- Petitioner
- Spouses Mariano Z. Velarde
- Respondent
- Court of Appeals
- Citation
- G.R. No. 108346
- Court
- Supreme Court
- Division
- Third Division
- Ponente
- Panganiban, J.
- Decided
- July 11, 2001
Summary
The Supreme Court affirmed the validity of a contract rescission in a real estate sale involving mortgage assumption. Spouses Velarde purchased property from David Raymundo for P800,000 down payment plus assumption of P1.8 million mortgage. When BPI disapproved the assumption application, Velardes failed to pay the balance as agreed and instead made a conditional offer with new terms. The Court held this constituted substantial breach of reciprocal obligation under Article 1191 of the Civil Code, justifying rescission. However, applying principles of mutual restitution, the Court ordered Raymundos to return P874,150 in payments received to prevent unjust enrichment. The decision clarifies that in contract rescission, parties must be restored to their original positions, and conditional offers with new terms cannot substitute for actual performance of existing obligations.