G.R. No. 196182 - ECE REALTY AND DEVELOPMENT INC., VS. RACHEL G. MANDAP.D E C I S I O N - Supreme Court E-Library

Ruling

WHEREFORE , premises considered, We hereby REVERSE and SET ASIDE the Decision and the Resolution dated June 21, 2007 and August 29, 2007, respectively, issued by the Office of the President in OP Case No. 06-F-224 . Accordingly, the contract between Rachel G. Mandap and ECE Realty is hereby ANNULLED . Consequently, ECE Realty is ordered to return the total amount of P422,500.00 representing payments made by Rachel G. Mandap on reservation fee, [downpayment] and monthly installments on the condominium unit, with legal interest thereon at twelve percent (12%) per annum from the date of filing of action until fully paid. No costs. SO ORDERED . [14] The CA held that petitioner employed fraud and machinations to induce respondent to enter into a contract with it. The CA also expressed doubt on the due execution of the Contract to Sell between the parties. Petitioner filed a Motion for Reconsideration, but the CA denied it in its March 15, 2011 Resolution. Hence, the present petition for review on certiorari with the following Assignment of Errors: I The Court of Appeals gravely erred in ruling that there was fraud in the execution of the subject contract to sell and declaring the same as annulled and ordering petitioner ECE to refund all payments made by respondent. II The Court of Appeals erred in ordering the award of legal interest at the rate of 12% per annum starting from the filing of the complaint until fully paid when legal interest should have been pegged at 6%. [15] The Court finds the petition meritorious. The basic issue in the present case is whether petitioner was guilty of fraud and if so, whether such fraud is sufficient ground to nullify its contract with respondent. Article 1338 of the Civil Code provides that [t]here is fraud when through insidious words or machinations of one of the contracting parties, the other is induced to enter into a contract which, without them, he would not have agreed to. In addition, under Article 1390 of the same Code, a contract is voidable or annullable where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud. Also, Article 1344 of the same Code provides that [i]n order that fraud may make a contract voidable, it should be serious and should not have been employed by both contracting parties. Jurisprudence has shown that in order to constitute fraud that provides basis to annul contracts, it must fulfill two conditions. First, the fraud must be dolo causante or it must be fraud in obtaining the consent of the party. [16] This is referred to as causal fraud. The deceit must be serious. The fraud is serious when it is sufficient to impress, or to lead an ordinarily prudent person into error; that which cannot deceive a prudent person cannot be a ground for nullity. [17] The circumstances of each case should be considered, taking into account the personal conditions of the victim. [18] Second , the fraud must be proven by clear and convincing evidence and not merely