Cantemprate vs. CRS Realty Development Corporation

The absence of a license to sell under P.D. No. 957 does not invalidate a perfected contract of sale, and the HLURB has exclusive jurisdiction over specific performance of contractual and statutory obligations by subdivision buyers but lacks jurisdiction over actions for quieting of title or reconveyance, which fall under the exclusive original jurisdiction of the RTC.

Petitioners purchased subdivision lots on installment from CRS Realty, a corporation owned and developed by respondents Casal and Salvador, and eventually paid the purchase prices in full. Despite full payment, respondents failed to deliver the corresponding certificates of title free from encumbrances, citing a notice of lis pendens annotated on the titles due to a pending ownership dispute between Casal and the Heirs of Laudiza. Casal subsequently executed a deed of absolute sale over the subdivision property, including the lots already paid for by petitioners, in favor of respondents Cuason and Ang, resulting in the issuance of a new transfer certificate of title in the latter's names.

• The Subdivision Purchases: Petitioners bought subdivision lots from CRS Realty on installment and paid in full. The contracts to sell expressly obliged the vendor to cause the issuance of a certificate of title upon full payment.
• The Encumbrance and Failure to Deliver: Respondents failed to deliver clean titles because of a notice of lis pendens annotated on the mother title due to Civil Case No. BCV-90-14 (Heirs of Laudiza v. Casal). Casal offered to deliver titles with the lis pendens annotation, which petitioners refused.
• The Subsequent Sale: Casal sold the subdivision property, including the already sold lots, to Cuason and Ang, resulting in the issuance of TCT No. 669732 to the new buyers.
• Internal Disputes Among Respondents: Casal claimed the obligation to deliver unencumbered titles fell on CRS Realty based on their subdivision development agreement. Salvador claimed she divested her interest in CRS Realty and that Casal assumed full responsibility in a 1996 agreement. Cuason and Ang claimed they bought the property as registered owners and petitioners' claims were unfounded due to lack of annotation.

• Validity of Sale: Petitioners argued that the absence of a license to sell did not render the sales void, contesting the Court of Appeals' pronouncement that the lack of license voided the contracts and precluded specific performance.
• Double Sale: Petitioners maintained that the subsequent sale of the lots to respondents Cuason and Ang constituted a double sale.
• HLURB Jurisdiction: Petitioners asserted that the HLURB had jurisdiction over the entire complaint, including the action for quieting of title and reconveyance.
• Minute Decision: Petitioners contended that the Office of the President's minute decision violated Section 14, Article VIII of the Constitution.

• Casal's Defense: Respondent Casal argued that the obligation to deliver unencumbered titles fell on CRS Realty pursuant to their subdivision development agreement, and that petitioners refused titles with lis pendens. He claimed he only sold the unsold portions to Cuason and Ang.
• Salvador's Defense: Respondent Salvador argued that her prior agreements with Casal were superseded by a 1996 agreement where Casal assumed full responsibility for the buyers' claims, and that she had already divested her interest in CRS Realty.
• Cuason and Ang's Defense: Respondents Cuason and Ang argued that Casal remained the registered owner when the property was transferred to them, and that petitioners' failure to annotate their claims on the title indicated those claims were unfounded.

• Validity of Sale: Whether the absence of a license to sell renders the subdivision sales void.
• Double Sale: Whether the subsequent sale to respondents Cuason and Ang constitutes a double sale.
• HLURB Jurisdiction: Whether the HLURB has jurisdiction over petitioners’ complaint for specific performance and quieting of title.
• Minute Decision: Whether the Office of the President's minute decision conforms to the requirement of Section 14, Article VIII of the Constitution.

• Validity of Sale: The absence of a license to sell does not render the sales void. A contract of sale is perfected upon the meeting of minds regarding the object and price. The lack of a license to sell under P.D. No. 957 is an administrative requirement that subjects the seller to penalties but does not affect the validity of the perfected contract.
• HLURB Jurisdiction (Specific Performance): The HLURB has exclusive jurisdiction over the complaint for specific performance to compel the delivery of certificates of title pursuant to Section 1 of P.D. No. 1344 and Section 25 of P.D. No. 957.
• HLURB Jurisdiction (Quieting of Title): The HLURB has no jurisdiction over actions for quieting of title or reconveyance, as these fall under the exclusive original jurisdiction of the Regional Trial Courts under Section 19 of B.P. Blg. 129.
• HLURB Jurisdiction (Double Sale): The HLURB may adjudicate whether the subsequent sale constituted a double sale, as this issue is intimately related to the complaint for specific performance and unsound business practices under P.D. No. 1344. The case was remanded to the HLURB to determine if the sale to Cuason and Ang was attended with fraud and bad faith.
• Remedy for Breach: Respondents are ordered to deliver clean certificates of title within six months. Failing this, they are solidarily liable to pay actual damages equivalent to the current market value of the lots, pursuant to Articles 1191, 2199, and 2200 of the Civil Code. The relativity of contracts prevents Salvador from evading liability based on a subsequent agreement with Casal.
• Minute Decision: The Office of the President's adoption by reference of the HLURB's findings complies with the Constitution, as memorandum decisions are sanctioned under Section 40 of B.P. Blg. 129.

• Validity of Contracts Without License to Sell — The absence of a license to sell under P.D. No. 957 does not automatically render a contract of sale void. The requirement is an administrative convenience for regulating the industry; its absence merely subjects the seller to civil and criminal liability but does not affect the validity of the perfected contract between buyer and seller.
• Relativity of Contracts — Contracts bind only the parties who entered into them and cannot favor or prejudice a third person. A subsequent agreement between developers rescinding their subdivision development agreement cannot affect the rights of third-party lot buyers.
• Rescission and Actual Damages in Subdivision Sales — When a subdivision developer fails to deliver clean titles, the buyer may seek specific performance. If specific performance becomes impossible, the buyer is entitled to rescission and actual damages, which include not only the purchase price but also the incremental value arising from the appreciation of the lots (current market value), pursuant to Articles 1191, 2199, and 2200 of the Civil Code.

• "The failure by respondent CRS Realty to obtain a license to sell the subdivision lots does not render the sales void on that ground alone especially that the parties have impliedly admitted that there was already a meeting of the minds as to the subject of the sale and price of the contract. The absence of the license to sell only subjects respondent CRS Realty and its officers civilly and criminally liable for the said violation under Presidential Decree (P.D.) No. 957 and related rules and regulations. The absence of the license to sell does not affect the validity of the already perfected contract of sale between petitioners and respondent CRS Realty."
• "The subsequent agreement which purportedly rescinded the subdivision development agreement between respondents Casal and Salvador could not affect third persons like herein petitioners because of the basic civil law principle of relativity of contracts which provides that contracts can only bind the parties who entered into it, and it cannot favor or prejudice a third person, even if he is aware of such contract and has acted with knowledge thereof."
• "In the event that respondents Casal, Salvador and CRS Realty cannot deliver clean certificates of title to petitioners, the latter must be reimbursed not only of the purchase price of the subdivision lots sold to them but also of the incremental value arising from the appreciation of the lots. Thus, petitioners are entitled to actual damages equivalent to the current market value of the subdivision lots."

• Co Chien v. Sta. Lucia Realty and Development, Inc., G.R. No. 162090, 31 January 2007, 513 SCRA 570 — Followed. Held that the requisite registration and license to sell under P.D. No. 957 do not affect the validity of the contract between a subdivision seller and buyer; absence does not automatically render the contract void.
• Spouses Suntay v. Gocolay, G.R. No. 144892, 23 September 2005, 470 SCRA 627 — Followed. Held that the HLURB has no jurisdiction over issues of ownership, possession, or interest in real property, which fall under the exclusive original jurisdiction of the RTCs.
• Union Bank of the Philippines v. Housing and Land Use Regulatory Board, G.R. No. 95364, 29 June 1992, 210 SCRA 558 — Applied. Upheld HLURB’s jurisdiction over a buyer’s complaint to annul a certificate of title issued to a third party when intimately related to the statutory obligations of the developer.
• Solid Homes, Inc. v. Spouses Tan, G.R. No. 145156-57, 29 July 2005, 465 SCRA 137 — Applied. Ordered the payment of the current market value of the subdivision lot as actual damages after the developer could no longer comply with its obligation to develop the property.

• Article 1458, Civil Code — Defines a contract of sale, applied to confirm the perfection of the contract between petitioners and CRS Realty despite the lack of a license to sell.
• Section 25, Presidential Decree No. 957 — Obliges the owner or developer to deliver the title of the lot to the buyer upon full payment, forming the statutory basis for the specific performance action within HLURB's jurisdiction.
• Section 1, Presidential Decree No. 1344 — Grants the HLURB exclusive jurisdiction over unsound real estate business practices, claims for refund, and specific performance of contractual and statutory obligations filed by subdivision lot buyers.
• Section 19, Batas Pambansa Blg. 129 — Vesting exclusive original jurisdiction over actions involving title to or possession of real property in the Regional Trial Courts, thereby excluding HLURB from adjudicating quieting of title actions.
• Article 1191, Civil Code — Provides the power to rescind reciprocal obligations in case of breach, applied to sanction the payment of current market value if specific performance becomes impossible.
• Articles 2199 and 2200, Civil Code — Define actual or compensatory damages, applied to entitle petitioners to the current market value of the lots to cover the value of the loss suffered and profits failed to be obtained.

Conchita Carpio Morales, Presbitero J. Velasco, Jr., Teresita J. Leonardo-De Castro, Arturo D. Brion