G.R. No. 189145 (December 4, 2013)
Topics: contract to sell; cancellation
Summary:
A couple entered into a contract to sell but were later unable to pay monthly installments. Petitioner filed a complaint for unlawful detainer.
Doctrines:
The three (3) requisites before the seller may actually cancel the subject contract:
first, the seller shall give the buyer a 60-day grace period to be reckoned from the date the installment became due;
second, the seller must give the buyer a notice of cancellation/demand for rescission by notarial act if the buyer fails to pay the installments due at the expiration of the said grace period; and
third, the seller may actually cancel the contract only after thirty (30) days from the buyer’s receipt of the said notice of cancellation/demand for rescission by notarial act.
Facts:
On April 26, 2005, Sps. Jovellanos entered into a Contract to Sell with Palmera Homes, Inc. (Palmera Homes) for the purchase of a residential house and lot situated in Block 3, Lot 14, Villa Alegria Subdivision, Caloocan City (subject property) for a total consideration of ₱1,015,000.00.
Pursuant to the contract, Sps. Jovellanos took possession of the subject property upon a down payment of ₱91,500.00, undertaking to pay the remaining balance of the contract price in equal monthly installments of ₱13,107.00 for a period of 10 years starting June 12, 2005.
On August 22, 2006, Palmera Homes assigned all its rights, title and interest in the Contract to Sell in favor of petitioner Optimum Development Bank (Optimum) through a Deed of Assignment of even date.
On April 10, 2006, Optimum issued a Notice of Delinquency and Cancellation of Contract to Sell9 for Sps. Jovellanos’s failure to pay their monthly installments despite several written and verbal notices.10
In a final Demand Letter dated May 25, 2006, Optimum required Sps. Jovellanos to vacate and deliver possession of the subject property within seven (7) days which, however, remained unheeded. Hence, Optimum filed, on November 3, 2006, a complaint for unlawful detainer before the MeTC, docketed as Civil Case No. 06-28830. Despite having been served with summons, together with a copy of the complaint,13 Sps. Jovellanos failed to file their answer within the prescribed reglementary period, thus prompting Optimum to move for the rendition of judgment.
Thereafter, Sps. Jovellanos filed their opposition with motion to admit answer, questioning the jurisdiction of the court, among others. Further, they filed a Motion to Reopen and Set the Case for Preliminary Conference, which the MeTC denied.
In a Decision dated June 8, 2007, the MeTC ordered Sps. Jovellanos to vacate the subject property and pay Optimum reasonable compensation in the amount of ₱5,000.00 for its use and occupation until possession has been surrendered. It held that Sps. Jovellanos’s possession of the said property was by virtue of a Contract to Sell which had already been cancelled for non-payment of the stipulated monthly installment payments. As such, their “rights of possession over the subject property necessarily terminated or expired and hence, their continued possession thereof constituted unlawful detainer.”
On appeal to the RTC, the decision was affirmed, and the motion for reconsideration by the Sps. Jovellanos was denied.
However, the Court of Appeals reversed and set aside the RTC’s decision, ruling to dismiss the complaint for lack of jurisdiction. It found that the controversy does not only involve the issue of possession but also the validity of the cancellation of the Contract to Sell and the determination of the rights of the parties thereunder as well as the governing law, among others, Republic Act No. (RA) 6552.
Accordingly, it concluded that the subject matter is one which is incapable of pecuniary estimation and thus, within the jurisdiction of the RTC.
Issue:
Whether the validity of the cancellation of the Contract to Sell under RA 6552 lies within the competence or jurisdiction of the Metropolitan Trial Court.
Ruling:
YES. Metropolitan Trial Courts are conditionally vested with authority to resolve the question of ownership raised as an incident in an ejectment case where the determination is essential to a complete adjudication of the issue of possession. Concomitant to the ejectment court’s authority to look into the claim of ownership for purposes of resolving the issue of possession is its authority to interpret the contract or agreement upon which the claim is premised.
In Union Bank of the Philippines v. Maunlad Homes, Inc. (Union Bank), citing Sps. Refugia v. CA, the Court declared that MeTCs have authority to interpret contracts in unlawful detainer cases.
Under RA 6552, known as the Maceda Law, the mechanics of cancellation of Contract to Sell is based on the amount of installments already paid by the buyer under the said contract. Since Sps. Jovellanos failed to pay their stipulated monthly installments as found by the MeTC (Jovellanos had paid less than two years in installments), the Court examines Optimum’s compliance with Section 4 of RA 6552, which is the provision applicable to buyers who have paid less than two (2) years-worth of installments.
Essentially, the said provision provides for three (3) requisites before the seller may actually cancel the subject contract: first, the seller shall give the buyer a 60-day grace period to be reckoned from the date the installment became due; second, the seller must give the buyer a notice of cancellation/demand for rescission by notarial act if the buyer fails to pay the installments due at the expiration of the said grace period; and third, the seller may actually cancel the contract only after thirty (30) days from the buyer’s receipt of the said notice of cancellation/demand for rescission by notarial act.
In the present case, the 60-day grace period automatically operated in favor of the buyers, Sps. Jovellanos, and took effect from the time that the maturity dates of the installment payments lapsed. With the said grace period having expired bereft of any installment payment on the part of Sps. Jovellanos, Optimum then issued a notarized Notice of Delinquency and Cancellation of Contract on April 10, 2006. Finally, in proceeding with the actual cancellation of the contract to sell, Optimum gave Sps. Jovellanos an additional thirty (30) days within which to settle their arrears and reinstate the contract, or sell or assign their rights to another.
It was only after the expiration of the thirty day (30) period did Optimum treat the contract to sell as effectively cancelled – making as it did a final demand upon Sps. Jovellanos to vacate the subject property only on May 25, 2006. Thus, based on the foregoing, the Court finds that there was a valid and effective cancellation of the Contract to Sell in accordance with Section 4 of RA 6552 and since Sps. Jovellanos had already lost their right to retain possession of the subject property as a consequence of such cancellation, their refusal to vacate and turn over possession to Optimum makes out a valid case for unlawful detainer as properly adjudged by the MeTC.