Case Summary (G.R. No. 254440)
Petitioner’s Contractual Terms and Payment History
Orbe entered an installment purchase agreement with Filinvest in June 2001 for a 385-sq.m. lot with total contract price P2,566,795.00. Contract terms specified a reservation fee, down payments and monthly amortizations that escalated yearly (first year monthly amortization P27,936.84; second year P39,758.84; thereafter increasing). From June 17, 2001 to July 14, 2004 Orbe paid P608,648.20 by checks and received official receipts from Filinvest. Thereafter she ceased payments due to financial difficulties.
Administrative and Judicial Procedural History
Filinvest sent a notice of cancellation dated October 4, 2004 (notarized by jurat on October 6, 2004). Orbe filed a Complaint for refund with damages before the HLURB Field Office (November 13, 2007). Arbiter Soriano ruled for Orbe (July 25, 2008), the HLURB Board affirmed (April 15, 2009), and the Office of the President sustained entitlement to refund (February 4, 2011). Filinvest appealed to the Court of Appeals, which reversed and dismissed Orbe’s complaint (October 11, 2012) and denied reconsideration (July 3, 2013). Orbe sought Supreme Court review by Petition for Review on Certiorari under Rule 45.
Issue Presented
Whether Orbe is entitled to refund or other benefits under Republic Act No. 6552, specifically whether she paid “at least two years of installments” so as to qualify under Section 3, and whether Filinvest validly cancelled the contract under Section 4.
Applicable Legal Framework
- 1987 Philippine Constitution (applicable as the decision date is 2017).
- Republic Act No. 6552 (Maceda Law), particularly Sections 3 and 4 governing rights of defaulting buyers depending on the extent of installment payments.
- 2004 Rules on Notarial Practice (A.M. No. 02-8-13-SC) defining acknowledgment, jurat, and competent evidence of identity; Rule 132, Section 19 (Rules of Court) on public and private documents and effect of acknowledgment.
Interpretation of “At least two years of installments” under Section 3
The Court held that “at least two years of installments” in Section 3 refers both to time and to the equivalent value of installments actually paid — i.e., the aggregate value equivalent to 24 monthly installments based on the monthly amortization amount required by the contract. The phrase is not satisfied merely by the passage of two years in which intermittent or token payments were made; the computation must reflect the proportionate monthly amortizations that ratably apportion the contract price across the contract term. The Court relied on precedent (Marina Properties, Gatchalian Realty) to reject interpretations that measure only temporal duration without regard to value.
Application of the Interpretation to the Present Facts
Because the contract’s monthly amortizations escalated yearly, the Court adopted the first-year monthly amortization (P27,936.84) as the conservative basis for computation in favor of the buyer. Using that divisor, Orbe’s total payments equated to 21.786 months’ worth of installments — short of the 24 months required by Section 3. Consequently Orbe did not satisfy Section 3’s threshold and could not claim the cash surrender-value refund privileges under that section.
Governing Rule under Section 4 and Requirements for Valid Cancellation
Having failed to meet Section 3’s threshold, Section 4 applied. Section 4 mandates: (1) a grace period of not less than 60 days from the installment due date; (2) if the buyer fails to pay within the grace period, cancellation may be effected only by notice of cancellation or demand for rescission “by notarial act”; and (3) the cancellation becomes effective only 30 days after the buyer’s receipt of that notarial notice. All three requisites must concur before a seller may validly cancel a contract under Section 4.
Notarial Act Requirement: Acknowledgment versus Jurat and Competent Evidence of Identity
The Court emphasized that the notarial act required by Sections 3 and 4 must be an acknowledgement — not a jurat — because an acknowledgement attests to voluntary execution and, when executed by a representative of a juridical seller, demonstrates that the representative is authorized to act (e.g., via board resolution or articles/by-laws). The 2004 Rules on Notarial Practice further require that the signer be personally known to the notary or identified by “competent evidence of identity.” As amended and as explained in Baylon, a community tax certificate (CTC) is not competent evidence of identity for notarial purposes. Filinvest’s October 4, 2004 notice was signed by a collection department representative, accompanied by a jurat (not an acknowledgement), and identified the affiant’s identity with a community tax certificate — a form of identification that the 2004 Rules and later amendments exclude as competent evidence. The jurat therefore did not meet the acknowledgement requirement and, in any event, did not satisfy the Rules’ identification standards.
Effect of Invalid Notarial Cancellation
Because Filinvest’s notice failed to satisfy Section 4’s second requisite (a proper notice by notarial act in the form of an acknowledgement with competent evidence of identity and, where applicable, proof of representative authority), the Court held the purported cancellation ineffective. The contract therefore remained valid and subsisting as between Orbe and Fil
...continue readingCase Syllabus (G.R. No. 254440)
Procedural History
- Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil Procedure seeking reversal of the Court of Appeals' October 11, 2012 Decision and July 3, 2013 Resolution in CA‑G.R. SP No. 118285.
- Lower and administrative proceedings:
- Complaint for refund with damages filed by petitioner Priscilla Zafra Orbe before the HLURB Expanded National Capital Region Field Office (HLURB Field Office) dated November 13, 2007.
- HLURB Field Office (Arbiter Leonard Jacinto A. Soriano) rendered a Decision on July 25, 2008 in favor of Orbe.
- HLURB Board of Commissioners affirmed Arbiter Soriano's decision in its April 15, 2009 Decision, awarding relief (but differing on legal reasoning).
- Office of the President reviewed and in its February 4, 2011 Decision sustained that Orbe was entitled to a 50% refund.
- Filinvest appealed to the Court of Appeals; the Court of Appeals, in an October 11, 2012 Decision, reversed prior rulings and dismissed Orbe's complaint, holding Orbe not entitled to Section 3 benefits and that Filinvest sent a valid notarized notice of cancellation. Court of Appeals denied Orbe's Motion for Reconsideration in its July 3, 2013 Resolution.
- Petition to the Supreme Court followed; the Supreme Court rendered a Decision on September 6, 2017 (filed/received by Clerk on November 29, 2017) granting the petition and reversing the Court of Appeals.
Parties and Subject Matter
- Petitioner: Priscilla Zafra Orbe.
- Respondent: Filinvest Land, Inc.
- Subject property: Lot 1, Block 10, Phase 1, Highlands Pointe, Taytay, Rizal (385 square meters).
- Relief sought: Refund and damages arising from alleged improper cancellation of contract and denial of benefits under Republic Act No. 6552 (Maceda Law).
Contract Terms and Payment Schedule (as stipulated in the Purchase Agreement)
- Total contract price: P2,566,795.00.
- Reservation fee: P20,000.00.
- Down payments: P493,357.00.
- Monthly installments payable from 8/4/01–4/4/02: P54,818.00.
- Balance: P2,053,436.00 payable in installments over seven years (5/8/02–4/8/09) with escalating monthly amortizations:
- First year monthly amortization: P27,936.84.
- Second year monthly amortization: P39,758.84.
- Third year monthly amortization: P41,394.84.
- Fourth to seventh years monthly amortization: P42,138.84.
Payments Made by Petitioner (total and by instrument)
- Total payments from June 17, 2001 to July 14, 2004: P608,648.20, mainly through several Metrobank checks for which Filinvest issued official receipts.
- Metrobank checks enumerated in the record with dates and amounts:
- Check No. 0306533, June 17, 2001 — P20,000.00.
- Check No. 0306544, July 29, 2001 — P54,818.00.
- Check No. 0306545, Aug. 29, 2001 — P54,818.00.
- Check No. 0306546, Sept. 29, 2001 — P54,818.00.
- Check No. 0320243 (or variant shown), May 8, 2002 — P100,000.00.
- Check No. 0320244, May 22, 2002 — P100,000.00.
- Check No. 0370882, March 26, 2003 — P80,000.00.
- Check No. 0370883, April 26, 2003 — P75,789.00.
- Check No. 0401000, Feb. 12, 2004 — P37,811.00.
- Check No. 0531301, July 14, 2004 — P30,000.00.
- Official receipts in the record further break down payments into reservation, down payment portions, late payment charges, and other entries (examples: OR Nos. 375303, 382315, 389615, 399797, 410221, 444630, 442366, 504093, 604163, 604162 with specific allocations noted).
Petitioner’s Alleged Default and Respondent’s Position
- Petitioner stopped making further payments allegedly due to financial difficulties.
- Filinvest’s position in its Answer and Counterclaim: Orbe failed to make 24 monthly amortization payments required to claim Section 3 benefits; the P608,648.20 paid mainly covered reservation fee, down payment, and late payment charges, exclusive of the monthly amortization payments.
Notice of Cancellation by Filinvest
- Filinvest sent a notice of cancellation dated October 4, 2004, received by Orbe on October 18, 2004.
- Key contents of the notice:
- Stated account remained unpaid despite written requests; given sixty (60) days to update but failed to settle account.
- Declared cancellation effective thirty (30) days from receipt.
- Signed by an individual identified as belonging to Filinvest’s Collection Department (signed name: Ma. Louella D. Senia).
- The notice was accompanied by a jurat dated OCT 06 2004 executed by Notary Public Avelio L. Salcedo and reflected a Community Tax Certificate as identification.
HLURB Field Office (Arbiter Soriano) Decision (July 25, 2008)
- Arbiter Soriano ruled in favor of petitioner Orbe.
- Findings summarized:
- Orbe made payments "from 17 June 2001 to 14 July 2004, or a period of more than two years."
- Payments should be credited to principal as no record showed payments covered overdue charges or penalties, nor were delinquency charges demanded.
- Because of more than two years of payments, Orbe was entitled under Section 3 of RA No. 6552 to refund the cash surrender value equivalent to 50% of total payments made.
HLURB Board of Commissioners Decision (April 15, 2009)
- Board affirmed Arbiter Soriano's decision as to the relief (refund).
- Legal reasoning and distinctions:
- Disagreed with Arbiter Soriano’s conclusion that Orbe had paid two years’ installments; found Orbe’s payments fell two months short of the equivalent of two years of installments.
- Nonetheless invoked equity given the relatively short payment period and substantial monthly installments and concluded Orbe was entitled to a 50% refund.
Office of the President Decision (February 4, 2011)
- Office of the President sustained the conclusion that Orbe was entitled to a 50% refund.
- Legal reasoning:
- Disagreed with HLURB Board’s reliance on equity; instead agreed with Arbiter Soriano that Orbe had "made installment payments for more than two (2) years," thereby invoking Section 3.
Court of Appeals Decision (October 11, 2012) and July 3, 2013 Resolution
- Court of Appeals reversed prior rulings and dismissed Orbe’s Complaint.
- Key holdings:
- Interpreted "two years of installments" in Section 3 to mean at least 24 monthly installments or total payments equivalent to two years’ worth of installments as per the contract amortizations.
- Found Orbe’s total payments of P608,648.20 were short of the required two years’ worth of installments; therefore, Section 3 benefits did not apply.
- Held Section 4 applied (buyer paid less than two years), which affords a 60‑day grace period and allows seller to cancel by notarial act if buyer fails to pay; found Filinvest sent a valid notarized notice of cancellation and thus cancellation precluded further relief.
- Denied Orbe’s Motion for Reconsideration in the July 3, 2013 Resolution.
Issues Presented to the Supreme Court
- Whether petitioner Priscilla Zafra Orbe is entitled to a refund or any other benefit under Republic Act No. 6552.
- Subsidiary issues addressed by the Supreme Court:
- Proper legal meaning and computation of "at least two years of installments" under Section 3.
- Whether Filinvest’s notice of cancellation complied with the notarial requisites under Sections 3 and 4 of the Maceda Law and the 2004 Rules on Notarial Practice.
- Appropriate equitable relief where se