After obtaining from the Housing Land Use and Regulatory Board (HLURB) a license to develop a subdivision known as Amville in 1985, ADC started selling the lots therein. One of those who purchased on October 8, 1985 was Gilbert. The contract to sell entered by Gilbert with ADC provides that Gilbert is to pay a down-payment of P26,058.50 upon execution, the balance to be paid in installments of P1,987.50 until full settlement of the purchase price of P130,290.
Gilbert remitted the down-payment upon signing the contract. Several months later, on March 11, 1987 he paid the initial installment. Thereafter, he verbally informed the owner/developer of his intention to stop further payments due to the latter’s non-compliance with its obligation to complete the development of the subdivision project. Gilbert told the owner/developer that up to that time the development was still on-going whereas under applicable laws, it must complete the development of the project within one year from the date of the issuance of the license. The owner/developer nevertheless made several demands for him to pay the monthly amortizations which the latter ignored, insisting that he would suspend payment until completion of the subdivision project.
Meantime, ZR apparently has taken over from ADC after it had won a case against the latter. Then four years later or on November 5, 1991 Gilbert formalized in writing his previous verbal notice about suspending payment of the installments. The realty firm still made several demands to pay back his arrears with a final notice sent when his arrears already amounted to P153,037.50. Then on May 14, 1992, ZR/ADC sent Gilbert a notarial notice of cancellation of the contract.
Thus on June 3, 1992, Gilbert filed a complaint with the HLURB against ZR and its president assailing the notarial rescission of the contract. He contended that his suspension of the amortization payment was justified by the non-development of the subdivision. After the HLURB conducted an ocular inspection of the project and found that it was still on going as of 1992, it rendered a decision in favor of Gilbert declaring Gilbert’s suspension of payment legal and valid and ZR’s rescission invalid and illegal. It also allowed Gilbert to pay the whole balance of his obligations upon ZR’s substantial compliance with its obligation as certified by HLURB. Was HLURB correct?
Yes. Since the development of the subdivision was registered as early as 1985 and there is no showing that ZR had been granted an extension by the HLURB, it has in effect failed to complete the project within one year from the date of issuance of the license for such development. Hence Gilbert is justified in refusing and suspending payment of the amortization as early as 1987, and ZR could not have validly exercised its right to cancel the contract to sell in favor of Gilbert. While the written notice of suspension was belatedly given on November 5, 1991, the verbal notice given in 1987 would suffice. The law does not specifically provide for the form of notice to be given to the owner/developer. Considering the purpose of the law and the evil sought to be prevented, a verbal notice of intention to suspend payment is sufficient. Neither is clearance from HLURB required. To require such clearance 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. In fine ZR was already guilty of incomplete development since 1987 and the validity of Gilbert’s suspension of payment should be reckoned from that date rather than from the date of the written notice on November 5, 1991 (Zamora Realty etc. vs. Gallardo et. al. G.R. 165724, November 2, 2006)
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