The Supreme Court held that a buyer is entitled to rescind a contract of sale for a house and lot if the seller misrepresented critical aspects of the property, rendering it unsafe and not legally compliant. This means buyers have legal recourse if they discover that a property they purchased is hazardous or does not meet legal standards due to the seller’s fraudulent misrepresentations. The ruling reinforces the duty of sellers to disclose material facts about properties and protects buyers from hidden dangers and legal issues.

High-Voltage Hazard: Can a Buyer Escape a Deceptive Home Sale?

In Nilo R. Jumalon v. Court of Appeals, Ma. Asuncion de Leon sought to rescind a contract for the purchase of a house and lot from Nilo R. Jumalon. De Leon argued that Jumalon fraudulently misrepresented the property as being free from encumbrances when, in fact, it was located within a 30-meter right-of-way of MERALCO, with high-tension wires posing a significant danger. She also contended that Jumalon lacked the necessary license to sell from the Housing and Land Use Regulatory Board (HLURB).

The central issue before the Supreme Court was whether the Court of Appeals erred in affirming the rescission of the contract of sale and whether De Leon’s right to demand rescission had prescribed. The Court found in favor of De Leon, upholding the rescission. This decision highlights the importance of transparency and honesty in real estate transactions and protects buyers from misrepresentation. It serves as a reminder to sellers of their obligation to disclose potential hazards and legal issues associated with a property.

The Court emphasized that factual findings of the Court of Appeals, when supported by substantial evidence, are conclusive and binding. In this case, the evidence clearly showed that the property was not safely habitable due to its location under high-tension wires, posing a risk to life and property. The Court highlighted that the construction of houses underneath such high-tension wires is prohibited due to the high voltage of electricity carried by the lines, which generates static electricity and electric sparks during rain.

The Court also addressed the issue of prescription, noting that De Leon filed the action to annul the sale within one year and four months from the contract’s execution. This timeframe falls within the prescriptive period prescribed by law. The Court cited Article 1391 of the Civil Code, which governs the period for filing an action for annulment based on vices of consent, such as fraud.

Furthermore, the decision underscored the significance of good faith and full disclosure in real estate transactions. Sellers have a duty to inform potential buyers of any material facts that could affect the value or safety of the property. This duty is particularly crucial when dealing with properties that may have hidden defects or encumbrances that are not immediately apparent. Failure to do so can result in the rescission of the contract and potential liability for damages. Presidential Decree No. 957, also known as the Subdivision and Condominium Buyers’ Protective Decree, aims to protect innocent buyers from unscrupulous developers and sellers.

The ruling also has broader implications for the real estate industry. It reinforces the need for developers and sellers to obtain all necessary permits and clearances before offering properties for sale. The HLURB plays a vital role in ensuring compliance with these regulations and protecting the interests of buyers. Developers who fail to comply with these requirements may face administrative sanctions and civil liability. This ensures the construction of houses and buildings is strictly prohibited within the right-of-way of transmission lines; hence, HLURB requires subdivision owners/developers to first secure clearance from the National Power Corporation (NPC) before their application for a subdivision project within MERALCO’s right-of-way easement can be acted upon.

The Supreme Court’s decision ultimately reinforces the principle that buyers are entitled to receive what they bargained for in a real estate transaction. When a seller misrepresents the condition or legality of a property, the buyer has the right to seek rescission of the contract and recover damages. This decision serves as a deterrent against fraudulent practices in the real estate industry and provides a clear path for buyers to seek redress when they have been wronged.

FAQs

What was the key issue in this case?	The key issue was whether the buyer, De Leon, could rescind the contract of sale due to the seller’s misrepresentation that the property was free from encumbrances, despite being located under high-tension wires.
What did the Court decide?	The Supreme Court affirmed the decision of the Court of Appeals, allowing De Leon to rescind the contract because of the seller’s fraudulent misrepresentation regarding the property’s safety and legality.
What constitutes misrepresentation in this context?	Misrepresentation involves the seller failing to disclose that the property was located within MERALCO’s right-of-way and under high-tension wires, posing a risk to life and property.
What is rescission?	Rescission is a legal remedy that cancels a contract, treating it as if it never existed, and restoring both parties to their original positions before the contract was made.
What is the prescriptive period for filing an action for rescission based on fraud?	The prescriptive period is four years from the discovery of the fraud, and in this case, the buyer filed the action within one year and four months, which was within the allowable period.
What is the significance of HLURB in this case?	The HLURB’s regulations require developers to secure clearance from the National Power Corporation (NPC) before developing properties within MERALCO’s right-of-way easement, highlighting the importance of regulatory compliance.
What protection does Presidential Decree No. 957 offer to buyers?	Presidential Decree No. 957, also known as the Subdivision and Condominium Buyers’ Protective Decree, aims to protect innocent buyers from unscrupulous developers and sellers in real estate transactions.
Are sellers required to disclose potential hazards on the property?	Yes, sellers have a duty to disclose any material facts that could affect the value or safety of the property, including potential hazards like high-tension wires.

The Jumalon v. Court of Appeals case emphasizes the importance of honesty and transparency in real estate transactions. Buyers should conduct thorough due diligence and sellers must be forthright about any potential issues with the property. Legal remedies, such as rescission, are available to protect buyers from fraudulent misrepresentations and to ensure fair dealings in the real estate market.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Nilo R. Jumalon v. Court of Appeals, G.R. No. 127767, January 30, 2002