G.R. No. 242366 VENUSTRIANO B. CHAVEZ, JR., MARIA CARMITA C. CERTEZA, VENERANDO B. CHAVEZ, CYNTHIA C. CHAN, CAROLINA C. GERSTMAYR, CARINA B. CHAVEZ, VERNON B. CHAVEZ, VICENZO B. CHAVEZ, BENJAMIN L. PALOMIQUE,** JAIME C. PALOMIQUE AND MARIAN CELINA C. PALOMIQUE, AND VIRGILIO B. CHAVEZ, PETITIONERS, VS. SPOUSES JOSELITO AND ADRIANA GOPEZ, RESPONDENTS. February 26, 2025

Before the Court is a Petition for Review onCertiorariunder Rule 45 of the Rules of Court assailing the Decision,^[1]dated April 17, 2018, and the Resolution,^[2]dated October 4, 2018, of the Court of Appeals (CA). The CA reversed the Decision,^[3]dated April 8, 2016, of Branch 100 of the Regional Trial Court, Quezon City (RTC) and declared the Acknowledgement Receipt between the parties as a Contract of Sale, and not a Contract to Sell.

Petitioners Virgilio B. Chavez (Virgilio), Benjamin L. Palomique, Jr., Venustriano B. Chavez, Jr., Maria Carmita C. Certeza, Venerando B. Chavez, Cynthia C. Chan, Carolina C. Gerstmayr, Carina B. Chavez, Vernon B. Chavez, Vicenzo B. Chavez, Jaime C. Palomique and Marian Celina C. Palomique (collectively,Chavez et al.) assert that the CA erred in declaring that the Acknowledgement Receipt over the subject lots amounts to a Contract of Sale.

The Facts

Respondents Joselito and Adriana Gopez (Spouses Gopez) filed a case in February 2013 for Specific Performance and Damages against Chavez et al.^[4]

This case involves two adjacent lots with a house covered by Transfer Certificate of Title (TCT) Nos. 004-2012013371 and 004-2012013402. Chavez et al. inherited the properties from their predecessors who died intestate and in whose names the properties were previously registered. Chavez et al. decided to sell the properties and hired a broker to look for buyers. In 2011, the broker introduced Virgilio Chavez to the Spouses Gopez. Chavez et al. alleged that the Spouses Gopez agreed in principle that:

1. The Spouses Gopez shall pay Chavez et al. a purchase price for the two properties in the net amount of PHP 31.5 million;
2. The Spouses Gopez shall pay the capital gains taxes, documentary stamp taxes, transfer taxes and estate taxes due on both properties;
3. The Spouses Gopez would take care of and handle the settlement of the estates and the payment of the estate taxes;
4. The Spouses Gopez shall budget and earmark the sum of PHP 3.5 million for the payment of (b) and (c) above and any unutilized amount shall be added to the PHP 31.5 million purchase price of the two properties;
5. The Spouses Gopez shall take care of all documentation; and
6. The Spouses Gopez shall make a downpayment of PHP 5 million which shall form part of the purchase price.^[5]

Virgilio asked that the agreement be formalized in a Contract to Sell and that the PHP 5 million downpayment be paid. To signify their commitment to buy the properties, the Spouses Gopez issued a check for PHP 200,000.00 to Virgilio with the promise to fully pay the downpayment and deliver the Contract to Sell.^[6]

Chavez et al. claimed that the Spouses Gopez never paid the PHP 5 million downpayment. Instead, the Spouses Gopez delayed the preparation of the draft special powers of attorneys (SPAs), which were needed to authorize attorneys-in-fact who would sign for and in behalf of Chavez et al., most of whom reside outside the Philippines. Chavez et al. also asserted that the Spouses Gopez unreasonably delayed the preparation of the extrajudicial settlement of estates. The deeds prepared by the Spouses Gopez turned out to be defective and needed to be rewritten, yet the new deeds never came. Chavez et al. alleged that the Spouses Gopez likewise delayed the drafting of the Contract to Sell, which took almost three months to complete. Moreover, the Contract to Sell significantly modified the terms agreed upon. The draft Contract to Sell excluded the agreement to pay a PHP 5 million downpayment, imposed new conditions, and created obligations for Chavez et al.^[7]

Conversely, the Spouses Gopez claimed that in addition to the initial PHP 200,000.00 worth of earnest money, they made partial payments through Banco de Oro (BDO) checks. The Spouses Gopez had paid PHP 1.5 million to Chavez et al. by the time the latter sought to terminate the agreement. The Spouses Gopez asserted that Chavez et al. agreed to furnish them with an authenticated extrajudicial settlement, certified true copies of tax declarations for the subject properties, and other pertinent documents. Chavez et al. failed to deliver these documents and the Spouses Gopez were thus unable to immediately prepare the documents.^[8]

On February 27, 2012, Virgilio wrote to the Spouses Gopez informing them that he is no longer interested in proceeding with the sale. In reply, the Spouses Gopez sent a letter denying responsibility for the delay and attributing the same to Chavez et al.'s failure to furnish them with the authenticated extrajudicial settlement, certified true copies of the tax declarations for the subject properties and certificates of landholdings of the decedents.^[9]

The Spouses Gopez then discovered that the titles covering the subject properties were cancelled and issued in the names of Chavez et al. and that the subject properties were being offered for sale to third persons. The Spouses Gopez then filed a claim for Specific Performance and Damages before the RTC.^[10]

The Ruling of the RTC

The RTC issued its Decision, dated April 8, 2016, dismissing the Spouses Gopez's Complaint for Specific Performance and Damages. The RTC stated that the parties did not put in issue the unenforceability of their contract and in fact agreed that what they have entered into is a Contract to Sell, as clearly defined during the Pre-Trial.^[11]

The RTC held that since the parties had entered into a Contract to Sell, and not a Contract of Sale, the earnest money of PHP 1.5 million did not result in the perfection of the contract. The suspensive condition to pay the remaining balance of the PHP 5 million downpayment was not fulfilled. Hence, the Spouses Gopez cannot compel Chavez et al. to transfer ownership of the properties to them.^[12]

The RTC further ruled that the evidence showed that the Spouses Gopez undertook to prepare everything for the sale. On the other hand, Chavez et al. supplied the needed SPA and the Deeds of Extrajudicial Settlement, and returned the draft Contract to Sell with their corrections. From the evidence, the Spouses Gopez continuously reneged on their obligations and Chavez et al. were well within their rights when they considered the agreement cancelled.^[13]

The RTC likewise ruled that Chavez et al. were entitled to ask for the recission of the contract and that the PHP 1.5 million paid should be returned to the Spouses Gopez. The RTC awarded moral and exemplary damages in favor of Chavez et al. It held that the Spouses Gopez acted with gross negligence amounting to bad faith and in wanton disregard of their contractual obligations. The RTC dismissed Chavez et al.'s claim for actual damages due to lack of proof. Hence, the Spouses Gopez were held liable to pay PHP 50,000.00 as moral damages, PHP 25,000.00 as exemplary damages, and PHP 50,000.00 as attorney's fees. The case was disposed, as follows:

WHEREFORE,premises considered, judgment is hereby rendered, order:

(1)	[T]he DISMISSAL of the instant Complaint[;]
(2)	[T]he RESCISSION of the oral contract to sell between the parties. Accordingly, defendants are ordered to reimburse to the plaintiffs the earnest money and/or partial payments made in the amount of [PHP 1.5 million];
(3)	Plaintiffs to PAY defendants the amount of [PHP 50,000.00] as moral damages, [PHP 25,000.00] as exemplary damages, and attorney's fees in the amount of [PHP 100,000.00;]
(4)	[T]he DISMISSAL of the claim for actual damages by defendants.

Cost against plaintiffs.

SO ORDERED.^[14](Emphasis in the original)

The Spouses Gopez appealed the case to the CA.

The Ruling of the CA

The CA reversed the RTC Judgment. The CA held that the agreement between the parties partakes of the nature of a written Contract of Sale, as evidenced by the Acknowledgment Receipt, dated October 21, 2011, which reads:

This is to acknowledge receipt [of] Check No. 0157934[,] dated October 21, 2021[,] amounting to [PHP 200,000.00] only [] as earnest money for the purchase of the property located at Mauban St. xxx for the amount of [PHP 31.5 million] (sic) [] with TCT [No.] RT-59039 & TCT No. 58821[,] Contract to Sell, Deed of Absolute Sale & Extrajudicial Settlement of Estate"^[15]

The CA ruled that the Acknowledgement Receipt contains all the elements of a Contract of Sale; (1) specific subject matter (the properties); (2) definite consideration (PHP 31.5 million); and (3) the meeting of the minds. The CA, citingCoronel v. Court of Appeals,^[16]ruled that the absence of an express reservation in the Acknowledgement Receipt made it a Contract of Sale. As to the draft Contract to Sell, the CA stated that it would not serve to modify the initial intention of the parties because it was never signed by them.^[17]

The CA further ruled that the records are bereft of any proof that Chavez et al. delivered the authenticated documents to the Spouses Gopez. Hence, there was no delay in the Spouses Gopez's performance of their obligations. Neither is there evidence that the parties agreed to a downpayment of PHP 5 million.^[18]The CA thus ruled:

WHEREFORE,premises considered, the appeal is herebyGRANTED.The assailed Decision[,] dated [April 8, 2016,] is herebyREVERSED and SET ASIDE.Judgment is hereby rendered ordering defendants-appellees to execute in favor of plaintiffs-appellants a deed of absolute sale over the subject properties covered TCT Nos. RT-59039 (51238) and 58821 (now TCT Nos. 004-20120113371 and 004-20120113402, respectively) of the Registry of Deeds for Quezon City, and upon receipt thereof, the plaintiffs-appellants are ordered to pay defendants the whole balance of the purchase price amounting to [PHP 30 million].

SO ORDERED.^[19](Emphasis in the original.)

The CA also denied Chavez et al.'s Motion for Reconsideration, hence the present Petition.^[20]

Chavez et al. argue thatCoronelis not applicable to the present case because the Acknowledgement Receipt in this case does not contain any undertakings on the part of the sellers. Rather, all the obligations fell on the buyers, the Spouses Gopez. Chavez et al. cite the testimony of Joselito Gopez stating that he agreed to prepare a Contract to Sell. In light of Joselito's admission that he undertook to prepare a Contract to Sell, it is clear that the parties had not yet agreed to transfer ownership of the properties. Chavez et al. further emphasize that the parties agreed during Pre-Trial that they had entered into a Contract to Sell. Contrary to the CA's ruling, Chavez et al. submitted Affidavits testifying that the Spouses Gopez agreed to pay a downpayment of PHP 5 million. Finally, Chavez et al. assert that it was the Spouses Gopez who consistently failed to fulfill their obligations under the agreement hence, the sellers were entitled to rescind the contract.^[21]

The Spouses Gopez cited the CA Decision, stating that the CA ruled based on the facts. They aver that the CA correctly appliedCoronelwhen it ruled that all the elements of a Contract of Sale were present in the Acknowledgment Receipt. They argue that a contract is determined by what the law defines it to be and not what the parties may call it. The Spouses Gopez contend that there was no express reservation of ownership by Chavez et al. and that the records are bereft of any oral agreement expressly reserving the title of the subject properties. They also cite Article 1482 of the Civil Code, which provides that whenever earnest money is given in a Contract of Sale, it shall be considered proof of the perfection of the contract. As to the testimony of Joselito that he agreed to prepare the "Contract to Sell," what he was referring to was actually the "Deed of Sale." As to the PHP 5 million downpayment, the Spouses Gopez assert that the Affidavits submitted by Chavez et al. are mere self-serving testimonies.^[22]

The Spouses Gopez argue further that the preparation of the SPAs and extrajudicial settlements were merely suspensive conditions attached to the Contract of Sale. The non-fulfillment of the conditions was due to Chavez et al.'s failure to submit the requested information to the Spouses Gopez. They underscore that Chavez et al. continued to accept partial payments from the Spouses Gopez, showing that the parties did not abandon the performance of the contract.^[23]The Spouses Gopez further argue that there was no delay because there was no stipulated period for the completion of the payment. The payment could not be completed before the preparation of documents, hence, the Spouses Gopez were not in delay pending the completion of the documents. In the absence of a fixed period and given Chavez et al.'s failure to perform their obligations, there was no breach of the contract.^[24]

The Issues

1.	Is the Acknowledgement Receipt a Contract of Sale?
2.	Were the Spouses Gopez prevented from fulfilling the conditions under the Contract?

The Ruling of the Court

The resolution of this case rests on the proper classification of the agreement between the parties as either a Contract of Sale or a Contract to Sell. Both parties thus rely on the handwritten Acknowledgement Receipt, which reads:

This is to acknowledge receipt [of] Check No. 0157934[,] dated October 21, 2011[,] amounting to [PHP 200,000.00] as earnest money for the purchase of the property located at Mauban St. xxx for the amount of [PHP 31.5 million] (sic) []with TCT [No.] RT-59039 & TCT No. 58821[,] Contract to Sell, Deed of Absolute Sale and Extrajudicial Settlement of Estate.^[25]

The doctrinal case ofCoroneldistinguishes a Contract of Sale from a Contract to Sell by the lack of consent from the seller to transfer ownership of the subject. In a Contract to Sell, the seller does not as yet agree or consent to transfer ownership of the subject properties until the happening of an event, usually the full payment of the purchase price. Rather, the seller obliges himself only to fulfill his promise to sell the subject properties after the happening of the event. If the event does not occur, then the obligation to sell does not arise and ownership is retained by the seller.^[26]

Therefore, a Contract to Sell may not be considered as a conditional Contract of Sale because in a conditional Contract of Sale the first element of consent is present, although it is conditioned upon the happening of a contingent event which may or may not occur. In a Contract to Sell, the fulfillment of the suspensive condition will not automatically transfer ownership to the buyer. The seller still has to convey title to the buyer. In a conditional Contract of Sale, however, upon the fulfillment of the suspensive condition, the sale becomes absolute and this will definitely affect the seller's title thereto. InCoronel, the Court determined that the Receipt of Down Payment was a Contract of Sale because of the express stipulations therein:

RECEIPT OF DOWN PAYMENT

[. . . .]

Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of [PHP 50,000.00] purchase price of our inherited house and lot, covered by TCT No. 119627 of the Registry of Deeds of Quezon City, in the total amount of [PHP 1.240 million].

We bind ourselves to effect the transfer in our names from our deceased father, Constancio P. Coronel, the transfer certificate of title immediately upon receipt of the down payment above-stated.

On our presentation of the TCT already in our name, We will immediately execute the deed of absolute sale of said property and Miss Ramona Patricia Alcaraz shall immediately pay the balance of the [PHP 1.190 million].

Clearly, the conditions appurtenant to the sale are the following:

1.	Ramona will make a down payment of [PHP 50,000.00] Pesos upon execution of the document aforestated;
2.	The Coronels will cause the transfer in their names of the title of the property registered in the name of their deceased father upon receipt of the [PHP 50,000.00] Pesos down payment;
3.	Upon the transfer in their names of the subject property,the Coronels will execute the deed of absolute sale in favor of Ramona and the latter will pay the former the whole balanceof [PHP 1.190 million].

[. . . .]

When the"Receipt of Down Payment" is considered in its entirety, it becomes more manifest that there was a clear intent on the part of petitioners to transfer title to the buyer, but since the transfer certificate of title was still in the name of petitioner's father, they could not fully effect such transfer although the buyer was then willing and able to immediately pay the purchase price. Therefore,petitioners-sellers undertook upon receipt of the down payment from private respondent Ramona P. Alcaraz, to cause the issuance of a new certificate of title in their names from that of their father, after which, they promised to present said title, now in their names, to the latter and to execute the deed of absolute sale whereupon, the latter shall, in turn, pay the entire balance of the purchase price.

The agreement could not have been a contract to sell because the sellers herein made no express reservation of ownership or title to the subject parcel of land. Furthermore, the circumstance which prevented the parties from entering into an absolute contract of sale pertained to the sellers themselves (the certificate of title was not in their names) and not the full payment of the purchase price. Under the established facts and circumstances of the case, the Court may safely presume that, had the certificate of title been in the names of petitioners-sellers at that time, there would have been no reason why an absolute contract of sale could not have been executed and consummated right there and then.

Moreover, unlike in a contract to sell, petitioners in the case at bar did not merely promise to sell the property to private respondent upon the fulfillment of the suspensive condition. On the contrary, having already agreed to sell the subject property,they undertook to have the certificate of title changed to their names and immediately thereafter, to execute the written deed of absolute sale.^[27](Emphasis supplied.)

The Court finds that the circumstances inCoronelare not akin to the present case. There was no question that the Receipt of Down Payment inCoronelimmediately imposed the obligation to effect the transfer of ownership. This obligation fell to the sellers since the buyers were willing and able to pay the purchase price already. These are pivotal facts in theCoronelcase, which are not present in this case. Comparing the present Acknowledgement Receipt against the receipt inCoronel, the Acknowledgement Receipt lacks any undertaking on the part of the sellers, Chavez et al., to transfer the properties to the Spouses Gopez. Rather, the Spouses Gopez were expected to fulfill certain conditions in addition to the payment of the purchase price, specifically the preparation of a draft Contract to Sell, Deed of Absolute Sale and Extrajudicial Settlement of Estate.

It is a canon in the interpretation of contracts that the words used in the agreement should be given their natural and ordinary meaning unless a technical meaning was intended.^[28]The limited statement contained in the Acknowledgement Receipt suggests that the parties agreed only to draft the preparatory documents to be used in affecting the sale. Hence, the agreement pertained to did not contemplate a transfer of ownership yet. These documents would still have to be reviewed, accepted and signed by both parties before they could effect the sale and transfer of the properties. The element of consent to transfer ownership is clearly lacking in this case.

The Spouses Gopez emphasize that the Acknowledgement Receipt does not contain any express reservation of ownership over the properties. CitingCoronel, they aver that the absence of an explicit reservation indicates that the agreement was therefore already a Contract of Sale.

The Court disagrees.

As explained above, the key characteristic of a Contract to Sell is lack of consent to transfer ownership. Contrary to the statement inCoronel, more recent jurisprudence teaches that a Contract to Sell may exist even without an explicit stipulation reserving ownership:

Even in the absence of an express stipulation to such effect, the intention of the parties to execute a contract to sell may be implied from the provisions of the contract. While Article 1478 of the Civil Code recognizes the right of the parties to agree that the ownership of the thing shall not pass to the purchaser until he has fully paid the price therefore, the same statutory provision does not require that such be expressly stipulated in the contract.

InAdelfa Properties, Inc. v. Court of Appeals, the Court ruled that since the contract between the parties therein did not contain a stipulation on reversion or reconveyance of the property to the seller in the event that the buyer did not comply with its obligation, it may legally be inferred that the parties never intended to transfer ownership to the buyer prior to the completion of the payment of the purchase price. Consequently, the contract involved in the aforementioned case was a mere contract to sell.^[29](Emphasis supplied.)

Similarly in this case, there is nothing in the facts or the stipulations between the parties that points to an agreement to transfer ownership over the properties. Rather, Chavez et al. required the Spouses Gopez to prepare all the necessary documents for the sale, which would then be submitted to Chavez et al. before they could proceed. Again, the simple terms of the Acknowledgement Receipt must be taken in their natural and ordinary meaning. Based on the foregoing, Chavez et al. retained their properties and did not consent to transferring ownership over the same to the Spouses Gopez.

This Court further finds that the mention of "earnest money" did not convert the Acknowledgement Receipt into a Contract of Sale. Although earnest money is usually given in a perfected Contract of Sale, it may also be given in a Contract to Sell. InRacelis v. Spouses Javier,^[30]this Court explained that in a Contract to Sell, the payment of earnest money represents the seller's opportunity cost of not entertaining other buyers or better deals. It is meant as a gesture to assure the other party of one's willingness to go through with the sale after a specified period or upon compliance with the conditions stated in the Contract to Sell. Absent a contrary agreement, the earnest money in a Contract to Sell should be forfeited if the sale does not happen.^[31]

Article 1482 of the Civil Code provides that "whenever earnest money is given in acontract of sale, it shall be considered as part of the price and proof of the perfection of the contract," it does not apply to a Contract to Sell by virtue of its express wording.^[32]In this case, the earnest money worth PHP 200,000.00 was given in a Contract to Sell and will form part of the consideration only if the sale is consummated upon full payment of the purchase price.^[33]From the foregoing, it is evident that the Acknowledgement Receipt is a Contract to Sell, and not a Contract of Sale.

Chavez et al. were well within their rights when they terminated the agreement due to the Spouses Gopez's non-fulfillment of the conditions. In Contracts to Sell, the condition is a positive suspensive condition while in Contracts of Sale, the obligation is a negative resolutory condition.^[34]In this case, non-fulfillment of the conditions under the Contract to Sell rendered the contract ineffective and there was no need to rescind the contract anymore. As this Court held inDe Guzman v. Spouses Santos:^[35]

Considering that non-payment of the full purchase price does not amount to a breach of contract, the remedy of specific performance cannot be availed of the remedy of rescission is also unavailable since it is impossible to rescind an obligation that is non-existing, the suspensive condition not having happened yet. The buyer's non-payment thus only renders the contract to sell ineffective and without force and effect. This Court has even pronounced that the failure to make full payment of the purchase price in a contract to sell is not really a breach, serious or otherwise, and therefore not a sufficient ground to award damages.^[36](Emphasis supplied.)

Hence, Chavez et al. could already deem the Contract ineffective with the Spouses Gopez' failure to fulfill the conditions.

The Spouses Gopez argue that it was Chavez et al. who prevented the fulfillment of the condition to draft the Contract of Sale. However, this is belied by the fact that the Spouses Gopez were nevertheless able to prepare the documents. Chavez et al., however, found the documents to be defective and requested a revision in the terms of the Contract to Sell, yet the revisions never came. Hence, the conditions remained unfulfilled.

In fact, it was the Spouses Gopez who objected to the PHP 5 million downpayment. To recall, the Spouses Gopez have only paid PHP 1.5 million out of the PHP 31.5 million purchase price for the properties. What prevented the fulfillment of the condition was the refusal of the Spouses Gopez to prepare the Contract to Sell to reflect the terms of the agreement and to pay the purchase price. Hence, Chavez et al. did not violate their contract obligations when they sought to terminate the agreement and return the money collected.

FOR THESE REASONS,the Petition for Review onCertiorariisGRANTED.The Decision dated April 17, 2018 and the Resolution dated October 4, 2018 of the Court of Appeals, in CA-G.R. CV No. 107001 areREVERSED. The Decision dated April 8, 2016 of Branch 100, Regional Trial Court, Quezon City, in Civil Case No. Q-13-72713 isREINSTATEDwith theMODIFICATIONthat the Contract to Sell between the parties is not rescinded but declared ineffective.

SO ORDERED.

Inting, Dimaampao, andMarquez,^*JJ., concur.
Caguioa, J. (Chairperson), see concurring opinion.

^**Also referred to as Benjamin L. Palomique, Jr. in some parts of therollo.

^[1]Rollo,pp. 73-88. The Decision in CA-G.R. CV No. 107001 was penned by Associate Justice Samuel H. Gaerlan (now a member of the Court) and concurred in by Associate Justices Ramon Paul L. Hernando (now a member of the Court) and Marie Christine Azcarraga-Jacob, Special Eighth Division of the Court of Appeals, Manila.

^[2]Id.at 91-92. The Resolution in CA-G.R. CV No. 107001 was penned by Associate Justice Samuel H. Gaerlan (now a member of the Court) and concurred in by Associate Justices Ramon Paul L. Hernando (now a member of the Court) and Marie Christine Azcarraga-Jacob, Former Special Eighth Division of the Court of Appeals, Manila.

^[3]Id.at 94-105. The Decision in Civil Case No. Q-13-72713 was penned by Presiding Judge Editha G. Mina-Aguba.

^[4]Id.at 52.

^[5]Id.at 53-54.

^[6]Id.

^[7]Id.

^[8]Id.at 133.

^[9]Id.

^[10]Id.at 134.

^[11]Id.at 98.

^[12]Id.at 99.

^[13]Id.at 99-100.

^[14]Id.at 105.

^[15]Id.at 82.

^[16]331 Phil. 294 (1996) [Per J. Melo, Third Division].

^[17]Rollo, p. 86.

^[18]Id.at 87-88.

^[19]Id.at 88.

^[20]Id.at 91-92.

^[21]Id.at 56-69.

^[22]Id.at 137-141.

^[23]Id.at 142-144.

^[24]Id.at 144-145.

^[25]Id.at 82.

^[26]Coronel v. Court of Appeals, 331 Phil. 294, 323 (1996) [Per J. Melo, Third Division].

^[27]Id.

^[28]Tan v. Court of Appeals, 287 Phil. 645 (1992) [Per J. Cruz, First Division].

^[29]Spouses Reyes v. Salvador, Sr., 586 Phil. 391, 412-413 (2008) [Per J. Chico-Nazario, Third Division], citingAdelfa Properties, Inc. v. Court of Appeals, 310 Phil. 623 (1995) [Per J. Regalado, Second Division].

^[30]824 Phil. 684 (2018) [Per J. Leonen, Third Division].

^[31]Id.at 695-703.

^[32]Chua v. Court of Appeals, 449 Phil. 25, 39-52 (2003) [Per J. Carpio, First Division].

^[33]Spouses Serrano v. Caguiat, 545 Phil. 660 (2007) [Per J. Sandoval-Gutierrez, First Division].

^[34]Ursal v. Court of Appeals, 509 Phil. 628, 644 (2005) [Per J. Austria-Martinez, Second Division].

^[35]G.R. No. 222957, March 29, 2023 [Per J. Gaerlan, Third Division].

^[36]Id.at 7. This pinpoint citation refers to the copy of the Decision uploaded to the Supreme Court website.

CAGUIOA,J.:

Theponenciain the above-captioned case grants the petition and reinstates the Decision dated April 8, 2016 of the Regional Trial Court in Civil Case No. Q-13-72713.^[1]Theponenciarules that petitioners-vendors Chavez, et al. were well within their rights when they terminated their sale agreement with respondents-vendees Spouses Joselito and Adriana Gopez (Spouses Gopez), evidenced by an Acknowledgment Receipt dated October 21, 2011, on the basis of the latter's failure to fulfill the conditions under the agreement,^[2]including the delivery of PHP 5,000,000.00 as downpayment.^[3]

The Acknowledgment Receipt reads:

This is to acknowledge receipt [of] Check No. 0157934[,] dated October 21, 2011[,] amounting to [PHP 200,000.00] only [] as earnest money for the purchase of the property located at Mauban St. ... for the amount of [PHP 31.5 million], (sic) [] with TCT [No.] RT-59039 & TCT No. 58821[,] Contract to Sell, Deed of Absolute Sale & Extrajudicial Settlement of Estate.^[4]

In arriving at its conclusion, theponenciacharacterizes the agreement between the parties as a contract to sell. Theponenciaobserves that the Acknowledgment Receipt lacks any undertaking on the part of the vendors to transfer the properties to Spouses Gopez. Moreover, the Acknowledgment Receipt evidences certain conditions to be fulfilled by Spouses Gopez, i.e., the preparation of the contract to sell, deed of absolute sale, and extrajudicial settlement of estate—in addition to the payment of the purchase price.^[5]

I concur in theponenciaand find it fitting to reiterate the view I espoused in Spouses Kaw v. Heirs of Nodalo, et al.^[6]on the introduction and evolution of the concept of a contract to sell in Philippine jurisprudence—a concept which, though lacking direct statutory foundation, has nonetheless taken firm root in our prevailing judicial framework.

Contract of Sale under the Civil Code

If one were to adhere strictly to the provisions of the Civil Code on Sales and on Obligations and Contracts, what jurisprudence has come to recognize as a "contract to sell" would, in fact, constitute a perfected contract of sale under Article 1458 of the Civil Code:

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 to pay therefor a price certain in money or its equivalent.

A contract of sale may be absolute or conditional.

Complementing this, Article 1475 of the Civil Code states that "[a] contract of sale isperfectedat the moment there is ameeting of minds upon the thing which is the object of the contract and upon the price."^[7]

Consistent with the above provisions of the Civil Code, the Court has repeatedly emphasized that "the nature of a sale is a consensual contract because it isperfected by mere consent."^[8]A contract of sale, thus, consists of the following essential elements:

(i)	Consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price;
(ii)	Determinate subject matter; and
(iii)	Price certain in money or its equivalent.[9]

As applied in this case, and as indeed found by the Court of Appeals,^[10]all the elements of a perfected contract of sale are present in the agreement between the parties—(i) petitioners and Spouses Gopez consented to the transfer of (ii) two adjacent lots in Quezon City for (iii) the purchase price of PHP 31,500,000.00.^[11]

Further, owing to the consensual nature of a contract of sale, a stipulation that the buyer must first comply with his obligation to pay before the seller shall comply with his obligation to cause the transfer of the ownership of the thing, would not divest an agreement of its character as a contract of sale. After all, Article 1478 of the Civil Code expressly allows parties in a contract of sale to stipulate that ownership shall not pass until the purchaser has fully paid the price,viz.:

ARTICLE 1478. The parties may stipulate that ownership in the thing shall not pass to the purchaser until he has fully paid the price.

Professor Araceli Baviera, a noted civil law professor, distinguished the definition of a contract of sale under Article 1445^[12]of the Spanish Civil Code and Article 1458^[13]of the New Civil Code, advancing the view that the latter now contemplates a contract of sale where reservation of ownership may be made by the seller despite delivery of the property to the buyer:

The Spanish Civil Code defined a contract of purchase and sale as one where a contracting party obligates himself to deliver a determinate thing and the other to pay a certain price therefor in money or in something representing it.The New Civil Code defines a contract of sale as a contract where one of the parties obligates himselfto transfer the ownership of and to deliver a determinate thing, and the other party to pay therefor a price certain in money or its equivalent. The Uniform Sales Act defines asale of goodsas an agreement whereby the sellertransfersthe property in goods to the buyer for a consideration called the price, while acontract to sell goodsis a contract whereby the selleragrees to transferthe property in goods to the buyer for a consideration called the price. Under the Uniform Commercial Code, a "contract for sale" includes both a present sale of goods and a contract to sell goods at a future time, and a "sale" consists in the passing of title from seller to the buyer for a price.

The Spanish Civil Code followed the Roman law definition imposing a duty on the seller to deliver, but the seller was not bound to make the buyer owner immediately and directly. According to the Code Commission, the definition in the Spanish Civil Code is unsatisfactory because even if the seller is not the owner of the thing sold, he may validly sell, subject to the warranty against eviction.The present definition is similar to the definition in the German Civil Code imposing two obligations on the seller.The implication of these separate obligations is that the seller may reserve ownership over the thing sold, notwithstanding delivery to the buyer.^[14](Citations omitted; emphasis supplied)

Despite the foregoing, theponencia's characterization of the agreement as a contract to sell, i.e., an agreement where the "seller does not yet agree or consent to transfer ownership until the happening of an event, usually the full payment of the purchase price,"^[15]is in accord with prevailing jurisprudence.

Contract to Sell— a jurisprudential concept

The concept of a contract to sell—one where title remains with the vendor until full payment of the price—was first articulated in the 1960 case ofManuel v. Rodriguez, Sr.^[16]penned by esteemed civilist Associate Justice J. B. L. Reyes:

Plaintiff-appellant, however, argues (Errors I-IV; VI; VIII) that the Payatas Subdivision had no right to cancel the contract, as there was no demand by suit or notarial act, as provided by Article 1504 of the Old Code (Art. 1592, N.C.C.). This is without merit, because Article 1504 requiring demand by suit or notarial act in case the vendor of realty wants to rescind, does not apply toa contract to sell or promise to sell, where title remains with the vendor until fulfillment to a positive suspensive condition, such as full payment of the price. . .^[17](Citations omitted; emphasis supplied)

Such characterization of a contract to sell inManuelfound footing in earlier rulings, the earliest of which is the 1940 case ofThe Caridad Estates, Inc. v. Santero.^[18]InCaridad Estates, the Court held that Article 1504^[19]of the Spanish Civil Code—which allows a vendee in default of payment to still proceed to pay, as long as there is no judicial or notarial demand for resolution by the vendor—does not apply to an agreement where the partiesexpressly stipulatethat non-payment warrants the cancellation of the contract and repossession upon demand. Notably, however, the Court still consistently referred to the agreement as a contract of sale, with its ruling anchored on the parties' freedom to stipulate, rather than a reclassification of the contract's nature.

The 1950 case ofAlbea v. Inquimboy^[20]marked the first time the Court expressly denominated the agreement inCaridad Estatesas a "contract to sell." WhileAlbeaalso involved a contract of sale on installment—with a stipulation that failure to timely pay the first installment would automatically cancel the sale^[21]—the Court emphasized a notable difference between the two cases. TheAlbeacontract contained a provision requiring the vendee to "execute and give the corresponding deed of cancellation and rescission"^[22]in case of default, which the Court interpreted as indicative of an absolute sale—i.e., ownership had already passed to the vendee, hence the need to reconvey title. In contrast, the Court characterizedCaridad Estatescontract as one where "title had not passed to [the vendee],"^[23]and classified it as a "mere contract to sell,"viz.:

The contract Exhibit A involved in the present case, was one of absolute sale whereby the vendor Inquimboy transferred and conveyed his title to the land in question to the vendee[.] ... In a separate document (Exhibit B) he agreed to pay that price as follows: [PHP] 2,500[.00] on or about November 15, 1941, and [PHP] 500[.00] in May, 1942, with the proviso that should he fail to pay the said sum of [PHP] 2,500[.00] on or before November 15, 1941, the deed of absolute sale Exhibit A "shallipso factobe deemed cancelled and rescinded and that I shall execute and give the corresponding deed of cancellation and rescission." In other words, the vendee agreed to retransfer or reconvey the property to the vendor should the former fail to pay the first sum of [PHP] 2,500[.00] on the date stipulated.

That contract is different from the one involved in the Caridad Estates case, in that the latter was not an absolute deed of sale but a merecontract to sellwhereby the vendee agreed to pay the purchase price in various installments with the stipulation that, upon failure to pay any installment within 60 days after due date, the vendor may, at his option, recover possession of the property and consider any and all amounts already paid as rental for the use and occupancy of the property. In that casethere wasno need for the vendee to execute any deed of reconveyance to the vendor because by the said contract to sell the title had not passed to him.

The contract involved in the present caseis similar to that involved in Villaruel vs. Tan King, in that both contractswere absolute sales which passed title to the vendee, although the purchase price was not fully paid....^[24](Emphases supplied)

Albea, thus, introduced the defining feature of what is now understood in jurisprudence as a contract to sell—the vendor's reservation of ownership until the fulfillment of a positive suspensive condition, such as full payment of the price. This characteristic was later adopted in formulating the definition of a contract to sell inManuel, and has since been recognized in case law as the hallmark of a contract to sell.

It is worth emphasizing, however, that the subject contracts inCaridad Estates, Albea, andManuelwere all executed before August 30, 1950 or before the New Civil Code came into effect.^[25]As such, the subject contracts were governed by, and interpreted in the context of the Spanish Civil Code. Accordingly, the Court, in these cases, had no occasion to consider: (i) the revised definition of a contract of sale under Article 1458 of the New Civil Code; and (ii) Article 1478—a new provision in the New Civil Code—which expressly allows contracting parties to "stipulate that ownership in the thing shall not pass to the purchaser until he has fully paid the price," without divesting the agreement of its nature as a contract of sale.

Contract of Sale vis-à-vis Contract to Sell

Since its introduction to Philippine jurisprudence, the concept of a "contract to sell"—where ownership of the property is retained by the owner-vendor until full payment of the purchase price by the vendee—has been upheld even in subsequent cases involving contracts governed by the New Civil Code.^[26]By definition, pivotal in the Court's determination that an agreement is a contract to sell—and verily distinguishing it from a contract of sale—is the finding of anevident intentof the parties to reserve the seller's ownership of the property pending the buyer's payment. So it must be, for as a general rule, with the seller's delivery or tradition of the object, ownership is acquired by the buyer, i.e., satisfying the obligations of the seller in a contract of sale as set forth in Article 1495^[27]of the Civil Code.

In this connection, it must be remembered that under Article 712^[28]of the Civil Code, ownership and other real rights over property are acquired and transmitted by tradition, in consequence of certain contracts, such as sale. Specifically, Articles 1477 and 1496 of the Civil Code on Sales state that:

ARTICLE 1477. The ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof.

. . . .

ARTICLE 1496. The ownership of the thing sold is acquired by the vendee from the moment it is delivered to him in any of the ways specified in articles 1497 to 1501, or in any other manner signifying an agreement that the possession is transferred from the vendor to the vendee.

Furthermore, Article 1498 of the Civil Code provides that the execution of a public instrument is equivalent to the delivery of the object of the sale: "[w]hen the sale is made through a public instrument, the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract, if from the deed the contrarydoes not appear or cannot clearly be inferred."^[29]

From the foregoing, to take an agreement out of the ambit of a contract of sale—which is perfected by mere consent and under which the seller's prestation is performed by either actual or constructive delivery—the reservation of ownership pending full paymentmust be expressly provided for, or should be capable of being clearly construed from the terms of the agreement.

Harmonizing the provisions of the Civil Code on contracts of sale with the decades-long body of jurisprudence on contracts to sell, it appears that as ageneral rule, where an agreement contains all the essential elements of a contract of sale under Article 1475^[30]of the Civil Code (i.e., consent, determinate subject matter, price certain), such agreement is a contract of sale. Jurisprudence, however, establishes anexception: if the contracting parties further stipulate that the transfer of ownership to the buyer is conditioned upon the full payment of the purchase price—which arrangement may be instituted through an express provision or may be clearly inferred from the other terms of the agreement—the deed takes the nature of a contract to sell.

In the absence of an express stipulation on reservation of ownership, the most commonly recognized indicator in jurisprudence of a contract to sell is a provision requiring the execution of a separate deed of absolute sale upon full payment of the purchase price. InDiego v. Diego,^[31]the Court pronounced such stipulation as "a unique and distinguishing characteristic of a contract to sell,"^[32]evidently implying the reservation of title in the vendor until the vendee has completed the payment.

As applied in the present case, I concur that the subject agreement falls within the jurisprudential exception and is indeed contracts to sell. To recall, no contract has yet been executed by the parties. However, from the language of the Acknowledgment Receipt—the only documentary evidence as to the parties' agreement—it can be clearly inferred that the petitioners did not intend to immediately transfer ownership over the subject properties. The Acknowledgment Receipt indicates that the following must be provided by Spouses Gopez for the purchase of the subject properties: [i] PHP 31,500,00.00; [ii] contract to sell; [iii] deed of absolute sale; and [iv] extrajudicial settlement of estate. The necessity of crafting these documents, particularly a separate deed of absolute sale, for purposes of conveying ownership implies that no such transfer is yet intended by the parties, consistent with the current understanding of a contract to sell.

However, I must underscore a deeper jurisprudential concern as I have advanced in my Concurring Opinion inSpouses Kaw:^[33]the "general rule-exception" framework on contracts of sale vis-à-vis contacts to sell is largely the product of judicial construction, rather than legislative design.

As demonstrated herein, the concept of a contract to sell built upon judicial foundations governed by the Spanish Civil Code—may warrant a reassessment within the legal architecture introduced by the New Civil Code. To reiterate, a strict application of the latter reveals that any meeting of the minds as to the delivery and the transfer of ownership of a determinate thing in exchange for a price certain is defined as a contract of sale,^[34]and any stipulation that ownership shall not pass unless the price has been fully paid^[35]should not negate its character as such.

Admittedly, however, the concept of a contract to sell now forms part of the underpinning of Philippine sales law, and recalibrating this construct may carry far-reaching implications for the broad body of jurisprudence that has been built around it.

ACCORDINGLY, ICONCURwith theponenciaand vote toGRANTthe Petition.

^[2]Id.at 12.

^[3]Id.

^[4]Id.at 8.

^[5]Id.at 10.

^[6]G.R. No. 263047, November 27, 2024 [Per J. Inting, Third Division].

^[7]Emphasis supplied.

^[8]The Heirs of Zenaida B. Gonzales v. Spouses Dominador and Estefania Basas, 923 Phil. 95, 108 (2022) [Per J. Hernando, First Division]. (Emphasis supplied)

^[9]Pasco v. Cuenca, 889 Phil. 68, 78 (2020) [Per J. Inting, Third Division].

^[10]Ponencia, p. 6.

^[11]Id.

^[12]ARTICLE 1445. By the contract of purchase and sale one of the contracting parties binds himselfto deliver a determinate thingand the other to pay a certain price therefor in money or in something representing the same. (Emphasis supplied)

^[13]ARTICLE 1458. By the contract of sale one of the contracting parties obligates himself totransfer the ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent.

A contract of sale may be absolute or conditional. (Emphasis supplied)

^[14]Heirs of Corazon Villeza v. Aliangan, 891 Phil. 443, 459-460 (2020) [Per J. Caguioa, First Division],citingARACELI T. BAVIERA, SALES 3-4 (2005).

^[15]Ponencia, p. 8.

^[16]109 Phil. 1 (1960) [Per J. Reyes, J. B. L., Second Division].

^[17]Id.at 9.

^[18]71 Phil. 114 (1940) [Per J. Laurel,En Banc].

^[19]ARTICLE 1504. In the sale of real property, even though it may have been stipulated that in default of the payment of the price within the time agreed upon, the resolution of the contract shall take placeipso jure, the purchaser may pay even after the expiration of the period, at any time before demand has been made upon him either by suit or by notarial act. After such demand has been made the judge cannot grant him further time.

^[20]86 Phil. 477 (1950) [Per J. Ozaeta, Second Division].

^[21]Id.at 482.

^[22]Id.

^[23]Id.at 483.

^[24]Id.at 482-483.

^[25]Lara v. Del Rosario, Jr., 94 Phil. 778, 783 (1954) [Per J. Montemayor,En Banc].

^[26]SeeVisayan Sawmill Company, Inc. v. Court of Appeals, 292 Phil. 382 (1993) [Per J. Davide, Jr.,En Banc];Ang Yu Asuncion v. Court of Appeals, 308 Phil. 624 (1994) [Per J. Vitug,En Banc].

^[27]ARTICLE 1495. The vendor is bound to transfer the ownership of and deliver, as well as warrant the thing which is the object of the sale.

^[28]ARTICLE 712. Ownership is acquired by occupation and by intellectual creation.

Ownership and other real rights over property are acquired and transmitted by law, by donation, by testate and intestate succession, and in consequence of certain contracts, by tradition.

They may also be acquired by means of prescription.

^[29]Emphasis supplied.

^[30]ARTICLE 1475. The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price.
. . . .

^[31]704 Phil. 373 (2013) [Per J. Del Castillo, Second Division].

^[32]Id.at 384.

^[33]Supranote 6.

^[34]SeeArt. 1458 of the Civil Code, the relevant portion of which provides:

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 to pay therefor a price certain in money or its equivalent.
. . . .

^[35]SeeArt. 1478 of the Civil Code, which provides:

ARTICLE 1478. The parties may stipulate that ownership in the thing shall not pass to the purchaser until he has fully paid the price.