Spouses Noel John M. Kaw & Josephine Caseres-Kaw v. Heirs of Marilyn Nodalo et al., G.R. No. 263047, November 27, 2024
Facts / Antecedents
1. The Spouses Kaw are registered owners of a parcel of land (Lot F, TCT No. T-158628) located in Cagmanaba, Oas, Albay, with an area of 3,040 sqm.
2. In February 2014, the Kaw spouses, through dentist colleagues (including Ivy Orolfo), introduced the subject property to prospective buyers (respondents, including heirs of Marilyn Nodalo and others). They agreed to sell a 2,000 sqm undivided portion, for ₱1,200,000. The buyers proposed to pay in two 1,000 sqm tranches at ₱600,000 each, with ₱300,000 downpayment and six months for the balance.
3. Two separate “Deeds of Conditional Sale” were executed (one on March 10, 2014; another on March 29, 2014) between Kaw spouses and the various respondents. Under those deeds:
The vendees made partial payments (down payments) toward the total consideration.
The balance was to be paid within six months; failure to do so would permit rescission.
Upon full payment, the vendors (Kaws) would execute and deliver the deed of absolute sale.
Meanwhile, respondents would have beneficial possession and enjoyment.
The deeds also contained a clause that respondents were prohibited from assigning, conveying, or hypothecating their rights under the agreement to third parties without prior written consent of the vendors.
4. After the execution of the contracts, the Kaw spouses were surprised to find that respondents had erected cottages, fences, did improvements, and operated a beach-resort business (renting cottages to third parties) on the subject property. The Kaws contended these acts breached the terms of the deeds (including the prohibition on assignment/letting, the nature of improvements, etc.).
5. Respondents, in turn, asserted they tendered payment of the balance under the conditional sale, but the Kaw spouses refused to accept. In fact, some respondents filed consignation cases in municipal trial court against Kaws (Civil Cases 1712-P, 1714-P) insisting on their right to tender and compel acceptance.
6. On September 29, 2015, Spouses Kaw filed with the Regional Trial Court (RTC), Ligao City, a Complaint for Rescission (with prayer for preliminary injunction) against respondents.
7. The RTC dismissed the rescission complaint for lack of merit; it found that respondents did not materially breach the contracts, and instead granted respondents’ counterclaim, ordering the Kaws to accept payment, execute the absolute deeds, pay taxes, surrender documents, and pay moral damages.
8. The Court of Appeals affirmed (with modification deleting the award of moral damages).
9. Kaws then filed a Petition for Review on Certiorari before the Supreme Court, raising primarily that (a) respondents committed fundamental breaches warranting rescission, and (b) respondents engaged in forum shopping in filing multiple actions (rescission vs consignation) in different courts.
Issues
1. Whether the Court of Appeals erred in dismissing the Kaws’ Complaint for Rescission of the Deeds of Conditional Sale.
2. Whether respondents are guilty of forum shopping, thereby subjecting their counterclaims (or other actions) to dismissal or penalty.
Ruling (Disposition)
The Supreme Court denied the petition, and affirmed with modification the CA decision.
Modifications included:
Ordering dismissal of the consignation cases (Civil Cases 1712-P and 1714-P) and associated appeals, on the ground of forum shopping.
Directing respondents (Heirs of Marilyn Nodalo, Zenaida Chiquillo, and Atty. Rudyard Anthony M. Trinidad) to show cause within ten (10) days why they should not be cited for contempt for engaging in forum shopping.
Referring the matter to the Integrated Bar of the Philippines for possible administrative action against their counsel for deliberate forum shopping.
In all other respects, the decision of the CA (affirming the RTC, except for moral damages) stands.
Ratio decidendi (Legal Reasoning)
1. Characterization as contract to sell (not conditional sale).
Although the instruments were denominated “Deed of Conditional Sale,” the Court examined the substantive terms and held that the true intention of the parties was to create contracts to sell, because:
The vendors (Kaws) retained the right to unilaterally rescind upon nonpayment (i.e. a right of rescission).
The obligation of the Kaws to execute a deed of absolute sale arises only after full and satisfactory payment of the purchase price.
The features of the deed mirror those of a contract to sell rather than a true conditional sale (i.e. not a suspensive condition in the classical sense).
Thus, the remedy under Article 1191 (rescission) may be available, as the obligations are reciprocal.
2. On the remedy of rescission: requirement of substantial (not slight) breach.
The Court reaffirmed that rescission is not available for slight or casual breaches — only fundamental or substantial breaches (i.e., those which defeat the very object of the contract) justify rescission.
In the present case:
The Kaw spouses alleged that respondents breached by (i) erecting permanent improvements, beyond what was allowed, contrary to supposed verbal limitations; and (ii) leasing cottages to third parties (thus assigning or hypothecating their rights).
The Court found that the written deed does not distinguish between “permanent” and “temporary” improvements; nor does it specify material limitations. Parol evidence to vary or limit those terms was not sufficiently proven or accepted.
Regarding the leasing/rental of cottages, the Court held that absent a clear prohibition in the deed, the act of leasing did not necessarily amount to a material breach that defeats the contract’s object.
Thus, the alleged acts did not constitute fundamental breach; hence the Kaws could not rescind the deed.
3. On forum shopping and dismissal of duplicative actions.
The Court agreed with the Kaw spouses that respondents (notably Chiquillo and Nodalo) engaged in forum shopping by instituting multiple actions (consignation in MCTC, and rescission in RTC) over the same subject matter.
The Court held that such duplicative actions pose risk of conflicting results and violate procedural rules. Accordingly:
The consignation cases (MCTC) are dismissed to prevent conflicting rulings.
The respondents engaged in forum shopping are to show cause why they should not be held in contempt.
The Court may refer the matter for administrative action against counsel who deliberately engaged in forum shopping.
4. Consequence: upholding CA and RTC decisions (except modification) and denying petition.
Having found that the Kaw spouses failed to establish fundamental breach and that respondents’ counterclaims should remain, the petition must be denied. The Court merely adjusts for the forum-shopping issues.
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