A civil judgment concerning Lin Li-ch'iu's request for a refund from Hsiang Yang Construction Company
Chinese Taipei
Case:
A civil judgment concerning Lin Li-ch'iu's request for a refund from Hsiang Yang Construction Company
Key Words:
common facilities, used portion, principle of good faith
Reference:
Supreme Court Civil Judgment (88) T'ai Shang Tzu No. 201
Industry:
Housing Construction (4601)
Relevant Laws:
Article 24 of the Fair Trade Law, Article 359 of the Civil Code, Article 75(1) of the Land Registration Regulations
Summary:
Lin Li-ch'iu asserted that she had purchased "Store B" and its premises on the first floor of the "Tung Kuang Fu Kui Chiao Mansions" located in the Chungshan district of Taipei City from Hsiang Yang Co. on February 12, 1995. The property at issue had an agreed-upon total area of 19.82 p'ing [one p'ing being an area of 36 square feet], and a price of NT$24 million, which Lin had already paid in full. However, the registered indoor floor area of the property had only 7.11 p'ing, and the commonly used area was a full 12.75 p'ing. Lin had been told by the salesperson from Siang Yang Co. that the property's indoor floor area had at least 11 p'ing and the area of the common facilities were approximately 8 p'ing. It was on this basis that the price for the property was calculated and the purchase agreement concluded. Due to that the store's area fell seriously short of the agreed-upon size, the value of the property or its ordinary utility, or utility as agreed upon in the contract, was diminished. Hsiang Yang Co. should be held liable under law for this deficiency. Based on the theory of unjust enrichment, Lin requested that Hsiang Yang Co. refund the aforesaid purchase price plus the arrears interest legally allowed.
The purchase agreement between the two parties specified that the 19.82 p'ing area of the property at issue included the store itself, and the common facilities including the veranda, the public stairwells, and the elevator area. Hsiang Yang Co. had therefore registered the first-floor common facilities such as the vestibule, elevator area, and veranda as the common property of all owners of the first-floor stores. Common facilities such as stairwells from the second floor up were not included in the common property that should be apportioned among the owners of the first-floor stores. None of this is in any way unfair or in violation of the purchase agreement. Moreover, when the two parties signed the contract, they included the floor plan of the property at issue as an addendum to, and a part of, the agreement. In addition, the structure and partition walls of the Tung Kuang building had already been completed prior to the signing of the contract. As a result, Lin Li-ch'iu should have made a close inspection and calculation of the site, and been aware of the area and proportions of the common facilities before signing the contract with Hsiang Yang Co. Hsiang Yang Co. did not conceal anything from Lin. The property at issue is located in a commercial area and faces a road at least seven meters wide. It is therefore required by law to set up an arcade. The arcade is intended to be used jointly by the first-floor owners, and the scope of use covers the entire arcade rather than being limited to the portions adjacent to the front of each individual store. Accordingly, its ownership should be registered as being apportioned among the various first-floor owners.
The High Court upheld in part and overthrew in part the unfavorable decision to Lin Li-chiu made by the court of the first instance. With regard to the overthrown part, the new judgment ordered Hsiang Yang Co. to pay Lin Li-ch'iu NT$1,919,877 plus interest on the following reasons:
(1) The purchase agreement signed by the two parties clearly stated: "The real estate being purchased, first-floor Store B, has a total area of 19.82 ping. Included therein are the principal structure, the veranda, the flower bed, and a portion of the common-use facilities encompassing the roof protrusion, the public stairwell, the elevator area, the power and switchboard rooms, and the water reservoir (parking spaces are not included), along with a proportionate share of the land." It can therefore be confirmed that the 19.82 ping area of the property at issue should include both the principal structure and the common-use sections.
(2) The law is silent regarding the apportionment of private and common-use areas of apartment (condominium) buildings among the various owners. However, Article 75(1) of the Land Registration Regulations and Article 4(iv) of the Ministry of the Interior's Simplified Procedures for Initial Surveys of Buildings provide that apportionment of common-use areas of condominium buildings should be based upon the "circumstances of actual use" by the various owners, and should be done only in a way that would facilitate the building's maintenance, appearance, functioning, and realization of profits. Based on the principle of good faith, builders may not arbitrarily expand the floor areas of common-use facilities and decrease the floor areas of private facilities. Therefore, questions regarding whether common facilities of condominium buildings are actually necessary for the use by the various owners should be decided on ad hoc basis. Claims generally and vaguely made by referring to the all-inclusive "proportion of common facilities" are not valid.
(3) The common-use parts of the building at issue include the roof protrusion, the machine rooms in basements one and two, and the water tanks. The ownership of these parts, popularly referred to as the "public" parts, is apportioned among all owners. When ownership of the unit was turned over to her, Lin Li-ch'iu raised no objections regarding the proportions and the area of those parts. Therefore, she can be deemed to have agreed to the apportionment. As far as the building's "semi-public" parts such as the first-floor vestibule, veranda, and arcade are concerned, use of the first floor vestibule and veranda is indispensable to all of the building's unit owners and the ownership of those areas cannot be considered as belonging solely to the first-floor owners. Moreover, the arcade is essentially for the use by all unit owners and cannot be considered as the common property held solely by the owners of the first-floor store either. The property at issue in this case is a first-floor store not an upper-floor apartment; its owner should not be required to share in the public stairwells and other common facilities on the second floor and above. Similarly, the apportionment of the common-use facilities at the first floor should be based on the circumstances of actual uses by the owners.
(4) The area, scope, content, and relative proportions of the privately owned areas and common-use areas of apartment buildings are critical factors that invariably would affect consumers' purchase decisions. Under the principle of good faith and to maintain trading order and security, sellers of apartment buildings have an obligation to make truthful and clear disclosure of the information. According to the resolution made by the Fair Trade Commission (FTC) at its 216th meeting, "as of February 1, 1996, the construction investment industry must specify in real estate purchase agreements the contents, areas, and proportions of the common facilities apportioned to each owner; otherwise, they may be in violation of Article 24 of the Fair Trade Law (FTL). Based on the principle of non-retroactivity, however, purchase agreements signed prior to the implementation of the aforesaid plan for industry-wide corrections will not be governed by this requirement."
Although the purchase agreement between the two parties in this case was signed before the aforesaid resolution was made, the principle of good faith is still the most authoritative guiding principle in law. The resolution is intended to avert possible violations of FTL Article 24 by the construction industry. The non-retroactivity provision merely means that construction enterprises will not retroactively be held liable for any possible violation of the FTL. It does set forth to establish or confirm the effect of the principle of good faith under private law. Whether the FTC had already passed the aforesaid resolution, or whether the resolution had taken effect should have no bearing on the validity of the purchase agreement in this case.
The Supreme Court finds that the agreement specifies that the principle structure of the property at issue is "Store B," and provides a scale indicating length and width, from which the area can be readily calculated and to which both parties affixed their seals. Insofar as this is the same principle structure (i.e. private portion) of the property as depicted in the architectural floor plans drafted by the architects, both parties can be deemed to have agreed upon the location and area as specified. If the location and area of the principal structure of the property at issue registered in Lin Li-ch'iu's name by Hsiang Yang Co. are the same as those specified in the purchase contract between the two parties, can Hsiang Yang Co. be said to have failed to fulfill its contractual obligation? Or to have violated the principle of good faith by what it had delivered? The high court failed to elaborate on these points in its judgment. Instead, it rashly rendered a judgment unfavorable to the appellant Hsiang Yang Co. on the dubious grounds that by registering the "semi-public" parts encompassing the first-floor vestibule, veranda, and arcade as the common property of the owners of the four first-floor stores, Hsiang Yang Co. had improperly expanded the common-use portion of Lin Li-ch'iu's property in such a manner as to decrease her private-use property, and thereby diminished the value and ordinary utility of the property at issue.
The Supreme Court also finds that the apportionment of common-use parts of condominium buildings should be based upon the "circumstances of actual use" by the various owners, and should be done only in a way that it would facilitate the maintenance, appearance, functioning, and realization of profit of the building. The veranda of the Tung Kuang building is located behind the first-floor vestibule, of which it is an annex providing illumination and ventilation. Structurally, it is separated from the property at issue and from the other stores at the first floor by an RC wall, and is not an annex of any of the first-floor stores, which has been confirmed by the high court.
The Supreme Court raises that given the first-floor vestibule and veranda are not for use by the owners of the four first-floor stores, shouldn't the first-floor unit owners be free from any need to share in the apportionment of those common-use areas based on the "circumstances of actual use" test? Furthermore, the high court also viewed the roof protrusion, the machine rooms at basement one and two and the water tanks, i.e. the "public" areas, as the common property of all owners as a whole with Lin Li-ch'iu included. Then, if Lin Li-ch'iu wishes to access to common facilities such as the roof protrusion, then how can she claim not to actually use public facilities such as stairwells on the upper floors? From this perspective, the claim brought by Lin Li-chiu alleging that the first-floor vestibule, veranda, and so forth should not be apportioned among her property is not entirely baseless. So are Hsiang Yang' s arguments reasonable that apart from the principal structure and annexes, it is a standard practice in common-facility registration that the common-use parts be registered as " semi-public" areas of each given floor, and be apportioned among the floor residents in proportion to the area of their principal structure and annexes, while other common-use portions be registered as "public" portions, and be apportioned among all the residents in proportion to the area of their principal structures, annexes, and semi-public portions. Yet, the high court did not explain how it weighed the arguments proposed by the two sides.
Finally, the high court computed the amount by which the ordinary utility and value of the property at issue was diminished as follows: The area of the common-use parts of the Tung Kuang building registered under Lin Li-ch'iu's name by Hsiang Yang Co. was 4.53 ping in excess of the area that should actually have been apportioned to her, and the unit price of the property was NT$423,814 per ping; the excessive NT$1,919,877 received by Hsiang Yang Co. was deemed to be unjust enrichment. The Supreme Court questions the basis on which the High Court arrives at these figures. If said excess area of the property, though it may diminish the ordinary utility and value of the purchased property, is nevertheless still deemed subject matter of the purchase, then why should its entire value be computed as undue enrichment? The High Court gives no explanation on the issues, and the judgment thereby made is deemed to be unlawful for the high court' s failure to provide reasons supporting its decision. The appeals of the two parties, both alleging that the High Court's judgment was improper and should be overthrown, are not groundless.
Summarized by Ch'iu Shu-fen
Supervised by Ch'en Hui-p'ing
Appendix:
Hsiang Yang Construction Limited Company's Uniform Invoice No.: 22265659