GR 165724; (November, 2006) (Digest)
G.R. No. 165724; November 2, 2006
ZAMORA REALTY and DEVELOPMENT CORPORATION and/or ERNESTO ZAMORA, Petitioners, vs. OFFICE OF THE PRESIDENT OF THE PHILIPPINES and EDILBERTO C. GALLARDO, Respondents.
FACTS
Respondent Edilberto Gallardo entered into a Contract to Sell with Amlac Development Corporation in 1985 for a subdivision lot. After paying the downpayment and an initial installment in March 1987, Gallardo informed the developer of his intention to suspend further amortization payments due to the latter’s failure to complete the development of the subdivision project. Despite demands from the developer, Gallardo maintained his position. In 1990, petitioner Zamora Realty, which had acquired the project, advised buyers to defer payments due to a pending case. Gallardo formally reiterated his suspension of payments in a 1991 letter. Zamora Realty later sent notices of arrears and a notarial notice of cancellation of the contract in 1992.
Gallardo filed a complaint with the HLURB, assailing the rescission. The HLURB Arbiter, after an ocular inspection finding the project still ongoing, ruled in Gallardo’s favor, declaring his suspension of payment valid and the rescission illegal. This decision was affirmed by the HLURB Board of Commissioners and the Office of the President. The Court of Appeals subsequently dismissed Zamora Realty’s petition, sustaining the validity of Gallardo’s action.
ISSUE
Whether respondent Gallardo was legally justified in suspending his amortization payments, thereby rendering the petitioner’s subsequent rescission of the Contract to Sell invalid.
RULING
Yes, Gallardo was legally justified. The Supreme Court affirmed the CA decision but modified the effective date of the valid suspension to March 12, 1987. The Court applied the provisions of Presidential Decree No. 957 (The Subdivision and Condominium Buyers’ Protective Decree). Under Section 20, a subdivision owner/developer is required to complete the development of the project within one year from the date of issuance of the license to sell. The project, registered in 1985, remained incomplete as of the 1992 ocular inspection, with no approved extension of the development period.
Crucially, Section 23 of P.D. 957 grants the buyer the right to suspend payment upon the developer’s failure to develop the project according to the approved plans and within the time limit. The Court held that this statutory right is a police power measure intended to protect buyers and is deemed written into the contract. Since the developer failed to complete the project within the statutory period, Gallardo’s suspension of payments was a valid exercise of this right. Consequently, the petitioner’s rescission of the contract, which was based on Gallardo’s non-payment, was illegal as it stemmed from a delay attributable to the developer’s own breach.