1.

The total consideration for the purchase of the aforedescribed parcel of land
FIRST DIVISION
together with the perimeter walls found therein is TWENTY EIGHT MILLION
(P28,000,000.00) PESOS payable as follows:

[G.R. No. 134241. August 11, 2003] (a) TEN MILLION (P10,000,000.00) PESOS upon signing of this Contract to Sell;

(b) The balance of EIGHTEEN MILLION (P18,000,000.00) PESOS shall be paid

on or before March 8, 1995 at 9:30 A.M. at a bank to be designated by the Buyer
DAVID REYES (Substituted by Victoria R. Fabella), petitioner, vs. JOSE LIM, but upon the complete vacation of all the tenants or occupants of the property and
CHUY CHENG KENG and HARRISON LUMBER, execution of the Deed of Absolute Sale. However, if the tenants or occupants have
INC., respondents. vacated the premises earlier than March 8, 1995, the VENDOR shall give the
VENDEE at least one week advance notice for the payment of the balance and
DECISION execution of the Deed of Absolute Sale.
CARPIO, J.:
2. That in the event, the tenants or occupants of the premises subject of this sale
shall not vacate the premises on March 8, 1995 as stated above, the VENDEE shall
The Case withhold the payment of the balance of P18,000,000.00 and the VENDOR agrees
to pay a penalty of Four percent (4%) per month to the herein VENDEE based on
the amount of the downpayment of TEN MILLION (P10,000,000.00) PESOS
This is a petition for review on certiorari of the Decision[1] dated 12 May 1998 until the complete vacation of the premises by the tenants therein.[4]
of the Court of Appeals in CA-G.R. SP No. 46224. The Court of Appeals dismissed
the petition for certiorari assailing the Orders dated 6 March 1997, 3 July 1997 and The complaint claimed that Reyes had informed Harrison Lumber to vacate
3 October 1997 of the Regional Trial Court of Paranaque, Branch 260[2] (trial court) the Property before the end of January 1995. Reyes also informed Keng[5] and
in Civil Case No. 95-032. Harrison Lumber that if they failed to vacate by 8 March 1995, he would hold them
liable for the penalty of P400,000 a month as provided in the Contract to Sell. The
complaint further alleged that Lim connived with Harrison Lumber not to vacate
The Facts the Property until the P400,000 monthly penalty would have accumulated and
equaled the unpaid purchase price of P18,000,000.

On 23 March 1995, petitioner David Reyes (Reyes) filed before the trial court On 3 May 1995, Keng and Harrison Lumber filed their Answer[6] denying they
a complaint for annulment of contract and damages against respondents Jose Lim connived with Lim to defraud Reyes. Keng and Harrison Lumber alleged that Reyes
(Lim), Chuy Cheng Keng (Keng) and Harrison Lumber, Inc. (Harrison Lumber). approved their request for an extension of time to vacate the Property due to their
difficulty in finding a new location for their business. Harrison Lumber claimed that
The complaint[3] alleged that on 7 November 1994, Reyes as seller and Lim as
as of March 1995, it had already started transferring some of its merchandise to its
buyer entered into a contract to sell (Contract to Sell) a parcel of land (Property)
new business location in Malabon.[7]
located along F.B. Harrison Street, Pasay City. Harrison Lumber occupied the
Property as lessee with a monthly rental of P35,000. The Contract to Sell provided On 31 May 1995, Lim filed his Answer[8] stating that he was ready and willing
for the following terms and conditions: to pay the balance of the purchase price on or before 8 March 1995. Lim requested
a meeting with Reyes through the latters daughter on the signing of the Deed of
Absolute Sale and the payment of the balance but Reyes kept postponing their
meeting. On 9 March 1995, Reyes offered to return the P10 million down payment The Ruling of the Court of Appeals
to Lim because Reyes was having problems in removing the lessee from the
Property. Lim rejected Reyes offer and proceeded to verify the status of Reyes title
The Court of Appeals ruled the trial court could validly issue the assailed
to the Property. Lim learned that Reyes had already sold the Property to Line One
orders in the exercise of its equity jurisdiction. The court may grant equitable reliefs
Foods Corporation (Line One) on 1 March 1995 for P16,782,840. After the
to breathe life and force to substantive law such as Article 1385[16] of the Civil Code
registration of the Deed of Absolute Sale, the Register of Deeds issued to Line One
since the provisional remedies under the Rules of Court do not apply to this case.
TCT No. 134767 covering the Property. Lim denied conniving with Keng and
Harrison Lumber to defraud Reyes. The Court of Appeals held the assailed orders merely directed Reyes to
deposit the P10 million to the custody of the trial court to protect the interest of Lim
On 2 November 1995, Reyes filed a Motion for Leave to File Amended
who paid the amount to Reyes as down payment. This did not mean the money
Complaint due to supervening facts. These included the filing by Lim of a complaint
would be returned automatically to Lim.
for estafa against Reyes as well as an action for specific performance and nullification
of sale and title plus damages before another trial court.[9] The trial court granted the
motion in an Order dated 23 November 1995.
The Issues
In his Amended Answer dated 18 January 1996,[10] Lim prayed for the
cancellation of the Contract to Sell and for the issuance of a writ of preliminary
attachment against Reyes. The trial court denied the prayer for a writ of preliminary Reyes raises the following issues:
attachment in an Order dated 7 October 1996.
1. Whether the Court of Appeals erred in holding the trial court could
On 6 March 1997, Lim requested in open court that Reyes be ordered to issue the questioned Orders dated March 6, 1997, July 3, 1997
deposit the P10 million down payment with the cashier of the Regional Trial Court and October 3, 1997, requiring petitioner David Reyes to deposit
of Paraaque. The trial court granted this motion. the amount of Ten Million Pesos (P10,000,000.00) during the
On 25 March 1997, Reyes filed a Motion to Set Aside the Order dated 6 pendency of the action, when deposit is not among the provisional
March 1997 on the ground the Order practically granted the reliefs Lim prayed for remedies enumerated in Rule 57 to 61 of the 1997 Rules on Civil
in his Amended Answer.[11]The trial court denied Reyes motion in an Order[12] dated Procedure.
3 July 1997. Citing Article 1385 of the Civil Code, the trial court ruled that an action
for rescission could prosper only if the party demanding rescission can return 2. Whether the Court of Appeals erred in finding the trial court could
whatever he may be obliged to restore should the court grant the rescission. issue the questioned Orders on grounds of equity when there is
an applicable law on the matter, that is, Rules 57 to 61 of the 1997
The trial court denied Reyes Motion for Reconsideration in its Order[13] dated Rules on Civil Procedure.[17]
3 October 1997. In the same order, the trial court directed Reyes to deposit the P10
million down payment with the Clerk of Court on or before 30 October 1997.
On 8 December 1997, Reyes[14] filed a Petition for Certiorari[15] with the Court The Courts Ruling
of Appeals. Reyes prayed that the Orders of the trial court dated 6 March 1997, 3
July 1997 and 3 October 1997 be set aside for having been issued with grave abuse Reyes contentions are without merit.
of discretion amounting to lack of jurisdiction. On 12 May 1998, the Court of
Appeals dismissed the petition for lack of merit. Reyes points out that deposit is not among the provisional remedies
enumerated in the 1997 Rules of Civil Procedure. Reyes stresses the enumeration
Hence, this petition for review. in the Rules is exclusive. Not one of the provisional remedies in Rules 57 to
61[18] applies to this case. Reyes argues that a court cannot apply equity and require Reyes had already sold to another buyer the Property for which Lim made the down
deposit if the law already prescribes the specific provisional remedies which do not payment. In fact, in his Comment[32] dated 20 March 1996, Reyes reiterated his offer
include deposit. Reyes invokes the principle that equity is applied only in the to return to Lim the P10 million down payment.
absence of, and never against, statutory law or x x x judicial rules of
On balance, it is unreasonable and unjust for Reyes to object to the deposit of
procedure.[19] Reyes adds the fact that the provisional remedies do not include
the P10 million down payment. The application of equity always involves a
deposit is a matter of dura lex sed lex.[20]
balancing of the equities in a particular case, a matter addressed to the sound
The instant case, however, is precisely one where there is a hiatus in the law discretion of the court. Here, we find the equities weigh heavily in favor of Lim, who
and in the Rules of Court. If left alone, the hiatus will result in unjust enrichment to paid the P10 million down payment in good faith only to discover later that Reyes
Reyes at the expense of Lim. The hiatus may also imperil restitution, which is a had subsequently sold the Property to another buyer.
precondition to the rescission of the Contract to Sell that Reyes himself seeks. This
In Eternal Gardens Memorial Parks Corp. v. IAC,[33] this Court held the
is not a case of equity overruling a positive provision of law or judicial rule for there
plaintiff could not continue to benefit from the property or funds in litigation during
is none that governs this particular case. This is a case of silence or insufficiency of
the pendency of the suit at the expense of whomever the court might ultimately
the law and the Rules of Court. In this case, Article 9 of the Civil Code expressly
adjudge as the lawful owner. The Court declared:
mandates the courts to make a ruling despite the silence, obscurity or insufficiency
of the laws.[21] This calls for the application of equity,[22] which fills the open spaces in
In the case at bar, a careful analysis of the records will show that petitioner admitted
the law.[23]
among others in its complaint in Interpleader that it is still obligated to pay certain
Thus, the trial court in the exercise of its equity jurisdiction may validly order amounts to private respondent; that it claims no interest in such amounts due and
the deposit of the P10 million down payment in court. The purpose of the exercise is willing to pay whoever is declared entitled to said amounts. x x x
of equity jurisdiction in this case is to prevent unjust enrichment and to ensure
restitution. Equity jurisdiction aims to do complete justice in cases where a court of Under the circumstances, there appears to be no plausible reason for petitioners
law is unable to adapt its judgments to the special circumstances of a case because objections to the deposit of the amounts in litigation after having asked for the
of the inflexibility of its statutory or legal jurisdiction.[24] Equity is the principle by assistance of the lower court by filing a complaint for interpleader where the deposit
which substantial justice may be attained in cases where the prescribed or customary of aforesaid amounts is not only required by the nature of the action but is a
forms of ordinary law are inadequate.[25] contractual obligation of the petitioner under the Land Development Program
(Rollo, p. 252).
Reyes is seeking rescission of the Contract to Sell. In his amended answer, Lim
is also seeking cancellation of the Contract to Sell. The trial court then ordered
There is also no plausible or justifiable reason for Reyes to object to the deposit
Reyes to deposit in court the P10 million down payment that Lim made under the
of the P10 million down payment in court. The Contract to Sell can no longer be
Contract to Sell. Reyes admits receipt of the P10 million down payment but opposes
enforced because Reyes himself subsequently sold the Property to Line One. Both
the order to deposit the amount in court. Reyes contends that prior to a judgment
Reyes and Lim are now seeking rescission of the Contract to Sell. Under Article
annulling the Contract to Sell, he has the right to use, possess and enjoy[26] the P10
1385 of the Civil Code, rescission creates the obligation to return the things that are
million as its owner[27] unless the court orders its preliminary attachment.[28]
the object of the contract. Rescission is possible only when the person demanding
To subscribe to Reyes contention will unjustly enrich Reyes at the expense of rescission can return whatever he may be obliged to restore. A court of equity will
Lim. Reyes sold to Line One the Property even before the balance of P18 million not rescind a contract unless there is restitution, that is, the parties are restored to
under the Contract to Sell with Lim became due on 8 March 1995. On 1 March the status quo ante.[34]
1995, Reyes signed a Deed of Absolute Sale[29] in favor of Line One. On 3 March
Thus, since Reyes is demanding to rescind the Contract to Sell, he cannot
1995, the Register of Deeds issued TCT No. 134767[30] in the name of Line
refuse to deposit the P10 million down payment in court.[35] Such deposit will ensure
One.[31] Reyes cannot claim ownership of the P10 million down payment because
restitution of the P10 million to its rightful owner. Lim, on the other hand, has
nothing to refund, as he has not received anything under the Contract to Sell.[36]
In Government of the Philippine Islands v. Wagner and Cleland
Wagner,[37] the Court ruled the refund of amounts received under a contract is a
precondition to the rescission of the contract. The Court declared:

The Government, having asked for rescission, must restore to the defendants
whatever it has received under the contract. It will only be just if, as a condition to
rescission, the Government be required to refund to the defendants an amount
equal to the purchase price, plus the sums expended by them in improving the land.
(Civil Code, art. 1295.)

The principle that no person may unjustly enrich himself at the expense of
another is embodied in Article 22[38] of the Civil Code. This principle applies not
only to substantive rights but also to procedural remedies. One condition for
invoking this principle is that the aggrieved party has no other action based on
contract, quasi-contract, crime, quasi-delict or any other provision of law.[39] Courts
can extend this condition to the hiatus in the Rules of Court where the aggrieved
party, during the pendency of the case, has no other recourse based on the
provisional remedies of the Rules of Court.
Thus, a court may not permit a seller to retain, pendente lite, money paid by
a buyer if the seller himself seeks rescission of the sale because he has subsequently
sold the same property to another buyer.[40] By seeking rescission, a seller necessarily
offers to return what he has received from the buyer. Such a seller may not take
back his offer if the court deems it equitable, to prevent unjust enrichment and
ensure restitution, to put the money in judicial deposit.
There is unjust enrichment when a person unjustly retains a benefit to the loss
of another, or when a person retains money or property of another against the
fundamental principles of justice, equity and good conscience.[41] In this case, it was
just, equitable and proper for the trial court to order the deposit of the P10 million
down payment to prevent unjust enrichment by Reyes at the expense of Lim.[42]
WHEREFORE, we AFFIRM the Decision of the Court of Appeals.
SO ORDERED.