Siska Development Corporation vs. Office of the President of the Philippines

A notice of cancellation or rescission must be sent to and received by the buyer before a contract to sell real property on installments may be validly cancelled, even where the contract stipulates automatic rescission. The requirement imposed by the Maceda Law (R.A. No. 6552) is procedural and does not impair contractual obligations. Moreover, a vendor who habitually accepts overdue payments, notwithstanding a non-waiver clause, waives the right to rescind and is estopped from invoking automatic cancellation for a subsequent slight or casual breach.

Petitioner Siska Development Corporation, a subdivision owner-developer, entered into a Contract to Sell on April 28, 1967 with Guadalupe Sering over a lot in Mira-Nila Subdivision, Quezon City. With petitioner’s consent, all rights and interests in the lot were transferred to respondent Socorro Sering, wife of respondent Jose Sering, on August 16, 1968. Private respondents assumed the obligation to pay monthly amortizations. Over the years, petitioner received delayed payments despite several defaults. When private respondents offered to pay the entire remaining balance on September 18, 1975, petitioner’s employee refused, claiming the contract had already been cancelled. Private respondents protested that they had not received any notice of rescission.

• The Contract and Assignment: On April 28, 1967, petitioner and Guadalupe Sering executed a Contract to Sell over a subdivision lot. Paragraph 6 stipulated that if the buyer failed to pay any installment and a period of ninety days elapsed from default without full payment of arrears and interest, “this contract shall automatically and without any further formality, become null and void.” On August 16, 1968, with petitioner’s consent, Guadalupe Sering transferred all her rights to respondent Socorro Sering. Thereafter, private respondents paid the monthly amortizations.

• Delayed Payments and Petitioner’s Response: Private respondents defaulted on several occasions, yet petitioner accepted late payments. On October 18, 1974, petitioner sent a notice of rescission, but cancelled it on November 12, 1974 after private respondents updated their account, subject to the condition that the account must be kept current and that a second rescission would be final. Private respondents again defaulted from January to September 1975.

• Offer of Full Payment and Refusal: On September 18, 1975, respondent Jose Sering went to petitioner’s office and offered to pay the entire remaining balance of P9,341.24. An employee refused, claiming the contract had already been cancelled. Jose Sering protested he had not received any notice of rescission. At that point, private respondents had paid a total of P26,601.21 (inclusive of interest and penalties) against a purchase price of P21,328.00.

• Administrative Finding on Notice: The Office of the President found that receipt of the notice of rescission was doubtful, as petitioner failed to show proof of service. It noted that petitioner’s representative did not inform Jose Sering of any prior rescission when he tendered full payment. The Office concluded that petitioner tolerated late payments repeatedly and was estopped from cancelling the contract, and that allowing rescission would result in unjust enrichment.

• Necessity of Notice: Petitioner argued that under paragraph 6 of the Contract to Sell, the contract automatically became null and void upon the 90-day default without need for any notice. It contended that the relationship was governed solely by the contract entered into in 1967, before the Maceda Law’s effectivity, and that imposing the law’s notice requirement violated the non-impairment clause of the Constitution.

• Estoppel and Non-Waiver: Petitioner maintained that its repeated acceptance of late payments did not constitute a waiver. It invoked paragraph 9 of the contract, which expressly provided that any condonation or failure to enforce strict compliance “shall not be interpreted as a renunciation on the part of the Owner of any rights granted it under this contract” in case of subsequent default.

• Grave Abuse of Discretion: Petitioner asserted that the Office of the President gravely abused its discretion in ordering acceptance of the balance and execution of a deed of sale, given that private respondents had repeatedly defaulted and that the contract’s automatic rescission clause had been triggered.

• Receipt of Notice: Private respondents argued that they never received the notice of rescission; had they known of it, Jose Sering would not have gone to petitioner’s office to tender full payment.

• Estoppel Through Acceptance: Private respondents contended that petitioner’s repeated acceptance of overdue payments estopped it from insisting on rescission. The tolerance of late payments over several instances negated any claim of strict enforcement.

• Slight Breach and Unjust Enrichment: Private respondents asserted that the breach was minimal, as they had already paid more than the purchase price and were willing to settle the small remaining balance. Allowing petitioner to retain both the payments and the lot would unjustly enrich the developer.

• Necessity of Notice of Rescission: Whether the Office of the President gravely abused its discretion in holding that the notice of rescission served no purpose because it was not actually received, despite the automatic cancellation clause in the contract and the claim that the Maceda Law’s notice requirement could not apply without impairing contractual obligations.

• Estoppel and Waiver: Whether the Office of the President gravely abused its discretion in ruling that petitioner was estopped from rescinding the contract after it had accepted late payments on several prior occasions, notwithstanding the non-waiver clause in the contract.

• Propriety of Specific Performance: Whether the Office of the President gravely abused its discretion in ordering petitioner to accept the balance of P9,341.24 and execute a final deed of sale, given the alleged breach and the automatic rescission clause.

• Necessity of Notice of Rescission: The factual finding that private respondents never received the notice of rescission, made by an administrative agency, was binding and not to be disturbed. Under Section 3(b) of R.A. No. 6552 (the Maceda Law), actual cancellation of a contract to sell takes place only thirty days from the buyer’s receipt of the notice of cancellation or demand for rescission. Although the Contract to Sell was executed before the law’s effectivity, the rescission occurred when the law was already in force. The notice requirement is a procedural aid to the remedy of rescission; it does not change the time or mode of performance, impose new conditions, dispense with agreed terms, or withdraw remedies. Hence, it does not impair the obligation of contracts in violation of Article III, Section 10 of the Constitution. Even prior to the Maceda Law, jurisprudence required written notice of rescission to the defaulting party (Palay, Inc. v. Clave, 124 SCRA 638 [1983]; University of the Philippines v. De los Angeles, 35 SCRA 102 [1970]). The automatic cancellation clause could not dispense with this requirement.

• Estoppel and Waiver: The Contract to Sell bore the characteristics of a contract of adhesion; it was drafted and prepared solely by petitioner on a take-it-or-leave-it basis. Petitioner’s repeated acceptance of delayed payments beyond the grace period constituted a waiver of the right to rescind and estopped petitioner from exercising that right, regardless of the non-waiver clause in paragraph 9. The ruling in Angeles v. Calasanz, 135 SCRA 323 (1985), which held that a vendor who accepts late payments is estopped from cancelling the contract despite a similar non-waiver stipulation, was squarely applicable. No grave abuse of discretion attended this finding.

• Propriety of Specific Performance: Unilateral cancellation of a contract to sell is not permitted when the breach is slight or casual (Song Fo & Co. v. Hawaii-Philippine Co., 47 Phil. 821 [1925]). Private respondents had already paid P26,601.21 against a P21,328.00 purchase price, leaving only P9,341.24 unpaid — a sum they were willing to satisfy. To sanction rescission under these circumstances would work injustice and result in unjust enrichment of petitioner at private respondents’ expense, contrary to Article 22 of the Civil Code. The order to accept the balance and execute the deed of sale was therefore proper.

• Notice Requirement under the Maceda Law (R.A. No. 6552) — Section 3(b) mandates that the actual cancellation of a contract to sell on installments takes effect thirty days from receipt by the buyer of the notice of cancellation or demand for rescission. The requirement applies even to contracts executed before the law’s effectivity if the rescission occurred after its enactment. It is procedural in nature and does not impair contractual obligations.

• Non-Impairment of Contracts; Procedural vs. Substantive Change — A law that merely provides a procedure in aid of an existing remedy does not impair the obligation of contracts. Impairment exists only if the subsequent law changes the terms, imposes new conditions, dispenses with agreed stipulations, or withdraws remedies for enforcement (Clemons v. Nolting, 42 Phil. 702 [1922]). The notice requirement under the Maceda Law affects only the mechanism of rescission, not the substantive rights of the parties.

• Estoppel by Acceptance of Late Payments; Contracts of Adhesion — Where a subdivision developer repeatedly accepts overdue amortizations, it waives the right to rescind and is estopped from later invoking automatic cancellation. A non-waiver clause in a contract of adhesion does not bar such estoppel when the vendor’s conduct has lulled the buyer into believing strict compliance will not be demanded (Angeles v. Calasanz, 135 SCRA 323 [1985]).

• Slight or Casual Breach; Unjust Enrichment — Rescission of a contract to sell is unwarranted when the breach is slight or casual. Where the buyer has substantially performed by paying an amount exceeding the original purchase price and the unpaid balance is minimal, allowing rescission would unjustly enrich the seller in violation of Article 22 of the Civil Code.

• “The requirement of notice of the rescission under the Maceda Law does not change the time or mode of performance or impose new conditions or dispense with the stipulations regarding the binding effect of the contract. Neither does it withdraw the remedy for its enforcement. At most, it merely provides for a procedure in aid of the remedy of rescission.” — This passage articulates why the Maceda Law’s notice mandate survives a non-impairment challenge.

• “The act of the party in treating a contract as cancelled should be made known to the other.” — Citing University of the Philippines v. De los Angeles, the Court reaffirms the jurisprudential rule predating the Maceda Law that cancellation must be communicated.

• “When petitioner accepted and received delayed payments beyond the grace period mentioned in paragraph 9 of the contract, it waived its right to rescind and is now estopped from exercising it.” — The core estoppel holding, importing from Angeles v. Calasanz that a pattern of acceptance defeats even a facially absolute non-waiver clause in an adhesion contract.

• “To sanction the rescission made by petitioner will work injustice to private respondents. It would unjustly enrich petitioner at their expense.” — The equitable basis for ordering specific performance where the breach is negligible and the buyer has substantially paid.

• Angeles v. Calasanz, 135 SCRA 323 (1985) — Followed. Establishes that a vendor’s repeated acceptance of late payments estops it from cancelling a contract to sell despite a non-waiver clause, especially in a contract of adhesion.

• Palay, Inc. v. Clave, 124 SCRA 638 (1983) — Cited as authority that jurisprudence requires a written notice of rescission sent to the defaulter even where the contract provides for automatic revocation.

• University of the Philippines v. De los Angeles, 35 SCRA 102 (1970) — Relied upon for the principle that a party treating a contract as cancelled must make that act known to the other party.

• Song Fo & Co. v. Hawaii-Philippine Co., 47 Phil. 821 (1925) — Applied for the rule that unilateral cancellation is not warranted when the breach is slight or casual.

• Clemons v. Nolting, 42 Phil. 702 (1922) — Used to define impairment of contracts as requiring a change in terms, new conditions, dispensation of agreed terms, or withdrawal of remedies.

• Jison v. Court of Appeals, 164 SCRA 339 (1988) — Cited for the effectivity date and general application of the Maceda Law.

• Section 3(b), Republic Act No. 6552 (Maceda Law) — Provides that actual cancellation of a contract to sell on installments takes effect thirty days from receipt by the buyer of the notice of cancellation or demand for rescission by notarial act. Applied to hold that the attempted rescission was ineffective because the buyers did not receive the required notice.

• Article III, Section 10, 1987 Constitution (Non-Impairment Clause) — Invoked by petitioner but held inapplicable; the Maceda Law’s notice requirement was procedural and did not impair the substantive obligations of the pre-existing contract.

• Article 22, Civil Code — Every person must act with justice, give everyone his due, and observe honesty and good faith. Applied to prevent unjust enrichment where the developer sought to retain all payments and the lot after a minimal breach.

• Presidential Decree No. 957 — Regulating the sale of subdivision lots and condominiums; provided the basis for NHA/HSRC jurisdiction over the complaint.

Narvasa, C.J., Cruz, Feliciano, Bidin, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Quiason, Puno, Vitug, and Kapunan, JJ., concurred.

• N/A (The petition was dismissed unanimously; there were no separate dissenting opinions.)