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Cell Members: Senoran, Art Aries; Taningco, Kevin; Te, Aaron Go

GR No. 164891
June 6, 2011
Virginia M. Guadines v. Sandiganbayan, Et. Al.

Facts: Petitioner ownes and manages V.M. Construction Supply, an entity that provides
construction materials. There was a bidding conducted by the municipal treasurer of the
Polilio, Quezon, Naime Ayuma, upon the instruction of the Provincial Treasurer of
Quezon. The contract was eventually awarded to the petitioners company. Subsequently,
a purchase order was issued by the Provincial Government of Quezon for construction
materials in the total price of P 83,228.00. On a later date, the materials, consisting of
lumber were stockpiled along the road about five meters away from the Navotas Bridge.
A team of Department of Environment and Natural Resources officials then confiscated
73 pieces of lumber stockpiled by the petitioner-supplier. Custody of these lumber were
taken by Bernie Azaula, who was then Barangay Captain and member of the
Sangguniang Bayan. Upon the completion of repair and construction of the said bridge in
accordance with Kapasiyahan issued by the Municipal Government, despite warnings
from forest rangers, payment was made in favor of the petitioner, as the specified
contractor in the agreement, pursuant to the purchase order. Thus, petitioner questions the
decision of the Sandiganbayan to return said amount to the Province of Quezon. The
Sandiganbayan has reduced the amount, representing payment of confiscated lumber to
P 70,924.00
Issue: Whether or not petitioner is authorized to receive payment for fulfillment of her
obligations in the contract.
Cell Members: Senoran, Art Aries; Taningco, Kevin; Te, Aaron Go

Held: The Supreme Court, in concurrence with the decision of the Sandiganbayan, held that the
petitioner is not authorized to receive payment. In the first instance, the lumbers provided
were acquired in a manner contrary to forestry laws. Therefore, it caused undue injury to
the government. Also, the High Court held that basic is the rule that contracts should not
be contrary to existing laws and regulations When the government confiscated the
materials consisting of lumber, they have acquired ownership over the thing. Thus, the
right of ownership by petitioner ceased upon confiscation. The Sandiganbayan, in its
decision, cited Article 1240 of the Civil Code, which states that payment shall be made to
the person in whose favor the obligation has been constituted, or his successor in interest
or any person authorized to receive it. Since the lumber had already been confiscated, the
petitioner has no right to receive payment. The payment of the made in her favor by the
Province of Quezon did not produce any legal effect. Therefore, petitioners claims were
found without merit.

Cell Members: Senoran, Art Aries; Taningco, Kevin; Te, Aaron Go

GR No. 188064
Mila A. Reyes v. Victoria T. Tuparan
June 1. 2011

Facts: Mila A. Reyes, petitioner, alleged that she was the registered owner of a 1,274 residential
and commercial lot located in Karuhatan, Valenzuela City where she put up a three-
storey commercial building known as RBJ Building. The petitioner then decided to
mortgage the said real properties to the Farmers Savings Bank and Loan Bank Inc. to
have a loan of P2,000,000.00 on June 20, 1988 payable in installments. The petitioner
then wanted to liquidate her bank loan and finance her businesses so she decided to sell
her real properties. Respondent, Victoria T. Tuparan, verbally offered to conditionally
buy the real properties of the petitioner for P4,200,000.00 payable on installment basis
and without interest. The respondent will also assume the bank loan. On November 26,
1990, the parties and FSL Bank executed the corresponding Deed of Conditional Sale of
Real Properties with Assumption of Mortgage. Under the deal, the respondent needs to
pay the petitioner P1,200,000.00 without interest as part of the purchase. As of August
31, 1992, respondent had only paid P395,000.00, leaving a balance of P805,000.00. The
petitioner then filed a complaint for Rescission of Contract with Damages against the
respondent on Regional Trial Court, Branch 172 on Valenzuela City. The ruling of the
RTC allows the defendant to pay the remaining balance of P805,000.00 within 30 days
and upon full payment the plaintiff should execute the necessary deed of sale. But failure
to do so within the said period will result to the rescission of the contract. The Court of
Cell Members: Senoran, Art Aries; Taningco, Kevin; Te, Aaron Go

Appeals affirmed the decision of the RTC with modification. Petitioner then filed a
petition for review of the decision of the Court of Appeals.
Issue: Whether or not the subject deed of conditional sale is rescissible on the ground of
respondents failure to pay the remaining balance; thus, constituting a breach of contract.
Held: The Court, in affirmation of the ruling of the courts below, held that the contract cannot
be subject to rescission since there was only a slight or casual breach in the fulfillment of
the obligation. The Court first distinguished a contract of sale from a contract to sell.
Sale, by nature, is a consensual contract because it is perfected by mere consent.
However, in a contract to sell, mere consent is not tantamount to the perfection of the
contract. It is only a reservation of the prospective seller to transfer the title to the
prospective buyer. Since the contract is not a contract of sale, but rather a contract to sell,
failure to pay the obligation in full is not a breach of contract. The obligation of the seller
to sell becomes demandable only upon the happening of a suspensive condition.
Therefore, there can be no rescission of an obligation that did not take place. Moreover, it
is not rescissible since the breach is not substantial or fundamental to the fulfillment of
the obligation. In the case at bar, petitioner was willing to settle the balance, as
manifested by an offer to pay P 751.000.00. Therefore, in lieu of her sincerity to comply,
the Court affirmed the decision of the lower courts to allow her to settle the remaining
obligation, instead of a rescission of the contract.