Selling Subdivision Lots Without a License: Criminal Liability Under P.D. 957

The Supreme Court has clarified a critical point for real estate developers and buyers alike: selling subdivision lots without the required license is a crime, and obtaining the license later does not erase that criminal liability. In Cabral v. Uy (G.R. No. 174584, January 22, 2010), the Court ruled that the subsequent issuance of a license to sell cannot retroactively cure an earlier violation of Presidential Decree (P.D.) 957, the law that protects subdivision buyers.

The Facts of the Case

Moldex Realty, Inc. (Moldex) applied for a license to sell subdivision lots in a Bulacan project on June 21, 2001. The Housing and Land Use Regulatory Board (HLURB) denied the application for failure to comply with requirements.

Despite the denial, Moldex sold a subdivision lot to a buyer. On April 28, 2003, the public prosecutor filed a criminal information against the company's chairman and officers for violating Section 5 of P.D. 957, which prohibits selling subdivision lots without a prior license from the HLURB.

Notably, the HLURB eventually issued Moldex the license to sell on September 17, 2003 — months after the criminal case was filed.

The respondents moved to quash the information, arguing two points: first, that only the HLURB had jurisdiction over violations of P.D. 957; and second, that the subsequent issuance of the license extinguished any criminal liability.

The Issues

The Supreme Court addressed two questions: (1) whether the public prosecutor and the trial court had jurisdiction over criminal violations of P.D. 957; and (2) whether the HLURB's later issuance of a license extinguished the criminal liability for sales made before the license was obtained.

The Court's Ruling

On jurisdiction. The Court upheld the authority of the public prosecutor and the trial court. Since P.D. 957 carries a penalty of a fine of up to P20,000.00 and imprisonment of not more than ten years, the offense falls squarely within the jurisdiction of the Regional Trial Court. The HLURB does not have exclusive jurisdiction over criminal cases under the decree.

On the effect of a subsequent license. The Court ruled that the later issuance of a license does not extinguish criminal liability. P.D. 957 was enacted to regulate, for the public good, the sale of subdivision lots and condominiums. Section 5 prohibits such sales without the prior issuance of an HLURB license.

The Court emphasized that the crime is malum prohibitum — an act wrong because the law forbids it, regardless of intent. Since the criminal information sufficiently alleged that Moldex sold a lot without a license, the crime was already committed. The subsequent issuance of the license and any claim of good faith cannot "reach back to erase the offense."

The Court distinguished an earlier case, Co Chien v. Sta. Lucia Realty, which involved a civil case for refund and contract nullification. In that case, the Court refused to void the contract because the absence of a license did not automatically invalidate it — but the HLURB still imposed an administrative fine. That case, the Court said, actually supports the rule that a subsequent license does not erase liability.

Practical Takeaways

• A license must come first. Under Section 5 of P.D. 957, a developer cannot sell any subdivision lot or condominium unit unless a license to sell has first been obtained from the HLURB.
• A later license does not cure past violations. Developers who sell before obtaining a license remain criminally liable even if the HLURB later issues the license.
• Criminal intent is not required. P.D. 957 violations are mala prohibita; the mere act of selling without a license is enough for liability.
• Officers can be held responsible. For corporations, the president, manager, administrator, or the person in charge of the business can be criminally liable for violations.
• Courts, not just the HLURB, have jurisdiction. Criminal cases under P.D. 957 may be filed with the public prosecutor and heard by the Regional Trial Court.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.