G.R. No. 225449, February 26, 2020
Spouses Rene Luis Godinez and Shemayne Godinez, Petitioners, v. Spouses Andrew T. Norman and Janet A. Norman, Respondents.

FACTS

Sometime in August 2006, petitioners Spouses Godinez agreed to sell the leasehold rights over a housing unit in Subic Bay Freeport Zone to respondents Spouses Norman for US$175,000.00. On August 23, 2006, respondents paid US$10,000.00 as partial payment, with the balance due within 30 working days. After this payment, respondents moved their furniture and appliances into the houses and assigned a caretaker. Respondents requested an extension to pay the balance, and petitioners agreed provided an additional US$30,000.00 was paid to a corporate account. Respondents paid this amount on December 1, 2006. By the end of January 2007, respondents still could not pay the balance, so the parties agreed respondents would remove their belongings so petitioners could reuse the units. Around three months later, respondents learned the property had been sold to another buyer. Respondents demanded the return of their US$40,000.00 payments, and upon petitioners’ failure to comply, filed a complaint for its recovery.
The Regional Trial Court ordered petitioners to return the US$40,000.00, finding a perfected contract of sale and that the partial payments were earnest money which should be returned upon rescission since no forfeiture was stipulated. The Court of Appeals affirmed but characterized the contract as a contract to sell, where the non-payment of the full price was a failure of a suspensive condition, rendering the contract ineffective. The appellate court, citing Olivarez Realty Corporation v. Castillo, held the partial payments should generally be returned unless the buyer was given possession prior to title transfer, allowing retention as rentals. It found respondents were not in “full possession” as they were restricted to storing items in one room and petitioners retained a key, and there was no stipulation for forfeiture. Petitioners filed a Petition for Certiorari under Rule 65, arguing the Court of Appeals committed grave abuse of discretion by misapplying Olivarez, asserting respondents were in full possession, and that the payments should be retained as reasonable rentals.

ISSUE

Whether the Court of Appeals committed grave abuse of discretion in ordering the refund of the partial payments made by respondents under the contract to sell.

RULING

No, the Court of Appeals did not commit grave abuse of discretion. The Supreme Court denied the petition and affirmed the appellate court’s decision. The contract was a contract to sell, where ownership is retained by the seller until the buyer fully pays the purchase price. The failure to pay the full price is not a breach but a failure of a suspensive condition, rendering the contract ineffective. Under Article 1592 of the Civil Code, payments made by the buyer in a contract to sell are generally recoverable if the sale does not materialize, unless there is a stipulation to the contrary. The exception, as established in Olivarez, allows the seller to retain payments as reasonable compensation for the buyer’s use and occupation of the property if the buyer was given possession prior to the transfer of title. In this case, the Court found that respondents were not given “full possession” of the property; they merely stored belongings and had a caretaker, while petitioners retained a key and control. There was no stipulation for forfeiture of the payments. Therefore, the general rule applies, and the partial payments must be refunded. The Court also held that a petition for certiorari under Rule 65 was not the proper remedy to challenge the Court of Appeals’ decision, as it raised errors of judgment, not jurisdiction, and the proper remedy was a petition for review on certiorari under Rule 45, which was not timely availed. However, even on the merits, the petition must fail.