JOSEPH HARRY WALTER POOLE-BLUNDEN v.
UNION BANK OF THE PHILIPPINES
G.R. No. 205838 November 29, 2017
Leonen, J.
DOCTRINE:
A bank that wrongly advertises the area of a property acquired through foreclosure because it
failed to dutifully ascertain the property's specifications is grossly negligent as to practically be in
bad faith making the sale voidable.
FACTS:
Poole-Blunden came across an advertisement placed by Union Bank in the Manila Bulletin for
the public auction of the subject condominium unit, "Unit" which was advertised to have an area
of 95 square meters. Thinking that it was sufficient and spacious enough for his residential
needs, Poole-Blunden decided to register for the sale and bid on the unit. Poole-Blunden placed
his bid and won the unit. He entered into a Contract to Sell with UnionBank. After occupying it,
he noticed apparent problems in its dimensions. He took rough measurements of the Unit,
which indicated that its floor area was just about 70 square meters, not 95 square meters, as
advertised by UnionBank.
Poole-Blunden wrote to UnionBank, informing it of the discrepancy. He asked for a rescission of
the Contract to Sell, along with a refund of the amounts he had paid, in the event that it was
conclusively established that the area of the unit was less than 95 square meters. He filed a
Complaint for Rescission of Contract and Damages before RTC which dismissed Poole-
Blunden's complaint for lack of merit. On appeal, the Court of Appeals affirmed the ruling of the
Regional Trial Court. It noted that the sale was made on an "as-is-where-is" basis as indicated in
Section 12 of the Contract to Sell. Thus, Poole-Blunden supposedly waived any errors in the
bounds or description of the unit.
Poole-Blunden charges UnionBank with fraud in failing to disclose to him that the advertised 95
square meters was inclusive of common areas. With the vitiation of his consent as to the object
of the sale, he asserts that the Contract to Sell may be voided. He insists that UnionBank is
liable for breach of warranty despite the "as-is-where-is" clause in the Contract to Sell. Finally,
he assails the Court of Appeals' application of Article 1542 of the Civil Code.
ISSUE:
Whether or not respondent Union Bank of the Philippines committed such a degree of fraud as
would entitle petitioner Joseph Harry Walter Poole-Blunden to the voiding of the Contract to Sell
the condominium unit.
HELD:
YES. Banks are required to observe a high degree of diligence in their affairs. This
encompasses their dealings concerning properties offered as security for loans. A bank that
wrongly advertises the area of a property acquired through foreclosure because it failed to
dutifully ascertain the property's specifications is grossly negligent as to practically be in bad
faith in offering that property to prospective buyers. Any sale made on this account is voidable
for causal fraud. In actions to void such sales, banks cannot hide under the defense that a sale
was made on an as-is-where-is basis. As-is-where-is stipulations can only encompass physical
features that are readily perceptible by an ordinary person possessing no specialized skills.
Reliance on Section 12's as-is-where-is stipulation is misplaced for two (2) reasons. First, a
stipulation absolving a seller of liability for hidden defects can only be invoked by a seller who
has no knowledge of hidden defects. Respondent here knew that the Unit's area, as reckoned in
accordance with the Condominium Act, was not 95 square meters. Second, an as-is-where-is
stipulation can only pertain to the readily perceptible physical state of the object of a sale. It
cannot encompass matters that require specialized scrutiny, as well as features and traits that
are immediately appreciable only by someone with technical competence.
A seller is generally responsible for warranty against hidden defects of the thing sold. As stated
in Article 1561 of the New Civil Code. It is clear from the records that respondent fully knew that
the Unit's area, reckoned strictly in accordance with the Condominium Act, did not total 95
square meters.
Whether it was unaware of the unit's actual interior area; or, knew of it, but wrongly thought that
its area should include common spaces, respondent's predicament demonstrates how it failed
to exercise utmost diligence in investigating the Unit offered as security before accepting it. This
negligence is so inexcusable; it is tantamount to bad faith.
Even the least effort on respondent's part could have very easily confirmed the Unit's true area.
Similarly, the most cursory review of the Condominium Act would have revealed the proper
reckoning of a condominium unit's area. Respondent could have exerted these most elementary
efforts to protect not only clients and innocent purchasers but, most basically, itself.
Respondent's failure to do so indicates how it created a situation that could have led to no other
outcome than petitioner being defrauded.
