MANUEL C. PAGTALUNAN vs. RUFINA DELA CRUZ VDA.

DE MANZANO
G.R. No. 147695
September 13, 2007
J. Azcuna

Facts:
In September 1974, Patricio Pagtalunan (step-father of Manuel, the petitioner) entered into a
Contact to Sell with Rufina Dela Cruz. The Contract involves the sale of a house and lot for P17,800
with the following terms:
● Manner of payment: P1,500 DP and P150 monthly installments until fully paid;
● That Rufina could immediately occupy the property;
● That in the case of default in installment 90 days after due date
○ the contract would automatically be rescinded without the need for judicial declaration,
○ all previous payments would be considered as rentals for the property,
○ that Rufina would peacefully vacate the property and deliver the possession of the
property to Patricio.

Petitioner’s allegations:
Five years later (December 1979), Rufina stopped paying her installments without explanation
(total payments made: P12,950). Patricio also entered into a Kasunduan in November 1979 where
Teodoro (Rufina’s husband) borrowed P3,000 from Patricio payable in one year, and in the event he
is unable to pay the loan, the amount shall be added to their installment payments for the land.

Rufina has become a mere lessee of the property because of her non-payment of her dues as
stated in the terms of the Contract.

Respondent’s answer:
Rufina said that she religiously pays her installments religiously until sometime in 1980 when
Patricio changed his mind about selling the property and offered her to refund all her payments, to
which she declined. Patricio then started harassing her and started to demolish their house portion by
portion. She admitted that she was unable to pay her dues for a time, but she resumed payments in
1980. She also claimed that Patricio never filed an ejectment case against her.

Rufina also claimed that she entered into an agreement with Patricio suspending her
payments for three months, which was attested to by the Barangay Chairman. Patricio continued to
demolish her house even before the suspension period had lapsed. The Barangay Chairman told
Rufina that she could suspend her payments until Patricio had returned the demolished materials to
her, which he failed to do until his death in 1992.

Rufina admitted that she did not pay her balance because of the unlawful act Patricio had
committed. She also denied knowledge of the agreement between Patricio and Teodoro (P3,000
loan).

As mentioned, Patricio died in 1992. His wife died in 1994. Hence, the action was brought by
their son Manuel (other heirs waived their rights). He sent Rufina a letter demanding her to vacate the
property, which Rufina ignored.
—
 Manuel filed a Complaint of Unlawful Detainer against Rufina for failure to return the property
to him and prayed that the installments be considered as rent payments for the property. MTC ruled
in favor of Manuel. It held that non-payment of dues caused the termination of the Contract to Sell
and that Rufina’s right of possession has ceased to be a legal right.

On appeal, RTC reversed the MTC decision. 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 Patricio as a condition precedent to convert the possession of Rufina
from lawful to unlawful.

CA affirmed RTC ruling, applying the Maceda Law. It said that for the Contract to Sell to be
validly cancelled or rescinded, Sec 3(b) of RA 6552 (Maceda Law) should be followed. [Note: The
Maceda Law is the governing law for real estate properties bought via installment payments]

Issues:
1. WON Rufina is a buyer who acted in bad faith to benefit from the Maceda Law.
2. WON the CA erred in applying the Maceda Law which was n raised in the MTC and
RTC proceedings
3. WON the CA should have remanded the case to the RTC

SC Ruling:
SC ruled in favor of Rufina. Affirmed with modifications.
The seller has the right to cancel the Contract outside the court as long as it follows the
required procedure in Sec 3(b) of the Maceda Law which states that there must be a notice of
cancellation by a notarial act and that half of the installment payments must be refunded to the buyer.
Both requirements were absent in this case. The formal demand letter sent by Manuel to Rufina
does not constitute a valid notice of cancellation.
1. Patricio died without validly cancel the Contract to Sell
2. Manuel also failed to cancel in accordance to law (RA 6552)
○ Even if he filed a case of unlawful detainer, it does not exempt him from
complying with the requirement.
3. Sec 3(b) of RA 6552 does not provide for a different requirement (in this case: that the
past payments be considered as rent)

The case has been pending for more than ten years. In the interest of fairness and justice, the
SC ruled:
1. That Rufina be allowed to pay her balances with 6% p.a. legal rate (no stipulation in
the contract), until the finality of the Court decision; afterwhich, 12% p.a. rate shall
apply until payment
2. Upon payment, Deed of Absolute Sale shall be executed in favor of Rufina
3. In case of failure to pay within 60 days from the finality of the decision, Rufina shall
vacate the property and the past payments shall be deemed rental payments.