Spouses Serrano vs Caguiat reiterated the same intent to pursue the sale
in a letter dated April 6, 1990.
GR 139173 , February 28, 2007
Facts: Spouses Onnie and Amparo Herrera,
petitioners, are the registered owners of a
lot located in Las Piñas, covered by Transfer
Certificate of Title.
Godofredo Caguiat, respondent, offered to
buy the lot. Petitioners agreed to sell it at
₱1,500.00 per square meter.
Caguiat then gave ₱100K as partial payment.
In turn, petitioners gave Caguiat the
corresponding receipt stating that Caguiat
promised to pay the balance of the purchase
price on or before March 23, 1990
On March 28(5 days after), Caguiat, through
his counsel Atty. Ponciano Espiritu, wrote
petitioners informing them of his readiness
to pay the balance of the contract price and
requesting them to prepare the final deed of
sale
Petitioners, through Atty. Ruben V. Lopez,
sent a letter to respondent stating that
petitioner Amparo Herrera is leaving for
abroad on or before April 15, 1990 and
that they are canceling the transaction.
Petitioners also informed Caguiat that he can
recover the earnest money of ₱100K
anytime.
In view of the cancellation of the contract by
petitioners, CAGUIAT filed with the RTC a
complaint against them for specific
performance and damages.
RTC: Caguiat’s position deserves more
weight and credibility.
First, the ₱100K that Caguiat paid
whether as downpayment or earnest
money showed that there was already a
perfected contract (to sell)
Second, Caguiat was the first to react to
show his eagerness to push through with the
sale by sending defendants the letter and
Third, Caguiat had the balance of the
purchase price ready for payment.
Defendants’ mere allegation that it was
plaintiff who did not appear on March 23,
1990 is unavailing. Defendants’ letters
appear to be mere afterthought.
CA:
CA affirmed the trial court’s judgment.
Issue:
Whether or not the document entitled
"Receipt for Partial Payment" signed by both
parties earlier mentioned is a contract to sell
or a contract of sale.
Ruling: Contract to sell.
Generally, the findings of fact of the lower
courts are entitled to great weight and
should not be disturbed except for cogent
reasons.14 Indeed, they should not be
changed on appeal in the absence of a
clear showing that the trial court
overlooked, disregarded, or
misinterpreted some facts of weight and
significance, which if considered would
have altered the result of the case. In
the present case, we find that both the trial
court and the Court of Appeals interpreted
some significant facts resulting in an
erroneous resolution of the issue involved.
In holding that there is a perfected contract
of sale, both courts mainly relied on the
earnest money given by Caguiat to
petitioners. They invoked Article 1482 of the
Civil Code which provides that "Whenever
earnest money is given in a contract of sale,
it shall be considered as part of the price
and as proof of the perfection of the
contract."
It is a canon in the interpretation of
contracts that the words used therein should
be given their natural and ordinary meaning
unless a technical meaning was intended.
Thus, when petitioners declared in the said
"Receipt for Partial Payment"– there can be
no other interpretation than that they agreed
to a conditional contract of sale,
consummation of which is subject only to the
full payment of the purchase price.
A contract to sell is akin to a conditional
sale where the efficacy or obligatory force of
the vendor's obligation to transfer title is
subordinated to the happening of a future
and uncertain event, so that if the
suspensive condition does not take place,
the parties would stand as if the conditional
obligation had never existed. The
suspensive condition is commonly full
payment of the purchase price.
considered as part of the price and proof of
the perfection of the contract."
However, this article speaks of earnest
money given in a contract of sale. In this
case, the earnest money was given in a
contract to sell. The earnest money forms
part of the consideration only if the sale is
consummated upon full payment of the
purchase price. Now, since the earnest
money was given in a contract to sell, Article
1482, which speaks of a contract of sale,
does not apply.

The differences between a contract to sell

and a contract of sale are well-settled in
jurisprudence. As early as 1951, in Sing Yee
v. Santos, we held that:

x x x [a] distinction must be made between

a contract of sale in which title passes to the
buyer upon delivery of the thing sold and a
contract to sell x x x where by agreement
the ownership is reserved in the seller and is
not to pass until the full payment, of the
purchase price is made. In the first case,
non-payment of the price is a negative
resolutory condition; in the second case, full
payment is a positive suspensive condition.
Being contraries, their effect in law cannot
be identical. In the first case, the vendor has
lost and cannot recover the ownership of the
land sold until and unless the contract of sale
is itself resolved and set aside. In the second
case, however, the title remains in the
vendor if the vendee does not comply with
the condition precedent of making payment
at the time specified in the contract.

In other words, in a contract to sell,

ownership is retained by the seller and is not
to pass to the buyer until full payment of the
price.

In this case, the "Receipt for Partial

Payment" shows that the true agreement
between the parties is a contract to sell.

It is true that Article 1482 of the Civil Code

provides that "Whenever earnest money is
given in a contract of sale, it shall be