G.R. No. L-18056 January 30, 1965
ASSOCIATED REALTY DEVELOPMENT COMPANY, INC., petitioner, vs. The COURT OF APPEALS, KEATER HUANG and TAN GIOK TIN, respondents.

FACTS

Petitioner Associated Realty Development Company, Inc. bought a parcel of land in Manila and planned to subdivide it for resale. The tenants, including respondent spouses Keater Huang and Tan Giok Tin, organized themselves into the Soler Tenant Association, frustrating the ejectment. Through the intervention of the Chinese Consul General, a mediation committee, which included respondent Keater Huang, was formed, leading to a settlement giving tenants the first option to buy their occupied lots. The property was subdivided into the Soler-Alvarado Subdivision. On April 22, 1947, petitioner executed a “Receipt of Full Payment and Agreement to Convey” selling Lot No. 24 (stated as 52 sq. meters, more or less) to Tan Giok Tin for P6,760. On the same date, petitioner also granted, via a letter, an additional parcel of land along the Estero de Magdalena adjacent to Lot No. 24 to the spouses in consideration of Keater Huang’s mediation services, with no financial obligation. Possession of both lots was delivered. The spouses built a cement fence on the estero lot and, with petitioner’s consent, constructed a three-story residential house on Lot No. 24. It was later discovered that Lot No. 24 actually contained only 45 square meters (7 sq. meters short) and that the estero lot was owned by the government, which petitioner had no authority to dispose of. The house, having a 52 sq. meter floor area, occupied a portion of the government-owned estero lot. Demands for conveyance were refused. Respondents filed a complaint for damages. The Court of First Instance of Manila awarded respondents P5,071. Both parties appealed to the Court of Appeals, which modified the judgment.

ISSUE

The primary issues involved the determination of damages due to petitioner’s failure to convey the contracted area of Lot No. 24 and its unauthorized grant of government-owned estero land, including the valuation of the lost properties, depreciation of the constructed house, and the award of attorney’s fees.

RULING

The Supreme Court affirmed the modified decision of the Court of Appeals. Petitioner was held liable for the difference in the value of Lot No. 24 based on the area deficiency, computed at the market price at the time the obligation should have been fulfilled (lucro cesante). The Court also upheld the award for the depreciation of the house built by respondents, as it could not fit the reduced lot area after the estero lot became unavailable. The Court further ruled that petitioner could take over Lot No. 24 and the house upon payment of the awards to respondents, given that respondents no longer had beneficial use of the lot in its reduced state. The award of attorney’s fees to respondents was deemed warranted under the circumstances.