SC: Property buyers entitled to refund in the absence of a contract

MANILA, Philippines — Offers made by sales agents of property developers are not considered advertisements under the law, but a buyer remains entitled to a refund if the seller fails to honor agreements after the initial round of payments, the Supreme Court has ruled.

The high court’s Third Division upheld the 2023 ruling of the Court of Appeals (CA) and 2022 findings of the Human Settlements Adjudication Commission (HSAC) that directed Empire East Holdings Inc. to refund the initial payments totaling P130,000 made by the buyer. This was after the developer did not comply with the agreement, made through a sales agent, that a contract to sell would be issued after the payments.

The amount covers the total monthly amortization of P110,000 and the reservation fee of P20,000 to secure a unit in one of Empire East’s projects in 2010.

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But even after the buyer paid the P130,000 after a year, Empire East did not issue the contract to sell.

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“While this sum is not insignificant to an ordinary Filipino, it is undeniable that a real estate corporation such as Empire East possessed the means and capacity to promptly satisfy the claim. Its refusal to do so is rendered even more unjustified by the fact that the validity of (buyer’s) claim was consistently affirmed by the HSAC Adjudicator, the HSAC, and the CA,” read the 13-page decision promulgated on Feb. 3 this year.

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Reciprocal obligation

In ruling in favor of the property buyer, the Supreme Court cited Article 1191 of the Civil Code, which allows the cancellation of obligations if one party fails to comply with what is expected of it.

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“[T]he Civil Code has provisions regarding agency, obligations, and contracts which can be invoked by a buyer who may be aggrieved when a developer fails to comply with the promises of its sales agent,” it said.

“Thus, when parties enter into a reciprocal obligation, and one of the parties fails to comply, the other party is entitled to rescind the obligation and ask for the return of whatever he has paid under the same,” it added.

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The Supreme Court also lamented that the property developer allowed the dispute to linger for nearly 16 years.

Aside from the refund, the high tribunal also awarded the buyer with exemplary damages totaling P260,000, which is double the amount to be refunded by Empire East. All monetary awards were set with an interest of six percent per annum until the amount is fully paid.