Agcaoili v. GSIS

The GSIS approved Marcelo Agcaoili's application to buy a house and lot in its Nangka, Marikina housing project. The approval letter allocated a specific lot "together with the housing unit constructed thereon." It told him to occupy the house immediately, warning that if he did not do so within three days the award would be automatically disapproved and given to another applicant. Agcaoili moved in but had to leave the next day because the house was a mere shell, without ceiling, stairs, double walling, lighting, water, toilet, kitchen or drainage. He left a homeless friend in the house as a watchman and complained to the GSIS, to no avail. He paid the first monthly amortization and the incidental fees but refused to pay more until the house was completed. The GSIS instead cancelled the award and demanded that he vacate. Agcaoili sued in the CFI of Manila for specific performance and damages. The GSIS presented no evidence, and the court declared the cancellation void, ordered the GSIS to complete the house before collecting amortizations, and awarded damages and attorney's fees. The GSIS appealed directly to the Supreme Court.

1. 1Whether Agcaoili was justified in suspending his amortization payments because the house was not habitable, so that the GSIS could not cancel the award.
2. 2Whether Agcaoili failed to meet the condition of immediate occupancy, or repudiated the award by leaving another person in the house.
3. 3Whether specific performance should be decreed according to the contract's literal terms.

Yes to the first; no to the second and third. The judgment was affirmed with modification. A perfected sale existed: there was a meeting of minds on a determinate house and lot at a definite price (Art. 1475). The seller must deliver the thing sold in a condition suitable for the use the buyer intended. Nothing in the GSIS forms said the house was sold "as is," and requiring occupancy within three days implied a habitable house. The GSIS drafted the forms, so any ambiguity was construed against it. Having failed to deliver a reasonably habitable dwelling, the GSIS could not use the suspension of payments as a ground to cancel: "(i)n reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him" (Art. 1169, last paragraph). Agcaoili did try to occupy the house. Leaving a friend there as caretaker was not a breach. However, after twenty years of deadlock, ordering completion at present costs for the original price would be inequitable. Exercising equity jurisdiction, the Court balanced the equities and adjusted the parties' rights to present conditions, consistent with Art. 19. It adopted Agcaoili's own alternative prayer: he would pay for the land and for the house in its unfinished state. The invalidation of the cancellation and the damages were affirmed. The order to complete the house was deleted; instead the price was reformed to the cost of the land plus the value of the unfinished house as of perfection, with amortizations adjusted, the value to be fixed by the trial court or commissioners.