Article 1191

Laperal vs. Solid Homes, Inc.

GR No. 130913
June 21, 2005
Garcia, J.:
Facts:
Filipinas Golf Sales and Development Corporation, predecessor-in-interest of Filipinas Golf
and CountryClub, Inc., represented by its then President, Oliverio Laperal, entered into a
Development and Management Agreement with respondent Solid Homes, Inc., a
registered subdivision developer, involving several parcelsof land owned by Laperal
and FGSDC. Under the terms and conditions of the aforementioned Agreement and the
Supplement, respondent undertook to convert at its own expense the land subject of the
agreement into a first-class residential subdivision, in consideration of which respondent will
get 45% of the lot titles of the saleable area in the entire project. The aforementioned
Agreement was cancelled by the parties, and, inlieu thereof, two contracts identically
denominated Revised Development and Management Agreement were entered into by
respondent with the two successors-in-interest of FGSDC. Unlike the original agreement,
both Revised Agreements omitted the obligation of petitioners Laperal and FGCCI to make
available torespondent Solid Homes, Inc. the owners duplicate copies of the titles covering
the subject parcels of land. It appears, however, that even as the Revised Agreements
already provided for the non-surrender of the owners duplicate copies of the titles,
respondent persisted in its request for the delivery thereof .Then, petitioners served on
respondent notices of rescission of the Revised Agreements with a demand to vacate the
subject properties and yield possession thereof to them.
Issue:
Whether the termination of the Revised Agreement and Addendum, because of
the contractual breachcommitted by respondent Solid Homes, carried with it the
effect provided under Article 1385 of the New Civil Code.
Ruling:
Mutual restitution is required in cases involving rescission under Article 1191.
Since Article 1385 of the CivilCode expressly and clearly states that rescission
creates the obligation to return the things which were the object of the contract,
together with their fruits, and the price with its interest, the Court finds no
justification to sustain petitioners position that said Article 1385 does not apply
to rescission under Article 1191.As a consequence of the resolution by petitioners,
rights to the lot should be restored to private respondent or the same should be
replaced by another acceptable lot. Applying the clear language of the law and
the consistent jurisprudence on the matter, therefore, the Court rules that

rescission under Article 1191 in the present case, carries with it the corresponding
obligation of restitution.
Fallo:
The petition is hereby granted. Accordingly, the assailed decision and resolution of
the Court of Appeals are reversed and set side and the decision dated December
19, 1991 of the Regional Trial Court is reinstated. No pronouncement as to costs.