Cebu Winland Development v. Ong Siao Hua
REITERATIONFacts
The Antecedents: Petitioner Cebu Winland Development Corporation (Winland) sold two condominium units and four parking slots to respondent Ong Siao Hua. The sale was based on a price list indicating 155 square meters per unit at P22,378.95 per square meter, with parking slots at P240,000 each. Respondent paid a down payment and the balance in installments. Upon full payment, respondent discovered that the actual area of each unit was only 110 square meters, contrary to the advertised area. Respondent demanded a refund for the alleged overpayment, which Winland refused. Procedural History: Respondent filed a complaint with the Housing and Land Use Regulatory Board (HLURB) seeking a refund. The HLURB Arbiter dismissed the complaint, finding no misrepresentation and ruling that the action had prescribed. The HLURB Board of Commissioners modified this, finding a mistake in the object of the sale and offering rescission or a refund. The Office of the President reinstated the Arbiter's decision, again finding the action prescribed. The Court of Appeals reversed this, holding that the action had not prescribed and reinstating the HLURB Board's decision. The Petition: Petitioner Winland filed a Petition for Review under Rule 45 of the Rules of Court, assailing the Court of Appeals' decision. The petition raises three grounds: (1) the Court of Appeals erred in holding that ownership is not transferred by delivery; (2) the Court of Appeals erred in holding that respondent's action has not prescribed; and (3) the Court of Appeals erred in finding petitioner guilty of misrepresentation, as a prior decision on this matter was allegedly final with respect to the respondent who did not appeal it. The core issue is whether respondent's action for a reduction in price due to a discrepancy in the unit area has prescribed under Article 1543 of the Civil Code.
Issue(s)
Whether respondent's action has prescribed pursuant to Article 1543, in relation to Articles 1539 and 1542 of the Civil Code. Whether the sale was made with a statement of area at a rate per unit of measure or for a lump sum. Whether the Court of Appeals erred in holding that ownership is not transferred by delivery; and whether the Court of Appeals erred in finding petitioner guilty of misrepresentation. On the final award.
Ruling
The Supreme Court denied the petition, affirming the Court of Appeals' decision but with a modification. Petitioner is ordered to refund the amount of ₱2,014,105.50 to respondent with legal interest.
Ratio Decidendi
On the issue of prescription: The Court held that the prescriptive period under Article 1543 of the Civil Code, which is six months from the day of delivery, commences not from the mere transfer of possession, but from the transfer of ownership. Ownership is acquired by the vendee from the moment the thing sold is delivered to him in any of the ways specified in Articles 1497 to 1501, or in any other manner signifying an agreement that possession is transferred from the vendor to the vendee. In this case, although possession was transferred on October 10, 1996, the Deeds of Absolute Sale were not yet executed, and ownership was withheld by the petitioner until full payment. Therefore, there was no 'delivery' in the sense contemplated by the Law on Sales, which requires the concurrent transfer of possession and ownership. Consequently, the action filed by respondent had not prescribed. On the nature of the sale: The Court determined that the sale was made with a statement of area at a rate of a certain price per unit of measure, as the purchase price was computed based on the price list of ₱22,378.95 per square meter. This means Article 1539 of the Civil Code, not Article 1542, is applicable. Under Article 1539, if the area delivered is less than stated, the vendee may choose between a proportional reduction of the price or rescission of the contract. Respondent chose the former by praying for a refund. On the Court of Appeals' finding of misrepresentation and rescission: The Court found that the Court of Appeals erred in affirming the HLURB Board's decision to grant rescission based on Articles 1330 and 1331 of the Civil Code. For mistake to invalidate consent, it must be material and go to the essence of the contract. The respondent's continued occupation of the properties and demand for a refund, rather than outright rescission, indicated that he did not consider the error in size significant enough to vitiate the contract. Therefore, the relief granted should be a proportional reduction of the price, as prayed for by the respondent. Also, the Court of Appeals erred in holding that ownership is not transferred by delivery. On the final award: The Court ordered petitioner to refund the amount of ₱2,014,105.50 to respondent, representing the proportional reduction of the price paid for the deficiency in area. Legal interest of six percent (6%) per annum from August 7, 1998 (date of judicial demand) and twelve percent (12%) per annum from the promulgation of the decision until full payment were imposed.
Main Doctrine
The prescriptive period for actions arising from Articles 1539 and 1542 of the Civil Code, which is six months from the day of delivery, commences not from the mere transfer of possession, but from the transfer of ownership, which is signified by the execution of the Deed of Absolute Sale and the delivery of the corresponding certificate of title.