Title
Orbe vs. Filinvest Land, Inc.
Case
G.R. No. 208185
Decision Date
Sep 6, 2017
A buyer, having paid less than two years' installments, sought a refund under the Maceda Law. The Supreme Court ruled the seller's cancellation notice invalid, ordering a refund with interest due to the lot's resale.
purchase agreement
property
cancellation

Case Summary (G.R. No. 208185)

Factual Background

In June 2001, Priscilla Zafra Orbe entered into a purchase agreement with Filinvest Land, Inc. for a 385-square-meter lot in Highlands Pointe, Taytay, Rizal, with a total contract price of P2,566,795.00 payable in installments under a schedule that established escalating monthly amortizations for years one through seven. Between June 17, 2001 and July 14, 2004, Orbe paid P608,648.20 by means of Metrobank checks and obtained official receipts from Filinvest. Orbe ceased making further payments, she asserted, due to financial difficulties, and on October 4, 2004 Filinvest sent her a notice of cancellation which Orbe received on October 18, 2004. The notice stated that Filinvest had given Orbe sixty days to update her account and that the account was hereby cancelled effective thirty days from receipt; the notice bore a jurat notarized on October 6, 2004 and the signatory exhibited a community tax certificate as proof of identity.

Procedural History

Orbe filed a Complaint for refund with damages before the HLURB Expanded National Capital Region Field Office on November 13, 2007, alleging that she had paid from June 2001 to October 2004 and that the October 4, 2004 notice did not constitute an effective cancellation by notarial act. Filinvest answered and counterclaimed, asserting that Orbe failed to make twenty-four monthly amortization payments and that her P608,648.20 covered reservation, down payments, and late charges rather than the stipulated monthly amortizations. Arbiter Leonard Jacinto A. Soriano ruled for Orbe on July 25, 2008, concluding that her payments covered a period of more than two years and should be credited to principal, entitling her to a refund equivalent to fifty percent of total payments under Section 3 of Republic Act No. 6552. The HLURB Board of Commissioners affirmed on April 15, 2009 but found that payments fell two months short of two years and nonetheless awarded a 50% refund on equitable grounds. The Office of the President, in its February 4, 2011 decision, sustained a 50% refund and agreed with Arbiter Soriano that Orbe had made installment payments for more than two years. Filinvest appealed to the Court of Appeals, which reversed in an October 11, 2012 decision and dismissed Orbe’s complaint; the Court of Appeals denied Orbe’s motion for reconsideration on July 3, 2013. Orbe then filed the present Petition for Review on Certiorari.

The Parties' Contentions

Orbe contended that she made installment payments from June 2001 to October 2004 and that Filinvest’s October 4, 2004 notice did not constitute an effective cancellation by notarial act under the Maceda Law, thereby entitling her to relief under Section 3 or, alternatively, equitable relief. Filinvest maintained that Orbe had not paid twenty-four monthly installments required by Section 3, that her payments covered reservation fee, down payment and late charges rather than monthly amortizations, and that it validly cancelled the contract under Section 4 by sending a notarized notice of cancellation.

Court of Appeals Ruling

The Court of Appeals held that the phrase “two years of installments” in Section 3 meant that the total payments made must be equivalent to two years’ worth of installments measured by the stipulated monthly amortization; because Orbe’s aggregate payments of P608,648.20 were short of the required two years’ worth of installments, she could not invoke Section 3. The Court of Appeals concluded that Section 4 applied, that Filinvest had given the 60-day grace and sent a valid notarized notice of cancellation, and that Filinvest could therefore cancel the contract; it dismissed Orbe’s complaint.

Issues Presented to the Supreme Court

The Supreme Court considered whether Orbe was entitled to a refund or any benefit under Republic Act No. 6552, specifically whether she had paid “at least two years of installments” so as to invoke Section 3, and whether Filinvest’s cancellation under Section 4 complied with the statutory and notarial requirements to be effective.

Supreme Court’s Findings on Section 3

The Court held that the phrase “at least two years of installments” in Section 3 refers to the buyer’s payment of the equivalent of two years’ worth of the stipulated fractional, periodic payments due under the contract, and thus, where installments are monthly, it ordinarily requires the aggregate value of twenty-four monthly installments. The Court explained that the phrase contemplates both value and time and that a mere continuance of intermittent or token payments over a two-year period without meeting the proportional monthly amortization would frustrate the statute’s purpose and produce absurd results. Applying precedent such as Gatchalian Realty v. Angeles and Marina Properties Corp. v. Court of Appeals, the Court used the monthly amortization as the proper divisor and noted that down payments and deposits are included in the computation of the total number of installment payments only insofar as they contribute to the aggregate amount relative to the monthly amortization. Using the first-year monthly amortization of P27,936.84 as the conservative divisor in favor of the buyer, the Court found that Orbe’s payments amounted to 21.786 months’ worth of installments, falling short of the requisite 24 months, and thus Section 3 did not apply.

Supreme Court’s Findings on Section 4 and Notarial Formalities

Because Orbe failed to satisfy Section 3, the Court found that Section 4 governed her case, entitling her to a 60-day grace period and permitting the seller to cancel only after sending a notice of cancellation or demand for rescission by notarial act and waiting thirty days after the buyer’s receipt. The Court held that not every notarization sufficed; cancellation under Sections 3 and 4 required a valid notarial act that properly demonstrated the authority of the signatory, particularly where a juridical person acted through a representative. The Court distinguished between acknowledgments and jurats under the 2004 Rules on Notarial Practice, observed that an acknowledgement rather than a jurat is imperative for notices of cancellation under the Maceda Law, and emphasized that the representative’s authority must be demonstrated by board resolution or appropriate corporate instrument when a corporation effects cancellation.

On the Invalidity of Filinvest’s Notarial Act

The Court found Filinvest’s October 4, 2004 notice defective because it bore a jurat rather than an acknowledgement and because the signatory identified a community tax certificate as proof of identity, which did not satisfy the competent evidence of identity requirement of the 2004 Rules on Notarial Practice effective August 1, 2004. The Court explained that the 2004 Rules required identification by at least one current identification document bearing photograph and signature or by credible witnesses, and that subsequent amendments expressly excluded community tax certificates as competent evidence. The Court therefore held that Filinvest failed to satisfy the second requisite of Section 4, rendering the purported cancellation ineffectual and leaving the contract valid and subsisting.

Equitable Relief and Disposition

Recognizing that Filinvest had since sold the lot to a th

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