Case Summary (G.R. No. 173794)
Factual Background
Valdes-Choy advertised her 718 sqm paraphernal house and lot in San Lorenzo Village, Makati (TCT No. 162955). Chua agreed to purchase at ₱10,800,000, paid ₱100,000 as earnest money on June 30, 1989, and was to pay the balance (₱10,700,000) by July 15, 1989. On July 13 and 14, 1989, Chua delivered checks totaling ₱585,000 for earnest money and capital gains tax. He then produced, but did not release, a ₱10,215,000 manager’s check until title transfer, prompting Valdes-Choy to tear up executed deeds of sale.
Procedural History
– July 17, 1989: Chua filed for specific performance; trial court dismissed (Nov 22, 1989).
– Nov 29, 1989: Chua refiled with damages; trial court granted specific performance (Aug 29, 1991), ordering escrow procedures, title transfer, and damages.
– Feb 23, 1995: Court of Appeals reversed—dismissed Chua’s case, forfeited earnest money, and ordered refund of capital gains payment.
– April 9, 2003: Supreme Court decision on Chua’s petition.
Trial Court Decision
The trial court found a binding contract to sell as of June 30, 1989, with a suspensive condition of full payment by July 15. Although Chua showed capacity (manager’s checks and tax advance), Valdes-Choy allegedly failed to put “all papers in proper order” (i.e., secure BIR capital gains receipt). The court compelled Valdes-Choy to deliver title documents and deeds and ordered Chua to deposit ₱10,295,000. Upon compliance, the clerk of court would pay taxes, register the sale, issue new title, and distribute funds.
Court of Appeals Ruling
The CA held that the agreement was a contract to sell, not a contract of sale. All “papers” (duplicate title, signed deeds, tax declarations, receipts) were indeed in order; Chua’s refusal to pay on time (despite capacity) was unjustified. The CA refused to include capital gains payment as a condition precedent to delivery of documents. It dismissed Chua’s complaint, forfeited the ₱100,000 earnest money, and ordered refund of the ₱485,000 tax advance.
Issues for Review
- Nature of the agreement: perfected contract of sale vs. contract to sell.
- Whether Chua’s withholding of payment was justified by Valdes-Choy’s alleged failure to put papers in order.
- Lawfulness of forfeiture of earnest money.
- Whether the trial court’s specific performance award was sustainable.
Applicable Law
– 1987 Constitution (jurisdiction)
– Civil Code (1987):
• Art. 1458 (definition of contract of sale)
• Art. 1495–1498 (vendor’s obligations; delivery by public instrument)
• Art. 1582 (vendee’s duty to pay)
• Art. 1181 (effect of suspensive conditions)
• Art. 1376 (usage or custom)
• Art. 1482 (earnest money in contract of sale)
• Art. 1592 (rescission in immovable property sale)
– Tax Code and P.D. 1529 (Torrens registration; capital gains tax computation)
Supreme Court Ruling
- The June 30 receipt created a contract to sell, not a contract of sale. Ownership remained with Valdes
Case Syllabus (G.R. No. 173794)
Facts of the Case
- Encarnacion Valdes-Choy owned a 718 sqm paraphernal house and lot at 40 Tampingco cor. Hidalgo St., San Lorenzo Village, Makati City (TCT No. 162955).
- Tomas K. Chua responded to the sale advertisement; parties agreed on a P10,800,000.00 cash price.
- On June 30, 1989, Chua paid P100,000.00 earnest money (PBCom Check No. 206011). Receipt: balance P10,700,000.00 due July 15, 1989; seller’s capital gains tax; forfeiture of earnest money if unpaid; “all papers in proper order.”
- On July 13, 1989, Chua secured a P480,000.00 manager’s check, then verbally ordered its stop payment.
- Parties executed on July 13 two Deeds of Absolute Sale: P8,000,000.00 for land/improvements; P2,800,000.00 for fixtures; agreed capital gains tax P485,000.00.
- On July 14, Chua gave PBCom Check No. 325851 for P485,000.00; Valdes-Choy issued receipt showing P10,215,000.00 remaining.
- Valdes-Choy paid the tax, presented manager’s check for P10,215,000.00; Chua refused delivery until TCT reissued in his name. Valdes-Choy tore the deeds.
- On July 17, Chua sued for specific performance; initial dismissal; refiled November 29, 1989.
Contractual Terms and Conditions
- Earnest money: P100,000.00, part of price if sale consummates; forfeitable if balance P10,700,000.00 unpaid by July 15.
- Seller to bear capital gains tax; buyer to pay balance by deadline; all papers to be in “proper order.”
- Deeds of Sale provided receipt of full payment despite the dispute that followed.
Trial Court Decision and Rationale
- Found a contract to sell on June 30, 1989, subject to payment and papers-in-order conditions.