Gatchalian Realty Inc. v.

Angeles
Legend: year (y); month (m)
• Angeles purchased a house and lot to be paid in installments for 10y.

• Under the Contract to Sell, GRI shall retain ownership despite delivery to Angeles.

• Angeles failed to satisfy her monthly installment. She paid only 35/48 installments.

• Angeles was given 12 notices for 3y. Despite receipt, she still failed to pay.

• After 51m of grace period, Angeles was sent a notice of notarial rescission.

• With regard the 50% refundable amount, GRI informed Angeles that it had already made
deductions from it as rent.

• For her continued refusal to pay, GRI filed a complaint for Unlawful Detainer against Angeles.

• MeTC: GRI won; RTC: reversed; MR: reversed; CA: Angeles won, the actual cancellation of
the contract between the parties did not take place because GRI failed to refund to Angeles
the cash surrender value.

• ISSUE: WoN CA erred in ruling that the actual cancellation of the contract did not take place.
(NO)

• Under the Maceda Law, the buyer’s failure to pay the installments due at the expiration of the
grace period allows the seller to cancel the contract after 30 days from the buyer’s receipt of
the notice of cancellation or demand for rescission of the contract by a notarial act.

• BUT a valid and effective cancellation under R.A. 6552 must comply with the mandatory twin
requirements of a notarized notice of cancellation and a refund of the cash surrender value.

• The actual cancellation of the contract can only be deemed to take place upon the expiry of a
30-day period following the receipt by the buyer of the notice of cancellation or demand for
rescission by a notarial act and the full payment of the cash surrender value.

- Here, GRI failed to surrender the Cash Surrender Value because GRI deducted from it the
payment for the rentals.

- There could be no compensation as there was nothing in the contracts which provided for
the amount of rentals in case the buyer defaults in her installment payments.

- For legal compensation to take place, the debts must be liquidated. Here, the rentals due
to GRI were not liquidated.

- Pilar v. Sps. Villar is not applicable in this case. There, it was the MeTC who decreed the
amount of rent. Here, it was the developer (GRI), who unilaterally imposed rentals.