03/07/2025
| The Supreme Court (SC) held that an acknowledgment receipt cannot be considered a contract of sale if it doesn't clearly show that the seller intends to transfer ownership of the property to the buyer.
In a 14-page decision penned by Associate Justice Maria Filomena Singh, the SC's Third Division has dismissed the claim for Specific Performance and Damages filed by spouses Joselito and Adriana Gopez, who bought a parcel of land from Virgilio Chavez.
In 2011, Chavez decided to sell the two parcels of land they inherited from their predecessors to the Gopezes. Chavez asked that the agreement be formalized in a contract to sell and that Spouses Gopez pay PHP 5 million as a down payment. Later, the Gopezes issued Chavez a check for PHP 200,000 to show their commitment to buy the properties; they also vowed to fully pay the down payment in exchange for the delivery of the contract to sell.
The Gopezes failed to pay the PHP 5 million down payment. Instead, they delayed the preparation of the draft special powers of attorney, extrajudicial settlement of estates, and the contract to sell, which were needed to authorize attorneys-in-fact who would sign for and on behalf of Chavez.
When the Contract to Sell was formally drafted, Chavez noticed that the Spouses Gopez significantly modified the terms earlier agreed upon between the parties by excluding the agreement to pay a PHP 5 million down payment, imposing new conditions, and creating obligations for Chavez.
Meanwhile, the Spouses Gopez claimed that in addition to the initial PHP 200,000 worth of earnest money, they made partial payments of PHP 1.5 million through checks, but by the time Chavez wanted to terminate the agreement. The Spouses Gopez also alleged that the reason why they were unable to immediately prepare the documents is because Chavez failed to deliver the necessary requirements.
Later, the Spouses Gopez discovered that the titles covering the subject properties were cancelled and issued in the names of Chavez and that the same were being offered for sale to third persons. This prompted them to file a claim for specific performance and Dldamages before the Regional Trial Court (RTC).
Initially, the RTC dismissed the said complaint, saying since the parties had entered into a contract to sell and not a contract of sale, the earnest money of PHP 1.5 million did not result in the perfection of the contract. The said decision was later reversed by the Court of Appeals as it held that the acknowledgement receipt contains all the elements of a contract of sale.
As a result, the CA ordered Alvarez to execute the necessary deed of absolute sale in favor of the Spouses Gopez, which in turn required them to pay the whole balance of the purchase price. This paved the way for Chavez to elevate the case before the Supreme Court.
In reinstating the RTC ruling with modification, the high court held that the mention of earnest money between Spouses Gopez and Chavez did not convert the acknowledgement receipt into a contract of sale.
“This Court further finds that the mention of earnest money did not convert the Acknowledgement Receipt into a Contract of Sale. Although earnest money is usually given in a perfected Contract of Sale, it may also be given in a Contract to Sell,” the Supreme Court said.
It clarified that the earnest money worth PHP 200,000 paid by Spouses Gopez was given in a Contract to Sell and will be considered part of the consideration only if the sale is consummated upon full payment of the purchase price.
The SC emphasized that since both parties entered into a contract to sell, Chavez has the right to terminate the agreement due to the spouses Gopez' non-fulfillment of the conditions.
“In contracts to sell, the condition is a positive suspensive condition, while in contracts of sale, the obligation is a negative resolutory condition. In this case, non-fulfillment of the conditions under the Contract to Sell rendered the contract ineffective, and there was no need to rescind the contract anymore. ” the Supreme Court added.
The court declared ineffective the contract to sell between the parties due to the refusal of the Spouses Gopez to prepare the necessary documents to reflect the terms of the agreement and to pay the purchase price.
