Maceda Law (RA 6652)

This law should be read in relation to rights and obligations of the buyer. This law was enacted
precisely to protect the buyer. This is a special law. The best way to remember the law, is to
remember the official name of the law: Realty Installment Buyer Act.

Realty This law can only be invoked if the object of the sale is residential realty.

(Note: not all immovables are considered as realty; the law does not apply to sale of industrial or
commercial property.)

Installment This law can only be invoked if the sale is on installment payments.

(Note: similarities with the Recto Law: (1) both laws apply to sales on installments, and (2) both
laws were passed to protect buyers)

(Note: Not all sales on credit are covered, only sales on credit on installment basis; For example: A
sale wherein it was stipulated that payment of the of the price shall be made upon perfection,
with the balance payable in 1 year this is a sale on credit on a straight basis.)

Buyer This law was intended to protect buyers.

(Note: Before the effectivity of this law, when a buyer in this kind of sales failed to pay the balance,
the seller was given the right to rescind the sale. Normally, mutual restitution would result, i.e.,
return of house and lot, and the price. However, seller would insert a forfeiture clause stating that
the amounts paid would constitute rentals and damages. Thus, the installments made by the buyer
would not be returned.)

(Note: it is a misconception to state that this law would only apply when the buyer has paid at least
2 years of installments.)

Rights of the buyer -

o Paid less than 2 years of installments 60 day grace period.

The buyer would have the right to pay for the arrears without penalty or interest. He can
even assign his rights or advance the balance.

o Paid at least 2 years of installments

Grace period - 1 month for every 1 year of installment payments.

The buyer can pay the installments due without additional interest.

The right to pay within the grace period can only be exercised by the buyer once
every 5 years.

If the contract is cancelled, payment of the cash surrender value equivalent to

50% of the total payments made, and, after 5 years of installments, an additional
5% every year but not to exceed 90% of the total payments made.

Down payments, deposits or options on the contract shall be included in the

computation of the total number of installment payments made.

Cancellation - A stipulation granting automatic cancellation is void. Actual cancellation of the

contract shall only take place:

1. After 30 days from receipt by the buyer of the notice of cancellation or the demand for
rescission of the contract by a notarial act; and
2. If the at least 2 years of installments have been paid, upon full payment of the cash
surrender value to the buyer.
 Validity of forfeiture clause If the buyer has paid at least 2 years of installment, a forfeiture clause
is void because the law requires the return of the cash surrender value. Otherwise, If the buyer has
paid less than 2 years of installment, a forfeiture clause is valid.

Q: A sold to B a residential condominium unit for P10M under the following terms: 50% down,
balance to be paid in 60 monthly installments. B paid until the 46 th installment. He then failed to
pay the 47th and 48th installments. Can B still pay the arrears on the 49th month?

A: Yes. More than 2 years of installments have been paid. (46/12 = more than 3 years). Under the Maceda
Law, the buyer is entitled to a grace period of 1 month for every year paid. In the case, B had a grace
period of 3 months. The 49th month was within the graced period.

Q: In a contract of sale of a residential realty, payment was to be made in equal monthly

installments for 20 years. The first 3 months were paid then the buyer defaulted. However, the
buyer was able to pay with in the 60 day grace. But again he was unable to pay for the 3 rd
installment of the 5th year. What is the grace period?

A: Wala na. Only have a grace period for every 5 years.

Remedies

Take note that remedies are provided only to aggrieved parties.

1526 enumerates the remedies of the unpaid seller.

1. Right to withhold the goods
2. Stoppage in transitu
3. Resale
4. Rescind.

But there are other remedies.

Who is an unpaid seller?

If 80% is paid, unpaid yes.

But does it mean he must be a party to the contract? No, the agent may be considered as a seller if the bill
of lading has been indorsed to him. Also heirs, assignees.

Even if ownership has already passed, the remedies are available.

Note that even if possession is retained, ownership may have passed.

These remedies are alternative right to retain and stoppage in transitu

But the other remedies are not alternative retention kailangan.

Right to retain possessory lien lien of the seller possessory in character to distinguish it from the lien of
the seller over the thing sold if the buyer becomes insolvent. He must have physical possession.

Insolvency is not required but it is not the only ground. Look for the codal grounds. Sale on credit, lapsed,
etc.

If the seller instead of invoking the other remedies, filed an action for specific performance and the court
rendered judgment in his favor possessory lien is not extinguished. There is only an order for payment, it is
not certain,

As far as stoppage in transitu is concerned insolvency is required. Insolvency can exist after the perfection
of the contract while the goods are in transit.

The goods must be in transit and the buyer must have parted with possession.
Transit not equal to parting with possession. Possessory lien may be the proper remedy if no parting.

How is this right exercised:

1. taking actual possession
2. Instructing the common carrier to transport to a specified place.

However, if the goods are covered any a negotiable bill of lading, the bill of lading must be delivered to the
covered carrier. This is a form of protection for the common carrier.

If the buyer sold the goods but his buyer sold the goods to a third person, but the seller still has a
possessory lien or made use of his right of stoppage in transitu, the seller would not as a rule lose his
possessory lien.

Exceptions:
1. assent to alienation
2. even without consent, the 3rd person is a buyer in good faith and for value (negotiable document)

Right of resale
Possessory lien is a requirement.
Is insolvency required? No. But it may be a scenario. Because one of the grounds is failure to pay for an
unreasonable time. Expressly reserved.. other grounds.

Two notices are provided by law:

1) notice as to intention to resell
2) Notice of the time and place of the resale

These are not necessary. The firstly is important only if the buyer has defaulted for an unreasonable time.

The 2nd notice would be relevant in order to hold the buyer liable for deficiency in case the goods are sold for
a price less than the liability.

Ex. P100,000.00. The goods were only sold for 70, the 30 balance could only be recovered if the sale was
made in good faith. Therefore the second notice becomes relevant. Note that the buyer is prohibited from
directly or indirectly purchasing the goods in the resale.

The more problematic is: P100,000.00 goods. Sold for P150,000.00. Who has the right to the excess?
Under the law, the seller is not responsible for the excess.

What if partial payment has already paid, would the buyer be entitled to the return of what was paid? No.
The buyer was at fault.

If ownership has already passed to the buyer, may the seller resell the goods without rescission? Rescission
is not required. When goods are sold in the resale, the would terminate the ownership of the first buyer by
operation of law. The 3rd person acquires ownership

Right to rescind similar to resale ang grounds but not included is perishable ang goods.

Recto Law both protection of buyer and remedy of the seller.

Remedies provided in this law: 1484

1. exact fulfillment specific performance
2. Cancellation of the sale rescission
3. Foreclosure of the mortgage.

Ex: P5,000,000.00 Sale of a car payable in 10 equal annual payments. The buyer failed to pay the 3 rd
installment, can the buyer chose from the 3 remedies? If the action is filed within one month, what can be
collected. The only amount due per installment is 500,000. Only the due amount can be demanded except
when there is an acceleration clause.

What if default on 3rd year but was able to pay until he defaulted again on the 7 th year. Would the seller have
the right to chose from the 3 remedies? No. 7th installment is only one installment.
Default on 3rd and 4th installments note that the default in installments must be consecutive chose
cancellation of the contact. Mutual restitution. Ordinary, the seller would have the obligation to pay the
installments. But the law gives the seller to retain a reasonable amount to be considered as rentals.

May the seller retain everything? Yes. If the there is a forfeiture clause. This is one of the differences from
the Maceda Law. The recto law would only apply if the object is movable property.

However, if the there is a forfeiture clause, if it will be unconscionable, no retention of everything. It will
depend on the circumstances.

What if the obligation to pay was secured by a mortgage executed by the buyer over a diamond. And the
buyer failed to pay the 3rd and 4th installment, and the seller opted to foreclose the mortgage but there was a
deficiency. Would the seller have the right the deficiency? Yes. The recto law does not apply. The object sold
must be the one mortgaged for the recto law to apply

Bar Examination Question.

A sold a car to B on installments. The sale was secured by a chattel mortgage over the car and a
real estate mortgage over the land of C, Bs brother. B failed to pay two installments. A foreclose the chattel
mortgage but a the was a deficiency. Can A foreclose the real estate mortgage?

No. Under Art. 1484, once the seller forecloses the chattel mortgage on the thing sold, he shall
have no further action against the purchaser to recover any unpaid balance. Foreclosure of the real estate
mortgage is a form of recovery of the deficiency. Thus, foreclosure cannot be made.