THIRD DIVISION

CARLOS R. TAMAYO,
Petitioner,

G.R. No. 164136

Present:

- versus -

MILAGROS HUANG, JOSEFINO

HUANG, HUANG SUI SIN,
MIGUEL HUANG and IAP TONG
HA,
Respondents.

QUISUMBING, J., Chairperson,

CARPIO,
CARPIO MORALES, and
TINGA, JJ.
Promulgated:
January 25, 2006

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
DECISION
CARPIO MORALES, J.:
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 manage 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. The parcels of land were later known as Doa
Luisa Village (the subdivision).
[1]

On or about April 30, 1981, Carlos R. Tamayo (petitioner) entered into a

contract to sell (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
[2]

area of 1,424 square meters atP170.00 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 ofP4,791.40, 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 ofP59,706.60.
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.
More than five years after the parties executed the contract on April 30, 1981,
respondents appear to have sent petitioner a letter demanding payment of the lot,
for in a letter dated December 24, 1986 addressed to respondents, petitioner stated
that he intentionally desisted from paying further monthly installments due to nondevelopment of the subdivision as agreed upon in the contract.
[3]

[4]

[5]

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 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.
[6]

[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 dated February 28, 1991 addressed to and
received by petitioners son.
[8]

Petitioner later filed a complaint 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).
[9]

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 of Branch 14 of the RTC
Davao City in Civil Case No. 17625 rescinding the Indenture forged by
respondents and EAP for the latters failure to develop the subdivision. Petitioner
also submitted a Certification 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.
[10]

[11]

In their Answer to the complaint, 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.
[12]

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, respondents informed that they were refusing

to accept petitioners checks as these were issued and consigned long after the
expiration of the contract on April 30, 1986.
[14]

By Decision of February 16, 1998, HLRUB Arbiter Atty. Joselito F. Melchor

dismissed petitioners complaint, holding that payment by tender and consignation
was not legally effected, the check dated January 9, 1991 having been sent back to
petitioners son, and the consignation of the two checks dated 1997 having failed to
meet the requirements set forth by law for a valid consignation.
[15]

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 formers breach of obligation
and P50,000.00 as attorneys fee; and
4. The complainant to pay the cost of litigation.
SO ORDERED. (Underscoring supplied)
[16]

Petitioner thereupon filed a petition for review before the HLURB Board of
Commissioners questioning the award of damages and attorneys 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 Arbiters 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, 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 which cancelled respondents TCT No. T74582. 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.
[17]

[18]

[19]

[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
Abijars 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. Thus the OP held:
[21]

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.
(Underscoring supplied)
[22]

The OP thus reversed the decision of the HLURB Board of Commissioners,

the dispositive portion of which reads:
WHEREFORE,
MODIFIED to wit:

premises

considered

judgment

is

hereby

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 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.
[23]

By decision rendered on January 23, 2004, the appellate court dismissed the
petition for lack of merit. Petitioners motion for reconsideration having been denied
by resolution of June 29, 2004, he filed the present petition.
[24]

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, thus
prompting respondents to continue development thereof on May 22, 1985 and to
even file a complaint to rescind its contract of Indenture with EAP which the RTC
Davao granted.
[25]

[26]

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 BUYERS 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, 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.
[27]

[28]

From petitioners 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.
xxxx
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. Ill 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 petitioners 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 latters 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.

xxxx
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. (Italics supplied)
[30]

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 petitioners 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 petitioners 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 torefund 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.
SO ORDERED.
CONCHITA CARPIO MORALES
Associate Justice

WE CONCUR:

LEONARDO A. QUISUMBING
Associate Justice
Chairperson

ANTONIO T. CARPIO
Associate Justice

DANTE O. TINGA
Associate Justice

ATTESTATION
I attest that the conclusions in the above Decision were reached in consultation
before the case was assigned to the writer of the opinion of the Courts Division.
LEONARDO A. QUISUMBING
Associate Justice
Chairperson

CERTIFICATION
Pursuant to Article VIII, Section 13 of the Constitution, and the Division
Chairmans Attestation, it is hereby certified that the conclusions in the above
Decision were reached in consultation before the case was assigned to the writer of
the opinion of the Court.

ARTEMIO V. PANGANIBAN
Chief Justice