Spouses Carmen S. Tongson v. Emergency Pawnshop Bula

Summary

This case involves a contract of sale where the Spouses Tongson sold their 364-square meter Davao property to Napala for P3,000,000. Napala paid P200,000 cash and issued a postdated check for P2,800,000 which bounced. The deed of sale showed only P400,000 to reduce taxes. The trial court annulled the contract for fraud, but the Court of Appeals found no causal fraud while ordering payment of the balance. The Supreme Court ruled that while no causal fraud existed to void the contract, Napala's substantial breach entitled the sellers to rescission under Article 1191. The Court ordered rescission with reconveyance of the property, affirmed damages awards, and directed BIR notification regarding tax fraud from undervaluation of the sale price.