03/07/2025
The (SC) has ruled that an acknowledgment receipt cannot be considered a contract of sale unless it clearly shows that the seller intends to transfer ownership of the property to the buyer.
In a decision written by Associate Justice Maria Filomena D. Singh, the SC’s Third Division ruled that the agreement between Virgilio B. Chavez and his fellow petitioners (Chavez family) on one hand, and Spouses Joselito and Adriana Gopez (spouses) on the other was a contract to sell, not a contract of sale.
The case involved two properties inherited by the Chavez family, which they agreed to sell to the Spouses Gopez for PHP 31.5 million. The spouses were required to pay PHP 5 million as downpayment and to prepare the necessary documents, including the contract to sell.
The spouses initially paid PHP 200,000, noted in an acknowledgment receipt as “earnest money.” This receipt was the only proof of their agreement.
Later, the Chavez family canceled the agreement, claiming that the spouses had not paid the full down payment and had delayed the paperwork. This led the Spouses Gopez to file a case to force the Chavez family to proceed with the sale.
Ruling that the transaction was a contract to sell, the SC explained that in such a contract, the seller does not agree to transfer ownership of the property just yet. The seller only commits to fulfilling their promise to sell the properties and transfer title to the buyer after an event, typically the full payment of the purchase price. If this does not happen, their obligation to sell does not arise, and the seller retains ownership of the property.
In contrast, a contract of sale clearly shows the seller's intent to transfer ownership to the buyer.
In this case, the acknowledgment receipt did not include any promise to transfer ownership. It only showed that the spouses needed to meet conditions: the payment of the purchase price and preparation of the contract to sell, deed of sale, and estate settlement.
Read the full text of the Press Release at https://tinyurl.com/3zfynpbc.
Read the full text of the Decision at https://tinyurl.com/4hvfm3ze.
Read the the Concurring Opinion of Associate Justice Alfredo Benjamin S. Caguioa at https://tinyurl.com/msysydyb.
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