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G.R. No. 168338 February 15, 2008 FRANCISCO CHAVEZ, petitioner, vs. RAUL M.

GONZALES, in his capacity as the Secretary of the Department of Justice; and NATIONAL TELECOMMUNICATIONS COMMISSION (NTC), respondents. SEPARATE CONCURRING OPINION CARPIO, J.: The Case This is a petition for the writs of certiorari and prohibition to set aside "acts, issuances, and orders" of respondents Secretary of Justice Raul M. Gonzalez (respondent Gonzales) and the National Telecommunications Commission (NTC), particularly an NTC "press release" dated 11 June 2005, warning radio and television stations against airing taped conversations allegedly between President Gloria Macapagal-Arroyo and Commission on Elections (COMELEC) Commissioner Virgilio Garcillano (Garcillano)1 under pain of suspension or revocation of their airwave licenses. The Facts On 24 June 2004, Congress, acting as national board of canvassers, proclaimed President Arroyo winner in the 2004 presidential elections. 2 President Arroyo received a total of 12,905,808 votes, 1,123,576 more than the votes of her nearest rival, Fernando Poe, Jr. Sometime before 6 June 2005, the radio station dzMM aired the Garci Tapes where the parties to the conversation discussed "rigging" the results of the 2004 elections to favor President Arroyo. On 6 June 2005, Presidential spokesperson Ignacio Bunye (Bunye) held a press conference in Malacaang Palace, where he played before the presidential press corps two compact disc recordings of conversations between a woman and a man. Bunye identified the woman in both recordings as President Arroyo but claimed that the contents of the second compact disc had been "spliced" to make it appear that President Arroyo was talking to Garcillano. However, on 9 June 2005, Bunye backtracked and stated that the woman's voice in the compact discs was not President Arroyos after all. 3 Meanwhile, other individuals went public, claiming possession of the genuine copy of the Garci Tapes. 4 Respondent Gonzalez ordered the National Bureau of Investigation to investigate media organizations which aired the Garci Tapes for possible violation of Republic Act No. 4200 or the Anti-Wiretapping Law. On 11 June 2005, the NTC issued a press release warning radio and television stations that airing the Garci Tapes is a "cause for the suspension, revocation and/or cancellation of the licenses or authorizations" issued to them. 5 On 14 June 2005, NTC officers met with officers of the broadcasters group, Kapisanan ng mga Broadcasters sa Pilipinas (KBP), to dispel fears of censorship. The NTC and KBP issued a joint press statement expressing commitment to press freedom.6 On 21 June 2005, petitioner Francisco I. Chavez (petitioner), as citizen, filed this petition to nullify the "acts, issuances, and orders" of the NTC and respondent Gonzalez (respondents) on the following grounds: (1) respondents conduct violated freedom of expression and the right of the people to information on matters of public concern under Section 7, Article III of the Constitution, and (2) the NTC acted ultra vires when it warned radio and television stations against airing the Garci Tapes. In their Comment to the petition, respondents raised threshold objections that (1) petitioner has no standing to litigate and (2) the petition fails to meet the case or controversy requirement in constitutional adjudication. On the merits, respondents claim that (1) the NTC's press release of 11 June 2005 is a mere "fair warning," not censorship, cautioning radio and television networks on the lack of authentication of the Garci Tapes and of the consequences of airing false or fraudulent material, and (2) the NTC did not act ultra vires in issuing the warning to radio and television stations. In his Reply, petitioner belied respondents' claim on his lack of standing to litigate, contending that his status as a citizen asserting the enforcement of a public right vested him with sufficient interest to maintain this suit. Petitioner also contests respondents' claim that the NTC press release of 11 June 2005 is a mere warning as it already prejudged the Garci Tapes as inauthentic and violative of the Anti-Wiretapping Law, making it a "cleverly disguised x x x gag order."

ISSUE The principal issue for resolution is whether the NTC warning embodied in the press release of 11 June 2005 constitutes an impermissible prior restraint on freedom of expression. I vote to (1) grant the petition, (2) declare the NTC warning, embodied in its press release dated 11 June 2005, an unconstitutional prior restraint on protected expression, and (3) enjoin the NTC from enforcing the same. 1. Standing to File Petition Petitioner has standing to file this petition. When the issue involves freedom of expression, as in the present case, any citizen has the right to bring suit to question the constitutionality of a government action in violation of freedom of expression, whether or not the government action is directed at such citizen. The government action may chill into silence those to whom the action is directed. Any citizen must be allowed to take up the cudgels for those who have been cowed into inaction because freedom of expression is a vital public right that must be defended by everyone and anyone. Freedom of expression, being fundamental to the preservation of a free, open and democratic society, is oftranscendental importance that must be defended by every patriotic citizen at the earliest opportunity. We have held that any concerned citizen has standing to raise an issue of transcendental importance to the nation,7 and petitioner in this present petition raises such issue. 2. Overview of Freedom of Expression, Prior Restraint and Subsequent Punishment Freedom of expression is the foundation of a free, open and democratic society. Freedom of expression is an indispensable condition8 to the exercise of almost all other civil and political rights. No society can remain free, open and democratic without freedom of expression. Freedom of expression guarantees full, spirited, and even contentious discussion of all social, economic and political issues. To survive, a free and democratic society must zealously safeguard freedom of expression. Freedom of expression allows citizens to expose and check abuses of public officials. Freedom of expression allows citizens to make informed choices of candidates for public office. Freedom of expression crystallizes important public policy issues, and allows citizens to participate in the discussion and resolution of such issues. Freedom of expression allows the competition of ideas, the clash of claims and counterclaims, from which the truth will likely emerge. Freedom of expression allows the airing of social grievances, mitigating sudden eruptions of violence from marginalized groups who otherwise would not be heard by government. Freedom of expression provides a civilized way of engagement among political, ideological, religious or ethnic opponents for if one cannot use his tongue to argue, he might use his fist instead. Freedom of expression is the freedom to disseminate ideas and beliefs, whether competing, conforming or otherwise. It is the freedom to express to others what one likes or dislikes, as it is the freedom of others to express to one and all what they favor or disfavor. It is the free expression for the ideas we love, as well as the free expression for the ideas we hate. 9 Indeed, the function of freedom of expression is to stir disputes: [I]t may indeed best serve its high purpose when it induces a condition of unrest, creates dissatisfaction with conditions as they are, or even stirs people to anger. Speech is often provocative and challenging. It may strike at prejudices and preconceptions and have profound unsettling effects as it presses for acceptance of an idea. 10 Section 4, Article III of the Constitution prohibits the enactment of any law curtailing freedom of expression: No law shall be passed abridging the freedom of speech, of expression, or the press, or the right of the people peaceably to assemble and petition the government for redress of grievances. Thus, the rule is that expression is not subject to any prior restraint or censorship because the Constitution commands that freedom of expression shall not be abridged. Over time, however, courts have carved out narrow and well defined exceptions to this rule out of necessity. The exceptions, when expression may be subject to prior restraint, apply in this jurisdiction to only four categories of expression, namely: pornography, 11 false or misleading

advertisement,12 advocacy of imminent lawless action, 13 and danger to national security.14 All other expression is not subject to prior restraint. As stated in Turner Broadcasting System v. Federal Communication Commission, "[T]he First Amendment (Free Speech Clause), subject only to narrow and well understood exceptions, does not countenance governmental control over the content of messages expressed by private individuals."15 Expression not subject to prior restraint is protected expression or high-value expression. Any content-based prior restraint on protected expression is unconstitutional without exception. A protected expression means what it says it is absolutely protected from censorship. Thus, there can be no prior restraint on public debates on the amendment or repeal of existing laws, on the ratification of treaties, on the imposition of new tax measures, or on proposed amendments to the Constitution. Prior restraint on expression is content-based if the restraint is aimed at the message or idea of the expression. Courts will subject to strict scrutiny content-based restraint. If the content-based prior restraint is directed at protected expression, courts will strike down the restraint as unconstitutional because there can be no content-based prior restraint on protected expression. The analysis thus turns on whether the prior restraint is content-based, and if so, whether such restraint is directed at protected expression, that is, those not falling under any of the recognized categories of unprotected expression. If the prior restraint is not aimed at the message or idea of the expression, it is content-neutral even if it burdens expression. A content-neutral restraint is a restraint which regulates the time, place or manner of the expression in public places 16 without any restraint on the content of the expression. Courts will subject content-neutral restraints to intermediate scrutiny. 17 An example of a content-neutral restraint is a permit specifying the date, time and route of a rally passing through busy public streets. A content-neutral prior restraint on protected expression which does not touch on the content of the expression enjoys the presumption of validity and is thus enforceable subject to appeal to the courts. 18Courts will uphold time, place or manner restraints if they are content-neutral, narrowly tailored to serve a significant government interest, and leave open ample alternative channels of expression. 19 In content-neutral prior restraint on protected speech, there should be no prior restraint on the content of the expression itself. Thus, submission of movies or pre-taped television programs to a government review board is constitutional only if the review is for classification and not for censoring any part of the content of the submitted materials. 20 However, failure to submit such materials to the review board may be penalized without regard to the content of the materials. 21 The review board has no power to reject the airing of the submitted materials. The review boards power is only to classify the materials, whether for general patronage, for adults only, or for some other classification. The power to classify expressions applies only to movies and pre-taped television programs22but not to live television programs. Any classification of live television programs necessarily entails prior restraint on expression. Expression that may be subject to prior restraint is unprotected expression or low-value expression. By definition, prior restraint on unprotected expression is content-based 23 since the restraint is imposed because of the content itself. In this jurisdiction, there are currently only four categories of unprotected expression that may be subject to prior restraint. This Court recognized false or misleading advertisement as unprotected expression only in October 2007. 24 Only unprotected expression may be subject to prior restraint. However, any such prior restraint on unprotected expression must hurdle a high barrier. First, such prior restraint is presumed unconstitutional.Second, the government bears a heavy burden of proving the constitutionality of the prior restraint.25 Courts will subject to strict scrutiny any government action imposing prior restraint on unprotected expression.26The government action will be sustained if there is a compelling State interest, and prior restraint is necessary to protect such State interest. In such a case, the prior restraint shall be narrowly drawn - only to the extent necessary to protect or attain the compelling State interest. Prior restraint is a more severe restriction on freedom of expression than subsequent punishment. Although subsequent punishment also deters expression, still the ideas are disseminated to the public. Prior restraint prevents even the dissemination of ideas to the public. While there can be no prior restraint on protected expression, such expression may be subject to subsequent punishment,27 either civilly or criminally. Thus, the publication of election surveys

cannot be subject to prior restraint, 28 but an aggrieved person can sue for redress of injury if the survey turns out to be fabricated. Also, while Article 201 (2)(b)(3) of the Revised Penal Code punishing "shows which offend any race or religion" cannot be used to justify prior restraint on religious expression, this provision can be invoked to justify subsequent punishment of the perpetrator of such offensive shows.29 Similarly, if the unprotected expression does not warrant prior restraint, the same expression may still be subject to subsequent punishment, civilly or criminally. Libel falls under this class of unprotected expression. However, if the expression cannot be subject to the lesser restriction of subsequent punishment, logically it cannot also be subject to the more severe restriction of prior restraint. Thus, since profane language or "hate speech" against a religious minority is not subject to subsequent punishment in this jurisdiction,30 such expression cannot be subject to prior restraint. If the unprotected expression warrants prior restraint, necessarily the same expression is subject to subsequent punishment. There must be a law punishing criminally the unprotected expression before prior restraint on such expression can be justified. The legislature must punish the unprotected expression because it creates a substantive evil that the State must prevent. Otherwise, there will be no legal basis for imposing a prior restraint on such expression. The prevailing test in this jurisdiction to determine the constitutionality of government action imposing prior restraint on three categories of unprotected expression pornography, 31 advocacy of imminent lawless action, and danger to national security - is the clear and present danger test. 32 The expression restrained must present a clear and present danger of bringing about a substantive evil that the State has a right and duty to prevent, and such danger must be grave and imminent. 33 Prior restraint on unprotected expression takes many forms - it may be a law, administrative regulation, or impermissible pressures like threats of revoking licenses or withholding of benefits.34 The impermissible pressures need not be embodied in a government agency regulation, but may emanate from policies, advisories or conduct of officials of government agencies. 3. Government Action in the Present Case The government action in the present case is a warning by the NTC that the airing or broadcasting of the Garci Tapes by radio and television stations is a "cause for the suspension, revocation and/or cancellation of the licenses or authorizations" issued to radio and television stations. The NTC warning, embodied in a press release, relies on two grounds. First, the airing of the Garci Tapes "is a continuing violation of the Anti-Wiretapping Law and the conditions of the Provisional Authority and/or Certificate of Authority issued to radio and TV stations." Second, the Garci Tapes have not been authenticated, and subsequent investigation may establish that the tapes contain false information or willful misrepresentation. Specifically, the NTC press release contains the following categorical warning: Taking into consideration the countrys unusual situation, and in order not to unnecessarily aggravate the same, the NTC warns all radio stations and television networks owners/operators that the conditions of the authorizations and permits issued to them by Government like the Provisional Authority and/or Certificate of Authority explicitly provides that said companies shall not use its stations for the broadcasting or telecasting of false information or willful misrepresentation. Relative thereto, it has come to the attention of the Commission that certain personalities are in possession of alleged taped conversation which they claim, (sic) involve the President of the Philippines and a Commissioner of the COMELEC regarding their supposed violation of election laws. These personalities have admitted that the taped conversations are product of illegal wiretapping operations. Considering that these taped conversations have not been duly authenticated nor could it be said at this time that the tapes contain an accurate or truthful representation of what was recorded therein, (sic) it is the position of the Commission that the continuous airing or broadcast of the said taped conversations by radio and television stations is a continuing violation of the Anti-Wiretapping Law and the conditions of the Provisional Authority and/or Certificate of Authority issued to these radio and television stations. If it has been (sic) subsequently established that the said tapes are false and/or fraudulent after a prosecution or appropriate investigation, the concerned radio and television companies are hereby warned that their

broadcast/airing of such false information and/or willful misrepresentation shall be just cause for the suspension, revocation and/or cancellation of the licenses or authorizations issued to the said companies. (Boldfacing and underscoring supplied) The NTC does not claim that the public airing of the Garci Tapes constitutes unprotected expression that may be subject to prior restraint. The NTC does not specify what substantive evil the State seeks to prevent in imposing prior restraint on the airing of the Garci Tapes. The NTC does not claim that the public airing of the Garci Tapes constitutes a clear and present danger of a substantive evil, of grave and imminent character, that the State has a right and duty to prevent. The NTC did not conduct any hearing in reaching its conclusion that the airing of the Garci Tapes constitutes a continuing violation of the Anti-Wiretapping Law. At the time of issuance of the NTC press release, and even up to now, the parties to the conversations in the Garci Tapes have not complained that the wire-tapping was without their consent, an essential element for violation of the Anti-Wiretapping Law.35 It was even the Office of the President, through the Press Secretary, that played and released to media the Garci Tapes containing the alleged "spliced" conversation between President Arroyo and Commissioner Garcillano. There is also the issue of whether a wireless cellular phone conversation is covered by the Anti-Wiretapping Law. Clearly, the NTC has no factual or legal basis in claiming that the airing of the Garci Tapes constitutes a violation of the Anti-Wiretapping Law. The radio and television stations were not even given an opportunity to be heard by the NTC. The NTC did not observe basic due process as mandated in Ang Tibay v. Court of Industrial Relations.36 The NTC claims that the Garci Tapes, "after a prosecution or the appropriate investigation," may constitute "false information and/or willful misrepresentation." However, the NTC does not claim that such possible false information or willful misrepresentation constitutes misleading commercial advertisement. In the United States, false or deceptive commercial speech is categorized as unprotected expression that may be subject to prior restraint. Recently, this Court upheld the constitutionality of Section 6 of the Milk Code requiring the submission to a government screening committee of advertising materials for infant formula milk to prevent false or deceptive claims to the public.37 There is, however, no claim here by respondents that the Garci Tapes constitute false or misleading commercial advertisement. The NTC concedes that the Garci Tapes have not been authenticated as accurate or truthful. The NTC also concedes that only "after a prosecution or appropriate investigation" can it be established that the Garci Tapes constitute "false information and/or willful misrepresentation." Clearly, the NTC admits that it does not even know if the Garci Tapes contain false information or willful misrepresentation. 4. Nature of Prior Restraint in the Present Case The NTC action restraining the airing of the Garci Tapes is a content-based prior restraint because it is directed at the message of the Garci Tapes. The NTCs claim that the Garci Tapes might contain "false information and/or willful misrepresentation," and thus should not be publicly aired, is an admission that the restraint is content-based. 5. Nature of Expression in the Present Case The public airing of the Garci Tapes is a protected expression because it does not fall under any of the four existing categories of unprotected expression recognized in this jurisdiction. The airing of the Garci Tapes is essentially a political expression because it exposes that a presidential candidate had allegedly improper conversations with a COMELEC Commissioner right after the close of voting in the last presidential elections. Obviously, the content of the Garci Tapes affects gravely the sanctity of the ballot. Public discussion on the sanctity of the ballot is indisputably a protected expression that cannot be subject to prior restraint. Public discussion on the credibility of the electoral process is one of the highest political expressions of any electorate, and thus deserves the utmost protection. If ever there is a hierarchy of protected expressions, political expression would occupy the highest rank, 38 and among different kinds of political expression, the subject of fair and honest elections would be at the top. In any event, public discussion on all political issues should always remain uninhibited, robust and wide open.

The rule, which recognizes no exception, is that there can be no content-based prior restraint on protected expression. On this ground alone, the NTC press release is unconstitutional. Of course, if the courts determine that the subject matter of a wiretapping, illegal or not, endangers the security of the State, the public airing of the tape becomes unprotected expression that may be subject to prior restraint. However, there is no claim here by respondents that the subject matter of the Garci Tapes involves national security and publicly airing the tapes would endanger the security of the State.39 The alleged violation of the Anti-Wiretapping Law is not in itself a ground to impose a prior restraint on the airing of the Garci Tapes because the Constitution expressly prohibits the enactment of any law, and that includes anti-wiretapping laws, curtailing freedom of expression. 40 The only exceptions to this rule are the four recognized categories of unprotected expression. However, the content of the Garci Tapes does not fall under any of these categories of unprotected expression. The airing of the Garci Tapes does not violate the right to privacy because the content of the Garci Tapes is a matter of important public concern. The Constitution guarantees the peoples right to information on matters of public concern. 41 The remedy of any person aggrieved by the public airing of the Garci Tapes is to file a complaint for violation of the Anti-Wiretapping Law after the commission of the crime. Subsequent punishment, absent a lawful defense, is the remedy available in case of violation of the Anti-Wiretapping Law. The present case involves a prior restraint on protected expression. Prior restraint on protected expression differs significantly from subsequent punishment of protected expression. While there can be no prior restraint on protected expression, there can be subsequent punishment for protected expression under libel, tort or other laws. In the present case, the NTC action seeks prior restraint on the airing of the Garci Tapes, not punishment of personnel of radio and television stations for actual violation of the Anti-Wiretapping Law. 6. Only the Courts May Impose Content-Based Prior Restraint The NTC has no power to impose content-based prior restraint on expression. The charter of the NTC does not vest NTC with any content-based censorship power over radio and television stations. In the present case, the airing of the Garci Tapes is a protected expression that can never be subject to prior restraint. However, even assuming for the sake of argument that the airing of the Garci Tapes constitutes unprotected expression, only the courts have the power to adjudicate on the factual and legal issue of whether the airing of the Garci Tapes presents a clear and present danger of bringing about a substantive evil that the State has a right and duty to prevent, so as to justify the prior restraint. Any order imposing prior restraint on unprotected expression requires prior adjudication by the courts on whether the prior restraint is constitutional. This is a necessary consequence from the presumption of invalidity of any prior restraint on unprotected expression. Unless ruled by the courts as a valid prior restraint, government agencies cannot implement outright such prior restraint because such restraint is presumed unconstitutional at inception. As an agency that allocates frequencies or airwaves, the NTC may regulate the bandwidth position, transmitter wattage, and location of radio and television stations, but not the content of the broadcasts. Such content-neutral prior restraint may make operating radio and television stations more costly. However, such content-neutral restraint does not restrict the content of the broadcast. 7. Government Failed to Overcome Presumption of Invalidity Assuming that the airing of the Garci Tapes constitutes unprotected expression, the NTC action imposing prior restraint on the airing is presumed unconstitutional. The Government bears a heavy burden to prove that the NTC action is constitutional. The Government has failed to meet this burden. In their Comment, respondents did not invoke any compelling State interest to impose prior restraint on the public airing of the Garci Tapes. The respondents claim that they merely "fairly warned" radio and television stations to observe the Anti-Wiretapping Law and pertinent NTC circulars on program standards. Respondents have not explained how and why the observance by radio and television stations of the Anti-Wiretapping Law and pertinent NTC circulars constitutes a compelling State interest justifying prior restraint on the public airing of the Garci Tapes.

Violation of the Anti-Wiretapping Law, like the violation of any criminal statute, can always be subject to criminal prosecution after the violation is committed. Respondents have not explained why there is a need in the present case to impose prior restraint just to prevent a possible future violation of the Anti-Wiretapping Law. Respondents have not explained how the violation of the Anti-Wiretapping Law, or of the pertinent NTC circulars, can incite imminent lawless behavior or endanger the security of the State. To allow such restraint is to allow prior restraint on all future broadcasts that may possibly violate any of the existing criminal statutes. That would be the dawn of sweeping and endless censorship on broadcast media. 8. The NTC Warning is a Classic Form of Prior Restraint The NTC press release threatening to suspend or cancel the airwave permits of radio and television stations constitutes impermissible pressure amounting to prior restraint on protected expression. Whether the threat is made in an order, regulation, advisory or press release, the chilling effect is the same: the threat freezes radio and television stations into deafening silence. Radio and television stations that have invested substantial sums in capital equipment and market development suddenly face suspension or cancellation of their permits. The NTC threat is thus real and potent. In Burgos v. Chief of Staff,42 this Court ruled that the closure of the We Forum newspapers under a general warrant "is in the nature of a previous restraint or censorship abhorrent to the freedom of the press guaranteed under the fundamental law." The NTC warning to radio and television stations not to air the Garci Tapes or else their permits will be suspended or cancelled has the same effect a prior restraint on constitutionally protected expression. In the recent case of David v. Macapagal-Arroyo,43 this Court declared unconstitutional government threats to close down mass media establishments that refused to comply with government prescribed "standards" on news reporting following the declaration of a State of National Emergency by President Arroyo on 24 February 2006. The Court described these threats in this manner: Thereafter, a wave of warning[s] came from government officials. Presidential Chief of Staff Michael Defensor was quoted as saying that such raid was "meant to show a 'strong presence,' to tell media outlets not to connive or do anything that would help the rebels in bringing down this government." Director General Lomibao further stated that "if they do not follow the standards and the standards are if they would contribute to instability in the government, or if they do not subscribe to what is in General Order No. 5 and Proc. No. 1017 we will recommend a 'takeover.'" National Telecommunications Commissioner Ronald Solis urged television and radio networks to "cooperate" with the government for the duration of the state of national emergency. He warned that his agency will not hesitate to recommend the closure of any broadcast outfit that violates rules set out for media coverage during times when the national security is threatened.44 (Emphasis supplied) The Court struck down this " wave of warning[s]" as impermissible restraint on freedom of expression. The Court ruled that "the imposition of standards on media or any form of prior restraint on the press, as well as the warrantless search of the Tribune offices and whimsical seizure of its articles for publication and other materials, are declared UNCONSTITUTIONAL." 45 The history of press freedom has been a constant struggle against the censor whose weapon is the suspension or cancellation of licenses to publish or broadcast. The NTC warning resurrects the weapon of the censor. The NTC warning is a classic form of prior restraint on protected expression, which in the words of Near v. Minnesota is "the essence of censorship."46 Long before the American Declaration of Independence in 1776, William Blackstone had already written in his Commentaries on the Law of England, "The liberty of the press x x x consists in laying no previous restraints upon publication x x x."47 Although couched in a press release and not in an administrative regulation, the NTC threat to suspend or cancel permits remains real and effective, for without airwaves or frequencies, radio and television stations will fall silent and die. The NTC press release does not seek to advance a legitimate regulatory objective, but to suppress through coercion information on a matter of vital public concern.

9. Conclusion In sum, the NTC press release constitutes an unconstitutional prior restraint on protected expression. There can be no content-based prior restraint on protected expression. This rule has no exception. I therefore vote to (1) grant the petition, (2) declare the NTC warning, embodied in its press release dated 11 June 2005, an unconstitutional prior restraint on protected expression, and (3) enjoin the NTC from enforcing the same. ANTONIO T. CARPIO Associate Justice

G.R. No. L-42283 March 18, 1985 BUENAVENTURA ANGELES, ET AL., plaintiffs-appellees, vs. URSULA TORRES CALASANZ, ET AL., defendants-appellants. GUTIERREZ, JR., J.: This is an appeal from the decision of the Court of First Instance of Rizal, Seventh Judicial District, Branch X, declaring the contract to sell as not having been validly cancelled and ordering the defendants-appellants to execute a final deed of sale in favor of the plaintiffs-appellees, to pay P500.00 attorney's fees and costs. The facts being undisputed, the Court of Appeals certified the case to us since only pure questions of law have been raised for appellate review. On December 19, 1957, defendants-appellants Ursula Torres Calasanz and Tomas Calasanz and plaintiffs-appellees Buenaventura Angeles and Teofila Juani entered into a contract to sell a piece of land located in Cainta, Rizal for the amount of P3,920.00 plus 7% interest per annum. The plaintiffs-appellees made a downpayment of P392.00 upon the execution of the contract. They promised to pay the balance in monthly installments of P 41.20 until fully paid, the installments being due and payable on the 19th day of each month. The plaintiffs-appellees paid the monthly installments until July 1966, when their aggregate payment already amounted to P4,533.38. On numerous occasions, the defendants-appellants accepted and received delayed installment payments from the plaintiffs-appellees. On December 7, 1966, the defendants-appellants wrote the plaintiffs-appellees a letter requesting the remittance of past due accounts. On January 28, 1967, the defendants-appellants cancelled the said contract because the plaintiffsappellees failed to meet subsequent payments. The plaintiffs' letter with their plea for reconsideration of the said cancellation was denied by the defendants-appellants. The plaintiffs-appellees filed Civil Case No. 8943 with the Court of First Instance of Rizal, Seventh Judicial District, Branch X to compel the defendants-appellants to execute in their favor the final deed of sale alleging inter alia that after computing all subsequent payments for the land in question, they found out that they have already paid the total amount of P4,533.38 including interests, realty taxes and incidental expenses for the registration and transfer of the land. The defendants-appellants alleged in their answer that the complaint states no cause of action and that the plaintiffs-appellees violated paragraph six (6) of the contract to sell when they failed and refused to pay and/or offer to pay the monthly installments corresponding to the month of August, 1966 for more than five (5) months, thereby constraining the defendants-appellants to cancel the said contract. The lower court rendered judgment in favor of the plaintiffs-appellees. The dispositive portion of the decision reads: WHEREFORE, based on the foregoing considerations, the Court hereby renders judgment in favor of the plaintiffs and against the defendants declaring that the contract subject matter of the instant case was NOT VALIDLY cancelled by the defendants. Consequently, the defendants are ordered to execute a final Deed of Sale in favor of the plaintiffs and to pay the sum of P500.00 by way of attorney's fees. Costs against the defendants. A motion for reconsideration filed by the defendants-appellants was denied. As earlier stated, the then Court of Appeals certified the case to us considering that the appeal involves pure questions of law. The defendants-appellants assigned the following alleged errors of the lower court: First Assignment of Error THE LOWER COURT ERRED IN NOT HOLDING THE CONTRACT TO SELL (ANNEX "A" OF COMPLIANCE) AS HAVING BEEN LEGALLY AND VALIDLY CANCELLED. Second Assignment of Error EVEN ASSUMING ARGUENDO THAT THE SAID CONTRACT TO SELL HAS NOT BEEN LEGALLY AND VALIDLY CANCELLED, THE LOWER

COURT ERRED IN ORDERING DEFENDANTS TO EXECUTE A FINAL DEED OF SALE IN FAVOR OF THE PLAINTIFF. Third Assignment of Error THE LOWER COURT ERRED IN ORDERING DEFENDANTS TO PAY PLAINTIFFS THE SUM OF P500.00 AS ATTORNEY'S FEES. The main issue to be resolved is whether or not the contract to sell has been automatically and validly cancelled by the defendants-appellants. The defendants-appellants submit that the contract was validly cancelled pursuant to paragraph six of the contract which provides: xxx xxx xxx SIXTH.In case the party of the SECOND PART fails to satisfy any monthly installments, or any other payments herein agreed upon, he is granted a month of grace within which to make the retarded payment, together with the one corresponding to the said month of grace; it is understood, however, that should the month of grace herein granted to the party of the SECOND PART expired; without the payments corresponding to both months having been satisfied, an interest of 10% per annum will be charged on the amounts he should have paid; it is understood further, that should a period of 90 days elapse, to begin from the expiration of the month of grace herein mentioned, and the party of SECOND PART has not paid all the amounts he should have paid with the corresponding interest up to that date, the party of the FIRST PART has the right to declare this contract cancelled and of no effect, and as consequence thereof, the party of the FIRST PART may dispose of the parcel of land covered by this contract in favor of other persons, as if this contract had never been entered into. In case of such cancellation of the contract, all the amounts paid in accordance with this agreement together with all the improvements made on the premises, shall be considered as rents paid for the use and occupation of the above mentioned premises, and as payment for the damages suffered by failure of the party of the SECOND PART to fulfill his part of the agreement; and the party of the SECOND PART hereby renounces all his right to demand or reclaim the return of the same and obliges himself to peacefully vacate the premises and deliver the same to the party of the FIRST PART. (Emphasis supplied by appellant) xxx xxx xxx The defendants-appellants argue that the plaintiffs-appellees failed to pay the August, 1966 installment despite demands for more than four (4) months. The defendants-appellants point to Jocson v. Capitol Subdivision (G.R. No. L-6573, February 28, 1955) where this Court upheld the right of the subdivision owner to automatically cancel a contract to sell on the strength of a provision or stipulation similar to paragraph 6 of the contract in this case. The defendantsappellants also argue that even in the absence of the aforequoted provision, they had the right to cancel the contract to sell under Article 1191 of the Civil Code of the Philippines. The plaintiffs-appellees on the other hand contend that the Jocson ruling does not apply. They state that paragraph 6 of the contract to sell is contrary to law insofar as it provides that in case of specified breaches of its terms, the sellers have the right to declare the contract cancelled and of no effect, because it granted the sellers an absolute and automatic right of rescission. Article 1191 of the Civil Code on the rescission of reciprocal obligations provides: 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 fulfillment, if the latter should become impossible. xxx xxx xxx Article 1191 is explicit. In reciprocal obligations, either party the right to rescind the contract upon the failure of the other to perform the obligation assumed thereunder. Moreover, there is nothing in the law that prohibits the parties from entering into an agreement that violation of the terms of the

contract would cause its cancellation even without court intervention (Froilan v. Pan Oriental Shipping, Co., et al., 12 SCRA 276) Well settled is, however, the rule that a judicial action for the rescission of a contract is not necessary where the contract provides that it may be revoked and cancelled for violation of any of its terms and conditions' (Lopez v. Commissioner of Customs, 37 SCRA 327, and cases cited therein) Resort to judicial action for rescission is obviously not contemplated . . . The validity of the stipulation can not be seriously disputed. It is in the nature of a facultative resolutory condition which in many cases has been upheld by this Court. (Ponce Enrile v. Court of Appeals, 29 SCRA 504). 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 that it may be rescinded for violation of its terms and conditions, was qualified by this Court in University of the Philippines v. De los Angeles , (35 SCRA 102) where we explained that: Of course, it must be understood that the act of a party in treating a contract as cancelled or resolved on account of infractions by the other contracting party 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 resort to judicial action in its own behalf, and bring the matter to court. Then, should the court, after due hearing, 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 the consequent indemnity awarded to the party prejudiced. In other words, the party who deems the contract violated many consider it resolved or rescinded, and act accordingly, without previous court action, but it proceeds at its own risk. For it is only the final judgment of the corresponding court that will conclusively and finally settle whether the action taken was or was not correct in law. ... . We see no conflict between this ruling and the previous jurisprudence of this Court invoked by respondent declaring that judicial action is necessary for the resolution of a reciprocal obligation; (Ocejo, Perez & Co. v. International Banking Corp., 37 Phil. 631; Republic v. Hospital de San Juan de Dios, et al., 84 Phil. 820) since in every case where the extrajudicial resolution is contested only the final award of the court of competent jurisdiction can conclusively settle whether the resolution was proper or not. It is in this sense that judicial action will be necessary, as without it, the extrajudicial resolution will remain contestable and subject to judicial invalidation, unless attack thereon should become barred by acquiescence, estoppel or prescription. The right to rescind the contract for non-performance of one of its stipulations, therefore, is not absolute. InUniversal Food Corp. v. 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. v. Hawaiian-Philippine Co., 47 Phil. 821, 827) The question of whether a breach of a contract is substantial depends upon the attendant circumstances. (Corpus v. Hon. Alikpala, et al., L-23707 & L-23720, Jan. 17, 1968). ... . The defendants-appellants state that the plaintiffs-appellees violated Section two of the contract to sell which provides: SECOND.That in consideration of the agreement of sale of the above described property, the party of the SECOND PART obligates himself to pay to the party of the FIRST PART the Sum of THREE THOUSAND NINE HUNDRED TWENTY ONLY (P3,920.00), Philippine Currency, plus interest at the rate of 7% per annum, as follows: (a) The amount of THREE HUNDRED NINETY TWO only (P392.00) when this contract is signed; and

(b) The sum of FORTY ONE AND 20/100 ONLY (P4l.20) on or before the 19th day of each month, from this date until the total payment of the price above stipulated, including interest. because they failed to pay the August installment, despite demand, for more than four (4) months. The breach of the contract adverted to by the defendants-appellants is so slight and casual when we consider that apart from the initial downpayment of P392.00 the plaintiffs-appellees had already paid the monthly installments for a period of almost nine (9) years. In other words, in only a short time, the entire obligation would have been paid. Furthermore, although the principal obligation was only P 3,920.00 excluding the 7 percent interests, the plaintiffs- appellees had already paid an aggregate amount of P 4,533.38. To sanction the rescission made by the defendants-appellants will work injustice to the plaintiffs- appellees. (See J.M. Tuazon and Co., Inc. v. Javier, 31 SCRA 829) It would unjustly enrich the defendants-appellants. 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 defendants-appellants in cancelling the contract. We agree with the observation of the lower court to the effect that: Although the primary object of selling subdivided lots is business, yet, it cannot be denied that this subdivision is likewise purposely done to afford those landless, low income group people of realizing their dream of a little parcel of land which they can really call their own. The defendants-appellants cannot rely on paragraph 9 of the contract which provides: NINTH.-That whatever consideration of the party of the FIRST PART may concede to the party of the SECOND PART, as not exacting a strict compliance with the conditions of paragraph 6 of this contract, as well as any other condonation that the party of the FIRST PART may give to the party of the SECOND PART with regards to the obligations of the latter, should not be interpreted as a renunciation on the part of the party of the FIRST PART of any right granted it by this contract, in case of default or non-compliance by the party of the SECOND PART. The defendants-appellants argue that paragraph nine clearly allows the seller to waive the observance of paragraph 6 not merely once, but for as many times as he wishes. The defendants-appellants' contention is without merit. We agree with the plaintiffs-appellees that when the defendants-appellants, instead of availing of their alleged right to rescind, have accepted and received delayed payments of installments, though the plaintiffs-appellees have been in arrears beyond the grace period mentioned in paragraph 6 of the contract, the defendants-appellants have waived and are now estopped from exercising their alleged right of rescission. In De Guzman v. Guieb (48 SCRA 68), we held that: xxx xxx xxx But defendants do not deny that in spite of the long arrearages, neither they nor their predecessor, Teodoro de Guzman, even took steps to cancel the option or to eject the appellees from the home-lot in question. On the contrary, it is admitted that the delayed payments were received without protest or qualification. ... Under these circumstances, We cannot but agree with the lower court that at the time appellees exercised their option, appellants had already forfeited their right to invoke the above-quoted provision regarding the nullifying effect of the non-payment of six months rentals by appellees by their having accepted without qualification on July 21, 1964 the full payment by appellees of all their arrearages. The defendants-appellants contend in the second assignment of error that the ledger of payments show a balance of P671,67 due from the plaintiffs-appellees. They submit that while it is true that the total monthly installments paid by the plaintiffs-appellees may have exceeded P3,920.00, a substantial portion of the said payments were applied to the interests since the contract specifically provides for a 7% interest per annum on the remaining balance. The defendants-appellants rely on paragraph 2 of the contract which provides:

SECOND.That in consideration of the agreement of sale of the above described property, the party of the SECOND PART obligates himself to pay to the party of the FIRST PART the Sum of THREE THOUSAND NINE HUNDRED TWENTY ONLY (P 3,920.00), Philippine Currency, plus interest at the rate of 7% per annum ... . (Emphasis supplied) The plaintiffs-appellees on the other hand are firm in their submission that since they have already paid the defendants-appellants a total sum of P4,533.38, the defendants-appellants must now be compelled to execute the final deed of sale pursuant to paragraph 12 of the contract which provides: TWELFTH.That once the payment of the sum of P3,920.00, the total price of the sale is completed, the party to the FIRST PART will execute in favor of the party of the SECOND PART, the necessary deed or deeds to transfer to the latter the title of the parcel of land sold, free from all hens and encumbrances other than those expressly provided in this contract; it is understood, however, that au the expenses which may be incurred in the said transfer of title shall be paid by the party of the SECOND PART, as above stated. Closely related to the second assignment of error is the submission of the plaintiffs-appellees that the contract herein is a contract of adhesion. We agree with the plaintiffs-appellees. The contract to sell entered into by the parties has some characteristics of a contract of adhesion. The defendants-appellants drafted and prepared the contract. The plaintiffs-appellees, eager to acquire a lot upon which they could build a home, affixed their signatures and assented to the terms and conditions of the contract. They had no opportunity to question nor change any of the terms of the agreement. It was offered to them on a "take it or leave it" basis. In Sweet Lines, Inc. v. Teves (83 SCRA 36 1), we held that: xxx xxx xxx ... (W)hile generally, stipulations in a contract come about after deliberate drafting by the parties thereto. . . . there are certain contracts almost all the provisions of which have been drafted only by one party, usually a corporation. Such contracts are called contracts of adhesion, because the only participation of the party is the signing of his signature or his "adhesion" thereto. Insurance contracts, bills of lading, contracts of sale of lots on the installment plan fall into this category. (Paras, Civil Code of the Philippines, Seventh ed., Vol. 1, p. 80.) (Emphasis supplied) While it is true that paragraph 2 of the contract obligated the plaintiffs-appellees to pay the defendants-appellants the sum of P3,920.00 plus 7% interest per annum, it is likewise true that under paragraph 12 the seller is obligated to transfer the title to the buyer upon payment of the P3,920.00 price sale. The contract to sell, being a contract of adhesion, must be construed against the party causing it. We agree with the observation of the plaintiffs-appellees to the effect that "the terms of a contract must be interpreted against the party who drafted the same, especially where such interpretation will help effect justice to buyers who, after having invested a big amount of money, are now sought to be deprived of the same thru the prayed application of a contract clever in its phraseology, condemnable in its lopsidedness and injurious in its effect which, in essence, and in its entirety is most unfair to the buyers." Thus, since the principal obligation under the contract is only P3,920.00 and the plaintiffs-appellees have already paid an aggregate amount of P4,533.38, the courts should only order the payment of the few remaining installments but not uphold the cancellation of the contract. Upon payment of the balance of P671.67 without any interest thereon, the defendants-appellants must immediately execute the final deed of sale in favor of the plaintiffs-appellees and execute the necessary transfer documents as provided in paragraph 12 of the contract. The attorney's fees are justified. WHEREFORE, the instant petition is DENIED for lack of merit. The decision appealed from is AFFIRMED with the modification that the plaintiffs-appellees should pay the balance of SIX HUNDRED SEVENTY ONE PESOS AND SIXTY-SEVEN CENTAVOS (P671.67) without any interests. Costs against the defendants-appellants. SO ORDERED.

G.R. No. L-32811 March 31, 1980 FELIPE C. ROQUE, petitioner, vs. NICANOR LAPUZ and THE COURT OF APPEALS, respondents. Taada, Sanchez, Taada, Taada for petitioner. N.M. Lapuz for respondent. GUERRERO, J.: Appeal by certiorari from the Resolution of the respondent court 1 dated October 12, 1970 in CAG.R. No. L-33998-R entitled "Felipe C. Roque, plaintiff-appellee, versus Nicanor Lapuz, defendant-appellant" amending its original decision of April 23, 1970 which affirmed the decision of the Court of First Instance of Rizal (Quezon City Branch) in Civil Case No. Q-4922 in favor of petitioner, and the Resolution of the respondent court denying petitioner's motion for reconsideration. The facts of this case are as recited in the decision of the Trial Court which was adopted and affirmed by the Court of Appeals: Sometime in 1964, prior to the approval by the National Planning Commission of the consolidation and subdivision plan of plaintiff's property known as the Rockville Subdivision, situated in Balintawak, Quezon City, plaintiff and defendant entered into an agreement of sale covering Lots 1, 2 and 9, Block 1, of said property, with an aggregate area of 1,200 square meters, payable in 120 equal monthly installments at the rate of P16.00, P15.00 per square meter, respectively. In accordance with said agreement, defendant paid to plaintiff the sum of P150.00 as deposit and the further sum of P740.56 to complete the payment of four monthly installments covering the months of July, August, September, and October, 1954. (Exhs. A and B). When the document Exhibit "A" was executed on June 25, 1954, the plan covering plaintiff's property was merely tentative, and the plaintiff referred to the proposed lots appearing in the tentative plan. After the approval of the subdivision plan by the Bureau of Lands on January 24, 1955, defendant requested plaintiff that he be allowed to abandon and substitute Lots 1, 2 and 9, the subject matter of their previous agreement, with Lots 4 and 12, Block 2 of the approved subdivision plan, of the Rockville Subdivision, with a total area of 725 square meters, which are corner lots, to which request plaintiff graciously acceded. The evidence discloses that defendant proposed to plaintiff modification of their previous contract to sell because he found it quite difficult to pay the monthly installments on the three lots, and besides the two lots he had chosen were better lots, being corner lots. In addition, it was agreed that the purchase price of these two lots would be at the uniform rate of P17.00 per square (meter) payable in 120 equal monthly installments, with interest at 8% annually on the balance unpaid. Pursuant to this new agreement, defendant occupied and possessed Lots 4 and 12, Block 2 of the approved subdivision plan, and enclosed them, including the portion where his house now stands, with barbed wires and adobe walls. However, aside from the deposit of P150.00 and the amount of P740.56 which were paid under their previous agreement, defendant failed to make any further payment on account of the agreed monthly installments for the two lots in dispute, under the new contract to sell. Plaintiff demanded upon defendant not only to pay the stipulated monthly installments in arrears, but also to make upto-date his payments, but defendant, instead of complying with the demands, kept on asking for extensions, promising at first that he would pay not only the installments in arrears but also make up-to-date his payment, but later on refused altogether to comply with plaintiff's demands. Defendant was likewise requested by the plaintiff to sign the corresponding contract to sell in accordance with his previous commitment. Again, defendant

promised that he would sign the required contract to sell when he shall have made up-to-date the stipulated monthly installments on the lots in question, but subsequently backed out of his promise and refused to sign any contract in noncompliance with what he had represented on several occasions. And plaintiff relied on the good faith of defendant to make good his promise because defendant is a professional and had been rather good to him (plaintiff). On or about November 3, 1957, in a formal letter, plaintiff demanded upon defendant to vacate the lots in question and to pay the reasonable rentals thereon at the rate of P60.00 per month from August, 1955. (Exh. "B"). Notwithstanding the receipt of said letter, defendant did not deem it wise nor proper to answer the same. In reference to the mode of payment, the Honorable Court of Appeals found Both parties are agreed that the period within which to pay the lots in question is ten years. They however, disagree on the mode of payment. While the appellant claims that he could pay the purchase price at any time within a period of ten years with a gradual proportionate discount on the price, the appellee maintains that the appellant was bound to pay monthly installments. On this point, the trial court correctly held that It is further argued by defendant that under the agreement to sell in question, he has the right or option to pay the purchase price at anytime within a period of ten years from 1954, he being entitled, at the same time, to a graduated reduction of the price. The Court is constrained to reject this version not only because it is contradicted by the weight of evidence but also because it is not consistent with what is reasonable, plausible and credible. It is highly improbable to expect plaintiff, or any real estate subdivision owner for that matter, to agree to a sale of his land which would be payable anytime in ten years at the exclusive option of the purchaser. There is no showing that defendant is a friend, a relative, or someone to whom plaintiff had to be grateful, as would justify an assumption that he would have agreed to extend to defendant such an extra- ordinary concession. Furthermore, the context of the document, Exhibit "B", not to mention the other evidences on records is indicative that the real intention of the parties is for the payment of the purchase price of the lot in question on an equal monthly installment basis for a period of ten years (Exhibits "A", "II", "J" and "K"). On January 22, 1960, petitioner Felipe C, Roque (plaintiff below) filed the complaint against defendant Nicanor Lapuz (private respondent herein) with the Court of First Instance of Rizal, Quezon City Branch, for rescission and cancellation of the agreement of sale between them involving the two lots in question and prayed that judgment be rendered ordering the rescission and cancellation of the agreement of sale, the defendant to vacate the two parcels of land and remove his house therefrom and to pay to the plaintiff the reasonable rental thereof at the rate of P60.00 a month from August 1955 until such time as he shall have vacated the premises, and to pay the sum of P2,000.00 as attorney's fees, costs of the suit and award such other relief or remedy as may be deemed just and equitable in the premises. Defendant filed a Motion to Dismiss on the ground that the complaint states no cause of action, which motion was denied by the court. Thereafter, defendant filed his Answer alleging that he bought three lots from the plaintiff containing an aggregate area of 1,200 sq. meters and previously known as Lots 1, 2 and 9 of Block 1 of Rockville Subdivision at P16.00, P15.00 and P15.00, respectively, payable at any time within ten years. Defendant admits having occupied the lots in question. As affirmative and special defenses, defendant alleges that the complaint states no cause of action; that the present action for rescission has prescribed; that no demand for payment of the balance was ever made; and that the action being based on reciprocal obligations, before one party may compel performance, he must first comply what is incumbent upon him. As counterclaim, defendant alleges that because of the acts of the plaintiff, he lost two lots containing an area of 800 sq. meters and as a consequence, he suffered moral damages in the

amount of P200.000.00; that due to the filing of the present action, he suffered moral damages amounting to P100,000.00 and incurred expenses for attorney's fees in the sum of P5,000.00. Plaintiff filed his Answer to the Counterclaim and denied the material averments thereof. After due hearing, the trial court rendered judgment, the dispositive portion of which reads: WHEREFORE, the Court renders judgment in favor of plain. plaintiff and against the defendant, as follows: (a) Declaring the agreement of sale between plaintiff and defendant involving the lots in question (Lots 4 and 12, Block 2 of the approved subdivision plan of the Rockville Subdivision) rescinded, resolved and cancelled; (b) Ordering defendant to vacate the said lots and to remove his house therefrom and also to pay plaintiff the reasonable rental thereof at the rate of P60.00 per month from August, 1955 until he shall have actually vacated the premises; and (c) Condemning defendant to pay plaintiff the sum of P2,000.00 as attorney's fees, as well as the costs of the suit. (Record on Appeal, p. 118) (a) Declaring the agreement of sale between plaintiff and defendant involving the lots in question (Lots 4 and 12, Block 2 of the approved subdivision plan of the Rockville Subdivision) rescinded, resolved and cancelled; (b) Ordering defendant to vacate the said lots and to remove his house therefrom and also to pay plaintiff the reasonable rental thereof at the rate of P60.00 per month from August, 1955 until he shall have actually vacated premises; and (c) Condemning defendant to pay plaintiff the sum of P2,000.00 as attorney's fees, as well as the costs of the suit. (Record on Appeal. p. 118) Not satisfied with the decision of the trial court, defendant appealed to the Court of Appeals. The latter court, finding the judgment appealed from being in accordance with law and evidence, affirmed the same. In its decision, the appellate court, after holding that the findings of fact of the trial court are fully supported by the evidence, found and held that the real intention of the parties is for the payment of the purchase price of the lots in question on an equal monthly installment basis for the period of ten years; that there was modification of the original agreement when defendant actually occupied Lots Nos. 4 and 12 of Block 2 which were corner lots that commanded a better price instead of the original Lots Nos. 1, 2 and 9, Block I of the Rockville Subdivision; that appellant's bare assertion that the agreement is not rescindable because the appellee did not comply with his obligation to put up the requisite facilities in the subdivision was insufficient to overcome the presumption that the law has been obeyed by the appellee; that the present action has not prescribed since Article 1191 of the New Civil Code authorizing rescission in reciprocal obligations upon noncompliance by one of the obligors is the applicable provision in relation to Article 1149 of the New Civil Code; and that the present action was filed within five years from the time the right of action accrued. Defendant filed a Motion for Reconsideration of the appellate court's decision on the following grounds: First Neither the pleadings nor the evidence, testimonial, documentary or circumstantial, justify the conclusion as to the existence of an alleged subsequent agreement novatory of the original contract admittedly entered into between the parties: Second There is nothing so unusual or extraordinary, as would render improbable the fixing of ten ears as the period within which payment of the stipulated price was to be payable by appellant; Third Appellee has no right, under the circumstances on the case at bar, to demand and be entitled to the rescission of the contract had with appellant; Fourth Assuming that any action for rescission is availability to appellee, the same, contrary to the findings of the decision herein, has prescribed; Fifth Assumming further that appellee's action for rescission, if any, has not yet prescribed, the same is at least barred by laches;

Sixth Assuming furthermore that a cause of action for rescission exists, appellant should nevertheless be entitled to tile fixing of a period within which to comply with his obligation; and Seventh At all events, the affirmance of the judgment for the payment of rentals on the premises from August, 1955 and he taxing of attorney's fees against appellant are not warranted b the circumstances at bar. (Rollo, pp. 8788) Acting on the Motion for Reconsideration, the Court of Appeals sustained the sixth ground raised by the appellant, that assuming that a cause of action for rescission exists, he should nevertheless be entitled to the fixing of a period within which to comply with his obligation. The Court of Appeals, therefore, amended its original decision in the following wise and manner: WHEREFORE, our decision dated April 23, 1970 is hereby amended in the sense that the defendant Nicanor Lapuz is hereby granted a period of ninety (90) days from entry hereof within which to pay the balance of the purchase price in the amount of P11,434,44 with interest thereon at the rate of 8% per annum from August 17, 1955 until fully paid. In the event that the defendant fails to comply with his obligation as above stated within the period fixed herein, our original judgment stands. Petitioner Roque, as plaintiff-appellee below, filed a Motion for Reconsideration; the Court of Appeals denied it. He now comes and appeals to this Court on a writ of certiorari. The respondent Court of Appeals rationalizes its amending decision by considering that the house presently erected on the land subject of the contract is worth P45,000.00, which improvements introduced by defendant on the lots subject of the contract are very substantial, and thus being the case, "as a matter of justice and equity, considering that the removal of defendant's house would amount to a virtual forfeiture of the value of the house, the defendant should be granted a period within which to fulfill his obligations under the agreement." Cited as authorities are the cases of Kapisanan Banahaw vs. Dejarme and Alvero, 55 Phil. 338, 344, where it is held that the discretionary power of the court to allow a period within which a person in default may be permitted to perform the stipulation upon which the claim for resolution of the contract is based should be exercised without hesitation in a case where a virtual forfeiture of valuable rights is sought to be enforced as an act of mere reprisal for a refusal of the debtor to submit to a usurious charge, and the case of Puerto vs. Go Ye Pin, 47 O.G. 264, holding that to oust the defendant from the lots without giving him a chance to recover what his father and he himself had spent may amount to a virtual forfeiture of valuable rights. As further reasons for allowing a period within which defendant could fulfill his obligation, the respondent court held that there exists good reasons therefor, having in mind that which affords greater reciprocity of rights (Ramos vs. Blas, 51 O.G. 1920); that after appellant had testified that plaintiff failed to comply with his part of the contract to put up the requisite facilities in the subdivision, plaintiff did not introduce any evidence to rebut defendant's testimony but simply relied. upon the presumption that the law has been obeyed, thus said presumption had been successfully rebutted as Exhibit "5-D" shows that the road therein shown is not paved The Court, however, concedes that plaintiff's failure to comply with his obligation to put up the necessary facilities in the subdivision will not deter him from asking f r the rescission of the agreement since this obligation is not correlative with defendant's obligation to buy the property. Petitioner assails the decision of the Court of Appeals for the following alleged errors: I. The Honorable Court of Appeals erred in applying paragraph 3, Article 1191 of the Civil Code which refers to reciprocal obligations in general and, pursuant thereto, in granting respondent Lapuz a period of ninety (90) days from entry of judgment within which to pay the balance of the purchase price. II. The Honorable Court of Appeals erred in not holding that Article 1592 of the same Code, which specifically covers sales of immovable property and which constitutes an exception to the third paragraph of Article 1191 of said Code, is applicable to the present case. III. The Honorable Court of Appeals erred in not holding that respondent Lapuz cannot avail of the provisions of Article 1191, paragraph 3 of the Civil Code aforesaid because he did not raise in his answer or in any of the pleadings he

filed in the trial court the question of whether or not he is entitled, by reason of a just cause, to a fixing of a new period. IV. Assuming arguendo that the agreement entered into by and between petitioner and respondent Lapuz was a mere promise to sell or contract to sell, under which title to the lots in question did not pass from petitioner to respondent, still the Honorable Court of Appeals erred in not holding that aforesaid respondent is not entitled to a new period within which to pay petitioner the balance of P11,434.44 interest due on the purchase price of P12.325.00 of the lots. V. Assuming arguendo that paragraph 3, Article 1191 of the Civil Code is applicable and may be availed of by respondent, the Honorable Court of Appeals nonetheless erred in not declaring that aid respondent has not shown the existence of a just cause which would authorize said Court to fix a new period within which to pay the balance aforesaid. VI. The Honorable Court of Appeals erred in reconsidering its original decision promulgated on April 23, 1970 which affirmed the decision of the trial court. The above errors may, however, be synthesized into one issue and that is, whether private respondent is entitled to the Benefits of the third paragraph of Article 1191, New Civil Code, for the fixing of period within which he should comply with what is incumbent upon him, and that is to pay the balance of P11,434,44 with interest thereon at the rate of 8% 1et annum from August 17, 1955 until fully paid since private respondent had paid only P150.00 as deposit and 4 months intallments amounting to P740.46, or a total of P890.46, the total price of the two lots agreed upon being P12,325.00. For his part, petitioner maintains that respondent is not entitled to the Benefits of paragraph 3, Article 1191, NCC and that instead, Article 1592 of the New Civil Code which specifically covers sales of immovable property and which constitute an exception to the third paragraph of Art. 1191 of aid Code, is the applicable law to the case at bar. In resolving petitioner's assignment of errors, it is well that We lay clown the oda provisions and pertinent rulings of the Supreme Court bearing on the crucial issue of whether Art. 1191, paragraph 3 of the New Civil Code applies to the case at Bar as held by the appellate court and supported by the private respondent, or Art. 1592 of the same Code which petitioner strongly argues in view of the peculiar facts and circumstances attending this case. Article 1191, New Civil Code, provides: Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one at the obligors should not comply with hat is incumbent upon him The injured partner 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 fulfillment, 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. Article 1592 also provides: Art. 1592. In the sale of immovable property, even though it may have been stipulated that upon failure to pay the price at the time agreed upon the rescission of the contract shall of right take place, the vendee may pay, even after the expiration of the period, as long as no demand for rescission of the contract has been made upon him either judicially or by a notarial act. After the demand, the court may not grant him a new term. The controlling and latest jurisprudence is established and settled in the celebrated case of Luzon Brokerage Co., Inc. vs. Maritime Building Co., Inc. and Myers Building Co., G.R. No. L-25885, January 31, 1972, 43 SCRA 93, originally decided in 1972, reiterated in the Resolution on Motion to Reconsider dated August 18, 1972, 46 SCRA 381 and emphatically repeated in the Resolution on Second Motion for Reconsideration promulgated November 16, 1978, 86 SCRA 309, which

once more denied Maritimes Second Motion for Reconsideration of October 7, 1972. In the original decision, the Supreme Court speaking thru Justice J.B.L. Reyes said: Under the circumstances, the action of Maritime in suspending payments to Myers Corporation was a breach of contract tainted with fraud or malice (dolo), as distinguished from mere negligence (culpa), "dolo" being succinctly defined as a "conscious and intention design to evade the normal fulfillment of existing obligations" (Capistrano, Civil Code of the Philippines, Vol. 3, page 38), and therefore incompatible with good faith (Castan, Derecho Civil, 7th Ed., Vol. 3, page 129; Diaz Pairo, Teoria de Obligaciones, Vol. 1, page 116). Maritime having acted in bad faith, it was not entitled to ask the court to give it further time to make payment and thereby erase the default or breach that it had deliberately incurred. Thus the lower court committed no error in refusing to extend the periods for payment. To do otherwise would be to sanction a deliberate and reiterated infringement of the contractual obligations incurred by Maritime, an attitude repugnant to the stability and obligatory force of contracts. The decision reiterated the rule pointed out by the Supreme Court in Manuel vs. Rodriguez, 109 Phil. 1, p. 10, that: In contracts to sell, where ownership is retained by the seller and is not to pass until the fun payment of the price, such payment, as we said is a positive suspensive condition, the failure of which is not a breach, casual or serious, but simply an event that prevented the obligation of the vendor to convey title from acquiring binding i force in accordance with Article 1117 of the Old Civil Code. To argue that there was only a casual breach is to proceed from the assumption that the contract is one of absolute sale, where non-payment is a resolutory condition, which is not the case." Continuing, the Supreme Court declared: ... appellant overlooks that its contract with appellee Myers s not the ordinary sale envisaged by Article 1592, transferring ownership simultaneously with the delivery of the real property sold, but one in which the vendor retained ownership of the immovable object of the sale, merely undertaking to convey it provided the buyer strictly complied with the terms of the contract (see paragraph [d], ante page 5). In suing to recover possession of the building from Maritime appellee Myers is not after the resolution or setting aside of the contract and the restoration of the parties to the status quo ante as contemplated by Article 1592, but precisely enforcing the Provisions of the agreement that it is no longer obligated to part with the ownership or possession of the property because Maritime failed to comply with the specific condition precedent, which is to pay the installments as they fell due. The distinction between contracts of sale and contracts to sell with reserved title has been recognized by this Court in repeated decisions upholding the power of promisors under contracts to sell in case of failure of the other party to complete payment, to extrajudicially terminate the operation of the contract, refuse conveyance and retain the sums or installments already received, where such rights are expressly provided for, as in the case at bar. In the Resolution denying the first Motion for Reconsideration, 46 SCRA 381, the Court again speaking thru Justice J.B.L. Reyes, reiterated the rule that in a contract to sell, the full payment of the price through the punctual performance of the monthly payments is a condition precedent to the execution of the final sale 4nd to the transfer of the property from the owner to the proposed buyer; so that there will be no actual sale until and unless full payment is made. The Court further ruled that in seeking to oust Maritime for failure to pay the price as agreed upon, Myers was not rescinding (or more properly, resolving) the contract but precisely enforcing it according to its expressed terms. In its suit, Myers was not seeking restitution to it of the ownership of the thing sold (since it was never disposed of), such restoration being the logical consequence of the fulfillment of a resolutory condition, expressed or implied (Art. 1190); neither was it seeking a declaration that its obligation to sell was extinguished. What is sought was a judicial declaration

that because the suspensive condition (full and punctual payment) had not been fulfilled, its obligation to sell to Maritime never arose or never became effective and, therefore, it (Myers) was entitled to repossess the property object of the contract, possession being a mere incident to its right of ownership. The decision also stressed that "there can be no rescission or resolution of an obligation as yet nonexistent, because the suspensive condition did not happen. Article 1592 of the New Civil Code (Art. 1504 of Old Civil Code) requiring demand by suit or notarial act in case the vendor of realty wants to rescind does not apply to a contract to sell or promise to sell, where title remains with the vendor until fulfillment to a positive condition, such as full payment of the price." (Manuel vs, Rodriguez, 109 Phil. 9) Maritime's Second Motion for Reconsideration was denied in the Resolution of the Court dated November 16, 1978, 86 SCRA 305, where the governing law and precedents were briefly summarized in the strong and emphatic language of Justice Teehankee, thus: (a) The contract between the parties was a contract to sell or conditional sale with title expressly reserved in the vendor Myers Building Co., Inc. Myers until the suspensive condition of full and punctual payment of the full price shall have been met on pain of automatic cancellation of the contract upon failure to pay any of the monthly installments when due and retention of the sums theretofore paid as rentals. When the vendee, appellant Maritime, willfully and in bad faith failed since March, 1961 to pay the P5,000. monthly installments notwithstanding that it was punctually collecting P10,000. monthly rentals from the lessee Luzon Brokerage Co., Myers was entitled, as it did in law and fact, to enforce the terms of the contract to sell and to declare the same terminated and cancelled. (b) Article 1592 (formerly Article 1504) of the new Civil Code is not applicable to such contracts to self or conditional sales and no error was committed by the trial court in refusing to extend the periods for payment. (c) As stressed in the Court's decision, "it is irrelevant whether appellant Maritime's infringement of its contract was casual or serious" for as pointed out in Manuel vs. Rodriguez, '(I)n contracts to self. whether ownership is retained by the seller and is not to pass until the full payment of the price, such payment, as we said, is a positive suspensive condition, the failure of which is not a breach, casual or serious, but simply an event that prevented the obligation of the vendor to convey title from acquiring binding force ... (d) It should be noted, however, that Maritimes breach was far from casual but a most serious breach of contract ... (e) Even if the contract were considered an unconditional sale so that Article 1592 of the Civil Code could be deemed applicable, Myers' answer to the complaint for interpleaded in the court below constituted a judicial demand for rescission of the contract and by the very provision of the cited codal article, 'after the demand, the court may not grant him a new term for payment; and (f) Assumming further that Article 1191 of the new Civil Code governing rescission of reciprocal obligations could be applied (although Article 1592 of the same Code is controlling since it deals specifically with sales of real property), said article provides that '(T)he court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period' and there exists to "just cause" as shown above for the fixing of a further period. ... Under the first and second assignments of error which petitioner jointly discusses, he argues that the agreement entered into between him and the respondent is a perfected contract of purchase and sale within the meaning of Article 1475 of the New Civil Code which provides that "the contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contract." Petitioner contends that "(n)othing in the decision of the courts below would show that ownership of the property remained with plaintiff for so long as the installments have not been fully paid. Which yields the conclusion that, by the delivery of the lots to defendant, ownership likewise was

transferred to the latter." (Brief for the Petitioner, p. 15) And he concludes that the sale was consummated by the delivery of the two lots, the subject thereof, by him to the respondent. Under the findings of facts by the appellate court, it appears that the two lots subject of the agreement between the parties herein were delivered by the petitioner to the private respondent who took possession thereof and occupied the same and thereafter built his house thereon, enclosing the lots with adobe stone walls and barbed wires. But the property being registered under the Land Registration Act, it is the act of registration of the Deed of Sale which could legally effect the transfer of title of ownership to the transferee, pursuant to Section 50 of Act 496. (Manuel vs. Rodriguez, et al., 109 Phil. 1; Buzon vs. Lichauco, 13 Phil. 354; Tuazon vs. Raymundo, 28 Phil. 635: Worcestor vs. Ocampo, 34 Phil. 646). Hence, We hold that the contract between the petitioner and the respondent was a contract to sell where the ownership or title is retained by the seller and is not to pass until the full payment of the price, such payment being a positive suspensive condition and failure of which is not a breach, casual or serious, but simply an event that prevented the obligation of the vendor to convey title from acquiring binding force. In the case at bar, there is no writing or document evidencing the agreement originally entered into between petitioner and private respondent except the receipt showing the initial deposit of P150.00 as shown in Exh. "A" and the payment of the 4- months installment made by respondent corresponding to July, 1954 to October, 1954 in the sum of P740.56 as shown in Exh. "B". Neither is there any writing or document evidencing the modified agreement when the 3 lots were changed to Lots 4 and 12 with a reduced area of 725 sq. meters, which are corner lots. This absence of a formal deed of conveyance is a very strong indication that the parties did not intend immediate transfer of ownership and title, but only a transfer after full payment of the price. Parenthetically, We must say that the standard printed contracts for the sale of the lots in the Rockville Subdivision on a monthly installment basis showing the terms and conditions thereof are immaterial to the case at bar since they have not been signed by either of the parties to this case. Upon the law and jurisprudence hereinabove cited and considering the nature of the transaction or agreement between petitioner and respondent which We affirm and sustain to be a contract to sell, the following resolutions of petitioner's assignment of errors necessarily arise, and so We hold that: 1. The first and second assignments of errors are without merit. The overwhelming weight of authority culminating in the Luzon Brokerage vs. Maritime cases has laid down the rule that Article 1592 of the New Civil Code does not apply to a contract to sell where title remains with the vendor until full payment of the price as in the case at bar. This is the ruling in Caridad Estates vs. Santero, 71 Phil. 120; Aldea vs. Inquimboy 86 Phil. 1601; Jocon vs. Capitol Subdivision, Inc., L-6573, Feb. 28, 1955; Miranda vs. Caridad Estates, L-2077 and Aspuria vs. Caridad Estates, L-2121 Oct. 3, 1950, all reiterated in Manuel vs. Rodriguez, et al. 109 Phil. 1, L-13435, July 27, 1960. We agree with the respondent Court of Appeals that Art, 1191 of the New Civil Code is the applicable provision where the obligee, like petitioner herein, elects to rescind or cancel his obligation to deliver the ownership of the two lots in question for failure of the respondent to pay in fun the purchase price on the basis of 120 monthly equal installments, promptly and punctually for a period of 10 years. 2. We hold that respondent as obligor is not entitled to the benefits of paragraph 3 of Art. 1191, NCC Having been in default, he is not entitled to the new period of 90 days from entry of judgment within which to pay petitioner the balance of P11,434.44 with interest due on the purchase price of P12,325.00 for the two lots. Respondent a paid P150.00 as deposit under Exh. "A" and P740.56 for the 4-months installments corresponding to the months of July to October, 1954. The judgment of the lower court and the Court of Appeals held that respondent was under the obligation to pay the purchase price of the lots m question on an equal monthly installment basis for a period of ten years, or 120 equal monthly installments. Beginning November, 1954, respondent began to default in complying with his obligation and continued to do so for the remaining 116 monthly interest. His refusal to pay further installments on the purchase price, his insistence that he had the option to pay the purchase price any time in ten years inspire of the clearness and certainty of his agreement with the petitioner as evidenced further by the receipt, Exh. "B", his dilatory tactic of refusing to sign the necessary contract of sale on the pretext that he will sign later when he shall have updated his monthly payments in arrears but which he never attempted to update, and his failure to deposit or make

available any amount since the execution of Exh "B" on June 28, 1954 up to the present or a period of 26 years, are all unreasonable and unjustified which altogether manifest clear bad faith and malice on the part of respondent puzzle making inapplicable and unwarranted the benefits of paragraph 3, Art. 1191, N.C.C. To allow and grant respondent an additional period for him to pay the balance of the purchase price, which balance is about 92% of the agreed price, would be tantamount to excusing his bad faith and sanctioning the deliberate infringement of a contractual obligation that is repugnant and contrary to the stability, security and obligatory force of contracts. Moreover, respondent's failure to pay the succeeding 116 monthly installments after paying only 4 monthly installments is a substantial and material breach on his part, not merely casual, which takes the case out of the application of the benefits of pa paragraph 3, Art. 1191, N.C.C. At any rate, the fact that respondent failed to comply with the suspensive condition which is the full payment of the price through the punctual performance of the monthly payments rendered petitioner's obligation to sell ineffective and, therefore, petitioner was entitled to repossess the property object of the contract, possession being a mere incident to his right of ownership (Luzon Brokerage Co., Inc. vs. Maritime Building Co., Inc., et al. 46 SCRA 381). 3. We further rule that there exists no just cause authorizing the fixing of a new period within which private respondent may pay the balance of the purchase price. The equitable grounds or considerations which are the basis of the respondent court in the fixing of an additional period because respondent had constructed valuable improvements on the land, that he has built his house on the property worth P45,000.00 and placed adobe stone walls with barbed wires around, do not warrant the fixing of an additional period. We cannot sanction this claim for equity of the respondent for to grant the same would place the vendor at the mercy of the vendee who can easily construct substantial improvements on the land but beyond the capacity of the vendor to reimburse in case he elects to rescind the contract by reason of the vendee's default or deliberate refusal to pay or continue paying the purchase price of the land. Under this design, strategem or scheme, the vendee can cleverly and easily "improve out" the vendor of his land. More than that, respondent has not been honest, fair and reciprocal with the petitioner, hence it would not be fair and reasonable to the petitioner to apply a solution that affords greater reciprocity of rights which the appealed decision tried to effect between the parties. As matters stand, respondent has been enjoying the possession and occupancy of the land without paying the other 116 monthly installments as they fall due. The scales of justice are already tipped in respondent,s favor under the amended decision of the respondent court. It is only right that We strive and search for the application of the law whereby every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith (Art. 19, New Civil Code) In the case at bar, respondent has not acted in good faith. With malice and deliberate intent, he has twisted the clear import of his agreement with the petitioner in order to suit his ends and delay the fulfillment of his obligation to pay the land he had enjoyed for the last 26 years, more than twice the period of ten years that he obliged himself to complete payment of the price. 4. Respondent's contention that petitioner has not complied with his obligation to put up the necessary facilities in the Rockville Subdivision is not sufficient nor does it constitute good reason to justify the grant of an additional period of 90 days from entry of judgment within which respondent may pay the balance of the purchase price agreed upon. The Judgment of the appellate court concedes that petitioner's failure to comply with his obligation to put up the necessary facilities in the subdivision will not deter him from asking for the rescission of the agreement since his obligation is not correlative with respondent's obligation to buy the property. Since this is so conceded, then the right of the petitioner to rescind the agreement upon the happening or in the event that respondent fails or defaults in any of the monthly installments would be rendered nugatory and ineffective. The right of rescission would then depend upon an extraneous consideration which the law does not contemplate. Besides, at the rate the two lots were sold to respondent with a combined area of 725 sq. meters at the uniform price of P17.00 per sq. meter making a total price of P12,325.00, it is highly doubtful if not improbable that aside from his obligation to deliver title and transfer ownership to the respondent as a reciprocal obligation to that of the respondent in paying the price in full and promptly as the installments fall due, petitioner would have assumed the additional obligation "to provide the subdivision with streets ... provide said streets with street pavements concrete curbs and

gutters, fillings as required by regulations, adequate drainage facilities, tree plantings, adequate water facilities" as required under Ordinance No. 2969 of Quezon City approved on May 11, 1956 (Answer of Defendant, Record on Appeal, pp. 35-36) which was two years after the agreement in question was entered into June, 1y54. The fact remains, however, that respondent has not protested to the petitioner nor to the authorities concerned the alleged failure of petitioner to put up and provide such facilities in the subdivision because he knew too well that he has paid only the aggregate sum of P890.56 which represents more or less 7% of the agreed price of P12,325.00 and that he has not paid the real estate taxes assessed by the government on his house erected on the property under litigation. Neither has respondent made any allegation in his Answer and in all his pleadings before the court up to the promulgation of the Resolution dated October 12, 1970 by the Court of Appeals, to the effect that he was entitled to a new period within which to comply with his obligation, hence the Court could not proceed to do so unless the Answer is first amended. (Gregorio Araneta, Inc. vs. Philippine Sugar Estates Development Co., Ltd., G.R. No. L-22558, May 31, 1967, 20 SCRA 330, 335). It is quite clear that it is already too late in the day for respondent to claim an additional period within which to comply with his obligation. Precedents there are in Philippine jurisprudence where the Supreme Court granted the buyer of real property additional period within which to complete payment of the purchase price on grounds of equity and justice as in (1) J.M. Tuazon Co., Inc. vs. Javier, 31 SCRA 829 where the vendee religiously satisfied the monthly installments for eight years and paid a total of P4,134.08 including interests on the principal obligation of only P3,691.20, the price of the land; after default, the vendee was willing to pay all arrears, in fact offered the same to the vendor; the court granted an additional period of 60 days -from receipt of judgment for the vendee to make all installment in arrears plus interest; (2) in Legarda Hermanos vs. Saldaa, 55 SCRA 324, the Court ruled that where one purchase, from a subdivision owner two lots and has paid more than the value of one lot, the former is entitled to a certificate of title to one lot in case of default. On the other hand there are also cases where rescission was not granted and no new or additional period was authorized. Thus, in Caridad Estates vs. Santero, 71 Phil. 114, the vendee paid, totalling P7,590.00 or about 25% of the purchase price of P30,000.00 for the three lots involved and when the vendor demanded revocation upon the vendee's default two years after, the vendee offered to pay the arears in check which the vendor refused; and the Court sustained the revocation and ordered the vendee ousted from the possession of the land. In Ayala y Cia vs. Arcache, 98 Phil. 273, the total price of the land was P457,404.00 payable in installments; the buyer initially paid P100,000.00 or about 25% of the agreed price; the Court ordered rescission in view of the substantial breach and granted no extension to the vendee to comply with his obligation. The doctrinal rulings that "a slight or casual breach of contract is not a ground for rescission. It must be so substantial and fundamental to defeat the object of the parties" (Gregorio Araneta Inc. vs. Tuazon de Paterno, L-2886, August 22, 1962; Villanueva vs. Yulo, L-12985, Dec. 29,1959); that "where time is not of the essence of t agreement, a slight delay on the part of one party in the performance of his obligation is not a sufficient ground for the rescission of the agreement"( Biando vs. Embestro L-11919, July 27, 1959; cases cited in Notes appended to Universal Foods Corporation vs. Court of Appeals, 33 SCRA 1), convince and persuade Us that in the case at bar where the breach, delay or default was committed as early as in the payment of the fifth monthly installment for November, 1954, that such failure continued and persisted the next month and every month thereafter in 1955, 1956, 1957 and year after year to the end of the ten-year period in 1964 (10 years is respondent's contention) and even to this time, now more than twice as long a time as the original period without respondent adding, or even offering to add a single centavo to the sum he had originally paid in 1954 which represents a mere 7% of the total price agreed upon, equity and justice may not be invoked and applied. One who seeks equity and justice must come to court with clean hands, which can hardly be said of the private respondent. One final point, on the supposed substantial improvements erected on the land, respondent's house. To grant the period to the respondent because of the substantial value of his house is to make the land an accessory to the house. This is unjust and unconscionable since it is a rule in Our Law that buildings and constructions are regarded as mere accessories to the land which is the principal, following the Roman maxim "omne quod solo inadeficatur solo cedit" (Everything that is built on the soil yields to the soil).

Pursuant to Art. 1191, New Civil Code, petitioner is entitled to rescission with payment of damages which the trial court and the appellate court, in the latter's original decision, granted in the form of rental at the rate of P60.00 per month from August, 1955 until respondent shall have actually vacated the premises, plus P2,000.00 as attorney's fees. We affirm the same to be fair and reasonable. We also sustain the right of the petitioner to the possession of the land, ordering thereby respondent to vacate the same and remove his house therefrom. WHEREFORE, IN VIEW OF THE FOREGOING, the Resolution appealed from dated October 12, 1970 is hereby REVERSED. The decision of the respondent court dated April 23, 1970 is hereby REINSTATED and AFFIRMED, with costs against private respondent. SO ORDERED.

G.R. No. L-39378 August 28, 1984 GENEROSA AYSON-SIMON, plaintiff-appellee, vs. NICOLAS ADAMOS and VICENTA FERIA, defendants-appellants. Wenceslao V. Jarin for plaintiff-appellee. Arnovit, Lacre & Adamos for defendants-appellants. MELENCIO-HERRERA, J.: Originally, this was an appeal by defendants from the Decision of the then Court of First Instance of Manila, Branch XX, in Civil Case No. 73942, to the Court of Appeals (now Intermediate Appellate Court), which Tribunal, certified the case to us because the issue is a pure question of law. On December 13, 1943, Nicolas Adamos and Vicente Feria, defendants-appellants herein, purchased two lots forming part of the Piedad Estate in Quezon City, with an area of approximately 56,395 square meters, from Juan Porciuncula. Sometime thereafter, the successors-in-interest of the latter filed Civil Case No. 174 in the then Court of First Instance of Quezon City for annulment of the sale and the cancellation of Transfer Certificate of Title No. 69475, which had been issued to defendants-appellants by virtue of the disputed sale. On December 18, 1963, the Court rendered a Decision annulling the sale, cancelling TCT 69475, and authorizing the issuance of a new title in favor of Porciuncula's successors-in-interest. The said judgment was affirmed by the Appellate Court and had attained finality. In the meantime, on May 29, 1946, during the pendency of the above-mentioned case, defendantsappellants sold to GENEROSA Ayson Simon, plaintiff-appellee herein, the two lots in question for P3,800.00 each, plus an additional P800.00 paid subsequently for the purpose of facilitating the issuance of new titles in GENEROSA's name. Due to the failure of defendants-appellants to comply with their commitment to have the subdivision plan of the lots approved and to deliver the titles and possession to GENEROSA, the latter filed suit for specific performance before the Court of First Instance of Quezon City on September 4, 1963 (Civil Case No. Q-7275). On January 20, 1964, said Court ordered: WHEREFORE, the plaintiff is declared entitled to a summary judgment and the defendants are hereby ordered to have the subdivision of Lot No. 6, Block No. 2, and Lot No. 11, Block No. 3, relocated and resurveyed and the subdivision plan approved and, if not possible for one reason or another, and in case of the absence or loss of said subdivision, to cause and effect the subdivision of the said lots and deliver the titles and possession thereof to the plaintiff. As to the claim and counterclaim for damages, let the hearing thereon be deferred until further move by the parties. 1 However, since execution of the foregoing Order was rendered impossible because of the judgment in Civil Case No. 174, which earlier declared the sale of the lots in question by Juan Porciuncula to defendants-appellants to be null and void, GENEROSA filed, on August 16, 1968, another suit in the Court of First Instance of Manila (Civil Case No. 73942) for rescission of the sale with damages. On June 7, 1969, the Court rendered judgment, the dispositive portion of which reads: WHEREFORE, judgment is rendered in favor of the plaintiff and against defendants, ordering the latter jointly and severally, to pay the former the sum of P7,600.00, the total amount received by them from her as purchase price of the two lots, with legal rate of interest from May 29, 1946 until fully paid; another sum of P800.00, with legal rate 6f interest from August 1, 1966 until fully paid; the sum of P1,000 for attorney's fees; and the costs of this suit. 2 Hence, the appeal before the Appellate Court on the ground that GENEROSA's action had prescribed, considering that she had only four years from May 29, 1946, the date of sale, within which to rescind said transaction, and that her complaint for specific performance may be deemed as a waiver of her right to rescission since the fulfillment and rescission of an obligation are alternative and not cumulative remedies. The appeal is without merit. The Trial Court presided by then Judge, later Court of Appeals Associate Justice Luis B. Reyes, correctly resolved the issues, reiterated in the assignments of error on appeal, as follows:

Defendants contend (1) that the fulfillment and the rescission of the obligation in reciprocal ones are alternative remedies, and plaintiff having chosen fulfillment in Civil Case No. Q- 7525, she cannot now seek rescission; and (2) that even if plaintiff could seek rescission the action to rescind the obligation has prescribed. The first contention is without merit. The rule that the injured party can only choose between fulfillment and rescission of the obligation, and cannot have both, applies when the obligation is possible of fulfillment. If, as in this case, the fulfillment has become impossible, Article 1191 3 allows the injured party to seek rescission even after he has chosen fulfillment. True it is that in Civil Case No. 7275 the Court already rendered a Decision in favor of plaintiff, but since defendants cannot fulfill their obligation to deliver the titles to and possession of the lots to plaintiff, the portion of the decision requiring them to fulfill their obligations is without force and effect. Only that portion relative to the payment of damages remains in the dispositive part of the decision, since in either case (fulfillment or rescission) defendants may be required to pay damages. The next question to determine is whether the action to rescind the obligation has prescribed. Article 1191 of the Civil Code provides that the injured party may also seek rescission, if the fulfillment should become impossible. The cause of action to claim rescission arises when the fulfillment of the obligation became impossible when the Court of First Instance of Quezon City in Civil Case No. 174 declared the sale of the land to defendants by Juan Porciuncula a complete nullity and ordered the cancellation of Transfer Certificate of Title No. 69475 issued to them. Since the two lots sold to plaintiff by defendants form part of the land involved in Civil Case No. 174, it became impossible for defendants to secure and deliver the titles to and the possession of the lots to plaintiff. But plaintiff had to wait for the finality of the decision in Civil Case No. 174, According to the certification of the clerk of the Court of First Instance of Quezon City (Exhibit "E-2"), the decision in Civil Case No. 174 became final and executory "as per entry of Judgment dated May 3, 1967 of the Court of Appeals." The action for rescission must be commenced within four years from that date, May 3, 1967. Since the complaint for rescission was filed on August 16, 1968, the four year period within which the action must be commenced had not expired. Defendants have the obligation to return to plaintiff the amount of P7,600.00 representing the purchase price of the two lots, and the amount of P800.00 which they received from plaintiff to expedite the issuance of titles but which they could not secure by reason of the decision in Civil Case No. 174. Defendant has to pay interest at the legal rate on the amount of P7,600.00 from May 29, 1946, when they received the amount upon the execution of the deeds of sale, and legal interest on the P800.00 from August 1, 1966, when they received the same from plaintiff. 4 WHEREFORE, the appealed judgment of the former Court of First Instance of Manila, Branch XX, in Civil Case No. 73942, dated June 7, 1969, is hereby affirmed in toto. Costs against defendantsappellants. SO ORDERED.