G.R. No. 91901. June 03, 1991
SPOUSES LEONCIO G. CIFRA AND AURORA R. JONGCO-CIFRA, PETITIONERS, VS. COURT OF APPEALS AND MANUEL B. YU CHUA, RESPONDENTS.
GANCAYCO, J.:
The interpretation of a contract to sell or a promise to sell real property is in issue in
this case.
On December 27, 1985,
petitioners spouses, represented by their attorney-in-fact Benedicto
Catalan, entered into an agreement with private respondent denominated
“Earnest Money” which provides as follows:
“EARNEST MONEY
Received from Dr. Manuel G. Yu Chua the cash sum of FIVE THOUSAND
PESOS (P5,000.00) Philippine currency as earnest money for the house and lot
owned by the spouses Leoncio G. Cifra,
Jr. and Aurora R. Jongco-Cifra. The property is located at 665 Boni Avenue, Mandaluyong,
Metro-Manila, Philippines and more particularly described in the Transfer
Certificate of Title (TCT) No. 490040 (6093).
The above property is presently mortgaged with the Social Security System (SSS) with
an outstanding balance of more or less FORTY THOUSAND PESOS (P40,000.00) as of
November, 1985. The agreed purchase
price being ONE MILLION and ONE HUNDRED THOUSAND PESOS (P1.1M) shall be payable
as follows: The sum equivalent to the
above purchase price minus the outstanding mortgage balance with the SSS and
the above earnest money shall be paid by the buyer to the seller upon the removal of the present tenant or occupant from the premises and upon
the execution of the Deed of Absolute Sale.
It is the understanding of the parties that the buyer shall assume
the mortgage or obligation of the seller with the SSS as of November 1985. The monthly amortization was last paid by the
seller on November 13, 1985 as evidenced by the Official Receipt (OR) No.
988474 K issued by Bank of the
Philippine Islands (BPI), Ayala
(Main). Further, the seller
promises to secure at the shortest possible time the certification of balance or up to date statement of
account from the SSS and deliver the same to the buyer.
If and when the buyer
purchases the property according to the terms and conditions above specified,
the herein earnest money shall form a part of the purchase price otherwise the same shall be forfeited in favor of
the seller.
IN WITNESS WHEREOF, the parties executed this instrument at the Municipality
of Mandaluyong,
Metro-Manila, Philippines,
this 27th day of December 1985.
Earnest money received
by the sellers: Earnest money paid by the buyer:
LEONCIO G. CIFRA, JR.
and
AURORA R.
JONGCO-CIFRA (s/t)
MANUEL G. YU CHUA, M.D.
By:
(s/t)
BENEDICTO F. CATALAN
Attorney-in-Fact
SIGNED IN THE PRESENCE OF:
(s/t)LOURDES
J. CATALAN (s/t) Illegible
EARNEST MONEY
(on
Page 2)
Addendum:
In the event that the buyer shall fail to purchase the property after
he is formally notified by the seller of the surrender of the premises by the
present tenant or occupant, in
addition to the forfeiture of the earnest money the buyer binds himself to pay
the seller the sum of TWENTY THOUSAND PESOS (P20,000.00) Philippine currency plus the attorney’s fees and other
costs for any court case that may arise.
On the other hand, if the seller shall not make good his promise to
sell the above property even after the present tenant, William Lim Valencia, shall have surrendered the premises
the seller binds himself to return
the earnest money and in addition pay the buyer the sum of TWENTY THOUSAND
PESOS (P20,000.00) Philippine currency plus the attorney’s fees and other cost
of any court case that may arise.
(s/t) BENEDICTO F.
CATALAN (s/t)
MANUEL G. YU CHUA, M.D.
(s/t.)LOURDES
J. CATALAN (s/t) Illegible”[1]
On May 25,
1986, Catalan
informed private respondent of the desire of petitioners to rescind the contract by a letter which reads:
“May 25, 1986
Dr. Manuel G. Yu Chua
649-D Boni
Avenue
Mandaluyong, M.M.
Dear Dr. Yu Chua:
I regret to inform you that my sister-in-law, Mrs. Aurora Cifra, has asked me to request for a rescission of her
offer to sell their property at 665 Boni Avenue. The negotiations
for the sale of the house and lot have taken such a long time without your fault nor their fault they have now missed the opportunity for which
they wanted to apply the proceeds of the sale.
I intend to see you on May 31, 1986
to return the earnest money that you gave us.
I would like to personally apologize for the way things turned out.
Very truly yours,
(s/t) Benedicto
F. Catalan”[2]
Atty. Marcelino
Arias replied in behalf of private respondent:
“MR. BENEDICTO F.
CATALAN
12 T. Evangelista, B.F. Homes
Parañaque, Metro Manila
Dear Mr. Catalan:
This is in behalf of my client, Dr. Manuel G. Yu Chua, of 649-D
Boni Ave., Mandaluyong, Metro Manila.
Your letter dated May 25,
1986 sent through registered
mail to my client was received
by my client today, May 29, 1986
and immediately referred the same to my office
for proper legal comment.
My client shall pursue the agreement
you have entered into and my client is willing to buy the property right now at 1.1 Million
Pesos’ minus of course the Five Thousand
(P5,000.00) Pesos earnest money and the outstanding SSS mortgage account over
the premises which my client had assumed
to pay.
You have stated of course, that it is not the fault of my client nor the fault of your principal and there
being no fault of any of them, then
there is no reason why the contract of agreement to sell shall not be pushed through.
My client is even willing to
pay the amount of 1.1 Million Pesos as per agreement even if the present
tenant in the premises is still occupying the said premises. Please take note that the contract of lease
executed by and between your principal and the present tenant clearly provides
that the tenant shall vacate the premises within ninety (90) days from notice of the sale of the property in question
to any other third person.
Off hand, my client shall certainly take this matter to court to
enforce his right and should this happen, then we shall be asking for proper
damages.
Consequently, we reiterate that we are willing to buy the property
now in the agreed amount as previously agreed upon. [sic]
You are aware also that my
client was deprived to buy a cheaper property of 614 sq. m. located at the
corner of Boni and Mayon
Sts. also in Mandaluyong for Nine Hundred Thousand
(P900.000.00) Pesos only in order to buy your property at 1.1 Million
Pesos. Now, the property at the corner
of Boni and Mayon Sts. is
no longer for sale to the damage and prejudice of my client.
Furthermore, my client had deposited the 1.1 Million Pesos in a
bank earning only the usual interest instead of a higher yielding business
venture because he was anticipating for the consummation of your agreement to
sell the property to my client.
I hope we shall not meet in
court to enforce my client’s right over the premises to avoid extra unnecessary
expenses in court litigation.
Very truly yours,
(s/t) MARCELINO P. ARIAS
(Original reply received May 31,1986 by (s/t) B.F. Catalan)”[3]
This was followed by
another letter:
June 13, 1986
R. BENEDICTO F. CATALAN
12 T. Evangelista, B.F. Homes
Parañaque, Metro Manila
Dear Mr. Catalan:
This is a reiteration of our letter dated May 29, 1986
and received by you on May 31, 1986. Up to now, we have not received any response
from you. We will give you ten (10) days
from receipt hereof within which to tell us in clear terms whether you will
still proceed with the sale of the property to my client, Dr. Manuel G. Yu Chua
or not.
Your silence would be interpreted by us to mean that you want us to
take this matter to court to
vindicate the rights of our client and should this happen, it will be an
additional unnecessary expenses on your part and on our part, but most of all, on your part as we will file an
action for damages aside from attorney’s
fees.
‘I hope we shall not
go to court to avoid unnecessary expenses.
We shall wait for your answer.
(s/t) MARCELINO P. ARIAS”[4]
Private respondent
himself wrote a letter to Catalan dated June 18, 1986:
“MR. & MRS. BENEDICTO CATALAN
12 Evangelista Street
BF Homes, Parañaque, Metro
Manila
Dear Mr. & Mrs. Catalan:
At the outset, you knew I disliked attending court trials, that is why to avoid such possibility
with your tenant, I agreed to the stiff price of P1.1 Million for the property
at 665 Boni Avenue,
Mandaluyong in exchange for your assurance that you
will take care of ejecting your tenant.
We signed our agreement to this effect last Dec. 27, 1985. You gave your tenant a 90-day notice to
vacate so that gave him up to the end of March 1986 to look for another residence.
Then suddenly, at the end of the 90-day period, you told me that the
tenant had just offered you a better price for the property and you were
considering it. That was bad faith, loud
and clear! The tenant had waived any right to the property to all of us
personally during the negotiations; and again, he confirmed this when he accepted the 90-day notice to
vacate. Without showing my indignation
at this trampling of my rights, I told you I was ready to buy the property even
while the tenant was still residing there.
In other words, I was willing now to suffer the inconvenience and added
costs of trying to eject the tenant. You
answered that you had to consult with your principal first and this would take
about two weeks. The 2 weeks extended to
two (2) months and last May 29, 1986 I received your letter rescinding our
contract. So any undue delay has been on
your part and deliberately at that. What
you kept referring to as lengthy negotiations were
simply delaying tactics on your part.
As I write this letter, you may have received my lawyer’s second
letter. Now as then, let me say again
that I do not like going to court if I can help it. But I feel you have done me a grave injustice and a court suit
is the only civilized way to get a redress.
My lawyer said the law is on my side and the court can compel you to
sell me the property, aside from making you pay for the trial expenses, the damages and attorney’s fees. At this latest age, I am still hoping you
would change your mind and decide to proceed with the sale without court
intervention. Atty. Mar Arias gave you
10 days to reply. You can reach him at
his address or at his radio program at DZME, 7:00
to 8:00 A.M., Monday to Friday.
Please reply favorably but do it soon.
Sincerely yours
(s/t) Dr. MANUEL G.
YU CHUA”[5]
On June 20,
1986, Atty. Narciso Tadeo, representative of
petitioners replied thereto:
“Dr. Manuel G. Yu Chua
649-D Boni
Avenue,
Mandaluyong, Metro Manila
Dear Dr. Yu Chua:
Our clients, Mr. &. Mrs. Leoncio Cifra, thru their attorney-in-fact, Mr. Benedicto
F. Catalan have endorsed to us the letter of your lawyer, Atty. Marcelino P. Arias dated May 29, 1986 relative to the
cancellation of the sale agreement on their property situated at 665 Boni Avenue, Mandaluyong, Metro
Manila.
You will kindly note that you paid on December 27,
1985 an earnest money of P5,000.00.
Under your said agreement, the balance of the agreed consideration of
ONE MILLION ONE HUNDRED PESOS (P1,100.000.00) shall be paid to the seller (our
clients) upon removal of the present tenant of occupant from the premises and
upon the execution of the Deed of Absolute Sale. As correctly pointed out by your counsel, the
contract of lease between our clients and the present tenant provides, among
others, that the tenant shall vacate the premises within ninety (90) days from
notice of the sale of the property to any third party.
To date, the tenant of the premises is still occupying the premises
in question. The tenant’s refusal to
comply with his contractual obligation to vacate the premises within the said
period is certainly not the fault of our clients nor yourself. However, the unexpected delay had caused our
clients’ lost opportunity to apply the proceeds of the sale to a business
venture abroad. This matter was relayed
to you by our clients’ attorney-in-fact in his letter dated May 25, 1986.
Under the foregoing circumstances, we believe that the rescission
of our clients offer to sell their said property is reasonable and
justified. Our clients’ attorney-in-fact
is ready to refund the P5,000.00 earnest money.
Very truly yours,
(s/t) NARCISO A. TADEO”[6]
On July 3,
1986 private
respondent filed an action for specific performance of the above agreement in
the Regional Trial Court at Pasig, Rizal, wherein
after the issues were joined and the trial on the merits a decision was
rendered on May 25, 1987, the dispositive
part of which reads:
“IN VIEW OF THE
FOREGOING, this Court renders judgment in favor of the plaintiff and against
the defendant ordering the said defendants:
a)
To execute the corresponding deed of absolute
sale in favor of plaintiff Manuel Yu Chua, over a parcel of land, together with
all the improvements found and existing thereon, located at 665 Boni Avenue, Mandaluyong, Metro
Manila, covered by Transfer Certificate of Title (TCT) No. 490040 of the
Registry of Deeds of Pasig, Metro Manila, upon
payment by the plaintiff of the amount of ONE MILLION ONE HUNDRED THOUSAND
PESOS (P1,100,000.00), minus the earnest money of P5,000.00 and the outstanding
mortgage balance with the Social Security System;
b)
Pay to the plaintiff the amount of P100,000.00
by way of moral damages;
c)
Pay to the said plaintiff the amount of
P50,000.00 as attorney’s fees; and
d)
Pay the costs of this suit.”[7]
Acting on a motion for reconsideration filed by petitioners the trial court modified its decision by absolving Catalan, the agent, from paying moral damages, attorney’s fees and costs of the suit.
Petitioners
interposed an appeal to the Court of Appeals wherein in due course a decision
was rendered on December
20, 1989 which affirmed the appealed judgment with the modification deleting the award of moral
damages. A motion for reconsideration filed by petitioners was denied on January 30, 1990.
Hence, this petition for
review on certiorari
which presents two legal issues:
“1) The major legal issue can be framed as follows;
Q – DOES CHUA, THE
RESPONDENT BUYER, HAVE THE RIGHT TO DEMAND SPECIFIC PERFORMANCE FROM THE
PETITIONERS TO SELL THE HOUSE AND LOT TO
HIM DESPITE THE FACT THAT HE HAD AGREED TO A WAIVER OF SUCH A RIGHT WHEN HE CONSENTED TO THE ADDENDUM
STIPULATION RECOGNIZING THE RIGHT ON THE PART OF THE PETITIONERS TO CANCEL OR
ABROGATE THE SALE FOR ANY REASON BY PAYING THE LIQUIDATED DAMAGES STIPULATED
THEREIN?
2) The minor legal issue may be framed as
follows:
Q — IS THE AWARD OF ATTORNEY’S FEES FOR P50,000.00
PROPER DESPITE THE FACT THAT THE OBLIGATION TO SELL IS COUPLED WITH A PENAL
CLAUSE IN CASE OF FAILURE TO PERFORM, WHICH PENALTY IS CONSIDERED IN LAW A SUBSTITUTE FOR THE INDEMNITY OF WHATEVER KIND OF DAMAGES PURSUANT
TO THE EXPRESS PROVISIONS OF ARTICLE 1226 OF THE CIVIL CODE?”[8]
The petition is impressed with merit.
The provisions of Articles 1370 to 1375 of the Civil Code on the
interpretation of contracts are squarely applicable to this case:
“ART. 1370. If the
terms of a contract are clear and leave no doubt upon the intention of the
contracting parties, the literal meaning of its stipulations shall control.
If the words appear to be contrary to the evident intention of the
parties, the latter shall prevail over the former.
ART. 1371. In order to judge the intention of the contracting
parties, their contemporaneous and subsequent acts shall be principally
considered.
ART. 1372. However general
the terms of a contract may be, they shall not be understood to comprehend things that are distinct and cases
that are different from those upon which the parties intended to agree.
ART. 1373. If some
stipulation of any contract
should admit of several meanings, it shall be understood as bearing that import which is most adequate to
render it effectual.
ART. 1374. The various
stipulations of a contract shall be interpreted together, attributing to the
doubtful ones that sense which may result from all of them taken jointly.
ART. 1375. Words which may
have different significations shall be understood in that which is most in
keeping with the nature and object of the contract.”
A reading of the subject contract which the parties labeled as
“Earnest money” shows that it is an agreement to sell the real property described therein for
the amount of P1.1 M with assumption of the P40,000.00 mortgage, by which
5,000.00 was paid upon signing of the agreement by private respondent to
petitioner as earnest money, which is part of the consideration. The balance of the consideration shall be
paid upon the removal of the tenant or occupant from the premises and upon the
execution of the deed of absolute sale.
In the addendum to the
agreement it is stipulated that in case the buyer fails to purchase the
property after the seller formally notified him of the surrender of the premises
by the tenant or occupant, in addition to the forfeiture of the earnest money, the buyer must pay the seller
P20,000.00 plus attorney’s fees and other costs in case of litigation. On the other hand, if the seller does not
make good his promise to sell the property even after the present tenant shall
have surrendered the premises, the seller binds himself to return the earnest
money and in addition pay the buyer P20,000.00 plus the attorney’s fees and
other costs in case of litigation.
This is the literal and
clear agreement of the parties. From
their contemporaneous and subsequent acts it also appears that the proceeds of
the sale of the property by petitioners were intended to apply to a proposed
business venture of petitioners abroad.
As said proposed business did not prosper and the tenants/occupants of
the premises have not yet vacated the premises, petitioners decided to rescind
the contract of sale in accordance with the agreement.
Under the addendum to the
same agreement, both parties are given the freedom to back out of the
transaction provided that, in the case of the seller, he must return the
earnest money in addition to being liable to the buyer for P20,000.00
plus attorney’s fees and other costs in case of litigation; and in case of the
buyer, the earnest money is forfeited, and he is liable to pay the seller
P20,000.00 in damages plus attorneys fees and other costs in case of litigation
to the seller. This right which is
afforded to both parties may be availed
of by them, irrespective of whether or not the
occupant of the premises had vacated the same.
This stipulation is the law between the parties.
Consequently, the action for specific performance must fail. For the rescission of the contract, petitioners
must return the P5,000.00 earnest money and pay P20,000.00 to the private
respondent. However, they are not liable
for attorneys fees, for it was private respondent who brought the case to court
as a result of which petitioners unnecessarily incurred expenses of litigation.
WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals dated December
20, 1989 and its
resolution dated January 30,
1990 are hereby REVERSED and SET
ASIDE. Another judgment is hereby
rendered dismissing the complaint and rescinding the subject contract to sell
dated December 27, 1985
upon the petitioners reimbursing to private respondent the P5,000.00 earnest
money and paying them P20,000.00 as damages according to the same agreement. No
costs in this instance.
SO ORDERED.
Narvasa, (Chairman), Cruz, Griño-Aquino, and Medialdea, JJ., concur.
[1]
Pages 10 to 12, rollo.
[2]
Page 12, rollo.
[3]
Pages 13 to 14, rollo.
[4]
Pages 13 to 14, rollo.
[5]
Pages 15 to 16, rollo.
[6]
Pages 16 to 17, rollo.
[7]
Page 18, rollo.
[8]
Pages 19 to 20, rollo.