b. Real Property (RA 6552)

Realty Installment Buyer Act

Commonly known as the “MACEDA LAW.” It is embodied in R.A. No. 6552. The law declares as “public policy to protect buyers of real estate on installment payments against onerous and oppressive conditions.”

Transactions/sale covered by the Maceda Law

The law involves the sale of immovables on installment.

Coverage: Residential Real Estate

Excluded:

• Industrial lots;
• Commercial buildings (and commercial lots by implication);
• Sale to tenants under agrarian laws; and
• Sale of lands payable in straight terms. (Sec. 3, R.A. No. 6552)

NOTE: The list is not exclusive.

Q: What are the so-called “Maceda” and “Recto” laws in connection with sales in installments? Give the most important features of each law

A: The Maceda Law is applicable to sales of immovable property on installments. The most important features are:

• After having paid installments for at least two years, the buyer is entitled to a mandatory grace period of one month for every year of installment payments made, to pay the unpaid installments without interest.

If the contract is cancelled, the seller shall refund to the buyer the cash surrender value equivalent to fifty percent (50%) of the total payments made, and after five years of installments, an additional five percent (5%) every year but not to exceed ninety percent (90%) of the total payments made.

NOTE: This requires a notarial act of rescission and the refund to the buyer of the full payment of the cash surrender value of the payments on the property. Failure to comply with the mandatory twin requirement shall result into the contract remaining to be valid and subsisting.

• In case the installments paid were less than 2 years, the seller shall give the buyer a grace period of not less than 60 days. If the buyer fails to pay the installments due at the expiration of the grace period, the seller may cancel the contract after 30 days from receipt by the buyer of the notice of cancellation or demand for rescission by notarial act. (Optimum Development Bank v. Spouses Jovellanos, citing Rillo v. CA, G.R. No. 189145, December 4, 2013)

NOTE: According to the Supreme Court, the vendor could go to the court and demand judicial rescission in lieu of a notarial act of rescission. An action for annulment of contract which is a kindred concept of rescission by notarial act will also suffice.

Q: Orbe purchased a land from Filinvest. She paid a total of P608,648.20 for the past two years and later on failed to pay the balance. She claims that she is entitled to get 50% of her payments because she paid for at least 2 years. However, Filinvest denied her claim alleging that what she paid did not really amount to two years worth of payments. Is Orber allowed to get the 50%?

A: NO. When Republic Act No. 6552 or the Maceda Law speaks of paying “at least two years of installments” in order for the benefits under its Section 3 to become available, it refers to the buyer's payment of two (2) years’ worth of the stipulated fractional, periodic payments due to the seller. (Priscilla Zafra Orbe v. Filinvest Land, Inc., G.R. No. 208185, September 06, 2017 J. Leonen)

Other rights granted to a buyer under the Maceda Law

• Sell or assign rights to another;
• Reinstate the contract by updating the account during the grace period and before actual cancellation;
• The buyer may sell or assign rights to another by notarial act and is entitled to a deed of sale upon full payment;
• Pay full installment in advance the balance of price anytime without interest; and
• Have full payment annotated in certificate of title.

NOTE: Applies to contracts even before the law was enacted. Stipulation to the contrary is void.

Q: Spouses Dakila entered into a contract to sell with Honorio Cruz over a parcel of industrial land in Valenzuela City, Metro Manila for a price of P3,500,000.00. The spouses would give a down payment of P500,000.00 upon the signing of the contract, while the balance would be paid for the next 3 consecutive months in the amount of P1,000,000.00 per month. The spouses paid the first 2 installments but not the last installment. After one year, the spouses offered to pay the unpaid balance which Honorio refused to accept. The spouses filed a complaint for specific performance against Honorio invoking the application of the Maceda Law. If you are the judge, how will you decide the case?

A: I will rule in favor of Honorio. The invocation of the Maceda Law is misplaced. The law applies only to sale or financing of realty on installment payments including residential units or residential condominium apartments and does not apply to sales of industrial units or industrial lands like in the case presented.

The sale to the Spouses Dakila is not a sale on installment but more of a straight sale where a down payment is to be made and the balance to be paid in a relatively short period of three months.

Q: Priscilla purchased a condominium unit in Makati City from the Citiland Corporation for a price of P10 million, payable P3 million down and the balance with interest thereon at 14% per annum payable in 60 equal monthly installments of P198,333.33.

They executed a Deed of Conditional Sale in which it is stipulated that should the vendee fail to pay three successive installments, the sale shall be deemed automatically rescinded without the necessity of judicial action and all payments made by the vendee shall be forfeited in favor of the vendor by way of rental for the use and occupancy of the unit and as liquidated damages.

For 46 months, Priscilla paid the monthly installments religiously, but on the 47th and 48th months, she failed to pay. On the 49th month, she tried to pay the installments due but the vendor refused to receive the payments tendered by her.

The following month, the vendor sent her a notice that it was rescinding the Deed of Conditional Sale pursuant to the stipulation for automatic rescission, and demanded that she vacate the premises. She replied that the contract cannot be rescinded without judicial demand or notarial act pursuant to Article 1592 of the Civil Code.

• Is Article 1592 applicable?
• Can the vendor rescind the contract?

A:

• NO. Article 1592 of the NCC does not apply to a conditional sale. Article 1592 applies only to a contract of sale and not to a Deed of Conditional Sale where the seller has reserved title to the property until full payment of the purchase price. The law applicable is the Maceda Law. (Jurado, 2019, citing Valarao v. CA, G.R. No. 130347, March 3, 1999)
• NO, the vendor cannot rescind the contract under the circumstances. Under the Maceda Law, which is the law applicable, the seller on installment may not rescind the contract till after the lapse of the mandatory grace period of one month for every one year of installment payments made, and only after 30 days from notice of cancellation or demand for rescission by a notarial act. In this case, the refusal of the seller to accept payment from the buyer on the 49th month was not justified because, having paid more than three years of installments, the buyer was entitled to a grace period computed at one month for every year of installment payments made under Section 3(a), and the payment was tendered within that period. Moreover, the notice of rescission served by the seller on the buyer was not effective because the notice was not by a notarial act. Besides, the buyer may still pay within the applicable period before cancellation takes effect. All these requirements for a valid rescission were not complied with by the seller. Hence, the rescission is invalid.

Q: Spouses Jovellanos entered into a Contract to Sell with Palmera Homes for the purchase of a residential house and lot payable for a period of 10 years. Later, Palmera Homes assigned all its rights, title, and interest in favor of Optimum Bank. After some time, Optimum issued a Notice of Delinquency and Cancellation of the Contract to Sell on April 10, 2006 for the spouses’ failure to pay their monthly payments. Thereafter, a final Demand Letter dated May 25, 2006 was issued by Optimum requesting the Sps. Jovellanos to vacate and deliver the properties which, however, remained unheeded. This prompted Optimum to file an unlawful detainer case against the spouses. Was the cancellation of the contract to sell valid?

A: YES. R.A. No. 6552 protects buyers in covered sales or financing of real estate on installments, including residential condominium apartments, but excludes industrial lots and commercial buildings. It recognizes the right of the seller to cancel the contract upon non-payment of an installment by the buyer, which is simply an event that prevents the obligation of the vendor to convey title from acquiring binding force. It also provides the right of the buyer on installments in case he defaults in the payment of succeeding installments.

The requirements for cancellation depend on the buyer’s payment history. If the buyer has paid less than two years of installments, the seller shall give the buyer a grace period of at least 60 days; if the buyer fails to pay within that period, the seller may cancel the contract after thirty (30) days from the buyer’s receipt of a notice of cancellation or demand for rescission by notarial act. (Sec. 4, R.A. No. 6552) If the buyer has paid at least two years of installments, the buyer is entitled to a grace period of one month for every year of installment payments made. If the contract is canceled, the seller must pay the statutory cash surrender value in full; actual cancellation takes place after thirty (30) days from the buyer’s receipt of a notice of cancellation or demand for rescission by notarial act and upon that full payment. (Sec. 3, R.A. No. 6552)

It was only after the expiration of the thirty day (30) period did Optimum treat the contract to sell as effectively cancelled – making as it did a final demand upon Sps. Jovellanos to vacate the subject property only on May 25, 2006. Thus, based on the foregoing, there was a valid and effective cancellation of the Contract to Sell and since Sps. Jovellanos had already lost their right to retain possession of the subject property as a consequence of such cancellation, their refusal to vacate and turn over possession to Optimum makes out a valid case for unlawful detainer. (Optimum Development Bank v. Jovellanos, G.R. No. 189145, December 4, 2013)