Universal International Investment v. Ray Burton Development
REITERATIONFacts
The Antecedents: Ray Burton Development Corporation (RBDC) developed Elizabeth Place, a condominium. On October 18, 1996, Universal International Investment (BVI) Limited (Universal) entered into Contracts to Sell for 10 condominium units and 10 parking slots. Universal paid the full purchase price of ₱52,836,781.50 by February 1999. RBDC failed to deliver possession of the properties and transfer the Condominium Certificates of Title (CCTs) to Universal's name. Universal discovered that the mother title to the lot was mortgaged to China Banking Corporation (China Bank) since July 31, 1991, and was foreclosed on May 18, 2001. Procedural History: Universal filed a Complaint for Specific Performance or Rescission of Contract and Damages with the HLURB, seeking delivery of properties and CCTs, or rescission with refund and penalty interest. A Writ of Attachment was issued against RBDC's properties. RBDC countered that Universal had not paid transfer charges and claimed delivery was made via a letter. RBDC also argued that Universal should demand titles from China Bank, citing a compromise judgment directing China Bank to release titles for fully paid units. The HLURB ENCRFO ruled in favor of Universal, finding full payment and due obligation for delivery. RBDC appealed to the HLURB Board of Commissioners (BOC), also moving for the discharge of an attached property in Lapu-Lapu City. The BOC remanded the case to include China Bank and later granted the discharge of the Lapu-Lapu property upon RBDC posting a counterbond. The Office of the President (OP) reversed the BOC, upholding Universal's right to rescind and refund but maintaining the validity of the property discharge. Universal assailed the discharge before the Court of Appeals (CA) via certiorari, which was dismissed. On the main controversy, the CA denied Universal's claim for damages. During the CA proceedings, Universal obtained the CCTs from China Bank on January 5, 2005. RBDC moved for the case to be considered moot, but Universal argued that this only partially satisfied its claims, still seeking damages for delayed delivery and property losses. The Petition: Universal filed consolidated Petitions for Review on Certiorari before the Supreme Court, assailing the CA's affirmation of the discharge of the Lapu-Lapu property, arguing that the BOC ruling became final due to lack of an appeal bond, and contesting the denial of damages and property losses.
Issue(s)
Whether the CA incorrectly affirmed the discharge of the Lapu-Lapu City property of RBDC. Whether the CA gravely erred in denying the demand of petitioner for the liquidated damages specified in Section 6 of the Contracts to Sell. Whether the CA committed a grievous error in not granting the claims of petitioner for losses amounting to ₱19,646,483.72. Whether petitioner is entitled to damages on account of the contractual breaches committed by respondent.
Ruling
The Supreme Court affirmed the CA's decision regarding the discharge of the Lapu-Lapu City property. It dismissed the argument about the lack of an appeal bond as moot and academic. The Court denied Universal's claim for liquidated damages under Section 6 of the Contracts to Sell, as the conditions for force majeure or substantial delay were not met. The claim for actual damages representing depreciation in market value was also denied due to lack of proof of causation and legal basis. However, the Court awarded Universal temperate damages, exemplary damages, and attorney's fees.
Ratio Decidendi
On the CA's affirmation of the discharge of the Lapu-Lapu City property: The Court found no grave abuse of discretion on the part of the CA in affirming the BOC's Resolution allowing the discharge. The BOC, as the reviewing body, had the power to modify or revise rulings of its subordinate, the ENCRFO. The filing of a second Motion for Partial Discharge was deemed a valid procedural recourse to address the BOC's failure to rule on the first motion. Furthermore, Universal's filing of an Opposition to the motion for discharge sufficiently satisfied the requirement of notice and hearing. On the denial of liquidated damages under Section 6 of the Contracts to Sell: The Court held that Section 6 of the Contracts to Sell, which provides for liquidated damages (1.5% monthly interest), is applicable only in cases of force majeure or substantial delay in the project's completion, defined as six months from the estimated completion date. Universal's claim was based on RBDC's failure to deliver possession and CCTs, not on force majeure or substantial delay. Therefore, the specific provision for liquidated damages was inapplicable to Universal's cause of action. On the denial of claims for losses amounting to ₱19,646,483.72: The Court ruled that Universal failed to prove its claim for actual damages, which represented the depreciation in market value between the purchase price in 1996 and the appraised market value in 2005. Article 2200 of the Civil Code, cited by Universal for lost profits, was inapplicable as Universal did not allege marketing the properties for profit. Even if it did, there was no competent proof of the actual amount of profits lost. The difference in value was deemed conjectural and speculative, not actual pecuniary loss duly proven with reasonable certainty. On the entitlement to damages on account of RBDC's breaches: The Court found that RBDC breached its contractual obligations under Section 3 of the Contracts to Sell, which were to deliver deeds of absolute sale and the corresponding CCTs. RBDC's excuse that Universal failed to pay transfer charges was rejected, as RBDC never made a demand for such payment, nor did it offer to handle the titling process as stipulated in Section 5(a) of the contract. Consequently, Universal was entitled to damages. Since actual damages were not sufficiently proven, the Court awarded temperate damages equivalent to 15% of the purchase value (₱7,925,517.23), considering the investment, duration of suffering, and RBDC's failure to act. Exemplary damages (₱300,000) were awarded due to RBDC's wanton, fraudulent, reckless, oppressive, or malevolent conduct in failing to deliver titles and deeds without basis, and for potentially failing to disclose the mortgage. Attorney's fees (₱200,000) were also awarded due to the grant of exemplary damages.
Main Doctrine
While a buyer is entitled to temperate, exemplary damages, and attorney's fees for the seller's breach of contract in failing to deliver deeds of absolute sale and condominium certificates of title, the buyer cannot claim liquidated damages under a clause specifically for force majeure or substantial delay, nor can they recover depreciation costs or expenses incurred due to the seller's delay if not duly proven as actual damages.