Cases 4

1. Vasquez vs Ayala Corporation GR No. 149734 November 19, 2004

FACTS:
Vasquez owns Conduit Development Inc. In 1981, Vasquez enters into a MOA with AYALA
wherein AYALA bought Conduit from Vasquez. AYALA committed to develop Conduit’s lands
including 4 parcels of land adjacent to Vasquez’ retained land. Be it noted that these parcels of
land were in the 3rdphase of AYALA’s development plan. Paragraph 5.15 of the MOA provides:

“5.15. The BUYER (AYALA) agrees to give the SELLERS (Vasquez) a first option to purchase four
developed lots next to the “Retained Area” at the prevailing market price at the time of the
purchase.”

In 1990, after AYALA was able to develop the said lots. This was after some slump, and some
litigation between Conduit’s former contractor (GP construction) and GP’s subcontractor (Lancer
Builders). AYALA then offered to sell the 4 parcels of land to Vasquez at P6.5k/sq m which was
the market price in 1990. Vasquez refused the offer. Vasquez contended that the purchase price
should be P460/ sq m which was the market price in 1981 (time of purchase). AYALA then lowered
the purchase price to P5k/ sq m but Vasquez refused again. Instead he made a counter offer to
buy the lots at P2k/ sq m. This time, AYALA refused.

ISSUE:

Whether or not Paragraph 5.15 of the MOA is an option contract

HELD:
No. The said paragraph is a mere right of first refusal. Although the paragraph has a
definite object, i.e., the sale of the 4 lots, the period within which they will be offered for sale to
Vasquez and, necessarily, the price for which the subject lots will be sold are not specified. The
phrase “at the prevailing market price at the time of the purchase” connotes that there is no
definite period within which AYALA is bound to reserve the subject lots for Vasquez to exercise
his privilege to purchase. Neither is there a fixed or determinable price at which the subject lots
will be offered for sale. The price is considered certain if it may be determined with reference to
another thing certain or if the determination thereof is left to the judgment of a specified person
or persons. Further, paragraph 5.15 was inserted into the MOA to give Vasquez the first crack to
buy the subject lots at the price which AYALA would be willing to accept when it offers the subject
lots for sale. It is not supported by an independent consideration.

2. Sps. Garcia vs CA GR No. 172036 April 23, 2010

FACTS:
Spouses Faustino and Josefina Garcia and spouses Meliton and Helen Galvez (appellees)
and defendant Emerlita De la Cruz (appellant) entered into a contract to sell to the former a
parcel of land in Tanza, Cavite. As agreed, plaintiffs shall make a down payment upon signing of
the contract while the balance shall be paid in 3 instalments. Plaintiffs failed to pay the last
instalment. They offered to pay the unpaid balance after 1.5 year delay which defendant refused
to accept. Defendant sold the parcel of land to intervenor Diogenes Bartolome. In order to
compel the defendant to accept full payment and execute the necessary documents, plaintiffs
filed before the RTC a complaint for specific performance. The trial court ruled that Emerlita’s
rescission of the contract was not valid. It applied RA 6552 (Maceda Law) and stated that Dela
Cruz is not allowed to unilaterally cancel the Contract to sell. It declared the deed of sale executed
by Emerlita, null and void. On appeal, the appellate court reversed the trial court’s decision and
dismissed the case. Hence, this petition.

ISSUE:
Whether or not rescission was correctly applied due to petitioner’s failure to pay the full
payment
HELD:
No. Contracts are law between the parties and they are bound by it’s stipulations. It is
clear that the parties intended their agreement to be a Contract to sell. Emerlita retains the
ownership of the subject lands and does not have the obligation to execute a deed of absolute
sale until petitioners’ payment of the full purchase price. Payment of the price is a suspensive
condition, failure of which is not a breach but an event that prevents the obligation of the vendor
to convey the title from becoming effective. Strictly speaking, there can be no rescission or
resolution of an obligation that is still non-existent due to the non-happening of the suspensive
condition. Emerlita is thus not obliged to execute of deed of absolute sale because of petitioners’
failure to make the payment.
  Article 1483

3. HEIRS OF CECILIO CLAUDEL VS. CA & HEIRS OF MACARIO CLAUDEL (SIBLINGS OF CECILIO)
Gr No. 85240, July 12,199

Facts:
Cecilio Claudel acquired from the Bureau of Lands a parcel of land. Thirty-nine years after his
death, two branches of Cecilio’s family contested the ownership over the land – the Heirs of
Cecilio and the Siblings of Cecilio. The Heirs of Cecilio partitioned the lot among themselves and
obtained the corresponding TCTs. Siblings of Cecilio filed a complaint for Cancellation of Titles
and Reconveyance with Damages alleging that their parents had purchased from the late Cecilio
several portions of the lot. They admitted that the transaction was verbal but they were able to
present the subdivision plan. The CFI dismissed the complaint disregarding the evidence. The CA
reversed the CFI’s ruling ordering the cancellation of the TCTs issued in the name of the Heirs of
Cecilio. As ruled by the CA, the Statute of Frauds applies only to executory contracts and not to
consummated sales as in the case at bar where oral evidence may be admitted.

Issue:
WON a contract of sale of land may be proven orally.

Held:
YES. A contract of sale of land may be proven orally subject to certain exceptions. This case falls
within the exception. The rule of thumb is that a sale of land, once consummated, is valid
regardless of the form it may have been entered into. For nowhere does law or jurisprudence
prescribe that the contract of sale be put in writing before such contract can validly cede or
transmit rights over a certain real property between the parties themselves.

However, in the event that a third party, as in this case, disputes the ownership of the property,
the person against whom that claim is brought cannot present any proof of such sale and hence
has no means to enforce the contract. Thus the Statute of Frauds was precisely devised to protect
the parties in a contract of sale of real property so that no such contract is enforceable unless
certain requisites, for purposes of proof, are met.

The purpose of the Statute of Frauds is to prevent fraud and perjury in the enforcement of
obligations depending on the evidence upon the unassisted memory of witnesses by requiring
certain enumerated contracts and transactions to be evidenced in writing.

Therefore, except under the conditions provided by the Statute of Frauds, the existence of the
contract of sale made by Cecilio with his siblings cannot be proved
 3. SPS. DALION VS. CA & SABESAJE JR.

Facts:

Sabesaje sued to recover ownership of a parcel of land, based on a private document of absolute
sale, allegedly executed by Dalion. Dalion denied the fact of sale, contending that the document
sued upon is fictitious, his signature thereon, a forgery, and that subject land is conjugal property.
Dalion further argued that assuming authenticity of his signature and the genuineness of the
document, Dalion nonetheless still impugns the validity of the sale on the ground that the same
is embodied in a private document, and did not thus convey title or right to the lot in question
since “acts and contracts which have for their object the creation, transmission, modification or
extinction of real rights over immovable property must appear in a public instrument”.

Issue:
WON the sale is valid considering that such was executed in a private document.

Held:
YES, the sale is valid. The provision of Art. 1358 on the necessity of a public document is only for
convenience, not for validity or enforceability. It is not a requirement for the validity of a contract
of sale of a parcel of land that this be embodied in a public instrument.

A contract of sale is a consensual contract, which means that the sale is perfected by mere
consent. No particular form is required for its validity. Upon perfection of the contract, the parties
may reciprocally demand performance (Art. 1475, NCC), i.e., the vendee may compel transfer of
ownership of the object of the sale, and the vendor may require the vendee to pay the thing sold
(Art. 1458, NCC). The trial court thus rightly and legally ordered Dalion to deliver to Sabesaje the
parcel of land and to execute corresponding formal deed of conveyance in a public document.

4. ORTEGA VS LEONARDO
103 Phil. 870 May 28, 1958

FACTS
Ortega occupied a parcel of land, but was disputed by Leonardo. Ortega and Leonardo both
agreed to a compromise, where Ortega would desist from pressing her claim and that Leonardo
would sell to her a portion provided thereof, provided she paid for the surveying of the lot. Ortega
thus desisted the claim, paid for the surveying of the lot and the preparation of the plan and paid
regularly a monthly rental . When Leonardo acquired title, he refused to sell the agreed portion
of lot. He claims that the contract is unenforceable based on the Statute of Frauds.

ISSUE
Whether or not the contract is unenforceable based on the Statute of Frauds
HELD
NO. The contract is enforceable. This case described several circumstance indicating partial
performance: relinquishment of rights. continued possession, building of improvements, tender
of payment plus the surveying of the lot at plaintiff's expense and the payment of rentals. Hence,
as there was partial performance, the principle excluding parol contracts for the sale of realty
and hence the Statute of Frauds, does not apply.

5. UNIVERSAL ROBINA SUGAR MILLING CORP VS HEIRS OF ANGEL TEVES

FACTS
Andres Abanto's heirs executed an “Extrajudicial Settlement of the Estate of the Deceased Andres
Abanto and Simultaneous Sale.” In this document, Abanto's heirs adjudicated unto themselves
the two lots and sold the (a) unregistered lot of 193,789 square meters to the United Planters
Sugar Milling Company, Inc. (UPSUMCO), and (b) the registered lot covered by TCT No. H-37 to
Angel M. Teves. The sale was not registered.
Teves verbally allowed UPSUMCO to use the lot covered by TCT No. H-37 for pier and loading
facilities, free of charge, subject to the condition that UPSUMCO shall shoulder the payment of
real property taxes and that its occupation shall be co-terminus with its corporate existence.i
URSUMCO then took possession of UPSUMCO’s properties, including Teves' lot covered by TCT
No. H-37.Teves formally asked the corporation to turn over to him possession thereof or the
corresponding rentals. URSUMCO refused to heed Teves' demand, claiming that it acquired the
right to occupy the property from UPSUMCO which purchased it from Andres Abanto; and that
it was merely placed in the name of Angel Teves, as shown by the “Deed of Transfer and Waiver
of Rights and Possession.
ISSUE
WON the contract of sale to Teves was valid even if not executed in a public document
HELD
That the contract of sale was not registered does not affect its validity. Being consensual in
nature, it is binding between the parties, the Abanto heirs and Teves. The embodiment of certain
contracts in a public instrument, is only for convenience, and the registration of the instrument
would merely affect third persons. Formalities are intended for greater efficacy or convenience
or to bind third persons, if not done, would not adversely affect the validity or enforceability of
the contract between the contracting parties themselves. Thus, by virtue of the valid sale, Angel
Teves stepped into the shoes of the heirs of Andres Abanto and acquired all their rights to the
property.
  Article 1484 with Article 1485 and 1486

6. LUNETA MOTOR COMPANY VS. DIMAGIBA

Facts:

Angel Dimagiba bought from the Luneta Motor Company a truck for a price which was
compromised at P16,126.12 payable in 18 monthly installments, to guarantee which he executed
a chattel mortgage on the same truck on May 7, 1956. As a further security thereto, he also
executed on the same date a chattel mortgage on another truck which belonged to the latter.
When Dimagiba failed to pay several installments as he agreed in the promissory note he
executed to cover the price of the truck he purchased, the company instituted an action not only
to recover the balance of his obligation but to secure the seizure of the two trucks mortgaged
with a prayer that the proceeds that may be realized after the sale of said trucks be applied to
the payment of the judgment that may be rendered in the case. Because of the vague nature of
the allegations contained in the complaint, as well as in its prayer, the court a quo, as well as the
Court of Appeals, considered the action taken as one of both replevin and foreclosure of
mortgage.

Issue:

WON the scheme of the company is a flagrant violation of Art. 1484 of the Civil Code.

Held:
YES. Art. 1484 prescribes three remedies which a vendor may pursue in a contract of sale of
personal property the price of which is payable in installments, to wit: (1) exact fulfillment of the
obligation; (2) cancel the sale; and (3) foreclose the mortgage on the thing sold. If he chooses the
third remedy, the article provides that he shall have no further action against the purchaser to
recover any unpaid balance of the purchase price. It even adds that any agreement to the
contrary shall be void.

But in the instant case the vendor was not content in choosing any of the three remedies, but
chose to avail itself of the first and third remedies. More than that, plaintiff even went to the
extent of suing for replevin, in other words, it filed an action containing three remedies: to collect
the purchase price, to seize the property purchased, and to foreclose the mortgage executed
thereon. Plaintiff even went to the extent of selling first the property of Noriel, who is not the
vendee, out of court, and after doing so, it asked the court for judgment in the balance. Such a
scheme is not only irregular but is a flagrant circumvention of the prohibition of the law.
 7. PAMECA WOOD TREATMENT PLANT VS. CA & DBP

Facts:
Pameca obtained a loan from DBP. By virtue of this loan, Pameca executed a promissory note for
the amount obtained, promising to pay the loan by installment. As security for said loan, a chattel
mortgage was executed over Pameca’s properties in Dumaguete. Upon Pameca’s failure to pay,
DBP extrajudicially foreclosed the chattel mortgage, and as sole bidder in the public auction,
purchased the same. DBP then filed a complaint for the collection of the balance. Trial court
rendered decision in favor of DBP, affirmed by CA.

Issue:
WON Art 1484, CC, can be applied in the case, hence, precludes DBP from collecting the balance.

Held:
NO.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 vendees failure to pay cover two or
more installments, this provision is specifically applicable to a sale on installments.

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

8. Pascual vs Universal Corp. 61 SCRA 121 November 20, 1974

FACTS:
Plaintiff-appellee spouses Lorenzo Pascual and Leonila Torres (spouses Pasqual) executed the
real estate mortgage subject matter of this complaint on December 14, 1960 to secure the
payment of the indebtedness of PDP Transit, Inc. (PDP Trans.) for the purchase of 5 units of
Mercedes Benz trucks, with a total purchase price or principal obligation of P152,506.50 which
was to bear interest at 1% per month starting that day, but the plaintiffs' guarantee is not to
exceed P50,000.00 which is the value of the mortgage. The PDP Trans., as the spouses Pasqual's
principal, paid to defendant-appellant Universal Motors Corporation (Universal Motors) the sum
of P92,964.91 on April 5, 1961 for two of the five Mercedes Benz trucks and on May 22, 1961 for
the remaining three, thus leaving a balance of P68,641.69 including interest due on February 8,
1965.
On March 19, 1965, Universal Motors filed this complaint with the CFI of Manila against the PDP
Trans. to collect the balance due under the Chattel Mortgages and to repossess all the units sold
to PDP Trans. as the spouse Pascual’s principal, including the 5 units guaranteed under the
subject Real (Estate) Mortgage. During the hearinbg, Universal Motors admitted that it was able
to repossess all the units sold to the latter, including the 5 units guaranteed by the subject real
estate mortgage, and to foreclose all the chattel mortgages constituted thereon, resulting in the
sale of the trucks at public auction. As the real estate mortgagors, the spouses Pascual filed an
action with the CFI of Quezon City for the cancellation of the mortgage they constituted on 2
parcels of land in favor of the Universal Motors to guarantee the obligation of PDP Trans. to the
amount of P50,000. The said CFI rendered judgment in favor of the spouses Pascual and ordered
the cancellation of the mortgage.
ISSUE:
Whether or not Article 1484 of the New Civil Code applicable in the case at bar?
HELD:
The Supreme Court affirmed the lower court’s decision. Appellant Universal Motors argues that
Article 1484 is not applicable to the case at bar because there is no evidence on record that the
purchase by PDP Trans. of the 5 trucks was payable in installments and that the PDP Trans. had
failed to pay two or more installments. Universal Motors also contends that what Article 1484
prohibits is for the vendor to recover from the purchaser the unpaid balance of the price after he
has foreclosed the chattel mortgage on the thing sold, but not a recourse against the security put
up by a third party.
The Supreme Court concluded to the contrary, saying that the first issue was whether or not the
sale was one on installments. The lower court found that it was, and that there was failure to pay
two or more installments, a finding which is not subject to review by the Supreme Court.
The next contention is that what article 1484 withholds from the vendor is “the right to recover
any deficiency from the purchaser after the foreclosure of the chattel mortgage,” and not a
“recourse to the additional security put up by a third party to guarantee the purchaser's
performance of his obligation.” But the Supreme Court to sustain this argument of the appellant
would be to indirectly subvert and public policy overturn the protection given by Article 1484.

9. Southern Motors vs Moscoso 2 SCRA 168 May 30, 1961

FACTS:
Plaintiff Southern Motors, Inc. sold to defendant Angel Moscoso one Chevrolet truck on
installment basis, for P6,445.00. Upon making a down payment, the defendant executed a
promissory note for the sum of P4,915.00, representing the unpaid balance of the purchase price
to secure the payment of which, a chattel mortgage was constituted on the truck in favor of the
plaintiff. Of said account, the defendant had paid a total of P550.00, of which P110.00 was applied
to the interest and P400.00 to the principal, thus leaving an unpaid balance of P4,475.00. The
defendant failed to pay 3 installments on the balance of the purchase price.
Plaintiff filed a complaint against the defendant, to recover the unpaid balance of the promissory
note. Upon plaintiff’s petition, a writ of attachment was issued by the lower court on the
properties of the defendant. Pursuant thereto, the said Chevrolet truck, and a house and lot
belonging to defendant, were attached by the Sheriff and said truck was brought to the plaintiff’s
compound for safe keeping. After attachment and before the trial of the case on the merits,
acting upon the plaintiff’s motion for the immediate sale of the mortgaged truck, the Provincial
Sheriff of Iloilo sold the truck at public auction in which plaintiff itself was the only bidder for
P1,OOO.OO. The trial court condemned the defendant to pay the plaintiff the amount of
P4,475.00 with interest at the rate of 12% per annum from August 16, 1957, until fully paid, plus
10% thereof as attorneys fees and costs. Hence, this appeal by the defendant.

ISSUE:
Whether or not the attachment caused to be levied on the truck and its immediate sale at public
auction, was tantamount to the foreclosure of the chattel mortgage on said truck.
HELD:
No.Article 1484 of the Civil Code provides that in a contract of sale of personal property the price
of which is payable in installments, the vendor may exercise any of the following remedies: (I)
Exact fulfillment of the obligation, should the vendee fail to pay; (2) Cancel the sale, should the
vendee’s failure to pay cover two or more installments; and (3) Foreclose the chattel mortgage
on the thing sold, if one has been constituted, should the vendee’s failure to pay cover two or
more installments. In this case, he shall have no further action against the purchaser to recover
any unpaid balance of the price. Any agreement to the contrary shall be void.
The plaintiff had chosen the first remedy. The complaint is an ordinary civil action for recovery of
the remaining unpaid balance due on the promissory note. The plaintiff had not adopted the
procedure or methods outlined by Sec. 14 of the Chattel Mortgage Law but those prescribed for
ordinary civil actions, under the Rules of Court. Had the plaintiff elected the foreclosure, it would
not have instituted this case in court; it would not have caused the chattel to be attached under
Rule 59, and had it sold at public auction, in the manner prescribed by Rule 39. That the plaintiff
did not intend to foreclose the mortgage truck, is further evinced by the fact that it had also
attached the house and lot of the appellant at San Jose, Antique.
We perceive nothing unlawful or irregular in plaintiff’s act of attaching the mortgaged truck itself.
Since the plaintiff has chosen to exact the fulfillment of the appellant’s obligation, it may enforce
execution of the judgment that may be favorably rendered hereon, on all personal and real
properties of the latter not exempt from execution sufficient to satisfy such judgment. It should
be noted that a house and lot at San Jose, Antique were also attached. No one can successfully
contest that the attachment was merely an incident to an ordinary civil action. The mortgage
creditor may recover judgment on the mortgage debt and cause an execution on the mortgaged
property and may cause an attachment to be issued and levied on such property, upon beginning
his civil action.
10. Zayas vs Luneta Motors Co. GR No. L-30583 October 23, 1982
FACTS:
Zayas purchased a Ford Thames Freighter from Escano Enterprises, the dealer of Luneta Motor
Co. The unit was delivered and Zayas issued a PN payable in 26 installments secured by a chattel
mortgage over the subject motor vehicle. Zayas failed to pay, thus Luneta extra-judicially
foreclosed on the mortgage and was the highest bidder. However, considering that the proceeds
of the sale was insufficient to cover the debt, Luneta filed a case for the recovery of the balance
of the purchase price. Zayas refused to pay.
ISSUE: W/N Luneta may still recover the balance
HELD: NO. When the unpaid seller forecloses on the mortgage, the law precludes him from
bringing further actions against the vendee for whatever balance, which was not satisfied from
the foreclosure. Luneta contends that Escano Enterprises is a different and distinct entity and
maintains that its contract with Zayas was a loan. This is unsubstantiated as the agency
relationship between Luneta and Escano is clear. Nevertheless, assuming that they were distinct
entities, the nature of the transaction remains the same. If Escano assigned its right to Luneta,
the latter merely acquires the rights of the formers—hence, Art. 1484 of the CC would likewise
be inapplicable.

11. Ridad vs Filipinas Investment and Finance Corporation GR No. 39806 January 27, 1983
FACTS:
Ridad purchased from Supreme Sales 2 Ford Consul Sedans, payable in 24 installments, for which
he executed a PN with chattel mortgage over the said property. Another chattel mortgage was
executed this time upon a separate Chevy car, and another one upon the franchise to operate
taxi cabs. Supreme Sales thereafter assigned its rights under the PN to Filinvest. Ridad defaulted
and Filinvest foreclosed on the mortgage. It was the highest bidder for the foreclosure sale of the
sedans. But unable to fully satisfy the debt, it also foreclosed the Chevy and the franchise.
ISSUE: W/N Filinvest may still foreclose the Chevy and the franchise to fully satisfy the debt
HELD: NO. When the unpaid seller forecloses on the mortgage, the law precludes him from
bringing further actions against the vendee for whatever balance, which was not satisfied by the
first foreclosure. By choosing to foreclose on the Ford sedans, Filinvest renounced all other rights
which it might have had under the PN; it must content itself with the proceeds of the sale of the
sedans at the public auction.

12. Levy Hermanos Inc. vs Gervacio 69 Phil 62 October 27, 1939

FACTS: Levy Hermanos sold a Packard car to Lazaro Gervacio. Gervacio made an initial payment
and executed a promissory note for the balance of P2,400. He failed to pay the note at maturity
date so Levy Hermanos foreclosed the mortgage and bought it at the public auction for P800.
Levy Hermanos then filed a complaint for the collection of the remaining balance and interest.
CFI ruled in favor of Gervacio finding that Levy can no longer recover the unpaid balance once he
has chosen foreclosure. Thus the case at bar.
ISSUE: W/N Levy Hermanos can still collect the balance
HELD: YES
In order to apply Art. 1454-A of the CC, there must be (1) a contract of sale of personal property
payable in installments and (2) there has been a failure to pay 2 or more installments. In the case
at bar, although it is a sale of personal property, it is not payable in installments. It is payable in
a straight term in which the balance should be paid in its totality at maturity date of the PN,
therefore the prohibition does not apply.

 RA No. 6552 (Maceda Law)

15. MANUEL C. PAGTALUNAN vs. RUFINA DELA CRUZ VDA. DE MANZANO, respondent

FACTS

Patricio Pagtalunan (Patricio), petitioner’s stepfather and predecessor-in-interest, entered into a

Contract to Sell with respondent, wife of Patricio’s former mechanic, Teodoro Manzano, whereby
the former agreed to sell, and the latter to buy, a house and lot which formed half of a parcel of
land. The consideration of P17,800 was agreed to be paid in the following manner: P1,500 as
down payment upon execution of the Contract to Sell, and the balance to be paid in equal
monthly installments of P150 on or before the last day of each month until fully paid.

It was alleged that respondent did not paid the monthly installment as what they have agreed
upon. On the other hand, it was denied by the respondent that she is religiously paying her
balance but the petitioner changes its mind and want to refund all the payments she gave,
however, she refused. She admittedly, that she had failed to pay some installments but she
continued paying later on.
Patricio and his wife died. Petitioner became their sole successor-in-interest pursuant to a waiver
by the other heirs. He eventually filed before the MTC unlawful detainer case and it was ruled in
favor of him. However, on appeal to RTC, it ruled to dismiss the complaint for lack of merit. The
Court of Appeals affirmed the decision of the RTC to dismiss the case. The CA found that the
parties, as well as the MTC and RTC failed to advert to and to apply Republic Act (R.A.) No. 6552,
more commonly referred to as the Maceda Law, which is a special law enacted in 1972 to protect
buyers of real estate on installment payments against onerous and oppressive conditions.The CA
held that the Contract to Sell was not validly cancelled or rescinded under Sec. 3 (b) of R.A. No.
6552, and recognized respondent’s right to continue occupying unmolested the property subject
of the contract to sell.

ISSUE

Whether or not the Maceda Law (RA 6552) is applicable to this case

RULING

Yes, it is applicable.

The CA correctly ruled that R.A No. 6552, which governs sales of real estate on installment, is
applicable in the resolution of this case.

This case originated as an action for unlawful detainer. Respondent is alleged to be illegally
withholding possession of the subject property after the termination of the Contract to Sell
between Patricio and respondent. It is, therefore, incumbent upon petitioner to prove that the
Contract to Sell had been cancelled in accordance with R.A. No. 6552.

The pertinent provision of R.A. No. 6552 reads:

Sec. 3. In all transactions or contracts involving the sale or financing of real estate on
installment payments, including residential condominium apartments but excluding
industrial lots, commercial buildings and sales to tenants under Republic Act Numbered
Thirty-eight hundred forty-four as amended by Republic Act Numbered Sixty-three
hundred eighty-nine, where the buyer has paid at least two years of installments, the
buyer is entitled to the following rights in case he defaults in the payment of succeeding
installments:

(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: Provided, That this right shall be
exercised by the buyer only once in every five years of the life of the contract and its
extensions, if any.
 (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 percent of the total payments
made and, after five years of installments, an additional five percent every year but not
to exceed ninety percent 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.9

R.A. No. 6552, otherwise known as the "Realty Installment Buyer Protection Act," recognizes in
conditional sales of all kinds of real estate (industrial, commercial, residential) the right of the
seller to cancel the contract upon non-payment of an installment by the buyer, which is simply
an event that prevents the obligation of the vendor to convey title from acquiring binding
force.10 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.

However, the cancellation of the contract by the seller must be in accordance with Sec. 3 (b) of
R.A. No. 6552, which requires a notarial act of rescission and 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 a notarial act and upon full payment of the cash
surrender value to the buyer.