G.R. No.

189145 December 4, 2013

OPTIMUM DEVELOPMENT BANK, Petitioner,
vs.
SPOUSES BENIGNO V. JOVELLANOS and LOURDES R. JOVELLANOS, Respondents.

The Facts
Spouses Jovellanos entered into a Contract to Sell with Palmera Homes for the purchase of a residential house and lot lot
situated in Block 3, Lot 14, Villa Alegria Subdivision, Caloocan City (subject property) for a total consideration of ₱1,015,000.00 with
down payment of ₱91,500.00 and the remaining balance payable 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 Optimum Development Bank. On April 10,
2006, Optimum issued a Notice of Delinquency and Cancellation of Contract to Sell for Sps. Jovellanos’s failure to pay their monthly
installments despite several written and verbal demands. A month later, a final Demand Letter by Optimum required Spouses Jovellanos
to vacate the deliver possession of the subject property within 7 days, which however remained unheeded. Optimum instituted the action
for unlawful detainer within one year from the final demand to vacate.
The MeTC Ruling:
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 constitute[d] unlawful detainer."
Sps. Jovellanos appealed to the RTC assailed the jurisdiction of the MeTC, claiming that the case did not merely involve the issue of
physical possession but rather, questions arising from their rights under a contract to sell which is a matter that is incapable of pecuniary
estimation and, therefore, within the jurisdiction of the RTC.
RTC Ruling:
RTC affirmed the MeTC’s judgment. It also affirmed the MeTC’s finding that the action does not involve the rights of the respective
parties under the contract but merely the recovery of possession by Optimum of the subject property after the spouses’ default.
CA Ruling:
CA 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.
Hence, the instant petition, submitting that the case is one for unlawful detainer, which falls within the exclusive original jurisdiction of
the municipal trial courts, and not a case incapable of pecuniary estimation cognizable solely by the regional trial courts.
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. The petition is GRANTED. The Decision of the Court of Appeals are SET ASIDE. The Decision of Metropolitan
Trial Court, Branch 53, Caloocan City in REINSTATED.
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