FIRST DIVISION

SPOUSES
ONNIE G.R. No. 139173
SERRANO
AND
AMPARO HERRERA,
Petitioners,
Present:

- versus -

PUNO, C.J., Chairperson,

SANDOVAL-GUTIERREZ,
CORONA,
*
AZCUNA, and
GARCIA, JJ.
Promulgated:

GODOFREDO CAGUIAT,
Respondent.
February 28, 2007
x-----------------------------------------------------------------------------------------------------x
DECISION
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
Decision[1] of the Court of Appeals datedJanuary 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 Pias, 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 Pias, Metro Manila

March 19, 1990
RECEIPT FOR PARTIAL PAYMENT OF LOT NO. 23
COVERED BY TCT NO. T-9905, LAS PIAS,
METRO MANILA
RECEIVED FROM MR. GODOFREDO CAGUIAT THE
AMOUNT OF ONE HUNDRED THOUSAND PESOS
(P100,000.00) AS PARTIAL PAYMENT OF OUR LOTSITUATED
IN LAS PIAS, 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 PIAS, 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 letter[4] 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
Managers Check No. 790537 datedApril 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
Decision[7] 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:
xxx
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 plaintiffs
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 courts judgment.

Forthwith, petitioners filed their motion for reconsideration

but it was denied by the appellate court in
its
[8]
Resolution 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 1458 [9] in relation to
Article 1475[10] 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 1482 [11] of the
same Code sincethere 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.[12] 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,

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
[13]

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 PIAS, 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 respondents complaint isDISMISSED.

SO ORDERED.

ANGELINA SANDOVAL-GUTIERREZ
Associate Justice

WE CONCUR:

REYNATO S. PUNO
Chief Justice
Chairperson
(On official leave)

RENATO C. CORONA
Associate Justice

ADOLFO S. AZCUNA
Associate Justice

CANCIO C. GARCIA
Associate Justice

CERTIFICATION

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 Courts Division.

REYNATO S. PUNO
Chief Justice

On official leave.
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).

[1]

[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.
Id.
[21]
Id.
[20]