The Supreme Court has denied the petition of Empire East Land Holdings, Inc. and ordered it to refund PHP 130,000.00 to buyer John Edrem Bautista, while also awarding him PHP 260,000.00 in exemplary damages. The Court affirmed the Court of Appeals ruling but modified it as to the award of damages.
The Court held that even though the representation of Empire East's sales agent is not considered an advertisement under Section 19 of Presidential Decree No. 957, Bautista is still entitled to a refund due to Empire East's failure to issue the Contract to Sell.
The Case
The case began with a complaint filed by Bautista seeking the refund of PHP 130,000.00 he paid to Empire East toward the purchase of a residential unit.
According to Bautista, sometime in September 2010, he paid a reservation fee of PHP 20,000.00 to purchase a unit from one of Empire East's projects. He paid the amount on the basis of a promise of a sales agent that the Contract to Sell would be executed after such payment. After the initial payment, Bautista paid an additional PHP 110,000.00.
Despite Bautista's payments, Empire East failed to release any Contract to Sell. This prompted Bautista to contact the sales agent, but the latter failed to communicate with him. Bautista stopped his payment of monthly amortizations and filed his complaint with the HSAC seeking the refund.
Empire East countered that Bautista failed to state a cause of action, since the failure to execute a Contract to Sell is not a ground for reimbursement. It also alleged that it was not bound by representations of its sales agent, as the Buyer's Information Sheet and Request for Reservation and Offer to Purchase (RROP) signed by Bautista stated that any representation made by the agent shall not be binding until reduced into writing and confirmed by a duly authorized officer.
The HSAC Adjudicator, in a Decision dated December 13, 2021, cancelled the Buyer's Information Sheet and RROP and ordered the refund. The HSAC affirmed this in a Decision dated April 25, 2022. The Court of Appeals denied Empire East's Petition for Review in a Decision dated July 28, 2023.
The Issue
The Court framed two questions: whether the CA erred in ruling that the representation made by Empire East's sales agent falls under Section 19 of Presidential Decree No. 957; and whether the CA erred in ruling that Bautista is entitled to a refund of the PHP 130,000.00 he paid.
The Ruling
The Court denied the petition. It ruled that under the reservation agreement, the parties entered into a reciprocal obligation: Bautista was obliged to pay the reservation fee, while Empire East was obliged to issue a Contract to Sell. Since Empire East failed to issue the Contract to Sell despite the lapse of over a year, the reservation agreement may be rescinded, and Bautista is entitled to the full PHP 130,000.00 he paid.
The Court's disposition reads: "ACCORDINGLY, the Petition for Review on Certiorari is DENIED. The Decision, dated July 28, 2023, and the Resolution, dated March 7, 2024, of the Court of Appeals in CA-G.R. SP No. 175501 are AFFIRMED WITH MODIFICATION as to the award of damages."
Empire East was ordered to pay Bautista PHP 130,000.00 as refund with 6% interest per annum from the filing of the complaint, and PHP 260,000.00 in exemplary damages, with the total earning 6% legal interest per annum from finality until full payment.
By the Numbers
- PHP 20,000.00 — reservation fee paid in September 2010
- PHP 110,000.00 — additional payment made by Bautista
- PHP 130,000.00 — total refund ordered, with 6% interest from August 2, 2012
- PHP 260,000.00 — exemplary damages, equivalent to twice the claimed refund
- Nearly 16 years — time the case remained in the court system
- December 13, 2021 — HSAC Adjudicator Decision
- April 25, 2022 — HSAC Decision
- July 28, 2023 — CA Decision
- March 7, 2024 — CA Resolution
The Court's Reasoning
The Court explained that rescission under Article 1191 of the Civil Code creates the obligation of mutual restitution, requiring both parties to surrender what they have received and be placed in their original positions. Since Empire East failed to issue the Contract to Sell despite Bautista's payment of the reservation fee, the agreement may be rescinded and the full amount returned.
The Court noted it is of no moment that the agreement stipulated only PHP 20,000.00 as reservation payment, because Bautista made the additional payments expecting a Contract to Sell would be issued. It also rejected Empire East's claim that Republic Act No. 6552, the Realty Installment Buyer Act, applies, since the parties never agreed on any Contract to Sell and the transaction never made it past the reservation stage.
On damages, the Court found that Empire East allowed the dispute to languish through a protracted appeals process, keeping the case in the court system for nearly 16 years despite the claim involving only PHP 130,000.00. It noted a real estate corporation possessed the means to promptly satisfy the claim, and that the claim's validity was consistently affirmed by the HSAC Adjudicator, the HSAC, and the CA. Accordingly, it awarded exemplary damages to deter socially undesirable conduct.
Source: Supreme Court Decision, G.R. No. 272556.
This report summarizes a public Supreme Court decision and is not legal advice.