The Supreme Court ruled that selling subdivision lots without a Housing and Land Use Regulatory Board (HLURB) license constitutes a violation of Presidential Decree (P.D.) 957, and subsequent acquisition of a license does not absolve the seller from criminal liability. This decision reinforces the HLURB’s regulatory authority and underscores the importance of obtaining necessary licenses before engaging in real estate sales, protecting the rights of subdivision buyers.

License to Sell: Can It Erase Prior Violations?

This case revolves around Moldex Realty, Inc., its officers, and their alleged violation of P.D. 957 by selling subdivision lots without the required HLURB license. Victoria P. Cabral filed a criminal complaint against Jacinto Uy, the chairman of Moldex, and other officers, claiming that the lots being sold were subject to a pending ownership dispute. Moldex had applied for a license to sell but was initially denied. Subsequently, a criminal information was filed against the respondents for selling lots without a license. The central legal question is whether the HLURB’s eventual issuance of a license to sell can retroactively nullify the criminal liability for sales made prior to obtaining the license. This case highlights the tension between regulatory compliance and the protection of property buyers.

The respondents argued that the public prosecutor and the trial court lacked jurisdiction over the case, asserting that jurisdiction rested solely with the HLURB. Furthermore, they contended that the subsequent issuance of the license absolved them of criminal liability. The trial court denied their motions, but the Court of Appeals (CA) reversed this decision, upholding the trial court’s jurisdiction but ordering the dismissal of the case due to the later issuance of the license. The Supreme Court, however, disagreed with the CA’s conclusion. Building on this, the Supreme Court emphasized that the public prosecutor had the authority to file the criminal information, and the trial court had the power to adjudicate the action, citing Sia v. People which affirmed the jurisdiction of regular courts over violations of P.D. 957 due to the penalties involved.

P.D. 957, also known as the Subdivision and Condominium Buyers’ Protective Decree, was enacted to safeguard the interests of the public and regulate the real estate industry. Section 5 of P.D. 957 explicitly prohibits the sale of subdivision lots or condominium units without a license from the HLURB. The Supreme Court highlighted the nature of the offense under P.D. 957, stating that it is considered malum prohibitum, meaning that the act is prohibited by law for the greater good, irrespective of malice or criminal intent.

“Sec. 5. License to Sell. – Such owner or dealer to whom has been issued a registration certificate shall not, however, be authorized to sell any subdivision lot or condominium unit in the registered project unless he shall have first obtained a license to sell the project within two weeks from the registration of such project.”

This contrasts with crimes that are mala in se, which are inherently immoral or wrong. In cases of malum prohibitum, the focus is on whether the prohibited act was committed, not on the intent behind it. Since the Information alleged that Moldex sold a subdivision lot without the requisite license, the offense was deemed complete at that moment. The subsequent issuance of the license, regardless of good faith, could not retroactively erase the violation. The Supreme Court emphasized that the essence of the violation lies in the act of selling without a license, not in the developer’s subsequent actions.

The CA’s reliance on Co Chien v. Sta. Lucia Realty and Development, Inc. was deemed misplaced. The Supreme Court clarified that Co Chien involved a buyer seeking a refund and nullification of a contract due to the developer’s lack of a license at the time of the sale. In that case, the Court refused to void the transaction, finding that the absence of a license alone was insufficient to invalidate the contract. However, the HLURB still imposed an administrative fine on the developer for selling without a license, underscoring that subsequent compliance does not negate prior violations. This distinction is critical in understanding the Court’s stance in Cabral v. Uy.

The Supreme Court reinforced the principle that regulatory compliance is paramount in the real estate sector. Selling subdivision lots without a license exposes buyers to potential risks, including fraudulent practices and unfulfilled promises. P.D. 957 aims to prevent these risks by requiring developers to obtain the necessary licenses before engaging in sales. The Court’s decision ensures that developers are held accountable for their actions and cannot evade liability by simply obtaining a license after the fact. In essence, this ruling reinforces the importance of adhering to legal requirements from the outset and underscores the protective intent of P.D. 957.

The implications of this ruling are significant for both developers and buyers in the real estate market. Developers must prioritize obtaining the necessary licenses and permits before offering subdivision lots for sale to avoid potential criminal and administrative liabilities. Buyers, on the other hand, can take comfort in knowing that the law provides them with protection against unscrupulous developers who may attempt to circumvent regulatory requirements. This decision serves as a reminder that regulatory compliance is not merely a formality but a crucial aspect of ensuring fairness and transparency in real estate transactions.

FAQs

What was the key issue in this case?	The key issue was whether the subsequent issuance of a license to sell by the HLURB could extinguish the criminal liability of a developer for selling subdivision lots prior to obtaining the license.
What is Presidential Decree (P.D.) 957?	P.D. 957, also known as the Subdivision and Condominium Buyers’ Protective Decree, is a law that regulates the sale of subdivision lots and condominiums to protect the interests of buyers.
What does Section 5 of P.D. 957 prohibit?	Section 5 of P.D. 957 prohibits the sale of subdivision lots or condominium units without first obtaining a license to sell from the HLURB.
What is ‘malum prohibitum’?	‘Malum prohibitum’ refers to an act that is wrong because it is prohibited by law, regardless of whether it is inherently immoral. Violations of P.D. 957 are considered malum prohibitum.
What was the Court’s ruling regarding jurisdiction over violations of P.D. 957?	The Court affirmed that regular courts, specifically the Regional Trial Court, have jurisdiction over criminal actions for violations of P.D. 957, alongside the public prosecutor’s authority to file the criminal information.
How did the Court distinguish this case from Co Chien v. Sta. Lucia Realty?	The Court distinguished this case by pointing out that Co Chien involved a civil action for refund and nullification of a contract, whereas Cabral v. Uy involved a criminal prosecution for violating P.D. 957.
What is the significance of obtaining a license to sell?	Obtaining a license to sell ensures that developers comply with regulatory requirements, protecting buyers from potential fraud and ensuring the project’s legitimacy and financial stability.
What are the potential penalties for violating P.D. 957?	Violators of P.D. 957 may face fines of up to twenty thousand pesos (P20,000.00) and/or imprisonment for a term not exceeding ten years.

This landmark decision clarifies the responsibilities of real estate developers and protects the rights of subdivision buyers. It reinforces the HLURB’s regulatory authority and sends a clear message that compliance with P.D. 957 is not optional but mandatory. Failing to obtain the necessary licenses before selling property can result in serious legal consequences, regardless of subsequent compliance.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Victoria P. Cabral vs. Jacinto Uy, G.R No. 174584, January 22, 2010