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THIRD DIVISION

November 29, 2017

G.R. No. 205838

JOSEPH HARRY WALTER POOLE-BLUNDEN, Petitioner

vs.
UNION BANK OF THE PHILIPPINES, Respondent

DECISION

LEONEN, J.:

Banks are required to observe a high degree of diligence in their affairs. This
encompasses their dealings concerning properties offered as security for loans. A bank
that wrongly advertises the area of a property acquired through foreclosure because it
failed to dutifully ascertain the property's specifications is grossly negligent as to
practically be in bad faith in offering that property to prospective buyers. Any sale made
on this account is voidable for causal fraud. In actions to void such sales, banks cannot
hide under the defense that a sale was made on an as-is-where-is basis. As-is-where-is
stipulations can only encompass physical features that are readily perceptible by an
ordinary person possessing no specialized skills.

This resolves a Petition for Review on Certiorari  under Rule 45 of the 1997 Rules of Civil
1

Procedure praying that the assailed November 15, 2012 Decision  and February 12, 2013
2

Resolution  of the Court of Appeals in CA-G.R. CV No. 95369 be reversed and set aside
3

and that judgment be rendered annulling or rescinding the Contract to Sell between
petitioner Joseph Harry Walter Poole-Blunden (Poole-Blunden) and respondent Union
Bank of the Philippines (UnionBank).

The assailed Court of Appeals Decision affirmed the April 20, 2010 Decision of the
Regional Trial Court, Branch 65, Makati City which dismissed the Complaint for
Rescission of Contract and Damages filed by Poole-Blunden against respondent
UnionBank.  The assailed Court of Appeals Resolution denied Poole-Blunden's Motion
4

for Reconsideration.5

Sometime in March 2001, Poole-Blunden came across an advertisement placed by

Union Bank in the Manila Bulletin. The ad was for the public auction of certain properties.
One of these properties was a condominium unit, identified as Unit 2-C of T-Tower
Condominium (the "Unit"), located at 5040 P. Burgos corner Calderon Streets, Makati
City.  UnionBank had acquired the property through foreclosure proceedings "after the
6

developer defaulted in the payment of its loan from [UnionBank]." 7

The Unit was advertised to have an area of 95 square meters. Thinking that it was
sufficient and spacious enough for his residential needs, Poole-Blunden decided to
register for the sale and bid on the unit. 8

About a week prior to the auction, Poole-Blunden visited the unit for inspection. He was
accompanied by a representative of UnionBank. The unit had an irregular shape; it was
neither a square nor a rectangle and included a circular terrace. Poole-Blunden did not
doubt the unit's area as advertised. However, he found that the ceiling was in bad
condition, that the parquet floor was damaged, and that the unit was in need of other
substantial repairs to be habitable.
9

On the day of the auction, Poole-Blunden inspected the Master Title of the project owner
to the condominium in the name of Integrated Network (TCT No. 171433) and the
Condominium Certificate of Title of UnionBank (CCT No. 36151) to verify once again the
details as advertised and the ownership of the unit. Both documents were on display at
the auction venue. 10

Poole-Blunden placed his bid and won the unit for ₱2,650,000.00.  On May 7, 2001,
11

Poole-Blunden entered into a Contract to Sell with UnionBank. This Contract stipulated
that Poole-Blunden would pay 10% of the purchase price as down payment  and that the
12

balance shall be paid over a period of 15 years in equal monthly instalments, with interest
of 15% per annum starting July 7, 2001. 13

Poole-Blunden started occupying the unit in June 2001. By July 20, 2003, he was able to
fully pay for the Unit, paying a total amount of ₱3,257,142.49. 14

In late 2003, Poole-Blunden decided to construct two (2) additional bedrooms in the Unit.
Upon examining it, he noticed apparent problems in its dimensions. He took rough
measurements of the Unit, which indicated that its floor area was just about 70 square
meters, not 95 square meters, as advertised by UnionBank. 15

Poole-Blunden got in touch with an officer of UnionBank to raise the matter, but no action
was taken.  On July 12, 2004, Poole-Blunden wrote to UnionBank, informing it of the
16

discrepancy. He asked for a rescission of the Contract to Sell, along with a refund of the
amounts he had paid, in the event that it was conclusively established that the area of the
unit was less than 95 square meters. 17

In a letter dated December 6, 2004,  UnionBank informed Poole-Blunden that after

18

inquiring with the Housing and Land Use Regulatory Board (HLURB), the Homeowners'
Association of T-Tower Condominium, and its appraisers, the Unit was confirmed to be
95 square meters, inclusive of the terrace and the common areas surrounding it. 19

Poole-Blunden was not satisfied with UnionBank's response as the condominium's

Master Title expressly stated that the "boundary of each unit are the interior surfaces of
the perimeter walls, floors, ceilings, windows and doors thereof."  Thus, he hired an
20

independent geodetic engineer, Engr. Gayril P. Tagal (Engr. Tagal) of the Filipinas Dravo
Corporation, to survey the Unit and measure its actual floor area. Engr. Tagal issued a
certification stating that the total floor area of the Unit was only 74.4 square
meters.  Poole-Blunden gave UnionBank a copy of Engr. Tagal's certification on July 12,
21

2005.22

In a letter dated February 1, 2006, UnionBank explained:

[T]he total area of the subject unit based on the ratio allocation maintenance cost
submitted by the developer to HLURB is 98 square meters (60 square meters as unit
area and 38 square meters as share on open space). On the other hand, the actual area
thereof based on the measurements made by its surveyor is 74.18 square meters which
was much higher than the unit area of 60 square meters that was approved by HLURB. 23

Poole-Blunden's dissatisfaction with UnionBank's answer prompted him to file his

Complaint for Rescission of Contract and Damages with the Regional Trial Court, Makati
City.
24

On April 20, 2010, the Regional Trial Court dismissed Poole-Blunden's complaint for lack
of merit. The dispositive portion of its Decision read:

WHEREFORE, premises considered, the instant complaint for rescission of contract and
damages is hereby DISMISSED for lack of merit. The counterclaim is likewise DENIED.

SO ORDERED. 25

On appeal, the Court of Appeals affirmed the ruling of the Regional Trial Court.  It noted
26

that the sale was made on an "as-is-where-is" basis as indicated in Section 12 of the
Contract to Sell.  Thus, Poole-Blunden supposedly waived any errors in the bounds or
27

description of the unit.  The Court of Appeals added that Poole-Blunden failed to show,
28

by clear and convincing evidence that causal fraud can be attributed to UnionBank.  It 29

added that the sale was made for a lump-sum amount and that, in accordance with
Article 1542, paragraph 1 of the Civil Code,  Poole-Blunden could not demand a
30

reduction in the purchase price. 31

Following the denial of his Motion for Reconsideration, Poole-Blunden filed the present
Petition before this Court.32

Poole-Blunden charges UnionBank with fraud in failing to disclose to him that the
advertised 95 square meters was inclusive of common areas.  With the vitiation of his
33

consent as to the object of the sale, he asserts that the Contract to Sell may be voided.
He insists that UnionBank is liable for breach of warranty despite the "as-is-where-is"
clause in the Contract to Sell.  Finally, he assails the Court of Appeals' application of
34

Article 1542 of the Civil Code. 35

For resolution is the sole issue of whether or not respondent Union Bank of the
Philippines committed such a degree of fraud as would entitle petitioner Joseph Harry
Walter Poole-Blunden to the voiding of the Contract to Sell the condominium unit
identified as Unit 2C, T-Tower Condominium, 5040 P. Burgos corner Calderon Streets,
Makati City.

No longer in dispute at this juncture is how the Unit's interior area is only 74.4 square
meters. While respondent has maintained that the Unit's total area is in keeping with the
advertised 95 square meters, it has conceded that these 95 square meters is inclusive of
outside spaces and common areas.

Even before litigation commenced, in a December 6, 2004 letter,  respondent informed

36

petitioner that, following inquiries with the HLURB, the Homeowners' Association of T-
Tower Condominium, and its appraisers, it had confirmed that the Unit's 95 square
meters was inclusive of "the terrace and the common areas surrounding it." 37

During trial, respondent's former Assistant Vice President of the Asset and Recovery
Group, Atty. Elna N. Cruz (Atty. Cruz), testified on how there would have been
documents (such as an appraisal report) relating to inspections made by respondent's
personnel at the time the unit was being offered as a collateral to a loan. These would
have concerned the unit's area.  She affirmed respondent's statements in its December
38

6, 2004 letter and indicated that, based on an appraisal report, the declared 95 square
meters was not exclusive to the Unit's interiors but included common areas:

Q: So my impression, Madam Witness, is that before you accepted the

property as a collateral, Union Bank already knew what was the actual
area of the unit?

A: Yes, sir.

Q: But you do not know what was the actual area as found by your
inspector?

A: It would be 95 square meters as per the record, sir.

Q: That was the actual findings of your inspector, Madam Witness?

A: Yes, sir.

Q: What's your basis for saying that?

A: The appraisal report, sir.

Q: Do you have now with you that appraisal report showing that the actual
area of the unit is indeed 95 square meters?

A: We gathered the appraisal report and in the December 06, 2004 letter
that we gave Mr. Blunden, we consulted the appraiser of the Bank and
we were informed that the area was indeed 95 square meters. But that
area was brought about by measuring not just the inside of the unit, sir,
but including also the terrace, and the common area.  (Emphasis 39

supplied)

Respondent has not disavowed Atty. Cruz's testimony. In its Comment, it merely
asserted that the "[e]xtensive reference to the [transcript of stenographic notes] is
unmistakable proof that the litigated issue is one of fact, not of law" and insisted that this
Court should not take cognizance of the present Petition. 40

Respondent's insistence on how common spaces should be included in reckoning the

Unit's total area runs afoul of how Republic Act No. 4726, otherwise known as the
Condominium Act, reckons what forms part of a condominium unit.

Section 3(b) of the Condominium Act defines a condominium unit, as follows:

Section 3. As used in this Act, unless the context otherwise requires:

....

(b) "Unit" means a part of the condominium project

intended for any type of independent use or ownership,
including one or more rooms or spaces located .in one or
more floors (or part or parts of floors) in a building or
buildings and such accessories as may be appended
thereto.
Section 6(a) of the Condominium Act specifies the reckoning of a condominium unit's
bounds. It also specifies that areas of common use "are not part of the unit":

Section 6. Unless otherwise expressly provided in the enabling or master

deed or the declaration of restrictions, the incidents of a condominium
grant are as follows:

(a) The boundary of the unit granted are the interior

surfaces of the perimeter walls, floors, ceilings, windows
and doors thereof. The following are not part of the
unit bearing walls, columns, floors, roofs, foundations and
other common structural elements of the building; lobbies,
stairways, hallways, and other areas of common
use, elevator equipment and shafts, central heating,
central refrigeration and central air-conditioning
equipment, reservoirs, tanks, pumps and other central
services and facilities, pipes, ducts, flues, chutes,
conduits, wires and other utility installations, wherever
located, except the outlets thereof when located within the
unit. (Emphasis supplied.)

Thus, the unit sold to petitioner was deficient in relation to its advertised area. This
advertisement having been made by respondent, it is equally settled there was a falsity in
the declarations made by respondent prior to, and with the intention of enticing buyers to
the sale. What remains in issue is whether or not this falsity amounts to fraud warranting
the voiding of the Contract to Sell.

II

For there to be a valid contract, all the three (3) elements of consent, subject matter, and
price must be present.  Consent wrongfully obtained is defective. The party to a contract
41

whose consent was vitiated is entitled to have the contract rescinded. Accordingly, Article
1390 of the Civil Code  stipulates that a contract is voidable or annullable even if there is
42

no damage to the contracting parties where "consent is vitiated by mistake, violence,

intimidation, undue influence or fraud."

Under Article 1338 of the Civil Code "[t]here is fraud when, through insidious words or
machinations of one of the contracting parties, the other is induced to enter into a
contract which, without them, he would not have agreed to." However, not all instances of
fraud enable the voiding of contracts. Article 1344 clarifies that in order to make a
contract voidable, the fraud "should be serious and should not have been employed by
both contracting parties." 43

Thus, Tankeh v. Development Bank of the Philippines  explained, "There are two types
44

of fraud contemplated in the performance of contracts: dolo incidente or incidental fraud

and dolo causante or fraud serious enough to render a contract voidable."  The fraud
45

required to annul or avoid a contract "must be so material that had it not been present,
the defrauded party would not have entered into the contract."  The fraud must be "the
46

determining cause of the contract, or must have caused the consent to be given." 47

Petitioner's contention on how crucial the dimensions and area of the Unit are to his
decision to proceed with the purchase is well-taken. The significance of space and
dimensions to any buyer of real property is plain to see. This is particularly significant to
buyers of condominium units in urban areas, and even more so in central business
districts, where the scarcity of space drives vertical construction and propels property
values. It would be immensely guileless of this Court to fail to appreciate how the
advertised area of the Unit was material or even indispensable to petitioner's consent. As
petitioner emphasized, he opted to register for and participate in the auction for the Unit
only after determining that its advertised area was spacious enough for his residential
needs. 48

III

The significance of the Unit's area as a determining cause of the Contract to Sell is
readily discernible. Falsity on its area is attributable to none but to respondent, which,
however, pleads that it should not be considered as having acted fraudulently given that
petitioner conceded to a sale on an as-is-where-is basis, thereby waiving "warranties
regarding possible errors in boundaries or description of property." 49

Section 12 of the Contract to Sell spells out the "as-is-where-is" terms of the purchase:

Section 12. The BUYER recognizes that he is buying the property on an

"as-is-where-is" basis including errors in boundaries or description of
property, if any etc. and among others, he shall be responsible for the
eviction of the occupants on the property, if any, or for the repair of the
property, if needed. It shall be understood that the SELLER makes no
warranty whatsoever on the authenticity, accuracy, or title over
property.  (Emphasis supplied.)
50

Reliance on Section 12's as-is-where-is stipulation is misplaced for two (2) reasons. First,
a stipulation absolving a seller of liability for hidden defects can only be invoked by a
seller who has no knowledge of hidden defects. Respondent here knew that the Unit's
area, as reckoned in accordance with the Condominium Act, was not 95 square meters.
Second, an as-is-where-is stipulation can only pertain to the readily perceptible physical
state of the object of a sale. It cannot encompass matters that require specialized
scrutiny, as well as features and traits that are immediately appreciable only by someone
with technical competence.

A seller is generally responsible for warranty against hidden defects of the thing sold. As
stated in Article 1561 of the New Civil Code:

Article 1561. The vendor shall be responsible for warranty against the
hidden defects which the thing sold may have, should they render it unfit
for the use for which it is intended, or should they diminish its fitness for
such use to such an extent that, had the vendee been aware thereof, he
would not have acquired it or would have given a lower price for it; but
said vendor shall not be answerable for patent defects or those which
may be visible, or for those which are not visible if the vendee is an expert
who, by reason of his trade or profession, should have known.

Article 1566, paragraph 2 states the seller's liability for hidden defects shall be
inapplicable if there is a stipulation made to the contrary. However, a mere stipulation
does not suffice. To be fully absolved of liability, Article 1566, paragraph 2 also requires a
seller to be unaware of the hidden defects in the thing sold.

Article 1566. The vendor is responsible to the vendee for any hidden
faults or defects in the thing sold, even though he was not aware thereof.

This provision shall not apply if the contrary has been stipulated, and the
vendor was not aware of the hidden faults or defects in the thing
sold. (Emphasis supplied.)
It is clear from the records that respondent fully knew that the Unit's area, reckoned
strictly in accordance with the Condominium Act, did not total 95 square meters.
Respondent admits that the only way the Unit's area could have amounted to 95 square
meters was if some areas for common use were added to its interior space. It
acknowledged knowing this fact through the efforts of its appraisers and even conceded
that their findings were documented in their reports.

In Hian v. Court of Tax Appeals,  this Court construed an as-is-where-is stipulation as

51

pertaining to the "physical condition" of the thing sold and "not to [its] legal situation."  As
52

further explained in National Development Company v. Madrigal Wan Hai Lines

Corporation: 53

In Hian vs. Court of Tax Appeals, we had the occasion to construe the
phrase "as is, where is" basis, thus:

"We cannot accept the contention in the Government's

Memorandum of March 31, 1976 that Condition No. 5 in
the Notice of Sale to the effect that 'The above-mentioned
articles (the tobacco) are offered for sale 'AS IS' and the
Bureau of Customs gives no warranty as to their condition'
relieves the Bureau of Customs of liability for the storage
fees in dispute. As we understand said Condition No. 5, it
refers to the physical condition of the tobacco and not to
the legal situation in which it was at the time of the sale,
as could be implied from the right of inspection to
prospective bidders under Condition No. 1 [.]" (Emphasis
ours)

The phrase "as is, where is" basis pertains solely to the physical condition
of the thing sold, not to its legal situation. In the case at bar, the US tax
liabilities constitute a potential lien which applies to NSCP's legal
situation, not to its physical aspect. Thus, respondent as a buyer, has no
obligation to shoulder the same. 54

A condominium unit's area is a physical attribute. In Hian's contemplation, it appeared

that the total area of a condominium unit is a valid object of an as-is-where-is clause.
However, while as-is-where-is clauses exclusively apply to the physical attributes of a
thing sold, they apply only to physical features that are readily observable. The
significance of this Court's pronouncements in Hian and National Development
Company are in clarifying that legal status, which is a technical matter perceptible only by
lawyers and regulators, cannot be encompassed by an as-is-where-is
stipulation. Hian and National Development Company are not a sweeping approbation of
such stipulations' coverage of every corporeal attribute or tangible trait of objects being
sold. Thus, in Asset Privatization v. T.J. Enterprises,  the as-is-where-is stipulation was
55

understood as one which "merely describes the actual state and location of the
machinery and equipment sold,"  and nothing else. Features that may be physical but
56

which can only be revealed after examination by persons with technical competence
cannot be covered by as-is-where-is stipulations. A buyer cannot be considered to have
agreed "to take possession of the things sold 'in the condition where they are found and
from the place where they are located'"  if the critical defect is one which he or she
57

cannot even readily sense.

In inspecting the Unit prior to the auction sale, petitioner took note of its actual state: "he
noticed that the ceilings were down, [that] there was water damage from the leaks
coming from the unit above, and [that] the parquet floor was damaged."  He also took
58

note of its irregular shape and the circular terrace outside it. These observations
represent the full extent of what was readily perceptible to petitioner. The precise
measurement of the Unit's area, in contrast, could only be determined by someone with
specialized or technical capabilities. While ordinary persons, such as petitioner, may hold
such opinions that the Unit looks small, their perception could not be ascertained until
after an examination by someone equipped with peculiar skills and training to measure
real property. Indeed, petitioner's suspicions were not roused until years after he had
occupied the Unit and confirmed until after a certification was issued by a surveyor.

Any waiver of warranties under Section 12 of the Contract to Sell could have only been
concerned with the readily apparent subpar condition of the Unit. A person not equipped
with technical knowledge and expertise to survey real property could not reasonably be
expected to recognize deficiencies in measurement at the first instance especially if that
property was of "irregular shape," "neither square nor rectangle," and having a "circular
terrace."59

IV

Contrary to the Court of Appeals' assertion, Article 1542 of the Civil Code does not bar
the voiding of the Contract to Sell.

Article 1542 of the Civil Code states:

Article 1542. In the sale of real estate, made for a lump sum and not at
the rate of a certain sum for a unit of measure or number, there shall be
no increase or decrease of the price, although there be a greater or less
area or number than that stated in the contract.

The same rule shall be applied when two or more immovables are sold
for a single price; but if, besides mentioning the boundaries, which is
indispensable in every conveyance of real estate, its area or number
should be designated in the contract, the vendor shall be bound to deliver
all that is included within said boundaries, even when it exceeds the area
or number specified in the contract; and, should he not be able to do so,
he shall suffer a reduction in the price, in proportion to what is lacking in
the area or number, unless the contract is rescinded because the vendee
does not accede to the failure to deliver what has been stipulated.
(Emphasis supplied.)

Article 1542 has nothing to do with annulling fraudulently made sales. What it is
concerned with is the proportionate reduction of the purchase price in relation to the
measurable units of the thing sold. Petitioner does not seek a reduction of the purchase
price. He seeks judicial relief to have the entirety of his purchase annulled, his consent
having been fraudulently obtained. By filing an action under Article 1390 of the Civil
Code, petitioner declared that his consent to the entire subject matter of the contract was
vitiated. What suffices as relief is the complete annulment of the sale, not the partial
reimbursement upon which Article 1542 is premised.

Likewise, Article 1542 does not contemplate the seller's delivery to the buyer of things
other than the agreed object of the sale. While it is true that petitioner did not buy the unit
on a per-square-meter basis, it remains that what he bought was a condominium unit. A
condominium unit's bounds are reckoned by "the interior surfaces of [its] perimeter walls,
floors, ceilings, windows and doors."  It excludes common areas. Thus, when petitioner
60

agreed to purchase the Unit at a lump-sum price, he never consented to including

common areas as part of his purchase. Article 1542's concern with a ratable reduction of
the price delivered by the buyer assumes that the seller correctly delivered, albeit
deficiently, the object of the sale.
In any case, for Article 1542 to operate, "the discrepancy must not be
substantial."  Article 1542 remains anchored on a sense of what is reasonable. An
61

estimate given as a premise for a sale should be "more or less" the actual area of the
thing sold.  Here, the area advertised and stipulated in the Contract to Sell was 95
62

square meters but the actual area of the unit was only 74.4 square meters.  By no stretch
63

of the imagination can a 21.68% deficiency be discounted as a mere minor discrepancy.

By definition, fraud presupposes bad faith or malicious intent. It transpires when insidious
words or machinations are deliberately employed to induce agreement to a contract.
Thus, one could conceivably claim that respondent could not be guilty of fraud as it does
not appear to have crafted a deceptive strategy directed specifically at petitioner.
However, while petitioner was not a specific target, respondent was so callously remiss
of its duties as a bank. It was so grossly negligent that its recklessness amounts to a
wrongful willingness to engender a situation where any buyer in petitioner's shoes would
have been insidiously induced into buying a unit with an actual area so grossly short of its
advertised space.

In Spouses Carbonell v. Metropolitan Bank and Trust Company,  this Court considered
64

gross negligence, in relation to the fiduciary nature of banks:

Gross negligence connotes want of care in the performance of one's

duties; it is a negligence characterized by the want of even slight
care, acting or omitting to act in a situation where there is duty to act, not
inadvertently but wilfully and intentionally, with a conscious indifference to
consequences insofar as other persons may be affected. It evinces a
thoughtless disregard of consequences without exerting any effort to
avoid them.

In order for gross negligence to exist as to warrant holding the respondent

liable therefor, the petitioners must establish that the latter did not exert
any effort at all to avoid unpleasant consequences, or that it wilfully and
intentionally disregarded the proper protocols or procedure . . . and in
selecting and supervising its employees.  (Emphasis supplied)
65

Banks assume a degree of prudence and diligence higher than that of a good father of a
family, because their business is imbued with public interest  and is inherently
66

fiduciary.  Thus, banks have the obligation to treat the accounts of its clients
67

"meticulously and with the highest degree of care."  With respect to its fiduciary duties,
68

this Court explained:

The law imposes on banks high standards in view of the fiduciary nature
of banking. Section 2 of Republic Act No. 8791 ("RA 8791"), which took
effect on 13 June 2000, declares that the State recognizes the "fiduciary
nature of banking that requires high standards of integrity and
performance." This new provision in the general banking law, introduced
in 2000, is a statutory affirmation of Supreme Court decisions, starting
with the 1990 case of Simex International v. Court of Appeals, holding
that "the bank is under obligation to treat the accounts of its depositors
with meticulous care, always having in mind the fiduciary nature of their
relationship.

This fiduciary relationship means that the bank's obligation to observe

"high standards of integrity and performance" is deemed written into
every deposit agreement between a bank and its depositor. The fiduciary
 nature of banking requires banks to assume a degree of diligence higher
than that of a good father of a family. Article 1172 of the Civil Code states
that the degree of diligence required of an obligor is that prescribed by
law or contract, and absent such stipulation then the diligence of a good
father of a family. Section 2 of RA 8791 prescribes the statutory diligence
required from banks — that banks must observe "high standards of
integrity and performance" in servicing their depositors.  (Citations 69

omitted)

The high degree of diligence required of banks equally holds true in their dealing with
mortgaged real properties, and subsequently acquired through foreclosure, such as the
Unit purchased by petitioner. In the same way that banks are "presumed to be familiar
with the rules on land registration," given that they are in the business of extending loans
secured by real estate mortgage,  banks are also expected to exercise the highest
70

degree of diligence. This is especially true when investigating real properties offered as
security, since they are aware that such property may be passed on to an innocent
purchaser in the event of foreclosure. Indeed, "the ascertainment of the status or
condition of a property offered to it as security for a loan must be a standard and
indispensable part of a bank's operations": 71

When the purchaser or the mortgagee is a bank, the rule on innocent

purchasers or mortgagees for value is applied more strictly.  Being in the
1âwphi1

business of extending loans secured by real estate mortgage, banks are

presumed to be familiar with the rules on land registration. Since the
banking business is impressed with public interest, they are expected to
be more cautious, to exercise a higher degree of diligence, care and
prudence, than private individuals in their dealings, even those involving
registered lands. Banks may not simply rely on the face of the certificate
of title. Hence, they cannot assume that, simply because the title offered
as security is on its face free of any encumbrances or lien, they are
relieved of the responsibility of taking further steps to verify the title and
inspect the properties to be mortgaged. As expected, the ascertainment
of the status or condition of a property offered to it as security for a loan
must be a standard and indispensable part of a bank's operations. It is of
judicial notice that the standard practice for banks before approving a
loan is to send its representatives to the property offered as collateral to
assess its actual condition, verify the genuineness of the title, and
investigate who is/are its real owner/s and actual possessors.  (Citations72

omitted)

Credit investigations are standard practice for banks before approving loans and
admitting properties offered as security. It entails the assessment of such properties: an
appraisal of their value, an examination of their condition, a verification of the authenticity
of their title, and an investigation into their real owners and actual possessors.  Whether
73

it was unaware of the unit's actual interior area; or, knew of it, but wrongly thought that its
area should include common spaces, respondent's predicament demonstrates how it
failed to exercise utmost diligence in investigating the Unit offered as security before
accepting it. This negligence is so inexcusable; it is tantamount to bad faith.

Even the least effort on respondent's part could have very easily confirmed the Unit's true
area. Similarly, the most cursory review of the Condominium Act would have revealed the
proper reckoning of a condominium unit's area. Respondent could have exerted these
most elementary efforts to protect not only clients and innocent purchasers but, most
basically, itself. Respondent's failure to do so indicates how it created a situation that
could have led to no other outcome than petitioner being defrauded.
 VI

The Regional Trial Court and the Court of Appeals gravely erred in finding that causal
fraud is not attendant in this case. Quite the contrary, it is evident that respondent
orchestrated a situation rife for defrauding buyers of the advertised unit. Therefore, the
assailed Decision and Resolution must be reversed, the Contract to Sell between
petitioner and respondent be annulled, and petitioner be refunded all the amounts he
paid to respondent in respect of the purchase of the Unit.

Under Article 2232, in relation to Article 2229 of the Civil Code, "[i]n contracts and quasi-
contracts, the court may award exemplary damages if the defendant acted in a wanton,
fraudulent, reckless, oppressive, or malevolent manner," "by way of example or
correction for the public good." By awarding exemplary damages to petitioner, this case
shall serve as an example and warning to banks to observe the requisite care and
diligence in all of their affairs.

Consistent with Article 2208 of the Civil Code,  respondent is equally liable to petitioner
74

for attorney's fees and the costs of litigation.

WHEREFORE, the Petition is GRANTED. The assailed November 15, 2012 Decision
and February 12, 2013 Resolution of the Court of Appeals in CA-G.R. CV No. 95369
are REVERSEDand SET ASIDE.

The Contract to Sell entered into by petitioner Joseph Harry Walter Poole-Blunden and
respondent Union Bank of the Philippines is declared null and void. Respondent is
ordered to pay petitioner the amount of ₱3,257,142.49 to refund the amounts petitioner
has paid to purchase Unit 2C of T-Tower Condominium located at 5040 P. Burgos corner
Calderon Streets, Makati City. This refund shall earn legal interest at twelve percent
(12%) per annum from the date of the filing of petitioner's Complaint for Rescission of
Contract and Damages up to June 30, 2013; and six percent (6%) per annum, reckoned
from July 1, 2013 until fully paid.

Respondent is ordered to pay petitioner ₱100,000.00 as exemplary damages,

₱100,000.00 as attorney's fees, and the costs of litigation.

SO ORDERED.
 SECOND DIVISION

[G.R. NO. 122463 December 19, 2005]

RUDOLF LIETZ, INC., Petitioner, v. THE COURT OF APPEALS, AGAPITO

BURIOL, TIZIANA TURATELLO & PAOLA SANI, Respondents.

DECISION

TINGA, J.:

This is a Petition for Review on Certiorari under Rule 45 of the Revised Rules

of Court, praying for the annulment of the Decision1 dated April 17, 1995 and
the Resolution2 dated October 25, 1995 of the Court of Appeals in CA-G.R. CV
No. 38854. The Court of Appeals affirmed the Decision3 in Civil Case No. 2164
of the Regional Trial Court (RTC), Branch 48, of Palawan and Puerto Princesa
City with the modification that herein respondents Tiziana Turatello and Paola
Sani are entitled to damages, attorney's fees, and litigation expenses.

The dispositive portion of the RTC Decision reads:

WHEREFORE, in view of the foregoing and as prayed for by the defendants,

the instant complaint is hereby DISMISSED. Defendant's counterclaim is
likewise DISMISSED. Plaintiff, however, is ordered to pay defendant Turatello
and Sani's counsel the sum of P3,010.38 from August 9, 1990 until fully paid
representing the expenses incurred by said counsel when the trial was
cancelled due to the non-appearance of plaintiff's witnesses. With costs
against the plaintiff.

SO ORDERED.4

As culled from the records, the following antecedents appear:

Respondent Agapito Buriol previously owned a parcel of unregistered land

situated at Capsalay Island, Port Barton, San Vicente, Palawan. On August
15, 1986, respondent Buriol entered into a lease agreement with Flavia
Turatello and respondents Turatello and Sani, all Italian citizens, involving
one (1) hectare of respondent Buriol's property. The lease agreement was for
a period of 25 years, renewable for another 25 years. The lessees took
possession of the land after paying respondent Buriol a down payment
of P10,000.00.5 The lease agreement, however, was reduced into writing only
in January 1987.

On November 17, 1986, respondent Buriol sold to petitioner Rudolf Lietz, Inc.
the same parcel of land for the amount of P30,000.00. The Deed of Absolute
Sale embodying the agreement described the land as follows:
A parcel of land, consisting of FIVE (5) hectares, more or less, a portion of
that parcel of land declared in the name of Agapito Buriol, under Tax
Declaration No. 0021, revised in the year 1985, together with all
improvements thereon, situated at the Island of Capsalay, Barangay Port
Barton, municipality of San Vicente, province of Palawan which segregated
from the whole parcel described in said tax declaration, has the following
superficial boundaries: NORTH, Sec. 01-017; and remaining property of the
vendor; EAST, by Seashore; SOUTH, 01-020; and WEST, by 01-018 (now
Elizabeth Lietz).6

Petitioner later discovered that respondent Buriol owned only four (4)
hectares, and with one more hectare covered by lease, only three (3)
hectares were actually delivered to petitioner. Thus, petitioner instituted on
April 3, 1989 a complaint for Annulment of Lease with Recovery of Possession
with Injunction and Damages against respondents and Flavia Turatello before
the RTC. The complaint alleged that with evident bad faith and malice,
respondent Buriol sold to petitioner five (5) hectares of land when respondent
Buriol knew for a fact that he owned only four (4) hectares and managed to
lease one more hectare to Flavia Turatello and respondents Tiziana Turatello
and Paola Sani. The complaint sought the issuance of a restraining order and
a writ of preliminary injunction to prevent Flavia Turatello and respondents
Turatello and Sani from introducing improvements on the property, the
annulment of the lease agreement between respondents, and the restoration
of the amount paid by petitioner in excess of the value of the property sold to
him. Except for Flavia Turatello, respondents filed separate answers raising
similar defenses of lack of cause of action and lack of jurisdiction over the
action for recovery of possession. Respondents Turatello and Sani also prayed
for the award of damages and attorney's fees.7

After trial on the merits, the trial court rendered judgment on May 27, 1992,
dismissing both petitioner's complaint and respondents' counterclaim for
damages. Petitioner and respondents Turatello and Sani separately appealed
the RTC Decision to the Court of Appeals, which affirmed the dismissal of
petitioner's complaint and awarded respondents Turatello and Sani damages
and attorney's fees. The dispositive portion of the Court of
Appeals Decision reads:

WHEREFORE, the decision appealed from is hereby AFFIRMED, with the

following modification:

Plaintiff-appellant Rudolf Lietz, Inc. is hereby (1) ordered to pay defendants-

appellants Turatello and Sani, the sum of P100,000.00 as moral damages;
(2) P100,000.00 as exemplary damages; (3) P135,728.73 as attorney's fees;
and (4) P10,000.00 as litigation expenses.

SO ORDERED.8

Petitioner brought to this Court the instant petition after the denial of its
motion for reconsideration of the Court of Appeal Decision. The instant
petition imputes the following errors to the Court of Appeals.

I. IN DEFENDING AGAPITO BURIOL'S GOOD FAITH AND IN STATING THAT

ASSUMING THAT HE (BURIOL) WAS IN BAD FAITH PETITIONER WAS SOLELY
RESPONSIBLE FOR ITS INEXCUSABLE CREDULOUSNESS.
II. IN ASSERTING THAT ARTICLES 1542 AND 1539 OF THE NEW CIVIL CODE
ARE, RESPECTIVELY, APPLICABLE AND INAPPLICABLE IN THE CASE AT BAR.

III. IN NOT GRANTING PETITIONER'S CLAIM FOR ACTUAL AND EXEMPLARY

DAMAGES.

IV. IN GRANTING RESPONDENTS TIZIANA TURATELLO AND PAOLA SANI

EXHORBITANT [sic] AMOUNTS AS DAMAGES WHICH ARE EVEN BEREFT OF
EVIDENTIARY BASIS.9

Essentially, only two main issues confront this Court, namely: (i) whether or
not petitioner is entitled to the delivery of the entire five hectares or its
equivalent, and (ii) whether or not damages may be awarded to either party.

Petitioner contends that it is entitled to the corresponding reduction of the

purchase price because the agreement was for the sale of five (5) hectares
although respondent Buriol owned only four (4) hectares. As in its appeal to
the Court of Appeals, petitioner anchors its argument on the second
paragraph of Article 1539 of the Civil Code, which provides:

Art. 1539. The obligation to deliver the thing sold includes that of placing in
the control of the vendee all that is mentioned in the contract, in conformity
with the following rules:

If the sale of real estate should be made with a statement of its area, at the
rate of a certain price for a unit of measure or number, the vendor shall be
obliged to deliver to the vendee, if the latter should demand it, all that may
have been stated in the contract; but, should this be not possible, the vendee
may choose between a proportional reduction of the price and the rescission
of the contract, provided that, in the latter case, the lack in the area be not
less than one-tenth of that stated.

....

The Court of Appeals Decision, however, declared as inapplicable the

abovequoted provision and instead ruled that petitioner is no longer entitled
to a reduction in price based on the provisions of Article 1542 of the Civil
Code, which read:

Art. 1542. In the sale of real estate, made for a lump sum and not at the rate
of a certain sum for a unit of measure or number, there shall be no increase
or decrease of the price, although there be a greater or lesser area or number
than that stated in the contract.

The same rule shall be applied when two or more immovables are sold for a
single price; but if, besides mentioning the boundaries, which is indispensable
in every conveyance of real estate, its area or number should be designated
in the contract, the vendor shall be bound to deliver all that is included within
said boundaries, even when it exceeds the area or number specified in the
contract; and, should he not be able to do so, he shall suffer a reduction in
the price, in proportion to what is lacking in the area or number, unless the
contract is rescinded because the vendee does not accede to the failure to
deliver what has been stipulated.
Article 1539 governs a sale of immovable by the unit, that is, at a stated rate
per unit area. In a unit price contract, the statement of area of immovable is
not conclusive and the price may be reduced or increased depending on the
area actually delivered. If the vendor delivers less than the area agreed upon,
the vendee may oblige the vendor to deliver all that may be stated in the
contract or demand for the proportionate reduction of the purchase price if
delivery is not possible. If the vendor delivers more than the area stated in
the contract, the vendee has the option to accept only the amount agreed
upon or to accept the whole area, provided he pays for the additional area at
the contract rate.10

In some instances, a sale of an immovable may be made for a lump sum and
not at a rate per unit. The parties agree on a stated purchase price for an
immovable the area of which may be declared based on an estimate or where
both the area and boundaries are stated.

In the case where the area of the immovable is stated in the contract based
on an estimate, the actual area delivered may not measure up exactly with
the area stated in the contract. According to Article 1542 11 of the Civil Code,
in the sale of real estate, made for a lump sum and not at the rate of a
certain sum for a unit of measure or number, there shall be no increase or
decrease of the price although there be a greater or lesser area or number
than that stated in the contract. However, the discrepancy must not be
substantial. A vendee of land, when sold in gross or with the description
"more or less" with reference to its area, does not thereby ipso facto take all
risk of quantity in the land. The use of "more or less" or similar words in
designating quantity covers only a reasonable excess or deficiency.12

Where both the area and the boundaries of the immovable are declared, the
area covered within the boundaries of the immovable prevails over the stated
area. In cases of conflict between areas and boundaries, it is the latter which
should prevail. What really defines a piece of ground is not the area,
calculated with more or less certainty, mentioned in its description, but the
boundaries therein laid down, as enclosing the land and indicating its limits.
In a contract of sale of land in a mass, it is well established that the specific
boundaries stated in the contract must control over any statement with
respect to the area contained within its boundaries. It is not of vital
consequence that a deed or contract of sale of land should disclose the area
with mathematical accuracy. It is sufficient if its extent is objectively indicated
with sufficient precision to enable one to identify it. An error as to the
superficial area is immaterial.13 Thus, the obligation of the vendor is to deliver
everything within the boundaries, inasmuch as it is the entirety thereof that
distinguishes the determinate object.14

As correctly noted by the trial court and the Court of Appeals, the sale
between petitioner and respondent Buriol involving the latter's property is one
made for a lump sum. The Deed of Absolute Sale shows that the parties
agreed on the purchase price on a predetermined area of five hectares within
the specified boundaries and not based on a particular rate per area. In
accordance with Article 1542, there shall be no reduction in the purchase
price even if the area delivered to petitioner is less than that stated in the
contract. In the instant case, the area within the boundaries as stated in the
contract shall control over the area agreed upon in the contract.
The Court rejects petitioner's contention that the property's boundaries as
stated in the Deed of Absolute Sale are superficial and unintelligible and,
therefore, cannot prevail over the area stated in the contract. First, as
pointed out by the Court of Appeals, at an ocular inspection prior to the
perfection of the contract of sale, respondent Buriol pointed to petitioner the
boundaries of the property. Hence, petitioner gained a fair estimate of the
area of the property sold to him. Second, petitioner cannot now assail the
contents of the Deed of Absolute Sale, particularly the description of the
boundaries of the property, because petitioner's subscription to the Deed of
Absolute Sale indicates his assent to the correct description of the boundaries
of the property.

Petitioner also asserts that respondent Buriol is guilty of misleading petitioner

into believing that the latter was buying five hectares when he knew prior to
the sale that he owned only four hectares. The review of the circumstances of
the alleged misrepresentation is factual and, therefore, beyond the province
of the Court. Besides, this issue had already been raised before and passed
upon by the trial court and the Court of Appeals. The factual finding of the
courts below that no sufficient evidence supports petitioner's allegation of
misrepresentation is binding on the Court.

The Court of Appeals reversed the trial court's dismissal of respondents

Turatello and Sani's counterclaim for moral and exemplary damages,
attorney's fees and litigation expenses. In awarding moral damages in the
amount of P100,000 in favor of Turatello and Sani, the Court of Appeals
justified the award to alleviate the suffering caused by petitioner's unfounded
civil action. The filing alone of a civil action should not be a ground for an
award of moral damages in the same way that a clearly unfounded civil action
is not among the grounds for moral damages.15

Exemplary or corrective damages are imposed, by way of example or

correction for the public good, in addition to the moral, temperate, liquidated
or compensatory damages.16 With the deletion of the award for moral
damages, there is no basis for the award of exemplary damages.

WHEREFORE, the instant Petition for Review on Certiorari is GRANTED in

PART. The Court of Appeals Decision in CA-G.R. CV No. 38854 is AFFIRMED
with the MODIFICATION that the award of moral and exemplary damages is
DELETED.

SO ORDERED.
 EN BANC

G.R. No. L-29449          December 29, 1928

LEODEGARIO AZARRAGA, Plaintiff-Appellee, vs. MARIA

GAY, Defendant-Appellant.

Araneta and Zaragoza for appellant.

Azarraga and Panis for appellee.

VILLAMOR, J.:

By a public document Exhibit A, dated January 17, 1921, the

plaintiff sold two parcels of lands to the defendant for the
lump sum of P47,000, payable in installments.   chanroblesvirtualawlibrary chanrobles virtual law library

The conditions of the payment were: P5,000 at the time of

signing the contract Exhibit A; P20,000 upon delivery by the
vendor to the purchaser of the Torrens title to the first
parcel described in the deed of sale, P10,000 upon delivery
by the vendor to the purchaser of Torrens title to the second
parcel; and lastly the sum of P12,000 one year after the
delivery of the Torrens title to the second parcel.   chanroblesvirtualawlibrary chanrobles virtual law library

The vendee paid P5,000 to the vendor when the contract

was signed. The vendor delivered the Torrens title to the
first parcel to the vendee who, pursuant to the agreement,
paid him P20,000. In the month of March 1921, Torrens title
to the second parcel was issued and forthwith delivered by
the vendor to the vendee who, however, failed to pay the
P10,000 as agreed, neither did she pay the remaining
P12,000 one year after having received the Torrens title to
the second parcel.  
chanroblesvirtualawlibrary chanrobles virtual law library

The plaintiff here claims the sum of P22,000, with legal

interest from the month of April 1921 on the sum of
P10,000, and from April 1922 on the sum of P12,000, until
full payment of the amounts claimed.   chanroblesvirtualawlibrary chanrobles virtual law library

The defendant admits that she purchased the two parcels of

land referred to by plaintiff, by virtue of the deed of sale
Exhibit A, but alleges in defense: (a) That the plaintiff
knowing that the second parcels of land he sold had an area
of 60 hectares, by misrepresentation lead the defendant to
believe that said second parcel contained 98 hectares, and
thus made it appear in the deed of sale and induced the
vendee to bind herself to pay the price of P47,000 for the
two parcels of land, which he represented contained an area
of no less than 200 hectares, to which price the defendant
would not have bound herself had she known that the real
area of the second parcel was 60 hectares, and,
consequently, she is entitled to a reduction in the price of
the two parcels in proportion to the area lacking, that is,
that the price be reduced to P38,000; (b) that the
defendant, in addition to the amounts acknowledged by the
plaintiff, had paid other sums amounting to P4,000; and (c)
that the defendants never refused to pay the justly reduced
price, but the plaintiff refused to receive the just amount of
the debt.  
chanroblesvirtualawlibrary chanrobles virtual law library

And by way of cross-complaint, the defendant prays that

she be indemnified in the sum of P15,000 for damages
sustained by her by reason of the malicious filing of the
instant complaint.   chanroblesvirtualawlibrary chanrobles virtual law library

The plaintiff, replying to the amended answer, alleges that

the contract of sale in question was made only for the lump
sum of P47,000, and not at the rate of so much per hectare,
and that the defendant's claim for alleged damages has
prescribed.   chanroblesvirtualawlibrary chanrobles virtual law library

The lower court, having minutely analyzed the evidence

adduced by the parties held that neither the plaintiff nor the
defendant gave any importance to the area of the land in
consenting to the contract in question, and that there having
been no fraud when the parties agreed to the lump sum for
the two parcels of land described in the deed Exhibit A,
following article 1471 of the Civil Code, ordered the
defendant to pay the plaintiff the sum of P19,300 with legal
interest at 8 per cent per annum from April 30, 1921 on the
sum of P7,300, and from April 30, 1922, on the sum of
P12,000. And finally dismissed the defendant's cross-
complaint, without special pronuncement as to costs.   chanroblesvirtualawlibrary chanrobles virtual law library

A motion for a new trial having been denied, this case was
brought up to this court through the proper bill of
exceptions.  
chanroblesvirtualawlibrary chanrobles virtual law library

The appellant alleges that the trial court erred in not

considering that the plaintiff induced the defendant by
deceit, to pay him the stipulated price for the two parcels he
sold, stating falsely in the deed of sale that the second of
said parcels had an area of 98 hectares when he knew that
in reality it only had about 60 hectares more or less, or at
least, if such deceit was not practised that mre that there
was a mistake on the part of Maria Gay in believing that said
second parcel contained 98 hectares.   chanroblesvirtualawlibrary chanrobles virtual law library

As a question of fact the trial court found from the evidence

adduced by the parties, that the plaintiff had not practised
any deception in agreeing with the defendant upon the sale
of the two parcels of land described in Exhibit A. We concur
with the trial court in this conclusion. It appears of record
that before the execution of the contract Exhibit A, the
defendant went over the plaintiff's land and made her wn
calculations as to the area of said two parcels. But this not
all. The plaintiff delivered to the defendant the documents
covering the land he was trying to sell. As to the first parcel
there is no question whatever and the defendant's
contention is limited solely to the actual area of the second
parcel. The defendant had document Exhibit 4 in her
possession which is the deed by which the plaintiff acquired
the land from the original owner, Crispulo Beramo, in which
document it appears that the area of the second parcel is
about 70 hectares. It was the defendant who intrusted the
drawing of the deed of sale Exhibit A to her attorney and
notary, Hontiveros, and it is to be presumed that both she
and the lawyer who drew the document Exhibit A, had read
the contents of the document Exhibit 4. The plaintiff
declares that he signed the document between 5 and 7 in
the afternoon of that day and he did not pay any attention
to the area of the second parcel, probably in the belief that
in the drawing of the document the data concerning the area
of the land had been taken from the said Exhibit 4. The
defendant testified that she received from the plaintiff a
note or piece of paper containing the data to be inserted in
the contract Exhibit A. The plaintiff denies this and said note
or piece of paper was not presented at the trial. We are of
opinion that this testimony of the defendant's is
unimportant, because, in reality, if the plaintiff had delivered
Exhibit 4 to the defendant, there was no need to deliver to
her another note to indicate the area of the second which
already appeared in the said Exhibit 4.   chanroblesvirtualawlibrary chanrobles virtual law library

If, notwithstanding the fact that it appeared in Exhibit 4 that

the area of the second parcel was, approximately, 70
hectares, the defendant, however, stated in said document
Exhibit A that said second parcel contained 98 hectares as
was admitted by him in his interviews with the plaintiff in
the months of April and June, 1924, then she has no right to
claim from the plaintiff the shortage in area of the second
parcel. Furthermore, there is no evidence of record that the
plaintiff made representatin to the defendant as to the area
of said second parcel, and even if he did make such false
representations as are now imputed to him by the
defendant, the latter accepted such representations at her
own risk and she is the only one responsible for the
consqunces of her inexcusable credulousness. In the case of
Songco vs. Sellner (37 Phil., 254), the court said:

The law allows considerable latitude to seller's

statements, or dealer's talk; and experience
teaches that it as exceedingly risky to accept it at
its face value.  
chanroblesvirtualawlibrary chanrobles virtual law library

Assertions concerning the property which is the

subject of a contract of sale, or in regard to its
qualities and characteristics, are the usual and
ordinary means used by sellers to obtain a high
price and are always understood as affording to
buyers no grund from omitting to make inquires.
A man who relies upon such an affirmation made
by a person whose interest might so readily
 prompt him to exaggerate the value of his
property does so at his peril, and must take the
consequences of his own imprudence.

The defendant had ample opportunity to appraise herself of

the condition of the land which she purchased, and the
plaintiff did nothing to prevent her from making such
investigation as she deemed fit, and as was said in Songco
vs. Sellner, supra, when the purchaser proceeds to make
investigations by himself, and the vendor does nothing to
prevent such investigation from being as complete as the
former might wish, the purchaser cannot later allege that
the vendor made false representations to him. (National
Cash Register Co. vs. Townsend, 137 N. C., 652; 70 L. R.
A., 349; Williamson vs. Holt, 147 N. C., 515.) The same
doctrine has been sustained by the courts of the United
States in the following cases, among others:
Misrepresentation by a vendor of real property with
reference to its area are not actionable, where a correct
description of the property was given in the deed and
recorded chain of title, which the purchaser's agent
undertook to investigate and report upon, and the vendor
made on effort to prevent a full investigation." (Shappirio
vs. Goldberg, 48 Law. ed., 419.) "One who contracts for the
purchase of real estate in reliance on the representations
and statements of the vendor as to its character and value,
but after he has visited and examined it for himself, and has
had the means and opportunity of verifying such
statements, cannot avoid the contract on the ground that
they were false or exaggerated." (Brown vs. Smith, 109
Fed., 26.) 
chanrobles virtual law library

That the defendant knew that the area of the second parcel
was only about 70 hectares is shown by the fact that she
received the document Exhibit 4 before the execution of the
contract Exhibit A, as also Exhibit E-3 on September 30,
1920; which is the notification of the day for the trial of the
application for registratin of said parcel, wherein it appears
that it had an area of 60 hectares more or less, and by the
fact that she received from the plaintiff in the month of June
1924 the copy of the plans of the two parcels, wherein
appear their respective areas; and yet, in spite of all this,
she did not complain of the difference in the area of said
second parcel until the year 1926. Moreover, the record
contains several of the defendant's letters to the plaintiff in
the years 1921 to 1925, in which said defendant
acknowledges her debt, and confining herself to petitioning
for extentions of time within which to make payment for the
reasons given therein. But in none of these letters is there
any allusion to such lack of area, nor did she complain to
the plaintiff of the supposed deceit of which she believes she
is a victim. All of which, in our opinion, shows that no such
deceit was practised, as the trial court rightly found.   chanroblesvirtualawlibrary chanrobles virtual law library

As to the alleged error to the effect that the trial court failed
to order the reduction from the price due on the second
parcel as stated in the contract of sale Exhibit A, the
proportional price of the area lacking, we are of the opinion
that said error has no legal ground.   chanroblesvirtualawlibrary chanrobles virtual law library

It appears that by the contract Exhibit A, the parties agreed

to the sale of two parcels of land, the first one containing
102 hectares, 67 ares and 32 centares, and the second one
containing about 98 hectares, for the lump sum of P47,000
payable partly in cash and partly in installments. Said two
parcels are defind by means of the boundaries given in the
instrument. Therefore, the case falls within the provision of
article 1471 of the Civil Code, which reads as follows:

ART. 1471. In case of the sale of real estate for a

lump sum and not at the rate of a specified price
for each unit of measure, there shall be no
increase or decrease of the price even if the area
be found to be more or less than that stated in
the contract.  
chanroblesvirtualawlibrary chanrobles virtual law library

The same rule shall apply when two or more

estates are sold for a single price; but, if in
addition to a statement of the boundaries, which
is indispensable in every conveyance of real
estate, the area of the estate should be
designated in the contract, the vendor shall be
obliged to deliver all that is included with such
boundaries, even should it exceed the area
specified in the contract; and, should he not be
 able to do so, he shall suffer a reduction of the
price in proportion to what is lacking of the area,
unless the contract be annulled by reason of the
vendee's refusal to accept anything other than
that which was stipulated.

The plaintiff contends that, in accrdance with the first

paragraph of this article, the defendant has no right to ask
for the reduction of price, whatever may be the area of the
two parcels of land sold her. On the ther hand, the
defendant contends that, according to paragraph 2 of the
same article of the Civil Code, she has a right to ask for a
reduction of the price due on the second parcel, in
proportion to the area lacking.   chanroblesvirtualawlibrary chanrobles virtual law library

In his comments on the article cited, Manresa says, among

other things:

. . . if the sale was made for a price per unit of

measure or number, the consideration of the
contract with respect to the vendee, is the
number of such units, or, if you wish, the thing
purchased as determined by the stipulated
number of units. But if, on the other hand, the
sale was made for a lump sum, the consideration
of the contract is the object sold, independently
of its number or measure, the thing as
determined by the stipulated boundaries, which
has been called in law a determinate object.   chanroblesvirtualawlibrary chanrobles virtual law library

This difference in consideration between the two

cases implies a distinct regulation of the
obligation to deliver the object, because, for an
acquittance delivery must be made in accordance
with the agreement of the parties, and the
performance of the agreement must show the
confirmation in fact, of the consideratin which
induces each of the parties to enter into the
contract.  
chanroblesvirtualawlibrary chanrobles virtual law library

From all this, it follows that the provisions of

article 1471 concerning the delivery
of determinate objects had to be materially
different from those governing the delivery of
things sold a price per unit of measure or
number. Let us examine it, and for the sake of
greater clearness, let us expound it as we
understand it.   chanroblesvirtualawlibrary chanrobles virtual law library

With respect to the delivery of determinate

objects two cases may arise, either the
determinate object is delivered as stipulated, that
is, delivering everything included within the
boundaries, inasmuch as it is the entirety thereof
that distinguishes the determinate object; or that
such entirety is impaired in the delivery by failing
to deliver to the purchaser something included
within the boundaries. These are the two cases
for which the Code has provided although, in our
opinion, it has not been sufficiently explicit in
expressing the distinction; hence, at first sight,
the article seems somewhat difficult to
understand.  
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The first paragraph and the first clause of the

second paragraph of article 1471 deal with the
first of said cases; that is where everything
included within the boundaries as set forth in the
contract has been delivered. The Code goes on to
consider the case where a definite area or number
has been expressed in the contract, and
enunciates the rule to be followed when, after
delivery, the area included within said bundaries
is found not to coincide with the aforesaid content
or number. Said rule may be thus stated:
Whether or not the object of sale be one realty
for a lump sum, or two or more for a single price
also a lump sum, and, consequently, not for so
much per unit of measure or number, there shall
be no increase or decrease in the price even if the
area be found to be more or less than that stated
in the contract.   chanroblesvirtualawlibrary chanrobles virtual law library

Thus understood the reason for the regulation is

clear and no doubts can arise from its application.
It is concerned with determinate objects. The
consideration of the contract, and the thing to be
delivered is a determinate object, and not the
number of units it contains. The price is
determined with relation to it; hence, its greater
or lesser area cannot influence the increase or
decrease of the price agreed upon. We have just
learned the reason for the regulation, bearing in
mind that the Code has rightly considered an
object as determinate for the purposes now
treated, when it is a single realty as when it is
two or more, so long as they are solds for a single
price constituting a lump sum and not for a
specified amount per unit of measure or
number.   chanroblesvirtualawlibrary chanrobles virtual law library

We have stated that the second possible case in

the delivery of determinate objects is that in
which, on account or circumstances of diverse
possible origins, everything included within the
boundaries is not delivered.   chanroblesvirtualawlibrary chanrobles virtual law library

We have indicated about that where everything

included within the boundaries is delivered there
can be no increase or decrease in price, no matter
whether the area be more or less than that given
in the contract. From this a very important
consequence follows, to wit: That if the vendor is
bound to deliver a determinate object, he is
bound to deliver all of it, that is, everything within
its boundaries, in the contract, and that from the
moment he fails to do so, either because he
cannot, or because, ignoring the meaning of the
contract, he alleges that it contains a greater area
than that stipulated, the contract is partially
unfulfilled and it is but just the certain actions be
available to the vendee for the protection of his
right.  
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The rule in the latter case is found in the second

paragraph of article 1471, with the exception of
the first clause which refers of the former
hypothesis. This rule may be stated as follows:
Whether or not the object of the sale be one
realty for a lump sum, or two or more for a single
price also a lump sum, and, consequently not at
the rate of a specified price for each unit of
measuring or number, the vendor shall be bound
to deliver everything that is included within the
boundaries stated, although it may exceed the
area or number expressed in the contract; in case
he cannot deliver it, the purchaser shall have the
right either to reduce the price proportionately to
what is lacking of the area or number, or to
rescind the contract at his option.  
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Comprehending the meaning of a sale of a

determinate object, it is easily understod how, in
cases wherein by virtue of the rule enunciated,
the vendor has to deliver a greater area than that
expressed in the contract, there is, strictly
speaking, no excess of area, inasmuch as one
may always properly ask, excess with respect to
what? With respect to the area appearing in the
deed, it will be answered. But as this area was
not taken into account in entering into the
contract inasmuch as the parties made neither
the amount of the price, nor the efficacy of the
contract to depend on the number of its units;
since area was written in to fulfill a formal
requisite demanded by the present rules upon the
drawing of public instruments, but as a condition
essential to the contract, which, if it were not
true, would not be consummated, it results in the
long run, that this detail of the written recital,
with respect to which the excess is to be
estimated, is so negligible, so inconsistent, so
haphazard, and in the vast majority of cases so
wide of the mark, that it is impossible to calculate
the excess; and considering the nature of a
contract of sale of a definite object, it cannot be
strictly held that there is any excess at all.   chanroblesvirtualawlibrary chanrobles virtual law library
If everything within the stipulated boundaries is
not delivered, then the determination object
which was the consideration of the contract for
the vendee, is not delivered; hence his power to
nullify it. However, it might be (and this he alone
can say), that although he has not received the
object, according to the stipulated terms, it suits
him; hence his power to carry the contract into
effect with the just decrease in price referred to in
the article under comment.   chanroblesvirtualawlibrary chanrobles virtual law library

The manner in which the matter covered by this

article was distributed in its two paragraphs
constributes to making it difficult to understand.
The rule might have been clearly stated had the
first clause of the second paragraph been
included in the first paragraph, the latter to end
with the words: "The same rule shall apply when
two or more estates are sold fos a single price."
And if by constituting an independent paragraph,
with the rest of the second paragraph, it were
made to appear more expressly that the rule of
the second paragraph thus drawn referred to all
the cases of paragraph one, as we have
expounded, namely, to the case of a sale of one
single estate and that of two or more for one
single price, the rule would have been clearer.  
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chanroblesvirtualawlibrary chanrobles virtual

In our opinion, this would have better answered

what we deem to be the indubitable intention of
the legislator.  
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Some eminent commentators construe the last

part of article 1471 in a different way. To them
the phrase "and should he not be able to do so"
as applied to the vendor, does not mean as
apparently it does "should he not be able to
deliver all that is included within the boundaries
stated," but this other thing namely, that if by
reason of the fact that a less area is included
within the boundaries than that expressed in the
contract, it is not possible for the vendor to
comply therewith according to its literal sense, he
must suffer the effects of the nullity of the
contract or a reduction of the price
proportionately what may be lacking of the area
or number. It is added as a ground for this
solution that if the vendor fulfills the obligations,
as stated in the article, by delivering what is not
included with in the boundaries, there can never
be any case of proportionate reduction of the
price on account of shortage of area, because he
does not give less who delivers all that he bound
himself to.  
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According to this opinion, which we believe

erroneous, if within the boundaries of the
property sold, there is included more area than
that expressed in the title deeds, nothing can be
claimed by the vendor who losses the value of
that excess, but if there is less area, then he
loses also because either the price is reduced or
the contract is annulled. This theory would be
anomalous in case of sale of properties in bulk,
but, especially, would work a gross injustice
which the legislator never intended.   chanroblesvirtualawlibrary chanrobles virtual law library

There is no such thing. So long as the vendor can

deliver, and for that reason, delivers all the land
included within the boundaries assigned to the
property, there can be no claim whatsoever either
on his part, although the area may be found to be
much greater than what was expressed, nor on
the part of the puchaser although that area may
be in reality much smaller. But as he sold
everything within the boundaries and this is all
the purchaser has paid, or must pay for whether
much or little, if afterwards it is found that he
cannot deliver all, because, for instance, a part, a
building, a valley, various pieces of land, a glen,
etc., are not his, there is no sale of a determinate
object, there is no longer a sale of the object
agreed upon, and the solution given by the article
 is then just and logical: Either the contract is
annulled or the price reduced proportionately.

We have quoted from Manresa's Commentaries at length for

a better understanding of the doctrine on the matter,
inasmuch as the contending counsel have inserted in their
respective briefs only such portions of said commentaries as
relate to their respective contentions.  
chanroblesvirtualawlibrary chanrobles virtual law library

It may be seen from a careful reading of the commentaries

on said article 1471, that the great author distinguishes
between the two cases dealt with in article 1471, and
formulates the proper rules for each. In the delivery of a
determinate object, says the author, two cases may arise;
either the determinate object is delivered as stipulated, that
is, delivering everything included within the boundaries,
inasmuch as it is the entirety thereof that distinguishes
the determinate object; or that such entirely is impaired in
the delivery by failing to deliver to the purchaser something
included within the boundaries. For the first case, Manresa
gives the following rule: "Whether or not the object of the
sale be one realty for a lump sum, or two or more for a
single price also a lump sum, and, consequently, not for so
much per unit of measure or number, there shall be no
increase or decrease in the price ecven if the area be found
to be more or less than that stated in the contract." And for
the second case, this other: "Whether or not the object of
the sale one realty for a lump sum, or two or more for a
single price also a lump sum, and, consequently, not at the
rate a specified price for each unit of measure or number,
the vendor shall be bnound to deliver everything that is
included within the boundaries stated, although it may
exceed the area or number expressed in the contract; in
case he cannot deliver it, the purchaser shall have the right
either to reduce the price proportionately to what is lacking
of the area or number, or to rescind the contract, at his
option."
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Considering the facts of the present controversy, it seems

clear to us that the rule formulated for the second
paragraph or article 1471 is inapplicable in the instant case
inasmuch as all the land included within the boundaries of
the two parcels sold has been delivered inits entirety to the
vendee. There is no division of the land enclosed within the
boundaries of the properties sold; the determinate object
which is the subject matter of the contract has been
delivered by the vendor in its entirety as he obligate himself
to do. Therefore, there is no right to complain either on the
part of the vendor, even if there be a greater area than that
stated in the deed, or on the part of the vendee, though the
area of the second parcel be really much smaller. (Irureta
Goyena vs. Tambunting, 1 Phil., 490.)  chanrobles virtual law library

With regard to the damages prayed for by the defendant,

the lower court finally dismissed the cross-complaint without
special pronouncement as to costs. And according to the
decision of the Supreme Court od Spain of 1897, a
judgment absolving a party from a claim of damages against
him, who has not contravened his obligations, does not
violate articles 1101 and 1108 of the Civil Code.   chanroblesvirtualawlibrary chanrobles virtual law library

With respect to the question of interest, the lower court

likewise held that, as the defendant had not paid the sum of
P7,300 on April 30, 1921, when the plaintiff had delivered
the certificate of title, she was in default from that date and
also from the date of one year thereafter, with respect to
the sum of P12,000, contituting the last period of the
obligation. We are of the opinion that the lower court has
committed no error which should be corrected by this
court.  
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The judgment appealed from being in accordance with the

law, it should be as it is hereby, affirmed with costs against
the appellant. So ordered.   chanroblesvirtualawlibrary chanrobles virtual law library

Avanceña, C. J., Johnson, Street, Ostrand, Johns,

Romualdez and Villa-Real, JJ., concur.