If you’ve ever bought or sold property, you know the paperwork is complex.
In the world of real estate, documents don’t always mean what they seem. A simple piece of paper acknowledging a downpayment—often called an Acknowledgment Receipt (AR)—can lead to years of legal dispute if the parties disagree on its fundamental nature.
The Philippine Supreme Court (SC) in the recent case of Chavez et.al. vs. Spouses Gopez (G.R. No. 242366, February 26, 2025) has ruled that an acknowledgment receipt cannot be considered a contract of sale unless it clearly shows that the seller intends to transfer ownership of the property to the buyer.
This decision confirms that even if money has changed hands, a proof labeled as an “Acknowledgment Receipt” may only be a Contract to Sell, meaning the deal can legally fall apart if certain conditions aren’t met.
The case involves two adjacent lots with a house inherited by Chavez family. They decided to sell the properties, through a broker to Spouses Gopez (buyer) in 2011.
The parties allegedly agreed in principle that:
- The purchase price for the two properties was PHP 31.5 million net to Chavez family.
- Spouses Gopez would handle all associated taxes (capital gains, documentary stamp, transfer, and estate taxes).
- Spouses Gopez would manage the settlement of the estates.
- Spouses Gopez would make a downpayment of PHP 5 million which would form part of the purchase price, and they issued an initial check for PHP 200,000.00 as earnest money.
The central document in dispute was a handwritten Acknowledgment Receipt (AR), dated October 21, 2011, which acknowledged the receipt of the PHP 200,000.00 check “as earnest money for the purchase of the property… for the amount of [PHP 31.5 million] with TCT [No.]… Contract to Sell, Deed of Absolute Sale and Extrajudicial Settlement of Estate”.
Chavez family claimed the Spouses Gopez failed to pay the full PHP 5 million downpayment and unreasonably delayed the preparation of required documents, including Special Powers of Attorney (SPAs) and the draft Contract to Sell. Chavez family alleged the draft documents prepared by Spouses Gopez were defective and the new deeds were never delivered. Conversely, the Spouses Gopez claimed they paid a total of PHP 1.5 million in partial payments (including the earnest money). They attributed the delay to Chavez family’s failure to furnish them with authenticated documents, such as the extrajudicial settlement and certified true copies of tax declarations.
The Supreme Court addressed the following issues:
- Is the Acknowledgment Receipt a Contract of Sale?
- Were the Spouses Gopez prevented from fulfilling the conditions under the Contract?
The Ruling of the Supreme Court
The SC ruled that the Acknowledgment Receipt is a Contract to Sell, and not a Contract of Sale. The key characteristic of a Contract to Sell is the lack of consent to transfer ownership until the fulfillment of a suspensive condition (usually full payment).
The SC explained that in such a contract, the seller does not agree to transfer ownership of the property just yet. The seller only commits to fulfilling their promise to sell the properties and transfer title to the buyer after an event, typically the full payment of the purchase price. If this does not happen, their obligation to sell does not arise, and the seller retains ownership of the property.
The explicit mention of “Contract to Sell, Deed of Absolute Sale and Extrajudicial Settlement of Estate” within the AR was pivotal. The SC concluded that the “limited statement” in the receipt suggested the parties had only agreed to draft the necessary preparatory documents, meaning they “did not contemplate a transfer of ownership yet”. The element of consent to transfer ownership was thus deemed lacking.
In this case, the acknowledgment receipt did not include any promise to transfer ownership. It only showed that the spouses needed to meet conditions: the payment of the purchase price and preparation of the contract to sell, deed of sale, and estate settlement.
The Supreme Court clarified that while earnest money is usually given in a perfected Contract of Sale, it may also be given in a Contract to Sell to assure the other party of willingness to go through with the sale upon compliance with conditions. Article 1482 of the Civil Code, which considers earnest money proof of perfection, does not apply to a Contract to Sell. The PHP 200,000.00 would form part of the consideration only if the sale was eventually consummated.
The SC found that Chavez family were within their rights to terminate the agreement due to the non-fulfillment of the conditions by the Spouses Gopez.
Accordingly, if you are buying property and sign an initial receipt, look closely at the terms! If the document requires future actions (like preparing a final deed, securing clearances, or completing a required downpayment) before the seller promises to transfer the title, you likely have a Contract to Sell. Non-fulfillment of those required steps means the entire deal simply ends, and you cannot force the sale to go through.
