Facts: 

Hua bought 2 condominium units from Cebu Winland Development Corporation. The area per condominium unit as indicated in the price list is 155 square meters and the price per square meter is P22,378.95. 

On October 10, 1996, possession of the subject properties was turned over to Hua.

After the purchase price was fully paid on January 31, 1997, Cebu Winland sent to Hua Deeds of Absolute Sale for the two condominium units for signature. Upon examination of the deed of absolute sale, Hua was distressed to find that the stated floor area is only 127 square meters contrary to the area indicated in the price list which was 155 square meters. 

Hua caused a verification survey of the said condominium units and discovered that the actual area is only 110 square meters per unit. Hua demanded from Cebu Winland to refund the amount of P2,014,105.50 representing excess payments for the difference in the area, computed as follows: 155 sq.m.-110 = 45 x 2 units = 90 sq.m. x P22,378.95 = P2,014,105.50. 

Cebu Winland refused to refund the said amount. Consequently, Hua filed a Complaint on August 7, 1998 in the Regional Office of the Housing and Land Use Regulatory Board (HLURB) in Cebu City. The Arbiter ruled that Hua's action had already prescribed pursuant to Article 1543, in relation to Articles 1539 and 1542, of the Civil Code. Hua appealed.

Cebu Winland argues that it delivered possession of the subject properties to Hua on October 10, 1996, hence, Hua's action filed on August 7, 1998 has already prescribed.

Hua, on the one hand, contends that his action has not prescribed because the prescriptive period has not begun to run as the same must be reckoned from the execution of the deeds of sale which has not yet been done.

Issues:

1. Whether Hua's action has prescribed.

2. Whether the sale in the case is one made with a statement of its area or at the rate of a certain price for a unit of measure and not for a lump sum. 

Held:

1. The action has not yet prescribed.

The pertinent provisions of the Civil Code on the obligation of the vendor to deliver the object of the sale provide:

Art. 1495. The vendor is bound to transfer the ownership of and deliver, as well as warrant the thing which is the object of the sale. 

Art. 1496. The ownership of the thing sold is acquired by the vendee from the moment it is delivered to him in any of the ways specified in Articles 1497 to 1501, or in any other manner signifying an agreement that the possession is transferred from the vendor to the vendee.

Art. 1497. The thing sold shall be understood as delivered, when it is placed in the control and possession of the vendee.  

Art. 1498. When the sale is made through a public instrument, the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract, if from the deed the contrary does not appear or cannot clearly be inferred.
  
Article 1497 above contemplates what is known as real or actual delivery, when the thing sold is placed in the control and possession of the vendee.  Article 1498, on the one hand, refers to symbolic delivery by the execution of a public instrument. It should be noted, however, that Article 1498 does not say that the execution of the deed provides a conclusive presumption of the delivery of possession.  It confines itself to providing that the execution thereof is equivalent to delivery, which means that the presumption therein can be rebutted by means of clear and convincing evidence. Thus, the presumptive delivery by the execution of a public instrument can be negated by the failure of the vendee to take actual possession of the land sold. 

Delivery is an act by which one party parts with the title to and the possession of the property, and the other acquires the right to and the possession of the same. In its natural sense, delivery means something in addition to the delivery of property or title; it means transfer of possession. 

“Delivery” as used in the Law on Sales refers to the concurrent transfer of two things: (1) possession and (2) ownership. This is the rationale behind the jurisprudential doctrine that presumptive delivery via execution of a public instrument is negated by the reality that the vendee actually failed to obtain material possession of the land subject of the sale. In the same vein, if the vendee is placed in actual possession of the property, but by agreement of the parties ownership of the same is retained by the vendor until the vendee has fully paid the price, the mere transfer of the possession of the property subject of the sale is not the “delivery” contemplated in the Law on Sales or as used in Article 1543 of the Civil Code.

In the case at bar, it appears that Cebu Windland was already placed in possession of the subject properties. However, it is crystal clear that the deeds of absolute sale were still to be executed by the parties upon payment of the last installment.  This fact shows that ownership of the said properties was withheld by petitioner.  Following case law, it is evident that the parties did not intend to immediately transfer ownership of the subject properties until full payment and the execution of the deeds of absolute sale. Consequently, there is no “delivery” to speak of in this case since what was transferred was possession only and not ownership of the subject properties.

The transfer of possession of the subject properties on October 10, 1996 to Hua cannot be considered as “delivery” within the purview of Article 1543 of the Civil Code. It follows that since there has been no transfer of ownership of the subject properties since the deeds of absolute sale have not yet been executed by the parties, the action filed by Hua has not prescribed.


2. Article 1539 provides that “If the sale of real estate should be made with a statement of its area, at the rate of a certain price for a unit of measure or number, the vendor shall be obliged to deliver to the vendee…all that may have been stated in the contract; but, should this be not possible, the vendee may choose between a proportional reduction of the price and the rescission of the contract….”  Article 1542, on the one hand, provides that “In the sale of real estate, made for a lump sum and not at the rate of a certain sum for a unit of measure or number, there shall be no increase or decrease of the price, although there be a greater or lesser area or number than that stated in the contract."

Article 1539 governs a sale of immovable by the unit, that is, at a stated rate per unit area. In a unit price contract, the statement of area of immovable is not conclusive and the price may be reduced or increased depending on the area actually delivered. If the vendor delivers less than the area agreed upon, the vendee may oblige the vendor to deliver all that may be stated in the contract or demand for the proportionate reduction of the purchase price if delivery is not possible. If the vendor delivers more than the area stated in the contract, the vendee has the option to accept only the amount agreed upon or to accept the whole area, provided he pays for the additional area at the contract rate.

In some instances, a sale of an immovable may be made for a lump sum and not at a rate per unit. The parties agree on a stated purchase price for an immovable the area of which may be declared based on an estimate or where both the area and boundaries are stated.  

In the case where the area of the immovable is stated in the contract based on an estimate, the actual area delivered may not measure up exactly with the area stated in the contract. According to Article 1542 of the Civil Code, in the sale of real estate, made for a lump sum and not at the rate of a certain sum for a unit of measure or number, there shall be no increase or decrease of the price although there be a greater or lesser area or number than that stated in the contract. However, the discrepancy must not be substantial. A vendee of land, when sold in gross or with the description "more or less" with reference to its area, does not thereby ipso facto take all risk of quantity in the land. The use of "more or less" or similar words in designating quantity covers only a reasonable excess or deficiency.

Where both the area and the boundaries of the immovable are declared, the area covered within the boundaries of the immovable prevails over the stated area. In cases of conflict between areas and boundaries, it is the latter which should prevail. What really defines a piece of ground is not the area, calculated with more or less certainty, mentioned in its description, but the boundaries therein laid down, as enclosing the land and indicating its limits. In a contract of sale of land in a mass, it is well established that the specific boundaries stated in the contract must control over any statement with respect to the area contained within its boundaries. It is not of vital consequence that a deed or contract of sale of land should disclose the area with mathematical accuracy. It is sufficient if its extent is objectively indicated with sufficient precision to enable one to identify it. An error as to the superficial area is immaterial. Thus, the obligation of the vendor is to deliver everything within the boundaries, inasmuch as it is the entirety thereof that distinguishes the determinate object.

In the case at bar, it is undisputed by the parties that the purchase price of the subject properties was computed based on the price list prepared by petitioner, or P22,378.95 per square meter.  Clearly, the parties agreed on a sale at a rate of a certain price per unit of measure and not one for a lump sum.  Hence, it is Article 1539 and not Article 1542 which is the applicable law.  Accordingly, respondent is entitled to the relief afforded to him under Article 1539, that is, either a proportional reduction of the price or the rescission of the contract, at his option.  Respondent chose the former remedy since he prayed in his Complaint for the refund of the amount of P2,014,105.50 representing the proportional reduction of the price paid to petitioner.