Paid Down Payment for a house which was never constructed

I issued a check to a builder/ constructor as a down payment for a house and lot. The check was cashed by the bank, no house was constructed. The person who received the money was denying that she had it. She won't talk to us and asks her lawyer to show us the blueprint everytime. No construction date menttioned, no building permit submitted. Finally, with the help of barangay officials, she told us in a meeting that the money was all gone and demanded that we pay the 2nd and 3rd payment as shown on the contract as "progress billing" which will end this Sept. 30 or she will sue us for breach of contract. What will be the right thing for us to do?