G.R. No. 80058 - Ang vs. Court of Appeals

Petitioners Ernesto R. Ang and Rosalinda Ang, brother and sister, are the registered owners of three parcels of land located at A. Bonifacio St., Balintawak, Quezon City, covering an aggregate area of 2,096 square meters under Transfer Certificates of Title Nos. 258870, 258871, and 236872.
The properties were originally acquired from the Cruz family on July 3, 1979, at a purchase price of P680,000.00.

In November 1979, negotiations took place for the sale of the subject properties between the petitioners (as sellers) and private respondent Lee Chuy Realty Corporation (through its president, Henry Lee Chuy, as buyer).
On December 4, 1979, private respondent issued a check for P50,000.00 as down payment along with a receipt that embodied the terms of the agreement, including:

Petitioners’ undertaking to clear the property of occupants and obstructions within December 1979.
Delivery of a deed of absolute sale and other pertinent documents upon clearance and payment of the balance in two installments (P750,000.00 immediately after clearing, and P800,000.00 within 45 days).
Usual seller’s warranty of peaceful possession and valid title, and allocation of expenses (including lawyer’s fees, documentary stamp tax, etc.) to the sellers.

Petitioners received and encashed the P50,000.00 check but did not return the receipt prepared by private respondent.
Instead, petitioners prepared and signed another receipt that reproduced most of the terms except for omitting the stated agreed purchase price.
Private respondent’s original receipt indicated a purchase price of P1,600,000.00, while petitioners later contended that the true price was P2,340,000.00.
Testimonies revealed conflicting explanations:

Henry Lee Chuy testified that the omission was due to petitioners’ intention to undervalue the property to reduce capital gains tax.
Ang Kilin (the petitioners’ father) maintained that the real price was P2,340,000.00 and attributed the omission to Mrs. Lee’s wish to undervalue the property.

On January 12, 1980, petitioner Rosalinda Ang sent a letter giving private respondent until January 24, 1980 to pay the balance, warning that failure to comply would cancel the agreement.
Private respondent replied on January 23, 1980, expressing surprise over the payment demand since it had been ready to perform (pending the clearing of the property by petitioners).
On March 3, 1980, private respondent, through counsel, demanded the refund of the P50,000.00 down payment upon petitioners’ failure to clear the property and their subsequent withdrawal from the sale.

Following petitioners’ refusal to refund the down payment, private respondent filed a complaint for the collection of money with damages before the Regional Trial Court (formerly the Court of First Instance) on May 9, 1980.
The trial court, after presenting evidence through one witness from each party, rendered a decision on June 23, 1983 in favor of petitioners, awarding them damages and attorney’s fees.
Both parties appealed the decision. On June 22, 1987, the Court of Appeals reversed the trial court’s decision, ordering petitioners to refund the P50,000.00 down payment with legal interest from the date of the demand, plus additional attorney’s fees.
Petitioners’ motion for reconsideration was denied by the Court of Appeals on September 18, 1987.

The case largely turned on documentary evidence (the two receipts) and the testimonies of the two witnesses:

The conflicting testimonies and the documentary evidence regarding the omission of the agreed price in the second receipt became central to establishing which party breached the agreement.

Failing to clear the subject property of occupants and obstructions within the stipulated period.
Refusing to execute the deed of absolute sale and deliver the necessary documents for the registration of the properties.
Demanding an increase in the purchase price to P2,340,000.00.

Evidence pointed to petitioners entering a separate agreement with another buyer (Dolora Chua) for a lower price, thereby bolstering the contention of breach and double-dealing.

Whether the omission of the agreed purchase price in the receipt signed by petitioners constitutes an act of bad faith and breach of contract.

The conflict between the original receipt (stating P1,600,000.00) and the receipt signed by petitioners (with no stated price) raises concerns over the true intention regarding the purchase price.
Whether this omission was a deliberate tactic to either compel a price increase or to enable petitioners to withdraw from the agreement without proper grounds.

Whether petitioners committed a serious breach justifying the rescission (resolution) of the contract.

Examining if the failure to clear the property and deliver the deed of sale constitutes a slight or substantial breach.
Whether petitioners’ subsequent demand for a higher purchase price (P2,340,000.00) amounts to an additional breach that defeats the object of the contract.

Whether the right to rescind (resolve) the contract under the circumstances exists.

Determining if the conditions breached were essential or merely incidental to the contract.
Whether the delay in performance by private respondent (if any) could be deemed a slight breach that does not justify rescission.