G.R. No. 137290, 31 July 2000, 336 SCRA 2000

FACTS:

Petitioner San Miguel Properties Philippines, Inc. offered for sale a two parcels of land totalling 1, 738 square meters to respondent spouses Huang represented by their lawyer, Atty. Dauz. In a letter sent to the petitioner, Atty. Dauz signified her clients’ interest in purchasing the properties for the amount for which they were offered by petitioner under the following terms: the sum of ₱500,000.00 would be given as earnest money and the balance would be paid in eight equal monthly instalments but was refused by petitioner. Respondent spouse then wrote another letter enclosing the sum of ₱1,000,000.00 representing earnest-deposit money provided that petitioner shall give respondent an exclusive option to buy the said property within 30 days, stipulate the terms and conditions of both parties during the said period and a refund of the earnest deposit money in case of failure to agree which was confirmed by Isidro A. Sobrecarey, petitioner’s vice-president and operations manager for corporate real estate.

Negotiation commenced but parties failed to agree on the terms and conditions of the sale despite the extension granted by petitioner is returning the amount of ₱1 million given as “earnest-deposit”. Respondent spouses filed specific performance before the Regional Trial Court of Pasig City but was dismissed. The decision was appealed by respondents before the CA and was overturned by the appellate court holding that all the requisites of a perfected contract of sale had been complied with as the offer made on March 29, 1994, in connection with which the earnest money in the amount of ₱1 million was tendered by respondents, had already been accepted by petitioner citing Art, 1482. Hence, this petition.

ISSUE:

Whether or not the ₱1 million allegedly given by respondents and accepted by petitioner through its vice-president and operations manager, Isidro A. Sobrecarey can be considered as “earnest money” as contemplated under Art. 1482 of the Civil Code.

RULING:

NO. With regard to the alleged payment and acceptance of earnest money, the Court holds that respondents did not give the ₱1 million as “earnest money” as provided by Art. 1482 of the Civil Code. They presented the amount merely as a deposit of what would eventually become the earnest money or downpayment should a contract of sale be made by them. The amount was thus given not as a part of the purchase price and as proof of the perfection of the contract of sale but only as a guarantee that respondents would not back out of the sale. Respondents in fact described the amount as an “earnest-deposit.” In Spouses Doromal, Sr. v. Court of Appeals, it was held:

. . . While the ₱5,000 might have indeed been paid to Carlos in October, 1967, there is nothing to show that the same was in the concept of the earnest money contemplated in Art. 1482 of the Civil Code, invoked by petitioner, as signifying perfection of the sale. Viewed in the backdrop of the factual milieu thereof extant in the record, We are more inclined to believe that the said ₱5,000.00 were paid in the concept of earnest money as the term was understood under the Old Civil Code, that is, as a guarantee that the buyer would not back out, considering that it is not clear that there was already a definite agreement as to the price then and that petitioners were decided to buy 6/7 only of the property should respondent Javellana refuse to agree to part with her 1/7 share.

In the present case, the ₱1 million “earnest-deposit” could not have been given as earnest money as contemplated in Art. 1482 because, at the time when petitioner accepted the terms of respondents’ offer of March 29, 1994, their contract had not yet been perfected. This is evident from the following conditions attached by respondents to their letter, to wit: (1) that they be given the exclusive option to purchase the property within 30 days from acceptance of the offer; (2) that during the option period, the parties would negotiate the terms and conditions of the purchase; and (3) petitioner would secure the necessary approvals while respondents would handle the documentation.

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