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Let it be resolved that, Force of a Contract should

prevail over a New law


Jefflyn Nicole Seguep Aishan Suarez
Kenneth Villanueva Dax Xenos P. Llorente
Ann Margaret Abando
FACTS OF THE CASE:
A & B entered into a Contract to sell involving a residential House and
Lot to be paid in Ten years with Monthly Amortizations.
B diligently paid his dues for Five years. However, on the sixth year, he
became delinquent.
A demanded B to vacate the property; A cited the contract provision
that upon the third month of delinquency, A can demand for Bs departure.
B refused and used the Maceda Law or RA 6552 or AN ACT TO
PROVIDE PROTECTION TO BUYERS OF REAL ESTATE ON
INSTALLMENT PAYMENTS as his point of defense. The law was passed
years AFTER the contract was already in effect.

POSITION:

The Agreement enshrined in the Provisions of a Contract should prevail


over the claims of an alleged right created by a new law.

In Metropolitan Bank and Trust Company vs Larry Marias, GR


179105, July 26, 2010, the high court stressed that:

Article 1159 of the Civil Code of the Philippines state that


obligations arising from contract have the force of law
between the contracting parties and should be complied
with in good faith. Verily, parties may freely stipulate
their duties and obligations which perforce would be
binding on them. Not being repugnant to any legal
proscription, the agreement entered into between
petitioner and respondent must be respected and given
the force of law between them.

No less than Article III, Section 10 of the 1987 Philippine


Constitution provide that:

No law impairing the obligation of contracts shall be passed.

The non-impairment clause is limited in application to laws that


derogate from prior acts or contracts by enlarging, abridging or in any
manner changing the intention of the parties. B intended to use the Maceda
Law as his shield in covering his delinquency.

There is impairment if a subsequent law changes the terms of a


contract between the parties, imposes new conditions, dispenses with those
agreed upon or withdraws remedies for the enforcement of the rights of the
parties.

There is no question in the good intentions of the law, however, to give


the law a retroactive effect in order to impair a contract is abhorring to the
constitution, hence, opening the gates open for greater evil putting the force
and effects of contracts in ridicule.
In general, laws should be prospective not retroactive. However, there
are some exceptions:

1. If the laws themselves provide for their retro-activity (Art. 4 Civil Code).
2. If the laws are remedial in nature.
3. If the statute is penal in nature, provided:
a. It is favorable to the accused or convict.
b. The accused or convict is not a habitual delinquent as defined in Art.
22 of the Revised Penal Code.
4. If the laws are of an emergency nature and are authorized by the police
power of the government. (Santos vs. Alvarez 44 O.G. 4259)
5. If the law is curative (necessarily retroactive for the precise purpose to
cure errors or irregularities). This kind of law to be valid must not impair
vested rights nor affect final judgments. (Frivaldo vs. Comelec and Lee G.R.
120295, June 28, 1996)

In Peoples Industrial vs CA, G.R. No. 112733. October 24, 1997, The
high court refused the malicious use of the Maceda Law whereas:

These decrees, however, were not yet in existence when


private respondent invoked provision No. 9 of the agreements or
contracts to sell and cancelled these in October 1971. 18 Article 4 of
the Civil Code provides that laws shall have no retroactive effect unless
the contrary is provided. Thus, it is necessary that an express
provision for its retroactive application must be made in the law. 19
There being no such provision in both P.D. Nos. 957 and 1344, these
decrees cannot be applied to a situation that occurred years before
their promulgation. Moreover, granting that said decrees indeed
provide for a retroactive application, still, these may not be applied in
this case...

Nowhere in the provisions of RA 6552 expressly state that it shall


be given a retroactive effect. The protection it provides to buyers of
real estate is commendable. But nowhere in the law that it state that
contracts entered prior its passage should be dishonored. Hence, the
Force of a contract should prevail over a New Law.

If we apply the principle of STARE DECISIS,

In case of PEOPLE'S INDUSTRIAL AND COMMERCIAL CORPORATION vs. CA and


MAR-ICK INVESTMENT CORPORATION.

Consequently, when petitioner failed to abide by its obligation to pay the installments in
accordance with the contracts to sell, provision No. 9 automatically took effect.
***Apparently, when B failed to abide by its obligation to pay the installments in accordance
with the contracts to sell, A cited the contracts provision that upon the third month of
delinquency, A can demand for Bs departure and its automatically took effect.

However, A failed to observe Section 4 of Republic Act No. 6552, the "Realty Installment
Buyer Protection Act, That section provides that "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. As cancellation of the agreements without a duly notarized demand for rescission
did not mean that it violated said provision of law. Republic Act No. 6552 was approved on
August 26, 1972, the law was passed years AFTER the contract was already in effect and the
contracts to sell had become automatically operational. Republic Act No. 6552 does not
expressly provide for its retroactive application and, therefore, it could not have any effects in the
cancellation of the contracts to sell in this case.

At this juncture, it is apropos to stress that the 1961 agreements are contracts to sell and not
contracts of sale. The distinction between these contracts is graphically depicted in Adelfa
Properties, Inc. v. Court of
Appeals, 21 as follows:

. . . . The distinction between the two is important for in a contract of sale, the title passes to
the vendee upon the delivery of the thing sold; whereas in a contract to sell, by agreement
the ownership is reserved in the vendor and is not to pass until the full payment of the price.
In a contract of sale, the vendor has lost and cannot recover ownership until and unless the
contract is resolved or rescinded; whereas, in a contract to sell, title is retained by the vendor
until the full payment of the price, such payment being a positive suspensive condition and
failure of which is not a breach but an event that prevents the obligation of the vendor to
convey title from becoming effective. Thus, a deed of sale is considered absolute in nature
where there is neither a stipulation in the deed that title to the property sold is reserved in the
seller until the full payment of the price, nor one giving the vendor the right to unilaterally
resolve the contract the moment the buyer fails to pay within a fixed period.

That the agreements of 1961 are contracts to sell is clear from the following provisions thereof:

3. Title to said parcel of land shall remain in the name of the OWNER until complete payment
by the PURCHASER of all obligations herein stipulated, at which time the OWNER agrees to
execute a final deed of sale in favor of the PURCHASER and cause the issuance of a
certificate of title in the name of the latter, free from liens and encumbrances except those
provided in the Land Registration Act, those imposed by the authorities, and those contained
in Clauses Nos. Five (5) and Six (6) of this agreement.

4. The PURCHASER shall be deemed for all legal purposes to take possession of the parcel
of land upon payment of the down or first payment; provided, however, that his/her
possession under this section shall be only that of a tenant or lessee and subject to
ejectment proceedings during all the period of this agreement.

5. The parcel of land subject of this agreement shall be used by the PURCHASER
exclusively for legal purposes, and he shall not be entitled to take or remove soil, stones, or
gravel from it or any other lots belonging to the OWNER.

Hence, being contracts to sell, Article 1592 of the Civil Code which requires rescission either
by judicial action or notarial act is not applicable.

"CONTRACT TO SELL." While the title of a contract is not controlling, its stipulations confirm the
nature of that contract. Thus, it provides:
5. Title to said parcels of land shall remain in the name of the OWNER until complete
payment by the PURCHASER of all obligations herein stipulated, at which time, the OWNER
agrees to execute a final deed of sale in favor of the PURCHASER and cause the issuance
of certificates of title in the name of the latter, free from all liens and encumbrances except
those provided in the Land Registration Act, those imposed by the authorities, and those
contained in the stipulations that follow.