The Supreme Court has clarified that selling subdivision lots without the required Housing and Land Use Regulatory Board (HLURB) license is a criminal offense under Presidential Decree (P.D.) 957, even if the license is later obtained. This ruling emphasizes that the act of selling without a license constitutes a violation of the law, regardless of subsequent compliance or good faith. Developers and real estate companies must secure all necessary licenses before offering properties for sale to avoid potential criminal liability.

Moldex Realty’s License: Can a Late Permit Erase Early Sales Violations?

This case revolves around a criminal complaint filed against Jacinto Uy, chairman of Moldex Realty, Inc., and other officers for allegedly violating Section 5 of Presidential Decree (P.D.) 957. The petitioner, Victoria P. Cabral, claimed that Moldex sold subdivision lots without a license from the HLURB. Moldex had applied for a license but was initially denied due to non-compliance with HLURB requirements. After the sale in question but before the trial, Moldex eventually obtained the necessary license. The central legal question is whether the subsequent issuance of a license could extinguish the criminal liability for sales made prior to its acquisition.

The respondents argued that the HLURB had exclusive jurisdiction over violations of P.D. 957 and 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 based on the subsequent license issuance. The Supreme Court, however, disagreed with the CA’s decision. Building on the principle established in Sia v. People, the Court affirmed the public prosecutor’s authority to file the criminal information and the trial court’s jurisdiction to hear the case, given the penalties involved.

The Supreme Court emphasized the nature of P.D. 957 as a regulatory law designed to protect the public in real estate transactions. Section 5 of P.D. 957 explicitly prohibits the sale of subdivision lots without a prior HLURB license. The Court deemed this violation a malum prohibitum, meaning the act itself is prohibited by law regardless of intent or moral implications. As the Court stated,

It is the commission of that act as defined by law, not its character or effect that determines whether or not its provision has been violated. Malice or criminal intent is immaterial in such crime. In crimes that are mala prohibita, the forbidden acts might not be inherently immoral. Still they are punished because the law says they are forbidden. With these crimes, the sole issue is whether the law has been violated.

This distinction is crucial because it means that the prosecution doesn’t need to prove malicious intent on the part of the developers. The mere act of selling without a license is sufficient to establish a violation. The Court highlighted that the subsequent issuance of the license does not retroactively negate the violation that occurred when the sale was made without proper authorization. The Supreme Court underscored the importance of adhering to the statutory requirements. It reiterated the purpose of P.D. 957, emphasizing that the decree was enacted to safeguard public interest by regulating the sale of subdivision lots and condominiums.

The CA relied on Co Chien v. Sta. Lucia Realty and Development, Inc., but the Supreme Court distinguished that case. In Co Chien, the issue was the validity of a contract of sale, not criminal liability. The Court in Co Chien upheld the contract despite the lack of a license at the time of execution, but the developer was still fined for selling without a license. The present case, the Supreme Court clarified, focused on the criminal culpability arising from the violation of Section 5 of P.D. 957. This ruling reinforces the strict application of P.D. 957 and the importance of obtaining the necessary licenses before engaging in the sale of subdivision lots.

The implications of this decision are significant for real estate developers. They must ensure full compliance with all licensing requirements before offering any subdivision lots for sale. Failure to do so can result in criminal prosecution, regardless of whether they later obtain the required licenses. The ruling serves as a reminder that regulatory compliance is not merely a procedural formality but a legal obligation with serious consequences for non-compliance. The decision effectively closes a potential loophole that developers might have exploited by selling first and seeking licenses later. By emphasizing strict adherence to P.D. 957, the Court has reinforced the protection afforded to subdivision buyers and the integrity of the real estate market.

FAQs

What is Presidential Decree 957?	Presidential Decree 957, also known as the Subdivision and Condominium Buyers’ Protective Decree, regulates the sale of subdivision lots and condominiums to protect buyers from fraudulent real estate practices.
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 a license to sell issued by the Housing and Land Use Regulatory Board (HLURB).
What is “malum prohibitum”?	“Malum prohibitum” refers to acts that are illegal because they are prohibited by law, not because they are inherently immoral or evil. The focus is on whether the law was violated, regardless of intent.
Does good faith excuse a violation of P.D. 957?	No, good faith is not a valid defense for selling subdivision lots without a license under P.D. 957 because it is considered a “malum prohibitum” offense. The act of selling without a license is the violation, regardless of intent.
What penalties are imposed 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 of not more than ten years. For corporations, the responsible officers are held criminally liable.
Can a subsequent license erase prior violations of P.D. 957?	No, the subsequent issuance of a license does not retroactively excuse or erase criminal liability for sales made prior to obtaining the license. The violation occurs at the moment of the unlicensed sale.
What was the Court of Appeals’ ruling in this case?	The Court of Appeals initially upheld the trial court’s jurisdiction but ruled that the subsequent issuance of the license extinguished the respondents’ criminal liability. The Supreme Court reversed this decision.
What was the Supreme Court’s final decision?	The Supreme Court reversed the Court of Appeals’ decision and reinstated the trial court’s order denying the respondents’ motion to quash. This means the criminal case against the respondents can proceed.

In conclusion, the Supreme Court’s decision in Cabral v. Uy reinforces the strict enforcement of P.D. 957 and underscores the importance of regulatory compliance in the real estate industry. This ruling serves as a stern warning to developers: secure the necessary licenses before selling, or face the consequences.

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, Michael Uy, Marilyn O. Uy, Richard O. Uy, Rey Ignacio Diaz, Jose Po and Juanito Malto, G.R. No. 174584, January 22, 2010