ECE Realty v MandapG.R. No. 196182.

September 1, 2014

Petitioner: ECE REALTY AND DEVELOPMENT, INC.,

vs.

Respondent: Rachel . Mandap

Facts:

ECE Realty, the petitioner, is a company that specializes in the construction and development of
condominium apartments. It began development on a condominium complex in Pasay City called
Central Park Condominium Building sometime in 1995. However, the condominium's printed
marketing stated that it would be built in Makati.

Respondent Mandap purchased a unit from the project in December 1995, paying a reservation fee, a
down payment, and monthly instalments. Six months later, Mandap and the Petitioner's
representative signed a Contract to Sell, indicating that the project would be built in Pasay.

Respondent, through her counsel, wrote petitioner a letter demanding the return of P422,500.00,
representing the payments she made, more than two years after the execution of the Contract to Sell,
claiming that she later discovered that the condominium project was being built in Pasay City, not
Makati City, as indicated in its printed advertisements. Rather than responding to Mandap's letter, the
petitioner instead provided her a dated written message stating that her unit is ready for inspection
and occupation.

Mandap filed a complaint with the Expanded National Capital Region Field Office (ENCRFO) of the
Housing and Land Use Regulatory Board (HLURB) seeking the annulment of her contract with
petitioner, the return of her payments, and damages, interpreting the written communication as a
denial in petitioner's part of her letter. However, ENCRFO dismissed the respondent's complaint,
ruling that the respondent failed to establish legal grounds for a fraudulent or malicious dealing with
her by the petitioner, such as the latter's use of deceptive words or machinations to induce or entrap
her into the contract, without which the respondent would not want to purchase a unit in the project.

On appeal, the HLURB Board of Commissioners dismissed the complaint of the respondent and upheld
the ENCRFO's ruling. The Board of Commissioners concluded that when the parties reduced their
contract in writing, their rights and obligations had to be found in the contract, and neither party
could impose a greater obligation than what the contract stipulated.

Respondent filed an appeal with the Office of the President, who dismissed the matter and upheld the
HLURB Board of Commissioners' decision in its entirety.

The respondent subsequently filed an appeal with the CA, which ruled in his favor. The CA determined
that petitioner used deception and manipulations to get respondent to sign a contract with it. The CA
threw out both parties' Contract to Sell and ordered petitioner to refund the money respondent
invested in the project, beginning with the reservation fee paid by the respondent.

As a result, ECE Realty has filed a petition challenging the CA's ruling.

Issue: Whether petitioner ECE Realty defrauded respondent Mandap, and if so, whether such
deception is sufficient to render its contract with respondent null and void.

Yes, petitioner committed deception, but it was not enough to render its relationship with petitioner
void. The Supreme Court upheld the Housing and Land Use Arbiter's, the HLURB Board of
Commissioners', and the President's decisions. The petition was granted.

Ruling:

According to Article 1344 of the same Code, “[i]n order for fraud to render a contract voidable, it must
be substantial and not have been used by both contracting parties.”

According to jurisprudence, fraud must meet two elements in order to provide a foundation for
contract cancellation:

The fraud must be dolo causante or include getting the consent of the other party. Causal fraud is
the term for this type of deception. It's obvious that the deception is serious. When a fraud is serious
enough to impress or lead an ordinarily prudent person into error, it cannot be used as a basis for
nullity. Each case's circumstances should be considered.

This Court determines that petitioner has made a false representation of a fact in this case. This is
demonstrated by its printed marketing, which state that the subject condominium complex is in
Makati City when it is actually in Pasay City.

The Court, however, agrees with the Housing and Land Use Arbiter, the HLURB Board of
Commissioners, and the Office of the President that the misrepresentation made by petitioner in its
advertisements does not constitute causal fraud because respondent failed to prove that the project's
location was the causal consideration or the primary inducement that led her to purchase her unit in
the project.

Despite the fact that the Contract to Sell stated that the condominium was located in Pasay City,
evidence suggests that respondent went ahead and signed it. This simply indicates that she accepted
to purchase the subject property despite the fact that it is located somewhere else than where she
was initially instructed. She should not have signed the Contract to Sell if she had a concern with the
property's location, and instead should have promptly discussed the issue with petitioner. She,
however, did not.

Respondent delayed more than two years from the execution of the Contract to Sell to demand a
refund of the money she paid on the grounds that she was deceived into believing the subject
property was in Makati City, as the Office of the President properly observed. She continued to pay
her bills in the meantime.

Respondent's claim that she signed a Contract to Sell that had multiple blank spots and purportedly
did not disclose the condominium's location was not substantiated by evidence. The essential rule is
that an allegation is not evidence and does not imply proof.

Mandap's assertion that he signed the Contract to Sell in black ink and that ECE Realty filled in the
blanks is surprisingly flimsy, given no evidence was presented to support such a claim in any of the
proceedings before the ENCRFO or the Board of Commissioners.

In any case, even though petitioner's deception amounts to fraud, which could be grounds for
annulling their Contract to Sell, respondent's act of signing the Contract after learning of the
property's true location can be regarded as an implied ratification.