Active Realty v. Daroya Case Digest

ACTIVE REALTY & DEVELOPMENT CORPORATION, petitioner, 
vs.
NECITA G. DAROYA, represented by Attorney-In-Fact Shirley Daroya-Quinones, respondents.

Facts:

Active Realty & Development Corporation (Active) is the owner and developer of Town & Country Hills Executive Village in Rizal. On January 2, 1985, it entered into a contract to sell with Necita Daroya. They agreed on the price of P224,025.00.

However, it was also stipulated that Daroya should pay the initial amount of P53,766.00 upon execution of the contract and the balance of P170,259.00 in sixty (60) monthly installments of P4,893.35. This amounts to P346,367.00, which is clearly higher than the original price agreed upon.

By August 8, 1989, Daroya was in default of P15,282.85 representing 3 monthly amortizations. Active sent Daroya a notice of cancellation of the contract to sell to take effect 30 days after receipt of the letter.

Later on, Daroya offered to pay the balance, but was rejected by Active because the latter had sold the land to someone else.

By this time, Daroya had already paid the total sum of P314,816.76, which amount is P90,835.76 more than the total contract price of P224,025.00.

Issue:

Whether or not the petitioner can be compelled to refund to the respondent the value of the lot or to deliver a substitute lot at respondent’s option

Ruling:

Yes.

The contract to sell in the case at bar is governed by Republic Act No. 6552—“The Realty Installment Buyer Protection Act,” or more popularly known as the Maceda Law—which came into effect in September 1972. Its declared public policy is to protect buyers of real estate on installment basis against onerous and oppressive conditions.

To help especially the low income lot buyers, the legislature enacted R.A. No. 6552 delineating the rights and remedies of lot buyers and protect them from one-sided and pernicious contract stipulations.

Section 3 of RA 6552 provides for the rights of the buyers:

1. To pay, without additional interest, the unpaid installments due within the total grace period earned by him, which is hereby fixed at the rate of one month grace period for every one year of installment payments made
2. If the contract is cancelled, 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; provided, that the actual cancellation of the contract shall take place after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act and upon full payment of the cash surrender value to the buyer

In the case at bar, Daroya had already paid 4 years equivalent od the contract price.

However, the records clearly show that the petitioner failed to comply with the mandatory twin requirements for a valid and effective cancellation under the law,¹⁹ i.e., he failed to send a notarized notice of cancellation and refund the cash surrender value.

It was only during the preliminary hearing of the case before the HLURB arbiter when petitioner offered to pay the cash surrender value.

The Court found it illegal and iniquitous that petitioner, without complying with the mandatory legal requirements for canceling the contract, forfeited both respondent’s land and hard-earned money after she has paid for, not just the contract price, but more than the consideration stated in the contract to sell.

Thus, for failure to cancel the contract in accordance with the procedure provided by law, the Court held that the contract to sell between the parties remains valid and subsisting. Following Section 3(a) of R.A. No. 6552, respondent has the right to offer to pay for the balance of the purchase price, without interest, which she did in this case.