ANGEL T. LIMJOCO, PETITIONER, VS. THE COURT OF APPEALS AND ROBERT TAN, RESPONDENTS.

In this petition for the review of respondent Court of Appeal’s decision
sustaining the right of the other respondent, Robert Tan, plaintiff in the
lower court, to recover the sum of P5,000.00 as earnest money for a projected
sale of real estate that was not consummated as well as the liquidated damages
agreed upon, the principal legal question raised and relied upon for the
reversal sought is the alleged disregard of the last paragraph of Article 1169
of the Civil Code to the effect that in reciprocal obligations, “neither
party incurs in delay if the other does not comply or is not ready to comply in
a proper manner with what is incumbent upon him.  From the moment one of the parties fulfills
his obligation, delay by the other begins.”^[1]
It was thus incumbent on petitioner Angel T. Limjoco,
defendant in the lower court and thereafter appellant before respondent Court,
to demonstrate that the conduct of respondent Tan could be considered as
falling within the above codal provision.  That he was unable to do.  The facts as found by the lower court, and
thereafter affirmed by respondent Court, negated his contention.  The conclusion reached by respondent Court
was thus adverse to petitioner.  After a
careful study of the records and in the light of the facts as found, impressed
as they are with the attribute of finality, there is no justification for a
reversal.  We affirm.

The basic contract that gave rise to this dispute executed on
April 30, 1957, starts with the recital that petitioner Angel T. Limjoco acknowledged the receipt of P5,000.00 from Robert
Tan, respondent in this case, as earnest money “for the land with a total
area of 3,148 square meters located in the compound at No. 56 (old number) R. Pascual Street, San Juan, Rizal,
together with all the improvements thereon which as absolute owner
thereof,”^[2]
the aforesaid Limjoco promised and did undertake to
sell to Tan for the sum of P85,000.00, it being further stipulated
“1.  That within sixty days from
this date [he undertakes] to execute the necessary deed of sale in favor of Mr.
Robert Tan for the above described property as evidenced by Transfer
Certificates of Title Nos. 25184, 7869 and 20713 of the Registry of Deeds of Rizal with all the improvements thereon for the sum of
[Eighty five thousand] (P85,000.00) [pesos], the terms of payment of which will
be that the buyer Mr. Robert Tan will assume the mortgage lien of about [Thirty
two thousand] (P32,000.00) [pesos] in said property in favor of the
Rehabilitation Finance Corporation for a ten-year period [with Limjoco undertaking] to arrange with said corporation, and
the said buyer upon [the] execution of the deed of sale will pay [him] one half
of the remaining balance after deducting the amount of mortgage to be assumed
by the buyer and the sum of [Five thousand] (P5,000.00) [pesos] earnest money
here received by [him] within one hundred twenty days thereafter the other half
of the aforesaid remaining balance; 2. 
That should [he] fail to perform the undertaking herein stipulated, [he]
hereby [binds himself] to return to Mr. Robert Tan the said sum of [Five
thousand] (P5,000.00) [pesos] within fifteen days
after the lapse of the sixty-day period herein stipulated, otherwise [he] shall
be liable to him for the additional sum of [Five thousand] (P5,000.00) [pesos]
as damages; and 3.  That should [he]
comply with all the stipulations herein stated within the sixty-day period and
Mr. Robert Tan fails to purchase the property herein described under the
conditions herein agreed, within fifteen days upon written notice to him, then
his earnest money of [Five thousand] (P5,000.00) [pesos] shall be declared
forfeited by [Tan] in [his] favor.”^[3]

As noted at the outset, there was a failure to consummate such
proposed sale.  The lower court found,
and it was upheld by respondent Court, that for such frustration of the intent
of the parties, petitioner Limjoco was to blame.  Thus: “As may be seen, defendant in
explicit terms undertook to execute the necessary deed of sale or conveyance of
the property, object of the contract, within 60 days from and after the execution
of the contract, Exhibit A.  This
contract, as already stated, was executed on April 30, 1957, so that defendant had until June 29, 1957, within which to comply
with its terms.  By the terms of the
contract also, defendant undertook to arrange with the RFC the assumption by
the plaintiff of the mortgage lien of about P32,000.00
covering said property in favor of the said corporation for a period of 10
years.  There is no dispute
that defendant failed to comply with these conditions.  Defendant contended, however, that he was not
able to arrange the approval of the assumption of the mortgage with the RFC
because of the refusal of the plaintiff to have his credit rating
investigated.  This is not borne out by
the facts, however, because the plaintiff had expressed his willingness to have
his credit rating investigated although he thought it was unnecessary.  The truth of the matter is that it was only
on July 9, 1957, when an
attempt was made by a representative of the RFC to investigate him but at that
time the period set forth in the contract, Exhibit A, had already
expired.”^[4]
Further to the same effect: “As to the reason of the delay of the attempt
to investigate the plaintiff that has not been satisfactorily explained by
defendant.  Defendant further contended
that he had submitted a draft of the deed of sale to the plaintiff before the
expiration of the date but according to him the plaintiff refused to accept the
draft.  The refusal, however, [of] the
plaintiff to accept the draft was based on the fact that there was no need of
the said draft because the terms and conditions of the deed of sale were
explicitly set forth in their agreement, Exhibit A.  This he made explicit in his letter to the
defendant, Exhibit J, wherein he stated that he had reminded defendant’s lawyer
to execute the necessary deed of sale on or before June 29, 1957.  Defendant, however, failed to execute the
deed.  The reason for this failure was,
in the opinion of the Court, the fact that the defendant could not secure the
signatures of all his children because one of them was in Davao at the time and ‘was
expected to he here about the end of next month’ (Exhibit G).”^[5]
As it turned out, petitioner Limjoco, whose status
according to the contract was that of a widower, was not the sole owner, His
children apparently were co-owners.

Moreover, the lower court did reach the conclusion that
petitioner was not successful in trying to prove through certain exhibits that
respondent Tan was not without fault because of the alleged loss of
interest.  Thus: “As may be noted,
these documents bear dates after the period of 60 days had already
elapsed.  Assuming that plaintiff had
lost interest in the deal, such loss of interest cannot be interpreted as proof
of plaintiff’s default in view of the fact that the loss of interest had taken
place after the 60 days period.  It
should not be lost sight of the fact that defendant had been reminded thru his
counsel to prepare the deed of sale on or before June 29, 1957, as shown by the letter, Exhibit G.  It will be noted that the fact of reminder
about the deed has not been denied or refuted by defendant.”^[6]

There was a reiteration later in the opinion of the lower court,
a view with which respondent Court was in agreement, that petitioner should be
held at fault for the sale not going through. 
Thus: “As has already been shown elsewhere in this decision, the
failure of defendant to comply with the terms of Exhibit A was due in the first
place to the fact that one of his children was not in a position to sign the
deed as she was then in Davao, and was not expected
to return until the end of July, and, second, because of the fact that a
representative of the RFC only took steps to investigate the credit rating of
the plaintiff after the expiration of the period.  If the defendant had exercised due diligence,
these two circumstances could have been avoided.  Moreover, when he found it impossible to
comply with the terms of the contract, he should have returned the earnest
money and put an end to the contract.  He
failed to do all these however.  Instead
he asked for extension of 30 days within which to comply with the terms of the
contract or a period of 90 days within which to return the money.”^[7]

On appeal, respondent Court, after quoting in full the above
decision, explained why it was entitled to affirmance.  Thus: “We have carefully read and
scrutinized the testimonial and documentary evidence presented by both parties
at the pre-trial and at the formal trial of this case, and we are greatly
satisfied that the findings of fact and conclusions of the learned trial Judge
are fully supported by the evidence and the law.  Why the plaintiff-appellee
was not declared to be the party who failed to comply with his duties and
obligations under his contract with defendant-appellant (Exhibit A), but it was
the latter who was found remiss in connection therewith, is explained at length
in the above-quoted decision.  As regards
this point, we have nothing to add thereto.”^[8]

On the above facts, which as pointed out we are not at liberty to
ignore, there is, to repeat, no legal basis for the reversal of the decision of
respondent Court of Appeals.

The first three alleged errors imputed to respondent Court would
seek to impress on us that respondent Tan failed to comply in a proper manner
with what was incumbent upon him and that therefore under Article 1169 of the
Civil Code, petitioner Limjoco could not be
considered as having incurred any delay in the fulfillment of his obligation.^[9]
It is undeniable that if a case were properly made out calling for the
application of Article 1169, then such a contention should be accorded
acceptance.  The facts as conclusively
found not only by respondent Court but also by the lower court negate such a
claim.  There is no denying that if the
sale within the two-month period stipulated did not take place, it was due
solely to petitioner.  As was so aptly
expressed in the opinion of the lower court to which there was full concurrence
on the part of respondent Court, “the failure of the defendant to execute
the deed of sale within the time limit was due to his inability to secure the
signature of all his children, and his failure to secure the approval of the
RFC to the assumption of the mortgage covering said property, which in the
agreement, Exhibit A, he undertook to arrange.”^[10]
There is no basis then for the allegation that respondent Court was unmindful
of the reciprocal obligation assumed by respondent Tan and that he should be
held accountable for the failure to comply with what was incumbent upon him
which in turn prevented petitioner from fulfilling his part of the
contract.  The first two assigned errors
are thus obviously without foundation. 
It would likewise follow that, as had been set forth above, the last
paragraph of Article 1169 of the Civil Code cannot be relied upon by petitioner
for relieving him from the obligation to execute the deed within the period
stipulated as his inability to do so was not the result of any fault that could
be imputed to respondent Tan.  The third
assignment of error is thus equally lacking in merit as is the fourth alleged
error committed by respondent Court to the effect that the suit by respondent
Tan was premature as he then lacked a cause of action.  There being a failure on the part of petitioner
to execute the deed of sale, he was required under the contract to return the
earnest money and to pay the liquidated damages.

This liability for liquidated damages is assailed in the fifth
assignment of error as immoral, petitioner relying on another provision of the
Civil Code^[11]
which would allow an equitable reduction in liquidated damages when found
iniquitous or unconscionable.  This Court
does not find persuasive the plea that for the failure on the part of a party
to comply with what is incumbent upon him, he is not only required to return
the earnest money but likewise to pay liquidated damages in the same
amount.  Petitioner was under no
compulsion to enter into such stipulation. 
Nor, in the absence of other considerations which petitioner’s brief
failed to mention at all, could it be held as a matter of law that the sum
agreed upon as liquidated damages could be assailed for the ground of its being
iniquitous or unconscionable.  Petitioner
Limjoco and respondent Tan are both property owners
and men of affairs who are presumed to know how to protect their interests in
dealing with other parties.  After
entering into such an agreement, petitioner cannot thereafter turn his back on
his word with a plea that on him was inflicted a penalty shocking to the
conscience and impressed with iniquity as to call for the relief sought on the
part of a judicial tribunal.

WHEREFORE, the decision of respondent Court of October 31,
1962 is hereby affirmed.  With costs against petitioner.

Dizon, Makalintal,
Zaldivar, Ruiz Castro, Teehankee,
and Barredo, JJ., concur.

Concepcion, C.J., and Reyes, J.B.L., J.,
in the result.

Villamor and Makasiar, JJ.,
did not take part.

^[1]
Article 1169 reads in full:  “Those
obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially
demands from them the fulfillment of their obligation.  However, the demand by the creditor shall not
be necessary in order that delay may exist: 
(1) When the obligation or the law expressly so declares; or (2) When
from the nature and the circumstances of the obligation it appears that the
designation of the time when the thing is to be delivered or the service is to
be rendered was a controlling motive for the establishment of the contract; or
(3) When demand would be useless, as when the obligor has rendered it beyond
his power to perform.  In reciprocal
obligations, neither party incurs in delay if the other does not comply or is
not ready to comply in a proper manner with what is incumbent upon him.  From the moment one of the parties fulfills his
obligation, delay by the other begins.”

^[2]
Appendix to the Brief for the Petitioner – Appellant, p. 37.

^[3] Ibid,
pp. 37-39.

^[4] Ibid,
pp. 48-49.

^[5] Ibid,
pp. 49-50.

^[6] Ibid,
pp. 51-52.

^[7] Ibid, p. 52.

^[8] Ibid, p. 55.

^[9]
Cf. Article 1169 and the following decisions: 
Rodriguez v. Belgica, L-10801, Feb. 28, 1961, 1 SCRA 611; Ramcar, Inc. v. Garcia, L-16997, April 25, 1962, 4 SCRA 1087; Camus v. Price, Inc. 
L-17858-59, July 13, 1962,
5 SCRA 581.

^[10]
Appendix to the Brief for the Petitioner-Appellant, pp. 52-53.

^[11]
Article 2227 provides:  “Liquidated
damages, whether intended as an indemnity or a penalty, shall be equitably
reduced if they are iniquitous or unconscionable.”