Goldloop vs Gsis

G.R. No. 171076 August 1, 2012 GOLDLOOP PROPERTIES INC., Petitioner, vs. GOVERNMENT SERVICE INSURANCE SYSTEM, Respondent. Facts: The petitioner Goldloop Properties executed a Memorandum of Agreement (MOA) with the respondent Government Service Insurance System (GSIS) undertaking the construction of a condominium on the parcel of land and the renovation of the façade of Philcomcen Building at its own expense, both owned by the GSIS, with the terms of their agreement stating that the petitioner will pay GSIS for the land in eight installments and the parties will share for the profits of every condominium sold with a certain percentage. Goldloop then performed the preparatory works, such as selling the condominiums but was not able to proceed because the building permits was not yet been approved and there were still accrued real property taxes that were unpaid.  After some time, Goldloop Goldloop received received a letter letter from GSIS GSIS to rescind rescind the MOA and Goldloop replied that the work stoppage was caused of the pending approval of the building permits. Despite this, GSIS sent a notice of rescission stating that Goldloop still have pending obligations under their MOA which prompted Goldloop to file a complaint with the RTC contending that it had begun with the preparatory works and such MOA should not be rescinded. RTC granted in favor of Goldloop,and thus GSIS appealed with the CA that it had the right to rescind the contract for failure of Goldloop to comply with the obligation as stated in the MOA, which the CA granted in favor of the GSIS. Issue/s: Whether or not the Memorandum of Agreement may be rescinded? Held: Yes, the Court ruled that GSIS have every right to rescind the contract under the terms of the MOA for which the parties may validly stipulate the unilateral rescission of their contract. It is the duty of both parties to surrender whatever amount received or property to part with, wherein Goldloop should return to GSIS the possession and control of the property subject of their agreements while GSIS should reimburse Goldloop whatever amount it had received from the latter by reason of the MOA and the Addendum. The Court also held that rescission constitute a mutual restitution of the things pursuant to Article 1191 of the Civil Code, where in case both parties have committed a breach of the obligation,the liability of the first infractor shall be equitably tempered by the courts.

If it cannot be determined which of the parties first violated the contract, the same shall be deemed extinguished, and each shall bear his own damages. In the case at bar, the first infractor cannot be determined, prompting the Court to order Goldloop to surrender possession of the land to the GSIS and that Goldloop should be reimbursed for the amount of expenses plus the return of the machineries, equipment and materials in the premises of the lot.