Liability of project developers

Real estate developers who renege on their commitments to their customers can be ordered to refund amortization payments made, and pay attorney’s fees and moral damages.

This, in a nutshell, was the ruling of the Supreme Court in the case of “Fil-Estate Properties Inc. and Fil-Estate Network Inc. vs Spouses Conrado and Maria Victoria Ronquillo, G.R. No. 185798, Jan. 13, 2014.”

In August 1997, the Ronquillos bought an 82-square-meter condominium unit in the proposed Central Park Place Tower from owner and developer Fil-Estate Properties, through marketing agent Fil-Estate Network. After signing the reservation agreement and paying the reservation fee of P200,000, the Ronquillos made a downpayment of P1,552,200. They paid the P63,363.33 monthly amortization until September 1998.

Upon learning that construction on the project had ceased, they stopped paying their monthly amortization. Thereafter, they demanded the repayment of the sum of P2,198,949.66 they claimed to have already paid, plus interest.

When their demands were not met, they filed a complaint with the Housing and Land Use Regulatory Board for the refund of their amortization and payment of attorney’s fees, moral damages and litigation expenses.

Judgment

In their answer, the Fil-Estate companies attributed the delay in construction of the building to the 1997 Asian financial crisis. They also denied committing fraud or misrepresentation that could entitle the Ronquillos to moral damages and attorney’s fees.

In 2002, the HLURB ruled that the companies’ failure to develop the condominium project was a substantial breach of their obligation to the Ronquillos, and that “mere economic hardship is not an excuse for contractual and legal delay.”

Accordingly, the companies were ordered to pay the Ronquillos the following sums of money: P2,198,949.96 with 12 percent interest computed from Oct. 8, 1998 (the time they made the demand for refund), P100,000 as moral damages and P50,000 as attorney’s fees.

In an effort to reverse that award, the companies filed a series of motions for reconsideration and appeals with the HLURB Board of Commissioners, Office of the President and Court of Appeals.

All the review and appellate bodies affirmed the earlier award and denied the motions for reconsideration and appeals by the companies.

Unfazed by the consecutive rebuffs, the companies, in 2009, elevated the case to the tribunal for final resolution.

Fortuitous events

Did the Asian financial crisis constitute a fortuitous event that would justify delay by the companies in the performance of their contractual obligations to the Ronquillos?

No, said the tribunal. Citing its earlier ruling on the same question, the justices said “we cannot generalize the Asian financial crisis in 1997 was unforeseeable and beyond the control of a business corporation.

“It is unfortunate that petitioner apparently met with considerable difficulty, e.g. increased cost of materials and labor, even before the scheduled commencement of its real estate project as early as 1995.

“However, a real estate enterprise engaged in the pre-selling of condominium units is concededly a master in projections on commodities and currency movements and business risks. The fluctuating movement of the Philippine peso in the foreign exchange market is an everyday occurrence, and the fluctuations in currency exchange rates happen everyday, thus, not an instance of caso fortuito.”

In addition, the tribunal chided the companies for raising the Asian financial crisis as an issue considering that, in August 2007, Fil-Estate Properties used that argument (and lost) in another case involving a different condominium property under the same factual situation.

Reimbursement

After brushing aside the “fortuitous event” argument, the justices said that as a result of the companies’ violation of their contractual obligations, the Ronquillos have the right to rescind the contract and get a refund of payments they’ve made, plus interest and damages.

This right is provided for in Sec. 23 of Presidential Decree 957 (The Subdivision and Condominium Buyers Protective Decree) which states that, if the owner or developer fails to develop the subdivision or condominium project according to the approved plans and within the time limit for complying with them, the “buyer may, at his option, be reimbursed the total amount paid including amortization interests but excluding delinquency interests, with interest thereon at the legal rate.”

With these findings, the tribunal ordered the companies to refund the Ronquillos the amortization they have made, plus 6 percent interest computed from the date they demanded a refund of their payments.

Considering that they were forced to litigate for 14 years and, in the process, incurred expenses due to the unjustified acts of the companies, the earlier award of attorney’s fees was affirmed.

As a final rebuke to the companies, moral damages were likewise adjudged against them because they “… acted in bad faith when they breached their contract, when they failed to address respondents” [referring to the Ronquillos] grievances and they adamantly refused to refund respondents’ payment.”

This ruling should serve as guidance for people who have been victimized by unscrupulous real estate developers. You can demand a refund of your amortization, plus damages, if the developer fails to live up to your agreement.

And if you decide to take that action, file it with the HLURB, not with the regular courts. You could lose on a technicality in your choice of venue for relief.

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