TL;DR

The Supreme Court ruled that a real estate developer and its president can be held criminally liable for failing to deliver land titles to a buyer after full payment, even if a civil contract remedy exists. This decision clarifies that violating Presidential Decree No. 957 (regulating real estate sales) and committing estafa (fraud) are criminal offenses, separate from civil breaches of contract. Developers who misrepresent property ownership and fail to deliver titles on fully paid properties may face both civil suits and criminal charges, emphasizing the strong legal protections for property buyers in the Philippines.

Promises Unkept: When Real Estate Deals Turn Criminal

This case, Facilities, Incorporated v. Ralph Lito W. Lopez, revolves around a property swap gone wrong and asks a critical question: Can a breach of real estate contract also be a crime? Facilities, Inc. and Primelink Properties and Development Corporation (PPDC), through its President Ralph Lito W. Lopez, entered into a “swap arrangement.” Facilities would lease condominium units to PPDC for four years. In return, for the first 21 months of lease, PPDC would transfer ownership of three lots to Facilities. However, PPDC failed to deliver the land titles despite Facilities fulfilling its part of the agreement by allowing PPDC to use the condominium units for over 21 months. Facilities discovered the lots were not even registered under PPDC’s name. This led to a criminal complaint against Lopez for violating Presidential Decree No. 957 (PD 957), which protects subdivision and condominium buyers, and for estafa under the Revised Penal Code (RPC).

The legal framework at the heart of this case includes Section 25 of PD 957, which mandates developers to deliver land titles upon full payment, and Section 39, which prescribes penalties for violations. Additionally, Article 316, paragraph 1 of the RPC addresses estafa, specifically penalizing those who fraudulently sell real property they do not own. The Office of the City Prosecutor (OCP) initially dismissed the complaint, viewing it as a civil matter. However, the Department of Justice (DOJ) reversed this, finding probable cause for criminal charges. The Court of Appeals (CA) partially affirmed the DOJ, upholding the PD 957 violation but dismissing the estafa charge. The Supreme Court then reviewed the CA decision, consolidating petitions from both Facilities and Lopez.

The Supreme Court emphasized that a preliminary investigation only requires evidence showing it is “more likely than not” a crime was committed. It cited Villanueva v. Caparas, affirming the prosecutor’s discretion in determining probable cause, reviewable only for grave abuse. Further, referencing Hilbero v. Morales, the Court clarified that probable cause doesn’t demand proof beyond reasonable doubt, just a “well-founded belief” of guilt. Applying these principles, the Court found sufficient probable cause to indict Lopez for both violating PD 957 and committing estafa.

Regarding PD 957, the Court underscored the explicit obligation of developers to deliver titles upon full payment. Section 25 of PD 957 states:

Sec. 25. Issuance of Title. The owner or developer shall deliver the title of the lot or unit to the buyer upon full payment of the lot or unit, xxx.

Section 39 of PD 957 further clarifies the criminal nature of violations:

Sec. 39. Penalties. Any person who shall violate any of the provisions of this Decree… shall, upon conviction, be punished by a fine … and/or imprisonment … in the case of corporations, … the President, Manager or Administrator … shall be criminally responsible…

The Court noted Facilities fulfilled its payment obligation by allowing PPDC’s lease of the condominium units. Lopez’s defense of non-payment of fees was deemed irrelevant as these fees become due only after the seller (PPDC) fulfills its tax obligations, which PPDC had not. The Court firmly stated, “a contract is the law between the parties,” and Lopez, representing PPDC, was bound by the MOA to deliver the titles.

Addressing the estafa charge, the Court cited Article 316(1) of the RPC:

Art. 316. Other forms of swindling. The penalty … shall be imposed upon:

(1) Any person who, pretending to be owner of any real property, shall convey, sell, encumber or mortgage the same.

The Court found that Lopez, on behalf of PPDC, misrepresented PPDC’s ownership of the lots, inducing Facilities to enter the agreement. Despite this representation, the titles remained under Primo Erni’s name, not PPDC’s, and certainly not Facilities’. The DOJ’s observation was highlighted: PPDC acted in “bad faith and committed deceit” by concealing the true status of the lots. The Court concluded that the existence of a civil remedy in the MOA (rescission) does not preclude criminal prosecution under PD 957 and the RPC. Section 41 of PD 957 explicitly states:

Section 41. Other remedies. The rights and remedies provided in this Decree shall be in addition to any and all other rights and remedies that may be available under existing laws.

Ultimately, the Supreme Court granted Facilities’ petition, denied Lopez’s, and affirmed the CA with the modification to reinstate the estafa charge. This ruling reinforces the criminal liability of real estate developers and their officers for failing to deliver titles and for misrepresenting property ownership, even when civil remedies are available. It serves as a strong reminder of the legal protections afforded to property buyers in the Philippines and the serious consequences for developers who fail to uphold their contractual and legal obligations.

FAQs

For inquiries regarding the application of this ruling to specific circumstances, please contact Atty. Gabriel Ablola through gaboogle.com or via email at connect@gaboogle.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: Facilities, Incorporated v. Ralph Lito W. Lopez, G.R. No. 208642 & 208883, February 07, 2018