RCAC Savings Bank EXPLORING OPTIONS IN NPL & ROPA MANAGEMENT + REVISITING THE MACEDA LAW (R.A. 6552) + CROSS DEFAULT,APPLICATION & ‘SECURITY CLAUSES BY: ATTY. JOHN A. AGBAYANI‘@RCBC Savings Bank Popularly known asthe Maceda Law (Law), RA.6S52 oF The Realty Installment Buyer Protection Act was authored by Senator Ernesto Maceda in 1972. Approved by Congress on August 26, 3972, t ‘became effective on September 14, 1972. The law aims to protect instalment buyers of real ‘roperty agaist one-sided conditions generally extant in seller-rafted contracts. ‘The buyer's rights to-a grace period, refund ofthe cash surender value assignment, updating. ‘repayment without penalty and annotation of fll payment onthe title ae guaranteed and which ‘an no longer be diminished or negated by stipulation. ‘The manner of rescinding the sale which ls otherwise governed by Articles 1191 of the New Chil Code, shall now be by 3 notarial act. Simple and clear as the Law appears, yt various issues of fist impression were elevated to the highest court the resolutions of which enriched our jursprudence in realty installment sale. “The passage of RA. 7394 or The Consumer Act ofthe Philppnes on April 19, 1992 complemented the consumers rights to a grace period and prepayment without penalty “The deluge of buyers of condominiums or house-and+ots in subdivisions who cannot afford to pay in ash needs ample protection in the event that they fll to complete their payments projets. ‘Banks shouldbe aware oftheir rights and of thelr clents. Maceda Law has thus become relevant. ‘GRCBC Savings Bank {Tantra yt ne a econ ee perin trmaynen ar er y en ret Spier tena anf eetyeeaaga ee ono Sie eae gr pnsensru ence eae Sc etre tarneeterttnrey ater oie th mt nt een rte oo Sy apneic mrt yep fe ash an St Pappas ca tine soot eae ota af ory Sch enctefecone tepr feet aeRCBC Savings Bank Il. THE POLICY — The Law’ s declared public policy is to protect buyers of real estate on installment basis against onerous and oppressive conditions (Section 3). The Supreme Court expounded on this policy in Active Realty vs. Daroya 382 SCRA 152 , where it held that “Real estate developers thus enjoy an unnecessary advantage over lot buyers who they often exploit with iniquitous results. They get to forfeit all the installment payments of defaulting buyers and resell the same lot to another buyer with the same ‘exigent conditions. To help especially the low income lot buyers, the legislature enacted R.A. No. 6552 delineating the rights and remedies of lot buyers and protect them from one-sided and pemicious contract stipulations ” COVERED SALES TRANSACTION - The Law covers all transactions or contracts involving the sale or financing of real estate on installment payments (Sec. 3). Itis not the form but the substance of the contract that matters in {determining whether or not the transaction is covered by the Law. Thus, in Associated Marine Officers vs. Decena 619 SCRA 280 , it was held that “despite its name having no reference to a contract o sell, the Shelter Contract Award isin fact a contract to sell”. EXCLUDED PROPERTIES- The Law excludes in its application 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. (Section 3). In Garcia v CA 619 SCRA 280, it was. held that : “the subject lands, comprising five (5) parcels and aggregating {69,028 square meters, do not comprise residential real estate within the ‘contemplation of the law’. In Odyssey Park vs. CA 280 SCRA 253 , it was held that “Even on the basis of the letter of Mr. Vicente A. Araneta, Exhibit E, the building is merely part of common areas and amenities under the ‘Condominium concept of selling to the public. The property subject of the contract to sell is more of a commercial building.“ORCBC Savings Bank 1. A buyer who has paid less than two years of installments is only entitled to a grace period of sixty days. He has no right toa refund. The effectivity of the cancellation is thirty days from receipt by the buyer of the notice of notarial rescission or demand. 2. Abuyer who has paid at least two (2) years of installments is entitled to a grace period . The grace period is fixed at one (1) month for every year of installments made. (when the law speaks of « month, 30 dys, Cl Code; year, 12 months) 3. The right to a grace period can be exercised only once for every five (5) years of the life of the contract and its extensions. (Slee et QRCBC Savings Bank ‘The right to prepay in partorin ull without interest cannot likewise be limited or negated by stipulation of the parties because the law prohibits such stipulation. The practiceof sellers in charging pre-termination penalties upon the buyers who prepay the purchase price {sno longerallowed. Thus: ‘Section 6 The buyer shall have the right to payin advance any installmentor the fullunpatd balance of the purchase price any time without interest and to have suc ll payment ofthe ‘purchase price annotated inthe cerca of ttle covering the property.” ‘The rightto prepay without additional charges should be read along with the provisions of ‘Articles 137 and 138 of A. 7394 (The Consumer Act), because the latter law likewise protects the rights ofthe consumer to prepay in partor in full without penalty a credit transaction, Ths: “ARTICLE 137- Right To Prepay- The person to whom credits extended may prepay in fllor {in par. at any time without penaly, the unpaid balance of any consumer red transaction. ARTICLE 138. Rebate on Prepayment - Upon prepayment in ull ofthe unpaid balance ofa ‘precomputed consumer credit transaction, refinancing or consoldation, an amount not less than the unearned portion ofthe finance charge calculated according to this Artice shall be rebated tothe person to whom credit is extended. Xx"{CBC Savings Bank ‘The itleto the property i still in the name ofthe developer and this rightis ranted to ‘the buyer for his protection against subsequent ales or other transactions involving the property considering thathe has fully paid the price thereof. the developer issues duly notarized certificate of fill payment, this document may be registered with the Register of Deeds. However ifthe developer refuses, the buyer may execute an affidavit full payment and register the same with the Register of Deeds for the purpose of annotating the fact of fll ppaymenton the affected title. Asarule, private documents need to be notarized for registrability with the Register of Deeds. This affidavit of fll payment may, in effect, be consideredas alien on the property, which is better than a mere adverse claim. ORCBC Savings Bank Leano vs. CA-The Supreme Court ordered the buyer to pay the ‘outstanding balance of the Contract To Sell together with the interest and charges under the contract even if it declared that the contract was not validly cancelled according to R.A. 6552. Pagtalunan vs. Manzano - The Supreme Court held that: “Instead, the ‘buyer should be allowed to pay the installments or the purchase price of ‘the property pursuant tothe contract to sell within the grace period. However ifthe grace period has elapsed, the buyer should pay interest ‘according to Art. 2209 of the new Civil Code.” The latter ase imposed an Interest rate based on Art. 2209 of the New Civil Code because the ‘contract did not stipulate the interest rate. Otherwise the stipulated rate of interest shall govern.GRCBC Savings Bank [EaUN} S UNDER RA QRCBC Savings Bank [SgUNERSSUESRON ssa WeerQRCBC Savings Bank |SECTIONZ3 Non aftr of Pome. ‘GRCBC Savings Bank + Abuyer has paid at least two years of installments xxx. Down payments, deposts or options on the contract shal be included in the computation of ‘the total number of installment payments made. (Section 3) ‘he ern ion an annual bass, means he has pad two annua installments. Thus, purchase price of ‘house and lot for 120,000. EXAMPLE. ti iepayablein4yearsat _F50/000 UPON SIGNING: 1730900 ATER 1 YEAR 30,000 ON THEZ™ YEAR 30,000 ON THES YEAR ‘Upon payment of P60,000, the buyer qualifies fora refund in ase of cancellation. (Layug case) xAMPLE2- ie terms of payment i ladderized payable in 4 years: Thus, year =20000 ztyear_=20,000 ssyear =20000 atyear =50000 de Buyers pays P40,000 forthe ist two years hes quale for refund in ase of cancelation, (Otis the frequency of payments and net the amount)@RCBC Savings Bank Inthe case of tay Court of Appeals 167 SCRA 627, the contre entered nto on October 4 157, set the pce forthe esa 120,00.00 pyaben tre (3) yer stamens, var 1. Pa,g00.0,Pppne Caren upon te signing of his agreemet/ontract. 2. Another an,00.00 aher wes (12 mnths or one yor fom the signing ofthe contact aprement 2. The tance of P0000 after 24 months two years rom the sgig ofthe conac/areement. ‘he fit armen of 0.00 was aid upon sgring the contrac on Ober 4 1978 and he second payment of ‘pan000 was paid on October 179. Bed on the agreement the iran fal payment of PO.00 supposed {oe pad on or belore October 4 1960 or 24 mont rom the srng ofthe agreement on Octobe 4 578 Lay ‘eluted on i third a al pyran. ‘The Supreme Cut eld that he payments made upon sgnng ofthe contrac in 1978 and the Second payment in 1579 areconsiered tw (2 yer of instalment payments ven payments wore made ines tan two ea “Thus, twas ed tat“ theese tbo Loy ed old we 2) anne instalment of P4,00.0 each es domed therfore nthe words ofthe low, shove ‘pai ot ast tw yor often” He therefore had ‘race period of ne month forever year of xtaiment payment mado to 2) month (ctesponding © ‘theo yor oftcaiments pad) from Ocabe 5, 580 within which o py the el hstlment.~ ORCBC Savings Bank + Abuyerhas paid at least two years of installments xxx. = Bown poyments, depos or pions thecontrct shal bended nthe computation ofthe ‘total number of installment payments made. (Section 3) the tris ona mona, aera, buyer who as pi wo Yeisen one who "mid meray anton exung i dou peer: ho yas ins means ony Trovestone {en tht spens of yur mene monte i Cad) es he acs Cw peaks [ster hb pd tyne earns, Kena athe ast have pid 3 mony arr ‘ous esr ists tthe donnpeymer depots opt al be nde comping the {calvumber ot wataiments payee made, Ws the eget fart peynent ors fers {atten ete) Inline sft or 9 at pret on crt of n bet (pine ea Earp, ose Asan ‘Shan “ies sarr of payment tats bye tastes spo compere ese” ‘hn tte depos enpeynen sn 2 moyenne tnt Sayers of tna of he dager eownpeynat In contig ero [Stents mad thew state that eta te eg mayer: 2 we is de he ‘mba ef ownpayets nas cone op th aia: oy fsa inthe Srmowr equi to fonts bt the rember ar reaecy of repr rte the Sinou of soungoyncte fio cne press pcswes ax pe ttt supreme Cort he et {owas tenet tnd becuse th tbe ef eae pas ws than oo eo 4 mots Inte tose, renuing down he downpayment oy P2000 srt new serena have {uted alot ehind. ut te Court vet sayea ee aeao aera oreescecaaae TTORCBC Savings Bank “Gatco vs Angles November 2013 When the Supreme Court compute the ight oa race pti ed not ‘beak th downpeyment ime instalments stead, emphasized hat "ow yas of islets ees the INSTALLMENTS THAT CORRESPOND TO THE NUMBER OF MONTHS OF AFYMENTS. Frequency of Regular smortaton. “sracaPerod stshould be noted that Section 3 of RA. 652 and paragraph sit of Contract Nos. 2271 an 272, speak of two ‘ear of nsaiments” The ba or computation ofthe term refers tothe lastaliments cht correspond to the number of months of payments, and not to te number of mens that he contrat nec 25 wel any arc pod that hasbeen phon oth the nw a the cont has pevet any baer who Pret been digentin paying ha mort istaliments rom unl rg the igh provided in Secon Sof RA “The MeC, the RTC, the Cal ound that Angles was abe to pay 35 statment for theo (Contac Ne 2273 and instalment forthe ous (Contract No. 22721 Angeles ths made ntallnent peymerts fo ess ‘on tre yar theo nd erty for yao the hose “Secon 3a) of A 6552 proves hat the tol grace peed correspond te one meth forever one aro Insane payments made, provided tat the bayer ray eer thi ight oly once in every ve yas of the of the eovtact an exteriors The buyer’ are to poy testament due atte expiration ofthe {ace ered allows the salle to cancel the coma afer 30 ays fom the buyer’ receipt ofthe nate of ‘calito demand fer resession of the covet by notarial et Paragraph la) ofthe contac ave ‘Angels the samo rigs. ‘Both the RTCand the CA found that GR gave Angeles an accumulated grace period of 1 month This ‘orion went beyond what was provided in R.A S52 andi thi contacts. raters — i=". ee ae Bi = [Ese Sees! |e poe a | | = aes ‘sts cu hn prams yl pet Tape Cotte Miata ease ha ce elses Eitan rearusnatottents om uaeceuscmsae sites ‘50 (2) earsininsallments, hence, bes not ented ta ead.GRCBC Savings Bank siizaghieaaa = a 3 3 3 & sealed eaachlen 10@RCBC Savings Bank RCBC Savings Bank Gatcalian ve Angeles Nov 2013 For paying more than wo year ofnstalimentonthelot, Angles was ened to eee cash surrender ‘ale of er paymentson the lat equivalent ity per cent ofthe total payments made. This rights ‘Provided by Section 3) of RA. 6552, a wel a paragraph 6(8) ofthe contrac. Outof the contrat price ‘P4S0,000, Angeles pid GR otal of 64.1889 consisting o P35 000 as downpayment and '729,18896 as nstallments and penalties The cash surrender valu of Angeles pajments on the ot amounted 1 #102,094482 In order that compensation maybe prope Ris necessary +) Mateach one othe obiigors be bound principal and that he be tthe same tne a prnepal creditor ofthe other + @)Matboth debts consist of sum of money orf the things du are consumable, they be ofthe Sane kind and alo ofthe same quay theater has Ben stated + @)Tatthe two debts are de; + (@)Thatthey beliquidated and demandabe: + )Teatover nether of them there be any eenton or controversy. commenced by thi persons and ‘communicated in due time tthe debtor + Mowrever twas eor forte MTC tw apply Article 1279 a there was nothing inthe contacts which [rode for the amount of rentals incase the buyer def in hor saline payments The reals (de to GR wer not Hgudated aul)RCBC Savings Bank ‘hrs tyor emails 0a mnie Mt Ani Merk andendred ca Oi reef {5 eter aon art ae elton ater sect en perfor ge) of te saa “ecru your ney wher oath parent ofrecer hme ma ng casa Be roan S07 ape ‘Ate et or de son 7 of he egy tara te alhe Maley of war ae” ‘haan fri nttbtaning pores srement sme aha on wee mesg mms (courte rmrctanrt he prove te lw nrc {ing nw yur que wane the eat cae Se (9p tc ad neque onthe payment of bea “arene ace wa eae pee ie ipa etl amet (ate Ay Manel 2 ‘Sony hr Shon te mort ntmen pyrite on os pment ed rete: ‘tmenating or hcrpy on) mht mento ard ean Tes her arma ea ‘rpc fon en fie ar tee ia ‘irene ene ara on sha ene Bae gmat te ty of water st ‘nde Sec? pro sapined thet ny payment mate ad rece incr th the monte aha tes ond ‘rere meh payment a ond te ‘hefner bred oat repented oy the ender} pn ioe sh he rn aaron sn meen the pn el coer el ond ‘iopnn dion tad on igh and og heathy and power of whic bgt oper former GRCBC Savings Bank@RCBC Savings Bank Boyan foe buyr had bea apc oral oth ope atropondan fad To py He ‘atmos coe “vere purgbon tl diss ofa ta ht © the ah savor taka and vo os Sechon fof aw see ate zipiaon ‘ant href entered icon ote pros of Secon 2. and shai el and a.” mau “Thea roqures fl payment aed. ectual refund ofthe cacy suender val. ‘iste bev’ Bont ve Chandon 6.8 Ro” Tose, September 5, 2012 tw Supreme Court old ‘hat. Thos i prayed ints “ns be orders to tepost wih «banking Wao ‘St poyment (2 er hes wcapacnte 1 reere the pyre a fe tie ts due hen, wid arse he esos ge 8 cep 4) Wha ho Fre persons Sa te sme Mgt calec| aera - o RCBC Savings Bank 13,ORCBC Savings Bank ES Lew Naa ele re @RCBC Savings Bank + This covers CTS (Contract To Sell) generated from PMSD disposal through Sales Contract Receivables (SCR). + When RSB sells on installments its real estate inventories through a Contract To. ‘Soll, Articles 1191 of the New Civil Code and R.A 6552 of the Realty installment ‘Buyer Act which is popularly known as Maceda Law generally govern the rights and ‘obligations of the parties to the sale. + Popularly known as the Maceda Law (Law), R.A.6562 or The Realty Installment Buyer Protection Act was enacted on September 14, 1972 to. protect installment buyers of real property against one-sided conditions genorally extant in sellor- ‘erafted contracts. + The buyer's rights to a grace period, refund of the cash surrender value, assignment, updating, prepayment without penalty and annotation of full payment ‘on the title are guaranteed and which can no longer be diminished or negated by ‘stipulation. + The manner of rescinding the sale which is otherwise governed by Articles 1191 of the New Civil Code, shall now be by a notarial act. +The passage of R.A. 7394 or The Consumer Act of the Philippines on April 19, 1992 comelnmented the coneumer’s rights toa grace pared and prepayment witout 14@RCBC Savings Bank ‘AA. AN ACTION FOR UNLAWFUL DETAINER OR POSSESSION IS PREMATURE IF CANCELLATION IS INVALID- An action forreconveyance or unlawful detainer is ot akin to a judicial rescission. An action for recovery of possession ofthe real property can be dismissed as premature unless the cancellation is done in ‘accordance with law. in ssociated Marine Officers and Seamen's Union of the Philippines - PTGWWO-ITF vs._Decena , G.R. No. 178584, October 8, 2012. twas held that: "Unless property cancelled, the buyer's right to continue occupying the ‘property subject of the Contract to Sell is stil recognized. Lacking proof that the ‘Shelter Contract Award has been cancelled in accordance with R.A. 6552, there is as ‘yelno basis to declare respondent's possession ofthe house and lt as llega. * ‘AS. SERVICE OF DECISION IN AN EJECTMENT SUIT IS EQUIVALENT TO PROPER SERVICE NOTARIAL NOTICE OF RESCISSION - In Leano vs. CA359 ‘SCRA 36, twas held that even ifthe notarial notice required under Section 3(b) of the ‘Law was not served upon the buyer, the said deficiency was cured when the buyer received a copy ofthe decision ofthe trial cout i the ejectment case against him. ‘Apparently, the Court has applied the general principle of equity inorder to avoid Croulty of suits. Thus, inthis case, itwas held that: “The decision inthe ejectment ‘case operated as the notice of cancellation requited by Sec. 3(0).” ‘QRCBC Savings Bank B.2. STIPULATION, CONVERSION OR DIMINUTION OF CASH SURRENDER VALUE ‘VOID The Law requires thatthe cash surrender value be actually refunded. Treating the cash surrender value as unpaid rentals is proscribed. In Pagtalunan vs. Manzano 533 SCRA 242, itwas held that “The provision does not provide a cffrent ‘requirement for contract to sell which allow possession ofthe property by the buyer ‘upon execution ofthe contract ke the instant case. Hence, pettoner cannot insist on ‘compliance withthe requiroment by assuming thet the cash surrender value payable to {he buyer had been applied fo rentals of the property after respondent failed fo pay the {instalments due. “More importantly, ay stipulation that diminishes or negates the Fight ofthe buyer tothe cash surrender value is null and void. Thus Section 7 ofthe Law slates that: “Any stibulation in any contract hereafier entered into contrary tothe provisions of Sections 3,4, § and 6, shall be null and void.” 'B.4, REMEDY IF BUYER FAILS OR REFUSES TO ACCEPT THE REFUND- ithe buyer ‘refuses to accept the efund, the payment shall first be tendered to him. fhe "njustifably refuses to accept tthe amount shall be consigned in court in accordance with Article 1256 ofthe New Civil Code . Thus, itstates :* Art. 1256- ifthe creditor fo ‘whom tender of payment has boon made refuses without just cause to accept the debtor shall be released from responsibilty by the consignation of the thing or sum ‘due. Consignation alone shall produce the same effect inthe folowing cases:(1) When the credo is absent or unknown, or does not appear at the place of payment (2) Wien ho is incapacitated to receive the payment at tho time it is due;(3) Wen, without Just cause, he refuses to give a recept(4) When two or more persons claim the same TE 22%t 10 colect(5) when he tte ofthe obligation has been lo! u 15QRCBC Savings Bank + B3.COMPLAINT FOR A COURT ORDER TO DEPOSIT THE AMOUNT WITH A BANK IS NOT. EQUIVALENT TO ACTUAL REFUND- A bare promise to pay ora mereattemptto deliver the ‘cash surrender value to the buyers not legally compliant. The law requires fll payment and actual refund ofthe cash surrender value. In Planters Dev. Bank vs. Chandumal, G.R.No. 1195619, September 05, 2012, the Supreme Court held that. "Thus, prayed nits complaint ‘hace Be ordered to “deposi with a banking institution in the Philippines forthe account of Defendants (sic), the amount of Ten Thousand Pesos (P1,000.00), Philippine Currency, representing the cash surrender value ofthe subject property xx" The allegation that CChandumal made hersel/ unavailable for payment is not an excuse as the twin requirements for a valid and effective cancellation under te law, ie, notice of cancellation or demand for rescission ‘bya notarial act andthe fl payment ofthe cash surrender value is mandatory." RCAC Savings Bank ‘+ A.CONTRACT TO SELL STILL SUBSISTS. THE BUYER HAS THE RIGHT TO PAY THE [BALANCE AND THE DEVELOPER IS OBLIGED TO DELIVER THE PROPERTY. Ifthe cancellations invalid for non-compliance with the twin mandatory requirements of ntaral notice and actual refund ofthe cash surrender value, the contract to sell remains and stil subsists The buyer has the right to pay the balance and developers obligated to dative the property: In Active vs. Daroya, supra, itwas held that since the cancellation was invalid the Contract still subsists. The Supreme Court hel: For failure to cancel the contract n accordance ‘with the procedure provided by law, we hold that the contract to sell between the parties ‘remains valid and subsisting. XXX" However, respondent can no longer exercise this right as ‘the subject lot was already sold by the petitioner to another buyer which lot as admitted by the petitioner, was valued at B1,700.00 per square meter. As respondent lst her chance to pay for ‘the balance ofthe 9875.00.00 lot, itis ony jst and equitable that the petitioner be ordered to ‘refund to respondent the actual value ofthe ot resol, P975,000.00 with 1206 interest per ‘num computed from August 26, 1981 until fully paid ort deliver a substitute ota the option ofthe respondent” 16QRCBC Savings Bank ‘+ A2. MERE DEMAND LETTER IS NOT COMPLIANT WITH THELAW- A simple demand letter or notice of resissionby the seller or his lawyeris not suficient. As held by the ‘Supreme Court in Pagtalunan vs. Manzano, 533 SCRA 242, “a mere demand etter isnot the same as the notice of cancellation or demand for rescission bya notarial act as required y the Taw." {A3.AN ACTION FOR JUDICIAL CONFIRMATION OF RESCISSION 1S EQUIVALENT [NOTARIAL NOTICE OF RESCISSION- An action for judicial rescission whichis served upon the ‘buyers equivalentto a notice of notarial rescission. In Layug vs. Court of Appeals, Ibi), it ‘washeld that: “the additional formality of a demand on [the sellers part for rescission by ‘notarial act would appear, in the premises, to be merely circuitous and consequently ‘uperfluous"zince the seller therein fled an action for annulment of contract, whichiakindred ‘concept of rescission by notarial act." ‘QRCBC Savings Bank 1. Notice of cancellation or demand for rescission must be by a notarial act regardless of the number of defaults by the buyer. It shall be sworn to before a notary public. 2. Service of notice of cancellation shalll be done according to the stipulation under the contract to sell. Otherwise, the les on service of notice by personal service , registered mail or publication under the New Civil Code and the Rules of Court, as applicable, shall be followed in order to ensure compliance with the Law. 3. A buyer who has paid less than two years of installments is only entitled to a grace period of sixty days. He has no right toa refund. The effectivity of the cancellation is thirty days from receipt by the buyer of the notice of notarial rescission or deman 7