Case Digest: Communities Cagayan, Inc. vs. Nanol G.R. No. 176791 November 14, 2012

Facts:

A Contract of Sell was entered into between respondent-spouses and petitioner Communities Cagayan, Inc. whereby the latter agreed to sell to respondent-spouses a house and lot. Accordingly, titles were transferred in the names of respondent-spouses to facilitate loan processing with Capitol Development Bank. The bank collapsed and closed before it could not release the loan thus respondent-spouses availed of the petitioner's in-house financing payable from 1997-2001. In 2000, respondent Arsenio demolished the original house and constructed a three-story house. He died in 2001 leaving his wife to pay for the monthly amortizations. On July 2005, petitioner fined a Complaint for Cancellation of Title, Recovery of Possession, Reconveyance and Damages. In December 2006, the RTC ruled declaring the Deed of Absolute Sale invalid and ordered the petitioner to pay the respondent-spouses their total monthly instalments and the value of the new house minus the cost of the original house.

Issues:

1) Whether petitioner is obliged to refund to respondent-spouses all the monthly installments paid; and

2) Whether petitioner is obliged to reimburse respondent-spouses the value of the new house minus the cost of the original house.

Ruling:

Applying Section 3(b) of Republic Act No. 6552 otherwise known as Maceda Law, the Court ruled that respondent-spouses are entitled to the cash surrender value of the payments on the property equivalent to 50% of the total payments made. In addition, applying Article 448 of the Civil Code, the Court ruled that respondent-spouses being considered builders in good faith are entitled to reimbursement of the improvements made on the property.