GR 176217; (August, 2008) (Digest)
G.R. No. 176217; August 13, 2008
STA. LUCIA REALTY & DEVELOPMENT INC., petitioner, vs. ROMEO UYECIO, AMARIS UYECIO, REYNALDO UYECIO AND MANUEL UYECIO, respondents.
FACTS
Petitioner Sta. Lucia Realty, developer of “The Royale Tagaytay Estates,” offered subdivision lots for sale, promising project completion by September 1999 and advertising numerous amenities. Respondents, the Uyecios, entered into contracts to sell for seven lots in May 1999, paying a downpayment and committing to amortizations. They suspended payments in April 2001 because the promised delivery date had passed and the advertised amenities were uncompleted. An HLURB ocular inspection in December 2002 confirmed the project’s unfinished state, noting the absence of critical features like a church, clubhouse, and perimeter fence.
Petitioner claimed near-completion of basic components but admitted low completion rates for electrical systems and fencing. It also argued that marketing materials were prepared by a separate entity and that it had secured an HLURB extension to complete the project until September 2004. The HLURB ruled for respondents, ordering contract rescission, refund of payments with interest, and damages. This decision was affirmed by the HLURB Board, the Office of the President, and the Court of Appeals.
ISSUE
Whether the Court of Appeals erred in affirming the rescission of the contracts to sell, the grant of a refund with interest, and the award of damages.
RULING
The Supreme Court denied the petition and affirmed the assailed decision. On the propriety of rescission, the Court held that petitioner committed a substantial breach by failing to develop the subdivision according to the approved plans and within the stipulated time. This failure granted respondents the right to rescind under Article 1191 of the Civil Code and, more specifically, Section 23 of Presidential Decree No. 957 (The Subdivision and Condominium Buyers’ Protective Decree), which allows buyers to desist from payment and seek a refund when the developer fails to complete the project as planned. Petitioner’s subsequent extension from the HLURB did not retroactively validate its prior default or nullify the buyers’ accrued rights.
Regarding the refund, the award of legal interest at 12% per annum from the filing of the complaint until full payment was proper, following established jurisprudence on monetary judgments. On damages, the Court sustained the awards for moral and exemplary damages as petitioner’s failure to fulfill its contractual obligations in bad faith, despite collecting substantial payments, caused respondents mental anguish and warranted correction by public example. Attorney’s fees were also correctly awarded as respondents were compelled to litigate to protect their interests. The Court found no reason to disturb the factual conclusions of the lower tribunals, which were supported by evidence.