G.R. No. 162090 ; January 31, 2007
Spouses Howard T. Co Chien and Susan Y. Co Chien, Petitioners, vs. Sta. Lucia Realty & Development, Inc., and Alsons Land Corporation, Respondents.

FACTS

Petitioners Spouses Co Chien entered into a Contract to Sell with respondents Sta. Lucia and Alsons on December 20, 1995, to purchase a lot in the Eagle Ridge subdivision. They paid a substantial down payment. A critical addendum stipulated that a 10% discount given would be forfeited and added to the balance if the spouses failed to pay the balance within seven days from notice that the title was ready. At the time of the contract’s execution, respondents did not possess the required Certificate of Registration and License to Sell from the HLURB, as mandated by Presidential Decree No. 957. These documents were only issued in July 1997.
In January 1998, respondents notified petitioners that the title was ready and demanded payment of the balance. Petitioners attempted to negotiate for a further discount or a lot exchange instead of paying. Upon their failure to pay within the stipulated period, respondents enforced the addendum, forfeiting the discount. Subsequently, in 1999, petitioners demanded a refund of their down payment, arguing the Contract to Sell was void from the beginning due to the absence of the HLURB license and certificate at the time of signing.

ISSUE

The primary issue is whether the absence of a Certificate of Registration and License to Sell at the time of the contract’s execution renders the Contract to Sell null and void, entitling petitioners to a refund.

RULING

The Supreme Court denied the petition and affirmed the lower courts’ rulings, holding the contract valid and binding. The Court explained that while Sections 4 and 5 of P.D. 957 prohibit the sale of subdivision lots without the requisite HLURB license and certificate, this requirement is directory and regulatory in nature, not a prerequisite for the validity of the contract itself. The provision is intended for public welfare and administrative oversight of the real estate trade. Non-compliance is an administrative violation punishable by fine, but it does not automatically void a consummated contract. The essential elements of a valid contract—consent, object, and cause—were present.
The legal logic is that the nullity of a contract requires a clear legislative declaration or that the illegality affects its very essence. P.D. 957 contains no such declaration of nullity for contracts executed without a license. The law’s primary objective is to protect buyers through regulation, not to invalidate agreements. Here, the license was obtained before the demand for the balance, and the project was nearly complete, thus the regulatory purpose was substantially served. Petitioners, having benefited from the contract and failed to fulfill their own obligation to pay the balance, cannot invoke the respondents’ prior administrative lapse to rescind the contract and recover their payment. Their own default, under the contract’s clear terms, was the operative cause of their loss.