REPUBLIC ACT No. 6552 BUYERS OF REAL Esra; PROVIDE PROTECTION TO £6 Anacrmors INSTALLMENT PAYMENTS. IN Section 1, This Act shall be known as the “Realty Installment Buys, Protection Act." Sec, 2. It is hereby declared a public policy to protect buyers of Tea] estate on installment payments against onerous and Oppressivg conditions. Sec. 3. In all transactions or contracts involving the sale or financing of real estate on installment payments, including residenti condominium apartments but excluding industrial lots, commercia| 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 lifeof the contract and its extensions, if any. (b) Ifthe contract is canceled, the seller shall refund to the buyer the cash surrender value of the payments on the property equivalent to fifty percent of the total payments made, and aftet five years of installments, an additional five percent every ¥°™ but not to exceed ninety percent of the total payments made: Provided, That the actual cancellation of the contract shall ta place after thirty days from receipt by the buyer of the notice® cancellation or the demand for rescission of the contract DY? notarial act and upon full ler valu? to the buyer, Payment of the cash surrend Down + be Payments, deposits or options on the contract shall ‘ included in the computation Hime ayments rade, of the total number of instal 236 >»Realty Installment Buyer Protection Act (R.A. No. 6552 or Maceda Law) Requisites for the application of the Maceda Law 4, Transactions or contracts involving the sale or financing of real estate on installment payments, including residential condominium apartments; and 2. Buyer defaults in payment of succeeding installments. Application of Maceda Law 4, Contract of sale 2, Contract to sell 3. Financing transactions or contracts When is the Maceda Law inapplicable? 1. Sale covering industrial lots 2, Sale covering commercial buildings 3. Sale to tenants under agrarian reform laws 4, Sale of lands payable in straight terms Under Section 3 of RA 6552, a defaulting buyer that has paid at least two years of installments has the following options: 1. 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 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, ifany. 2. Ifthe contract is cancelled, the seller shall refund to the buver the cash surrender value of the payments on the property equivalent to fifty percent of the total payments made and, after five years of installments, an additional five percent every year but not to exceed ninety percent 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. What is notarial rescission? A notarial rescission contemplated under RA 6552 is a unilateral cancellation by a seller of a perfected contract thereunder acknowledged by a notary public and accompanied by competent evidence of identity. This notarial notice of rescission has peculiar technical requirements. 237LA, No, 6552 oF Maceda tay) R. Realty Installment Buyer protection Act (I ‘court declared that the Notariay iy eC e case, the Supreme t ; In one lation into a public one must he Z converting the private notice of cancel acknowledgment. nan y, Manzano, the Court stressed the importance f the Maceda Law as to the Cancellation oy contracts to sell involving realty installment schemes. There it was held thay the cancellation of the contract by the seller must be in accordance wig, Section 3 (b) of the Maceda Law, which requires and the refund to the buyer of the full payment of the cash surrender value the payments made on the property. The actual cancellation of the Contragy takes place after thirty (30) days from receipt by the buyer of the notice 9; cancellation or the demand for rescission of the contract by a notarial act ang upon full payment of the cash surrender value to the buyer, to wit: In Pagtalui complying with the provisions 0! (b) Ifthe contract is cancelled, the seller shall refund to the buyer the cash surrender value of the payments on the property equivalent to Jifty percent of the total payments made and, after five years of installments, an additional five percent every year but not to exceed ninety percent 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.1 Problem: Interested in acquiring a 180-square meter lot, F asked X Inc, the developer, to reserve the lot for her as shown by a Reservation Application dated April 11, 1992. While the cash purchase price for the land is P396,000.00, the price if payment is made on installment basis 583,498.20 at monthly amortizations of P8,140.97 payable in 5 years with 21% interest per annum based on the balance and an additional 5% surcharge for every month of delay on the monthly installment due. F ope! to pay on installment and began making a periodical payments from 19920 1996 in the total amount of P375,295,49, In April, August, and October 1996, X, Inc. sent F notices reminding her to update her account. Upon inquiry, however, F was shocked to find ou that as of July 1996, she owed X, Inc. P2 996, the amount ballooned to P491,265.91, | 7969-10. In November 2 X, Inc, thus suggested to F to sale of the subject lot toa new buyer she can get half of all payments she request for refund, , o execute a written authorization forth and a written request for refund sou ; made, However, F never made a ¥!Realty Installment Buyer Protection Act (R.A. No, 6552 or Maceda Law) As of April 1997, X, Inc. computed F's unpaid account at P576,569.89, Itthen sent F a Notarized Notice of Cancellation of Reservation Application and/or Contract to Sell. F, on the other hand, filed before the Housing and Land Use Regulatory Board (HLURB) a Complaint for the annulment of the contract to sell, recovery of all her payments with interests, and damages. Is F entitled to a 50% refund under the Maceda Law? Answer: Under the Maceda Law, the defaulting buyer who has paid at least two years of installments has the right of either to avail of the grace period to pay or, the cash surrender value of the payments made: 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, ifany. (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 percent of the total payments made, and, after five years of installments, an additional five percent every year but not to exceed ninety percent 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. It is on record that F had already paid more than two years of installments (from March 11, 1992 to July 19, 1996) in the aggregate amount of P375,295.49, Her last payment was made on July 19, 1996. It is also shown that F has defaulted in her succeeding payments. Thereafter, X, Inc. sent 239, . 6552 or Mi Realty Installment Buyer Protection Act (R.A. No ced Lay | but to no avail. She could thus no j, notices to F to update her account (2) nthe Maceda Law which, one i i ded in Section 3 avail of the option provided in Se‘ eee : her unpaid installments within the grace perio ready. Fa Notarized Notice of Cancellation of Reserveniot Application andy Contract to Sell. Hence, the only option available is ) whereby seller, in this case, X, Inc. shall refund to the buyer, F, ‘4 e ra Surrender vay of the payments on the property equivalent to 50% of the total paymeny, made, or P187,647.75.2 Problem: | On December 29, 2004, C Corp. and Spouses H and W executed ; contract to sell covering the sale of a house and lot. Under the terms Of the contract, the price of the property was fixed at P915,895.00, with a down payment of P183,179.00, and the remaining balance to be paid in 120 equa, monthly installments with an annual interest rate of 21% commencing February 8, 2005 and every 8th day of the month thereafter. Subsequently, on May 12, 2005, C Corp. executed the Deed of Assignment of Claims and Accounts (Assignment) in favor of P Bank. Under the said agreement, P Bank purchased from C Corp. various accounts, including the account of H and W, for a consideration of P100,000,000.00. In tum, ¢ Corp. assigned its rights, titles, interests, and participation in various contracts to sell with its buyers to P Bank. In February of 2007, H and W allegedly started to default in their payments. Months later, C Corp. decided to declare H and W delinquent and to cancel the contract considering that 9 months of agreed amortization were left unpaid. On December 8, 2007, the notarized Notice of Delinqueny and Cancellation of the Contract to Sell, dated November 21, 2007, was received by H and W. They were given 30 days within which to pay the arrears and failure to do so would authorize C Corp. to consider the contrat as cancelled. On June 15, 2009, C Corp. sent its final demand letter asking Hand | to vacate the premises due to their continued failure to pay the arrears. Hat W did not heed the demand, forcing C Corp. to file the complaint for unla’ detainer before the MTCC on July 29, 2009, Can C Corp. evict H and W? Answer: The intent of C Corp. was more than just an assignment of credit. diene 2 asta all rights under the contract to sell was even fortifie PY ry of documents such as the perti theT Had it been the intent of CCorp. to avon nee eg acts to sel and Oats p. to assign merely its interest in the receiv due from H and W, the tenor of t soso i ven sree tence OF the deed of assignment would have Sos ‘see les ey nr FPA Sateen Wa 76RD ata. 240 /_Realty Installment Buyer Protection Act (R.A. No, 6552 or Maceda Law) In the said provision, C Corp, as the seller has been given the right to cancel the contract to sell in cases of continuing default by H and W. Considering, however, that the right to cancel was aiready assigned prior to the commencement of this controversy with the execution of the Assignment, its legal consequences cannot be avoided, In this case, the execution of the Assignment in favor of P Bank relegated C Corp. to the status of a mere stranger to the jural relations established under the contract to sell. With P Bank as the assignee, it is clear that C Corp. has ceased to have any right to cancel the contract to sell with H and W. Without this right, which has been vested in P Bank, C Corp. undoubtedly had no cause of action against H and W. The Supreme Court still upholds the right of H and W to remain undisturbed in the possession of the subject property, The reason is simple - C Corp. failed to comply with the procedures for the proper cancellation of the contract to sell as prescribed by Maceda Law. In Pagtalunan v. Manzano, the Court stressed the importance of complying with the provisions of the Maceda Law as to the cancellation of contracts to sell involving realty installment schemes. There it was held that the cancellation of the contract by the seller must be in accordance with Section 3 (b) of the Maceda Law, which requires the notarial act of rescission and the refund to the buyer of the full payment of the cash surrender value of the payments made on the property. The actual cancellation of the contract takes 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, to wit: XXX (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 percent of the total payments made and, after five years of installments, an additional five percent every year but not to exceed ninety percent 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. 2x Based on the Statement of Account, dated March 18, 2009, H and W started defaulting from January 8, 2008. This shows that prior to that date, amortizations covering the 3-year period, which started with the down payment, had been paid. This is consistent with the admission of C Corp. during the preliminary conference. By its admission that H and W had been 2416552 or Maceda Realty Installment Buyer" protection Act (R.A. No. Law) i to doubt H — rs, there is no reason and wy ing the amortizations for 3 years, Se . compliance with the minimum a eet ap, surrender ath ci a : amortization, entitling them to the p: ee : : ontract t provided for by law and by the ct ‘actual cancellation to take place, the the Maceda Law requires that for an ation fo al notice of cancellation by notarial act and the full payment of the cash surrender value must be first received by the buyer. Clearly no payment o Without the valid cancellation of the contract, there is no basis t treat the possession ofthe property by Hand Wasillegal. In AMOSUP-PrGy, ITF v. Decena, the Court essentially held that such similar failure to vali cancel the contract, meant that the possessor therein, similar to H and W in this case, remained entitled to the possession of the property. In the said case, the Court stated: In the parallel case of Pagtalunan v. Dela Cruz Vda. De Manzano, which likewise originated as an action for unlawful detainer, we affirmed the finding of the appellate court that, since the contract to sell was not validly cancelled or rescinded under Section 3(b) of RA. No. 6552, the respondent therein had the right to continue occupying unmolested the property subject thereof? Problem: On December 28, 1994, X purchased a house (under Contract to Sell No. 002) and lot (under Contract to Sell No. 001) from G Corp. valued at P750,000 and P450,000, respectively, with 24% interest per annum to be paid by installment within a period of 10 years. The house and lot were delivered to Xin 1995. After sometime, X failed to satisfy her monthly installments with Corp. X was only able to pay 35 installments for Contract to Sell No. 001 and 48 installments for Contract to Sell No. 002. After giving a total of 51 months grace period for both contracts and in consideration of the continued disregard of the demands of G Corp., X was served with a notice of notarial rescission dated September 11, 2003 by registered mail which she allegedly received on September 19, 2003 as evidenced by a registry return receipt. Consequently, X was furnished by G Corp. with a demand letter dat September 26, 2003 demandin, hy outstanding reasonable rentals for her Sen rl lot as of August 2003 and to vaci at that the 50% refundable anoles deducted with the reasonable valu reasonable rentals she incurred du same. She was informed in said lette™ at she is entitled to has already bee? le for the use of the properties oF ! ring such period that she was not able? Spe Mihee Ney yy te eS oyna Ce ene Peer Dentro a. 28448, ptt 22,2818Realty Installment Buyer Protection Act (R.A. No, 2. or Maceda Law) pay the installments due her, After deducting the rentals from the refundable amount, she still had a balance of P112,304.42 which she was required to settle within 15 days from receipt of the letter, ; Allegedly, X subsequently sent postal money orders through registered mail to G Corp. In a letter dated January 27, 2004, X was notified by G Corp. of its receipt of a postal money order sent by X. More so, she was requested to notify G Corp. of the purpose of the payment. X was informed that if the postal money order was for her monthly amortization, the same will not be accepted and she was likewise requested to pick it up from G Corp’s office. On January 29, 2004, another mail with a postal money order was sent by X to G Corp. In her February 6, 2004 letter, G Corp. was informed that the postal money orders were supposed to be payments for her monthly amortization. Again, in its February 8, 2004 letter, itwas reiterated by G Corp. that the postal money orders will only be accepted if the same will serve as payment of her outstanding rentals and not as monthly amortization. Four more postal money orders were sent by X by registered mail to G Corp. For her continued failure to satisfy her obligations with G Corp. and her refusal to vacate the house and lot, G Corp. filed a complaint against X on November 11, 2003. Did the actual cancellation of the contract between the parties take place? Answer: Republic Act No. 6552, also known as the Maceda Law, or the Realty Installment Buyer Protection Act, has the declared public policy of "protecting buyers of real estate on installment payments against onerous and oppressive conditions.” Section 3 of R.A. 6552 provides for the rights of a buyer who has paid at least two years of installments but defaults in the payment of succeeding installments. It should be noted that Section 3 of R.A. 6552 and paragraph 6 of Contract Nos. 001 and 002, speak of “two years of installments." The basis for computation of the term refers to the installments that correspond to the number of months of payments, and not to the number of months that the contract is in effect as well as any grace period that has been’given. Both the law and the contracts thus prevent any buyer who has not been diligent in paying his monthly installments from unduly claiming the rights provided in Section 3 of R.A. 6552. The MeTC, the RTC, and the CA all found that X was able to pay 35 installments for the lot (Contract No. 001) and 48 installments for the house (Contract No. 002). X thus made installment payments for less than 3 years on the lot, and exactly 4 years on the house. Section 3(a) of R.A. 6552 provides that the total grace period Corresponds to one month for every one year of installment payments made, Provided that the buyer may exercise this right only once in every five years of the life of the contract and its extensions. The buyer's failure to pay the 2437 . 6552 or Ma Realty Installment Buyer protection Act (R.A. No. Ceda Lay) | i ce period allows the sey expiration of the grace Pr elle | the contract after 30 days from the buyer's et of the no cancellation a demand for rescission of the a YY a notar tract gave X the same TiBN™S: aA ATC ind the CA found that G Corp. gave X an accumula grace period of 51 months. This extension went beyon what was proyj ded i d in their contracts. oo a ome eae return of the registered mail is prima facie proof, of te facts indicated therein. X failed to present contrary evidence to rebut th, presumption with competentand proper evidence. The eee theca, ruling that G Corp. was able to substantiate its claim that it served X tj, notarial rescission sent through registered mail in accordance with the requirements of R.A. 6552. : However, there was no actual cancellation of the contracts hecays: re tice y al ag installments due at the toX. ‘This Court has been consistent in ruling that a valid and effectiye cancellation under R.A. 6552 must comply with the mandatory twin requirements of a notarized notice of cancellation and a refund of the cash surrender value. In Olympia Housing, Inc. v, Panasiatic Travel Corp., the Court ruled that | the notarial act of rescission must be accompanied by the refund of the cash surrender value. The actual cancellation of the contract can only be deemed to take place upon the expiry of a 30-day period following the receipt by the buyer of the notice of cancellation or demand for rescission by a notarial act and the full payment of the cash surrender value. In Pagtalunan v. Dela Cruz Vda. De Manzano, the Court ruled that there | is no valid cancellation of the Contract to Sell in the absence of a refund of the cash surrender value. The Supreme Court stated that: xxx Sec. 3 (b) of RA. No, 6552 requires refund of the cash surrender value of the payments on the property to the buyer before cancellation of the contract. The provision does not provide a different requirement for contracts to sell which allow possession of the property by the buyer upon execution of the contract like the instant case. Hence, petitioner cannot insist on compliance with the requirement by assuming that the cash surrender value payable to the buyer had been applied to rentals of the property after respondent failed to pay the installments due. In view of the absence of a valid cancellation, the Contract 0 5" between G Corp. and X remains valid and subsisting. is - endit This case has, from the instituti i with the courts for 10 years. As both ee of the complaint, bee? tet ji 5 F ies prayed for the issuance of" that are just and equitable under the premises, and in the exercise e 244 jsRealty Installment Buyer Protection Act (R.A. No, 6552 or Maceda Law) Supreme Court’s discretion, the Court resolve to dispose of this case in an equitable manner, Considering that G Corp. did not validly rescind Contracts to Sell Nos. 001 and 002, X has two options: 1. The option to pay, within 60 days from the MeTC’s determination of the Proper amounts, the unpaid balance of the full value of the purchase price of the subject properties plus interest at 6% per annum from November 11, 2003, the date of filing of the complaint, up to the finality of this Decision, and thereafter, at the rate of 6% per annum, Upon payment of the full amount, G Corp. shall immediately execute Deeds of Absolute Sale over the subject properties and deliver the corresponding transfer certificate of title to X. In the event that the subject properties are no longer available, G Corp. should offer substitute properties of equal value. Acceptance of the suitability of the substitute properties is X's sole prerogative. Should X refuse the substitute properties, G Corp. shall refund to X the actual value of the subject properties with 6% interest per annum computed from November 11, 2003, the date of the filing of the complaint, until fully paid; and 2. The option to accept from G Corp. P574,148.40, the cash surrender value of the subject properties, with interest at 6% per annum, computed from November 11, 2003, the date of the filing of the complaint, until fully paid. Contracts to Sell Nos. 001 and 002 shall be deemed cancelled 30 days after X's receipt of G Corp.'s full payment of the cash surrender value, No rent is further charged upon X as G Corp. already had possession of the subject properties on October 10, 2006.4 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. One of the legal features of RA 6552 is Section 4 thereof, which provides for the remedies of a defaulting buyer that has paid less than two years of installment amortizations for a purchase of real property: ner 27,2013 245 ‘te ache Rey. nc vs vy Ages CRNction Act (R.A. No. 6552 or Maceda law) Realty Installment Buyer Prote installments wer, 7 less than ewo years of ere aig Se 4 nt ebayer agrace peri of not less than sixty days eller fom the date the installment became jue. i ts due at the expirgg;. | ils to pay the installmen' ration eed Pay cancel the contract after thirty days iod, the seller’ M c Pan cin bythe buyer of the notice of ‘cancellation or the demang ‘for rescission of the contract by a notarial act. a defaulting buyer that has paiq les titled to the following: yer a grace period of not less than a stallment became due; Under Section 4 of RA 6552, than two years of installments is en! 1. The seller shall give the bu days to be reckoned from the date the in: 2. The seller must give the buyer a notice of cancellation/demang for rescission by notarial act if the buyer fails to pay the installments due at the expiration of the said grace period; and 3. The seller may actually cancel the contract only after 30 days from the buyer's receipt of the said notice of cancellation/demand for rescission by notarial act. Four conditions before seller may actually cancel the contract Section 4 of RA 6552 requires 4 conditions before the seller may actually cancel the contract thereunder: 1, The defaulting buyer has paid less than 2 years of installments; 2. The seller must give such defaulting buyer a 60-day grace period, reckone! from the date the installment became due; | 3. If the buyer fails to pay the installments due at the expiration of the sal grace period, the seller must give the buyer a notice of cancellation and/ a demand for rescission by notarial act; and 4. The seller may actually cancel the contract only after the lapse of 30 44 from the buyer's receipt of the sai on and/or de the said noti i a ' na at notice of cancellati / Problem: On April 26, 2005, Sell with P Homes, Inc. for i : 900.00. Pursuant t ni underatg io Subject property upon a Gawain Hg 5000 Pay the remaining balance of the contract price in ¢ " 246Realty Installment Buyer Protection Act (R.A. No, 6552 or Maceda Law) ee, installments of P13,107.00 fora period of 10 years starting June 12, 20 P Homes, Inc. assigned all its rights, title, and interest in the Contract to Sell in favor of O Bank through a Deed of Assignment of even date. On April 10, 2006, O Bank issued a Notice of Delinquency and Cancellation of Contract to Sell for H and W’s failure to pay their monthly installments despite several written and verbal notices. Ina final Demand Letter dated May 25, 2006, O Bank required H and W to vacate and deliver possession of the subject property within 7 days which, however, remained unheeded. Hence, 0 Bank filed, on November 3, 2006, a complaint for unlawful detainer before the MeTC. Was there a valid cancellation of the contract to sell in accordance with section 4 of RA 6552? Answer: As the Court similarly held in one case, the seller's cancellation of the contract to sell necessarily extinguished the buyer's right of possession over the property that was the subject of the terminated agreement. It is significant to note that given that the Contract to Sell in this case is one which has for its object real property to be sold on an installment basis, the said contract is especially governed by - and thus, must be examined under the provisions of RA 6552, or the "Realty Installment Buyer Protection Act", which provides for the rights of the buyer in case of his default in the payment of succeeding installments. Breaking down the provisions of the law, the Court, in the case of Rilo v. CA, explained the mechanics of cancellation under RA 6552 which are based mainly on the amount of installments already paid by the buyer under the subject contract, to wit: Given the nature of the contract of the parties, the respondent court correctly applied Republic Act No. 6552. Known as the 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 ofan 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, viz: (1) Where he has paid at least two years of installments, (@ 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. 2471. 6552 01 Realty Installment Buyer protection Act ( R.A. No, r Maceda aw) tis slled, the seller shall refund to the buyer y CD acai eS on the property equivalent to fifty ‘a cay surrender value of the pay™ : ran sine total pagrnents made and, after five Years of Unstallmeny, additional five percent evely. year but no! Percent Sf th : That the actual cancellation ments made; Provided, ! eureka take place after cancellation or the demand for resciss ion 7 the contract by a notarial act and upon full payment of the cash Surrende, value to the buyer. its or options on the contract shall be includeg in Down payments, deposi the computation of the total number of installments made. (2) Where he has paid less than two years in installments, Sec. 4, xxx 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. Pertinently, since H and W failed to pay their stipulated monthly installments as found by the MeTC, the Court examines O Bank’s compliance with Section 4 of RA 6552, as above-quoted and highlighted, which is the provision applicable to buyers who have paid less than 2 years-worth of installments. Essentially, the said provision provides for 3 requisites before the seller may actually cancel the subject contract: first, the seller shall give the buyera 60-day grace period to be reckoned from the date the installment became due; second, the seller must give the buyer a notice of cancellation/demand for rescission by notarial act if the buyer fails t° pay the installments due at the expiration of the said grace period; and gi the seller may actually cancel the contract only after thirty (30) days from the buyer's receipt of the said notice of cancellation/demand for rescission by notarial act. In the present case, the 60-day grace period automatical’Y operated in favor of the buyers, H and W, and took effect from the time the" the maturity dates of the installment payments lapsed. With the said g'= period having expired bereft of any installment payment on the part of Ha" W, 0 Bank then issued a notarized Notice of Delinquency and Cancellation Contract on April 10, 2006. Finally, in proceeding with the actual cancellation of the contract to sell, 0 Bank gave sof wit! which to settle their arrears andemy ong, a8 additional 30 days Mir rights to another, It was only after the ex the contract to sell as effectivel upon H and W to vacate the instate the contract, or sell or assis" : it piration of the 30-day period did 0 Bank ly cancelled ~ making as it did a final de", Subject property only on May 25, 2006 248Realty Installment Buyer Protection Act (R.A. No. 6552 or Maceda Law) based on the foregoing, the Court finds that ‘ ff and since H and W 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 O Bank makes out a valid case for unlawful detainer as properly adjudged by the MeTC.S Problem: N alleged the following in his Complaint for recovery of a sum of money: in 1995, he purchased 3 lots from P Corp.; also in 1995, he deposited a total amount of P393,435.00 through check payments in favor of P Corp.; the latter did not deliver to N the copies of the lots’ certificates of title and their sales agreement; he was dismayed when he finally received the sales agreement, as it contained unacceptable conditions to which he conveyed his objections to P Corp.; since he had not yet signed the sales agreement, there was still no meeting of the minds between him and P Corp,; and that despite demands for refund of his deposit payments, P Corp. failed to comply. P Corp. filed an Answer with Counterclaims. It countered that N could not yet be issued certificates of title since their transaction was not a contract of sale but a contract to sell. N was allegedly furnished a copy of the Contract to Sell as early as November 8, 1995, which he signed and even requested for an amended Contract to Sell to reflect a new amortization schedule. N, under Republic Act No. 6552 (RA 6552) or the Maceda Law, was not entitled to a refund of his deposits since he failed to complete the payments within the grace period provided by P Corp, resulting in their forfeiture and the rescission of the contract to sell. P Corp. maintains that N impliedly agreed to the unsigned Contract to Sell and harks on the applicability of RA 6552 or the Maceda Law. It posits that N is not entitled to a refund of his installment payments because there was. valid rescission of the Contract to Sell when P Corp. sent Nits December 5, 1998 letter, P Corp. thus maintains that N has forfeited his deposit payments in favor of P Corp. While admitting that he entered into a contract to sell with P Corp., N asserts that he did not sign a written Contract to Sell and that he is entitled to arefund of the down payments he made to P Corp. Was the contract between P Corp. and N rescinded in accordance with RA 6552 and should P Corp. refund N? Answer: The contract to sell between P Corp, and N was not validly cancelled. The Realty Installment Buyer Protection Act, otherwise known as RA. 6552 or the Maceda Law, protects “buyers ofreal estate on installment payments against onerous and oppressive conditions." PNA fia wipe, at ‘Optima Dery Bus sous Benign V.jovtine and Lauren ata Ae 8914, December 62013 249a | No. 6552 or Mag, ea Ly ™) Realty Installment Buyer Protection Act (R.A. ction 4 of RA 6552 requires 4 conditions before the i % ~ Seller actually cancel the contract thereunder: 1. first, the defaulting buyer has paid less than two (2) Yearg installments; of second, the seller must give such defaulting buyer a si day grace period, reckoned from the date the installme., became due; nt third, if the buyer fails to pay the installments due at 4, expiration of the said grace period, the seller must give. buyer a notice of cancellation and/or a demand j rescission by notarial act; and fourth, the seller may actually cancel the contract only after the lapse of thirty (30) days from the buyer's receipt of the sag notice of cancellation and/or demand for rescission by notarial act. In claiming that it had validly rescinded its contract to sell withy,p Corp. relies on two documents: a written Contract to Sell, which sets out automatic cancellation provision in case of default and which P Corp. alley: that N impliedly agreed to, and its denial of the refund as asserted init Answer with Counterclaims against N's Complaint before the RTC. Both documents, however, fail P Corp. The written Contract to Sell ineffectual. P Corp. insists on the application of the written Contract to Sell. Te Court quotes the pertinent stipulation thereunder, vi: 2x 14, AUTOMATIC CANCELLATION FOR FAILURE TO PAY ANY MONTHLY INSTALLMENT TOGETHER WITH INTEREST, TAKES OR ASSESSMENT. Without prejudice to the rights of the SELLER to consider this contract as automatically cancelled unde" Paragraph 16 hereof, it is herein stipulated that should the BUY®® fail for any reason to make payment of any of the monthly installments together with the interest, taxes and assessiet® thereon as provided in this contract, the rights and obligations the parties hereto shall be as follows: (A) Where the BUYER shall have paid less than two Je, installments prior to his default, he shail have a grace peti sixty (60) days from the date the monthly installment becom’, Should the SELLER not actually receive payment within he (60) day grace period, this contract shall be COM sp automatically cancelled thirty (30) days after sexvice by 250Realty Installment Buyer Protection Act (R.A. No, 6552 or Maceda Law) to the BUYER of a notarized notice of cancellation or rescission, in which event any and all sums of money paid under this contract together with all the improvements made on the premises shall become rentals of the property. The sending of such notice by registered mail to the BUYER's above address shall be deemed sufficient service thereof for the purpose, irrespective of whether or not it was personally or actually received by the BUYER. 2X Contracts are created upon agreement between consenting parties and generally do not require it to be reduced into writing to validate its existence. P Corp. must be enlightened that the written Contract to Sell did not and does not bind N for the following reasons. First, the highlighted conditions in the Contract to Sell conflict with RA 6552, which dictates “receipt” and not "service" of the notice of rescission to the buyer as the reckoning point of the 30-day period before actual cancellation. P Corp.'s Contract to Sell even dispensed with this legal requirement of receipt by deeming mere service by registered mail as sufficient proof of service and constructive receipt. For being contrary to Section 4 of RA 6552, these stipulations are rendered null and void, and the general provisions governing a contract to sell under RA 6552 shall govern. Moreover, it was not signed by N. Even if so signed, the Contract to Sell was not worded to effect its automatic cancellation upon N's default. While the word automatic cancellation implies unconditionality, the body of the above contractual stipulation betrays its title. The entire provision practically mirrored the demands of Section 4 of RA 6552: defaulting buyer paid less than two (2) years of installments, a grace period of sixty (60) days, aservice of a notarial notice of cancellation or rescission, and a lapse of thirty (30) days from the said service of notice of cancellation or rescission. There was compliance with the first and second requisites when P Corp. sent N, a defaulting buyer whose payments did not amount to two years' worth of installments, its December S, 1998 letter giving him sixty (60) days to make good on his obligation. P Corp., however, did not meet the last two conditions, As properly determined by the CA, there was no notice of i issi . Necessarily, thirty (30) days could not have lapsed from a non-existent service of such notice. P Corp.'s Answer with Counterclaims cannot be deemed as a notarial rescission under RA 6552. ‘A notarial rescission contemplated under RA 6582 is a unilateral cancellation by a seller of a perfected contract thereunder acknowledged by a notary public and accompanied by competent evidence of identity. This notarial notice of rescission has peculiar technical requirements. The Court finds that P Corp. violated all of them. 251allment Buyer Protection Act (R.A. No. 6552 or Macega lay Realty Inst: Orbe v. Filinyest Land, Inc (Orbe), an analogous case hereto, 4. ty Hi i ivate notice of cancellation j that the notarial act converting the private no tog one must be an . P Corp.'s Answer with Count, Md al, i Clans as notarized through a jural- oo hy powers, ‘tor. only alleged the fact of rescission in its Anse, ; Counterclaims without further evidence that would adequately determin, hy truth, Itis not the independent notarial rescission contemplated by ose The allegations contained in P Corp.'s Answer with Countere. : Se et ca cannot constitute as substantial notice of rescission of its contract to Selly N. Suffice it to state that nothing in the said pleading elicited a clear. positive notification to N that P Corp. was rescinding the contract to sell, Ithas been held that j The Supreme Court affirms the courts below in directing the Tefing of the deposit payments made by N to P Corp. While this buyer's optin claim refund is not explicitly mentioned in RA 6552, equity consideratioy, have already filled up this legal vacuum as declared in Orbe. In the said cay the buyer therein failed to make at least two years of installment paymens in consideration of a purchase of a lot. The seller, however, failed to can) their contract through a valid notarial act and sold the lot in issue to thin person. The Court, finding the provisions of RA 6552 applicable to th transaction, ordered the refund of the amounts actually paid by the buye, justifying the same with equitable reasons as laid out by relevat jurisprudence. It bears mentioning, however, that RA 6552 grants the following rights to real property buyers on installment upon default, whether or no he/she has paid two (2) years' worth of installment payments, as contain in Section 6: Section 6. The buyer shall have the right to pay in advance ary installment or the full unpaid balance of the purchase price any time without interest and to have such full payment of the purchase price annotated in the certificate of title covering the property. jefaultiné ‘The courts a quo left out the discussion of this option of the d re buyer to pay advance installments or the full unpaid balance of the pure’ price. Rightly so, since N was firm in his choice to claim a refund by fli? the outset a case for recovery of sum of money against P Corp. “ect In summary and only for purposes of brevity, the Court poi that a defaulting buyer of real property on installments, whether 0°", or he has paid two (2) year of installments, has three (3) common ss remedies j i 5 “on 60 ited by Section and jurisprudence: Branted by t 252Realty Installment Buyer Protection Act (R.A. No. 6552 or Maceda Law) (a) Pay in advance any installment at any time, necessarily without interest; (b) Pay the full unpaid balance of the purchase price at any time without interest, and to have such full payment of the purchase price; annotated in the certificate of title covering the real property subject of the transaction under RA 6552; or (c) Claim an equitable refund of prior payments and /or deposits made by the defaulting buyer to the seller pertinent to their transaction under RA 6552, if any. Finally, a modification of the interest imposed on the amount of refund is proper. Pursuant to Nacar v, Gallery Frames, the amount of P393,435.00 shall be subject to legal interest at the rate of 12% per annum reckoned from the date of judicial demand on January 22, 1999 until June 30, 2013; and 6% per annum from July 1, 2013 until fully paid. Sec, 5. Under Section 3 and 4, the buyer shall have the right to sell his rights or assign the same to another person or to reinstate the contract by updating the account during the grace period and before actual cancellation of the contract. The deed of sale or assignment shall be done by notarial act. Sec, 6, The buyer shall have the right to pay in advance any installment or the full unpaid balance of the purchase price any time without interest and to have such full payment of the purchase price annotated in the certificate of title covering the property. RA 6552 grants the following rights to real property buyers on installment upon default, whether or not he/she has paid two (2) years’ worth of installment payments, as contained in Section 6: Section 6. The buyer shall have the right to pay in advance any installment or the full unpaid balance of the purchase price any time without interest and to have such full payment of the purchase price annotated in the certificate of title covering the property. A defaulting buyer of real property on installments, whether or not she or he has paid two (2) year of installments, has three (3) common legal remedies in the absence ofa valid rescission, granted by Section 6 of RA 6552 and jurisprudence: 1. Pay in advance any installment at any time, necessarily without interest; ‘se Pye Proper orp. (now Pryce Corp) Maro Maan, GR Na, 203990 Aus 24,2020oN Realty Installment Buyer Protection Act (R.A. No. 6552 or Maceda Lay) 2. Pay the full unpaid balance of the purchase price at ,, without interest, and to have such full payment of the ra ting price; annotated in the certificate of title covering he property subject of the transaction under RA 6552; or Tey 3. Claim an equitable refund of prior payments and /or q, made by the defaulting buyer to the seller pertinent transaction under RA 6552, if any. CP asity to the, Sec. 7. Any stipulation in any contract hereafter entered into Contrary the provisions of Sections 3, 4, 5 and 6, shall be null and void, » Sec. 8. If any provision of this Act is held invalid or unconstitutional, no other provision shall be affected thereby. Sec. 9. This Act shall take effect upon its approval. Approved: August 26, 1972. 254Realty Installment Buyer Protection Act (R.A. No, 6552 or Maceda Law) True or False di Realy Installment Buyer Protection Act is also known as the Maceda 2. techn aeecee esos Law is to protect buyers of real estate on silt Maes ae igainst onerous and oppressive conditions. . be included ie the Payments, deposits or options on the contract shall computation of the total number of installment payments made, 4, In Maceda Law, the notarial act converting the private notice of cancellation into a public one must be a jurat. 5. Under the Maceda Law, the defaulting buyer who has paid at least three years of installments has the right of either to avail of the grace period to pay or, the cash surrender value of the payments made. 6. Avalid and effective cancellation under R.A. 6552 must comply with the mandatory twin requirements of a notarized notice of cancellation and a refund of the cash surrender value where the buyer has paid at least two years of installments, 7. In case where less than two years of installments were paid, the seller shall give the buyer a grace period of not less than ninety days from the date the installment became due. 8. In the absence of a lawful rescission of a contract governed by the Maceda Law, the same remains valid and subsisting. 9. In Maceda Law, the buyer shall have the right to sell his rights or assign the same to another person or to reinstate the contract by updating the account during the grace period and before actual cancellation of the contract. The deed of sale or assignment may be done through a private document. 10. A defaulting buyer of real property on installments, whether or not she or he has paid 2 year of installments has the right to pay in advance any e necessarily with interest. installment at any tim Multiple Choice 1. The following are not covered by Maceda Law, except: A. Industrial lots B. Commercial buildings C. Sales to tenants under R.A. 3844 0) D. Residential condominium apartments . 2. Inall transactions or contracts involving the sale or financing of real estate i has paid at least two years of on installment payments where the buyer has pai I installments, ee bier is entitled to the following rights in case he defaults in the payment of succeeding installments: ; To ry, tion additional interest, the unpaid installments due within the Cote period earned by him which is hereby fixed atthe rate of one month grace period for every two years of installment payments made r Agricultural Land Reform Code 255Realty Installment 3. 4, S. 6. puyer Protection Act (RA: No. 6552 or Maceda Law) the seller shall refund to the buyer the ¢, ents on the property equivalent to seven nd after ten years of installments, ut not to exceed ninety per cent ofthe II. If the contract is canceled, surrender value of the Pay! cent of the total payments ate saditional five per cent every Yea total payments made Only Lis true Only I is true Both are true false vaunlter a seller of a perfected contract thereunder It is a unilateral cancellation by f acknowledged by a notary public and accompanied by competent evidence of identity. A. Notarial Rescission B. Judicial Rescission C. Extrajudicial Rescission D. Cancellation 1 The cancellation of the contract by the seller must be in accordance with Section 3 (b) of the Maceda Law, which requires the notarial act of rescission and the refund to the buyer of the full payment of the cash surrender value of the payments made on the property. I The actual cancellation of the contract takes place after 60 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. A. Only Lis true B. Only Ilis true C. Both are true D. Bothare false Per pomp 1, Section 3(b) of the Maceda Law requires that for an actual cancellation to take place, the notice of cancellation by notarial act and the full paymento! the cash surrender value must be first received by the buyer. Il. Republic Act No. 6552, also known as the Maceda Law, or the Realty Installment Buyer nn Act, has the declared public policy ° cting bu i i ” 7 teeing buyer i i realestate on installment payments against onero"s A. Onlylistrue B. Only Ilis true C. Bothare true D. Bothare false 1. Section 3(a) of RA. 6552 life of the contract and its a extensii IL. The buyer's failure to pay ies grace period allows the seller to can . tallments due at the expiration ae cel the contract after 30 days fro 256Realty Installment Buyer Protection Act (R.A. No, 6552 or Maceda Law) ission of the buyer's receipt of the notice of cancellation or demand for res contract by a notarial act. Only lis true Only Iis true Both are true . Both are false 7. 1. The notarial act of rescission must be accompanied by the refund of the cash surrender value in case the buyer has paid at least two years of installments. IL. There is no valid cancellation of the Contract to Sell in the absence of a refund of the cash surrender value where the buyer has paid at least two years of installments. A. Only Tis true B. Only Ilis true C. Both are true D. Both are false 8.A defaulting buyer that has paid less than two years of installments is entitled to the following: A. The seller shall give the buyer a 60-day grace period of not less than 60 days to be reckoned from the date the installment became due. B. The seller must give the buyer a notice of cancellation/demand for rescission by notarial act if the buyer fails to pay the installments due at the expiration of the said grace period. The seller may actually cancel the contract only after 30 days from the buyer's receipt of the said notice of cancellation/demand for rescission by notarial act. D. Allofthe above. 9. Section 4 of RA 6552 requires four conditions before the seller may actually cancel the contract thereunder. Which of the following is not included in the four conditions? ‘A. The defaulting buyer has paid less than 2 years of installments. B. The seller must give such defaulting buyer a 60-day grace period, reckoned from the date the installment became due. C.. Ifthe buyer fails to pay the installments due at the expiration of the said grace period, the seller must give the buyer a notice of cancellation and/or a demand for rescission by notarial act. D. The seller may actually cancel the contract only after the lapse of 45 days from the buyer's receipt ofthe said notice of cancellation andor demand for rescission by notarial act. 10. A defaulting buyer of real property on installments, whether or not she or he has paid 2 year of installments, has common legal remedies in the absence of a valid rescission. Which is not one of the common legal remedies? , A. Pay in advance any installment at any time, necessarily without interest. B. Pay the full unpaid balance of the purchase price at any time without interest and to have such full payment of the purchase price annotated sosP 257Realty Installment Buyer protection Act (R.A. No. 6552 or Maceda Law) in the certificate of title covering the real property subject of transaction. the C. Claim an equitable refund of prior payments and /or deposits made the defaulting buyer to the seller pertinent to their transaction, D. Pay the full unpaid balance of the purchase price at any time wi ayment of the purchase price annotate interest and to have such full p in the certificate of title covering the real property subject of th transaction. 258 4PRESIDE! TIAL DECREE No. 957 July 12,1976 Subdivision and Condominium Buyer's Protective Decree {as amended by P.D. 1216) REGULATING THE SALE OF SUBDIVISION LOTS AND CONDOMINIUMS, PROVIDING PENALTIES FOR VIOLATIONS THEREOF | WHEREAS, it is the policy of the State to afford its inhabitants the requirements of decent human settlement and to provide them with ample opportunities for improving their quality of life; WHEREAS, numerous reports reveal that many real estate subdivision owners, developers, operators, and/or sellers have reneged on their representations and obligations to provide and maintain properly subdivision roads, drainage, sewerage, water systems, lighting systems, and other similar basic requirements, thus endangering the health and safety of home and lot buyers; WHEREAS, reports of alarming magnitude also show cases of swindling and fraudulent manipulations perpetrated by unscrupulous subdivision and condominium sellers and operators, such as failure to deliver titles to the buyers or titles free from liens and encumbrances, and to pay real estate taxes, and fraudulent sales of the same subdivision lots to different innocent purchasers for value; WHEREAS, these acts not only undermine the land and housing program of the government but also defeat the objectives of the New Society, particularly the promotion of peace and order and the enhancement of the economic, social, and moral condition of the Filipino people; WHEREAS, this state of affairs has rendered it imperative that the real estate subdivision and condominium businesses be closely supervised and regulated, and that penalties be imposed on fraudulent practices and manipulations committed in connection therewith. NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested in me by the Constitution, do hereby decree and order: 259| rotective Decree (Pp, 9s er's P: The Subdivision and Condominium Buys Title I TITLE AND DEFINITIONS cree shall be known as THE SUBDIVIsIon Al PROTECTIVE DECREE. ND Section 1. Title. This Dec CONDOMINIUM BUYERS ‘ regulate for the public good the sale of subdivision lots and condominiums. Its Section 5 propibits such sale Withoy the prior issuance of an HLURB license and punishes those who engag, iy such selling, The crime is regarded as malum prohibitum since P.D. 957 ig, special law designed to protect the welfare ofsociety and ensure the cai ‘in on of the purposes of civil life. It is the commission of that act as defined ty law, not its character or effect that determines whether or not its provision has been violated. Malice or criminal intent is immaterial in such crime, In crimes that are mala prohibita, the forbidden acts might not be inherent] immoral. Still they are punished because the law says they are forbidden. P.D. 987 has been enacted t Presidential Decree No. 957 is a law that ini in view of the increasing number of incidents wherein "real estate subdivision owners, developers, operators, and/or sellers have reneged on their representations and obligations to provide and maintain properly" the basic requirements and amenities, as well as of reports of alarming magnitude of swindling and fraudulent manipulations perpetrated by unscrupulous subdivision and condominium sellers and operators, such as failure to deliver titles to the buyers or titles free from liens and encumbrances. Presidential Decree No. 957 authorizes the suspension and revocation of the registration and license of the real estate subdivision owners, developers, operators, and/or sellers in certain instances, as well as provides the procedure to be observed in such instances; it prescribes administrative fines and other penalties in case of violation of, or 10 compliance with its provisions? | Note: The Department of Human Settlements and Urban Development (DHSUD) was created by Republic Act (R.A.) No. 11201 (Approved February 14, 2019) through the consolidation of *® Housing and Urban Development Coordinating Council (HUDCC) and the Housing and Land Use Regulatory Board (HLURB). Note: HLURB ‘Authority (NHA) the successor agency of the National Housing ST, 1 San Miguel Properties ine. vs See. Her reams ea ne a 0The Subdivision and Condominium Buyer's Protective Decree (P.D. 957) Note: Section 12 and 15 of R.A. No. 11201, provides, thus: Section 12. Reconstitution of the HLURB as the Human Settlements Adjudication Commission (HSAC).- The HLURB is hereby reconstituted and shall henceforth be known as the Human Settlements Adjudication Commission, hereinafter referred to as the "Commission". The adjudicatory function of the HLURB is hereby transferred to the Commission and shall be attached to the DHSUD for policy, planning and program coordination only. XXX Section 15. Jurisdiction of the Commission. - The Commission shalll have the exclusive appellate jurisdiction over: (a) All cases decided by the Regional Adjudicators; and (b) Appeals from decisions of local and regional planning and zoning bodies. The decision of the Commission shall be final and executory after fifteen (15) calendar days from receipt thereof by the parties. Section 1 of PD No. 957 limits the HLURB's jurisdiction to three kinds of cases: (a) Unsound real estate business practices; (b) Claims involving refund and any other claims filed by subdivision lot or condominium unit buyers against the project owner, developer, dealer, broker, or salesman; and (c) Cases involving specific performance of contractual and statutory obligations filed by buyers of subdivision lots or condominium units against the owner, developer, dealer, broker, or salesman. While paragraphs (b) and (c) limit the HLURB cases to those between the buyer and the subdivision or condominium owner, developer, dealer, broker or salesman, paragraph (a) is broad enough to include third parties to the sales contract. 261puyer’s Protective Decree (P,), 95 ‘The Subdivision and Condominium ¢p.D. No. 957 to! Rationale behind the enactmen| es the rationale behing . a Jurisprudence consistently recogniz tof PD No. 957 - enactment “ror this reason, the Supreme Court has broadly construed ie jurisdiction of the HLURB to include eS Toma ¢ = Doe units. Indeed bia of condominium or subdivision units. Ince! ip/liquidati sme Court declared that the Hr under receivership/liquidation, the Supre! Ue retains jurisdiction over an action for the annulment of the mortgage: The jurisdiction of the HLURB to regulate the real estate trade is broad enough to include jurisdiction over complaints for annulment of mortgage. TO disassociate the issue of nullity of mortgage and lodge it separately with the liquidation court would only cause inconvenience to the parties and would not serve the ends of speedy and inexpensive administration of justice as vesting quasi-judicial powers in the agency mandated by the laws It must be stressed that No. 957 was enacted with no other end in view than who may fall prey to the manipulations and machinations of unscrupulous subdivision and condominium sellers. It was issued in the wake of numerous reports that many real estate subdivision owners, developers, operators, and/or sellers have reneged on their representations and obligations to provide and maintain properly subdivision roads, drainage, sewerage, water systems, lighting systems, and other basic requirements for the health and safety of home and lot buyers. Such intent of the law is nowhere expressed more clearly than in its preamble, the pertinent portion of which reads: WHEREAS, it is the policy of the State to afford its inhabitants the requirements of decent human settlement and to provide them with ample opportunities for improving their quality of life; WHEREAS, numerous reports reveal that many real estate subdivision owners, developers, operators, and/or sellers have reneged on their representations and obligations to provide and maintain proper subdivision roads, drainage, sewerage, water systems, lightind systems, and other similar basic requirements, thus endangering *® health and safety ofhome and lot buyers; feolltg arc of alarming magnitude also show cases of subdivision and condogn amibulations perpetrated by: unscrupulous subdivision and condominium sellers and operators, such as failure r titles to the buyers or titles free from liens and encumbranees a ‘rnnppine Bue of Comment Pras aa Cop al. GM. 3S5113, amir 9,2013.The Subdivision and Condominium Buyer's Protective Decree (P.D. 957) ed pay real estate taxes, and fraudulent sales of the same subdivision lots to different innocent purchasers for value; xxx* Problem: M, Inc, is the owner and developer of $ Subdivision. In March 1988, M, Inc. mortgaged Block 10 of the said subdivision to B Bank to secure a loan of P1,700,000. M, Inc. failed to pay its loan and B Bank foreclosed on the mortgage. After title was consolidated in B Bank, the Registry of Deeds of Quezon City issued Transfer Certificate of Title (TCT) No. 86389 to the said bank on May 17,1993. Sometime in mid-1994, B Bank advertised the aforesaid lot for sale in the newspapers. This prompted $ Homeowners Association (SHA) to file before the Housing and Land Use Regulatory Board (HLURB) a letter- complaint, to declare the mortgage between M Inc. and B Bank void on the ground that the subject property has been allocated as SHA’s open space pursuant to law. SHA thus sought reconveyance of the property. In its Answer, B Bank insisted that the complaint should have been filed with the regular courts. Is B Bank correct? Answer: Section 3 of P.D. No. 957 granted to the National Housing Authority (NHA) exclusive jurisdiction to regulate the real estate trade and business in order to curb swindling and fraudulent manipulations by unscrupulous subdivision and condominium sellers and operators, such as failure to deliver titles to the buyers or titles free from liens and encumbrances, or to pay real estate taxes, and fraudulent sales of the same subdivision lots to different innocent purchasers for value. P.D. No. 1344 in turn expanded the jurisdiction of the NHA to include the following: SECTION 1. In the exercise of its functions to regulate the real estate trade and business and in addition to its powers provided for in Presidential Decree No. 957, the National Housing Authority shall all have exclusive jurisdiction to hear and decide cases of the following nature: . 4a) Unsound real estate business practices; / 5) Claims involving refund and any other claims filed by subdivision lot or condominium unit buyer against the project ‘owner, developer, dealer, broker or salesman; and c) Cases involving specific performance of contractual and Statutory obligations filed by buyers of subdivision lot or tondominium unit against the owner, developer, dealer, broker, or salesman. oan omen cet eden Pipe andes Carn GA MoT 263 Bora nd Developme Corporation an evenz tive Det ‘The Subdivision and Condominium Buyer's Protective Decree (20.959, e Sul t, the consistent ry}; the Supreme Court, on rulin diction over complaints arising from conte, lay er and the lot buyer, or those aimed its contractual and staty = In the cases reaching been that the HLURB has juris between the subdivision develop: 7 compelling the developer to comply wil COO letter-complaint puts in issue the validity of the mortgage Block 10 of § Subdivision and the detriment and prejudice to the Tesidents and the violation by M Inc. of its obligation to maintain i ts open space unis P.D. No. 1216 are all too plain, as the following 'whereas" clauses of Pp, No, 1216 underscore: WHEREAS, there is a compelling need to create and maintain g healthy environment in human settlements by providing open spaces, roads, alleys and sidewalks as may be deemed suitable to enhance the quality of life of the residents therein; WHEREAS, such open spaces, roads, alleys, and sidewalks in residential subdivision are for public use and are, therefore, beyond the commerce of men. Section 1 of P.D. No. 1216 defines "open space” as an area in the subdivision reserved exclusively for parks, playgrounds, recreational uses, schools, roads, places of worship, hospitals, health centers, barangay centers and other similar facilities and amenities. Section 2 thereof further provides that these reserved areas are non-alienable and non-buildable. The SHAwas in view ofits exclusive jurisdiction over "any claims filed ty subdivision lot or condominium unit buyer against the project owner, develop? dealer, broker or salesman; and cases involving specific performance of contractual and statutory obligations filed by buyers of subdivision lot or condominium unt against the ovmer or developer." As the agency tasked to oversee the specific compliance b/ developers with their contractual and statutory obligations, such * maintaining the open space as non-alienable and non-buildable, there is” doubt that the HLURB is empowered to annul the subject mortgage. The Court has long recogni: . ind PD- No. 957, which is gnized and upheld the rationale behindThe Subdivision and Condominium Buyer's Protective Decree (P.D. 957) section 2, Definition of Terms. When used in this Decree, the following terms shall, unless the context otherwise indicates, have the following respective meanings: (a) Person. "Person" shall mean a natural or a juridical person. A juridical person refers to a business firm whether a corporation, partnership, cooperative or associations ora single proprietorship. (b) Sale or sell. "Sale" or "sell" shall include every disposition, or attempt to dispose, fora valuable consideration, ofa subdivision lot, including the building and other improvements thereon, if any, in a subdivision project or a condominium unit in a condominium project. "Sale" and "sell" shall also include a contract to sell, a contract of purchase and sale, an exchange, an attempt to sell, an option of sale or purchase, a solicitation of a sale, or an offer to sell, directly or by an agent, or by a circular, letter, advertisement or otherwise. A privilege given to a member of a cooperative, corporation, partnership, or any association and/or the issuance of a certificate or receipt evidencing or giving the right of participation in, or right to, any land in consideration of payment of the membership fee or dues, shall be deemed a sale within the meaning of this definition. (c) Buy and purchase. The “buy” and "purchase" shall include any contract to buy, purchase, or otherwise acquire for a valuable consideration a subdivision lot, including the building and other improvements, if any, in a subdivision project or a condominium unit in a condominium project. (d) Subdivision project. "Subdivision project” shall mean a tract or a parcel of land registered under Act No. 496 which is partitioned primarily for residential purposes into individual lots with or without improvements thereon, and offered to the public for sale, in cash or in installment terms. It shall include all residential, commercial, industrial and recreational areas as well as open spaces and other community and publicareas in the project. 265The Subdivision and Condominiu m Buyer's Protective Decree (p,p, 95) “subdivision lot shall mean any of the, ‘e) Subdivision lot. D - (e) commercial, industrial, or Fecreationay ‘ whether residential, a subdivision project. on plan. "Complex subdivision plan” shay Jan of a registered land wherein a stre I] is delineated on the plan, et, (0) Complex subdivisi mean a subdivision p passageway or open space ini “Condominium project" shall (g) Condominium project. i" mea the entire parcel of real property divided or to be divides primarily for residential purposes into condominium Units, including all structures thereon. inium unit. "Condominium unit" shall mean a part of ium project intended for any type of independent use or ownership, including one or more rooms or spaces located in one or more floors (or part of parts of floors) ina building or buildings and such accessories as may be appended thereto. (i) Owner. "Owner" shall refer to the registered owner of the land subject of a subdivision or a condominium project. (i) Developer. "Developer" shall mean the person who develops or improves the subdivision project or condominium project for and in behalf of the owner thereof. (k) Dealer. "Dealer" shall mean any person directly engaged a principal in the business of buying, selling or exchanging red! estate whether on a full-time or part-time basis. () Broker. "Broker" shall mean any person who, for commissiot or other compensation, undertakes to sell or negotiate the sal¢ of a real estate belonging to another, (m) Salesman. "Salesman" shall refer to the person regulat! employed by a broker to perform, for and in his behalf, any all the functions of a real estate broker olan (n) Authority. "Authority" Authority, shall mean the National Housi"# 266,ision and Condominium Buyer's Protective Decree (P.D. 957) Title 1 REGISTRATION AND LICENSE TO SELL section 3. National Housing Authority, The National Housing Authority shall have exclusive jurisdiction to regulate the real estate trade and business in accordance with the provisions of this Decree. Note: The Department of Human Settlements and Urban Development (DHSUD) was created by Republic Act (R.A.) No. 11201 (Approved February 14, 2019) through the consolidation of the Housing and Urban Development Coordinating Council (HUDCC) and the Housing and Land Use Regulatory Board (HLURB). Note: HLURB was the successor agency of the National Housing Authority (NHA). The provisions of P.D No. 957 were intended to encompass all questions regarding subdivisions and condominiums. The intention was to provide for an appropriate government agency, the HLURB, to which all parties - buyers and sellers of subdivision and condominium units - may seek remedial recourse. The law recognized, too, that subdivision and condominium development involves public interest and welfare and should be brought to a body, like the HLURB, that has technical expertise. In the exercise of its powers, the HLURB, on the other hand, is empowered to interpret and apply contracts, and determine the rights of private parties under these contracts. This ancillary power, generally judicial, is now no longer with the regular courts to the extent that the pertinent HLURB laws provide. Viewed from this perspective, the HLURB's jurisdiction over contractual rights and obligations of parties under subdivision and condominium contracts comes out very clearly. But hand in hand with this definition and grant of authority is the provision on criminal penalties for Violations of the Decree, provided under the Decree’s Section 39. Significantly, nothing in P.D. No. 957 vests the HLURB with jurisdiction to impose the Section 39 criminal penalties. What the Decree provides is the authority of the HLURB to impose administrative fines under Section 38, as implemented by the Rules Implementing the Subdivision and Condominium Buyer's Protective Decree. This Section of the Decree provides: Sec. 38, Administrative Fines. - The Authority may prescribe and impose fines not exceeding ten thousand pesos for violations of the provisions of this Decree or of any rule or regulation thereunder. Fines 267D The Subdivision and Condominium Buyer's protective Decree (P.p, 95) uthority and enforceable through writs y shall be payable to the A ith the provisions of the Rules of Court, execution in accordance W Jes, for their part, clarify that " administrative fines shall not rectus, criminal prosecution of the offender under Section ee of tte Decree Thus the implementing rules themselves expressly acknowl ss a : separa remedies with differing consequences may be sought under a e Decree, specifically, the administrative remedy and criminal prosecution.’ D No. 957 were intended to encompass a questions regarding subdivisions and condominiums. The intention was aimed at providing for an appropriate government agency, the HLURB, tp which all parties aggrieved in the implementation of provisions and the enforcement of contractual rights with respect to said category of real estate may take recourse. The business of developing subdivisions and corporations being i i i any question arising from the exercise of that prerogative should be brought to the HLURB which has the technical know-how on the matter. In the exercise of its powers, the HLURB The Implementing Rul implementation and payment of The provisions of P. must commonly interpret and apply contracts and determine the rights of | private parties under such contracts. This ancillary power is no longer a uniquely judicial function, exercisable only by the regular courts. As observed in one case decided by the Supreme Court: The argument that only courts of justice can adjudicate claims resoluble under the provisions of the Civil Code is out of step with the fast-changing times. There are hundreds of administrative bodies now performing this function by virtue of a valid authorization from the legislature. This quasi-judicial function, as it is called, is exercised by them as an incident of the principal power entrusted to them of regulating certain activities falli . fall ilar expertise. falling under their particu In the Solid Homes case for example the Court affirmed the competence of the Housing and Land Use Regulatory Board damages although this is an essentially judicial power exercisable of the government to respond swiftly competently to the pressing problems of the modern world.” atts nanan ani 300, ren HN. 162774 apr, 268 17,2008,The Subdivision and Condominium Buyer's Protective Decree (P.D. 957) Note: 7 Ve ‘Supreme Court has thus consisten tly held that complaints for reac! of contract or specific performance with damages filed by @ subdivision lot or condominium unit buyer against the owner or developer fall under the exclusive jurisdiction of the HLURB? SECTION 4. Registration of Projects. The registered owner ofa parcel of land who wishes to convert the same into a subdivision project shall submit his subdivision plan to the Authority which shall act upon and approve the same, upon a finding that the plan complies with the Subdivision Standards and Regulations enforceable at the time the plan is submitted, The same procedure shall be followed in the case of a plan for a condominium project except that, in addition, said Authority shall act upon and approve the plan with respect to the building or buildings included in the condominium project in accordance with the National Building Code (R.A. No. 6541). The subdivision plan, as so approved, shall then be submitted to the Director of Lands for approval in accordance with the procedure prescribed in Section 44 of the Land Registration Act (Act No. 496, as amended by R.A. No. 440); Provided, that in case of complex subdivision plans, court approval shall no longer be required. The condominium plan as likewise so approved, shall be submitted to the Register of Deeds of the province or city in which the property lies and the same shall be acted upon subject to the conditions and in accordance with the procedure prescribed in Section 4 of the Condominium Act (R.A. No. 4726), The owner or the real estate dealer interested in the sale of lots or units, respectively, in such subdivision project or condominium project shall register the project with the Authority by filing therewith asworn registration statement containing the following information: a) Name of the owner; b) The location of the owner's principal business office, and if the owner is a non-resident Filipino, the name and address of his agent or representative in the Philippines authorized to receive notice; c) The Snes and addresses of all the directors and officers of the business firm, ifthe owner bea corporation, association, trust, or other entity, and ofall the partners, ifit be a partnership; d) The general character of the business actually transacted or to be transacted by the owner; and es Rado Fe GR No. A627, Ap 206. 269 "Soma ends On and Ligaya sen Arnvy 7 ive D ‘The Subdivision and Condominium Buyer's Protective Decree (P.p, 957) lization of the owner, incluqj, | nt of the capital i c bas So eatcmad and outstanding amounts of its capital stock ang we proportion thereof which is paid-up. The following documents shall be attached to the Teistrat | statement: 7 a) A copy of the subdivision plan or condominium plan as approvey in accordance with the first and second paragraphs of a section. b) A copy of any circular, prospectus, brochure, advertisemen letter, or communication to be used for the public offering of, subdivision lots or condominium units. ¢) In case of a business firm, a balance sheet showing the amount and general character of its assets and liabilities and a copy ofits articles of incorporation or articles of partnership or association, as the case may be, with all the amendments thereof and existing by-laws or instruments corresponding thereto. | d) A title to the property which is free from all liens and encumbrances: Provided, however, that in case any subdivision lot or condominium unit is mortgaged, it is sufficient if the instrument of mortgage contains a stipulation that the mortgagee shall release the mortgage on any subdivision lot or condominium unit as soon as the full purchase price for the same is paid by the buyer. The person filing the registration statement shall pay tht registration fees prescribed therefor by the Authority. Thereupon, the Authority shall immediately cause to | Published a notice of the filing of the registration statement at ti expense of the appli ‘cant-owner or dealer, in two newspapers of gene"! circulation, one published in English and ino, once? week for two consecutive weeks, ‘ alte cee dea ee Fecitin, istration stateme” for the sale of subdivision lots or condeniciae Gave anced fil the National Housing Authority; that the aforesaid registratio? statement, as well as the papers attached thereto, are open to inspect” during business hours by interested parties, under cyt regulations impose; and h that copies furnish ment of the iriane be to any party upon pa: 270the Subdivision and Condominium Buyer's Protective Decree (P:).957) The subdivision project u or the condominium t b deemed ee Upon completion of the aioe uieaulee requiremen ae fact of such registration shall be evidenced bya registration certificate to be issued to the applicant-owner or dealer. Sections 4 and 5 of P.D. 957 state; Sec. 4. Registration of Projects xx i The owner or the real estate dealer interested in the sale of lots or units, respectively, in such subdivision project or condominium project shall register the project with the Authority by filing therewith @ sworn registration statement containing the following information: XXX The subdivision project of the condominium project shall be deemed registered upon completion of the above publication requirement, The fact of such registration shall be evidenced by a registration certificate to be issued to the applicant-owner or dealer. Sec. 5. License to Sell, - Such owner or dealer to whom has been issued a registration certificate shall not, however, be authorized to sell any subdivision lot or condominium unit in the registered project unless he shall have first obtained a license to sell the project within two weeks from the registration of such project. The Authority, upon proper application therefor, shall issue to such owner or dealer of a registered project a license to sell the project if, after an examination of the registration statement filed by said owner or dealer and all the pertinent documents attached thereto, he is convinced that the owner. or dealer is of good repute, that his business is financially stable, and that the proposed sale of the subdivision lots or condominium units to the public would not be fraudulent. The same decree further states: See. 38, Administrative Fines. - The Authority may prescribe and impose fines not exceeding ten thousand pesos for violations of the provisions of this Decree or ofany rule or regulation thereunder. Fines Shall be payable to the Authority and enforceable through writs of execution in accordance with the provisions of the Rules of Court. 271' ive Di ‘The Subdivision and Condominium Buyer's Protective Decree (P.p, 957 ies. - Any pel 0 shall violate any of the Provision Sh Pn a/on any rule or regulation iat ny, be seus pursuant to this Decree shall, upon CO E000) ished by a fine gy | not more than twenty thousand (I space epee and/or imprisonment of not more than ten years: Provided, 1 at in the case cooperatives, OF associations, the of corporations, partnership, Presidente, Manager or. ‘Administrator or the person who has charge oy inis ie i ill be criminally responsibl. the administration of the business shal efor any violation of this Decree and/or the rules and regulations promulgated pursuant thereto. wrson wh PD. 957 is a law that seeks to regulate the sale of subdivision lots ang condominiums in view of the increasing number of incidents wherein "reg estate subdivision owners, developers, operators, and/ or sellers have reneged on their representations and obligations to provide and maintaiy properly "the basic requirements and amenities, as well as "reports of alarming magnitude xxx of swindling and fraudulent manipulations perpetrated by unscrupulous subdivision and condominium sellers and operators." As such, PD, i jon not just of the developers, sellers, brokers and/or owners of the project but also of the project itself. Upon registration of the project, a license to sel] must be obtained prior to the sale of the subdivision lots or condominium units therein. The law also provides for the suspension and revocation of the registration and license in certain instances, as well as the procedure to be observed in the event thereof. Finally, the law provides for administrative fines and other penalties in case of violation of, or non-compliance with its provisions. A review of the relevant provisions of P.D. 957 reveals that while the law penalizes the selling of subdivision lots and condominium units without prior issuance of a Certificate of Registration and License to Sell by the HLURB, it does not provide that the absence thereof will automatically render a contract, otherwise validly entered, void. The penalty imposed by | decree is the general penalty provided for the violation of any of i provisions. It is well-settled in this jurisdiction that the clear language oft law shall prevail. This principle particularly enjoins strict compliance “i provisions of law which are penal in nature, or when a penalty is provided or the violation thereof. With regard to P.D. 957, nothing therein provides the nullification of a contract to sell in the event that the seller, at the time! contract was entered into, did not possess a certificate of registra? license to sell. Absent any specific sanction pertaining to the violation ° . questioned provisions (Secs 4 and 8), the general penalties provided ys . The gener i DE in P.D. 957 are provided for fe sore ca ay te see? " 272 xThe Subdivision and Condominium Buyer's Protective Decree (P.D. 957) the aforequoted provisions, the same do n contracts that are otherwise valid! lot include the nullification of ly entered, The subdivision plan, as so a " 5 proved, shall then be submitted to the Director of Lands for approval in accordance with the procedure prescribed in Section 44 of the Land Registration Act (Act No. 496, as amended by RA. No. 440): Provided, that in case of complex subdivision plans, court approval shall no longer be required. The condominium plan as likewise so approved shall be submitted to the Register of Deeds of the province or eity in which the property lies and the same shall be acted upon subject to the conditions and in accordance with the procedure prescribed in Section 4 of the Condominium Act (RA. No. 4726). The owner or the real estate dealer interested in the sale of lots or units, respectively, in such subdivision project or condominium project shall register the project with the Authority by filin ig therewith a sworn registration statement containing the following information: (a) Name of the owner; (b) The location of the owner's principal business office, and if the owner is a non-resident Filipino, the name and address of his agent or representative in the Philippines who is authorized to receive notice; (c) The names and addresses of all the directors and officers of the business firm, if the owner be a corporation, association, trust, or other entity, and of all the partners, if it be a partnership; (d) The general character of the business actually transacted or to be transacted by the owner; and (e) A statement of the capitalization of the owner, including the authorized and outstanding amounts of its capital stock and the proportion thereof which is paid-up. The Following Documents shall be Attached to the Registration Statement 1. Acopy of the subdivision plan or condominium plan as approved. 2. A copy of any circular, prospectus, brochure, advertisement, letter, or communication to be used for the public offering of the subdivision lots or condominium units. 3. Incase ofa business firm, a balance sheet, a copy ofits articles of incorporation or articles of partnership or association, as the case may be, and existing by-laws. 4. A title to the property which is free from all liens and encumbrances. beh ag Tit 3) ville "Sse Howard. Cu Chien and Suan ohn vi St Ld Reay &Derelpment nan Akon Lat Corpration CR Ne, 62090 January 3, 2007,y Hs tive D ‘The Subdivision and Condominium Buyer's Protective Decree (p,p, 95 Noe , dominium unit is ot or coni mors In case any subdivision a mortage, is sufficient ifthe instrument of mortgage con tains a Stipulation ‘i | Fie pagee shal release the mortgage On AMY Subdivision condominium unit as soon as the full purchase price for the sane, paid by the buyer. Section 5. License to sell. Such owner oF dealer to whom has been issu, a registration certificate shall not, however, be authorized to sel] an subdivision lot or condominium unitin the registered Project Unless hy shall have first obtained a license to sell the project within two wee, from the registration of such project. ‘The Authority, upon proper application therefor, shall issue ty such owner or dealer of a registered project a license to sell the project if, after an examination of the registration statement filed by said owne; or dealer and all the pertinent documents attached thereto, he is convinced that the owner or dealer is of good repute, that his business is financially stable, and that the proposed sale of the subdivision lots or condominium units to the public would not be fraudulent. Owner It refers to the registered owner of the land subject of a subdivision or a condominium project. Dealer Any person directly engaged as principal in the business of buying selling or exchanging real estate whether on a full-time or part-time basis. Requirements for the issuance of License to Sell 1. The owner or dealer is of good repute. 2. The business of the owner or dealer is financially stable. 3. The proposed sale of the subdivision lots or condominium units the public would not be fraudulent, The lack of a license to sell or the failure on the part of a subdivisie® developer to register the contract to sell or deed of conveyance Wi Register of Deeds does not result to the nullification or invalidation of contract to sell it entered into with a buyer. The contract to sell remains V2" and subsisting. Problem: Interested in acquiring a 180-s inc, th square ked X Ines, developer, to reserve the lot for ber SS ewe by Reservatio® 274 a»The Subdivision and Condominium Buyer's Protective Decree (P.D.957) Application dated April 11, 1992. While the cash purchase price for the land is P396,000.00, the price if payment is made on installment basis is 583,498.20 at monthly amortizations of P8,140.97 payable in 5 years with 21% interest per annum based on the balance and an additional 5% surcharge for every month of delay on the monthly installment due. F opted to pay on installment and began making a periodical payments from 1992 to 1996 in the total amount of P375,295.49. In April, August, and October 1996, X, Inc. sent F notices reminding her to update her account. Upon inquiry, however, F was shocked to find out that as of July 1996, she owed X, Inc. P247,969.10. In November 1996, the amount ballooned to P491,265.91. X, Inc, thus suggested to F to execute a written authorization for the sale of the subject lot to a new buyer and a written request for refund so that she can get half of all payments she made. However, F never made a written request for refund. As of April 1997, X, Inc, computed F's unpaid account at P576,569.89. It then sent F a Notarized Notice of Cancellation of Reservation Application and/or Contract to Sell. F, on the other hand, filed before the Housing and Land Use Regulatory Board (HLURB) a Complaint for the annulment of the contract to sell, recovery of all her payments with interests, damages, and the cancellation of X, Inc.’s license to sell. Aside from imputing bad faith on the part of X, Inc. in bloating her unpaid balance, F alleged that the contract to sell between her and X, Inc. is void from its inception. According to F, X, Inc. violated Section S of Presidential Decree (PD) No. 957 when it sold the subject lot to her on April 11, 1992 or before it was issued a license to sell on September 8, 1992. F likewise claimed that X, Inc. violated Section 17 of the same law because it failed to register the contract to sell in the Registry of Deeds. In its defense, X, Inc. averred that F was only able to pay P228,201.03 and thereafter defaulted in her payment from April 1994 to May 1997. Hence, P's subsequent payments were applied to her delinquencies. As regards the alleged bloating, X, Inc. explained that the amount reflected in F's Statement of Account included the arrears and surcharges incurred due to her non- payment of the monthly installments. And since F was not able to settle her account, X, Inc, exercised its right under Republic Act (RA) No. 6552, or the Maceda Law, by cancelling the reservation Agreement/Contract to Sell and forfeiting all payments made. Finally, X, Inc. alleged that since F was at fault, the latter cannot be heard to make an issue out of X, Inc’s lack of license or demand relief from it. Is the intrinsic validity of the contract developer's violation of Section 5 of P.D. 957? Answer: In one case, the Supreme Court has already ruled that the lack of a t to sell not affected by the 275‘The Subdivision and Condominium Buyer’s Protective Decree (pp, 959 7 . The contract to sell remains val | held the validity of the contrac, ,, ™ sisting. In said case, the Court up! i " | notwithstanding viotations by the don : me Peete ae PD 957, “ Supreme Court held that nothing In ©” 9 0 nullity contract validly entered into in cases of violation of any of its provision. su | as the lack ofa license to sell. Thus: | ‘A review of the relevant provisions of P.D. 957 reveals thay while the law penalizes the selling of subdivision lots ang condominium units without prior issuance of a Certificate of Registration and License to Sell by the HLURB, it does not provide tha the absence thereof will automatically render a contract, otherwise validly entered, void. The penalty imposed by the decree is the general penalty provided for the violation of any of its provisions. It is well. settled in this jurisdiction that the clear language of the law shal prevail. This principle particularly enjoins strict compliance with provisions of law which are penal in nature, or when a penalty is provided for the violation thereof. With regard to P.D. 957, nothing therein provides for the nullification of a contract to sell in the event that the seller, at the time the contract was entered into, did not possess a certificate of registration and license to sell. Absent any specific sanction pertaining to the violation of the questioned provisions (Secs. 4 and 5), the general penalties provided in the law shall be applied. The general penalties for the violation of any provisions in P.D. 957 are provided for in Sections 38 and 39.xxx ‘The contract to sell entered into between F and X, Inc. remains valid despite the lack of license to sell on the part of the latter at the time the contract was entered into. Moreover, F claims that the contract she entered into with X, Incs void because of the latter’s failure to register the contract to sell/document of conveyance with the Register of Deeds, in violation of Section 17 of PD 957 However, just like in Section 5 which did not penalize the lack of a licens¢ to sell with the nullification of the contract, Section 17 similarly did not mentie® that the developer's or X, Inc’’s failure to register the contract to sell or deet of conveyance with the Register of Deeds resulted to the nullification invalidity of the said contract or deed. Thus, non-registration a instrument of conveyance will not affect the validity of a contract to sél. x will remain valid and effective between the parties thereto as under PD 154° or The Property Registration Decree, registration merely serves constructive notice to the whole world to bind third parties.1° tase Mode Ray lnc ora Sberen GR. No 17629 Ap 2013, 276 ws S|‘The Subdivision and Condominium Buyer’s Protective Decree (P.D. 957) execution of a Contract of Sale Between the Parties is Not an Essential Ingredient before there could be a Violation of Section 5 A review of the pertinent provisions of P.D. 957 plainly shows that the execution of a contract of sale between the parties is not an essential ingredient before there could be a violation of Section 5, viz: SECTION 5. License to sell. - Such owner or dealer to whom has been issued a registration certificate shall not, however, be authorized to sell any subdivision lot or condominium unit in the registered project unless he shall have first obtained a license to sell the project within two weeks from the registration of such project. The Authority, upon proper application therefore, shall issue to such owner or dealer of a registered project a license to sell the project if, after an examination of the registration statement filed by said owner or dealer and all the pertinent documents attached thereto, he is convinced that the owner or dealer is of, good repute, that his business is financially stable, and that the proposed sale of the subdivision lots or condominium units to the public would not be fraudulent. xx SECTION 2. Definition of Terms- When used in this Decree, the following terms shall, unless the context otherwise indicates, have the ‘following respective meanings: XXX b)Sale or sell, - “Sale” or “sell” shall include every ion, of a subdivision lot, including the building and Sther improvements thereof, ifany, ina subdivision project or a.condominium unit in a condominium project. "Sale" and "sell" shall also include a contract to sell a ¢) Buy and purchase. - The “buy” and "purchase" shall include ut Z valuable consideration a subdivision lot, d other improvements, if any, in a ndominium unit in a condominium acquire for including the building an subdivision project or a cor project. 277‘the Subdivision and Condominium Buyer's FORE Pace HL Sy aay SECTION 39. Penalties. - ay pocson who shal volate- any of yy hat may be issued pursuant (0 this Decree shall, ee more than twenty thousand Oto ia imprisonment of not more than ten years: Provided, atin the case of corporations, partnership, cooperatives, or associations, the President, Manager or Administrator or the person who has charge 6 the administration of the business shall be criminally responsible for any violation of this Decree and/or the rules and regulations promulgated pursuant thereto. xxx Read in conjunction with Section 2 of P.D. 957, Section 5 has ay extended definition of "sale," which forbids all activities that dispose or attempt to dispose of subdivision lots or condominium units absent a priorissuance of an HLURB license to sell. The prohibition includes all agreements that are in the nature of a “contract to sell, a contract of purchase and sale, an exchange, an attempt to sell, an option of sale or purchase, a solicitation ofa sale, or an offer to sell.” One of the reasons behind the expanded meaning of the term "sale" was to deter the rising cases of swindling and fraudulent manipulations perpetrated by unscrupulous subdivision and condominium sellers and operators against unknowing buyers. Thus, for the state to be able to closely supervise and regulate real estate subdivision and condominium businesses, owners or dealers thereof must have a license to sell before they engage ia any type of "sale" within the meaning of the law. The Supreme Court emphasize that the owner or dealer of subdivision lots or condominium units must have already obtained a licens? to sell at the time it disposes or attempts to dispose of the property: Th? subsequent issuance of a license to sell and the invocation of good faith “cannot reach back to erase the offense and extinguish an accused's crimi lability.” This is because engaging in such activities is regarded asa crime t™™* ismalum prohibitum, one to which criminal intent is immaterial: perpetrators are punished, because the law forbids the mere commission ® an act regardless of whether the conduct is inherently immoral or not: "eta Brrr Andrew Cheng hun Tao. G Ma. 8501 ly 1204