In Sps. Co Chien v. Sta. Lucia Realty & Dev., Inc., et al., G.R. No. 162090, January 31, 2007 (Puno, J), there was a sale of a realty but there was a contention that the sale is void for lack of prior certificate of registration and license to sell by the HLURB. Is the contention correct? Why?
Held: No. P.D. 957 is a law that seeks to regulate the sale of subdivision lots and condominiums in view of the increasing number of incidents wherein “real estate subdivision owners, developers, operators, and/or sellers have reneged on their representations and obligations to proved and maintain properly” the basic requirements and amenities, as well as “reports of alarming magnitude… of swindling and fraudulent manipulations perpetrated by unscrupulous subdivision and condominium sellers and operators.” As such, P.D. 957 requires the registration not just of the developers, seller, brokers and/or owners of the project but also of the project itself. Upon the registration of the project, a license to sell must be obtained prior to the sale of the subdivision lots or condominium units therein. The law also provides for the suspension and revocation of the registration and license in certain instances, as well as the procedure to be observed in the event thereof. Finally, the law provides for administrative fines and other penalties in case of violation of, or non-compliance with its provisions.
A review of the relevant provisions of P.D. 957 reveals that while the law penalizes the selling of subdivision lots and condominium units without prior issuance of a Certificate of Registration and License to Sell by the HLURB, it does not provide that the absence thereof will automatically render a contract, otherwise validly entered, void. The penalty imposed by the decree is the general penalty provided for the violation of any of its provisions. It is well-settled in this jurisdiction that the clear language of the law shall prevail. This principle particularly enjoins strict compliance with provisions of law which are penal in nature, or when a penalty is provided for the violation thereof. With regard to P.D. 957, nothing therein provides for the nullification of a contract to sell in the event that the seller, at the time the contract was entered into, did not possess a certificate of registration and license to sell. Absent any specific sanction pertaining to the violation of the questioned provisions (Secs. 4 and 5), the general penalties provided in the law shall be applied. The general penalties for the violation of any provisions in P.D. 957 are provided for in Sections 38 and 39. As can early be seen in the aforequoted provisions, the same do not include the nullification of contracts that are otherwise validly entered.
The requirements of Section 4 and 5 of P.D. 957 do not go into the validity of the contract, such that the absence thereof would automatically render the contract null and void. It is rather more of an administrative convenience in order to allow for a more effective regulation of industry. While it is the intent of the prohibition in Section 5 of P.D. 957 “to prevent cases of swindling and fraudulent manipulations perpetrated by unscrupulous subdivision and condominium seller s and operators” and to ensure that “penalties be imposed on fraudulent practices and manipulations committed in connection therewith”, such does not obtain in this case, as it is undisputed that the title to the subject property has been available for more than a year, and the Eagle Ridge project was almost 100% completed, before Spouses Co Chien decided to have the Contract declared void to seek a refund of their down payment. Contrary to Spouses Co Chien’s bare allegation of bad faith on the part of the private respondents, the Court of Appeals found that at the time the Contract to Sell was executed, the applications for the Certification and the License were already pending with the HLURB but were only issued several months thereafter. More importantly, when Spouse Co Chien received notice of the availability of the title to the subject property, the private respondents had long since been issued the Certificate and License. It was in fact Spouses Co Chien who, instead of paying the balance as required in the contract, sought to renegotiate the same, and failing therein, sought to nullify the contract a year and a half after notice that the title to the subject property, free from any liens and encumbrance, was already available for delivery.
One of the purposes of P.D. 957 is to discourage and prevent unscrupulous owners, developers, agents and sellers from reneging on their obligations and representations to the detriment of innocent purchasers. The law mandates HLURB to close regulate, supervise and monitor the real estate industry, particularly residential developments such as subdivisions and condominium projects. To this end, P.D. 957 provides for the issuance, suspension, revocation and even the outright denial of registration and license to developers, agents and the project itself, as well as penalties for the non-compliance with the requirements provided therein. It does not, however, provide for the nullification of a contract, due to the lack of registration and license at the moment of execution, which in this case was thereafter undisputedly issued by HLURB. As correctly averred by respondent Alsons, the requirement for registration and license is primarily directed at preventing fraudulent schemes from being perpetrated on the public who seek to have their own abode. No fraud has been alleged, much less proven, by Spouses Co Chien in the present case. The lack of certificate and registration, without more, while penalized under the law, is not in and of itself sufficient to render a contract void. Such a deficiency, however, together with other relevant factors may be duly considered in nullifying a contract, should the circumstances so demand.
3 kinds of estoppel.
There are generally three kinds of estoppel: (1) estoppel in pais; (2) estoppel by deed; and (3) estoppel by laches. In the first classification, a person is considered in estoppel if by his conduct, representations or admissions or silence when he ought to speak out, whether intentionally or through culpable negligence, “causes another to believe certain facts to exist and such other rightfully relies and acts on such belief, as a consequence of which he would be prejudiced if the former is permitted to deny the existence of such facts.” Estoppel by deed, on the other hand, occurs when a party to a deed and his privies are precluded from denying any material fact stated in the said deed as against the other party and his privies. Estoppel by laches is considered an equitable estoppel wherein a person who failed or neglected to assert a right for an unreasonable and unexplained length of time is presumed to have abandoned or otherwise declined to assert such right and cannot later on seek to enforce the same, to the prejudice of the other party, who has no notice or knowledge that the former would assert such rights and whose condition has so changed that the latter cannot, without injury or prejudice, be restored to his former states. (Placewell International Services Corp. v. Ireneo B. Camote, G.R. No. 169973, June 26, 2006; Heirs of Eulalio Ragua v. Court of Appeals, G.R. Nos. 88521-22 and 89366-67, January 31, 2000).
Binding effect of contracts.
It is well-settled that the terms of a contract have the force of law between the parties. As such, the terms thereof shall govern their relationship, rights and obligations in connection with the same. Obligations arising from contracts should be complied with in good faith. Unless the stipulations in the contract are contrary to law, morals, good customs, public order or public policy, the same are binding as between the parties. (Romeo G. Roxas, et al. v. Antonio de Zuzuarregui, et al., G.R. Nos. 152072 and 152104, January 31, 2006). In the instant case, as previously discussed, the Contract to Sell between Spouses Co Chien and private respondent Sta. Lucia and Alsons has all the essential requisites of a valid and binding contract. while there is non-compliance with the requirements in Section 4 and 5 of P.D. 957 due to the lack of the Certificate and License at the moment of execution, such defect does not affect the intrinsic validity of the contract, particularly in this case wherein the said Certificate and License have been issued prior to the demand for the payment of the balance of the purchase price and the project is almost 100% complete and operational.
Effect of failure develop subdivision within one year from the issuance of license.
In Zamora Realty Dev. Corp. v. Office of the President, et al., G.R. No. 165724, November 2, 2006, there was purchase of a subdivision property. The buyer notified the seller that it was suspending payment due to its failure to develop, hence, the seller sewed a notice of cancellation by notarial act. The buyer assailed the cancellation which was affirmed up to the CA.
Before the SC, it raised the issue of whether the buyer violated the contract when he suspended the payment of the monthly amortizations due to the incomplete development. It was
Held: No, there was no violation. Under PD 957, the seller is obliged to develop the subdivision, otherwise, the buyer has the right to suspend payment and the only requirement under the law is to give due notice to the owner or developer of the buyer’s intention to suspend payment.
The contention that the written notice was belatedly sent is not correct since there was a verbal notice to suspend payment.
The law does not specifically provide the form of notice to be given to the owner/developer. Considering the purpose of the law and the evil sought to be prevented, a verbal notice of the intention to suspend remittance of payment is sufficient. Such a holding is consistent with the ruling in Francel Realty Corp. v. Sycip, G.R. No. 154684, September 8, 2005, 469 SCRA 424, where the requirement of an HLURB clearance under Section 23, Rule VI of the Rules Implementing P.D. No. 957 before the buyer of a subdivision lot or a home could lawfully withhold monthly payments was declared void. It was explained:
x x x To require clearance from the HLURB before stopping payment would not be in keeping with the intent of the law to protect innocent buyer of lots or homes from scheming subdivision developers. To give full effect to such intent, it would be fitting to treat the right to stop payment to be immediately effective upon giving due notice to the owner or developer or upon filing a complaint before the HLURB against the erring developer. Such course of action would be without prejudice to the subsequent determination of its propriety and consequences, should the suspension of payment subsequently be found improper. (Tamayo v. Huang, G.R. No. 164136, January 25, 2006, 480 SCRA 156; Francel Realty Corp. v. Sycip).
Purpose of PD 957.
P.D. No. 957 was enacted with no other end in view than to provide a protective mantle over helpless citizens who may fall prey to the manipulations and machinations of unscrupulous subdivision and condominium sellers. (Eugenio v. Drilon, 322 Phil. 112 (1996)). It was issued in the wake of numerous reports that many real estate subdivision owners, developers, operators and/or seller have reneged on their representations and obligations to provide and maintain properly subdivision roads, drainage, sewerage, water systems, lighting systems, and other basic requirements for the health and safety of home and lot buyers. (Casa Filipina Realty Corp. v. Office of the Pres., 311 Phil. 170 (1995)).
The buyer justly withheld the payment of amortization of the subject lot, and seller’s unilateral cancellation of the contract to sell cannot be sustained. Consequently, the contract to sell still subsisted.
Option to suspend payment or demand for reimbursement given to buyer.
In case the developer of a subdivision or condominium fails in its obligation under Section 20 of P.D. No, 957, Section 23 of the law gives the buyer the option to demand reimbursement of the total amount paid, or to wait for further development of the subdivision, and when the buyer opts for the latter alternative, he may suspend payment of installments until such time that the owner or developer had fulfilled its obligation to him. (Tamayo v. Huang).
It is thus clear that the law provides two remedies in case of incomplete development of the subdivision project: (1) reimbursement of the total amount paid, including amortization interest but excluding delinquency interests, with interest thereon at the legal rate; or (2) for the buyer to suspend amortization payments until the completion of the project. These remedies are available to the prospective buyer to give effect to the law’s intent to protect the buyers from abusive owners/developers of subdivisions. In cases of incomplete development, it is the developer who is the one at fault, as it would then have violated its promise to the prospective buyers to provide the necessary facilities in the subdivision. The aggrieved party, therefore, is the prospective buyer because of the non-fulfillment of the developer’s commitment. As such, it is but logical that the option is given to the prospective buyer, not to the developer.
In those cases cited, the SC held since there had been no valid substitution by the heirs of the deceased party, therefore the judgment cannot be made binding upon them. In this case not only the heirs of the plaintiff interpose no objection to the jurisdiction of the court over their persons; they are actually claiming and embracing such jurisdiction. In doing so, their waiver is not even merely implied (by their participation in the appeal of said Decision), but express by their explicit espousal of such view in both the Court of Appeals and in the Supreme Court.
Thus, lack of jurisdiction over the person, being subject to waiver, is a personal defense which can only be asserted by the party who can thereby waive it by silence.
Spirit behind rule on substitution of parties.
It also pays to look into the spirit behind the general rule requiring a formal substitution of heirs. The underlying principle is not really because substitution of heirs is a jurisdictional requirement, but because non-compliance therewith results in the undeniable violation of the right to due process of those who, though not duly notified of the proceedings, are substantially affected by the decision rendered therein. (Vda. de Salazar v. CA, 320 Phil. 737 (1997)). Such violation of due process can only be asserted by the persons whose rights are claimed to have been violated, namely the heirs to whom the adverse judgment is sought to be enforced.
Care should, however, be taken in applying the foregoing conclusions. In People v. Florendo, 77 Phil. 16 (1946) it was held that the proceedings that took place after the death of the party are void, it was held that questioned the validity of the decision, claiming it to be void for failure to comply with the requirement of substitution under Sec. 16, Rule 3 of the Rules of Court. They cited the ruling in Vda. de Haberer v. CA, G.R. No. 42699 and 42709, May 26, 1981, 104 SCRA 534, and Ferreria v. Vda. de Gonzales, 104 Phil. 143 (1958), where the SC ruled:
“Thus, it has been held that when a party dies in an action that survives and no order is issued by the court for the appearance of the legal representative or of the heirs of the deceased in substitution of the deceased, and as a matter of fact no substitution has even been effected, the trial held by the court without such legal representatives or heirs and the judgment rendered after such trial are null and void because the court acquired no jurisdiction over the persons of the legal representatives or of the heirs upon whom the trial and judgment would be binding.
In the present case, there had been no court order for the legal representative of the deceased to appear, nor had any such legal representative appeared in court to be substituted for the deceased; neither had the complainant even procured the appointment of such legal representative of the deceased, including appellant, ever asked to be substituted for the deceased. As a result, no valid substitution was effected, consequently, the court never acquired jurisdiction over appellant for the purpose of making her a party to the case and making decision binding upon her, either personally or as a representative of the estate of her deceased mother.”
The SC however ruled that unlike jurisdiction over the subject matter which is conferred by law and is not subject to the discretion of the parties (Zamora v. CA, G.R. No. 78206, March 19, 1990, 183 SCRA 279), jurisdiction over the person of the parties to the case may be waived either expressly or impliedly. Implied waiver comes in the form of either voluntary appearance or a failure to object. (Manila Railroad Co. v. Attorney-General, 20 Phil. 523 (1911)).