CITY Attorney Rey Gealon said the Cebu City Government is not bound by the previous administration officials’ mistake and non-compliance with the Deed of Sale on Installment (DSI) with Filinvest Land Inc. (FLI).
He said, “The previous administration and FLI failed to arrive at an agreement as to the return or restitution of the amounts paid by FLI.”
The “previous administration” refers to the time of then mayor Tomas Osmeña.
Gealon said regardless if the contract was rescinded immediately or not, FLI has yet to fully pay the purchase price.
FLI’s failure to pay, he said, means a continuing breach of its obligation of the DSI. The unpaid installments are subject to interest at the rate of six percent per annum on the diminishing balance.
Cebu City’s ‘failure’
FLI’s letter, which was sent to the City Council, emphasized the City’s failure to comply with 15 undertakings and covenants stated in the DSI. The real estate developer further stated that the City failed to return its down payment and installment payments.
Due to these reasons, FLI has now stated that its rescission of its purchase of the 19.2-hectare lot at the South Road Properties in 2017 was invalid.
Gealon explained that “several circumstances arose during the previous administration’s term in office which caused legal and factual impossibility” on the part of the City to comply with its undertakings within the given period as stated in the DSI.
FLI rescinded its purchase during the time of Osmeña—the predecessor and political nemesis of Mayor Edgardo Labella, who is Gealon’s boss at the City Hall.
After he was elected as mayor in 2016, Osmeña said he would revoke the contract sale with three developers that purchased lots at the SRP, including FLI, as the transactions were illegal during the time of Michael Rama, who served as mayor from 2010 until 2016.
Osmeña said Rama, now Labella’s partymate and vice mayor, was not authorized by the City Council to sell the properties.
Consignation
Under Section 3 of the DSI, the City was supposed to deliver documents, which included a copy of the current tax declaration covering the property in the name of Cebu City, the original joint certification from the City Assessor’s Office and City Treasurer’s Office attesting the ownership of the City of the property and the exemption from payment of real property tax, and the original copy of the zoning certification issued by the Zoning Enforcement Division.
The City was also supposed to deliver full and vacant possession of the property to the FLI free and clear of all structures and occupants not later than May 2016. However, FLI claimed the City failed to do so.
The other developers SM Prime and Ayala Holdings availed themselves of consignation, which in the civil law means a “deposit which a debtor makes of the thing that he owes, into the hands of a third person, and under the authority of a court of justice.”
FLI, on its part, chose to suspend its payments and sought the return of its down payment and installment payments.
Instead of resorting to consignation, Gealon said FLI chose to rescind the DSI on Feb. 7, 2017, because it then believed that the City could not comply with its undertakings “within a foreseeable reasonable period of time.”
The SM-Ayala Consortium, which consigned the amount to the court, was recently granted a land development permit by the City Council. It is set to break ground on its 26-hectare lot some time in December this year. (JJL)