Right to rescind implied in every reciprocal obligation

Article 1191 of the Civil Code provides: "The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him.

The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he had chosen fulfillment, if the latter should become impossible. xxx xxx xxx"

From the foregoing, the right of rescission is implied in every reciprocal obligation where one party fails to perform what is incumbent upon him while the other is willing and ready to comply. Certainly, petitioner's failure to deliver the units on the commencement date of the lease on October 1, 1997 gave respondent the right to rescind the contract after the latter had already paid the contract price in full.
Furthermore, respondent's right to rescind the contract cannot be prevented by the fact that petitioner had the option to substitute the stalls. Even if petitioner had that option, it did not, however, mean that it could insist on the continuance of the contract by forcing respondent to accept the substitution. Neither did it mean that its previous default had been obliterated completely by the exercise of that option.

However, so as not to run counter to or depart from the well-established doctrines in BF Homes, Inc. and PAL, and considering further the SEC's appointment of a receivership committee, the Supreme Court will defer the entry of judgment in this case even after this resolution attains finality. In effect, the execution of the RTC decision (which the CA and the Supreme Court have affirmed) is suspended until further advice from us.

One final note. Petitioner's extreme bad faith in dealing with respondent was too glaring for the Court to ignore. Petitioners lack of good and honest intentions, as well as the evasive manner by which it was able to frustrate respondent's claim for a decade, should not go unsanctioned. Parties in a contract cannot be allowed to engage in double-dealing schemes to dupe those who transact with them in good faith. (G.R. No. 168522; December 19, 2007)