G.R. No. 135929, 20 April 2001, 357 SCRA 209


Respondents offered to sell to petitioner a parcel of land consisting of 48, 260 square meters, situated in Barrio San Dionisio, Parañaque, Metro Manila where the latter agreed to buy the property at the price of P34.00 per square meter and gave the sum of P20,000.00 to respondent spouses as “earnest money;” and gave her a 10-day option period to purchase the property, However, the property in question is mortgaged to spouses Ramos.

Petitioner alleged that she agreed to meet the respondent spouses and Ramoses to pay the balance of the purchase price and to consummate the sale but no transaction was formalized due to failure of respondents to appear and to pay the back taxes of the property.

The property was then a subject of negotiation of sale to SUNVAR Realty Development Corporation and was later executed of which title was given to the latter. Petitioner move for the annulment of the sale and cancellation of title issued to SUNVAR.

Respondent spouses maintained that petitioner had no sufficient cause of action against them; that she was not the real party in interest; that the option to buy the property had long expired; that there was no perfected contract to sell between them; and, that petitioner had no legal capacity to sue. The RTC rendered judgment in favor of petitioner but was completely reversed by the Court of Appeals.

Hence, this petition.


Whether or not the consideration P20,000 paid by petitioner to respondent spouses is considered as earnest money.


NO. A careful examination of the words used indicated that the money is not earnest money but option money. “Earnest money” and “option money” are not the same but distinguished thus;

(a) earnest money is part of the purchase price, while option money is the money given as a distinct consideration for an option contract;
(b) earnest money given only where there is already a sale, while option money applies to a sale not yet perfected; and,
(c) when earnest money is given, the buyer is bound to pay the balance, while when the would-be buyer gives option money, he is not required to buy but may even forfeit it depending on the terms of the option.

There is nothing in the Receipt which indicates that the P20,000.00 was part of the purchase price. Moreover, it was not shown that there was a perfected sale between the parties where earnest money was given. Finally, when petitioner gave the “earnest money” the Receipt did not reveal that she was bound to pay the balance of the purchase price. In fact, she could even forfeit the money given if the terms of the option were not met.

Thus, the P20,000.00 could only be money given as consideration for the option contract. That the contract between the parties is one of option is buttressed by the provision therein that should the transaction of the provision therein that should the transaction of the property not materialize without fault of petitioner as buyer, respondent Lorenzo de Vera obligates himself to return the full amount of P20,000.00 “earnest money” with option to buy or forfeit the same on the fault of petitioner. It is further bolstered by the provision therein that guarantees petitioner that she or her representative would be notified in case the subject property was sold or encumbered to a third person.

*Case digest by JAY MARK P. BALBOSA JD – IV, Andres Bonifacio College, SY 2019 – 2020.