MANILA – The Supreme Court has ordered real estate developer Empire East Land Holdings, Inc. to refund a buyer after its sales agent allegedly promised to issue a Contract to Sell upon payment of a reservation fee but the agreement was never provided.

In a decision penned by Associate Justice Maria Filomena D. Singh, the Supreme Court Third Division ruled that the sales agent’s promise was not an advertisement covered by Presidential Decree No. 957, or the Subdivision and Condominium Buyers’ Protective Decree.

The Court, however, said the developer could still be held liable under its contractual obligations and other applicable laws.

The case stemmed from the purchase of a residential unit by John Edrem Bautista, who paid Empire East a total of P130,000. The amount consisted of a P20,000 reservation fee and an additional P110,000 in payments.

Bautista said he made the payments after Empire East’s sales agent assured him that a Contract to Sell would be issued once he paid the reservation fee.

More than a year passed without the promised contract being issued. Bautista eventually stopped making payments and sought the return of the money he had already paid.

Empire East denied being bound by the sales agent’s representation, citing a waiver signed by Bautista stating that only written representations approved by an authorized company officer would be binding on the developer.

Both the Human Settlements Adjudication Commission and the Court of Appeals ruled in Bautista’s favor and held Empire East liable under Section 19 of PD 957, which provides for developer liability concerning advertisements and sales propaganda made by its agents.

The Supreme Court agreed that Bautista should receive a refund but differed on the legal basis for the developer’s liability.

The Court explained that Section 19 of PD 957 covers advertisements and sales materials intended for the general public, including those disseminated through newspapers, radio, television and other forms of mass communication.

It does not cover a sales agent’s individual promise made directly to a prospective buyer, the Court said.

The ruling nevertheless emphasized that such a limitation does not leave buyers without legal protection when developers fail to honor representations made during a transaction.

In Bautista’s case, the Court found that the parties had entered into a reciprocal agreement. After Bautista fulfilled his obligation by paying the reservation fee, Empire East was expected to issue the Contract to Sell.

Because the developer failed to issue the contract despite the lapse of more than a year, the Court said Bautista had the right under the Civil Code to cancel the agreement and recover his payments.

The Supreme Court also ordered Empire East to pay P260,000 in exemplary damages, which are intended to deter wrongful conduct and discourage similar acts.

The Court took into account the length of time the dispute remained unresolved, noting that Bautista’s P130,000 claim had been litigated for nearly 16 years.

“While this sum is not insignificant to an ordinary Filipino, it is undeniable that a real estate corporation such as Empire East possessed the means and capacity to promptly satisfy the claim. Its refusal to do so is rendered even more unjustified by the fact that the validity of Bautista’s claim was consistently affirmed by the HSAC Adjudicator, the HSAC, and the CA.”

The ruling clarified that while individual representations by sales agents may fall outside PD 957’s definition of advertisements, developers can still be held accountable when those representations form part of enforceable contractual arrangements.