San Miguel Properties, Inc. vs. BF Homes, Inc.

A subdivision developer is mandatorily obligated under Section 25 of Presidential Decree No. 957 to deliver the certificate of title to the buyer upon full payment of the purchase price; the HLURB has exclusive jurisdiction over the buyer’s complaint for specific performance and may not suspend its proceedings pending resolution by the SEC of an intra-corporate controversy involving the receiver’s authority. Acceptance of full payment and partial delivery of titles ratify any want of authority of the seller’s representative, estop the seller from repudiating the sale, and remove the transaction from the Statute of Frauds. Mere inadequacy of price does not invalidate a sale, and the absence of notarization does not affect the validity of the conveyance between the parties.

BF Homes, Inc. owned several parcels of land in the northern portion of BF Homes Parañaque Subdivision known as Italia II lots. It was placed under rehabilitation by the Securities and Exchange Commission. Florencio B. Orendain was appointed rehabilitation receiver in 1988; his appointment was revoked in 1989, and FBO Networks Management, Inc., of which Orendain was Chairman, was appointed in his stead. Between 1992 and 1993, BF Homes, through Orendain as representative of FBO Networks Management, Inc., executed three Deeds of Absolute Sale conveying a total of 130 lots to San Miguel Properties, Inc. for an aggregate consideration of ₱106,247,701.00. SMPI completed payment by December 1995, and BF Homes delivered the corresponding Transfer Certificates of Title for 110 lots but withheld 20 TCTs. Despite demand, BF Homes refused to deliver the remaining titles, prompting SMPI to file a complaint for specific performance with damages before the HLURB. BF Homes resisted, alleging that Orendain acted without authority, that the consideration was grossly inadequate, and that the deeds were undated and not notarized.

• Parties and Nature of the Action: BF Homes, Inc. was the owner-developer of the Italia II lots in BF Homes Parañaque Subdivision. San Miguel Properties, Inc. was the buyer of 130 lots. The action before the HLURB was one for specific performance to compel delivery of 20 TCTs.
• Receivership of BF Homes: The SEC placed BF Homes under rehabilitation. In February 1988, Florencio B. Orendain was appointed rehabilitation receiver. His appointment was revoked in May 1989, and FBO Networks Management, Inc. was appointed as the new receiver. Orendain served as Chairman of FBO Networks Management, Inc.
• The Sales Transactions: In 1992 and 1993, BF Homes, through Orendain acting for FBO Networks Management, Inc., executed three Deeds of Absolute Sale covering 130 Italia II lots with a total area of 44,345 square meters, for an aggregate price of ₱106,247,701.00. The first deed covered 76 lots; the second, 13 lots; the third, 41 lots. Each deed contained a covenant obligating BF Homes to deliver the titles and documents necessary to effect the transfer.
• Payment and Partial Delivery: SMPI completed full payment of the purchase price by December 1995. BF Homes delivered the TCTs for 110 of the 130 lots but withheld the remaining 20 TCTs. SMPI, through counsel, demanded delivery of the outstanding titles in a letter dated May 20, 1996. BF Homes did not comply.
• Defenses Raised by BF Homes: In its Answer with Counterclaim before the HLURB, BF Homes alleged that Orendain executed the deeds in his personal capacity and without authority, because his appointment as receiver had been revoked in 1989. It further claimed that the consideration was grossly inadequate and disadvantageous, and that the deeds were undated and not notarized. BF Homes prayed for dismissal of the complaint, nullification of the sale, reconveyance of the 110 lots, and damages.
• SEC Proceedings on Receivership: The SEC issued an Omnibus Order in July 1996 relating to the rehabilitation case. BF Homes filed a petition for review before the SEC, and in a Decision dated May 1997, the SEC clarified that the admission of the receiver’s closing report did not constitute acceptance of the veracity of its contents. In September 2000, the SEC terminated the rehabilitation proceedings without definitively resolving the propriety of the receiver’s acts. BF Homes filed a motion for clarification and/or partial reconsideration, which remained pending.
• HLURB Suspension and Subsequent Appeals: The HLURB Arbiter, after the parties had submitted position papers and evidence, suspended proceedings on the ground that the SEC had exclusive jurisdiction to determine Orendain’s authority — a condition sine qua non to the HLURB case. The HLURB Board of Commissioners affirmed, applying the doctrine of primary jurisdiction. On appeal, the Office of the President reversed, held that the HLURB should have decided the case, and ruled on the merits in favor of SMPI. The Court of Appeals agreed that the HLURB had exclusive jurisdiction but ordered the case remanded for further proceedings.

• Error in Remanding to the HLURB: SMPI argued that the Court of Appeals’ decision to remand the case lacked a clear legal basis and failed to identify any factual matter requiring further trial, in violation of Section 14, Article VIII of the 1987 Constitution. It contended that the doctrine of primary jurisdiction could not be invoked for the first time on appeal and was inapplicable because the parties had already amplified their causes of action and defenses through pleadings and position papers before the HLURB.
• Decision on the Merits Should Have Been Affirmed: SMPI maintained that the sole issue — whether it was entitled to the delivery of 20 fully paid lots — was a pure question of law that the Office of the President correctly resolved. It asserted that the relevant facts (full payment, non-delivery) were undisputed, no triable evidentiary matter remained, and further HLURB proceedings would be dilatory and barred by substantial res judicata.
• Validity of the Sale and Receiver’s Authority: SMPI contended that the SEC had confirmed the validity of the sales through its Orders dated November 7, 1994 and July 31, 1996, which had become final. It further argued that under Section 9, Rule 9 of the Interim Rules of Procedure Governing Intra-corporate Controversies and Section 17, Rule 4 of the Interim Rules of Procedure on Corporate Rehabilitation, receivers are immune from suit for acts done in good faith in the exercise of their functions.
• Estoppel and Ratification: SMPI argued that BF Homes was estopped from refusing to deliver the remaining 20 titles because it had already delivered 110 TCTs and accepted full payment. SMPI maintained that BF Homes had thereby ratified the transactions.
• Mandatory Obligation under P.D. No. 957: SMPI invoked Section 25 of Presidential Decree No. 957, which requires the developer to deliver the title upon full payment.
• Award of Attorney’s Fees: SMPI claimed entitlement to attorney’s fees because it was compelled to litigate due to BF Homes’ unjustified refusal to deliver the titles.

• Lack of Authority of Receiver: BF Homes asserted that the Deeds of Absolute Sale were entered into by Orendain in his personal capacity and without authority, as his appointment as rehabilitation receiver had been revoked by the SEC in 1989. The validity of the sale was thus contingent on the resolution of the receiver’s authority, a matter pending before the SEC.
• Inadequacy of Purchase Price: BF Homes averred that the consideration for the 130 lots was grossly inadequate and disadvantageous, with the lots valued at ₱3,000.00 to ₱3,500.00 per square meter based on an appraisal report, while the average purchase price was only ₱2,500.00 per square meter.
• Defective Form of Deeds: BF Homes pointed out that the Deeds of Absolute Sale were undated and not notarized, rendering them invalid.
• Non-finality of SEC Orders: BF Homes countered that the SEC Omnibus Order of July 31, 1996 had not become final, as it had assailed the order via a Petition for Certiorari before the SEC. The SEC’s May 1997 Decision merely admitted the receiver’s closing report without approving its contents. The September 2000 termination order also did not resolve the issues against the receiver.
• Improper Suspension/HLURB’s Competence: BF Homes did not necessarily oppose the HLURB’s suspension but defended the HLURB Board of Commissioners’ application of the doctrine of primary jurisdiction, arguing that the SEC should first determine the receiver’s authority. Before the Court of Appeals, BF Homes sought to uphold the suspension or, alternatively, the remand.

• Exclusive Jurisdiction and Suspension of Proceedings: Whether the HLURB properly suspended proceedings in the specific performance complaint pending resolution by the SEC of the receiver’s authority.
• Propriety of Remand to the HLURB: Whether the Court of Appeals correctly remanded the case to the HLURB for further proceedings despite the submission by the parties of their pleadings and evidence.
• Obligation to Deliver Titles: Whether SMPI is entitled to the delivery of the remaining 20 TCTs under the Deeds of Absolute Sale and Section 25 of Presidential Decree No. 957.
• Defenses to the Sale: Whether BF Homes may validly resist delivery based on (a) lack of authority of the receiver; (b) inadequacy of the purchase price; and (c) the absence of notarization and dating of the deeds.
• Attorney’s Fees: Whether the award of ₱100,000.00 in attorney’s fees to SMPI was proper.

• Exclusive Jurisdiction and Suspension of Proceedings: The HLURB possesses exclusive jurisdiction under Section 1 of Presidential Decree No. 1344 over complaints for specific performance filed by subdivision lot buyers against developers. The HLURB should not have suspended its proceedings pending resolution by the SEC of the receiver’s authority. The HLURB’s mandate to interpret contracts and determine the rights of buyers and sellers of subdivision lots is distinct from the SEC’s jurisdiction over intra-corporate controversies. The two proceedings could proceed independently; a ruling by the SEC on the receiver’s authority would not automatically nullify the sale or justify the refusal to deliver titles, since issues of good faith, ratification, and estoppel fall squarely within the HLURB’s competence. The suspension unduly delayed the expeditious resolution of a dispute imbued with public interest.
• Propriety of Remand to the HLURB: Remanding the case to the HLURB was unwarranted. The parties had already filed pleadings and submitted evidence; the case was deemed submitted for decision before the Arbiter. Requiring further proceedings would be circuitous and inconsistent with the summary nature of HLURB proceedings, as well as the shared objective of the HLURB Rules and the Rules of Court to secure a just, speedy, and inexpensive disposition. Several recognized exceptions to the doctrine of primary jurisdiction applied: the dispute involved a strong public interest (housing); judicial intervention was urgent; and remanding would cause unreasonable delay and irreparable prejudice. The Supreme Court, in the interest of settling the entire controversy, resolved the case on the merits based on the records.
• Obligation to Deliver Titles: Section 25 of Presidential Decree No. 957 imposes a mandatory duty on the owner or developer to deliver the title upon full payment. SMPI submitted adequate proof of full payment for the 130 lots, a fact BF Homes did not effectively controvert. Accordingly, the obligation to deliver the remaining 20 TCTs became absolute.
• Defenses to the Sale: All three defenses raised by BF Homes were rejected.
• Lack of Authority/Ratification and Estoppel: Even assuming that Orendain/FBO Networks Management, Inc. acted without or beyond authority, the resulting contracts were merely unenforceable under Article 1403(1) of the Civil Code and could be ratified. BF Homes ratified the Deeds of Absolute Sale by accepting full payment and by partially implementing the transaction, delivering 110 of 130 TCTs. Such acceptance of benefits also estopped BF Homes from repudiating the sale.
• Inadequacy of Price: Under Article 1355 of the Civil Code, mere inadequacy of cause does not invalidate a contract absent fraud, mistake, or undue influence. The appraisal report submitted by BF Homes did not prove gross inadequacy, and SMPI’s explanation that a volume discount was granted remained unrebutted. Private transactions are presumed fair and regular.
• Undated and Non-Notarized Deeds: The Deeds of Absolute Sale were in writing and signed by the parties. The lack of notarization did not affect the validity of the conveyance between the parties; it merely deprived the documents of the character of public instruments. The form requirement under Article 1358 of the Civil Code is for efficacy, not validity. Moreover, the contracts had been partially performed and benefits accepted, taking them out of the Statute of Frauds and ratifying any evidentiary defect.
• Attorney’s Fees: The award of ₱100,000.00 was affirmed. BF Homes acted in gross and evident bad faith in refusing to satisfy SMPI’s plainly valid, just, and demandable claim for the delivery of the remaining titles, compelling SMPI to litigate. The amount was deemed just and reasonable.

• Exclusive Jurisdiction of the HLURB under P.D. No. 1344 — The HLURB has exclusive jurisdiction to hear and decide cases involving specific performance of contractual and statutory obligations filed by buyers of subdivision lots or condominium units against the owner, developer, dealer, broker, or salesman. This jurisdiction is mandatory and cannot be suspended or declined in favor of another tribunal when the complaint falls squarely within its statutory grant.
• Mandatory Obligation under Section 25, P.D. No. 957 — Upon full payment of the purchase price of a subdivision lot or condominium unit, the owner or developer is mandatorily obliged to deliver the corresponding certificate of title to the buyer. Any unjustified refusal constitutes a violation of the law and the contract.
• Ratification of Unauthorized Contracts under Article 1403(1) of the Civil Code — A contract entered into in the name of another by one who lacked or exceeded authority is unenforceable unless ratified. Ratification may be effected by the acceptance of benefits under the contract, such as the receipt of the full purchase price and partial performance.
• Estoppel by Acceptance of Benefits — A party who has accepted benefits arising from a contract cannot later repudiate the contract or deny the authority of the person who executed it. The doctrine of estoppel precludes a party from adopting an inconsistent position to the prejudice of another who relied in good faith on the validity of the transaction.
• Effect of Non-Notarization on Conveyances of Real Property — The requirement of a public document under Article 1358 of the Civil Code is for the efficacy, not the validity, of the contract. The sale of real property embodied in a private writing is valid and binding between the parties, and the buyer may compel the seller to execute the necessary public instrument. Partial performance and acceptance of benefits also ratify the contract and remove it from the Statute of Frauds.
• Inadequacy of Price under Article 1355 of the Civil Code — Mere inadequacy of the purchase price does not invalidate a contract of sale, save in cases provided by law or where there has been fraud, mistake, or undue influence. A disparity between the agreed price and market value, standing alone, does not nullify the sale.
• Doctrine of Primary Jurisdiction — Exceptions — The doctrine that courts will defer to the administrative agency with special competence is not absolute; it yields where (a) strong public interest is involved; (b) judicial intervention is urgent; (c) there is unreasonable delay or official inaction; (d) the question is purely legal; or (e) the controverted acts violate due process, among other recognized exceptions.

• “Upon full payment of the agreed price, petitioner is mandated by law to deliver the title of the lot or unit to the buyer. Both the ‘Contract to Sell’ of petitioner and private respondents, and Sec. 25 of P.D. 957 state — ‘The owner or developer shall deliver the title of the lot or unit to the buyer upon full payment of the lot or unit.’” — This passage distills the mandatory character of the developer’s obligation and was applied to compel delivery.
• “The HLURB is behooved to settle the controversy brought before it with dispatch if only to achieve the purpose of Presidential Decree No. 957 … Shelter is a basic human need whose fulfillment cannot afford any kind of delay.” — This excerpt emphasizes the public interest dimension of subdivision disputes and the heightened duty of the HLURB to act expeditiously.
• “The form required is for evidentiary purposes only. Hence, if the parties permit a contract to be proved, without any objection, it is then just as binding as if the Statute has been complied with. … The Statute of Frauds is applicable only to contracts which are executory and not to those which have been consummated either totally or partially.” — The Court clarified the role of the Statute of Frauds and the effect of partial performance, reinforcing the enforceability of the deeds.
• “Receiving full payment for the 130 Italia II lots from SMPI also estops BF Homes from denying the authority of Orendain/FBO Networks Management, Inc. to enter into the Deeds of Absolute Sale. … ‘[T]he doctrine of estoppel precludes BISTRANCO from repudiating an obligation voluntarily assumed by it, after having accepted benefits therefrom.’” — The Court applied estoppel to prevent BF Homes from escaping its obligation after enjoying the fruits of the contract.
• “The HLURB and the SEC being bestowed with distinct powers and functions, the exercise of those functions by one shall not abate the performance by the other of its own functions.” — This line, drawn from Arranza, was adopted to hold that the HLURB need not wait for the SEC’s determination.

• Siasoco v. Narvaja, 373 Phil. 766 (1999) — Cited for the proposition that the HLURB has exclusive jurisdiction over complaints for specific performance against subdivision developers.
• Bank of the Philippines Islands v. ALS Management and Development Corporation, 471 Phil. 544 (2004) — Reiterated that the HLURB’s jurisdiction over cases under P.D. No. 1344 is exclusive and that the board has sole jurisdiction in complaints for delivery of title to a subdivision lot buyer.
• Spouses Chua v. Ang, 614 Phil. 416 (2009) — Applied to underscore that public interest and welfare are involved in subdivision and condominium development, and that the dispute must be resolved swiftly.
• G.O.A.L., Inc. v. Court of Appeals, 342 Phil. 321 (1997) — Relied upon for the mandatory obligation under Section 25 of P.D. No. 957 to deliver the title upon full payment.
• Cenido v. Spouses Apacionado, 376 Phil. 801 (1999) — Used to support the ruling that non-notarization of a deed of sale does not affect validity; the buyer may compel execution of a public document.
• Swedish Match v. Court of Appeals, 483 Phil. 735 (2004) — Invoked to explain the Statute of Frauds, emphasizing that partial performance and acceptance of benefits remove a contract from its coverage.
• Bisaya Land Transportation, Inc. v. Sanchez, 237 Phil. 510 (1987) — Applied by analogy on the doctrine of estoppel, precluding a party from repudiating obligations after accepting benefits.
• Republic v. Lacap, 546 Phil. 87 (2007) — Enumerated the exceptions to the doctrine of exhaustion of administrative remedies and the doctrine of primary jurisdiction, several of which were found applicable.
• Ching v. Court of Appeals, 387 Phil. 28 (2000) — Cited to justify the Court’s resolution of the merits on the existing record instead of remanding the case, in the interest of expeditious administration of justice.

• Section 25, Presidential Decree No. 957 — Imposes the mandatory duty of the owner or developer to deliver the title to the buyer upon full payment of the lot or unit. Applied as the primary statutory basis for SMPI’s right to the 20 TCTs.
• Section 1, Presidential Decree No. 1344 — Confers upon the NHA (and its successor, the HLURB) exclusive jurisdiction to hear and decide cases of specific performance of contractual and statutory obligations filed by subdivision lot buyers. The HLURB was obliged to exercise this jurisdiction and not suspend proceedings.
• Section 6(d), Presidential Decree No. 902-A (SEC Reorganization Act) — Empowers the rehabilitation receiver to take custody and control of assets and to evaluate, restructure, and rehabilitate the corporation. Cited to establish the receiver’s general authority and the presumption of regularity of official acts.
• Article 1355, Civil Code — “Lesion or inadequacy of cause shall not invalidate a contract, save in cases specified by law or unless there has been fraud, mistake or undue influence.” Applied to reject BF Homes’ claim of inadequacy of price.
• Articles 1358, 1403, and 1405, Civil Code — Govern the formal requirements for contracts involving real rights, the Statute of Frauds, and ratification. The absence of notarization does not void the sale; the contracts were ratified by acceptance of payment and partial performance.
• Article 2208, Civil Code — Allows recovery of attorney’s fees where the defendant acted in gross and evident bad faith in refusing to satisfy a plainly valid, just, and demandable claim. Applied to affirm the award.
• Section 3(m) and (p), Rule 131, Revised Rules of Court — Establish presumptions that official duties have been regularly performed and that private transactions have been fair and regular. Applied to the receiver’s acts and the sale price.
• Section 3, Rule 1, 1996 Rules of Procedure of the HLURB, and Section 6, Rule 1, 1997 Rules of Civil Procedure — Invoked to reinforce the policy of just, speedy, and inexpensive disposition of cases, which a remand would contravene.

Chief Justice Maria Lourdes P.A. Sereno (Chairperson), Justice Lucas P. Bersamin, Justice Jose Portugal Perez, Justice Estela M. Perlas-Bernabe.