G.R. No. 126812 - Goldenrod, Inc. vs. Court of Appeals

Goldenrod, Inc. (petitioner) sought to purchase property owned by Pio Barretto and Sons, Inc. (initial respondent), whose assets had been transferred to Pio Barretto Realty Development, Inc. (respondent BARRETTO REALTY).
The property comprised 43 registered parcels covering 18,500 square meters located at Carlos Palanca St., Quiapo, Manila, which had previously been mortgaged with the United Coconut Planters Bank (UCPB).

In May 1988, Goldenrod, Inc. initiated discussions by sending a letter through its president, Sonya G. Mathay, to respondent Anthony Que, President of BARRETTO & SONS.

The letter acknowledged BARRETTO’s acceptance of Goldenrod’s offer subject to a few amendments regarding payment details.
It specifically mentioned Goldenrod’s agreement to amend the payment of interest from semi-annual to monthly and extend the period for property improvements from 90 days to 180 days.

Goldenrod, Inc. enclosed an earnest money deposit of P1,000,000 intended to form part of the purchase price, with the anticipation that the lots be reconsolidated from 43 titles to the original mother titles.

Upon the expiration of BARRETTO & SONS, all of its assets and liabilities, including the property, were transferred to BARRETTO REALTY.
The terms of the agreement with BARRETTO REALTY involved Goldenrod paying:

P24.5 million to settle BARRETTO REALTY’s outstanding mortgage obligations with UCPB by 30 June 1988.
An additional P20 million as the balance of the purchase price payable in installments over three years with an 18% per annum interest rate.

It requested and was initially granted a one-month extension by UCPB.
A subsequent request for an additional 60-day extension was denied, and finally a request for a 30-day extension on 25 August 1988 was also rejected.

In compliance with petitioner’s earlier directive, BARRETTO REALTY arranged the reconsolidation of the 43 parcels into two consolidated lots (Lots 1 and 2) on 4 August 1988, incurring expenses of P250,000.
On 30 August 1988, on account of UCPB’s denial for further extension and circumstances beyond its control, Goldenrod, through its agent Logarta Realty, notified respondent Anthony Que of its decision to rescind the sale.
Despite this notification and subsequent demands for the return of the earnest money:

On 31 August 1988, BARRETTO REALTY sold Lot 2 to Asiaworld Trade Center Phils., Inc.
On 13 October 1988, Lot 1 was conveyed, by way of dacion, to UCPB which then sold it to ASIAWORLD.

After repeated demands for the return of the P1,000,000 earnest money (notably in letters dated 12 December 1988 and 7 February 1989), Goldenrod, Inc. filed a complaint with the Regional Trial Court of Manila.
The trial court, on 15 March 1991, ordered the respondent(s) to refund the P1,000,000 along with legal interest, unrealized profits, and attorney’s fees, basing its decision on the absence of any written agreement for forfeiture of the earnest money.
The respondent(s) contended that the earnest money was forfeited as agreed, serving as damages in case of non-compliance by the buyer.
The Court of Appeals reversed the trial court’s ruling, prompting the present petition for review.

Whether, in the absence of a specific stipulation expressly providing that the earnest money shall be forfeited as damages in case of non-compliance by the buyer, the seller is entitled to retain such money.

Whether the earnest money deposited by Goldenrod, Inc. was intended solely as part of the purchase price rather than as a penalty.
Whether the retention of the earnest money by BARRETTO REALTY, despite the extrajudicial rescission of the sale by Goldenrod, constitutes unjust enrichment.
Whether the conduct of the parties—specifically, the silence and non-opposition of the respondents to Goldenrod’s rescission—affects their claim to retain the earnest money.