G. R. No. 112212. March 2, 1998 GREGORIO FULE, petitioner, vs.

COURT OF APPEALS, NINEVETCH

CRUZ and JUAN BELARMINO, respondents.
H.
I. FACTS:  Petitioner Gregorio Fule, a banker by profession and a jeweler at the same time,
acquired a 10-hectare property in Tanay.  Fule had shown interest in buying a pair of emerald-cut
diamond earrings owned by Dr. Cruz, the herein respondent.  Subsequently, however, negotiations
for the barter of the jewelry and the Tanay property ensued.  A deed of absolute sale was executed
and signed.  The actual consideration of the sale was P200,000.00.  Since the jewelry was appraised
only at P160,000.00, the parties agreed that the balance of P40,000.00 would just be paid later in
cash.  The petitioner, upon taking the jewelry handed by the cashier examined it for 10-15 mins. 
After a while, Dr. Cruz asked, Okay na ba iyan? Petitioner expressed his satisfaction by nodding his
head.  Later in the evening of the same day, petitioner complained that the jewelry given to him was
fake.  On October 26, 1984, petitioner filed a complaint before the Regional Trial Court of San Pablo
City against private respondents praying, among other things, that the contract of sale over the Tanay
property be declared null and void on the ground of fraud and deceit.  The lower court ruled in favor
of the respondent and finds that all the elements of a valid contract under Article 1458 of the Civil
Code were present.  The CA affirmed the decision of the lower court. Hence this petition.

ISSUE: W/N the contract of barter or sale under the circumstances of this case is valid.

HELD: YES.  The Civil Code provides that contracts are perfected by mere consent.  From this
moment, the parties are bound not only to the fulfillment of what has been expressly stipulated but
also to all the consequences which, according to their nature, may be in keeping with good faith,
usage and law.  A contract of sale is perfected at the moment there is a meeting of the minds upon
the thing which is the object of the contract and upon the price.  It is evident from the facts of the
case that there was a meeting of the minds between petitioner and Dr. Cruz.  As such, they are
bound by the contract unless there are reasons or circumstances that warrant its nullification.  While
it is true that the amount of P40,000.00 forming part of the consideration was still payable to
petitioner, its nonpayment by Dr. Cruz is not a sufficient cause to invalidate the contract or bar the
transfer of ownership and possession of the things exchanged considering the fact that their contract
is silent as to when it becomes due and demandable.  Both the trial and appellate courts, therefore,
correctly ruled that there were no legal bases for the nullification of the contract of sale.  Ownership
over the parcel of land and the pair of emerald-cut diamond earrings had been transferred to Dr. Cruz
and petitioner, respectively, upon the actual and constructive delivery thereof.  Said contract of sale
being absolute in nature, title passed to the vendee upon delivery of the thing sold since there was no
stipulation in the contract that title to the property sold has been reserved in the seller until full
payment of the price or that the vendor has the right to unilaterally resolve the contract the moment
the buyer fails to pay within a fixed period.  Such stipulations are not manifest in the contract of sale.

While it is true that the amount of P40,000.00 forming part of the consideration was still payable to
petitioner, its nonpayment by Dr. Cruz is not a sufficient cause to invalidate the contract or bar the
transfer of ownership and possession of the things exchanged considering the fact that their contract
is silent as to when it becomes due and demandable.32cräläwvirtualibräry

Neither may such failure to pay the balance of the purchase price result in the payment of interest
thereon. Article 1589 of the Civil Code prescribes the payment of interest by the vendee for the
period between the delivery of the thing and the payment of the price in the following cases:

(1) Should it have been so stipulated;

(2) Should the thing sold and delivered produce fruits or income;

(3) Should he be in default, from the time of judicial or extrajudicial demand for the payment of the
price.

Not one of these cases obtains here. This case should, of course, be distinguished from De la Cruz v.
Legaspi,33 where the court held that failure to pay the consideration after the notarization of the
contract as previously promised resulted in the vendees liability for payment of interest. In the case at
bar, there is no stipulation for the payment of interest in the contract of sale nor proof that the Tanay
property produced fruits or income. Neither did petitioner demand payment of the price as in fact he
filed an action to nullify the contract of sale.

All told, petitioner appears to have elevated this case to this Court for the principal reason of
mitigating the amount of damages awarded to both private respondents which petitioner considers as
exorbitant. He contends that private respondents do not deserve at all the award of damages. In fact,
he pleads for the total deletion of the award as regards private respondent Belarmino whom he
considers a mere nominal party because no specific claim for damages against him was alleged in the
complaint. When he filed the case, all that petitioner wanted was that Atty. Belarmino should return
to him the owners duplicate copy of TCT No. 320725, the deed of sale executed by Fr. Antonio Jacobe,
the deed of redemption and the check alloted for expenses. Petitioner alleges further that Atty.
Belarmino should not have delivered all those documents to Dr. Cruz because as the lawyer for both
the seller and the buyer in the sale contract, he should have protected the rights of both parties.
Moreover, petitioner asserts that there was no firm basis for damages except for Atty. Belarminos
uncorroborated testimony

LEVY HERMANOS, INC., plaintiff and appellant,

vs.
LAZARO BLAS GERVACIO, defendant and appellee.
No. 46306. October 27, 1939.
MORAN, J.
Rule Synopsis
Sale with initial payment and balance payable via execution of a PN is not one of installment that will
place the transaction within the purview of then Art. 1454-A.

Case Summary
Levy Hermanos sold a car to Gervavio. The latter made and initial payment and executed a PN for the
balance. The PN was secured by a mortgage on the car. Gervacio failed to pay the PN on maturity.
Hermanos foreclosed the mortgage, whereby he emerged as the highest bidder for P800.

Hermanos brought an action to collect the deficiency of P1,600.

Gervacio, as defense, raised the provision of Act. No. 4122, inserting Art. 1454-A to the Civil Code,
barring the recovery of deficiency in case of a foreclosure sale of personal property sold and payable
on installments.

The lower court ruled in favor of Gervacio. The SC reversed.

Issue resolved —
May Levy Hermanos recover the deficiency from the foreclosure sale?

HELD – YES.
For Art. 1454-A to apply, two requisites must concur:

that there was a contract for the sale of personal property payable in installments; and
that there has been a failure to pay two or more installments.
In the case at bar, the first requirement was not present, i.e. while the sale was for a personal
property, it is not payable on installment but on a straight term with the balance payable in the
period stipulated in the PN after payment of the initial sum. Thus, it does not fall within the coverage
of Art. 1454-A.

Reason behind Art. 1454-A. It is aimed at those sales where price is payable in several installments
“constituting thus a great temptation for improvident purchasers to buy beyond their means.” These
terms deem to place purchasers off their guard and delude them to a miscalculation of their ability to
pay.
Such temptation, according to the Court, is not present in this case.

ELISCO TOOL MFG CORP vs. CA GR # 109966, May31, 1999

FACTS: Private respondent Rolando Lantan entered into an agreement with his empl oyer, herein
petitioner, leasing unto the former a Colt lancer fro a period of 5 years. The contract also provided
that at the end of the 5 year period, Lantan may exercise the option to purchase price of the car and
he should just pay the remaining balance. Said option is limited to the employee. It also provided t hat
upon Lantan s failure to pay 3 accumulated monthly rentals, the petitioner will have the option to
lease said vehicle to another. Lantan also has to return th e car in case he resigns or is dismissed. He
was laid off after petitioner ceas ed operations in 1981. At that time, he has paid P61, 070.94.
Petitioner then filed a replevin case against Lantan and his wife, alleging that they have failed to pay
the monthly rentals despite repeated demands.

HELD: Although the agreement provides for the payment by Lantan of monthly rentals , the 5th
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. Clearly, the transaction is a lease in name only. The so-called
monthly rentals are in truth monthly amortizations on the car s price. Being a contract of sale on
installment, A.1484 &1485 apply. As such, the case should be considered as one for specific perf
ormance pursuant to A.1484 (1). The prayer for a writ of replevin is only for the purpose of ensuring
specific performance by private respondents. However, the private respondents could no longer be
held liable for the payment of interest on unpaid monthly rentals since it was entered into in
pursuance of a car plan adopted by petitioner for the benefit of its deserving employees. Further,
private respondents default in payment was due to the cessation of operations of petitioner s sister
company. Elizalde Steel Company. That petitioner accepted payments from Lantan more than 2 years
after the latter s employment have been terminated constitutes a waiver of petitioner s right to
collect interest upon delayed payment . What private respondents paid should be considered the
payment in full.

Borbon II v. Servicewide Specialists, Inc.

G.R. No. 106418, 11 July 1996

FACTS:

Petitioners Daniel L. Borbon and Francisco Borbon signed a promissory note in favor of Pangasinan
Auto Mart, Inc. or order in the amount of One Hundred Twenty Two Thousand Eight Hundred Fifty Six
(P122,856.00) to be payable without need or notice or demand, in installments of the amounts
following and the dates hereinafter set forth, to wit: P10,238.00 monthly for (twelve) 12 months due
and payable on the 7th day of each month starting January, 1985, provided that at late payment
charge of 3% per month shall be added on each unpaid installment from due date until fully paid. It
likewise agreed that upon such default, attorney’s fees 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 attorney’s plus an additional sum equivalent to 25% of
the total sum which likewise shall not be less than Five Hundred Pesos for liquidated damages, aside
from expenses of collection and legal costs provided for in the rules of court.

To secure the promissory note, the defendant executed a chattel mortgage on “One (1) Brand New
1984 Isuzu, KCD 20 Crew Cab (Conv.) Serial No. KCD20DOF 207685k, Key No. 5509. The rights of
Pangasinan Auto Mart, Inc. was later assigned to Filinvest Credit Corporation on December 10, 1984,
with notice to the defendants. On March 21, 1985, Filinvest Credit Corporation assigned all its rights,
interests and title over the Promissory Note and the Chattel Mortage to the plaintiff.

The Promissory Note stipulates that the installment of P10, 238.00 monthly should be paid on the 7th
day of each month starting January 1985, but the defendants failed to comply with their obligation.
Because the defendants did not pay their monthly installments, Filinvest demanded from the
defendants the payment of their installments due in January 29, 1985 by telegram. After the accounts
were assigned to the plaintiff, the plaintiff attempted to collect by sending a demand letter to the
defendants for them to pay their entire obligations which as of March 12, 1985, totaled P185, 257.80.
The appellate court upheld the court a quo in the award of liquidated damages and attorney’s fees in
favor of private respondent, hence, petitioners seek a modification of the decision of the appellate
court invoking bthe provisions of Article 1484 of the New Civil Code.

ISSUE:

Whether liquidated damages and attorney’s fees apply in cases involving contract of sale covered by
Promissory Note and Chattel Mortgage.

RULING:

The court modified the appealed decision by deleting therefrom the award for liquidated damages; in
all other respects, the judgment of the appellate court is upheld.

Article 1484 of the Civil Code provides:

Art. 1484. 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:

1.) Exact fulfillment of the obligation, should the vendee failed to pay;
2.) Cancel the sale, should the vendee’s failure to pay covered two or more installments;
3.) Foreclose the Chattel Mortgage or 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.

In Macondary & Co. vs. Eustaquio, we have said that the phrase “any unpaid balance” can only mean
the deficiency judgment to which the mortgagee maybe entitled to when the proceeds from the
auction sale are insufficient to cover the “full amount of the secured obligations which… include the
interest on the principal, attorney’s fees, expenses of collection, and the costs”.

In sum, we have observed that the, legislative intent is not to merely limit the proscription of any
further action to the” unpaid balance of the principal” but, as so later ruled in Luneta Motor Co., vs.
Salvador, to all, other claims that may be likewise called in the accompanying Promissory Note against
the buyer, mortgagor or his guarantor, including costs and attorney’s fees. Private respondent bewails
the instant petition in that petitioners have failed to specifically raise the issue on liquidated damages
and attorney’s fees stipulated in the actionable documents. In several cases, we have ruled that as
long as the questioned items bear relevance and close relation to those specifically raised, the interest
of justice would dictate that they too, must be considered.

Given the circumstances, we must strike down the award for liquidated damages made by the court a
quo but we uphold the grant of attorney’s fees stipulated in the actionable documents.

Industrial Finance Corp. v. Ramirez, 77 SCRA 152

Facts:

On December 4, 1970 Arnaldo Dizon sold to Consuelo Alcoba his 1966 model Chevrolet car for
P13,157.89, payable in eighteen monthly installments, which were secured by a chattel mortgage on
the car. On that same date, Dizon assigned for ten thousand pesos to Industrial Finance Corporation
all his rights and interest in the chattel mortgage. Alcoba defaulted in the payment of the first four
installments. Because of that default and by virtue of the acceleration clause in the promissory note
forming part of the mortgage, the whole obligation became due and demandable. In its complaint
Industrial Finance Corporation prayed for alternative reliefs. The main objective of its complaint was
recovery of the mortgaged car by means of a writ of replevin. It submitted a redelivery bond.
Undoubtedly, the mortgagee-assignee wanted to foreclose extrajudicially the chattel mortgage but,
before it could do so, the sheriff had to seize the car by means of the provisional remedy of an order
for the delivery of personal property. The lower court issued the writ of replevin. Consequently, there
was no extrajudicial foreclosure of the mortgage since, for that purpose, possession of the car by the
sheriff is necessary (Bachrach Motor Co. vs. Summers, 42 Phil. 3). Consuelo Alcoba did not appeal.
That judgment became final and executory. The sheriff was able to levy upon the mortgaged car
which was then in the possession of the Aco Motor Service of Dagupan City. At the execution sale
held on April 25, 1974 Industrial Finance Corporation bought the mortgaged car for P4,000 (Exh. 3-A,
p. 72, Expedients). However, in order to take possession of the car, the corporation had to pay P4,250
to the Aco Motor Service to satisfy its lien for the repair and storage of the car. The corporation
contended that, because of that payment, it sustained a loss of P250 in the execution sale. It asked for
a third alias writ of execution in order to satisfy the balance of Consuelo Alcoba’s obligation which,
together with the 12% interest, it computed at P11,300.92

Issue:

Did Consuelo, mortgagor, have to pay the balance of her obligation?

Held:

Yes. The mortgagors should pay the deficiency. The corporation’s action was for specific performance
or fulfillment of the obligation and not for judicial foreclosure Consuelo Alcoba’s payment of P2,000
on account of the money judgment against her signified that she acquiesced in the action for specific
performance. The Civil Code provides that it is only when there has been a foreclosure that the
mortgagor is not liable for any deficiency. In this case, there was no foreclosure. The mortgagee
evidently chose the remedy of specific performance. It levied upon the car by virtue of an execution
and not as an incident of a foreclosure proceeding. The rule is that in installment sales, if the action
instituted is for specific performance and the mortgaged property is subsequently attached and sold,
the sale thereof does not amount to a foreclosure of the mortgage. Hence, the seller-creditor is
entitled to a deficiency judgment

PCI LEASING AND FINANCE, INC., petitioner,

vs.
GIRAFFE-X CREATIVE IMAGING, INC., respondent.
G.R. No. 142618. July 12, 2007.
Rule Synopsis
Sales of personal property purporting to be leases (lease with option to buy or finance lease) are
covered by the Recto Law. Where in case of default, the lessee is given the option to either: a) pay the
rent for the full lease term without the obligation of surrendering the subject property, or b)
surrender the same, the lease is said to be one with an option to purchase.

Case Summary
PCI Leasing and Finance, Inc. (PCI) and Giraffe-X Creative Imaging, Inc. entered into a lease agreement
whereby the former leased to the latter several equipment for 36 months. The agreement provided,
among others, that in case of Giraffe’s default, PCI may recover the rentals for the remaining term,
and obtain possession of the equipment (cumulative remedies). Giraffe defaulted after a year. PCI
sent a letter to Giraffe demanding payment of the rentals for the remaining term of the lease OR
surrender of the subject equipment. Giraffe did not heed the demand.

Thus, PCI filed a complaint against Giraffe, praying for the issuance of a writ of replevin for the
recovery of the leased property, and in addition, to pay the balance of the rental obligation (P8M).

Giraffe sought for the dismissal of the case arguing that the subject transaction fall within the
coverage of Art. 1484 (Recto Law), being in actuality, a lease with an option to buy. And that PCI’s
recovery of the possession of the subject property was tantamount to a foreclosure thereof which
bars recovery of the balance.
The RTC ruled in favor of Giraffe and dismissed the complaint. The SC affirmed.

Issues resolved —
Were the Lease Agreement, Lease Schedules and the Disclosure Statements that embody the financial
leasing arrangement between the parties covered by and subject to the consequences of Articles
1484 and 1485 of the New Civil Code (Recto Law)?

HELD – YES.
There is nothing in R.A. No. 8556 (Financing Company Act) which defines the rights and obligations, as
between each other, of the financial lessor and the lessee.

Also, the demand letter sent by PCI to Giraffe was fashioned in the alternative, i.e. payment of the full
amount of the unpaid balance for the entire lease period or the surrender of the financed asset. In
other words, should Giraffe opted to pay the balance stated, it need not return the subject
equipment. Likewise, if Giraffe opted not the exercise its option of acquiring the equipment by
returning them, then it need not pay the outstanding balance. The legal import is that the transaction
at hand is a lease in name only. The so-called monthly rentals are in truth monthly amortizations of
the price of the equipment. The absence of a “purchase option” in the lease agreement, does not
negate the fact that the true nature of the transaction is really a lease with an option to buy.

Given the above, the Recto Law should apply. And PCI in choosing to deprive Giraffe of the possession
of the equipment waived its right to bring an action to recover unpaid rentals, under par. 3 of Art.
1484.

IRENE P. RELUCIO VS. ZEIDA B. BRILLANTE-GARFIN AND COURT OF APPEALS G.R. No. 76518 July 13,
1990 Facts: Private respondent filed a complaint before the lower court for specific performance with
damages against petitioner to compel the latter to execute a final deed of sale over two residential
subdivision lots in Mariano Village Subdivision, Naga City and construct paved roads as well as
necessary facilities and improvements on the subdivision. Private respondent alleged that she had
already paid for the downpayment and the subsequent 128 equal monthly instalments of P89.45
each. She alleged that the contract price was P10,800 and there was overpayment that has to be
returned to her. Further, the stipulated interest of 6% per annum is null and void and does not apply
to her as she paid them on time. On the other hand, petitioner resisted the complaint, stating that the
private respondent is obliged to pay the interest on the instalment payments of the unpaid
outstanding balance even if paid on their due dates per schedule of payments, that the private
respondent had actually been in arrears in the amount of P4,269.40 representing interest as of June
1979, which therefore entitled the petitioner to cancel the contract in question.

Issue: Whether or not the petitioner can cancel the contract subject of the case

Ruling: No. Despite private respondent's failure to fully pay the stipulated price of the two lots in
question, petitioner, however, could not validly rescind the contract not being lawfully entitled to do
so. Petitioner failed to rebut private respondents' allegations that the former had failed to introduce
required improvements in the subdivision; the former's bare allegation that the improvements have
already been donated to the city government was not accepted by the trial court. Section 23 of
Presidential Decree No. 957, otherwise known as The Subdivision and Condominium Buyers'
Protective Decree, provides: "Section 23. Non-forfeiture of Payments. -- -No installment payment
made by the buyer in a subdivision or condominium project for the lot or unit he contracted to buy
shall be forfeited in favor of the owner or developer when the buyer, after due notice to the owner or
developer desists from further payment due to the failure of the owner or developer to develop the
subdivision or condominium project according to the approved plans and within the time limit for
complying with the same. Such buyer may, at his option, be reimbursed the total amount paid…"
(Underscoring supplied) In this respect, the trial court was correct in holding that petitioner could not
rescind the contract. As the law vests upon the buyer the option to demand reimbursement of the
total amount paid, or to wait for further development of the subdivision, private
respondent who opted for the latter alternative by waiting for the proper development of the site,
may not be ousted from the subdivision.

CASA FILIPINA DEVELOPMENT CORPORATION

VS. THE DEPUTY EXECUTIVE SECRETARY, MAY 28, 1992

ACTION: PETITION OF REVIEW ON CERTIORARI (treated as petition for certiorari), seeking to reverse
the Office of the President’s Decision

FACTS:

Jose Valenzuela Jr( Valenzuela for brevity) entered into a contract to sell with Casa Filipina
Development (CFD for brevity). However, despite full payment by Valenzuela and his offer to pay the
transfer expenses, CFD refused to execute the deed of absolute sale and deliver the property. So
Valenzuela filed a complaint before the Office of Appeals (OAALA) of the Human Settlements
Regulatory Commission (now HLURB). CFD on the other hand contends that Valnezuela’s action is
premature since Valenzuela has yet to comply with the other conditional requierments of their
contract: i.e. payment of certain fees and expenses.

OOALA ruled in favor of Valenzuela, ordering that CFD must execute the deed of absolute sale, bill
Valenzuela of the transfer expenses, and deliver the property free from liens and encumbrances. In
case CFD is unable to do so, CFD must refund Valenzuela P76,180.82 (80/100) plus 24% per annum
until fully paid.

CFD appealed the decision and reasoned that due to succeeding events (CFD’s new mortgagee bank
prohibits the release of individual title until CFD’s prior obligations be paid first) and the failure of the
past administration to put up a viable and progressive economic program precludes CFD from making
the transfer. This reason was not well-taken by HLURB since no proof was shown to substantiate
CFD’s claim. HLURB emphasized the six (6) month period from full payment within which the
developer must deliver the property sold (PD 957,Sec 25). It is also within such time that redemption
may be had. In the present case, it has been more than one (1) year already.

CFD appealed then again appealed the decision before the Office of the President.

ISSUES (as raised by CFD)

1. Whether or not both remedies of specific performance and rescision may be availed of at the sme
time.
2. Whether or not Valenzuela showed proof of his intent to pay the expenses of the transfer of title.
3. Whether or not the 24% interest was with basis.
4. Whether ot not the 6-month period provided by PD 947 for the purpose of redemption had not
began to run since the title had not yet been issued in view of the takeoverof the new mortgagee
bank.

RULING:

1. Whether or not both remedies of specific performance and rescision may be availed of at the same
time.

The decision of OOALA is clear. IT only ordered the rescission in the event specific performane is not
feasible.

2. Whether or not Valenzuela showed proof of his intent to pay the expenses of the transfer of title.
The Court accorded respect to the finding of fact by the OAALA that “the complainant was ready,
willing and able to pay for the expenses for the transfer of title as stipulated in the Contract to Sell.

3. Whether or not the 24% interest was with basis.

The interest rate of 24% was mutually agreed to by the parties, thus, it must be applied and not the
legal rate of interest.

4. Whether ot not the 6-month period provided by PD 947 for the purpose of redemption had not
began to run since the title had not yet been issued in view of the takeover of the new mortgagee
bank.

The Court has the following to say: “The argument of petitioner that the issuance of the title is a
prerequisite to the running of the six month period of redemption, fails to convince Us. Otherwise,
the owner or developer can readily concoct a thousand and one reasons as justifications for its failure
to issue the title and in the process, prolong the period within which to deliver the title to the buyer
free from any liens or encumbrances. Additionally, by not issuing/delivering the title of the lot to
private respondent upon full payment thereof, petitioner has already violated the explicit mandate of
the first sentence of Section 25 of P.D. No. 957. If We were to count the six month period of
redemption from the belated issuance of the title, petitioner will have a lot to gain from its own non-
observance of said provision. We shall not countenance such absurdity.”

Vicenta Cantemprate et al., vs. CRS Realty Dev't. Corp. et al.

G.R. No. 171399

May 8, 2009

Petitioners bought on an installment basis subdivision lots from respondent CRS Realty and had paid
in full the agreed purchase prices; but notwithstanding the full payment and despite demands,
respondents failed and refused to deliver the corresponding certificates of title to petitioners. They
alleged that respondent Casal was the owner of a parcel of land situated in General Mariano Alvarez,
Cavite known as the CRS Farm Estate while respondent Salvador was the president of respondent CRS
Realty, the developer of CRS Farm Estate. Petitioners averred that respondents failed to deliver the
titles to their respective properties. Casal averred that despite his willingness to deliver them,
petitioners refused to accept the certificates of title with notice of lis pendens covering the
subdivision lots. Respondent Salvador alleged that the failure by respondent Casal to comply with his
obligation under the first agreement to deliver to CRS or the buyers the certificates of title was caused
by the annotation of the notice of lis pendens on the certificate of title covering the subdivision
property.

HLURB Arbiter Ma. Perpetua Y. Aquino declared that the regular courts and not the HLURB had
jurisdiction over petitioners’ complaint, thus, the complaint for quieting of title could not be given due
course. The Heirs of Laudiza and Ligon were dropped as parties on the ground of lack of cause of
action. However, she found respondents CRS Realty, Casal and Salvador liable on their obligation to
deliver the certificates of title of the subdivision lots to petitioners who had paid in full the purchase
price of the properties. She also found as fraudulent and consequently nullified the subsequent
transfer of a portion of the subdivision to respondents Ang and Cuason.

Issues:

(1) whether or not the absence of a license to sell has rendered the sales void;
(2) whether or not the subsequent sale to respondent Cuason and Ang constitutes double sale;

(3) whether or not the HLURB has jurisdiction over petitioners’ complaint; and

(4) whether a minute decision conforms to the requirement of Section 14, Article VIII of the
Constitution.

Ruling:

1. The only requisite for a contract of sale or contract to sell to exist in law is the meeting of minds
upon the thing which is the object of the contract and the price, including the manner the price is to
be paid by the vendee. The absence of the license to sell does not affect the validity of the already
perfected contract of sale between petitioners and respondent CRS Realty.

2. The HLURB has exclusive jurisdiction over the complaint for specific performance to compel
respondents CRS Realty, Casal and Salvador as subdivision owners and developers to deliver to
petitioners the certificates of title after full payment of the subdivision lots. On this score, the Court
affirms the findings of HLURB Arbiter Aquino with respect to the obligation of respondents Casal,
Salvador and CRS Realty to deliver the certificates of title of the subdivision to petitioners pursuant to
their respective contracts to sell.

There is no question that respondents Casal, Salvador and CRS Realty breached their obligations to
petitioners under the contracts to sell. It is settled that a breach of contract is a cause of action either
for specific performance or rescission of contracts.Respondents Casal, Salvador and CRS Realty have
the obligation to deliver the corresponding clean certificates of title of the subdivision lots, the
purchase price of which have been paid in full by petitioners. That the subject subdivision property is
involved in a pending litigation between respondent Casal and persons not parties to the instant case
must not prejudice petitioners.

3. As regards petitioners’ prayer to declare them the absolute owners of the subdivision lots, the
HLURB had no jurisdiction to declare petitioners as absolute owners of the subdivision lots as against
the Heirs of Laudiza who filed an action for reconveyance against respondent Casal, which is still
pending before the RTC.

4. The decision of the OP does not violate the mandate of Section 14, Article VIII of the Constitution,
which provides that “No decision shall be rendered by any court without expressing therein clearly
and distinctly the facts and the law on which it is based.”

The OP decision ruled that “the findings of fact and conclusions of law of the office a quo are amply
supported by substantial evidence” and that it is “bound by said findings of facts and conclusions of
law and hereby adopt(s) the assailed resolution by reference.”

The Court finds these legal bases in conformity with the requirements of the Constitution. The Court
has sanctioned the use of memorandum decisions, a species of succinctly written decisions by
appellate courts in accordance with the provisions of Section 40, B.P. Blg. 129 on the grounds of
expediency, practicality, convenience and docket status of our courts. The Court has declared that
memorandum decisions comply with the constitutional mandate.
Moldex Realty v. Saberon
G.R. No. 176289, 8 April 2013

FACTS:

Respondent Flora asked Moldex, to reserve the lot for her as shown by a Reservation Application.
Flora opted to pay on installment and began making a periodical payments Moldex sent Flora notices
reminding her to update her account. Upon inquiry, however, Flora was shocked to find out that as of
July 1996, she owed Moldex P247,969.10. Moldex thus suggested to Flora to execute a written
authorization for the sale of the subject lot to a new buyer and a written request for refund so that
she can get half of all payments she made.

However, Flora never made a written request for refund. Moldex, then sent Flora a Notarized Notice
of Cancellation of Reservation Application and/or Contract to Sell. Flora, on the other hand, filed
before the Housing and Land Use Regulatory Board (HLURB) Regional Field Office IV a Complaint for
the annulment of the contract to sell, recovery of all her payments with interests, damages, and the
cancellation of Moldex’s license to sell. Flora alleged that the contract to sell between her and Moldex
is void from its inception.

According to Flora, Moldex violated Section 5 of Presidential Decree (PD) No. 957 when it sold the
subject lot to her on April 11, 1992 or before it was issued a license to sell on September 8, 1992.
Flora likewise claimed that Moldex violated Section 17 of the same law because it failed to register
the contract to sell in the Registry of Deeds. In its defense, Moldex exercised its right under Republic
Act (RA) No. 6552, or the Maceda Law, by cancelling the reservation Agreement/Contract to Sell and
forfeiting all payments made.

Finally, Moldex alleged that since Flora was at fault, the latter cannot be heard to make an issue out
of Moldex’s ; the HLURB Arbiter declared as void the Contract to Sell entered into by the parties
because Moldex lacked the required license to sell at the time of the contract’s perfection, in violation
of Section 5 of PD 957. Hence, Moldex was ordered to refund everything Flora had paid, plus legal
interest, and to pay attorney’s fees. Moreover, Moldex was ordered to pay a fine for its violation of
the above provision of PD 957.

In its Petition for Review before the HLURB Board of Commissioners (HLURB Board), Moldex argued
that the absence of license at the time of the contract’s perfection does not render it void the HLURB
Board, in a Decision dated July 29, 1999, dismissed the petition and affirmed in toto the Arbiter’s
Decision. It held that the law is clear on the prerequisite of a license to sell before a developer can sell
lots.

Since Moldex did not have a license to sell at the time it contracted to sell the subject lot to Flora, the
Board agreed with the Arbiter in declaring the contract invalid and in ordering the refund of Flora’s
payments. Moldex then appealed to the Office of the President (OP). The OP affirmed the finding that
the contract to sell was a nullity. Moldex thus sought relief with the CA via a Petition for Review. the
CA agreed with the findings of the tribunals.

It ratiocinated that Moldex’s non-observance of the mandatory provision of Section 5 of PD 957

rendered the contract to sell void, notwithstanding Flora’s payments and her knowledge that Moldex
did not at that time have the requisite license to sell. It also held that the subsequent issuance by the
HLURB of a license to sell in Moldex’s favor did not cure the defect or result to the ratification of the
contract.

ISSUE:

Moldex only raises the matter of the validity of the contract to sell it entered with Flora contending
that the same remains valid and binding.
RULING:

A review of the relevant provisions of P.D. 957 reveals that while the law penalizes the selling of
subdivision lots and condominium units without prior issuance of a Certificate of Registration and
License to Sell by the HLURB, it does not provide that the absence thereof will automatically render a
contract, otherwise validly entered. With regard to P.D. 957, nothing therein provides for the
nullification of a contract to sell in the event that the seller, at the time the contract was entered into,
did not possess a certificate of registration and license to sell. Absent any specific sanction pertaining
to the violation of the questioned provisions (Secs. 4 and 5), the general penalties provided in the law
shall be applied. The general penalties for the violation of any provisions in P.D. 957 are provided for
in Sections 38 and 39. As it can clearly be seen in the aforequoted provisions, the same do not include
the nullification of contracts that are otherwise validly entered. Thus, the contract to sell entered into
between Flora and Moldex remains valid despite the lack of license to sell on the part of the latter at
the time the contract was entered into.

Moreover, Flora claims that the contract she entered into with Moldex is void because of the latter’s
failure to register the contract to sell/document of conveyance with the Register of Deeds, in violation
of Section 17 of PD 957. However, just like in Section 5 which did not penalize the lack of a license to
sell with the nullification of the contract, Section 17 similarly did not mention that the developer’s or
Moldex’s failure to register the contract to sell or deed of conveyance with the Register of Deeds
resulted to the nullification or invalidity of the said contract or deed. Thus, non-registration of an
instrument of conveyance will not affect the validity of a contract to sell. It will remain valid and
effective between the parties thereto as under PD 1529 or The Property Registration Decree,
registration merely serves as a constructive notice to the whole world to bind third parties.

Under the Maceda Law, the defaulting buyer who has paid at least two years of installments has the
right of either to avail of the grace period to pay or, the cash surrender value of the payments made.

It is on record that Flora had already paid more than two years of installments (from March 11, 1992
to July 19, 1996) in the aggregate amount of ₱375,295.49. Her last payment was made on July 19,
1996. It is also shown that Flora has defaulted in her succeeding payments. Thereafter, Moldex sent
notices to Flora to update her account but to no avail. She could thus no longer avail of the option
provided in Section 3(a) of the Maceda Law which is to pay her unpaid installments within the grace
period. Besides, Moldex already sent Flora a Notarized Notice of Cancellation of Reservation
Application and/or Contract to Sell. Hence, the only option available is Section 3(b) whereby the
seller, in this case, Moldex shall refund to the buyer, Flora, the cash surrender value of the payments
on the property equivalent to 50% of the total payments made, or ₱187,647.75.33

WHEREFORE, the Petition is GRANTED. The contract to sell between petitioner Moldex Realty, Inc.
and respondent Flora A. Saberon is declared CANCELLED and petitioner Moldex Realty, Inc. is ordered
to REFUND to respondent Flora A. Saberon the cash surrender value of the amortizations she made
equivalent to Pl87,647.75 pursuant to Section 3(b) of Republic Act No. 6552 within 15 days from date
of finality of this Decision.

UNITED OVERSEAS BANK OF PHILIPPINES v. BOARD OF COMMISSIONERS-HLURB, GR No. 182133,

2015-06-23

Facts:

Respondent J.O.S. Managing Builders, Inc. (JOS Managing Builders) is the registered owner and
developer of the condominium project Aurora Milestone Tower. On December 16, 1997, JOS
Managing Builders and respondent EDUPLAN Philippines, Inc. (EDUPLAN) entered into a

Contract to Sell covering Condominium Unit E, 10th Floor of the Aurora Milestone Tower

In August 1998, EDUPLAN effected full payment, and in December 1998, JOS Managing Builders and
EDUPLAN executed a Deed... of Absolute Sale over the condominium unit.
JOS Managing Builders failed to cause the issuance of a Condominium Certificate of Title over the
condominium unit in the name of EDUPLAN.

EDUPLAN learned that the... lots on which the condominium building project Aurora Milestone Tower
was erected had been mortgaged by JOS Managing Builders to petitioner United Overseas Bank of the
Philippines (United Overseas Bank) without the prior written approval of the Housing and Land Use

Regulatory Board (HLURB).

Due to the inability of JOS Managing Builders to deliver the condominium certificate of title covering
the unit purchased by EDUPLAN, the latter filed a complaint for specific performance and damages
against JOS Managing Builders and United

Overseas Bank before the HLURB praying that: (a) the mortgage between JOS Managing Builders and
United Overseas Bank be declared null and void; (b) JOS Managing Builders and United Overseas Bank
be compelled to cause the issuance and release of the Condominium Certificate of

Title; and (c) JOS Managing Builders be ordered to provide emergency power facilities, to refund the
monthly telephone carrier charges, and to permanently cease and desist from further collecting such
charges.

Issues:

THE COURT OF APPEALS ERRED IN REFUSING TO APPLY THE EXCEPTION TO THE DOCTRINE OF
EXHAUSTION OF ADMINISTRATIVE REMEDIES... whether the HLURB is correct in declaring null and
void the entire mortgage constituted by JOS Managing

Builders in favor of United Overseas Bank, as well as the foreclosure of the entire mortgage, is a legal
question which is an exception to the rule on exhaustion of administrative remedies.

Ruling:

The petition is meritorious.

The doctrine of exhaustion of administrative remedies is a cornerstone of our judicial system. The
thrust of the rule is that courts must allow administrative agencies to carry out their functions and
discharge their responsibilities within the specialized areas of their... respective competence

It has been held, however, that the doctrine of exhaustion of administrative remedies and the
doctrine of primary jurisdiction are not iron-clad rules.

In the case of Republic v. Lacap,... the Court... enumerated the numerous exceptions to these rules,
namely:

(e) where the question involved is purely legal and will ultimately have to be decided by the courts
of... justice

The issue on whether non-compliance with the clearance requirement with the HLURB would result
to the nullification of the entire mortgage contract or only a part of it is purely legal which will have to
be decided ultimately by a regular court of law.

The issue does not require technical knowledge and experience, but one that would involve the
interpretation and application of law.

here is, thus, no need to exhaust administrative remedies, under the premises.
The HLURB erred in declaring null and void the entire mortgage executed between JOS Managing
Builders and United Overseas Bank.

We find the recent view espoused in Philippine National Bank to be in accord with law and equity.
While a mortgage may be nullified if it was in violation of Section 18 of P.D. No. 957, such nullification
applies only to the interest of the complaining buyer. It cannot... extend to the entire mortgage. A
buyer of a particular unit or lot has no standing to ask for the nullification of the entire mortgage.

Since EDUPLAN has an actionable interest only over Unit E, 10th Floor, Aurora Milestone Tower, it is
but logical to conclude that it has no standing to seek for the complete nullification of the subject
mortgage and the HLURB was incorrect when it voided... the whole mortgage between JOS Managing
Builders and United Overseas Bank.

It should be noted, however, that the failure of JOS Managing Builders to secure prior approval of the
mortgage from the HLURB and United Overseas Bank's failure to inquire on the status of the property
offered for mortgage placed the condominium developer and the creditor Bank... in pari delicto.

Hence, they cannot ask the courts for relief for such parties should be left where they are found for
being equally at fault.

More importantly, it should be understood that the prior approval requirement is intended to protect
buyers of condominium units from fraudulent manipulations perpetrated by unscrupulous
condominium sellers and operators, such as their failure to deliver titles to the buyer or... titles free
from lien and encumbrances.[21] This is pursuant to the intent of P.D. No. 957 to protect hapless
buyers from the unjust practices of unscrupulous developers which may constitute mortgages over
condominium projects sans the knowledge of the... former and the consent of the HLURB.

Thus, failure to secure the HLURB'S prior written approval as required by P.D. No. 957 will not annul
the entire mortgage between the condominium developer and the creditor bank, otherwise the
protection intended for condominium buyers will inadvertently be extended to the... condominium
developer even though, by failing to secure the government's prior approval, it is the party at fault.

From all the foregoing, the HLURB erred when it declared the entire mortgage constituted by JOS
Managing Builders, Inc. in favor of United Overseas Bank null and void based solely on the complaint
of EDUPLAN which was only claiming ownership over a single condominium unit of

Aurora Milestone Tower. Accordingly, the mortgage executed between JOS Managing Builders and
United Overseas Bank is valid.

Principles:

There is a question of law when the doubt or difference arises as to what the law is on a certain state
of facts, and not as to the truth or the falsehood of alleged facts. Said question at best could... be
resolved only tentatively by the administrative authorities. The final decision on the matter rests not
with them but with the courts of justice.

Digests created by other user

Geronimo v Sps Calderon Facts: On May 15, 2006, respondents spouses Estela and Rodolfo Calderon
(respondents, for brevity) filed a verified complaint5 before the HLURB Regional Office against
Silverland Realty & Development Corporation, Silverland Village I Homeowners Association, Silverland
Alliance Christian Church (SACC), Joel Geronimo, Annie Geronimo, Jonas Geronimo and Susan
Geronimo, for specific performance and for the issuance of cease and desist order and damages.
Sometime in May 2005, a building was erected beside the house of Joel and Annie. Jonas Geronimo
directed the construction. When respondents asked about the building, Susan Geronimo told them
that her son, Joel, had bought the adjacent lot to build an extension house in order to create a wider
playing area for the Geronimo grandchildren because their two-storey house could no longer
accommodate their growing family. When the construction was finished, the building turned out to
be the church of petitioner SACC. The noise allegedly affected respondents’ health and caused
inconvenience to respondents because they were forced to leave their house if they want peace and
tranquility. Respondents sought assistance from the President of the homeowners’ association. SACC,
through Atty. Alan Alambra promised that it will take steps to avoid church activities beyond 10:00
p.m. However, the intolerable noise still continued. SACC, Joel Geronimo, Annie Geronimo, Susan
Geronimo and Jonas Geronimo averred that the HLURB has no jurisdiction over the case which
primarily involves abatement of nuisance, primarily lodged with the regular courts. They also alleged
lack of privity with respondents and that they are not real parties-in-interest with respect to the
subject matter of the complaint. Silverland Realty & Development Corporation and Silverland Village 1
Homeowners Association did not respond to the complaint. The HLURB Arbiter rendered a Decision6
on October 22, 2007 and ordered petitioners not to use the property at #46 Silverlane Street for
religious purposes and as a location of a church. The CA agreed with the OP that the case involves the
failure of a developer of a subdivision project and the homeowners’ association to ensure that the
construction of structures inside the subdivision conforms to the approved plan. The CA said that the
Development Permit issued for the subdivision project clearly indicates that the subject lot’s use is
residential. Petitioners, however, succeeded in constructing a church thereon, and the developer and
the homeowners’ association failed to maintain the residential usage of the lot. CA also dismissed
petitioner’s MR.

Issue: whether the HLURB has jurisdiction over the present controversy

Held: We deny the petition and affirm the CA ruling. We agree with the CA that the HLURB has
jurisdiction over the present controversy. We have ruled that the jurisdiction of the HLURB to hear
and decide cases is determined by the nature of the cause of action, the subject matter or property
involved and the parties.12 We explained the HLURB’s exclusive jurisdiction in Christian General
Assembly, Inc. v. Spouses Ignacio13 in this wise:

Generally, the extent to which an administrative agency may exercise its powers depends largely, if
not wholly, on the provisions of the statute creating or empowering such agency. Presidential Decree
(P.D.) No. 1344, "EMPOWERING THE NATIONAL HOUSING AUTHORITY TO ISSUE WRIT OF EXECUTION
IN THE ENFORCEMENT OF ITS DECISION UNDER PRESIDENTIAL DECREE NO. 957," clarifies and spells
out the quasi-judicial dimensions of the grant of jurisdiction to the HLURB in the following specific
terms: SEC. 1. In the exercise of itsfunctions to regulate the real estate trade and business and in
addition to its powers provided for in Presidential Decree No. 957, the National Housing Authority
shall have exclusive jurisdiction to hear and decide cases of the following nature: A. Unsound real
estate business practices; B. Claims involving refund and any other claims filed by subdivision lot or
condominium unit buyer against the project owner, developer, dealer, broker or salesman; and C.
Cases involving specific performance of contractual and statutory obligations filed by buyers of
subdivision lots or condominium units against the owner, developer, dealer, broker or salesman. The
extent to which the HLURB has been vested with quasi- judicial authority must also be determined by
referring to the terms of P.D. No. 957, "THE SUBDIVISION AND CONDOMINIUM BUYERS’ PROTECTIVE
DECREE." Section 3 of this statute provides: x x x National Housing Authority [now HLURB]. – The
National Housing Authority shall have exclusive jurisdiction to regulate the real estate trade and
business in accordance with the provisions of this Decree. In Maria Luisa Park Association,Inc. (MPLAI)
v. Almendras,14 we also ruled that: The provisions of P.D. No. 957 were intended to encompass all
questions regarding subdivisions and condominiums. The business of developing subdivisions and
corporations being imbued with public interest and welfare, any question arising from the exercise of
that prerogative should be brought to the HLURB which has the technical know-how on the matter. In
the exercise of its powers, the HLURB must commonly interpret and apply contracts and determine
the rights of private parties under such contracts. This ancillary power is no longer a uniquely judicial
function, exercisable only by the regular courts. (Emphasis supplied) In the present case, respondents
are buyers of a subdivision lot from subdivision owner and developer Silverland Realty &
Development Corporation. Respondents’ action against Silverland Realty & Development Corporation
was for violation of its own subdivision plan when it allowed the construction and operation of
SACC.16 Respondents sued to stop the church activities inside the subdivision which isin
contravention of the residential use of the subdivision lots. Undoubtedly, the present suit for the
enforcement of statutory and contractual obligations of the subdivision developer clearly falls within
the ambit of the HLURB’s jurisdiction. Needless to stress, when an administrative agency or body is
conferred quasi-judicial functions, all controversies relating to the subject matter pertaining to its
specialization are deemed to be included within the jurisdiction of said administrative agency or
body.17

ROYAL PLAINS VIEW, INC. AND/OR RENATO PADILLO, Petitioners,

vs

NESTOR C. MEJIA, Respondent.

Facts:

The late Dominador Ramones (Dominador) was the registered owner of a parcel of land in Magdum,
Tagum City, Davao Del Norte, which during his lifetime has executed a Contract of Sale in favor of Blas
Mejia (Blas), father of herein respondent, Nestor C. Mejia (Nestor, involving the western portion of
the land. They agreed to reduce the purchased lot to six (6) hectares.

Despite of the sale, the property remained in the name of Dominador married to Maria Ramones
(spouses Ramones).

Further, the remaining portion was also sold to a certain Pablo Benito (Pablo) on February 17, 1965
through a Deed of Absolute Sale of Land.

After the transaction, Blas dies and survived by his son, Nestor, who has the actual physical
possession of the entire parcel of the land with an entire area of 12.3 hectares, covered by OCT No.
(P-1324) P-232 registered in the name of spouses Ramones. Nestor also had in his possession the
ancient instrument denominated as Contract of Sale executed on September 17, 1960 by the parties
then alive (Dominador in favor of Blas, for the six hectares) and another Deed of Sale dated February
17, 1965, in favor of Pablo, for the other 6.3 hectares.

Nestor agreed with the petitioner, Renato Padillo (Renato) to split the entire lot into two titles
resulting to the issuance of TCT Nos. T-225549 and T-225550. Titles are still in the name of spouses
Ramones, but T-225549 remained with Nestor.

Nestor entered into a contract denominated as Deed of Conditional Sale with the petitioner
Corporation that involved the parcel of land covered by T-225549 and registered in the name of
Dominador. The contract provides that petitioner Corporation bound itself to pay Nestor the sum of
P8,000,000.00 of which P500,000.00 was for down payment. The balance was to be paid in 36 equal
monthly installments of P208,333.30 beginning June 30, 2005 up to May 30, 2008.

On April 11, 2007, the March 23, 2005 Deed of Conditional Sale was later revoked and a new of
Conditional Sale was executed changing the terms of the initial agreement, stating that the
Corporation already paid the amount of PhP1,972,000.00 and the balance will be paid in 40 monthly
installments to end by June 2010.

It was also alleged that the Corporation entered into a verbal gentlemen’s agreement with Nestor to
divide the lots covered by T-225549 into two, each keeping a copy. However, since the Company
handled the transfer, it had in its possession TCT No. T-225549 covering the portion sold to Blas. One
day, Nestor, asked the petitioner to give him the original owner’s duplicate copy of TCT No. T-225549,
only to find out that Nestor sold the whole property to spouses Egina. Subsequently, eight TCTs were
issued in favor of spouses Engina that was later cancelled and because of the controversies, T-225549
was in the custody of the Registry of Deeds.

Nestor evaded Renato’s attempt to contact him and instead, the latter received a document entitled
“Rescission of Deed of Conditional Sale”, alleging that the petitioner’s defaulted in the payment of
monthly installments as agreed upon on the Aprill 11, 2007 contract.

On October 12, 2011, petitioners filed before the RTC, a Complaint for Declaration of Nullity of the
Instrument denominated as Rescission of Conditional Sale, Specific Performance, Sums of Money, etc.
against respondent Nestor and the heirs of the spouses Ramones, represented by Remedios
Ramones-Emperado. Nestor did not file an Answer. Hence, he was declared in default in an Order
dated May 31, 2012.

On their Decision, the court found that the whole transaction between Nestor and the petitioners
tainted with badges of fraud, knowing that the subject property was still registered in the name of
Dominador, the Company should not have paid a hefty amount to Nestor.

The Court of Appeals reversed the Decision of the RTC and ruled in favor of the petitioners, citing that
the parties actual intention is to enter in a Contract to Sell and that the intention was reserve
ownership of the land until the buyers made full payment of the contract price. Since the petitioners
already paid for at least two years of installments then the provisions of Republic Act (R.A.) No. 6552
or the Maceda Law should be applied. When Nestor cancelled the contract, he failed to comply with
the requirement under the Maceda Law, that is, the refund of the cash surrender value. Therefore,
there was no valif rescission of the contract to sell.

Issue:

Whether or not the parties entered into a Contract to Sell.

Whether or not the rescission and cancellation of the conditional sale, valid.
Held:

The Court held that it is vital to characterize the nature of the agreement between the parties –
whether the same is a contract of sale or a contract to sell. The Court agrees with CA that the April 11,
2007 Deed of Conditional Sale executed by the parties is actually a contract to sell. However the
protection under the Maceda Law is not applicable, since Section 3 of the Maceda provides for the
exclusion of industrial lots, commercial buildings and sales to tenants.

“The contract between the parties is not an absolute conveyance of real property but a contract to
sell. In a contract to sell real property on installments, the full payment of the purchase price is a
positive suspensive condition, the failure of which is not considered a breach, casual or serious, but
simply an event which prevented the obligation of the vendor to convey title from acquiring any
obligatory force. The transfer of ownership and title would occur after full payment of the purchase
price.”

In a contract to sell, failure to pay the price agreed upon is a condition that prevents the obligation
from acquiring an obligatory force that the vendor remains the owner for as long as the vendee has
not complied fully with the condition of paying the purchase price, while in in a contract of sale,
where nonpayment of the price is a negative resolutory condition that the vendor has lost ownership
of the thing sold and cannot recover it, unless the contract of sale is rescinded and set aside.

Strictly speaking, in a contract to sell, there can be no rescission or resolution of an obligation that is
still non-existent due to the non-happening of the suspensive condition.

Given that the waiver of demand was not included in their contract and failure of Nestor to demand
payment in the case of default and since Nestor did not inform the petitioners that he is already
cancelling their contract, it did not give the petitioners the opportunity to question the cancellation
before the courts.

Therefore, the Court held that the Deed of Conditional Sale remains valid and subsisting. The
petitioners were given 60 days from the finality of the Decision to pay the remaining balance of the
agreed purchase price and upon full payment, for Nestor to execute the corresponding Deed of
Absolute Sale over the property covered by TCT No. T-225549.

In case of failure of petitioners to pay the sum as herein adjudged, the Deed of Conditional Sale is
deemed cancelled and the payments they had already paid will be considered rentals for the use of
the property.

GATCHALIAN REALTY, INC., petitioner,

vs.
EVELYN M. ANGELES, respondent.
G.R. No. 202358. November 27, 2013.
Rule Synopsis
Under the Maceda Law, for the rescission of the contract of sale to be valid, the seller must comply
with the twin requirements, i.e. notarial notice of rescission, and refund of the CSV.

Case Summary
Evelyn Angeles (buyer) purchased a lot and house from Gatchalian Realty, Inc. (GRI; buyer) for P450k
and P750k, respectively. Both were payable in installments for 10 years. The buyer eventually
defaulted after making 35 and 48 monthly installments, respectively. Despite the seller’s grant of 51
months grace period, and repeated demands, the buyer still failed to make further payments. The
seller then sent a notarial notice of cancellation to the buyer, it also demanded payment of rentals
from the latter of P 112,304.42. The latter amounts is net of the 50% CSV on the installment payments
by the buyer which the seller deducted. The buyer then tried making installment payments via postal
money order but the seller refused; it also demanded that the buyers vacate the subject properties,
the latter refused.

The seller thus filed an unlawful detainer suit before the MeTC.

The MeTC ruled in favor of GRI, holding the rescission valid. The RTC affirmed with modifications; it
ruled that the requirements of Sec. 3 of R.A. No. 6552 of refund of the CSV of the installments made
was complied with by the seller’s deduction of such CSV from the rentals due from the buyer. The CA
reversed; it held that no valid rescission took place given the seller’s failure to pay the CSV. The SC
affirmed with modification. As it held that there was no valid rescission, it gave the buyer the option
to 1) pay the outstanding balance, or 2) accept the CSV.

Issue resolved —
Was the seller’s cancellation of the contract of sale valid? Stated otherwise, had the seller complied
with the requirements under Sec. 3 of R.A. No. 6552 to effect a valid cancellation of the sale?

HELD – NO. A VALID AND EFFECTIVE CANCELLATION UNDER R.A. 6552 MUST COMPLY WITH THE
MANDATORY TWIN REQUIREMENTS OF A NOTARIZED NOTICE OF CANCELLATION AND A REFUND OF
THE CASH SURRENDER VALUE.
GRI gave the buyer sufficient grace period. The MeTC, RTC and CA all found that the buyer was able to
complete 35 months installment on the house, and 48 months installment of the lot. Under Sec. 3 of
R.A. No. 6552, the buyer is entitled to 1 month grace period for every year of installment completed.
Thus, the buyer was entitled to 2 months and 4 months grace period respectively. And as the seller
had granted him 51 months grace, the Court found the seller in compliance, even beyond, the
requirement of the law.
GRI duly notified the buyer of the rescission via registered mail. GRI presented the affidavit of its
liaison officer Fortunato Gumahad, the registry receipt from the Greenhills Post Office, and the
registry return receipt. The latter is prima facie proof of the facts indicated therein, and the buyer
failed to adduce controverting proof.

GRI’s failed to actually refund the cash surrender value to the buyer. The cash surrender value of the
buyer’s payments on the lot and house amounted to P182,094.48 and P392,053.92, respectively.
Legal compensation was not applicable in this case, contrary to MeTC’s ruling. GRI cannot off-set its
obligation to pay the CSV of the buyer’s installments with the rentals due from the latter. there was
nothing in the contracts which provided for the amount of rentals in case the buyer defaults in her
installment payments; the rental amounts weren’t liquidated. Furthermore, GRI merely imposed said
rentals (and 10% increase thereon) unilaterally. The ruling in Pilar, cited by GRI, is not applicable since
in the latter case, it was the MeTC (not the buyer) who determined the amount of rentals and ordered
its offsetting with the CSV due from the seller.

ISSUES: 1) Whether there is a valid cancellation of the Contract to Sell. 2) Whether Angeles is
entitled to the benefit of Maceda Law or RA 6552. 3) Whether Angeles can be ejected for non-
payment of monthly installments.

HELD: 1) NO. A valid and effective cancellation under RA 6552 must comply with the mandatory
twin requirements of a notarized notice of cancellation and a refund of the cash surrender value.
Although there was a notarial rescission sent thru registered mail but it was not accompanied by
the refund of the cash surrender value equivalent to 50% of the total payments made. For failure to
refund the cash surrender value to the defaulting buyer Angeles, Gatchalian cannot deduct the
same for the amount of the rentals due to Gatchalian as there was nothing in the contract to apply
compensation under Art. 1279 of the New Civil Code.

For her continued failure to satisfy her obligations with [GRI] and her refusal to vacate the house and
lot, [GRI] filed a complaint for unlawful detainer against [Angeles] on 11 November 2003.

2) Angeles is entitled to receive the cash surrender value equivalent to 50% of the total payments
made as provided for by Section 3 (b) of RA 6552.

The MeTC's Ruling The MeTC of Branch 79, Las Piñas City ruled in favor of GRI. The MeTC determined
that the case was for an unlawful detainer, and thus assumed jurisdiction. The MeTC further held that
the facts show that GRI was able to establish the validity of the rescission . Although the MeTC agreed
with Angeles that her total payment is already more than the contracted amount, the MeTC found
that Angeles did not pay the monthly amortizations in accordance with the terms of the contract.
Interests and penalties accumulated and increased the amount due. Furthermore, the MeTC found
the monthly rentals imposed by GRI reasonable and within the range of the prevailing rental rates in
the vicinity. Compensation between GRI and Angeles legally took effect in accordance with Article
1290[10] of the Civil Code. The MeTC ruled that GRI is entitled to ?1,060,896.39 by way of reasonable
rental fee less ?574,148.40 as of May 2005, thus leaving a balance of ?486,747.99 plus the amount
accruing until Angeles finally vacates the subject premises.

3) In the absence of a valid cancellation of the Contract to Sell between Gatchalian and Angeles, the
contract remains valid and existing. Thus the complaint for unlawful detainer would be a violation of
the mandate of RA 6552. ______

The RTC's Ruling

Requisites of a valid and effective cancellation under R.A. 6552 (Maceda Law) - protection of the
rights of house and lot buyers on installment basis. "Mandatory Twin Requirements: Notarized Notice
of Cancellation and Refund of Cash Surrender Value This Court has been consistent in ruling that a
valid and effective cancellation under R.A. 6552 must comply with the mandatory twin requirements
of a notarized notice of cancellation and a refund of the cash surrender value.
In Olympia Housing, Inc. v. Panasiatic Travel Corp.,39 we ruled that the notarial act of rescission must
be accompanied by the refund of the cash surrender value. x x x The actual cancellation of the
contract can only be deemed to take place upon the expiry of a 30-day period following the receipt by
the buyer of the notice of cancellation or demand for rescission by a notarial act and the full payment
of the cash surrender value. In Pagtalunan v. Dela Cruz Vda. De Manzano,40 we ruled that there is no
valid cancellation of the Contract to Sell in the absence of a refund of the cash surrender value. We
stated that: x x x Sec. 3 (b) of R.A. No. 6552 requires refund of the cash surrender value of the
payments on the property to the buyer before cancellation of the contract. The provision 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. Hence, petitioner cannot insist on
compliance with the requirement by assuming that the cash surrender value payable to the buyer had
been applied to rentals of the property after respondent failed to pay the installments due.

Petition denied, judgment and resolution affirmed with modification

PRISCILLA ORBE vs. FILINVEST LAND, INC.

G.R. No. 208185, 6 September 2017
FACTS:
Sometime in June 2001, Priscilla Orbe entered into a purchase agreement with respondent Filinvest
Land, Inc. over a 385-square meter lot identified as Lot 1, Block 10, Phase 1, Highlands Pointe, Taytay,
Rizal. The total contract price was PhP 2,566,795.00, payable on installment basis.

From June 17, 2001 to July 14, 2004, Orbe paid a total of PhP 608,648.00. These were mainly through
several Metrobank checks, for which Filinvest issued official receipts. Orbe was unable to make
further payments allegedly on account of financial difficulties.

On October 4, 2004, Filinvest sent a notice of cancellation, which was received by Orbe on October
18, 2004.

Noting that efforts to seek for a reconsideration of said cancellation proved futile, and that the parcel
had since been sold by Filinvest to a certain Ruel Ymana in evident bad faith, Orbe filed against
Filinvest a Complaint for refund with damages dated November 13, 2007 before the HLURB Field
Office. Orbe emphasized that she made payments beginning June 2001 to October 2004. She further
asserted that the October 4, 2004 Notice did not amount to an effective cancellation by notarial act.
ISSUES:
1) Whether Orbe is entitled to the benefits under Section 3 of RA No. 6552.
2) Whether Filinvest’s cancellation was effectively made by notarial act.
3) Whether Orbe is entitled to a refund.
RULING:
1) No.

Contrary to petitioner’s allegations, she did not pay at least two years of installments as to fall within
the protection of Section 3.

When Section 3 speaks of paying “at least two years of installments,” it refers to the equivalent of the
totality of payments diligently or consistently made throughout a period of two years. Accordingly,
where installments are to be paid on a monthly basis, paying “at least two years of installments”
pertains to the aggregate value of 24 monthly installments. As explained in Gatchalian Realty v.
Angeles: It should be noted that Section 3 of R.A. 6552 and paragraph six of Contract Nos. 2271 and
2272, speak of “two years of installments.” The basis for computation of the term refers to the
installments that correspond to the number of months of payments, and not to the number of
months that the contract is in effect as well as any grace period that has been given. Both the law and
the contracts thus prevent any buyer who has not been diligent in paying his monthly installments
from unduly claiming the rights provided in Section 3 of R.A. 6552.

The phrase “at least two years of installments” refers to value and time. It does not only refer to the
period when the buyer has been making payments, with total disregard for the value that the buyer
has actually conveyed. It refers to the proportionate value of the installments made, as well as
payments having been made for at least two years.

Laws should never be so interpreted as to produce results that are absurd or unreasonable. Sustaining
petitioner’s contention that she falls within Section 3’s protection just because she has been paying
for more than two years goes beyond a justified liberal construction of the Maceda Law. It facilitates
arbitrariness, as intermittent payments of fluctuating amounts would become permissible, so long as
they stretch for two years. Worse, it condones absurdity. It sets a precedent that would endorse
minimal token payments that extend for two years. A buyer could, then, literally pay loose change for
two years and still come under Section 3’s protection.

2) No.

For cancellations under Section 4 to be valid, three requisites must concur. First, the buyer must have
been given a 60-day grace period but failed to utilize it. Second, the seller must have sent a notice of
cancellation or demand for rescission by notarial act. Third, the cancellation shall take effect only after
30 days from the buyer’s receipt of the notice of cancellation.

To be effective, sellers’ cancellations under the Maceda Law mist strictly comply with the
requirements of Sections 3 and 4. The Court clarifies that with respect to notices of cancellation or
demands for rescission by notarial act, an acknowledgment is imperative. Moreover, when these are
made through representatives of juridical persons selling real property, the authority of these
representatives must be duly demonstrated. For corporations, the representative’s authority must
have either been granted by a board resolution or existing in the seller’s articles of incorporation or
by-laws.

3) Yes.

There being no valid cancellation, the purchase agreement between petitioner and respondent
remains valid and subsisting. However, respondent has already sold the lot purchased by petitioner to
a certain Ruel Ymana.

It was Active Realty and Development v. Daroya that originally identified two options where a seller
wrongly cancelled a contract with a buyer and had since sold that property to a third person,
refunding the actual value of the lot sold plus interest or delivering a substitute lot to the buyer.

In Active, the buyer managed to pay the full price of the principal value of the lot but was still short of
the total contract price net of interest. Unlike the buyer in Active, petitioner here has only made
partial payments. Thus, a full refund of the actual value of the lot is improper. In addition, petitioner
has disavowed any interest in proceeding with the purchase. She has even admitted to not having the
financial capacity for this. The antecedents, too, demonstrate that petitioner made no further attempt
at proceeding with the purchase.

Considering that it did not validly cancel its contract with petitioner and has also sold the lot to
another person, it is proper that respondent be ordered to refund petitioner. This refund shall not be
full actual value of the lot resold, lest petitioner be unjustly enriched. Rather, it shall only be the
amount actually paid by petitioner to respondent, i.e., PhP 608,648.20, subject to the legal interest at
the rate of 12% per annum reckoned from the filing of petitioner’s Complaint until June 30, 2013 and
6% per annum from July 1, 2013 until fully paid.