By Benjamin Cuaresma
MANILA — The Supreme Court has ruled that a real estate sales agent’s promise to issue a Contract to Sell is not considered an “advertisement” under Presidential Decree No. 957, but stressed that developers cannot simply walk away from commitments made to individual buyers.
In a decision penned by Associate Justice Maria Filomena D. Singh, the Supreme Court’s Third Division ordered Empire East Land Holdings, Inc. to return the payments made by buyer John Edrem Bautista after the developer failed to deliver the Contract to Sell that its sales agent had promised.
Bautista paid a total of ₱130,000 for a residential unit—₱20,000 as a reservation fee and another ₱110,000 in subsequent payments.
According to Bautista, he made the payments after an Empire East sales agent assured him that the Contract to Sell would be issued once he paid the reservation fee.
But the promised contract never came.
More than a year passed without Empire East issuing the document, prompting Bautista to stop making further payments and seek the return of the money he had already paid.
Empire East resisted the claim, arguing that it should not be bound by the sales agent’s representations. The company pointed to a waiver signed by Bautista stating that only written representations approved by an authorized company officer would be binding on the developer.
The case eventually reached the Supreme Court after both the Human Settlements Adjudication Commission and the Court of Appeals ruled in Bautista’s favor.
The lower tribunals had held Empire East liable under Section 19 of PD 957, which makes subdivision and condominium developers responsible for the truthfulness of their advertisements and sales propaganda, including representations made through their agents.
The Supreme Court, however, drew an important distinction.
The high court ruled that the particular promise made by Empire East’s sales agent could not be treated as an advertisement under Section 19 of PD 957.
The provision covers advertisements and sales materials directed toward the general public, including promotional materials disseminated through newspapers, radio, television and other comparable mass communication channels.
A promise personally made by a sales agent to an individual buyer does not automatically fall within that definition, the Court explained.
But the ruling did not mean Bautista was left without legal protection.
The Supreme Court found another basis for holding Empire East liable: the agreement between the buyer and the developer itself.
The Court found that Bautista and Empire East had entered into a reciprocal agreement.
Bautista had performed his part by paying the reservation fee, while Empire East was obligated to issue the promised Contract to Sell.
When the developer failed to fulfill that obligation for more than a year, Bautista had the right under the Civil Code to cancel the agreement and recover the money he had paid.
Thus, while the sales agent’s representation did not constitute an advertisement under PD 957, Empire East could still be held accountable for failing to comply with its contractual obligation.
The decision underscores that the protection afforded to real estate buyers does not depend solely on whether a developer’s representation qualifies as advertising under PD 957.
A developer may still face liability when its contractual commitments are not honored.
The Supreme Court also ordered Empire East to pay Bautista ₱260,000 in exemplary damages.
The Court said exemplary damages are intended, among other purposes, to discourage wrongful conduct and serve as a warning against similar behavior.
The justices took particular note of the unusually long legal battle over Bautista’s ₱130,000 claim, which remained unresolved in the courts for nearly 16 years.
The Court observed that Empire East, as a real estate corporation, had the resources and capacity to settle the claim promptly.
Its refusal became even more difficult to justify because Bautista’s claim had repeatedly been upheld by the HSAC adjudicator, the HSAC itself and the Court of Appeals.
The Supreme Court emphasized that the amount involved, while modest compared with the resources of a large real estate company, was not insignificant to an ordinary Filipino buyer.
The ruling therefore sends a clear message: a developer may not escape responsibility simply by arguing that a sales agent’s promise was not an advertisement.
Where a buyer has performed his obligations and the developer fails to fulfill a corresponding commitment, the law may still provide grounds for cancellation, refund and damages.
The case is G.R. No. 272556, Empire East Land Holdings, Inc. v. John Edrem Bautista.
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