SPOUSES HEINZRICH THEIS AND BETTY THEIS, petitioners, vs. HONORABLE COURT OF APPEALS, HONORABLE ELEUTERIO GUERRERO, ACTING PRESIDING JUDGE, BRANCH XVIII, REGIONAL TRIAL COURT, TAGAYTAY CITY, CALSONS DEVELOPMENT CORPORATION, respondents.
FACTS
Private respondent Calsons Development Corporation owned three adjacent lots in Tagaytay City. In 1985, it constructed a two-storey house on one lot (parcel 3). A survey error that year mistakenly indicated that the house stood on a different lot (parcel 1) and that Calsons’ two idle lots were located on an adjacent vacant lot (parcel 4), which it did not own. Unaware of this error, Calsons, through its representative, sold the non-existent parcel 4 to petitioners-spouses Theis in 1987 for P486,000, delivering the titles for its two actual idle lots (parcels 2 and 3) as part of the transaction.
Upon returning from abroad in 1990, the petitioners discovered that parcel 4 was owned by another person and that the titles they received corresponded to parcels 2 and 3. They insisted they had bought the vacant parcel 4, or alternatively, demanded parcel 3 with the house. Calsons could not sell parcel 4, as it was not the owner, and offered instead its two genuine vacant lots (parcels 1 and 2) or a refund. The petitioners refused, prompting Calsons to file an action for annulment of the deed of sale and reconveyance.
ISSUE
Whether the contract of sale is voidable on the ground of mistake, warranting its annulment.
RULING
Yes, the contract is voidable due to an essential mistake. The Supreme Court affirmed the lower courts’ decisions annulling the deed of sale. The legal logic centers on Article 1331 of the Civil Code, which states that a contract may be annulled if there was an error concerning the substance or principal conditions of the thing which was the principal cause of the contract. Here, the mistake was essential and mutual. Both parties intended the subject of the sale to be a specific vacant lot (parcel 4). Calsons erroneously believed it owned and could sell that lot, while the petitioners intended to purchase that same vacant lot. This error regarding the very identity and existence of the object of the sale vitiated Calsons’ consent.
The Court rejected the petitioners’ claim to parcel 3 (with the house), as this would result in unjust enrichment. The evidence showed the parties negotiated for a vacant lot, and the construction cost of the house far exceeded the purchase price. The offer of two vacant lots or a refund was a reasonable remedy for the mutual mistake. The annulment of the contract, with consequent obligations of restitution, was the proper legal outcome to correct the error concerning the principal object of the agreement.
