G.R. No. 112330 - Spouses Co vs. Court of Appeals

On October 9, 1984, the plaintiff (Mrs. Adoracion Custodio) entered into a verbal contract with the respondents (Sps. Henry Co, Elizabeth Co, and Melody Co) for the purchase of a house and lot located at 316 Beata St., New Alabang Village, Muntinlupa, Metro Manila for a total price of US$100,000.00.
One week later, and shortly before her departure to the United States, the plaintiff paid earnest money amounting to US$1,000.00 and P40,000.00 to the respondents, with the understanding that these sums would be deducted from the total purchase price.

On January 25, 1985, despite the lapse of the agreed payment period, the plaintiff made a partial payment of US$30,000.00 to defendant Melody Co in the United States.
On March 15, 1985, the respondents’ counsel, Atty. Leopoldo Cotaco, sent a letter demanding payment of the balance of US$70,000.00, which went unanswered by the plaintiff.

On August 8, 1986, another letter from the respondents’ counsel notified the plaintiff that she had lost her option to purchase the Beata property, and alternatively, she was offered the opportunity to buy another property.
On September 5, 1986, the plaintiff’s counsel wrote to the respondents indicating that the plaintiff was ready to pay the remaining balance of US$70,000.00 to complete the agreed selling price of US$100,000.00.
Subsequently, on October 24, 1986, the plaintiff filed the instant complaint seeking rescission of the contract and the refund of amounts previously paid.

The Regional Trial Court (RTC) ruled in favor of the private respondent, Adoracion Custodio, ordering the petitioners (COS) to refund the amount of US$30,000.00 alongside a declaration regarding the forfeiture of the initial earnest money.
The RTC’s decision was later affirmed by the Court of Appeals (CA), which maintained the order for the refund.
The petitioners argued on appeal that:

The August 8, 1986 letter merely granted an option for buying a different property and did not extend the option regarding the Beata property.
The plaintiff had already defaulted by failing to pay as scheduled, thereby forfeiting her option.
The respondents were entitled to rescind the contract unilaterally and claim damages pursuant to Article 1191 of the Civil Code.
Additionally, they contended that attorney’s fees should be awarded because the plaintiff’s conduct compelled them to litigate further.

Whether the Court of Appeals erred in ordering the respondents to refund the US$30,000.00 paid by the plaintiff.
Whether the respondents’ contention that the plaintiff lost her option to purchase the Beata property due to her default is legally tenable.
Whether the respondents had the right to unilaterally rescind the contract of sale by imposing a forfeiture condition without the plaintiff’s consent.
Whether the respondents were rightly denied the recovery of attorney’s fees despite the claim that the plaintiff’s conduct necessitated additional litigation expenses.