MANUEL C.

PAGTALUNAN (petitioner)
vs.
RUFINA DELA CRUZ VDA. DE MANZANO (respondents)
[G.R. No. 147695. September 13, 2007]

Facts:
Patricio Pagtalunan, Manuel Pagtalunan’s stepfather, entered into a Contract to Sell with
Rufina Manzano whereby he agreed to sell, and later to buy a house and lot for P17,000 with
P1,500 as downpayment and a monthly payment of P150 on or before the last day of each month
until fully paid. It was stipulated in the contract that the responded could immediately occupy the
property and in case of default in payment, it would be automatically rescinded, all payments
made and all improvements done by the respondent would be considered as rentals for the use
and occupation, and obliging the respondent to vacate and deliver the possession thereof to the
vendor. Pagtalunan claimed that the respondent only paid P12,950 and stopped paying after
December 1979 making her status of buyer and the contract to be transformed as lease.
Respondent admitted that she failed to pay instalments after December 1979, but resumes paying
in 1980 although Pagtalunan even accepted her late payments. Pagtalunan issued a demand
letter for Manzano to vacate the premises of the property but Manzano ignored the same.
Thus, Pagtalunan filed a Complaint for unlawful detainer against respondent with the Municipal
Trial Court (MTC) of Guiguinto, Bulacan. On appeal, the RTC of Malolos, Bulacan reversed the
decision of the MTC and dismissed the case for lack of merit.

Issue:
Whether or not the contract has been automatically rescinded pursuant to the agreement
when Manzano defaulted in the payment of her installments

Ruling:
The cancellation of the contract by the seller must be in accordance with Sec. 3 (b) of the
Maceda Law; (1) a notarial act of rescission and (2) the refund to the buyer of the full payment of
the cash surrender value of the payments on the property. Actual cancellation of the
contract takes place after 30 days from receipt by the buyer of the notice of 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.
In this case, the contract to sell was not validly cancelled under the Maceda Law. Such
cannot be automatically rescinded for the fact that Patricio, the vendor in the Contract
to Sell, died on without canceling the Contract to Sell and petitioner also failed to cancel the
Contract to Sell in accordance with law. Also, the demand letter is not the same to notice of
cancellation or demand for rescission by a notarial act required by the Maceda Law.