Associated Marine Officers and Seamen's Union of the Philippines - PTGWO-ITF vs. Noriel Decena

G.R. No. 178584, October 8, 2012

(Obligations and Contracts, Ejectment, Sales)

FACTS

Petitioner Associated Marine Officers and Seamen's Union of the Philippines - PTGWO-ITF entered into a Shelter Contract Award with respondent Noriel Decena, with the following terms: (1) reimburse petitioner the cost of the residential property in 180 equal monthly payments, (2) three-month grace period to pay arrears in case of failure to remit three monthly reimbursements, (3) otherwise, the contract shall be automatically cancelled and respondent shall vacate the premises.

When the respondent failed to pay 25 monthly reimbursements despite demands, petitioner cancelled the contract and treated all the respondent's reimbursements as rental payments. An ejectment (unlawful detainer) complaint was then filed which was granted by the Municipal Trial Court and affirmed later on appeal by the Regional Trial Court.  The Court of Appeals reversed the judgment on the ground of prematurity as it treated the contract as not one having been converted to contract of lease but one which is a contract to sell, which requires notarial notice of rescission under Republic Act 6552.

ISSUE

Is the Shelter Contract Award between the parties a contract to sell or has it been converted to a contract of lease?

RULING

Despite its name having no reference to contract to sell, the Shelter Contract Award is in fact a contract to sell.

"A contract to sell is defined as a bilateral contract whereby the prospective seller, while expressly reserving the ownership of the subject property despite delivery thereof to the prospective buyer, binds itself to sell the said property exclusively to the prospective buyer upon fulfillment of the condition agreed upon, that is, full payment of the purchase price."

The Shelter Contract Award falls within this definition, as it stipulates that upon full reimbursement payment of the value of the house and lot, the petitioner shall execute a Deed of Transfer and shall cause the transfer of title of the property to respondent's name. Any reference to monthly reimbursements in the contract is just a guise to hide what actually are installments payments for the value of the house and lot.

Since the contract to sell was not validly rescinded under Section 3(b) of Republic Act 6552 (Realty Installment Buyer Protection Act), the respondent can still occupy the property undisturbed.

Section 3(b), R.A. 6552:

"(b) If the contract is canceled, 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."

Lacking proof that the Shelter Contract Award has been cancelled in accordance with R.A. 6552, there is as yet no basis to declare respondent's possession of the house and lot as illegal.

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