ASB Realty v. Ortigas & Co. LTD

G.R. No. 202947

December 9, 2015

 ASB REALTY REALTY CORPORATION CORPORATION,, vs. PARTNERSHIP

ORTIGAS & COMPANY COMPANY LIMITED

Civil Law; Contract; Rescission of contracts. Rescission is proper if one of the parties to the contract commits a substantial breach of its provisions. It abrogates the contract from its inception and requires the mutual restitution of the benets received; hence, it can be carried out only when the party who demands rescission can return whatever he may be obliged to restore. ame; ame; !"ect of assignment of contract.#he mere assignment ass ignment of a bilateral e$ecutory contract does not automatically result to the assignee%s assumption of the assignor%s duties, so as to have the e"ect of creating a new liability on the part of the assignee to the other party to the contract assigned. #he assignee of the vendee is under no personal engagement to the vendor where there is no privity between them.

BERSAMIN,  J.:  J.:

FACTS: Ortigas Ortigas & Company Company imite! imite! "artners "artners#ip #ip $Ortigas%, $Ortigas%, entere! into a

Dee! o 'a(e )it# *met#yst "ear( Corporation $*met#yst% on +ne 29, 1994. -#is -#is ino ino( (e! e! t#e t#e parc parce( e( o (an! (an! )i )it# t# an area area o 1,01 1,012 2 s/a s/are re meter meters s sitate! in arrio Oranbo, "asig City an! registere! n!er -C- No. 511 o t#e Register o Dee!s o Ri3a( or t#e consi!eration o "#p 2,024,000.00. Conse/ent(y, t#e Register o Dee!s o Ri3a( cance((e! -C- No. 511 an! isse! isse! -C- No. "-941 "-94175 75 in t#e name name o *met#y *met#yst. st. *n! t#e con!it con!ition ions s containe! in t#e Dee! o 'a(e )ere a(so annotate! on -C- No. "-94175 as encmbrances. -#ereater, *met#yst, on December 2, 199, assigne! t#e sbect property to its so(e stoc6#o(!er, petitioner *' Rea(ty Corporation, n!er a soca((e soca((e! ! Dee! Dee! o *ssignm *ssignment ent in i/i! i/i!ati ation on in consi!e consi!erat ration ion o 10,000 10,000 s#ares o t#e petitioners otstan!ing capita( stoc6. -#s, t#e property )as transerre! to t#e petitioner ree rom any (iens or encmbrances e8cept t#ose !(y annotate! on -C- No. "-94175. -#e Register o Dee!s o Ri3a( cance((e! -C- No. "-94175 an! isse! -C- No. "-105797 in t#e name o  t#e petitio petitioner ner )it )it# # t#e same same encmb encmbran rances ces annota annotate! te! on -C- No. No. "- "- 94175.

De to a((ege! io(ation o t#e terms o t#e Dee! o *bso(te 'a(e, citing among ot#ers t#e constrctions on t#e property )#ic# are commercia( in natre, Ortigas (e! a comp(aint or specic perormance against t#e petitioner beore t#e R-C in "asig City. :t arge! t#at t#e  io(ations committe! by t#e petitioner empo)ers it to ni(atera((y cance( t#e Dee! o *bso(te 'a(e. :t praye! or t#e reconeyance o t#e property or a(ternatie(y, or t#e !emo(ition o t#e strctres an! improements t#ereon. -#e R-C ren!ere! its !ecision an! !ismisse! t#e comp(aint. Ortigas appea(e! to t#e C*, )#ic# initia((y a;irme! t#e R-C !ecision. otion or Reconsi!eration, t#e C* reerse! its preios !ecision an! aore! Ortigas. -#e petitioner appea(e! to t#e C* bt !enie! t#e petitioners >otion or Reconsi!eration or being (e! ot o time. ?ence, t#is petition. ISSUE: @#et#er or not Ortigas a(i!(y rescin!e! t#e Dee! o 'a(e !e to

t#e ai(re o *met#yst an! its assignee, t#e petitioner, to ((( t#e coenants n!er t#e Dee! o 'a(e.

HELD: NEGATIVE. -#e cort grante! t#e petition. Rescission n!er

 *rtic(e 1191 o t#e Cii( Co!e is proper i one o t#e parties to t#e contract commits a sbstantia( breac# o its proisions. :t abrogates t#e contract rom its inception an! re/ires t#e mta( restittion o t#e benets receie!A #ence, it can be carrie! ot on(y )#en t#e party )#o !eman!s rescission can retrn )#ateer #e may be ob(ige! to restore. Ortigas !i! not #ae a case o action against t#e petitioner or t#e rescission o t#e Dee! o 'a(e. -#e essentia( e(ements o a case o action areB $1% a rig#t in aor o t#e p(ainti; by )#ateer means an! n!er )#ateer (a) it arises or is create!A $2% an ob(igation on t#e part o t#e !een!ant not to io(ate sc# rig#tA an! $% an act or omission on t#e part o  t#e !een!ant in io(ation o t#e rig#t o t#e p(ainti; or constitting a breac# o t#e ob(igation o t#e !een!ant to t#e p(ainti; or )#ic# t#e (atter may maintain an action or recoery o !amages or ot#er re(ie. :n t#e case at bar, t#e secon! an! t#ir! e(ements )ere absent. -#e petitioner )as not priy to t#e Dee! o 'a(e becase it )as not t#e party ob(ige! t#ereon. :ts ai(re to comp(y )it# t#e coenants in t#e Dee! o 'a(e !i! not constitte a breac# o contract t#at gae rise to Ortigas rig#t o rescission. :t )as rat#er *met#yst t#at !ea(te! on t#e coenants n!er t#e Dee! o 'a(e. -#e mere assignment o a bi(atera( e8ectory contract !oes not atomatica((y res(t to t#e assignee=s assmption o t#e assignor=s

!ties, so as to #ae t#e e;ect o creating a ne) (iabi(ity on t#e part o t#e assignee to t#e ot#er party to t#e contract assigne!. Conse/ent(y, t#e br!en to perorm t#e coenants n!er t#e Dee! o 'a(e remaine! )it#  *met#ystA #ence, t#e action to enorce t#e proisions o t#e contract or to rescin! t#e contract s#o(! be against *met#yst. .