Solid Homes v. Tan
REITERATIONFacts
The Antecedents: Spouses Joe Uy and Myrna Uy purchased a subdivision lot from Solid Homes, Inc. (Solid Homes). Subsequently, the Uys sold the same lot to respondents, Spouses Ancheta K. Tan and Corazon de Jesus Tan (Spouses Tan). Spouses Tan discovered that the lot and surrounding areas lacked the promised infrastructure and utility systems (water, sewerage, electricity, telephone) and were occupied by squatters. Procedural History: Spouses Tan sent a demand letter to Solid Homes for the provision of facilities and clearing of squatters. Upon receiving no reply, they filed a complaint for specific performance and damages with the Housing and Land Use Regulatory Board (HLURB), seeking either the provision of facilities or an alternative lot. The HLURB Arbiter ruled in favor of Spouses Tan, ordering Solid Homes to provide facilities or an alternative lot, and to pay attorney's fees. The HLURB Board of Commissioners affirmed this decision. The Office of the President (O.P.) affirmed with modification, allowing Solid Homes to pay the purchase price with interest if replacement was impossible, but later denied Spouses Tan's motion for reconsideration seeking payment of fair market value instead of purchase price. Both parties appealed to the Court of Appeals (CA). The CA set aside the O.P. decision, affirmed the HLURB Board's decision, but modified it to require Solid Homes to pay the current market value of the lot if no replacement lot was available. Solid Homes' motion for reconsideration was denied. The Petition: Solid Homes filed a petition for review on certiorari with the Supreme Court, seeking to nullify the CA's decision and resolution, arguing that the CA erred in ruling that prescription had not set in, in applying equity against positive law, and in ordering payment of the current market value.
Issue(s)
Whether the respondents' right to bring the action for specific performance has prescribed. Whether, in case of rescission or failure to provide an alternative lot, Solid Homes should pay the respondents the current market value of the lot, considering the principles of equity and the purpose of P.D. 957.
Ruling
The Supreme Court denied the petition, affirming the decision of the Court of Appeals. It ruled that the action had not prescribed and that Solid Homes should pay the Spouses Tan the current market value of the lot if no replacement lot with facilities could be provided.
Ratio Decidendi
On the issue of prescription: The Court disagreed with Solid Homes' contention that the 10-year prescriptive period should commence from the date of the original sale. It clarified that under Article 1144 of the Civil Code, the prescriptive period commences from the time the right of action accrues, which is upon demand. Since the complaint was filed within 10 years from the demand, the action had not prescribed. The Court cited Banco Filipino Savings and Mortgage Bank vs. CA and Social Security System vs. Moonwalk Development and Housing Corporation, et al. to support this principle. On the issue of payment of market value: The Court found no reason to alter the ruling of the Court of Appeals. While acknowledging that Article 1385 of the Civil Code generally governs rescission by requiring the return of the price with interest, the Court held that a literal application of this provision would lead to unjust, unfair, and absurd results. Allowing Solid Homes to pay only the purchase price plus interest would enable them to profit from their own wrong. The Court agreed with the CA that equity and justice dictated that the injured party be paid the current market value of the lot to prevent unjust enrichment, aligning with the spirit and purpose of P.D. 957, which was enacted to protect buyers from developers who renege on their obligations.
Main Doctrine
The prescriptive period for an action for specific performance, arising from a breach of obligation to develop a subdivision, commences not from the date of sale or acquisition of the lot, but from the time the obligee makes a demand for performance, as delay or violation of right only occurs upon demand.