SPOUSES GODINEZ V.

SPOUSES NORMAN
[ G.R. No. 225449, February 26, 2020 ]

LEONEN, J.:

Generally, partial payments of the purchase price on a contract to sell should be returned to the buyer if
the sale does not push through, unless forfeiture of such partial payments was stipulated. However, these
partial payments may be retained and considered as rentals by the seller if the buyer was given
possession or was able to use the property prior to transfer of title.

This is a Petition for Certiorari2 under Rule 65 filed by spouses Rene Luis Godinez and Shemayne
Godinez (the Godinez Spouses) alleging that the Court of Appeals committed grave abuse of discretion
amounting to lack or excess of jurisdiction when it ordered them to reimburse the amounts paid by
spouses Andrew and Janet Norman (the Norman Spouses) under a contract to sell.

FACTS:

 Sometime in August 2006, the Godinez Spouses agreed to sell the leasehold rights over a
housing unit at 8-A and 8-B Grouper Street, East Kalayaan, Subic Bay Freeport Zone, to the
Norman Spouses for US$175,000.00.8

 On August 23, 2006, the Norman Spouses paid US$10,000.00 to the Godinez Spouses as partial
payment. The parties agreed that the remaining balance would be paid within 30 working days
from the payment of the US$10,000.00. After initial installment, the Norman Spouses moved their
furniture and appliances into the houses, and assigned a house helper as caretaker.

 However, the Norman Spouses eventually asked the Godinez Spouses for an extension of time
to pay the remaining balance. The Godinez Spouses agreed to give them more time, provided
they pay US$30,000.00 to the account of Rene Godinez. Thus, on December 1, 2006, or around
three (3) months after the full payment on the property was due, Andrew Norman transferred
US$30,000.00 to the account of Woodra Enterprises, a corporation owned by the Godinez
Spouses.

 Despite the extension, the Norman Spouses were still unable to pay the remaining balance by the
end of January 2007. Thus, the parties agreed that the Norman Spouses would remove their
furniture and appliances, so that the Godinez Spouses could use the units again.

 Around three (3) months later, the Norman Spouses learned that the housing unit had been sold
to another buyer. The Norman Spouses requested the return of their payments from the Godinez
Spouses, writing demand letters on October 23, 2007 and on November 20, 2007. When their
demand letters went unheeded, they filed a complaint against the Godinez Spouses, praying for
the return of the US$40,000.00.

 DECISION OF THE RTC: Granted the Norman Spouses' prayer for the return of their partial
payments. It found that the spouses had a perfected contract of sale, and that the partial
payments were in the form of earnest money, which formed part of the purchase price. Upon
rescission of the contract of sale due to substantial breach, the earnest money should have been
returned to the Norman Spouses, since the parties never stipulated its forfeiture in favor of the
Godinez Spouses. - ORDERED TO RETURN to Sps. Norman the amount of US$40,000.00 (or
its peso equivalent) with legal interest thereon

 CA – affirmed the Regional Trial Court's ruling that the amounts paid by the Norman Spouses
should be returned. However, the Court of Appeals found that the contract was not a contract of
sale, but a contract to sell. Thus, the nonfulfillment of the obligation to pay the full amount of the

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 purchase price was not a breach of contract but rather an unfulfilled suspensive condition, which
prevented the seller from conveying title to the buyer. Thus, the Norman Spouses' failure to pay
was not a breach that could result in their partial payments being forfeited as compensatory
damages. Instead, it rendered the contract to sell "ineffective and without further force and
effect." Furthermore, their partial payment could not be retained as there was no stipulation to
that effect between the parties.

 Thus, the Godinez Spouses filed a Petition for Certiorari under Rule 65 – SC - dismissed the
Petition for Certiorari for being an improper remedy, and for its failure to establish any grave
abuse of discretion on the part of the Court of Appeals.  Petitioners moved for
reconsideration,30 maintaining that a party's resort to a wrong remedy may be liberally construed
in pursuit of substantial justice, and in view of the merits of their arguments. – MR granted

ISSUE:

1. Whether or not the CA committed grave abuse of discretion when it dismissed petitioners' appeal
and ordered the reimbursement of the amounts paid by respondents. - YES

a. Whether or not the prospective buyer's failure to fully pay the purchase price on a
contract to sell may result in the forfeiture of such partial payments absent a stipulation to
that effect. - YES

2. REMEDIAL/PROCEDURAL ISSUE: Whether or not petitioners' recourse to a petition for certiorari

RULING:

1. YES. This Court grants the petition.

This Court finds the application of Olivarez in order. (Olivarez case – ruling: The court order the
PhP2,500,000.00 forfeited in favor of Castillo as reasonable compensation for Olivarez Realty
Corporation's use of the property. It clarified that partial payments on a failed contract to sell may be
retained by the seller as "reasonable compensation for use of the [property].")

Here, petitioners turned over possession of the premises to respondents after the latter made partial
payments amounting to US$10,000.00. Respondents then moved their furniture and groceries into one of
the housing unit's rooms and also hired a house helper to watch over the premises in the
interim. Respondents made subsequent payments, bringing its total to US$40,000.00, but the contract to
sell still failed to take effect because of respondents' subsequent default in paying the balance. During
this five (5) month period, petitioners were unable to enjoy their property despite retaining a key to the
premises. Thus, petitioners should have been compensated for respondents' use of the property,
consistent with Olivarez.

The conversion of partial payments into rentals is also consistent with Article 1378 of the Civil Code,
which teaches that doubts in the interpretation of onerous contracts "should be settled in favor of the
greatest reciprocity of interests." We find it only proper that respondents reciprocate their use of the
premises with the payment of rentals while full payment on their contract to sell was still pending.

Olivarez also recognized that compensation for use of the property must be reasonable.

While there is no definitive legal standard for computing reasonable rentals on residential properties, this
Court notes that US$40,000.00 amounts to 22.9%, or over a fifth, of the total purchase price of petitioner's
housing unit, which is not commensurate to the value respondents may have derived from their four (4)
month possession of the property. While respondents' possession prevented petitioners from using the

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premises, even petitioners recognized that respondents did not actually occupy the housing unit. There is
also no evidence before this Court indicating the "benefits, financial or otherwise," that respondents may
have derived from their possession. Thus, respondents' limited use of the premises requires us to temper
the amount of partial payments that petitioners may reasonably retain.

Determining reasonable rentals would depend on the circumstances of the parties, the nature of the
property being rented, and the prevailing situation in the relevant market at the time of the transaction,
among others. Ordinarily, this would require reception of evidence, and thus, a remand of the case to the
lower courts. However, in order to speedily dispose of this case, and in view of the time already spent
litigating this issue, a recourse to the analogous case of Olivarez is proper.

In Olivarez, this Court effectively allowed the prospective seller to convert partial payments to rentals, with
such rentals amounting to 13.1% of the property's total purchase price. Having already determined the
applicability of the Olivarez ruling on the retention of partial payments, the circumstances of this case
would warrant the retention of a similar amount. Thus, rentals for the housing unit may be set at 13.1% of
the US$175,000.00 total purchase price, or US$22,925.00. Petitioners may, therefore, retain
US$22,925.00 of the US$40,000.00 partially paid by respondents, but must return the remaining
US$17,075.00 to respondents.

The Court of Appeals' insistence that compensation is not warranted because respondents were unable
to fully occupy the property is unmeritorious. Full occupation of the premises is not required; neither is this
Court persuaded by respondents' argument that Olivarez does not apply because respondents did not
illegally withhold possession of the premises or of payment of the purchase price. The payment of
reasonable rentals is not meant to punish the illegality of respondents' actions, but to compensate
petitioners' inability to enjoy or use its own property. Here, the record shows that petitioners were unable
to use the property for the duration of their contract with respondents. Thus, this Court finds that the
partial payments made by respondents may be converted into rentals.

As to the parties' claims for damages, this Court reiterates that respondents' failure to fully pay the
purchase price effectively cancelled the contract to sell. As such, "the parties shall stand as if the
obligation to sell never existed." Since the contract to sell was effectively nonexistent, there was no basis
for the alleged violations that would have given rise to damages.

WHEREFORE, the Petition for Certiorari is GRANTED. SO ORDERED.

2. NO. Petition for Certiorari is not the proper recourse since petition for certiorari corrects only
errors of jurisdiction, and cannot correct errors of judgment. As such, a Rule 65 petition "must
raise not errors of judgment but the acts and circumstances showing grave abuse of discretion
amounting to lack or excess of jurisdiction." Petitioners are clearly arguing a point of law (the
amounts already paid to the sellers under a contract to sell may be retained when the prospective
buyers were placed in possession of the property prior to transfer of ownership), which is
correctible by an appeal and not by a petition for certiorari.

While a petition for certiorari may not substitute for a lost appeal, this rule is not absolute.
Punongbayan-Visitacion v. People discussed instances when procedural rules may be relaxed:
(a) when public welfare and the advancement of public policy dictates; (b) when the broader
interest of justice so requires; (c) when the writs issued are null and void; or (d) when the
questioned order amounts to an oppressive exercise of judicial authority. As will be shown
forthwith, exception (b) applies to the present case.

While petitioners raise errors of judgement that fall outside the purview of the remedy sought,
procedural rules may be relaxed in view of the ultimate goal of rendering substantive justice.

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