You are on page 1of 10

TodayisMonday,November28,2016

Search

RepublicofthePhilippines
SUPREMECOURT
Manila
THIRDDIVISION
G.R.No.179594September11,2013
MANUELUY&SONS,INC.,Petitioner,
vs.
VALBUECO,INCORPORATED,Respondent.
DECISION
PERALTA,J.:
Thisisapetitionforreviewoncertiorari1oftheCourtofAppealsDecision2datedDecember11,2006inCAG.R.
CVNo.85877,anditsResolutiondatedSeptember4,2007,denyingpetitionersmotionforreconsideration.
TheCourtofAppealsreversedandsetasidetheDecision3oftheRegionalTrialCourt(RTC)ofManila,Branch1,
dismissingtheComplaintforspecificperformanceanddamages.TheCourtofAppealsreinstatedtheComplaint
and directed petitioner to execute deeds of absolute sale in favor of respondent after payment of the purchase
priceofthesubjectlots.
Thefacts,asstatedbytheCourtofAppeals,areasfollows:
PetitionerManuelUy&Sons,Inc.istheregisteredownerofparcelsoflandlocatedinTeresa,Rizalcoveredby
Transfer Certificate of Title(TCT) No. 59534, covering an area of about 6,119 square meters TCT No.59445,
coveringanareaofabout6,838squaremetersTCTNo.59446,coveringanareaofabout12,389squaremeters
andTCTNo.59444,coveringanareaofabout32,047squaremeters.
On November 29, 1973, two Conditional Deeds of Sale were executed by petitioner, as vendor, in favor of
respondent Valbueco, Incorporated, as vendee. The first Conditional Deed of Sale4 covered TCT Nos. 59534,
59445and59446,andcontainedthefollowingtermsandconditions:
That for and in consideration of the sum of ONE HUNDREDSIXTYFOUR THOUSAND SEVEN HUNDRED
FORTYNINE(Php164,749.00) PESOS, Philippine currency, the VENDOR hereby agrees to SELL, CEDE,
TRANSFER and CONVEY unto the VENDEE xx x the aforementioned properties, payable under the following
termsandconditions:
1. The sum of FORTYONE THOUSAND ONE HUNDREDEIGHTYSEVEN and 25/100 (Php 41,187.25)
PESOSshallbepaiduponsigningofthisconditionaldeedofsaleand
2.ThebalanceofONEHUNDREDTWENTYTHREETHOUSANDFIVEHUNDREDSIXTYONEand75/100
(Php123,561.75) PESOS shall be paid within a period of one (1) year from November 15, 1973, with
interestof12%perannumbasedonthebalance,inthemodeandmannerspecifiedbelow:
a)January4,1974P16,474.90plusinterest
b)OnorbeforeMay15,1974P53,543.43plusinterest
c)OnorbeforeNovember15,1974P53,543.32plusinterest
3.Thatthevendeeshallbegivenagraceperiodofthirty(30)daysfromtheduedateofanyinstallmentwith
corresponding interest to be added, but should the VENDEE fail to make such payment within the grace
period this contract shall be deemed rescinded and without force and effect after notice in writing by
VENDORtoVENDEE.

4.ThattheVENDORagreestohavetheexistingMortgagesonthepropertiessubjectofthissalereleased
onorbeforeMay20,1974.
5. That the VENDOR agrees to have the abovedescribed properties freed and cleared of all lessees,
tenants,adverseoccupantsorsquatterswithin100daysfromtheexecutionofthisconditionaldeedofsale.
In case of failure by the VENDOR to comply with the undertaking provided in this paragraph and the
VENDEEshallfinditnecessarytofileacaseorcasesincourttoejectthesaidlessees,tenants,occupants
and/or squatters from the land, subject of this sale, the VENDOR agrees to answer and pay for all the
expenses incurred and to be incurred in connection with said cases until the same are fully and finally
terminated.
6.ThattheVENDORandtheVENDEEagreethatduringtheexistenceofthisContractandwithoutprevious
expressed written permission from the other, they shall not sell, cede, assign, transfer or mortgage, or in
anywayencumberuntoanotherpersonorpartyanyright,interestorequitythattheymayhaveinandto
saidparcelsofland.xxxx
8. That it is understood that ownership of the properties herein conveyed shall not pass to the VENDEE
until after payment of the full purchase price provided, however, that the VENDOR shall allow the
annotationofthisConditionalDeedofSaleatthebackofthetitlesoftheabovedescribedparcelsoflandin
thecorrespondingRegistryofDeedsxxx.
9.Thatuponfullpaymentofthetotalpurchaseprice,aDeedofAbsoluteSaleshallbeexecutedinfavorof
the VENDEE and the VENDOR agrees to pay the documentary stamps and the science stamp tax of the
DeedofSalewhiletheVENDEEagreestopaytheregistrationandotherexpensesfortheissuanceofa
newtitle.
10.Thatitismutuallyagreedthatincaseoflitigation,thevenueofthecaseshallbeinthecourtsofManila,
havingcompetentjurisdiction,anyothervenuebeingexpresslywaived.5
Ontheotherhand,thesecondConditionalDeedofSale6coveringLotNo.59444provides,thus:
1.ThesumofFIFTYTWOTHOUSANDSEVENTYSIXAND37/100(Php52,076.37)PESOS,shallbepaid
uponsigningofthisconditionaldeedofsaleand
2. The balance of ONE HUNDRED FIFTYSIXTHOUSAND TWO HUNDRED TWENTYNINE and 13/100
(Php156,229.13) PESOS shall be paid within a period of one (1) year from November 15, 1973, with
interestof12%perannumbasedonthebalance,inthemodeandmannerspecifiedbelow:
a)January4,1974P20,830.55plusinterest
b)OnorbeforeMay15,1974P67,699.29plusinterest
c)OnorbeforeNovember15,1974,P67,699.29plusinterest
3.ThattheVENDEEshallbegivenagraceperiodofthirty(30)daysfromtheduedateofanyinstallment
with corresponding interest to be added, but should the VENDEE fail to make such payment within the
graceperiod,thiscontractshallbedeemedrescindedandwithoutforceandeffectafternoticeinwritingby
VENDORtoVENDEE.
4.ThattheVENDORagreesandacknowledgesthatanyandallpaymentstobemadebytheVENDEEby
reasonofthispresentsunlesshereafteradvisedbyVENDORtothecontrary,shallbemadeinfavorofand
tothePhilippineTrustCompanybywayofliquidationandpaymentoftheexistingmortgageontheproperty
subjectofthissale.
5. That after each payment adverted to above the VENDOR shall issue the corresponding receipt for the
amountpaidbytheVENDORtothePhilippineTrustCompany.
6. That the VENDOR agrees to have the abovedescribed property freed and cleared of all lessees,
tenants,adverseoccupantsorsquatterswithin100daysfromtheexecutionofthisconditionaldeedofsale.
In case of failure by the VENDOR to comply with this undertaking provided in this paragraph and the
VENDEEshallfinditnecessarytofileacaseorcasesincourttoejectthesaidlessees,tenants,occupants
and/or squatters from the land, subject of this sale, the VENDOR agrees to answer and pay for all the
expenses incurred and to be incurred in connection with said cases until the same are fully and finally
terminated.
7.ThattheVENDORandtheVENDEEagreethatduringtheexistenceofthisContractandwithoutprevious
expressed written permission from the other, they shall not sell, cede, assign, transfer or mortgage, or in

anywayencumberuntoanotherpersonorpartyanyright,interestorequitythattheymayhaveinandto
saidparcelofland.
xxxx
9.ThatitisunderstoodthatownershipofthepropertyhereinconveyedshallnotpasstotheVENDEEuntil
afterpaymentofthefullpurchaseprice,provided,however,thattheVENDORshallallowtheannotationof
the Conditional Deed of Sale at the back of the Title of the abovedescribed parcel of land in the
correspondingRegistryofDeedsxxx.
10.Thatuponfullpaymentofthetotalpurchaseprice,aDeedofAbsoluteSaleshallbeexecutedinfavor
oftheVENDEEandtheVENDORagreestopaythedocumentarystampsandthesciencestamptaxofthe
DeedofSalewhiletheVENDEEagreestopaytheregistrationandotherexpensesfortheissuanceofa
newtitle.
11.Thatitismutuallyagreedthatincaseoflitigation,thevenueofthecaseshallbeinthecourtsofManila,
havingcompetentjurisdiction,anyothervenuebeingexpresslywaived.7
Respondent was able to pay petitioner the amount of P275,055.558 as partial payment for the two properties
correspondingtotheinitialpaymentsandthefirstinstallmentsofthesaidproperties.
At the same time, petitioner complied with its obligation under the conditional deeds of sale, as follows: (1) the
mortgageforTCTNo.59446wasreleasedonMay18,1984,whilethemortgagesforTCTNos.59445and59534
werereleasedonJuly19,1974(2)theunlawfuloccupantsofthelotscoveredbyTCTNos.59444,59534,59445
and59446surrenderedtheirpossessionanduseofthesaidlotsinconsiderationoftheamountofP6,000.00ina
document9 dated November 19, 1973, and they agreed to demolish their shanties on or before December 7,
1973and(3)themortgagewithPhilippineTrustCompanycoveringTCTNo.59444wasdischarged10in1984.
However,respondentsuspendedfurtherpaymentasitwasnotsatisfiedwiththemannerpetitionercompliedwith
itsobligationsundertheconditionaldeedsofsale.Consequently,onMarch17,1978,petitionersentrespondenta
letter11informingrespondentofitsintentiontorescindtheconditionaldeedsofsaleandattachingtherewiththe
originalcopyoftherespectivenotarialrescission.
OnNovember28,1994,respondentfiledaComplaint12forspecificperformanceanddamagesagainstpetitioner
withtheRTCofAntipoloCity.However,onJanuary15,1996,thecasewasdismissedwithoutprejudice13forlack
ofinterest,asrespondent'scounselfailedtoattendthepretrialconference.
Five years later, or on March 16, 2001, respondent again filed with the RTC of Manila, Branch 1 (trial court) a
Complaint14 for specific performance and damages, seeking to compel petitioner to accept the balance of the
purchase price for the two conditional deeds of sale and to execute the corresponding deeds of absolute sale.
Respondent contended that its nonpayment of the installments was due to the following reasons:(1) Petitioner
refusedtoreceivethebalanceofthepurchasepriceasthepropertiesweremortgagedandhadtoberedeemed
firstbeforeadeedofabsolutesalecouldbeexecuted(2)Petitionerassuredthattheexistingmortgagesonthe
propertieswouldbedischargedonorbeforeMay20,1974,orthatpetitionerdidnotinformit(respondent)thatthe
mortgagesonthepropertieswerealreadyreleasedand(3)Petitionerfailedtofullyejecttheunlawfuloccupants
inthearea.
In its Answer,15 petitioner argued that the case should be dismissed, as it was barred by prior judgment.
Moreover, petitioner contended that it could not be compelled to execute any deed of absolute sale, because
respondentfailedtopayinfullthepurchasepriceofthesubjectlots.Petitionerclaimedthatitgaverespondenta
noticeofnotarialrescissionofbothconditionaldeedsofsalethatwouldtakeeffect30daysfromreceiptthereof.
ThenoticeofnotarialrescissionwasallegedlyreceivedbyrespondentonMarch17,1978.Petitionerassertedthat
since respondent failed to pay the full purchase price of the subject lots, both conditional deeds of sale were
rescindedasofApril16,1978hence,respondenthadnocauseofactionagainstit.
InitsReply,16respondentdeniedthatitreceivedtheallegednoticeofnotarialrescission.Respondentalsodenied
thattheallegedrecipient(oneWennaLaurenciana)17oftheletterdatedMarch17,1978,whichwasattachedto
the notice of notarial rescission, was its employee. Respondent stated that assuming arguendo that the notice
wassenttoit,theaddress(6thFloor,SGCBldg.,SalcedoStreet,LegaspiVillage,Makati,MetroManila)wasnot
thegivenaddressofrespondent.Respondentcontendedthatitsaddressontheconditionaldeedsofsaleandthe
receiptsissuedbyitandpetitionershowedthatitsprincipalbusinessaddresswasthe7thFloor,BankofP.I.Bldg,
AyalaAvenue,Makati,Rizal.
OnAugust1,2005,thetrialcourtrenderedaDecision,18dismissingthecomplaint,aspetitionerhadexercisedits
righttorescindthecontracts.ThedispositiveportionoftheDecisionreads:

WHEREFORE,premisesconsidered,thecomplaintisDISMISSEDforlackofmerit.
Claimsandcounterclaimsfordamagesarealsodismissed.19
Thetrialcourtstatedthattheissuesbeforeitwere:(1)Didpetitionerunlawfullyevadeitsobligationtoexecutethe
finaldeedofsaleandtoejectthesquatters/occupantsontheproperties(2)Isthecasebarredbypriorjudgment
and(3)Doesrespondenthaveacauseofactionagainstpetitioner.
Thetrialcourtsaidthatbothconditionaldeedsofsaleclearlyprovidedthat"ownershipxxxshallnotpasstothe
VENDEE until after full payment of the purchase price." Respondent admitted that it has not yet fully paid the
purchaseprice.Thetrialcourtheldthattheconditionsintheconditionaldeedsofsalebeingsuspensive,thatis,
itsfulfillmentgivesrisetotheobligation,thereasonsfortheinabilityofrespondenttofulfillitsownobligationsis
material, in order that the obligation of petitioner to execute the final deeds of absolute sale will arise. The trial
courtstatedthattheevidenceshowedthatpetitionerhadexerciseditsrighttorescindthecontractbyawritten
noticedatedMarch17,1978andnotarialactsbothdatedMarch15,1978.Thetrialcourtnotedthatrespondent
deniedhavingreceivedthenoticeanddisclaimedknowingtherecipient,WennaLaurenciana.However,oncross
examination, respondent's witness, Gaudencio Juan, who used to be respondent's Personnel Manager and
Foresteratthesametime,admittedknowingLaurencianabecauseshewasthesecretaryofMr.ValerianoBueno,
respondent's president at that time, although Laurenciana was not employed by respondent, but she was
employedbyMahoganyProductsCorporation,presumablyoneofthe14othercompaniesbeingcontrolledbyMr.
Bueno.20
The trial court held that the conditional deeds of sale were executed on November 29, 1973 and were already
coveredbyRepublicAct(R.A.)No.6552,otherwiseknownastheRealtyInstallmentBuyerAct.UnderSection4
ofthelaw,ifthebuyerfailstopaytheinstallmentsdueattheexpirationofthegraceperiod,whichisnotlessthan
60daysfromthedatetheinstallmentbecamedue,thesellermaycancelthecontractafter30daysfromreceipt
of the buyer of the notice of cancellation or the demand for rescission of the contracts by notarial act. The trial
courtfoundnolawfulgroundtograntthereliefprayedforanddismissedthecomplaintforlackofmerit.
Respondent appealed the decision of the trial court to the Court of Appeals, and made these assignments of
error: (1) the trial court erred in holding that petitioner did not unlawfully evade executing a final deed of sale,
since respondent's failure to fulfill its own obligation is material (2) the trial court erred in holding that it is
unbelievableandaselfcontradictionthatrespondentwasinformedofthemortgageonlywhenitwaspayingthe
balanceofthepropertiesand(3)thetrialcourterredinholdingthatasearlyasNovember19,1973,petitioner
had already taken necessary steps to evict the squatters/occupants through the intercession of the agrarian
reformofficer.
OnDecember11,2006,theCourtofAppealsrenderedaDecision,reversingandsettingasidetheDecisionofthe
trialcourt.Itreinstatedthecomplaintofrespondent,anddirectedpetitionertoexecutedeedsofabsolutesalein
favorofrespondentafterpaymentofthebalanceofthepurchasepriceofthesubjectlots.Thedispositiveportion
oftheDecisionreads:
WHEREFORE,premisesconsidered,theAugust1,2005DecisionoftheRegionalTrialCourtofManila,Branch1,
inCivilCaseNo.01100411,isherebyREVERSEDandSETASIDE.
Anewoneisherebyentered:REINSTATINGthecomplaintanddefendantappelleeMANUELUY&SONSINC.is
herebyDIRECTED,pursuanttoSec.4,R.A.No.6552,otherwiseknownastheMacedaLaw,toEXECUTEand
DELIVER:
(1)DeedsofAbsoluteSaleinfavorofVALBUECO,INC.and
(2)TransferCertificatesofTitlepertainingtoNos.59534,59445,59446and59444,inthenameofplaintiff
appellantVALBUECO,INC.,afterVALBUECOpaysMANUELUY&SONS,withoutadditionalinterest,within
thirtydaysfromfinalityofthisjudgment,thebalanceofthecontractprice.
IfMANUELUY&SONSrefusestodelivertheDeedsofAbsoluteSaleandthecoowner'scopyoftheTCTs,the
Register of Deeds of Antipolo, Rizal is hereby DIRECTED to CANCEL the latest TCTs issued derived from TCT
Nos.59534,59445,59446and59444,andto
ISSUEnewTCTSinthenameofVALBUECO.
OnlyifVALBUECOfailsinthepaymentdirectedabove,thendefendantappelleeMANUELUY&SONSINC.has
theopportunitytoserveavalidnoticeofnotarialrescission.
SOORDERED.21

TheCourtofAppealsheldthatthetwoconditionaldeedsofsaleinthiscasearecontractstosell.Itstatedthatthe
law applicable to the said contracts to sell on installments is R.A. No. 6552, specifically Section 4thereof, as
respondent paid less than two years in installments. It held that upon repeated defaults in payment by
respondent,petitionerhadtherighttocancelthesaidcontracts,butsubjecttotheproperreceiptofrespondentof
thenoticeofcancellationorthedemandfortherescissionofthecontractsbynotarialact.
However, the Court of Appeals found that petitioner sent the notice of notarial rescission to the wrong address.
Thebusinessaddressofrespondent,asusedinallitstransactionswithpetitioner,wasthe7thFloor,Bankofthe
PhilippineIslandsBuilding,AyalaAvenue,MakatiCity,butthenoticeofnotarialrescissionwassenttothewrong
addressatthe6thFloor,SGCBuilding,SalcedoStreet,LegaspiVillage,Makati,MetroManila.Petitionerserved
thenoticetotheaddressofMahoganyProductsCorporation.Itwasestablishedthatthepersonwhoreceivedthe
notice,oneWennaLaurenciana,wasanemployeeofMahoganyProductsCorporationandnotanemployeeof
respondent or Mr. Valeriano Bueno, the alleged president of Mahogany Products Corporation and respondent
company.22 The appellate court stated that this cannot be construed as to have been contructively received by
respondent as the two corporations are two separate entities with a distinct personality independent from each
other. Thus, the Court of Appeals held that the notarial rescission was in validly served. It stated that it is a
generalrulethatwhenserviceofnoticeisanissue,thepersonallegingthatthenoticewasservedmustprovethe
fact of service by a preponderance of evidence. In this case, the Court of Appeals held that there was no
evidencethatthenoticeofcancellationbynotarialactwasactuallyreceivedbyrespondent.Thus,forpetitioner's
failuretocancelthecontractinaccordancewiththeprocedureprovidedbylaw,theCourtofAppealsheldthatthe
contracts to sell on installment were valid and subsisting, and respondent has the right to offer to pay for the
balanceofthepurchasepricebeforeactualcancellation.
Petitioner's motion for reconsideration was denied for lack of merit by the Court of Appeals in a Resolution23
datedSeptember4,2007.
Petitionerfiledthispetitionraisingthefollowingissues:
I
THE HONORABLE COURT OF APPEALS GRAVELY ERRED INREVERSING THE RTC DECISION
ANDREINSTATINGTHECOMPLAINTWHENONITSFACEITHASLONGBEENPRESCRIBED,AS
ITWASFILEDAFTER27YEARSANDHASNOJURISDICTION(SIC).
II
THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED ANDGRAVELY ABUSED ITS
DISCRETION IN COMPELLINGPETITIONER TO EXECUTE A FINAL DEED OF ABSOLUTE SALE
EVEN IF RESPONDENT JUDICIALLY ADMITTED ITS NONPAYMENT OF THE BALANCE OF THE
DEEDSOFCONDITIONALSALEDUESINCE1974.
III
THE HONORABLE COURT OF APPEALS GRAVELY ERRED INGRANTING THE RELIEFS PRAYED
BY RESPONDENT IN ITSCOMPLAINT FOR SPECIFIC PERFORMANCE WHEN IT
WASRESPONDENTWHOBREACHEDTHECONTRACT.
IV
THE HONORABLE COURT OF APPEALS COMMITTED GRAVEINJUSTICE WHEN IT PENALIZED
PETITIONER FOR EXERCISINGITS LEGAL RIGHT AND DID NOT COMMIT AN
ACTIONABLEWRONG WHILE IT HEFTILY REWARDED RESPONDENT, WHOBREACHED THE
CONTRACT,ANDORDEREDTOPAYWITHOUTINTERESTPHP97,998.95,WHICHISDUESINCE
1974 UNDER THECONTRACT, FOR FOUR (4) PARCELS OF LAND (57,393 SQUAREMETERS),
NOWWORTHHUNDREDMILLIONS.
V
THE HONORABLE COURT OF APPEALS GRAVELY ERRED INANNULING THE NOTARIAL
RESCISSION WHEN THE COMPLAINT IS ONLY FOR SPECIFIC PERFORMANCE AND WAS NOT
ANISSUERAISEDINTHEPLEADINGSORDURINGTHETRIAL.24
ThemainissueiswhetherrespondentisentitledtothereliefgrantedbytheCourtofAppeals.Petitionercontends
that the Court of Appeals erred in directing it to execute deeds of absolute sale over the subject lots even if
respondentadmittednonpaymentofthebalanceofthepurchaseprice.

AsfoundbytheCourtofAppeals,thetwoconditionaldeedsofsaleenteredintobythepartiesarecontractsto
sell,astheybothcontainedastipulationthatownershipofthepropertiesshallnotpasstothevendeeuntilafter
full payment of the purchase price. In a conditional sale, as in a contract to sell, ownership remains with the
vendor and does not pass to the vendee until full payment of the purchase price.25 The full payment of the
purchasepricepartakesofasuspensivecondition,andnonfulfillmentoftheconditionpreventstheobligationto
sellfromarising.26Todifferentiate,adeedofsaleisabsolutewhenthereisnostipulationinthecontractthattitle
tothepropertyremainswiththeselleruntilfullpaymentofthepurchaseprice.
Ramosv.Heruela27heldthatArticles1191and1592oftheCivilCode28areapplicabletocontractsofsale,while
R.A.No.6552appliestocontractstosell.
The Court of Appeals correctly held that R.A. No. 6552, otherwise known as the Realty Installment Buyer Act,
applies to the subject contracts to sell. 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 nonpayment of an
installmentbythebuyer,whichissimplyaneventthatpreventstheobligationofthevendortoconveytitlefrom
acquiringbindingforce.29
It also provides the right of the buyer on installments in case he defaults in the payment of succeeding
installments30asfollows:
Section 3. In all transactions or contracts involving the sale or financing of real estate on installment payments,
including residential condominium apartments but excluding industrial lots, commercial buildings and sales to
tenants under Republic Act Numbered Thirtyeight hundred fortyfour, as amended by Republic Act Numbered
Sixtythreehundredeightynine,wherethebuyerhaspaidatleasttwoyearsofinstallments,thebuyerisentitled
tothefollowingrightsincasehedefaultsinthepaymentofsucceedinginstallments:
(a)Topay,withoutadditionalinterest,theunpaidinstallmentsduewithinthetotalgraceperiodearnedby
himwhichisherebyfixedattherateofonemonthgraceperiodforeveryoneyearofinstallmentpayments
made:Provided,Thatthisrightshallbeexercisedbythebuyeronlyonceineveryfiveyearsofthelifeof
thecontractanditsextensions,ifany.
(b)Ifthecontractiscanceled,thesellershallrefundtothebuyerthecashsurrendervalueofthepayments
onthepropertyequivalenttofiftypercentofthetotalpaymentsmade,and,afterfiveyearsofinstallments,
an additional five per cent every year but not to exceed ninety per cent of the total payments made:
Provided,Thattheactualcancellationofthecontractshalltakeplaceafterthirtydaysfromreceiptbythe
buyerofthenoticeofcancellationorthedemandforrescissionofthecontractbyanotarialactandupon
fullpaymentofthecashsurrendervaluetothebuyer.
Downpayments,depositsoroptionsonthecontractshallbeincludedinthecomputationofthetotalnumberof
installmentpaymentsmade.chanroblesalawlibrary
Sec.4.Incasewherelessthantwoyearsofinstallmentswerepaid,thesellershallgivethebuyeragraceperiod
ofnotlessthansixtydaysfromthedatetheinstallmentbecamedue.
If the buyer fails to pay the installments due at the expiration of the grace period, the seller may cancel the
contractafterthirtydaysfromreceiptbythebuyerofthenoticeofcancellationorthedemandforrescissionofthe
contractbyanotarialact.31
In this case, respondent has paid less than two years of installments therefore, Section 4 of R.A. No. 6552
applies.
TheCourtofAppealsheldthatevenifrespondentdefaultedinitsfullpaymentofthepurchasepriceofthesubject
lots, the conditional deeds of sale remain valid and subsisting, because there was no valid notice of notarial
rescission to respondent, as the notice was sent to the wrong address, that is, to Mahogany Products
Corporation, and it was received by a person employed by Mahogany Products Corporation and not the
respondent.TheCourtofAppealsstatedthattheallegationthatMahoganyProductsCorporationandrespondent
have the same President, one Valeriano Bueno, is irrelevant and has not been actually proven or borne by
evidence.Theappellatecourtheldthattherewasinsufficientproofthatrespondentactuallyreceivedthenoticeof
notarialrescissionoftheconditionaldeedsofsalehence,theunilateralrescissionoftheconditionaldeedsofsale
cannotbegivencredence.
However,uponreviewoftherecordsofthiscase,theCourtfindsthatrespondenthadbeenservedanoticeofthe
notarial rescission of the conditional deeds of sale when it was furnished with the petitioner's Answer, dated
February16,1995,toitsfirstComplaintfiledonNovember28,1994withtheRTCofAntipoloCity,whichcasewas
docketed as Civil Case No.943426, but the complaint was later dismissed without prejudice on January15,
1996.32

It appears that after respondent filed its first Complaint for specific performance and damages with the RTC of
AntipoloCityonNovember28,1994,petitionerfiledanAnswerandattachedtheretoacopyofthewrittennotice
datedMarch17,1978andcopiesofthenotarialactsofrescissiondatedMarch15,1978,andthatrespondent
receivedacopyofthesaidAnswerwiththeattachednoticesofnotarialrescission.However,toreiterate,thefirst
Complaintwasdismissedwithoutprejudice.
FiveyearsafterthedismissalofthefirstComplaint,respondentagainfiledthiscaseforspecificperformanceand
damages,thistime,withtheRTCofManila.PetitionerfiledanAnswer,andalleged,amongothers,thatthecase
was barred by prior judgment, since respondent filed a complaint on November 28, 1994 before the RTC of
Antipolo City, Branch 73, against it (petitioner) involving the same issues and that the case, docketed as Civil
CaseNo.943426,wasdismissedonJanuary15,1996forlackofinterest.RespondentfiledaReply33datedJuly
18, 2001, asserting that petitioner prayed for the dismissal of the first case filed on November 28, 1994 (Civil
CaseNo.943426)onthegroundofimpropervenueasthepartiesagreedinthedeedsofconditionalsalethatin
case of litigation, the venue shall be in the courts of Manila. To prove its assertion, respondent attached to its
ReplyacopyofpetitionersAnswertothefirstComplaintinCivilCaseNo.943426,whichAnswerincludedthe
writtennoticedatedMarch17,1978andtwonotarialactsofrescission,bothdatedMarch15,1978,ofthetwo
conditionaldeedsofsale.Hence,respondentisdeemedtohavehadnoticeofthenotarialrescissionofthetwo
conditionaldeedsofsalewhenitreceivedpetitionersAnswertoitsfirstcomplaintfiledwiththeRTCofAntipolo,
since petitioners Answer included notices of notarial rescission of the two conditional deeds of sale. The first
complaint was filed six years earlier before this complaint was filed. As stated earlier, the first complaint was
dismissed without prejudice, because respondents counsel failed to appear at the pretrial. Since respondent
already received notices of the notarial rescission of the conditional deeds of sale, together with petitioners
AnswertothefirstComplaintfiveyearsbeforeitfiledthiscase,itcannolongerdenyhavingreceivednoticesof
the notarial rescission in this case, as respondent admitted the same when it attached the notices of notarial
rescissiontoitsReplyinthiscase.Consequently,respondentisnotentitledtothereliefgrantedbytheCourtof
Appeals.
Under R.A. No. 6552, the right of the buyer to refund accrues only when he has paid at least two years of
installments.34Inthiscase,respondenthaspaidlessthantwoyearsofinstallmentshence,itisnotentitledtoa
refund.35
Moreover, petitioner raises the issue of improper venue and lack of jurisdiction of the RTC of Manila over the
case. It contends that the complaint involved real properties in Antipolo City and cancellation of titles hence, it
wasimproperlyfiledintheRTCofManila.
Petitioner'scontentionlacksmerit,aspetitionerandrespondentstipulatedinbothConditionalDeedsofSalethat
theymutuallyagreedthatincaseoflitigation,thecaseshallbefiledinthecourtsofManila.36
Further,petitionercontendsthattheactionhasprescribed.Petitionerpointsoutthatthecauseofactionisbased
onawrittencontracthence,thecomplaintshouldhavebeenbroughtwithin10yearsfromthetimetherightof
actionaccruesunderArticle1144oftheCivilCode.Petitionerarguesthatitisevidentonthefaceofthecomplaint
andthetwocontractsofconditionalsalethatthecauseofactionaccruedin1974yet,thecomplaintforspecific
performancewasfiledafter27years.Petitionerassertsthattheactionhasprescribed.
Thecontentionismeritorious.
Section1,Rule9ofthe1997RulesofCivilProcedureprovides:
Section 1. Defense and objections not pleaded. Defenses and objections not pleaded whether in a motion to
dismissorintheansweraredeemedwaived.However,whenitappearsfromthepleadingsthatthecourthasno
jurisdictionoverthesubjectmatter,thatthereisanotheractionpendingbetweenthesamepartiesforthesame
cause, or that the action is barred by a prior judgment or by statute of limitations, the court shall dismiss the
claim.37
InGicanov.Gegato,38theCourtheld:
x x x (T)rial courts have authority and discretion to dismiss an action on the ground of prescription when the
parties'pleadingsorotherfactsonrecordshowittobeindeedtimebarred(Franciscov.Robles,Feb,15,1954
Sisonv.McQuaid,50O.G.97Bambaov.Lednicky,Jan.28,1961Cordovav.Cordova,Jan.14,1958Convets,
Inc.v.NDC,Feb.28,195832SCRA529Sinaonv.Sorongan,136SCRA408)anditmaydosoonthebasisofa
motiontodismiss(Sec.1,f,Rule16,RulesofCourt),orananswerwhichsetsupsuchgroundasanaffirmative
defense (Sec. 5, Rule16), or even if the ground is alleged after judgment on the merits, as in a motion for
reconsideration(Ferrerv.Ericta,84SCRA705)orevenifthedefensehasnotbeenassertedatall,aswhereno
statementthereofisfoundinthepleadings(Garciav.Mathis,100SCRA250PNBv.PacificCommissionHouse,
27SCRA766ChuaLamcov.Dioso,etal.,97Phil.821)

or where a defendant has been declared in default (PNB v. Perez, 16 SCRA 270). What is essential only, to
repeat, is that the facts demonstrating the lapse of the prescriptive period, be otherwise sufficiently and
satisfactorilyapparentontherecordeitherintheavermentsoftheplaintiff'scomplaint,orotherwiseestablished
bytheevidence.39
Moreover,Dinov.CourtofAppeals40held:
Evenifthedefenseofprescriptionwasraisedforthefirsttimeonappealinrespondent'sSupplementalMotionfor
Reconsideration of the appellate court's decision, this does not militate against the due process right of the
petitioners.Onappeal,therewasnonewissueoffactthataroseinconnectionwiththequestionofprescription,
thusitcannotbesaidthatpetitionerswerenotgiventheopportunitytopresentevidenceinthetrialcourttomeet
a factual issue. Equally important, petitioners had the opportunity to oppose the defense of prescription in their
Opposition to the Supplemental Motion for Reconsideration filed in the appellate court and in their Petition for
ReviewinthisCourt.41
Inthiscase,petitionerraisedthedefenseofprescriptionforthefirsttimebeforethisCourt,andrespondenthad
theopportunitytoopposethedefenseofprescriptioninitsCommenttothepetition.Hence,theCourtcanresolve
theissueofprescriptionasbothpartieswereaffordedtheopportunitytoventilatetheirrespectivepositionsonthe
matter. The Complaint shows that the Conditional Deeds of Sale were executed on November 29, 1973, and
paymentsweredueonbothConditionalDeedsofSaleonNovember15,1974.Article114442oftheCivilCode
provides that actions based upon a written contract must be brought within ten years from the time the right of
actionaccrues.Nonfulfillmentoftheobligationtopayonthelastduedate,thatis,onNovember15,1974,would
give rise to an action by the vendor, which date of reckoning may also apply to any action by the vendee to
determine his right under R.A. No. 6552. The vendee, respondent herein, filed this case on March 16, 2001,
whichisclearlybeyondthe10yearprescriptiveperiodhence,theactionhasprescribed.
WHEREFORE,thepetitionisGRANTED.TheDecisionoftheCourtofAppeals,datedDecember11,2006,inCA
G.R.CVNo.85877anditsResolutiondatedSeptember4,2007areREVERSEDandSETASIDE.TheDecisionof
the Regional Trial Court of Manila, Branch I, dated August 1, 2005 in Civil Case No. 01100411, dismissing the
caseforlackofmerit,isREINSTATED.
SOORDERED.
DIOSDADOM.PERALTA
AssociateJustice
WECONCUR:
PRESBITEROJ.VELASCO,JR.
AssociateJustice
Chairperson
ROBERTOA.ABAD
AssociateJustice

JOSECATRALMENDOZA
AssociateJustice

MARVICMARIOVICTORF.LEONEN
AssociateJustice
ATTESTATION
I attest that the conclusions in the above Decision had been reached in consultation before the case was
assignedtothewriteroftheopinionoftheCourtsDivision.
PRESBITEROJ.VELASCO,JR.
AssociateJustice
Chairperson
CERTIFICATION
PursuanttoSection13,ArticleVIIIoftheConstitutionandtheDivisionChairpersonsAttestation,Icertifythatthe
conclusionsintheaboveDecisionhadbeenreachedinconsultationbeforethecasewasassignedtothewriterof
theopinionoftheCourtsDivision.
MARIALOURDESP.A.SERENO
ChiefJustice

Footnotes
1UnderRule45oftheRulesofCourt.
2PennedbyAssociateJusticeVicenteQ.RoxasoftheSixteenthDivision,withAssociateJusticeJosefina

GuevaraSalongaasChairmanandAssociateJusticeApolinarioD.Bruselas,Jr.asmember,concurring.
3InCivilCaseNo.01100411.
4Rollo,pp.351354.
5Id.at352353.
6Id.at355358.
7Id.at356357.
8Records,pp.117123DecisionoftheCourtofAppeals,id.at73.
9Records,pp.294295.
10Id.at256.
11Id.at52.
12DocketedasCivilCaseNo.943426.
13Records,p.89.
14DocketedasCivilCaseNo.01100411.
15Records,pp.4346.
16Id.at6975.
17Alsomentionedas"Wilma"LaurencianaintheTSNdatedApril24,2003.
18Rollo,pp.5362.
19Id.at62.
20RTCDecision,id.at61,citingTSN,April24,2003,p.17TSN,October16,2001,p.22.
21Rollo,pp.8485.(Emphasisintheoriginal)
22 TSN, April 24, 2003, pp. 1719, Crossexamination and Redirect examination of witness Gaudencio

Juan.
23Rollo,p.89.
24Id.at2930.
25Ramosv.Heruela,509Phil.658,665(2005).
26Id.
27Id.at667.
28 Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors

shouldnotcomplywithwhatisincumbentuponhim.Theinjuredpartymaychoosebetweenthefulfillment
and the rescission of the obligation, with the payment of damages in either case. He may also seek
rescission, even after he has chosen fulfillment, if the latter should become impossible. The court shall
decree the rescission claimed, unless there be just cause authorizing the fixing of a period. This is
understood to be without prejudice to the rights of third persons who have acquired the thing, in

accordance with Articles 1385 and 1388 and the Mortgage Law. Art. 1592. In the sale of immovable
property, even though it may have been stipulated that upon failure to pay the price at the time agreed
upontherescissionofthecontractshallofrighttakeplace,thevendeemaypay,evenaftertheexpiration
oftheperiod,aslongasnodemandforrescissionofthecontracthasbeenmadeuponhimeitherjudicially
orbyanotarialact.Afterthedemand,thecourtmaynotgranthimanewterm.
29Rollov.CourtofAppeals,G.R.No.125347,June19,1997,274SCRA461,467468.
30Id.at468.
31Emphasissupplied.
32Records,p.89.
33Id.at69.
34Rollov.CourtofAppeals,supranote29,at469.
35Id.
36SeeRulesofCourt,Rule5,Sec.4.
37Emphasissupplied.
38241Phil.139,145146(1988),citedinDinov.CourtofAppeals,411Phil.594,603604(2001).
39Emphasissupplied.
40Supranote38.
41Dinov.CourtofAppeals,supra,at605.
42CivilCode,Art.1144.Thefollowingactionsmustbebroughtwithintenyearsfromthetimetherightof

action accrues: (1) Upon a written contract (2) Upon an obligation created by law and (3) Upon a
judgment.
TheLawphilProjectArellanoLawFoundation

You might also like