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.36

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 interests but excluding delinquency interests, with interest thereon at the legal rate;37 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 laws 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 developers commitment. As such, it is but logical that the option is given to the prospective buyer, not to the developer.

Petitioner therefore cannot insist that payments made by respondent be returned to him; neither can respondent be compelled to accept another property in lieu of the lot subject of the contract. To reiterate, respondent, as prospective buyer, had opted to exercise his right to suspend payment and wait for the completion of the subdivision project. He cannot therefore be forced to accept reimbursement of his amortization payments or to accept a lot different from the subject of the contract.http://www.lawphil.net/judjuris/juri2006/nov2006/gr_165724_2006.html

G.R. No. 154684 September 8, 2005

FRANCEL REALTY CORPORATION, Petitioners, vs.RICARDO T. SYCIP, Respondent.

D E C I S I O N

PANGANIBAN, Acting CJ:

n general, lack of jurisdiction over the subject matter may be raised at any stage of the proceeding, even on appeal. This defense may be determined from the factual allegations of the complaint, regardless of the answer or even before the answer is filed.

__________________

* On official business.

The Case

Before us is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Court, assailing the February 2, 2001 Decision2 and August 14, 2002 Resolution3 of the Court of Appeals in CA-GR CV No. 55127. The CA disposed as follows:

"It is not disputed that [petitioner] filed an illegal detainer case against [respondent] docketed as Civil Case No. 1310 before the Municipal Trial Court [MTC] of Bacoor, Cavite, which was accordingly dismissed by the MTC (See answer, p. 28, record). The filing of the instant case is another blatant attempt by [petitioner] to circumvent the law. For it is well-settled that where a complaint arises from the failure of a buyer [of real property] on installment basis to pay based on a right to stop monthly amortizations under Presidential Decree No. 957, as in the case at bench, the determinative question is exclusively cognizable by the Housing and Land Use Regulatory Board (HLURB) (Francel Realty Corp. v. Court of Appeals, 252 SCRA 127 [1996]).

"WHEREFORE, premises considered, the decision appealed from is hereby AFFIRMED in toto."4

The assailed Resolution denied petitioners Motion for Reconsideration.

The Facts

The CA narrated the facts as follows:

"x x x [I]n November, 1989, [petitioner] and [respondent] entered into a contract to sell a house and lot covered by TCT No. T-281788. Upon execution of the contract to sell, [respondent] made a down payment of P119,700.00, which was considered as monthly rentals at the rate of P2,686.00 per month. On March 16, 1990, the townhouse subject of the contract to sell was transferred in the name of [respondent] as evidenced by TCT No. T-281788. Despite the transfer of the title in the name of [respondent], the latter refused to pay the balance of P250,000.00. By applying the down payment of P119,700.00 to defendants monthly rental starting from December 1989, said amount has been reduced to nothing. Despite several demands made by [petitioner] to [respondent], including the demand dated December 12, 1991 made by [petitioners] counsel, the [respondent] refused to reconvey the subject property to [petitioner]. The [petitioner] suffered actual damages in the form of repairs amounting to not less than P100,000.00 as well as moral and exemplary damages, attorneys fees and litigation expenses. x x x.

"The [respondent] filed a motion to dismiss on the ground of lack of jurisdiction but the court below denied the motion stating that the ground relied upon by [respondent did not appear to be] indubitable.

"Denying the material allegations of the complaint, the [respondent] again invoked the courts lack of jurisdiction over the subject matter of the case. Further, there is a pending case between the same parties and involving the same townhouse before the Housing and Land Use Regulatory Board for unsound real estate business practices. Likewise, the [respondent] justified his refusal to pay the amortizations alleging that the [petitioner] sold and delivered to him a defective townhouse unit under Sec. 3 of Presidential Decree No. [957].

"After trial, the court below dismissed the case for lack of jurisdiction."5

Ruling of the Court of Appeals

Agreeing with the trial court, the CA held that the case involved not just reconveyance and damages, but also a determination of the rights and obligations of the parties to a sale of real estate under PD 957; hence, the case fell exclusively under the jurisdiction of the HLURB. The appellate court observed that respondent and other buyers of the townhouses had notified petitioner of their intention to stop paying amortizations because of defective structures and materials used in the construction; they had in fact filed other cases, also before the HLURB, against petitioner for unsound real estate business practice.

Noting that petitioners illegal detainer case against respondent had been dismissed by the MTC, the appellate court concluded that the filing of the instant case was another blatant attempt to circumvent the law.

Hence this Petition.6

Issues

In its Memorandum, petitioner raises the following issues:

"A. Whether or not the lower court can dismiss, after full blown trial, Civil Case No. BCV-94-2 of the RTC, Imus, Cavite, on the ground of lack of jurisdiction.

"B. Whether or not the lower court can dismiss this case in spite of the indisputable fact that respondent never secured HLURB authority or clearance to stop payment of monthly rentals."7

The Courts Ruling

The Petition lacks merit.

First Issue:

Dismissal for Lack of Jurisdiction

Before going into the jurisdictional question, we must at the outset point out that, contrary to petitioners assignment of errors, the trial courts Decision is not the proper subject of this Rule 45 Petition. Rather, it is the Decision of the CA that is up for review by this Court. This mistake in stating the issues could have been fatal to petitioners case, had it not correctly restated them in its arguments and discussion.8 That said, we now proceed to the main issues.

Petitioner argues that the CAs affirmation of the trial courts dismissal of its case was erroneous, considering that a full-blown trial had already been conducted. In effect, it contends that lack of jurisdiction could no longer be used as a ground for dismissal after trial had ensued and ended.

The above argument is anchored on estoppel by laches, which has been used quite successfully in a number of cases to thwart dismissals based on lack of jurisdiction. Tijam v. Sibonghanoy,9 in which this doctrine was espoused, held that a party may be barred from questioning a courts jurisdiction after being invoked to secure affirmative relief against its opponent. In fine, laches prevents the issue of lack of jurisdiction from being raised for the first time on appeal by a litigant whose purpose is to annul everything done in a trial in which it has actively participated.10

Laches is defined as the "failure or neglect for an unreasonable and unexplained length of time, to do that which, by exercising due diligence, could or should have been done earlier; it is negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert it either has abandoned it or declined to assert it."11

The ruling in Sibonghanoy on the matter of jurisdiction is, however, the exception rather than the rule.12 Estoppel by laches may be invoked to bar the issue of lack of jurisdiction only in cases in which the factual milieu is analogous to that in the cited case. In such controversies, laches should be clearly present; that is, lack of jurisdiction must have been raised so belatedly as to warrant the presumption that the party entitled to assert it had abandoned or declined to assert it. 13 That Sibonghanoy applies only to exceptional circumstances is clarified in Calimlim v. Ramirez,14 which we quote:

"A rule that had been settled by unquestioned acceptance and upheld in decisions so numerous to cite is that the jurisdiction of a court over the subject-matter of the action is a matter of law and may not be conferred by consent or agreement of the parties. The lack of jurisdiction of a court may be raised at any stage of the proceedings, even on appeal. This doctrine has been qualified by recent pronouncements which stemmed principally from the ruling in the cited case of Sibonghanoy. It is to be regretted, however, that the holding in said case had been applied to situations which were obviously not contemplated therein. The exceptional circumstance involved in Sibonghanoy which justified the departure from the accepted concept of non-waivability of objection to jurisdiction has been ignored and, instead a blanket doctrine had been repeatedly upheld that rendered the supposed ruling in Sibonghanoy not as the exception, but rather the general rule, virtually overthrowing altogether the time-honored principle that the issue of jurisdiction is not lost by waiver or by estoppel."15

Indeed, the general rule remains: a courts lack of jurisdiction may be raised at any stage of the proceedings, even on appeal.16 The reason is that jurisdiction is conferred by law, and lack of it affects the very authority of the court to take cognizance of and to render judgment on the action.17 Moreover, jurisdiction is determined by the averments of the complaint, not by the defenses contained in the answer.18

From the very beginning, the present respondent has been challenging the jurisdiction of the trial court and asserting that the HLURB is the entity that has proper jurisdiction over the case. Consonant with Section 1 of Rule 16 of the Rules of Court, he had raised the issue of lack of jurisdiction in his Motion to Dismiss. Even when the Motion was denied, he continuously invoked lack of jurisdiction in his Answer with affirmative defenses, his subsequent pleadings, and verbally during the trial. This consistent and continuing objection to the trial courts jurisdiction defeats petitioners contention that raising other grounds in a Motion to Dismiss is considered a submission to the jurisdiction of the court.19

We stress that Rule 9 of the Rules of Court requires that all defenses and objections -- except lack of jurisdiction over the subject matter, litis pendentia, bar by prior judgment and/or prescription -- must be pleaded in a motion to dismiss or in an answer; otherwise, they are deemed waived. 20 As to the excepted grounds, the court may dismiss a claim or a case at any time "when it appears from the pleadings or the evidence on record" that any of those grounds exists.

In the present case, the trial court at first denied the Motion to Dismiss filed by respondent, because the grounds he had relied upon did not appear to be indubitable. The ruling was made under the pre-1997 Rules of Civil Procedure, which then provided that the court, "after hearing x x x may deny or grant the motion or allow amendment of pleading, or may defer the hearing and determination of the motion until the trial if the ground alleged therein does not appear to be indubitable."21 Moreover, the factual allegations of the Complaint22 that petitioner filed below for reconveyance and damages sufficiently conformed to the jurisdictional requisites for the exercise of the MTCs authority. Thus, in accord with the procedures then prescribed, the court conducted trial to allow all arguments and evidence to surface.

Significantly, petitioner has previously sued respondents brother and co-complainant before the HLURB over the same subdivision project. In Francel Realty v. Court of Appeals and Francisco Sycip,23 petitioners Complaint for unlawful detainer was premised on the failure of respondents brother to pay monthly amortizations on the basis of his right to stop paying them under PD 957. In that case, the Court had ruled that the issue involved a "determinative question x x x exclusively cognizable by the HLURB"; that is, a "determination of the rights and obligations of parties in a sale of real estate under P.D. 957."24

Because an earlier Complaint had been filed by Sycip before the HLURB against Francel Realty Corporation for unsound real estate business practices, the Court dismissed petitioners cause of action. The reason for the dismissal was that the Complaint should "instead be filed as a counterclaim in [the] HLURB [case] in accordance with Rule 6, Section 6 of the Rules of Court x x x."25 For the same reason, this Court has ruled that a suit to collect on a promissory note issued by a subdivision lot buyer involves the "sales of lots in commercial subdivisions"; and that jurisdiction over such case lies with the HLURB, not with the courts.26

Further, the rules governing counterclaims27 and the prohibition on the splitting of causes of action (grounded on the policy against a multiplicity of suits)28 should effectively bar the Complaint for reconveyance and damages filed by petitioner. Its Complaint came at the heels of its unlawful detainer suit that had previously been dismissed by the MTC of Imus, Cavite, and of the litigation filed by respondent against Francel Realty before the HLURB. Petitioner avers that the present controversy is not cognizable by the HLURB, because it was filed by the developer rather than by the buyer, as provided under PD No. 1344.29 Such pretension flies in the face of the ruling of the Court in Francel Realty Corp. v. Court of Appeals and Francisco Sycip,30 which we quote:

"x x x. In the case of Estate Developers and Investors Corporation v. Antonio Sarte and Erlinda Sarte the developer filed a complaint to collect the balance of the price of a lot bought on installment basis, but its complaint was dismissed by the Regional Trial Court for lack of jurisdiction. It appealed the order to this Court. In dismissing the appeal, we held:

The action here is not a simple action to collect on a promissory note; it is a complaint to collect amortization payments arising from or in connection with a sale of a subdivision lot under P.D. Nos. 957 and 1344, and accordingly falls within the exclusive original jurisdiction of the HLURB to regulate the real estate trade and industry, and to hear and decide cases of unsound real estate business practices. Although the case involving Antonio Sarte is still pending resolution before the HLURB Arbiter, and there is as yet no order from the HLURB authorizing suspension of payments on account of the failure of plaintiff developer to make good its warranties, there is no question to Our mind that the matter of collecting amortizations for the sale of the subdivision lot is necessarily tied up to the complaint against the plaintiff and it affects the rights and correlative duties of the buyer of a subdivision lot as regulated by NHA pursuant to P.D. 957 as amended. It must accordingly fall within the exclusive original jurisdiction of the said Board, and We find that the motion to dismiss was properly granted on the ground that the regular court has no jurisdiction to take cognizance of the complaint."31

Petitioners strategy, if allowed, would open a convenient gateway for a developer to subvert and preempt the rights of buyers by the mere expediency of filing an action against them before the regular courts, as in this case. Fortunately, the CA saw through the ruse. Contrary to petitioners contention, the HLURB is not deprived of jurisdiction to hear and decide a case merely on the basis that it has been initiated by the developer and not by the buyer.

Petitioner cites Ayala Corporation v. Ray Burton Development Corporation32 and Fajardo Jr. v. Freedom to Build, Inc.,33 which do not further its cause either. These cases pertain to deed restrictions and restrictive covenants in the sale of subdivision units; hence, they do not fall under any of the cases over which the HLURB exercises exclusive jurisdiction. Naturally, there was every reason for the courts in the said cases to assume and exercise their jurisdiction.

Second Issue:

Authority to Stop Payment

of Monthly Rentals

The next proposition relates to the absence of a clearance from the HLRUB authorizing respondent to stop payment of his amortizations. It is petitioners position that under Section 23 of Rule VI of the Rules implementing PD 957, clearance must first be secured from the Board before the buyer of a subdivision lot or a home can lawfully withhold monthly payments.

This contention is also unmeritorious.

First, Section 23 of PD 957 -- the law upon which the Implementing Rule cited was based -- requires only due notice to the owner or developer for stopping further payments by reason of the latters failure to develop the subdivision according to the approved plans and within the time limit. Section 23 provides as follows:

"SECTION 23. Non-Forfeiture of Payments. No installment payment made by a buyer in a subdivision or condominium project for the lot or unit he contracted to buy shall be forfeited in favor of the owner or developer when the buyer, after due notice to the owner or developer, desists from further payment due to the failure of the owner or developer to develop the subdivision or condominium project according to the approved plans and within the time limit for complying with the same. Such buyer may, at his option, be reimbursed the total amount paid including amortization interests but excluding [delinquency] interests, with interest thereon at the legal rate." (Italics supplied)

To be valid, an administrative rule or regulation must conform, not contradict, the provisions of the enabling law.34 An implementing rule or regulation cannot modify, expand, or subtract from the law it is intended to implement. Any rule that is not consistent with the statute itself is null and void.35 Thus, the Court in People v. Maceren36 explained as follows:

"Administrative regulations adopted under legislative authority by a particular department must be in harmony with the provisions of the law, and should be for the sole purpose of carrying into effect its general provisions. By such regulations, of course, the law itself cannot be extended. x x x.

"The rule making power must be confined to details for regulating the mode or proceeding to carry into effect the law as it has been enacted. The power cannot be extended to amending or expanding the statutory requirements or to embrace matters not covered by the statute. Rules that subvert the statute cannot be sanctioned. x x x."

Plainly, therefore, Section 23 of Rule VI of the Implementing Rules cannot rise higher than Section 23 of PD 957, which is the source of its authority. For that matter, PD 957 would have expressly required the written approval of the HLURB before any stoppage of amortization payments if it so intended, in the same manner that the decree specifically mandates written consent or approval by the NHA (now the HLURB) in Section 18.37

Section 18 has been held by the Court to be a prohibitory law; hence, "acts committed contrary to it are void,"38 pursuant to the intent of PD 957 "to provide a protective mantle over helpless citizens who may fall prey to the razzmatazz of what P.D. 957 termed unscrupulous subdivision and condominium sellers."39 The Court stressed that "such construal ensures the attainment of the purpose of the law: to protect lot buyers, so that they do not end up still homeless despite having fully paid for their home lots with their hard-earned cash."40

Apropos, to require clearance from the HLURB before stopping payment would not be in keeping with the intent of the law to protect innocent buyers 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 HLRUB 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.

Significantly also, the Court has upheld the reliance of a buyer on Section 23 of PD 957 when he ordered his bank to stop payment of the checks he had issued, so that he could suspend amortization payments until such time as the owner or developer would have fulfilled its obligations.41 In Antipolo Realty Corporation v. National Housing Authority,42 the exercise of a statutory right to suspend installment payments was considered a valid defense against the purported violations of Batas Pambansa (BP) Blg. 22 by the petitioner in that case. Such right negated the third element the "subsequent dishonor of the check without valid cause." With more reason, then, should the buyers right to suspend installment payments be considered a valid defense against the suit for reconveyance and damages.

WHEREFORE, this Petition is hereby DENIED and the assailed Decision and Resolution are AFFIRMED. Costs against petitioner.

SO ORDERED.

ARTEMIO V. PANGANIBANActing Chief Justice

G.R. No. 109404 January 22, 1996

FLORENCIO EUGENIO, doing business under the name E & S Delta Village, petitioner, vs.EXECUTIVE SECRETARY FRANKLIN M. DRILON, HOUSING AND LAND USE REGULATORY BOARD (HLURB) AND PROSPERO PALMIANO, respondents.

R E S O L U T I O N

PANGANIBAN, J.:

Did the failure to develop a subdivision constitute legal justification for the non-payment of amortizations by a buyer on installment under land purchase agreements entered into prior to the enactment of P.D. 957, "The Subdivision and Condominium Buyers' Protective Decree"? This is the major question raised in the instant Petition seeking to set aside the Decision of the respondent Executive Secretary dated March 10, 1992 in O.P. Case No. 3761, which affirmed the order of the respondent HLURB dated September 1, 1987.

On May 10, 1972, private respondent purchased on installment basis from petitioner and his co-owner/developer Fermin Salazar, two lots in the E & S Delta Village in Quezon City.

Acting on complaints for non-development docketed as NHA Cases Nos. 2619 and 2620 filed by the Delta Village Homeowners' Association, Inc., the National Housing Authority rendered a resolution on January 17, 1979 inter alia ordering petitioner to cease and desist from making further sales of lots in said village or in any project owned by him.

While NHA Cases Nos. 2619 and 2620 were still pending, private respondent filed with the Office of Appeals, Adjudication and Legal Affairs (OAALA) of the Human Settlements Regulatory Commission (HSRC), a complaint (Case No. 80-589) against petitioner and spouses Rodolfo and Adelina Relevo alleging that, in view of the above NHA resolution, he suspended payment of his amortizations, but that petitioner resold one of the two lots to the said spouses Relevo, in whose favor title to the said property was registered. Private respondent further alleged that he suspended his payments because of petitioner's failure to develop the village.

Private respondent prayed for the annulment of the sale to the Relevo spouses and for reconveyance of the lot to him.

On October 11, 1983, the OAALA rendered a decision upholding the right of petitioner to cancel the contract with private respondent and dismissed private respondent's complaint.

On appeal, the Commission Proper of the HSRC reversed the OAALA and, applying P.D. 957, ordered petitioner to complete the subdivision development and to reinstate private respondent's purchase contract over one lot, and as to the other, "it appearing that Transfer Certificate of Title No. 269546 has been issued to . . . spouses Rodolfo and Ad(e)lina Relevo . . . , the management of E & S Delta Village is hereby ordered to immediately refund to the complainant-appellant (herein private respondent) all payments made thereon, plus interests computed at legal rates from date of receipt hereof until fully paid."

The respondent Executive Secretary, on appeal, affirmed the decision of the HSRC and denied the subsequent Motion for Reconsideration for lack of merit and for having been filed out of time. Petitioner has now filed this Petition for review before the Supreme Court.

Under Revised Administrative Circular No. 1-95, "appeals from judgments or final orders of the . . . Office of the President . . . may be taken to the Court of Appeals . . . " However, in order to hasten the resolution of this case, which was deemed submitted for decision one and a half years ago, the Court resolved to make an exception to the said Circular in the interest of speedy justice.

In his Petition before this Court, petitioner avers that the Executive Secretary erred in applying P.D. 957 and in concluding that the non-development of the E & S Delta Village justified private respondent's non-payment of his amortizations. Petitioner avers that inasmuch as the land purchase agreements were entered into in 1972, prior to the effectivity of P.D. 957 in 1976, said law cannot govern the transaction.

We hold otherwise, and herewith rule that respondent Executive Secretary did not abuse his discretion, and that P.D. 957 is to be given retroactive effect so as to cover even those contracts executed prior to its enactment in 1976.

P.D. 957 did not expressly provide for retroactivity in its entirety, but such can be plainly inferred from the unmistakable intent of the law.

The intent of the law, as culled from its preamble and from the situation, circumstances and conditions it sought to remedy, must be enforced. On this point, a leading authority on statutory construction stressed:

The intent of a statute is the law. . . . The intent is the vital part, the essence of the law, and the primary rule of construction is to ascertain and give effect to the intent. The intention of the legislature in enacting a law is the law itself, and must be enforced when ascertained, although it may not be consistent with the strict letter of the statute. Courts will not follow the letter of a statute when it leads away from the true intent and purpose of the legislature and to conclusions inconsistent with the general purpose of the act. . . . In construing statutes the proper course is to start out and follow the trite intent of the legislature and to adopt that sense which harmonizes best with the context and promotes in the fullest manner the apparent policy and objects of the legislature.1 (emphasis supplied.)

It goes without saying that, as an instrument of social justice, the law must favor the weak and the disadvantaged, including, in this instance, small lot buyers and aspiring homeowners. P.D. 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", and such intent is nowhere expressed more clearly than in its preamble, pertinent portions of which read as follows:

WHEREAS, it is the policy of the State to afford its inhabitants the requirements of decent human settlement and to provide them with ample opportunities for improving their quality of life;

WHEREAS, numerous reports reveal that many real estate subdivision owners, developers, operators, and/or sellers have reneged on their representations and obligations to provide and maintain properly subdivision roads, drainage, sewerage, water systems, lighting systems, and other similar basic requirements, thus endangering the health and safety of home and lot buyers;

WHEREAS, reports of alarming magnitude also show cases of swindling and fraudulent manipulations perpetrated by unscrupulous subdivision and condominium sellers and operators, such as failure to deliver titles to the buyers or titles free from liens and encumbrances, and to pay real estate taxes, and fraudulent sales of the same subdivision lots to different innocent purchasers for value;2 (emphasis supplied.)

From a dedicated reading of the preamble, it is manifest and unarguable that the legislative intent must have been to remedy the alarming situation by having P.D. 957 operate retrospectively even upon contracts already in existence at the time of its enactment. Indeed, a strictly prospective application of the statute will effectively emasculate it, for then the State will not be able to exercise its regulatory functions and curb fraudulent schemes and practices perpetrated under or in connection with those contracts and transactions which happen to have been entered into prior to P.D. 957, despite obvious prejudice to the very subdivision lot buyers sought to be protected by said law. It is hardly conceivable that the legislative authority intended to permit such a loophole to remain and continue to be a source of misery for subdivision lot buyers well into the future.

Adding force to the arguments for the retroactivity of P.D. 957 as a whole are certain of its provisions, viz., Sections 20, 21 and 23 thereof, which by their very terms have retroactive effect and will impact upon even those contracts and transactions entered into prior to P.D. 957's enactment:

Sec. 20. Time of Completion. Every owner or developer shall construct and provide the facilities, improvements, infrastructures and other forms of development, including water supply and lighting facilities, which are offered and indicated in the approved subdivision or condominium plans, brochures, prospectus, printed matters, letters or in any form of advertisement, within one year from the date of the issuance of the license for the subdivision or condominium project or such other period of time as may be fixed by the Authority.

Sec. 21.Sales Prior to Decree. In cases of subdivision lots or condominium units sold or disposed of prior to the effectivity of this Decree, it shall be incumbent upon the owner or developer of the subdivision or condominium project to complete compliance with his or its obligations as provided in the preceding section within two years from the date of this Decree unless otherwise extended by the Authority or unless an adequate performance bond is filed in accordance with Section 6 hereof.

Failure of the owner or, developer to comply with the obligations under this and the preceding provisions shall constitute a violation punishable under Section 38 and 39 of this Decree.

Sec. 23.Non-Forfeiture of Payments. No installment payment made by a buyer in a subdivision or condominium project for the lot or unit he contracted to buy shall be forfeited in favor of the owner or developer, when the buyer, after due notice to the owner or developer, desists from further payment due to the failure of the owner or developer to develop the subdivision or condominium project according to the approved plans and within the time limit for complying with the same. Such buyer may, at his option, be reimbursed the total amount paid including amortization interests but excluding delinquency interests, with interest thereon at the legal rate. (emphasis supplied)

On the other hand, as argued by the respondent Executive Secretary, the application of P.D. 957 to the contracts in question will be consistent with paragraph 4 of the contracts themselves, which expressly provides:

(4)The party of the First Part hereby binds himself to subdivide, develop and improve the entire area covered by Transfer Certificate of Title No. 168119 of which the parcels of lands subject of this contract is a part in accordance with the provisions of Quezon City Ordinance No. 6561, S-66 and the Party of the First Part further binds himself to comply with and abide by all laws, rules and regulations respecting the subdivision and development of lots for residential purposes as may be presently in force or may hereafter be required by laws passed by the Congress of the Philippines or required by regulations of the Bureau of Lands, the General Registration Office and other government agencies. (emphasis supplied)

Moreover, as P.D. 957 is undeniably applicable to the contracts in question, it follows that Section 23 thereof had been properly invoked by private respondent when he desisted from making further payment to petitioner due to petitioner's failure to develop the subdivision project according to the approved plans and within the time limit for complying with the same. (Such incomplete development of the subdivision and non-performance of specific contractual and statutory obligations on the part of the subdivision-owner had been established in the findings of the HLURB which in turn were confirmed by the respondent Executive Secretary in his assailed Decision.) Furthermore, respondent Executive Secretary also gave due weight to the following matters: although private respondent started to default on amortization payments beginning May 1975, so that by the end of July 1975 he had already incurred three consecutive arrearages in payments, nevertheless, the petitioner, who had the cancellation option available to him under the contract, did not exercise or utilize the same in timely fashion but delayed until May 1979 when he finally made up his mind to cancel the contracts. But by that time the land purchase agreements had already been overtaken by the provisions of P.D. 957, promulgated on July 12, 1976. (In any event, as pointed out by respondent HLURB and seconded by the Solicitor General, the defaults in amortization payments incurred by private respondent had been effectively condoned by the petitioner, by reason of the latter's tolerance of the defaults for a long period of time.)

Likewise, there is no merit in petitioner's contention that respondent Secretary exceeded his jurisdiction in ordering the refund of private respondent's payments on Lot 12 although (according to petitioner) only Lot 13 was the subject of the complaint. Respondent Secretary duly noted that the supporting documents submitted substantiating the claim of non-development justified such order inasmuch as such claim was also the basis for non-payment of amortizations on said Lot 12.

Finally, since petitioner's motion for reconsideration of the (Executive Secretary's) Decision dated March 10, 1992 was filed only on the 21st day from receipt thereof, said decision had become final and executory, pursuant to Section 7 of Administrative Order No. 18 dated February 12, 1987, which provides that "(d)ecisions/ resolutions/orders of the Office of the President shall, except as otherwise provided for by special laws, become final after the lapse of fifteen (15) days from receipt of a copy thereof . . . , unless a motion for reconsideration thereof is filed within such period."

WHEREFORE, there being no showing of grave abuse of discretion, the petition is DENIED due course and is hereby DISMISSED. No costs.

SO ORDERED.

Narvasa, C.J., Davide Jr., Melo and Francisco, JJ., concur.

Footnotes

1 Vol. II, Sutherland, Statutory Construction, pp. 693-695.

2 Preamble, Presidential Decree No. 957.

G.R. No. 164136 January 25, 2006

CARLOS R. TAMAYO, Petitioner, vs.MILAGROS HUANG, JOSEFINO HUANG, HUANG SUI SIN, MIGUEL HUANG and IAP TONG HA, Respondents

D E C I S I O N

CARPIO MORALES, J.:

On August 14, 1978, respondents Huang Sui Sin, Josefino Huang, Miguel Huang and Milagros Huang, four of five registered owners of four parcels of land located in Barangay Matina, Davao City and covered by Transfer Certificates of Title Nos. T-20694, T-20704, T-20717 and a portion of TCT No. T-20729, executed a contract of "Indenture" with EAP Development Corporation (EAP) under which EAP undertook to manage and develop said parcels of land into a first class subdivision and sell the lots therein in consideration for which EAP would retain 55% percent of the sales proceeds.1 The parcels of land were later known as Doa Luisa Village (the subdivision).

On or about April 30, 1981, Carlos R. Tamayo (petitioner) entered into a contract to sell2 (the contract) with respondents through their Attorney-in-Fact and Manager, EAP, for the purchase of Lot No. 15, Block No. 11 (the lot) of the subdivision, covered by TCT No. T-74582 (a transfer from TCT-20717) with an area of 1,424 square meters at P170.00 per square meter or for the total price of P242,080.00.

Under the contract, petitioner was to pay upon execution P35,749.60 and the balance, including interest at the rate of 14% per annum, in 60 monthly installments of P4,791.40, without necessity of demand; and if petitioner failed to pay the installments, respondents were given the right to demand interest thereon at the rate of 14% per annum, to be computed on the same day of the month the installments became due.

Petitioner did make the down payment alright and paid monthly installments up to June 1982 after which he stopped paying. At that time, petitioner had paid a total of P59,706.60.

In the meantime, as EAP had abandoned the development of the subdivision, respondents filed on June 27, 1985 a complaint against EAP for rescission of their "Indenture" contract before the Regional Trial Court (RTC) of Davao, docketed as Civil Case No. 17625.3

More than five years after the parties executed the contract on April 30, 1981,4 respondents appear to have sent petitioner a letter demanding payment of the lot, for in a letter5 dated December 24, 1986 addressed to respondents, petitioner stated that he intentionally desisted from paying further monthly installments due to non-development of the subdivision as agreed upon in the contract.

Nothing had been heard from the parties until January 2, 1991 when, after noting that the development of the subdivision was in progress, petitioner issued Prudential Bank Check No. 0230146 dated January 2, 1991 in the amount of P270,527.00 purportedly representing full payment of the purchase price of the lot, for which he was issued a receipt.7

Respondents immediately returned the check to petitioner, however, by letter of January 9, 1991, they claiming that their employee had committed a mistake in receiving it. Respondents letter bearing the check was returned unopened, drawing respondents to return it again, by letter8 dated February 28, 1991 addressed to and received by petitioners son.

Petitioner later filed a complaint9 on July 24, 1997 against respondents, for specific performance and delivery of title with damages, before the Housing and Land Use Regulatory Board (HLURB), Region XI, Davao City, the subject of the petition at bar, anchoring his rights under Presidential Decree No. 957 (the subdivision and condominium buyers protective decree).

In his complaint before the HLURB, petitioner posited that from the execution of the contract up to the time he sent his above-said letter dated December 24, 1986, respondents failed to develop the subdivision, in support of which he submitted the January 31, 1990 decision10 of Branch 14 of the RTC Davao City in Civil Case No. 17625 rescinding the "Indenture" forged by respondents and EAP for the latters failure to develop the subdivision. Petitioner also submitted a Certification11 dated November 24, 1997 of the President of Homeowners Association of the subdivision that the entrance road of the subdivision connecting to the Quimpo Boulevard was concreted only about two years earlier, and that as of said date, the drainage system was not completed and some of the roads were not yet concreted.

In their Answer to the complaint,12 respondents averred that the EAP stopped the development of the subdivision only by the end of 1983; petitioner had no factual or legal basis for not paying his monthly installment beginning July 1982 since the development of the subdivision was then in progress; the contract was deemed rescinded on April 30, 1986 five (5) years after its execution, and if petitioner wanted to go on with the purchase of the lot, it would be under terms different from those executed in the contract; petitioner was not entitled to the provisions of Republic Act No. 6552 (the realty installment buyer act) as the therein prescribed condition of two-year continuous payment of monthly installments for entitlement to rights thereunder was not complied with; and if petitioner had any right at all, it was only to a refund of what he had already paid.

In the interim, petitioner consigned on September 4, 1997 with the HLURB two checks, one dated August 29, 1997, and the other dated September 2, 1997, in the amounts of P270,000.00 and P527.00, respectively.13

By a Counter-Manifestation,14 respondents informed that they were refusing to accept petitioners checks as these were issued and consigned long after the expiration of the contract on April 30, 1986.

By Decision15 of February 16, 1998, HLRUB Arbiter Atty. Joselito F. Melchor dismissed petitioners complaint, holding that payment by tender and consignation was not legally effected, the check dated January 9, 1991 having been sent back to petitioners son, and the consignation of the two checks dated 1997 having failed to meet the requirements set forth by law for a valid consignation.

And so the HLURB decision disposed:

WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered ordering:

1. The DISMISSAL of the instant case for lack of merit.

2. The complainant to immediately pay in full his account with the payment of corresponding interest and penalty under the terms and conditions of his contract with the respondents. In the event cancellation procedures of the contract between the parties have already been effected by respondents in accordance with RA 6552, the respondent shall give the complainant a grace period of not less than sixty days from finality of this judgment to pay his unpaid obligations as stated above. Failure on the part of the complainant to pay said unpaid obligations at the expiration of the grace period, the respondents may cancel the contract after thirty days from receipt by the complainant of the notice of cancellation or demand for rescission of the contract by notarial act;

3. The complainant to pay respondents the amount of P100,000.00 as damages because of formers breach of obligation and P50,000.00 as attorneys fee; and

4. The complainant to pay the cost of litigation.

SO ORDERED.16 (Underscoring supplied)

Petitioner thereupon filed a petition for review before the HLURB Board of Commissioners questioning the award of damages and attorneys fee to respondents, and praying that respondents be ordered to receive the amount of P270,527.00 consigned with the HLURB Davao City and execute the final deed of sale and deliver the title.

By Decision of August 25, 1998, the HLURB Board of Commissioners affirmed the Arbiters decision, but deleted the award to respondents of damages and costs.

Respondents appealed the HLURB Board of Commissioners decision to the Office of the President (OP).

During the pendency of the appeal before the OP, respondents filed on October 13, 2000 a "Manifestation and Motion,"17 averring for the first time that on April 1997, they sold the disputed lot to one Nene Abijar in whose favor a "Deed of Absolute Sale" was executed on November 2, 1997, and to whom was issued on November 11, 1997 TCT No. T-29227918 which cancelled respondents TCT No. T-74582.19 The records disclose that on September 3, 2001, Abijar oddly filed an Answer with Counter-claim against petitioner and Cross-claim against respondents in HLURB REM-A-980316-0042 before the HLURB Davao after the said case had been resolved by the HLURB Davao and while it was on appeal before the OP.20

By Decision of December 12, 2001, the OP upheld the HLURB finding that there was no effective cancellation of the contract, but nevertheless ruled that Abijars right as an innocent purchaser for value must be accorded preference over that of petitioner, without prejudice to the right of petitioner to recover what he had paid under the contract.21 Thus the OP held:

x x x M[s]. Abijar, three (3) months before the appellee[-herein petitioner] instituted the present action, bought the property from the appellants[-herein respondents] apparently without notice that some other person has a right to, or has interest over the same. Fact is, M[s]. Abijar was able to register title to the property under h[er] name, and there appears nothing in h[er] title which indicates any encumbrance, lien or inchoate right which may subsequently defeat h[er] right thereto. A person dealing with a registered land is not, as a rule, required to go behind the register to determine the condition of the property, and is only charged with notice of the burdens on the property which are noted on the face of the register or certificate of title [Radiowealth Finance Company v. Manuelito S. Palileo, 197 SCRA 245]. It thus strikes us as rather unconscionable, if not legally impossible, to take the literal application of RA 6552. Otherwise, we shall be asking the appellants to surrender the subject property to the appellee after its sale to, and registration under the name of, M[s]. Abijar. If that would be the case, then our judgment would run counter to the doctrine on the efficacy and conclusiveness of the certificate of title which the Torrens system seeks to ensure and protect.22 (Underscoring supplied)

The OP thus reversed the decision of the HLURB Board of Commissioners, the dispositive portion of which reads:

WHEREFORE, premises considered judgment is hereby MODIFIED to wit:

1) Ordering appellants[-herein respondents] to refund to appellee the amount of P59,706.00, the sum total of the amortizations paid by the appellee, with legal interest from the date of conveyance by appellants of the subject parcel of land to Mr. Nene Abijar;

2) Ordering the release to appellee Carlos R. Tamayo of the amount of P270,537.00 which he consigned to the HLURB; and

3) Ordering the appellants[-herein respondents] to pay to HLURB the amount of P 20,000 as administrative fine.

SO ORDERED. (Underscoring supplied)

His motion for reconsideration having been denied by Order23 of June 17, 2003, petitioner filed a petition for review with the appellate court before which he argued, inter alia, that the OP erred in applying equity in favor of Abijar who was not a party to the case.

By decision24 rendered on January 23, 2004, the appellate court dismissed the petition for lack of merit. Petitioners motion for reconsideration having been denied by resolution of June 29, 2004, he filed the present petition.

It is not disputed that EAP, acting as the Attorney-in-Fact and Manager of respondents, totally abandoned the development of the subdivision in 1983,25 thus prompting respondents to continue development thereof on May 22, 198526 and to even file a complaint to rescind its contract of "Indenture" with EAP which the RTC Davao granted.

Paragraph 8 of the contract between petitioner and respondents through EAP provides:

Eight. SUBDIVISION IMPROVEMENTS: - To insure the beauty of the subdivision in line with the modern trend of urban development, EAP Development Corporation hereby obligates itself to provide the subdivision with:

(a) Concrete Paved road or asphalt when price of cement becomes prohibitive

(b) Concrete curbs and gutters

(c) Underground drainage system

(d) Water distribution system

(e) Electrical lighting system

(f) 24 hour Security Guard Service

x x x x (Underscoring supplied)

The subdivision and condominium buyers protective decree directs every owner and developer of real property to provide the necessary facilities, improvements, infrastructures and other forms of development, failure to carry out which is sufficient cause for the buyer to suspend payment, and any sums of money already paid shall not be forfeited.

Sections 20 and 23 of P.D. 957 of the same decree further direct as follows:

Sec. 20. Time of Completion. - Every owner or developer shall construct and provide the facilities, improvements, infrastructures and other forms of development, including water supply and lighting facilities, which are offered and indicated in the approved subdivision or condominium plans, brochures, prospectus, printed matters, letters or in any form of advertisement, within one year from the date of the issuance of the license for the subdivision or condominium project or such other period of time as may be fixed by the Authority. (Underscoring supplied)

Sec. 23. Non-Forfeiture of Payments. No installment payment made by a buyer in a subdivision or condominium project for the lot or unit he contracted to buy shall be forfeited in favor of the owner or developer when the buyer, after due notice to the owner or developer, desists from further payment due to the failure of the owner or developer to develop the subdivision or condominium project according to the approved plans and within the time limit for complying with the same. Such buyer may, at his option, be reimbursed the total amount paid including amortization interest but excluding delinquency interests, with interest thereon at the legal rate. (Underscoring supplied)

In case the developer of a subdivision or condominium fails in its obligation under Section 20, Section 23 gives the buyer the option to demand reimbursement of the total amount paid, or to wait for further development of the subdivision,27 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.28

From petitioners earlier-mentioned letter of December 24, 1986, he made clear his intention not to seek reimbursement of the total amount he had already paid but to comply with his obligation to pay the balance in full upon completion of the development of the subdivision.

x x x x

Please be informed that I int[en]tionally stopped paying my monthly installment because I could not see any development in your subdivision, like concrete road, electrical facilities, drainage and water among others as stipulated in our contract. Under existing laws, I understand I can suspend my payment pending your completion of the subdivision facilities as agreed in our contract. Ill only resume payment if you complete the development of the subdivision.

x x x x (Underscoring supplied)

The claim-advice of petitioner notwithstanding, respondents were mum about it. Such silence suggests an admission of the veracity and validity of petitioners claim.29

Respondents nevertheless claim that the contract was "deemed rescinded" five years after its execution on April 30, 1981. Respondents demand for payment of the unpaid balance sometime between the period of April 30, 1986 to December 24, 1986 betrays such claim, however. In any event, it puts them in estoppel.

As for respondents position that before petitioner could lawfully withhold his monthly payments, he needed to secure previous clearance from the HLURB following Section 23 of Rule VI of the Rules implementing the subdivision and condominium buyers protective decree, law and jurisprudence are not on their side.

Section 23 of PD 957 -- the law upon which the Implementing Rule cited was based -- requires only due notice to the owner or developer for stopping further payments by reason of the latters failure to develop the subdivision according to the approved plans and within the time limit. x x x

To be valid, an administrative rule or regulation must conform, not contradict, the provisions of the enabling law. An implementing rule or regulation cannot modify, expand, or subtract from the law it is intended to implement. Any rule that is not consistent with the statute itself is null and void. x x x

Section 23 of Rule VI of the Implementing Rules cannot rise higher than Section 23 of PD 957, which is the source of its authority. For that matter, PD 957 would have expressly required the written approval of the HLURB before any stoppage of amortization payments if it so intended, in the same manner that the decree specifically mandates written consent or approval by the NHA (now the HLURB) in Section 18.

x x x x

Apropos, to require clearance from the HLURB before stopping payment would not be in keeping with the intent of the law to protect innocent buyers 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.30 (Italics supplied)

Section 4 of the realty installment act directs as follows in case a buyer defaults in the payment of succeeding installments where he has paid less than two years of installments, as in petitioners case:

SECTION 4. In case where less than two years of installments were paid, the seller shall give the buyer a grace period of not less than sixty days from the date the installment became due.

If the buyer fails to pay the installments due at the expiration of the grace period, the seller may cancel the contract 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. (Underscoring supplied)

As noted earlier, petitioner, by letter of December 24, 1986, informed respondents that he desisted from further paying monthly installments and that he would resume payment if the development of the subdivision had been completed. Yet respondents sent no notarized notice or any notice of cancellation at all. In fact, it was only after petitioner filed on July 24, 1997 the complaint before the HLURB that respondents offered to reimburse petitioner of the total amount he had already paid.

The contract not having been cancelled in accordance with law, it has remained valid and subsisting. It was, therefore, within petitioners right to maintain his option to await the completion of the development of and introduction of improvements in the subdivision and thereafter, upon full payment of the purchase price, without interest, compel respondents to execute a deed of absolute sale.

The decision of the OP, however, which passed upon the sale of the lot to Abijar whom it found to be a buyer in good faith and for value basis of its ruling that petitioner can no longer exercise above-said right, which decision was deemed affirmed too by the appellate court, does not lie. For, the subsequent sale was brought to light by respondents only while their appeal was pending before the OP, and as correctly argued by petitioner, Abijar was not a party to the case. Parenthetically, the records of the case do not bear whether the deed of absolute sale in favor of Abijar was in fact registered, and TCT No. T-74582 in the name of respondents was indeed cancelled and TCT No. T-292279 in the name of Abijar was issued in its stead. As petitioner points out, what was appended to the records of the OP was a plain uncertified photocopy of TCT No. T-292279.

The decision of the OP which was deemed affirmed by the appellate court ordering a full refund of the installment payments of petitioner in the amount of P59,706.00 and the release to petitioner of the amount of P270,537.00 he had consigned does not lie too, for under the law, petitioner is entitled to the lot he contracted to purchase after payment of the outstanding balance which he was ready and willing to do.31

If the sale of the lot to Abijar is eventually declared valid, respondents should refund petitioner its actual value as resold to Abijar, to bear 12% interest per annum computed from the date of such sale until fully paid or deliver a substitute lot at the option of petitioner. So this Court instructs in Active Realty and Development Corporation v. Daroya:32

In the case at bar, respondent offered to pay for her outstanding balance of the contract price but respondent refused to accept it. Neither did petitioner adduce proof that the respondent's offer to pay was made after the effectivity date stated in its notice of cancellation. Moreover, there was no formal notice of cancellation or court action to rescind the contract. Given the circumstances, we find 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, we hold 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. Ordinarily, petitioner would have had no other recourse but to accept payment. However, respondent can no longer exercise this right as the subject lot was already sold by the petitioner to another buyer which lot, as admitted by the petitioner, was valued at P1,700.00 per square meter. As respondent lost her chance to pay for the balance of the P875,000.00 lot, it is only just and equitable that the petitioner be ordered to refund to respondent the actual value of the lot resold, i.e., P875,000.00, with 12% interest per annum computed from August 26, 1991 until fully paid or to deliver a substitute lot at the option of the respondent. (Italics in the original; underscoring supplied)

This Court, not being a trier of facts, thus resolves to remand the case to the HLURB for a proper determination of the respective rights of the parties vis a vis the alleged sale of the lot to Abijar in accordance with the foregoing discussions.

WHEREFORE, the decision of the Court of Appeals is REVERSED and SET ASIDE. The case is REMANDED to the Housing and Land Use Regulatory Board of Davao City for further proceedings in accordance with the directive in the immediately preceding paragraph.

SO ORDERED.

CONCHITA CARPIO MORALES

Associate Justice

WE CONCUR:

LEONARDO A. QUISUMBINGAssociate JusticeChairperson

ANTONIO T. CARPIOAssociate JusticeDANTE O. TINGAAsscociate JusticeA T T E S T A T I O N

I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

LEONARDO A. QUISUMBINGAssociate JusticeChairperson

C E R T I F I C A T I O N

Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairmans Attestation, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court.

ARTEMIO V. PANGANIBANChief Justice

Footnotes

1 Annex "A", Housing and Land Use Regulatory Board (HLURB) Records, p. 61.

2 Annex "B", HLURB Records at 4-3. The records are paginated from 161-1.

3 Id. at 63.

4 Id. at 131.

5 Id. at 2.

6 Id. at 13.

7 Id. at 1.

8 Id. at 13.

9 Id. at 11-6.

10 Id. at 63-58.

11 Id. at 57.

12 Id. at 21-17.

13 Id. at 27.

14 Id. at 25-24.

15 Id. at 88-78

16 Id. at 78-79.

17 Office of the President (OP) Case Folder.

18 Rollo, p. 170.

19 HLURB Records, p. 5.

20 Rollo, pp. 198-205.

21 Decision of the Office of the President, OP Case Folder.

22 Ibid.

23 CA rollo, p. 41.

24 Id. at 186-193.

25 HLURB Records, p. 21.

26 Id. at 60.

27 Relucio v. Brillante-Garfin, G.R. No. 76518, July 13, 1990, 187 SCRA 405, 411.

28 Antipolo Realty Corporation v. National Housing Authority, G.R. No. L-50444, August 31, 1987, 153 SCRA 399, 409.

29 Adelfa Properties, Inc. v. Court of Appeals, 310 Phil. 623, 651 (1995).

30 Francel Realty Corporation v. Sycip, G.R. No. 154684, September 8, 2005.

31 Active Realty and Development Corporation v. Daroya, 431 Phil. 753, 763 (2002).

32 Id. at 762-763.

Republic of the PhilippinesSUPREME COURTManila

SECOND DIVISION

G.R. No. 185798 January 13, 2014

FIL-ESTATE PROPERTIES, INC. AND FIL-ESTATE NETWORK INC., Petitioners, vs.SPOUSES CONRADO AND MARIA VICTORIA RONQUILLO, Respondents.

D E C I S I O N

PEREZ, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the 1997 Rules .of Civil Procedure assailing the Decision1 of the Court of Appeals in CA-G.R. SP No. 100450 which affirmed the Decision of the Office of the President in O.P. Case No. 06-F-216.

As culled from the records, the facts are as follow:

Petitioner Fil-Estate Properties, Inc. is the owner and developer of the Central Park Place Tower while co-petitioner Fil-Estate Network, Inc. is its authorized marketing agent. Respondent Spouses Conrado and Maria Victoria Ronquillo purchased from petitioners an 82-square meter condominium unit at Central Park Place Tower in Mandaluyong City for a pre-selling contract price of FIVE MILLION ONE HUNDRED SEVENTY-FOUR THOUSAND ONLY (P5,174,000.00). On 29 August 1997, respondents executed and signed a Reservation Application Agreement wherein they deposited P200,000.00 as reservation fee. As agreed upon, respondents paid the full downpayment of P1,552,200.00 and had been paying the P63,363.33 monthly amortizations until September 1998.

Upon learning that construction works had stopped, respondents likewise stopped paying their monthly amortization. Claiming to have paid a total of P2,198,949.96 to petitioners, respondents through two (2) successive letters, demanded a full refund of their payment with interest. When their demands went unheeded, respondents were constrained to file a Complaint for Refund and Damages before the Housing and Land Use Regulatory Board (HLURB). Respondents prayed for reimbursement/refund of P2,198,949.96 representing the total amortization payments, P200,000.00 as and by way of moral damages, attorneys fees and other litigation expenses.

On 21 October 2000, the HLURB issued an Order of Default against petitioners for failing to file their Answer within the reglementary period despite service of summons.2

Petitioners filed a motion to lift order of default and attached their position paper attributing the delay in construction to the 1997 Asian financial crisis. Petitioners denied committing fraud or misrepresentation which could entitle respondents to an award of moral damages.

On 13 June 2002, the HLURB, through Arbiter Atty. Joselito F. Melchor, rendered judgment ordering petitioners to jointly and severally pay respondents the following amount:

a) The amount of TWO MILLION ONE HUNDRED NINETY-EIGHT THOUSAND NINE HUNDRED FORTY NINE PESOS & 96/100 (P2,198,949.96) with interest thereon at twelve percent (12%) per annum to be computed from the time of the complainants demand for refund on October 08, 1998 until fully paid,

b) ONE HUNDRED THOUSAND PESOS (P100,000.00) as moral damages,

c) FIFTY THOUSAND PESOS (P50,000.00) as attorneys fees,

d) The costs of suit, and

e) An administrative fine of TEN THOUSAND PESOS (P10,000.00) payable to this Office fifteen (15) days upon receipt of this decision, for violation of Section 20 in relation to Section 38 of PD 957.3

The Arbiter considered petitioners failure to develop the condominium project as a substantial breach of their obligation which entitles respondents to seek for rescission with payment of damages. The Arbiter also stated that mere economic hardship is not an excuse for contractual and legal delay.

Petitioners appealed the Arbiters Decision through a petition for review pursuant to Rule XII of the 1996 Rules of Procedure of HLURB. On 17 February 2005, the Board of Commissioners of the HLURB denied4 the petition and affirmed the Arbiters Decision. The HLURB reiterated that the depreciation of the peso as a result of the Asian financial crisis is not a fortuitous event which will exempt petitioners from the performance of their contractual obligation.

Petitioners filed a motion for reconsideration but it was denied5 on 8 May 2006. Thereafter, petitioners filed a Notice of Appeal with the Office of the President. On 18 April 2007, petitioners appeal was dismissed6 by the Office of the President for lack of merit. Petitioners moved for a reconsideration but their motion was denied7 on 26 July 2007.

Petitioners sought relief from the Court of Appeals through a petition for review under Rule 43 containing the same arguments they raised before the HLURB and the Office of the President:

I.

THE HONORABLE OFFICE OF THE PRESIDENT ERRED IN AFFIRMING THE DECISION OF THE HONORABLE HOUSING AND LAND USE REGULATORY BOARD AND ORDERING PETITIONERS-APPELLANTS TO REFUND RESPONDENTS-APPELLEES THE SUM OF P2,198,949.96 WITH 12% INTEREST FROM 8 OCTOBER 1998 UNTIL FULLY PAID, CONSIDERING THAT THE COMPLAINT STATES NO CAUSE OF ACTION AGAINST PETITIONERS-APPELLANTS.

II.

THE HONORABLE OFFICE OF THE PRESIDENT ERRED IN AFFIRMING THE DECISION OF THE OFFICE BELOW ORDERING PETITIONERS-APPELLANTS TO PAY RESPONDENTS-APPELLEES THE SUM OF P100,000.00 AS MORAL DAMAGES AND P50,000.00 AS ATTORNEYS FEES CONSIDERING THE ABSENCE OF ANY FACTUAL OR LEGAL BASIS THEREFOR.

III.

THE HONORABLE OFFICE OF THE PRESIDENT ERRED IN AFFIRMING THE DECISION OF THE HOUSING AND LAND USE REGULATORY BOARD ORDERING PETITIONERS-APPELLANTS TO PAY P10,000.00 AS ADMINISTRATIVE FINE IN THE ABSENCE OF ANY FACTUAL OR LEGAL BASIS TO SUPPORT SUCH FINDING.8

On 30 July 2008, the Court of Appeals denied the petition for review for lack of merit. The appellate court echoed the HLURB Arbiters ruling that "a buyer for a condominium/subdivision unit/lot unit which has not been developed in accordance with the approved condominium/subdivision plan within the time limit for complying with said developmental requirement may opt for reimbursement under Section 20 in relation to Section 23 of Presidential Decree (P.D.) 957 x x x."9 The appellate court supported the HLURB Arbiters conclusion, which was affirmed by the HLURB Board of Commission and the Office of the President, that petitioners failure to develop the condominium project is tantamount to a substantial breach which warrants a refund of the total amount paid, including interest. The appellate court pointed out that petitioners failed to prove that the Asian financial crisis constitutes a fortuitous event which could excuse them from the performance of their contractual and statutory obligations. The appellate court also affirmed the award of moral damages in light of petitioners unjustified refusal to satisfy respondents claim and the legality of the administrative fine, as provided in Section 20 of Presidential Decree No. 957.

Petitioners sought reconsideration but it was denied in a Resolution10 dated 11 December 2008 by the Court of Appeals.

Aggrieved, petitioners filed the instant petition advancing substantially the same grounds for review:

A.

THE HONORABLE COURT OF APPEALS ERRED WHEN IT AFFIRMED IN TOTO THE DECISION OF THE OFFICE OF THE PRESIDENT WHICH SUSTAINED RESCISSION AND REFUND IN FAVOR OF THE RESPONDENTS DESPITE LACK OF CAUSE OF ACTION.

B.

GRANTING FOR THE SAKE OF ARGUMENT THAT THE PETITIONERS ARE LIABLE UNDER THE PREMISES, THE HONORABLE COURT OF APPEALS ERRED WHEN IT AFFIRMED THE HUGE AMOUNT OF INTEREST OF TWELVE PERCENT (12%).

C.

THE HONORABLE COURT OF APPEALS LIKEWISE ERRED WHEN IT AFFIRMED IN TOTO THE DECISION OF THE OFFICE OF THE PRESIDENT INCLUDING THE PAYMENT OF P100,000.00 AS MORAL DAMAGES, P50,000.00 AS ATTORNEYS FEES AND P10,000.00 AS ADMINISTRATIVE FINE IN THE ABSENCE OF ANY FACTUAL OR LEGAL BASIS TO SUPPORT SUCH CONCLUSIONS.11

Petitioners insist that the complaint states no cause of action because they allegedly have not committed any act of misrepresentation amounting to bad faith which could entitle respondents to a refund. Petitioners claim that there was a mere delay in the completion of the project and that they only resorted to "suspension and reformatting as a testament to their commitment to their buyers." Petitioners attribute the delay to the 1997 Asian financial crisis that befell the real estate industry. Invoking Article 1174 of the New Civil Code, petitioners maintain that they cannot be held liable for a fortuitous event.

Petitioners contest the payment of a huge amount of interest on account of suspension of development on a project. They liken their situation to a bank which this Court, in Overseas Bank v. Court of Appeals,12 adjudged as not liable to pay interest on deposits during the period that its operations are ordered suspended by the Monetary Board of the Central Bank.

Lastly, petitioners aver that they should not be ordered to pay moral damages because they never intended to cause delay, and again blamed the Asian economic crisis as the direct, proximate and only cause of their failure to complete the project. Petitioners submit that moral damages should not be awarded unless so stipulated except under the instances enumerated in Article 2208 of the New Civil Code. Lastly, petitioners refuse to pay the administrative fine because the delay in the project was caused not by their own deceptive intent to defraud their buyers, but due to unforeseen circumstances beyond their control.

Three issues are presented for our resolution: 1) whether or not the Asian financial crisis constitute a fortuitous event which would justify delay by petitioners in the performance of their contractual obligation; 2) assuming that petitioners are liable, whether or not 12% interest was correctly imposed on the judgment award, and 3) whether the award of moral damages, attorneys fees and administrative fine was proper.

It is apparent that these issues were repeatedly raised by petitioners in all the legal fora. The rulings were consistent that first, the Asian financial crisis is not a fortuitous event that would excuse petitioners from performing their contractual obligation; second, as a result of the breach committed by petitioners, respondents are entitled to rescind the contract and to be refunded the amount of amortizations paid including interest and damages; and third, petitioners are likewise obligated to pay attorneys fees and the administrative fine.

This petition did not present any justification for us to deviate from the rulings of the HLURB, the Office of the President and the Court of Appeals.

Indeed, the non-performance of petitioners obligation entitles respondents to rescission under Article 1191 of the New Civil Code which states:

Article 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him.

The injured party may choose between the fulfillment and the rescission of the obligation, with payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible.

More in point is Section 23 of Presidential Decree No. 957, the rule governing the sale of condominiums, which provides:

Section 23. Non-Forfeiture of Payments.1wphi1 No installment payment made by a buyer in a subdivision or condominium project for the lot or unit he contracted to buy shall be forfeited in favor of the owner or developer when the buyer, after due notice to the owner or developer, desists from further payment due to the failure of the owner or developer to develop the subdivision or condominium project according to the approved plans and within the time limit for complying with the same. Such buyer may, at his option, be reimbursed the total amount paid including amortization interests but excluding delinquency interests, with interest thereon at the legal rate. (Emphasis supplied).

Conformably with these provisions of law, respondents are entitled to rescind the contract and demand reimbursement for the payments they had made to petitioners.

Notably, the issues had already been settled by the Court in the case of Fil-Estate Properties, Inc. v. Spouses Go13 promulgated on 17 August 2007, where the Court stated that the Asian financial crisis is not an instance of caso fortuito. Bearing the same factual milieu as the instant case, G.R. No. 165164 involves the same company, Fil-Estate, albeit about a different condominium property. The company likewise reneged on its obligation to respondents therein by failing to develop the condominium project despite substantial payment of the contract price. Fil-Estate advanced the same argument that the 1997 Asian financial crisis is a fortuitous event which justifies the delay of the construction project. First off, the Court classified the issue as a question of fact which may not be raised in a petition for review considering that there was no variance in the factual findings of the HLURB, the Office of the President and the Court of Appeals. Second, the Court cited the previous rulings of Asian Construction and Development Corporation v. Philippine Commercial International Bank14 and Mondragon Leisure and Resorts Corporation v. Court of Appeals15 holding that the 1997 Asian financial crisis did not constitute a valid justification to renege on obligations. The Court expounded:

Also, we cannot generalize that the Asian financial crisis in 1997 was unforeseeable and beyond the control of a business corporation. It is unfortunate that petitioner apparently met with considerable difficulty e.g. increase cost of materials and labor, even before the scheduled commencement of its real estate project as early as 1995. However, a real estate enterprise engaged in the pre-selling of condominium units is concededly a master in projections on commodities and currency movements and business risks. The fluctuating movement of the Philippine peso in the foreign exchange market is an everyday occurrence, and fluctuations in currency exchange rates happen everyday, thus, not an instance of caso fortuito.16

The aforementioned decision becomes a precedent to future cases in which the facts are substantially the same, as in this case. The principle of stare decisis, which means adherence to judicial precedents, applies.

In said case, the Court ordered the refund of the total amortizations paid by respondents plus 6% legal interest computed from the date of demand. The Court also awarded attorneys fees. We follow that ruling in the case before us.

The resulting modification of the award of legal interest is, also, in line with our recent ruling in Nacar v. Gallery Frames,17 embodying the amendment introduced by the Bangko Sentral ng Pilipinas Monetary Board in BSP-MB Circular No. 799 which pegged the interest rate at 6% regardless of the source of obligation.

We likewise affirm the award of attorneys fees because respondents were forced to litigate for 14 years and incur expenses to protect their rights and interest by reason of the unjustified act on the part of petitioners.18 The imposition of P10,000.00 administrative fine is correct pursuant to Section 38 of Presidential Decree No. 957 which reads:

Section 38. Administrative Fines. The Authority may prescribe and impose fines not exceeding ten thousand pesos for violations of the provisions of this Decree or of any rule or regulation thereunder. Fines shall be payable to the Authority and enforceable through writs of execution in accordance with the provisions of the Rules of Court.

Finally, we sustain the award of moral damages. In order that moral damages may be awarded in breach of contract cases, the defendant must have acted in bad faith, must be found guilty of gross negligence amounting to bad faith, or must have acted in wanton disregard of contractual obligations.19 The Arbiter found petitioners to have acted in bad faith when they breached their contract, when they failed to address respondents grievances and when they adamantly refused to refund respondents' payment.

In fine, we find no reversible error on the merits in the impugned Court of Appeals' Decision and Resolution.

WHEREFORE, the petition is PARTLY GRANTED. The appealed Decision is AFFIRMED with the MODIFICATION that the legal interest to be paid is SIX PERCENT (6%) on the amount due computed from the time of respondents' demand for refund on 8 October 1998.

SO ORDERED.

JOSE PORTUGAL PEREZAssociate Justice

WE CONCUR:

ANTONIO T. CARPIOAssociate JusticeChairperson

ARTURO D. BRIONAssociate JusticeMARIANO C. DEL CASTILLOAssociate JusticeESTELA M. PERLAS-BERNABEAssociate Justice

A T T E S T A T I O N

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

ANTONIO T. CARPIOAssociate JusticeSecond Division, Chairperson

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson s Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

MARIA LOURDES P. A. SERENOChief Justice

Footnotes

1 Penned by Associate Justice Arturo G. Tayag with Associate Justices Martin S. Villarama, Jr. (now Supreme Court Associate Justice) and Noel G. Tijam, concurring. Rollo, pp. 34-46.

2 Id. at 68.

3 Id. at 92.

4 Id. at 113-115.

5 Id. at 129-130.

6 Id. at 178-180.

7 Id. at 191.

8 See Petition for Review filed with the Court of Appeals. Id. at 198-199.

9 Id. at 42.

10 Id. at 48-49.

11 Id. at 16-17.

12 192 Phil. 355 (1981).

13 557 Phil. 377 (2007).

14 522 Phil. 168, 180-181 (2006).

15 499 Phil. 268, 279 (2005).

16 Fil-Estate Properties, Inc. v. Spouses Go, supra note 13 at 384.

17 G.R. No. 189871, 13 August 2013.

18 Maglasang v. Northwestern University, Inc., G.R. No. 188986, 20 March 2013, 694 SCRA 128, 140.

19 Almeda Development and Equipment Corp. v. Metro Motor Sales, Inc., 534 Phil. 672, 675 (2006).