PROPERTY DIGEST POOL
A.Y. 2021 – 2022
Title: 20. Poole-Blunden v. Union Bank of the Philippines G.R. No.
G.R. No: 205838
November
Topic: Condominium Act (RA 4726) Date:
29, 2017
Tickler: Union Bank’s failure to disclose that the 95 sq. m. as advertised already included
common areas violates Condominium Act
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.”
Article 1390 of the Civil Code stipulates that a contract is voidable or annullable even
if there is no damage to the contracting parties where “consent is vitiated by mistake,
violence, intimidation, undue influence or fraud.”
Seller is generally responsible for warranty against hidden defects of the thing sold.
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 cannot even readily sense.
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.”
A condominium unit’s bounds are reckoned by “the interior surfaces of [its] perimeter
Doctrine/s: walls, floors, ceilings, windows and doors.” It excludes common areas.
By definition, fraud presupposes bad faith or malicious intent.
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 fiduciary.
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 degree of diligence.
Whether 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.
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.
FACTS
Case Type: PETITION for review on certiorari of the decision and resolution of the Court of
Appeals.
U.I.O.G.D.
Pool of: Bae, Escarcha, Lapuz, Mariano, Novales, Paghunasan, Tana
PROPERTY DIGEST POOL
A.Y. 2021 – 2022
Poole-Blunden (petitioner) came across an advertisement for public auction of certain
properties placed by Union Bank in the Manila Bulletin sometime in March 2001. One
of these properties was Unit 2-C of T-Tower Condominium located at Makati City. The
condominium unit was acquired by UnionBank through forclosure proceedings.
A week prior to the auction, petitioner visited the unit for inspection. He found that the
unit had an irregular shape, but didn’t doubt the unit’s area as advertised, the ceiling in
a bad condition, and the unit needed substantial repairs to be habitable. On the day of
the auction, he also inspected the Master Title of the project owner to the condominium.
Petitioner won the bid and he entered to a Contract to Sell with UnionBank. He started
occupying the unit in June 2001 and by July 2003, he was able to fully pay for the unit,
paying a total amount of P 3,257,142.49.00.
Petitioner decided to construct two additional bedrooms in the unit. He noticed apparent
problems in its dimensions. He took a rough measurement and found that the floor area
was just 70 sqm, not 95 sqm as advertised. He got in touch with an officer of UnionBank
to raise the matter, but no action was taken. He then wrote to Unionbank to inform them
of the discrepancy and asked for the rescission of the Contract to Sell, along with the
refund of the amounts he had paid. UnionBank replied that upon inquiring with
HLURB, the Homeowners’s Association of T-Tower, and its appraisers, the unit was
General
confirmed to be 95 sqm inclusive of the terrace and the comon areas surrounding it.
Facts
The petitioner was not satisfied because according to the Master Title, “boundary of
each unit are the interior surfaces of the perimeter walls, floors, ceilings, windows and
doors thereof." He hired an independent geodetic engineer, to survey the unit and
measure its actual floor. It was found out that the actual area was only 74.4 sqm and
gave a copy of the certification to Unionbank. UnionBank explained that the total area
of the unit is 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. The petitioner was
dissatisfied with the said explanation.
Petitioner filed for the recission of the Contract to Sell with Damages with the RTC of
Makati and said court dismissed the complaint. The CA affirmed the ruling of the RTC
stating that the sale was made on a "as-is-where-is" basis as indicated in their contract.
Thus, the petitioner supposedly waived any errors in the bounds or description of the
unit. With the denial of his Motion for Reconsideration, he filed for a petition to the
Supreme Court.
Petitioner alleged that there was a vitiation of his consent as to the object of the sale
and he charges UnionBank with fraud since it failed to disclose to him that the
Petitioner’s
advertised 95 square meters was inclusive of common areas. Thus, the Contract to Sell
Contention
may be voided and that Union Bank is liable for breach of warranty despite the "as-is-
where-is" clause in the Contract to Sell.
Respondent’s insisted that common spaces should be included in reckoning the Unit’s
Respondent’s total area.
Contention
U.I.O.G.D.
Pool of: Bae, Escarcha, Lapuz, Mariano, Novales, Paghunasan, Tana
PROPERTY DIGEST POOL
A.Y. 2021 – 2022
Trial Court’s RTC dismissed the Complaint for Rescission of Contract and Damages filed by Poole-
Decision Blunden against respondent Union Bank.
CA’s Court of Appeals’ Decision affirmed the April 20, 2010 Decision of the Regional Trial
Decision Court
ISSUE/S
Whether or not Union Bank committed such a degree of fraud that would entitle the petitioner to annul
the Contract to Sell the said condominium unit for his failure to disclose that the 95 sq. m. as advertised
already included common areas.
RULING
Yes. Union Bank committed fraud when it failed to disclose that the 95 sq. m. as advertised already
included common areas, thus the Contract to sell may be annulled.
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. Section 3(b) of the
Condominium Act defines a condominium unit, as follows:
"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":
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.
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.
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.
The defense of "as-is-where-is" terms of the purchase is untenable. 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.
Thus, the Court ordered that 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 plus
damages.
U.I.O.G.D.
Pool of: Bae, Escarcha, Lapuz, Mariano, Novales, Paghunasan, Tana
