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PRISCILLA ZAFRA ORBE v. FILINVEST LAND

FACTS:

Priscilla Zafra Orbe entered into a purchase agreement with Filinvest Land, Inc. for a lot in Taytay, Rizal. The total contract price was P2,566,795.00 payable on an installment basis for a period of 7 years. From June 2001 to July 2004, Orbe made several payments totaling P608,648.20. However, she was unable to make further payments due to financial difficulties. On October 2004, Filinvest sent a notice of cancellation to Orbe, stating that her account remains unpaid despite previous requests for payment. Orbe filed a complaint for refund with damages before the HLURB Field Office, claiming that she had made payments from June 2001 to October 2004 and that the cancellation notice was not valid. The HLURB Arbiter ruled in favor of Orbe, ordering a refund of 50% of the total payments she had made. Filinvest appealed to the HLURB Board of Commissioners, which upheld the Arbiter's decision.

The case involves the interpretation of Sections 3 and 4 of the Maceda Law, which govern the rights of defaulting buyers on installment payments. The petitioner claims that she falls within the protection of Section 3 as she has been making payments for more than two years. However, the court disagrees and clarifies that "at least two years of installments" refers to the aggregate value of 24 monthly installments, not just the period when payments have been made. The court also cautions against interpreting the law in a way that would allow arbitrary and minimal payments to qualify for Section 3's protection. The court finds that the petitioner did not pay "at least two years of installments" as required by Section 3 of the Maceda Law.

The case involves a dispute between H.L. Carlos Construction, Inc. (HL Carlos) and the Spouses Mahusay over a contract to sell a property. The Spouses Mahusay argued that they were entitled to a refund of the cash surrender value of their payments under the provisions of Republic Act No. 6552 (RA 6552) or the Maceda Law. However, HL Carlos argued that the Spouses Mahusay failed to pay at least two years of installments, thus disentitling them to a refund under RA 6552. The court concluded that the Spouses Mahusay failed to pay at least two years of installments and, therefore, were not entitled to a refund under RA 6552. The court also noted a previous case where the correct standard for apportioning the down payment was used, which included the total amount of the down payment in the computation of the total number of installment payments made.

ISSUES:

  1. Whether the down payment should be included in computing the total number of installment payments made.

  2. Whether the buyer has paid at least two years' worth of installments.

  3. Whether the seller has validly canceled the contract.

  4. Whether the notarization of respondent's notice of cancellation by jurat instead of acknowledgement is valid.

  5. Whether the notarization of the notice of cancellation by the respondent complied with the requirements under Section 4 of the Maceda Law.

  6. Whether the failure to comply with the notarization requirements rendered the cancellation of the purchase agreement ineffectual.

  7. Whether or not the defaulting buyer is obligated to pay the balance of the purchase price plus interest to the developer.

  8. Whether or not the defaulting buyer has the right to offer to pay the balance of the purchase price and the developer is obligated to accept payment.

  9. Whether or not the developer is obligated to refund the cash surrender value to the defaulting buyer if the subject property is no longer available.

  10. Whether the contract to sell between the parties remains valid and subsisting.

  11. Whether the petitioner should be ordered to refund the actual value of the lot resold or only the amount actually paid by the petitioner.

RULING:

  1. The down payment should be included in computing the total number of installment payments made. However, the correct divisor should be the monthly installment on the down payment, not the monthly installments on the purchase price.

  2. The buyer has not paid at least two years' worth of installments. The court calculated the number of installments paid using the monthly amortizations due from the buyer, using the monthly installment set for the first year as the basis. The buyer fell short of the requisite two years' or 24 months' worth of installments.

  3. The seller has not validly canceled the contract. The seller did give the buyer a 60-day grace period, but the notice of cancellation was not in the form of a valid notarial act as required by the Maceda Law.

  4. No, the notarization of respondent's notice of cancellation by jurat instead of acknowledgement is not valid.

  5. The notarization of the notice of cancellation did not comply with the requirements under Section 4 of the Maceda Law. The respondent failed to include a competent evidence of identity, such as a government-issued ID, in the notarization process. The respondent's reliance on the community tax certificate as proof of identity was also deemed unreliable and not acceptable.

  6. The failure to comply with the notarization requirements rendered the cancellation of the purchase agreement ineffectual. The cancellation should have been done through a notarial act, as mandated by the Maceda Law. The respondent's failure to comply with the mandatory legal requirements for canceling the contract invalidated the cancellation and rendered the purchase agreement between the petitioner and respondent valid and subsisting.

  7. The defaulting buyer is obligated to pay the balance of the purchase price plus interest to the developer.

  8. The defaulting buyer has the right to offer to pay the balance of the purchase price and the developer is obligated to accept payment.

  9. The developer is obligated to refund the cash surrender value to the defaulting buyer if the subject property is no longer available.

  10. The contract to sell between the parties remains valid and subsisting in accordance with Section 3(a) of R.A. No. 6552.

  11. The petitioner should be ordered to refund the amount actually paid by the petitioner, which is P608,648.20, with legal interest at twelve percent (12%) per annum from November 17, 2004 to June 30, 2013, and six percent (6%) per annum from July 1, 2013 until fully paid.

PRINCIPLES:

  • The down payment should be included in computing the total number of installment payments made, but the correct divisor should be the monthly installment on the down payment.

  • The satisfaction of the requisite two years' worth of installments is calculated using the monthly amortizations due from the buyer.

  • Cancellation of the contract under the Maceda Law requires three requisites: the buyer must be given a 60-day grace period, the seller must send a notice of cancellation or demand for rescission by notarial act, and the cancellation shall take effect after 30 days from the buyer's receipt of the notice of cancellation.

  • Section 19 of the Revised Rules of Evidence specifically requires that a document be acknowledged before a notary public.

  • Rule II, Section 1 of A.M. No. 02-8-13-SC defines an acknowledgement as an act that requires the appearance of an individual before a notary public, presentation of an integrally complete instrument or document, personal knowledge of the notary public or identification through competent evidence of identity, representation of the individual that the signature on the instrument or document was voluntary, and declaration of the individual's authority to sign in a representative capacity if applicable.

  • Notarization under the Maceda Law extends beyond converting private documents into public ones and is necessary for the exercise of the statutory right of unilateral cancellation by the seller of a perfected contract.

  • Individuals acting as representatives must declare that they are authorized to act as such representatives, especially in notices of cancellation or demands for rescission made under Sections 3 and 4 of the Maceda Law.

  • A jurat is a distinct notarial act and does not attest to the authority of a representative.

  • Rule II, Section 6 of the 2004 Rules on Notarial Practice defines a jurat as an act that requires the personal appearance of an individual before a notary public, presentation of an instrument or document, personal knowledge of the notary public or identification through competent evidence of identity, signing of the instrument or document in the presence of the notary, and taking of an oath or affirmation before the notary as to the instrument or document.

  • Competent evidence of identity, as originally worded in the 2004 Rules on Notarial Practice, refers to identification based on an identification document issued by an official agency or the oath or affirmation of a credible witness, neither of whom is privy to the instrument, document or transaction.

  • The use of a community tax certificate as proof of identity does not satisfy the requirement of competent evidence of identity as amended by A.M. No. 02-8-13-SC.

  • Notaries public should faithfully observe the rules governing notarial acts, especially when it comes to the cancellation of contracts. (Marina Properties v. Court of Appeals)

  • Cancellation of a contract must first be done through a notarial act in order to be valid. (Realty Exchange Venture Corp. v. Sendino)

  • The cancellation of a contract without complying with the requirements imposed by law is invalid and improper. (Active Realty and Development v. Daroya)

  • The cancellation of contracts under the Maceda Law must strictly comply with the requirements set forth in the law. (Gatchalian Realty v. Angeles)

  • The grant of a statutory privilege under the Maceda Law relating to a civil contract requires strict compliance with the law's conditions. (Marina Properties v. Court of Appeals)

  • Liberal construction of the Maceda Law cannot be made in favor of the seller at the expense of burdening the buyer. (Marina Properties v. Court of Appeals)

  • Failure to send a notarized notice of cancellation and to refund the cash surrender value results in the validity of the contract between the parties. (Active and Associated cases)

  • In case the subject property is no longer available, the defaulting buyer has the option to choose between a refund or an offer of substitute properties. (Gatchalian case)

  • The defaulting buyer is obligated to pay the balance of the purchase price plus interest, and the developer is obligated to issue the corresponding certificate of title upon payment. (Active, Associated, and Gatchalian cases)

  • The contract to sell between the parties remains valid and subsisting following the procedure provided by law. (Section 3(a) of R.A. No. 6552)

  • In cases where a seller wrongly cancels a contract with a buyer and sells the property to a third person, the buyer has the right to either receive a refund of the actual value of the lot resold or a substitute lot. (Active and Gatchalian cases)

  • The refund to the buyer shall only be the amount actually paid to the seller and shall earn legal interest. (Nacar v. Gallery Frames)