Rescission of FLI purchase at SRP ‘invalid’

IN 2017, FILINVEST Land Inc. (FLI) rescinded its purchase of the 19.2-hectare lot at the South Road Properties (SRP), saying the local government failed to fulfill its obligations under the sale contract.

Now, the real estate developer is standing pat that the deed of sale on installment (DSI) remains valid as the rescission is deemed ineffective due to the Cebu City Government’s failure to return the former’s down payment and installment payments.

The FLI also pointed out that the City failed to comply with 15 undertakings and covenants stated in the DSI.

“It is undisputed that Cebu City, through no fault on our part, failed to comply with the condition to the rescission that it first return the amounts paid pursuant to the DSI plus interests within the given period (90 days) in accordance with Section 5.7 of the DSI,” stated FLI in its letter to the City Council dated Nov. 4, 2019.

The FLI said the City also failed to comply with the terms and conditions for rescission in the joint written notice.

In a separate letter sent to the council, the FLI stated that the City Government failed to deliver documents, such as copy of the current tax declaration covering the property in the name of the seller, which is Cebu City, and transfer of taxes and expenses.

The council referred the letter to the City Legal Office.

In a letter dated Nov. 5, the FLI said the City was not able to comply with Sections 3 and 5 of the DSI, dated Aug. 7, 2015.

Undelivered documents

Under Section 3, 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 that May 2016, but it had not, according to FLI.

Also under Section 3, the seller was supposed to issue a new title covering the property under the name of Cebu City, cancel the Mortgage Annotation, issue the necessary permit approval and clearance that are supposed to be submitted to the buyers.

Under Section 5, or Transfer Taxes and Expenses, “the transfer tax, however, shall be for the sole account of the seller (Cebu City). Any other tax, whether direct or indirect or and penalties that may be assessed on the sale of the property to the buyer shall be for the seller’s account... The buyers undertake to submit to the seller competent proof of the timely, proper and adequate payment of the above-mentioned taxes for the account of the buyers not later than five working days from the statutory deadlines for the payment of the same.”

Open to discussion

The FLI said it has a value added tax (VAT) receipt from Cebu City, but it has no adequate information that the City paid VAT to the Bureau of Internal Revenue.

The FLI said the City generally failed “to timely and properly comply with its covenants, undertakings and obligations under the deed and breach any of its representations and warranties.”

With that, the FLI should be considered relieved from any of its responsibilities arising out of the deed and “should not be held liable” to pay the unpaid balance of the purchase price of the property until the City rectifies the breach committed, it said.

Despite the City’s “failures,” FLI said it is open to any discussion with City officials to “thresh out issues towards the complete and successful implementation of the DSI to the satisfaction of both parties.”

City Attorney Rey Gealon, for his part, said he has yet to see the letters. .

When Tomas Osmeña became mayor in 2016, he said he would rescind the contract sale with three developers that purchased properies at the SRP, including FLI, saying the transactions were illegal.

In previous reports, Osmeña said Michael Rama, mayor at the time of the sale and now vice mayor, was not authorized by the City Council to sell the lots. (JJL)