G.R. No. 216023 - Buenviaje vs. Spouses Salonga

Case Summary (G.R. No. 216023)

Factual Background

In May 1997, Jebson Holdings Corporation, through its Executive Vice President Ferdinand Juat Banez, entered into a Joint Venture Agreement with Spouses Jovito R. and Lydia B. Salonga to develop three parcels of land in Tagaytay City into ten residential units known as Brentwoods Tagaytay Villas. Under the JVA, the spouses retained ownership of three units while Jebson took seven units and assumed responsibility for construction, permits, subdivision, and payment of the mortgage. On June 9, 1997, Jebson contracted to sell Unit Five to Dr. Buenviaje for P10,500,000, and P7,800,000 of the purchase price was purportedly paid through a “swapping arrangement” whereby Buenviaje conveyed a house and lot and a golf share to Jebson, with the balance paid periodically and additional sums paid for improvements. Despite full payment, Jebson failed to complete the unit within the contractual period and cited the 1997 financial crisis for the delay.

Administrative Complaint and Consolidation

On May 27, 2002, Dr. Buenviaje filed before the HLURB-RIV a Complaint for Specific Performance with Damages and Attorney’s Fees against Jebson, Banez, and Sps. Salonga, seeking completion and delivery of Unit Five, subdivision and titling, and damages or, alternatively, rescission and restitution including return of swapped properties. The complaint was consolidated with claims by other buyers, including Beliz Realty and the Spouses Co, who sought completion of their purchased units.

HLURB-RIV Ruling

The HLURB Regional Field Office issued a Decision on December 5, 2002 rescinding the contracts to sell, finding respondents solidarily liable for return of payments with interest at 12% p.a., awarding moral and exemplary damages, attorney’s fees and litigation expenses, ordering return of swapped properties to the buyers, and imposing an administrative fine for violations of Sections 4, 5, 20, and 25 of PD 957. The HLURB-RIV concluded respondents were not authorized to sell because they lacked registration and license to sell, and it held the spouses solidarily liable with Jebson and Banez as joint venture partners.

HLURB-BOC Ruling

On appeal, the HLURB Board of Commissioners reversed the HLURB-RIV in a Decision dated September 16, 2004. The HLURB-BOC upheld the validity of the contracts to sell with buyers including Dr. Buenviaje, rescinded only the swapping arrangements which used non-cash assets as downpayments, directed completion of specified units within six months, and ordered the complainants to pay moral damages and attorney’s fees to Sps. Salonga. The HLURB-BOC found only a slight or casual breach that did not warrant resolution under Article 1191 of the Civil Code, but it invalidated the swaps as prejudicial to the spouses because they depleted the cash funding for the project. It also held that the JVA did not create solidarity and that the spouses were not in control of the project.

Office of the President Ruling

The Office of the President affirmed the HLURB-BOC Decision in a November 30, 2005 Decision. The OP found no factual basis to hold Sps. Salonga solidarily liable, sustained that the spouses’ conformity was not secured as required by the JVA and thus the contracts were unenforceable against them, agreed that rescission was impractical given the near completion of the units, and upheld the rescission of the property swaps. Reconsideration was denied.

Court of Appeals Ruling

The Court of Appeals, in a Decision dated November 29, 2013, affirmed the OP and HLURB-BOC rulings. The CA held that Jebson violated the JVA by selling without the spouses’ conformity and by failing to secure permits, but given the buyers’ primary prayer for specific performance and the near completion of the units, the CA sustained the orders requiring completion and delivery while rescinding only the swapping arrangements. The CA also adopted the HLURB-BOC and OP finding that Dr. Buenviaje had connived with Jebson in diluting the cash portion of his payment, and upheld awards of moral damages and attorney’s fees in favor of Sps. Salonga.

Issues Presented to the Supreme Court

The Supreme Court considered whether the Court of Appeals correctly ruled that: (a) the remedy of specific performance was proper for Dr. Buenviaje; (b) Sps. Salonga are not solidarily liable with Jebson and Banez for completion and delivery of the unit; (c) the “swapping arrangement” was invalid and subject to rescission; and (d) Dr. Buenviaje is liable to Sps. Salonga for moral damages and attorney’s fees.

Supreme Court’s Disposition

The petition was partly granted. The Supreme Court affirmed the CA Decision with modification. It affirmed the order directing Jebson to comply with its obligations under the Contract to Sell and upheld the finding that Sps. Salonga were not solidarily liable with Jebson and Banez. The Court reversed and deleted the HLURB-BOC/OP/CA directive to rescind the swapping arrangement and the consequent order requiring Dr. Buenviaje to pay P7,200,000 in cash, and it deleted the awards of moral damages of P50,000 and attorney’s fees of P25,000 in favor of Sps. Salonga against Dr. Buenviaje. The remainder of the CA Decision stood.

Legal Reasoning — Specific Performance and Resolution

The Court explained that specific performance and resolution under Article 1191 of the Civil Code are alternative remedies and that the injured party may elect either. The Court observed that Dr. Buenviaje primarily sought specific performance — completion, subdivision, and turnover of Unit Five — and therefore was bound by that election. The Court held that the impossibility of fulfillment, which would permit post-election rescission, was not demonstrated. Given the near completion of the units, the tribunals correctly granted specific performance and fixed a period for completion rather than ordering resolution.

Legal Reasoning — Relativity of Contracts and Solidary Liability

Relying on Article 1311 of the Civil Code and the doctrine of relativity of contracts, the Court held that obligations under the Contract to Sell were binding only between Jebson and Dr. Buenviaje, and not against non-parties such as Sps. Salonga, absent privity or a separate source of obligation. The Court explained that solidary liability presupposes an obligation attaching to the person sought to be held liable. The Court found no evidence to invoke Section 40, PD 957 because records did not show that the spouses directly or indirectly controlled Jebson or acted in bad faith to induce the violative acts. Likewise, Articles 1822 and 1824 (partnership liability) did not apply because no partnership or partnership obligation existed between the spouses and Dr. Buenviaje in relation to the Contract to Sell.

Legal Reasoning — Rescission of the Swapping Arrangement

The Court addressed the HLURB-BOC’s rescission of the swapping arrangement under rescissible-contract doctrines in Articles 1177, 1313, and 1381–1384 of the Civil Code. It reiterated that rescission for fraud of creditors requires proof that the conveyance was undertaken with the intent to defeat creditors and that the burden of proving fraudulent intent rests on the creditors. The Court found that the spouses failed to prove that the swaps were fraudulent conveyances intended to defraud them. The acceptance by Jebson of non-cash assets was a business decision which, though possibly imprudent and contributing to funding difficulties, did not demonstrate the requisite intent to defraud. Consequently, the swapping arrangement was a bona fide transaction and could not be rescinded on the record.

Legal Reasoning — Moral Damages and Attorney’s Fees

The Court reiterated that awards of moral damages under Article 2219 require pleading and proof of moral suffering, mental anguish or analogous injury; the existence of such factual ba

Case Syllabus (G.R. No. 216023)

Parties and Procedural Posture

Petitioner Dr. Restituto C. Buenviaje filed a petition for review on certiorari assailing the Court of Appeals' affirmation of the HLURB-BOC decision and resolution.
Respondents Spouses Jovito R. and Lydia B. Salonga are the registered owners of the Tagaytay property covered by TCT No. T-9000 and convened the joint venture with Jebson.
Respondent Jebson Holdings Corporation is the developer that contracted to construct Brentwoods Tagaytay Villas and entered into the Contract to Sell with petitioner.
Respondent Ferdinand Juat Banez acted as Jebson's Executive Vice President and signed the Joint Venture Agreement and the Contract to Sell.
The petition challenged the CA Decision dated November 29, 2013 and Resolution dated December 15, 2014 in CA-G.R. SP No. 93422 affirming portions of the HLURB-BOC rulings.

Key Factual Allegations

The Joint Venture Agreement dated May 29, 1997 provided that Sps. Salonga would contribute three parcels totaling 2,935 square meters and that Jebson would construct ten high-end residential units named Brentwoods Tagaytay Villas.
Under the JVA, seven units were allocated to Jebson and three units were allocated to Sps. Salonga, with subdivision and individual titling to be undertaken and Jebson assuming the mortgage liability.
Jebson agreed to secure permits, a license to sell from HLURB, and to construct the units at its expense, while Jebson retained the right to market its units subject to the spouses' conformity.
On June 9, 1997, Jebson entered into the subject Contract to Sell with Buenviaje for Unit Five for P10,500,000, and approximately P7,800,000 of the price was paid by a "swapping arrangement" of non-cash assets.
Jebson failed to complete Unit Five within the contractual period, citing the 1997 financial crisis, and the unit remained undelivered despite subsequent extensions and demands.

Procedural History

Buenviaje filed a Complaint for Specific Performance with Damages before HLURB-RIV on May 27, 2002, consolidated with similar complaints from other buyers.
HLURB-RIV rescinded the contracts to sell, held respondents solidarily liable, ordered return of swapped properties, and imposed fines for violations of PD 957.
Sps. Salonga appealed to the HLURB-BOC, which reversed HLURB-RIV by upholding the contracts to sell, fixing completion periods, rescinding only the swapping arrangements, and awarding moral damages and attorney's fees to the spouses.
The Office of the President affirmed the HLURB-BOC decision, and Buenviaje brought a petition for review to the Court of Appeals, which affirmed the OP ruling.
Buenviaje filed the present petition before the Supreme Court contesting CA's affirmation.

Issues Presented

Whether specific performance was a proper remedy under the circumstances.
Whether Sps. Salonga are solidarily liable with Jebson and Banez for completion and delivery of Unit Five.
Whether the "swapping arrangement" was invalid and subject to rescission.
Whether Buenviaje is liable to Sps. Salonga for moral damages and attorney's fees.

Rulings and Disposition

The Supreme Court partly granted the petition by affirming the CA Decision with modification.
The Court affirmed the grant of specific performance directing Jebson to comply with its obligations under the Contract to Sell.
The Court reversed the HLURB-BOC and CA directives insofar as they rescinded the swapping arrangement and ordered Buenviaje to pay P7,200,000 as cash down payment.
The Court deleted the awards of moral damages of P50,000 and attorney's fees of P25,000 against Buenviaje to Sp