Filipino dreams of having their own homes. They usually sign contracts with onerous provisions being offered on a take it or leave it basis. Most of the contracts of adhesion prepared by developers, entrap buyers by requiring cash deposits with onerous default clauses where all the installment payments for several years will be forfeited if they default. Developers enjoy unnecessary advantage over lot buyers, as they forfeit all the installment payments of defaulting buyers and resell the same lot. Thus, Republic Act No. 6552 – Realty Installment Buyer Act – popularly known as the Maceda Law was passed to protect buyers of real estate on installment payments against onerous and oppressive conditions. In all contracts involving the sale or financing of real estate where two years installments have been paid, buyer, who defaults in paying the succeeding installments, is entitled to pay without interest with grace period of one month for every year of installment and if the contract is cancelled, the seller shall refund the buyer cash surrender value equivalent to 50% of the total payments and additional 5% every year but not to exceed 90%. The cancellation of the contract shall take place after 30 days from receipt by the buyer of notarial cancellation and upon full payment of cash surrender value. Where the installment payments is less than two years, the buyer is entitled a grace period of 60 days to pay.
May a developer just cancel a contract without refunding the buyer, who defaults? Our Honorable Supreme Court ruled the issue in Orbe v. Filinvest Land, Inc., G.R. 208185, September 6, 2017. In this case, Orbe entered a sales contract with Filinvest over a 385 square meter lot in Taytay, Rizal for P2.5 million payable in installments at P28,000 per month in 2001. Orbe defaulted in 2004. Filinvest sent a notarized letter of cancellation of contract using a community tax certificate without any acknowledgment, effective 30 days from receipt. Filinvest resold the lot. Orbe sued Filinvest in 2007 for refund of 50% at P304,324.10 as her period of payment is more than 24 months from June 2001 to July 2004 for P608,648.20. Filinvest opposed it since the law only requires refund if there are 24 amortization payments, not 24-month period of payments. The HLURB Arbiter ordered Filinvest to refund Orbe of cash surrender value of 50% of the total payments in 2008. The HLURB Board of Commissioners and Office of the President ruled for Orbe. On third appeal of Filinvest, the Court of Appeals reversed all prior rulings and dismissed Orbe’s suit since she is not entitled to cash surrender value since her amortized payment is less than 24. Orbe appealed.
The Supreme Court ruled that under Section 3 of R.A. 6552, when the developer cancels a contract to sell, the buyer is entitled to cash surrender value of 50% of all payments if he has paid 24 amortized payments. Otherwise, under Section 4 of R.A. 6552, he is only entitled to a grace period of 60 days from due date to pay her installment. For cancellation to be valid under Section 4, three requisites must concur: buyer must have been given a 60-day grace period but failed to utilize it; seller must have sent notarized cancellation or demand and the cancellation shall take effect only after 30 days from the date of receipt by the buyer. While under Section 3, the additional requirement is payment of cash surrender value, Orbe fell short of 24 amortization payment and thus, she is not entitled to refund. But, the developer’s notice of cancellation was notarized by way of jurat, not acknowledgment and used a community tax certificate. This is not the valid notarial act contemplated by the Maceda Law. Since the cancellation did not strictly comply with the law, the contract to sell continues to be valid. Thus, the defaulting buyer had the right to offer to pay the balance of the purchase price and the developer had no choice but to accept payment. But, the defaulting buyer was unable to exercise this right since the developer sold the lot. To prevent unjust enrichment, this Court ordered the developer to refund the defaulting buyer the lot’s actual value with 12% interest per annum computed from the date of the filing of the complaint until fully paid, or to deliver a substitute lot at the option of defaulting buyer. The Court decried the iniquity foisted upon a buyer and finds it illegal and iniquitous for developer, without complying with the mandatory legal requirements for canceling the contract, forfeit both the buyer’s land and hard-earned money. As developer did not validly cancel its contract and sold the lot to another person, it is proper that Filinvest be ordered to refund Orbe of P608,648.20 with legal interest of 12% per annum from the time she filed the complaint.
