In Spouses Noynay v. Citihomes Builder and Development, Inc., the Supreme Court reinforced the protections afforded to real estate installment buyers under the Maceda Law. The Court ruled that a property seller could not evict buyers who had paid installments for over two years without first complying with the Maceda Law’s requirements for contract cancellation, including providing a notice of cancellation and paying the cash surrender value of the payments made. This decision underscores the importance of strict adherence to the Maceda Law to protect the rights of vulnerable installment buyers in the Philippines.

Contract Assignments and Buyer Protection: Who Has the Right to Evict?

This case revolves around a contract to sell a house and lot between Spouses Noynay and Citihomes. The Spouses Noynay eventually defaulted on their payments, leading Citihomes to file an unlawful detainer suit to evict them. A key twist emerged when it was revealed that Citihomes had assigned its rights under the contract to United Coconut Planters Bank (UCPB). This assignment raised the central question: Did Citihomes still have the right to evict the Spouses Noynay, or did that right transfer to UCPB? The case further explores the protection afforded to buyers by the Maceda Law.

The Municipal Trial Court for Cities (MTCC) initially dismissed Citihomes’ complaint, reasoning that the assignment to UCPB divested Citihomes of its rights. The Regional Trial Court (RTC), however, reversed this decision, arguing that the assignment was limited to the installment accounts receivable and did not include the transfer of title or ownership. The Court of Appeals (CA) affirmed the RTC’s conclusion that Citihomes retained the right to evict as the registered owner. The Supreme Court disagreed with the RTC and CA and sided with the MTCC, though not entirely for the same reasons.

The Supreme Court’s analysis hinged on the interpretation of the Assignment of Claims and Accounts between Citihomes and UCPB. The Court found that the assignment was not merely a transfer of receivables but a transfer of all of Citihomes’ rights, titles, and interests in the contract to sell, including the right to cancel the contract upon default. The relevant portion of the agreement states:

NOW, THEREFORE, for and in consideration of the foregoing premises, the ASSIGNOR hereby agrees as follows:

1. The ASSIGNOR hereby assigns, transfers and sets over unto the ASSIGNEE all its rights, titles and interest in and to, excluding its obligations under the Contract/s to Sell enumerated and described in the List of Assigned Receivables which is hereto attached and marked as Annex “A” hereof, including any and all sum of money due and payable to the ASSIGNOR, the properties pertaining thereto, all replacements, substitution, increases and accretion thereof and thereto which the ASSIGNOR has executed with the Buyers, as defined in the Agreement, and all moneys due, or which may grow upon the sales therein set forth.
2. For purposes of this ASSIGNMENT, the ASSIGNOR hereby delivers to the ASSIGNEE, which hereby acknowledges receipt of the following documents evidencing the ASSIGNOR’s title, right, interest, participation and benefit in the assigned Installment Account Receivables listed in Annex “A” and made as integral part hereof.

   a) Original Contracts to Sell

   b) Transfer Certificates of Title

3. The ASSIGNOR, hereby irrevocably appoints the ASSIGNEE to be its true and lawful agent or representative for it and in its name and stead, but for such ASSIGNEE’s own benefit: (1) to sell, assign, transfer, set over, pledge, compromise or discharge the whole, or any part, of said assignment; (2) to do all acts and things necessary, or proper, for any such purpose; (3) to ask, collect, receive and sue for the moneys due, or which may grow due, upon the said Assignment; and (4) to substitute one person, or more, with like powers; hereby ratifying and confirming all that said agent or representative, or his substitute, or substitutes, shall lawfully do, by virtue hereof.

This comprehensive assignment meant that Citihomes had relinquished its right to cancel the contract and, consequently, its right to evict the Spouses Noynay. As the Court emphasized, an assignee is deemed subrogated to the rights and obligations of the assignor and is bound by the same conditions. With the right to cancel residing with UCPB, Citihomes lacked the necessary cause of action for unlawful detainer.

However, the Supreme Court did not solely rely on the assignment issue. Even if Citihomes had retained the right to cancel the contract, the Court found that it failed to comply with the Maceda Law (Republic Act No. 6552), which protects installment buyers of real estate. The Maceda Law outlines specific procedures for canceling contracts to sell, particularly when the buyer has paid installments for a certain period.

Section 3(b) of the Maceda Law provides:

(b) 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 percent of the total payments made and, after five years of installments, an additional five percent every year but not to exceed ninety percent 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.

The lower courts had concluded that Spouses Noynay were not entitled to the cash surrender value because they had not completed the two-year minimum period of paid amortizations. However, the Supreme Court, referencing the contract and the admissions made during the preliminary conference, determined that the Spouses Noynay had been paying for more than three years.

The factual stipulations made during the preliminary conference were critical. The Court cited Oscar Constantino v. Heirs of Oscar Constantino, stating that judicial admissions are binding on the parties. These admissions are a waiver of proof, and evidence to the contrary should be ignored. In this case, the MTCC noted in its Preliminary Conference Order that Citihomes admitted that Spouses Noynay had been paying the monthly amortization for more than three years, only stopping payments by January 8, 2008.

Given that Spouses Noynay had paid installments for more than two years, the Maceda Law required Citihomes to provide a notice of cancellation by notarial act and to pay the cash surrender value before the cancellation could be considered valid. Since Citihomes did not pay the cash surrender value, the Supreme Court concluded that the contract to sell was not validly canceled, and therefore, the Spouses Noynay’s possession of the property was not illegal. As such, Citihomes had no basis to evict them.

The impact of this ruling is significant for both sellers and buyers in real estate installment contracts. Sellers must understand that assigning their rights under a contract to sell may mean relinquishing their right to cancel the contract and evict the buyer. Moreover, even if they retain that right, strict compliance with the Maceda Law is essential, especially regarding the notice of cancellation and the payment of the cash surrender value.

For buyers, this case serves as a reminder of the protections afforded to them by the Maceda Law. It reinforces the principle that developers cannot simply evict buyers who have been paying installments without following the proper legal procedures. Buyers who believe their rights have been violated should seek legal advice to understand their options.

FAQs

What was the key issue in this case?	The key issue was whether Citihomes had the right to evict Spouses Noynay from the property, considering the assignment of rights to UCPB and the provisions of the Maceda Law. The court needed to determine if Citihomes retained the right to cancel the contract and if the Maceda Law’s requirements for cancellation were met.
What is the Maceda Law?	The Maceda Law (R.A. 6552) is a law that protects real estate installment buyers in the Philippines. It provides certain rights and protections to buyers who have paid installments for a certain period, including the right to a grace period and the right to a refund of a portion of their payments if the contract is canceled.
What is a cash surrender value?	Cash surrender value, under the Maceda Law, refers to the amount the seller must refund to the buyer if the contract is canceled, provided the buyer has paid installments for at least two years. It’s equivalent to 50% of the total payments made, with additional percentages for payments made after five years.
What does it mean to assign a contract?	Assigning a contract means transferring one’s rights and obligations under the contract to another party. In this case, Citihomes assigned its rights under the contract to sell to UCPB, which included the right to receive payments and potentially the right to cancel the contract.
How did the assignment of rights affect Citihomes’ case?	The Supreme Court determined that the assignment of rights to UCPB included the right to cancel the contract. Because Citihomes had assigned this right, it no longer had the legal standing to file an unlawful detainer case against Spouses Noynay.
What did the Court say about the Spouses Noynay’s payment history?	The Court determined, based on the contract and admissions made during the preliminary conference, that Spouses Noynay had been paying the amortizations for more than three years. This entitled them to the protections of the Maceda Law, including the right to receive a cash surrender value upon cancellation of the contract.
Why was the payment of cash surrender value important in this case?	The payment of cash surrender value is a mandatory requirement under the Maceda Law for a valid cancellation of a contract to sell when the buyer has paid installments for at least two years. Since Citihomes did not pay the cash surrender value, the Court ruled that the contract was not validly canceled.
What was the final ruling of the Supreme Court?	The Supreme Court ruled in favor of Spouses Noynay, reversing the decision of the Court of Appeals and reinstating the decision of the Municipal Trial Court for Cities. The Court held that Citihomes did not have a valid cause of action for unlawful detainer because it had assigned its rights to UCPB and had failed to comply with the Maceda Law.

This case illustrates the interplay between contract law, property law, and consumer protection laws in the Philippines. It emphasizes the importance of carefully reviewing contracts, understanding the implications of assigning contractual rights, and complying with the requirements of the Maceda Law to protect the rights of real estate installment buyers.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Spouses Michelle M. Noynay And Noel S. Noynay, Petitioners, vs. Citihomes Builder And Development, Inc., Respondent., G.R. No. 204160, September 22, 2014