G.R. No. 202358 - Gatchalian Realty, Inc. vs. Angeles

Evelyn M. Angeles (Angeles) purchased a house and lot from Gatchalian Realty, Inc. (GRI) under two Contracts to Sell dated 28 December 1994:

Payment terms included a 24% per annum interest rate and installment payments over ten years. The ownership remained with GRI until full payment was made. The house and lot were delivered to Angeles in 1995.

Angeles failed to comply with monthly installment payments, paying only 35 installments for the lot and 48 installments for the house.
GRI sent at least twelve payment notices over three years and three additional notices warning of impending legal action or contract rescission.
Despite a total grace period of 51 months granted by GRI, Angeles failed to settle the account.

GRI served Angeles a notice of notarial rescission dated 11 September 2003, received on 19 September 2003 as evidenced by registry return receipt.
GRI demanded payment of ₱112,304.42 for reasonable rentals accrued until August 2003 and demanded Angeles vacate the property.
GRI deducted the refundable portion of Angeles’ payments (cash surrender value) from the rentals, leaving a balance due.

Angeles sent several postal money orders to GRI, which were refused because GRI considered the payments as installment amortizations rather than rental payments.
GRI requested Angeles to pick up the postal money orders.

GRI filed an unlawful detainer complaint against Angeles on 11 November 2003.
The Metropolitan Trial Court (MeTC) ruled in favor of GRI, acknowledging valid rescission due to default and ordering Angeles to vacate and pay rentals, attorney’s fees, and costs.
Angeles appealed to the Regional Trial Court (RTC), which initially ruled in her favor, dismissing the ejectment case for lack of valid cancellation and finding no legal compensation between parties.
The RTC later reversed itself, modifying the judgment to apply the cash surrender value to rentals and awarding GRI an outstanding rental balance with interest and attorney’s fees.
The Court of Appeals (CA) reversed the RTC, ruling no actual cancellation took place due to failure to refund the cash surrender value, and dismissed the unlawful detainer case filed by GRI.

GRI filed a petition for review under Rule 45 challenging the CA decision, asserting errors in ruling no refund was made and that cancellation did not validly take place.
The Supreme Court affirmed the CA with modification, directing further actions concerning payment options and determination of unpaid balances.

Whether GRI validly cancelled the Contracts to Sell with Angeles pursuant to R.A. No. 6552 (Maceda Law), considering the alleged failure to refund the cash surrender value.
Whether the actual cancellation of the contracts took place as required by law and contract terms.
Whether the MeTC and RTC properly ordered Angeles to vacate and pay rentals and if the compensation of rentals with the cash surrender value was justified.
What remedies are available to the parties in light of the cancellation or continuation of the Contracts to Sell.