G.R. No. 179594. September 11, 2013.

*
MANUEL UY & SONS, INC., petitioner, vs. VALBUECO,
INCORPORATED, respondent.

Civil Law; Contracts; Contract to Sell; In a conditional sale, as in a

contract to sell, ownership remains with the vendor and does not pass to the
vendee until full payment of the purchase price.—As found by the Court of
Appeals, the two conditional deeds of sale entered into by the parties are
contracts to sell, as they both contained a stipulation that ownership of the
properties shall not pass to the vendee until after full payment of the
purchase price. In a conditional sale, as in a contract to sell, ownership
remains with the vendor and does not pass to the vendee until full payment
of the purchase price. The full payment of the purchase price partakes of a
suspensive condition, and non-fulfillment of the condition prevents the
obligation to sell from arising. To differentiate, a deed of sale is absolute
when there is no stipulation in the contract that title to the property remains
with the seller until full payment of the purchase price. Ramos v. Heruela,
473 SCRA 79 (2005), held that Articles 1191 and 1592 of the Civil Code are
applicable to contracts of sale, while R.A. No. 6552 applies to contracts to
sell.
Same; Same; Same; Realty Installment Buyer Act (R.A. No. 6552); R.A.
No. 6552 recognizes in conditional sales of all kinds of real estate
(industrial, commercial, residential) the right of the seller to cancel the
contract upon non-payment of an installment by the buyer, which is simply
an event that prevents the obligation of the vendor to convey title from
acquiring binding force.—The Court of Appeals correctly held that R.A.
No. 6552, otherwise known as the Realty Installment Buyer Act, applies to
the subject contracts to sell. R.A. No. 6552 recognizes in conditional sales
of all kinds of real estate (industrial, commercial, residential) the right of the
seller to cancel the contract upon non-payment of an installment by the
buyer, which is simply an event that prevents the obligation of the vendor to
convey title from acquiring binding force.
Same; Same; Same; Same; Under R.A. No. 6552, the right of the buyer
to refund accrues only when he has paid at least two years

_______________

* THIRD DIVISION.

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538 SUPREME COURT REPORTS ANNOTATED

Manuel Uy & Sons, Inc. vs. Valbueco, Incorporated

of installments.—Under R.A. No. 6552, the right of the buyer to refund

accrues only when he has paid at least two years of installments. In this
case, respondent has paid less than two years of installments; hence, it is not
entitled to a refund.
 Same; Same; Prescription; Article 1144 of the Civil Code provides that
actions based upon a written contract must be brought within ten years from
the time the right of action accrues.—In this case, petitioner raised the
defense of prescription for the first time before this Court, and respondent
had the opportunity to oppose the defense of prescription in its Comment to
the petition. Hence, the Court can resolve the issue of prescription as both
parties were afforded the opportunity to ventilate their respective positions
on the matter. The Complaint shows that the Conditional Deeds of Sale were
executed on November 29, 1973, and payments were due on both
Conditional Deeds of Sale on November 15, 1974. Article 1144 of the Civil
Code provides that actions based upon a written contract must be brought
within ten years from the time the right of action accrues. Non-fulfillment of
the obligation to pay on the last due date, that is, on November 15, 1974,
would give rise to an action by the vendor, which date of reckoning may
also apply to any action by the vendee to determine his right under R.A. No.
6552. The vendee, respondent herein, filed this case on March 16, 2001,
which is clearly beyond the 10-year prescriptive period; hence, the action
has prescribed.

PETITION for review on certiorari of the decision and resolution of

the Court of Appeals.
The facts are stated in the opinion of the Court.
Abundio D. Bello for petitioner.
Jaso, Dorillo & Associates for respondent.

PERALTA, J.:
This is a petition for review on certiorari1 of the Court of
Appeals’ Decision2 dated December 11, 2006 in CA-G.R. CV

_______________
1 Under Rule 45 of the Rules of Court.
2 Penned by Associate Justice Vicente Q. Roxas of the Sixteenth Division, with
Associate Justice Josefina Guevara-Salonga as Chairman and Associate Justice
Apolinario D. Bruselas, Jr. as member, concurring.

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Manuel Uy & Sons, Inc. vs. Valbueco, Incorporated

No. 85877, and its Resolution dated September 4, 2007, denying

petitioner’s motion for reconsideration.
The Court of Appeals reversed and set aside the Decision3 of the
Regional Trial Court (RTC) of Manila, Branch 1, dismissing the
Complaint for specific performance and damages. The Court of
Appeals reinstated the Complaint and directed petitioner to execute
deeds of absolute sale in favor of respondent after payment of the
purchase price of the subject lots.
The facts, as stated by the Court of Appeals, are as follows:
Petitioner Manuel Uy & Sons, Inc. is the registered owner of
parcels of land located in Teresa, Rizal covered by Transfer
Certificate of Title (TCT) No. 59534, covering an area of about
6,119 square meters; TCT No. 59445, covering an area of about
6,838 square meters; TCT No. 59446, covering an area of about
12,389 square meters; and TCT No. 59444, covering an area of
about 32,047 square meters.
 On November 29, 1973, two Conditional Deeds of Sale were
executed by petitioner, as vendor, in favor of respondent Valbueco,
Incorporated, as vendee. The first Conditional Deed of Sale4 covered
TCT Nos. 59534, 59445 and 59446, and contained the following
terms and conditions:

That for and in consideration of the sum of ONE HUNDRED

SIXTY-FOUR THOUSAND SEVEN HUNDRED FORTY-NINE
(Php 164,749.00) PESOS, Philippine currency, the VENDOR hereby
agrees to SELL, CEDE, TRANSFER and CONVEY unto the
VENDEE x x x the aforementioned properties, payable under the
following terms and conditions:
1. The sum of FORTY-ONE THOUSAND ONE HUNDRED
EIGHTY-SEVEN and 25/100 (Php

_______________
3 In Civil Case No. 01-100411.
4 Rollo, pp. 351-354.

540

540 SUPREME COURT REPORTS ANNOTATED

Manuel Uy & Sons, Inc. vs. Valbueco, Incorporated

41,187.25) PESOS shall be paid upon signing of this conditional

deed of sale; and
2. The balance of ONE HUNDRED TWENTY-THREE
THOUSAND FIVE HUNDRED SIXTY-ONE and 75/100 (Php
123,561.75) PESOS shall be paid within a period of one (1) year
from November 15, 1973, with interest of 12% per annum based on
the balance, in the mode and manner specified below:
a) January 4, 1974 – P16,474.90 plus interest
b) On or before May 15, 1974 – P53,543.43 plus interest
c) On or before November 15, 1974 – P53,543.32 plus
interest
3. That the vendee shall be given a grace period of thirty (30)
days from the due date of any installment with corresponding interest
to be added, but should the VENDEE fail to make such payment
within the grace period this contract shall be deemed rescinded and
without force and effect after notice in writing by VENDOR to
VENDEE.
4. That the VENDOR agrees to have the existing Mortgages on
the properties subject of this sale released on or before May 20, 1974.
5. That the VENDOR agrees to have the above-described
properties freed and cleared of all lessees, tenants, adverse occupants
or squatters within 100 days from the execution of this conditional
deed of sale. In case of failure by the VENDOR to comply with the
undertaking provided in this paragraph and the VENDEE shall find it
necessary to file a case or cases in court to eject the said lessees,
tenants, occupants and/or squatters from the land, subject of this sale,
the VENDOR agrees to answer and pay for all the expenses incurred
and to be incurred in connection with said cases until the same are
fully and finally terminated.
6. That the VENDOR and the VENDEE agree that during the
existence of this Contract and without previous expressed written
permission from the other,

541
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Manuel Uy & Sons, Inc. vs. Valbueco, Incorporated

they shall not sell, cede, assign, transfer or mortgage, or in any way
encumber unto another person or party any right, interest or equity
that they may have in and to said parcels of land.
xxxx
8. That it is understood that ownership of the properties herein
conveyed shall not pass to the VENDEE until after payment of the
full purchase price; provided, however, that [the] VENDOR shall
allow the annotation of this Conditional Deed of Sale at the back of
the titles of the above-described parcels of land in the corresponding
Registry of Deeds x x x.
9. That upon full payment of the total purchase price, a Deed of
Absolute Sale shall be executed in favor of the VENDEE and the
VENDOR agrees to pay the documentary stamps and the science
stamp tax of the Deed of Sale; while the VENDEE agrees to pay the
registration and other expenses for the issuance of a new title.
10. That it is mutually agreed that in case of litigation, the venue
of the case shall be in the courts of Manila, having competent
jurisdiction, any other venue being expressly waived.5

On the other hand, the second Conditional Deed of Sale6

covering Lot No. 59444 provides, thus:

1. The sum of FIFTY-TWO THOUSAND SEVENTY-SIX AND

37/100 (Php 52,076.37) PESOS, shall be paid upon signing of this
conditional deed of sale; and
2. The balance of ONE HUNDRED FIFTY-SIX THOUSAND
TWO HUNDRED TWENTY-NINE and 13/100 (Php 156,229.13)
PESOS shall be paid within a period of one (1) year from November
15, 1973, with interest of 12% per annum based on the balance, in
the mode and manner specified below:

_______________
5 Id., at pp. 352-353.
6 Id., at pp. 355-358.

542

542 SUPREME COURT REPORTS ANNOTATED

Manuel Uy & Sons, Inc. vs. Valbueco, Incorporated

a) January 4, 1974 – P20,830.55 plus interest

b) On or before May 15, 1974 – P67,699.29 plus interest
c) On or before November 15, 1974 – P67,699.29 plus
interest
3. That the VENDEE shall be given a grace period of thirty
(30) days from the due date of any installment with corresponding
interest to be added, but should the VENDEE fail to make such
payment within the grace period, this contract shall be deemed
rescinded and without force and effect after notice in writing by
VENDOR to VENDEE.
4. That the VENDOR agrees and acknowledges that any and all
payments to be made by the VENDEE by reason of this presents
unless hereafter advised by VENDOR to the contrary, shall be made
in favor of and to the Philippine Trust Company by way of
 liquidation and payment of the existing mortgage on the property
subject of this sale.
5. That after each payment adverted to above the VENDOR
shall issue the corresponding receipt for the amount paid by the
VENDOR to the Philippine Trust Company.
6. That the VENDOR agrees to have the above-described
property freed and cleared of all lessees, tenants, adverse occupants
or squatters within 100 days from the execution of this conditional
deed of sale. In case of failure by the VENDOR to comply with this
undertaking provided in this paragraph and the VENDEE shall find it
necessary to file a case or cases in court to eject the said lessees,
tenants, occupants and/or squatters from the land, subject of this sale,
the VENDOR agrees to answer and pay for all the expenses incurred
and to be incurred in connection with said cases until the same are
fully and finally terminated.
7. That the VENDOR and the VENDEE agree that during the
existence of this Contract and without previous expressed written
permission from the other, they shall not sell, cede, assign, transfer or
mortgage, or

543

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in any way encumber unto another person or party any right, interest
or equity that they may have in and to said parcel of land.
xxxx
9. That it is understood that ownership of the property herein
conveyed shall not pass to the VENDEE until after payment of the
full purchase price, provided, however, that [the] VENDOR shall
allow the annotation of the Conditional Deed of Sale at the back of
the Title of the above-described parcel of land in the corresponding
Registry of Deeds; x x x
10. That upon full payment of the total purchase price, a Deed
of Absolute Sale shall be executed in favor of the VENDEE and the
VENDOR agrees to pay the documentary stamps and the science
stamp tax of the Deed of Sale; while the VENDEE agrees to pay the
registration and other expenses for the issuance of a new title.
11. That it is mutually agreed that in case of litigation, the venue
of the case shall be in the courts of Manila, having competent
jurisdiction, any other venue being expressly waived.7

Respondent was able to pay petitioner the amount of

P275,055.558 as partial payment for the two properties
corresponding to the initial payments and the first installments of the
said properties.
At the same time, petitioner complied with its obligation under
the conditional deeds of sale, as follows: (1) the mortgage for TCT
No. 59446 was released on May 18, 1984, while the mortgages for
TCT Nos. 59445 and 59534 were released on July 19, 1974; (2) the
unlawful occupants of the lots covered by TCT Nos. 59444, 59534,
59445 and 59446 surrendered their possession and use of the said
lots in considera-

_______________
7 Id., at pp. 356-357.
 8 Records, pp. 117-123; Decision of the Court of Appeals, id., at p. 73.

544

544 SUPREME COURT REPORTS ANNOTATED

Manuel Uy & Sons, Inc. vs. Valbueco, Incorporated

tion of the amount of P6,000.00 in a document9 dated November 19,

1973, and they agreed to demolish their shanties on or before
December 7, 1973; and (3) the mortgage with Philippine Trust
Company covering TCT No. 59444 was discharged10 in 1984.
However, respondent suspended further payment as it was not
satisfied with the manner petitioner complied with its obligations
under the conditional deeds of sale. Consequently, on March 17,
1978, petitioner sent respondent a letter11 informing respondent of
its intention to rescind the conditional deeds of sale and attaching
therewith the original copy of the respective notarial rescission.
On November 28, 1994, respondent filed a Complaint12 for
specific performance and damages against petitioner with the RTC
of Antipolo City. However, on January 15, 1996, the case was
dismissed without prejudice13 for lack of interest, as respondent’s
counsel failed to attend the pre-trial conference.
Five years later, or on March 16, 2001, respondent again filed
with the RTC of Manila, Branch 1 (trial court) a Complaint14 for
specific performance and damages, seeking to compel petitioner to
accept the balance of the purchase price for the two conditional
deeds of sale and to execute the corresponding deeds of absolute
sale. Respondent contended that its non-payment of the installments
was due to the following reasons: (1) Petitioner refused to receive
the balance of the purchase price as the properties were mortgaged
and had to be redeemed first before a deed of absolute sale could be
executed; (2) Petitioner assured that the existing mortgages on the
properties would be discharged on or before May 20, 1974,

_______________
9 Records, pp. 294-295.
10 Id., at p. 256.
11 Id., at p. 52.
12 Docketed as Civil Case No. 94-3426.
13 Records, p. 89.
14 Docketed as Civil Case No. 01-100411.

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Manuel Uy & Sons, Inc. vs. Valbueco, Incorporated

or that petitioner did not inform it (respondent) that the mortgages

on the properties were already released; and (3) Petitioner failed to
fully eject the unlawful occupants in the area.
In its Answer,15 petitioner argued that the case should be
dismissed, as it was barred by prior judgment. Moreover, petitioner
contended that it could not be compelled to execute any deed of
absolute sale, because respondent failed to pay in full the purchase
price of the subject lots. Petitioner claimed that it gave respondent a
notice of notarial rescission of both conditional deeds of sale that
would take effect 30 days from receipt thereof. The notice of notarial
rescission was allegedly received by respondent on March 17, 1978.
Petitioner asserted that since respondent failed to pay the full
purchase price of the subject lots, both conditional deeds of sale
were rescinded as of April 16, 1978; hence, respondent had no cause
of action against it.
In its Reply,16 respondent denied that it received the alleged
notice of notarial rescission. Respondent also denied that the alleged
recipient (one Wenna Laurenciana)17 of the letter dated March 17,
1978, which was attached to the notice of notarial rescission, was its
employee. Respondent stated that assuming arguendo that the notice
was sent to it, the address (6th Floor, SGC Bldg., Salcedo Street,
Legaspi Village, Makati, Metro Manila) was not the given address of
respondent. Respondent contended that its address on the
conditional deeds of sale and the receipts issued by it and petitioner
showed that its principal business address was the 7th Floor, Bank of
P.I. Bldg, Ayala Avenue, Makati, Rizal.
On August 1, 2005, the trial court rendered a Decision,18
dismissing the complaint, as petitioner had exercised its right

_______________
15 Records, pp. 43-46.
16 Id., at pp. 69-75.
17 Also mentioned as “Wilma” Laurenciana in the TSN dated April 24, 2003.
18 Rollo, pp. 53-62.

546

546 SUPREME COURT REPORTS ANNOTATED

Manuel Uy & Sons, Inc. vs. Valbueco, Incorporated

to rescind the contracts. The dispositive portion of the Decision

reads:

WHEREFORE, premises considered, the complaint is

DISMISSED for lack of merit.
Claims and counterclaims for damages are also dismissed.19

The trial court stated that the issues before it were: (1) Did
petitioner unlawfully evade its obligation to execute the final deed of
sale and to eject the squatters/occupants on the properties; (2) Is the
case barred by prior judgment; and (3) Does respondent have a
cause of action against petitioner.
The trial court said that both conditional deeds of sale clearly
provided that “ownership x x x shall not pass to the VENDEE until
after full payment of the purchase price.” Respondent admitted that
it has not yet fully paid the purchase price. The trial court held that
the conditions in the conditional deeds of sale being suspensive, that
is, its fulfillment gives rise to the obligation, the reasons for the
inability of respondent to fulfill its own obligations is material, in
order that the obligation of petitioner to execute the final deeds of
absolute sale will arise. The trial court stated that the evidence
showed that petitioner had exercised its right to rescind the contract
by a written notice dated March 17, 1978 and notarial acts both
dated March 15, 1978. The trial court noted that respondent denied
having received the notice and disclaimed knowing the recipient,
Wenna Laurenciana. However, on cross-examination, respondent’s
witness, Gaudencio Juan, who used to be respondent’s Personnel
Manager and Forester at the same time, admitted knowing
Laurenciana because she was the secretary of Mr. Valeriano Bueno,
respondent’s president at that time, although Laurenciana was not
employed by respondent, but she was employed by Ma-

_______________
19 Id., at p. 62.

547

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Manuel Uy & Sons, Inc. vs. Valbueco, Incorporated

hogany Products Corporation, presumably one of the 14 other

companies being controlled by Mr. Bueno.20
The trial court held that the conditional deeds of sale were
executed on November 29, 1973 and were already covered by
Republic Act (R.A.) No. 6552, otherwise known as the Realty
Installment Buyer Act. Under Section 4 of the law, if the buyer fails
to pay the installments due at the expiration of the grace period,
which is not less than 60 days from the date the installment became
due, the seller may cancel the contract after 30 days from receipt of
the buyer of the notice of cancellation or the demand for rescission
of the contracts by notarial act. The trial court found no lawful
ground to grant the relief prayed for and dismissed the complaint for
lack of merit.
Respondent appealed the decision of the trial court to the Court
of Appeals, and made these assignments of error: (1) the trial court
erred in holding that petitioner did not unlawfully evade executing a
final deed of sale, since respondent’s failure to fulfill its own
obligation is material; (2) the trial court erred in holding that it is
unbelievable and a self-contradiction that respondent was informed
of the mortgage only when it was paying the balance of the
properties; and (3) the trial court erred in holding that as early as
November 19, 1973, petitioner had already taken necessary steps to
evict the squatters/occupants through the intercession of the agrarian
reform officer.
On December 11, 2006, the Court of Appeals rendered a
Decision, reversing and setting aside the Decision of the trial court.
It reinstated the complaint of respondent, and directed petitioner to
execute deeds of absolute sale in favor of respondent after payment
of the balance of the purchase price of the subject lots. The
dispositive portion of the Decision reads:

_______________
20 RTC Decision, id., at p. 61, citing TSN, April 24, 2003, p. 17; TSN, October
16, 2001, p. 22.

548

548 SUPREME COURT REPORTS ANNOTATED

Manuel Uy & Sons, Inc. vs. Valbueco, Incorporated
 WHEREFORE, premises considered, the August 1, 2005 Decision of
the Regional Trial Court of Manila, Branch 1, in Civil Case No. 01-100411,
is hereby REVERSED and SET ASIDE.
A new one is hereby entered: REINSTATING the complaint and
defendant-appellee MANUEL UY & SONS INC. is hereby DIRECTED,
pursuant to Sec. 4, R. A. No. 6552, otherwise known as the Maceda Law, to
EXECUTE and DELIVER:
(1) Deeds of Absolute Sale in favor of VALBUECO, INC.; and
(2) Transfer Certificates of Title pertaining to Nos. 59534, 59445, 59446
and 59444, in the name of plaintiff-appellant VALBUECO, INC.,
after VALBUECO pays MANUEL UY & SONS, without additional
interest, within thirty days from finality of this judgment, the balance of the
contract price.
If MANUEL UY & SONS refuses to deliver the Deeds of Absolute Sale
and the co-owner’s copy of the TCTs, the Register of Deeds of Antipolo,
Rizal is hereby DIRECTED to CANCEL the latest TCTs issued derived
from TCT Nos. 59534, 59445, 59446 and 59444, and to ISSUE new TCTS
in the name of VALBUECO.
Only if VALBUECO fails in the payment directed above, then
defendant-appellee MANUEL UY & SONS INC. has the opportunity to
serve a valid notice of notarial rescission.
SO ORDERED.21

The Court of Appeals held that the two conditional deeds of sale
in this case are contracts to sell. It stated that the law applicable to
the said contracts to sell on installments is R.A. No. 6552,
specifically Section 4 thereof, as respondent paid less than two years
in installments. It held that upon re-

_______________
21 Rollo, pp. 84-85. (Emphasis in the original)

549

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peated defaults in payment by respondent, petitioner had the right to

cancel the said contracts, but subject to the proper receipt of
respondent of the notice of cancellation or the demand for the
rescission of the contracts by notarial act.
However, the Court of Appeals found that petitioner sent the
notice of notarial rescission to the wrong address. The business
address of respondent, as used in all its transactions with petitioner,
was the 7th Floor, Bank of the Philippine Islands Building, Ayala
Avenue, Makati City, but the notice of notarial rescission was sent to
the wrong address at the 6th Floor, SGC Building, Salcedo Street,
Legaspi Village, Makati, Metro Manila. Petitioner served the notice
to the address of Mahogany Products Corporation. It was established
that the person who received the notice, one Wenna Laurenciana,
was an employee of Mahogany Products Corporation and not an
employee of respondent or Mr. Valeriano Bueno, the alleged
president of Mahogany Products Corporation and respondent
company.22 The appellate court stated that this cannot be construed
as to have been constructively received by respondent as the two
corporations are two separate entities with a distinct personality
independent from each other. Thus, the Court of Appeals held that
the notarial rescission was invalidly served. It stated that it is a
general rule that when service of notice is an issue, the person
alleging that the notice was served must prove the fact of service by
a preponderance of evidence. In this case, the Court of Appeals held
that there was no evidence that the notice of cancellation by notarial
act was actually received by respondent. Thus, for petitioner’s
failure to cancel the contract in accordance with the procedure
provided by law, the Court of Appeals held that the contracts to sell
on installment were valid and subsisting, and respondent has the
right to offer to pay for the balance of the purchase price before
actual cancellation.

_______________
22 TSN, April 24, 2003, pp. 17-19, Cross-examination and Re-direct examination
of witness Gaudencio Juan.

550

550 SUPREME COURT REPORTS ANNOTATED

Manuel Uy & Sons, Inc. vs. Valbueco, Incorporated

Petitioner’s motion for reconsideration was denied for lack of

merit by the Court of Appeals in a Resolution23 dated September 4,
2007.
Petitioner filed this petition raising the following issues:

I
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN
REVERSING THE RTC DECISION AND REINSTATING THE
COMPLAINT WHEN ON ITS FACE IT HAS LONG BEEN
PRESCRIBED, AS IT WAS FILED AFTER 27 YEARS AND HAS NO
JURISDICTION (SIC).
II
THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED AND
GRAVELY ABUSED ITS DISCRETION IN COMPELLING PETITIONER
TO EXECUTE A FINAL DEED OF ABSOLUTE [SALE] EVEN IF
RESPONDENT JUDICIALLY ADMITTED ITS NON­PAYMENT OF THE
BALANCE OF THE DEEDS OF CONDITIONAL SALE DUE SINCE
1974.
III
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN
GRANTING THE RELIEFS PRAYED BY RESPONDENT IN ITS
COMPLAINT FOR SPECIFIC PERFORMANCE WHEN IT WAS
RESPONDENT WHO BREACHED THE CONTRACT.
IV
THE HONORABLE COURT OF APPEALS COMMITTED GRAVE
INJUSTICE WHEN IT PENALIZED PETITIONER FOR EXERCISING
ITS LEGAL RIGHT AND DID NOT COMMIT AN ACTIONABLE
WRONG WHILE IT HEFTILY REWARDED RESPONDENT, WHO
BREACHED THE CONTRACT, AND ORDERED TO PAY WITHOUT
INTEREST PHP 97,998.95, WHICH IS DUE SINCE 1974 UNDER THE
CONTRACT, FOR FOUR (4) PARCELS OF LAND (57,393 SQUARE
METERS), NOW WORTH HUNDRED MILLIONS.

_______________
23 Rollo, p. 89.
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V
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN
ANNULING THE NOTARIAL RESCISSION WHEN THE COMPLAINT
IS ONLY FOR SPECIFIC PERFORMANCE AND WAS NOT AN ISSUE
RAISED IN THE PLEADINGS OR DURING THE TRIAL.24

The main issue is whether respondent is entitled to the relief

granted by the Court of Appeals. Petitioner contends that the Court
of Appeals erred in directing it to execute deeds of absolute sale over
the subject lots even if respondent admitted non-payment of the
balance of the purchase price.
As found by the Court of Appeals, the two conditional deeds of
sale entered into by the parties are contracts to sell, as they both
contained a stipulation that ownership of the properties shall not
pass to the vendee until after full payment of the purchase price. In a
conditional sale, as in a contract to sell, ownership remains with the
vendor and does not pass to the vendee until full payment of the
purchase price.25 The full payment of the purchase price partakes of
a suspensive condition, and non-fulfillment of the condition prevents
the obligation to sell from arising.26 To differentiate, a deed of sale is
absolute when there is no stipulation in the contract that title to the
property remains with the seller until full payment of the purchase
price. Ramos v. Heruela27 held that Articles 1191 and 1592 of the
Civil Code28 are applicable to contracts of sale, while R.A. No. 6552
applies to contracts to sell.

_______________
24 Id., at pp. 29-30.
25 Ramos v. Heruela, 509 Phil. 658, 665; 473 SCRA 79, 86 (2005).
26 Id.
27 Id., at p. 667; p. 88.
28 Art. 1191. The power to rescind obligations is implied in reciprocal ones, in
case one of the obligors should not comply with what is incumbent upon him.
The injured party may choose between the fulfillment and the rescission of the
obligation, with the payment of damages in either

552

552 SUPREME COURT REPORTS ANNOTATED

Manuel Uy & Sons, Inc. vs. Valbueco, Incorporated

The Court of Appeals correctly held that R.A. No. 6552,

otherwise known as the Realty Installment Buyer Act, applies to the
subject contracts to sell. R.A. No. 6552 recognizes in conditional
sales of all kinds of real estate (industrial, commercial, residential)
the right of the seller to cancel the contract upon non-payment of an
installment by the buyer, which is simply an event that prevents the
obligation of the vendor to convey title from acquiring binding
force.29 It also provides the right of the buyer on installments in case
he defaults in the payment of succeeding installments30 as follows:
 Section 3. In all transactions or contracts involving the sale or financing of
real estate on installment payments, including residential condominium
apartments but excluding industrial lots, commercial buildings and sales to
tenants under Republic Act Numbered Thirty-eight hundred forty-four, as
amended by Republic Act Numbered Sixty-three hundred eighty-nine, where
the buyer has paid at least two years of installments, the buyer is entitled to
the following rights in case he defaults in the payment of succeeding
installments:

_______________
case. He may also seek rescission, even after he has chosen fulfillment, if the
latter should become impossible.
The court shall decree the rescission claimed, unless there be just cause
authorizing the fixing of a period.
This is understood to be without prejudice to the rights of third persons who have
acquired the thing, in accordance with Articles 1385 and 1388 and the Mortgage Law.
Art. 1592. In the sale of immovable property, even though it may have been
stipulated that upon failure to pay the price at the time agreed upon the rescission of
the contract shall of right take place, the vendee may pay, even after the expiration of
the period, as long as no demand for rescission of the contract has been made upon
him either judicially or by a notarial act. After the demand, the court may not grant
him a new term.
29 Rillo v. Court of Appeals, G.R. No. 125347, June 19, 1997, 274 SCRA 461,
467-468.
30 Id., at p. 468.

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(a) To pay, without additional interest, the unpaid installments due

within the total grace period earned by him which is hereby fixed at
the rate of one month grace period for every one year of installment
payments made: Provided, That this right shall be exercised by the
buyer only once in every five years of the life of the contract and its
extensions, if any.
(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.
Down payments, deposits or options on the contract shall be included in the
computation of the total number of installment payments made.
Sec. 4. In case where less than two years of installments were paid, the
seller shall 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 of the
31
contract by a notarial act
 _______________
31 Emphasis supplied.

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554 SUPREME COURT REPORTS ANNOTATED

Manuel Uy & Sons, Inc. vs. Valbueco, Incorporated

In this case, respondent has paid less than two years of

installments; therefore, Section 4 of R.A. No. 6552 applies.
The Court of Appeals held that even if respondent defaulted in its
full payment of the purchase price of the subject lots, the conditional
deeds of sale remain valid and subsisting, because there was no valid
notice of notarial rescission to respondent, as the notice was sent to
the wrong address, that is, to Mahogany Products Corporation, and it
was received by a person employed by Mahogany Products
Corporation and not the respondent. The Court of Appeals stated that
the allegation that Mahogany Products Corporation and respondent
have the same President, one Valeriano Bueno, is irrelevant and has
not been actually proven or borne by evidence. The appellate court
held that there was insufficient proof that respondent actually
received the notice of notarial rescission of the conditional deeds of
sale; hence, the unilateral rescission of the conditional deeds of sale
cannot be given credence.
However, upon review of the records of this case, the Court finds
that respondent had been served a notice of the notarial rescission of
the conditional deeds of sale when it was furnished with the
petitioner’s Answer, dated February 16, 1995, to its first Complaint
filed on November 28, 1994 with the RTC of Antipolo City, which
case was docketed as Civil Case No. 94-3426, but the complaint was
later dismissed without prejudice on January 15, 1996.32
It appears that after respondent filed its first Complaint for
specific performance and damages with the RTC of Antipolo City on
November 28, 1994, petitioner filed an Answer and attached thereto
a copy of the written notice dated March 17, 1978 and copies of the
notarial acts of rescission dated March 15, 1978, and that respondent
received a copy of the said Answer with the attached notices of
notarial rescission. However, to reiterate, the first Complaint was
dismissed without prejudice.

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32 Records, p. 89.

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Five years after the dismissal of the first Complaint, respondent

again filed this case for specific performance and damages, this time,
with the RTC of Manila. Petitioner filed an Answer, and alleged,
among others, that the case was barred by prior judgment, since
respondent filed a complaint on November 28, 1994 before the RTC
of Antipolo City, Branch 73, against it (petitioner) involving the
same issues and that the case, docketed as Civil Case No. 94-3426,
was dismissed on January 15, 1996 for lack of interest. Respondent
filed a Reply33 dated July 18, 2001, asserting that petitioner prayed
for the dismissal of the first case filed on November 28, 1994 (Civil
Case No. 94-3426) on the ground of improper venue as the parties
agreed in the deeds of conditional sale that in case of litigation, the
venue shall be in the courts of Manila. To prove its assertion,
respondent attached to its Reply a copy of petitioner’s Answer to the
first Complaint in Civil Case No. 94-3426, which Answer included
the written notice dated March 17, 1978 and two notarial acts of
rescission, both dated March 15, 1978, of the two conditional deeds
of sale. Hence, respondent is deemed to have had notice of the
notarial rescission of the two conditional deeds of sale when it
received petitioner’s Answer to its first complaint filed with the RTC
of Antipolo, since petitioner’s Answer included notices of notarial
rescission of the two conditional deeds of sale. The first complaint
was filed six years earlier before this complaint was filed. As stated
earlier, the first complaint was dismissed without prejudice, because
respondent’s counsel failed to appear at the pre-trial. Since
respondent already received notices of the notarial rescission of the
conditional deeds of sale, together with petitioner’s Answer to the
first Complaint five years before it filed this case, it can no longer
deny having received notices of the notarial rescission in this case,
as respondent admitted the same when it attached the notices of
notarial rescission to its Reply in this

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33 Id., at p. 69.

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556 SUPREME COURT REPORTS ANNOTATED

Manuel Uy & Sons, Inc. vs. Valbueco, Incorporated

case. Consequently, respondent is not entitled to the relief granted by

the Court of Appeals.
Under R.A. No. 6552, the right of the buyer to refund accrues
only when he has paid at least two years of installments.34 In this
case, respondent has paid less than two years of installments; hence,
it is not entitled to a refund.35
Moreover, petitioner raises the issue of improper venue and lack
of jurisdiction of the RTC of Manila over the case. It contends that
the complaint involved real properties in Antipolo City and
cancellation of titles; hence, it was improperly filed in the RTC of
Manila.
Petitioner’s contention lacks merit, as petitioner and respondent
stipulated in both Conditional Deeds of Sale that they mutually
agreed that in case of litigation, the case shall be filed in the courts
of Manila.36
Further, petitioner contends that the action has prescribed.
Petitioner points out that the cause of action is based on a written
contract; hence, the complaint should have been brought within 10
years from the time the right of action accrues under Article 1144 of
the Civil Code. Petitioner argues that it is evident on the face of the
complaint and the two contracts of conditional sale that the cause of
action accrued in 1974; yet, the complaint for specific performance
was filed after 27 years. Petitioner asserts that the action has
prescribed.
 The contention is meritorious.
Section 1, Rule 9 of the 1997 Rules of Civil Procedure provides:

Section 1. Defense and objections not pleaded.—Defenses and

objections not pleaded whether in a mo-

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34 Rillo v. Court of Appeals, supra note 29, at p. 469.
35 Id.
36 See Rules of Court, Rule 5, Sec. 4.

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tion to dismiss or in the answer are deemed waived. However, when

it appears from the pleadings that the court has no jurisdiction over
the subject matter, that there is another action pending between the
same parties for the same cause, or that the action is barred by a
prior judgment or by statute of limitations, the court shall dismiss
the claim.37

In Gicano v. Gegato38 the Court held:

x x x (T)rial courts have authority and discretion to dismiss an action

on the ground of prescription when the parties’ pleadings or other
facts on record show it to be indeed time-barred; (Francisco v.
Robles, Feb, 15, 1954; Sison v. McQuaid, 50 O.G. 97; Bambao v.
Lednicky, Jan. 28, 1961; Cordova v. Cordova, Jan. 14, 1958; Convets,
Inc. v. NDC, Feb. 28, 1958; 32 SCRA 529; Sinaon v. Sorongan, 136
SCRA 408); and it may do so on the basis of a motion to dismiss
(Sec. 1,f, Rule 16, Rules of Court), or an answer which sets up such
ground as an affirmative defense (Sec. 5, Rule 16), or even if the
ground is alleged after judgment on the merits, as in a motion for
reconsideration (Ferrer v. Ericta, 84 SCRA 705); or even if the
defense has not been asserted at all, as where no statement
thereof is found in the pleadings (Garcia v. Mathis, 100 SCRA
250; PNB v. Pacific Commission House, 27 SCRA 766; Chua
Lamco v. Dioso, et al., 97 Phil. 821); or where a defendant has been
declared in default (PNB v. Perez, 16 SCRA 270). What is essential
only, to repeat, is that the facts demonstrating the lapse of the
prescriptive period, be otherwise sufficiently and satisfactorily
apparent on the record; either in the aver

_______________
37 Emphasis supplied.
38 241 Phil. 139, 145-146; 157 SCRA 140, 145-146 (1988), cited in Dino v. Court of
Appeals, 411 Phil. 594, 603-604; 359 SCRA 91, 100 (2001).

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-558 SUPREME COURT REPORTS ANNOTATED

Manuel Uy & Sons, Inc. vs. Valbueco, Incorporated

ments of the plaintiffs complaint, or otherwise established by the

evidence.39
 Moreover, Dino v. Court of Appeals40 held:

Even if the defense of prescription was raised for the first time on
appeal in respondent’s Supplemental Motion for Reconsideration of
the appellate court’s decision, this does not militate against the due
process right of the petitioners. On appeal, there was no new issue of
fact that arose in connection with the question of prescription, thus it
cannot be said that petitioners were not given the opportunity to
present evidence in the trial court to meet a factual issue. Equally
important, petitioners had the opportunity to oppose the defense of
prescription in their Opposition to the Supplemental Motion for
Reconsideration filed in the appellate court and in their Petition for
Review in this Court.41

In this case, petitioner raised the defense of prescription for the

first time before this Court, and respondent had the opportunity to
oppose the defense of prescription in its Comment to the petition.
Hence, the Court can resolve the issue of prescription as both parties
were afforded the opportunity to ventilate their respective positions
on the matter. The Complaint shows that the Conditional Deeds of
Sale were executed on November 29, 1973, and payments were due
on both Conditional Deeds of Sale on November 15, 1974. Article
114442 of the Civil Code provides that actions based upon a written
contract must be brought within ten years from the time the right of
action accrues. Non-fulfillment of the obliga-

_______________
39 Emphasis supplied.
40 Supra note 38.
41 Dino v. Court of Appeals, supra, at p. 605; p. 101.
42 Civil Code, Art. 1144. The following actions must be brought within ten
years from the time the right of action accrues: (1) Upon a written contract; (2) Upon
an obligation created by law; and (3) Upon a judgment.

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tion to pay on the last due date, that is, on November 15, 1974,
would give rise to an action by the vendor, which date of reckoning
may also apply to any action by the vendee to determine his right
under R.A. No. 6552. The vendee, respondent herein, filed this case
on March 16, 2001, which is clearly beyond the 10-year prescriptive
period; hence, the action has prescribed.
WHEREFORE, the petition is GRANTED. The Decision of the
Court of Appeals, dated December 11, 2006, in CA-G.R. CV No.
85877 and its Resolution dated September 4, 2007 are REVERSED
and SET ASIDE. The Decision of the Regional Trial Court of
Manila, Branch 1, dated August 1, 2005 in Civil Case No. 01-
100411, dismissing the case for lack of merit, is REINSTATED.
SO ORDERED.

Velasco, Jr. (Chairperson), Abad, Mendoza and Leonen, JJ.,

concur.

Petition granted, judgment and resolution reversed and set aside.

 Notes.—In this jurisdiction, the defense of prescription cannot be
raised for the first time on appeal. (Republic vs. Mangotara, 624
SCRA 360 [2010])
Before a contract to sell can be validly and effectively cancelled,
the seller has (1) to send a notarized notice of cancellation to the
buyer and (2) to refund the cash surrender value. Until and unless
the seller complies with these twin mandatory requirements, the
contract to sell between the parties remains valid and subsisting.
(Communities Cagayan, Inc. vs. Nanol, 685 SCRA 453 [2012])
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