G.R. No. 140468 . January 16, 2003.
OLYMPIA HOUSING, INC., petitioner, vs. PANASIATIC TRAVEL CORPORATION and MA. NELIDA GALVEZ-YCASIANO, respondents.

FACTS

Petitioner Olympia Housing, Inc. and respondent Ma. Nelida Galvez-Ycasiano entered into a Contract to Sell on August 8, 1984, for the sale of a condominium unit at the price of P2,340,000.00, payable with a down payment and the balance in sixty monthly installments of P33,657.40. Respondent Ycasiano made the initial payments but subsequently failed to pay the monthly installments on time, often paying late or in irregular amounts, sometimes through credit memos for plane tickets purchased from her company, Panasiatic Travel Corporation. As of June 2, 1988, the unpaid amount allegedly reached P1,924,345.52. Petitioner sent a demand and subsequently rescinded the contract by a Notarial Act of Rescission. Petitioner then filed a complaint for Recovery of Possession (Accion Publiciana) against respondents. The Regional Trial Court dismissed the complaint for being prematurely filed without complying with Republic Act No. 6552 (The Maceda Law), but ordered respondent Ycasiano to pay the balance of the purchase price, plus interest, within sixty days, and upon payment, for petitioner to issue the title; in case of non-payment, respondents must vacate. Respondents tendered payment via cashier’s check, which petitioner refused, leading to consignation. Both parties appealed. The Court of Appeals sustained the trial court. Petitioner filed the instant petition.

ISSUE

Whether the Court of Appeals erred in: 1) not ruling on the effect of the filing of the complaint and the Notarial Act of Rescission vis-à-vis R.A. 6552; 2) refusing to decree rescission on the ground that petitioner failed to pay the cash surrender value prior to filing the complaint; and 3) affirming the trial court’s decision allowing respondent to pay the defaulted obligations and ordering petitioner to issue the title upon payment.

RULING

The Supreme Court DENIED the petition and AFFIRMED the appealed decision.
1. The Court held that the trial court correctly dismissed the complaint for being premature. Under Section 3(b) of R.A. 6552, for contracts where installments have been paid for less than two years, the seller must give the buyer a grace period of not less than sixty days from the date the installment became due. If the buyer fails to pay the installments due at the expiration of the grace period, the seller may cancel the contract after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission by notarial act. Petitioner failed to prove that it complied with this mandatory 30-day period after notice before filing the complaint. The Notarial Act of Rescission and the filing of the complaint were insufficient to constitute a valid rescission without adhering to the statutory waiting period.
2. The Court ruled that petitioner’s failure to refund the cash surrender value as required by Section 4 of R.A. 6552 (for contracts with at least two years of installments paid) was a fatal defect that barred the action for rescission. Since respondent had paid more than two years of installments, petitioner was obligated to refund the cash surrender value, which it did not do. The statutory right to rescind is conditioned upon the return of the cash surrender value.
3. The Court found no error in the appellate court’s affirmation of the trial court’s decision allowing respondent to pay the balance. The trial court’s decision, which ordered payment of the balance within sixty days and the issuance of title upon payment, or vacation in case of non-payment, was in accordance with law and equity. The Court also noted that a party cannot substantially change its theory on appeal; petitioner’s case was for recovery of possession based on an extrajudicial rescission, not an action for judicial rescission which could allow for different remedies.