Abad v. Goldloop Properties
REITERATIONFacts
The Antecedents: Petitioners, owners of 13 parcels of agricultural land, entered into a Deed of Conditional Sale with respondent for a total price of ₱34,815,300.00. They paid ₱1,000,000.00 as earnest money and ₱6,765,660.00 as first payment. The remaining balance was to be paid on or before December 31, 1997, subject to verification of land area. Paragraph 8 of the Deed stipulated that if the buyer could not fulfill its obligation, it could request a one-time extension of 30 days. Failure to pay within the extension would result in the forfeiture of the earnest money, but the first payment would be returned to the buyer. Procedural History: Respondent informed petitioners of its inability to consummate the purchase due to economic conditions and requested the return of the first payment. Respondent filed a complaint for collection, seeking the return of ₱6,765,660.00 plus interest and attorney's fees. The RTC ruled in favor of respondent, holding that the return of the first payment was an unconditional obligation. The CA affirmed the RTC's decision but modified the liability to joint instead of solidary. Petitioners appealed to the Supreme Court. The Petition: Petitioners argued that their obligation to return the first payment was conditional or at least had a period, and that respondent failed to comply with the conditions for an extension. They contended that the court should have fixed a period for the return of the payment under Article 1197 of the Civil Code.
Issue(s)
Whether the obligation of petitioners to return the first payment of ₱6,765,660.00 is an unconditional obligation. Whether the obligation to return the first payment, assuming it to be unconditional, is a pure obligation or an obligation with a period. Whether the court must first fix the duration of the period within which petitioners have to comply with their obligation before respondent can demand its fulfillment.
Ruling
The petition is denied. The Decision and Resolution of the Court of Appeals are affirmed. Petitioners are jointly liable to return the first payment of ₱6,765,660.00 to respondent, with 6% legal interest per annum from the filing of the complaint until fully paid, and attorney's fees equivalent to 10% of the principal obligation.
Ratio Decidendi
On whether the obligation to return the first payment is unconditional: The Court held that Paragraph 8 of the Deed of Conditional Sale is clear and unambiguous. It explicitly states that "but the first payment check of SIX MILLION SEVEN HUNDRED SIXTY-FIVE THOUSAND SIX HUNDRED SIXTY PESOS (PHP6,765,660.00) shall be returned to the BUYER without any additional charges to the SELLER." This provision clearly distinguishes the treatment of the earnest money from the first payment. Unlike the earnest money which is subject to forfeiture, the first payment's return is stipulated without any stated condition or contingency, making the obligation to return it unconditional. On whether the obligation is a pure obligation or with a period: The Court rejected petitioners' contention that the obligation should be deemed one with a period. It emphasized that there is no occasion to apply Article 1197 of the Civil Code, which allows a court to fix a period, because there was no showing that the parties intended such a period. This intention was not raised in the pleadings nor supported by evidence. The parties are bound by the literal terms of their agreement, which, in this case, did not specify a period for the return of the first payment, thus rendering it a pure obligation demandable at once. On whether the court must fix a period: The Court reiterated that Article 1197 of the Civil Code is not applicable when the contract does not show any intention to establish a period. The cardinal rule in contract interpretation, as embodied in Article 1370 of the Civil Code, dictates that if the terms are clear and leave no doubt upon the intention of the parties, the literal meaning of the stipulations shall control. Since the contract did not indicate any intention for a period for the return of the first payment, the obligation is pure and demandable immediately, obviating the need for the court to fix a period.
Main Doctrine
In a Deed of Conditional Sale, where the contract clearly stipulates that the earnest money shall be forfeited upon the buyer's failure to pay the balance, but the first payment shall be returned, the obligation to return the first payment is unconditional and demandable at once, unless the contract explicitly provides for a period or condition for its return.