Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 139173             February 28, 2007

SPOUSES ONNIE SERRANO AND AMPARO HERRERA, Petitioners
vs.
GODOFREDO CAGUIAT, Respondent.

D E C I S I O N

SANDOVAL-GUTIERREZ, J.:

Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended, assailing the Decision1 of the Court of Appeals dated January 29, 1999 and its Resolution dated July 14, 1999 in CA-G.R. CV No. 48824.

Spouses Onnie and Amparo Herrera, petitioners, are the registered owners of a lot located in Las Piñas, Metro Manila covered by Transfer Certificate of Title No. T-9905.

Sometime in March 1990, Godofredo Caguiat, respondent, offered to buy the lot. Petitioners agreed to sell it at P1,500.00 per square meter. Respondent then gave petitioners P100,000.00 as partial payment. In turn, petitioners gave respondent the corresponding receipt stating that respondent promised to pay the balance of the purchase price on or before March 23, 1990, thus:

Las Piñas, Metro Manila

March 19, 1990

RECEIPT FOR PARTIAL PAYMENT OF LOT NO. 23 COVERED BY TCT NO. T-9905, LAS PIÑAS, METRO MANILA

RECEIVED FROM MR. GODOFREDO CAGUIAT THE AMOUNT OF ONE HUNDRED THOUSAND PESOS (P100,000.00) AS PARTIAL PAYMENT OF OUR LOT SITUATED IN LAS PIÑAS, M.M. COVERED BY TCT NO. T-9905 AND WITH AN AREA OF 439 SQUARE METERS.

MR. CAGUIAT PROMISED TO PAY THE BALANCE OF THE PURCHASE PRICE ON OR BEFORE MARCH 23, 1990, AND THAT WE WILL EXECUTE AND SIGN THE FINAL DEED OF SALE ON THIS DATE.

SIGNED THIS 19th DAY OF MARCH, 1990 AT LAS PIÑAS, M.M.

(SGD) AMPARO HERRERA                 (SGD) ONNIE SERRANO"2

On March 28, 1990, respondent, 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.3

On April 4, 1990, petitioners, through Atty. Ruben V. Lopez, sent a letter4 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 respondent that he can recover the earnest money of P100,000.00 anytime.

Again, on April 6, 1990,5 petitioners wrote respondent stating that they delivered to his counsel Philippine National Bank Manager’s Check No. 790537 dated April 6, 1990 in the amount of P100,000.00 payable to him.

In view of the cancellation of the contract by petitioners, respondent filed with the Regional Trial Court, Branch 63, Makati City a complaint against them for specific performance and damages, docketed as Civil Case No. 90-1067.6

On June 27, 1994, after hearing, the trial court rendered its Decision7 finding there was a perfected contract of sale between the parties and ordering petitioners to execute a final deed of sale in favor of respondent. The trial court held:

x x x

In the evaluation of the evidence presented by the parties as to the issue as to who was ready to comply with his obligation on the verbal agreement to sell on March 23, 1990, shows that plaintiff’s position deserves more weight and credibility. First, the P100,000.00 that plaintiff paid whether as downpayment or earnest money showed that there was already a perfected contract. Art. 1482 of the Civil Code of the Philippines, reads as follows, to wit:

‘Art. 1482. 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.’

Second, plaintiff was the first to react to show his eagerness to push through with the sale by sending defendants the letter dated March 25, 1990. (Exh. ‘D’) and reiterated the same intent to pursue the sale in a letter dated April 6, 1990. Third, plaintiff had the balance of the purchase price ready for payment (Exh. ‘C’). Defendants’ mere allegation that it was plaintiff who did not appear on March 23, 1990 is unavailing. Defendants’ letters (Exhs. ‘2’ and ‘5’) appear to be mere afterthought.

On appeal, the Court of Appeals, in its assailed Decision of January 29, 1999, affirmed the trial court’s judgment.

Forthwith, petitioners filed their motion for reconsideration but it was denied by the appellate court in its Resolution8 dated July 14, 1999.

Hence, the present recourse.

The basic issue to be resolved is whether the document entitled "Receipt for Partial Payment" signed by both parties earlier mentioned is a contract to sell or a contract of sale.

Petitioners contend that the Receipt is not a perfected contract of sale as provided for in Article 14589 in relation to Article 147510 of the Civil Code. The delivery to them of P100,000.00 as down payment cannot be considered as proof of the perfection of a contract of sale under Article 148211 of the same Code since there was no clear agreement between the parties as to the amount of consideration.

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.1awphi1.net12 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 respondent 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."

We are not convinced.

In San Miguel Properties Philippines, Inc. v. Spouses Huang,13 we held that the 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, which 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, which begins when the parties perform their respective undertakings under the contract of sale, culminating in the extinguishment thereof.

With the above postulates as guidelines, we now proceed to determine the real nature of the contract entered into by the parties.

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.14 Thus, when petitioners declared in the said "Receipt for Partial Payment" that they –

RECEIVED FROM MR. GODOFREDO CAGUIAT THE AMOUNT OF ONE HUNDRED THOUSAND PESOS (P100,000.00) AS PARTIAL PAYMENT OF OUR LOT SITUATED IN LAS PIÑAS, M.M. COVERED BY TCT NO. T-9905 AND WITH AN AREA OF 439 SQUARE METERS.

MR. CAGUIAT PROMISED TO PAY THE BALANCE OF THE PURCHASE PRICE ON OR BEFORE MARCH 23, 1990, AND THAT WE WILL EXECUTE AND SIGN THE FINAL DEED OF SALE ON THIS DATE.

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.15

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,16 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.17

In this case, the "Receipt for Partial Payment" shows that the true agreement between the parties is a contract to sell.

First, ownership over the property was retained by petitioners and was not to pass to respondent until full payment of the purchase price. Thus, petitioners need not push through with the sale should respondent fail to remit the balance of the purchase price before the deadline on March 23, 1990. In effect, petitioners have the right to rescind unilaterally the contract the moment respondent fails to pay within the fixed period.18

Second, 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.19

Third, petitioners retained possession of the certificate of title of the lot. This is an additional indication that the agreement did not transfer to respondent, either by actual or constructive delivery, ownership of the property.20

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 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.21 Now, since the earnest money was given in a contract to sell, Article 1482, which speaks of a contract of sale, does not apply.

As previously discussed, the suspensive condition (payment of the balance by respondent) did not take place. Clearly, respondent cannot compel petitioners to transfer ownership of the property to him.

WHEREFORE, we GRANT the instant Petition for Review. The challenged Decision of the Court of Appeals is REVERSED and respondent’s complaint is DISMISSED.

SO ORDERED.

ANGELINA SANDOVAL-GUTIERREZ
Associate Justice

WE CONCUR:

REYNATO S. PUNO
Chief Justice
Chairperson


RENATO C. CORONA
Associate Justice
(On official leave)
ADOLFO S. AZCUNA
Asscociate Justice

CANCIO C. GARCIA
Associate Justice

C E R T I F I C A T I O N

Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

REYNATO S. PUNO
Chief Justice


Footnotes

1 Penned by Associate Justice Conchita Carpio Morales (now a member of this Court) and concurred in by Associate Justice Jainal D. Rasul and Associate Justice Bernardo P. Abesamis (both retired).

2 Exhibit "B," Records, p. 124.

3 Exhibit "D," id., p. 125.

4 Exhibit "2," id., p. 173.

5 Exhibit "5," Rollo, p. 177.

6 Records, pp. 1-4.

7 Id., pp. 423-430.

8 Id., p. 25.

9 Article 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other himself to pay therefore a price certain in money or its equivalent. A contract of sale may be absolute or conditional.

10 Article 1475. The contract of sale is perfected at the moment there is a meeting of the minds upon the thing which is the object of the contract and upon the price.

From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contracts.

11 Article 1482. 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.

12 Gamaliel C. Villanueva and Irene C. Villanueva v. Court of Appeals, Spouses Jose and Leonila Dela Cruz, and Spouses Guido and Felicitas Pile, G.R. No. 107624, January 28, 1997, 267 SCRA 89.

13 G.R. No. 137290, July 31, 2000, 336 SCRA 737, citing Ang Yu Asuncion v. Court of Appeals, 238 SCRA 602 (1994).

14 Tan v. Court of Appeals, G.R. No. 100942, August 12, 1992, 212 SCRA 586.

15 Philippine National Bank v. Court of Appeals and Lapaz Kaw Ngo, G.R. No. 119580, September 26, 1996, citing Rose Packing Co., Inc. v. Court of Appeals, 167 SCRA 309, 318 (1988) and Lim v. Court of Appeals, 182 SCRA 564, 670 (1990), with citations.

16 47 O.G. 6372 (1951).

17 Id., citing Jacinto v. Kaparaz, 209 SCRA 246, 254 (1992).

18 Tomas K. Chua v. Court of Appeals and Encarnacion Valdes-Choy, G.R. No. 119255, April 9, 2003, 401 SCRA 54.

19 Id.

20 Id.

21 Id.


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