1. Pameca v.

CA and DBP | July 14, 1991

GR No. 106435, Gonzaga-Reyes, J.

been aptly described as "justice outside legality", is applied only in the absence of, and
never against, statutory law or judicial rules of procedure.

FACTS: On April 17, 1980, petitioner PAMECA Wood Treatment Plant, Inc. (PAMECA)
obtained a loan of US$267,881.67, or the equivalent of P2,000,000.00 from
respondent Bank. By virtue of this loan, petitioner PAMECA, through its President,
petitioner Herminio Teves, executed a promissory note for the said amount, promising
to pay the loan by installment. As security for the said loan, a chattel mortgage was
also executed over PAMECA's properties in Dumaguete City, consisting of inventories,
furniture and equipment, to cover the whole value of the loan.

The court finds the petitioners' submission that the public auction sale is void on
grounds of fraud and inadequacy of price without merit. Petitioners never assailed the
validity of the sale in the RTC, and only in the CA did they attempt to prove inadequacy
of price. Basic is the rule that parties may not bring on appeal issues that were not
raised on trial.

On January 18, 1984, and upon petitioner PAMECA's failure to pay, respondent bank
extrajudicially foreclosed the chattel mortgage, and, as sole bidder in the public
auction, purchased the foreclosed properties for a sum of P322,350.00. On June 29,
1984, respondent bank filed a complaint for the collection of the balance of
P4,366,332.46 with the RTC of Makati against petitioner PAMECA and private
petitioners herein, as solidary debtors with PAMECA under the promissory note.
On February 8, 1990, the RTC of Makati rendered a decision, ordering the defendants
to pay jointly and severally plaintiff the sum of P4,366,332.46 representing the
deficiency claim of the latter as of March 31, 1984, plus 21% interest per annum and
other charges from April 1, 1984 until the whole amount is fully paid. The Court of
Appeals affirmed the RTC decision thus, this petition for review on certiorari was filed
by petitioner.
ISSUE: W/N the petitioner is liable for the payment of the respondent banks deficiency
claim arising from a loan secured by a chattel mortgage.
HELD: The petition is DENIED and the assailed decision is AFFIRMED.
It is clear from Section 14 of Act No. 1508, as amended that the effects of foreclosure
under the Chattel Mortgage Law run inconsistent with those of pledge under Article
2115. Whereas, in pledge, the sale of the thing pledged extinguishes the entire
principal obligation, such that the pledgor may no longer recover proceeds of the sale
in excess of the amount of the principal obligation, Section 14 of the Chattel Mortgage
Law expressly entitles the mortgagor to the balance of the proceeds, upon satisfaction
of the principal obligation and costs. Since the Chattel Mortgage Law bars the creditormortgagee from retaining the excess of the sale proceeds there is a corollary obligation
on the part of the debtor-mortgagee to pay the deficiency in case of a reduction in the
price at public auction.
Neither is Article 1484 applicable by analogy to the instant case. As correctly pointed
out by the trial court, the said article applies clearly and solely to the sale of personal
property the price of which is payable in installments. Although Article 1484, paragraph
(3) expressly bars any further action against the purchaser to recover an unpaid
balance of the price, where the vendor opts to foreclose the chattel mortgage on the
thing sold, should the vendee's failure to pay cover two or more installments, this
provision is specifically applicable to sale on installments.
To accommodate petitioners' prayer on the basis of equity would be to expand the
application of the provisions of Article 1484 to situations beyond its specific purview,
and ignore the language and intent of the Chattel Mortgage Law. Equity, which has

Furthermore, the mere fact that respondent bank was the sole bidder for the
mortgaged properties in the public sale does not warrant the conclusion that the
transaction was attended with fraud. Fraud is a serious allegation that requires full and
convincing evidence, and may not be inferred from the lone circumstance that it was
only respondent bank that bid in the sale of the foreclosed properties. The sparseness
of petitioners' evidence in this regard leaves us no discretion but to uphold the
presumption of regularity in the conduct of the public sale.
The Court likewise affirmed private petitioners' joint and several liability with petitioner
corporation in the loan. As found by the RTC and CA, the terms of the promissory note
unmistakably set forth the solidary nature of private petitioners' commitment. It is clear
that private petitioners intended to bind themselves solidarily with petitioner PAMECA
in the loan. As correctly submitted by respondent bank, private petitioners are not
made to answer for the corporate act of petitioner PAMECA, but are made liable
because they made themselves co-makers with PAMECA under the promissory note.
_________________________________________________________
2. Superlines v. Lavides | February 28, 2003
GR No. 150673, Callejo, Sr., J.
FACTS: In 1995, Superlines Transportation Co., Inc. (Superlines, for brevity) decided
to acquire five new buses from the Diamond Motors Corporation for the price
of P10,873,582.00. However, Superlines lacked financial resources for the
purpose. By virtue of a board resolution, Superlines authorized its President and
General Manager, Manolet Lavides, a graduate of the Ateneo de Manila School of Law
and a businessman for twenty years, to look for and negotiate with a financing
corporation for a loan for the purchase of said buses.
Lavides and ICC Leasing & Financing Corporation (ICC, for brevity) agreed to finance
the purchase of the new buses via a loan and proposed a three-year term for the
payment thereof at a fixed interest rate of 22% per annum. The new buses to be
purchased were to be used by Superlines as security for the loan. ICC required
Superlines to submit certificates of registration of the said buses under the name of
Superlines before the appropriate document was executed by the parties and their
transactions consummated. On October 19, 1995, Diamond Motors Corporation sold
to Superlines five new buses under Vehicle Invoice Nos. 9225 to 9229.[3] Superlines,
through Lavides, acknowledged receipt of the buses.
On November 22, 1995, the vehicle invoices were filed with the Land Transportation
Office which then issued certificates of registration covering the five buses under the
name of Superlines.[4] With the buses now registered under its name, Superlines,
through Lavides, executed two documents, namely: a deed of chattel mortgage over
the said buses as security for the purchase price of the buses in the amount

of P13,114,287.00[5] loaned by ICC to Superlines, which deed was annotated on the

face of said certificates of registration, and a promissory note in favor of ICC binding
and obliging itself to pay to the latter the amount of P10,873,582.00 in monthly
installments of P415,290.00, the first installment to start on December 23, 1995, with
interest thereon at the rate of 22% per annum until full payment of said amount in favor
of Superlines and ICC covenanted in said deed.
Superlines and Lavides executed a Continuing Guaranty to pay jointly and severally in
favor of ICC the amount of P13,114,285.00. ICC drew and delivered to Superlines
Metrobank Check No. 0661909113, dated November 23, 1995, payable to the account
of Superlines in the amount of P10,873,582.00, representing the net proceeds of the
loan. The latter acknowledged receipt of the check in Cash Voucher No. 0.0769.
Superlines remitted the said check to Diamond Motors Corporation in full payment of
the purchase price of the new buses.
After paying only seven monthly amortizations for the period of December 1995 to
June 1996, Superlines defaulted in the payment of its obligation to ICC. On April 2,
1997, ICC wrote Superlines demanding full payment of its outstanding obligation,
which as of March 31, 1997 amounted to P12,606,020.55. However, Superlines failed
to heed said demand.
ICC filed a complaint for collection of sum of money with prayer for a writ of replevin
on April 21, 1997 with Branch 142 of the Regional Trial Court of Makati City against
Superlines and Lavides.
In the meantime, the trial court issued a writ of seizure for the five mortgaged buses.
On May 29, 1997, the sheriff took possession of the five buses in compliance with the
writ of seizure issued by the trial court. Thereafter, ICC instituted extra-judicial
foreclosure proceedings over the subject buses. An auction sale was held on July 2,
1997. ICC offered a bid of P7,200,000.00 for the motor vehicles and was declared the
winning bidder, resulting in a deficiency of P5,406,029.55. In addition, ICC incurred
necessary expenses in the amount of P920,524.62. Superlines thus still owed ICC the
amount of P6,326,556.17.

The Court of Appeals stated that ICC and Superlines entered into an amortized
commercial loan agreement with ICC as creditor-mortgagee and Superlines as debtormortgagor, and ordered Superlines and Lavides to pay to ICC jointly and severally the
sum of P5,956,351.18 as deficiency.[18]
It further declared that it was Diamond Motors Corporation and not ICC which sold the
subject buses to Superlines. It held that no evidence had been presented by
Superlines to show that ICC bought the said buses from Diamond Motors Corporation
under a special arrangement and that ICC sold the buses to Superlines. The appellate
court also ruled that Article 1484(3) is applicable only where there is vendor-vendee
relationship between the parties and since ICC did not sell the buses to Superlines, the
latter cannot invoke said law.
ISSUE: W/N the mortgagee is entitled for the deficiency of the payment due them after
the foreclosure?
HELD: YES. SC agreed with the CA decision.
Petitioners failed to adduce a preponderance of evidence to prove that respondents
and Diamond Motors Corporation entered into a special arrangement relative to the
issuance of certificates of registration over the buses under the name of petitioner
Superlines. Petitioners were also unable to prove that respondent purchased from
Diamond Motors Corporation the new buses. In contrast, the vehicle invoices of
Diamond Motors Corporation irrefragably show that it sold the said buses to petitioner
Superlines. The net proceeds of the loan were remitted by respondent to petitioner
Superlines and the latter remitted the same to Diamond Motors Corporation in payment
of the purchase price of the buses. In fine, respondent and Diamond Motors
Corporation had no direct business transactions relative to the purchase of the buses
and the payment of the purchase price thereof.

On June 1, 1999, the trial court rendered a decision ordering the dismissal of the case
and for ICC to pay damages and litigation expenses to Superlines and Lavides, the
decretal portion of which reads:

As aptly observed by the Court of Appeals, petitioner Lavides is a graduate of the

Ateneo de Manila University School of Law. He had been in business for twenty years
or so. It is incredible that petitioner Superlines through petitioner Lavides never
required respondent and Diamond Motors Corporation to execute a deed evidencing
their special agreement or arrangement if indeed they had one. The trial court indulged
in a non sequitur when it quoted part of the testimony of Leonardo Serrano, Jr. out of
context and used it as anchor for its finding that respondent and Diamond Motors
Corporation forged a special arrangement. Leonardo Serrano, Jr. never testified that
respondent and Diamond Motors Corporation had a special arrangement relative to the
registration of the new buses. The mere admission of the witness that respondent in
the course of its business transactions allowed special arrangements does not
constitute proof that it in fact had a special arrangement with Diamond Motors
Corporation relative to the registration of the new buses.

The trial court found that, as testified to by Lavides, ICC and Superlines forged a
consumer loan agreement and not an amortized commercial loan. It further declared
that, as testified to by Lavides, there was a special arrangement for the purchase by
ICC of said buses. The trial court finally stated that Superlines purchased the buses
from ICC, the purchase price therefor payable in monthly installments. ICC appealed
the trial courts decision to the Court of Appeals. On July 30, 2001, the appellate court
rendered a decision reversing the decision of the RTC and ordering Superlines and
Lavides to pay the deficiency claim of ICC.

The evidence on record shows that under the Promissory Note, Chattel Mortgage and
Continuing Guaranty, respondent was the creditor-mortgagee of petitioner Superlines
and not the vendor of the new buses. This Court had consistently ruled that if in an
extra-judicial foreclosure of a chattel mortgage a deficiency exists, an independent civil
action may be instituted for the recovery of said deficiency. To deny the mortgagee
the right to maintain an action to recover the deficiency after foreclosure of the chattel
mortgage would be to overlook the fact that the chattel mortgage is only given as
security and not as payment for the debt in case of failure of payment. Both the Chattel

In their Answer with Counterclaim, Superlines and Lavides asserted that the real
agreement of the parties was one of financing a sale of personal property, the prices
for which shall be payable on installments. Relying on Article 1484(3) of the Civil
Code, Superlines and Lavides claimed that since the chattel mortgage on subject
buses was already foreclosed by ICC, the latter had no further action against
Superlines and Lavides for the unpaid balance of the price.

Mortgage Law and Act 3135 governing extra-judicial foreclosure of real estate
mortgage, do not contain any provision, expressly or impliedly, precluding the
mortgagee from recovering deficiency of the principal obligation. In the case
of PAMECA Wood Treatment Plant, Inc. vs. Court of Appeals, this Court declared that
under Section 14 of the Chattel Mortgage Law, the mortgagor is entitled to recover the
balance of the proceeds, upon satisfaction of the principal obligation and costs, thus
there is a corollary obligation on the part of the debtor-mortgagor to pay the deficiency
in case of a reduction in the price at public auction.

claim the deficiency from the debtor. For when the legislature intends to deny the right
of a creditor to sue for any deficiency resulting from foreclosure of security given to
guarantee an obligation it expressly provides as in the case of pledges [Civil Code, Art.
2115] and in chattel mortgages of a thing sold on installment basis [Civil Code, Art.
1484(3)]. Act No. 3135, which governs the extrajudicial foreclosure of mortgages, while
silent as to the mortgagee's right to recover, does not, on the other hand, prohibit
recovery of deficiency. Accordingly, it has been held that a deficiency claim arising from
the extrajudicial foreclosure is allowed.

_________________________________________________________

The essential elements of estoppel are: (1) conduct amounting to false representation
or concealment of material facts or at least calculated to convey the impression that the
facts are otherwise than, and inconsistent with, those which the party subsequently
attempts to assert; (2) intent, or at least expectation, that this conduct shall be acted
upon by, or at least influence, the other party; and (3) knowledge, actual or
constructive, of the real facts.

3. PNB v. CA | June 14, 1999

GR No. 121739, Mendoza, J.
DOCTRINE: As a General Rule, A deficiency claim may be had when the proceeds
from the foreclosure is not sufficient to pay the balance. By way of exception, the
Legislature intended to deny the right of a creditor to sue for any deficiency resulting
from foreclosure of security given as collateral for an obligation when it EXPRESSLY
so provided in Art 1484 and other provisions.
FACTS: Respondent Spouses were granted by the Petitioner bank a one-year Time
Loan Commercial of P34,000.00. To secure the payment of said loan, Respondent
spouses executed in favor of petitioner PNB a real estate mortgage over nine (9)
parcels of individually titled lands located in Sta. Maria, Pangasinan with an aggregate
area of 2,292sqm which were classified as residential lands. The properties after due
inspection and evaluation was appraised by Petitioner for loan purposes in the total
amount of (P49,000.00) thereby justifying the grant of the loan applied for. The same
property was initially bought by respondents for only 10,000 as an agricultural land but
upon reclassification into a residential land it was valued much higher by Petitioner.
After the initial payment of 15,000, the Respondents failed to pay the balance on the
loan(19,000) despite repeated demands from Petitioner. Thereafter, Petitioner
foreclosed the mortgaged properties extrajudicially and it was the highest bidder during
the public auction with its bid of Php7,000. This amount, however, was short of
P64,624.31 representing the balance on the principal obligation, accrued interest,
penalties, attorney's fees, and expenses of litigations. For failure to redeem the
properties within the statutory period allowed by law, Petitioner filed the instant
deficiency claim. Respondent spouses aver that the foreclosure should have satisfied
the entire balance and that the foreclosure was actually irregular and fraudulent.
The RTC and CA ruled in favour of the Respondent Spouses based on the fact that it
was petitioner bank itself that made the valuation of the properties at 49000 and the
respondents only relied on the same and in good faith. It also adjudged Petitioner to be
estopped from claiming the deficiency claim due to such circumstance as when it later
on devalued the property only at 2000 from the initial 49,000.
ISSUE: W/N Petitioner is estopped from pursuing its deficiency claim arising from the
extrajudicial foreclosure against respondent spouses' properties.
HELD: NO. The Court upheld the right of Petitioner bank to pursue its deficiency claim
against the respondents and reversed the order of the lower courts. The Court held
that to begin with, it is settled that if the proceeds of the sale are insufficient to cover
the debt in an extrajudicial foreclosure of the mortgage, the mortgagee is entitled to

As related to the party claiming the estoppel, the essential elements are: (1) lack of
knowledge and of the means of knowledge of the truth as to the question; (2) reliance,
in good faith, upon the conduct or statements of the party to be estopped; (3) action or
inaction based thereon of such character as to change the position or status of the
party claiming the estoppel, to his injury, detriment, or prejudice.
Furthermore the respondents were actually benefited rather than harmed by the
downward valuation of the properties, As held in Velasquez v. Coronel:
. . . However, while in ordinary sales for reasons of equity a transaction may
be invalidated on the ground of inadequacy of price, or when such
inadequacy shocks one's conscience as to justify the courts to interfere,
such does not follow when the law gives to the owner the right to redeem,
as when a sale is made at public auction, upon the theory that the lesser
the price the easier it is for the owner to effect the redemption. And so it was
aptly said; "When there is the right to redeem, inadequacy of price should
not be material, because the judgment debtor may reacquire the property or
also sell his right to redeem and thus recover the loss he claims to have
suffered by reason of the price obtained at the auction sale."

Indeed, as pointed out by petitioner bank, respondents had several options. They could
have participated in the public bidding or exercised their right of redemption or sold
such right to redeem or simply settled their debt. However, they did none of these
things despite due notice to them. Respondents are thus to blame for their
predicament. Their claim of financial distress is not an excuse to evade their clear
obligation to the bank.
_________________________________________________________
4. Visayas v. CA | March 3, 1993
GR No. 83851, Davide, Jr., J.
FACTS: On May 1, 1983, herein plaintiff-appellee and defendants-appellants entered
into a sale involving scrap iron located at the stockyard of Visayan Sawmill Co., Inc.
(Sawmill) at Cawitan, Sta. Catalina, Negros Oriental, subject to the condition that
Eugenio O. Original will open an irrevocable and unconditional letter of credit in the
amount of P250,000.00 in favor of Sawmill on or before May 15, 1983. This is

evidenced by a contract entitled `Purchase and Sale of Scrap Iron' duly signed by both
parties.
On 17 May 1983, Originals men started digging up and gathering scrap iron within the
Sawmills premises. Sawill ordered Originals men to stop the digging in view of a case
filed against the latter by a certain Alberto Pursuelo. This was denied by Sawmill who
alleged that on May 23, 1983, they sent a telegram to Original cancelling the contract
of sale because of failure of the latter to comply with the conditions thereof, i.e. to
make an irrevocable and unconditional letter of credit in favor of Sawmill not later than
May 15, 1983. What actually happened was RJH Trading informed Sawmill by
telegram that this letter of credit was opened on May 12, 1983 at the Bank of the
Philippine Islands (BPI) main office in Ayala where it was transmitted in delay. It was
only on May 26, 1983 that Sawmill received a letter of credit without recourse and at
sight from the Dumaguete City Branch of the Bank of the Philippine Islands dated May
26, 1983 transferring P250,000.00 to ARMACO-MARSTEEL ALLOY CORPORATION
by Ang Tay c/o Visayan Sawmill Co., Inc. for the 500 MT of assorted steel scrap
marine/heavy equipment.

The trial court assumed that the transaction is a contract of sale and, influenced by its
view that there was an "implied delivery" of the object of the agreement, concluded that
Article 1593 of the Civil Code was inapplicable; citing Guevarra vs. Pascual 10 and
Escueta vs. Pando, 11 it ruled that rescission under Article 1191 of the Civil Code could
only be done judicially. The trial court further classified the breach committed by the
private respondent as slight or casual, foreclosing, thereby, petitioners' right to rescind
the agreement.

Because of the delay, a case was filed in the RTC Iloilo which rendered a decision in
favor of plaintiff and against the defendants; plaintiff appealed to the CA which also
rendered in favor of Sawmill. It held that there has been already a delivery of the scrap
metals when Sawmill permitted Originals men to dig up scrap metals in its (Sawmills)
premises even though there has been no identification and designation of scrap iron by
Sawmill. There being delivery, the contract cannot be rescinded without the necessary
intervention of the courts to annul the contract according to the RTC. Further, as ruled
by the same, there can be no rescission when the breach is only slight and the delay in
the opening of the delay in opening the letter of credit was only 11 days.

(2) YES. The obligation of the petitioner corporation to sell did not arise upon the failure
of the private respondent to comply with the terms of the contract. He not only did the
private respondent fail to open, make or indorse an irrevocable and unconditional letter
of credit on or before 15 May 1983 despite his earlier representation in his 24 May
1983 telegram that he had opened one on 12 May 1983, the letter of advice received
by the petitioner corporation on 26 May 1983 from the Bank of the Philippine Islands
Dumaguete City branch explicitly makes reference to the opening on that date of a
letter of credit in favor of petitioner Ang Tay c/o Visayan Sawmill Co. Inc., drawn without
recourse on ARMACO-MARSTEEL ALLOY CORPORATION and set to expire on 24
July 1983, which is indisputably not in accordance with the stipulation in the contract
signed by the parties on at least three (3) counts: (1) it was not opened, made or
indorsed by the private respondent, but by a corporation which is not a party to the
contract; (2) it was not opened with the bank agreed upon; and (3) it is not irrevocable
and unconditional, for it is without recourse, it is set to expire on a specific date and it
stipulates certain conditions with respect to shipment. In all probability, private
respondent may have sold the subject scrap iron to ARMACO-MARSTEEL ALLOY
CORPORATION, or otherwise assigned to it the contract with the petitioners. Private
respondent's complaint fails to disclose the sudden entry into the picture of this
corporation.

A petition for review was filed with the SC to set aside the decision of the CA which
affirmed with modifications, in respect to the moral damages, the decision of the RTC
Iloilo.

Therefore, Sawmill cannot be compelled by specific performance nor rescind the

contract as mandated by Art. 1191 of the Civil Code. However he may rescind the
contract in accordance with Art. 1597 of the Civil Code:

ISSUES:
(1) W/N there was a contract of sale.
(2) W/N Sawmill may rescind the contract.
HELD:
(1) NONE. The transaction is a mere contract to sell or promise to sell and not a
contract of sale. The petitioner corporation's obligation to sell is unequivocally subject
to a positive suspensive condition, i.e., the private respondent's opening, making or
indorsing of an irrevocable and unconditional letter of credit. The former agreed to
deliver the scrap iron only upon payment of the purchase price by means of an
irrevocable and unconditional letter of credit. Otherwise stated, the contract is not one
of sale where the buyer acquired ownership over the property subject to the resolutory
condition that the purchase price would be paid after delivery. Thus, there was to be no
actual sale until the opening, making or indorsing of the irrevocable and unconditional
letter of credit. Since what obtains in the case at bar is a mere promise to sell, the
failure of the private respondent to comply with the positive suspensive condition
cannot even be considered a breach casual or serious but simply an event that
prevented the obligation of petitioner corporation to convey title from acquiring binding
force. The contract was a mere accommodation to expedite the weighing and hauling
of the iron in the event that the sale would materialize

ARTICLE 1597. Where the goods have not been delivered to the
buyer, and the buyer has repudiated the contract of sale, or has
manifested his inability to perform his obligations, thereunder, or
has committed a breach thereof, the seller may totally rescind the
contract of sale by giving notice of his election so to do to the buyer.

WHEREFORE, the instant petition is GRANTED. The decision of public respondent

Court of Appeals in C.A.-G.R. CV No. 08807 is REVERSED and Civil Case No. 15128
of the Regional Trial Court of Iloilo is ordered DISMISSED.
Costs against the private respondent.
SO ORDERED.
_________________________________________________________
5. Filinvest v. Philippine Acetylene Co | January 30, 1982
GR No. L-50449, De Castro J.
FACTS: On October 1971, respondent Philippine Acetylene Co. (PAC) purchased
from one Alexander Lim a 1969 model Chevrolet motor vehicle for P55,247.80 with a
downpayment of P20,000 and the balance payable in installments for 34 months. To
secure payment, PAC executed a chattel mortgage over the motor vehicle in favour of
Alexander Lim. The latter, however assigned his rights to Filinvest Finance

Corporation (FFC) all his rights and titles by virtue of a Deed of Assignment. Due to a
subsequent merger with Credit and Development Corporation, FFC assigned its
rights
and titles to Filinvest Credit Corporation (FCC) herein petitioner.

respondent, it shall be its obligation to pay the said taxes but with recourse to the
original vendor Alexander Lim because of the existence of a specific provision in the
Deed of Sale between Alexander and PAC that the former warrants the thing to be free
from liens and encumbrances.

Respondent PAC failed to pay nine successive installments causing petitioner tosend a
letter demanding the payment of the balance of the motor vehicle. PAC replied to the
said letter stating their intention to the return the motor vehicle to petitioner as payment
of the balance. The vehicle was then delivered to petitioner FCC with a Special Power
of Attorney to Sell. Petitioner averred that it cannot sell the said vehicle due to the
existence of unpaid taxes and offered to return the vehicle to PAC in which the latter
refused causing petitioner to institute an action against PAC in the Court of First
Instance. The CFI ruled in favour of petitioner causing respondent to appeal in the
appellate court contending that its obligation has already extinguished by returning the
said motor vehicle to petitioner pursuant to Article 1484(c) of the New Civil Code and
that it cannot be imputed to pay the unpaid taxes which was a breach of warranty of
the original vendor Alexander Lim.

_________________________________________________________

ISSUES:
(1) W/N the return of the motor vehicle by the respondent extinguished its obligation to
pay the purchase price.
(2) W/N the breach of warranty of unpaid taxes may be imputed against respondents.
HELD:
1. No. Respondents aver that the return of the said motor vehicle is tantamount to
dacion en pago. The court ruled in the negative by reason that dacion en pago
partakes in the nature of a contract of sale and that there must be acceptance on the
part of the vendee on such mode of payment. In this case, petitioner did not consent to
the return nor accepted the delivery of the said vehicle to it.
The fact that the mortgaged motor vehicle was delivered to him does not necessarily
mean that ownership thereof, as juridically contemplated by dacion en pago, was
transferred from appellant to appellee. In the absence of clear consent of appellee to
the proferred special mode of payment, there can be no transfer of ownership of the
mortgaged motor vehicle from appellant to appellee. If at all, only transfer of
possession of the mortgaged motor vehicle took place, for it is quite possible that
appellee, as mortgagee, merely wanted to secure possession to forestall the loss,
destruction, fraudulent transfer of the vehicle to third persons, or its being rendered
valueless if left in the hands of the appellant.
Another proof that dacion en pago did not partake in this case is the existence of the
Special Power of Attorney to sell which merely conferred to petitioner the possession of
the motor vehicle and not its ownership rendering him merely an agent for respondent.
Petitioner cannot be considered to have been estopped by reason that it did not even
accept the delivery of the said motor vehicle. It cannot also be said that petitioner
exercised its rights under Article 1484 (c) of the New Civil Code for it did not foreclose
the said vehicle and also rejected the return of the motor vehicle to him. It was merely
exercising its right under 1484 (a) by exacting payment of the remaining balance of the
purchase price.
2. Yes. The Court held that unpaid taxes are a burden on property and whoever holds
the said property shall be bound to answer for the said liens and encumbrances on the
said property. Since the ownership of the said motor vehicle never left from

6. Spouses Nonato v. IAC | November 22, 1985

GR No. 67181, Paras, J.
FACTS: On June 28, 1976, petitioner spouses purchased one unit of Volkswagen
Sakbayan from the Peoples Car, Inc., on instalment basis. To secure complete
payment, the petitioners executed a promissory note and chattel mortgage in favour of
Peoples Car, Inc. The latter assigned its rights and interests over the note and
mortgage in favour of private respondent Investors Finance Corp (IFC). Due to the
failure of the petitioners to pay two or more installments, despite demands, the car was
repossessed by IFC on March 20, 1978. Despite repossession, private respondent
demanded from the petitioners the balance of the price of the car.
Spouses Nonato contended that when the company repossessed the vehicle, it had,
by that act, effectively cancelled the sale of the vehicle. It is therefore barred from
exacting recovery of the unpaid balance of the purchased price, as mandated by the
provisions of Article 1484 of the New Civil Code. The trial court rendered a decision in
favour of the IFC which was confirmed by the appellate court upon appeal to it.
ISSUE: W/N a vendor, or his assignee/s, who had cancelled the sale of a motor
vehicle for failure of the buyer to pay two or more of the stipulated installments, may
also demand payment of the balance of the purchase price.
HELD: No. The applicable law in the case at bar, involving as it does a sale of personal
property on installment, is Article 1484 of the New Civil Code. The meaning of the
provision has been repeatedly enunciated in a long line of cases. Thus, should the
vendee or purchaser of a personal property default in the payment of two or more of
the agreed installments, the vendor or seller has the option to avail of any of these
three remedies- either to exact fulfilment by the purchaser of the obligation, or to
cancel the sale, or to foreclose the mortgage on the purchased personal property, if
one was constituted. The remedies have been recognized as alternative, not
cumulative, that the exercise of one would bar the exercise of the others.
Respondent corporation further asserts that it repossessed the vehicle for the purpose
of appraising its current value. The allegation is untenable, for even after it had notified
the Nonatos that the value of the car was not sufficient to cover the balance of the
purchase price, there was no attempt at all on the part of the company to return the
repossessed car.
_________________________________________________________
7. Borbon v. Servicewide Specialists Inc | July 11, 1996
GR No. 106418, Vitug, J.
DOCTRINE: In ordinary alternative obligations, a mere choice categorically and
unequivocally made and then communicated by the person entitled to exercise the
option concludes the parties. The creditor may not thereafter exercise any other

option, unless the chosen alternative proves to be ineffectual or unavailing due to no

fault on his part.
FACTS: Daniel L. Borbon and Francisco Borbon signed a promissory with a stipulation,
among others that the loan will be to be payable without need of notice or demand, in
installments of the amounts following and at the dates hereinafter set forth.
Furthermore, the note stipulated that the attorneys services are availed of, an
additional sum equal to twenty five percent (25%) of the total sum due thereon, which
shall not be less than five hundred pesos, shall be paid to the holder hereof for
attorneys fees plus an additional sum equivalent to twenty five percent (25%) of the
total sum due which likewise shall not be less than five hundred pesos for liquidated
damages, aside from expenses of collection and the legal costs provided for in the
Rules of Court. For their defense, the defendants claim that what they intended to buy
from Pangasinan Auto Mart was a jeepney type Isuzu K. C. Cab. The vehicle that they
bought was not delivered (pp. 11-12, tsn, Oct. 17, 1985).
Instead, through
misrepresentation and machination, the Pangasinan Motor, Inc. delivered an Isuzu
crew cab, as this is the unit available at their warehouse. Later the representative of
Pangasinan Auto Mart, Inc. (assignor) told the defendants that their available stock is
an Isuzu Cab but minus the rear body, which the defendants agreed to deliver with the
understanding that the Pangasinan Auto Mart, Inc. will refund the defendants the
amount of P10,000.00 to have the rear body completed.
ISSUES:
(1) W/N the assignment of credit wit a third party voids the chattel mortgage
(2) W/N the execution of the writ of replevin complied with all the requisites.
HELD:
(1) When the seller assigns his credit to another person, the latter is likewise bound by
the same law. Accordingly, when the assignee forecloses on the mortgage, there can
be no further recovery of the deficiency,and the seller-mortgagee is deemed to have
renounced any right thereto.A contrario, in the event the seller-mortgagee first seeks,
instead, the enforcement of the additional mortgages, guarantees or other security
arrangements, he must then be held to have lost by waiver or non-choice his lien on
the chattel mortgage of the personal property sold by any mortgaged back to him,
although, similar to an action for specific performance, he may still levy on it.
In ordinary alternative obligations, a mere choice categorically and unequivocally made
and then communicated by the person entitled to exercise the option concludes the
parties. The creditor may not thereafter exercise any other option, unless the chosen
alternative proves to be ineffectual or unavailing due to no fault on his part. This rule,
in essence, is the difference between alternative obligations, on the one hand, and
alternative remedies, upon the other hand, where, in the latter case, the choice
generally becomes conclusive only upon the exercise of the remedy. For instance, in
one of the remedies expressed in Article 1484 of the Civil Code, it is only when there
has been a foreclosure of the chattel mortgage that the vendee-mortgagor would be
permitted to escape from a deficiency liability. Thus, if the case is one for specific
performance, even when this action is selected after the vendee has refused to
surrender the mortgaged property to permit an extrajudicial foreclosure, that property
may still be levied on execution and an alias writ may be issued if the proceeds thereof
are insufficient to satisfy the judgment credit. So, also, a mere demand to surrender the
object which is not heeded by the mortgagor will not amount to a foreclosure, but the
repossession thereof by the vendor-mortgagee would have the effect of foreclosure.

(2) In Filipinas Investment & Finance Corporation vs. Ridad while we reiterated and
expressed our agreement on the basic philosophy behind Article 1484, we stressed,
nevertheless, that the protection given to the buyer-mortgagor should not be
considered to be without circumscription or as being preclusive of all other laws or legal
principles. Hence, borrowing from the examples made in Filipinas Investment, where
the mortgagor unjustifiably refused to surrender the chattel subject of the mortgage
upon failure of two or more installments, or if he concealed the chattel to place it
beyond the reach of the mortgagee, that thereby constrained the latter to seek court
relief, the expenses incurred for the prosecution of the case, such as attorneys fees,
could rightly be awarded.
Given the circumstances, we must strike down the award for liquidated damages made
by the court a quo but we uphold the grant of attorneys fees which we, like the
appellate court, find to be reasonable. Parenthetically, while the promissory note may
appear to have been a negotiable instrument, private respondent, however, clearly
cannot claim unawareness of its accompanying documents so as to thereby gain a
right greater than that of the assignor.
_________________________________________________________
8. Ridad v. Filipinas Investment| January 27, 1983
GR No. L-39806, De Castro, J.
DOCTRINE/S: The vendor of personal property the purchase price of which is payable
in installments, has the right, should the vendee default in the payment of two or more
of the agreed installments, to exact fulfillment by the purchaser of the obligation, or to
cancel the sale, or to foreclose the mortgage on the purchased personal property, if
one was constituted. Whichever right the vendor elects, he cannot avail of the other,
these remedies being alternative, not cumulative. (Art. 1484)
Furthermore, if the vendor avails himself of the right to foreclose his mortgage, the law
prohibits him from further bringing an action against the vendee for the purpose of
recovering whatever balance of the debt secured not satisfied by the foreclosure sale
The precise purpose of the law is to prevent mortgagees from seizing the mortgaged
property, buying it at foreclosure sale for a low price and then bringing suit against the
mortgagor for a deficiency judgment, otherwise, the mortgagor-buyer would find
himself without the property and still owing practically the full amount of his original
indebtedness
FACTS: On April 14, 1964, plaintiffs purchased from the Supreme Sales arid
Development Corporation two (2) brand new Ford Consul Sedans complete with
accessories, for P26,887 payable in 24 monthly installments. To secure payment
thereof, plaintiffs executed on the same date a promissory note covering the purchase
price and a deed of chattel mortgage not only on the two vehicles purchased but also
on another car (Chevrolet) and plaintiffs' franchise or certificate of public convenience
granted by the defunct Public Service Commission for the operation of a taxi fleet
Then, with the conformity of the plaintiffs, the vendor assigned its rights, title and
interest to the above-mentioned promissory note and chattel mortgage to defendant
Filipinas Investment and Finance Corporation
Due to the failure of the plaintiffs to pay their monthly installments as per promissory
note, the defendant corporation foreclosed the chattel mortgage extra-judicially, and at

the public auction sale of the two Ford Consul cars, of which the plaintiffs were not
notified, the defendant corporation was the highest bidder and purchaser.

(d) judicial foreclosure;

(e) ordinary civil action to exact fulfillment of the mortgage contract.

Another auction sale was held involving the remaining properties subject of the deed of
chattel mortgage since plaintiffs' obligation was not fully satisfied by the sale of the
aforesaid vehicles, and at the public auction sale, the franchise of plaintiffs to operate
five units of taxicab service was sold for P8,000 to the highest bidder, herein defendant
corporation, which subsequently sold and conveyed the same to herein defendant
Jose D. Sebastian, who then filed with the Public Service Commission an application
for approval of said sale in his favour

It was further stipulated that "[w]hichever remedy is elected by the mortgagee, the
mortgagor expressly waives his right to reimbursement by the mortgagee of any and all
amounts on the principal and interest already paid by him.

The Trial Court declares the chattel mortgage to be null and void in so far as the
taxicab franchise and the used Chevrolet car of plaintiffs are concerned, and the sale
at public auction conducted by the City Sheriff of Manila concerning said taxicab
franchise, to be of no legal effect

The vendee-mortgagor having failed to make further payments, Northern Motors, Inc.
filed the present complaint on July 22, 1966, against Sapinoso and a certain person
whose name, identity and address were still unknown to the plaintiff, hence
denominated in the complaint as "John Doe." In its complaint, Northern Motors, Inc.
stated that it was availing itself of the option given it under the mortgage contract of
extrajudicially foreclosing the mortgage, and prayed that a writ of replevin be issued
upon its filing of a bond for the seizure of the car and for its delivery to it; that after
hearing, the plaintiff be adjudged to have the rightful possession and ownership of the
car; that in default of delivery, the defendants be ordered to pay the plaintiff the sum of
P10,218.10 with interest, at 12% per annum from April 18, 1966, until full payment of
the said sum, as well as an amount equivalent to 25% of the sum due as and for
attorney's fees and expenses of collection, and the costs of the suit. Plaintiff also
prayed for such other remedy as might be deemed just and equitable in the premises.
Subsequent to the commencement of the action, but before the filing of his answer,
defendant Sapinoso made two payments on the promissory note, the first on August
22, 1966, for P500.00, and the second on September 27, 1966, for P750.00. In the
meantime, on August 9, 1966, upon the plaintiff's filing of a bond, a writ of replevin was
issued by the court.

Defendants appealed to the CA, which certified the appeal to the SC.
ISSUE/S: W/N the chattel mortgage insofar as the franchise and the subsequent sale
thereof are valid
HELD: NO. The lower court rightly declared the nullity of the chattel mortgage in
question in so far as the taxicab franchise and the used Chevrolet car of plaintiffs are
concerned
The vendor of personal property sold on the installment basis is precluded, after
foreclosing the chattel mortgage on the thing sold from having a recourse against the
additional security put up by a third party to guarantee the purchaser's performance of
his obligation on the theory that to sustain the same would overlook the fact that if the
guarantor should be compelled to pay the balance of the purchase price, said
guarantor will in turn be entitled to recover what he has paid from the debtor-vendee,
and ultimately it will be the latter who will be made to bear the payment of the of the
balance of the price, despite the earlier foreclosure of the chattel mortgage given by
him, thereby indirectly subverting the protection given the latter
(Cruz vs Filipinos Investment & Finance, 23 SCRA 791)
_________________________________________________________
9. Northern Motors Inc v Sapinoso | May 29, 1970
GR No. L-28074, Villamor, J.
FACTS: On June 4, 1965, Casiano Sapinoso purchased from Northern Motors, Inc. an
Opel Kadett car for the price of P12,171.00, making a down payment and executing a
promissory note for the balance of P10,540.00 payable in installments with interest at
12% per annum, as follows: P361.00 on July 5, 1965, and P351.00 on the 5th day of
each month beginning August, 1965, up to and including December, 1967. To secure
the payment of the promissory note, Sapinoso executed in favor of Northern Motors,
Inc. a chattel mortgage on the car. The mortgage contract provided, among others, that
upon default by the mortgagor in the payment of any part of the principal or interest
due, the mortgagee may elect any of the following remedies:
(a) sale of the car by the mortgagee;
(b) cancellation of the contract of sale;
(c) extrajudicial foreclosure;

Sapinoso failed to pay the first 5 installments due fromAugust-November 1965; he

made payments though on November and December and on April the next year
butfailed to make subsequent payments.

As special defenses the said defendant alleged that he failed to pay the installments
due because the car was defective, and the plaintiff failed to have it fixed although he
had repeatedly called the plaintiff's attention thereto, hence, the defendant had to
procrastinate in his payments in order to move the plaintiff to repair the car; and that
although the car could not be used, he paid P700.00 to the plaintiff upon the latter's
assurance that the car would be fixed, but that instead of having the car fixed, the
plaintiff, in bad faith, filed the present complaint. The defendant prayed that the
complaint be dismissed and that the plaintiff be ordered to return the car to him. He
stated in his prayer that he would be very much willing to pay the car in a compromise
agreement between him and the plaintiff.
The trial court held that defendant Sapinoso having failed to pay more than two (2)
installments, plaintiff-mortgagee acquired the right to foreclose the chattel mortgage
and that the foreclosure of the chattel mortgage and the recovery of the unpaid
balance of the price are alternative remedies which may not be pursued conjunctively,
so that in availing itself of its right to foreclose the chattel mortgage, the plaintiff thereby
renounced whatever claim it may have had on the promissory note, and, therefore, the
plaintiff has no more right to the collection of the attorney's fees stipulated in the
promissory note, and should return to defendant Sapinoso the sum of P1,250.00 which
the plaintiff had received.
ISSUE: W/N plaintiff Northern Motors is barred from recoverring unpaid balance of
the debt after having elected to foreclose the chattel mortgage.

HELD: NO. In issuing a writ of replevin, and, after trial, in upholding plaintiff-appellant's
right to the possession of the car, and ratifying and confirming its delivery to the said
plaintiff-appellant, the court correctly considered the action as one of replevin to secure
possession of the mortgaged vehicle as a preliminary step to this foreclosure sale
contemplated in Section 14 of Act No. 1508. The said court however erred in
concluding that the legal effect of the filing of the action was to bar plaintiff-appellant
from accepting further payments on the promissory note. That the ultimate object of the
action is the foreclosure of the chattel mortgage, is of no moment, for it is the fact of
foreclosure and actual sale of the mortgaged chattel that bar further recovery by the
vendor of any balance on the purchaser's outstanding obligation not satisfied by the
sale.
In any event, what Article 1484(3) prohibits is "further action against the purchaser to
recover any unpaid balance of the price;" and although this Court has construed the
word "action" in said Article 1484 to mean "any judicial or extrajudicial proceeding by
virtue of which the vendor may lawfully be enabled to exact recovery of the supposed
unsatisfied balance of the purchase price from the purchaser or his privy" (Cruz, et al.
vs. Filipinas Investment & Finance Corporation, supra), there is no occasion at this
stage to apply the restrictive provision of the said article, because there has not yet
been a foreclosure sale resulting in a deficiency. The payment of the sum of P1,250.00
by defendant-appellee Sapinoso was a voluntary act on his part and did not result from
a "further action" instituted by plaintiff-appellant. If the mortgage creditor, before the
actual foreclosure sale, is not precluded from recovering the unpaid balance of the
price although he has filed an action of replevin for the purpose of extrajudicial
foreclosure, or if a mortgage creditor who has elected to foreclose but who
subsequently desists from proceeding with the auction sale, without gaining any
advantage or benefit, and without causing any disadvantage or harm to the vendeemortgagor, is not barred from suing on the unpaid account (Radiowealth, Inc. vs. Lavin,
et al., G.R. No. L-18563, April 27, 1963 [7 SCRA 804, 807]), there is no reason why a
mortgage creditor should be barred from accepting, before a foreclosure sale,
payments voluntarily tendered by the debtor-mortgagor who admits a subsisting
indebtedness.
_________________________________________________________
10. Agustin v. CA | April 18, 1997
GR No. 107846, Francisco, J.
Facts: The dispute stemmed from an unpaid promissory note executed by petitioner
Leovillo Agustin in favor of ERM Commercial for the amount of P43,480.80. The note
was payable in monthly installments and secured by a chattel mortgage over an Isuzu
diesel truck, both of which were subsequently assigned to private respondent Filinvest
Finance Corporation. When petitioner defaulted in paying the installments, private
respondent demanded from him the payment of the entire balance or, in lieu thereof,
the possession of the mortgaged vehicle. Neither payment nor surrender was made.
Aggrieved, private respondent filed a complaint against petitioner praying for the
issuance of a writ of replevin or, in the alternative, for the payment of P32,723.97 plus
interest at the rate of 14% per annum from due date until fully paid. A writ of replevin
was issued by RTC, and by virtue thereof private respondent acquired possession of
the vehicle. Upon repossession, private respondent discovered that the vehicle was no
longer in running condition and that several parts were missing which private
respondent replaced. The vehicle was then foreclosed and sold at public auction.

Private respondent subsequently filed a supplemental complaint claiming additional

reimbursement worth P8, 852.76 as value of replacement parts and for expenses
incurred in transporting the mortgaged vehicle from Cagayan to Manila. Petitioner
contends that the award of repossession expenses to private respondent, as
mortgagee is contrary to the letter, intent and spirit of Article 1484 of the Civil Code.
He asserts that private respondents repossession expenses have been amply covered
by the foreclosure of the chattel mortgage, hence he could no longer be held liable.
ISSUE: W/N the award for repossession expenses is proper
HELD: Petitioners arguments are devoid of merit. In Filipinas Investment & Finance
Corporation v. Ridad, the Court recognized an exception to the rule stated under Article
1484(3) upon which petitioner relies. Thus: Where the mortgagor plainly refuses to
deliver the chattel subject of the mortgage upon his failure to pay two or more
installments, or if he conceals the chattel to place it beyond the reach of the
mortgagee, what then is the mortgagee expected to do? It logically follows as a matter
of common sense, that the necessary expenses incurred in the prosecution by the
mortgagee of the action for replevin so that he can regain possession of the chattel,
should be borne by the mortgagor. Recoverable expenses would, in our view, include
expenses properly incurred in effecting seizure of the chattel and reasonable attorneys
fees in prosecuting the action for replevin.
_________________________________________________________
11. Elisco Tool Manufacturing Corp v. CA | May 31, 1999
GR No. 109966, Mendoza, J.
FACTS: Private respondent Rolando Lantan was employed at the Elisco Tool
Manufacturing Corporation as head of its cash department. He entered into an
agreement with the company which provided that: the EMPLOYER is the owner of a
car Colt Lancer 2 door; for and in consideration of a monthly rental of P1,010.65
Philippine Currency, EMPLOYER desires to lease the motor vehicle; the EMPLOYEE
agrees as he hereby agreed to pay the lease rental thru salary deduction from his
monthly remuneration in the amount as above specified for a period of FIVE (5) years;
at the end of FIVE (5) year period or upon payment of the 60th monthly rental,
EMPLOYEE may exercise the option to purchase the motor vehicle from the
EMPLOYER and all monthly rentals shall be applied to the payment of the full
purchase price of the car and further, should EMPLOYEE desire to exercise this option
before the 5-year period lapse, he may do so upon payment of the remaining balance
on the five year rental unto the EMPLOYER. On the same day, private respondent
executed a promissory note.
Elisco Tool ceased operations, as a result of which private respondent Rolando Lantan
was laid off. Petitioner filed a complaint, entitled "replevin plus sum of money,"
Petitioner alleged that private respondents failed to pay the monthly rentals. Private
respondents claimed that their true agreement was "to buy and sell and not lease with
option to buy" the car in question. Petitioner maintained that the contract between the
parties was one of lease with option to purchase.
The trial court sustained private respondents' claim that the agreement in question was
one of sale and held that, under the Recto law (Arts. 1484 & 1485, Civil Code), the
vendor who repossesses the goods sold on installments, has no right to sue the

vendee for the unpaid balance thereof. The Court of Appeals rendered its decision,
affirming in toto the decision of the trial court.
Issue:
Held: In the case at bar, although the agreement provides for the payment by private
respondents of "monthly rentals," the fifth paragraph thereof gives them the option to
purchase the motor vehicle at the end of the 5th year or upon payment of the 60th
monthly rental when "all monthly rentals shall be applied to the payment of the full
purchase price of the car." It is clear that the transaction in this case is a lease in name
only. The so-called monthly rentals are in truth monthly amortizations on the price of
the car.
The condition that the lessor has deprived the lessee of possession or enjoyment of
the thing for the purpose of applying Art. 1485 was fulfilled in this case by the filing by
petitioner of the complaint for replevin to recover possession of movable property. By
virtue of the writ of seizure issued by the trial court, the deputy sheriff seized the
vehicle and thereby deprived private respondents of its use.
This case should be considered as one for specific performance, pursuant to Art.
1484(1), consistent with its prayer with respect to the unpaid installments. In this view,
the prayer for the issuance of a writ of replevin is only for the purpose of insuring
specific performance by private respondents.
Both the trial court and the Court of Appeals correctly ruled that private respondents
could no longer be held liable for the amounts of P39,054.86 or P60,000.00 because
private respondents had fulfilled their part of the obligation. The agreement does not
provide for the payment of interest on unpaid monthly "rentals" or installments. The 2%
surcharge is not provided for in the agreement. Consequently, the total amount of
P61,070.94 already paid to petitioner should be considered payment of the full
purchase price of the car or the total installments paid.
_________________________________________________________
12. Siska Development v. Office of the Pres | April 24, 1994
GR No. 93176, Quiason J.
FACTS: On April 28, 1967, petitioner, a subdivision owner-developer, entered into a
Contract to Sell with Guadalupe Sering, involving a lot situated at the Mira-Nila
Subdivision in Quezon City.On August 16, 1968, Guadalupe Sering, with the consent of
petitioner, transferred all her rights and interests over the aforesaid lot in favor of
respondent Socorro Sering, wife of respondent Jose Sering. Thereafter, private
respondents assumed the transferor's obligation by paying the monthly amortizations
for the lot.
On several occasions, private respondents defaulted in the payment of their
monthly amortizations, but petitioner still accepted the late payments.
On October 18, 1974, petitioner sent private respondents a notice of rescission of the
Contract to Sell for failure to pay the monthly amortizations on time. Petitioner,
however, cancelled the said notice of rescission on November 12, 1974, after private
respondents updated their payments. Petitioner, however, imposed the condition that
private respondents' account "must be kept current" and that should it be necessary to

rescind the contract for a second time, the second rescission would be final. Private
respondents again defaulted in paying their monthly amortizations from January to
September 1, 1975. When respondent Jose Sering offered to pay the remaining
balance of the purchase price on September 18, 1975, an employee of petitioner
refused to accept the payment, alleging that the contract had already been
cancelled. However, said respondent protested that he had not received any
notice of rescission from petitioner.
To compel the execution by petitioner of the final deed of sale, private respondents filed
an action for specific performance in the Court of First Instance of Surigao. Petitioner
questioned the order of the trial court, upholding the venue, before the Court of
Appeals, which in turn ruled for petitioner and dismissed the case.The case was later
transferred to the HSRC by virtue of Executive Order No. 648 dated Feb. 7, 1981
(HSRC Case No. REM-A-0156). After hearing, the Office of Appeals Adjudication and
Legal Affairs (OAALA) of the HSRC denied private respondents' request for specific
performance of the Contract to Sell and directed petitioner to refund to private
respondents the amount of P15,960.73. Their motion for reconsideration having been
denied, private respondents appealed the OAALA decision to the HSRC. HSRC
dismissed private respondents' appeal for lack of merit and affirmed the decision of the
OAALA. Private respondents elevated the case to the Office of the President.
ISSUES:
1. W/N the sending of notice of rescission is necessary for cancellation of the contract
to take effect?
2. W/N the petitioner should accept the delayed payment of the private respondent?
3. W/N the petitioners unilateral cancellation of the contract is in accordance with law?
HELD: Petitioner is ordered to accept the amount of P9,341.29, the balance of the
purchase price and to execute immediately the final deed of sale in favor of private
respondents.
1. YES. The Office of the President found that private respondents never received the
notice of rescission sent by petitioner. This is a finding of fact of an administrative
agency which we shall not disturb (Chong Guan Trading v. National Labor Relations
Commission, 172 SCRA 831 [1989]). The sending of a notice of cancellation to the
buyer is mandated by R.A. 6552 entitled "An Act to Provide Protection to Buyers
of Real Estate on Installment Payments," (the Maceda Law) which took effect on
September 14, 1972 (Jison v. Court of Appeals, 164 SCRA 339 [1988]). In Section
3(b) thereof, it provides that "the actual cancellation of the contract shall take
place thirty days from receipt of the buyer of the notice of cancellation or the
demand for rescission of the contract by a notarial act and upon full payment of
the cash surrender value to the buyer."Petitioner argues that the relationship
between the parties is governed solely by the Contract to Sell because said contract
was entered into long before the passage of the Maceda Law (Rollo, p. 7). While the
contract was entered into before the effectivity of the Maceda Law, the
rescission took place when the said law was in full force and effect. But even
before the effectivity of said law, jurisprudence made necessary a notice of
rescission.
2. YES. Petitioner, if ever on several occasions it accepted the delayed payments of
private respondents, then that must not be considered a waiver or estoppel on its part.
Petitioner invokes paragraph 9 of the contract, which provides:

9. Effect of failure to enforce provision. That whatever consideration the Owner may
concede to the Buyer as not exacting a strict compliance with any of the terms and
conditions of this contract, as well as any other condonation that the Owner may give
to the Buyer with regard to the obligations of the latter, shall not be interpreted as a
renunciation on the part of the Owner of any rights granted it under this contract in
case of any default or non-compliance by the Buyer (Rollo, p. 8).
The Contract to Sell entered into by the parties has some characteristics of a contract
of adhesion. The petitioner drafted and prepared the contract. Private respondents,
who were eager to acquire a lot upon which they could build a home, affixed their
signatures thereon and assented to the terms and conditions of the contract. They had
no opportunity to question nor change any of the terms of the agreement. It was
offered to them on a take-it-or- leave-it basis (Angeles v. Calasanz, 135 SCRA 323
[1985]). When petitioner accepted and received delayed payments beyond the
grace period mentioned in paragraph 9 of the contract, it waived its right to
rescind and is now estopped from exercising it (Angeles v. Calasanz, supra).
3. Unilateral cancellation of a contract to sell is not warranted if the breach is slight or
casual (Song Fo & Co. v. Hawaii-Philippine Co., 47 Phil. 821 [1925]). The breach of the
contract adverted to by petitioner was so slight considering that private respondents
had already paid P26,601.21 (inclusive of interests and penalties) out of the total
purchase price of P21,328.00 and the remaining balance was only P9,341.24, which
private respondents were willing to pay. To sanction the rescission made by petitioner
will work injustice to private respondents. It would unjustly enrich petitioner at their
expense (Civil Code of the Philippines, Art. 22).

Regulatory Board (HLURB). It sought to compel the petitioner to execute a final Deed
of Absolute Sale in respondents favor after she pays any balance that may still be due
from her. Respondent claimed that she is entitled to the final deed of sale after she
offered to pay the balance of P24,048.47, considering that she has already paid the
total sum of P314,816.76, which amount is P90,835.76 more than the total contract
price of P224,025.00. The HLURB ruled in favor of Daroya and cancelled the contract
to sell and declared it void as petitioner failed to pay the cash surrender value to
respondent as mandated by law. Petitioner was ordered to refund to respondent all her
payments in the amount of P314,816.70, with 12% interest per annum from August 26,
1991 (the date of the filing of the complaint) until fully paid and to pay P10,000.00 as
attorneys fees. By this time, petitioner sold the lot to a third person.
The case was then brought before the HLURB Board of Commissioners who set aside
the Arbiters Decision to formulate an equitable solution. It ruled that both parties
were at fault, i.e., respondent incurred in delay in her installment payments and
respondent failed to send a notarized notice of cancellation, petitioner was ordered to
refund to the respondent one half of the total amount she has paid or P157,408.35,
which was allegedly akin to the remedy provided under the Maceda Law.
Respondent appealed to the Office of the President where Chief Presidential Counsel
Renato C. Corona, acting by authority of the President, modified the Decision of the
HLURB as he found that it was not in accord with the provisions of the Maceda Law.
Petitioner did not comply with the legal requisites for a valid cancellation of the
contract, the contract to sell between the parties subsisted and concluded that
respondent was entitled to the lot after payment of her outstanding balance. A motion
for reconsideration was filed but was denied.

_________________________________________________________
13. Active Realty v. Daroya | May 9, 2002
GR No. 141205, Puno, J.
FACTS: Petitioner ACTIVE REALTY & DEVELOPMENT CORPORATION is the owner
and developer of Town & Country Hills Executive Village in Antipolo, Rizal. On January
2, 1985, it entered into a Contract to Sell with respondent NECITA DAROYA, a contract
worker in the Middle East, whereby the latter agreed to buy a 515 sq. m. lot for
P224,025.00 in petitioners subdivision. It states that the respondent shall pay the initial
amount of P53,766.00 upon execution of the contract and the balance of P170,259.00
in sixty (60) monthly installments of P4,893.35. Adding the down payment and
installment payments, it would appear that the total amount is P346,367.00, a figure
higher than that stated as the contract price.
On May 5, 1989, petitioner accepted respondents amortization in the amount of
P40,000.00. By August 8, 1989, respondent was in default of P15,282.85 representing
three (3) monthly amortizations. Petitioner sent respondent a notice of cancellation of
their contract to sell, to take effect thirty (30) days from receipt of the letter. It does not
appear from the records, however, when respondent received the letter. Nonetheless,
when respondent offered to pay for the balance of the contract price, petitioner refused
as it has allegedly sold the lot to another buyer. In truth, it was revealed in the records
that it was only during the preliminary hearing of the case before the HLURB arbiter
when petitioner offered to pay the cash surrender value.
On August 26, 1991, respondent filed a complaint for specific performance and
damages against petitioner before the Arbitration Branch of the Housing and Land Use

A petition for review was filed before the Court of Appeals (CA) who denied it for
insufficiency of form and substance. A petition for reconsideration filed but was denied
for untimely filing of petition for review.
ISSUE: W/N the petitioner can be compelled to refund to the respondent the value of
the lot or to deliver a substitute lot at respondents option.
HELD: YES. Under Section 3 of R.A. No. 6552 provided for the rights of the buyer in
case of default in the payment of succeeding installments, where he has already paid
at least two (2) years of installments, thus:
"(a) To pay, without additional interest, the unpaid installments due
within the total grace period earned by him, which is hereby fixed at the
rate of one month grace period for every one year of installment
payments made; x x x
(b) If the contract is cancelled, the seller shall refund to the buyer the
cash surrender value of the payments on the property equivalent to fifty
per cent of the total payments made; provided, that the actual
cancellation of the contract shall take place after thirty days from receipt
by the buyer of the notice of cancellation or the demand for rescission of
the contract by a notarial act and upon full payment of the cash
surrender value to the buyer."

In this case, respondent has already paid in four (4) years a total of P314,860.76 or
P90,835.76 more than the contract price of P224,035.00. In April 1989, petitioner
decided to cancel the contract when the respondent incurred in delay in the payment of

P15,282.85, representing three (3) monthly amortizations. Petitioner refused to accept

respondents subsequent tender of payment of the outstanding balance alleging that it
has already cancelled the contract and sold the subject lot to another buyer. However,
the records clearly show that the petitioner failed to comply with the mandatory twin
requirements for a valid and effective cancellation under the law, i.e., he failed to send
a notarized notice of cancellation and refund the cash surrender value. Moreover,
petitioner justifies its inaction on the ground that the respondent was always out of the
country. Even then, the records are bereft of evidence to show that petitioner attempted
to pay the cash surrender value to respondent through her last known address.
Thus, for failure to cancel the contract in accordance with the procedure provided by
law, we hold that the contract to sell between the parties remains valid and subsisting.
Following Section 3(a) of R.A. No. 6552, respondent has the right to offer to pay for the
balance of the purchase price, without interest, which she did in this case. Ordinarily,
petitioner would have had no other recourse but to accept payment. However,
respondent can no longer exercise this right as the subject lot was already sold by the
petitioner to another buyer which lot, as admitted by the petitioner, was valued at
P1,700.00 per square meter. As respondent lost her chance to pay for the balance of
the P875,000.00 lot, it is only just and equitable that the petitioner be ordered to refund
to respondent the actual value of the lot resold, i.e., P875,000.00, with 12% interest per
annum computed from August 26, 1991 until fully paid or to deliver a substitute lot at
the option of the respondent.
IN VIEW WHEREOF, the Decision of then Chief Presidential Legal Assistant Renato
Corona, Office of the President, dated June 2, 1998, is AFFIRMED in toto. Costs
against petitioner.
_________________________________________________________
14. Pagtalunan v. dela Cruz | September 13, 2007
GR No. 147695, Azcuna, J.
FACTS: Patricio Pagtalunan (petitioners stepfather and predecessor-in-interest)
entered into a Contract to Sell with respondent Manzano over a house and lot for Php
17,000.00, to be paid in installments. Php 1,500.00 as downpayment upon execution of
the contract and the balance to be paid in equal monthly installments of Php 150.00 on
or before the last day of each month until fully paid.
The contract provides that while respondent could immediately occupy the house and
lot, in case of default in the payment of any of the installments for 90 days after its due
date, the contract would be automatically rescinded without need of judicial
declaration, and that all payments made and all improvements done on the premises
by respondent would be considered as rentals for the use and occupation of the
property or payment for damages suffered, and respondent was obliged to peacefully
vacate the premises and deliver the possession thereof to the vendor.

Petitioner issued a demand letter for respondent to vacate the premises of the property
but Manzano ignored the same. Thus, the former filed a complaint for unlawful detainer
against the latter with MTC Guiguinto, Bulacan.
The MTC found for Pagtalunan, holding that failure to pay not a few installments
caused the resolution or termination of the Contract to Sell. On appeal, the RTC of
Malolos, Bulacan reversed the decision of MTC and dismissed the unlawful detainer
case due to lack of merits, ruling that the agreement could not be automatically
rescinded and that a judicial determination of rescission must first be secured by
petitioner.
The CA affirmed the RTCs decision but held that the parties, as well as the MTC and
RTC, failed to advert to and apply the Maceda Law (RA 6552). It ruled that the Contract
to Sell was not validly cancelled or rescinded under Sec. 3 (b) of the Maceda Law, and
recognized respondents right to continue occupying unmolested the subject property.
ISSUE: W/N the contract has been validly rescinded.
HELD: No. The agreement could not be automatically rescinded.
While the Court agrees with petitioner that the cancellation of the Contract to Sell may
be done outside the court particularly when the buyer agrees to such cancellation, the
cancellation of the contract by the seller must be in accordance with Sec. 3 (b) of the
Maceda Law, which requires: (1) a notarial act of rescission and (2) the refund to the
buyer of the full payment of the cash surrender value of the payments on the property.
Actual cancellation of the contract takes place after 30 days from receipt by the buyer
of the notice of cancellation or the demand for rescission of the contract by notarial act
and upon full payment of the cash surrender value to the buyer.
The demand letter made by the petitioner is not the same as the notice of cancellation
or demand for rescission by a notarial act required by the Maceda Law. Moreover,
petitioners contention that the cash surrender value payable to the buyer was already
paid by applying such amount to the rentals of the property after respondent failed to
pay the installments due was erroneous. Sec. 3 (b) of the Maceda Law does not
provide a different requirement for contracts to sell which allow possession of the
property by the buyer upon execution of the contract like the instant case but the
refund of the cash surrender value of the payments on the property to the buyer before
cancellation of the contract.
There being no valid cancellation of the Contract to Sell, Manzano has the right to
continue occupying the property subject of the Contract to Sell and the dismissal of the
unlawful detainer case was proper. Consequently, it is only right and just, under the
Maceda Law, to allow respondent to pay her arrears and settle the balance of the
purchase price, subject to interests.
_________________________________________________________

Pagtalunan alleged that the respondent stopped paying after December 1979 without
any justification or explanation. He further asserted that when respondent ceased
paying her installments, her status of buyer was automatically transformed to that of a
lessee. Therefore, she continued to possess the property by mere tolerance of Patricio
and, subsequently of petitioner.

15. Spouses Dijamco v. CA | October 7, 2004

GR No. 113665, Corona, J.
FACTS: The Dijamco spouses were granted 4 separate loans from Premiere
Development Bank (PDB), two industrial loans and two real estate loans. To secure
their 4th loan of P210,000.00 in 1981, the Dijamco spouses executed a REAL ESTATE

MORTGAGE over a 5-door apartment in Pasay, City. When the Dijamco spouses failed
to remit monthly amortizations regularly on the 4th loan, PDB sought a PETITION FOR
EXTRAJUDICIAL FORECLOSURE OF MORTGAGE because the former violated the
provisions of the mortgage contract. Deputy Sheriff Umberto Ramos issued a NOTICE
OF SHERIFF'S SALE to be conducted on October 6, 1983. However, it was not held
on the specified date due to the Dijamco spouses' request for 5 successive
postponements.

consideration for the continuation of their option right for the next six months. Hence,
the automatic revocation clause of the agreement took effect, resulting in the rescission
of the contract of option to purchase and the contract to sell by respondent bank. A
judicial action for the rescission of a contract is not necessary where the contract
provides that it may be revoked and cancelled for violation of any of its terms and
conditions
_________________________________________________________

On May 7, 1984, the Office of the Ex-Officio Sheriff of Pasay City issued a
CERTIFICATE OF SALE stating that the mortgaged property was sold in public auction
to PDB for P359, 881.80. Through a letter addressed to PDB's President, Procopio
Reyes, Remedios Dijamco voluntarily entered to repurchase the property. She
proposed to pay the monthly interest of P13, 478.73 just so the principal of P622, 095
as of May 30, 1986 will no longer be increased and they wish to repurchase their
foreclosed properties within a year's time. As a condition, failure to remit interest
payment when the same is due will render this proposal automatically revoked without
need of formal demand, and PDB may immediately enforce Writ of Possession. And
that in case of failure to repurchase the subject property until May 1987, all interest and
other payment made by Dijamco sps shall be treated as rentals for the use of property.
In compliance with the letter-agreement, the Dijamco sps paid PDB 6 monthly
remittances for P80, 872. 38. But the payment was discontinued when Atty. Araos, VP
of PDB informed them that "none of the amount will be deducted from the purchase
price." After which, the Dijamco sps sued PDB on the ground that the latter employed
fraud and undue advantage in depriving them of their properties and prayed for the
recovery of said property for P350, 000 and damages.

16. Spouses Lagandaon v. CA | May 21, 1998

GR Nos. 102526-31, Panganiban, J.

RTC dismissed the complaint which was affirmed by CA. Hence, this appeal.

Pursuant to real estate mortgages constituted on the entire Pacweld [s]ubdivision lots
by Pacweld Steel Corporation (Pacweld) in favor of the Development Bank of the
Philippines to secure a loan of P1.5 million, the said DBP foreclosed the mortgaged
properties including the properties sold to defendants/purchasers at public auction on
June 2, 1975 due to the failure of Pacweld to pay its loan at maturity. As there were no
bidders, the DBP as creditor participated in the bidding and thereafter, owing to the
non-redemption of the properties, titles to the Pacweld Subdivision lots were
consolidated in the name of DBP.

ISSUE:
(1) W/N the contract executed between Remedios Dijamco and PDB is a contract of
sale?
(2) W/N there is a valid rescission of the contract?
HELD:
(1) NO, it was only a contract to sell evidenced by the following: a. By its own terms, it
was a contract whereby the Dijamco sps were granted the right to repurchase the
property involved at the fixed price of P622,095.00 within a year provided they paid
monthly interest payments of P13,478.73;b. No transfer or conveyance of ownership
was effected by its terms. The interest payments were not even part of the repurchase
price because in case of failure to exercise the right to repurchase they would be
considered as rentals for the use of the property. They [were] not to be returned. The
interest payments were in a way a consideration to preserve the right to repurchase. In
default of the interest payments, the right to repurchase terminated.
*Article 1479, par. 2 is applicable: An accepted unilateral promise to buy (by the
Dijamco sps) or to sell a determinate thing (the subject real property of Premiere
Development Bank) for a price certain (P622,095) is binding upon the promissor if the
promise is supported by a consideration distinct from the price (a monthly interest
payment of P13,478.73).
(2) YES, there is a valid rescission of the contract. Although petitioners paid six
months interest until January 1987, they did not exercise their right to purchase the
property during that period. Neither did they keep on paying the monthly interest as

FACTS: On different dates, Pacweld Steel Corporation (Pacweld) a now defunct

domestic corporation executed in favor of present defendants herein a Contract to Sell
pieces of lots payable in installment for which payments started to be made. On or
about the year 1972, the above-mentioned defendants-purchasers deferred/refused
further payments on their amortization to Pacweld because of the refusal of Lorenzo V.
Lagandaon, then President of Pacweld officials sic to undertake the development of the
areas bought. Defendants/Purchasers, together with other lot buyers filed an action for
Specific Performance with the then Court of First Instance of Manila. The trial court
ruled in favor of Pacweld. Ordering among others the defendants to strictly comply with
their obligations under the contract to sell (par. 6-a) within sixty (60) days from receipt
hereof, in the event of defendants failure to comply with said undertakings, the
plaintiffs are authorized to avail of the services of a contractor to undertake the
cementing of the roads, gutters and concrete curbs including the drainage system, all
at the expense of the defendants.

On May 12, 1980, a Deed of Absolute Sale was executed by DBP in favor of herein
plaintiffs [now petitioners] covering 69 parcels of land known as Pacweld Village
located at Marulas. Plaintiffs became the registered owners by virtue of said Deed of
Absolute Sale, under TCT No. B-42988.
Although no copy of the said Deed of Absolute Sale was furnished this Court, it
appears in one of the pleadings submitted to Court that in said Deed of Absolute Sale
is a typewritten condition to which plaintiffs are now bound and which is below quoted:
It is hereby understood that any and all claims, liens, assessments,
liabilities and/or damages whatsoever arising from any case or litigation
involving the above, properties shall wholly be assumed and borne by the
vendees to the exclusion of the vendor.

Plaintiffs allege that by virtue of the acquisition of ownership by DBP over the entire
Pacweld Subdivision lots including the lots in question and under the authority of the
above-mentioned Deed of Absolute Sale executed by DBP in favor of plaintiffs, the
unregistered Contract to Sell executed by Pacweld and herein defendants were
rendered stale and/or inoperative and consequently, defendants lost their rights and

interests over the parcels of land agreed to be sold to them by Pacweld under their
respective Contract to Sell; that without necessarily recognizing the defendants rights
under the Contract to Sell, but out of pure liberality and Christian compassion, the
plaintiffs agreed to continue with the sale on installment of the above-mentioned
parcels of land, pursuant to the Contract to Sell in favor of the defendants provided that
they would update their account consistent with the provisions of the said Contract to
Sell and provided further that plaintiffs have the right of forfeiture and would not be
bound or liable to comply with the obligation of the developer under the Contract to
Sell.
In their answer, private respondents denied the existence of a modified contract to sell.
They also argued that petitioners, as successors-in-interest of Pacweld, had no right to
demand rescission or payment of the unpaid balance, until such time that they have
completed the development of the subdivision pursuant to the provisions of the
Contract to Sell and the Decision of the CFI of Manila.
In its decision, the trial court held that petitioners cannot base their acts on an alleged
modified contract to sell, which this Court believes to be non-existent not only
physically but also legally.
The CA held that petitioners had no right to demand the rescission of the various
contracts to sell on the basis of the alleged modified contracts to sell which were
inexistent. Hence, it affirmed the trial courts decision dismissing the complaint, but
deleted the award of attorneys fees.

was stipulated in said contract that, in case respondent fails to remit three (3) monthly
reimbursement payments, he shall be given a 3-month grace period within which to
remit his arrears, otherwise, the contract shall be automatically revoked or cancelled
and respondent shall voluntarily vacate the premises without need of demand or
judicial action.
Subsequently, respondent failed to pay twenty-five (25) monthly reimbursement
payments covering the period August 1999 to August 2001, despite demands. Hence,
petitioner cancelled the contract and treated all his reimbursement payments as rental
payments for his occupancy of the house and lot.
On August 21, 2001, petitioner sent respondent a notice of final demand requiring him
to fulfill his obligation within a 30-day grace period. Thereafter, on October 18, 2001,
his wife received a notice to vacate the premises.
For failure of respondent to heed said notices, petitioner filed a case for unlawful which
was granted by the Municipal Trial Court and affirmed later on appeal by the Regional
Trial Court. The Court of Appeals reversed the judgment on the ground of prematurity
as it treated the contract as a contract to sell and not one having been converted to a
contract of lease, which requires notarial notice of rescission under Republic Act 6552.
ISSUE: W/N the Shelter Contract Award between the parties is a contract to sell or has
it been converted to a contract of lease?
HELD: Despite its name having no reference to contract to sell, the Shelter Contract
Award is in fact a contract to sell.

ISSUE: W/N Maceda Law is applicable in this case.

HELD: The Maceda Law has no application to the present case. The policy of that law,
as embodied in its title, is to provide protection to buyers of real estate on installment
payments. As clearly specified in Section 3, the declared public policy espoused by
Republic Act No. 6552 is to protect buyers of real estate on installment payments
against onerous and oppressive conditions. In this case, petitioners did not buy the
property on installment; private respondents did. And thus, if the Maceda Law has any
relevance at all, it is to protect the said respondents, not the petitioners. Furthermore,
Section 3(b) of the same law does not grant petitioners any legal ground to cancel the
contracts to sell; rather, it prescribes the responsibility of the seller in case the
contracts are cancelled. Clearly, Respondent Court was correct in refusing to apply
the Maceda Law and in not cancelling the contracts to sell.
_________________________________________________________
17. Associated Marine Officers v. Decena | October 8, 2012
GR No. 178584, Perlas-Bernabe, J.
FACTS: Associated Marine Officers and Seamen's Union of the Philippines PTGWOITF (petitioner) is a duly registered labor organization engaged in an on-going Shelter
Program, which offers residential lots and fully- furnished houses to its membersseafarers.
On April 27, 1995, petitioner entered into a contract under the Shelter Program with
one of its members, Noriel Decena (respondent), allowing the latter to take possession
of a house and lot described as 7 STOLT MODEL, Lot 16, Block 7, in the Seamen's
Village, Sitio Piela, Barangay Paliparan, Dasmarinas, Cavite, with the obligation to
reimburse petitioner the cost (US$28,563) thereof in 180 equal monthly payments. It

"A contract to sell is defined as a bilateral contract whereby the prospective seller,
while expressly reserving the ownership of the subject property despite delivery thereof
to the prospective buyer, binds itself to sell the said property exclusively to the
prospective buyer upon fulfillment of the condition agreed upon, that is, full payment of
the purchase price."
The Shelter Contract Award falls within this definition, as it stipulates that upon full
reimbursement payment of the value of the house and lot, the petitioner shall execute
a Deed of Transfer and shall cause the transfer of title of the property to respondent's
name. Any reference to monthly reimbursements in the contract is just a guise to hide
what actually are installments payments for the value of the house and lot.
Since the contract to sell was not validly rescinded under Section 3(b) of Republic Act
6552 (Realty Installment Buyer Protection Act), the respondent can still occupy the
property undisturbed.
Section 3(b), R.A. 6552: "(b) If the contract is canceled, the seller shall refund to the
buyer the cash surrender value of the payments on the property equivalent to fifty per
cent of the total payments made, and, after five years of installments, an additional five
per cent every year but not to exceed ninety per cent of the total payments made:
Provided, That the actual cancellation of the contract shall take place after thirty days
from receipt by the buyer of the notice of cancellation or the demand for rescission of
the contract by a notarial act and upon full payment of the cash surrender value to the
buyer."

Lacking proof that the Shelter Contract Award has been cancelled in accordance with
R.A. 6552, there is as yet no basis to declare respondent's possession of the house
and lot as illegal.