G.R. No. 246836 . October 07, 2020
Spouses Teodulo Bayudan and Filipina Bayudan, Petitioner, vs. Rodel H. Dacayan, Respondent.

FACTS

Respondent Rodel Dacayan, a co-owner of a parcel of land in Valenzuela City, filed an unlawful detainer complaint against petitioners Spouses Bayudan. Dacayan alleged that the spouses leased a store on the property based on an oral contract but failed to pay monthly rentals since September 2012. Despite a demand letter, they refused to pay and vacate, claiming ownership by virtue of a “Kasunduang Magbilhan ng Bahagi ng Lupa” (Contract to Sell) they executed with Dacayan on January 9, 2013. Under this contract, the spouses agreed to buy a 40-square meter portion for P300,000.00, payable within two years until January 2015.
The Spouses Bayudan asserted that their possession was anchored on this Contract to Sell, not the prior lease, and that they had paid P190,000.00 as of June 2014. They contended that Dacayan failed to secure the title as agreed and wrongfully refused their tender of the balance. Prior to the ejectment suit, they filed a complaint for specific performance to enforce the contract. The Metropolitan Trial Court (MeTC) ruled for Dacayan, holding possession became unlawful upon default in payments under the contract. The Regional Trial Court (RTC) reversed, finding the contract was not validly cancelled under Republic Act No. 6552 (The Realty Installment Buyer Protection Act). The Court of Appeals reinstated the MeTC decision, ruling possession was by mere tolerance.

ISSUE

Whether the possession of Spouses Bayudan became unlawful, giving rise to a cause of action for unlawful detainer.

RULING

The Supreme Court ruled in favor of the Spouses Bayudan, reversing the Court of Appeals. The legal logic centers on the application of Republic Act No. 6552 to the Contract to Sell. The Court clarified that for a seller to eject a buyer in an installment sale, the contract must first be validly cancelled in accordance with the mandatory procedure under Section 4 of R.A. 6552. This requires the seller to: (1) give the buyer a grace period of at least sixty days from the date of default; and (2) thereafter send a notarized notice of cancellation or demand for rescission.
The records showed Dacayan did not comply with these requisites. His first demand letter in November 2014 was sent even before the two-year payment period under the contract expired in January 2015. Furthermore, his subsequent demand letter in March 2015 was not the equivalent of the required notarized notice of cancellation. Consequently, the Contract to Sell was not effectively terminated. Following the precedent in Pagtalunan v. Vda. De Manzano, an unlawful detainer action cannot prosper against a buyer where the underlying contract to sell has not been validly cancelled under R.A. 6552. Thus, there was no legal basis to declare the spouses’ possession unlawful. The RTC decision dismissing the ejectment case was reinstated.