MANILA, Philippines — The Supreme Court has ruled that an acknowledgment receipt alone cannot be considered a valid contract of sale unless it explicitly shows the seller’s intent to transfer ownership of the property.

In a decision penned by Associate Justice Maria Filomena D. Singh, the Court’s Third Division sided with the Chavez family in their legal dispute with Spouses Joselito and Adriana Gopez, ruling that the transaction was a contract to sell, not a contract of sale.

The case centered on two properties inherited by the Chavez family and offered to the spouses for ₱31.5 million. The agreement required a ₱5 million downpayment and the preparation of sale documents, including a formal contract to sell. The spouses initially paid ₱200,000, which was recorded in an acknowledgment receipt as “earnest money”—the only written proof of the transaction.

However, the Chavez family later canceled the agreement, citing the spouses’ failure to pay the full downpayment and delays in preparing required documents. They also pointed out that the draft contract to sell, which omitted the ₱5 million downpayment clause and altered key terms, remained unsigned.

The spouses filed a case before the Regional Trial Court (RTC), claiming they had already paid ₱1.5 million and should be allowed to proceed with the sale. The RTC dismissed the case, affirming that the deal was a contract to sell. It ruled that since the spouses had not fulfilled the downpayment requirement, they had no right to demand the transfer of ownership.

However, the Court of Appeals reversed this decision, ruling that the acknowledgment receipt constituted a contract of sale since it identified the properties, the price, and the parties’ agreement. The appellate court also noted that the receipt did not state any condition reserving ownership to the seller.

The Supreme Court reinstated the RTC’s ruling, explaining that in a contract to sell, the seller only commits to transferring ownership once certain conditions—usually full payment—are met. Until then, the seller retains ownership. In contrast, a contract of sale signifies a clear and immediate intent to transfer ownership.

In this case, the acknowledgment receipt did not include any express promise to transfer ownership, nor did it indicate fulfillment of the key conditions—full payment, preparation of a deed of sale, and execution of estate settlement.

The Court further clarified that the use of the term “earnest money” does not automatically indicate a perfected sale. It can also be used in a contract to sell to show good faith, with actual transfer of title subject to compliance with agreed-upon conditions.

“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 in the Contract to Sell,” the SC explained.

In a concurring opinion, Associate Justice Alfredo Benjamin S. Caguioa noted that even in the absence of an express clause reserving ownership, a contract to sell exists if a separate deed of sale is required after full payment. He also referenced previous Supreme Court rulings that help distinguish between contracts to sell and contracts of sale.