Supreme Court E-Library
Information At Your Fingertips

  View printer friendly version

515 Phil. 788


[ G.R. NO. 164136, January 25, 2006 ]




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 mana ge 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 Doña Luisa Village (the subdivision).

On or about April 30, 1981, Carlos R. Tamayo (petitioner) entered into a contract to sell[2] (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 letter[5] 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. 023014[6] 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 letter[8] dated February 28, 1991 addressed to and received by petitioner's son.

Petitioner later filed a complaint[9] 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 decision[10] of Branch 14 of the RTC Davao City in Civil Case No. 17625 rescinding the "Indenture" forged by respondents and EAP for the latter's failure to develop the subdivision. Petitioner also submitted a Certification[11] 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 petitioner's checks as these were issued and consigned long after the expiration of the contract on April 30, 1986.

By Decision[15] of February 16, 1998, HLRUB Arbiter Atty. Joselito F. Melchor dismissed petitioner's complaint, holding that payment by tender and consignation was not legally effected, the check dated January 9, 1991 having been sent back to petitioner's 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 former's breach of obligation and P50,000.00 as attorney's 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 attorney's 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 Arbiter's 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-292279[18] 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 Abijar's 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 Order[23] 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 decision[24] rendered on January 23, 2004, the appellate court dismissed the petition for lack of merit. Petitioner's 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, 1985[26] 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 BUYER'S 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 petitioner's 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. I'll 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 petitioner's 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 latter's 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 petitioner's 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 petitioner's 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.


Quisumbing, (Chairperson), Carpio, and Tinga, JJ., concur.

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.

© Supreme Court E-Library 2019
This website was designed and developed, and is maintained, by the E-Library Technical Staff in collaboration with the Management Information Systems Office.