Siy vs. Court of Appeals

A party who elects rescission of a reciprocal obligation under Article 1191 of the Civil Code cannot simultaneously recover the unpaid purchase price as damages, because the law does not authorize the injured party to rescind the obligation and at the same time seek its partial fulfillment under the guise of recovering damages. However, the breaching party remains liable for reasonable compensation for the use of the property, such as monthly rentals.

Private respondents spouses Sergio and Virginia Valdez owned a parcel of land with an area of 155 square meters, more or less, and the house constructed thereon, situated at No. 333 Jefferson Street, Makati, covered by Transfer Certificate of Title No. 32718 of the Registry of Deeds of Rizal. Petitioner Virgilio Siy and the spouses entered into a contract of sale regarding the property, but the controversy stemmed from subsequent agreements executed by the parties. The property was mortgaged to the Government Service Insurance System (GSIS), and the petitioner applied for a loan with the Social Security System (SSS) through the Home Financing Commission (HFC), which required the parties to execute a Deed of Sale with Assumption of Mortgage.

Private respondents spouses Sergio and Virginia Valdez owned a parcel of land containing an area of 155 square meters, more or less, and the house constructed thereon, situated at No. 333 Jefferson Street, Makati, covered by Transfer Certificate of Title No. 32718 of the Registry of Deeds of Rizal. The petitioner and private respondents entered into a contract of sale regarding the said property, but the controversy stemmed from subsequent agreements executed by the parties.

The first agreement was the Deed of Conditional Sale (Exh. A) whereby for and in consideration of P22,000.00, the private respondents as vendors agreed to sell to the petitioner as vendee the lot covered by TCT No. 32718 with all the improvements thereon. The sale was subject to the condition that immediately upon the approval of the petitioner's loan with the Social Security System (SSS) and its payment to the respondents, the vendor shall execute the deed of absolute sale in favor of the vendee. The petitioner applied for a loan with the SSS through the Home Financing Commission (HFC). Since the property was mortgaged to the Government Service Insurance System (GSIS), the HFC requested both parties to execute a Deed of Sale with Assumption of Mortgage (Exh. G), stating among others that the respondents sell, transfer, and convey to the petitioner the property for and in consideration of the sum of P22,000.00, of which P6,400.00 (representing the amount allegedly incurred by the petitioner for improvements on said property) had been paid and the balance of P15,600.00 payable upon approval of the petitioner's loan with the SSS. In reality, however, the respondents had not received a single centavo from the petitioner at the time.

Subsequently, the parties executed three more contracts. The first contract (Exh. 1), executed more than one month after Exhibit A, provided that the respondents agreed to sell the property to the petitioner at P14,000.00 while the latter must negotiate a loan with the SSS in order to settle the amount within a period of thirty days from March 17, 1963. The contract also provided for the payment of rentals by the petitioner at P50.00 a month from March 1, 1963 until the date of final settlement and damages at the rate of P30.00 a day for each day of delay. The next day, another contract was executed which was essentially the same as Exh. "1". Respondent Virginia Valdez explained that she did not agree with the granting of another thirty-day extension to the petitioner and so Exh. "1" was torn up. However, the respondents changed their minds after the mother of the petitioner pleaded with them for another extension. Thus, Exh. "2" came into being, providing that the full amount of P14,000.00 would be paid on or before the 30th day from the date of the execution of the contract and that failure of the petitioner to settle his obligation within that period shall make him liable for damages at P30.00 for every day of delay.

The last agreement entered into by the parties (Exh. 5) provided, among others, that the respondents agreed to receive the partial amount of P12,000.00 on the condition that the balance of P4,376.00 is completely paid forty-five days after the date fixed by them and that failure of the petitioner to pay the said balance on the agreed time will entitle the respondents to damages at P20.00 for every day of delay until said balance shall have been fully paid. Within the forty-five (45) days deadline, however, the petitioner failed to pay both the P12,000.00 which was supposed to be received by the respondents upon the execution of the agreement and the balance of P4,376.00. Thus, when the petitioner's loan with the SSS was finally ready for release, he requested the respondents to sign the deed of absolute sale and other papers required by the SSS but the latter refused on the ground that the petitioner had already breached their latest agreement (Exh. 5). The petitioner filed an action for specific performance with writ of preliminary mandatory injunction seeking to compel the respondents to execute the deed of absolute sale of the property and other such documents required by the SSS for the immediate release of the approved loan.

In its first decision, the trial court rendered judgment in favor of the petitioner, holding that the breach committed by the petitioner was not the breach contemplated by law and that the respondents could be compelled to fulfill the condition agreed upon in Exhibits "A" and "G". After the respondents filed a motion for reconsideration and the trial court realized its error in not considering their rejoinder, a second decision was rendered in favor of the private respondents, holding that Exhibits "A", "G", "1", "2" and "5" were complementary contracts that should be construed together to arrive at the true intention of the parties, and that the petitioner's failure to pay the P12,000.00 and the balance of P4,376.00 constituted a breach of their last agreement, entitling the respondents to rescission with damages.

• Lack of Jurisdiction: Petitioner maintained that the motions for reconsideration filed by the respondents were both pro forma because they presented issues which the trial court had already considered and ruled upon, and that the second motion for reconsideration merely asked the court to consider two documents which were already submitted by respondents in evidence. Petitioner argued that the said motion did not interrupt the running of the period to appeal and thus, when the second decision was rendered, the trial court had already lost its jurisdiction over the case, making such decision null and void.

• Improper Rescission: Petitioner contended that the Court of Appeals committed a reversible error in affirming the rescission of the contract when the respondents did not pray for rescission in their pleadings.

• Unwarranted Damages: Petitioner argued that the appellate court erred in ordering the payment of damages and attorney's fees notwithstanding the fact that the complaint for specific performance was not instituted in bad faith.

• Breach of Contract: Respondents argued that the petitioner clearly committed a breach of their last agreement (Exh. 5) by failing to pay the P12,000.00 and the balance of P4,376.00 within the forty-five day period, which sufficiently and justly entitled them to ask for the rescission of the contracts.

• Complementary Contracts: Respondents maintained that the various contracts executed by the parties should be interpreted together under Article 1374 of the New Civil Code, attributing to the doubtful ones that sense which may result from all of them taken together, and that Exhibits "A", "G", "1", "2" and "5" being complementary contracts should be construed to correctly arrive at the true intention of the parties.

• Right to Rescind: Respondents asserted that under Article 1191 of the New Civil Code, 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, and that the injured party may choose between fulfillment and rescission of the obligation with the payment of damages in either case.

• Jurisdiction of the Trial Court: Whether the Court of Appeals erred in ruling that the first decision of the trial court was not final when the same was set aside and superseded by the second decision, and thus, the trial court had no more jurisdiction to render said second decision.

• Propriety of Rescission and Damages: Whether the Court of Appeals erred in sustaining the trial court in ordering the rescission of the agreement (Exhibit 5) and the payment of damages and attorney's fees.

• Jurisdiction of the Trial Court: No. The motions for reconsideration filed by the respondents were not pro forma, and the second motion, although captioned as a motion for reconsideration, was in reality a supplementary pleading aimed to call the court's attention to the fact that it had given the respondents five days to file their rejoinder. The trial court retained jurisdiction to render the second decision.

• Propriety of Rescission and Damages: Partially. The rescission of the contracts was properly ordered because the petitioner clearly committed a breach of contract by failing to pay the stipulated amounts. However, the award of damages in the amount of P4,376.00 was unwarranted because the law does not authorize the injured party to rescind the obligation and at the same time seek its partial fulfillment under the guise of recovering damages. The petitioner must pay P50.00 monthly rentals with legal interest from March 1963.

• Jurisdiction of the Trial Court: The very purpose of a motion for reconsideration is to point out the findings and conclusions of the decision which in the movant's view are not supported by law or the evidence. The movant is often confined to the amplification or further discussion of the same issues already passed upon by the court; otherwise, his remedy would not be a reconsideration of the decision but a new trial or some other remedy. Citing Vina vs. Court of Appeals (126 SCRA 381-382), the Court emphasized that a motion for reconsideration is not pro forma even if it reiterates previous arguments, because one of its ends is precisely to convince the court that its ruling is erroneous and improper, contrary to the law or the evidence. As for the second motion of respondents, it should not be strictly construed as a motion for reconsideration although captioned as such because in reality it is merely a supplementary pleading aimed to call the court's attention to the fact that it had given the respondents five days to file their rejoinder, with which they complied. Supplemental pleadings are meant to supply deficiencies in aid of original pleadings, not to entirely substitute the latter, and neither should they be considered independently nor separately from such original pleadings. The appellate court did not commit grave abuse of discretion in upholding the trial court's jurisdiction when it rendered the second decision.

• Propriety of Rescission and Damages: In their answer to the petitioner's complaint, the respondents prayed for the annulment of both the Deed of Conditional Sale (Exh. "A") and the Deed of Sale with Assumption of Mortgage (Exh. "G") which are the very bases of the supplemental agreements executed between the petitioner and the respondent. The technical argument that the respondents never prayed for the rescission of the contracts has no merit. By failing to pay the amount of P12,000.00 and the balance of P4,376.00 as stipulated in the contract within the forty-five (45) days period, the petitioner clearly committed a breach of contract which sufficiently and justly entitled the respondents to ask for the rescission of the contracts. Citing Nagarmull vs. Binalbagan-Isabel Sugar Co., Inc. (33 SCRA 52), the Court ruled that the breach of contract committed by the petitioner gave the respondents, under the law and even under general principles of fairness, the right to rescind the contract or to ask for its specific performance, in either case with right to demand damages. The respondents chose to rescind the contracts after the petitioner repeatedly failed to pay not only the balance but the initial amount as downpayment. As a matter of fact, the petitioner later asked the SSS to cancel his loan application, thereby abandoning his own claim for specific performance. The payment of attorney's fees was correctly affirmed because of the environmental circumstances which compelled the respondents to litigate for the protection of their interests, pursuant to Article 2208 (2) of the New Civil Code.

• Award of Damages: The award of damages in the amount of P4,376.00 was unwarranted. The amount was mainly based on the "P30.00 per day of delay" penalty clause embodied in the agreement marked Exhibit "1". Enforcement of the clause on daily penalties would result in excessive damages considering that the agreement was entered into way back in 1963. Moreover, the P2,000.00 represents part of the purchase price of the sale which was already rescinded. Under Article 1191 of the Civil Code, the injured party may choose between the fulfillment and rescission of the obligation, with the payment of damages in either case, but the law does not authorize the injured party to rescind the obligation and at the same time seek its partial fulfillment under the guise of recovering damages. The appellate court erred in including both the penalty clause and the part of the purchase price in the computation of damages. However, the petitioner must pay damages for the use of the house and lot until he vacates the premises, since he and his family have lived in the respondents' house all these years without paying either the price he obligated himself to pay or the monthly rentals he agreed to pay as early as 1963. At the very least, the petitioner should pay P50.00 monthly rentals with legal interest from March 1963.

• Nature of a Motion for Reconsideration — A motion for reconsideration is not pro forma merely because it reiterates issues already passed upon by the court; its very purpose is to point out findings and conclusions of the decision which, in the movant's view, are not supported by law or the evidence. The movant is often confined to the amplification or further discussion of the same issues already passed upon by the court, and if a motion for reconsideration may not discuss these issues, the losing party would be confined to filing only motions for reopening and new trial.

• Rescission and Damages Under Article 1191 — In reciprocal obligations, when one of the obligors does not comply with what is incumbent upon him, the injured party may choose between fulfillment and rescission of the obligation, with payment of damages in either case. However, the law does not authorize the injured party to rescind the obligation and at the same time seek its partial fulfillment under the guise of recovering damages. A party who elects rescission cannot recover the unpaid purchase price as damages, as that would constitute partial fulfillment of the rescinded contract.

• Interpretation of Complementary Contracts — Under Article 1374 of the New Civil Code, the various stipulations of a contract shall be interpreted together, attributing to the doubtful ones that sense which may result from all of them taken together. When parties execute multiple complementary contracts, they should be construed together to correctly arrive at the true intention of the parties.

• "Contrary to petitioner's contention, REPUBLIC's Motion for Reconsideration dated January 10, 1973 was not pro forma, even if we were to concede that it was a reiteration of its previous Motion for suspension of the proceedings. ... Among the ends to which a motion for reconsideration is addressed, one is precisely to convince the court that its ruling is erroneous and improper, contrary to the law or the evidence (Rule 37, Section 1, subsection [c]; and in doing so, the movant has to dwell of necessity upon the issues passed upon by the court." — This passage, quoted from Vina v. Court of Appeals, defines the nature and purpose of a motion for reconsideration and was used by the Court to reject the petitioner's argument that the respondents' motions were pro forma.

• "The law, however, does not authorize the injured party to rescind the obligation and at the same time seek its partial fulfillment under the guise of recovering damages." — This statement articulates the controlling principle that a party who elects rescission under Article 1191 cannot simultaneously recover the unpaid purchase price as damages, forming the basis for setting aside the P4,376.00 damages award.

• "There is no question that the petitioner must pay damages for the use of the house and lot until he vacates the premises. The petitioner and his family have lived in the respondents' house all these years without paying either the price he obligated himself to pay or the monthly rentals he agreed to pay as early as 1963. At the very least, the petitioner should pay P50.00 monthly rentals with legal interest from March, 1963." — This passage explains the Court's reasoning for ordering the petitioner to pay monthly rentals despite setting aside the damages award, recognizing that the petitioner had enjoyed the use of the property without compensation.

• Vina vs. Court of Appeals, 126 SCRA 381-382 — Cited as controlling authority on the nature of a motion for reconsideration, establishing that such a motion is not pro forma even if it reiterates issues already passed upon by the court.

• Guerra Enterprises Co., Inc. vs. Court of First Instance of Lanao del Sur, 32 SCRA 317 (1970) — Cited in support of the proposition that a motion for reconsideration may discuss issues already passed upon by the court, and that ruling otherwise would eliminate subsection (c) of Section 1 of Rule 37.

• Pasay City Government vs. CFI of Manila, 132 SCRA 169 — Cited for the principle that supplemental pleadings are meant to supply deficiencies in aid of original pleadings, not to entirely substitute the latter, and should not be considered independently or separately from such original pleadings.

• Nagarmull vs. Binalbagan-Isabel Sugar Co., Inc., 33 SCRA 52 — Cited as controlling authority for the proposition that a breach of contract gives the injured party the right to rescind the contract or to ask for its specific performance, in either case with the right to demand damages.

• Bert Osmena & Associates vs. Court of Appeals, 120 SCRA 401 — Cited in support of the award of attorney's fees where environmental circumstances compelled the respondents to litigate for the protection of their interests.

• Article 1191, New Civil Code — Provides that in reciprocal obligations, when one of the obligors should not comply with what is incumbent upon him, the injured party may choose between fulfillment and rescission of the obligation, with payment of damages in either case. The Court applied this provision to uphold the rescission of the contracts but held that it does not authorize the injured party to rescind and simultaneously seek partial fulfillment under the guise of damages.

• Article 1170, New Civil Code — Provides that those who, in the performance of their obligations, are guilty of delay and those who, in any manner, contravene the tenor thereof, are liable for damages. The Court applied this provision to hold the petitioner liable for damages occasioned by his delay.

• Article 1374, New Civil Code — Provides that the various stipulations of a contract shall be interpreted together, attributing to the doubtful ones that sense which may result from all of them taken together. The Court applied this provision in construing Exhibits "A", "G", "1", "2" and "5" as complementary contracts to arrive at the true intention of the parties.

• Article 2208 (2), New Civil Code — Provides for the award of attorney's fees in actions where the defendant was compelled to litigate for the protection of his interests. The Court applied this provision to affirm the award of attorney's fees because of the environmental circumstances which compelled the respondents to litigate.

• Rule 37, Section 1, subsection (c), Rules of Court — Cited in the quoted passage from Vina vs. Court of Appeals regarding the grounds for a motion for reconsideration, specifically that the ruling is contrary to law or the evidence.

Melencio-Herrera, Plana, Relova, De la Fuente and Patajo, JJ., concurred. Teehankee, J., reserved his vote.