G.R. No. 230832 , November 12, 2018
Royal Plains View, Inc. and/or Renato Padillo, Petitioners, vs. Nestor C. Mejia, Respondent.

FACTS

The case involves a parcel of land originally owned by Dominador Ramones. During his lifetime, Dominador executed a Contract of Sale in favor of Blas Mejia, father of respondent Nestor Mejia, for a portion of the land. Despite this sale, the title remained in the name of the Ramones spouses. In 2005, Nestor, who was in possession of the land and the old sale documents, entered into a Deed of Conditional Sale with petitioner Royal Plains View, Inc., represented by its President Renato Padillo, for the property covered by a derivative title (TCT No. T-225549). The corporation made partial payments. Later, Renato discovered that Nestor had sold the entire property to third parties, the spouses Egina, leading to the issuance of new titles. Nestor subsequently sent a “Rescission of Deed of Conditional Sale” to petitioners, alleging default in installment payments.
Petitioners filed a complaint for declaration of nullity of the rescission instrument and for specific performance. The Regional Trial Court (RTC) dismissed the complaint, finding the entire transaction tainted with fraud and noting that Nestor could not have validly sold the property as his father’s contract was merely a conditional sale and title never transferred. The Court of Appeals (CA) reversed the RTC, declaring the rescission void and ordering Nestor to return the payments received with interest. The CA held that the rescission was ineffective for non-compliance with the mandatory procedure under the Maceda Law (RA 6552).

ISSUE

The core issue is whether the respondent’s extrajudicial rescission of the Deed of Conditional Sale was valid and effective.

RULING

The Supreme Court denied the petition and affirmed the CA decision, ruling the rescission was invalid. The contract was a contract to sell, not a contract of sale, as the obligation of petitioners to pay the installments was not a suspensive condition for the contract’s perfection but was the very consideration for the seller’s obligation to execute a final deed of sale. The Court applied the Realty Installment Buyer Protection Act (RA 6552 or the Maceda Law), which governs sales of real estate on installment payments.
Under Section 4 of the Maceda Law, in contracts where the buyer has paid at least two years of installments, the seller must grant a grace period of at least sixty days from the due date and must execute a notarized notice of cancellation or demand for rescission. The Court found that petitioners had paid more than two years’ worth of installments. Respondent’s act of sending a unilateral “Rescission” document failed to comply with these mandatory requirements. A mere letter, without being notarized and without granting the mandatory grace period, is insufficient to effect a valid rescission. Consequently, the rescission was void. The Court upheld the CA’s order for Nestor to return the payments received by petitioners, with legal interest, as a consequence of the ineffective rescission. The ruling emphasizes the protective intent of the Maceda Law and the necessity of strict adherence to its procedural requirements for the valid cancellation of installment contracts.