G.R. No. L-65922 December 3, 1991
LAURETA TRINIDAD, petitioner, vs. INTERMEDIATE APPELLATE COURT and VICENTE J. FRANCISCO, respondent.

FACTS

Petitioner Laureta Trinidad agreed to buy a house and lot from respondent Vicente J. Francisco. Before the sale, she inspected the property and a vicinity map showing drainage canals. After moving in, she learned from neighbors that previous buyers had left due to flooding. Francisco allegedly assured her the problem was fixed. Relying on this, she completed the down payment and signed a Contract of Conditional Sale. The property flooded severely in 1972. An inspection by the Quezon City Engineer found the lot was low and a narrowed portion of a creek. Trinidad sued for annulment based on fraud, seeking refund of payments, damages for improvements and losses, and moral damages.
The trial court annulled the sale, ordered a refund and payment for improvements. The Intermediate Appellate Court reversed, dismissing the complaint. It upheld the cancellation of the contract for Trinidad’s non-payment of installments, forfeited her payments as rental, and ordered her to vacate. The appellate court found no conclusive proof of fraud, noting Trinidad’s pre-sale inspection and the common occurrence of floods in the area.

ISSUE

Whether the contract of sale should be annulled on the ground of fraud due to misrepresentation about the property’s susceptibility to flooding.

RULING

The Supreme Court denied annulment but modified the appellate court’s decision on equitable grounds. The legal logic is that fraud must be proven by clear and convincing evidence. The Court found no such proof. Trinidad inspected the property and the map herself prior to the sale. Francisco’s alleged verbal assurance that flooding was “fixed” was not a fraudulent concealment or misrepresentation of a material fact that would vitiate consent. The property’s tendency to flood, while unfortunate, did not constitute a legal vice or defect that made it outside the commerce of man. The Court cited the principle that courts cannot relieve parties from bad bargains or unwise investments absent a violation of law. However, considering the unique circumstances and the fact that Trinidad had made improvements and resided there for years, the Court, in equity, sustained the contract. It ordered Trinidad to pay the remaining balance of the purchase price with interest, and allowed her to keep the house without returning it, effectively recognizing her investments. The claims for moral and exemplary damages were denied.