REPUBLIC ACT No. 6552 AN ACT TO PROVIDE PROTECTION TO BUYERS OF REAL ESTATE ON INSTALLMENT PAYMENTS. (Rep. Act No.

6552) Section 1. This Act shall be known as the "Realty Installment Buyer Act." Section 2. It is hereby declared a public policy to protect buyers of real estate on installment payments against onerous and oppressive conditions. 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 canceled, the seller shall refund to the buyer the cash surrender value of the payments on the property equivalent to fifty per cent of the total payments made, and, after five years of installments, an additional five per cent every year but not to exceed ninety per cent of the total payments made: Provided, That the actual cancellation of the contract shall take place after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act and upon full payment of the cash surrender value to the buyer. Down payments, deposits or options on the contract shall be included in the computation of the total number of installment payments made.lawphi1 Section 4. In case where less than two years of installments were paid, the seller shall give the buyer a grace period of not less than sixty days from the date the installment became due. If the buyer fails to pay the installments due at the expiration of the grace period, the seller may cancel the contract 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. Section 5. Under Section 3 and 4, the buyer shall have the right to sell his rights or assign the same to another person or to reinstate the contract by updating the account during the grace period and before actual cancellation of the contract. The deed of sale or assignment shall be done by notarial act. Section 6. The buyer shall have the right to pay in advance any installment or the full unpaid balance of the purchase price any time without interest and to have such full payment of the purchase price annotated in the certificate of title covering the property. Section 7. Any stipulation in any contract hereafter entered into contrary to the provisions of Sections 3, 4, 5 and 6, shall be null and void. Section 8. If any provision of this Act is held invalid or unconstitutional, no other provision shall be affected thereby.lawphi1 Section 9. This Act shall take effect upon its approval. Approved: August 26, 1972.

Ramos v. Heruela, 473 scra 79

Facts: The spouses Ramos own a parcel of land, consisting of 1,883 square meters. On 18 February 1980, the spouses Ramos made an agreement with the spouses Heruela covering 306 square meters of the land. According to the spouses Ramos, the agreement is a contract of conditional sale. The spouses Heruela allege that the contract is a sale on installment basis. On 27 January 1998, the spouses Ramos filed a complaint for Recovery of Ownership with Damages against the spouses Heruela. The spouses Ramos allege that out of the P15,300 consideration for the sale of the land, the spouses Heruela paid only P4,000. The last installment that the spouses Heruela paid was on 18 December 1981. The spouses Ramos assert that the spouses Heruela s unjust refusal to pay the balance of the purchase price caused the cancellation of the Deed of Conditional Sale. In June 1982, the spouses Ramos discovered that the spouses Heruela were already occupying a portion of the land. Cherry and Raymond Pallori, daughter and son-in-law, respectively, of the spouses Heruela, erected another house on the land. The spouses Heruela and the spouses Pallori refused to vacate the land despite demand by the spouses Ramos. The spouses Heruela allege that the contract is a sale on installment basis. They paid P2,000 as down payment and made several installment payments from 31 March 1980 until 18 December 1981. The spouses Heruela claim that in March 1982, they expressed their willingness to pay the balance of P11,300 but the spouses Ramos refused their offer. The trial court ruled that the contract is a sale by installment. The trial court ruled that the spouses Ramos failed to comply with Section 4 of Republic Act No. 6552. Issue: Whether RA 6552 is applicable to the case at bar.

Ruling: The Agreement is a Contract to Sell. In a conditional sale, as in a contract to sell, ownership remains with the vendor and does not pass to the vendee until full payment of the purchase price. The full payment of the purchase price partakes of a suspensive condition, and non-fulfillment of the condition prevents the obligation to sell from arising. In this case, the agreement of the parties is embodied in a one-page, handwritten document. The document does not contain the usual terms and conditions of a formal deed of sale. The original document, elevated to this Court as part of the Records, is torn in part. Only the words LMENT BASIS is legible on the title. The names and addresses of the parties and the identity of the property cannot be ascertained. The agreement only provides for the following terms of the sale:
TERM[S] OF SALE: PRICE PER SQM P50.00 X 306 SQM P 15,300.00 DOWN PAYMENT (TWO THOUSAND PESOS) 2,000.00 BALANCE PAYABLE AT MINIMUM OF P200.00 P 13,300.00 PER MONTH UNTIL FULLY PAID =======

The records show that the spouses Heruela did not immediately take actual, physical possession of the land. Clearly, there was no transfer of title to the spouses Heruela. The spouses Ramos retained their ownership of the land. This only shows that the parties did not intend the transfer of ownership until full payment of the purchase price. [19] [20] RA 6552 is the Applicable Law. Articles 1191 and 1592 of the Civil Code are applicable to contracts of sale. In contracts to sell, RA 6552 applies. In this case, the spouses Heruela paid less than two years of installments. Thus, Section 4 of RA 6552 applies. However, there was neither a notice of cancellation nor demand for rescission by notarial act to the spouses Heruela. There being no valid rescission of the contract to sell, the spouses Heruela have not lost the statutory grace period within which to pay. Decision AFFIRMED with MODIFICATIONS.

Fabrigas v. San Francisco del Monte, 476 scra 247

Facts: On April 23, 1983, herein petitioner spouses Isaias and Marcelina Fabrigas and respondent San Francisco Del Monte, Inc. entered into an agreement, denominated as Contract to Sell No. 2482-V, whereby the latter agreed to sell to Spouses Fabrigas a parcel of residential land for and in consideration of the amount of P109,200.00. The agreement stipulated that Spouses Fabrigas shall pay P30,000.00 as downpayment and the balance within ten (10) years in monthly successive installments of P1,285.69. Among the clauses in the contract is an automatic cancellation clause in case of default, which states as follows:
7. Should the PURCHASER fail to make any of the payments including interest as herein provided, within 30 days after the due date, this contract will be deemed and considered as forfeited and annulled without necessity of notice to the PURCHASER, and said SELLER shall be at liberty to dispose of the said parcel of land to any other person in the same manner as if this contract had never been executed. In the event of such forfeiture, all sums of money paid under this contract will be considered and treated as rentals for the use of said parcel of land, and the PURCHASER hereby waives all right to ask or demand the return thereof and agrees to peaceably vacate the said premises.

After paying P30,000.00, Spouses Fabrigas took possession of the property but failed to make any installment payments on the balance of the purchase price. Del Monte sent demand letters on four occasions to remind [4] Spouses Fabrigas to satisfy their contractual obligation. In particular, Del Monte s third letter dated November 9, 1983 demanded the payment of arrears in the amount of P8,999.00. Said notice granted Spouses Fabrigas a fifteen-day grace period within which to settle their accounts. Petitioners failure to heed Del Monte s demands prompted the latter to send a final demand letter dated December 7, 1983, granting Spouses Fabrigas another grace period of fifteen days within which to pay the overdue amount and warned them that their failure to satisfy their obligation would cause the rescission of the contract and the forfeiture of the sums of money already paid. Petitioners received Del Monte s final demand letter on December 23, 1983. Del Monte considered Contract to Sell No. 2482-V cancelled fifteen days thereafter, but did not furnish petitioners any notice regarding its cancellation. On November 6, 1984, petitioner Marcelina Fabrigas remitted the amount of P13,000.00 to Del Monte. On January 12, 1985, petitioner Marcelina again remitted the amount of P12,000.00. A few days thereafter, or on January 21, 1985, petitioner Marcelina and Del Monte entered into another agreement denominated as Contract to Sell No. 2491-V, covering the same property but under restructured terms of payment. Under the second contract, the parties agreed on a new purchase price of P131,642.58, the amount of P26,328.52 as downpayment and the balance to be paid in monthly installments ofP2,984.60 each. Between March 1985 and January 1986, Spouses Fabrigas made irregular payments under Contract to Sell No. 2491-V. Del Monte sent a demand letter dated February 3, 1986, informing petitioners of their overdue account equivalent to nine (9) installments or a total amount of P26,861.40. Del Monte required petitioners to satisfy said amount immediately in two subsequent letters dated March 5 and April 2, 1986. This prompted petitioners to pay a total of P12,000 from February 3, 1986 until July 14, 1986. No other payments were made by petitioners except the amount of P10,000.00 which petitioners tendered sometime in October 1987 but which Del Monte refused to accept, the latter claiming that the payment was intended for the satisfaction of Contract to Sell No. 2482-V which had already been previously cancelled. On March 24, 1988, Del Monte sent a letter demanding the payment of accrued installments under Contract to Sell No. 2491V in the amount of P165,759.60 less P48,128.52, representing the payments made under the restructured contract, or the net amount of P117,631.08. Del Monte allowed petitioners a grace period of thirty (30) days within which to pay the amount asked to avoid rescission of the contract. For failure to pay, Del Monte notified petitioners on March 30, 1989 that Contract to Sell No. 2482-V had been cancelled and demanded that petitioners vacate the property. On September 28, 1990, Del Monte instituted an action for Recovery of Possession with Damages against Spouses Fabrigas before the RTC. The complaint alleged that Spouses Fabrigas owed Del Monte the principal amount ofP206,223.80 plus interest of 24% per annum. In their answer, Spouses Fabrigas claimed, among others, that Del

Monte unilaterally cancelled the first contract and forced petitioner Marcelina to execute the second contract, which materially and unjustly altered the terms and conditions of the original contract. After trial on the merits, the trial court rendered a Decision upholding the validity of Contract to Sell No. 2491V and ordering Spouses Fabrigas either to complete payments thereunder or to vacate the property. Aggrieved, Spouses Fabrigas elevated the matter to the Court of Appeals, arguing that the trial court should have upheld the validity and existence of Contract to Sell No. 2482-V instead and nullified Contract to Sell No. 2491-V. The Court of Appeals rejected this argument on the ground that Contract to Sell No. 2482-V had been rescinded pursuant to the automatic rescission clause therein. While the Court of Appeals declared Contract to Sell No. 2491V as merely unenforceable for having been executed without petitioner Marcelina s signature, it upheld its validity upon finding that the contract was subsequently ratified. Petitioners theorize that Contract to Sell No. 2482-V should remain valid and subsisting because the notice of cancellation sent by Del Monte did not observe the requisites under Section 3 of R.A. 6552. According to petitioners, since respondent did not send a notarial notice informing them of the cancellation or rescission of Contract to Sell No. 2482-V and also did not pay them the cash surrender value of the payments on the property, the Court of Appeals erred in concluding that respondent correctly applied the automatic rescission clause of Contract to Sell No. 2482-V. Petitioners also cite Section 7 of said law to bolster their theory that the automatic rescission clause in Contract to Sell No. 2482-V is invalid for being contrary to law and public policy. Issue: If Contract to Sell No. 2482-V was rescinded, should the manner of rescission comply with the requirements of Republic Act No. (R.A.) 6552? Ruling: The Court of Appeals erred in ruling that Del Monte was well within its right to cancel the contract by express grant of paragraph 7 without the need of notifying [petitioners], instead of applying the pertinent provisions of R.A. 6552. Petitioners contention that none of Del Monte s demand letters constituted a valid rescission of Contract to Sell No. 2482-V is correct. Petitioners defaulted in all monthly installments. They may be credited only with the amount of P30,000.00 paid upon the execution of Contract to Sell No. 2482-V, which should be deemed equivalent to less than two (2) years installments. Given the nature of the contract between petitioners and Del Monte, the applicable legal provision on the mode of cancellation of Contract to Sell No. 2482-V is Section 4 and not Section 3 of R.A. 6552. Section 4 is applicable to instances where less than two years installments were paid. Thus, the cancellation of the contract under Section 4 is a two-step process. First, the seller should extend the buyer a grace period of at least sixty (60) days from the due date of the installment. Second, at the end of the grace period, the seller shall furnish the buyer with a notice of cancellation or demand for rescission through a notarial act, effective thirty (30) days from the buyer s receipt thereof. It is worth mentioning, of course, that a mere notice or letter, short of a notarial act, would not suffice. While the Court concedes that Del Monte had allowed petitioners a grace period longer than the minimum sixty (60)-day requirement under Section 4, it did not comply, however, with the requirement of notice of cancellation or a demand for rescission. Instead, Del Monte applied the automatic rescission clause of the contract. Contrary, however, to Del Monte s position which the appellate court sustained, the automatic cancellation clause is void under Section 7 in relation to Section 4 of R.A. 6552. Notwithstanding the improper rescission, the facts of the case show that Contract to Sell No. 2482-V was subsequently novated by Contract to Sell No. 2491-V. The execution of Contract to Sell No. 2491-V accompanied an upward change in the contract price, which constitutes a change in the object or principal conditions of the contract. In entering into Contract to Sell No. 2491-V, the parties were impelled by causes different from those obtaining under Contract to Sell No. 2482-V. On the part of petitioners, they agreed to the terms and conditions of Contract to Sell No. 2491-V not only to acquire ownership over the subject property but also to avoid the

consequences of their default under Contract No. 2482-V. On Del Monte s end, the upward change in price was the consideration for entering into Contract to Sell No. 2491-V. In sum, Contract to Sell No. 2491-V is valid and binding. There is nothing to prevent respondent Del Monte from enforcing its contractual stipulations and pursuing the proper court action to hold petitioners liable for their breach thereof. The instant Petition for Review is DENIED and the Decision of the Court of Appeals is AFFIRMED.

Rillo v. CA, 247 scra 461

Facts: On June 18, 1985, petitioner Rillo signed a "Contract To Sell of Condominium Unit" with private respondent Corb Realty Investment Corporation. Under the contract, CORB REALTY agreed to sell to RILLO a 61.5 square meter condominium unit. The contract price was P150,000.00, one half of which was paid upon its execution, while the balance of P75,000.00 was to be paid in twelve (12) equal monthly installments of P7,092.00 beginning July 18, 1985. It was also stipulated that all outstanding balance would bear an interest of 24% per annum; the installment in arrears would be subject to liquidated penalty of 1.5% for every month of default from due date. It was further agreed that should petitioner default in the payment of three (3) or four (4) monthly installments, forfeiture proceedings would be governed by existing laws, particularly the Condominium Act. On July 18, 1985, RILLO failed to pay the initial monthly amortization. On August 18, 1985, he again defaulted in his payment. On September 20, 1985, he paid the first monthly installment of P7,092.00. On October 2, 1985, he paid the second monthly installment of P7,092.00. His third payment was on February 2, 1986 but he paid only P5,000.00 instead of the stipulated P7,092.00. On July 20, 1987 or seventeen (17) months after RILLO's last payment, CORB REALTY informed him by letter that it is cancelling their contract due to his failure to settle his accounts on time. CORB REALTY also expressed its willingness to refund RILLO's money. CORB REALTY, however, did not cancel the contract for on September 28, 1987, it received P60,000.00 from petitioner. RILLO defaulted again in his monthly installment payment. Consequently, CORB REALTY informed RILLO through letter that it was proceeding to rescind their contract. In a letter dated August 29, 1988, it requested RILLO to come to its office and withdraw P102,459.35 less the rentals of the unit from July 1, 1985 to February 28, 1989. Again the threatened rescission did not materialize. A "compromise" was entered into by the parties on March 12, 1989, which stipulated the following:
"1. Restructure Outstanding Balance Down to P50,000.00 "2. Payment @ P2,000.00/Month @ 18% (Eighteen Percent)-Monthly- To Compute No. of Installments "3. To Pay Titling Plus Any Real Estate Tax Due "4. Installments to start April 15, 1989."

Rillo once more failed to honor their agreement. RILLO was able to pay P2,000.00 on April 25, 1989 and P2,000.00 on May 15, 1989. On April 3, 1990, CORB REALTY sent RILLO a statement of accounts which fixed his total arrears, including interests and penalties, to P155,129.00. When RILLO failed to pay this amount, CORB REALTY filed a complaint for cancellation of the contract to sell with the Regional Trial Court of Pasig. In his answer to the complaint, RILLO averred, among others, that while he had already paid a total of P149,000.00, CORB REALTY could not deliver to him his individual title to the subject property; that CORB REALTY could not claim any right under their previous agreement as the same was already novated by their new agreement for him to payP50,000.00 representing interest charges and other penalties spread through twenty-five (25) months beginning April 1989; and that CORB REALTY's claim of P155,129.99 over and above the amount he already paid has no legal basis.

The Regional Trial Court held that CORB REALTY cannot rescind the "Contract to Sell" because petitioner did not commit a substantial breach of its terms. It found that RILLO substantially complied with the "Contract to Sell" by paying a total of P154,184.00. It ruled that the remedy of CORB REALTY is to file a case for specific performance to collect the outstanding balance of the purchase price. The respondent Court of Appeals reversed the decision. It ruled: (1) that rescission does not apply as the contract between the parties is not an absolute conveyance of real property but is a contract to sell; (2) that the Condominium Act (Republic Act No. 4726, as amended by R.A. 7899) does not provide anything on forfeiture proceedings in cases involving installment sales of condominium units, hence, it is Presidential Decree No. 957 (Subdivision and Condominium Buyers Protective Decree) which should be applied to the case at bar. Under Presidential Decree No. 957, the rights of a buyer in the event of failure to pay installment due, other than the failure of the owner or developer to develop the project, shall be governed by Republic Act No. 6552 or the REALTY INSTALLMENT BUYER PROTECTION ACT also known as the Maceda Law (enacted on September 14, 1972). The dispositive portion of its Decision states: Issue: Whether or not CORB REALTY is entitle to rescind the contract.

Ruling: The respondent court did not err when it did not apply Articles 1191 and 1592 of the Civil Code on rescission to the case at bar. The contract between the parties is not an absolute conveyance of real property but a contract to sell. In a contract to sell real property on installments, the full payment of the purchase price is a positive suspensive condition, the failure of which is not considered a breach, casual or serious, but simply an event which prevented the obligation of the vendor to convey title from acquiring any obligatory force." The transfer of ownership and title would occur after full payment of the purchase price. There can be no rescission of an obligation that is still non-existent, the suspensive condition not having happened. Given the nature of the contract of the parties, the respondent court correctly applied Republic Act No. 6552. Known as the Maceda Law, R.A. No. 6552 recognizes in conditional sales of all kinds of real estate (industrial, commercial, residential) the right of the seller to cancel the contract upon non-payment of an installment by the buyer, which is simply an event that prevents the obligation of the vendor to convey title from acquiring binding force. It also provides the right of the buyer on installments in case he defaults in the payment of succeeding installments. Petitioner RILLO paid less than two years in installment payments, hence, he is only entitled to a grace period of not less than sixty (60) days from the due date within which to make his installment payment. CORB REALTY, on the otherhand, has the right to cancel the contract after thirty (30) days from receipt by RILLO of the notice of cancellation. Hence, the respondent court did not err when it upheld CORB REALTY's right to cancel the subject contract upon repeated defaults in payment by RILLO. Nevertheless, we do not agree with the respondent Court so far as it ordered private respondent CORB REALTY to refund 50% of P158,184.00 or P79,092.00 to petitioner RILLO. Under Republic Act No. 6552, the right of the buyer to a refund accrues only when he has paid at least two (2) years of installments. In the case at bar, RILLO has paid less than two (2) years in installments, hence, he is not entitled to a refund. The decision appealed from is AFFIRMED with the MODIFICATION that the refund of 50% P158,184.00 or P79,092.00 made in favor of petitioner Emiliano Rillo is deleted.

Cordero v. FS Management and Corp., 506 scra 451

Facts: On or about October 27, 1994, petitioner Belen Cordero (Belen), in her own behalf and as attorney-in-fact of her co-petitioners Darrel Cordero, Egmedio Bautista, Rosemay Bautista, Marion Bautista, Danny Boy Cordero and Ladylyn Cordero, entered into a contract to sell3 with respondent, F.S. Management and Development Corporation, through its chairman Roberto P. Tolentino over five (5) parcels of land located in Nasugbu, Batangas.

Pursuant to the terms and conditions of the contract to sell, respondent paid earnest money in the amount ofP500,000 on October 27, 1994. She likewise paid P1,000,000 on June 30, 1995 and another P1,000,000 on July 6, 1995. No further payments were made thereafter. Petitioners thus sent respondent a demand letter dated November 28, 1996 informing her that they were revoking/canceling the contract to sell and were treating the payments already made as payment for damages suffered as a result of the breach of contract, and demanding the payment of the amount of P10 Million Pesos for actual damages suffered due to loss of income by reason thereof. Respondent ignored the demand, however. Hence, on February 21, 1997, petitioner Belen, in her own behalf and as attorney-in-fact of her co-petitioners, filed before the RTC of Paraaque a complaint for rescission of contract with damages8 alleging that respondent failed to comply with its obligations under the contract to sell, specifically its obligation to pay the downpayment ofP3.5 Million by April 30, 1995, and the balance within 18 months thereafter; and that consequently petitioners are entitled to rescind the contract to sell as well as demand the payment of damages. In its Answer, respondent alleged that petitioners have no cause of action considering that they were the first to violate the contract to sell by preventing access to the properties despite payment of P2.5 Million Pesos; petitioners prevented it from complying with its obligation to pay in full by refusing to execute the final contract of sale unless additional payment of legal interest is made; and petitioners refusal to execute the final contract of sale was due to the willingness of another buyer to pay a higher price. Meanwhile, the trial court issued its decision on November 18, 1997, finding for petitioners and ordering respondent to pay damages and attorney s fees. The dispositive portion of the decision reads: WHEREFORE, premises considered, the contract to sell between the Plaintiffs and the Defendant is hereby declared as rescinded and the defendant is likewise ordered to pay the plaintiff. In the assailed decision, the Court of Appeals set aside the contract to sell, it finding that petitioners obligation thereunder did not arise for failure of respondent to pay the full purchase price. It also set aside the award to petitioners of damages for not being duly proven. And it ordered petitioners to return "the amount received from [respondent]." Petitioners contend that the Court of Appeals erred in ruling on the nature of the contract to sell and the propriety of the remedy of rescission under Article 1191 of the Civil Code, these matters not having been raised by respondents in the assigned errors. In any event, petitioners claim that the contract to sell involves reciprocal obligations, hence, it falls within the ambit of Article 1191 Issue: WON respondent has the right to rescind the contract. WON petitioner are entitled to retain the payments already made by respondents. Ruling: Under a contract to sell, the seller retains title to the thing to be sold until the purchaser fully pays the agreed purchase price. The full payment is a positive suspensive condition, the non-fulfillment of which is not a breach of contract but merely an event that prevents the seller from conveying title to the purchaser. The nonpayment of the purchase price renders the contract to sell ineffective and without force and effect. Since the obligation of petitioners did not arise because of the failure of respondent to fully pay the purchase price, Article 1191 of the Civil Code would have no application. The subject contract to sell clearly states that "title will be transferred by the owner (petitioners) to the buyer (respondent) upon complete payment of the agreed purchase price." Since respondent failed to fully pay the

purchase price, petitioners obligation to convey title to the properties did not arise. While rescission does not apply in this case, petitioners may nevertheless cancel the contract to sell, their obligation not having arisen. The properties subject of the contract having been intended for commercial, and not for residential, purposes, petitioners are entitled to retain the payments already made by respondent. RA 6552 expressly recognizes the vendor s right to cancel contracts to sell on installment basis of industrial and commercial properties with full retention of previous payments. But even assuming that the properties were not intended for commercial or industrial purpose, since respondent paid less than two years of installments, it is not entitled to any refund. It is on this score that a modification of the challenged issuances of the appellate court is in order. The assailed Court of Appeals Decisions are AFFIRMED with the MODIFICATION that petitioners are entitled to retain the payments already received from respondent.

PAGTALUNAN, petitioner, vs. VDA. DE MANZANO, respondent.

Facts: On July 19, 1974, Patricio Pagtalunan (Patricio), petitioner s stepfather and predecessor-in-interest, entered into a Contract to Sell with respondent, wife of Patricio s former mechanic, Teodoro Manzano, whereby the former agreed to sell, and the latter to buy, a house and lot which formed half of a parcel of land, with an area of 236 square meters. The consideration of P17,800 was agreed to be paid in the following manner: P1,500 as downpayment upon execution of the Contract to Sell, and the balance to be paid in equal monthly installments of P150 on or before the last day of each month until fully paid. It was also stipulated in the contract that respondent could immediately occupy the house and lot; that in case of default in the payment of any of the installments for 90 days after its due date, the contract would be automatically rescinded without need of judicial declaration, and that all payments made and all improvements done on the premises by respondent would be considered as rentals for the use and occupation of the property or payment for damages suffered, and respondent was obliged to peacefully vacate the premises and deliver the possession thereof to the vendor. Petitioner claimed that respondent paid only P12,950. She allegedly stopped paying after December 1979 without any justification or explanation. Moreover, in a "Kasunduan"1 dated November 18, 1979, respondent borrowedP3,000 from Patricio payable in one year either in one lump sum payment or by installments, failing which the balance of the loan would be added to the principal subject of the monthly amortizations on the land. Lastly, petitioner asserted that when respondent ceased paying her installments, her status of buyer was automatically transformed to that of a lessee. Therefore, she continued to possess the property by mere tolerance of Patricio and, subsequently, of petitioner. On the other hand, respondent alleged that she paid her monthly installments religiously, until sometime in 1980 when Patricio changed his mind and offered to refund all her payments provided she would surrender the house. She refused. Patricio then started harassing her and began demolishing the house portion by portion. Respondent admitted that she failed to pay some installments after December 1979, but that she resumed paying in 1980 until her balance dwindled to P5,650. She claimed 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 and Patricio signed an agreement (Exh. 2) whereby he consented to the suspension of respondent s monthly payments until December 1981. However, even before the lapse of said period, Patricio resumed demolishing respondent s house, prompting her to lodge a complaint with the Barangay Captain who advised her that she could continue suspending payment even beyond December 31, 1981 until Patricio returned all the materials he took from her house. This Patricio failed to do until his death.

Respondent did not deny that she still owed Patricio P5,650, but claimed that she did not resume paying her monthly installment because of the unlawful acts committed by Patricio, as well as the filing of the ejectment case against her. She denied having any knowledge of the Kasunduan of November 18, 1979. Patricio and his wife died on September 17, 1992 and on October 17, 1994, respectively. Petitioner became their sole successor-in-interest pursuant to a waiver by the other heirs. On March 5, 1997, respondent received a letter from petitioner s counsel dated February 24, 1997 demanding that she vacate the premises within five days on the ground that her possession had become unlawful. Respondent ignored the demand. On April 8, 1997, petitioner filed a Complaint for unlawful detainer against respondent with the Municipal Trial Court praying that, after hearing, judgment be rendered ordering respondent to immediately vacate the subject property and surrender it to petitioner; forfeiting the amount of P12,950 in favor of petitioner as rentals; ordering respondent to pay petitioner the amount of P3,000 under the Kasunduan and the amount of P500 per month from January 1980 until she vacates the property, and to pay petitioner attorney s fees and the costs. The MTC rendered a decision in favor of petitioner. It stated that although the Contract to Sell provides for a rescission of the agreement upon failure of the vendee to pay any installment, what the contract actually allows is properly termed a resolution under Art. 1191 of the Civil Code. On appeal, the RTC, reversed the decision of the MTC and dismissed the case for lack of merit. According to the RTC, the agreement could not be automatically rescinded since there was delivery to the buyer. A judicial determination of rescission must be secured by petitioner as a condition precedent to convert the possession de facto of respondent from lawful to unlawful. The CA found that the parties, as well as the MTC and RTC failed to advert to and to apply Republic Act (R.A.) No. 6552, more commonly referred to as the Maceda Law, which is a special law enacted in 1972 to protect buyers of real estate on installment payments against onerous and oppressive conditions. The CA held that the Contract to Sell was not validly cancelled or rescinded under Sec. 3 (b) of R.A. No. 6552, and recognized respondent s right to continue occupying unmolested the property subject of the contract to sell. Before the SC, petitioner contends that respondent also had more than the grace periods provided under the 7 Maceda Law within which to pay. Under Sec. 3 of the said law, a buyer who has paid at least two years of installments has a grace period of one month for every year of installment paid. Based on the amount of P12,950 which respondent had already paid, she is entitled to a grace period of six months within which to pay her unpaid installments after December, 1979. Respondent was given more than six months from January 1980 within which to settle her unpaid installments, but she failed to do so. Petitioner s demand to vacate was sent to respondent in February 1997. There is nothing in the Maceda Law, petitioner asserts, which gives the buyer a right to pay arrearages after the grace periods have lapsed, in the event of an invalid demand for rescission. The Maceda Law only provides that actual cancellation shall take place after 30 days from receipt of the notice of cancellation or demand for rescission and upon full payment of the cash surrender value to the buyer. Petitioner contends that his demand letter dated February 24, 1997 should be considered the notice of cancellation since the demand letter informed respondent that she had "long ceased to have any right to possess the premises in question due to [her] failure to pay without justifiable cause." In support of his contention, he citedLayug v. Intermediate Appellate Court which held that "the additional formality of a demand on [the seller s] part for rescission by notarial act would appear, in the premises, to be merely circuitous and consequently superfluous." He stated that in Layug, the seller already made a written demand upon the buyer.

In addition, petitioner asserts that whatever cash surrender value respondent is entitled to have been applied and must be applied to rentals for her use of the house and lot after December, 1979 or after she stopped payment of her installments. Issue: WON the Maceda Law is applicable to the instant case.

Ruling: The CA correctly ruled that R.A No. 6552, which governs sales of real estate on installment, is applicable in the resolution of this case. This case originated as an action for unlawful detainer. Respondent is alleged to be illegally withholding possession of the subject property after the termination of the Contract to Sell between Patricio and respondent. It is, therefore, incumbent upon petitioner to prove that the Contract to Sell had been cancelled in accordance with R.A. No. 6552. R.A. No. 6552, otherwise known as the "Realty Installment Buyer Protection Act," recognizes in conditional sales of all kinds of real estate (industrial, commercial, residential) the right of the seller to cancel the contract upon nonpayment of an installment by the buyer, which is simply an event that prevents the obligation of the vendor to convey title from acquiring binding force. The Court agrees with petitioner that the cancellation of the Contract to Sell may be done outside the court particularly when the buyer agrees to such cancellation. However, the cancellation of the contract by the seller must be in accordance with Sec. 3 (b) of R.A. No. 6552, which requires a notarial act of rescission and the refund to the buyer of the full payment of the cash surrender value of the payments on the property. Actual cancellation of the contract takes place after 30 days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act and upon full payment of the cash surrender value to the buyer. Based on the records of the case, the Contract to Sell was not validly cancelled or rescinded under Sec. 3 (b) of R.A. No. 6552. First, Patricio, the vendor in the Contract to Sell, died on September 17, 1992 without canceling the Contract to Sell. Second, petitioner also failed to cancel the Contract to Sell in accordance with law. Clearly, the demand letter is not the same as the notice of cancellation or demand for rescission by a notarial act required by R.A No. 6552. In addition, 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. There being no valid cancellation of the Contract to Sell, the CA correctly recognized respondent s right to continue occupying the property subject of the Contract to Sell and affirmed the dismissal of the unlawful detainer case by the RTC. Considering that the Contract to Sell was not cancelled by the vendor, Patricio, during his lifetime or by petitioner in accordance with R.A. No. 6552 when petitioner filed this case of unlawful detainer after 22 years of continuous possession of the property by respondent who has paid the substantial amount of P12,300 out of the purchase price of P17,800, the Court agrees with the CA that it is only right and just to allow respondent to pay her arrears and settle the balance of the purchase price. Decision AFFIRMED with MODIFICATIONS.