Olympia Housing, Inc. v. Panasiatic Travel Corporation
REITERATIONFacts
The Antecedents: Olympia Housing, Inc. (Olympia) filed a complaint for Recovery of Possession (Accion Publiciana) against Panasiatic Travel Corporation and Ma. Nelida Galvez-Ycasiano (Ycasiano) for a condominium unit sold for P2,340,000.00, payable in installments. A Contract to Sell was entered into on August 8, 1984. Ycasiano made a reservation/deposit and a down payment, with the balance payable in 60 monthly installments. Payments were made partly in cash and partly through credit memos for plane tickets purchased by Olympia from Panasiatic Travel Corp. Olympia alleged that Ycasiano failed to pay monthly installments, amounting to P1,924,345.52 as of June 2, 1988. Olympia claimed to have rescinded the contract by a Notarial Act of Rescission and sought recovery of possession, attorney's fees, damages, and rentals. Procedural History: The Regional Trial Court (RTC) dismissed the complaint, finding it prematurely filed for non-compliance with Republic Act No. 6552. However, it ordered Ycasiano to pay the outstanding balance of P4,007,473.49 as of November 30, 1994, plus interest, within sixty days. Upon payment, Olympia was to issue the certificate of title. Failure to pay would result in Ycasiano vacating the premises, with all payments charged as rentals. Both parties appealed. The Court of Appeals (CA) sustained the RTC's decision. The Petition: Olympia filed a petition for review on certiorari with the Supreme Court, assailing the CA's decision and resolution. Olympia argued that the CA erred in not ruling on the effect of the filing of the complaint and the notarial act of rescission vis-à-vis R.A. 6552, in refusing to decree rescission for failure to pay the cash surrender value prior to filing the complaint, and in allowing Ycasiano to pay her defaulted obligations and then ordering Olympia to issue the title.
Issue(s)
Whether the Court of Appeals erred in not ruling on the effect of the filing of the complaint and the notarial act of rescission vis-à-vis the requirements of Republic Act No. 6552, specifically regarding the validity of the rescission and the necessity of a prior valid cancellation. Whether the Court of Appeals erred in refusing to decree the rescission of the contract to sell on the ground that petitioner failed to pay the cash surrender value prior to the filing of the complaint, considering the mandatory requirements of R.A. 6552 for a valid rescission. Whether the Court of Appeals erred in affirming the trial court's decision allowing respondent Ycasiano to pay her already-defaulted obligations and, upon such payment, ordering petitioner to issue the certificate of title to her, given the finding that no valid rescission had occurred.
Ruling
The petition is denied, and the appealed decision of the Court of Appeals is affirmed. The contract to sell remains valid and subsisting.
Ratio Decidendi
On the issue of rescission and compliance with R.A. 6552: The Court held that the action for reconveyance filed by Olympia was predicated on the assumption that its contract to sell had been validly cancelled or rescinded. However, the records showed that no such cancellation took place prior to the institution of the action. The letter dated June 2, 1988, sent by Olympia to Ycasiano, merely demanded payment within thirty days with a threat of cancellation or rescission if the demand was not heeded. This letter did not constitute a valid notice of cancellation or demand for rescission by notarial act as contemplated by law. Furthermore, the so-called "notarial rescission" was not sent to the respondents prior to the institution of the case but was merely attached to the complaint. The Court emphasized that a notarial rescission, standing alone, could not validly effect the cancellation of the contract. The trial court correctly observed that the June 2, 1988 letter was not a notice of cancellation or demand for rescission by a notarial act. On the issue of paying the cash surrender value: Republic Act No. 6552, the Realty Installment Buyer Protection Act, mandates specific procedures for cancellation. Section 3(b) clearly states that actual cancellation of the contract shall take place 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, and upon full payment of the cash surrender value to the buyer. The law requires the seller to refund the cash surrender value, which is equivalent to fifty percent of the total payments made, and an additional five percent for every year after five years of installments, not to exceed ninety percent. Olympia failed to present any evidence that it delivered the cash surrender value to Ycasiano, nor was there any allegation of such delivery. Therefore, no effective rescission had taken place due to the failure of Olympia to comply with this mandatory requirement. On the issue of allowing payment and issuing title: The Court affirmed the trial court's and the appellate court's decisions. Since no valid rescission occurred, the contract to sell remained valid and subsisting. Consequently, Ycasiano was still obligated to pay the outstanding balance of the purchase price. The trial court's order allowing Ycasiano to pay the due amount within sixty days and, upon full payment, for Olympia to issue the certificate of title was a proper course of action to give effect to the subsisting contract. The Court reiterated that while a seller is not precluded from seeking judicial rescission, the action filed by Olympia was for recovery of possession, predicated on a rescission that did not validly occur. The character of the action is determined by the allegations in the complaint and the relief sought, and Olympia could not unilaterally change its theory of the case.
Main Doctrine
For a valid rescission of a contract to sell under Republic Act No. 6552, the seller must not only send a notice of cancellation or demand for rescission by notarial act but must also refund the buyer the cash surrender value of the payments made. Actual cancellation occurs only after 30 days from receipt of the notice and full payment of the cash surrender value.