OLYMPIA HOUSING, INC., (PETITIONER) VS. PANASIATIC TRAVEL CORPORATION AND MA. NELIDA GALVEZ-YCASIANO, RESPONDENTS.

FACTS: The object in litigation is a condominium unit sold at the price of P2,340,000.00 payable on installments at the rate of P33,657.40 per month. On August 8, 1984, plaintiff Olympia Housing, Inc. and defendant Ma. Nelida Galvez-Ycasiano entered into a Contract to Sell, whereby the former agreed to sell to the latter condominium unit no. D-12, comprising an area of 160.50 square meters, more or less, situated on the ground floor of Olympia Condominium located at Makati, Metro Manila, covered by Condominium Certificate of Title No. 6711, for the agreed price of P2,340,000.00 payable in installments of P33,657.40 per month. Monthly amortization to commence on Sept. 17, 1984. Interest of 2% is included in regular monthly amortization, past due amortization shall bear interest of 2% per month plus penalty charge of 2% per month. Pursuant to the Contract to Sell, defendant Ma. Nelida Galvez-Ycasiano made a reservation/deposit in the amount of P100,000.00 on July 17, 1984 and 50% down payment in the amount of P1,070,000.00 on July 19, 1984. Defendants made several payments in cash and thru credit memos issued by plaintiff representing plane tickets bought by plaintiff from defendant Panasiatic Travel Corp., which is owned by defendant Ma. Nelida GalvezYcasiano, who credited/offset the amount of the said plane tickets to defendants account due to plaintiff. Plaintiff alleged that far from complying with the terms and conditions of said Contract to Sell, defendants failed to pay the corresponding monthly installments which as of June 2, 1988 amounted to P1,924,345.52. Demand to pay the same was sent to defendant Ma. Nelida Galvez-Ycasiano, but the latter failed to settle her obligation. For failure of defendant to pay her obligation plaintiff allegedly rescinded the contract by a Notarial Act of Rescission. At present, the subject condominium unit is being occupied by defendant Panasiatic Travel Corp., hence the suit for Recovery of Possession (Accion Publiciana) with prayer for attorneys fees, exemplary damages and reasonable rentals for the unit from July 28,1988 at the rate of P32,100.00 per month until the condominium unit is finally vacated.

Defendant Ma. Nelida Galvez-Ycasiano, while admitting the existence of the contract to sell, interposed the defense that she has made substantial payments of the purchase price of the subject condominium unit amounting to P1,964,452.82 in accordance with the provisions of the contract to sell; that she decided to stop payment of the purchase price in the meantime because of substantial differences between her and the plaintiff in the computation of the balance of the purchase price. The Regional Trial Court dismissed the complaint, having been prematurely filed without complying with RA6552. Respondents tendered the amount of P4,304,026.53 to petitioner via Metrobank Cashiers Check. Petitioner refused to accept the payment, constraining respondents to consign at the disposal of the court. In an order, the check was allowed to be substituted by another cashiers check payable to the Clerk of Court of the Makati Regional Trial Court. Complying with yet another court order, respondents deposited the amount of P4,304,026.53 with the Land Bank of the Philippines and subsequently submitted to the court the corresponding bank book as well as the banks verification. Both parties appealed the judgment of the trial court. In its now questioned decision of 11 June 1999, the appellate court sustained the trial court. ISSUES: 1) effect of the filing of the complaint and the notarial act of rescission attached thereto vis--vis the requirements of r.a. 6552 2) rescission of the subject contract to sell on the ground that petitioner failed to pay the cash surrender value prior to the filing of the complaint 3) allowing respondent ycasiano to pay on her already-defaulted obligations and, upon such payment, ordering petitioner to issue the certificate of title to her. RULING: The petition must be denied. The action for reconveyance filed by petitioner was predicated on an assumption that its contract to sell executed in favor of respondent buyer had been validly cancelled or rescinded. The records would show that, indeed, no such cancellation took place at any time prior to the institution of the action for reconveyance. What had been sent by petitioner to respondent was a letter, dated 02 June 1988, that read: 02 June 1988

MS. NELIDA GALVEZ Pan Asiatic Travel Corp. 3rd Floor, S & L Building Roxas Boulevard, Manila Dear Ms. Galvez: We have sent you many letters in the past asking you to update your payments in accordance with the terms of our Contract to Sell dated August 25, 1984 as follows: You are in default and your overdue account now stands as follows: Unless we receive payment in full within 30 days after service of this notice upon you, our Contract to Sell shall be cancelled and/or rescinded. Please give this matter its due attention. Very truly yours, (Sgd.) Illegible (Type) FELIX H. LIMCAOCO, JR. [8] President As so aptly observed by the courts below, the foregoing communication to the buyer merely demanded payment within thirty (30) days from receipt thereof with the threat that if the demand were not heeded, the contract would forthwith be cancelled or rescinded. Nor did the appellate court erroneously ignore the notarial rescission attached to the complaint for reconveyance. Apparently, the so-called notarial rescission was not sent to respondents prior to the institution of the case for reconveyance but merely served on respondents by way of an attachment to the complaint. In any case, a notarial rescission, standing alone, could not have invalidly effected, in this case, the cancellation of the contract. As the trial court elaborated in this case: It should be a notice of cancellation or demand for rescission of the contract by notarial act. Further, the law requires also full payment of the cash surrender value to the buyer but there is no evidence adduced by the plaintiff that they delivered to the defendant the cash surrender value. Admittedly, no such full payment of the cash surrender value to the defendant was made. A mere promise to return is not what the law contemplates. The governing law is Republic Act No. 6552, otherwise known as the Realty Instalment Buyer Protection Act,a special law governing transactions that

involve, subject to certain exceptions, the sale on instalment basis of real property. The law has been enacted mainly to protect buyers of real estate on instalment payments against onerous and oppressive conditions. The enactment recognizes the right of the seller to cancel the contract but any such cancellation must be done in conformity with the requirements [12] therein prescribed. In addition to the notarial act of rescission, the seller is required to refund to the buyer the cash surrender value of the payments on [13] the property. 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. The Court agrees with petitioner that it is not precluded from going to the court to demand judicial rescission in lieu of a notarial act of rescission. This much must be recognized. Thus, in Layug vs. Intermediate Appellate [14] Court the Court has ruled that a demand for rescission by notarial act would appear to be merely circuitous, consequently superfluous, with the filing by the seller of an action for annulment of contract and for recovery of damages. Unfortunately for petitioner, it would be incorrect to apply Layug to the instant case. Layug is basically an action for annulment of contract, a kindred concept of rescission, whereas the instant case before the Court is one for recovery of possession on the thesis of a prior rescission of the [15] contract covering the property. Not only is an action for reconveyance conceptually different from an action for rescission but that, also, the effects that flow from an affirmative judgment in either case would be materially dissimilar in various respects. The judicial resolution of a contract gives rise to mutual restitution which is not necessarily the situation that can arise in an action for reconveyance. Additionally, in an action for rescission (also often termed as resolution), unlike in an action for reconveyance predicated on an extrajudicial rescission (rescission by notarial act), the Court, instead of [16] decreeing rescission, may authorize for a just cause the fixing of a period.