SPS HERRERA v CAGUIAT
February 28, 2007 | Sandoval-Guitierrez, J. | Definition-Contract of Sale
FACTS:
1. Spouses Onnie and Amparo Herrera are
the registered owners of a lot located in
Las Pias.
2. Mar 1990: Godofredo Caguiat offered to
buy the lot. Sps Herrera agreed to sell it at
P1,500 per square meter. C gave the Sps
P100k as partial payment. In turn, the Sps
gave a receipt (Receipt for Partial Payment
of Lot No. 23) stating that C promised to
pay the balance of the purchase price on
or before Mar 23, 1990 and that the Sps
will execute and sign the final deed of sale
on the same date. Both husband and wife
signed the receipt.
3. Mar 28, 1990: C wrote the Sps informing
them of his readiness to pay the balance
of the contract price and requesting them
to prepare the final deed of sale.
4. Apr 4, 1990: The Sps sent a letter stating
that they are canceling the transaction as
Amparo is leaving for abroad on or before
Apr 15, 1990. Additionally, he can recover
the earnest money of P100k anytime.
5. Apr 6, 1990: The Sps wrote C stating that
they delivered to his counsel a PNB
Managers Check dated April 6, 1990 in
the amount of P100k payable to him.
6. C filed a complaint for specific
performance at the RTC Br 63 Makati City.
7. TC: There was a perfected contract of sale
between the parties. The Sps were
ordered to execute a final deed of sale in
favor of Caguiat.
a. The P100k (whether as downpayment
or earnest money) showed that there
was already a perfected contract.
b. Court cited Art 1482 CC: 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.
c. C was eager to push through with the
sale as evidenced by the letters he
sent to the Sps.
d. C had the balance of the purchase
price ready for payment.
8. CA: Affirmed TC. Denied the Sps Motion
for Reconsideration.
9. Petitioners contention:
a. The Receipt is not a perfected
contract of sale as provided for in Art
1458 in relation to Art 1475 of the CC.
b. P100k cannot be considered as proof
of the perfection of a contract of sale
under Art 1482 CC since there was no
clear agreement between the parties
as to the amount of consideration.
ISSUE: WON the document entitled "Receipt for
Partial Payment" is a contract to sell or a contract
of sale CONTRACT TO SELL
HELD: Petition for Review GRANTED. CA decision
REVERSED.
RATIO:
1. Stages of a contract of sale are:
(1) Negotiation - covering the period from
the time the prospective contracting
parties indicate interest in the contract
to the time the contract is perfected;
(2) Perfection - Takes place upon the
concurrence of the essential elements
of the sale, which is the meeting of the
minds of the parties as to the object of
the contract and upon the price; and
(3) Consummation - Begins when the
parties perform their respective
undertakings under the contract of
sale, culminating in the
extinguishment thereof.
2. Using stat con (words used therein should
be given their natural and ordinary
meaning unless a technical meaning was
intended), the Receipt for Partial
Payment meant that the parties agreed
to a conditional contract of sale,
consummation of which is subject only to
the full payment of the purchase price.
3. A contract to sell is like 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. 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.
4. Differences between a contract to sell and
a contract of sale:
Contract of sale
title passes to the buyer upon delivery
of the thing sold
non-payment of the price is a negative
resolutory condition
the vendor has lost and cannot
recover the ownership of the land sold
until and unless the contract is set
aside
Contract to sell
the ownership is reserved in the seller
and is not to pass until the full
 payment, of the purchase price is
made
full payment is a positive suspensive
condition
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
5. The "Receipt for Partial Payment" shows
that the true agreement between the
parties is a contract to sell.
Ownership over the property was
retained by the Sps and was not to
pass to C until full payment of the
purchase price.
Sps have the right to rescind
unilaterally the contract the moment
C fails to pay within the fixed period.
The agreement between the parties
was not embodied in a deed of sale.
The absence of a formal deed of
conveyance is a strong indication
that the parties did not intend
immediate transfer of ownership, but
only a transfer after full payment of
the purchase price.
Sps retained possession of the certificate
of title of the lot.
6. When Art 1482 CC speaks of earnest
money it is in the context of a contract
of sale.
7. Here, 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. Thus, Art 1482 does not
apply.
8. The suspensive condition (payment of the
balance by respondent) did not take place.
C cannot compel the Sps to transfer
ownership of the property to him.