REFUND UNDER THE MACEDA LAW (R.A.

6552) provide a different requirement for contracts to sell which

By: Atty. JOHN A. AGBAYANI (Esq.)* allow possession of the property by the buyer upon
execution of the contract like the instant case. Hence,
INTRODUCTION- The issue that confronts the seller petitioner cannot insist on compliance with the
when a default occurs in a realty installment sale is the requirement by assuming that the cash surrender value
right of the buyer to a refund if the contract to sell is payable to the buyer had been applied to rentals of the
rescinded . The law requires actual payment of the cash property after respondent failed to pay the installments
surrender value to the buyer to validly effect a rescission. due. “ More importantly, any stipulation that diminishes
A mere promise to refund is not enough and any or negates the right of the buyer to the cash surrender
stipulation that diminishes or negates the right to a refund value is null and void. Thus Section 7 of the Law states
is prohibited by the law. For contracts which are in that: “Any stipulation in any contract hereafter entered
default and had a payment of at least two years of into contrary to the provisions of Sections 3, 4, 5 and 6,
installments, the seller cannot resell the property until shall be null and void.”
actual refund is made because the rescission of the first
contract to sell is incomplete. Legally, the first contract D. COMPLAINT FOR A COURT ORDER TO
still exists and if the property is in the possession of the DEPOSIT THE AMOUNT WITH A BANK IS NOT
first buyer, the seller has no right to file an ejectment case EQUIVALENT TO ACTUAL REFUND- A mere
against him. attempt to deliver the cash surrender value to the buyer is
not legally compliant. The law requires full payment and
A. FULL PAYMENT OF CASH SURRENDER actual refund of the cash surrender value. In Planters Dev.
VALUE- For an effective cancellation to take place, the Bank vs. Chandumal, G.R. No. 195619, September 05,
cash surrender value shall be fully paid. The actual 2012, the Supreme Court held that:. “Thus, it prayed in
cancellation of the contract can only be deemed to take its complaint that it be ordered to “deposit with a banking
place upon the expiry of a 30-day period following the institution in the Philippines, for the account of
receipt by the buyer of the notice of cancellation or Defendants (sic), the amount of Ten Thousand Pesos
demand for rescission by a notarial act and the full (P10,000.00), Philippine Currency, representing the cash
payment of the cash surrender value (Olympia Housing surrender value of the subject property; x x x.” The
vs. Panasiatic Travel 395 SCRA 298. If the buyer fails or allegation that Chandumal made herself unavailable for
refuses to accept the refund, the proper process of payment is not an excuse as the twin requirements for a
effecting full payment shall be pursued under Article valid and effective cancellation under the law, i.e., notice
1249 to 1251 and Article 1256 of the New Civil Code of cancellation or demand for rescission by a notarial act
which define and regulate payment, tender of payment and and the full payment of the cash surrender value, is
consignation, respectively. mandatory..”

B. CASH SURRENDER VALUE INCLUDE DOWN E. REMEDY IF BUYER FAILS OR REFUSES TO

PAYMENT, DEPOSITS & OPTIONS- Down payments, ACCEPT THE REFUND- If the buyer refuses to accept
deposits or options on the contract shall be included in the the refund, the payment shall first be tendered to him. If
computation of the total number of installment payments he unjustifiably refuses to accept it, the amount shall be
made (Section 3-b). The cash surrender value increases consigned in court. Article 1256 of the New Civil Code
but not to exceed ninety (90%) percent of the total states that : if the creditor to whom tender of payment has
payments made. If the contract is canceled, the seller shall been made refuses without just cause to accept it, the
refund to the buyer the cash surrender value of the debtor shall be released from responsibility by the
payments on the property equivalent to fifty per cent of consignation of the thing or sum due. Consignation alone
the total payments made, and, after five years of shall produce the same effect in the following cases:(1)
installments, an additional five per cent every year but not When the creditor is absent or unknown, or does not
to exceed ninety per cent of the total payments made appear at the place of payment;(2) When he is
(Section 4-b). incapacitated to receive the payment at the time it is due;
(3) When, without just cause, he refuses to give a receipt;
C. STIPULATION, CONVERSION OR (4) When two or more persons claim the same right to
DIMINUTION OF CASH SURRENDER VALUE collect;(5) When the title of the obligation has been lost.
VOID– The Law requires that the cash surrender value be
actually refunded. A mere promise to refund is not F. EJECTMENT SUIT PREMATURE IF
sufficient. Treating the cash surrender value as unpaid CANCELLATION IS INVALID- An action for
rentals is proscribed. In Pagtalunan vs. Manzano 533 reconveyance or unlawful detainer is not akin to a judicial
SCRA 242, it was held that: “The provision does not rescission. An action for recovery of possession of the
1
real property can be dismissed as premature unless the was subsequently novated by Contract to Sell No. 2491-V.
cancellation is done in accordance with law. In The execution of Contract to Sell No. 2491-V
Associated Marine Officers and Seamen's Union of the accompanied an upward change in the contract price,
Philippines - PTGWO-ITF vs. Decena , G.R. No. which constitutes a change in the object or principal
178584, October 8, 2012 , it was held that : “Unless conditions of the contract. In entering into Contract to
properly cancelled, the buyer’s right to continue Sell No. 2491-V, the parties were impelled by causes
occupying the property subject of the Contract to Sell is different from those obtaining under Contract to Sell No.
still recognized. Lacking proof that the Shelter Contract 2482-V. On the part of petitioners, they agreed to the
Award has been cancelled in accordance with R.A. 6552, terms and conditions of Contract to Sell No. 2491-V not
there is as yet no basis to declare respondent's possession only to acquire ownership over the subject property but
of the house and lot as illegal. “ also to avoid the consequences of their default under
Contract No. 2482-V. On Del Monte’s end, the upward
G. CHALLENGING REFUNDS – Late payment change in price was the consideration for entering into
charges and novation are effective tools to cushion the Contract to Sell No. 2491-V. In order that an obligation
impact of the buyer’s claim for refund. may be extinguished by another which substitutes the
same, it is imperative that it be so declared in unequivocal
G.1 SELLER CAN DEMAND PAYMENTS OF THE terms, or that the old and the new obligations be on every
BALANCE OF THE PURCHASE PRICE PLUS point incompatible with each other. The test of
INTEREST AND CHARGES. The technical flaw that incompatibility is whether or not the two obligations can
the seller may have committed such as the lack of a stand together, each one having its independent existence.
notarial rescission and actual refund to the buyer does not If they cannot, they are incompatible and the latter
excuse the buyer from paying the balance of the purchase obligation novates the first. The execution of Contract to
price, interest and penalties. If the buyer defaults, his Sell No. 2491-V created new obligations in lieu of those
obligation to pay the principal, interest and other charges under Contract to Sell No. 2482-V, which are already
under the contract still subsists. Notwithstanding the considered extinguished upon the execution of the second
defective notice of cancellation upon the buyer, he should contract. The two contracts do not have independent
still comply with the contract . He cannot take undue existence for to hold otherwise would present an absurd
advantage of the error committed by the Seller and escape situation where the parties would be liable under each
payment of what is due under the agreement. Thus, in contract having only one subject matter. “
Leano vs. CA, supra, the Supreme Court ordered the
buyer to pay the outstanding balance of the Contract To CONCLUSION- Amidst some twists introduced by
Sell together with the interest and charges under the jurisprudence and the application of the legal principles
contract even if it declared that the contract was not of novation, estoppel and laches, the Supreme Court, in
validly cancelled according to R.A. 6552. Also in various cases , has mandated the parties in realty
Pagtalunan vs. Manzano (Ibid) , it was held that : installment sale to promptly and properly exercise their
“Instead, the buyer should be allowed to pay the rights under the Law. Otherwise, the intended benefits
installments or the purchase price of the property may become illusory however noble the objectives of the
pursuant to the contract to sell within the grace period. Law may be. Failure to refund has a far-reaching cost to
However if the grace period has elapsed, the buyer should the seller because legally the contract still subsists. As
pay interest according to Art. 2209 of the new Civil such, the buyer has the right to pay the balance and the
Code.” The latter case imposed an interest rate based on seller is obligated to deliver the property. If the property
Art. 2209 of the New Civil Code because the contract did can no longer be delivered because it has been sold to
not stipulate the interest rate. another, the seller is obliged to pay its market value or
deliver an equivalent property, at the option of the buyer.
G.2. SELLER CAN NOVATE THE CONTRACT OF (Active Realty vs. Daroya 382 SCRA 152).
DEFAULTING BUYER- A seller can avoid the _______________________________________________
application of refund under the law if there is a novation _______________________________________________
of the old contract which entitled the buyer to a refund. *Bachelor of Laws (Ll.B), San Beda College, Manila
In Fabrigas vs Del Monte, 476 SCRA 226, the Court had (1978); Admitted to the Bar (1979, 18th Place).
the occasion to rule that if a second contract to sell Professor, San Beda College of Law, Manila (1994-2008)
involving the same property is executed by the parties, the
subsequent contract governs their relationship if the two
contracts cannot independently exist from each. Thus, it
was held that : “Notwithstanding the improper rescission,
the facts of the case show that Contract to Sell No. 2482-V