FIL-ESTATE PROPERTIES, INC., PETITIONER, VS. ARMANDO P. ANCHETA, RESPONDENT.

Fil-Estate Properties versus Ancheta

The Case

This is a petition for review brought by Fil-Estate Properties, Incorporated against Armando Ancheta, a subdivision lot buyer who paid the full contract price for his lot but never received the certificate of title. The case is a dispute over the obligation of a developer to deliver title, and it matters because the Supreme Court draws a firm line between the price of the lot and the incidental expenses of transfer: the buyer's failure to pay taxes and transfer fees is not a lawful excuse for withholding the title. It is also a compact review of the damages that flow from a bad-faith breach of contract.

Procedural History

Armando Ancheta filed a complaint for specific performance and damages with the Housing and Land Use Regulatory Board. The HLURB Arbiter ruled in his favor, ordering Fil-Estate to deliver the transfer certificate of title within thirty days from finality, or in the alternative to refund the price with interest, and to pay moral damages, exemplary damages, attorney's fees, and costs. Fil-Estate appealed to the HLURB Board of Commissioners, which denied the appeal and affirmed. Fil-Estate then appealed to the Office of the President, which denied the appeal in a Decision dated April 24, 2013, and denied reconsideration in a Resolution dated August 1, 2013. Fil-Estate came to the Supreme Court by petition for review under Rule 43 of the 1997 Rules of Civil Procedure.

Facts

On September 30, 1999, Fil-Estate sold to the spouses Armando and Marissa Ancheta a residential lot of 175 square meters in Plaridel Heights Residential Estates, Plaridel, Bulacan, under a Contract to Sell, at a contract price of 481,250 pesos. Upon full payment of the price, a Deed of Absolute Sale was executed in the buyers' favor.

On February 28, 2008, the spouses made a formal request for the turnover of the certificate of title, but Fil-Estate refused and failed to deliver it. Armando Ancheta then filed the HLURB complaint, praying for release of the title or, alternatively, refund of the 481,250 pesos with twenty-one percent interest per annum from full payment, plus moral and exemplary damages of 100,000 pesos and attorney's fees of 50,000 pesos.

Fil-Estate answered that the complaint stated no cause of action, because the buyer had not complied with his other monetary obligations, such as payment of real property taxes and transfer fees, which it claimed were a prerequisite to delivery of title under the Deed of Sale. The Arbiter found that the buyer had fully paid the price, that Fil-Estate never demanded the transfer fees before delivery, and that the refusal to deliver was unjustified. The Board of Commissioners and the Office of the President both affirmed.

Issues

• Whether or not the complaint was prematurely filed and stated no cause of action, given that the buyer had not yet paid the taxes and transfer fees for titling.
• Whether or not the award of moral damages, exemplary damages, attorney's fees, and costs of suit in favor of the buyer was proper.

Applicable Provisions

The Court applied Article 1170 of the Civil Code, which provides:

Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who in any manner contravene the tenor thereof, are liable for damages.

This is the basis for holding Fil-Estate liable for damages for refusing to deliver the title despite full payment.

The Court also relied on Article 2220 of the Civil Code, which provides:

Willful injury to property may be a legal ground for awarding moral damages if the court should find that, under the circumstances, such damages are justly due. The same rule applies to breaches of contract where the defendant acted fraudulently or in bad faith.

This allows moral damages in a breach of contract where the defendant acted in bad faith, which the Court found here.

On exemplary damages, Article 2229 of the Civil Code provides:

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.

This supports the award of exemplary damages in addition to moral damages.

Finally, Article 2208 of the Civil Code provides, in its relevant portions:

In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial costs, cannot be recovered, except: (1) When exemplary damages are awarded; (2) When the defendant's act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protest his interests; In all cases, the attorney's fees and expenses of litigation must be reasonable.

This is the ground for attorney's fees, since the buyer was compelled to litigate by the unjustified refusal to deliver the title.

Ruling

On the first issue, the Court held that the complaint was not premature and stated a cause of action. The buyer had fully complied with his obligation by paying the total price under the contract to sell, and the Deed of Absolute Sale had been executed in his favor. Fil-Estate was therefore under obligation to deliver the title. The Court examined the Deed of Sale's stipulation on taxes and assessments, which provided that documentary stamp tax, value-added tax, transfer tax, and other related taxes and expenses due and payable in connection with the transfer of title shall be for the account of the vendee. The Court held that nothing in that stipulation made the buyer's failure to pay the documentation and titling expenses a valid ground for non-delivery of the title. Those taxes and fees are not part of the contract price, and delivery of the title is not dependent on their payment. Since the Deed of Sale attached no qualification to the duty to deliver, the ordinary and literal meaning of deliver prevails: the seller must perform all necessary formalities, which it had done, and give the certificate of title to the buyer's control. The seller can discharge this obligation without requiring the buyer to settle the expenses on his account; after delivery, it is the buyer's own concern to go to the Register of Deeds, present the Deed of Sale with the certificate of title, pay the corresponding fees and taxes, and have the title cancelled and transferred in his name.

On the second issue, the Court sustained all the awards. Under Article 1170, those who in the performance of their obligations are guilty of fraud, negligence, or delay, or who in any manner contravene the tenor thereof, are liable for damages. Under Article 2220, moral damages may be recovered in breaches of contract where the defendant acted fraudulently or in bad faith, and the Court found that Fil-Estate acted in bad faith in refusing to deliver the certificate of title despite full payment. Exemplary damages were sustained as warranted by way of example or correction for the public good, in addition to moral damages. Attorney's fees were sustained under Article 2208, because the defendant's act or omission compelled the plaintiff to incur expenses to protect his interest; here the buyer was compelled to litigate because of the refusal to deliver the title without any justifiable cause.

Doctrine

First, the obligation to deliver the certificate of title arises upon full payment of the contract price and execution of the deed of sale. The buyer's obligation to pay transfer taxes and titling expenses is a separate monetary obligation that is not part of the contract price, and non-payment of those expenses is not a valid ground for withholding the title, absent a stipulation making delivery dependent on such payment.

Second, where the deed attaches no qualification to the duty to deliver, the word deliver is given its ordinary and literal meaning: the seller performs the formalities and cedes the certificate of title to the buyer's control, leaving the buyer to attend to registration and payment of fees thereafter.

Third, a seller who refuses to deliver title despite full payment acts in bad faith and is liable under Article 1170, with moral damages under Article 2220, exemplary damages under Article 2229, and attorney's fees under Article 2208.

Disposition

The petition was dismissed for lack of merit, and the Decision dated April 24, 2013 and the Resolution dated August 1, 2013 of the Office of the President were affirmed, so Armando Ancheta prevailed.

Remember This

The one line to memorize: transfer taxes and titling expenses are not part of the contract price, so their non-payment does not excuse the developer from delivering the title. Examiners use this case to test the distinction between the price and incidental transfer expenses, and to test the bad-faith breach that justifies moral damages, exemplary damages, and attorney's fees.