Angeles vs.
Calasanz that Angeles (P) violated the contract to sell when they failed to pay a
Lot buyer (P) vs. Seller (D)
GR L-42283 [T]
Summary: A buyer of a property paid monthly installments for nine
years, but was five months late on the installment payment due. The
seller rescinded the contract and applied the installments made as
rentals.
Rule of Law: The act of a party in treating a contract as canceled or
resolved on account of infractions by the other is always provisional,
being ever subject to scrutiny and review by the proper court.
Facts: Ursula and Tomas Calasanz (D) sold a piece of land to
Buenaventura Angeles (P) and Teofila Juani covered by a contract to
sell.
Angeles (P) paid a downpayment upon the execution of the contract
and started paying the balance in monthly installments. Angeles (P)
paid monthly installments for nine years with only a few remaining
installments left to pay. Although Calasanz (D) accepted late
payments before, Angeles (P) was now five months late.
Calasanz (D) demanded payment of past due accounts, but did not
receive any. Eventually, Calansanz (D) canceled the said contract
because Angeles (P) failed to pay the subsequent payments. Angeles
(P) asked for reconsideration, but was denied.
Angeles (P) filed a case to compel the Calasanz (D) to execute in their
favor the final deed of sale alleging that they have already fully paid
the total price of the property. Calasanz (D) alleged in their answer
monthly installment.
A provision in the contract to sell gave Calasanz (D) the right to cancel
the contract and consider the amounts paid as rent for the property.
However, the lower court ruled that the contract was not validly
canceled and ordered Calasanz (D) to execute a final Deed of Sale in
favor of Angeles (P)
Issues: Was the contract to sell validly canceled?
Ruling: No. The rule that it is not always necessary for the injured
party to resort to court for rescission of the contract when the contract
itself provides was qualified by this Court in University of the
Philippines v. De los Angeles, (35 SCRA 102) where we explained
(paraphrased) that:
Of course, the act of a party in treating a contract as canceled or
resolved on account of infractions by the other must be made known
to the other and is always provisional, being ever subject to scrutiny
and review by the proper court. If the other party denies that rescission
is justified, it is free to bring the matter to court. Then, should the court
decide that the resolution of the contract was not warranted, the
responsible party will be sentenced to damages; in the contrary case,
the resolution will be affirmed and indemnity awarded to the party
prejudiced.
In short, the party who deems the contract violated many consider it
resolved or rescinded without previous court action, but it proceeds at
its own risk. For it is only the final judgment of the court that will
conclusively and finally settle whether the action taken was or was not
correct in law.
The right to rescind the contract for non-performance of one of its
stipulations, therefore, is not absolute. In Universal Food Corporation
vs. Court of Appeals (33 SCRA 1) the Court stated that:
The general rule is that rescission of a contract will not be permitted
for a slight or casual breach, but only for such substantial and
fundamental breach as would defeat the very object of the parties in
making the agreement. (Song Fo & Co. vs. Hawaiian-Philippine Co.,
47 Phil. 821) The question of whether a breach of a contract is
substantial depends upon the attendant circumstances. (Corpus vs.
Alikpala, GR L-23707 & L-23720, January 17, 1968)
The breach of the contract alleged by Calasanz (D) is so slight
considering that Angeles (P) had already paid monthly installments for
almost nine years. In only a short time, the entire obligation would
have been paid. To sanction the rescission made by Calasanz (D) will
work injustice to Angeles (P) and unjustly enrich Calasanz (D).

Article 1234 of the Civil Code which provides that:

If the obligation has been substantially performed in good faith, the
obligor may recover as though there had been a strict and complete
fulfillment, less damages suffered by the obligee.
also militates against the unilateral act of the Calasanz (P) in
cancelling the contract.