TL;DR
The Supreme Court affirmed that for real estate installment purchases in the Philippines, sellers must strictly comply with the Maceda Law (RA 6552) when cancelling contracts due to buyer default. Specifically, a notarial notice of cancellation, properly acknowledged and served to the buyer, is legally required. In this case, Pryce Properties failed to validly rescind its contract to sell with Mr. Nolasco because it did not serve a proper notarial notice. Consequently, Mr. Nolasco was entitled to a refund of his payments despite his default. This ruling underscores the importance of due process and buyer protection under the Maceda Law, ensuring developers cannot easily forfeit payments without following the law’s precise cancellation procedures. Buyers are protected even if they default, and sellers must adhere to formal rescission requirements to legally cancel contracts and forfeit payments.
Missed Notice, Money Back: Pryce’s Pricey Lesson in Maceda Law Compliance
This case, Pryce Properties Corp. v. Narciso R. Nolasco, Jr., revolves around a failed real estate transaction and highlights a crucial aspect of Philippine law concerning installment purchases of property: the Realty Installment Buyer Protection Act, also known as the Maceda Law. Mr. Nolasco sought a refund from Pryce Properties for payments made on three lots he intended to purchase, arguing that the developer failed to deliver the titles and imposed unacceptable conditions. Pryce countered that Mr. Nolasco defaulted on payments under a contract to sell and thus forfeited his payments. The central legal question became whether Pryce validly rescinded the contract under the Maceda Law and whether Mr. Nolasco was entitled to a refund.
The Supreme Court sided with Mr. Nolasco, emphasizing the procedural rigor required for contract cancellations under the Maceda Law. The Court first addressed Pryce’s procedural misstep in raising factual issues in a Rule 45 petition, which is generally limited to questions of law. Even overlooking this, the Court proceeded to dissect the core issue: the purported rescission of the contract. Crucially, the Court affirmed the lower courts’ finding that Pryce did not validly cancel the contract to sell because it failed to comply with the Maceda Law’s explicit requirement of a notarial act of rescission. Section 4 of RA 6552 meticulously outlines the conditions for cancellation when a buyer has paid less than two years of installments:
Section 4. In case where less than two years of installments were paid, the seller shall give the buyer a grace period of not less than sixty days from the date the installment became due.
If the buyer fails to pay the installments due at the expiration of the grace period, the seller may cancel the contract 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.
The Supreme Court identified four key conditions for valid cancellation under this section: (1) less than two years of installments paid, (2) a 60-day grace period, (3) notice of cancellation or demand for rescission by notarial act, and (4) a 30-day waiting period after the buyer receives this notice. Pryce argued that its December 5, 1998 letter granting a grace period and its Answer with Counterclaims filed in court served as sufficient notice of rescission. However, the Court debunked both arguments.
Regarding the proposed Contract to Sell with an automatic cancellation clause, the Court clarified that even if such a contract existed, its stipulations conflicted with the Maceda Law. Specifically, the contract’s provision for “service” of notice by registered mail, irrespective of “receipt,” and its attempt to bypass the notarial act requirement were deemed void as they contravened Section 4 of RA 6552. Furthermore, the purported Contract to Sell was not even signed by Mr. Nolasco, rendering it ineffective against him.
Pryce’s assertion that its Answer with Counterclaims constituted notarial rescission was also rejected. The Court emphasized that a notarial rescission under the Maceda Law requires a formal acknowledgment before a notary public, affirming the act of rescission itself. Pryce’s Answer, notarized merely with a jurat (an oath that the document was signed and sworn to), fell short of this requirement. The Court cited Orbe v. Filinvest Land, Inc., highlighting the distinction between an acknowledgment, which validates a deed or act, and a jurat, which merely authenticates an affidavit or pleading. The Answer with Counterclaims, therefore, was deemed a mere allegation of rescission, not a valid notarial act of rescission itself. Adding to Pryce’s woes, the notary public improperly relied on a Community Tax Certificate (cedula) as proof of identity, further invalidating the notarial act.
Because Pryce failed to validly rescind the contract, the Supreme Court upheld Mr. Nolasco’s right to a refund. While the Maceda Law doesn’t explicitly mention a refund for buyers who have paid less than two years of installments, the Court invoked equity considerations and prior jurisprudence to justify the refund. The Court also clarified the interest rates applicable to the refunded amount, applying 12% per annum from judicial demand (January 22, 1999) until June 30, 2013, and 6% per annum from July 1, 2013, until full payment, in line with prevailing legal interest rate guidelines. The decision ultimately underscores the protective mantle of the Maceda Law for real estate installment buyers, mandating strict adherence to its provisions by sellers seeking to cancel contracts due to default. It clarifies that mere notice of default or legal pleadings are insufficient substitutes for the formal notarial rescission required by law, ensuring fairness and preventing unjust forfeiture of buyer payments.
FAQs
| What is the Maceda Law? | The Maceda Law (RA 6552) is the Realty Installment Buyer Protection Act in the Philippines. It protects buyers of real estate on installment payments against oppressive conditions, especially in cases of default. |
| What is a notarial act of rescission? | It is a formal notice of contract cancellation that must be acknowledged before a notary public. This act makes the private cancellation a public and legally recognized act, as required by the Maceda Law. |
| Why was Pryce’s Answer with Counterclaims not considered a valid notarial act of rescission? | Because it was notarized with a jurat, not an acknowledgment, and it did not clearly and unequivocally declare a rescission. A jurat merely certifies that the document was signed and sworn to, not that the act itself (rescission) was acknowledged. |
| What happens if a seller fails to properly rescind a contract under the Maceda Law? | The attempted rescission is invalid, and the contract remains in effect. In cases where the buyer has defaulted but no valid rescission occurred, the buyer may be entitled to remedies such as a refund of payments made, based on equity. |
| What are the buyer’s rights if they default on payments but have paid less than two years of installments? | Under the Maceda Law, they are entitled to a 60-day grace period to pay. If they fail to pay within this period, the seller can cancel the contract after 30 days from the buyer’s receipt of a notarial notice of cancellation. Even without explicit provision for refund in the law for those who paid less than 2 years, jurisprudence provides for equitable refund. |
| What evidence of identity is acceptable for notarial acts? | Competent evidence of identity is required for notarial acts, as defined by the Rules on Notarial Practice. Community Tax Certificates (cedulas) are no longer considered competent evidence of identity. |
For inquiries regarding the application of this ruling to specific circumstances, please contact Atty. Gabriel Ablola through gaboogle.com or via email at connect@gaboogle.com.
Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Pryce Properties Corp. v. Nolasco, G.R. No. 203990, August 24, 2020