Zamora Realty v. Office of the President
REITERATIONFacts
The Antecedents: Respondent Edilberto C. Gallardo entered into a contract to sell with Amlac Development Corporation (Amlac) for a subdivision lot. Gallardo made a downpayment and initial installment but later suspended further payments due to Amlac's non-compliance with its obligation to complete the subdivision development. Zamora Realty and Development Corporation (Zamora Realty), which later sent notices regarding the pending case between it and Amlac, continued to demand payment. Eventually, Amlac/Zamora Realty sent a notarial notice of cancellation of the contract. Procedural History: Gallardo filed a complaint with the Housing and Land Use Regulatory Board (HLURB) assailing the rescission. The HLURB Arbiter, after an ocular inspection revealing ongoing development, ruled in favor of Gallardo, declaring his suspension of payment legal and the rescission illegal. The HLURB Board of Commissioners affirmed this decision, noting the project's registration in 1985 and the failure to complete development within the statutory period. The Office of the President (OP) dismissed Zamora Realty's appeal, and its motion for reconsideration was denied. The Court of Appeals (CA) also dismissed Zamora Realty's petition for review, sustaining Gallardo's suspension of payments under P.D. No. 957. The Petition: Zamora Realty filed a petition for review on certiorari with the Supreme Court, arguing that Gallardo violated the contract to sell by suspending payments and that the contract was validly rescinded. It also contended that the CA erred in not ordering reimbursement or the sale of an equivalent lot.
Issue(s)
Whether respondent Edilberto C. Gallardo violated the contract to sell by his failure to pay the monthly amortizations, and whether he was justified in suspending payment due to incomplete development of petitioner's project. Whether the Court of Appeals erred in not directing petitioner either to reimburse respondent's payments, together with interests, or require it to sell to respondent a different lot equivalent to the subject property.
Ruling
The petition is bereft of merit. The Supreme Court affirmed the Court of Appeals' decision with modification, declaring that respondent Edilberto C. Gallardo validly exercised his right to suspend remittance of payments as of March 12, 1987, not November 21, 1991.
Ratio Decidendi
On whether respondent violated the contract to sell by his failure to pay the monthly amortizations and if he was justified in suspending payment due to incomplete development: The Court held that respondent Gallardo was justified in suspending payment. Presidential Decree (P.D.) No. 957, "The Subdivision and Condominium Buyers’ Protective Decree," limits the seller's right to consider a contract to sell ineffectual due to non-payment. Section 23 of P.D. No. 957 explicitly states that no installment payment shall be forfeited if the buyer, after due notice, desists from further payment due to the failure of the owner or developer to develop the project according to approved plans and within the time limit. The Court found that the subdivision was registered in 1985, and development was still ongoing as of 1992, indicating incomplete development within the statutory one-year period from license issuance. Although Gallardo's written notice of suspension was belatedly given in 1991, the Court considered his verbal notification as early as 1987, following his last payment on March 11, 1987, as sufficient due notice. The Court emphasized that P.D. No. 957 was enacted to protect buyers from unscrupulous developers, and requiring a formal HLURB clearance before stopping payment was declared void in Francel Realty Corporation v. Sycip, as it would defeat the law's protective intent. Therefore, Gallardo's suspension of payment was legal and justified, and Zamora Realty's unilateral cancellation of the contract was unsustainable. On whether the CA erred in not directing petitioner either to reimburse respondent's payments or require it to sell another lot: The Court ruled in the negative. Section 23 of P.D. No. 957 provides two remedies for the buyer in case of incomplete development: (1) demand reimbursement of the total amount paid, with legal interest, or (2) suspend amortization payments until the project's completion. These remedies are at the buyer's option, not the developer's. Since Gallardo opted to suspend payment and await project completion, he could not be forced to accept reimbursement or a different property. The Court also noted that petitioner's claim that the subject property was sold to another person after cancellation lacked evidentiary support and sufficient discussion in lower tribunals, thus it could not rule on this allegation.
Main Doctrine
A buyer is justified in suspending amortization payments for a subdivision lot when the developer fails to complete the project according to approved plans and within the statutory period, provided due notice is given to the developer. The developer's unilateral rescission of the contract under such circumstances is illegal.