Chua v.

Court of Appeals
G.R. 119255 9 April 2003
Facts:

Private Respondent Encarnacion Valdez-Choy advertised for sale her house in Makati City.
Petitioner Tomas Chua respondent to the advertisement and the two agreed on the purchase price
of P 10,800,000.00 payable in cash.
Valdez-Choy received from Chua a check for P 100,000 as earnest money as evidenced in a
receipt dated 30 June 1989, which indicates that failure to pay balance on or before 15 July 1989
forfeits the earnest money. This is provided that all papers are in order.
Chua then paid the private respondent P 485,000 through a managers check as payment for
capital gains tax. Valdez-Choy prepared another receipt confirming payment and indicating that
petitioner had a remaining balance of P 10,215,000 after the two advance payments.
Chua then showed to the respondent a managers check for the remaining balance but mentioned
that he will not deposit it because the property was not under his name. Valdez-Choy did not
consent to this arguing that it was not part of the original agreement.
Chua filed a complaint for specific performance with damages against Valdez-Choy with the
RTC. The RTC ruled in favor of Chua, but the said ruling was overturned by the CA. Hence this
petition.
Chua argues, contrary to what is stated in his legal arguments with the lower courts, that there is a
perfected contract of sale rather than contract to sell. Consequently, his payment of earnest money
and its acceptance by Valdez-Choy precludes the latter from rejecting the binding effect of the
contract of sale.
Chua also argues that he was ready to pay before the deadline, but the private respondent did not
fulfill her obligation to put all papers in proper order.

Issues:

Whether the contract between Chua and Valdez Choy is a contract of sale?
Whether there is a valid ground for Chua to withhold payment?

Held: No. Petition denied

Reason:

The contract in question is a contract to sell, not contract of sale. The ownership of the property
was retained by Valdez-Choy and was subject to a suspensive condition of payment of purchase
price. This is proven by the existence of a receipt stating Chuas initial payment and remaining
balance and the absence of a deed of sale.
Chua also insists that he was ready to pay the balance of the purchase price provided that all
papers are in proper order. In particular, Chua claims that Valdez-Choy fialed to show that
capital gains tax had been paid after he had advanced the money for its payment.
Chua argues that proper order should be interpreted to mean the transfer of the title to his name.
He also argued that Valdez-Choy failed to present proof of payment of the capital gains tax.
The Court found this interpretation to be contrary to customs. Customarily, in the absence of a
contrary agreement, the submission by an individual seller to the buyer of the following papers
would complete the sale of real estate: (1) owners duplicate of Torrens title, (2) signed deed of

absolute sale, (3) tax declaration, (4) tax realty receipt. Payment of capital gains tax is not a pre
requisite to the transfer of ownership of the buyer.
Article 1376: The usage of the custom of the place shall be borne in mind in the interpretation of
the ambiguities of the contract, and shall fill the omissions of the stipulations which are ordinarily
established.