PRETINES REAL ESTATE AND MANAGEMENT CORPORATION, PETITIONER, VS. MA. EDITHA LEILANI LITAN-BRISTOL AND CARSON REAL ESTATE AND MANAGEMENT CORPORATION, RESPONDENTS.

Pretines Real Estate versus Litan-Bristol

The Case

This is a petition for review brought by Pretines Real Estate and Management Corporation against Ma. Editha Leilani Litan-Bristol and Carson Real Estate and Management Corporation. The action began as a complaint for the cancellation and revocation of two contracts to sell over a residential lot in the Southern Plains Subdivision in Canlubang, Calamba, Laguna, and for the refund of everything the buyer had paid, with damages. The buyer grounded her complaint on the failure of the owners and developers to complete the subdivision development within the period fixed in the license to sell, a violation of the law on subdivision and condominium buyers. The case matters because it settles who answers to the buyer when a subdivision project is left unfinished, and because it shows how strictly the Supreme Court guards the rule against raising a new theory for the first time on appeal.

Procedural History

The complaint was filed with the Housing and Land Use Regulatory Board. The arbiter ruled for the buyer, ordering the rescission of both contracts to sell, the refund of 700,264 pesos to be paid by Pretines and by Carson separately, each with legal interest, and the joint and several payment of moral damages, exemplary damages, and attorney's fees, plus an administrative fine for violation of Section 20 of the law. Pretines and Carson asked the Board of Commissioners to review that decision. The Board affirmed the rescission and the refund but modified the interest to the legal rate and set aside the moral and exemplary damages. Their motion for reconsideration was denied. They then appealed to the Office of the President, arguing for the first time that the project had already been completed before the complaint was filed. The Office of the President was not convinced, noting that this defense contradicted their earlier implied admission of delay, and affirmed the Board. Their motion for reconsideration was denied. Pretines then elevated the case to the Supreme Court by petition for review, impleading Carson as a respondent and arguing that Carson alone, as developer, should be liable.

Facts

Pretines was the original owner of the Southern Plains land. It entered into a joint venture agreement with Carson for the development of the property into a residential subdivision, with Fil-Estate Sales as the authorized broker. In July 1995 the buyer paid Pretines a reservation fee of 20,000 pesos. In August 1995 she paid the full down payment of 159,400 pesos on a contract price of 598,000 pesos. In October 1995 she formally entered into a contract to sell with Pretines, obliging her to pay the balance of 410,600 pesos in forty-six monthly installments. On the same terms she entered into a similar contract to sell with Carson. She paid each of them a total of 700,264 pesos, inclusive of the reservation fee, the down payment, the installments, and interest.

The last paragraph of Section 14 of the contracts provided that construction of the residential house on the property should start not later than thirty-six months from the date of the contract to sell. The buyer made repeated inquiries. In June 1996 she asked when her title would be available and when the clubhouse would be finished, and was told the titles were being processed and the clubhouse would be completed by the end of that year. In 1999 she wrote that after four years the development was less than fifty percent complete, and that the house she had planned, with architectural plans already drawn, should have been finished by September 1998. The project remained substantially incomplete despite promises, making it impractical for her to build.

She then filed her complaint. Pretines and Carson defended by blaming legal impediments beyond their control, the Asian financial crisis, rising construction costs, and a change of contractor. Fil-Estate claimed it was a mere sales agent. The records showed that the project had reached only about forty-five percent accomplishment in early 1999 and about sixty-two percent by mid-2000, with repeated requests for extension, and it was still incomplete when the complaint was filed in 2002.

Issues

• Whether or not Pretines may raise for the first time on petition for review the theory that Carson alone, as developer, is liable under the law, and that Pretines as mere owner is not.
• Whether or not the remedy of the buyer for the failure to develop the subdivision may be directed against the owner as well as the developer.
• Whether or not the contracts to sell may be cancelled and the amounts paid refunded on the ground of the owners' and developers' failure to complete the development within the required period.

Applicable Provisions

Section 20 of Presidential Decree Number 957 provides:

SECTION 20. Time of Completion. — Every owner or developer shall construct and provide the facilities, improvements, infrastructures and other forms of development, including water supply and lighting facilities, which are offered and indicated in the approved subdivision or condominium plans, brochures, prospectus, printed matters, letters or in any form of advertisement, within one year from the date of the issuance of the license for the subdivision or condominium project or such other period of time as may be fixed by the Authority.

This is the provision the Court found violated, and it binds both the owner and the developer to complete the project on time.

Section 23 of the same decree provides:

SECTION 23. Non-Forfeiture of Payments. — No installment payment made by a buyer in a subdivision or condominium project for the lot or unit he contracted to buy shall be forfeited in favor of the owner or developer when the buyer, after due notice to the owner or developer, desists from further payment due to the failure of the owner or developer to develop the subdivision or condominium project according to the approved plans and within the time limit for complying with the same. Such buyer may, at his option, be reimbursed the total amount paid including amortization interests but excluding delinquency interests, with interest thereon at the legal rate.

This is the provision that entitles the buyer to reimbursement and that the Court read as offering the buyer a choice of remedies against either the owner or the developer.

Ruling

On the first issue, the Court refused to entertain the new theory. The argument that Pretines is not the developer and so is not in delay was never raised before the Board or the Office of the President, where Pretines and Carson stood on the same side and raised the same defenses. The Court held that no question will be entertained on appeal unless it has been raised in the proceedings below, and that points of law, theories, issues, and arguments not brought to the attention of the trial court, administrative agency, or quasi-judicial body need not be considered by a reviewing court, as they cannot be raised for the first time at that late stage. Due process impels the rule, because the adverse party would have no opportunity to present further evidence material to the new theory.

On the second issue, the Court held that even if the defense were allowed, it deserves scant consideration. Pretines was a joint venture partner and the owner of half the residential lots, and it signed the contract to sell with the buyer, binding itself to perform its undertakings. Whatever arrangement Pretines and Carson had between themselves cannot bind the buyer, who was never privy to it. The Court read Section 23 as giving the buyer remedies directed interchangeably against the owner or the developer, noting that the word "or" is a disjunctive article indicating an alternative.

On the third issue, the Court upheld the factual findings of the Board, which are generally accorded great respect, if not finality, because of the agency's special knowledge and expertise, and which were here supported by substantial evidence. The completion period was three years, or up to October 1996. Extensions were requested, yet the project remained incomplete when the complaint was filed in 2002. The exchange of correspondence amounted to an implied admission that the project had never been completed. This was a clear violation of Section 20, justifying the cancellation of the two contracts to sell and the refund of the payments made.

Doctrine

First, a party may not raise a new theory, issue, or argument for the first time on appeal or on petition for review; the reviewing court will not entertain it, and due process requires that the adverse party have had the chance to meet it below. Second, under Section 20 of the subdivision and condominium buyers' law, every owner or developer must complete the project within the period fixed, and failure to do so entitles the buyer, under Section 23, to reimbursement of the total amount paid, including amortization interests but excluding delinquency interests, with interest at the legal rate, or to suspend amortization payments. Third, these remedies may be directed interchangeably against the owner or the developer, since the statute uses the disjunctive "or." Fourth, an owner who signs the contract to sell is bound by its undertakings, and its private arrangement with the developer cannot prejudice a buyer who was never privy to it. Fifth, the factual findings of administrative agencies like the Board are accorded great respect, if not finality, absent a showing that they are not borne out by the records or not based on substantial evidence.

Disposition

The petition was denied and the order of the Office of the President was affirmed, so the buyer prevailed: both contracts to sell were cancelled and the owners and developers were ordered to refund the amounts she paid.

Remember This

The one line to memorize is that the buyer's remedy for an unfinished subdivision may be directed interchangeably against the owner or the developer, for the statute says "or." Examiners use this case to test the rule against raising new theories on appeal and the protection given to subdivision buyers under the time of completion and non-forfeiture provisions.