GOLDENROD INC. V. CA (November 04, 1998)

FACTS:

Respondents Barreto realty owns 43 parcels of land in Quiapo Manila which they mortgaged in UCPB. Respondent sold the property to petitioner Goldenrod who In turn pays 1M earnest money and promise to pay respondent’s debt to UCPB. Respondent caused 2 land titles to the property.

Petitioner was not able to pay UCPB and the latter did not agree for and extension. Hence, petitioner rescinded the contact and demands the return of the earnest money.

Respondent did not oppose the recession but did not gave the earnest money. They even sold the first lot to Asiaworld Trade Center and the other lot to UCPB for payment of their mortgage.

ISSUE:

WON respondent should return the earnest money of the petitioner.

HELD:

Earnest money is a part of payment of a sale. Art. 1385 of the Civil Code provides that rescission creates the obligation to return the things which were the object of the contract together with their fruits and interest. Since the respondent did not oppose the extra-judicial recission, they should return the earnest money of the petitioner. It would be most inequitable if resondent BARRETTO REALTY would be allowed to retain petitioner's payment of P1,000,000.00 and at the same time appropriate the proceeds of the second sale made to another.