GR 205838; (November, 2017) (Digest)
G.R. No. 205838 NOVEMBER 29, 2017
JOSEPH HARRY WALTER POOLE-BLUNDEN, Petitioner, vs. UNION BANK OF THE PHILIPPINES, Respondent.
FACTS
Petitioner Joseph Harry Walter Poole-Blunden purchased a foreclosed condominium unit from respondent Union Bank of the Philippines (UnionBank) after seeing its advertisement stating a floor area of 95 square meters. He inspected the irregularly-shaped unit, noted its poor physical condition, but did not doubt the advertised area. He won the auction, entered into a Contract to Sell, fully paid the purchase price, and occupied the unit. Years later, while planning renovations, he suspected a discrepancy and had the unit professionally measured, discovering the actual floor area was only about 74 square meters.
Poole-Blunden demanded rescission of the contract and a refund. UnionBank refused, asserting the 95-square-meter figure included the terrace and common areas, and defended the sale as being on an “as-is-where-is” basis. The Regional Trial Court and the Court of Appeals dismissed Poole-Blunden’s complaint for rescission and damages, upholding the “as-is-where-is” stipulation and finding no causal fraud by the bank.
ISSUE
Whether the Contract to Sell between Poole-Blunden and UnionBank is voidable on the ground of causal fraud due to the bank’s gross negligence in advertising an incorrect floor area for the condominium unit.
RULING
Yes, the contract is voidable. The Supreme Court reversed the lower courts and ruled in favor of Poole-Blunden. Banks are held to the highest degree of diligence in their dealings, including the sale of foreclosed properties. UnionBank’s failure to accurately ascertain and advertise the unit’s true floor area constituted gross negligence equivalent to bad faith. This misrepresentation, upon which Poole-Blunden relied, constitutes causal fraud under Article 1338 of the Civil Code, rendering the contract voidable.
The Court rejected UnionBank’s defense based on the “as-is-where-is” clause. Such a stipulation applies only to defects or conditions that are readily observable or discoverable by an ordinary prudent buyer upon inspection. The true floor area, especially for an irregularly shaped unit, is not a patent defect perceivable without specialized skill or measurement; it is a latent specification that the bank, as seller, had a duty to verify and disclose correctly. The bank’s gross negligence in this duty amounted to fraud, vitiating Poole-Blunden’s consent. The contract was rescinded, and UnionBank was ordered to refund the total purchase price with legal interest.