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CEBU WINLAND DEVELOPMENT CORPORATION v. ONG SIAO HUA

FACTS:

The petitioner, Cebu Winland Development Corporation, is the owner and developer of a condominium project called the Cebu Winland Tower Condominium located in Cebu City. The respondent, Ong Siao Hua, bought two condominium units and four parking slots from the petitioner. The parties did not execute any written document for the transaction.

After the purchase price was fully paid, the respondent requested for the condominium certificates of title but discovered that the actual area of the units was smaller than what was indicated in the price list. The respondent demanded a refund for the excess payments, but the petitioner refused.

As a result, the respondent filed a Complaint with the Housing and Land Use Regulatory Board (HLURB) in Cebu City, seeking the refund of the excess payments. The HLURB Arbiter dismissed the complaint, finding no misrepresentation by the petitioner and ruling that the respondent's action had already prescribed.

The respondent appealed to the Board of Commissioners of the HLURB, which ordered an ocular inspection of the units. The inspection revealed discrepancies in the measurements of the units. The Board affirmed the Arbiter's ruling on prescription but found that there was a mistake regarding the object of the sale, warranting rescission of the contract.

The case involves a dispute between the petitioner and respondent regarding a contract of sale over certain real properties. The Housing and Land Use Regulatory Board (HLURB) initially ruled in favor of the respondent, directing the petitioner to refund a specified amount and ordering the turnover of certain properties. However, the petitioner appealed to the Office of the President, arguing that the respondent's action had already prescribed. The Office of the President modified the HLURB's decision, stating that the respondent's action had indeed prescribed. The respondent filed a motion for reconsideration, which was denied. Subsequently, the respondent filed a petition for review with the Court of Appeals, which ruled in favor of the respondent, stating that his action had not prescribed. The petitioner then filed a motion for reconsideration, which was denied. The petitioner brings the case to the Supreme Court, raising various grounds for review. The main issue before the Supreme Court is whether the respondent's action has already prescribed, as prescribed by Articles 1539, 1542, and 1543 of the Civil Code. The petitioner argues that since possession of the properties was delivered on October 10, 1996, the respondent's action filed on August 7, 1998 has already prescribed. The respondent, on the other hand, argues that his action has not prescribed.

ISSUES:

  1. Whether the action to recover possession of the subject properties prescribed

  2. When does the prescriptive period for the action to recover possession begin to run?

  3. Whether there was delivery of the subject properties in this case.

  4. Whether the sale of the subject properties is one made with a statement of its area or at the rate of a certain price for a unit of measure and not for a lump sum.

  5. Whether Article 1542 or Article 1539 is the applicable law in determining the relief to be granted to the respondent.

  6. Whether the action filed by the respondent has already prescribed.

  7. Whether the relief of rescission under Articles 1330 and 1331 of the Civil Code is warranted in the present case.

RULING:

  1. The action to recover possession has not prescribed.

  2. The prescriptive period for the action to recover possession begins to run from the delivery of the subject properties. Delivery, in the context of the Law on Sales, refers to the concurrent transfer of possession and ownership. Mere transfer of possession is not considered delivery if ownership is still retained by the vendor until full payment.

  3. The transfer of possession of the subject properties cannot be considered as "delivery" within the purview of Article 1543 of the Civil Code since what was transferred was possession only and not ownership. Therefore, the action filed by the respondent has not prescribed.

  4. The sale of the subject properties is one made at the rate of a certain price for a unit of measure and not for a lump sum. Hence, Article 1539 and not Article 1542 is the applicable law.

  5. The Court held that Article 1539 is the applicable law in this case, and not Article 1542. Therefore, the respondent is entitled to a proportional reduction of the price or the rescission of the contract, and he chose the former remedy.

  6. The Court ruled that the action filed by the respondent has not yet prescribed, and reinstated the decision of the Board.

  7. The Court found that Articles 1330 and 1331 of the Civil Code, which provide for rescission based on mistake, are inapplicable in the present case. The mistake must refer to the substance of the thing or conditions which have principally moved the parties to enter into the contract. In this case, the error in size was not considered significant enough by the respondent to vitiate the contract. Thus, the Court held that the Board's decision to grant rescission based on Articles 1330 and 1331 was erroneous.

PRINCIPLES:

  • Ownership does not pass by mere stipulation, but only by delivery.

  • Delivery under any of the forms provided by the Civil Code signifies that the transmission of ownership from vendor to vendee has taken place.

  • The execution of a public instrument is equivalent to delivery, but the presumption of delivery can be rebutted by clear and convincing evidence.

  • Delivery in the Law on Sales refers to the concurrent transfer of possession and ownership.

  • Mere transfer of possession is not considered delivery if ownership is still retained by the vendor until full payment.

  • A mere transfer of possession without the transfer of ownership does not constitute delivery under Article 1543 of the Civil Code.

  • Article 1539 governs a sale of immovable by the unit, while Article 1542 governs a sale of immovable for a lump sum.

  • In a sale of immovable by the unit, the statement of area is not conclusive and the price may be reduced or increased depending on the area actually delivered.

  • In a sale of immovable for a lump sum, there shall be no increase or decrease of the price although there be a greater or lesser area than that stated in the contract, provided that the discrepancy is not substantial.

  • In a contract of sale of land in a mass, the specific boundaries stated in the contract control over any statement with respect to the area contained within its boundaries.

  • The choice of remedy in cases of sale with an error in size is governed by Article 1539, which provides for a proportional reduction of the price or the rescission of the contract.

  • The prescription of actions for relief in cases of sale with an error in size is determined by the applicable laws and rules.

  • Rescission of a contract based on mistake requires that the mistake must refer to the substance of the thing or conditions which have principally moved the parties to enter into the contract. The error in size must be material enough to vitiate the consent of the parties.