G.R. No. 176289, 8 April 2013

FACTS:

Respondent Flora asked Moldex, to reserve the lot for her as shown by a Reservation Application. Flora opted to pay on installment and began making a periodical payments Moldex sent Flora notices reminding her to update her account. Upon inquiry, however, Flora was shocked to find out that as of July 1996, she owed Moldex P247,969.10. Moldex thus suggested to Flora to execute a written authorization for the sale of the subject lot to a new buyer and a written request for refund so that she can get half of all payments she made.

However, Flora never made a written request for refund. Moldex, then sent Flora a Notarized Notice of Cancellation of Reservation Application and/or Contract to Sell. Flora, on the other hand, filed before the Housing and Land Use Regulatory Board (HLURB) Regional Field Office IV a Complaint for the annulment of the contract to sell, recovery of all her payments with interests, damages, and the cancellation of Moldex’s license to sell. Flora alleged that the contract to sell between her and Moldex is void from its inception.

According to Flora, Moldex violated Section 5 of Presidential Decree (PD) No. 957 when it sold the subject lot to her on April 11, 1992 or before it was issued a license to sell on September 8, 1992. Flora likewise claimed that Moldex violated Section 17 of the same law because it failed to register the contract to sell in the Registry of Deeds. In its defense, Moldex exercised its right under Republic Act (RA) No. 6552, or the Maceda Law, by cancelling the reservation Agreement/Contract to Sell and forfeiting all payments made.

Finally, Moldex alleged that since Flora was at fault, the latter cannot be heard to make an issue out of Moldex’s ; the HLURB Arbiter declared as void the Contract to Sell entered into by the parties because Moldex lacked the required license to sell at the time of the contract’s perfection, in violation of Section 5 of PD 957. Hence, Moldex was ordered to refund everything Flora had paid, plus legal interest, and to pay attorney’s fees. Moreover, Moldex was ordered to pay a fine for its violation of the above provision of PD 957.

In its Petition for Review before the HLURB Board of Commissioners (HLURB Board), Moldex argued that the absence of license at the time of the contract’s perfection does not render it void the HLURB Board, in a Decision dated July 29, 1999, dismissed the petition and affirmed in toto the Arbiter’s Decision. It held that the law is clear on the prerequisite of a license to sell before a developer can sell lots.

Since Moldex did not have a license to sell at the time it contracted to sell the subject lot to Flora, the Board agreed with the Arbiter in declaring the contract invalid and in ordering the refund of Flora’s payments. Moldex then appealed to the Office of the President (OP). The OP affirmed the finding that the contract to sell was a nullity. Moldex thus sought relief with the CA via a Petition for Review. the CA agreed with the findings of the tribunals.

It ratiocinated that Moldex’s non-observance of the mandatory provision of Section 5 of PD 957 rendered the contract to sell void, notwithstanding Flora’s payments and her knowledge that Moldex did not at that time have the requisite license to sell. It also held that the subsequent issuance by the HLURB of a license to sell in Moldex’s favor did not cure the defect or result to the ratification of the contract.

ISSUE:

Moldex only raises the matter of the validity of the contract to sell it entered with Flora contending that the same remains valid and binding.

RULING:

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. 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 it can clearly be seen in the aforequoted provisions, the same do not include the nullification of contracts that are otherwise validly entered. Thus, the contract to sell entered into between Flora and Moldex remains valid despite the lack of license to sell on the part of the latter at the time the contract was entered into.

Moreover, Flora claims that the contract she entered into with Moldex is void because of the latter’s failure to register the contract to sell/document of conveyance with the Register of Deeds, in violation of Section 17 of PD 957. However, just like in Section 5 which did not penalize the lack of a license to sell with the nullification of the contract, Section 17 similarly did not mention that the developer’s or Moldex’s failure to register the contract to sell or deed of conveyance with the Register of Deeds resulted to the nullification or invalidity of the said contract or deed. Thus, non-registration of an instrument of conveyance will not affect the validity of a contract to sell. It will remain valid and effective between the parties thereto as under PD 1529 or The Property Registration Decree, registration merely serves as a constructive notice to the whole world to bind third parties.

Under the Maceda Law, the defaulting buyer who has paid at least two years of installments has the right of either to avail of the grace period to pay or, the cash surrender value of the payments made.

It is on record that Flora had already paid more than two years of installments (from March 11, 1992 to July 19, 1996) in the aggregate amount of ₱375,295.49. Her last payment was made on July 19, 1996. It is also shown that Flora has defaulted in her succeeding payments. Thereafter, Moldex sent notices to Flora to update her account but to no avail. She could thus no longer avail of the option provided in Section 3(a) of the Maceda Law which is to pay her unpaid installments within the grace period. Besides, Moldex already sent Flora a Notarized Notice of Cancellation of Reservation Application and/or Contract to Sell. Hence, the only option available is Section 3(b) whereby the seller, in this case, Moldex shall refund to the buyer, Flora, the cash surrender value of the payments on the property equivalent to 50% of the total payments made, or ₱187,647.75.33

WHEREFORE, the Petition is GRANTED. The contract to sell between petitioner Moldex Realty, Inc. and respondent Flora A. Saberon is declared CANCELLED and petitioner Moldex Realty, Inc. is ordered to REFUND to respondent Flora A. Saberon the cash surrender value of the amortizations she made equivalent to Pl87,647.75 pursuant to Section 3(b) of Republic Act No. 6552 within 15 days from date of finality of this Decision.

*Case Digest by Radolfzell Adasa, JD – 4, Andres Bonifacio College, SY 2019 – 2020