G.R. No. 166836. September 4, 2013.* SAN MIGUEL PROPERTIES, INC., petitioner, vs. SEC. HERNANDO B. PEREZ, ALBERT C. AGUIRRE, TEODORO B. ARCENAS, JR., MAXY S. ABAD, JAMES G. BARBERS, STEPHEN N. SARINO, ENRIQUE N. ZALAMEA, JR., MARIANO M. MARTIN, ORLANDO O. SAMSON, CATHERINE R. AGUIRRE and ANTONIO V. AGCAOILI, respondents.

 

Civil Law; Actions; Action for Specific Performance; An action for specific performance is the remedy to demand the exact performance of a contract in the specific form in which it was made, or according to the precise terms agreed upon by a party bound to fulfill it.—An action for specific performance is the remedy to demand the exact performance of a contract in the specific form in which it was made, or according to the precise terms agreed upon by a party

bound to fulfill it. Evidently, before the remedy of specific performance is availed of, there must first be a breach of the contract. The remedy has its roots in Article 1191 of the Civil Code, which reads: Article 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible. x x x Same; Rescission; Reciprocal Obligations; As presently worded, Article 1191 speaks of the remedy of rescission in reciprocal obligations within the context of Article 1124 of the former Civil Code which used the term resolution.—The injured party may choose between specific performance or rescission with damages. As presently worded, Article 1191 speaks of the remedy of rescission in reciprocal obligations within the context of Article 1124 of the former Civil Code which used the term resolution. The remedy of resolution applied only to reciprocal obligations, such that a party’s breach of the contract equated to a tacit resolutory

 condition that entitled the injured party to rescission. The present article, as in the former one, contemplates alternative remedies for the injured party who is granted the option to pursue, as principal actions, either the rescission or the specific performance of the obligation, with payment of damages in either case. Same; Subdivisions; Condominiums; Presidential Decree No. 957; Presidential Decree No. 957 is a law that regulates the sale of subdivision lots and condominiums in view of the increasing number of incidents wherein “real estate subdivision owners, developers, operators, and/or sellers have reneged on their representations and obligations to provide and maintain properly” the basic requirements and amenities, as well as of reports of alarming magnitude of swindling and fraudulent manipulations perpetrated by unscrupulous subdivision and condominium sellers and operators, such as failure to deliver titles to the buyers or titles free from liens and encumbrances.—Presidential Decree No. 957 is a law that regulates the sale of subdivision lots and condominiums in view of the increasing number of incidents wherein “real estate subdivision owners, developers, operators, and/or sellers have reneged on their representa

tions and obligations to provide and maintain properly” the basic requirements and amenities, as well as of reports of alarming magnitude of swindling and fraudulent manipulations perpetrated by unscrupulous subdivision and condominium sellers and operators, such as failure to deliver titles to the buyers or titles free from liens and encumbrances. Presidential Decree No. 957 authorizes the suspension and revocation of the registration and license of the real estate subdivision owners, developers, operators, and/or sellers in certain instances, as well as provides the procedure to be observed in such instances; it prescribes administrative fines and other penalties in case of violation of, or non-compliance with its provisions.

BERSAMIN, J.: The pendency of an administrative case for specific performance brought by the buyer of residential subdivision lots in the Housing and Land Use Regulatory Board (HLURB) to compel the seller to deliver the transfer certificates of title

(TCTs) of the fully paid lots is properly considered a ground to suspend a criminal prosecution for violation of Section 25 of Presidential Decree No. 9571 on the ground of a prejudicial question. The administrative determination is a logical antecedent of the resolution of the criminal charges based on non-delivery of the TCTs. Antecedents Petitioner San Miguel Properties Inc. (San Miguel Properties), a domestic corporation engaged in the real estate business, purchased in 1992, 1993 and April 1993 from B.F. Homes, Inc. (BF Homes), then represented by Atty. Florencio B. Orendain (Orendain) as its duly authorized rehabilitation receiver appointed by the Securities and Exchange Commission (SEC),2 130 residential lots situated in its subdivision BF Homes Parañaque, containing a total area of 44,345 square meters for the aggregate price of P106,248,000.00. The transactions were embodied in three separate deeds of sale.3 The TCTs covering the lots bought under the first and second deeds were fully delivered to San Miguel Properties, but 20 TCTs covering 20 of the 41 parcels of land with a total area of 15,565 square meters purchased under the third deed of sale, executed in April 1993 and for which San Miguel Properties paid the full price of P39,122,627.00, were not delivered to San Miguel Properties. On its part, BF Homes claimed that it withheld the delivery of the 20 TCTs for parcels of land purchased under the third deed of sale because Atty. Orendain had ceased to be its rehabilitation receiver at the time of the transactions after being meanwhile replaced as receiver by FBO Network Man

agement, Inc. on May 17, 1989 pursuant to an order from the SEC.4 BF Homes refused to deliver the 20 TCTs despite demands. Thus, on August 15, 2000, San Miguel Properties filed a complaint-affidavit in the Office of the City Prosecutor of Las Piñas City (OCP Las Piñas) charging respondent directors and officers of BF Homes with nondelivery of titles in violation of Section 25, in relation to Section 39, both of Presidential Decree No. 957 (I.S. No. 00- 2256).5 At the same time, San Miguel Properties sued BF Homes for specific performance in the HLURB (HLURB Case No. REM-082400-11183),6 praying to compel BF Homesto release the 20 TCTs in its favor. In their joint counter-affidavit submitted in I.S. No. 00- 2256,7 respondent directors and officers of BF Homes refuted San Miguel Properties’ assertions by contending that: (a) San Miguel Properties’ claim was not legally demandable because Atty. Orendain did not have the authority to sell the 130 lots in 1992 and 1993 due to his having been replaced as BF Homes’ rehabilitation receiver by the SEC on May 17, 1989; (b) the deeds of sale conveying the lots were irregular for being undated and unnotarized; (c) the claim should have been brought to the SEC because BF Homes was under receivership; (d) in receivership cases, it was essential to suspend all claims against a distressed corporation in order to enable the receiver to effectively exercise its powers free from judicial and extrajudicial interference that could unduly hinder the rescue of the distressed company; and (e) the lots involved were under custodia legis in view of the pending receivership proceedings, necessarily stripping the OCP Las Piñas of the jurisdiction to proceed in the action.

On October 10, 2000, San Miguel Properties filed a motion to suspend proceedings in the OCP Las Piñas,8 citing the pendency of BF Homes’ receivership case in the SEC. In its comment/opposition, BF Homes opposed the motion to suspend. In the meantime, however, the SEC terminated BF Homes’ receivership on September 12, 2000, prompting San Miguel Properties to file on October 27, 2000 a reply to BF Homes’ comment/opposition coupled with a motion to withdraw the sought suspension of proceedings due to the intervening termination of the receivership.9 On October 23, 2000, the OCP Las Piñas rendered its resolution,10 dismissing San Miguel Properties’ criminal complaint for violation of Presidential Decree No. 957 on the ground that no action could be filed by or against a receiver without leave from the SEC that had appointed him; that the implementation of the provisions of Presidential Decree No. 957 exclusively pertained under the jurisdiction of the HLURB; that there existed a prejudicial question necessitating the suspension of the criminal action until after the issue on the liability of the distressed BF Homes was first determined by the SEC en banc or by the HLURB; and that no prior resort to administrative jurisdiction had been made; that there appeared to be no probable cause to indict respondents for not being the actual signatories in the three deeds of sale. On February 20, 2001, the OCP Las Piñas denied San Miguel Properties’ motion for reconsideration filed on November 28, 2000, holding that BF Homes’ directors and officers could not be held liable for the non-delivery of the TCTs under Presidential Decree No. 957 without a definite ruling on the legality of Atty. Orendain’s actions; and that the criminal liability would attach only after BF Homes did not comply

titles.11 San Miguel Properties appealed the resolutions of the OCP Las Piñas to the Department of Justice (DOJ), but the DOJ Secretary denied the appeal on October 15, 2001, holding: 

Ruling of the Court The petition has no merit. 1. Action for specific performance, even if pending in the HLURB, an administrative agency, raises a prejudicial question BF Homes’ posture that the administrative case for specific performance in the HLURB posed a prejudicial question that must first be determined before the criminal case for violation of Section 25 of Presidential Decree No. 957 could be resolved is correct. A prejudicial question is understood in law to be that which arises in a case the resolution of which is a logical antecedent of the issue involved in the criminal case, and the cognizance of which pertains to another tribunal. It is determinative of the criminal case, but the jurisdiction to try and resolve it is lodged in another court or tribunal. It is based on a fact distinct and separate from the crime but is so intimately connected with the crime that idetermines the guilt or innocence of the accused.22 The rationale behind the principle of prejudicial question is to avoid conflicting decisions.23 The essential elements of a prejudicial question are provided in Section 7, Rule 111 of the Rules of Court, to wit: (a) the previously instituted civil action involves an issue similar or intimately related to the issue raised in the subsequent criminal action, and (b) the resolution of such issue determines whether or not the criminal action may proceed.

determines the guilt or innocence of the accused.22 The rationale behind the principle of prejudicial question is to avoid conflicting decisions.23 The essential elements of a prejudicial question are provided in Section 7, Rule 111 of the Rules of Court, to wit: (a) the previously instituted civil action involves an issue similar or intimately related to the issue raised in the subsequent criminal action, and (b) the resolution of such issue determines whether or not the criminal action may proceed.

The determination of whether the proceedings ought to be suspended because of a prejudicial question rested on whether the facts and issues raised in the pleadings in the specific performance case were so related with the issues raised in the criminal complaint for the violation of Presidential Decree No. 957, such that the resolution of the issues in the former would be determinative of the question of guilt in the criminal case. An examination of the nature of the two cases involved is thus necessary. An action for specific performance is the remedy to demand the exact performance of a contract in the specific form in which it was made, or according to the precise terms agreed upon by a party bound to fulfill it.26 Evidently, before the remedy of specific performance is availed of, there must first be a breach of the contract.27 The remedy has its roots in Article 1191 of the Civil Code, which reads: Article 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible. x x x (Emphasis supplied) Accordingly, the injured party may choose between specific performance or rescission with damages. As presently worded, Article 1191 speaks of the remedy of rescission in reciprocal obligations within the context of Article 1124 of the 

former Civil Code which used the term resolution. The remedy of resolution applied only to reciprocal obligations, such that a party’s breach of the contract equated to a tacit resolutory condition that entitled the injured party to rescission. The present article, as in the former one, contemplates alternative remedies for the injured party who is granted the option to pursue, as principal actions, either the rescission or the specific performance of the obligation, with payment of damages in either case.28 On the other hand, Presidential Decree No. 957 is a law that regulates the sale of subdivision lots and condominiums in view of the increasing number of incidents wherein “real estate subdivision owners, developers, operators, and/or sellers have reneged on their representations and obligations to provide and maintain properly” the basic requirements and amenities, as well as of reports of alarming magnitude of swindling and fraudulent manipulations perpetrated by unscrupulous subdivision and condominium sellers and operators,29 such as failure to deliver titles to the buyers or titles free from liens and encumbrances. Presidential Decree No. 957 authorizes the suspension and revocation of the registration and license of the real estate subdivision owners, developers, operators, and/or sellers in certain instances, as well as provides the procedure to be observed in such instances; it prescribes administrative fines and other penalties in case of violation of, or non-compliance with its provisions. Conformably with the foregoing, the action for specific performance in the HLURB would determine whether or not San Miguel Properties was legally entitled to demand the delivery of the remaining 20 TCTs, while the criminal action would decide whether or not BF Homes’ directors and officers were criminally liable for withholding the 20 TCTs. The resolution of the former must obviously precede that of the latter, for should the HLURB hold San Miguel Properties to be not entitled to the delivery of the 20 TCTs because Atty. Orendain did not have the authority to represent BF Homes in the sale due to his receivership having been terminated by the SEC, the basis for the criminal liability for the violation of Section 25 of Presidential Decree No. 957 would evaporate, thereby negating the need to proceed with the criminal case. Worthy to note at this juncture is that a prejudicial question need not conclusively resolve the guilt or innocence of the accused. It is enough for the prejudicial question to simply test the sufficiency of the allegations in the information in order to sustain the further prosecution of the criminal case. A party who raises a prejudicial question is deemed to have hypothetically admitted that all the essential elements of the crime have been adequately alleged in the information, considering that the Prosecution has not yet presented a single piece of evidence on the indictment or may not have rested its case. A challenge to the allegations in the information on the ground of prejudicial question is in effect a question on the merits of the criminal charge through a non-criminal suit.30

It is not tenable for San Miguel Properties to argue that the character of a violation of Section 25 of Presidential Decree No. 957 as malum prohibitum, by which criminal liability attached to BF Homes’ directors and officers by the mere failure to deliver the TCTs, already rendered the suspension unsustainable.34 The mere fact that an act or omission was malum prohibitum did not do away with the initiative inherent in every court to avoid an absurd result by means of rendering a reasonable interpretation and application of the procedural law. Indeed, the procedural law must always be given a reasonable construction to preclude absurdity in its application.35 Hence, a literal application of the principle governing prejudicial questions is to be eschewed if such application would produce unjust and absurd results or unreasonable consequences.

San Miguel Properties further submits that respondents could not validly raise the prejudicial question as a reason to suspend the criminal proceedings because respondents had not themselves initiated either the action for specific performance or the criminal action. It contends that the defense of a prejudicial question arising from the filing of a related case could only be raised by the party who filed or initiated said related case. The submission is unfounded. The rule on prejudicial question makes no distinction as to who is allowed to raise the defense. Ubi lex non distinguit nec nos distinguere debemos. When the law makes no distinction, we ought not to distinguish.3

WHERFORE, the Court AFFIRMS the decision promulgated on February 24, 2004 by the Court of Appeals in CA-G.R. SP NO. 73008; and ORDERS petitioner to pay the costs of suit. SO ORDERED.