EXECUTION OF DEED OF SALE UPON OR AFTER FULL PAYMENT IS A CONTRACT TO

SELL

NICOLAS P. DIEGO vs. RODOLFO P. DIEGO and EDUARDO P. DIEGO

G.R. No. 179965; February 20, 2013
Del Castillo, J.

Facts:
This is a Petition for Review on Certiorari questioning the resolution of the CA which affirmed the
RTC.

Petitioner and his brother, Rodolfo, entered into an oral contract to sell covering the former’s
share, as co-owner of the family’s building. Rodolfo made a downpayment and it was agreed that
the deed of sale shall be executed upon payment of the balance. However, Rodolfo failed to pay.
Meanwhile, the building was leased to 3rd parties. Nicolas’ share was being remitted to Rodolfo
arguing thAT Nicolas had no more claim in the rents since Rodolfo had already sold his share.
The RTC ruled in favor of Rodolfo by stating that Nicolas was no longer entitled to fruits of his
aliquot share in the building since had ceased to be the co-owner thereof. It also ruled that when
Nicolas received the downpayment, a contract of sale was perfected. The CA sustained the RTC’s
decision by pronouncing that by virtue of the agreement Nicolas entered into with Rodolfo, he had
already transferred his ownership over the subject property and as a consequence, Rodolfo is
legally entitled to collect the fruits in the form of rentals.

Petitioner argues that there was no perfected contract of sale in the absence of payment of the
full purchase prices and that there was to be no transfer of title over his share in the building until
Rodolfo effected full payment, thus, giving no right to his share in the rentals. The respondents
accuse the petitioner of cheating them, claiming that when the petitioner received the
downpayment, he “hibernated in the USA, he being an American citizen” only to come back and
claim that the said amount was a mere loan.

Issue:
Whether the contract entered into by Nicolas and Rodolfo was a contract of sale or contract to
sell

Held:
The contract entered into by Nicolas and Rodolfo was a CONTRACT TO SELL. The stipulation
to execute a deed of sale upon full payment of the purchase price is a unique and distinguishing
characteristic of a contract to sell. It also shows that the vendor reserved title to the property until
full payment. Explicitly stated, the Court ruled that the agreement to execute a deed of sale upon
full payment of the purchase price "shows that the vendors reserved title to the subject property
until full payment of the purchase price. Also, the acknowledgement receipt signed by Nicolas as
well as the contemporaneous acts of the parties show that they agreed on a contract to sell, not
of sale. The absence of a formal deed of conveyance is indicative of a contract to sell. The
absence of a formal deed of conveyance is a strong indication that the parties did not intend
immediate transfer of ownership, but only a transfer after full payment of the purchase price."
Thus, the "true agreement between the parties was a contract to sell. There could not have been
a surrender of title or possession since by the nature of the agreement, by Nicholas’s repeated
demands for return of all rents remitted to Rodolfo, and by Rodolfo and Eduardo repeatedly
demanding an execution of a deed of sale, the subject property remains with Nicolas.