ASSIGNMENT NO.
3: DIFFERENT KINDS OF OBLIGATION
[G.R. No. 118347. October 24, 1996.]
VICENTE and MICHAEL LIM, Petitioner,
vs.
COURT OF APPEALS and LIBERTY H. LUNA, Respondents.
FACTS:
1. Petitioner’s/Plaintiff’s claim/s (no more than 3 sentences)
On September 02, 1988, respondent Liberty Luna is the owner
of a piece of land located in Quezon City, the respondent sold
the land covered by TCT No. 193230 to the petitioners Vicente
and Michael Lim for P3,547,600.00. In the agreement, private
respondent assumes full responsibility for ejecting the squatters
occupying the property within 60 days from the date of the
receipt of earnest money and shall refund the earnest money if
she failed to do so. In addition, if the squatters were ejected and
the buyers do not pay the balance, the earnest money shall be
forfeited in favor of Luna.
2. Respondent’s/Defendant’s claim/s (no more than 3
sentences)
Private respondent Luna failed to eject the squatters from
the land despite her alleged efforts to do so. Defendant asked
the help of a building official and a city engineer to effect
ejectment. Nonetheless, petitioners did not demand the return of
their earnest money. On January 17, 1989, the parties met to
negotiate a price increase to facilitate the ejectment of the
squatters. Defendant’s claimed that as a result off her failure to
remove the squatters from the land, the contract off sale ceased
to exist and no longer had the obligation to sell and deliver her
property to petitioners, as petitioners had refused to accept the
refund off the earnest money, Luna wrote them that the amount
would be deposited in court by consignation.
3. Decision of the lower courts
On December 28, 1992, the trial court rules in favor of
petitioners. The trial court held that there was a perfect contract
of sale between the parties. According to Article 1545 of the
Civil Code, although the failure of Luna to eject the squatters
was a breach of warranty, the performance of warranty could be
waived by the buyer, as petitioners did in this case. Luna acted
in bad faith by not exerting earnest efforts to eject the squatters,
in order to get out of the contract and ordered her to comply
with petitioner’s request to continue the sale.
The court of appeals reversed the Regional Trial Courts
(RTC) and rules in favor of respondent. As a result of the
non-fulfillment of the condition of ejecting the squatters,
petitioners lost the right to demand from the Luna the sale of
the land to them. It also ruled that consignment was proper
since the obligation to refund earnest money was a clear debt,
and that, contrary to the trial court's judgment, the
circumstances show that private respondent made genuine
efforts to evict the squatters and thus was not acting in bad
faith. The sale in this case as a “contract with a conditional
obligation” whereby Luna’s obligation to sell and deliver 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.
ISSUE
4. Issue/s (one sentence)
1st Issue: Petitioner lost the right to demand execution of the
sale due to Luna’s failure to eject the squatters from the land.
2nd Issue: Respondent is liable for damages
HELD
5. Disposition of the case (one sentence)
The decision of the Court of Appeals is REVERSED and
that of the Regional Trial Court is REINSTATED, with
MODIFICATION that respondent is ordered to pay sum off
100,000.00 as moral damages and 50,000.00 as attorney’s
fees to petitioners.
6. Dictum (no more than five sentences addressing the issue
relevant to the topic under discussion)
1st Issue
No. The buyers (Lim) did not lose their rights, and the
appellate court's judgment was erroneous. A perfected contract
of sale can be seen in the agreement. Under Article 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 that only requires the parties' consent on
these two things. Because no specific form is required for the
legitimacy of their contract, the parties can mutually demand
fulfillment of their respective obligations once it is completed.
(Court of Appeals vs. Dalion, 182 SCRA 872, 1990). Petitioners’
obligation was to pay balance of the price, while private
respondent’s obligation was to deliver the property to petitioners
upon payment of the price. Failure to comply with the first
condition in the failure of a contract, while failure to comply with
the second condition only gives the other party the opinion either
to refuse to proceed with the sale or to waive the condition.
2nd Issue
Yes. Luna’s failure is to eject the squatters which is her
“full responsibility” and “commitment” that is under the contract
of sale. Moral damage 100,000.00 only, according to Article
2220: Moral Damages may be awarded in case of a breach of
contract wherein the defendant acted fraudulently or in bad
faith. Award of Attorney’s fees is upheld that there was clear
absence of merit in Luna’s position thus unnecessarily forcing
petitioners to litigate.
