Case Summary (G.R. No. 141205)
Contract Terms and Payment Details
The contract required an initial payment of P53,766.00 and monthly amortizations of P4,893.35, which cumulatively exceeded the stated contract price, totaling approximately P346,367.00. The respondent made payments amounting to P314,816.76 over four years, exceeding the contract price by P90,835.76. However, by August 1989, the respondent defaulted on three monthly installments totaling P15,282.85.
Notice of Cancellation and Petitioner's Action
The petitioner sent a notice of cancellation effective 30 days from receipt, but records did not establish when the respondent received it. Despite the respondent's offer to pay the outstanding balance, the petitioner refused, alleging the lot had been sold to another buyer. Subsequently, the respondent filed a complaint for specific performance and damages with the Housing and Land Use Regulatory Board (HLURB).
HLURB Arbiter’s Decision
On June 14, 1993, HLURB Arbiter Alfredo M. Tan II ruled in favor of the respondent, declaring the contract cancellation void due to the petitioner’s failure to comply with the Maceda Law’s requirement to pay the cash surrender value to the buyer. Since the lot was already sold, the arbiter ordered the petitioner to refund the respondent all payments made, amounting to P314,816.70 plus 12% interest from the complaint date, and attorney’s fees of P10,000.00.
HLURB Board of Commissioners’ Reversal
The Board of Commissioners nullified the arbiter’s decision, declining to apply the Maceda Law remedies. Instead, it implemented an equitable solution, concluding both parties were at fault—the respondent for delayed payments and the petitioner for failing to send a notarized cancellation notice. Consequently, the petitioner was ordered to refund only half of the respondent’s payments (P157,408.35).
Office of the President Review
The respondent appealed to the Office of the President. On June 2, 1998, Chief Presidential Counsel Renato C. Corona, acting under the President’s authority, modified the HLURB Board’s decision. Finding the Board’s resolution inconsistent with the Maceda Law, he held that the contract remained subsisting due to the petitioner’s failure to comply with the conditions for valid cancellation. Since the lot had already been sold to a third party, the petitioner was ordered to refund the full actual value of the lot equivalent to P875,000.00 (based on an assessed value of P1,700 per sqm at the contract date) with 12% interest from the date of complaint or to deliver a substitute lot at the respondent’s choice.
Procedural Issues Before the Court of Appeals
The petitioner’s motion for reconsideration was denied, and its subsequent petition for review to the Court of Appeals was dismissed due to insufficiency in form and substance. The grounds cited were the absence of an affidavit of service, failure to attach relevant parts of the case record, and lack of Board resolution authorizing the petitioner’s legal representative. The Court of Appeals also later denied the motion for reconsideration for untimely filing.
Supreme Court’s Procedural Findings
The Supreme Court found that the petitioner substantially complied with Rule 43 of the Rules of Court. It noted that there were registry receipts evidencing service of the petition and actual receipt by the respondent’s counsel, adequate submission of the key decisions and resolutions, and a subsequent Secretary’s Certificate confirming the representative’s authority. The Court also clarified that the motion for reconsideration was timely filed.
Substantial Compliance and Due Course of the Petition
The Supreme Court held that the Court of Appeals erred in prioritizing procedural technicalities over substantive rights, thereby denying the petitioner due process. It ruled that substantial compliance with procedural rules sufficed to give due course to the petition to address the parties’ substantive rights concerning installment sale contracts.
Governing Law: The Maceda Law (R.A. No. 6552)
The contract to sell was governed by Republic Act No. 6552, otherwise known as the Realty Installment Buyer Protection Act or Maceda Law, enacted to protect installment buyers against harsh conditions. The law recognizes buyer protections after paying at least two years’ installments, granting grace periods for payment and mandating refund of at least 50% of payments made as a cash surrender value upon valid contract cancellation.
The Maceda Law’s Purpose and Buyer Protection
The law was enacted to address the prevalent hardship of low and middle-income buyers exposed to onerous contracts. It counters exploitative practices by developers enforcing forfeiture of installment payments upon default, thereby entitling buyers to fair treatment including notice, refund, and possibility to exercise tender of payment to keep the contract alive.
Respondent's Compliance and Petitioner's Failure to Cancel Validly
The respondent had paid significantly beyond two years of installments and had offered to pay arrears. The petitioner’s cancellation was invalid due to failure to send a notarized notice and to pay the required cash surrender value before reselling the lot. Additionally, there was no proof of petitioner’s effort to fulfill its refund obligation or to notify the respondent properly despite respondent’s absence abroad.
Invalidity of Cancellation and Continuing Contractual Obligations
As cancellation was not effected in accordance with the Maceda Law’s mandatory requisites, the contract remained valid and subsisting. Under Section 3(a) of R.A. No. 6552, the respondent had the right to pay the remaining balance without additional interest, obligating the petitioner to accept it.
Petitioner’s Sale of the Lot and Remedies Available
Since the petitioner sold the lot to a third party, thereby depriving respondent of the opportunity to fulfill her obligation, the remedy was to order the petitioner to refu
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Case Syllabus (G.R. No. 141205)
Procedural History and Background of the Case
- This case involves a petition for review on certiorari under Rule 45 of the Revised Rules of Court, filed by Active Realty & Development Corporation (“petitioner”) to reverse the Resolution of the Court of Appeals dated August 3, 1999, which denied due course to its appeal on grounds of insufficiency in form and substance.
- Petitioner is the owner and developer of Town & Country Hills Executive Village in Antipolo, Rizal.
- On January 2, 1985, petitioner entered into a Contract to Sell a 515 square meter lot for P224,025.00 with respondent Necita G. Daroya, a contract worker overseas.
- The contract required an initial down payment of P53,766.00 and sixty monthly installments of P4,893.35, which sums up to a total higher than the contract price, amounting to P346,367.00.
- Respondent paid P40,000.00 on May 5, 1989, but later defaulted by P15,282.85 for three monthly amortizations by August 8, 1989.
- Petitioner sent a cancellation notice to respondent to take effect thirty days from receipt, but the exact date of receipt was unclear.
- Petitioner refused further payments claiming the lot was sold to another buyer.
- Respondent filed a complaint for specific performance and damages before the HLURB Arbitration Branch on August 26, 1991, seeking to compel the issuance of a Deed of Absolute Sale upon payment of the balance.
HLURB Arbiters' and Board of Commissioners’ Decisions
- On June 14, 1993, HLURB Arbiter Alfredo M. Tan II ruled in favor of respondent, declaring the cancellation of the contract void due to petitioner’s failure to pay the cash surrender value mandated by law.
- Because the lot was sold to a third party and respondent agreed to a full refund of installment payments, petitioner was ordered to refund P314,816.70 with 12% interest from August 26, 1991, plus P10,000.00 attorney’s fees.
- On appeal, the HLURB Board of Commissioners set aside the Arbiter’s decision. They rejected application of Maceda Law remedies, viewing both parties as at fault—respondent for delayed payments and petitioner for failure to send notarized cancellation.
- The Board ordered petitioner to refund only half of respondent’s total payments (P157,408.35), purporting this to be an equitable solution.
- Respondent further appealed to the Office of the President.
Decision of the Office of the President (June 2, 1998)
- Acting through Chief Presidential Counsel Renato C. Corona, the Office of the President modified the HLURB Board’s decision, holding the Board’s ruling inconsistent with Maceda Law.
- It found petitioner’s cancellation invalid for failing to meet legal requisites: the notarized notice of cancellation and payment of cash surrender value.
- The contract to sell remained subsisting and respondent was entitled to the lot upon payment of the outstanding balance.
- As petitioner sold the lot to another buyer, petitioner was ordered to refund the actual lot value of P875,000.00 (calculated at P1,700.00 per sq. m.), with 12% interest per annum from August 26, 1991, until full payment, or to deliver a substitute lot at respondent’s choice.
- Petitioner’s motion for reconsideration was denied.