Angel Palma Gil) filed Civil Case No. 15,356 to cancel the deeds of sale and the resulting titles. They alleged the sale to Pacetes was merely executory and rescissible due to non-payment of the balance. The complaint did not implead all the compulsory heirs of Concepcion; petitioners claimed they rushed the filing due to the demolition of buildings on the property and could not contact all heirs.

• Non-Payment of Purchase Price: Petitioners argued that the Pacetes spouses failed to pay the balance of P14,100, consigning only P11,983 twenty-one years after the execution of the deed without instituting an action to cancel their obligation.
• Ineffective Consignation: Petitioners maintained that the consignation produced no legal effect because it was partial and unduly delayed.
• Bad Faith of Subsequent Purchasers: Petitioners contended that Maglana and Matulac were not purchasers in good faith because a two-storey building constructed by the Villarica spouses was still existing on the property at the time of their purchases.

• Bar by Prior Judgment: Respondents countered that the action was barred by the Supreme Court's decision in G.R. No. L-60690, which affirmed the validity of the sales and the execution of the judgment in Civil Case No. 1160.

• Indispensable Parties: Whether the failure to implead all compulsory heirs of a deceased party renders the action void.
• Rescission of Reciprocal Obligations: Whether the vendor's heirs can rescind a contract based on the vendee's non-payment when the vendor failed to comply with her reciprocal obligation to transfer title.
• Validity of Consignation: Whether the consignation of a portion of the purchase price by the vendee defeats the right to rescind.

• Indispensable Parties: The action was rendered void by the failure to implead all compulsory heirs. Upon Concepcion's death, her rights and obligations were transmitted to her sister and nephews and nieces by way of succession. As indispensable parties, their absence deprived the trial court of authority to act, not only as to the absent parties but also as to those present.
• Rescission of Reciprocal Obligations: Rescission under Article 1191 was properly denied because the vendor's heirs were not the injured parties entitled to rescind. The right of rescission is predicated on a breach of faith by the other party that violates the reciprocity between them. Under the deed of sale, the obligation to pay the balance was conditioned upon the delivery of the certificate of title in the vendee's name. Because Concepcion and her heirs failed to secure the title, Iluminada was not in delay and was not in breach.
• Validity of Consignation: The consignation of the purchase price by the vendee defeated the right to rescind. Although the consignation was P2,017 short of the balance, the shortfall was properly chargeable to the expenses the vendee incurred to secure the title—an obligation the vendor failed to fulfill under Article 1167 of the Civil Code. Furthermore, no notarial or judicial demand for rescission had been made prior to the consignation.

• Indispensable Parties — Parties are considered indispensable when their interests are such that a final decree cannot be made without either affecting those interests or leaving the controversy in such a condition that its final determination may be wholly inconsistent with equity and good conscience. The absence of indispensable parties renders all subsequent actions of the trial court null and void for want of authority to act.
• Rescission of Reciprocal Obligations — Under Article 1191 of the Civil Code, the right of rescission is predicated on a breach of faith by the other party that violates the reciprocity between them. A party who has not complied with their own obligation under the contract cannot seek rescission based on the other party's non-performance, especially when the other party's performance was a condition precedent to their own.

• "The right of rescission of a party to an obligation under Article 1191 of the New Civil Code is predicated on a breach of faith by the other party that violates the reciprocity between them."
• "Being indispensable parties, the absence of the surviving sister, nephews and nieces of the decedent in the complaint as parties-plaintiffs, and in this case, as parties-petitioners, renders all subsequent actions of the trial court null and void for want of authority to act, not only as to the absent parties, but even as to those present."

• Central Bank of the Philippines v. Bichara, 328 SCRA 807 (2000) — Followed regarding the principle that non-payment of the purchase price constitutes a resolutory condition for which the remedy is rescission or specific performance under Article 1191.
• Romero v. Court of Appeals, 250 SCRA 223 (1995) — Followed regarding the principle that the right of rescission is predicated on a breach of faith violating reciprocity, and that consignation of the purchase price defeats the right to demand rescission.
• Santana-Cruz v. Court of Appeals, 361 SCRA 520 (2001) — Followed regarding the necessity of impleading indispensable parties and the effect of their absence on the court's authority.
• Jorge v. Hon. Consolacion, 179 SCRA 593 (1989) — Followed regarding the execution of judgments and the rights of successors-in-interest in the specific property.

• Article 1191, Civil Code — Applied as the basis for the rule on rescission of reciprocal obligations, requiring a breach of faith by the other party.
• Article 1592, Civil Code — Cited in relation to the vendee's right to pay even after the expiration of the period, as long as no demand for rescission has been made judicially or by notarial act.
• Article 1169, Civil Code — Applied to determine delay in reciprocal obligations, establishing that neither party incurs delay if the other does not comply with what is incumbent upon them.
• Article 1167, Civil Code — Applied to justify charging the expenses incurred by the vendee in securing the title against the balance of the purchase price, as the vendor failed to fulfill her obligation to do so.
• Articles 975, 1003, 1005, 1009, Civil Code — Applied to establish the transmission of rights and obligations from the decedent to her compulsory heirs by way of succession.

Bellosillo (Chairman), Quisumbing, and Tinga, JJ., concurred. Austria-Martinez, J., took no part, having concurred in the CA decision.