Goldenrod, Inc. v.

CA
G.R. NO. 126812, November 04, 1998

FACTS: Barretto owned parcels of land which were mortgaged to UCPB. Barretto failed
to pay; the properties were foreclosed. Goldenrod made an offer to Barretto that it would
buy the properties and pay off the remaining balance of Barretto’s loan with UCPB. It
paid Barretto 1 million pesos as part of the purchase price. The remaining balance
would be paid once Barretto had consolidated the titles. On the date that Goldenrod
was supposed to pay, Goldenrod asked for an extension. UCPB agreed. When the
extension date arrived, Goldenrod asked for another extension. UCPB refused. Barretto
successfully consolidated the titles. Goldenrod informed Barretto that it would not be
able to push through with their agreement. It asked Barretto to return the 1 million
pesos. Barretto did not give in to Goldenrod’s rescission. Instead, it sold the property
that was part of their agreement to Asiaworld.

ISSUE: WON respondent should return the earnest money of the petitioner.

RULING: YES. Earnest money is a part of payment of a sale. 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 rescission,
they should return the earnest money of the petitioner. It would be most inequitable if
respondent 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.