Moldex Realty v. Saberon
REITERATIONFacts
The Antecedents: Respondent Flora A. Saberon (Flora) entered into a Contract to Sell with petitioner Moldex Realty, Inc. (Moldex) for a lot in Dasmariñas, Cavite. Flora opted to pay on installment and made payments from 1992 to 1996, totaling ₱375,295.49. Moldex sent notices for Flora to update her account, but upon inquiry, Flora discovered a significantly ballooned balance, which she alleged was due to bad faith and bloating by Moldex. Moldex suggested Flora authorize the sale to a new buyer and request a refund, but Flora did not. Procedural History: Flora filed a complaint with the Housing and Land Use Regulatory Board (HLURB) Regional Field Office IV, seeking annulment of the contract, recovery of payments, damages, and cancellation of Moldex's license to sell. Flora alleged Moldex violated Section 5 of PD 957 by selling the lot before obtaining a license to sell and Section 17 of the same law by failing to register the contract to sell. The HLURB Arbiter declared the contract void for violation of Section 5 of PD 957 and ordered Moldex to refund Flora's payments with interest, plus attorney's fees and an administrative fine. The HLURB Board of Commissioners affirmed the Arbiter's decision. The Office of the President (OP) also affirmed the voiding of the contract and the imposition of the fine. The Court of Appeals (CA) agreed with the lower tribunals, holding the contract void due to Moldex's non-compliance with Section 5 of PD 957, and that subsequent issuance of a license did not cure the defect. The CA also affirmed the administrative fine and attorney's fees. The Petition: Moldex filed a Petition for Review on Certiorari with the Supreme Court, assailing the CA's decision and resolution, primarily contending that the contract to sell remains valid and binding.
Issue(s)
Whether the contract to sell between Moldex and Flora is void due to Moldex's lack of a license to sell at the time of perfection. Whether the contract to sell is void due to Moldex's failure to register the contract to sell with the Register of Deeds. Whether Flora is entitled to a refund under the Maceda Law.
Ruling
The Supreme Court granted the petition, annulling and setting aside the decisions of the Court of Appeals, the Office of the President, and the HLURB. The contract to sell between Moldex and Flora was declared cancelled, and Moldex was ordered to refund Flora the cash surrender value of her amortizations equivalent to ₱187,647.75.
Ratio Decidendi
On the validity of the contract to sell despite lack of license to sell: The Court held that the lack of a license to sell on the part of a subdivision developer does not result in the nullification or invalidation of the contract to sell. The contract remains valid and subsisting. The Court cited Spouses Co Chien v. Sta. Lucia Realty and Development Corporation, Inc., stating that PD 957 penalizes selling without a license but does not provide for the nullity of a contract otherwise validly entered into. The penalties provided in Sections 38 and 39 of PD 957 do not include the nullification of contracts. Therefore, the contract to sell between Flora and Moldex remains valid despite Moldex's lack of a license to sell at the time of its execution. On the validity of the contract to sell despite failure to register: The Court ruled that similar to the lack of a license to sell, Moldex's failure to register the contract to sell with the Register of Deeds, in violation of Section 17 of PD 957, does not result in the nullification or invalidity of the contract. Extrapolating the ratio in Co Chien, the non-registration of an instrument of conveyance does not affect the validity of a contract to sell between the parties. Registration under PD 1529 serves as constructive notice to bind third parties, but it does not invalidate the contract between the buyer and seller. On the entitlement to a refund under the Maceda Law: The Court found that Flora is entitled to a refund under Republic Act No. 6552 (Maceda Law). Flora had paid installments for more than two years (₱375,295.49) and had defaulted in her subsequent payments. Since she could no longer avail of the grace period to pay under Section 3(a) due to her default and Moldex's notice of cancellation, her recourse was under Section 3(b). This section mandates that if the contract is cancelled, the seller shall refund the buyer the cash surrender value of the payments made, equivalent to 50% of the total payments. Thus, Moldex was ordered to refund Flora 50% of her payments, amounting to ₱187,647.75.
Main Doctrine
The lack of a license to sell or the failure to register the contract to sell does not nullify the contract to sell; however, a buyer who has paid at least two years of installments and defaults is entitled to the cash surrender value of her payments under the Maceda Law.