Unnecessary

Pre-selling is now one of the most common schemes of real estate companies to entice buyers and to ensure viability of their projects. This case however should serve as a warning to these companies using this scheme as sales gimmick by proffering all sorts of empty promises. This is the case of Mita.

On July 7, 1995 Mita purchased from a condominium developer (MGA), a 224 square meter condominium unit in “The Salcedo Park” in Makati pursuant to a “Contract to Buy and Sell” which provides among others that: (1) the contract price of P16.8 million shall be payable 30% down or P4.9 million after deducting the P100,000 reservation fee; P9.2 million in 30 equal monthly installment of P308,000 from August 14, 1995 to January 14, 1998; the remaining P2.5 million on October 31, 1995, the stipulated delivery date of the unit; provided that if the construction is completed earlier, Mita would pay the balance within 7 days from receipt of notice of turnover.

Under the said contract, the construction of the Project and the unit purchased shall be completed and delivered not later than October 31, 1998 with additional grace period of 6 months barring delays due to fire, earthquakes, the elements, acts of God, war, civil disturbance, strikes or other labor disturbances, government and economic controls making it impossible to obtain the materials, acts of third persons or any other cause or conditions beyond the control of MGA, under any of which event, the completion and delivery are deemed extended without liability on MGA’s part.

Mita paid all the installments due up to January 1998 leaving the unpaid balance P2.5 million pending delivery of the unit. MGA however failed to deliver the unit within the stipulated period on October 31, 1998 or April 30, 1999 the last day of the six-month grace period. It was only on April 23, 2002 or a few days short of three years after the expiration of the stipulated period when MGA informed Mita that the unit was ready for inspection preparatory to delivery.

Mita replied through counsel that in view of MGA’s failure to deliver the unit on time, she was demanding the return of P14.2 million representing the total amount she paid for the unit with 12% interest from April 30, 1999, the expiration of the six-month period. Mita pointed out that none of the excepted causes of the delay existed. When her demand went unheeded, Mita filed a complaint against MGA with the Housing and Land Use Regulatory Board (HLURB) for rescission of contract, refund of payment and damages.

In its answer, MGA attributed the delay to the 1997 Asian financial crisis which was beyond its control. It also argued that default has not set in because Mita had not made any demand for delivery of the unit before the receipt of the notice of turnover. The HLURB sustained MGA and dismissed Mita’s complaint and ordered her to pay the balance plus damages finding that MGA effected delivery before Mita made a demand. Was HLURB correct?

No. Pursuant to Article 1169 of the Civil Code, in reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. But from the moment one of the parties fulfills his obligation delay by the other begins.

In this case, the contract contains reciprocal obligations: to complete and deliver the unit within the stipulated period on the part of MGA; and to pay the balance at the time of delivery on the part of Mita. Mita religiously paid all the installments due up to January 1998 whereas MGA reneged on its obligation to deliver within the stipulated period. MGA, having failed to comply with its obligation it is liable under the contract.

The sending of a notice of turnover by MGA before Mita demanded for a refund does not abate Mita’s cause. Such demand would have been useless because MGA has failed in its obligation to deliver the unit on the agreed date. Demand by the creditor shall not be necessary in order that delay may exist when the demand would be useless as when the debtor has rendered it beyond his power to perform (Par. 3, Article 1169).

The 1997 Asian financial crisis cannot be generalized as unforeseeable and beyond the control of business corporations. A real estate enterprise engaged in the pre-selling of condominium units is concededly a master in projections on commodities and currency movements as well as business risks. The fluctuating movement of the Philippine peso in the foreign exchange market is an everyday occurrence, not an instance of caso fortuito. MGA’s excuse for its delay does not therefore lie.

Hence pursuant to Section 23 of PD 957, Mita is entitled to be reimbursed the total amount of P14.2 million she paid to MGA with 6% per annum from date of demand and 12% from date of finality of judgment until paid, plus P200,000 attorney’s fees and costs and P100,000 exemplary damages (Megaworld vs. Tanseco, G.R. 181206, October 3, 2009).

Note: Books containing compilation of my articles on Labor Law and Criminal Law (Vols. I and II) are now available. Call tel. 7249445.

*      *      *

E-mail at: [email protected]