Case Summary (G.R. No. 181206)
Contract Terms and Payment Schedule
Parties agreed on a P16,802,037.32 purchase price for a 224 sqm unit. Buyer paid:
• 30% less P100,000 reservation fee by July 14, 1995
• 30 monthly installments (Aug 1995–Jan 1998)
• Balance P2,520,305.63 upon delivery (due Oct 31, 1998 or seven days after earlier turnover notice)
Construction Schedule and Extension Clause
Seller warranted completion by Oct 31, 1998, plus a six‐month grace period, except for delays due to force majeure (e.g., fire, war, acts of God, government controls). Seller reserved right to withdraw and refund payments without interest if completion became impossible or loss‐making for reasons beyond its control.
Delay, Turnover Notice, and Buyer’s Demand
Seller missed both the Oct 31, 1998 deadline and the April 30, 1999 grace‐period expiry. On April 23, 2002, it issued a turnover notice. Buyer’s counsel responded May 6, 2002, demanding refund of P14,281,731.70 plus 12% interest from April 30, 1999, citing absence of force majeure.
HLURB Proceedings and Laches Ruling
Buyer filed for rescission, refund, and damages with HLURB in June 2002. The Arbiter (May 28, 2003) dismissed the complaint, holding no default since turnover notice preceded buyer’s demand. HLURB Board (Nov 28, 2003) affirmed on grounds of laches for failure to promptly demand rescission; appellate review by the Office of the President (Apr 28, 2006; Aug 30, 2006 resolution) dismissed buyer’s appeal.
Court of Appeals Decision
On Rule 43 review (Sept 28, 2007), the Court of Appeals:
- Declared time of performance of essence under Art. 1169(2)—no demand required.
- Computed delay from Oct 31, 1998 (no valid force majeure).
- Rescinded the contract, ordered full refund with 12% interest from Oct 31, 1998.
- Awarded P200,000 exemplary damages and P200,000 attorney’s fees.
Article 1169 and Default Without Demand
Civil Code Art. 1169 provides that when time is a controlling motive in reciprocal obligations, obligor incurs delay without demand. Here, buyer’s obligation to pay balance was contingent upon seller’s timely delivery.
Force Majeure and the 1997 Financial Crisis
Art. 1174 limits liability for unforeseeable and inevitable events. The Court held that a seasoned real‐estate developer cannot invoke ordinary currency and business fluctuations as force majeure—1997 crisis was neither unforeseeable nor inevitable for a “master in projections.”
Equity Considerations and Rejection of Laches
Laches, guided by equity, did not bar buyer’s claim. Buyer honored installment payments up to Jan 1998; seller alone defaulted. Equitable balance favored buyer.
Non-Forfeiture under PD 957 Section 23
Under PD 957 Sec. 23, when developer fails to deliver per approved plans and schedule, buyer may desist after due notice and recover total payments plus legal interest. Buyer was entitled to reimbursement of P14,281,731.70 with statutory interest.
Interest, Attorney’s Fees, and Costs
• Interest: 6% per annum from May 6, 2002 (first demand); 12% per annum from finality of judgment.
• Attorney’s Fees and Costs: Contractual stipulation plac
Case Syllabus (G.R. No. 181206)
Parties and Contract Execution
- On July 7, 1995, Megaworld Globus Asia, Inc. (“Megaworld”) and Mila S. Tanseco (“Tanseco”) entered into a pre-selling Contract to Buy and Sell for a 224-sqm condominium unit at The Salcedo Park, Makati City.
- Total purchase price stipulated at ₱16,802,037.32.
- Tanseco paid a reservation fee of ₱100,000.
Payment Terms
- Down payment: 30% of the purchase price less the ₱100,000 reservation fee, i.e., ₱4,940,611.19, to be paid by post-dated check on July 14, 1995.
- Monthly installments: ₱308,037.35 each for 30 months (August 14, 1995 to January 14, 1998), totaling ₱9,241,120.50.
- Balance of ₱2,520,305.63 due on October 31, 1998 (or within seven days of earlier turnover notice).
Construction Schedule and Delay Clauses
- Contract Section 4 provided completion and delivery by October 31, 1998, with a six-month grace period to April 30, 1999.
- Barring delays caused by fire, earthquakes, acts of God, war, civil disturbances, strikes, government controls, third-party acts, or other force majeure.
- Seller reserved the right to withdraw and refund payments without interest if completion became impossible or loss-making for reasons beyond its control.
Non-Delivery and Demand for Refund
- Tanseco complied with installment payments through January 1998; pending balance of ₱2,520,305.63 awaited delivery.
- Megaworld failed to deliver by October 31, 1998, and by the April 30, 1999 grace-period deadline.
- On April 23, 2002, Megaworld issued a notice of turnover; Tanseco, via counsel (May 6, 2002), demanded a refund of ₱14,281,731.70 with 12% per annum interest from April 30, 1999, citing lack of any valid excuse for delay.
HLURB Proceedings
- June 5, 2002: Tanseco filed a complaint before the HLURB Expanded NCR Field Office for rescission, refund, and damages.
- Megaworld answ