331 Phil. 853
However, when private respondent signed the receipt, she crossed out the bracketed portion in paragraph 3 providing for the payment by private respondent of the amount of P100,000.00 as liquidated damages in the event she failed to eject the squatters sixty (60) days after the signing of the agreement. Thereafter, a check for P200,000.00 was given to private respondent as earnest money, leaving a balance of P3,347,600.00 to be paid in full after the squatters are ejected.
R E C E I P T
RECEIVED from ZAPATA REALTY CO. INC., through Mr. Edmundo Kaimo of 101 Kaimo Building, Metrobank Cashier’s Check No. 020583, Dasmariñas branch, in the sum of TWO HUNDRED THOUSAND (P200,000.00) PESOS, as earnest money for the purchase of a parcel of land at the corner of G. Araneta Avenue and Quezon Avenue, Quezon City, with an area of 1,013.6 sq. m. covered by TCT 193230, Registry of Deeds for Quezon City, at the price of P3,547,600.00, subject to the following conditions:
1. This sum of P200,000.00 shall form part of the purchase price;
2. The balance of P3,347,600.00 shall be paid in full after the squatters/occupants have totally vacated the premises;
3. The seller assumes full responsibility to eject the squatters/occupants within a period of sixty (60) days from the date of receipt of the earnest money; and in case the seller shall fail in her commitment to eject the squatters/occupants within said period, the seller shall refund to the buyer this sum of P200,000.00 [plus another sum of ONE HUNDRED THOUSAND (P100,000.00) PESOS as liquidated damages]; however, if the buyer shall fail to pay the balance after the seller has ejected the squatters/occupants, this sum of P200,000.00 shall be forfeited by the seller;
4. Capital gains tax, documentary stamps tax and broker’s commission shall be for seller’s account while transfer and registration fees shall be for buyer’s account.
5. That Zapata Realty Co. Inc. and Edmundo F. Kaimo are the exclusive brokers of the buyers Vicente & Michael Lim.
6. Buyer assumes responsibility of the premises immediately upon eviction of the squatters.
Quezon City, September 2, 1988.
(SGD.) LIBERTY H. LUNA
(SGD.) EDMUNDO KAIMO
WHEREFORE, under cool reflection and prescinding from the foregoing, judgment is rendered in favor of the defendants and against plaintiff:The private respondent appealed to the Court of Appeals, which reversed the trial court and allowed the complaint for consignation. It held that as a result of the nun-fulfillment of the condition of ejecting the squatters, petitioners lost the right to demand from the private respondent the sale of the land to them. The appellate court described the sale in this case as a "contract with a conditional obligation" whereby the private respondent’s obligation to sell and deliver and the petitioners’ obligation to pay the balance of the purchase price depended on the fulfillment of the condition that the squatters be removed within 60 days.
1. The complaint is dismissed.
2. Perforce, plaintiff is ordered to comply with the Receipt Agreement dated September 02, 1988 regarding the sale to the defendants of the property covered by Transfer Certificate of Title No. T-193230 of the Registry of Deeds of Quezon City, upon payment by the defendants of the balance of P3,800,000.00.
3. Plaintiff is ordered to pay the defendants the sum of P500,000.00 as moral damages.
4. Plaintiff to pay defendants the sum of P50,000.00 by way of attorney’s fees.
5. Plaintiff to pay the cost.
The Court of Appeals held:It also ruled that consignation was proper as the obligation to refund earnest money was a clear debt and that contrary to the finding of the trial court, the facts show that private respondent exerted earnest efforts to eject the squatters and was, therefore, not in bad faith.
Under such conditions, upon the ejectment of the squatters plaintiff would acquire the right to demand that defendants proceed with the sale and pay the balance of the purchase price; and, on the other hand, should the event not happen, defendants would lose the right they had acquired by giving the earnest money to plaintiff to demand that the latter sell said land to them.
I. THE RULING OF THE COURT OF APPEALS THAT "THE NON-FULFILLMENT OF THE CONDITION OF EJECTING THE SQUATTERS RESULTED IN DEFENDANTS’ LOSING THE RIGHT (ACQUIRED BY VIRTUE OF THE EARNEST MONEY) TO DEMAND THAT PLAINTIFF SELL THE LAND TO THEM" IS PATENTLY AGAINST THE SPECIFIC LAW ON SALES, AND IS A DISTORTED AND CLEARLY ERRONEOUS APPLICATION OF THE GENERAL PROVISIONS OF THE LAW ON OBLIGATIONS AND CONTRACTS.The petition is well taken. The first question is whether as a result of private respondent’s failure to eject the squatters from the land, petitioners, as the Court of Appeals ruled, lost the right to demand that the land be sold to them. We hold that they did not and that the appellate court erred in holding otherwise. The agreement, as quoted, shows a perfected contract of sale. Under Art. 1475 of the Civil Code, there is a perfected contract of sale if there is a meeting of the minds on the subject and the price. A sale is a consensual contract requiring only the consent of the parties on these two points. In this case, the parties agreed on the subject, the 1,013.6 square meter lot and on the purchase price of P4,000,000.00. No particular form is required for the validity of their contract and, therefore, upon its perfection. The parties can reciprocally demand performance of their respective obligations.
II. THE RULING OF THE COURT OF APPEALS IS A DISTORTION OF THE CONTRACT BETWEEN THE PARTIES, WAY OF JUSTICE ITSELF BECAUSE IT REWARDS RATHER THAN SANCTIONS THE NON-PERFORMANCE OF A CONTRACTED OBLIGATION.
III. THE QUESTION OF WHETHER OR NOT RESPONDENT LUNA EXERTED EARNEST EFFORTS TO EJECT THE SQUATTERS DOES NOT PERTAIN TO THE ISSUE OF THE PROPRIETY OF CONSIGNATION BUT REFERS TO THE MATTER OF WHETHER OR NOT RESPONDENT LUNA WAS IN BAD FAITH AND IS THEREFORE LIABLE FOR DAMAGES INFLICTED UPON THE PETITIONERS; AND THE RULING THAT SUCH EARNEST EFFORTS WAS PRESENT IS CONTRARY TO UNCONTRADICTED EVIDENCE.
ART. 1545. Where the obligation of either party to a contract of sale is subject to any condition which is not performed, such party may refuse to proceed with the contract or he may waive performance of the condition. If the other party has promised that the condition should happen or be performed, such first mentioned party may also treat the nonperformance of the condition as a breach of warranty.In this case, there is already a perfected contract. The condition was imposed only on the performance of the obligation. Hence, petitioners have the right to choose whether to demand the return of P200,000.00 which they have paid as earnest money or to proceed with the sale. They have chosen to proceed with the sale and private respondent cannot refuse to do so.
Where the ownership in the things has not passed, the buyer may treat the fulfillment by the seller of his obligation to deliver the same as described and as warranted expressly or by implication in the contract of sale as a condition of the obligation of the buyer to perform his promise to accept and pay for the thing. (Emphasis added)
Under the agreement, private respondent is obligated to evict the squatters on the property. The ejectment of the squatters is a condition the operative act of which sets into motion the period of compliance by petitioner of his own obligation, i.e., to pay the balance of the purchase price. Private respondent’s failure "to remove the squatters from the property" within the stipulated period gives petitioner the right to either refuse to proceed with the agreement or waive that condition in consonance with Article 1545 of the Civil Code. This option clearly belongs to petitioner and not to private respondent.The second question is whether private respondent is liable for damages to petitioners. The trial court correctly found private respondent guilty of breach of contract and awarding moral damages and attorney’s fees to petitioners. The court held:
. . . .
In any case, private respondent’s action for rescission is not warranted. She is not the injured party. The right of resolution of a party to an obligation under Article 1191 of the Civil Code is predicated on a breach of faith by the other party that violates the reciprocity between them. It is private respondent who has failed in her obligation under the contract.
The failure of the plaintiff (Luna) to eject the squatters which is her "full responsibility" and "commitment" under the contract of sale, aggravated by her persistence in evading the obligation to deliver the property on the basis of her very own failure, the persistence culminating in the instant case for consignation, show not just a breach of contract but a breach in bad faith. . . .Indeed, the evidence shows that private respondent made little more than token effort to seek the ejectment of squatters from the land, revealing her real intention to be finding a way of getting out of her contract. Her failure to eject the squatters despite sufficient time and funds given to her by petitioners, her offer to return the earnest money only a month after their meeting on January 17, 1989 in which she agreed to proceed with the sale in consideration of which the purchase price was increased by almost P500,000.00 and her consignation of the earnest money despite petitioners’ insistence that the sale should go on even if she had failed to eject the squatters -- all these betray private respondent’s failure to comply with her obligation. Private respondent’s lack of intention to really comply with her obligation under the contract is underscored by her failure to seek the assistance of courts in ejecting the squatters. It might be granted that, at first, she thought going to the city engineer’s office was the expedient way of ejecting the squatters. However, having seen the futility of such recourse and having been given money, private respondent had no excuse for filing the action below. Her failure to make use of her resources and her insistence on rescinding the sale shows quite clearly that she was indeed just looking for away to get out of her contractual obligation by pointing to her own abject failure to rid the land of squatters.
The Court finds that the defendant may be awarded moral damages in the amount they prayed for, which is P500,000.00 considering that it was the same amount which the parties have determined as the cost of the removal of the squatters. The clear absence of merit of plaintiff’s position, which at [the] bottom is an attempt to profit from one’s own breach, compels this court to award attorney’s fees, defendants having been unnecessary dragged into a litigation.