Facts:
Liberty H. Luna owned a 1,013.6 square meter lot at the corner of G. Araneta Avenue and Quezon Avenue, Quezon City, covered by TCT No. 193230. On September 2, 1988 she agreed to sell the property to
Vicente and Michael Lim for P3,547,600, and a receipt prepared by
Zapata Realty Company and Atty.
Rustico Zapata recorded an earnest payment of P200,000, a balance to be paid after the squatters were ejected, and a provision that the seller would assume full responsibility to eject the squatters within sixty days, with a bracketed clause for liquidated damages of P100,000 crossed out by private respondent. A P200,000 check was delivered as earnest money and petitioners later agreed with private respondent to increase the purchase price to P4,000,000 on January 17, 1989, with a balance of P3,800,000 to be paid. Private respondent thereafter attempted to return the earnest money, notified petitioners she would consign it to court, and filed a complaint for consignation on March 10, 1989, alleging inability to eject the squatters; petitioners refused consignation and contended that private respondent acted in bad faith and never intended to effect ejectment. The Regional Trial Court rendered judgment on December 28, 1992 finding a perfected contract of sale, concluding petitioners waived the warranty of ejectment and ordering specific performance with awards of P500,000 moral damages and P50,000 attorneys fees, while the Court of Appeals reversed and allowed consignation, ruling that nonfulfillment of the ejectment condition deprived petitioners of the right to demand sale and that private respondent had exerted earnest efforts; petitioners then brought the case to the Supreme Court, which rendered the final decision on October 24, 1996.
Issues:
Did private respondent’s failure to eject the squatters within the stipulated period extinguish petitioners’ right to demand specific performance of the sale? Was private respondent liable to petitioners for damages and attorneys fees for breach of her obligation and bad faith? Was consignation proper under the circumstances?
Ruling:
Ratio:
Doctrine: