Unprotected buyer

Republic Act 6552 protects buyers of real estate payable in installments. To be protected by said law, the buyer must also comply with the contract to sell. This case of Leo is an example.

Leo purchased for and in behalf of his five children a parcel of land with an aggregate area of 286 square meters located at a subdivision in Pasig City owned and developed by PRDC. Under the contract to sell, the total purchase price of P189,810 shall be payable in installments with a down payment of P45,506.40, and the balance of P144,103.60 with interest at P3,898.48 beginning June 18, 1987.

Upon execution of the contract Leo paid in behalf of his children the down payment of P45,506.40 and then issued ten postdated checks of P5,000 in favor of PRDC. Only the first check dated March 10, 1988 was honored while the rest were dishonored for insufficiency of funds.

On May 27, 1988 PRDC demanded settlement of all unpaid amortization plus interest then amounting to P46,781.76 covering the period June 18, 1987 to May 18, 1988. But Leo was able to pay in cash P10,000 on June 6, 1988. Thereafter, no further payment was made.

On January 18, 1989, PRDC notified Leo and his children by registered mail that it was exercising its option to cancel the contract to sell with forfeiture of payments made effective 30 days from notice in accordance with Section 4 of RA 6552 and paragraph 6 of the contract to sell. PRDC then personally served another notice on February 16, 1989 when the registry receipt of the first notice was not returned to it.

It was only more than two years later, or on May 3, 1991 when PRDC requested Leo and his children to vacate the property to enable a new buyer to take possession of the same. But instead of vacating, Leo questioned the cancellation before the Housing Land Use and Regulatory Board (HLURB) alleging that they stopped payment because PRDC failed to develop the subdivision. Leo prayed for specific performance with damages against PRDC. Upon ocular inspection however, the HLURB found that PRDC has substantially developed the subdivision.

So on November 12, 1992, the HLURB Arbiter dismissed Leo’s complaint filed in behalf of his children and declared the cancellation of the contract to sell, as well as the forfeiture of payments made by Leo and his children, valid, legal and binding. Was the ruling correct?

Yes. The rescission of the contract and the consequent forfeiture of the payments made were in accordance with the contract itself and RA 6552. Leo and his children defaulted in the payment of several installments. Out of the contract price of P189,810, only P60,506.40 was paid. In effect, of the 60 monthly amortizations agreed upon, only about 12 were settled.

In cases like this where less than two years of installments have been made, Section 4, of RA 6552 grants the buyer a grace period of not less than 60 days from the date the installment became due, to pay the amortizations. If the buyer fails to pay at the end of the grace period, the seller may cancel the contract 30 days after receipt by the buyer of the notice of cancellation.

In the same vein, paragraph 6 of the contract to sell granted the seller an option to cancel the contract and forfeit the payments made should the buyer fail to pay any of the monthly amortizations within 60 days from due date. Thereafter, the seller may dispose of the subject lot to any other person as if said contract has never been made.

In this case, after the first check of P5,000 on March 10, 1988, no other payment was made except on June 6, 1988 when Leo paid in cash the sum of P10,000. Despite the lapse of more than 60 days as grace period, Leo and his children continued to default in their obligation. On January 18, 1989 PRDC opted to cancel the contract with forfeiture of payments made. Accordingly, 30 days from receipt of such notice, the contract was cancelled and payments made were forfeited.

Leo and his children cannot seek protection from PD 957 particularly its provision providing for non-forfeiture of payments when the vendee desists from further payment due to failure of developer to develop the subdivision. The ocular inspection report showed substantial compliance by PRDC (Delos Santos etc. vs. Court of Appeals et. al., G.R. 147912, April 26, 2006).

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