Geromo vs. La Paz Housing and Development Corporation

3/12/22, 10:04 AM SUPREME COURT REPORTS ANNOTATED VOLUME 814

G.R. No. 211175. January 18, 2017.*

ATTY. REYES G. GEROMO, FLORENCIO BUENTIPO,
JR., ERNALDO YAMBOT and LYDIA BUSTAMANTE,
petitioners, vs. LA PAZ HOUSING AND DEVELOPMENT
CORPORATION and GOVERNMENT SERVICE
INSURANCE SYSTEM, respondents.
Civil Law; Sales; Warranty Against Hidden Defects; Under

the Civil Code, the vendor shall be answerable for warranty
against hidden defects on the thing sold.—Under the Civil Code,
the vendor shall be answerable for warranty against hidden
defects on the thing sold under the following circumstances: 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.
(Emphasis supplied) Art. 1566. The vendor is responsible to the
vendee for any hidden faults or defects in the thing sold, even
though he was not aware thereof. This provision shall not apply if
the contrary has been stipulated and the vendor was not aware of
the hidden faults or defects in the thing sold.
Same; Same; Same; For the implied warranty against hidden
defects to be applicable, the following conditions must be met: a.
Defect is Important or Serious; i. The thing sold is unfit for the use
which it is intended; ii. Diminishes its fitness for such use or to
such an extent that the buyer would not have acquired it had he
been aware thereof; b. Defect is Hidden; c. Defect Exists at the time
of the sale; d. Buyer gives Notice of the defect to the seller within
reasonable time.—For the implied warranty against hidden
defects to be applicable, the following conditions must be met: a.
Defect is Important or Serious; i. The thing sold is unfit for the
use which it is intended; ii.
_______________
* SECOND DIVISION.
https://central.com.ph/sfsreader/session/0000017f7be01ac6eed0c203000d00d40059004a/t/?o=False 1/21

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Geromo vs. La Paz Housing and Development Corporation
Diminishes its fitness for such use or to such an extent that

the buyer would not have acquired it had he been aware thereof;
b. Defect is Hidden; c. Defect Exists at the time of the sale; d.
Buyer gives Notice of the defect to the seller within reasonable
time. Here, the petitioners observed big cracks on the walls and
floors of their dwellings within two years from the time they
purchased the units. The damage in their respective houses was
substantial and serious. They reported the condition of their
houses to La Paz, but the latter did not present a concrete plan of
action to remedy their predicament. They also brought up the
issue of water seeping through their houses during heavy rainfall,
but again La Paz failed to properly address their concerns. The
structural cracks and water seepage were evident indications that
the soil underneath the said structures could be unstable. Verily,
the condition of the soil would not be in the checklist that a
potential buyer would normally inquire about from the developer
considering that it is the latter’s prime obligation to ensure
suitability and stability of the ground.
Same; Same; Same; Subdivisions; Condominiums;
Subdivision and Condominium Buyers’ Protective Decree; One of
the purposes of Presidential Decree (PD) No. 957, also known as
The Subdivision and Condominium Buyers’ Protective Decree, is to
discourage and prevent unscrupulous owners, developers, agents,
and sellers from reneging on their obligations and representations
to the detriment of innocent purchasers.—One of the purposes of
P.D. No. 957, also known as The Subdivision and Condominium
Buyers’ Protective Decree, is to discourage and prevent
unscrupulous owners, developers, agents, and sellers from
reneging on their obligations and representations to the
detriment of innocent purchasers. Considering the nature of the
damage sustained by the structures, even without the findings of
the local governmental agency and the MGB-DENR, La Paz is
still liable under the doctrine of res ipsa loquitur.
Same; Same; Same; Same; Same; In this case, the subdivision
plan/layout was prepared and approved by La Paz. The actual
excavation, filling and levelling of the subdivision grounds were
exclusively done under its supervision and control. There being no
contributory fault on the part of the petitioner, there can be no
other conclusion except that it was the fault of La Paz for not
properly compacting the soil, which used to be an old creek.—In
this case, the subdivision plan/layout was prepared and approved
by La Paz. The

580
580 SUPREME COURT REPORTS ANNOTATED

actual excavation, filling and levelling of the subdivision

grounds were exclusively done under its supervision and control.
There being no contributory fault on the part of the petitioner,
there can be no other conclusion except that it was the fault of La
Paz for not properly compacting the soil, which used to be an old
creek. It should have taken adequate measures to ensure the
structural stability of the land before they started building the
houses thereon. The uneven street pavements and visible cracks
on the houses were readily apparent yet La Paz did not undertake
any corrective or rehabilitative work. La Paz’s argument that the
damage could have been sustained because of the 1990
earthquake or through the various enhancements undertaken by
the petitioners on their respective structures was not
substantiated. Records undeniably show that the petitioners had
raised their concerns as early as 1988 — before the earthquake
occurred in 1990.
Same; Damages; Temperate Damages; Temperate or moderate
damages may be recovered when some pecuniary loss has been
suffered but its amount cannot, from the nature of the case, be
proved with certainty.—Temperate or moderate damages may be
recovered when some pecuniary loss has been suffered but its
amount cannot, from the nature of the case, be proved with
certainty. The amount thereof is usually left to the discretion of
the courts but the same should be reasonable, bearing in mind
that temperate damages should be more than nominal but less
than compensatory. In this case, the petitioners suffered some
form of pecuniary loss due to the impairment of the structural
integrity of their dwellings. In view of the circumstances
obtaining, an award of temperate damages amounting to two
hundred thousand pesos (P200,000.00) is just and reasonable.
Same; Same; Moral Damages; Moral damages are not meant
to be punitive but are designed to compensate and alleviate the
physical suffering, mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock, social
humiliation, and similar harm unjustly caused to a person.—
Moral damages are not meant to be punitive but are designed to
compensate and alleviate the physical suffering, mental anguish,
fright, serious anxiety, besmirched reputation, wounded feelings,
moral shock, social humiliation, and similar harm unjustly caused
to a person. To be entitled to such an award, the claimant must
satisfactorily prove that he indeed suf-

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VOL. 814, JANUARY 18, 2017 581

fered damages and that the injury causing the same sprung
from any of the cases listed in Articles 2219 and 2220 of the Civil
Code. Moreover, the damages must be shown to be the proximate
result of a wrongful act or omission. Moral damages may be
awarded when the breach of contract was attended with bad faith,
or is guilty of gross negligence amounting to bad faith. Obviously,
the uncaring attitude of La Paz amounted to bad faith. For said
reason, the Court finds it proper to award moral damages in the
amount of P150,000.00.
Same; Same; Exemplary Damages; Exemplary damages are
awarded when a wrongful act is accompanied by bad faith or
when the guilty party acted in a wanton, fraudulent, reckless,
oppressive, or malevolent manner under Article 2232 of the Civil
Code.—Petitioners are also entitled to exemplary damages which
are awarded “when a wrongful act is accompanied by bad faith or
when the guilty party acted in a wanton, fraudulent, reckless,
oppressive, or malevolent manner” under Article 2232 of the Civil
Code. The indifference of La Paz in addressing the petitioners’
concerns and its subsequent failure to take remedial measures
constituted bad faith. Considering that the award of moral and
exemplary damages is proper in this case, attorney’s fees and cost
of the suit may also be recovered as provided under Article 2208
of the Civil Code.
Housing Loans; The housing loan agreements that the
petitioners entered into with Government Service Insurance
System (GSIS) were separate and distinct from the purchase
contracts they executed with La Paz. GSIS merely agreed to pay
the purchase price of the housing unit that each petitioner
purchased from La Paz. It was merely the lender, not the
developer.—As to the petitioners’ prayer to make GSIS jointly and
severally liable with La Paz, the Court finds that there is no legal
basis to juridically bind GSIS because it was never a party in the
contracts between La Paz and the petitioners. The housing loan
agreements that the petitioners entered into with GSIS were
separate and distinct from the purchase contracts they executed
with La Paz. GSIS merely agreed to pay the purchase price of the
housing unit that each petitioner purchased from La Paz. It was
merely the lender, not the developer.
PETITION for review on certiorari of the decision and

resolution of the Court of Appeals.

582

The facts are stated in the opinion of the Court.

Icaonapo, Litong, Morales and Associates Law Office
for petitioners.
GSIS Legal Services Group for GSIS.
Smith & Associates for La Paz Housing &
Development Corp.
MENDOZA, J.:

Before the Court is a Petition for Review on Certiorari
under Rule 45 of the Rules of Court assailing the
September 26, 2013 Decision1 and the January 29, 2014
Resolution2 of the Court of Appeals (CA), in C.A.-G.R. S.P.
No. 123139, which affirmed the January 11, 2012 Decision3
of the Office of the President (OP), dismissing the action for
damages filed by the petitioners before the Housing and
Land Use Regulatory Board (HLURB) against La Paz
Housing and Development Corporation (La Paz) and the
Government Service Insurance System (GSIS), on the
ground of breach of warranty against hidden defects.

The Antecedents

Petitioners Atty. Reyes G. Geromo (Geromo), Florencio
Buentipo, Jr. (Buentipo), Ernaldo Yambot (Yambot), and
Lydia Bustamante (Bustamante) acquired individual
housing units of Adelina 1-A Subdivision (Adelina) in San
Pedro, Laguna from La Paz, through GSIS financing, as
evidenced by their deeds of conditional sale.4 The
properties were all situated along the old Litlit Creek.
_______________
1 Rollo, pp. 54-67.

2 Id., at pp. 68-69.
3 Id., at pp. 185-187.
4 Id., at pp. 108-115.

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VOL. 814, JANUARY 18, 2017 583

In 1987, Geromo, Bustamante and Yambot started

occupying their respective residential dwellings, which
were all located along Block 2 (Pearl Street) of the said
subdivision. Buentipo, on the other hand, opted to demolish
the turned-over unit and build a new structure thereon.
After more than two (2) years of occupation, cracks started
to appear on the floor and walls of their houses. The
petitioners, through the President of the Adelina 1-A
Homeowners Association, requested La Paz, being the
owner/developer, to take remedial action. They collectively
decided to construct a riprap/retaining wall along the old
creek believing that water could be seeping underneath the
soil and weakening the foundation of their houses.
Although La Paz was of the view that it was not required to
build a retaining wall, it decided to give the petitioners
P3,000.00 each for expenses incurred in the construction of
the said riprap/retaining wall. The petitioners claimed that
despite the retaining wall, the condition of their housing
units worsened as the years passed. When they asked La
Paz to shoulder the repairs, it denied their request,
explaining that the structural defects could have been
caused by the 1990 earthquake and the
renovations/improvements introduced to the units that
overloaded the foundation of the original structures.
In 1998, the petitioners decided to leave their housing
units in Adelina.5
In May 2002, upon the request of the petitioners, the
Municipal Engineer of San Pedro and the Mines and
Geosciences Bureau (MGB) of the Department of
Environment and Natural Resources (DENR) conducted an
ocular inspection of the subject properties. They found that
there was “differential settlement of the area where the
affected units were constructed.”6
_______________
5 Id., at pp. 89-90.

6 Id., at p. 185.

584

On the basis thereof, Geromo filed a complaint for

breach of contract with damages against La Paz and GSIS
before the HLURB.7 On May 3, 2003, Buentipo, Yambot
and Bustamante filed a similar complaint against La Paz
and GSIS.8 They all asserted that La Paz was liable for
implied warranty against hidden defects and that it was
negligent in building their houses on unstable land. Later
on, the said complaints were consolidated.
La Paz, in its Answer, averred that it had secured the
necessary permits and licenses for the subdivision project;
that the houses thereon were built in accordance with the
plans and specifications of the National Building Code and
were properly delivered to the petitioners; that it did not
violate Presidential Decree (P.D.) No. 957 as it was issued
compliance documents, such as development permits,
approved alteration plan, license to sell, and certificate of
completion by HLURB; that the Philippine Institute of
Volcanology and Seismology (PHILVOLCS), based on the
serial photo interpretation of its field surveyors in 1996,
reported that a portion of the topography of the subdivision
developed an active fault line; and lastly, that there were
unauthorized, irregular renovation/alteration and
additional construction in the said units. Hence, it argued
that it should not be held liable for any damage incurred
and that the same should be for the sole account of the
petitioners.9
In its defense, GSIS moved for the dismissal of the
complaint for lack of cause of action. It asserted that the
deeds of conditional sale were executed between La Paz
and the petitioners only and that its only participation in
the transactions was to grant loans to the petitioners for
the purchase of their respective properties.10
_______________
7 Docketed as HLURB Case No. IV6-11202-1885.

8 Docketed as HLURB Case No. IV6-051503-1980.
9 Rollo, p. 167.
10 Id., at p. 164.

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VOL. 814, JANUARY 18, 2017 585


The Decision of the HLURB Arbiter

In its August 9, 2004 Decision,11 the HLURB Arbiter

found La Paz liable for the structural damage on the
petitioners’ housing units, explaining that the damage was
caused by its failure to properly fill and compact the soil on
which the houses were built and to maintain a three (3)-
meter easement from the edge of the creek as required by
law. As to GSIS, the HLURB ruled that there was no
cogent reason to find it liable for the structural defects as it
merely facilitated the financing of the affected units. The
decretal portion of the decision of the HLURB Arbiter
reads:
WHEREFORE, premises considered, judgment is hereby

rendered as follows:
1) Ordering respondent La Paz Housing and Dev’t. Corp. to
immediately undertake and cause the necessary
repairs/construction of the subject units to make it suitable for
human habitation for which it was originally intended for;
2) In the alternative, if it is no longer possible for the said
units to be repaired to make it suitable for human habitation,
respondent LPHDC is hereby ordered to give each complainant a
substitute property of the same nature and area, more or less,
within the subdivision project or in any project owned and
developed by LPHDC within the vicinity of San Pedro, Laguna;
3) Ordering respondent LPHDC to pay complainants:
a. the equivalent sum of what each complainant may prove by
documentary evidence such as receipts and the like, as actual
damages;
b. the sum of P15,000.00 each as moral damages;
c. the sum of P10,000.00 each as exemplary damages;
_______________
11 Id., at pp. 159-170. Penned by Housing and Land Use Regulatory

Board Arbiter Atty. Ma. Perpetua Y. Aquino.

586

d. the sum of P10,000.00 as attorney’s fees;

e. cost of suit.
SO ORDERED.12

The Decision of
the HLURB Board
of Commissioners

In its September 12, 2005 Decision,13 the HLURB Board
of Commissioners set aside the Arbiter’s decision,
explaining that there was no concrete evidence presented
to prove that the houses of the petitioners were indeed
damaged by the failure of La Paz to comply with the
building standards or easement requirements.
The petitioners moved for reconsideration, but the
HLURB Board of Commissioners denied their motion in its
Resolution,14 dated January 31, 2006.

The Decision of the OP

Aggrieved, the petitioners elevated the case to the OP
which initially dismissed the appeal on December 18, 2006
for late filing.15 The petitioners questioned the dismissal
before the CA and in its Decision,16 dated March 31, 2009,
the appellate court reversed the resolution of the OP and
ordered the latter to resolve the appeal on the merits.
On January 11, 2012, the OP finally rendered a decision
dismissing the appeal for lack of merit. It found that on the
culpability of La Paz, the petitioners merely relied on the
report submitted by the team that conducted the “ocular in-
_______________
12 Id., at pp. 169-170.

13 Id., at pp. 171-174.
14 Id., at pp. 178-179.
15 Id., at pp. 183-184.
16 Id., at pp. 87-105.

587
VOL. 814, JANUARY 18, 2017 587

spection” of the subject properties. It wrote that “[w]hat is

visual to the eye, though, is not always reflective of the real
cause behind, x x x other than the ocular inspection, no
investigation was conducted to determine the real cause of
damage on the housing units.” According to the OP, the
petitioners “did not even show that the plans, specifications
and designs of their houses were deficient and defective.” It
concluded that the petitioners failed to show that La Paz
was negligent or at fault in the construction of the houses
in question or that improper filing and compacting of the
soil was the proximate cause of damage.17

The CA’s Decision

Not in conformity, the petitioners appealed the OP
decision, dated January 11, 2012, before the CA. On
September 26, 2013, the CA affirmed the ruling of the OP
and found that the petitioners had no cause of action
against La Paz for breach of warranty against hidden
defects as their contracts were merely contracts to sell, the
titles not having been legally passed on to the petitioners.
It likewise ruled that La Paz could not be held liable for
damages as there was not enough evidence on record to
prove that it acted fraudulently and maliciously against the
petitioners.18
On January 29, 2014, the CA denied the motion for
reconsideration19 filed by the petitioners.
Hence, the present petition raising the following:
Issues

The CA gravely erred in the issuance of the assailed
Decision and challenged Resolution which affirmed in toto
the Decision of the
_______________
17 Id., at pp. 186-187.

18 Id., at pp. 54-67.
19 Id., at pp. 71-79.

588

O.P. [dismissing the petition for lack of merit] despite the

conclusive:
A. Findings of the MGB, DENR, Engineer’s Office, San
Pedro, Laguna and HLURB Director that petitioners’
housing are unfit for human habitation. Hence, they are
entitled to the protective mantle of PD 957 which was
enacted to protect the subdivision lot buyers against the
commission of fraud or negligence by the
developer/contractor like La Paz.
B. The contractual relationship between the parties is
not governed by Articles 1477 or 1478, the New Civil Code
as the correct issue is the liability of La Paz as the
contractor/developer to the petitioners’ housing units
declared by government agencies unfit for human
habitation. What governs are Art. 2176 in relation to Arts.

1170, 1173 and Art. 19 in relation to Art. 20 and Art. 21, the
Civil Code of the Philippines.
C. La Paz is liable for warranty against hidden defects
when it sold to the petitioners the housing units declared
unfit for human habitation. La Paz’s defense of force
majeure will not lie.
D. GSIS’ privity to the Contract (Deed of Conditional
Sale) executed by and between the petitioners and La Paz
for the housing loans which it financed makes it jointly
and severally liable for the petitioners’ defective housing
units.20
_______________
20 Id., at pp. 27-28.

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VOL. 814, JANUARY 18, 2017 589

The central issue in this case is whether La Paz should

be held liable for the structural defects on its implied
warranty against hidden defects.
The petitioners assert that La Paz was grossly negligent
when it constructed houses over a portion of the old Litlit
Creek. They claim that La Paz merely covered the old creek
with backfilled materials without properly compacting the
soil.21 They argue that they, or any buyer for that matter,
could not have known that the soil beneath the cemented
flooring of their housing units were not compacted or
leveled properly and that the water beneath continuously
seeped, causing the soil foundation to soften resulting in
the differential settlement of the area.22

The Court’s Ruling

After a judicious review of the records of this case, the
Court finds merit in the petition.
Under the Civil Code, the vendor shall be answerable for
warranty against hidden defects on the thing sold under
the following circumstances:
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.
(Emphasis supplied)
_______________
21 Id., at p. 32.
22 Id., at p. 40.

590

Art. 1566. The vendor is responsible to the vendee for any

hidden faults or defects in the thing sold, even though he was not
aware thereof.
This provision shall not apply if the contrary has been
stipulated and the vendor was not aware of the hidden faults or
defects in the thing sold.

For the implied warranty against hidden defects to be
applicable, the following conditions must be met:
a. Defect is Important or Serious;

i. The thing sold is unfit for the use which it is intended;
ii. Diminishes its fitness for such use or to such an extent
that the buyer would not have acquired it had he been
aware thereof;
b. Defect is Hidden;
c. Defect Exists at the time of the sale;
d. Buyer gives Notice of the defect to the seller within
reasonable time.

Here, the petitioners observed big cracks on the walls
and floors of their dwellings within two years from the time
they purchased the units. The damage in their respective
houses was substantial and serious. They reported the
condition of their houses to La Paz, but the latter did not
present a concrete plan of action to remedy their
predicament. They also brought up the issue of water
seeping through their houses during heavy rainfall, but
again La Paz failed to properly address their concerns. The
structural cracks and water seepage were evident
indications that the soil underneath the said structures
could be unstable. Verily, the condition of the soil would

not be in the checklist that a potential buyer would
normally inquire about from the developer considering that
it is the latter’s prime obligation to ensure suitability and
stability of the ground.

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VOL. 814, JANUARY 18, 2017 591

Furthermore, on June 11, 2002, HLURB Director Belen

G. Ceniza, after confirming the cracks on the walls and
floors of their houses, requested MGB-DENR and the Office
of the Municipal Mayor to conduct a geological/geohazard
assessment and thorough investigation on the entire
Adelina subdivision.23 Thus, in its August 8, 2002 Letter-
Report,24 MGB reported that there was evident ground
settlement in the area of the Litlit Creek where the houses
of the petitioners were located, probably “caused by
hydrocompaction of the backfill and or alluvial deposits
x x x.” The Engineering Department of San Pedro
Municipality, on the other hand, confirmed the settlement
affecting at least six (6) houses along Block 2, Pearl St.,
including that of Geromo, resulting in various structural
damage.25 Records reveal that a portion of Pearl Street
itself had sunk, cracking the concrete pavement of the
road. For several years, the petitioners had to endure the
conditions of their homes while La Paz remained silent on
their constant follow-ups. Eventually, they had to leave
their own dwellings due to safety concerns.
Based on the said findings, the Court is of the
considered view that the petitioners were justified in
abandoning their dwellings as they were living therein
under unsafe conditions. With the houses uncared for, it
was no surprise that, by the time the case was filed in
2004, they were in a worse condition.
La Paz remained unconcerned even after receiving
incident reports of structural issues from homeowners and
despite constant follow-ups from them for many years. In
fact, the petitioners took it upon themselves to build a
riprap/retaining wall due to La Paz’s indifference.
One of the purposes of P.D. No. 957, also known as The
Subdivision and Condominium Buyers’ Protective Decree,
is
_______________
23 Id., at pp. 149-150.
24 Id., at pp. 153-154.

25 Id., at p. 155.

592

to discourage and prevent unscrupulous owners,

developers, agents, and sellers from reneging on their
obligations and representations to the detriment of
innocent purchasers.26
Considering the nature of the damage sustained by the
structures, even without the findings of the local
governmental agency and the MGB-DENR, La Paz is still
liable under the doctrine of res ipsa loquitur. In the case of
D.M. Consunji, Inc. v. CA,27 the Court expounded on this
doctrine in this wise:
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.
x x x where it is shown that the thing or instrumentality
which caused the injury complained of was under the
control or management of the defendant, and that the
occurrence resulting in the injury was such as in the
ordinary course of things would not happen if those who
had its control or management used proper care, there is
sufficient evidence, or, as sometimes stated, reasonable
evidence, in the absence of explanation by the defendant,
that the injury
_______________
26 Co Chien v. Sta. Lucia Realty and Development, Inc., 542 Phil. 558,
568; 513 SCRA 570, 580.
27 409 Phil. 275; 357 SCRA 249 (2001).

593
VOL. 814, JANUARY 18, 2017 593

arose from or was caused by the defendant’s want of care.

One of the theoretical bases for the doctrine is its necessity, i.e.,
that necessary evidence is absent or not available.
The res ipsa loquitur doctrine is based in part upon the
theory that the defendant in charge of the instrumentality
which causes the injury either knows the cause of the
accident or has the best opportunity of ascertaining it and
that the plaintiff has no such knowledge, and therefore is
compelled to allege negligence in general terms and to rely
upon the proof of the happening of the accident in order to
establish negligence. The inference which the doctrine
permits is grounded upon the fact that the chief evidence of
the true cause, whether culpable or innocent, is practically
accessible to the defendant but inaccessible to the injured
person.
It has been said that the doctrine of res ipsa loquitur
furnishes a bridge by which a plaintiff, without knowledge
of the cause, reaches over to defendant who knows or should
know the cause, for any explanation of care exercised by the
defendant in respect of the matter of which the plaintiff
complains. The res ipsa loquitur doctrine, another court has
said, is a rule of necessity, in that it proceeds on the theory
that under the peculiar circumstances in which the doctrine
is applicable, it is within the power of the defendant to show
that there was no negligence on his part, and direct proof of
defendants negligence is beyond plaintiff’s power.
Accordingly, some courts add to the three prerequisites for
the application of the res ipsa loquitur doctrine the further
requirement that for the res ipsa loquitur doctrine to apply,
it must appear that the injured party had no knowledge or
means of knowledge as to the cause of the accident, or that
the party to be charged with negli-

594

gence has superior knowledge or opportunity for explanation of

the accident.28

Under the said doctrine, expert testimony may be
dispensed with to sustain an allegation, of negligence if the
following requisites obtain: a) the event is of a kind which
does not ordinarily occur unless someone is negligent; b)
the cause of the injury was under the exclusive control of
the person in charge; and c) the injury suffered must not
have been due to any voluntary action or contribution on
the part of the person injured.29
In this case, the subdivision plan/layout was prepared
and approved by La Paz. The actual excavation, filling and
levelling of the subdivision grounds were exclusively done
under its supervision and control. There being no
contributory fault on the part of the petitioner, there can be
no other conclusion except that it was the fault of La Paz
for not properly compacting the soil, which used to be an
old creek.
It should have taken adequate measures to ensure the
structural stability of the land before they started building
the houses thereon. The uneven street pavements and
visible cracks on the houses were readily apparent yet La
Paz did not undertake any corrective or rehabilitative
work.
La Paz’s argument that the damage could have been
sustained because of the 1990 earthquake or through the
various enhancements undertaken by the petitioners on
their respective structures was not substantiated. Records
undeniably show that the petitioners had raised their
concerns as early as 1988 — before the earthquake
occurred in 1990.

On Damages

Due to the indifference and negligence of La Paz, it
should compensate the petitioners for the damages they
sustained.
_______________
28 Id., at pp. 289-291; pp. 257-259.

29 Id., at p. 291; p. 259.

595
VOL. 814, JANUARY 18, 2017 595

On actual damages, the standing rule is that to be entitled

to them, there must be pleading and proof of actual
damages suffered.
Actual damages, to be recoverable, must not only be capable of

proof, but must actually be proved with a reasonable degree of
certainty. Courts cannot simply rely on speculation, conjecture or
guesswork in determining the fact and amount of damages. To
justify an award of actual damages, there must be competent
proof of the actual amount of loss, credence can be given only to
claims which are duly supported by receipts.30

In this regard, the petitioners failed to prove with
concrete evidence the amount of the actual damages they
suffered. For this reason, the Court does not have any basis
for such an award.
Nevertheless, temperate or moderate damages may be
recovered when some pecuniary loss has been suffered but
its amount cannot, from the nature of the case, be proved
with certainty.31 The amount thereof is usually left to the
discretion of the courts but the same should be reasonable,
bearing in mind that temperate damages should be more
than nominal but less than compensatory.32 In this case,
the petitioners suffered some form of pecuniary loss due to
the impairment of the structural integrity of their
dwellings. In view of the circumstances obtaining, an
award of temperate damages amounting to P200,000.00 is
just and reasonable.
The petitioners are also entitled to moral and exemplary
damages. Moral damages are not meant to be punitive but
are designed to compensate and alleviate the physical
suffering,
_______________
30 Viron Transportation Co., Inc. v. Delos Santos, 399 Phil. 243; 345
SCRA 509 (2000).
31 Art. 2224, Civil Code of the Philippines.
32 College Assurance Plan v. Belfranlt Development, Inc., 563 Phil.
355, 367; 538 SCRA 27, 40 (2007).

596

mental anguish, fright, serious anxiety, besmirched

reputation, wounded feelings, moral shock, social
humiliation, and similar harm unjustly caused to a person.

To be entitled to such an award, the claimant must
satisfactorily prove that he indeed suffered damages and
that the injury causing the same sprung from any of the
cases listed in Articles 221933 and 222034 of the Civil Code.
Moreover, the damages must be shown to be the proximate
result of a wrongful act or omission. Moral damages may be
awarded when the breach of contract was attended with
bad faith,35 or is guilty of gross
33 Article 2219. Moral damages may be recovered in the following

and analogous cases:
(1) A criminal offense resulting in physical injuries;
(2) Quasi-delicts causing physical injuries;
(3) Seduction, abduction, rape or other lascivious acts;
(4) Adultery or concubinage;
(5) Illegal or arbitrary detention or arrest;
(6) Illegal search;
(7) Libel, slander or any other form of defamation;
(8) Malicious prosecution;
(9) Acts mentioned in Article 309;
(10) Acts and actions referred to in Articles 21, 26, 27, 28, 29,
30, 32, 34, and 35.
The parents of the female seduced, abducted, raped, or abused,
referred to in No. 3 of this article, may also recover moral damages.
The spouse, descendants, ascendants, and brothers and sisters may
bring the action mentioned in No. 9 of this article, in the order
named.
34 Willful injury to property may be a legal ground for awarding moral
damages if the court should find that, under the circumstances, such
damages are justly due. The same rule applies to breaches of contract
where the defendant acted fraudulently and in bad faith.
35 Frias v. San Diego-Sison, 549 Phil. 49, 61; 520 SCRA 244, 256
(2007).

597
VOL. 814, JANUARY 18, 2017 597

negligence amounting to bad faith.36 Obviously, the

uncaring attitude of La Paz amounted to bad faith. For said
reason, the Court finds it proper to award moral damages
in the amount of P150,000.00.
Petitioners are also entitled to exemplary damages
which are awarded “when a wrongful act is accompanied by
bad faith or when the guilty party acted in a wanton,
fraudulent, reckless, oppressive, or malevolent manner”37
under Article 223238 of the Civil Code. The indifference of

La Paz in addressing the petitioners’ concerns and its
subsequent failure to take remedial measures constituted
bad faith.
Considering that the award of moral and exemplary
damages is proper in this case, attorney’s fees and cost of
the suit may also be recovered as provided under Article
220839 of the Civil Code.40
_______________
36 Bankcard, Inc. v. Feliciano, 529 Phil. 53, 62-63; 497 SCRA 52, 59
(2006).
37 Amado v. Salvador, 564 Phil. 728, 745; 540 SCRA 161, 181 (2007).
38 In contracts and quasi-contracts, the court may award exemplary
damages if the defendant acted in a wanton, fraudulent, reckless,
oppressive, or malevolent manner.
39 Art. 2208. In the absence of stipulation, attorney’s fees and
expenses of litigation, other than judicial costs, cannot be recovered,
except:
(1) When exemplary damages are awarded;
(2) When the defendants act or omission has compelled the
plaintiff to litigate with third persons or to incur expenses to
protect his interest;
(3) In criminal cases of malicious prosecution against the plaintiff;
(4) In case of a clearly unfounded civil action or proceeding
against the plaintiff;
(5) Where the defendant acted in gross and evident bad faith in
refusing to satisfy the plaintiffs plainly valid, just and demandable
claim;
(6) In action for legal support;

598


GSIS not liable

As to the petitioners’ prayer to make GSIS jointly and
severally liable with La Paz, the Court finds that there is
no legal basis to juridically bind GSIS because it was never
a party in the contracts between La Paz and the
petitioners. The housing loan agreements that the
petitioners entered into with GSIS were separate and
distinct from the purchase contracts they executed with La
Paz. GSIS merely agreed to pay the purchase price of the
housing unit that each petitioner purchased from La Paz. It

was merely the lender, not the developer.
WHEREFORE, the petition is GRANTED. The August
9, 2004 Decision of the HLURB Arbiter is hereby
REINSTATED with MODIFICATIONS to read as
follows:
WHEREFORE, Judgment is hereby rendered:
1) Ordering respondent La Paz Housing and
Development Corporation to immediately undertake and
cause the necessary repairs/construction
_______________
(7) In actions for the recovery of wages of household helpers,

laborers and skilled workers;
(8) In actions for indemnity under workmen’s compensation and
employers’ liability laws;
(9) In a separate civil action to recover civil liability arising from a
crime;
(10) When at least double judicial costs are awarded;
(11) In any other case where the court deems it just and equitable
that attorney’s fees and expenses of litigation should be recovered.
In all cases, the attorneys fees and expenses of litigation must be
reasonable. (Emphasis supplied)
40 Unlad Resources Development Corporation v. Dragon, 582
Phil. 61, 86; 560 SCRA 63, 85 (2008).

599
VOL. 814, JANUARY 18, 2017 599

of the subject units to make it suitable for human

habitation for which it was originally intended;
2) In the alternative, if it would no longer possible for
the said units to be repaired to make it suitable for human
habitation, ordering respondent La Paz to give each
petitioner another property of the same nature and size,
more or less, within the subdivision project or in any
project owned and developed by La Paz in San Pedro,
Laguna, or pay the monetary equivalent thereof; and
3) Ordering respondent La Paz to pay each of the
petitioners:
a. the sum of P200,000.00 as temperate damages;
b. the sum of P150,000.00 as moral damages;
c. the sum of P150,000.00 as exemplary damages;
d. the sum of P100,000.00 as attorney’s fees; and
e. cost of suit.

All awards shall earn legal interest at the rate of six
percent (6%) per annum from the finality of judgment until
full payment, in line with recent jurisprudence.41
SO ORDERED.
Carpio (Chairperson), Peralta, Leonen and Jardeleza,

JJ., concur.
Petition granted, August 9, 2004 decision of HLURB

Arbiter reinstated with modifications.
_______________
41 Nacar v. Gallery Frames, 716 Phil. 267, 280-281; 703 SCRA 439,
458 (2013).

600

Notes.—In the case of residential subdivisions, the

allocation of the 3-meter strip along the banks of a stream,
like the Mahabang Ilog Creek in this case, is required and
shall be considered as forming part of the open space
requirement pursuant to P.D. 1216 dated October 14, 1977.
(Pilar Development Corporation vs. Dumadag, 693 SCRA
96 [2013])
The retroactive application of P.D. No. 957 to
transactions entered into prior to its enactment in 1976 is
already settled. (Rotario vs. Alcantara, 736 SCRA 584
[2014])

——o0o——
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3/12/22, 10:04 AM SUPREME COURT REPORTS ANNOTATED VOLUME 814

G.R. No. 211175. January 18, 2017.*

Civil Law; Sales; Warranty Against Hidden Defects; Under

VOL. 814, JANUARY 18, 2017 579

Diminishes its fitness for such use or to such an extent that

580 SUPREME COURT REPORTS ANNOTATED

actual excavation, filling and levelling of the subdivision

VOL. 814, JANUARY 18, 2017 581

PETITION for review on certiorari of the decision and

582 SUPREME COURT REPORTS ANNOTATED

The facts are stated in the opinion of the Court.

1 Rollo, pp. 54-67.

VOL. 814, JANUARY 18, 2017 583

In 1987, Geromo, Bustamante and Yambot started

5 Id., at pp. 89-90.

584 SUPREME COURT REPORTS ANNOTATED

On the basis thereof, Geromo filed a complaint for

7 Docketed as HLURB Case No. IV6-11202-1885.

VOL. 814, JANUARY 18, 2017 585

In its August 9, 2004 Decision,11 the HLURB Arbiter

WHEREFORE, premises considered, judgment is hereby

11 Id., at pp. 159-170. Penned by Housing and Land Use Regulatory

586 SUPREME COURT REPORTS ANNOTATED

d. the sum of P10,000.00 as attorney’s fees;

12 Id., at pp. 169-170.

VOL. 814, JANUARY 18, 2017 587

spection” of the subject properties. It wrote that “[w]hat is

17 Id., at pp. 186-187.

588 SUPREME COURT REPORTS ANNOTATED

O.P. [dismissing the petition for lack of merit] despite the

habitation. What governs are Art. 2176 in relation to Arts.

20 Id., at pp. 27-28.

VOL. 814, JANUARY 18, 2017 589

The central issue in this case is whether La Paz should

Art. 1561. The vendor shall be responsible for warranty

590 SUPREME COURT REPORTS ANNOTATED

Art. 1566. The vendor is responsible to the vendee for any

a. Defect is Important or Serious;

could be unstable. Verily, the condition of the soil would

VOL. 814, JANUARY 18, 2017 591

Furthermore, on June 11, 2002, HLURB Director Belen

23 Id., at pp. 149-150.

24 Id., at pp. 153-154.

592 SUPREME COURT REPORTS ANNOTATED

to discourage and prevent unscrupulous owners,

The concept of res ipsa loquitur has been explained in this

VOL. 814, JANUARY 18, 2017 593

arose from or was caused by the defendant’s want of care.

594 SUPREME COURT REPORTS ANNOTATED

gence has superior knowledge or opportunity for explanation of

28 Id., at pp. 289-291; pp. 257-259.

VOL. 814, JANUARY 18, 2017 595

On actual damages, the standing rule is that to be entitled

Actual damages, to be recoverable, must not only be capable of

596 SUPREME COURT REPORTS ANNOTATED

mental anguish, fright, serious anxiety, besmirched

humiliation, and similar harm unjustly caused to a person.

33 Article 2219. Moral damages may be recovered in the following

VOL. 814, JANUARY 18, 2017 597