SPOUSES NOYNAY VS.

CITIHOMES BUILDER AND DEVELOPMENT INC

G.R. No. 204160 | September 22, 2014

FACTS:

Petitioners Michelle and Noel Noynay and respondent Citihomes executed a contract to sell
covering the sale of a house and lot. Under the terms of the contract, the price of the property
was fixed at a certain amount with a downpayment and the remaining balance was to be paid in
120 equal monthly installments with annual interest.

Two years later, the petitioner spouses allegedly started to default on their payments. Several
months later, the respondent decided to declare the petitioners delinquent and to cancel the
contract considering that nine months of agreed amortizations were left unpaid. The notarized
Notice of Delinquency and Cancellation of the Contract to Sell was received by the petitioners.
They were given 30 days within which to pay the arrears and failure to do so would authorize
the respondent to consider the contract as cancelled. Respondent sent its final demand letter
asking the petitioners to vacate the premises due to their continued failure to pay the arrears.

The petitioners insist that by virtue of the monthly installments amounting to three years that
they had already paid, the Maceda Law should apply in their case. This means that for the
cancellation to be effective, the cash surrender value should have been paid first to them by
respondent. Respondent counters that because the petitioners failed to pay at least 2 years of
installments, the cancellation became effective upon the expiration of the 30-day period
following the receipt of the notice of delinquency and cancellation notice and without the need
for the payment of the cash surrender value.

ISSUE: Whether or not the cancellation of the contract to sell was valid.

RULING:

No. It is not valid.

The Contract to Sell dated December 29, 2004 is enlightening on the matter. The amount
representing the full down payment shall be paid upon signing of the contract. Respondent
claimed that the period of the payment of the amortizations started five months after. As can be
gleaned from the contract to sell, it appears however that the payment of the down payment
started from the signing of the contract.

Moreover, based on the most recent statement of account, petitioners started defaulting about 3
years after from when the contract was signed. This shows that prior to that date, amortizations
covering the 3-year period starting with the down payment, had been paid. This is consistent
with the admission of the respondent during the preliminary conference. By its admission, the
petitioners had been paying the amortizations for 3 years, there is no reason to doubt their
compliance with the minimum requirement of two years payment of amortization, entitling them
to the payment of the cash surrender value provided for by law and by the contract to sell.

To reiterate, the Maceda Law requires that for an actual cancellation to take place, the notice of
cancellation by notarial act and the full payment of the cash surrender value must be first
received by the buyer. Clearly, no payment of the cash surrender value was made to the
petitioners. Thus, no cancellation of the contract to sell could be considered as validly effected.