Republic of the Philippines

National Capital Judicial Region

REGIONAL TRIAL COURT
Makati City, Branch 62

SPS. VIRGINIA BAUTISTA &

JAMES O. BAUTISTA,
Plaintiffs',

-versus- Civil Case No. 14-1072

Complaint for Rescission of Contract
Plus Damages
MERLINA N. ALIPAY,
Defendant.
x-----------------------------------------------x

MEMORANDUM

PREFATORY STATEMENT

Rescission is a remedy granted by law to the contracting parties and to

third persons in order to secure reparation for damages caused them by a
contract, even if the contract is valid, by means of the restoration of things
to their condition prior to the celebration of said contract. -Manresa

THE PARTIES

Plaintiffs Spouses Virginia B. Bautista & James O. Bautista, are of

legal age, Filipinos, with residence and post-office address located at Block
183 Lot 6B, Jasmin Street, Pembo, Makati City.
Defendant Merlina N. Alipay is likewise of legal age, Filipino,
married, with residence and post office address located at Zone 7, Barangay
Minipark, Taguig City.

STATEMENT OF THE CASE

The plaintiffs filed a case for rescission of contract plus damages with
the Honorable Court of Regional Trial Court-Branch 62 of Makati City. The
plaintiffs prays that judgment be rendered to rescind the Kasunduan ng
Paghahati ng Lupa dated April 18, 2012 which was notarized on December
11, 2012, to revoke/rescind the waiver of rights dated April 16, 2012 which
was notarized on December 11, 2012, and to adjudge the defendant to pay
plaintiff moral damages, exemplary damages, and attorneys fees.

STATEMENT OF FACTS

The Plaintiffs' Contention

Plaintiffs Spouses Bautista claims that since 1988 and up to the
present are the registered owner, lawful possessor and occupant of a
government lot described and identified as Block 348 Lot 11 located at
Cornflower Street, Zone 14, Pembo, Makati City, with an area of 110 square
meters. They allege that the said government lot is now being applied by the
homeowners association to be awarded to them being member beneficiaries
therein. From the time of plaintiffs' occupancy and possession under the
concept of owners', plaintiffs' introduced improvements thereon consisting
of an old house erected at the half portion of the said lot by the plaintiffs'.

On February 2012, defendant being a former housemaid of the

plaintiffs, orally offers to buy half of the said property and instead, decided
to have the old house renovated on April 2012. When defendant learned of
the plaintiffs' intention to have the old house renovated, defendant again,
approached the plaintiffs' and pleaded that half of the property be given to
her with the promise and commitment that upon receipt of payment by SM
Aura of the lot where her house is erected, she will pay plaintiffs' the
consideration of the rights over the lot as well as whatever will be spent in
the renovation of the old house erected therein. Defendant further committed
that she will be the one in-charged in securing all the necessary permits for
renovation as well as overseeing the construction for that renovation of the
old house.

Plaintiffs were adamant to consider defendant's plight at first; due to

the fact that defendant was one's plaintiffs' house maid who took care of
their own child. Hence, plaintiffs finally acceded to share to the defendant
half of the property where the old house is erected and have it renovated at
plaintiffs' expense, with the commitment by the defendant that she will be
the one in-charge in securing all the necessary permits for the renovation pf
the old house and whatever will be spent in the renovation as well as
expenses incurred by the plaintiffs' as a result of their occupancy over the
said lot and that the defendant will reimburse the plaintiffs.

On April 15, 2012, the defendant applied for a renovation permit

before the barangay of Pembo, Makati City for the renovation of the old
house under her name but the Barangay refused to give defendant permit for
renovation because based on the Barangay master list, plaintiff James
Bautista appears as the owner and possessor of the said lot. Defendant then
told the plaintiffs' that the only way she be given a renovation permit in her
name is for plaintiff James Bautista to execute a waiver of rights over the
said lot and a document in writing that half of the property where the
intended renovation will be made, will be executed in her favor.

The plaintiffs trusted and believed in good faith that defendant is true
to her promise and commitment to pay plaintiffs' the consideration of the lot
given to defendant as well as all the expenses for renovation. On April 16,
2012, plaintiffs executed written documents denominated as Waiver of the
Rights and Kasunduan sa Paghahati ng Lupa in favor of defendant which
documents , the parties agree that it should only be notarized upon
fulfillment by the defendant of her promise to pay the money spent by the
plaintiffs for the renovation as well as the consideration of the lot.
Furthermore, the waiver of rights was executed purposely to expedite the
issuance of the Brgy. Renovation permit in the name of defendant and the
Kasunduan sa Paghahati ng Lupa was executed to give defendant the portion
of Block 348 Lot 11 where the old house which is the subject matter of
renovation was erected conditioned that whatever money spent by plaintiffs
in the renovation as well as the consideration of the lot will be paid by the
defendant to them.

The renovation of the old house lasted for more than two (2) months
under the supervision of defendant and plaintiffs' spent the amount of
P615,000.00 for the renovation.

Sometime in April 2013, certain Juvy Anin filed a Barangay case

against plaintiff Virginia Bautista, defendant Merlina Alipay and Andres
Ardaniel. The case is a collection of sum of money where plaintiff Virginia
Bautista learn from Juvy Anin that defendant Merlina Alipay is looking for a
mortgagee of the house erected at Block 348 Lot 11 which is the renovated
house of plaintiffs'. According to Juvy Anin, defendant Merlina Alipay told
her that she is the absolute owner of the renovated house pursuant to the two
(2) documents executed by plaintiffs' in her favor. As a result, plaintiff
Virginia Bautista immediately lodged a complaint before the Barangay
against defendant Merlina Alipay for ownership of the house and lot located
at Block 348 Lot 11. Defendant manifested during the barangay conciliation
that she is the absolute owner of the renovated house and half of the lot
described in Block 348 Lot 11 Cornflower Street, Pembo, Makati City,
where the renovated house was erected by virtue of the two (2) documents
executed by the plaintiffs' in her favor. It was later learned that defendant's
proof of ownership and claim over the renovated house and half of the lot
described in Block 348 Lot 11 was the two (2) documents denominated
Waiver of Rights and Kasunduan sa Paghahati ng Lupa this time,
notarized by certain Atty. Batalla.

The plaintiffs were constrained to file an action because the case filed
by the plaintiffs before the barangay against defendant Merlina Alipay was
not settled. Due to the failure of defendant Merlina Alipay to comply with
what is incumbent upon her to perform and fulfill her duties and promises in
relation to the execution of the Waiver of Rights and the Kasunduan sa
Paghahati ng Lupa that is to pay the consideration of the lot given to her
and the expenses for the renovation of the old house erected in the premises
of Block 348 Lot 11, and instead, claiming absolute ownership thereof and
disregarding what has been agreed upon by the parties, plaintiffs' through
counsel sent a demand letter dated July 25, 2013, notifying respondent
Merlina Alipay that plaintiffs' are now nullifying the two (2) documents
mentioned and consider them as of no force and effect. The plaintiffs cited
Article 1191 of the Civil Code of the Philippines to support their contention.

To advance defendant's personal interest in claiming ownership over

said lot and renovated house, defendant Merlina Alipay caused the
notarization of the two (2) documents notarized before a Notary Public,
without the consent, appearance, and participation of plaintiffs on December
11, 2012 that paved way to the filing of a Falsification of Public Documents
by a private person by the plaintiffs' against defendant Merlina Alipay and
Andres Ardaniel before the Office of the City Prosecutor of Makati City.
Worst of all, defendant Merlina Alipay had stolen the two (2) documents
inside the house of the plaintiffs.

To know the truth as to whether Atty. Virgilio Batalla actually

notarized the two (2) documents, plaintiff James Bautista lodged an
Administrative Case against Atty. Virgilio Batalla before the Integrated Bar
of the Philippines. Atty. Virgilio Batalla's Answer to the Administrative
Complaint of plaintiff James Bautista, the former stated that he did not
notarized the two (2) documents above mentioned.

The Defendant's Contention

The defendant, Merlina Alipay argues that there is no violation of the

two (2) documents committed by the defendant to warrant their valid
rescission. According to the defendant, the claims of 50-50 sharing in the
construction/renovation in the portion allotted for defendant is without any
factual and legal basis.

Defendant Merlina Alipay claims that plaintiffs are not the lone
occupants of the lot because said lot belongs to both plaintiffs and defendant
by virtue of the Kasunduan sa Paghahati ng Lupa which was freely and
voluntarily agreed upon by both plaintiffs and defendant. She further claims
that she has no knowledge of the plaintiffs' claim that they introduced any
improvement on the portion of the lot allotted to them in the kasunduan.

Sometime in April 2012, after the execution of the plaintiff James

Bautista of his Waiver of Rights in favor of defendant and the Kasunduan,
defendant immediately sought from the Barangay a Zone Clearance for the
introduction of permanent improvements on the lot allotted to her.

On April 24, 2012, the office of Barangay Pembo issued Infrastructure

Inspection Report on the request of the defendant for the issuance of
Barangay Clearance for building permit.

It was defendant who made and introduced permanent improvements

on the 55 square meters lot allotted to her, and she hired the service of
Demetrio Taculao, Jr. for the construction and introduction of permanent
improvements. It was defendant who shouldered all the expenses, spending
her own money for all the costs of the permanent improvements.

The defendant spent more or less P500,000.00 in the construction of

permanent improvements in the portion of the lot allotted to her in the
Kasunduan, for the cost of labor and materials, the original receipts of the
latter are all intact in her possession.

It was the defendant who leased the premises, but without any
justifiable reason, when one of defendant's tenants vacated the rented room,
plaintiffs in conspiracy with Gigi Beltran and Gladys Miguel, by means of
stealth, surreptitiously occupied the room vacated by defendant's tenant,
wherein out of which, defendant filed and lodged a complaint against them
before the barangay for forcible entry.

On June 8, 2014, without any justifiable reasons, by means of force

and violence, plaintiffs destroyed the door lock of one of the vacant rooms
of the house of defendant, and forcibly occupied the same, prompting
defendant to file a complaint before the barangay.

The defendant did not claim absolute ownership of the lot where the
house was constructed because the lot is owned by the government. Both
parties, plaintiffs and defendant were just informal settlers with the same
level of rights if any.

The two (2) documents Waiver of Rights and Kasunduan are clear
and without any imposition of anything to be performed or to be done before
becoming effective. The two (2) documents are self-executory in
themselves. They do not indicate of any condition that will be performed
wherein if there is failure to do so, it could be rescinded. Hence, the
invocation of Art. 1191 of the Civil Code is misplaced because the two (2)
documents Waiver of Rights and Kasunduan do not speak of reciprocal
obligations.

Further, the plaintiffs did not spent any amount in the introduction of
improvements in the portion of the lot allotted to the defendant because the
lot was already divided between them at 55 square meters for each of them
and that any party may introduce improvements at its designated portion of
the lot.

The Orders of the Court

In an Order dated January 29, 2016, Hon. Judge Alaras called the case
for management conference where counsels for both parties and their
respective clients were in court. Unfortunately, due to the failure of the
parties and the court to minimize the issues for trial due to the numerous
issues that cannot be admitted, the court in the exercise of judicial discretion
takes this case out of the Face to Face and Alternative Trial settings. The
case was set for offer of plaintiffs' evidence.

In an Order dated January 26, 2017, the stenographers who

participated in the case are ordered to immediately transcribe their
stenographic notes and submit the same to the civil clerk in charge within
ten days from the date of the order. The parties are given 30 days from the
date of the issuance of the Order to file their memorandum. With the filing
of the parties' respective Memorandum, plaintiffs on March 6, 2017 and
defendant on March 3, 2017, the case is considered submitted for decision.

II

ISSUE TO BE RESOLVED

Whether or not the plaintiffs have sufficient grounds to ask for the rescission
of the Waiver of Rights and Kasunduan sa Paghahati ng Lupa

III

THE RULING

Defendant is not guilty of falsification

of public documents

The Office of the City Prosecutor dismissed the complaint for

violation of The Revised Penal Code (RPC), Art. 172 for lack of merit.
Pursuant to Art. 172 in relation to Art. 171 of The Revised Penal Code, a
falsification of public document by a private individual can be committed by
any of the following acts:

a. Counterfeiting or imitating any handwriting, signature or

rubric.
b. Causing it to appear that persons have participated in any
act or proceeding when they did not in fact so participate.
c. Attributing to persons who have participated in an act or
proceeding statements other than those in fact made by them.
d. Making untruthful statements in a narration of facts.

The Office of the City Prosecutor is correct in finding that all of the
essential elements of the crime of falsification of public document are
wanting. Based on the evidence on record, the handwritten documents
subject of falsification was personally executed and signed by spouses
Bautista themselves. Thus, no signature in the instant case has been forged
or imitated. On the other hand, the elements under par. b and c of Article 171
of the RPC are also wanting.

According to complainant, the act done by respondents in making it

appear that they had appeared, subscribed and sworn before a Notary Public
is a clear violation of Art. 172 of the RPC. The Office is not convinced.
What is contemplated by law under this paragraph is that the person
complaining was made to appear that he participated in the preparation and
execution of a falsified document when in truth it was not. This is not
present in the instant case. The official act of notarizing a document to the
submission of the Office is not the act being contemplated by law. If there is
any violation committed under the Rules on Notarial Practice, it is the
Notary Public himself who should be held answerable either
administratively or criminally for his failure to require the presence of the
parties who are privy to the contract being notarized. The last two elements,
however, cannot apply four-square to the case at hand. Making untruthful
statements in a narration of facts requires a legal obligation to disclose the
truth of the facts so narrated. On matters of altering true dates, obviously the
same was never an issue in this case. There being no reason to depart from
the findings of the Office of City Prosecutor, the Court affirms.

Defendants claim that they are both

Informal settlers in the lot where the
House is constructed must fail.

The claim of the defendant that the subject lot is owned by the
government was not fully supported by evidence. Under Section 48 of the
Property Registration Decree, a certificate of title cannot be subject to a
collateral attack and can only be altered, modified or cancelled in a direct
proceeding in accordance with law.1 Defendant can only act on the issues
presented to them on the pleadings. Assuming arguendo that the government
has a better right over the property, they must be impleaded in the case.

For defendants failure to comply

with her obligation, the Waiver
of Rights and Kasunduan sa
Paghahati ng Lupa are deemed
rescinded.

Defendants argument that the invocation of Art. 1191 of the Civil

Code is misplaced because the two (2) documents Waiver of Rights and
Kasunduan do not speak of reciprocal obligations is untenable. Contrary to
1
Section 48, Presidential Decree No. 1529 otherwise known as Property Registration Decree.
defendants argument, the absence of provision in the contract which
provides that it may be revoked or cancelled upon violation of its terms and
conditions do not mean that rescission is inapplicable. In reciprocal
obligations, or those which arise from the same cause, and in which each
party is a debtor and a creditor of the other, in the sense that the obligation of
one is dependent upon the obligation of the other, the right to rescind is
implied, such that absent any provision providing for a right to rescind, the
parties may nevertheless rescind the contract should the other obligor fail to
comply with its obligations2. It is equally settled that in the absence of a
stipulation to the contrary, the power to rescind in reciprocal obligations
must be invoked judicially; it cannot be exercised solely on a partys own
judgment that the other has committed a breach of obligation.3

Article 1191 of the Civil Code states that:

Art. 1191. 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.

The injured party may choose between the

fulfillment and the rescission of the obligation,
with the payment of damages in either case. He
may also seek rescission, even after he has
chosen fulfilment, if the latter should become
impossible.

The court shall decree the rescission claimed,

unless there be just cause authorizing the fixing
of a period. This is understood to be without
prejudice to the rights of third persons who have
acquired the thing, in accordance with articles
1385 and 1388 and the Mortgage Law.4

According to Tolentino, rescission under Article 1191 extinguishes the

obligatory relation as if it had never been created, the extinction having a
retroactive effect. Hence, both parties must surrender what they have
respectively received and return each other as far as practicable to their
original situation.5

Under Art 1191, the right to rescind an obligation is predicated on the

violation of the reciprocity between parties, brought about by a breach of
faith by one of them. Rescission, however, is allowed only where the breach
2
Multinational Village Homeowners Association, Inc. vs. Ara Security and Surveillance Agency, Inc., G.R.
No. 154852, 21 October 2004.
3
Philippine Amusement Enterprises, Inc. vs. Soledad Natividad and Mariano Natividad, G.R. No. L-
21876, 29 September 1967.
4
Article 1191, Civil Code of the Philippines.
5
Arturo M. Tolentino, Commentaries and Jurisprudence on the Civil Code of the Philippines.
is substantial and fundamental to the fulfillment of the obligation.6

In the present case, the plaintiffs executed the Waiver of Rights and
Kasulatan sa Paghahati ng Lupa unnotarized for the purpose of easing the
issuance of the renovation permit and to which they both arranged to be
notarized only upon completion of the renovation and payment of
consideration agreed upon. However, the defendant notarized the said
documents without the knowledge of the plaintiff and without performing
the obligations incumbent to her. Such breach can be treated as substantial
and fundamental violation of the contract as it defeats the object of the
parties in making the agreement.

In the case of Spouses Tongson vs. Emergency Pawnshop Bula, Inc.

and Napala7, a decision penned by Justice Carpio, the Court reiterated its
ruling on the case of Swedish Match, AB vs. Court of Appeals in explaining
the three stages of a contract, thus:

In general, contracts undergo three distinct

stages, to wit: negotiation; perfection or birth;
and consummation. Negotiation begins from the
time the prospective contracting parties manifest
their interest in the contract and ends at the
moment of agreement of the parties. Perfection
or birth of the contract takes place when the
parties agree upon the essential elements of the
contract. Consummation occurs when the parties
fulfill or perform the terms agreed upon in the
contract, culminating in the extinguishment
thereof.

In the same case, it was held that the performance of the obligation of
the plaintiffs as sellers in executing the Deed of Sale, which led to the
cancellation of their title in favor of EPBI and the failure of the respondents
as buyers to perform their correlative obligation of paying the full amount of
the contract price is tantamount to substantial breach of reciprocal obligation
on the part of the respondents as buyers which entitles the plaintiffs to the
rescission of the sales contract8. This case is instructive.

The said documents were notarized without the fulfillment of

defendants obligation. Clearly, the plaintiffs executed the documents for the
purpose of expediting the issuance of Barangay Renovation permit to the
defendant. Hence, after the execution of the documents and issuance of
Barangay Renovation Permit, the defendant has the duty to fulfill her
promise to do the renovation and pay the consideration agreed upon. As to
when said failure or delay of performance may arise, Art. 1169 par. 3 of
6
Del Castillo Vda de Mistica vs Naguiat,, G.R. No. 137909, 11 December 2003.
7
Spouses Tongson vs. Emergency Pawnshop Bula, Inc. and Napala, G.R. No. 167864, 15 January 2010.
8
Id..
Civil Code provides:

Art. 1169.
xxxx
Neither party incurs in delay if the other does
not comply or is not ready to comply in a proper
manner with what is incumbent upon him. From
the moment one of the parties fulfills his
obligation, delay by the other begins.9

Because of defendants non-performance of the obligation incumbent

to her, even after receiving the letter of demand, the plaintiffs may rescind
the contracts namely the Waiver of Rights and Kasulatan ng Paghahati ng
Lupa. Such substantial breach partakes of a resolutory condition which
gives right to the plaintiffs to rescission. In reciprocal obligations, either
party may rescind the contract upon the others substantial breach of the
obligation/s he had assumed thereunder.

WHEREFORE, there being substantial breach, the petition for

rescission of contract is hereby granted without prejudice to the right of the
defendant to be paid on improvements made thereon.

9
Article 1169, Civil Code of the Philippines.