Case Summary (G.R. No. 91901)
Agreement Details
On December 27, 1985, the petitioners entered into an "Earnest Money" agreement with the private respondent, which included terms regarding the outstanding mortgage with the Social Security System (SSS). As per the agreement, Dr. Chua would pay the balance upon the removal of current tenants from the property. An addendum to the agreement stipulated conditions under which either party could rescind, specifying liquidated damages payable in the event of cancellation.
Events Leading to Dispute
On May 25, 1986, the petitioners, through their attorney-in-fact Benedicto Catalan, formally expressed a desire to rescind the agreement due to an inability to complete the sale within a specified time frame. Dr. Chua’s representative responded, indicating a willingness to proceed with the purchase regardless of the tenant situation and expressing that the delays were unjust.
Legal Action and Court Processes
Dr. Chua filed an action for specific performance on July 3, 1986, after the petitioners rescinded the contract. The Regional Trial Court rendered a judgment on May 25, 1987, ordering the petitioners to execute the deed of sale in favor of the plaintiff, and additionally awarding damages and attorney's fees to Dr. Chua.
Appeals and Court Decisions
The petitioners appealed the trial court's decision to the Court of Appeals, which upheld the judgment while modifying it by removing the award for moral damages. The petitioners subsequently filed a motion for reconsideration, which was denied.
Legal Issues Presented
The Supreme Court was presented with two legal issues:
- Whether Dr. Chua had the right to demand specific performance despite agreeing to a waiver of such a right in the addendum.
- Whether the award of attorney's fees was appropriate given the penal clause in the contract concerning non-performance.
Supreme Court's Ruling
The Supreme Court granted the petition, invoking provisions from the Civil Code regarding contract interpretation. The Court clarified that the agreement constituted a clear contract to sell and that the rights purported by both parties in their addendum were enforceable as stated. The Court found that the petitioners’ rescission o
...continue readingCase Syllabus (G.R. No. 91901)
Case Background
- The case revolves around the interpretation of a contract of sale involving a house and lot located at 665 Boni Avenue, Mandaluyong, Metro-Manila, Philippines, between the petitioners, Spouses Leoncio G. Cifra and Aurora R. Jongco-Cifra, and the private respondent, Dr. Manuel B. Yu Chua.
- On December 27, 1985, the petitioners, represented by their attorney-in-fact Benedicto Catalan, entered into an agreement termed "Earnest Money."
- The agreement detailed a purchase price of P1.1 million, with the buyer assuming an outstanding mortgage of approximately P40,000 with the Social Security System (SSS).
Terms of the Contract
- An earnest money payment of P5,000 was made as part of the transaction.
- The contract stipulated that the buyer would pay the remaining balance upon the removal of the current tenant and the execution of a Deed of Absolute Sale.
- In the event of cancellation by either party, specific conditions regarding the forfeiture of earnest money and payment of damages were laid out in an addendum:
- If the buyer failed to purchase after being notified of the tenant's surrender, the earnest money would be forfeited, and the buyer would owe the seller P20,000 plus attorney's fees.
- Conversely, if the seller failed to sell after the tenant vacated, the seller would return the earnest money and pay the buyer P20,000 plus attorney's fees.