The Supreme Court ruled that a housing developer is liable for damages due to hidden defects in houses sold, even years after the purchase. This decision reinforces the principle that developers must ensure the structural integrity of properties they sell. It protects homebuyers by holding developers accountable for latent issues that render homes unsafe or uninhabitable, even if those issues aren’t immediately apparent.

Unstable Foundations: Who Pays When a Dream Home Crumbles?

Imagine buying your dream home, only to find cracks appearing on the walls and floors a few years later. This was the reality for the petitioners in this case, who purchased homes in Adelina 1-A Subdivision from La Paz Housing and Development Corporation. These homeowners sought recourse when structural defects emerged in their properties, arguing that La Paz was responsible for building on unstable land. The central legal question is whether La Paz should be held liable for these defects under the implied warranty against hidden defects.

The petitioners argued that La Paz was negligent in constructing houses over a portion of the old Litlit Creek, failing to properly compact the soil. They contended that this negligence resulted in the “differential settlement of the area where the affected units were constructed,” leading to significant structural damage. The foundation of their claim rests on the Civil Code provisions regarding a vendor’s responsibility for hidden defects, specifically Articles 1561 and 1566.

Art. 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 this trade or profession, should have known them.

For an implied warranty against hidden defects to apply, the defect must be serious, hidden, existing at the time of sale, and the buyer must give notice within a reasonable time. The Supreme Court found that all these conditions were met in this case. The cracks and water seepage were substantial, indicating unstable soil, a condition not readily apparent to buyers. The Court noted that it is the developer’s obligation to ensure ground suitability and stability. The HLURB Director also requested the MGB-DENR and the Office of the Municipal Mayor to conduct geological/geohazard assessment to the entire Adelina subdivision after confirming the cracks on the walls and floors of their houses.

La Paz argued that the damage could have been caused by the 1990 earthquake or alterations made by the homeowners. However, the Court found that the homeowners had raised concerns as early as 1988, before the earthquake. This timeline undermined La Paz’s defense and highlighted their negligence in addressing the initial concerns.

Even without the local government’s and MGB-DENR’s findings, the Court invoked the doctrine of res ipsa loquitur, which means “the thing speaks for itself”. This doctrine applies when the event doesn’t ordinarily occur unless someone is negligent, the cause of the injury was under the exclusive control of the person in charge, and the injury was not due to any voluntary action by the injured party. Here, La Paz had exclusive control over the subdivision plan, excavation, filling, and leveling of the grounds. Since the homeowners were not at fault, the Court concluded that La Paz’s failure to properly compact the soil was the cause of the damage.

The concept of res ipsa loquitur has been explained in this wise:

While negligence is not ordinarily inferred or presumed, and while the mere happening of an accident or injury will not generally give rise to an inference or presumption that it was due to negligence on defendants part, under the doctrine of res ipsa loquitur, which means, literally, the thing or transaction speaks for itself, or in one jurisdiction, that the thing or instrumentality speaks for itself, the facts or circumstances accompanying an injury may be such as to raise a presumption, or at least permit an inference of negligence on the part of the defendant, or some other person who is charged with negligence.

The Court emphasized the purpose of Presidential Decree (P.D.) No. 957, also known as The Subdivision and Condominium Buyers’ Protective Decree, which aims to protect innocent purchasers from unscrupulous developers. La Paz’s indifference to the homeowners’ concerns and failure to take corrective action constituted a breach of this protective decree.

Regarding damages, the Court found that the homeowners did not provide sufficient evidence to support an award of actual damages. However, it awarded temperate damages of P200,000.00, recognizing the pecuniary loss suffered due to the impaired structural integrity of their dwellings. It also awarded moral damages of P150,000.00, citing La Paz’s uncaring attitude and bad faith, as well as exemplary damages of P150,000.00 to deter similar behavior. Attorney’s fees of P100,000.00 and the cost of the suit were also granted. GSIS, however, was not held liable as they were not party to the contracts between La Paz and the homeowners, acting only as a lender.

The Supreme Court ordered La Paz to either repair the units to make them habitable or provide each homeowner with another property of similar nature and size. This underscores the developer’s responsibility to ensure the habitability and safety of the properties they sell.

FAQs

What was the key issue in this case?	The key issue was whether a housing developer could be held liable for structural defects that appeared in homes several years after they were purchased. The court addressed the applicability of the implied warranty against hidden defects.
What is the implied warranty against hidden defects?	The implied warranty against hidden defects holds a seller responsible for defects in a product that are not easily visible and that render the product unfit for its intended use. This warranty is provided by law.
What is the doctrine of res ipsa loquitur?	Res ipsa loquitur is a legal doctrine that allows negligence to be inferred from the very nature of an accident or injury, in the absence of direct evidence of negligence. It suggests that the event would not have occurred if not for someone’s negligence.
Why was La Paz found liable in this case?	La Paz was found liable because it failed to properly compact the soil when constructing the houses, leading to structural damage. The Court determined La Paz’s negligence and breach of implied warranty.
What kind of damages were awarded to the homeowners?	The homeowners were awarded temperate damages (P200,000.00), moral damages (P150,000.00), exemplary damages (P150,000.00), attorney’s fees (P100,000.00), and the cost of the suit. These damages are meant to compensate for their losses and to penalize La Paz for its negligence.
What options did the court give La Paz to resolve the issue?	The court ordered La Paz to either repair the units to make them suitable for habitation or provide the homeowners with another property of similar nature and size. This ruling enforces the developer’s obligations.
Why was GSIS not held liable in this case?	GSIS was not held liable because it was not a party to the contracts between La Paz and the homeowners. GSIS was merely the lender that financed the purchase of the properties, and not the developer.
What is the significance of P.D. No. 957?	P.D. No. 957, or the Subdivision and Condominium Buyers’ Protective Decree, is intended to protect innocent purchasers from unscrupulous developers. The ruling underscores the importance of this law.

This case serves as a reminder to housing developers of their responsibility to ensure the structural integrity of the properties they sell. It also highlights the importance of due diligence for homebuyers, although it acknowledges that some defects are inherently hidden and the responsibility for those lies with the developer. The ruling reinforces consumer protection in real estate transactions and sets a precedent for holding developers accountable for negligence and breaches of warranty.

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: Atty. Reyes G. Geromo, et al. v. La Paz Housing and Development Corporation, G.R. No. 211175, January 18, 2017