Resolution and rescission

Question 1

RESOLUTION 1191

Answer 1

Rescission under Art. 1191 of the Civil Code is an action for resolution and not in a sense as it is used in defective contract.
- Applicable only in reciprocal obligations i.e. negotiorum gestio, contract of lease, contract of sale

• The power to rescind is given to the injured party.
• When one party fails to comply with his obligation under a contract, the other party has the right to either demand performance or ask for the resolution of the contract.

Question 2

Elements of resolution 1191

Answer 2

Requisites for Action for Resolution

1. Reciprocal obligation
   - those which arise from the same cause, and in which each party is a debtor and a creditor of the other, such that the obligation of one is dependent upon the obligation of the other. They are to be performed simultaneously, so that the performance of one is conditioned upon the simultaneous fulfillment of the other.
2. Complete performance of the aggrieved party or at least substantial compliance
3. The other party committed substantial breach, not trivial, casual or slight only like 10-day delay of delivery
   There is substantial breach if the non-performance of obligation defeats the very rights of the other party for which the obligation is based. Rescission will not be permitted for a slight or casual breach of the contract, but only for such breaches as are so substantial and fundamental as to defeat the object of the parties in making the agreement.
4. The plaintiff, for the action to prosper, should not be guilty of breach
5. The subject matter of the obligation is not yet passed to an innocent third person

Question 3

Purpose of action for rescission

Answer 3

Purpose of action for rescission: status quo ante

The exercise of the power to rescind extinguishes the obligatory relation as if it had never been created, the extinction having a retroactive effect.

The rescission is equivalent to invalidating and unmaking the juridical tie, leaving things in their status before the celebration of the contract.

Where a contract is rescinded, it is the duty of the court to require both parties to surrender that which they have respectively received and to place each other as far as practicable in his original situation.

Question 4

When rescission not possible

Answer 4

When rescission not possible

• If restitution and restoration to status quo ante is not possible because it will prejudice the rights of third party, the only remedy left is damages or specific performance.
• Restitution and specific performance are alternative remedies, only one can be chosen.
• Even if the aggrieved party chose restitution but the same is impossible, the court can still order specific performance.

Question 5

ACCION PAULIANA/ RESCISSION

Answer 5

Action to rescind or revoke acts which the debtor may have done to defraud them or acts which are considered as fraudulent reductions of the properties of the debtor which constitute the guaranty for his debts.
- All acts of the debtor which reduce his patrimony in fraud of his creditors, whether by gratuitous or onerous title, can be revoked by this action.

Question 6

Revocable under accion pauliana

Answer 6

Revocable actions

• Alienations of property
• Payments of debts which are not due
• Renunciations of rights such as the right of usufruct or an inheritance
• Assignments of credit
• Remission of debts
• Renunciation of a prescription which has already been acquired.
• Judicial acts such as when the debtor, in connivance with another, permits the latter to bring an action against him and obtain a judgment by default or confession and such judgment is enforced against the debtor’s property.

XPN: Payment of pre-existing obligations already due, whether natural or civil, cannot be impugned by this action.

Question 7

ACCION SUBROGATORIA -

Answer 7

The action which the creditor may exercise in the place of his negligent debtor in order to preserve or recover for the patrimony of the debtor the product of such action, and then obtain therefrom the satisfaction of his own credit. - The creditor shall be substituted to all the rights the debtor has as against third person. - To exercise accion subrogatoria, a previous approval of the court is not necessary.

Question 8

Accion subrogatoria ways

Answer 8

Ways
1. Assignment
E.g. repudiated share in inheritance
-If repudiation (debtor refuses to accept his inheritance) prejudices rights of third person, accion subrogatoria can be filed by the third person.
- If the inheritance is repudiated and the same was used to fulfill the obligation of the debtor, in case there is excess, the same cannot be recovered by the heir.
2. Garnishment
Bank pays the debt of the depositor to the creditor, the debt paid will be subtracted to the deposit of the depositor.