First Division

WILLIAM UY and RODEL ROXAS vs. CA, HON. ROBERT BALAO and NHA
G.R. No. 120465. September 9, 1999

Ponente: Kapunan
Facts: Petitioners are agents authorized to sell eight parcels of land by the owners thereof. They
offered to sell the said lands to NHA to be utilized and developed as a housing project. The NHA
Board approved the acquisition. However, only five parcels were paid for by the NHA because of
the report it received from the DENR that the remaining area is located at an active landslide
area and, therefore, not suitable for a housing project. The NHA cancelled the sale over the
three parcels of land but it offered the P1.225 million to the landowners as daos perjuicios. The
petitioners filed before the RTC of QC a Complaint for Damages against NHA and its General
Manager Balao. The RTC declared the cancellation of the contract to be justified and awarded
damages to plaintiffs in the sum of P1.255 million. The CA reversed the decision of the RTC and
dismissed the complaint. It held that since there was "sufficient justifiable basis" in cancelling
the sale, "it saw no reason" for the award of damages.
Issue: Whether or not NHA has the right to cancel the contract.
Held: Yes. Petitioners confuse the cancellation as a rescission under Article 1191 of the Civil Code. The
right of rescission or, more accurately, resolution, of a party is predicated on a breach of faith by
the other party that violates the reciprocity between them. The NHA did not rescind the
contract. The cancellation was not a rescission under Article 1191. Rather, the cancellation was
based on the negation of the cause arising from the realization that the lands were not suitable
for housing.
Cause is the essential reason which moves the contracting parties to enter into it. Cause, which
is the essential reason for the contract, should be distinguished from motive, which is the
particular reason of a contracting party which does not affect the other party. The cause of the
vendor (petitioners' principals) in entering into the contract is to obtain the price. For the
vendee, NHA, it is the acquisition of the land. The motive of the NHA, on the other hand, is to
use said lands for housing.
Ordinarily, a party's motives for entering into the contract do not affect the contract. However,
when the motive predetermines the cause, the motive may be regarded as the cause.
It is clear that NHA would not have entered into the contract were the lands not suitable for
housing. The quality of the land was an implied condition for the NHA to enter into the contract.
The NHA was justified in cancelling the contract. The realization of the mistake as regards the
quality of the land resulted in the negation of the motive/cause thus rendering the contract
inexistent. Article 1318 of the Civil Code states that there is no contract unless the following
requisites concur: xxx (3) Cause of the obligation which is established.
Petition is denied.
Puno, Pardo and Ynares-Santiago, JJ., concur.
Davide, Jr., C.J., is on leave.