Gatchalian Realty, Inc Vs Angeles

2/27/2018 SUPREME COURT REPORTS ANNOTATED VOLUME 711
G.R. No. 202358. November 27, 2013.*

GATCHALIAN REALTY, INC., petitioner, vs. EVELYN M.
ANGELES, respondent.
Civil Law; Maceda Law; Realty Installment Buyer Protection

Act (R.A. No. 6552); Republic Act No. 6552, also known as the
Maceda Law, or the Realty Installment Buyer Protection Act, has
the declared public policy of “protecting buyers of real estate on
installment payments against onerous and oppressive
conditions.”—Republic Act No. 6552, also known as the Maceda
Law, or the Realty Installment Buyer Protection Act, has the
declared public policy of “protect[ing] buyers of real estate on
installment payments against onerous and oppressive conditions.”
Section 3 of R.A. 6552 provides for the rights of a buyer who has
paid at least two years of installments but defaults in the
payment of succeeding installments.
Same; Same; Same; The buyer’s failure to pay the

installments due at the expiration of the grace period allows the
seller to cancel the contract after 30 days from the buyer’s receipt of
the notice of cancellation or demand for rescission of the contract
by a notarial act. Paragraph 6(a) of the contract gave Angeles the
same rights.—Section 3(a) of R.A. 6552 provides that the total
grace period corresponds to one month for every one year of
installment payments made, provided that the buyer may exercise
this right only once in every five years of the life of the contract
and its extensions. The buyer’s failure to pay the installments due
at the expiration of the grace period allows the seller to cancel the
contract after 30 days from the buyer’s receipt of the notice of
cancellation or demand for rescission of the contract by a notarial
act. Paragraph 6(a) of the contract gave Angeles the same rights.
Same; Same; Same; 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.—
This Court has been consistent in ruling that a valid and effective
cancellation under R.A. 6552 must comply with the mandatory
twin require-
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http://www.central.com.ph/sfsreader/session/00000161d6123a83910c584c003600fb002c009e/t/?o=False 1/21
* SECOND DIVISION.
164
ments of a notarized notice of cancellation and a refund of the

cash surrender value. In Olympia Housing, Inc. v. Panasiatic
Travel Corp., 395 SCRA 298 (2003), 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.
PETITION for review on certiorari of the decision and

resolution of the Court of Appeals.
The facts are stated in the opinion of the Court.
Conti, Gatchalian, Villanueva, Rabuco & Bailon Law
Offices for petitioner.
Eduardo T. Sierra, Jr. for respondent.
CARPIO, J.:
The Case
G.R. No. 202358 is a petition for review[1] assailing the

Decision[2] promulgated on 11 November 2011 as well as
the Resolution[3] promulgated on 19 June 2012 by the
Court of Appeals (CA) in CA-G.R. SP No. 105964. The CA
reversed and set aside the 8 October 2008 Order[4] of
Branch 197 of the Regional Trial Court of Las Piñas City
(RTC) in Civil Case No. LP-070143. The CA also dismissed
the unlawful detainer case filed by Gatchalian Realty, Inc.
(GRI) against Evelyn M. Angeles (Angeles).
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[1] Under Rule 45 of the 1997 Rules of Civil Procedure.
[2] Rollo, pp. 43-54. Penned by Associate Justice Samuel H. Gaerlan,
with Associate Justices Rosmari D. Carandang and Ramon R. Garcia,
concurring.
[3] Id., at p. 41. Penned by Associate Justice Samuel H. Gaerlan, with
Associate Justices Rosmari D. Carandang and Ramon R. Garcia,
concurring.
[4] Id., at p. 219. Penned by Judge Erlinda Nicolas-Alvaro.
165
The Metropolitan Trial Court (MeTC) rendered on 28

February 2006 a decision[5] in Civil Case No. 6809 in favor
of GRI and against Angeles. In its decision[6] dated 13
February 2008, the RTC set aside the decision of the MeTC
and dismissed the ejectment case filed by GRI against
Angeles. The RTC reversed itself in an Order[7] dated 17
June 2008, and affirmed with modification the decision of
the MeTC. The RTC denied Angeles’ Motion for
Reconsideration in an Order dated 8 October 2008.
The Facts
The CA recited the facts as follows:
On 28 December 1994, [Angeles] purchased a house (under

Contract to Sell No. 2272) and lot (under Contract to Sell No.
2271) from [GRI] valued at Seven Hundred Fifty Thousand Pesos
(Php 750,000.00) and Four Hundred Fifty Thousand Pesos (Php
450,000.00), respectively, with twenty-four percent (24%) interest
per annum to be paid by installment within a period of ten years.
The house and lot were delivered to [Angeles] in 1995.
Nonetheless, under the contracts to sell executed between the
parties, [GRI] retained ownership of the property until full
payment of the purchase price.
After sometime, [Angeles] failed to satisfy her monthly
installments with [GRI]. [Angeles] was only able to pay thirty-five
(35) installments for Contract to Sell No. 2271 and forty-eight (48)
installments for Contract to Sell No. 2272. According to [GRI],
[Angeles] was given at least twelve (12) notices for payment in a
span of three (3) years but she still failed to settle her account
despite receipt of said notices and without any valid reason.
[Angeles] was again given more time to pay her dues and likewise
furnished with three (3) notices reminding her
_______________
[5] CA Rollo, pp. 29-37. Penned by Judge Arthur A. Famini.
[6] Id., at pp. 23-28. Penned by Judge Manuel N. Duque.
[7] Id., at pp. 20-22. Penned by Judge Erlinda Nicolas-Alvaro.
166
to pay her outstanding balance with warning of impending legal

action and/or rescission of the contracts, but to no avail. After
giving a total of fifty-one (51) months grace period for both
contracts and in consideration of the continued disregard of the
demands of [GRI], [Angeles] was served with a notice of notarial
rescission dated 11 September 2003 by registered mail which she
allegedly received on 19 September 2003 as evidenced by a
registry return receipt.
Consequently [Angeles] was furnished by [GRI] with a demand

letter dated 26 September 2003 demanding her to pay the amount
of One Hundred Twelve Thousand Three Hundred Four Pesos and
Forty Two Centavos (Php 112,304.42) as outstanding reasonable
rentals for her use and occupation of the house and lot as of
August 2003 and to vacate the same. She was informed in said
letter that the fifty percent (50%) refundable amount that she is
entitled to has already been deducted with the reasonable value
for the use of the properties or the reasonable rentals she incurred
during such period that she was not able to pay the installments
due her. After deducting the rentals from the refundable amount,
she still had a balance of One Hundred Twelve Thousand Three
Hundred Four Pesos and Forty Two Centavos (Php 112,304.42)
which she was required to settle within fifteen (15) days from
receipt of the letter.
Allegedly, [Angeles] subsequently sent postal money orders
through registered mail to [GRI]. In a letter dated 27 January
2004 [Angeles] was notified by [GRI] of its receipt of a postal
money order sent by [Angeles]. More so, she was requested to
notify [GRI] of the purpose of the payment. [Angeles] was
informed that if the postal money order was for her monthly
amortization, the same will not be accepted and she was likewise
requested to pick it up from [GRI’s] office. On 29 January 2004,
another mail with a postal money order was sent by [Angeles] to
[GRI]. In her 6 February 2004 letter, [GRI] was informed that the
postal money orders were supposed to be payments for her
monthly amortization. Again, in its 8 February 2004 letter, it was
reiterated by [GRI] that the postal money orders will only be
accepted
167
if the same will serve as payment of her outstanding rentals and

not as monthly amortization. Four (4) more postal money orders
were sent by [Angeles] by registered mail to [GRI].
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.[8]
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:
A careful scrutiny of the evidence presented by both parties

regarding payments made clearly show that [Angeles] defaulted
in the payment of the monthly installments due. Repeated notices
and warnings were given to her but she still and failed to update
her account (Exhibits “E” to “E-1” and “G” to “G-2”, [GRI’s]
Position Paper). This is a clear violation of the condition of their
contracts. An ample grace period, i.e., 51 months, was granted to
her by [GRI] but she still failed to pay the whole amount due as
provided in paragraph 6 of the contracts and Section 3 of RA
6552. [Angeles] has been in arrears beyond the grace period
provided under the contracts and law. The last payment received
by [GRI], which represents [Angeles’] 35th installment, was made
in July 2002. On the other hand, the last payment, which
represents her 48th installment, [was] received [by GRI] in April
1999. Thus, [GRI], as seller, can terminate or rescind the contract
by giving her the notice of notarial rescission of the contracts. The
notarial rescission of the contracts was executed on September 26,
2003 and served upon [Angeles].[9]
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[8] Rollo, pp. 44-45.
[9] CA Rollo, p. 33.
168
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 P1,060,896.39 by way of reasonable
rental fee less P574,148.40 as of May 2005, thus leaving a
balance of P486,747.99 plus the amount accruing until
Angeles finally vacates the subject premises.
The dispositive portion of the MeTC’s Decision reads:
WHEREFORE, in view of the foregoing, the Court renders

judgment for [GRI] and against [Angeles] and all persons
claiming rights under her, as follows:
1. Ordering [Angeles] and all persons claiming rights under
her to immediately vacate the property subject of this case
situated at Blk. 3, Lot 8, Lanzones St., Phase 3-C, Gatchalian
Subdivision, Las Piñas City and surrender possession thereof to

[GRI];
2. Ordering the encashment of the Postal Money Order
(PMO) in the total amount of Php 120,000.00 in favor of [GRI];
3. Ordering [Angeles] to pay [GRI] the outstanding amount of
Php 486,747.99 representing reasonable monthly rentals of the
subject premises as of May 2005 less the amount of the postal
money orders [worth] Php 120,000.00 and all the monthly rentals
that will accrue until she vacates the subject premises and have
pos-
_______________
[10] Article 1290 of the Civil Code reads: “When all the requisites mentioned in
Article 1279 are present, compensation takes effect by operation of law and
extinguishes both debts to the concurrent amount, even though the creditors and
debtors are not aware of the compensation.”
169
session thereof turned over to [GRI], plus the interests due

thereon at the rate of twelve percent (12%) per annum from the
time of extrajudicial demand;
4. Ordering [Angeles] to pay [GRI] the amount of Php
20,000.00 as attorney’s fees; and
5. Costs of suit.
[Angeles’] counterclaims are hereby dismissed for lack of merit.
SO ORDERED.[11]
On 21 March 2006, Angeles filed a notice of appeal with

the MeTC. A week later, on 28 March 2006, Angeles filed a
motion to dismiss based on lack of jurisdiction. The Las
Piñas RTC denied Angeles’ motion to dismiss in an order
dated 28 July 2006.
Angeles also filed on 2 October 2006 a Petition for
Certiorari with Immediate Issuance of Temporary
Restraining Order and Injunction, which was docketed as
SCA Case No. 06-008.[12] On 3 May 2007, Branch 201 of
the Las Piñas RTC dismissed Angeles’ Petition for
Certiorari for forum-shopping.[13]
GRI, on the other hand, filed a Motion for Execution
Pending Appeal. A Writ of Execution Pending Appeal was
issued in favor of GRI on 25 August 2006, and the
properties were turned over to GRI on 10 October 2006.[14]
The RTC’s Ruling

Angeles’ appeal before Branch 197 of the Las Piñas RTC
initially produced a result favorable to her. The RTC found
that the case was one for ejectment. As an ejectment court,
the MeTC’s jurisdiction is limited only to the issue of

possession and does not include the title or ownership of
the properties in question.
_______________
[11] CA Rollo, pp. 36-37.
[12] Rollo, pp. 190-197.
[13] Id., at pp. 198-200.
[14] Id., at p. 198.
170
The RTC pointed out that Republic Act No. 6552 (R.A.
6552) provides that the nonpayment by the buyer of an
installment prevents the obligation of the seller to convey
title from acquiring binding force. Moreover, cancellation of
the contract to sell may be done outside the court when the
buyer agrees to the cancellation. In the present case,
Angeles denied knowledge of GRI’s notice of cancellation.
Cancellation of the contract must be done in accordance
with Section 3 of R.A. 6552, which requires a notarial act of
rescission and refund to the buyer of the cash surrender
value of the payments on the properties. Thus, GRI cannot
insist on compliance with Section 3(b) of R.A. 6552 by
applying Angeles’ cash surrender value to the rentals of the
properties after Angeles failed to pay the installments due.
Contrary to the MeTC’s ruling, there was no legal
compensation between GRI and Angeles. The RTC ruled:
There being no valid cancellation of the Contract to Sell, this

Court finds merit in the appeal filed by [Angeles] and REVERSES
the decision of the court a quo. This Court recognized [Angeles’]
right to continue occupying the property subject of the Contract to
Sell.
WHEREFORE, premises considered, the decision of the lower
court is hereby SET ASIDE and the ejectment case filed by [GRI]
is hereby DISMISSED.
SO ORDERED.[15]
GRI filed a Motion for Reconsideration. The RTC issued

an Order on 17 June 2008 which ruled that GRI had
complied with the provisions of R.A. 6552, and had
refunded the cash surrender value to Angeles upon its
cancellation of the contract to sell when it deducted the
amount of the cash surrender value from rentals due on the
subject properties. The RTC relied on this Court’s ruling in
Pilar Development Corporation v. Spouses Villar.[16] The
RTC ruled:
_______________
[15] CA Rollo, p. 28.
[16] 536 Phil. 465; 505 SCRA 617 (2006).
171
Applying the above Pilar ruling in the present case, the cash
surrender value of the payments made by [Angeles] shall be
applied to the rentals that accrued on the property occupied by
[Angeles], which rental is fixed by this Court in the amount of
seven thousand pesos per month (P7,000.00). The total rental
payment due to Gatchalian Realty Inc. is six hundred twenty
three thousand (P623,000.00) counted from June 1999 to October
2006. According to R.A. 6552, the cash surrender value, which in
this case is equivalent to fifty percent (50%) of the total payment
made by [Angeles], should be returned to her by [GRI] upon
cancellation of the contract to sell on September 11, 2003.
Admittedly no such return was ever made by [GRI]. Thus, the
cash surrender value, which in this case is equivalent to
P182,094.48 for Contract to Sell No. 2271 and P392,053.92 for
Contract to Sell No. 2272 or a total cash surrender value of
P574,148.40 should be deducted from the rental payment or
award owing to [Angeles].
WHEREFORE, premises considered, the Motion for
Reconsideration is hereby GRANTED. The earlier decision dated
February 13, 2008 is SET ASIDE and the decision of the court a
quo is MODIFIED to wit:
1. Ordering [Angeles] and all persons claiming rights under
her to immediately vacate the property subject of this case
situated at Blk. 3, Lot 8, Lanzones St., Phase 3-C, Gatchalian
Subdivision, Las Piñas City and surrender possession thereof to
[GRI];
2. Ordering the encashment of the Postal Money Order
(PMO) in the total amount of Php 120,000.00 in favor of [GRI];
3. Ordering defendant, Evelyn M. Angeles, to pay plaintiff,
Gatchalian Realty Inc., the outstanding rental amount of forty
eight thousand eight hundred fifty one pesos and sixty centavos
(P48,851.60) and legal interest of six percent (6%) per annum,
until the above amount is paid;
4. Ordering [Angeles] to pay [GRI] the amount of Php
20,000.00 as attorney’s fees; and
5. Costs of suit.
172
SO ORDERED.[17]
The Court of Appeals’ Ruling
The CA dismissed GRI’s complaint for unlawful

detainer, and reversed and set aside the RTC’s decision.
Although the CA ruled that Angeles received the notice of
notarial rescission, it ruled that the actual cancellation of
the contract between the parties did not take place because
GRI failed to refund to Angeles the cash surrender value.
The CA denied GRI’s motion for reconsideration.
GRI filed the present petition for review before this
Court on 10 August 2012.
The Issues
GRI assigned the following errors of the CA:
The court a quo committed reversible error when it declared that

there was no refund of the cash surrender value in favor of
[Angeles] pursuant to R.A. No. 6552; and
The court a quo erred in holding that the actual cancellation of
the contract between the parties did not take place.[18]
The Court’s Ruling

GRI’s petition has no merit. We affirm the ruling of the
CA with modification.
Validity of GRI’s
Cancellation of the Contracts
Republic Act No. 6552, also known as the Maceda Law,

or the Realty Installment Buyer Protection Act, has the
declared
_______________
[17] CA Rollo, pp. 21-22.
[18] Rollo, pp. 24-25.
173
public policy of “protect[ing] buyers of real estate on

installment payments against onerous and oppressive
conditions.”[19] Section 3 of R.A. 6552 provides for the
rights of a buyer who has paid at least two years of
installments but defaults in the payment of succeeding
installments. Section 3 reads:
Section 3. In all transactions or contracts involving the sale

or financing of real estate on installment payments, including
residential condominium apartments but excluding industrial
lots, commercial buildings and sales to tenants under Republic
Act Numbered Thirty-eight hundred forty-four, as amended by
Republic Act Numbered Sixty-three hundred eighty-nine, where
the buyer has paid at least two years of installments, the buyer is
entitled to the following rights in case he defaults in the payment
of succeeding installments:
(a) To pay, without additional interest, the unpaid
installments due within the total grace period earned by him
which is hereby fixed at the rate of one month grace period for
every one year of installment payments made: Provided, That this
right shall be exercised by the buyer only once in every five years
of the life of the contract and its extensions, if any.
(b) If the contract is cancelled, the seller shall refund to the
buyer the cash surrender value of the payments on the property
equivalent to fifty per cent of the total payments made, and, after
five years of installments, an additional five per cent every year
but not to exceed ninety per cent of the total payments made:
Provided, That the actual cancellation of the contract shall take
place after thirty days from receipt by the buyer of the notice of
cancellation or the demand for rescission of the contract by a
notarial act and upon full payment of the cash surrender value to
the buyer.
Down payments, deposits or options on the contract shall be
included in the computation of the total number of installment
payments made.
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[19] R.A. 6552, Section 2.
174
The sixth paragraph of the contracts between Angeles and

GRI similarly provides:
SIXTH — Should the VENDEE/S fail to pay due any monthly

installment the VENDOR shall have the right to cancel this
Contract and resell the lot/s subject matter of this contract to
another buyer, provided, however, that where the VENDEE/S
has/have already paid at least two years of installments, the
VENDEE/S will have the right:
a) to pay without additional interest, the installments in
arrears within the total grace period earned by him/her/them
which is hereby fixed at the rate of one (1) month grace period for
every one (1) year of installment payment made, but this right
can be exercised by the VENDEE/S only once in every five (5)
years of the life of this contract and its extension, if any, and
b) if the contract is cancelled, the VENDOR shall refund to
the VENDEE/S the cash surrender value of the payments made
on the lot/s equivalent to fifty per cent (50%) of the total payments
made, and after five (5) years of installment, an additional five
per cent (5%) every year but not to exceed ninety per cent (90%) of
the total payments made; Provided, that the actual cancellation of

the contract shall take place after thirty (30) days from the receipt
by the VENDEE/S of the notice of cancellation or the demand for
rescission of the contract by a notarial act upon full payment of
the cash surrender value to the VENDEE/S; where, however, the
VENDEE/S has/have paid less than two (2) years of installments,
the VENDOR shall give the VENDEE/S [a] grace period of sixty
(60) days from the date the installment became due; and if the
VENDEE/S fail/s to pay the installment due after the expiration
of the grace period, the VENDOR may cancel the contract after
thirty (30) days from receipt by the VENDEE/S of the notice of
cancellation or the demand for rescission of the contract by a
notarial act; and in case of cancellation and/or rescission of this
contract, all improvements on the lot/s above-described shall be
forfeited in favor of the VENDOR, and in this connection, the
VENDEE/S obligate/s himself/herself/themselves to
175
peacefully vacate the premises mentioned above without necessity

of notice or demand by the VENDOR.[20]
We examine GRI’s compliance with the requirements of

R.A. 6552, as it insists that it extended to Angeles
considerations that are beyond what the law provides.
Grace Period
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 MeTC, the RTC, and the CA all found that Angeles
was able to pay 35 installments for the lot (Contract No.
2271) and 48 installments for the house (Contract No.
2272).[21] Angeles thus made installment payments for less
than three years on the lot, and exactly four years on the
house.
Section 3(a) of R.A. 6552 provides that the total grace
period corresponds to one month for every one year of
installment payments made, provided that the buyer may
exercise this right only once in every five years of the life of
the contract and its extensions. The buyer’s failure to pay
the installments due at the expiration of the grace period
allows the seller to cancel the contract after 30 days from

the buyer’s receipt of the notice of cancellation or demand
for rescission of the contract by a notarial act. Paragraph
6(a) of the contract gave Angeles the same rights.
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[20] Rollo, pp. 95-96.
[21] Id., at p. 44.
176
Both the RTC and the CA found that GRI gave Angeles
an accumulated grace period of 51 months.[22] This
extension went beyond what was provided in R.A. 6552 and
in their contracts.
Receipt of the Notice of Notarial Rescission
The registry return of the registered mail is prima facie

proof of the facts indicated therein.[23] Angeles failed to
present contrary evidence to rebut this presumption with
competent and proper evidence. To establish its claim of
service of the notarial rescission upon Angeles, GRI
presented the affidavit of its liaison officer Fortunato
Gumahad,[24] the registry receipt from the Greenhills Post
Office,[25] and the registry return receipt.[26] We affirm the
CA’s ruling that GRI was able to substantiate its claim that
it served Angeles the notarial rescission sent through
registered mail in accordance with the requirements of R.A.
6552.
Amount of the Cash Surrender Value
GRI claims that it gave Angeles a refund of the cash

surrender value of both the house and the lot in the total
amount of P574,148.40 when it deducted the amount of the
cash surrender value from the amount of rentals due.
For paying more than two years of installments on the
lot, Angeles was entitled to receive cash surrender value of
her payments on the lot equivalent to fifty per cent of the
total payments made. This right is provided by Section 3(b)
of R.A. 6552, as well as paragraph 6(b) of the contract. Out
of the
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[22] Id.
[23] Club Filipino, Inc. v. Araullo, 538 Phil. 430; 508 SCRA 583 (2006),
citing Genuino Ice Company, Inc. v. Magpantay, 526 Phil. 170; 493 SCRA
195 (2006).
[24] CA Rollo, pp. 245-246.
[25] Rollo, p. 159.

[26] Id.
177
contract price of P450,000, Angeles paid GRI a total of

P364,188.96 consisting of P135,000 as downpayment and
P229,188.96 as installments and penalties.[27] The cash
surrender value of Angeles’ payments on the lot amounted
to P182,094.48.[28]
For the same reasons, Angeles was also entitled to
receive cash surrender value of the payments on the house
equivalent to fifty per cent of the total payments made. Out
of the contract price of P750,000, Angeles paid GRI a total
of P784,107.84 consisting of P165,000 as downpayment and
P619,107.84 as installments and penalties.[29] The cash
surrender value of Angeles’ payments on the house
amounted to P392,053.92.[30]
Actual Cancellation of the Contracts
There was no actual cancellation of the contracts

because of GRI’s failure to actually refund the cash
surrender value to Angeles.
Cancellation of the contracts for the house and lot was
contained in a notice of notarial rescission dated 11
September 2003.[31] The registry return receipts show that
Angeles received this notice on 19 September 2003.[32]
GRI’s demand for rentals on the properties, where GRI
offset Angeles’ accrued rentals by the refundable cash
surrender value, was contained in another letter dated 26
September 2003.[33] The registry return receipts show that
Angeles received this letter on 29 September 2003.[34] GRI
filed a complaint for unlawful de-
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[27] CA Rollo, p. 21.
[28] Id., at pp. 21-22.
[29] Id., at p. 21.
[30] Id., at pp. 21-22.
[31] Rollo, pp. 157-158.
[32] Id., at p. 159.
[33] Id., at pp. 163-165.
[34] Id., at p. 166.
178
tainer against Angeles on 11 November 2003, 61 days after

the date of its notice of notarial rescission, and 46 days
after the date of its demand for rentals. For her part,
Angeles sent GRI postal money orders in the total amount
of P120,000.[35]
The MeTC ruled that it was proper for GRI to
compensate the rentals due from Angeles’ occupation of the
property from the cash surrender value due to Angeles
from GRI. The MeTC stated that compensation legally took
effect in accordance with Article 1290 of the Civil Code,
which reads: “When all the requisites mentioned in Article
1279 are present, compensation takes effect by operation of
law and extinguishes both debts to the concurrent amount,
even though the creditors and debtors are not aware of the
compensation.” In turn, Article 1279 of the Civil Code
provides:
In order that compensation may be proper, it is necessary:

(1) That each one of the obligors be bound principally, and
that he be at the same time a principal creditor of the other;
(2) That both debts consist of a sum of money, or if the
things due are consumable, they be of the same kind, and
also of the same quality if the latter has been stated;
(3) That the two debts are due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any retention or
controversy, commenced by third persons and
communicated in due time to the debtor.
However, it was error for the MeTC to apply Article

1279 as there was nothing in the contracts which provided
for the amount of rentals in case the buyer defaults in her
installment payments. The rentals due to GRI were not
liquidated. GRI, in its letter to Angeles dated 26 September
2003, unilaterally imposed the amount of rentals, as well
as an annual 10% increase:
_______________
[35] Id., at pp. 45-46.
179
PERIOD COVERED NO. OF RENTALS AMOUNT DUE

MONTHS PER MONTH
June to December 1999 7 11,000.00 77,000.00
January to December 2000 12 12,100.00 145,200.00
January to December 2001 12 13,310.00 159,720.00
January to December 2002 12 14,641.00 175,692.02 [sic]
January to August 2003 8 16,105.10 128,840.80
TOTAL AMOUNT DUE: P 686,452.82 [sic][36]
We cannot subscribe to GRI’s view that it merely

followed our ruling in Pilar Development Corporation v.
Spouses Villar[37] (Pilar) when it deducted the cash
surrender value from the rentals due. In Pilar, the
developer also failed to refund the cash surrender value to
the defaulting buyer when it cancelled the Contract to Sell
through a Notice of Cancellation. It was this Court, and not
the developer, that deducted the amount of the cash
surrender value from the accrued rentals. Moreover, the
developer in Pilar did not unilaterally impose rentals. It
was the MeTC that decreed the amount of monthly rent.
Neither did the developer unilaterally reduce the accrued
rentals by the refundable cash surrender value. The
cancellation of the contract took effect only by virtue of this
Court’s judgment because of the developer’s failure to
return the cash surrender value.
This was how we ruled in Pilar:
According to R.A. 6552, the cash surrender value, which in this

case is equivalent to fifty percent (50%) of the total payment made
by the respondent spouses, should be returned to them by the
petitioner upon the cancellation of the contract to sell on August
31, 1998 for the cancellation to take effect. Admittedly, no such
return was ever made by petitioner. Thus, the said cash
_______________
[36] Id., at p. 164. The amount due for the period January to December 2001
should only be P175,692.00; hence, the total amount due should be P686,452.80.
[37] 536 Phil. 465; 505 SCRA 617 (2006).
180
surrender value is hereby ordered deducted from the award owing

to the petitioner based on the MeTC judgment, and cancellation
takes effect by virtue of this judgment.
Finally, as regards the award of P7,000.00/month as rental
payment decreed by the MeTC for the use of the property in
question from the time the respondent spouses obtained
possession thereof up to the time that its actual possession is
surrendered or restored to the petitioner, the Court finds the
same just and equitable to prevent the respondent spouses, who
breached their contract to sell, from unjustly enriching
themselves at the expense of the petitioner which, for all legal
intents and purposes, never ceased to be the owner of the same

property because of the respondents’ non-fulfillment of the
indispensable condition of full payment of the purchase price, as
embodied in the parties’ contract to sell. However, as earlier
explained, this sum is to be reduced by the cash surrender value
of the payments so far made by the spouses, and the resulting net
amount still owing as accrued rentals shall be subject to legal
interest from finality of this Decision up to the time of actual
payment thereof.[38]
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.
_______________
[38] Id., at pp. 473-474; pp. 623-624.
[39] 443 Phil. 385, 398-399; 395 SCRA 298, 308 (2003). Italicization in
the original.
181
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. (Emphasis supplied)
Remedies of the Buyer in the

Absence of a Valid Cancellation
of a Contract to Sell
In view of the absence of a valid cancellation, the

Contract to Sell between GRI and Angeles remains valid
and subsisting. Apart from Olympia and Pagtalunan, we
are guided by our rulings in Active Realty & Development
Corp. v. Daroya[41] (Active) and Associated Marine Officers
and Seamen’s Union of the Philippines PTGWO-ITF v.
Decena[42] (Associated).
_______________
[40] 559 Phil. 658, 669-670; 533 SCRA 242, 254 (2007).
[41] 431 Phil. 753; 382 SCRA 152 (2002).
[42] G.R. No. 178584, 8 October 2012, 682 SCRA 308.
182
In Olympia, this Court dismissed the complaint for

recovery of possession for having been prematurely filed
without complying with the mandate of R.A. 6552. We
ordered the defaulting buyer to pay the developer the
balance as of the date of the filing of the complaint plus
18% interest per annum computed from the day after the
date of the filing of the complaint, but within 60 days from
the receipt of a copy of the decision. Upon payment, the
developer shall issue the corresponding certificate of title in
favor of the defaulting buyer. If the defaulting buyer fails
to pay the full amount, then the defaulting buyer shall
vacate the subject property without need of demand and all
payments will be charged as rentals to the property. There
was no award for damages and attorney’s fees, and no costs
were charged to the parties.
In Pagtalunan, this Court dismissed the complaint for
unlawful detainer. We also ordered the defaulting buyer to
pay the developer the balance of the purchase price plus
interest at 6% per annum from the date of filing of the
complaint up to the finality of judgment, and thereafter, at
the rate of 12% per annum. Upon payment, the developer
shall issue a Deed of Absolute Sale of the subject property
and deliver the corresponding certificate of title in favor of
the defaulting buyer. If the defaulting buyer fails to pay the
full amount within 60 days from finality of the decision,
then the defaulting buyer should vacate the subject
property without need of demand and all payments will be

charged as rentals to the property. No costs were charged
to the parties.
In Active, this Court held that the Contract to Sell
between the parties remained valid because of the
developer’s failure to send a notarized notice of cancellation
and to refund the cash surrender value. The defaulting
buyer thus had the right to offer to pay the balance of the
purchase price, and the developer had no choice but to
accept payment. However, the defaulting buyer was unable
to exercise this right because the developer sold the subject
lot. This Court ordered the developer to refund to the
defaulting buyer the actual value of the lot with 12%
interest per annum computed from the date of
183
the filing of the complaint until fully paid, or to deliver a

substitute lot at the option of the defaulting buyer.
In Associated, this Court dismissed the complaint for
unlawful detainer. We held that the Contract to Sell
between the parties remained valid because the developer
failed to send to the defaulting buyer a notarized notice of
cancellation and to refund the cash surrender value. We
ordered the MeTC to conduct a hearing within 30 days
from receipt of the decision to determine the unpaid
balance of the full value of the subject properties as well as
the current reasonable amount of rent for the subject
properties. We ordered the defaulting buyer to pay, within
60 days from the trial court’s determination of the
amounts, the unpaid balance of the full value of the subject
properties with interest at 6% per annum computed from
the date of sending of the notice of final demand up to the
date of actual payment. Upon payment, we ordered the
developer to execute a Deed of Absolute Sale over the
subject properties and deliver the transfer certificate of
title to the defaulting buyer. In case of failure to pay within
the mandated 60-day period, we ordered the defaulting
buyer to immediately vacate the premises without need for
further demand. The developer should also pay the
defaulting buyer the cash surrender value, and the contract
should be deemed cancelled 30 days after the defaulting
buyer’s receipt of the full payment of the cash surrender
value. If the defaulting buyer failed to vacate the premises,
he should be charged reasonable rental in the amount
determined by the trial court.
We observe that this case has, from the institution of the
complaint, been pending with the courts for 10 years. As
both parties prayed for the issuance of reliefs that are just
and equitable under the premises, and in the exercise of
our discretion, we resolve to dispose of this case in an
equitable manner. Considering that GRI did not validly
rescind Contracts to Sell Nos. 2271 and 2272, Angeles has
two options:
184
1. The option to pay, within 60 days from the MeTC’s

determination of the proper amounts, the unpaid balance of
the full value of the purchase price of the subject properties
plus interest at 6% per annum from 11 November 2003, the
date of filing of the complaint, up to the finality of this
Decision, and thereafter, at the rate of 6% per annum.[43]
Upon payment of the full amount, GRI shall immediately
execute Deeds of Absolute Sale over the subject properties
and deliver the corresponding transfer certificate of title to
Angeles.
In the event that the subject properties are no longer
available, GRI should offer substitute properties of equal
value. Acceptance of the suitability of the substitute
properties is Angeles’ sole prerogative. Should Angeles
refuse the substitute properties, GRI shall refund to
Angeles the actual value
_______________
[43] See Nacar v. Gallery Frames and/or Felipe Bordey, Jr., G.R. No.
189871, 13 August 2013, 703 SCRA 439. This case modified the guidelines
on imposition of interest rates laid down in Eastern Shipping Lines, Inc. v.
Court of Appeals, G.R. No. 97412, 12 July 1994, 234 SCRA 78 to reflect
Bangko Sentral ng Pilipinas — Monetary Board Circular No. 799, Series
of 2013, effective 1 July 2013. Nacar stated:
Thus, from the foregoing, in the absence of an express stipulation
as to the rate of interest that would govern the parties, the rate of
legal interest for loans or forbearance of any money, goods or credits
and the rate allowed in judgments shall no longer be twelve percent
(12%) per annum — as reflected in the case of Eastern Shipping
Lines, Inc. and Subsection X305.1 of the Manual of Regulations for
Banks and Sections 4305Q.1, 4305S.3 and 4303P.1 of the Manual of
Regulations for Non-Bank Financial Institutions, before its
amendment by BSP-MB Circular No. 799 — but will now be six
percent (6%) per annum effective July 1, 2013. It should be noted,
nonetheless, that the new rate could only be applied prospectively
and not retroactively. Consequently, the twelve percent (12%) per
annum legal interest shall apply only until June 30, 2013. Come July
1, 2013 the new rate of six percent (6%) per annum shall be the
prevailing rate of interest when applicable.
185
of the subject properties with 6% interest per annum[44]

computed from 11 November 2003, the date of the filing of
the complaint, until fully paid; and
2. The option to accept from GRI P574,148.40, the cash
surrender value of the subject properties, with interest at
6% per annum,[45] computed from 11 November 2003, the
date of the filing of the complaint, until fully paid.
Contracts to Sell Nos. 2271 and 2272 shall be deemed
cancelled 30 days after Angeles’ receipt of GRI’s full
payment of the cash surrender value. No rent is further
charged upon Angeles as GRI already had possession of the
subject properties on 10 October 2006.
WHEREFORE, we DENY the petition. The Decision of
the Court of Appeals in CA-G.R. SP No. 105964
promulgated on 11 November 2011 and the Resolution
promulgated on 19 June 2012 are AFFIRMED with
MODIFICATIONS.
1. The Metropolitan Trial Court of Las Piñas City is
directed to conduct a hearing within a maximum period of
30 days from finality of this Decision to (1) determine
Evelyn M. Angeles’ unpaid balance on Contracts to Sell
Nos. 2271 and 2272; and (2) the actual value of the subject
properties as of 11 November 2003.
2. Evelyn M. Angeles shall notify the Metropolitan
Trial Court of Las Piñas City and Gatchalian Realty, Inc.
within a maximum period of 60 days from the Metropolitan
Trial Court of Las Piñas City’s determination of the unpaid
balance whether she will pay the unpaid balance or accept
the cash surrender value.
Should Evelyn M. Angeles choose to pay the unpaid
balance, she shall pay, within 60 days from the MeTC’s
determination of the proper amounts, the unpaid balance of
the full value of the purchase price of the subject properties
plus interest at 6% per annum from 11 November 2003, the
date of filing of the complaint, up to the finality of this
Decision, and
_______________
[44] Id.
[45] Id.
186
thereafter, at the rate of 6% per annum. Upon payment of

the full amount, GRI shall immediately execute Deeds of
Absolute Sale over the subject properties and deliver the
corresponding transfer certificate of title to Angeles.
In the event that the subject properties are no longer
available, GRI should offer substitute properties of equal
value. Should Angeles refuse the substitute properties, GRI
shall refund to Angeles the actual value of the subject
properties with 6% interest per annum computed from 11
November 2003, the date of the filing of the complaint,
until fully paid.
Should Evelyn M. Angeles choose to accept payment of
the cash surrender value, she shall receive from GRI
P574,148.40 with interest at 6% per annum, computed from
11 November 2003, the date of the filing of the complaint,
until fully paid. Contracts to Sell Nos. 2271 and 2272 shall
be deemed cancelled 30 days after Angeles’ receipt of GRI’s
full payment of the cash surrender value. No rent is further
charged upon Evelyn M. Angeles.
No costs.
SO ORDERED.
Brion, Del Castillo, Abad** and Perez, JJ., concur.
Petition denied, judgment and resolution affirmed with

modifications.
Note.—The Maceda Law governs sales of real estate on

installments. (Communities Cagayan, Inc. vs. Nanol, 685
SCRA 453 [2012])
——o0o——
_______________
** Designated acting member per Special Order No. 1619 dated 22
November 2013.
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2/27/2018 SUPREME COURT REPORTS ANNOTATED VOLUME 711

G.R. No. 202358. November 27, 2013.*

Civil Law; Maceda Law; Realty Installment Buyer Protection

Same; Same; Same; The buyer’s failure to pay the

Same; Same; Same; This Court has been consistent in ruling

ments of a notarized notice of cancellation and a refund of the

PETITION for review on certiorari of the decision and

G.R. No. 202358 is a petition for review[1] assailing the

The Metropolitan Trial Court (MeTC) rendered on 28

On 28 December 1994, [Angeles] purchased a house (under

to pay her outstanding balance with warning of impending legal

Consequently [Angeles] was furnished by [GRI] with a demand

if the same will serve as payment of her outstanding rentals and

The MeTC’s Ruling

A careful scrutiny of the evidence presented by both parties

Although the MeTC agreed with Angeles that her total

WHEREFORE, in view of the foregoing, the Court renders

Subdivision, Las Piñas City and surrender possession thereof to

session thereof turned over to [GRI], plus the interests due

On 21 March 2006, Angeles filed a notice of appeal with

The RTC’s Ruling

the MeTC’s jurisdiction is limited only to the issue of

There being no valid cancellation of the Contract to Sell, this

GRI filed a Motion for Reconsideration. The RTC issued

The Court of Appeals’ Ruling

The CA dismissed GRI’s complaint for unlawful

The court a quo committed reversible error when it declared that

The Court’s Ruling

Republic Act No. 6552, also known as the Maceda Law,

public policy of “protect[ing] buyers of real estate on

Section 3. In all transactions or contracts involving the sale

The sixth paragraph of the contracts between Angeles and

SIXTH — Should the VENDEE/S fail to pay due any monthly

the total payments made; Provided, that the actual cancellation of

peacefully vacate the premises mentioned above without necessity

We examine GRI’s compliance with the requirements of

It should be noted that Section 3 of R.A. 6552 and

allows the seller to cancel the contract after 30 days from

The registry return of the registered mail is prima facie

GRI claims that it gave Angeles a refund of the cash

[25] Rollo, p. 159.

contract price of P450,000, Angeles paid GRI a total of

There was no actual cancellation of the contracts

tainer against Angeles on 11 November 2003, 61 days after

In order that compensation may be proper, it is necessary:

However, it was error for the MeTC to apply Article

[35] Id., at pp. 45-46.

PERIOD COVERED NO. OF RENTALS AMOUNT DUE

June to December 1999 7 11,000.00 77,000.00

January to December 2000 12 12,100.00 145,200.00

January to December 2001 12 13,310.00 159,720.00

January to December 2002 12 14,641.00 175,692.02 [sic]

January to August 2003 8 16,105.10 128,840.80

TOTAL AMOUNT DUE: P 686,452.82 [sic][36]

We cannot subscribe to GRI’s view that it merely

According to R.A. 6552, the cash surrender value, which in this

surrender value is hereby ordered deducted from the award owing

intents and purposes, never ceased to be the owner of the same

Mandatory Twin Requirements: