Case Summary (G.R. No. 48006)
Respondent’s Discovery and Demand for Refund
Over two years later, through counsel, respondent demanded on October 30, 1998 the return of ₱422,500.00, alleging she was misled by the Makati City advertisements. Petitioner’s silence on the refund request and its November 30, 1998 invitation to inspect the unit prompted respondent to file a complaint with the HLURB’s Expanded National Capital Region Field Office (ENCRFO).
HLURB Proceedings and Dismissals
On September 30, 2005, the ENCRFO dismissed the complaint for lack of evidence of “insidious words or machinations” constituting causal fraud under Civil Code Article 1338. The HLURB Board of Commissioners (April 25, 2006) and the Office of the President (June 21, 2007; denial of reconsideration on August 29, 2007) unanimously affirmed that respondent failed to prove that the project’s location was the principal inducement for her consent.
Court of Appeals’ Annulment and Relief
The Court of Appeals (July 21, 2010) reversed the Office of the President’s decisions, holding petitioner’s misrepresentation constituted fraud sufficient to annul the contract. It ordered refund of ₱422,500.00 plus 12% annual interest from filing until full payment. A motion for reconsideration was denied on March 15, 2011.
Supreme Court’s Standard for Fraud and Voidability
Under Civil Code Articles 1338, 1390, and 1344, fraud must be causal (dolo causante), serious enough to mislead a reasonably prudent person, and proved by clear and convincing evidence. Mere misrepresentation in advertisements, without proof that location was the decisive factor inducing consent, does not satisfy the causal-fraud requirement.
Assessment of Misrepresentation and Causal Fraud
Although the Court condemned petitioner’s inaccurate advertisements, respondent’s continued performance under the Contract to Sell (including signing after verifying Pasay City location and making payments) demonstrated lack of reliance on the misrepresentation. The absence of evidence that location was the essential consideration precludes annulment.
Presumption of Regularity of Notarized Contract
The notarized contract enjoys a presumption of regularity. Respondent’s unsubstantiated claims of blank spaces and extrinsic affidavits failed to overcome this presumption. Clear, convincing, and admissible evidence is required to impeach a notarized document.
Implied Ratification of the Contract
By signing and continuing payments despite knowledge of the actual location, respondent tacitly ratified the voidable contract under Civil Code Articles 1392, 1393, and 1396, extinguishing any right to annul and cleansing the contract of defects from inception.
Conclusion and Disposition
The petition is granted. The Court of Appeals’
Case Syllabus (G.R. No. 48006)
Facts of the Case
- Petitioner ECE Realty and Development Inc. is engaged in the building and development of condominium units.
- In 1995, ECE began construction of Central Park Condominium Building along Jorge St., Pasay City.
- Printed advertisements misrepresented the project’s location as Makati City.
- In December 1995, respondent Rachel G. Mandap paid a reservation fee, then a downpayment and monthly installments for a unit.
- On June 18, 1996, both parties executed a notarized Contract to Sell which accurately stated the condominium’s location in Pasay City.
- On October 30, 1998, Mandap demanded the return of ₱422,500.00, alleging she was induced by misrepresentations into the purchase.
- On November 30, 1998, instead of refunding, ECE Realty invited Mandap to inspect and occupy the unit.
- Mandap thereafter filed a complaint with the HLURB Expanded NCR Field Office seeking annulment of the contract, refund of payments, and damages.
Procedural History
- September 30, 2005: HLURB ENCRFO dismissed Mandap’s complaint for lack of fraud, ordering the parties to fulfill their sales contract.
- April 25, 2006: HLURB Board of Commissioners affirmed the ENCRFO decision, giving full effect to the written Contract to Sell.
- June