G.R. No. 165164 - Fil-Estate Properties, Inc. vs. Spouses Go

Case Summary (G.R. No. 165164)

Factual Background

On December 29, 1995, Fil-Estate Properties, Inc. entered into a contract to sell a condominium unit at “Eight Sto. Domingo Place” to spouses Gonzalo and Consuelo Go for a lump sum price of P3,620,000. The spouses paid a total of P3,439,000.07 of the contract price. The project was not developed, and on August 4, 1999 the spouses sent a demand for refund of the amount they paid plus interest. When no refund was forthcoming, the spouses filed a complaint before the Housing and Land Use Regulatory Board (HLURB) seeking reimbursement of P3,620,000 plus interest, attorney’s fees of P100,000, and litigation expenses.

HLURB Proceedings

The HLURB Housing and Land Use Arbiter ruled in favor of the spouses, a decision the Regional Director approved on July 18, 2000. The HLURB found that the Asian financial crisis and the depreciation of the peso did not constitute a fortuitous event excusing performance because currency fluctuations are foreseeable and avoidable by economic measures. The HLURB concluded that Fil-Estate failed to fulfill its contractual obligations and that under Article 1475 and Article 1191 of the Civil Code the spouses could demand performance or rescission with damages; rescission and refund were appropriate because performance had become impossible. The Arbiter ordered refund of the amount proved plus interest and awarded attorney’s fees.

Administrative Appeals

The Board of Commissioners of the HLURB denied Fil-Estate’s petition for review and motion for reconsideration. The Office of the President likewise dismissed Fil-Estate’s appeal and denied its motion for reconsideration, thereby affirming the HLURB findings and relief.

Court of Appeals Decision

Fil-Estate appealed to the Court of Appeals. The Court of Appeals affirmed the HLURB and Office of the President, holding that the Asian financial crisis could not be considered a fortuitous event under Article 1174 and that the spouses’ remedy was governed by Section 23 of P.D. No. 957. The appellate court observed that the project should have begun in 1995 or 1996 and been completed by 1997, so the 1997 crisis did not excuse the developer’s failure to commence and complete the project. The Court of Appeals awarded refund and interest and granted attorney’s fees, and it denied Fil-Estate’s motion for reconsideration.

Issues Presented

The petition to the Supreme Court presented two issues: first, whether the Court of Appeals erred in holding that the Asian financial crisis was not a fortuitous event that would excuse Fil-Estate’s nonperformance; and second, whether the Court of Appeals erred in holding Fil-Estate liable for the payment of attorney’s fees.

Parties’ Contentions

Fil-Estate argued that the 1997 Asian financial crisis qualified as a fortuitous event under Article 1174 because it was unforeseen, inevitable, and beyond the parties’ control, thus excusing delay or suspension of construction. Fil-Estate maintained it had not abandoned the project but only suspended work, had secured required permits, and sought extensions from the HLURB. The spouses contended that the petition should be dismissed for failure to raise a question of law because the fortuitous-event claim and the award of attorney’s fees were factual matters resolved consistently by the HLURB, Office of the President, and the Court of Appeals. The spouses further asserted that Fil-Estate had not even commenced the project in 1995 and therefore could not attribute nonperformance to the 1997 crisis.

Standard of Review and Preliminary Observations

The Supreme Court noted that whether an event is fortuitous is generally a question of fact. The Court observed that where the findings of fact are consistent across the HLURB, the Office of the President, and the Court of Appeals, a petition for review does not lie to reexamine such factual determinations. The Court referenced its prior decisions holding that the 1997 Asian financial crisis did not, as a matter of law, constitute a fortuitous event excusing contractual obligations.

Supreme Court’s Analysis on Fortuitous Event

The Supreme Court affirmed the view that the 1997 Asian financial crisis did not automatically constitute a fortuitous event under Article 1174. The Court relied on precedent, including Asian Construction and Development Corporation v. Philippine Commercial International Bank and Mondragon Leisure and Resorts Corporation v. Court of Appeals, which held that the 1997 crisis did not justify nonperformance. The Court emphasized that real estate developers engaged in pre-selling are masters of economic projections and business risks, and that currency fluctuations are regular occurrences rather than unforeseeable fortuitous events. The Court also noted factual findings that Fil-Estate failed to commence the project in 1995 when it should have, so the 1997 crisis could not account for the developer’s failure to start or complete the project by 1997.

Supreme Court’s Ruling on Refund and Interest

The Supreme Court held that the spouses were entitled to reimbursement of the actual sums paid. Although the spouses had sought refund of the full lump sum P3,620,000, the Court limited recovery to the actual payments proved, namely P3,439,000.07, together with legal interest. The Court reduced the interest rate awarded by the Court of Appeals from 12% to 6% per annum, conformably with the rule applied in Eastern Shipping Lines, Inc. v. Court of Appeals, that 6% is the appropriate legal interest rate on non-loan obligations when discretion to award interest is exercised and the demand is established with reasonable certainty. Interest was made to run from the date of demand, August 4, 1999, until full payment.

Supreme Court’s Ruling on Attorney’s Fees

The Supreme Court modified the award of attorney’s fees. Whereas the Court of Appeals had awarded P25,000, the Supreme Court increased attorney’s fees to P100,000 as just and equitable, reasoning that the spouses had been compelled to retain counsel over eight years to protect their interests because of Fil-Estat

Case Syllabus (G.R. No. 165164)

Parties and Posture

Fil-Estate Properties, Inc. was the petitioner in a certiorari appeal to the Supreme Court.
Spouses Gonzalo and Consuelo Go were the respondents who purchased a condominium unit from petitioner.
The case reached the Supreme Court by petition for certiorari from the Court of Appeals decision affirming administrative rulings.
The appeal sought review of the Court of Appeals’ affirmation of the HLURB and the Office of the President decisions.

Key Facts

Fil-Estate and the Spouses Go executed a contract dated December 29, 1995 to sell a condominium unit at Eight Sto. Domingo Place for P3,620,000.00.
The Spouses Go actually paid P3,439,000.07 toward the contract price.
The Spouses Go sent a demand letter on August 4, 1999 requesting refund of amounts paid plus interest due to petitioner’s failure to develop the condominium project.
Fil-Estate asserted that the 1997 Asian financial crisis caused the delay and constituted a caso fortuito or fortuitous event beyond its control.
The Spouses Go alleged that the project had not even been started in 1995 and therefore could not be excused by the 1997 crisis.

Procedural History

The Housing and Land Use Arbiter ruled in favor of the Spouses Go and the HLURB Regional Director approved that decision on July 18, 2000.
The HLURB Board of Commissioners denied petitioner’s petition for review and motion for reconsideration.
The Office of the President dismissed petitioner’s appeal and denied its motion for reconsideration.
The Court of Appeals in CA-G.R. SP No. 79624 affirmed the administrative bodies and denied petitioner’s motion for reconsideration.
The present petition for certiorari to the Supreme Court challenged the Court of Appeals’ rulings on two legal issues.

Issues Presented

Whether the Asian financial crisis of 1997 constituted a fortuitous event excusing Fil-Estate from performance under the contract pursuant to Art. 1174 of the Civil Code.
Whether Fil-Estate should be held liable for the payment of attorney’s fees to the Spouses Go.

Contentions

Fil-Estate contended that the 1997 crisis was unforeseen and inevitable under Art. 1174 and relied on Servando v. Philippine Steam Navigation Co. for support.
Fil-Estate asserted that it had obtained required government permits and had only suspended, not abandoned, the project, and had sought extension from the HLURB.
The Spouses Go contended that the crisis could not justify nonperformance because the project had not even commenced in 1995 and was due to be completed by 1997.
The Spouses Go a