obligations and contracts for prelim 2014

8/10/2019 Obligations and contracts for prelim 2014

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1186 Constructive Fulfillment

Republic of the PhilippinesSUPREME COURT Manila

THIRD DIVISIONG.R. No. 96053 March 3, 1993JOSEFINA TAYAG, RICARDO GALICIA, TERESITA GALICIA,EVELYN GALICIA, JUAN GALICIA, JR. and RODRIGOGALICIA,petitioners,vs.COURT OF APPEALS and ALBRIGIDO LEYVA,respondents.Facundo T. Bautista for petitioners.Jesus T. Garcia for private respondent.

MELO, J.: The deed of conveyance executed on May 28, 1975 by JuanGalicia, Sr., prior to his demise in 1979, and Celerina Labuguin,in favor of Albrigido Leyva involving the undivided one-halfportion of a piece of land situated at Poblacion, Guimba, NuevaEcija for the sum of P50,000.00 under the following terms:1. The sum of PESOS: THREE THOUSAND (P3,000.00) isHEREBY acknowledged to have been paid upon the executionof this agreement;2. The sum of PESOS: TEN THOUSAND (P10,000.00) shall bepaid within ten (10) days from and after the execution of thisagreement;3. The sum of PESOS: TEN THOUSAND (P10,000.00)represents the VENDORS' indebtedness with the PhilippineVeterans Bank which is hereby assumed by the VENDEE; and4. The balance of PESOS: TWENTY SEVEN THOUSAND(P27,000.00.) shall be paid within one (1) year from and after theexecution of this instrument. (p. 53,Rollo)is the subject matter of the present litigation between the heirs ofJuan Galicia, Sr. who assert breach of the conditions as againstprivate respondent's claim anchored on full payment andcompliance with the stipulations thereof.The court of origin which tried the suit for specific performancefiled by private respondent on account of the herein petitioners'reluctance to abide by the covenant, ruled in favor of the vendee(p. 64,Rollo) while respondent court practically agreed with thetrial court except as to the amount to be paid to petitioners andthe refund to private respondent are concerned (p. 46,Rollo).There is no dispute that the sum of P3,000.00 listed as firstinstallment was received by Juan Galicia, Sr. According topetitioners, of the P10,000.00 to be paid within ten days fromexecution of the instrument, only P9,707.00 was tendered to,and received by, them on numerous occasions from May 29,1975, up to November 3, 1979. Concerning private respondent's

assumption of the vendors' obligation to the Philippine VeteranBank, the vendee paid only the sum of P6,926.41 while thedifference the indebtedness came from Celerina Labuguin (p.73, Rollo). Moreover, petitioners asserted that not a singlecentavo of the P27,000.00 representing the remaining balancewas paid to them. Because of the apprehension that the heirs ofJuan Galicia, Sr. are disavowing the contract inked by theirpredecessor, private respondent filed the complaint for specificperformance.In addressing the issue of whether the conditions of theinstrument were performed by herein private respondent asvendee, the Honorable Godofredo Rilloraza, Presiding Judge oBranch 31 of the Regional Trial Court, Third Judicial Regionstationed at Guimba, Nueva Ecija, decided to uphold privaterespondent's theory on the basis of constructive fulfillment und Article 1186 and estoppel through acceptance of piecemealpayments in line with Article 1235 of the Civil Code. Anent the P10,000.00 specified as second installment, the lowecourt counted against the vendors the candid statement ofJosefina Tayag who sat on the witness stand and made theadmission that the check issued as payment thereof wasnonetheless paid on a staggered basis when the check wasdishonored (TSN, September 1, 1983, pp. 3-4; p. 3, Decision; p66, Rollo). Regarding the third condition, the trial court noted thplaintiff below paid more than P6,000.00 to the PhilippineVeterans Bank butCelerina Labuguin, the sister and co-vendorof Juan Galicia, Sr. paid P3,778.77 which circumstance wasconstrued to be a ploy under Article 1186 of the Civil Code tha"prematurely prevented plaintiff from paying the installment fuand "for the purpose of withdrawing the title to the lot". The

acceptance by petitioners of the various payments even beyondthe periods agreed upon, was perceived by the lower court astantamount to faithful performance of the obligation pursuant t Article 1235 of the Civil Code. Furthermore, the trial court notthat private respondent consigned P18,520.00, an amountsufficient to offset the remaining balance, leaving the sum ofP1,315.00 to be credited to private respondent.On September 12, 1984, judgment was rendered:1. Ordering the defendants heirs of Juan Galicia, to executethe Deed of Sale of their undivided ONE HALF (1/2) portion oLot No. 1130, Guimba Cadastre, covered by TCT No. NT-120563, in favor of plaintiff Albrigido Leyva, with an equal

frontage facing the national road upon finality of judgment; thain their default, the Clerk of Court II, is hereby ordered to execthe deed of conveyance in line with the provisions of Section 1Rule 39 of the Rules of Court;2. Ordering the defendants, heirs of Juan Galicia, jointly andseverally to pay attorney's fees of P6,000.00 and the further sumof P3,000.00 for actual and compensatory damages;3. Ordering Celerina Labuguin and the other defendants hereinto surrender to the Court the owner's duplicate of TCT No. NT-


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120563, province of Nueva Ecija, for the use of plaintiff inregistering the portion, subject matter of the instant suit;4. Ordering the withdrawal of the amount of P18,520.00 nowconsigned with the Court, and the amount of P17,204.75 bedelivered to the heirs of Juan Galicia as payment of the balanceof the sale of the lot in question, the defendants herein afterdeducting the amount of attorney's fees and damages awardedto the plaintiff hereof and the delivery to the plaintiff of the furthersum of P1,315.25 excess or over payment and, defendants topay the cost of the suit. (p. 69,Rollo)and following the appeal interposed with respondent court,Justice Dayrit with whom Justices Purisima and Aldecoa, Jr.concurred, modified the fourth paragraph of the decretal portionto read:4. Ordering the withdrawal of the amount of P18,500.00 nowconsigned with the Court, and that the amount of P16,870.52 bedelivered to the heirs of Juan Galicia, Sr. as payment to theunpaid balance of the sale, including the reimbursement of the

amount paid to Philippine Veterans Bank, minus the amount ofattorney's fees and damages awarded in favor of plaintiff. Theexcess of P1,649.48 will be returned to plaintiff. The costsagainst defendants. (p. 51,Rollo) As to how the foregoing directive was arrived at, the appellatecourt declared:With respect to the fourth condition stipulated in the contract, theperiod indicated therein is deemed modified by the parties whenthe heirs of Juan Galicia, Sr. accepted payments withoutobjection up to November 3, 1979. On the basis of receiptspresented by appellee commencing from August 8, 1975 up toNovember 3, 1979, a total amount of P13,908.25 has been paid,

thereby leaving a balance of P13,091.75. Said unpaid balanceplus the amount reimbursable to appellant in the amount ofP3,778.77 will leave an unpaid total of P16,870.52. Sinceappellee consigned in court the sum of P18,500.00, he is entitledto get the excess of P1,629.48. Thus, when the heirs of JuanGalicia, Sr. (obligees) accepted the performance, knowing itsincompleteness or irregularity and without expressing any protestor objection, the obligation is deemed fully complied with (Article1235, Civil Code). (p. 50,Rollo)Petitioners are of the impression that the decision appealedfrom, which agreed with the conclusions of the trial court, isvulnerable to attackvia the recourse before Us on the principal

supposition that the full consideration of the agreement to sellwas not paid by private respondent and, therefore, the contractmust be rescinded.The suggestion of petitioners that the covenant must becancelled in the light of private respondent's so-called breachseems to overlook petitioners' demeanor who, instead ofimmediately filing the case precisely to rescind the instrumentbecause of non-compliance, allowed private respondent to effectnumerous payments posterior to the grace periods provided in

the contract. This apathy of petitioners who even permittedprivate respondent to take the initiative in filing the suit forspecific performance against them, is akin to waiver orabandonment of the right to rescind normally conferred by Art1191 of the Civil Code. As aptly observed by Justice GutierrezJr. in Angeles vs. Calasanz (135 SCRA 323 [1985]; 4Paras,Civil Code of the Philippines Annotated, Twelfth Ed. [1989], p203:. . . We agree with the plaintiffs-appellees that when thedefendants-appellants, instead of availing of their alleged rightrescind, have accepted and received delayed payments ofinstallments, though the plaintiffs-appellees have been in arreabeyond the grace period mentioned in paragraph 6 of thecontract, the defendants-appellants have waived, and are nowestopped from exercising their alleged right of rescission . . .In Development Bank of the Philippines vs. Sarandi(5 CAR (25)811; 817-818; cited in 4 Padilla, Civil Code Annotated, SeventhEd. [1987], pp. 212-213) a similar opinion was expressed to th

effect that:In a perfected contract of sale of land under an agreed scheduleof payments, while the parties may mutually oblige each other compel the specific performance of the monthly amortizationplan, and upon failure of the buyer to make the payment, theseller has the right to ask for a rescission of the contract under Art. 1191 of the Civil Code, this shall be deemed waived byacceptance of posterior payments.Both the trial and appellate courts were, therefore, correct insustaining the claim of private respondent anchored on estoppeor waiver by acceptance of delayed payments under Article 12of the Civil Code in that:

When the obligee accepts the performance, knowing itsincompleteness or irregularity, and without expressing anyprotest or objection, the obligation is deemed fully complied wconsidering that the heirs of Juan Galicia, Sr. accommodatedprivate respondent by accepting the latter's delayed paymentsnot only beyond the grace periods but also during the pendencyof the case for specific performance (p. 27, Memorandum forpetitioners; p. 166,Rollo). Indeed, the right to rescind is notabsolute and will not be granted where there has beensubstantial compliance by partial payments (4Caguioa,Comments and Cases on Civil Law, First Ed. [1968] p. 132). Band large, petitioners' actuation is susceptible of but one

construction that they are now estopped from reneging fromtheir commitment on account of acceptance of benefits arisingfrom overdue accounts of private respondent.Now, as to the issue of whether payments had in fact beenmade, there is no doubt that the second installment was actuallpaid to the heirs of Juan Galicia, Sr. due to Josefina Tayag'sadmissionin judicio that the sum of P10,000.00 was fullyliquidated. It is thus erroneous for petitioners to suppose that"the evidence in the records do not support this conclusion" (p.


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18, Memorandum for Petitioners; p. 157,Rollo). Acontrario,when the court of origin, as well as the appellate court,emphasized the frank representation along this line of JosefinaTayag before the trial court (TSN, September l, 1983, pp. 3-4; p.5, Decision in CA-G.R. CV No. 13339, p. 50,Rollo; p. 3,Decision in Civil Case No. 681-G, p. 66,Rollo), petitioners choseto remain completely mute even at this stage despite theopportunity accorded to them, for clarification. Consequently, theprejudicial aftermath of Josefina Tayag's spontaneous reactionmay no longer be obliterated on the basis of estoppel ( Article1431, Civil Code;Section 4, Rule 129; Section 2(a), Rule 131,Revised Rules on Evidence).Insofar as the third item of the contract is concerned, it may berecalled that respondent court applied Article 1186 of the CivilCode on constructive fulfillment which petitioners claim shouldnot have been appreciated because they are the obligees whilethe proviso in point speaks of the obligor. But, petitioners mustconcede that in a reciprocal obligation like a contract of

purchase, (Ang vs. Court of Appeals, 170 SCRA 286 [1989];4 Paras, supra , at p. 201), both parties are mutually obligors andalso obligees (4Padilla, supra, at p. 197), andany of thecontracting parties may, upon non-fulfillment by the other privy ofhis part of the prestation, rescind the contract or seek fulfillment( Article 1191, Civil Code). In short, it is puerile for petitioners tosay that they are the only obligees under the contract since theyare also bound as obligors to respect the stipulation in permittingprivate respondent to assume the loan with the PhilippineVeterans Bank which petitioners impeded when they paid thebalance of said loan. As vendors, they are supposed to executethe final deed of sale upon full payment of the balance as

determined hereafter.Lastly, petitioners argue that there was no valid tender ofpayment nor consignation of the sum of P18,520.00 which theyacknowledge to have been deposited in court on January 22,1981 five years after the amount of P27,000.00 had to be paid(p. 23, Memorandum for Petitioners; p. 162,Rollo). Again thissuggestion ignores the fact that consignation alone produced theeffect of payment in the case at bar because it was establishedbelow that two or more heirs of Juan Galicia, Sr. claimed thesame right to collect ( Article 1256 , (4), Civil Code; pp. 4-5,Decision in Civil Case No. 681-G; pp. 67-68,Rollo). Moreover,petitioners did not bother to refute the evidence on hand that,

aside from the P18,520.00 (not P18,500.00 as computed byrespondent court) which was consigned, private respondent alsopaid the sum of P13,908.25 (Exhibits "F" to "CC"; p. 50,Rollo).These two figures representing private respondent's payment ofthe fourth condition amount to P32,428.25, less the P3,778.77paid by petitioners to the bank, will lead us to the sum ofP28,649.48 or a refund of P1,649.48 to private respondent asoverpayment of the P27,000.00 balance.

WHEREFORE, the petition is hereby DISMISSED and thedecision appealed from is hereby AFFIRMED with the slightmodification of Paragraph 4 of the dispositive thereof which isthus amended to read:4. ordering the withdrawal of the sum of P18,520.00 consignedwith the Regional Trial Court, and that the amount of P16,870.be delivered by private respondent with legal rate of interest unfully paid to the heirs of Juan Galicia, Sr. as balance of the saleincluding reimbursement of the sum paid to the PhilippineVeterans Bank, minus the attorney's fees and damages awardedin favor of private respondent. The excess of P1,649.48 shall breturned to private respondent also with legal interest until fullpaid by petitioners. With costs against petitioners.SO ORDERED.

1191 Recission/Resolution .SECOND DIVISION

[G.R. No. 139523. May 26, 2005]SPS. FELIPE AND LETICIA CANNU, petitioners, vs . SPS.GIL AND FERNANDINA GALANG AND NATIONAL HOMMORTGAGE FINANCE CORPORATION,respondents .D E C I S I O NCHICO-NAZARIO,J .:Before Us is a Petition for Review onCertiorariwhich seeks toset aside the decision[1] of the Court of Appeals dated 30September 1998 which affirmed with modification the decisionBranch 135 of the Regional Trial Court (RTC) of Makati City,dismissing the complaint for Specific Performance and Damagfiled by petitioners, and its Resolution[2] dated 22 July 1999

denying petitioners motion for reconsideration. A complaint[3] for Specific Performance and Damages was filedby petitioners-spouses Felipe and Leticia Cannu againstrespondents-spouses Gil and Fernandina Galang and theNational Home Mortgage Finance Corporation (NHMFC) befoBranch 135 of the RTC of Makati, on 24 June 1993. The casewas docketed as Civil Case No. 93-2069.The facts that gave rise to the aforesaid complaint are as followRespondents-spouses Gil and Fernandina Galang obtained aloan from Fortune Savings & Loan Association for P173,800.0to purchase a house and lot located at Pulang Lupa, Las Pias,with an area of 150 square meters covered by Transfer

Certificate of Title (TCT) No. T-8505 in the names ofrespondents-spouses. To secure payment, a real estatemortgage was constituted on the said house and lot in favor ofFortune Savings & Loan Association. In early 1990, NHMFCpurchased the mortgage loan of respondents-spouses fromFortune Savings & Loan Association forP173,800.00.Respondent Fernandina Galang authorized[4] her attorney-in-fact, Adelina R. Timbang, to sell the subject house and lot.
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Petitioner Leticia Cannu agreed to buy the propertyfor P120,000.00 and to assume the balance of the mortgageobligations with the NHMFC and with CERF Realty[5] (theDeveloper of the property).Of the P120,000.00, the following payments were made bypetitioners:Date Amount PaidJuly 19, 1990 P40,000.00[6] March 13, 1991 15,000.00[7] April 6, 1991 15,000.00[8] November 28, 1991 5,000.00[9] Total P75,000.00Thus, leaving a balance of P45,000.00. A Deed of Sale with Assumption of Mortgage Obligation[10] dated20 August 1990 was made and entered into by and betweenspouses Fernandina and Gil Galang (vendors) and spousesLeticia and Felipe Cannu (vendees) over the house and lot in

question which contains,inter alia, the following:NOW, THEREFORE, for and in consideration of the sum of TWOHUNDRED FIFTY THOUSAND PESOS (P250,000.00),Philippine Currency, receipt of which is hereby acknowledged bythe Vendors and the assumption of the mortgage obligation, theVendors hereby sell, cede and transfer unto the Vendees, theirheirs, assigns and successor in interest the above-describedproperty together with the existing improvement thereon.It is a special condition of this contract that the Vendees shallassume and continue with the payment of the amortization withthe National Home Mortgage Finance Corporation Inc. in theoutstanding balance of P_______________, as of __________and shall comply with and abide by the terms and conditions ofthe mortgage document dated Feb. 27, 1989 and identified asDoc. No. 82, Page 18, Book VII, S. of 1989 of Notary Public forQuezon City Marites Sto. Tomas Alonzo, as if the Vendees arethe original signatories.Petitioners immediately took possession and occupied the houseand lot.Petitioners made the following payments to the NHMFC:Date Amount Receipt No.July 9, 1990 P 14,312.47 D-503986[11] March 12, 1991 8,000.00 D-729478[12] February 4, 1992 10,000.00 D-999127[13]

March 31, 1993 6,000.00 E-563749[14]

April 19, 1993 10,000.00 E-582432[15] April 27, 1993 7,000.00 E-618326[16]

P 55,312.47Petitioners paid the equity or second mortgage to CERFRealty.[17] Despite requests from Adelina R. Timbang and FernandinaGalang to pay the balance of P45,000.00 or in the alternative tovacate the property in question, petitioners refused to do so.

In a letter [18] dated 29 March 1993, petitioner Leticia Cannuinformed Mr. Fermin T. Arzaga, Vice President, FundManagement Group of the NHMFC, that the ownership rightsover the land covered by TCT No. T-8505 in the names ofrespondents-spouses had been ceded and transferred to herand her husband per Deed of Sale with Assumption of Mortgagand that they were obligated to assume the mortgage and paythe remaining unpaid loan balance. Petitioners formalassumption of mortgage was not approved by the NHMFC.[19] Because the Cannus failed to fully comply with their obligationrespondent Fernandina Galang, on 21 May 1993,paid P233,957.64 as full payment of her remaining mortgageloan with NHMFC.[20] Petitioners opposed the release of TCT No. T-8505 in favor ofrespondents-spouses insisting that the subject property hadalready been sold to them. Consequently, the NHMFC held inabeyance the release of said TCT.Thereupon, a Complaint for Specific Performance and Damage

was filed asking, among other things, that petitioners (plaintifftherein) be declared the owners of the property involved subjecto reimbursements of the amount made by respondents-spouse(defendants therein) in preterminating the mortgage loan withNHMFC.Respondent NHMFC filed its Answer .[21] It claimed thatpetitioners have no cause of action against it because they havenot submitted the formal requirements to be consideredassignees and successors-in-interest of the property underlitigation.In their Answer ,[22] respondents-spouses alleged that because ofpetitioners-spouses failure to fully pay the consideration and to

update the monthly amortizations with the NHMFC, they paid full the existing obligations with NHMFC as an initial step in threscission and annulment of the Deed of Sale with Assumptioof Mortgage. In their counterclaim, they maintain that the actspetitioners in not fully complying with their obligations give rirescission of the Deed of Sale with Assumption of Mortgage wthe corresponding damages. After trial, the lower court rendered its decision ratiocinating:On the basis of the evidence on record, testimonial anddocumentary, this Court is of the view that plaintiffs have nocause of action either against the spouses Galang or theNHMFC. Plaintiffs have admitted on record they failed to pay

amount of P45,000.00 the balance due to the Galangs inconsideration of the Deed of Sale With Assumption of MortgagObligation (Exhs. C and 3). Consequently, this is a breach ofcontract and evidently a failure to comply with obligation arisifrom contracts. . . In this case, NHMFC has not been dulyinformed due to lack of formal requirements to acknowledgeplaintiffs as legal assignees, or legitimate tranferees and,therefore, successors-in-interest to the property, plaintiffs shou
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have no legal personality to claim any right to the sameproperty.[23] The decretal portion of the decision reads:Premises considered, the foregoing complaint has not beenproven even by preponderance of evidence, and, as such,plaintiffs have no cause of action against the defendantsherein. The above-entitled case is ordered dismissed for lack ofmerit.Judgment is hereby rendered by way of counterclaim, in favor ofdefendants and against plaintiffs, to wit:1. Ordering the Deed of Sale With Assumption of MortgageObligation (Exhs. C and 3) rescinded and hereby declared thesame as nullified without prejudice for defendants-spousesGalang to return the partial payments made by plaintiffs; and theplaintiffs are ordered, on the other hand, to return the physicaland legal possession of the subject property to spouses Galangby way of mutual restitution;2. To pay defendants spouses Galang and NHMFC, each the

amount of P10,000.00 as litigation expenses, jointly andseverally;3. To pay attorneys fees to defendants in the amount ofP20,000.00, jointly and severally; and4. The costs of suit.5. No moral and exemplary damages awarded.[24] A Motion for Reconsideration[25] was filed, but same wasdenied. Petitioners appealed the decision of the RTC to theCourt of Appeals. On 30 September 1998, the Court of Appealsdisposed of the appeal as follows:Obligations arising from contract have the force of law betweenthe contracting parties and should be complied in good

faith. The terms of a written contract are binding on the partiesthereto.Plaintiffs-appellants therefore are under obligation to paydefendants-appellees spouses Galang the sum of P250,000.00,and to assume the mortgage.Records show that upon the execution of the Contract of Sale oron July 19, 1990 plaintiffs-appellants paid defendants-appelleesspouses Galang the amount of only P40,000.00.The next payment was made by plaintiffs-appellants on March13, 1991 or eight (8) months after the execution of thecontract. Plaintiffs-appellants paid the amount of P5,000.00.The next payment was made on April 6, 1991 for P15,000.00

and on November 28, 1991, for another P15,000.00.From 1991 until the present, no other payments were made byplaintiffs-appellants to defendants-appellees spouses Galang.Out of the P250,000.00 purchase price which was supposed tobe paid on the day of the execution of contract in July, 1990plaintiffs-appellants have paid, in thespan of eight (8) years, from1990 to present, the amount of only P75,000.00. Plaintiffs-appellants should have paid the P250,000.00 at the time of theexecution of contract in 1990. Eight (8) years have already

lapsed and plaintiffs-appellants have not yet complied with theobligation.We consider this breach to be substantial.The tender made by plaintiffs-appellants after the filing of thiscase, of the Managerial Check in the amount of P278,957.00dated January 24, 1994 cannot be considered as an effectivemode of payment.Performance or payment may be effected not by tender ofpayment alone but by both tender and consignation. It isconsignation which is essential in order to extinguish plaintiffsappellants obligation to pay the balance of the purchase price.In addition, plaintiffs-appellants failed to comply with theirobligation to pay the monthly amortizations due on the mortgaIn the span of three (3) years from 1990 to 1993, plaintiffs-appellants made only six payments. The payments made byplaintiffs-appellants are not even sufficient to answer for thearrearages, interests and penalty charges.On account of these circumstances, the rescission of the

Contract of Sale is warranted and justified.. . .WHEREFORE, foregoing considered, the appealed decision ishereby AFFIRMED with modification. Defendants-appelleesspouses Galang are hereby ordered to return the partialpayments made by plaintiff-appellants in the amount ofP135,000.00.No pronouncement as to cost.[26] The motion for reconsideration[27] filed by petitioners was deniedby the Court of Appeals in a Resolution[28] dated 22 July 1999.Hence, this Petition forCertiorari .Petitioners raise the following assignment of errors:

1. THE HONORABLE COURT OF APPEALS ERRED WIT HELD THAT PETITIONERS BREACH OF THE OBLIGAWAS SUBSTANTIAL.2. THE HONORABLE COURT OF APPEALS ERRED WIN EFFECT IT HELD THAT THERE WAS NO SUBSTANTIACOMPLIANCE WITH THE OBLIGATION TO PAY THEMONTHLY AMORTIZATION WITH NHMFC.3. THE HONORABLE COURT OF APPEALS ERRED WIT FAILED TO CONSIDER THE OTHER FACTS ANDCIRCUMSTANCES THAT MILITATE AGAINST RESCISSIO4. THE HONORABLE COURT OF APPEALS ERRED WIT FAILED TO CONSIDER THAT THE ACTION FOR

RESCISSION IS SUBSIDIARY.[29]

Before discussing the errors allegedly committed by the Court Appeals, it must be stateda priori that the latter made amisappreciation of evidence regarding the consideration of theproperty in litigation when it relied solely on the Deed of Salewith Assumption of Mortgage executed by the respondents-spouses Galang and petitioners-spouses Cannu. As above-quoted, the consideration for the house and lot statedin the Deed of Sale with Assumption of Mortgage
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is P250,000.00, plus the assumption of the balance of themortgage loan with NHMFC. However, after going over therecord of the case, more particularly the Answer of respondents-spouses, the evidence shows the consideration thereforis P120,000.00, plus the payment of the outstanding loanmortgage with NHMFC, and of the equity or second mortgagewith CERF Realty (Developer of the property).[30] Nowhere in the complaint and answer of the petitioners-spousesCannu and respondents-spouses Galang shows that theconsideration is P250,000.00. In fact, what is clear is that ofthe P120,000.00 to be paid to the latter, only P75,000.00 waspaid to Adelina Timbang, the spouses Galangs attorney-in-fact. This debunks the provision in the Deed of Sale with Assumption of Mortgage that the amount of P250,000.00 hasbeen received by petitioners.Inasmuch as the Deed of Sale with Assumption of Mortgagefailed to express the true intent and agreement of the partiesregarding its consideration, the same should not be fully relied

upon. The foregoing facts lead us to hold that the case on handfalls within one of the recognized exceptions to the paroleevidence rule. Under the Rules of Court, a party may presentevidence to modify, explain or add to the terms of the writtenagreement if he puts in issue in his pleading, among others, itsfailure to express the true intent and agreement of the partiesthereto.[31] In the case at bar, when respondents-spouses enumerated intheir Answer the terms and conditions for the sale of the propertyunder litigation, which is different from that stated in the Deed ofSale with Assumption with Mortgage, they already put in issuethe matter of consideration. Since there is a difference as to

what the true consideration is, this Court has admittedevidence aliunde to explain such inconsistency. Thus, the Courthas looked into the pleadings and testimonies of the parties tothresh out the discrepancy and to clarify the intent of the parties. As regards the computation[32] of petitioners as to the breakdownof the P250,000.00 consideration, we find the same to be self-serving and unsupported by evidence.On the first assigned error, petitioners argue that the Court erredwhen it ruled that their breach of the obligation was substantial.Settled is the rule that rescission or, more accurately,resolution,[33] of a party to an obligation under Article 1191[34] ispredicated on a breach of faith by the other party that violates

the reciprocity between them.[35]

Article 1191 reads: Art. 1191. The power to rescind obligations is implied inreciprocal ones, in case one of the obligors should not complywith what is incumbent upon him.The injured party may choose between the fulfillment and therescission of the obligation, with the payment of damages ineither case. He may also seek rescission, even after he haschosen fulfillment, if the latter should become impossible.

The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period.Rescission will not be permitted for a slight or casual breach ofthe contract. Rescission may be had only for such breaches thaare substantial and fundamental as to defeat the object of theparties in making the agreement.[36] The question of whether abreach of contract is substantial depends upon the attendingcircumstances[37] and not merely on the percentage of theamount not paid.In the case at bar, we find petitioners failure to pay theremaining balance of P45,000.00 to be substantial. Evenassuming arguendo that only said amount was left out of thesupposed consideration of P250,000.00, or eighteen (18%)percent thereof, this percentage is still substantial. Takentogether with the fact that the last payment made was on 28November 1991, eighteen months before the respondentFernandina Galang paid the outstanding balance of themortgage loan with NHMFC, the intention of petitioners to

renege on their obligation is utterly clear.CitingMassive Construction, Inc. v. Intermediate AppellateCourt ,[38] petitioners ask that they be granted additional time tocomplete their obligation. Under the facts of the case, to givepetitioners additional time to comply with their obligation willputting premium on their blatant non-compliance of theirobligation. They had all the time to do what was required ofthem (i.e., pay the P45,000.00 balance and to properly assumethe mortgage loan with the NHMFC), but still they failed tocomply. Despite demands for them to pay the balance, nopayments were made.[39] The fact that petitioners tendered a Managers Check to

respondents-spouses Galang in the amount of P278,957.00seven months after the filing of this case is of nomoment. Tender of payment does not by itself produce legalpayment, unless it is completed by consignation.[40] Their failureto fulfill their obligation gave the respondents-spouses Galangthe right to rescission. Anent the second assigned error, we find that petitioners werenot religious in paying the amortization with the NHMFC. Asadmitted by them, in the span of three years from 1990 to 1993their payments covered only thirty months.[41] This, indeed,constitutes another breach or violation of the Deed of Sale with Assumption of Mortgage. On top of this, there was no formal

assumption of the mortgage obligation with NHMFC because othe lack of approval by the NHMFC[42] on account of petitionersnon-submission of requirements in order to be considered asassignees/successors-in-interest over the property covered bythe mortgage obligation.[43] On the third assigned error, petitioners claim there was no cleaevidence to show that respondents-spouses Galang demandedfrom them a strict and/or faithful compliance of the Deed of Sawith Assumption of Mortgage.
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We do not agree.There is sufficient evidence showing that demands were madefrom petitioners to comply with their obligation. Adelina R.Timbang, attorney-in-fact of respondents-spouses, perinstruction of respondent Fernandina Galang, made constantfollow-ups after the last payment made on 28 November 1991,but petitioners did not pay.[44] Respondent Fernandina Galangstated in her Answer [45] that upon her arrival from America inOctober 1992, she demanded from petitioners the completecompliance of their obligation by paying the full amount of theconsideration (P120,000.00) or in the alternative to vacate theproperty in question, but still, petitioners refused to fulfill theirobligations under the Deed of Sale with Assumption ofMortgage. Sometime in March 1993, due to the fact that fullpayment has not been paid and that the monthly amortizationswith the NHMFC have not been fully updated, she made herintentions clear with petitioner Leticia Cannu that she will rescindor annul the Deed of Sale with Assumption of Mortgage.

We likewise rule that there was no waiver on the part ofpetitioners to demand the rescission of the Deed of Sale with Assumption of Mortgage. The fact that respondents-spousesaccepted, through their attorney-in-fact, payments in installmentsdoes not constitute waiver on their part to exercise their right torescind the Deed of Sale with Assumption of Mortgage. AdelinaTimbang merely accepted the installment payments as anaccommodation to petitioners since they kept on promising theywould pay. However, after the lapse of considerable time (18months from last payment) and the purchase price was not yetfully paid, respondents-spouses exercised their right ofrescission when they paid the outstanding balance of the

mortgage loan with NHMFC. It was only after petitionersstopped paying that respondents-spouses moved to exercisetheir right of rescission.Petitioners cite the case of Angeles v. Calasanz [46] to supporttheir claim that respondents-spouses waived their right torescind. We cannot apply this case since it is not on all fourswith the case before us. First, in Angeles, the breach was onlyslight and casual which is not true in the case beforeus. Second, in Angeles, the buyer had already paid more thanthe principal obligation, while in the instant case, the buyers(petitioners) did not pay P45,000.00 of the P120,000.00 theywere obligated to pay.

We find petitioners statement that there is no evidence ofprejudice or damage to justify rescission in favor of respondents-spouses to be unfounded. The damage suffered byrespondents-spouses is the effect of petitioners failure to fullycomply with their obligation, that is, their failure to pay theremaining P45,000.00 and to update the amortizations on themortgage loan with the NHMFC. Petitioners have in theirpossession the property under litigation. Having parted with theirhouse and lot, respondents-spouses should be fully

compensated for it, not only monetarily, but also as to the termand conditions agreed upon by the parties. This did not happein the case before us.CitingSeva v. Berwin & Co., Inc.,[47] petitioners argue that norescission should be decreed because there is no evidence onrecord that respondent Fernandina Galang is ready, willing andable to comply with her own obligation to restore to them thetotal payments they made. They added that no allegation to theffect is contained in respondents-spouses Answer. We find this argument to be misleading.First, the facts obtaining inSeva case do not fall squarely withthe case on hand. In the former, the failure of one party toperform his obligation was the fault of the other party, while inthe case on hand, failure on the part of petitioners to performtheir obligation was due to their own fault.Second, what is stated in the book of Justice Edgardo L. Paras [i]t (referring to the right to rescind or resolve) can be demanonly if the plaintiff is ready, willing and able to comply with hi

own obligation, and the other is not. In other words, if one parthas complied or fulfilled his obligation, and the other has not,then the former can exercise his right to rescind. In this case,respondents-spouses complied with their obligation when theygave the possession of the property in question topetitioners. Thus, they have the right to ask for the rescission othe Deed of Sale with Assumption of Mortgage.On the fourth assigned error, petitioners, relying on Article 138of the Civil Code, maintain that the Court of Appeals erred whit failed to consider that the action for rescission is subsidiary.Their reliance on Article 1383 is misplaced.The subsidiary character of the action for rescission applies to

contracts enumerated in Articles 1381[48] of the Civil Code. Thecontract involved in the case before us is not one of thosementioned therein. The provision that applies in the case at bais Article 1191.In the concurring opinion of Justice Jose B.L. Reyes inUniversalFood Corp. v. Court of Appeals,[49] rescission under Article 1191was distinguished from rescission under Article 1381. JusticeJ.B.L. Reyes said:. . . The rescission on account of breach of stipulations is notpredicated on injury to economic interests of the party plaintiffbut on the breach of faith by the defendant, that violates thereciprocity between the parties. It is not a subsidiary action, an

Article 1191 may be scanned without disclosing anywhere thatthe action for rescission thereunder is subordinated to anythingother than the culpable breach of his obligations by thedefendant. This rescission is a principal action retaliatory incharacter, it being unjust that a party be held bound to fulfill hipromises when the other violates his. As expressed in the oldLatin aphorism:Non servanti fidem, non est fidesservanda. Hence, the reparation of damages for the breach ispurely secondary.
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On the contrary, in the rescission by reason oflesion oreconomic prejudice, the cause of action is subordinated to theexistence of that prejudice, because it is theraison d tre as wellas the measure of the right to rescind. Hence, where thedefendant makes good the damages caused, the action cannotbe maintained or continued, as expressly provided in Articles1383 and 1384. But the operation of these two articles is limitedto the cases of rescission forlesion enumerated in Article 1381of the Civil Code of the Philippines, and does not apply to casesunder Article 1191.From the foregoing, it is clear that rescission (resolution intheOld Civil Code) under Article 1191 is a principal action, whilerescission under Article 1383 is a subsidiary action. The formeris based on breach by the other party that violates the reciprocitybetween the parties, while the latter is not.In the case at bar, the reciprocity between the parties wasviolated when petitioners failed to fully pay the balance ofP45,000.00 to respondents-spouses and their failure to update

their amortizations with the NHMFC.Petitioners maintain that inasmuch as respondents-spousesGalang were not granted the right to unilaterally rescind the saleunder the Deed of Sale with Assumption of Mortgage, theyshould have first asked the court for the rescission thereof beforethey fully paid the outstanding balance of the mortgage loan withthe NHMFC. They claim that such payment is a unilateral act ofrescission which violates existing jurisprudence.In Tan v. Court of Appeals,[50] this court said:. . . [T]he power to rescind obligations is implied in reciprocalones in case one of the obligors should not comply with what isincumbent upon him is clear from a reading of the Civil Code

provisions. However, it is equally settled that, in the absence ofa stipulation to the contrary, this power must be invoked judicially; it cannot be exercised solely on a partys own judgment that the other has committed a breach of theobligation. Where there is nothing in the contract empoweringthe petitioner to rescind it without resort to the courts, thepetitioners action in unilaterally terminating the contract in thiscase is unjustified.It is evident that the contract under consideration does notcontain a provision authorizing its extrajudicial rescission in caseone of the parties fails to comply with what is incumbent uponhim. This being the case, respondents-spouses should have

asked for judicial intervention to obtain a judicial declaration ofrescission. Be that as it may, and considering that respondents-spouses Answer (with affirmative defenses) with Counterclaimseeks for the rescission of the Deed of Sale with Assumption ofMortgage, it behooves the court to settle the matter once and forall than to have the case re-litigated again on an issue alreadyheard on the merits and which this court has already takencognizance of. Having found that petitioners seriously breached

the contract, we, therefore, declare the same is rescinded infavor of respondents-spouses. As a consequence of the rescission or, more accurately,resolution of the Deed of Sale with Assumption of Mortgage, ithe duty of the court to require the parties to surrender whatevethey may have received from the other. The parties should berestored to their original situation.[51] The record shows petitioners paid respondents-spouses theamount of P75,000.00 out of the P120,000.00 agreedupon. They also made payments to NHMFC amounting toP55,312.47. As to the petitioners alleged payment to CERFRealty of P46,616.70, except for petitioner Leticia Cannus barallegation, we find the same not to be supported by competentevidence. As a general rule, one who pleads payment has theburden of proving it.[52] However, since it has been admitted inrespondents-spouses Answer that petitioners shall assume thesecond mortgage with CERF Realty in the amount ofP35,000.00, and that Adelina Timbang, respondents-spouses

very own witness, testified[53] that same has been paid, it is butproper to return this amount to petitioners. The three amountstotal P165,312.47 -- the sum to be returned to petitioners.WHEREFORE, premises considered, the decision of the Court o Appeals is hereby AFFIRMED with MODIFICATION. SpousGil and Fernandina Galang are hereby ordered to return thepartial payments made by petitioners in the amount ofP165,312.47. With costs.SO ORDERED.Puno, Acting C.J., (Chairman), Austria-Martinez,and Callejo, Sr.JJ., concur .Tinga, J., out of the country.

Republic of the PhilippinesSUPREME COURT ManilaFIRST DIVISION G.R. No. 147695 September 13, 2007 MANUEL C. PAGTALUNAN, petitioner,vs.RUFINA DELA CRUZ VDA. DE MANZANO, respondent.D E C I S I O N AZCUNA,J.: This is a petition for review oncertiorariunder Rule 45 of the

Rules of Court of the Court of Appeals (CA) Decisionpromulgated on October 30, 2000 and its Resolution datedMarch 23, 2001 denying petitioners motion for reconsideratioThe Decision of the CA affirmed the Decision of the RegionalTrial Court (RTC) of Malolos, Bulacan, dated June 25, 1999dismissing the case of unlawful detainer for lack of merit.The facts are as follows:On July 19, 1974, Patricio Pagtalunan (Patricio), petitionersstepfather and predecessor-in-interest, entered into a Contract t
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Sell with respondent, wife of Patricios former mechanic, TeodoroManzano, whereby the former agreed to sell, and the latter tobuy, a house and lot which formed half of a parcel of land,covered by Transfer Certificate of Title (TCT) No. T-10029 (nowTCT No. RT59929 [T-254773]), with an area of 236 squaremeters. The consideration of P17,800 was agreed to be paid inthe following manner: P1,500 as downpayment upon executionof the Contract to Sell, and the balance to be paid in equalmonthly installments of P150 on or before the last day of eachmonth until fully paid.It was also stipulated in the contract that respondent couldimmediately occupy the house and lot; that in case of default inthe payment of any of the installments for 90 days after its duedate, the contract would be automatically rescinded without needof judicial declaration, and that all payments made and allimprovements done on the premises by respondent would beconsidered as rentals for the use and occupation of the propertyor payment for damages suffered, and respondent was obliged

to peacefully vacate the premises and deliver the possessionthereof to the vendor.Petitioner claimed that respondent paid only P12,950. Sheallegedly stopped paying after December 1979 without any justification or explanation. Moreover, in a "Kasunduan"1 datedNovember 18, 1979, respondent borrowedP3,000 from Patriciopayable in one year either in one lump sum payment or byinstallments, failing which the balance of the loan would beadded to the principal subject of the monthly amortizations onthe land.Lastly, petitioner asserted that when respondent ceased payingher installments, her status of buyer was automatically

transformed to that of a lessee. Therefore, she continued topossess the property by mere tolerance of Patricio and,subsequently, of petitioner.On the other hand, respondent alleged that she paid her monthlyinstallments religiously, until sometime in 1980 when Patriciochanged his mind and offered to refund all her paymentsprovided she would surrender the house. She refused. Patriciothen started harassing her and began demolishing the houseportion by portion. Respondent admitted that she failed to paysome installments after December 1979, but that she resumedpaying in 1980 until her balance dwindled to P5,650. Sheclaimed that despite several months of delay in payment, Patricio

never sued for ejectment and even accepted her late payments.Respondent also averred that on September 14, 1981, she andPatricio signed an agreement (Exh. 2) whereby he consented tothe suspension of respondents monthly payments untilDecember 1981. However, even before the lapse of said period,Patricio resumed demolishing respondents house, promptingher to lodge a complaint with theBarangay Captain who advisedher that she could continue suspending payment even beyond

December 31, 1981 until Patricio returned all the materials hetook from her house. This Patricio failed to do until his death.Respondent did not deny that she still owed Patricio P5,650, buclaimed that she did not resume paying her monthly installmenbecause of the unlawful acts committed by Patricio, as well asthe filing of the ejectment case against her. She denied havingany knowledge of theKasunduanof November 18, 1979.Patricio and his wife died on September 17, 1992 and onOctober 17, 1994, respectively. Petitioner became their solesuccessor-in-interest pursuant to a waiver by the other heirs. OMarch 5, 1997, respondent received a letter from petitionerscounsel dated February 24, 1997 demanding that she vacate thepremises within five days on the ground that her possession habecome unlawful. Respondent ignored the demand. ThePunongBarangay failed to settle the dispute amicably.On April 8, 1997, petitioner filed a Complaint for unlawfuldetainer against respondent with the Municipal Trial Court (MTof Guiguinto, Bulacan praying that, after hearing, judgment be

rendered ordering respondent to immediately vacate the subjecproperty and surrender it to petitioner; forfeiting the amountof P12,950 in favor of petitioner as rentals; ordering respondento pay petitioner the amount of P3,000 under theKasunduan andthe amount of P500 per month from January 1980 until shevacates the property, and to pay petitioner attorneys fees andthe costs.On December 22, 1998, the MTC rendered a decision in favor petitioner. It stated that although the Contract to Sell provides fa rescission of the agreement upon failure of the vendee to payany installment, what the contract actually allows is properlytermed a resolution under Art. 1191 of the Civil Code.

The MTC held that respondents failureto pay not a fewinstallments caused the resolution or termination of the Contrato Sell. The last payment made by respondent was on January 91980 (Exh. 71). Thereafter, respondents right of possession ipsofacto ceased to be a legal right, and became possession bymere tolerance of Patricio and his successors-in-interest. Saidtolerance ceased upon demand on respondent to vacate theproperty.The dispositive portion of the MTC Decision reads:Wherefore, all the foregoing considered, judgment is herebyrendered, ordering the defendant:a. to vacate the property covered by Transfer Certificate of Titl

No. T-10029 of the Register of Deeds of Bulacan (now TCT NRT-59929 of the Register of Deeds of Bulacan), and to surrendpossession thereof to the plaintiff;b. to pay the plaintiff the amount of P113,500 representingrentals from January 1980 to the present;c. to pay the plaintiff such amount of rentals, at P500/month, thmay become due after the date of judgment, until she finallyvacates the subject property;
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d. to pay to the plaintiff the amount ofP25,000 as attorneysfees.SO ORDERED.2 On appeal, the RTC of Malolos, Bulacan, in a Decision datedJune 25, 1999, reversed the decision of the MTC and dismissedthe case for lack of merit. According to the RTC, the agreementcould not be automatically rescinded since there was delivery tothe buyer. A judicial determination of rescission must be securedby petitioner as a condition precedent to convert thepossession de facto of respondent from lawful to unlawful.The dispositive portion of the RTC Decision states:WHEREFORE, judgment is hereby rendered reversing thedecision of the Municipal Trial Court of Guiguinto, Bulacan andthe ejectment case instead be dismissed for lack of merit.3 The motion for reconsideration and motion for execution filed bypetitioner were denied by the RTC for lack of merit in an Orderdated August 10, 1999.Thereafter, petitioner filed a petition for review with the CA.

In a Decision promulgated on October 30, 2000, the CA deniedthe petition and affirmed the Decision of the RTC. Thedispositive portion of the Decision reads:WHEREFORE, the petition for review on certiorari is Denied.The assailed Decision of the Regional Trial Court of Malolos,Bulacan dated 25 June 1999 and its Order dated 10 August1999 are hereby AFFIRMED.SO ORDERED. 4 The CA found that the parties, as well as the MTC and RTCfailed to advert to and to apply Republic Act (R.A.) No. 6552,more commonly referred to as the Maceda Law, which is aspecial law enacted in 1972 to protect buyers of real estate on

installment payments against onerous and oppressiveconditions.The CA held that the Contract to Sell was not validly cancelled orrescinded under Sec. 3 (b) of R.A. No. 6552, and recognizedrespondents right to continue occupying unmolested theproperty subject of the contract to sell.The CA denied petitioners motion for reconsideration in aResolution dated March 23, 2001.Hence, this petition for review oncertiorari .Petitioner contends that: A. Respondent Dela Cruz must bear the consequences of herdeliberate withholding of, and refusal to pay, the monthly

payment. The Court of Appeals erred in allowing Dela Cruz whoacted in bad faith from benefiting under the Maceda Law.B. The Court of Appeals erred in resolving the issue on theapplicability of the Maceda Law, which issue was not raised inthe proceedingsa quo.C. Assumingarguendo that the RTC was correct in ruling thatthe MTC has no jurisdiction over a rescission case, the Court of Appeals erred in not remanding the case to the RTC for trial.5

Petitioner submits that the Maceda Law supports and recognizethe right of vendors of real estate to cancel the sale outside ofcourt, without need for a judicial declaration of rescission,citingLuzon Brokerage Co., Inc., v. Maritime Building Co., Inc.6 Petitioner contends that respondent also had more than thegrace periods provided under the Maceda Law within which topay. Under Sec. 37 of the said law, a buyer who has paid at leastwo years of installments has a grace period of one month forevery year of installment paid. Based on the amount of P12,95which respondent had already paid, she is entitled to a graceperiod of six months within which to pay her unpaid installmenafter December, 1979. Respondent was given more than sixmonths from January 1980 within which to settle her unpaidinstallments, but she failed to do so. Petitioners demand tovacate was sent to respondent in February 1997.There is nothing in the Maceda Law, petitioner asserts, whichgives the buyer a right to pay arrearages after the grace periodshave lapsed, in the event of an invalid demand for rescission.

The Maceda Law only provides that actual cancellation shall taplace after 30 days from receipt of the notice of cancellation ordemand for rescission and upon full payment of the cashsurrender value to the buyer.Petitioner contends that his demand letter dated February 24,1997 should be considered the notice of cancellation since thedemand letter informed respondent that she had "long ceased tohave any right to possess the premises in question due to [her]failure to pay without justifiable cause." In support of hiscontention, he cited Layug v. Intermediate AppellateCour t 8 which held that "the additional formality of a demand on[the sellers] part for rescission by notarial act would appear, in

the premises, to be merely circuitous and consequentlysuperfluous." He stated that inLayug , the seller already made awritten demand upon the buyer.In addition, petitioner asserts that whatever cash surrender valurespondent is entitled to have been applied and must be appliedto rentals for her use of the house and lot after December, 1979or after she stopped payment of her installments.Petitioner argues that assuming Patricio accepted respondentsdelayed installments in 1981, such act cannot prevent thecancellation of the Contract to Sell. Installments after 1981 westill unpaid and the applicable grace periods under the MacedaLaw on the unpaid installments have long lapsed. Respondent

cannot be allowed to hide behind the Maceda Law. She actedwith bad faith and must bear the consequences of her deliberatwithholding of and refusal to make the monthly payments.Petitioner also contends that the applicability of the Maceda Lawas never raised in the proceedings below; hence, it should nohave been applied by the CA in resolving the case.The Court is not persuaded.
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The CA correctly ruled that R.A No. 6552, which governs salesof real estate on installment, is applicable in the resolution of thiscase.This case originated as an action for unlawful detainer.Respondent is alleged to be illegally withholding possession ofthe subject property after the termination of the Contract to Sellbetween Patricio and respondent. It is, therefore, incumbentupon petitioner to prove that the Contract to Sell had beencancelled 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 orfinancing of real estate on installment payments, includingresidential condominium apartments but excluding industrial lots,commercial buildings and sales to tenants under Republic ActNumbered Thirty-eight hundred forty-four as amended byRepublic Act Numbered Sixty-three hundred eighty-nine, wherethe buyer has paid at least two years of installments, the buyer isentitled to the following rights in case he defaults in the payment

of succeeding installments:(a) To pay, without additional interest, the unpaid installmentsdue within the total grace period earned by him, which is herebyfixed at the rate of one month grace period for every one year ofinstallment payments made: Provided, That this right shall beexercised by the buyer only once in every five years of the life ofthe contract and its extensions, if any.(b) If the contract is cancelled, the seller shall refund to thebuyer the cash surrender value of the payments on theproperty equivalent to fifty percent of the total payments madeand, after five years of installments, an additional five percentevery year but not to exceed ninety percent of the total payments

made: Provided , That the actual cancellation of the contractshall take place after thirty days from receipt by the buyer ofthe notice of cancellation or the demand for rescission ofthe contract by a notarial act and upon full payment of thecash surrender value to the buyer .9 R.A. No. 6552, otherwise known as the "Realty Installment BuyerProtection Act," recognizes in conditional sales of all kinds of realestate (industrial, commercial, residential) the right of the sellerto cancel the contract upon non-payment of an installment by thebuyer, which is simply an event that prevents the obligation ofthe vendor to convey title from acquiring binding force.10 TheCourt agrees with petitioner that the cancellation of the Contract

to Sell may be done outside the court particularly when the buyeragrees to such cancellation.However, the cancellation of the contract by the seller must be inaccordance with Sec. 3 (b) of R.A. No. 6552, which requires anotarial act of rescission and the refund to the buyer of the fullpayment of the cash surrender value of the payments on theproperty. Actual cancellation of the contract takes place after 30days from receipt by the buyer of the notice of cancellation or the

demand for rescission of the contract by a notarial act and uponfull payment of the cash surrender value to the buyer.Based on the records of the case, the Contract to Sell was notvalidly cancelled or rescinded under Sec. 3 (b) of R.A. No. 655First, Patricio, the vendor in the Contract to Sell, died onSeptember 17, 1992 without canceling the Contract to Sell.Second, petitioner also failed to cancel the Contract to Sell inaccordance with law.Petitioner contends that he has complied with the requirementsof cancellation under Sec. 3 (b) of R.A. No. 6552. He asserts thhis demand letter dated February 24, 1997 should be considereas the notice of cancellation or demand for rescission by notariact and that the cash surrender value of the payments on theproperty has been applied to rentals for the use of the house anlot after respondent stopped payment after January 1980.The Court, however, finds that the letter 11 dated February 24,1997, which was written by petitioners counsel, merely madeformal demand upon respondent to vacate the premises in

question within five days from receipt thereof since she had "loceased to have any right to possess the premises x x x due to[her] failure to pay without justifiable cause the installmentpayments x x x."Clearly, the demand letter is not the same as the notice ofcancellation or demand for rescissionby a notarial act requiredby R.A No. 6552. Petitioner cannot rely onLayug v. Intermediate Appellate Cour t 12 to support his contention that the demand lettewas sufficient compliance.Layug held that "the additionalformality of a demand on [the sellers] part for rescission bynotarial act would appear, in the premises, to be merelycircuitous and consequently superfluous" since the seller therei

filed an action forannulment of contract, which is a kindredconcept of rescission by notarial act.13 Evidently, the case ofunlawful detainer filed by petitioner does not exempt him fromcomplying with the said requirement.In addition, Sec. 3 (b) of R.A. No. 6552 requires refund of thecash surrender value of the payments on the property to thebuyer before cancellation of the contract. The provision does nprovide a different requirement for contracts to sell which allowpossession of the property by the buyer upon execution of thecontract like the instant case. Hence, petitioner cannot insist oncompliance with the requirement by assuming that the cashsurrender value payable to the buyer had been applied to rental

of the property after respondent failed to pay the installmentsdue.There being no valid cancellation of the Contract to Sell, the Ccorrectly recognized respondents right to continue occupying property subject of the Contract to Sell and affirmed thedismissal of the unlawful detainer case by the RTC.The Court notes that this case has been pending for more thanten years. Both parties prayed for other reliefs that are just andequitable under the premises. Hence, the rights of the parties
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over the subject property shall be resolved to finally dispose ofthat issue in this case.Considering that the Contract to Sell was not cancelled by thevendor, Patricio, during his lifetime or by petitioner in accordancewith R.A. No. 6552 when petitioner filed this case of unlawfuldetainer after 22 years of continuous possession of the propertyby respondent who has paid the substantial amount of P12,300out of the purchase price of P17,800, the Court agrees with theCA that it is only right and just to allow respondent to pay herarrears and settle the balance of the purchase price.For respondents delay in thepayment of the installments, theCourt, in its discretion, and applying Article 220914 of the CivilCode, may award interest at the rate of 6% per annum15 on theunpaid balance considering that there is no stipulation in theContract to Sell for such interest. For purposes of computing thelegal interest, the reckoning period should be the filing of thecomplaint for unlawful detainer on April 8, 1997.Based on respondents evidence16 of payments made, the MTC

found that respondent paid a total of P12,300 out of thepurchase price of P17,800. Hence, respondent still has abalance of P5,500, plus legal interest at the rate of 6% perannum on the unpaid balance starting April 8, 1997.The third issue is disregarded since petitioner assails aninexistent ruling of the RTC on the lack of jurisdiction of the MTCover a rescission case when the instant case he filed is forunlawful detainer.WHEREFORE, the Decision of the Court of Appeals datedOctober 30, 2000 sustaining the dismissal of the unlawfuldetainer case by the RTC isAFFIRMED with thefollowingMODIFICATIONS:

1. Respondent Rufina Dela Cruz Vda. de Manzano shall paypetitioner Manuel C. Pagtalunan the balance of the purchaseprice in the amount of Five Thousand Five Hundred Pesos(P5,500) plus interest at 6% per annum from April 8, 1997 up tothe finality of this judgment, and thereafter, at the rate of 12% perannum;2. Upon payment, petitioner Manuel C. Pagtalunan shall executea Deed of Absolute Sale of the subject property and deliver thecertificate of title in favor of respondent Rufina Dela Cruz Vda. deManzano; and3. In case of failure to pay within 60 days from finality of thisDecision, respondent Rufina Dela Cruz Vda. de Manzano shall

immediately vacate the premises without need of furtherdemand, and the downpayment and installment paymentsof P12,300 paid by her shall constitute rental for the subjectproperty.No costs.SO ORDERED.

Republic of the PhilippinesSUPREME COURT ManilaSECOND DIVISIONG.R. No. 179965 February 20, 2013 NICOLAS P. DIEGO, Petitioner,vs.RODOLFO P. DIEGO and EDUARDO P. DIEGO, Respondents.D E C I S I O NDEL CASTILLO,J.: It is settled jurisprudence, to the point of being elementary, thaan agreement which stipulates that the seller shall execute adeed of sale only upon or after tl1ll payment of the purchaseprice is a contract to sell, not a contract of sale. InReyes v.Tuparan, 1 this Court declared in categorical terms that"[w]herethe vendor promises to execute a deed of absolute saleupon the completion by the vendee of the payment of theprice, the contract is only a contract to sell. The aforecited

stipulation shows that the vendors reserved title to thesubject property until full payment of the purchase price." In this case, it is not disputed as in tact both parties agreed thatthe deed of sale shall only be executed upon payment of theremaining balance of the purchase price. Thus, pursuant to theabove stated jurisprudence, we similarly declare that thetransaction entered into by the parties is a contract to sell.Before us is a Petition for Review onCertiorar i 2 questioning theJune 29, 2007 Decision3 and the October 3, 2007 Resolution4 ofthe Court of Appeals (CA) in CA-G.R. CV No. 86512, whichaffirmed the April 19, 2005 Decision5 of the Regional Trial Court(RTC), Branch 40, of Dagupan City in Civil Case No. 99-0297

D.Factual Antecedents In 1993, petitioner Nicolas P. Diego (Nicolas) and his brotherRodolfo, respondent herein, entered into an oral contract to selcovering Nicolass share, fixed at P500,000.00, as co-owner ofthe familys Diego Building situated in Dagupan City. Rodolfomade a downpayment of P250,000.00. It was agreed that thedeed of sale shall be executed upon payment of the remainingbalance of P250,000.00. However, Rodolfo failed to pay theremaining balance.Meanwhile, the building was leased out to third parties, butNicolass share in the rents were not remitted to him by herein

respondent Eduardo, another brother of Nicolas and designatedadministrator of the Diego Building. Instead, Eduardo gaveNicolass monthly share in the rents to Rodolfo. Despitedemands and protestations by Nicolas, Rodolfo and Eduardofailed to render an accounting and remit his share in the rentsand fruits of the building, and Eduardo continued to hand themover to Rodolfo.Thus, on May 17, 1999, Nicolas filed a Complaint6 againstRodolfo and Eduardo before the RTC of Dagupan City and
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docketed as Civil Case No. 99-02971-D. Nicolas prayed thatEduardo be ordered to render an accounting of all thetransactions over the Diego Building; that Eduardo and Rodolfobe ordered to deliver to Nicolas his share in the rents; and thatEduardo and Rodolfo be held solidarily liable for attorneys feesand litigation expenses.Rodolfo and Eduardo filed their Answer with Counterclaim7 fordamages and attorneys fees. They argued that Nicolas had nomore claim in the rents in the Diego Building since he hadalready sold his share to Rodolfo. Rodolfo admitted havingremitted only P250,000.00 to Nicolas. He asserted that he wouldpay the balance of the purchase price to Nicolas only after thelatter shall have executed a deed of absolute sale.Ruling of the Regional Trial Court After trial on the merits, or on April 19, 2005, the trial courtrendered its Decision8 dismissing Civil Case No. 99-02971-D forlack of merit and ordering Nicolas to execute a deed of absolutesale in favor of Rodolfo upon payment by the latter of

the P250,000.00 balance of the agreed purchase price. It madethe following interesting pronouncement:It is undisputed that plaintiff (Nicolas) is one of the co-owners ofthe Diego Building, x x x. As a co-owner, he is entitled to [his]share in the rentals of the said building. However, plaintiff [had]already sold his share to defendant Rodolfo Diego in the amountof P500,000.00 and in fact, [had] already received a partialpayment in the purchase price in the amountof P250,000.00.Defendant Eduardo Diego testified that asper agreement, verbal, of the plaintiff and defendant RodolfoDiego, the remaining balance of P250,000.00 will be paidupon the execution of the Deed of Absolute Sale. It was in

the y

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