Legal Opinion Refund Under Maceda Law - Scribd

REFUND UNDER THE MACEDA LAW (R.A.
6552)
Legal Opinion
SUMMARY: In a nutshell, buyers are entitled to a refund, as well as grace periods, so long as they have paid for at least two years. The
law requires actual payment of the cash surrender value to the buyer to validly effect a rescission. A mere promise to refund is not
enough and any stipulation that diminishes or negates the right to a refund is prohibited by the law. For contracts which are in default
and had a payment of at least two years of installments, the seller cannot resell the property until actual refund is made because the
rescission of the first contract to sell is incomplete. Legally, the first contract still exists and if the property is in the possession of the first
buyer, the seller has no right to file an ejectment case against him.
A. FULL PAYMENT OF CASH SURRENDER VALUE - For an effective cancellation to take place, the cash surrender value shall be
fully paid. The actual cancellation of the contract can only be deemed to take place upon the expiry of a 30-day period following the
receipt by the buyer of the notice of cancellation or demand for rescission by a notarial act and the full payment of the cash surrender
value (Olympia Housing vs. Panasiatic Travel 395 SCRA 298). If the buyer fails or refuses to accept the refund, the proper process of
effecting full payment shall be pursued under Article 1249 to 1251 and Article 1256 of the New Civil Code which define and regulate
payment, tender of payment and consignation, respectively.
B. CASH SURRENDER VALUE INCLUDE DOWN PAYMENT, DEPOSITS & OPTIONS - Down payments, deposits or options on
the contract shall be included in the computation of the total number of installment payments made (Section 3-b). The cash surrender
value increases but not to exceed ninety (90%) percent of the total payments made. If the contract is canceled, the seller shall refund to
the buyer the cash surrender value of the payments on the property equivalent to fifty per cent of the total payments made, and, after five
years of installments, an additional five per cent every year but not to exceed ninety per cent of the total payments made (Section 4-b).
C. STIPULATION, CONVERSION OR DIMINUTION OF CASH SURRENDER VALUE VOID The Law requires that the cash
surrender value be actually refunded. A mere promise to refund is not sufficient. Treating the cash surrender value as unpaid rentals is
proscribed. In Pagtalunan vs. Manzano 533 SCRA 242, it was held that: The provision does not provide a different requirement for
contracts to sell which allow possession of the property by the buyer upon execution of the contract like the instant case. Hence,
petitioner cannot insist on compliance with the requirement by assuming that the cash surrender value payable to the buyer had been
applied to rentals of the property after respondent failed to pay the installments due. More importantly, any stipulation that diminishes or
negates the right of the buyer to the cash surrender value is null and void. Thus Section 7 of the Law states that: Any stipulation in any
contract hereafter entered into contrary to the provisions of Sections 3, 4, 5 and 6, shall be null and void.
D. COMPLIANT FOR A COURT ORDER TO DEPOSIT THE AMOUNT WITH A BANK IS NOT EQUIVALENT TO ACTUAL
REFUND - A mere attempt to deliver the cash surrender value to the buyer is not legally compliant. The law requires full payment and
actual refund of the cash surrender value. In Planters Dev. Bank vs. Chandumal, G.R. No. 195619, September 05, 2012, the Supreme
Court held that:. Thus, it prayed in its complaint that it be ordered to deposit with a banking institution in the Philippines, for the account
of Defendants (sic), the amount of Ten Thousand Pesos (P10, 000.00), Philippine Currency, representing the cash surrender value of the
subject property; x x x. The allegation that Chandumal made herself unavailable for payment is not an excuse as the twin requirements
for a valid and effective cancellation under the law, i.e., notice of cancellation or demand for rescission by a notarial act and the full
payment of the cash surrender value, is mandatory...
E. EJECTMENT SUIT PREMATURE IF CANCELLATION IS INVALID - An action for conveyance or unlawful detainer is not akin to
a judicial rescission. An action for recovery of possession of the real property can be dismissed as premature unless the cancellation is
done in accordance with law. In Associated Marine Officers and Seamen's Union of the Philippines - PTGWO-ITF vs. Decena ,
G.R. No. 178584, October 8, 2012, it was held that: Unless properly cancelled, the buyers right to continue occupying the property
subject of the Contract to Sell is still recognized. Lacking proof that the Shelter Contract Award has been cancelled in accordance with
R.A. 6552, there is as yet no basis to declare respondent's possession of the house and lot as illegal.
CONCLUSION - The Supreme Court, in various cases, has mandated the parties in realty installment sale to promptly and properly
exercise their rights under the Law. Otherwise, the intended benefits may become illusory however noble the objectives of the Law may
be. Failure to refund has a far-reaching cost to the seller because legally the contract still subsists. As such, the buyer has the right to
pay the balance and the seller is obligated to deliver the property. If the property can no longer be delivered because it has been sold to
another, the seller is obliged to pay its market value or deliver an equivalent property, at the option of the buyer . (Active Realty vs.
Daroya 382 SCRA 152).

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REFUND UNDER THE MACEDA LAW (R.A.

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