Can an acknowledgment receipt qualify as a sale contract?
A sale remains valid for as long as the parties agreed on the transfer of the ownership of the concerned property, regardless of the form of the document reflecting it.
This can be seen in the Supreme Court’s recent decision in Chavez, Jr., et al. v. Spouses Gopez.
Petitioners in this case inherited two adjacent lots from their predecessors who had died intestate. They decided to sell these properties by hiring a broker, who eventually introduced them to respondents Spouses Joselito and Adriana Gopez (collectively, “Spouses Gopez”).
Spouses Gopez supposedly agreed to buy the lots by, among others, paying their purchase price, and the necessary taxes and other fees, and make a downpayment. Virgilio Chavez, one of the petitioners, requested that Spouses Gopez formalize their agreement by executing a contract to sell and proceeding with the downpayment.
According to petitioners, Spouses Gopez had delayed preparing the necessary documents to proceed with the sale, failed to make the downpayment, and substantially altered the terms of the contract to sell.
Over time, Virgilio informed Spouses Gopez that he was no longer interested in proceeding with the sale. Spouses Gopez denied causing the delay, which could purportedly be attributed to petitioners’ failure to furnish them with certain documents, and claimed to have been making partial payments to petitioners, which partly consisted of earnest money, usually a portion of the purchase price.
Contract to sell vs sale contract
These incidents, along with Spouses Gopez’ discovery that petitioners had been selling the lots to other individuals, constrained them to file a complaint for specific performance and damages before the Regional Trial Court (RTC).
The RTC dismissed Spouses Gopez’ complaint, declaring that since the parties had executed a contract to sell, and not a sale contract, Spouses Gopez’ payment of the earnest money did not oblige petitioners to transfer to them the ownership of the lots.
Upon appeal, the Court of Appeals reversed RTC’s findings. It found that the parties had executed a sale contract, based on an acknowledgement receipt (AR) on petitioners’ receipt of Spouses Gopez’ payment of the earnest money.
Petitioners thus appealed the Court of Appeals’ decision before the Supreme Court.
The Supreme Court reversed the Court of Appeals’ findings and reinstated the RTC’s decision. In so doing, it first distinguished a contract to sell from a conditional sale contract.
Under a contract to sell, the seller has not agreed to transfer the ownership of his property until a certain event has happened, which is usually the buyer’s full payment of the purchase price. If this event did not occur, then the seller’s obligation to sell does not arise; he remains the property owner.
If the event occurred, the seller will still need to convey title to the buyer by executing the corresponding sale contract.
Meanwhile, a conditional sale contract obliges the seller to transfer the ownership of his property to the buyer. This remains to be so, even when this transfer only occurs once the condition—that is, a contingent event which may or may not occur, has been fulfilled.
In this case, the parties’ AR does not reflect an undertaking from petitioners to transfer ownership of the lots to Spouses Gopez.
Lack of express reservation
Moreover, petitioners’ lack of express reservation of their ownership did not affect the nature of this agreement. According to the Supreme Court, the intent to transfer such ownership can neither be inferred from the facts of the case nor the parties’ stipulations.
In this case, petitioners and Spouses Gopez only agreed for the latter to fulfill certain conditions, such as paying the purchase price and preparing documents to be used in affecting the sale. Thus, the parties’ agreement did not contemplate the transfer of ownership of the lots.
Meanwhile, the mention of “earnest money,” which Spouses Gopez’ supposedly paid, did not change their transaction with petitioners. The paid amounts were still given pursuant to the contract to sell.
Thus, they will only form part of the purchase price when the sale has been consummated—that is, upon the full payment of the purchase price.
