Ece Realty and Development Inc. v. Mandap
REITERATIONFacts
The Antecedents: ECE Realty and Development Inc. (petitioner) advertised a condominium project in Makati City, but it was actually being built in Pasay City. Rachel G. Mandap (respondent) agreed to buy a unit, paying a reservation fee, downpayment, and monthly installments. A Contract to Sell was executed, indicating the project's location in Pasay City. Procedural History: More than two years after signing the contract, respondent demanded the return of her payments, alleging misrepresentation. Petitioner did not comply. Respondent filed a complaint with the HLURB, seeking annulment of the contract, return of payments, and damages. The HLURB ENCRFO dismissed the complaint, finding no fraudulent or malicious dealing. The HLURB Board of Commissioners affirmed this, holding that rights are governed by the written contract. The Office of the President also dismissed respondent's appeal and denied her motion for reconsideration. The Petition: The Court of Appeals reversed the Office of the President, annulling the contract and ordering petitioner to return respondent's payments with legal interest, finding that petitioner employed fraud and machinations. Petitioner sought review from the Supreme Court.
Issue(s)
Whether the Court of Appeals erred in ruling that there was fraud in the execution of the subject contract to sell and declaring the same as annulled. Whether the Court of Appeals erred in ordering the award of legal interest at the rate of 12% per annum starting from the filing of the complaint until fully paid.
Ruling
The petition is granted. The Decision and Resolution of the Court of Appeals are reversed and set aside. The Decision of the HLURB ENCRFO, which dismissed respondent's complaint and directed the parties to resume fulfillment of their sales contract, is reinstated.
Ratio Decidendi
On the issue of fraud and annulment of the contract: The Court held that while petitioner was guilty of false representation in its advertisements by stating the project was in Makati City when it was in Pasay City, this did not constitute causal fraud (dolo causante) sufficient to annul the Contract to Sell. Causal fraud requires that through insidious words or machinations, one party is induced to enter into a contract which they would not have agreed to otherwise. The Court agreed with the HLURB Arbiter, Board of Commissioners, and the Office of the President that the respondent failed to prove that the project's location was the essential or moving factor that led her to consent to the purchase. Evidence showed that respondent proceeded to sign the Contract to Sell, which clearly stated the Pasay City location, and continued making payments for over two years before demanding a refund. This conduct, along with signing a notarized contract, indicated she still agreed to buy the property regardless of the location discrepancy. The Court also found that the respondent failed to overcome the presumption of regularity accorded to the notarized Contract to Sell, as her allegations of signing in blank were not substantiated by clear and convincing evidence. Furthermore, even assuming the misrepresentation constituted fraud, respondent's act of signing the contract after knowing the actual location could be construed as an implied ratification thereof, which extinguishes the action to annul a voidable contract. On the issue of legal interest: The Court did not explicitly rule on the rate of legal interest in the dispositive portion, as it reinstated the HLURB decision which did not award interest. However, the Court's reversal of the CA's award implies that the 12% interest rate was not applicable in this case, aligning with the reinstatement of the lower agencies' findings.
Main Doctrine
While misrepresentation in advertisements regarding the location of a condominium project may constitute false representation, it does not amount to causal fraud sufficient to annul a Contract to Sell if the buyer proceeds to sign the contract despite knowing the actual location, or if the misrepresentation was not the principal inducement for entering into the contract. Furthermore, signing a notarized contract after acquiring knowledge of its true contents, or continuing to make payments, can be construed as an implied ratification, extinguishing the right to annul the contract.