1

CARMELITA LEAO, assisted by her husband GREGORIO CUACHON, petitioner,

FACTS:
n November 13, 1985, Hermogenes Fernando, as vendor and Carmelita Leao, as vendee
executed a contract to sell involving a piece of land, Lot No. 876-B, with an area of 431 square
meters, located at Sto. Cristo, Baliuag, Bulacan.
n the said contract, Leao bound herself to pay Fernando the sum of one hundred seven thousand
and seven hundred and fifty pesos (P107,750.00) as the total purchase price of the lot. The manner
of paying the total purchase price was as follows:
"The sum of TEN TH&SAND SEVEN H&NDRED SEVENTY FVE (P10,775.00)
PESS, shall be paid at the signing of this contract as DN PAYMENT, the balance of
NNETY SX TH&SAND NNE H&NDRED SEVENTY FVE PESS (P96,975.00) shall be
paid within a period of TEN (10) years at a monthly amortization of P1,747.30 to begin from
December 7, 1985 with interest at eighteen per cent (18%) per annum based on balances.
The contract also provided for a grace period of one month within which to make payments, together
with the one corresponding to the month of grace. Should the month of grace expire without the
installments for both months having been satisfied, an interest of 18% per annum will be charged on
the unpaid installments.
Should a period of ninety (90) days elapse from the expiration of the grace period without the
overdue and unpaid installments having been paid with the corresponding interests up to that date,
respondent Fernando, as vendor, was authorized to declare the contract cancelled and to dispose of
the parcel of land, as if the contract had not been entered into. The payments made, together with all
the improvements made on the premises, shall be considered as rents paid for the use and
occupation of the premises and as liquidated damages.
Leao made several payments in lump sum and then she constructed a house on the subject lot.
The last payment that she made was on April 1, 1989. Due to this default of Leao, Fernando filed
an ejectment case and the trial court issued a writ of execution which was duly served on petitioner
Leao.
n September 27, 1993, petitioner Leao filed with the Regional Trial Court of Malolos, Bulacan a
complaint for specific performance with preliminary injunction assailing the validity of the judgment of
the municipal trial court for being violative of her right to due process and for being contrary to the
avowed intentions of Republic Act No. 6552 (Maceda Law).
n February 6, 1995, the trial court rendered a decision, it made the issued preliminary injunction
permanent and ordered the plaintiff to pay the defendant the sum of P103,090.70.
n February 21, 1995, respondent Fernando filed a motion for reconsideration. The trial court
increased the amount of P103,090.70 to P183,687.00 and ordered petitioner Leao to pay attorney's
fees. According to the trial court, the transaction between the parties was an absolute sale, making
petitioner Leao the owner of the lot upon actual and constructive delivery thereof. Respondent
Fernando, the seller, was divested of ownership and cannot recover the same unless the contract is
rescinded pursuant to Article 1592 of the Civil Code which requires a judicial or notarial demand.
Since there had been no rescission, petitioner Leao, as the owner in possession of the property,
cannot be evicted.
n time, petitioner Leao appealed the decision to the Court of Appeals which promulgated a
decision affirming that of the Regional Trial Court in toto. n February 11, 1997, petitioner Leao
filed a motion for reconsideration but the Court of Appeals denied the motion. Hence this petition.

ISSUES:


1. hether or not the contract between the parties is an absolute sale or a conditional sale.
2. hether or not there was a proper cancellation of the contract to sell.
3. hether or not petitioner was in delay in the payment of the monthly amortizations.

HELD:
The transaction between the parties was not an absolute sale. The intention of the parties was to
reserve the ownership of the land in the seller until the buyer has paid the total purchase price. The
contract to sell makes the sale, cession and conveyance "subject to conditions" set forth in the
contract to sell. hat was transferred was the possession of the property, not ownership. n 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 that prevented the obligation of the vendor to convey title from acquiring any obligatory
force.

The transfer of ownership and title would occur after full payment of the price. n the case at
bar, petitioner Leao's non-payment of the installments after April 1, 1989, prevented the obligation
of respondent Fernando to convey the property from arising. n fact, it brought into effect the
provision of the contract on cancellation.
No. There was no proper cancellation of the contract. Contrary to the findings of the trial court,
Article 1592 of the Civil Code is inapplicable to the case at bar.

However, any attempt to cancel the
contract to sell would have to comply with the provisions of Republic Act No. 6552, the "Realty
nstallment Buyer Protection Act." R.A. No. 6552 recognizes in contract to sell of real estate, 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. The law also provides for the rights of the buyer in case of cancellation. Thus, Sec. 3 (b) of
the law provides that:
1 the contract is cancelled, the seller shall re1:nd to the b:er the cash s:rrender
val:e o1 the pa2ents on the propert eq:ivalent to 1i1t percent o1 the total pa2ents 2ade
and, a1ter 1ive ears o1 install2ents, an additional 1ive percent ever ear b:t not to exceed
ninet percent o1 the total pa2ent 2ade: Provided, That the act:al cancellation o1 the
contract shall take place a1ter thirt das 1ro2 receipt b the b:er o1 the notice o1
cancellation or the de2and 1or rescission o1 the contract b a notarial act and :pon 1:ll
pa2ent o1 the cash s:rrender val:e to the b:er.
The decision in the ejectment case operated as the notice of cancellation required by Sec. 3(b) but
petitioner Leao was not given then cash surrender value of the payments that she made, therefore
there was still no actual cancellation of the contract. Consequently, petitioner Leao may still
reinstate the contract by updating the account during the grace period and before actual
cancellation. Should petitioner Leao wish to reinstate the contract, she would have to update her
accounts with respondent Fernando in accordance with the statement of account which amount was
P183,687.00.
n the issue of whether petitioner Leao was in delay in paying the amortizations, the SC ruled that
while the contract provided that the total purchase price was payable within a ten-year period, the
same contract specified that the purchase price shall be paid in monthly installments for which the
corresponding penalty shall be imposed in case of default. Petitioner Leao cannot ignore the
provision on the payment of monthly installments by claiming that the ten-year period within which to
pay has not elapsed. n the case at bar, respondent Fernando performed his part of the obligation
by allowing petitioner Leao to continue in possession and use of the property. Clearly, when
petitioner Leao did not pay the monthly amortizations in accordance with the terms of the contract,
she was in delay and liable for damages.

However, the SC agreed with the trial court that the default
committed by petitioner Leao in respect of the obligation could be compensated by the interest and
surcharges imposed upon her under the contract in question.
The Supreme Court denied the petition and affirmed the decision of the Court of Appeals

in toto.






CCN1kAC1 CI SALL CCN1kAC1 1C SLLL

1he nonpaymenL of prlce ls a resoluLory condlLlon
LhaL ls Lhe conLracL of sale may by such occurrence
puL an end Lo a LransacLlon LhaL once upon a Llme
exlsLed
1he paymenL ln full of Lhe prlce ls a poslLlve
suspenslve condlLlon Pence lf Lhe prlce ls noL
pald lL ls as lf Lhe obllgaLlon of Lhe seller Lo dellver
and Lo Lransfer ownershlp never became effecLlve
and blndlng

1lLle over Lhe properLy generally passes Lo Lhe
buyer upon dellvery
Cwnershlp ls reLalned by Lhe seller regardless of
dellvery and ls noL Lo pass unLll Lhe full paymenL of
Lhe prlce

AfLer dellvery has been made Lhe seller has losL
ownershlp and cannoL recover lL unless Lhe
conLracL ls resolved or resclnded
Slnce seller reLalns ownershlp desplLe dellvery he
ls enforclng and noL resclndlng Lhe conLracL lf he
seeks Lo ousL Lhe buyer for fallure Lo pay

A conLracL Lo sell may noL be consldered as a ConLracL of Sale because Lhe flrsL essenLlal
elemenL ls lacklng ln a conLracL Lo sell Lhe prospecLlve seller expllclLly reserves Lhe Lransfer of LlLle Lo
Lhe prospecLlve buyer meanlng Lhe prospecLlve seller does noL yeL agree or consenL Lo Lransfer
ownershlp of Lhe properLy sub[ecL of Lhe conLracL Lo sell unLll Lhe happenlng of Lhe evenL whlch ls Lhe
full paymenL of Lhe purchase prlce WhaL Lhe seller agrees or obllges hlmself Lo do ls Lo fulflll hls
promlse Lo sell Lhe sub[ecL properLy when Lhe enLlre amounL of Lhe purchase prlce ls dellvered Lo hlm
A conLracL Lo sell may Lhus be deflned as bllaLeral conLracL whereby Lhe prospecLlve seller whlle
expressly reservlng Lhe ownershlp of Lhe sub[ecL properLy desplLe dellvery Lhereof Lo Lhe prospecLlve
buyer blnds hlmself Lo sell Lhe sald properLy excluslvely Lo Lhe prospecLlve buyer upon fulflllmenL of Lhe
condlLlon agreed upon LhaL ls full paymenL of purchase prlce

CCN1kAC1 1C SLLL NC1 A CCNDI1ICNAL SALL
A conLracL Lo sell may noL even be consldered as a condlLlonal conLracL of sale where Lhe seller
may llkewlse reserve LlLle Lo Lhe properLy sub[ecL of Lhe sale unLll Lhe fulflllmenL of a suspenslve
condlLlon because ln a condlLlonal conLracL of sale Lhe flrsL elemenL of consenL ls presenL alLhough lL ls
condlLloned upon Lhe happenlng of a conLlngenL evenL whlch may or may noL occur lf Lhe suspenslve
condlLlon ls noL fulfllled Lhe perfecLlon of Lhe conLracL of sale ls compleLely abaLed Powever lf Lhe
suspenslve condlLlon ls fulfllled Lhe conLracL of sale ls Lhereby perfecLed such LhaL lf Lhere had been
prevlous dellvery of Lhe properLy sub[ecL of Lhe sale Lo Lhe buyer ownershlp LhereLo auLomaLlcally
Lransfers Lo Lhe buyer by operaLlon of law wlLhouL any furLher acL havlng Lo be performed by Lhe seller
ln a conLracL Lo sell upon fulflllmenL of Lhe suspenslve condlLlon whlch ls Lhe full paymenL of Lhe
purchase prlce ownershlp wlll noL auLomaLlcally Lransfer Lo Lhe buyer alLhough Lhe properLy may have
been prevlously dellvered Lo hlm 1he prospecLlve seller sLlll has Lo convey LlLle Lo prospecLlve buyer by
enLerlng lnLo a conLracL of absoluLe sale

Art|c|e 1S92 of NCC Not App||cab|e to Contract to Se||
ArLlcle 139 of Lhe nCC does noL apply Lo a conLracL Lo sell buL lL speaks of Lhe resclsslon of
conLracLs of sale of real properLy lL also permlLs Lhe vendee Lo pay even afLer Lhe explraLlon of Lhe
perlod as long as no demand for resclsslon of Lhe conLracL has been made upon elLher [udlclally or by
noLarlal acL


MACLDA LAW (kea|ty Insta||ment 8uyer rotect|on Act) kA 6SS2


1ypes of sale whlch ls noL covered by Maceda Law
1 ueed of AbsoluLe Sale ConLracL
lnsLallmenL sales coverlng lndusLrlal loLs and commerclal bulldlngs
Sale Lo LenanLs under 8A as amended
lnsLallmenL sales lnvolvlng resldenLlal properLles buL covered by deed of sale wlLh morLgage
and noL by conLracL Lo sell
Maceda Law provldes proLecLlon for buyers of real esLaLe on lnsLallmenL paymenLs agalnsL onerous and
oppresslve condlLlons
under Maceda Law buyers are enLlLled Lo recelve nC1A8lAL nC1lCL Cl CAnCLLLA1lCn before conLracL
can be legally cancelled by Lhe seller whlch cancellaLlon can only Lake effecL days afLer recelpL of such
noLlce
ln case of cancellaLlon of conLracL buyers under Maceda Law are enLlLled Lo recelve refund of Lhe cash
surrender value of paymenLs made whlch ls equlvalenL Lo 3 of lnsLallmenLs made and afLer flve years
of lnsLallmenLs an addlLlonal 3 every year buL noL Lo exceed 9 of Lhe LoLal paymenLs made
8A 633 Look effecL lasL AugusL 6 197

Lxample of compuLlng Lhe cash surrender value
A buyer of real esLaLe has already pald ln years of lnsLallmenL for a LoLal amounL of 3
lncluslve of penalLy WhaL ls Lhe cash surrender value of Lhe properLy based on Maceda
Law?
3 years 3
years 13
years 63

Cash surrender value (3 % 63
3