GOLDENROD INC. v. CA November 04, 1998


 Barreto realty owns 43 parcels of land in Quiapo Manila, which they mortgaged in UCPB. Respondent sold the property to Goldenrod who in turn paidP1M earnest money and promise to pay Barreto’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Hence, petitioner rescinded the contact and demanded the return of the earnest money.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.


WON respondent should return the earnest money of the petitioner.


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 respondentBarretto 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.



In ordinary sales, by reasons of equity, a transaction may be invalidated on the ground of inadequacyof price. In forced sales, as when a sale is made at a public auction, the owner has the right to redeem.When there is a right to redeem, inadequacy of price is immaterial because judgment debtor canbetter acquire the property or also sell his right to redeem and thus recover the loss he claims to havesuffered by reason of the price obtained from the auction sale.

Digest Credit: Rose May Erazo


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