Case Summary (G.R. No. 137122)
Property Transaction and Initial Agreement
In 1988, Barretto & Sons owned multiple parcels of land in Quiapo, Manila, mortgaged to the United Coconut Planters Bank (UCPB). Following the corporation's financial difficulties, Goldenrod expressed interest in purchasing the properties. On May 25, 1988, Goldenrod sent a letter to Anthony Que, adjusting terms related to payment and property consolidation while enclosing an earnest money deposit of PHP 1 million, which was to be applied towards the total purchase price.
Obligations and Extension Requests
As negotiations progressed, Goldenrod agreed to assume Barretto Realty's obligations to UCPB, which included a PHP 24.5 million payment due by June 30, 1988, and a PHP 20 million balance. Goldenrod failed to meet the initial payment deadline, requesting multiple extensions which UCPB ultimately denied. The property was subsequently reconsolidated into two titles at the request of Goldenrod.
Notification of Non-Compliance and Rescission
On August 30, 1988, Goldenrod, via its agent, communicated that it could not proceed with the acquisition. This decision stemmed largely from UCPB's refusal for further extensions. Following this notice, Goldenrod requested the return of the PHP 1 million earnest money. The property was sold by Barretto Realty to a third party, Asiaworld, shortly thereafter.
Legal Proceedings and Initial Rulings
Goldenrod initiated legal action against the respondents for the return of the earnest money and associated damages. The initial trial court found that there was no agreement for forfeiture of the earnest money upon non-completion of the sale, ultimately ordering respondents to return the deposit, alongside damages.
Appeal and Ruling of the Court of Appeals
Respondents appealed this decision, contending that the earnest money was rightfully withheld under the terms of the agreement for potential losses. The Court of Appeals overturned the trial court’s ruling, leading to Goldenrod's petition for review.
Supreme Court's Decision
The Supreme Court ruled in favor of Goldenrod, noting the absence of any definitive stipulation for the forfeiture of the earnest money. The Court referred to provisions under Article 1482 of the Civil Code, stipulating that earnest money is part of the purchase price, and emphasized that the lack of an express agreement on forfeiture suggested that retaining the earnest money would constitute unjust enrichment. The Court iterated that the failure of Goldenrod to complete the transaction allowed for the extrajudicial rescission of the contract, which was uncontested by Barretto Realty.
Impli
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Case Citation
- Jurisdiction: Supreme Court of the Philippines
- Case Number: G.R. No. 126812
- Date: November 24, 1998
- Reported in: 359 Phil. 468
Parties Involved
- Petitioner: Goldenrod, Inc. (GOLDENROD)
- Respondents: Court of Appeals, Pio Barretto & Sons, Inc. (BARRETTO & SONS), Pio Barretto Realty Development, Inc. (BARRETTO REALTY), and Anthony Que
Background
- Property Details: BARRETTO & SONS owned 43 parcels of registered land in Quiapo, Manila, mortgaged to the United Coconut Planters Bank (UCPB).
- Financial Situation: By 1988, BARRETTO & SONS had unpaid obligations to UCPB, leading to imminent foreclosure.
- Offer to Purchase: GOLDENROD offered to buy the property, with a purchase agreement being established on May 25, 1988, including an earnest money deposit of P1 million.
Key Issues
- Earnest Money Agreement: The case centers around whether the seller (BARRETTO REALTY) could retain the earnest money as damages due to the prospective buyer's (GOLDENROD) failure to complete the sale.
Chronology of Events
- May 25, 1988: GOLDENROD offered to purchase property and paid earnest money of P1 million.
- June 30, 1988: Deadline for GOLDENROD to settle BARRETTO REALTY's outstanding obligations with UCPB, which GOLDENROD failed to meet.
- August 4, 1988: Titles were reconsolidated by BARRETTO REALTY at GOLDENROD's request.
- August 30, 1988: GOLDENROD, through its broker, informed BARRETTO REALTY of their