Maceda Law - "Realty Installment Buyer Act" (R.A. 6552, Sept. 1972)
Reason/Justification of the law:
To help especially the low-income lot buyers;
The law provides for the rights and remedies of lot buyers and
protect them from one-sided and pernicious contract stipulations;
To protect buyers of real estate on installment payments against
onerous and oppressive conditions.
Coverage of R.A. 6552
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 3844, as amended by Republic Act 6389, where the buyer has
paid at least two (2) years of installments.
Requisites to Avail of Rights under R.A. 6552
(1) Transactions or contracts involving the sale or financing of
real estate on installments payments, including residential
condominium apartments;
(2) The buyer has paid at least two (2) years of installments;
and
(3) The buyer defaults in payment of succeeding installments.
Article 1592
In the sale of immovable property, even though it may have been stipulated
that upon failure to pay the price at the time agreed upon the rescission of
the contract shall of right take place, the vendee may pay, even after the
expiration of the period, as long as no demand for rescission of the
contract has been made upon him either judicially or by a notarial act.
After the demand, the court may not grant him a new term. (1504a)
Rights of a Buyer under R.A. 6552
(1) Payment
To pay, without additional interests, the unpaid installments due within the
total 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.
Rights of a Buyer under R.A. 6552
(2) Cash Surrender Value
The seller shall refund to the buyer the cash surrender value
of the payments on the property equivalent to fifty percent
(50%) of the total payments made (more than 2 years);
No Refund (Less than 2 years);
An additional five percent (5%) every year but not to exceed
ninety percent (90%) of the total payments made (after 5
years). *Excludes penalty interest;
Actual cancellation of the contract by a NOTARIAL ACT and
upon full payment of the cash surrender value to the buyer;
Rights of a Buyer under R.A. 6552
(3) Assignment/Reinstatement
The right to sell his rights or assigns the same to another
person;
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.
Rights of a Buyer under R.A. 6552
(4) Pay in Advance
Right to pay in advance any installments or the full unpaid
balance of the purchase price any time without interest;
To have such full payment of the purchase price annotated in
the certificate of title covering the property.
Downpayments
Downpayment, Deposits or Options on the contract included in
the computation of the total number of installment payments
made.
Penalties are not included.
Summary
Cash Surrender Value
Less than 2 years
No Refund
More than 2 years
50%
More than 5 years
50% + additional 5% for every year
CSV Formula
TP x % RF = RF or CSV
Total Payments x Percentage of Refund = Refund/Cash Surrender Value
Capacity to Buy or Sell
Art. 1489
All persons who are authorized in this Code to obligate themselves, may
enter into a contract of sale, saving the modifications contained in the
following articles.
Where necessaries are sold and delivered to a minor or other person
without capacity to act, he must pay a reasonable price therefor.
Necessaries are those referred to in Article 290.
Kinds of Incapacity
General rule: All persons, whether natural or juridical, who can bind themselves by contract
have also legal capacity to buy and sell.
Exceptions: Cases when the law determines that party suffers from either absolute or
relative incapacity.
Kinds of Incapacity:
(1) Absolute – in the case of persons who cannot bind themselves (ex.
minors, insane); and
(2) Relative – where it exists only with reference to certain persons or a
certain class of property;
Persons who are merely relatively incapacitated are stated in Articles
1490-1491 (ex. husband and wife).
Liability for Necessaries of Minor or Other Person without Capacity to Act
Necessaries are things which are needed for sustenance, dwelling, clothing,
medical attendance, education and transportation.
Generally, contracts entered into by minor and other incapacitated person
(insane or demented persons, deaf-mutes who do not know how to write)
are voidable;
But where necessaries are sold and delivered to him (without the
intervention of the parent or guardian), he must pay a reasonable price
therefor.
Sale by Minors
The sale of real estate effected by minors who have already passed the ages
of puberty and adolescence and are now in the adult age, when they
pretended to have already reached their majority, while in fact they have
not, is valid;
They cannot be permitted later on to excuse themselves from
compliance with the obligations assumed by them or to seek their
annulment.
Article 1490
The husband and the wife cannot sell property to each other, except:
(1) When a separation of property was agreed upon in the marriage
settlements; or
(2) When there has been a judicial separation of property under Article
191.
Relative Incapacity of Husband and Wife
General rule: The husband and wife are prohibited by from selling property to
each other;
A sale between husband and wife in violation of Article 1490 is inexistent and
void from the beginning;
Reason of prohibition – to protect third persons;
They are also prohibited from making donations to each other during the
marriage except moderate gifts on the occasion of any family rejoicing;
Exceptions:
1. If there has been a separation of property agreed upon in the marriage
settlements; or
2. when there has been a judicial separation of property decreed between them
by the court.
Article 1491
The following persons cannot acquire by purchase even at a public or judicial auction, either
in person or through the mediation of another.
(1) The guardian, the property of the person or persons who may be under his
guardianship;
(2) Agents, the property whose administration or sale may have been entrusted to them,
unless the consent of the principal has been given;
(3) Executors and administrators, the property of the estate under administration;
Article 1491
(4) Public officers and employees, the property of the State or of any subdivision thereof, or of any
government-owned or controlled corporation, or institution, the administration of which has been
intrusted to them; this provisions shall apply to judges, and government experts who, in any manner
whatsoever, take part in the sale;
(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers
and employees connected with the administration of justice, the property and rights in litigation or
levied upon an execution before the court within whose jurisdiction or territory they exercise their
respective functions; this prohibition include the act of acquiring by assignment and shall apply to
lawyers, with respect to the property and rights which may be the object of any litigation in which
they may take part by virtue of their profession;
(6) Any others especially disqualified by law.
Incapacity by Reason of Position and Relation to Property
(1) guardians;
(2) agents;
(3) executors and administrators;
(4) public officers and employees;
(5) judicial officers and employees and lawyers; and
(6) others especially disqualified by law.
Reason of prohibition – to prevent frauds on the part of persons enumerated therein and minimize
temptations to the exertion of undue and improper influence;
The law does not trust human nature to resist the temptations likely to arise out of antagonism
between the interest of the seller and the buyer.
Incapacity by Reason of Position and Relation to Property
In a contract for agency, after termination of the relationship, the agent is not prohibited
to purchase a property belonging to the former principal;
Article 1491 (5) of the Civil Code prohibits lawyers from acquiring by purchase or
assignment the property or rights involved which are the object of the litigation;
But the prohibition applies only during the pendency of the case;
Other Persons especially Disqualified
(1) Aliens who are disqualified to purchase private agricultural lands;
(2) An unpaid seller; having a right of lien or having stopped the goods in transit, who is
prohibited from buying the goods either directly or indirectly in the resale of the same at a
public or private sale which he may make; and
(3) The officer conducting an execution sale of property to enforce a court judgment
rendered against the owner thereof cannot become a purchaser or be interested directly,
or indirectly in any purchase at such sale.
Effect of Sale in Violation of Prohibition
With respect to Nos. 1 to 3, the sale shall only be voidable because in such cases only
private interests are affected. The defect can be cured by ratification of the seller;
With respect to Nos. 4 to 6, the sale shall be null and void, public interests being involved
therein.
Article 1492
The prohibitions in the two preceding articles are applicable to sales in
legal redemption, compromises and renunciations.
This Prohibition is founded on public policy.
Prohibition Extends to Sales in Legal Redemption, etc.
(1) The relative incapacity in Arts. 1490 and 1491 applies also to sales by virtue of legal redemption,
compromises, and renunciations;
a. Compromise is a contract whereby the parties, by reciprocal concessions, avoid a litigation or put
an end to one already commenced. It is the amicable settlement of a controversy;
b. By renunciation, a creditor gratuitously abandons his right against his creditor. The other terms
used by law are condonation and remission.
(2) The persons disqualified to buy referred to in Arts. 1490 and 1491 are also disqualified to lessees
of the things mentioned therein.
Effects of the Contract when the Thing Sold has been Lost
Art. 1493
If at the time the contract of sale is perfected, the thing which is the object
of the contract has been entirely lost, the contract shall be without any
effect.
But if the thing should have been lost in part only, the vendee may choose
between withdrawing from the contract and demanding the remaining
part, paying its price in proportion to the total sum agreed upon.
When a Thing is Considered Lost
A thing is lost when it perishes or goes out of commerce or disappears in
such a way that its existence is unknown, or it cannot be recovered. (Art.
1189[2])
“Perishes” – includes a case where there has been a material deterioration
or complete change in the nature of the thing in such a manner that
it losses its former utility (a consideration of contract).
Effect of Loss of Thing at the Time of Scale
Here, the loss or injury – before or at the time the contract of sale is
perfected:
(1) The thing is entirely lost – contract is inexistent and void;
Reason: There is no object;
(2) The thing is only partially lost – vendee may elect between withdrawing
from the contract and demanding the remaining part, paying its
proportionate price;
Effect of Loss of Thing at the Time of Scale
S sold his car to B. Unknown to both of them, the car has been totally
destroyed before they agreed on the sale.
Here, no valid contract of sale for lack of object;
S (owner) bears the loss; B need not pay the price;
If car is only partially destroyed, there still remains of the object;
Since the character or condition of the car has been materially changed,
the buyer may withdraw from the contract or demand delivery of the car
but paying only the proportionate price.
Article 1494
Where the parties purport a sale of specific goods, and the goods without
the knowledge of the seller have perished in part or have wholly or in a
material part so deteriorated in quality as to be substantially changed in
character, the buyer may at his option treat the sale:
(1) As avoided; or
(2) As valid in all of the existing goods or in so much thereof as have not
deteriorated, and as binding the buyer to pay the agreed price for the
goods in which the ownership will pass, sale was divisible.
Effect of Loss in case of Specific Goods
Article 1493 – sale of specific things;
Article 1494 – sale of goods (mass of “specific goods” identified and agreed upon
when contract of sale was made);
If sale is divisible – the second option is available;
If sale is indivisible – buyer should pay only the proportionate price of the remaining
goods as provided in par. 2 of Article 1493;
Say the subject matter sold was 100 cavans of rice in the warehouse of S at
P1,000 per cavan, or for a total price of P100,000;
If 60 cavans of rice were lost, B may, at this option, withdraw from the
contract without the obligation of paying the rice; or demand the delivery
of the 40 cavans, but binding him to pay the agreed price thereof
(P40,000);
If the contract is indivisible (100 cavans of rice were sold for P100,000
without consideration of the number of cavans), B should be made to pay
only the proportionate price of 40 cavans which is also P40,000.