Title
Spouses Co Chien vs. Sta. Lucia Realty and Development, Inc.
Case
G.R. No. 162090
Decision Date
Jan 31, 2007
A real estate contract remained valid despite lacking a License to Sell and Certificate of Registration at execution; petitioners' delay and renegotiation attempts estopped nullity claims.
property purchase
contract
void

Case Summary (G.R. No. 162090)

Factual Background

In December 1995 private respondents offered lots and golf shares in the Eagle Ridge Golf and Residential Estates in General Trias, Cavite. Sta. Lucia Realty & Development, Inc. owned 60 percent of Eagle Ridge and Alsons Land Corporation owned 40 percent under a joint venture. Fil-Estate Realty Corporation acquired exclusive marketing rights on December 5, 1995. On December 20, 1995 the petitioners entered into a Contract to Sell, with an addendum, to purchase Lot No. 16, Block No. 1, Phase I, an area of 301 square meters, for P1,293,300.00. The contract provided a ten percent discount and required one half of the purchase price as down payment, which the petitioners paid in the amount of P581,535.00 after discount. The addendum stipulated that the ten percent discount deducted from the down payment would be forfeited and added to the balance if the petitioners failed to pay the balance within seven days from notice that the title was ready for delivery.

Contract Terms and HLURB Requirements

At the time of the Contract to Sell the private respondents had not yet obtained a Certificate of Registration or a License to Sell from the HLURB as required by P.D. 957. The Certificate and License were issued in July 1997. On January 19, 1998 Sta. Lucia notified the petitioners that the title was ready and demanded payment of the balance. The petitioners sought a further discount or an exchange for a better lot and failed to pay within seven days; the respondents then forfeited the ten percent discount in accordance with the contract. The petitioners thereafter sought refund of their down payment on the ground that the contract was void for lack of HLURB registration and license.

Administrative and Judicial Proceedings

The petitioners filed a complaint with the HLURB on July 6, 1999. The HLURB Arbiter on May 30, 2001 ruled for the petitioners, ordered refund of the down payment with legal interest from July 6, 1999, and awarded P10,000.00 attorneys' fees, concluding the contract was nullified by absence of the Certificate and License. On appeal the HLURB Board reversed, held the Contract to Sell valid, ordered the petitioners to pay the balance of P646,150.00 without penalty interest, and assessed administrative fines totaling P40,000.00 against the respondents for violations of Sections 4 and 5 of P.D. 957. The Office of the President affirmed the HLURB Board on June 10, 2003. The Court of Appeals denied the petition on February 10, 2004, and affirmed the decision of the Office of the President. The petitioners then filed this petition for certiorari under Rule 45.

The Parties' Contentions

The petitioners contended that the absence of the Certificate of Registration and License to Sell at the time of execution rendered the Contract to Sell null and void, relying on the mandatory language of Section 5 of P.D. 957 — notably the phrases "shall not" and "unless he shall have first obtained a license to sell" — and sought refund of their down payment. The private respondents argued that Section 5 does not automatically invalidate contracts entered without the Certificate and License; they characterized Section 5 as directory and administrative in nature, such that noncompliance should attract the penalties provided in the decree rather than automatic nullification of contracts.

Legal Issues Presented

The Court identified two principal issues: first, whether the absence of the Certificate of Registration and License to Sell at the time of execution rendered the Contract to Sell and its addendum null and void; and second, whether the petitioners were barred by laches or estoppel from asserting such a defect.

Court's Analysis on P.D. 957 and Contract Validity

The Court reviewed P.D. 957 and its purpose to regulate subdivision and condominium sales, to protect purchasers against fraudulent and unscrupulous practices, and to require registration of projects and issuance of a license to sell before offering lots to the public. The Court observed that while the decree penalizes selling without prior issuance of the Certificate and License, it does not expressly provide that the absence thereof automatically renders a contract void. Sections 38 and 39 set forth the general penalties for violations and do not include nullification as a sanction. The Court invoked the principle that the clear language of law prevails and that penal provisions require strict compliance, but noted that where a statute prescribes penalties yet does not specify contract nullification, the general penalties must be applied. Consequently the Court concluded that the requirements of Sections 4 and 5 do not go into the intrinsic validity of a contract and are primarily administrative in nature to regulate the industry. The Court further relied on the undisputed facts that applications for the Certificate and License were pending at the time of execution and that those instruments were issued long before the petitioners demanded payment of the balance; the project was substantially complete and the title had been available for delivery for more than a year before the petitioners sought nullification. The Court also noted that petitioners alleged bad faith but did not prov

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