Rhona M.

Marasigan
Law on Sales
Maceda Law

REPUBLIC ACT No. 6552

AN ACT TO PROVIDE PROTECTION TO BUYERS OF REAL ESTATE ON INSTALLMENT

PAYMENTS. (Rep. Act No. 6552)

Section 1. This Act shall be known as the "Realty Installment Buyer Act."

Section 2. It is hereby declared a public policy to protect buyers of real estate on installment
payments against onerous and oppressive conditions.

Section 3. In all transactions or contracts 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 Republic Act Numbered Thirty-eight hundred forty-four, as
amended by Republic Act Numbered Sixty-three hundred eighty-nine, 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 canceled, the seller shall refund to the buyer the cash surrender value of
the payments on the property equivalent to fifty per cent of the total payments made, and,
after five years of installments, an additional five per cent every year but not to exceed ninety
per cent 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.

RA 6552 also known as THE REALTY INSTALLMENT BUYER PROTECTION ACT

MACEDA LAW BACKGROUND

 Named after its author Sen. Ernesto Maceda

 Enacted in August 26, 1972 before declaration of Martial Law.

PURPOSE:

 Provides for certain protection to particular buyers of real estate payable on installments.

 The law seeks to address the acute housing shortage problem in our country that
has prompted thousands of middle and lower class buyers of houses, lots and
condominium units to enter into all sorts of contracts with private housing developers
involving installment schemes.

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Rhona M. Marasigan
Law on Sales
Maceda Law

o Lot of buyers, mostly low income earners eager to acquire a lot upon which to
build their homes, readily affix their signatures on these contracts, without an
opportunity to question provisions therein as the contract is offered to them on a
“take it or leave it” basis.

 The law declares as “public policy to protect buyers of real estate on installment
payments against onerous and oppressive conditions.”

 In Luzon Brokerage vs. Maritime Bldg., the court viewed the enactment of Maceda Law
as a confirmation of its jurisprudential rulings that recognizes the seller’s right of
cancellation of sale on installments of industrial and commercial properties with full
retention of previous payments.

ROLE:

 A policy statement of the State in protecting the interests of buyers of residential real
estate on installments.

What sale are covered by the Maceda Law?

1. Residential real estate

2. Covers not only “sales” on installments of real estate, but also “financing” of such
acquisition.

3. Contract to sell

What are excluded?

1. Sales covering industrial lots;

2. Sales covering commercial buildings (and commercial lots by implication); and

3. Sales to tenants under agrarian reform laws.

Note: the enumeration is not exclusive. (Ex. Sale on installment of commercial or

office condominium units.)

 Maceda Law cannot be invoked by a person or entity who acquired the subdivision lots in
a foreclosure sale on the mortgaged constituted thereon by the developer.

What are the rights granted?

1. At least 2 years installment paid (Sec. 3 of RA 6552)

The buyer is entitled to the following rights:

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Rhona M. Marasigan
Law on Sales
Maceda Law

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;

b.  If the contract is canceled, the seller shall refund to the buyer the cash surrender value
of the payments on the property equivalent to fifty per cent of the total payments made,
and, after five years of installments, an additional five per cent every year but not to
exceed ninety per cent of the total payments made.

What is the grace period under Sec. 3?

 The buyer can exercise only once every five (5) years of the life of the contract and its
extensions, if any.

How Cancellation of contract can be effected?

The cancellation shall take place after thirty (30) 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.

2. Less than 2 years installment paid

SPOUSES RAMOS vs. SPOUSES HERUELA AND PALLORI

FACTS:

1. Spouses Ramos own a parcel of land situated at Cagayan de Oro City. Ramos then entered
into contract of sale in installment basis with Spouses Heruela.

2. Later, Ramos filed a complaint for recovery of ownership against Heruela. He alleged that
the agreed price was 15k, and out of this, only 4k was paid by Heruela. He asserts that
Heruela’s refusal to pay the purchase price caused the cancellation of deed of conditional
sale. Moreover, he discovered that spouses Heruela together with its in-laws, were already
occupying the said land.

3. Spouses Heruela alleged that they expressed their willingness to the price in 1982 but
Ramos refused their offer.

4. The trial court held that the contract is of sale by installment and Ramos failed to comply
with Sec. 4 of RA 6552.

ISSUE:

W/N RA 6552 is applicable in the case.

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Rhona M. Marasigan
Law on Sales
Maceda Law

RULING:

The court held in affirmative.

In the case of Rillo vs. CA, the court held that Maceda Law, R.A. No. 6552 recognizes in conditional
sales of all kinds of real estate (industrial, commercial, residential) 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.

Sec. 3. In all transactions or contracts 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 Republic Act Numbered Thirty-eight hundred forty-four as
amended by Republic Act Numbered Sixty-three hundred eighty-nine, 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 fifty per cent of the total payments made and, after five years
of installments, an additional five per cent every year but not to exceed ninety per cent 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 installments made.

Sec. 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.

In the case at bar, Sec. 4 of RA 6552 applies.

The action for reconveyance filed by petitioner was predicated on an assumption that its contract to
sell executed in favor of respondent buyer had been validly cancelled or rescinded. The records
would show that, indeed, no such cancellation took place at any time prior to the institution of the
action for reconveyance. In the present case, there being no valid rescission of the contract to sell,
the action for reconveyance is premature.

The spouses Heruela are not entirely fault-free. They have been remiss in performing their
obligation. The trial court found that the spouses Heruela offered once to pay the balance of the
purchase price. However, the spouses Heruela did not consign the payment during the pendency of
the case. In the meanwhile, the spouses Heruela enjoyed the use of the land.

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Rhona M. Marasigan
Law on Sales
Maceda Law

The court note that the trial court failed to fixed the grace period to sixty days in accordance with
Sec. 4 of RA 6552. Moreover, the court also finds that Ramos failed to alleged when it demand for
payment of the balance. It only avers that Heruela’s unjust refusal to pay in full has caused the
conditional sale to be rescinded, revoked and annulled.

The court affirmed the decision of trial court with modification. Heruela to pay the balance with
interest at 6% per annum.

FABRIGAS vs. DEL MONTE

FACTS:

1. Del Monte entered into contract to sell with spouses Fabrigas parcel of land situated in Las
Pinas. The agreement stipulated that Fabrigas shall pay Del Monte 30k as d/p and the
balance within 10 years. The price was agreed to be 109,200. The contract provides that in
case of default, the same is automatically cancelled and payments will be considered as
rentals.
2. After downpayment, Fabrigas failed to pay the agreed monthly installment. Upon several
demand of Del Monte it is only after a year where Fabrigas made such payment.
3. However, the parties agreed to enter into another contract wherein they restructure the terms
of payment. This includes changing the price of the land to 131,642.58. Sps Fabrigas
however, made irregular payments. Upon several demand and granting of grace period,
Fabrigas still failed to pay the said amount.
4. Del Monte then instituted an action for Recovery of Possession with damages against
Fabrigas alleging that the latter owned them an amount of 206k plus interest. On the other
hand, Del Monte alleged that the first contract was cancelled, hence the second contract
altered the terms and conditions of the first.
5. After merits of the case, the trial court upheld the validity of the second contract and ordered
sps Fabrigas to complete payments or to vacate the property. Upon appeal, the CA upheld
the validity of second contract however, it noted that the same was unenforceable, it upheld
its validity upon finding that the contract was subsequently ratified.

ISSUE:

W/N RA 6652 is applicable in the case at bar.

RULING:

The court held in affirmative.

The court find that given the nature of the contract between the parties, the applicable legal
provision on the mode of cancellation of the first contract is Sec. 4 of RA 6652.

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.

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Rhona M. Marasigan
Law on Sales
Maceda Law

The cancellation of the contract under Section 4 is a two-step process. First, the seller should extend
the buyer a grace period of at least sixty (60) days from the due date of the installment. Second, at
the end of the grace period, the seller shall furnish the buyer with a notice of cancellation or demand
for rescission through a notarial act, effective thirty (30) days from the buyer’s receipt thereof.

While the Court concedes that Del Monte had allowed petitioners a grace period longer than the
minimum sixty (60)-day requirement under Section 4, it did not comply, however, with the
requirement of notice of cancellation or a demand for rescission. Instead, Del Monte applied the
automatic rescission clause of the contract. Contrary, however, to Del Monte’s position which the
appellate court sustained, the automatic cancellation clause is void under Section 718 in relation to
Section 4 of R.A. 6552.

Notwithstanding the improper rescission, the facts of the case show that first contract was
subsequently novated by second. The execution of second accompanied an upward change in the
contract price, which constitutes a change in the object or principal conditions of the contract. In
entering into second, the parties were impelled by causes different from those obtaining under first.
On the part of Fabregas, they agreed to the terms and conditions of second not only to acquire
ownership over the subject property but also to avoid the consequences of their default under first.
On Del Monte’s end, the upward change in price was the consideration for entering into second.

On the issue of validity of the second contract, the court held that the same is still valid. Even the
contract is unenforceable, the subsequent acts of Fabrigas for continuous payment of the purchase
price makes it ratified, hence, still valid.

RILLO vs. CA

FACTS:

1. Corb Realty entered into contract to sell with Rillo wherein the parties agreed the price of
150k, ½ upon execution and the remaining balance on 12 equal monthly installment. It was
also stipulated that the balance would bear 12% interest per annum. It was further agreed
that upon default or payment for 3-4 monthly installment, forfeiture proceedings would
governed by Condominium Act.

2. During the execution of the contract, Rillo failed to comply with the said terms. Corb Realty
demanded payment from Rillo to settle his account, however Rillo failed to remit the same.
Corb filed for cancellation of the contract to sell with RTC Pasig.

3. Rillo avered that he already paid total of 149k yet Corb did not deliver the title and the
amount claimed by the latter has no legal basis.

4. After merits of the case, the trial court held that Corb cannot rescind the contract because
Rillo did not commit a substantial breach of terms. it ruled that the remedy of corb is to file for
specific performance for the payment of the balance. Upon appeal, the CA reversed the
decision of the trial court and held that PD 957 (Subdivision and Condominium Buyers
Protective Decree) shall apply.

ISSUE:

W/N RA 6552 is applicable in the case at bar.

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Rhona M. Marasigan
Law on Sales
Maceda Law

RULING:

The court held in affirmative.

The court ruled that given the circumstances of the case, the appellate court correctly applied RA
6552 which recognizes in conditional sales of all kinds of real estate (industrial, commercial,
residential) 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.

In the case at bar, Rillo paid less than two (2) years in installment payments, he is only entitled to a
grace period of not less than sixty (60) days from the due date within which to make his installment
payment. CORB REALTY, on the otherhand, has the right to cancel the contract after thirty (30)
days from receipt by RILLO of the notice of cancellation.

On the issue of novation, the court held that Article 1292 of the Civil Code provides that "In order that
an obligation may be extinguished by another which substitutes the same, it is imperative that it be
so declared in unequivocal terms, or that the old and the new obligations be on every point
incompatible with each other." Novation is never presumed. Parties to a contract must expressly
agree that they are abrogating their old contract in favor of a new one. ITCAB, the compromise
agreement entered into by the parties was to give life to their Contract to sell.

However, on the issue of refund , RA No. 6652 the right of the buyer accrues only when he has paid
at least two (2) years of installments. In the case at bar, RILLO has paid less than two (2) years in
installments, hence, he is not entitled to a refund.

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