G.R. No. 165025, 31 August 2011

FACTS:

Petitioner was the owner and developer of a condominium project known as Fedman Suites Building (FSB). Interchem Laboratories Incorporated (Interchem) purchased FSB’s Unit 411 under a contract to sell. Thereafter, FDC executed a Master Deed with Declaration of Restrictions, and formed the Fedman Suite Condominium Corporation (FSCC) to manage FSB and hold title over its common areas.

On October 10, 1980, Interchem, with FDC’s consent, transferred all its rights in Unit 411 to respondent Federico Agcaoili, a practicing attorney who was then also a member of the Provincial Board of Quezon Province. Not getting any immediate response, when the centralized air-conditioning unit of FSB’s fourth floor broke down, respondent sent follow-up letters to FSCC reiterating the demand, but the letters went unheeded. He then informed FDC and FSCC that he was suspending the payment of his condominium dues and monthly amortizations. FDC cancelled the contract to sell involving Unit 411 and cut off the electric supply to the unit. Respondent was thus prompted to sue FDC and FSCC but the parties later executed a compromise agreement.

Few months later, petitioner again disconnected the electric supply of Unit 411. Respondent lodged a complaint for damages against FDC and FSCC. He alleged that the disconnection of the electric supply of Unit 411 on April 22, 1986 had unjustly deprived him of the use and enjoyment of the unit; that the disconnection had seriously affected his law practice and had caused him sufferings, inconvenience and embarrassment; that petitioner and FSCC violated the compromise agreement; that he was entitled to actual damages as well as to moral and exemplary damages, and attorney’s fees as might be proven during the trial; that the payment of interest sought by petitioner and FSCC under the contract to sell was illegal; and that petitioner and FSCC were one and the same corporation.

On the other hand, petitioner contended that it had a personality separate from that of FSCC; that it had no obligation or liability in favor of respondent and the latter failed to comply with the terms of the contract to sell; that despite demands, respondent did not pay the amortizations and the surcharges; that due to the non-payment, petitioner cancelled the contract to sell and forfeited the amount paid by respondent, applying the amount to the payment of liquidated damages, agent’s commission, and interest; that it demanded that respondent vacate Unit 411, but its demand was not heeded. The RTC rendered judgment in favor of respondent which the CA affirmed. Hence, the petition.

ISSUE:

Whether the petitioner was justified when it rescinded the contract to sell.

RULING:

No. In the instant case, petitioner failed to show by evidence that it incurred loans and /or other financial accommodations to pay interest for its loans in developing the property.

Thus, the increased interest rates it imposed on respondent was not justified, and to allow the same is tantamount to unilaterally altering the terms of the contract which the law proscribes. The contract must bind both contracting parties; its validity or compliance cannot be left to the will of one of them.

For this reason, the Court sees no valid reason for petitioner to cancel the contract to sell on ground of default or non-payment of monthly amortizations. It was also grave error on the part of the petitioner to cancel the contract to sell for non-payment of the monthly amortizations without taking into consideration Republic Act 6552, otherwise known as the Maceda Law.

The policy of law, as embodied in its title, is “to provide protection to buyers of real estate on installment payments.” As clearly specified in Section 3, the declared public policy espoused by Republic Act No. 6552 is “to protect buyers of real estate on installment payments against onerous and oppressive conditions.”

Thus, in order for petitioner to have validly cancelled the existing contract to sell, it must have first complied with Section 3 (b) of RA 6552. Petitioner should have refund respondent the cash surrender value of the payments on the property equivalent to fifty percent of the total payments made.

*Case digest by Rezeile S. Morandarte, JD – 4, Andres Bonifacio College, SY 2019–2020