1
In his answer to the complaint, RILLO averred, among others, that while he had
[G.R. No. 125347. June 19, 1997]
EMILIANO RILLO, petitioner, vs. COURT OF APPEALS and CORB REALTY
INVESTMENT, CORP., respondents.
DECISION
PUNO, J.:
This is an appeal under Rule 45 of the Rules of Court to set aside the decision [1] of
the Court of Appeals in CA G.R. CV No. 39108 cancelling the "Contract to Sell"
between petitioner Emiliano Rillo and private respondent Corb Realty Investment
Corporation. It also ordered Rillo to vacate the premises subject of the contract and
Corb Realty to return 50% of P158,184.00 or P79,092.00 to Rillo.
The facts of the case are the following:
On June 18, 1985, petitioner Rillo signed a "Contract To Sell of Condominium
Unit" with private respondent Corb Realty Investment Corporation. Under the
contract, CORB REALTY agreed to sell to RILLO a 61.5 square meter condominium
unit located in Mandaluyong, Metro Manila. The contract price was P150,000.00, one
half of which was paid upon its execution, while the balance of P75,000.00 was to be
paid in twelve (12) equal monthly installments of P7,092.00 beginning July 18, 1985. It
was also stipulated that all outstanding balance would bear an interest of 24% per
annum; the installment in arrears would be subject to liquidated penalty of 1.5% for
every month of default from due date. It was further agreed that should petitioner
default in the payment of three (3) or four (4) monthly installments, forfeiture
proceedings would be governed by existing laws, particularly the Condominium Act. [2]
On July 18, 1985, RILLO failed to pay the initial monthly amortization. On August
18, 1985, he again defaulted in his payment. On September 20, 1985, he paid the first
monthly installment of P7,092.00. On October 2, 1985, he paid the second monthly
installment of P7,092.00. His third payment was on February 2, 1986 but he paid
only P5,000.00 instead of the stipulated P7,092.00.[3]
On July 20, 1987 or seventeen (17) months after RILLO's last payment, CORB
REALTY informed him by letter that it is cancelling their contract due to his failure to
settle his accounts on time. CORB REALTY also expressed its willingness to refund
RILLO's money.[4]
CORB REALTY, however, did not cancel the contract for on September 28, 1987,
it received P60,000.00 from petitioner.[5]
RILLO defaulted again in his monthly installment payment. Consequently, CORB
REALTY informed RILLO through letter that it was proceeding to rescind their
contract.[6] In a letter dated August 29, 1988, it requested RILLO to come to its office
and withdraw P102,459.35 less the rentals of the unit from July 1, 1985 to February 28,
1989.[7] Again the threatened rescission did not materialize. A "compromise" was
entered into by the parties on March 12, 1989, which stipulated the following:
"1. Restructure Outstanding Balance Down to P50,000.00
"2. Payment @ P2,000.00/Month @ 18% (Eighteen Percent)-Monthly-
To Compute No. of Installments
"3. To Pay Titling Plus Any Real Estate Tax Due
"4. Installments to start April 15, 1989."[8]
Rillo once more failed to honor their agreement. RILLO was able to pay P2,000.00
on April 25, 1989 and P2,000.00 on May 15, 1989.[9]
On April 3, 1990, CORB REALTY sent RILLO a statement of accounts which fixed
his total arrears, including interests and penalties, to P155,129.00. When RILLO failed
to pay this amount, CORB REALTY filed a complaint[10] for cancellation of the contract
to sell with the Regional Trial Court of Pasig.
already paid a total of P149,000.00, CORB REALTY could not deliver to him his
individual title to the subject property; that CORB REALTY could not claim any right
under their previous agreement as the same was already novated by their new
agreement for him to pay P50,000.00 representing interest charges and other penalties
spread through twenty-five (25) months beginning April 1989; and that CORB
REALTY's claim of P155,129.99 over and above the amount he already paid has no
legal basis.[11]
At the pre-trial, the parties stipulated that RILLO's principal outstanding obligation
as of March 12, 1989 was P50,000.00 and he has paid only P4,000.00 thereof and that
the monthly amortization of P2,000.00 was to bear 18% interest per annum based on
the unpaid balance. The issues were defined as: (1) whether or not CORB REALTY
was entitled to a rescission of the contract; and (2) if not, whether or not RILLO's
current obligation to CORB REALTY amounts to P62,000.00 only inclusive of accrued
interests.[12]
The Regional Trial Court held that CORB REALTY cannot rescind the "Contract to
Sell" because petitioner did not commit a substantial breach of its terms. It found that
RILLO substantially complied with the "Contract to Sell" by paying a total
of P154,184.00. It ruled that the remedy of CORB REALTY is to file a case for specific
performance to collect the outstanding balance of the purchase price.
CORB REALTY appealed the aforesaid decision to public respondent Court of
Appeals assigning the following errors, to wit:
"THE TRIAL COURT ERRED IN DISREGARDING OTHER FACTS OF THE CASE,
INCLUDING THE FACT THAT THE CONTRACT TO SELL, AS NOVATED, CREATED
RECIPROCAL OBLIGATIONS ON BOTH PARTIES;
"THE TRIAL COURT ERRED IN DISREGARDING ARTICLE 1191 OF THE CIVIL
CODE;
"THE TRIAL COURT ERRED IN RENDERING JUDGMENT BY SIMPLY
DISREGARDING THE CASE OF ROQUE V. LAPUZ, 96 SCRA 744, AND WITHOUT
INDICATING THE APPLICABLE LAW ON THE CASE.
"THE TRIAL COURT ERRED IN RENDERING A DECISION WHICH DID NOT
COMPLETELY DISPOSE OF THE CASE."
The respondent Court of Appeals reversed the decision. It ruled: (1) that
rescission does not apply as the contract between the parties is not an absolute
conveyance of real property but is a contract to sell; (2) that the Condominium Act
(Republic Act No. 4726, as amended by R.A. 7899) does not provide anything on
forfeiture proceedings in cases involving installment sales of condominium units, hence,
it is Presidential Decree No. 957 (Subdivision and Condominium Buyers Protective
Decree) which should be applied to the case at bar. Under Presidential Decree No.
957, the rights of a buyer in the event of failure to pay installment due, other than the
failure of the owner or developer to develop the project, shall be governed by Republic
Act No. 6552 or the REALTY INSTALLMENT BUYER PROTECTION ACT also known
as the Maceda Law (enacted on September 14, 1972). The dispositive portion of its
Decision states:
"WHEREFORE, the decision appealed from is hereby SET ASIDE. The Contract to Sell
is hereby declared cancelled and rendered ineffective. Plaintiff-Appellant is hereby
ordered to return 50% of P158,184.00 or P79,092.00 to appellee who is hereby ordered
to vacate the subject premises.
"SO ORDERED."[13]
Hence, this appeal with the following assignment of errors:

"THE HONORABLE COURT OF APPEALS SERIOUSLY AND GRAVELY ERRED IN
HOLDING AND DECIDING THAT RESCISSION IS THE PROPER REMEDY ON A
PERFECTED AND CONSUMMATED CONTRACT;
"THE HONORABLE COURT OF APPEALS SERIOUSLY AND GRAVELY ERRED IN
NOT HOLDING AND DECIDING THAT THE OLD CONSUMMATED CONTRACT HAS
BEEN SUPERSEDED BY A NEW, SEPARATE, INDEPENDENT AND SUBSEQUENT
CONTRACT BY NOVATION."
The petition is without merit.
The respondent court did not err when it did not apply Articles 1191 and 1592 of
the Civil Code on rescission to the case at bar. The contract between the parties is not
an absolute conveyance of real property but a contract to sell. In a contract to sell real
property on installments, the full payment of the purchase price is a positive suspensive
condition, the failure of which is not considered a breach, casual or serious, but simply
an event which prevented the obligation of the vendor to convey title from acquiring any
obligatory force."[14] The transfer of ownership and title would occur after full payment of
the purchase price. We held in Luzon Brokerage Co., Inc. v. Maritime Building Co.,
Inc.[15] that there can be no rescission of an obligation that is still non-existent, the
suspensive condition not having happened.
Given the nature of the contract of the parties, the respondent court correctly
applied Republic Act No. 6552. Known as the Maceda Law, R.A. No. 6552 recognizes
in conditional sales of all kinds of real estate (industrial, commercial, residential) the
right of the seller to cancel the contract upon non-payment of an installment by the
buyer, which is simply an event that prevents the obligation of the vendor to convey title
from acquiring binding force.[16] It also provides the right of the buyer on installments in
case he defaults in the payment of succeeding installments, viz:
(1) Where he has paid at least two years of installments,
"(a) To pay, without additional interest, the unpaid installments due within the total
grace period earned by him, which is hereby fixed at the rate of one month grace period
for every one year of installment payments made: Provided, That this right shall be
exercised by the buyer only once in every five years of the life of the contract and its
extensions, if any.
(b) If the contract is cancelled, the seller shall refund to the buyer the cash surrender
value of the payments on the property equivalent to fifty per cent of the total payments
made and, after five years of installments, an additional five per cent every year but not
to exceed ninety per cent of the total payments made: Provided, That the actual
cancellation of the contract shall take place after cancellation or the demand for
rescission of the contract by a notarial act and upon full payment of the cash surrender
value to the buyer.
Down payments, deposits or options on the contract shall be included in the
computation of the total number of installments made."
(2) Where he has paid less than two years in installments,
"Sec. 4. x x x the seller shall give the buyer a grace period of not less than sixty days
from the date the installment became due. If the buyer fails to pay the installments due
at the expiration of the grace period, the seller may cancel the contract after thirty days
from receipt by the buyer of the notice of cancellation or the demand for rescission of
the contract by a notarial act."
Petitioner RILLO paid less than two years in installment payments, hence, he is
only entitled to a grace period of not less than sixty (60) days from the due date within
which to make his installment payment. CORB REALTY, on the otherhand, has the
right to cancel the contract after thirty (30) days from receipt by RILLO of the notice of
cancellation. Hence, the respondent court did not err when it upheld CORB REALTY's
right to cancel the subject contract upon repeated defaults in payment by RILLO.
2
Petitioner further contends that the contract to sell has been novated by the
parties agreement of March 12, 1989. The contention cannot be sustained. Article 1292
of the Civil Code provides that "In order that an obligation may be extinguished by
another which substitutes the same, it is imperative that it be so declared in unequivocal
terms, or that the old and the new obligations be on every point incompatible with each
other." Novation is never presumed.[17]Parties to a contract must expressly agree that
they are abrogating their old contract in favor of a new one. [18] In the absence of an
express agreement, novation takes place only when the old and the new obligations are
incompatible on every point.[19] In the case at bar, the parties executed their May 12,
1989 "compromise agreement" precisely to give life to their "Contract to Sell". It merely
clarified the total sum owed by petitioner RILLO to private respondent CORB REALTY
with the view that the former would find it easier to comply with his obligations under the
Contract to Sell. In fine, the "compromise agreement" can stand together with the
Contract to Sell.
Nevertheless, we do not agree with the respondent Court so far as it ordered
private respondent CORB REALTY to refund 50% of P158,184.00 or P79,092.00 to
petitioner RILLO. Under Republic Act No. 6552, the right of the buyer to a refund
accrues only when he has paid at least two (2) years of installments. In the case at bar,
RILLO has paid less than two (2) years in installments, hence, he is not entitled to a
refund.
IN VIEW WHEREOF, the decision appealed from is AFFIRMED with the
MODIFICATION that the refund of 50% P158,184.00 or P79,092.00 made in favor of
petitioner Emiliano Rillo is deleted. No costs.
SO ORDERED.
Regalado, (Chairman), Romero, Mendoza, and Torres, Jr., JJ., concur.
14. p. 70 valarao v ca
15. p. 71 active realty
16. fabrigas
G.R. No. 152346 November 25, 2005
ISAIAS F. FABRIGAS and MARCELINA R. FABRIGAS, petitioners
vs.
SAN FRANCISCO DEL MONTE, INC., respondent
FACTS:
Spouses Fabrigas entered into an agreement denominanted as Contract to
Sell No. 2482-V with San Francisco Del Monte, Inc. a parcel of residential lot situated in
Barrio Almanza, Las Pias, Manila for a consideration of P109,200,00. The agreement
includes that the spouses shall pay a downpayment of P30,000 with balance within 10
years in successive instalments of P1,285.69 and a contract containing an automatic
cancellation clause, in the event the purchaser fail to pay any installments and in the
event of forfeiture, all sums of money paid will be treated as rentals and waives all right
to ask or demand the return of the amount and agrees to peaceably vacate the
premises.
Fabrigas paid the downpayment and took possession of the property but failed
to pay any installments. Del Monte sent demand letters on 4 occasions to Fabrigas as
final letter sent on December 7, 1983 having grace period of 15 days and otherwise will
forfeit all payments maid and the rescission however letter was received by Fabrigas on

December 23, 1983 but the contract was considered cancelled by Del Monte but did not
notice Fabrigas on the cacellation.
Marcelina Fabrigas continued remitting money to Del Monte until on January
21, 1985, parties enter into another contract to sell of No. 2491-V but under different
terms. Between March 1985 and January 1986, spouses Fabrigas made irregular
payments for the second contract then on February 3, 1986 Del Monte sent a demand
letter to Fabrigas for overdue account.
A petition for review was made in assailment for the decision made by the
Court of Appeals in CA-G.R. CV No. 45203 and its resolution denying petitioners
motion for reconsideration. In the decision, the spouses Fabrigas, as defendants,
considered paid by the amount of P78,152.00 were ordered (a) to make complete
payment under the conditions of Contract to Sell No. 2491-V dated January 21, 1985
within 20 days from the receipt of the decision and in the event of failure or refusal, all
persons claiming right and possession or occupation are ordered to vacate and leave
the premises of the house and lot, (b) if defendants chose to surrender possession of
the property will be ordered to pay San Francisco, the plaintiff, P206,223.80 as unpaid
installments on the land inclusive of interests (c) ordering defendants to jointly and
severally pay plaintiff the amount of P10,000.00 for attorneys fees and (d) to pay the
costs of suit.
ISSUES:
1. Whether or not Contract to Sell No. 2482-V, the first contract entered
into by the parties, has really been cancelled and no longer valid.
2. Whether or not consent by the husband needed for novation was
achieved.
RULINGS:
1. Yes, Contract to Sell No. 2482-V has really been cancelled and replaced by
Contract to Sell No. 2491-V. It is already novated by the second contract because of the
ratification made by the Fabrigas.
According to the Maceda Law Sec 4, the cancellation of the contract is a two-
step process. First, the seller should extend the buyer a grace period of at least sixty
days from the due date of the instalment . Second, at the end of the grace period, the
seller shall furnish the buyer with a notice of cancellation or demand for rescission
through a notarial act, effective thirty days fro the buyers receipt thereof. The mere
notice or letter will not suffice.
Del Monte did not comply with this but applied automatic rescission clause of
the contract, but rescission is not the only mode of extinguishing obligations. In this
case Novation was applied. Novation takes place when an old obligation is terminated
by the creation of a new obligation or when the old obligation subsists to the extent it
remains compatible with the amendatory agreement. Requisites for novation are a
previous valid obligation, an agreement of all parties concerned to a new contract, the
extinguishment of the old obligation and the birth of a valid new obligation. These
requisites were complied with by the both parties even though a question of consent
takes place.
2. Yes, consent for novation was achieved.
On article 172 of the civil code expressly classifies a contract executed by the
husband without the consent of the wife as merely annullable at the instance of the
wife. However, there is no comparable provision covering an instance where the wife
3
alone consented to a contract involving conjugal property. Art. 168, the wife may, by
express authority of the husband embodied in a public instrument, administer the
conjugal partnership property. Art. 169, the wife may also, my express authority of the
husband appearing in a public instrument, administer the latter’s estate. Any transaction
entered by the wife without the court or the husbands authority is unenforceable in
accordance with Art. 1317.
Being unenforceable, Contract to Sell No. 2491- is susceptible to ratification. In
here, Isaias Fabrigas, the husband continued remitting payments for the satisfaction of
the obligation under Contract to Sell No. 2491-V, constitute ratification of the contract.
Therefore, Contract to Sell No. 2482-V was novated by Contract to Sell No.
2491-V due to ratification, then the spouses Fabrigas shall follow the decision of the
Court of Appeals.
17. jestra v pacific
JESTRA DEVELOPMENT AND MANAGEMENT CORPORATION v. DANIEL
PONCE PACIFICO
513 SCRA 403 (2007)
Cancellation of the contract, under the law, requires that the seller should extend the
buyer a grace period of at least 60 days from the due date of the installment, and at the
end of the grace period, the seller shall furnish the buyer with a notice of cancellation or
demand for rescission.
Daniel Ponce Pacifico (Pacifico) signed a Reservation Application with Fil-Estate
Marketing Association for the purchase of a house and lot located at Paranaque, Metro
Manila and paid the reservation fee of 20,000.00. Under the Reservation Application,
upon fulfillment of the 30% down payment by Pacifico, he will sign a contract to sell with
the owner and developer of the property which is the JESTRA Development and
Management Corporation (Jestra).
Pacifico run out of funds to pay for the property, and he requested to Jestra to suspend
payment. Jestra denied his request. Pacifico filed a complaint before the Housing and
Land Use Regulatory Board (HLURB) against Jestra claiming that despite his full
payment of the down payment, Jestra failed to deliver to him the property within 90
days as provided in the contract to sell dated March 6, 1997 and Jestra instead sold the
property to another buyer in October 1998.
ISSUE:
Whether or not the act of Jestra in canceling the contract to sell agreement with Pacifico
is valid
HELD:
R.A. 6552 was enacted to protect buyers of real estate on installment against onerous
and oppressive conditions. In Fabrigas v. San Francisco del Monte,Inc., the court
described the cancellation of the contract under Section 4 of R.A. 6552 as a two-step
process. First, the seller should extend the buyer a grace period of at least 60 days
from the due date of the installment. Second, at the end of the grace period, the seller
shall furnish the buyer with a notice of cancellation or demand for rescission through a
notarial act, effective 30 days from the buyer‘s receipt thereof.
Pacifico admits that the first installment on the 70% balance of the purchase price was
due on January 5, 1998. He issued checks for it but was dishonored due to insufficiency
of funds. Pacifico was notified of the dishonor of the checks but he took no action,
hence, 60 days grace period lapsed. Pacifico made no further payments thereafter.
Instead, he requested for suspension of payment.
 4

Also, Pacifico admits that Jestra was justified in canceling the contract to sell via the of the seller to cancel the contract upon non-payment of an installment by the buyer,
notarial Notice of Cancellation which he received on May 13, 1998 which took effect on which is simply an event that prevents the obligation of the vendor to convey title from
June 12, 1998. Thus, the cancellation of the contract to sell of Jestra is valid. acquiring binding force. It is noteworthy that upon review of the records of this case, the
18. manuel v valbueco Court finds that respondent had been served a notice of the notarial rescission of the
conditional deeds of sale when it was furnished with the petitioner's Answer, dated
MANUEL UY & SONS, INC. February 16, 1995, to its first Complaint filed on November 28, 1994with the RTCbut
vs. the complaint was later dismissed without prejudice xxx.Five years after the dismissal
VALBUECO, INCORPORATED, of the first Complaint, respondent again filed this case for specific performance in which
it received the petitioner’s answer containing the notarial rescission of the conditional
G.R. No. 179594, September 11, 2013 sale. Since respondent already received notices of the notarial rescission of the
Facts: Petitioner is the owner of the subject lots. In 1973, two Conditional Deeds of conditional deeds of sale, together with petitioner’s Answer to the first Complaint five
Sale were executed by petitioner in favor of the respondent. The Deeds of Conditional years before it filed this case, it can no longer deny having received notices of the
Sale provided, among others, that the purchase price shall be paid in 3 installments notarial rescission in this case, as respondent admitted the same when it attached the
with interest, that the vendee be granted a grace period of 30 days from date of notices of notarial rescission to its Reply in this case.
installment and that ownership of the properties shall not pass to the vendee until after
full payment of the purchase price. Respondent was able to pay petitioner the amount Contracts; contract to sell distinguished from contract of sale; in a contract to sell,
of P275,055.558 as partial payment for the two properties corresponding to the initial ownership remains with the vendor and does not pass to the vendee until full payment
payments and the first installments of the said properties.However, respondent of the purchase price; a deed of sale is absolute when there is no stipulation in the
suspended further payment as it was not satisfied with the manner petitioner complied contract that title to the property remains with the seller until the full payment of the
with its obligations under the conditional deeds of sale.Consequently, in 1978, petitioner purchase price. In a conditional sale, as in a contract to sell, ownership remains with
sent respondent a letter informing respondent of its intention to rescind the conditional the vendor and does not pass to the vendee until full payment of the purchase price.
deeds of sale and attaching therewith the original copy of the respective notarial The full payment of the purchase price partakes of a suspensive condition, and non-
rescission. In 1994, respondent filed a Complaint for specific performance and fulfillment of the condition prevents the obligation to sell from arising. To differentiate, a
damages against petitioner with the RTC. Such was dismissed without prejudice for deed of sale is absolute when there is no stipulation in the contract that title to the
lack of interest, as respondent's counsel failed to attend the pre-trial conference. In property remains with the seller until full payment of the purchase price. Ramos v.
2001, respondent again filed with the RTC a complaint for specific performance and Heruela held that Articles 1191 and 1592 of the Civil Code are applicable to contracts of
damages, seeking to compel petitioner to accept the balance of the purchase price for sale, while R.A. No. 6552 applies to contracts to sell.
the two conditional deeds of sale and to execute the corresponding deeds of absolute
sale. Respondent contended that its non-payment of the instalments was due to the 19. Gatchalian realty v angeles
following reasons:(1) Petitioner refused to receive the balance of the purchase price as
the properties were mortgaged and had to be redeemed first before a deed of absolute
sale could be executed; (2) Petitioner assured that the existing mortgages on the
properties would be discharged on or before May 20,1974, or that petitioner did not
inform it (respondent) that the mortgages on the properties were already released; and
(3) Petitioner failed to fully eject the unlawful occupants in the area. On the other hand,
Petitioner claimed that it gave respondent a notice of notarial rescission of both
conditional deeds of sale that would take effect 30 days from receipt thereof. The notice
of notarial rescission was allegedly received by respondent in 1978. Petitioner asserted
that since respondent failed to pay the full purchase price of the subject lots, both
conditional deeds of sale were rescinded as of April 16, 1978; hence, respondent had
no cause of action against it. The trial court dismissed the complaint. On appeal the
court of appeals reversed and set aside the RTC decision. It reinstated the complaint of
respondent, and directed petitioner to execute deeds of absolute sale in favor of
respondent after payment of the balance of the purchase price of the subject lots.
Issue: Whether or not the contracts to sell were validly rescinded. Ruling: Yes. The
contracts to sell were validly rescinded. In Ramos v. Heruela the Court held that
Articles 1191 and 1592 of the Civil Code are applicable to contracts of sale, while R.A.
No. 6552or the Realty

Installment Buyer Act applies to contracts to sell.R.A. No. 6552 recognizes in

conditional sales of all kinds of real estate (industrial, commercial, residential) the right