[G.R. No. 140468. January 16, 2003]




The petition for review on certiorari before the Court assails the decision, promulgated on 11 June 1999, and the resolution, promulgated on 14 October 1999, of the Court of Appeals in CA-G.R. CV Case No. 53516.

The case originated from a complaint for Recovery of Possession (Accion Publiciana) filed by Olympia Housing, Inc., against Panasiatic Travel Corporation, Maria Nelida Ycasiano and the latters husband. The object in litigation is a condominium unit sold at the price of P2,340,000.00 payable on installments at the rate of P33,657.40 per month.

On the basis of the facts encapsulated by the trial court, it would appear that

On August 8, 1984, plaintiff and defendant Ma. Nelida Galvez-Ycasiano entered into a Contract to Sell, whereby the former agreed to sell to the latter condominium unit no. D-12, comprising an area of 160.50 square meters, more or less, situated on the ground floor of Olympia Condominium located at Makati, Metro Manila, covered by Condominium Certificate of Title No. 6711, for the agreed price of P2,340,000.00 payable in installments of P33,657.40 per month.

The schedule of payments [were] as follows:

Date Particulars Amount

July 17, 1984 Reservation/Deposit P100,000.00

July 19, 1984 50% Down payment P1,070,000.00

Balance of 50% payable in sixty (60) monthly installments at 24% per annum base on diminishing balance.

Monthly amortization to commence on Sept. 17,


Interest of 2% is included in regular monthly amortization, past due amortization shall bear interest of 2% per month plus penalty charge of 2% per month.

Pursuant to the Contract to Sell, defendant Ma. Nelida Galvez-Ycasiano made a reservation/deposit in the amount of P100,000.00 on July 17, 1984 and 50% down payment in the amount of P1,070,000.00 on July 19, 1984.

Defendants made several payments in cash and thru credit memos issued by plaintiff representing plane tickets bought by plaintiff from defendant Panasiatic Travel Corp., which is owned by defendant Ma. Nelida Galvez-Ycasiano, who credited/offset the amount of the said plane tickets to defendants account due to plaintiff.

Plaintiff alleged that far from complying with the terms and conditions of said Contract to Sell, defendants failed to pay the corresponding monthly installments which as of June 2, 1988 amounted to P1,924,345.52. Demand to pay the same was sent to defendant Ma. Nelida Galvez-Ycasiano, but the latter failed to settle her obligation.

For failure of defendant to pay her obligation plaintiff allegedly rescinded the contract by a Notarial Act of Rescission.

At present, the subject condominium unit is being occupied by defendant Panasiatic Travel Corp., hence the suit for Recovery of Possession (Accion Publiciana) with prayer for attorneys fees, exemplary damages and reasonable rentals for the unit from July 28,1988 at the rate of P32,100.00 per month until the condominium unit is finally vacated.

Defendant Ma. Nelida Galvez-Ycasiano, while admitting the existence of the contract to sell, interposed the defense that she has made substantial payments of the purchase price of the subject condominium unit amounting to P1,964,452.82 in accordance with the provisions of the contract to sell; that she decided to stop payment of the purchase price in the meantime because of substantial differences between her and the plaintiff in the computation of the balance of the purchase price.

xxx xxx xxx

Evidence adduced by plaintiff such as the statement of account of defendant Ma. Nelida Galvez-Ycasiano (Exh. C) has been established by plaintiffs witness, Mrs. Isabelita Rivera, which indeed shows that on several occasions defendant either failed to pay on time or was completely in default in the payment of the monthly installment of the subject condominium unit.

It can be deduced from said documentary evidence that defendant should start paying the installment on September 17, 1984, but defendant paid on September 21, 1984 the amount of P51,238.00 thru credit memo. Witness claimed that a credit memo is a document issued by Olympia Housing Inc. to Panasiatic Travel Corp. for the amount of ticket purchased instead of paying in cash they just issued credit memo in order that it would be offset on the monthly amortization due to Olympia Housing Corp. She claimed that they based it on the invoice that they [were] sending them.

Witness further claimed that since the amount due was only P33,657.40 what she did to the excess of P51,238.00 was to apply it to the next installment. The next installment was due on October 12, 1984 in the amount of P26,158.00 representing the excess. It was paid thru credit memo no. 031 on October 17, 1984. In fact, there was still an excess of P10,081.20. The third installment was due on November 17, 1984. Defendant made partial payment because the excess payment of P10,081.20 was applied to the third installment. The 4th installment was due on December 17, 1984; the defendant did not pay instead she paid On January 9, 1985 the amount of P51,619.08 in cash per O.R. No. 295. Before this payment on January 9, 1985 defendant owed plaintiff P59,931.81 based on the amortization. The basis [was] the unpaid amortization due and payable plus 2% interest and 2% penalty charges per month. After payment, the amount due was P8,312.73. The 5th installment was due on January 17, 1985. No payment was made on the 6th, 7th 8th installments which were due on January, February, March, April 17, 1985 respectively. The 9th installment was due on May 17, 1985, it was not paid. Defendant made a payment on June 1985 for P33,231.90 in cash per O.R. No. 439. The next payment was made on June 8, 1985 for P25,574.59. After these two payments, there was still an outstanding amount due of P32,552.44. No payment was made on the 10th and 11th installments. The next payment was made on July 24, 1985 for P60,000.00. After this payment the outstanding amount due was P43,881.76. She made payment on August 16, 1985 for P30,067.00 thru credit memo no. 045. After this payment the outstanding amount due was P15,160.46. She did not on the 12th installment, instead she paid on August 28, 1985 for P26,043.00 thru credit memo no. 046. After this payment the outstanding amount due was P23,511.07. She did not pay on the 13th installment, instead she paid on October 10, 1985 for P20,830.00 thru credit memo no. 006. After this payment the outstanding amount due was P38,728.61. She did not pay on the 14th installment, instead payment was made on November 10, 1985 for P16,212.00 thru credit memo no. 010. After this payment the outstanding amount due was P58,851.83. No payments were made on the 15th, 16th and 17th installments. She paid on January 30, 1986 for P33,657.40 in cash per O.R. No. 842. After this payment the outstanding balance was P138,233.23. No payment was made on the 18th and 19th installment which fell due on February 17 and March 17, 1986. The next payment was made on April 15, 1986 for P25,263.23. After this payment the outstanding balance was P198,425.88. She did not pay for six (6) consecutive months from April 17 to September 17, 1986 corresponding to the 20th up to the 25th installment. The next payment was made on October 14, 1986 for P82,780.33 in cash per O.R. No. 1628. After this payment the outstanding amount due was P350,712.73. The 26th and 27th installments were not paid. She paid on November 24, 1986 for P134,629.60. After this payment the outstanding balance was P306,306.66. Witness claimed that the basis for the computation was the unpaid amortization due payable for the particular period plus 2% interest and 2% penalty charge per month. In computing the interest she used the simple method. The 28th up to the 31st installments were not paid. The next payment was made on April 30, 1987 for P22,213.00 thru credit memo no. 134. After this payment the outstanding balance was P471,317.60. The basis for this computation is the unpaid amortization due plus 2% interest and 2% penalty charge per month. The 33rd, 34th and 35th installments were not paid. The next payment was made on July 22, 1987 for P19,752.00 thru credit memo no. 146. After this payment the outstanding balance was P664,822.78. The 36th and 37th installments were not paid.[1]

On 31 January 1995, the Regional Trial Court, Branch V, of Makati City ruled thusly-

WHEREFORE, premises considered, judgment is hereby rendered as follows:

1. As the complaint has been prematurely filed without complying with the mandate of Republic Act No. 6552, the complaint is hereby dismissed;

2. That the obligation of defendant Maria Nelida Galvez Ycasiano has now become due and demandable, said defendant is hereby ordered to pay the sum of P4,007,473.49 as of November 30, 1994 plus 18% interest per annum, computed from 1 December 1994, but within sixty days from receipt of a copy of this decision;

3. Upon payment thereof, for plaintiff to issue the corresponding certificate of title in favor of defendant;

4. In the event that said amount in full is not paid including the current amount due including the interest sans penalties, then immediately thereafter, without necessity of demand, the defendants must vacate the premises and all payments will be charged as rentals to the property.

No award of damages and attorneys fees for any parties is being adjudged.

No costs.[2]

Thereupon, respondents tendered the amount of P4,304,026.53 to petitioner via Metrobank Cashiers Check No. CC008857. Petitioner refused to accept the payment, constraining respondents to consign at the disposal of the court a quo the check on 26 April 1995. In an order, dated 05 June 1996, the check was allowed to be substituted by another cashiers check payable to the Clerk of Court of the Makati Regional Trial Court. Complying with yet another court order of 04 January 1996, respondents deposited the amount of P4,304,026.53 with the Land Bank of the Philippines and subsequently submitted to the court the corresponding bank book as well as the banks verification.

Meanwhile, both parties appealed the judgment of the trial court. In its now questioned decision of 11 June 1999, the appellate court sustained the trial court.

The denial of the motion for reconsideration prompted petitioner to file the instant petition for review on certiorari, raising the following assignment of errors, to wit:







Respondents, upon the other hand, would insist that the petition should be held devoid of merit considering that: first, the issues raised in the petition would strike at fundamentally factual questions beyond the province of a petition for review on certiorari with this Court; second, there was no valid rescission of the contract to sell on account of the failure of petitioner to give notice of rescission by notarial act, a requisite laid down in Republic Act No. 6552; third, the oft-invoked Layug vs. IAC[4] case would scarcely find application, it being a case for annulment of contract, not one for the recovery of possession; fourth, no effective rescission had taken place on account of the failure of petitioner to pay the cash surrender value, conformably with the terms of the law; and fifth, there being no valid rescission, the contract remained valid and subsisting, still thereby obligating respondents to pay the outstanding balance of the purchase price.

In its Reply Brief, petitioner asseverated that, while not categorically made, the Court, in Layug,[5] had held to be sufficiently anchored, nevertheless, an action for judicial rescission even if no notarial act of rescission was priorly executed and the non-payment of the cash surrender value before the filing of the complaint.[6] Moreover, petitioner argued that while the complaint before the trial court was denominated as one for recovery of possession, the suit could still be considered as a case for judicial rescission considering that the issue of whether or not it was entitled to recover possession over the property subject matter of the contract to sell would require, for its resolution, passing upon the initial issue of whether or not the contract was in fact rescinded by virtue of a notarial act.[7]

The petition must be denied.

The action for reconveyance filed by petitioner was predicated on an assumption that its contract to sell executed in favor of respondent buyer had been validly cancelled or rescinded. The records would show that, indeed, no such cancellation took place at any time prior to the institution of the action for reconveyance. What had been sent by petitioner to respondent was a letter, dated 02 June 1988, that read:

02 June 1988


Pan Asiatic Travel Corp.

3rd Floor, S & L Building

Roxas Boulevard, Manila

Dear Ms. Galvez:

We have sent you many letters in the past asking you to update your payments in accordance with the terms of our Contract to Sell dated August 25, 1984 as follows:

Purchase Price, Unit No. D-12 P2,340,000.00

Terms of Payment:

- July 17, 1984, Reservation/

Deposit 100,000.00

- July 19, 1984, 50%

Down payment 1,070,000.00

- balance payable in 60

monthly installments with

24% p.a. interest on

diminishing balance.

Monthly payments to commence

Sept. 12, 1984 33,657.04/month

Note: Past due payments to bear interest of 2% per month plus penalty charge of 2% per month.

You are in default and your overdue account now stands as follows:

Purchase Price P2,340,000.00

Add: Interest on monthly

Amortizations 849,444.00


Add: Interest and penalties

on overdues (Refer

to Exh. A) 679,002.34


Less: Payments (Refer

To Exh. B) 1,944,100.82



Unless we receive payment in full within 30 days after service of this notice upon you, our Contract to Sell shall be cancelled and/or rescinded.

Please give this matter its due attention.

Very truly yours,

(Sgd.) Illegible



As so aptly observed by the courts below, the foregoing communication to the buyer merely demanded payment within thirty (30) days from receipt thereof with the threat that if the demand were not heeded, the contract would forthwith be cancelled or rescinded. Nor did the appellate court erroneously ignore the notarial rescission attached to the complaint for reconveyance. Apparently, the so-called notarial rescission was not sent to respondents prior to the institution of the case for reconveyance but merely served on respondents by way of an attachment to the complaint. In any case, a notarial rescission, standing alone, could not have invalidly effected, in this case, the cancellation of the contract.

As the trial court elaborated in this case:

A careful study of the evidence presented does not show a notice of cancellation or the demand for rescission of the contract by a notarial act. The plaintiff appears to be claiming that the June 2, 1988 letter is a notice of cancellation or a demand for rescission of the contract by a notarial act. This could not be what the law contemplates. It should be a notice of cancellation or demand for rescission of the contract by notarial act.

Further, the law requires also full payment of the cash surrender value to the buyer but there is no evidence adduced by the plaintiff that they delivered to the defendant the cash surrender value. Admittedly, no such full payment of the cash surrender value to the defendant was made. A mere promise to return is not what the law contemplates.[9]

The governing law is Republic Act No. 6552, otherwise known as the Realty Installment Buyer Protection Act, which has become effective since 16 September 1972. Republic Act No. 6552 is a special law governing transactions that involve, subject to certain exceptions, the sale on installment basis of real property.[10] The law has been enacted mainly to protect buyers of real estate on installment payments against onerous and oppressive conditions.[11] Section 3 of the statute provides:

Sec. 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 Number Thirty-eight hundred forty-four as amended by Republic Act Numbered Sixty three hundred eighty-nine, where the buyer has paid at least two years of installments, the buyer is entitled to the following rights in case he defaults in the payment of succeeding 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 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.

Down payments, deposits or options on the contract shall be included in the computation of the total number of installments made.

The enactment recognizes the right of the seller to cancel the contract but any such cancellation must be done in conformity with the requirements therein prescribed.[12] In addition to the notarial act of rescission, the seller is required to refund to the buyer the cash surrender value of the payments on the property.[13] The actual cancellation of the contract can only be deemed to take place upon the expiry of a 30-day period following the receipt by the buyer of the notice of cancellation or demand for rescission by a notarial act and the full payment of the cash surrender value.

The Court agrees with petitioner that it is not precluded from going to the court to demand judicial rescission in lieu of a notarial act of rescission. This much must be recognized. Thus, in Layug vs. Intermediate Appellate Court[14] the Court has ruled that a demand for rescission by notarial act would appear to be merely circuitous, consequently superfluous, with the filing by the seller of an action for annulment of contract and for recovery of damages. Unfortunately for petitioner, it would be incorrect to apply Layug to the instant case. Layug is basically an action for annulment of contract, a kindred concept of rescission, whereas the instant case before the Court is one for recovery of possession on the thesis of a prior rescission of the contract covering the property.[15] Not only is an action for reconveyance conceptually different from an action for rescission but that, also, the effects that flow from an affirmative judgment in either case would be materially dissimilar in various respects. The judicial resolution of a contract gives rise to mutual restitution which is not necessarily the situation that can arise in an action for reconveyance. Additionally, in an action for rescission (also often termed as resolution), unlike in an action for reconveyance predicated on an extrajudicial rescission (rescission by notarial act), the Court, instead of decreeing rescission, may authorize for a just cause the fixing of a period.[16]

Nor should a party in litigation be permitted to freely and substantially change the theory or the cause of action of his case[17] that, otherwise, can put to undue disadvantage the other party by not being accurately and timely apprised of what he is up against. The character of an action is determined from the issues raised by the complaint, from the nature of the right or grievance asserted, and from the relief sought in the complaint.[18] A change of theory can result in grave alteration of the stand theretofore taken by the parties, and a court must not thereafter take it upon itself to assume its own position on, or the factual and legal considerations of, the case.

WHEREFORE, all premises considered, the instant petition is DENIED and the appealed decision is AFFIRMED. No costs.


Davide, Jr., C.J., (Chairman), Ynares-Santiago, Carpio and Azcuna, JJ., concur.

[1] Rollo, pp. 179-184.

[2] Rollo, p. 193.

[3] Rollo, pp. 29-30.

[4] 167 SCRA 627.

[5] Ibid.

[6] Rollo, p. 429.

[7] Rollo, p. 32.

[8] Rollo, p. 59.

[9] Rollo, p. 191.

[10] Layug vs. IAC, supra.

[11] Sec. 2, R.A. No. 6552.

[12] Leano vs. Court of Appeals, G.R. No. 129018,15 November 2001.

[13] Rillo vs. Court of Appeals, 274 SCRA 461.

[14] Supra.

[15] Paragraph 5 of the complaint alleged that for failure of Defendants to pay their unpaid installments to Plaintiff within the grace period of 30 days as mandated by Republic Act 6552, otherwise known as the Maceda Act, Plaintiff rescinded said contract by a Notarial Act of Rescission.

[16] Article 1191, Civil Code.

[17] See Arroyo vs. HRET, 246 SCRA 384.

[18] Ft. Smith & W.P. Co. vs. Ford, 34 Okla 575, 126 P 745.