All my bags are packed but I am not ready to go

Angel purchased a house and lot under Contracts to Sell No. 6271 and 6272 from Green Green Grass of Home Inc. (GGGHI) valued at P750,000 and P450,000 respectively, with a 24-percent annual interest to be paid by installment over a 10-year period.

The house and lot were delivered to Angel. But GGGHI—pursuant to the contracts to sell—retained ownership of the property until full payment of the purchase price.

Angel defaulted. She was was only able to pay 35 installments for Contract to Sell No. 6271 and 48 installments for Contract to Sell No. 6272.

Despite receipt of 12 notices for payment from GGGHI, Angel still failed to settle her account.

After giving a 51-months grace period for both contracts and in consideration of the continued disregard of the demands of GGGHI, the company served Angel a notice of notarial rescission. GGGHI jettisoned the contracts into oblivion.

While Angel packed her bags, she still could not let go of the place she calls home. In heart and mind, GGGHI notarial rescission of the contracts to sell is legally flawed.

Q: What are the rights of a buyer who has paid at least 2 years of installments but defaults in the payment of succeeding installments?

A: Section 3 of R.A. 6552, also known as the Maceda Law, provides as follows:

Where the buyer has paid at least two years of installments, the buyer is entitled to the following rights in case he defaults in the payment of succeeding installments:

(a) To pay, without additional interest, the unpaid installments due within the total grace period earned by him which is hereby fixed at the rate of one month grace period for every one year of installment payments made: Provided, that this right shall be exercised by the buyer only once in every five years of the life of the contract and its extensions, if any.

(b) If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of the payments on the property equivalent to 50 percent of the total payments made, and, after five years of installments, an additional 5 percent every year but not to exceed 90 percent of the total payments made: Provided, that the actual cancellation of the contract shall take place after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act and upon full payment of the cash surrender value to the buyer.

Down payments, deposits or options on the contract shall be included in the computation of the total number of installment payments made.

Note that the “two years of installments” refers to the installments that correspond to the number of months of payments, and not to the number of months that the contract is in effect as well as any grace period that has been given.

The law thus prevent any buyer who has not been diligent in paying his monthly installments from unduly claiming the rights provided in Section 3 of R.A. 6552. (Gatchalian Realty, Inc. vs. Angeles, G.R. No. 202358, November 27, 2013).

Q: What are the transactions that are covered by the Maceda Law?

A: The transactions or contracts covered by the Maceda are those involving the sale or financing of real estate on installment payments, including residential condominium apartments but excluding industrial lots, commercial buildings and sales to tenants under R.A. Thirty-eight hundred forty-four, as amended by Republic Act No. 6389.

Q: What will happen should the buyer fails to to pay the installments due at the expiration of the grace period?

A: The law allows the seller to cancel the contract after 30 days from the buyer’s receipt of the notice of cancellation or demand for rescission of the contract by a notarial act. (Gatchalian Realty, Inc. vs. Angeles, G.R. No. 202358, November 27, 2013).

Q: Did GGHI give Angel the required grace period before it cancelled the contracts to sell?

A: Yes, Angel was given a grace period of 51 months which is more than was provided in R.A. 6552 and in their contracts.

Q: Is Angel entitled to a refund of the cash surrender value?

A: For paying more than two years of installments on the lot, Angel is entitled to receive cash surrender value of her payments on the lot equivalent to fifty per cent of the total payments made. (Gatchalian Realty, Inc. vs. Angeles, G.R. No. 202358, November 27, 2013).

Q: Did the receipt of the GGGHI’s notarial rescission by Angel resulted to the actual cancellation of the contracts of sale?

A: No, there was no actual cancellation of the contracts because of GRI’s failure to actually refund the cash surrender value to Angeles. A valid and effective cancellation under R.A. 6552 must comply with the mandatory twin requirements of a notarized notice of cancellation and a refund of the cash surrender value. In other words, the notarial act of rescission must be accompanied by the refund of the cash surrender value.

The actual cancellation of the contract can only be deemed to take place upon the expiry of a 30-day period following the receipt by the buyer of the notice of cancellation or demand for rescission by a notarial act and the full payment of the cash surrender value. (Gatchalian Realty, Inc. vs. Angeles, G.R. No. 202358, November 27, 2013 citing n Olympia Housing, Inc. v. Panasiatic Travel Corp., 443 Phil. 385, 398-399 [2003];  Pagtalunan v. Dela Cruz Vda. De Manzano, 559 Phil. 658, 669-670 [2007])

Q: What are the remedies of Angel as a buyer?

A:  Since the contracts to sell between the parties remained valid because of the developer’s failure to comply with one of the twin requirements of the Maceda law, the defaulting buyer thus had the right to offer to pay the balance of the purchase price, and the developer had no choice but to accept payment.

Ma. Soledad Deriquito-Mawis is currently the Dean of College of Law, Lyceum of the Philippines University; and President of Philippine Association of Law Schools