G.R. No. 91901 (June 3, 1991)
Topics: Earnest Money
Summary:
RTC ordered the execution of the deed of absolute sale in favor of Chua. Cifra informed Chua of its desire to rescind the contract and promised to return the earnest money. In reply, Chua sent a number of letters with the following stipulations: He intends to pursue the sale because there is no just reason to rescind it.
Both parties are given the freedom to back out of the transaction provided that the seller pays the buyer Php 20,000.00. This right is afforded to both parties, irrespective of whether or not the occupant of the premises had vacated the same.
Doctrines:
Art. 1482. Whenever earnest money is given in a contract of sale, it shall be considered as part of the price and as proof of the perfection of the contract.
Facts:
Spouses Cifra entered into an agreement with Chua. Their agreement is denominated as ‘Earnest Money”, with the following provisions:
- That Cifra received from Cgua Php 5,000.00 earnest money
- Property is presently mortgaged with SSS
- Manner of payment for the agreed purchase price of Php 1.1M. It shall be paid upon the removal of the tenant from the subject property
- Earnest money shall form part of the purchase price
- In case one of the parties shall not make good his promise
- In case the buyer fails to purchase the property after the tenant vacate, earnest money will be forfeited and additional payment of Php 20,000.00 shall be made
- In case the seller shall not make good his promise to sell, he shall return the earnest money and make additional payment of Php 20,000.00
Subsequently, through a letter, Cifra informed Chua of its desire to rescind the contract and promised to return the earnest money.
In reply, Chua also send a number of letters with the following stipulations:
- He intends to pursue the sale because there is no just reason to rescind the sale
- He can pay the purchase price and undertake the action to vacate the tenants
Chua then filed an action for specific performance. RTC ordered the execution of the deed of absolute sale in favor of Chua.
CA affirmed RTC decision. Hence, this petition.
Issue:
Whether Chua has the right to demand specific performance from Cifra to sell the property despite the fact that he had agreed to a waiver of such right when he consented to the stipulation recognizing on the part of Cifra to cancel the sale for any reason by paying the liquidated damages.
Ruling:
No. It is clear from the contract/Earnest Money document that both parties are given the freedom to back out of the transaction provided that
- In case of the seller, he must return the earnest money plus give the buyer Php 20,000.00.
- In case of the buyer, earnest money will be forfeited plus payment of Php 20,000.00 to the seller.
This right to revoke is afforded to both parties, irrespective of whether or not the occupant of the premises had vacated the same.