G.R. No. 171172 - Bank of the Philippine Islands vs. Spouses Co

Respondents, Spouses Francisco and Emilia Buenaventura (represented by Ricardo Segismundo), filed a complaint on January 16, 1996, before the Housing and Land Use Regulatory Board (HLURB).
They sought specific performance, damages, and attorney’s fees against petitioner Sta. Lucia Realty & Development, Inc.

Respondents alleged that they bought Lot 3, Block 4, Phase II at Greenwood Executive Village, Cainta, Rizal from Loida Gonzales Alfonso on August 16, 1989.
The lot was part of a subdivision project owned and being developed by petitioner.
During the construction of their house, respondents later discovered that their lot had been subdivided and occupied by Marilou Panlaque and Ma. Veronica Banez, who too were issued construction permits by petitioner.

It had no transaction record regarding Lot 3, Block 4, Phase II.
The disputed lot actually belonged to ACL Development Corporation, its joint-venture partner.
RCD Realty Corporation was responsible for subdividing the lot and conducting separate residential construction on what it designated as Lot 3, Block 4, Phase II-A.
Respondents had acted in bad faith by building on Lot 4, which belonged to another.

To resolve the dispute, petitioner suggested a three-way exchange of properties involving respondents, RCD Realty Corporation, and the owner of Lot 4.
On September 1, 1997, petitioner filed a third-party complaint against ACL Development Corporation and RCD Realty Corporation.

ACL alleged that petitioner was responsible for the issuance of all construction permits on the subdivision, thus creating the confusion.
RCD Realty Corporation maintained that it acted in good faith upon receiving a construction permit from petitioner.

On June 16, 1998, the HLURB Arbiter for the National Capital Region Field Office rendered a decision ordering petitioner:

To cause the vacation of complainants’ possession of Lot 3, Block 4, Phase II, or alternatively reimburse its current market value (stipulated at no less than P4,500 per square meter).
To pay P100,000 as moral damages, P50,000 as exemplary damages, and P50,000 as attorney’s fees.

RCD Realty Corporation’s erroneous construction was permitted by petitioner through its issuance of a construction permit.
As the owner-developer, petitioner was responsible for ensuring the correct enforcement of subdivisions and the proper annotation of restrictions.

On June 24, 1999, the HLURB Board of Commissioners affirmed the Arbiter’s decision with the modification that the market value be reduced from P4,500 to P3,200 per square meter plus 12% interest per annum from the time of complaint filing.

July 18, 2003 – The Office of the President issued a Decision affirming the HLURB Board’s ruling.
November 28, 2003 – A Motion for Reconsideration by petitioner was denied by the Office of the President.
December 21, 2006 – The Court of Appeals affirmed the decision of the Office of the President, stating that:

Petitioner’s issuance of a construction permit caused confusion on the identity of the lots.
Petitioner was remiss and negligent in delivering the property described in respondents’ title.

March 21, 2007 – The Court of Appeals denied petitioner’s subsequent Motion for Reconsideration.

Serious reversible error regarding liability in a complaint for specific performance.
Serious reversible error in sustaining the award of refund with interest, as well as moral, exemplary damages, and attorney’s fees to respondents.

There was no privity of contract with respondents since it originally sold the lot to Alfonso.
RCD Realty Corporation was solely responsible for the erroneous construction on Lot 3, Block 4, Phase II.
Respondents acted in bad faith by constructing a house on Lot 4, which actually belonged to a different owner.
Alfonso, having transferred her rights to respondents, was no longer an indispensable party.

The legal contention included the transmissibility of rights under Article 1311 of the New Civil Code and the implications of assignment in binding petitioner to the obligations originally owed to Alfonso.

Whether petitioner is liable for the specific performance claim regarding the disputed Lot 3, Block 4, Phase II, given that respondents acquired the lot through assignment from Alfonso.
Whether the award of damages—including moral, exemplary damages, and attorney’s fees—as well as the reimbursement based on the adjusted market value is proper.
Whether petitioner’s negligence and its issuance of a construction permit to RCD Realty Corporation effectively caused the confusion regarding lot identity and the erroneous construction on the property.
Whether the doctrine of privity of contract and the assignment of rights and obligations (from Alfonso to respondents) legally bind petitioner to respond to the claims of respondents.
Whether the modification of the applicable interest rate to 6% per annum (from the time of filing the complaint) for the reimbursement is consistent with established legal principles, as opposed to the 12% per annum rate under other circumstances.