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 3 rd 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.