G.R. No.

118509 December 1, 1995

LIMKETKAI SONS MILLING, INC., petitioner,
vs.
COURT OF APPEALS, BANK OF THE PHILIPPINE ISLANDS and NATIONAL BOOK STORE, respondents.
MELO, J.:
The issue in the petition before us is whether or not there was a perfected contract between petitioner Limketkai Sons Milling, Inc.
and respondent Bank of the Philippine Islands (BPI) covering the sale of a parcel of land, approximately 3.3 hectares in area, and
located in Barrio Bagong Ilog, Pasig City, Metro Manila.
Branch 151 of the Regional Trial Court of the National Capital Judicial Region stationed in Pasig ruled that there was a perfected
contract of sale between petitioner and BPI. It stated that there was mutual consent between the parties; the subject matter is
definite; and the consideration was determined. It concluded that all the elements of a consensual contract are attendant. It
ordered the cancellation of a sale effected by BPI to respondent National Book Store (NBS) while the case was pending and the
nullification of a title issued in favor of said respondent NBS.
Upon elevation of the case to the Court of Appeals, it was held that no contract of sale was perfected because there was no
concurrence of the three requisites enumerated in Article 1318 of the Civil Code. The decision of the trial court was reversed and
the complaint dismissed.
Hence, the instant petition.
Shorn of the interpretations given to the acts of those who participated in the disputed sale, the findings of facts of the trial court
and the Court of Appeals narrate basically the same events and occurrences. The records show that on May 14, 1976, Philippine
Remnants Co., Inc. constituted BPI as its trustee to manage, administer, and sell its real estate property. One such piece of
property placed under trust was the disputed lot, a 33,056-square meter lot at Barrio Bagong Ilog, Pasig, Metro Manila covered by
Transfer Certificate of Title No. 493122.
On June 23, 1988, Pedro Revilla, Jr., a licensed real estate broker was given formal authority by BPI to sell the lot for P1,000.00
per square meter. This arrangement was concurred in by the owners of the Philippine Remnants.
Broker Revilla contacted Alfonso Lim of petitioner company who agreed to buy the land. On July 8, 1988, petitioner's officials and
Revilla were given permission by Rolando V. Aromin, BPI Assistant Vice-President, to enter and view the property they were
buying.
On July 9, 1988, Revilla formally informed BPI that he had procured a buyer, herein petitioner. On July 11, 1988, petitioner's
officials, Alfonso Lim and Albino Limketkai, went to BPI to confirm the sale. They were entertained by Vice-President Merlin
Albano and Asst. Vice-President Aromin. Petitioner asked that the price of P1,000.00 per square meter be reduced to P900.00
while Albano stated the price to be P1,100.00. The parties finally agreed that the lot would be sold at P1,000.00 per square meter
to be paid in cash. Since the authority to sell was on a first come, first served and non-exclusive basis, it may be mentioned at
this juncture that there is no dispute over petitioner's being the first comer and the buyer to be first served.
Notwithstanding the final agreement to pay P1,000.00 per square meter on a cash basis, Alfonso Lim asked if it was possible to
pay on terms. The bank officials stated that there was no harm in trying to ask for payment on terms because in previous
transactions, the same had been allowed. It was the understanding, however, that should the term payment be disapproved, then
the price shall be paid in cash.
It was Albano who dictated the terms under which the installment payment may be approved, and acting thereon, Alfonso Lim, on
the same date, July 11, 1988, wrote BPI through Merlin Albano embodying the payment initially of 10% and the remaining 90%
within a period of 90 days.
Two or three days later, petitioner learned that its offer to pay on terms had been frozen. Alfonso Lim went to BPI on July 18, 1988
and tendered the full payment of P33,056,000.00 to Albano. The payment was refused because Albano stated that the authority
to sell that particular piece of property in Pasig had been withdrawn from his unit. The same check was tendered to BPI VicePresident Nelson Bona who also refused to receive payment.
An action for specific performance with damages was thereupon filed on August 25, 1988 by petitioner against BPI. In the course
of the trial, BPI informed the trial court that it had sold the property under litigation to NBS on July 14, 1989. The complaint was
thus amended to include NBS.
On June 10, 1991, the trial court rendered judgment in the case as follows:
WHEREFORE, judgment is hereby rendered in favor of plaintiff and against defendants Bank of the Philippine
Islands and National Book Store, Inc.:
1. Declaring the Deed of Sale of the property covered by T.C.T. No. 493122 in the name of the Bank of the
Philippine Islands, situated in Barrio Bagong Ilog, Pasig, Metro Manila, in favor of National Book Store, Inc., null
and void;
2. Ordering the Register of Deeds of the Province of Rizal to cancel the Transfer Certificate of Title which may
have been issued in favor of National Book Store, Inc. by virtue of the aforementioned Deed of Sale dated July
14, 1989;
3. Ordering defendant BPI, upon receipt by it from plaintiff of the sum of P33,056,000.00, to execute a Deed of
Sale in favor of plaintiff of the aforementioned property at the price of P1,000.00 per square meter; in default
thereof, the Clerk of this Court is directed to execute the said deed;

4. Ordering the Register of Deeds of Pasig, upon registration of the said deed, whether executed by defendant
BPI or the Clerk of Court and payment of the corresponding fees and charges, to cancel said T.C.T. No. 493122
and to issue, in lieu thereof, another transfer certificate of title in the name of plaintiff;
5. Ordering defendants BPI and National Book Store, Inc. to pay, jointly and severally, to the plaintiff the sums
of P10,000,000.00 as actual and consequential damages and P150,000.00 as attorney's fees and litigation
expenses, both with interest at 12% per annum from date hereof;
6. On the cross-claim of defendant bank against National Book Store, ordering the latter to indemnify the former
of whatever amounts BPI shall have paid to the plaintiff by reason hereof; and
7. Dismissing the counterclaims of the defendants against the plaintiff and National Book Store's cross-claim
against defendant bank.
Costs against defendants.
(pp. 44-45, Rollo.)
As earlier intimated, upon the decision being appealed, the Court of Appeals (Buena [P], Rasul, and Mabutas, JJ.), on August 12,
1994, reversed the trial court's decision and dismissed petitioner's complaint for specific performance and damages.
The issues raised by the parties revolve around the following four questions:
(1) Was there a meeting of the minds between petitioner Limketkai and respondent BPI as to the subject matter of the contract
and the cause of the obligation?
(2) Were the bank officials involved in the transaction authorized by BPI to enter into the questioned contract?
(3) Is there competent and admissible evidence to support the alleged meeting of the minds?
(4) Was the sale of the disputed land to the NBS during the pendency of trial effected in good faith?
There is no dispute in regard to the following: (a) that BPI as trustee of the property of Philippine Remnant Co. authorized a
licensed broker, Pedro Revilla, to sell the lot for P1,000.00 per square meter; (b) that Philippine Remnants confirmed the authority
to sell of Revilla and the price at which he may sell the lot; (c) that petitioner and Revilla agreed on the former buying the
property; (d) that BPI Assistant Vice-President Rolando V. Aromin allowed the broker and the buyer to inspect the property; and
(e) that BPI was formally informed about the broker having procured a buyer.
The controversy revolves around the interpretation or the significance of the happenings or events at this point.
Petitioner states that the contract to sell and to buy was perfected on July 11, 1988 when its top officials and broker Revilla
finalized the details with BPI Vice-Presidents Merlin Albano and Rolando V. Aromin at the BPI offices.
Respondents, however, contend that what transpired on this date were part of continuing negotiations to buy the land and not the
perfection of the sale. The arguments of respondents center on two propositions (1) Vice-Presidents Aromin and Albano had
no authority to bind BPI on this particular transaction and (2) the subsequent attempts of petitioner to pay under terms instead of
full payment in cash constitutes a counter-offer which negates the existence of a perfected contract.
The alleged lack of authority of the bank officials acting in behalf of BPI is not sustained by the record.
At the start of the transactions, broker Revilla by himself already had full authority to sell the disputed lot. Exhibit B dated June 23,
1988 states, "this will serve as your authority to sell on an as is, where is basis the property located at Pasig Blvd., Bagong Ilog . .
. ." We agree with Revilla's testimony that the authority given to him was to sell and not merely to look for a buyer, as contended
by respondents.
Revilla testified that at the time he perfected the agreement to sell the litigated property, he was acting for and in behalf of the BPI
as if he were the Bank itself. This notwithstanding and to firm up the sale of the land, Revilla saw it fit to bring BPI officials into the
transaction. If BPI could give the authority to sell to a licensed broker, we see no reason to doubt the authority to sell of the two
BPI Vice-Presidents whose precise job in the Bank was to manage and administer real estate property.
Respondent BPI alleges that sales of trust property need the approval of a Trust Committee made up of top bank officials. It
appears from the record that this trust committee meets rather infrequently and it does not have to pass on regular transactions.
Rolando Aromin was BPI Assistant Vice-President and Trust Officer. He directly supervised the BPI Real Property Management
Unit. He had been in the Real Estate Division since 1985 and was the head supervising officer of real estate matters. Aromin had
been with the BPI Trust Department since 1968 and had been involved in the handling of properties of beneficial owners since
1975 (tsn., December 3, 1990, p. 5).
Exhibit 10 of BPI, the February 15, 1989 letter from Senior Vice-President Edmundo Barcelon, while purporting to inform Aromin
of his poor performance, is an admission of BPI that Aromin was in charge of Torrens titles, lease contracts, problems of tenants,
insurance policies, installment receivables, management fees, quitclaims, and other matters involving real estate transactions.
His immediate superior, Vice-President Merlin Albano had been with the Real Estate Division for only one week but he was
present and joined in the discussions with petitioner.
There is nothing to show that Alfonso Lim and Albino Limketkai knew Aromin before the incident. Revilla brought the brothers
directly to Aromin upon entering the BPI premises. Aromin acted in a perfectly natural manner on the transaction before him with
not the slightest indication that he was acting ultra vires. This shows that BPI held Aromin out to the public as the officer routinely
handling real estate transactions and, as Trust Officer, entering into contracts to sell trust properties.
Respondents state and the record shows that the authority to buy and sell this particular trust property was later withdrawn from
Trust Officer Aromin and his entire unit. If Aromin did not have any authority to act as alleged, there was no need to withdraw
authority which he never possessed.
Petitioner points to Areola vs. Court of Appeals (236 SCRA 643 [1994]) which cited Prudential Bank vs. Court of Appeals (22
SCRA 350 [1993]), which in turn relied upon McIntosh vs. Dakota Trust Co. (52 ND 752, 204 NW 818, 40 ALR 1021), to wit:

Accordingly a banking corporation is liable to innocent third persons where the representation is made in the
course of its business by an agent acting within the general scope of his authority even though, in the particular
case, the agent is secretly abusing his authority and attempting to perpetrate a fraud upon his principal or some
other person for his own ultimate benefit.
(at pp. 652-653.)
In the present case, the position and title of Aromin alone, not to mention the testimony and documentary evidence about his
work, leave no doubt that he had full authority to act for BPI in the questioned transaction. There is no allegation of fraud, nor is
there the least indication that Aromin was acting for his own ultimate benefit. BPI later dismissed Aromin because it appeared that
a top official of the bank was personally interested in the sale of the Pasig property and did not like Aromin's testimony. Aromin
was charged with poor performance but his dismissal was only sometime after he testified in court. More than two long years after
the disputed transaction, he was still Assistant Vice-President of BPI.
The records show that the letter of instruction dated June 14, 1988 from the owner of Philippine Remnants Co. regarding the sale
of the firm's property was addressed to Aromin. The P1,000.00 figure on the first page of broker Revilla's authority to sell was
changed to P1,100.00 by Aromin. The price was later brought down again to P1,000.00, also by Aromin. The permission given to
petitioner to view the lot was signed by Aromin and honored by the BPI guards. The letter dated July 9, 1988 from broker Revilla
informing BPI that he had a buyer was addressed to Aromin. The conference on July 11, 1988 when the contract was perfected
was with Aromin and Vice-President Albano. Albano and Aromin were the ones who assured petitioner Limketkai's officers that
term payment was possible. It was Aromin who called up Miguel Bicharra of Philippine Remnants to state that the BPI rejected
payment on terms and it was to Aromin that Philippine Remnants gave the go signal to proceed with the cash sale. Everything in
the record points to the full authority of Aromin to bind the bank, except for the self-serving memoranda or letters later produced
by BPI that Aromin was an inefficient and undesirable officer and who, in fact, was dismissed after he testified in this case. But, of
course, Aromin's alleged inefficiency is not proof that he was not fully clothed with authority to bind BPI.
Respondents' second contention is that there was no perfected contract because petitioner's request to pay on terms constituted
a counter-offer and that negotiations were still in progress at that point.
Asst. Vice-President Aromin was subpoenaed as a hostile witness for petitioner during trial. Among his statements is one to the
effect that
. . . Mr. Lim offered to buy the property at P900.00 per square meter while Mr. Albano counter-offered to sell the
property at P1,100.00 per square meter but after the usual haggling, we finally agreed to sell the property at the
price of P1,000.00 per square meter . . .
(tsn, 12-3-90, p. 17; Emphasis supplied.)
Asked if there was a meeting of the minds between the buyer and the bank in respect to the price of P1,000.00 per square meter,
Aromin answered:
Yes, sir, as far as my evaluation there was a meeting of the minds as far as the price is concerned, sir.
(ibid, p. 17.)
The requirements in the payment of the purchase price on terms instead of cash were suggested by BPI Vice-President Albano.
Since the authority given to broker Revilla specified cash payment, the possibility of paying on terms was referred to the Trust
Committee but with the mutual agreement that "if the proposed payment on terms will not be approved by our Trust Committee,
Limketkai should pay in cash . . . the amount was no longer subject to the approval or disapproval of the Committee, it is only on
the terms." (ibid, p. 19). This is incontrovertibly established in the following testimony of Aromin:
A. After you were able to agree on the price of P1,000.00/sq. m., since the letter or authority
says the payment must be in cash basis, what transpired later on?
B. After we have agreed on the price, the Lim brothers inquired on how to go about
submitting the covering proposal if they will be allowed to pay on terms. They requested us to
give them a guide on how to prepare the corresponding letter of proposal. I recall that, upon
the request of Mr. Albino Limketkai, we dictated a guide on how to word a written firm offer
that was to be submitted by Mr. Lim to the bank setting out the terms of payment but with the
mutual agreement that if his proposed payment on terms will not be approved by our trust
committee, Limketkai should pay the price in cash.
Q And did buyer Limketkai agree to pay in cash in case the offer of terms will be cash
(disapproved).
A Yes, sir.
Q At the start, did they show their willingness to pay in cash?
A Yes, sir.
Q You said that the agreement on terms was to be submitted to the trust committee for
approval, are you telling the Court that what was to be approved by the trust committee was
the provision on the payment on terms?
A Yes, sir.
Q So the amount was no longer subject to the approval or disapproval of the committee, it is
only on the terms?
A Yes, sir.
(tsn, Dec. 3, 1990, pp. 18-19; Emphasis supplied.)

The record shows that if payment was in cash, either broker Revilla or Aromin had full authority. But because petitioner took
advantage of the suggestion of Vice-President Albano, the matter was sent to higher officials. Immediately upon learning that
payment on terms was frozen and/or denied, Limketkai exercised his right within the period given to him and tendered payment in
full. The BPI rejected the payment.
In its Comment and Memorandum, respondent NBS cites Ang Yu Asuncion vs. Court of Appeals (238 SCRA 602 [1994]) to
bolster its case. Contrarywise, it would seem that the legal principles found in said case strengthen and support petitioner's
submission that the contract was perfected upon the meeting of the minds of the parties.
The negotiation or preparation stage started with the authority given by Philippine Remnants to BPI to sell the lot, followed by (a)
the authority given by BPI and confirmed by Philippine Remnants to broker Revilla to sell the property, (b) the offer to sell to
Limketkai, (c) the inspection of the property and finally (d) the negotiations with Aromin and Albano at the BPI offices.
The perfection of the contract took place when Aromin and Albano, acting for BPI, agreed to sell and Alfonso Lim with Albino
Limketkai, acting for petitioner Limketkai, agreed to buy the disputed lot at P1,000.00 per square meter. Aside from this there was
the earlier agreement between petitioner and the authorized broker. There was a concurrence of offer and acceptance, on the
object, and on the cause thereof.
The phases that a contract goes through may be summarized as follows:
a. preparation, conception or generation, which is the period of negotiation and bargaining, ending at the
moment of agreement of the parties;
b. perfection or birth of the contract, which is the moment when the parties come to agree on the terms of the
contract; and
c. consummation or death, which is the fulfillment or performance of the terms agreed upon in the contract
(Toyota Shaw, Inc. vs. Court of Appeals, G.R. No. 116650, May 23, 1995).
But in more graphic prose, we turn to Ang Yu Asuncion, per Justice Vitug:
. . . A contract undergoes various stages that include its negotiation or preparation, its perfection and, finally, its
consummation. Negotiation covers the period from the time the prospective contracting parties indicate interest
in the contract to the time the contract is concluded (perfected). The perfectionof the contract takes place upon
the concurrence of the essential elements thereof. A contract which isconsensual as to perfection is so
established upon a mere meeting of minds, i.e., the concurrence of offer and acceptance, on the object and on
the cause thereof. A contract which requires, in addition to the above, the delivery of the object of the
agreement, as in a pledge or commodatum, is commonly referred to as a real contract. In a solemn contract,
compliance with certain formalities prescribed by law, such as in a donation of real property, is essential in
order to make the act valid, the prescribed form being thereby an essential element thereof. The stage of
consummation begins when the parties perform their respective undertakings under the contract culminating in
the extinguishment thereof.
Until the contract is perfected, it cannot, as an independent source of obligation, serve as a binding juridical
relation. In sales, particularly, to which the topic for discussion about the case at bench belongs, the contract is
perfected when a person, called the seller, obligates himself, for a price certain, to deliver and to transfer
ownership of a thing or right to another, called the buyer, over which the latter agrees.
(238 SCRA 602; 611 [1994].)
In Villonco Realty Company vs. Bormaheco (65 SCRA 352 [1975]), bearing factual antecendents similar to this case, the Court,
through Justice Aquino (later to be Chief Justice), quoting authorities, upheld the perfection of the contract of sale thusly:
The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object
of the contract and upon the price. From that moment, the parties may reciprocally demand performance,
subject to the provisions of the law governing the form of contracts. (Art. 1475, Ibid.)
xxx xxx xxx
Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are
to constitute the contract. The offer must be certain and the acceptance absolute. A qualified acceptance
constitutes a counter-offer (Art. 1319, Civil Code). "An acceptance may be express or implied." (Art. 1320, Civil
Code).
xxx xxx xxx
It is true that an acceptance may contain a request for certain changes in the terms of the offer and yet be a
binding acceptance. "So long as it is clear that the meaning of the acceptance is positively and unequivocally to
accept the offer, whether such request is granted or not, a contract is formed." (Stuart vs. Franklin Life Ins. Co.,
105 Fed. 2nd 965, citing Sec. 79, Williston on Contracts).
xxx xxx xxx
. . . the vendor's change in a phrase of the offer to purchase, which change does not essentially change the
terms of the offer, does not amount to a rejection of the offer and the tender or a counter-offer. (Stuart vs.
Franklin Life Ins. Co., supra.)
(at pp. 362-363; 365-366.)
In the case at bench, the allegation of NBS that there was no concurrence of the offer and acceptance upon the cause of the
contract is belied by the testimony of the very BPI official with whom the contract was perfected. Aromin and Albano concluded
the sale for BPI. The fact that the deed of sale still had to be signed and notarized does not mean that no contract had already

been perfected. A sale of land is valid regardless of the form it may have been entered into (Claudel vs. Court of Appeals, 199
SCRA 113, 119 [1991]). The requisite form under Article 1458 of the Civil Code is merely for greater efficacy or convenience and
the failure to comply therewith does not affect the validity and binding effect of the act between the parties (Vitug, Compendium of
Civil Law and Jurisprudence, 1993 Revised Edition, p. 552). If the law requires a document or other special form, as in the sale of
real property, the contracting parties may compel each other to observe that form, once the contract has been perfected. Their
right may be exercised simultaneously with action upon the contract (Article 1359, Civil Code).
Regarding the admissibility and competence of the evidence adduced by petitioner, respondent Court of Appeals ruled that
because the sale involved real property, the statute of frauds is applicable.
In any event, petitioner cites Abrenica vs. Gonda (34 Phil. 739 [1916]) wherein it was held that contracts infringing the Statute of
Frauds are ratified when the defense fails to object, or asks questions on cross-examination. The succinct words of Justice
Araullo still ring in judicial cadence:
As no timely objection or protest was made to the admission of the testimony of the plaintiff with respect to the
contract; and as the motion to strike out said evidence came too late; and, furthermore, as the defendants
themselves, by the cross-questions put by their counsel to the witnesses in respect to said contract, tacitly
waived their right to have it stricken out, that evidence, therefore, cannot be considered either inadmissible or
illegal, and court, far from having erred in taking it into consideration and basing his judgment thereon,
notwithstanding the fact that it was ordered to be stricken out during the trial, merely corrected the error he
committed in ordering it to be so stricken out and complied with the rules of procedure hereinbefore cited.
(at p. 748.)
In the instant case, counsel for respondents cross-examined petitioner's witnesses at length on the contract itself, the purchase
price, the tender of cash payment, the authority of Aromin and Revilla, and other details of the litigated contract. Under
the Abrenica rule (reiterated in a number of cases, among them Talosig vs. Vda. de Nieba 43 SCRA 472 [1972]), even assuming
that parol evidence was initially inadmissible, the same became competent and admissible because of the cross-examination,
which elicited evidence proving the evidence of a perfected contract. The cross-examination on the contract is deemed a waiver
of the defense of the Statute of Frauds (Vitug, Compendium of Civil Law and Jurisprudence, 1993 Revised Edition, supra, p.
563).
The reason for the rule is that as pointed out in Abrenica "if the answers of those witnesses were stricken out, the crossexamination could have no object whatsoever, and if the questions were put to the witnesses and answered by them, they could
only be taken into account by connecting them with the answers given by those witnesses on direct examination" (pp. 747-748).
Moreover, under Article 1403 of the Civil Code, an exception to the unenforceability of contracts pursuant to the Statute of Frauds
is the existence of a written note or memorandum evidencing the contract. The memorandum may be found in several writings,
not necessarily in one document. The memorandum or memoranda is/are written evidence that such a contract was entered into.
We cite the findings of the trial court on this matter:
In accordance with the provisions of Art. 1403 of the Civil Code, the existence of a written contract of the sale is
not necessary so long as the agreement to sell real property is evidenced by a written note or memorandum,
embodying the essentials of the contract and signed by the party charged or his agent. Thus, it has been held:
The Statute of Frauds, embodied in Article 1403 of the Civil Code of the Philippines, does not
require that the contract itself be written. The plain test of Article 1403, Paragraph (2) is clear
that a written note or memorandum, embodying the essentials of the contract and signed by
the party charged, or his agent suffices to make the verbal agreement enforceable, taking it
out of the operation of the statute. (Emphasis supplied)
xxx xxx xxx
In the case at bar, the complaint in its paragraph 3 pleads that the deal had been closed by
letter and telegram (Record on Appeal, p. 2), and the letter referred to was evidently the one
copy of which was appended as Exhibit A to plaintiffs opposition to the motion to dismiss. The
letter, transcribed above in part, together with the one marked as Appendix B, constitute an
adequate memorandum of the transaction. They are signed by the defendant-appellant; refer
to the property sold as a Lot in Puerto Princesa, Palawan, covered by T.C.T. No. 62, give its
area as 1,825 square meters and the purchase price of four (P4.00) pesos per square meter
payable in cash. We have in them, therefore, all the essential terms of the contract and they
satisfy the requirements of the Statute of Frauds.
(Footnote 26, Paredes vs. Espino, 22 SCRA 1000 [1968]).
While there is no written contract of sale of the Pasig property executed by BPI in favor of plaintiff, there are
abundant notes and memoranda extant in the records of this case evidencing the elements of a perfected
contract. There is Exhibit P, the letter of Kenneth Richard Awad addressed to Roland Aromin, authorizing the
sale of the subject property at the price of P1,000.00 per square meter giving 2% commission to the broker and
instructing that the sale be on cash basis. Concomitantly, on the basis of the instruction of Mr. Awad, (Exh. P),
an authority to sell, (Exh. B) was issued by BPI to Pedro Revilla, Jr., representing Assetrade Co., authorizing
the latter to sell the property at the initial quoted price of P1,000.00 per square meter which was altered on an
unaccepted offer by Technoland. After the letter authority was issued to Mr. Revilla, a letter authority was signed
by Mr. Aromin allowing the buyer to enter the premises of the property to inspect the same (Exh. C). On July 9,

1988, Pedro Revilla, Jr., acting as agent of BPI, wrote a letter to BPI informing it that he had procured a buyer
in the name of Limketkai Sons Milling, Inc. with offices at Limketkai Bldg., Greenhills, San Juan, Metro Manila,
represented by its Exec. Vice-President, Alfonso Lim (Exh. D). On July 11, 1988, the plaintiff, through Alfonso
Lim, wrote a letter to the bank, through Merlin Albano, confirming their transaction regarding the purchase of
the subject property (Exh. E). On July 18, 1988, the plaintiff tendered upon the officials of the bank a check for
P33,056,000.00 covered by Check No. CA510883, dated July 18, 1988. On July 1, 1988, Alfonso Zamora
instructed Mr. Aromin in a letter to resubmit new offers only if there is no transaction closed with Assetrade Co.
(Exh. S). Combining all these notes and memoranda, the Court is convinced of the existence of perfected
contract of sale. Aptly, the Supreme Court, citing American cases with approval, held:
No particular form of language or instrument is necessary to constitute a memorandum or
note in writing under the statute of frauds; any document or writing, formal or informal, written
either for the purpose of furnishing evidence of the contract or for another purpose, which
satisfies all the requirements of the statute as to contents and signature, as discussed
respectively infra secs. 178-200, and infra secs. 201-205, is a sufficient memorandum or
note. A memorandum may be written as well with lead pencil as with pen and ink. It may also
be filled in on a printed form. (37 C.J.S., 653-654).
The note or memorandum required by the statute of frauds need not be contained in a single
document, nor, when contained in two or more papers, need each paper be sufficient as to
contents and signature to satisfy the statute. Two or more writings properly connected may
be considered together, matters missing or uncertain in one may be supplied or rendered
certain by another, and their sufficiency will depend on whether, taken together, they meet the
requirements of the statute as to contents and the requirements of the statutes as to
signature, as considered respectively infra secs. 179-200 and secs. 201-215.
(pp. 460-463, Original RTC Record).
The credibility of witnesses is also decisive in this case. The trial court directly observed the demeanor and manner of testifying of
the witnesses while the Court of Appeals relied merely on the transcript of stenographic notes.
In this regard, the court of origin had this to say:
Apart from weighing the merits of the evidence of the parties, the Court had occasion to observe the demeanor
of the witnesses they presented. This is one important factor that inclined the Court to believe in the version
given by the plaintiff because its witnesses, including hostile witness Roland V. Aromin, an assistant vicepresident of the bank, were straightforward, candid and unhesitating in giving their respective testimonies.
Upon the other hand, the witnesses of BPI were evasive, less than candid and hesitant in giving their answers
to cross examination questions. Moreover, the witnesses for BPI and NBS contradicted each other. Fernando
Sison III insisted that the authority to sell issued to Mr. Revilla was merely an evidence by which a broker may
convince a prospective buyer that he had authority to offer the property mentioned therein for sale and did not
bind the bank. On the contrary, Alfonso Zamora, a Senior Vice-President of the bank, admitted that the authority
to sell issued to Mr. Pedro Revilla, Jr. was valid, effective and binding upon the bank being signed by two class
"A" signatories and that the bank cannot back out from its commitment in the authority to sell to Mr. Revilla.
While Alfredo Ramos of NBS insisted that he did not know personally and was not acquainted with Edmundo
Barcelon, the latter categorically admitted that Alfredo Ramos was his friend and that they have even discussed
in one of the luncheon meetings the matter of the sale of the Pasig property to NBS. George Feliciano
emphatically said that he was not a consultant of Mr. Ramos nor was he connected with him in any manner, but
his calling card states that he was a consultant to the chairman of the Pacific Rim Export and Holdings Corp.
whose chairman is Alfredo Ramos. This deliberate act of Mr. Feliciano of concealing his being a consultant to
Mr. Alfredo Ramos evidently was done by him to avoid possible implication that he committed some
underhanded maneuvers in manipulating to have the subject property sold to NBS, instead of being sold to the
plaintiff.
(pp. 454-455, Original RTC Record.)
On the matter of credibility of witnesses where the findings or conclusions of the Court of Appeals and the trial court are contrary
to each other, the pronouncement of the Court in Serrano vs. Court of Appeals (196 SCRA 107 [1991]) bears stressing:
It is a settled principle of civil procedure that the conclusions of the trial court regarding the credibility of
witnesses are entitled to great respect from the appellate courts because the trial court had an opportunity to
observe the demeanor of witnesses while giving testimony which may indicate their candor or lack thereof.
While the Supreme Court ordinarily does not rule on the issue of credibility of witnesses, that being a question
of fact not properly raised in a petition under Rule 45, the Court has undertaken to do so in exceptional
situations where, for instance, as here, the trial court and the Court of Appeals arrived at divergent conclusions
on questions of fact and the credibility of witnesses.
(at p. 110.)
On the fourth question of whether or not NBS is an innocent purchaser for value, the record shows that it is not. It acted in bad
faith.

Respondent NBS ignored the notice of lis pendens annotated on the title when it bought the lot. It was the willingness and design
of NBS to buy property already sold to another party which led BPI to dishonor the contract with Limketkai.
Petitioner cites several badges of fraud indicating that BPI and NBS conspired to prevent petitioner from paying the agreed price
and getting possession of the property:
1. The sale was supposed to be done through an authorized broker, but top officials of BPI personally and directly took over this
particular sale when a close friend became interested.
2. BPI Senior Vice President Edmundo Barcelon admitted that NBS's President, Alfredo Ramos, was his friend; that they had
lunch meetings before this incident and discussed NBS's purchase of the lot. Barcelon's father was a business associate of
Ramos.
3. George Feliciano, in behalf of NBS, offered P5 million and later P7 million if petitioner would drop the case and give up the lot.
Feliciano went to petitioner's office and haggled with Alfonso Lim but failed to convince him inspite of various and increasing
offers.
4. In a place where big and permanent buildings abound, NBS had constructed only a warehouse marked by easy portability. The
warehouse is bolted to its foundations and can easily be dismantled.
It is the very nature of the deed of absolute sale between BPI and NBS which, however, clearly negates any allegation of good
faith on the part of the buyer. Instead of the vendee insisting that the vendor guarantee its title to the land and recognize the right
of the vendee to proceed against the vendor if the title to the land turns out to be defective as when the land belongs to another
person, the reverse is found in the deed of sale between BPI and NBS. Any losses which NBS may incur in the event the title
turns out to be vested in another person are to be borne by NBS alone. BPI is expressly freed under the contract from any
recourse of NBS against it should BPI's title be found defective.
NBS, in its reply memorandum, does not refute or explain the above circumstance squarely. It simply cites the badges of fraud
mentioned in Oria vs. McMicking (21 Phil. 243 [1912]) and argues that the enumeration there is exclusive. The decision in said
case plainly states "the following are some of the circumstances attending sales which have been denominated by courts (as)
badges of fraud." There are innumerable situations where fraud is manifested. One enumeration in a 1912 decision cannot
possibly cover all indications of fraud from that time up to the present and into the future.
The Court of Appeals did not discuss the issue of damages. Petitioner cites the fee for filing the amended complaint to implead
NBS, sheriffs fees, registration fees, plane fare and hotel expenses of Cebu-based counsel. Petitioner also claimed, and the trial
court awarded, damages for the profits and opportunity losses caused to petitioner's business in the amount of P10,000,000.00.
We rule that the profits and the use of the land which were denied to petitioner because of the non-compliance or interference
with a solemn obligation by respondents is somehow made up by the appreciation in land values in the meantime.
Prescinding from the above, we rule that there was a perfected contract between BPI and petitioner Limketkai; that the BPI
officials who transacted with petitioner had full authority to bind the bank; that the evidence supporting the sale is competent and
admissible; and that the sale of the lot to NBS during the trial of the case was characterized by bad faith.
WHEREFORE, the questioned judgment of the Court of Appeals is hereby REVERSED and SET ASIDE. The June 10, 1991
judgment of Branch 151 of the Regional Trial Court of The National Capital Judicial Region stationed in Pasig, Metro Manila is
REINSTATED except for the award of Ten Million Pesos (P10,000,000.00) damages which is hereby DELETED.
SO ORDERED.
G.R. No. 109125 December 2, 1994
ANG YU ASUNCION, ARTHUR GO AND KEH TIONG, petitioners,
vs.
THE HON. COURT OF APPEALS and BUEN REALTY DEVELOPMENT CORPORATION, respondents.
Antonio M. Albano for petitioners.
Umali, Soriano & Associates for private respondent.
VITUG, J.:
Assailed, in this petition for review, is the decision of the Court of Appeals, dated 04 December 1991, in CA-G.R. SP No. 26345
setting aside and declaring without force and effect the orders of execution of the trial court, dated 30 August 1991 and 27
September 1991, in Civil Case No. 87-41058.
The antecedents are recited in good detail by the appellate court thusly:
On July 29, 1987 a Second Amended Complaint for Specific Performance was filed by Ang Yu Asuncion and
Keh Tiong, et al., against Bobby Cu Unjieng, Rose Cu Unjieng and Jose Tan before the Regional Trial Court,
Branch 31, Manila in Civil Case No. 87-41058, alleging, among others, that plaintiffs are tenants or lessees of
residential and commercial spaces owned by defendants described as Nos. 630-638 Ongpin Street, Binondo,
Manila; that they have occupied said spaces since 1935 and have been religiously paying the rental and
complying with all the conditions of the lease contract; that on several occasions before October 9, 1986,
defendants informed plaintiffs that they are offering to sell the premises and are giving them priority to acquire
the same; that during the negotiations, Bobby Cu Unjieng offered a price of P6-million while plaintiffs made a
counter offer of P5-million; that plaintiffs thereafter asked the defendants to put their offer in writing to which
request defendants acceded; that in reply to defendant's letter, plaintiffs wrote them on October 24, 1986 asking
that they specify the terms and conditions of the offer to sell; that when plaintiffs did not receive any reply, they
sent another letter dated January 28, 1987 with the same request; that since defendants failed to specify the

terms and conditions of the offer to sell and because of information received that defendants were about to sell
the property, plaintiffs were compelled to file the complaint to compel defendants to sell the property to them.
Defendants filed their answer denying the material allegations of the complaint and interposing a special
defense of lack of cause of action.
After the issues were joined, defendants filed a motion for summary judgment which was granted by the lower
court. The trial court found that defendants' offer to sell was never accepted by the plaintiffs for the reason that
the parties did not agree upon the terms and conditions of the proposed sale, hence, there was no contract of
sale at all. Nonetheless, the lower court ruled that should the defendants subsequently offer their property for
sale at a price of P11-million or below, plaintiffs will have the right of first refusal. Thus the dispositive portion of
the decision states:
WHEREFORE, judgment is hereby rendered in favor of the defendants and against the
plaintiffs summarily dismissing the complaint subject to the aforementioned condition that if
the defendants subsequently decide to offer their property for sale for a purchase price of
Eleven Million Pesos or lower, then the plaintiffs has the option to purchase the property or of
first refusal, otherwise, defendants need not offer the property to the plaintiffs if the purchase
price is higher than Eleven Million Pesos.
SO ORDERED.
Aggrieved by the decision, plaintiffs appealed to this Court in
CA-G.R. CV No. 21123. In a decision promulgated on September 21, 1990 (penned by Justice Segundino G.
Chua and concurred in by Justices Vicente V. Mendoza and Fernando A. Santiago), this Court affirmed with
modification the lower court's judgment, holding:
In resume, there was no meeting of the minds between the parties concerning the sale of the
property. Absent such requirement, the claim for specific performance will not lie. Appellants'
demand for actual, moral and exemplary damages will likewise fail as there exists no
justifiable ground for its award. Summary judgment for defendants was properly granted.
Courts may render summary judgment when there is no genuine issue as to any material fact
and the moving party is entitled to a judgment as a matter of law (Garcia vs. Court of
Appeals, 176 SCRA 815). All requisites obtaining, the decision of the court a quois legally
justifiable.
WHEREFORE, finding the appeal unmeritorious, the judgment appealed from is hereby
AFFIRMED, but subject to the following modification: The court a quo in the aforestated
decision gave the plaintiffs-appellants the right of first refusal only if the property is sold for a
purchase price of Eleven Million pesos or lower; however, considering the mercurial and
uncertain forces in our market economy today. We find no reason not to grant the same right
of first refusal to herein appellants in the event that the subject property is sold for a price in
excess of Eleven Million pesos. No pronouncement as to costs.
SO ORDERED.
The decision of this Court was brought to the Supreme Court by petition for review on certiorari. The Supreme
Court denied the appeal on May 6, 1991 "for insufficiency in form and substances" (Annex H, Petition).
On November 15, 1990, while CA-G.R. CV No. 21123 was pending consideration by this Court, the Cu Unjieng
spouses executed a Deed of Sale (Annex D, Petition) transferring the property in question to herein petitioner
Buen Realty and Development Corporation, subject to the following terms and conditions:
1. That for and in consideration of the sum of FIFTEEN MILLION PESOS (P15,000,000.00),
receipt of which in full is hereby acknowledged, the VENDORS hereby sells, transfers and
conveys for and in favor of the VENDEE, his heirs, executors, administrators or assigns, the
above-described property with all the improvements found therein including all the rights and
interest in the said property free from all liens and encumbrances of whatever nature, except
the pending ejectment proceeding;
2. That the VENDEE shall pay the Documentary Stamp Tax, registration fees for the transfer
of title in his favor and other expenses incidental to the sale of above-described property
including capital gains tax and accrued real estate taxes.
As a consequence of the sale, TCT No. 105254/T-881 in the name of the Cu Unjieng spouses was cancelled
and, in lieu thereof, TCT No. 195816 was issued in the name of petitioner on December 3, 1990.
On July 1, 1991, petitioner as the new owner of the subject property wrote a letter to the lessees demanding
that the latter vacate the premises.
On July 16, 1991, the lessees wrote a reply to petitioner stating that petitioner brought the property subject to
the notice of lis pendens regarding Civil Case No. 87-41058 annotated on TCT No. 105254/T-881 in the name
of the Cu Unjiengs.
The lessees filed a Motion for Execution dated August 27, 1991 of the Decision in Civil Case No. 87-41058 as
modified by the Court of Appeals in CA-G.R. CV No. 21123.
On August 30, 1991, respondent Judge issued an order (Annex A, Petition) quoted as follows:

Presented before the Court is a Motion for Execution filed by plaintiff represented by Atty.
Antonio Albano. Both defendants Bobby Cu Unjieng and Rose Cu Unjieng represented by
Atty. Vicente Sison and Atty. Anacleto Magno respectively were duly notified in today's
consideration of the motion as evidenced by the rubber stamp and signatures upon the copy
of the Motion for Execution.
The gist of the motion is that the Decision of the Court dated September 21, 1990 as
modified by the Court of Appeals in its decision in CA G.R. CV-21123, and elevated to the
Supreme Court upon the petition for review and that the same was denied by the highest
tribunal in its resolution dated May 6, 1991 in G.R. No.
L-97276, had now become final and executory. As a consequence, there was an Entry of
Judgment by the Supreme Court as of June 6, 1991, stating that the aforesaid modified
decision had already become final and executory.
It is the observation of the Court that this property in dispute was the subject of the Notice of
Lis Pendens and that the modified decision of this Court promulgated by the Court of Appeals
which had become final to the effect that should the defendants decide to offer the property
for sale for a price of P11 Million or lower, and considering the mercurial and uncertain forces
in our market economy today, the same right of first refusal to herein plaintiffs/appellants in
the event that the subject property is sold for a price in excess of Eleven Million pesos or
more.
WHEREFORE, defendants are hereby ordered to execute the necessary Deed of Sale of the
property in litigation in favor of plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go for the
consideration of P15 Million pesos in recognition of plaintiffs' right of first refusal and that a
new Transfer Certificate of Title be issued in favor of the buyer.
All previous transactions involving the same property notwithstanding the issuance of another
title to Buen Realty Corporation, is hereby set aside as having been executed in bad faith.
SO ORDERED.
On September 22, 1991 respondent Judge issued another order, the dispositive portion of which reads:
WHEREFORE, let there be Writ of Execution issue in the above-entitled case directing the
Deputy Sheriff Ramon Enriquez of this Court to implement said Writ of Execution ordering the
defendants among others to comply with the aforesaid Order of this Court within a period of
one (1) week from receipt of this Order and for defendants to execute the necessary Deed of
Sale of the property in litigation in favor of the plaintiffs Ang Yu Asuncion, Keh Tiong and
Arthur Go for the consideration of P15,000,000.00 and ordering the Register of Deeds of the
City of Manila, to cancel and set aside the title already issued in favor of Buen Realty
Corporation which was previously executed between the latter and defendants and to register
the new title in favor of the aforesaid plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go.
SO ORDERED.
On the same day, September 27, 1991 the corresponding writ of execution (Annex C, Petition) was issued. 1
On 04 December 1991, the appellate court, on appeal to it by private respondent, set aside and declared without force and effect
the above questioned orders of the court a quo.
In this petition for review on certiorari, petitioners contend that Buen Realty can be held bound by the writ of execution by virtue of
the notice of lis pendens, carried over on TCT No. 195816 issued in the name of Buen Realty, at the time of the latter's purchase
of the property on 15 November 1991 from the Cu Unjiengs.
We affirm the decision of the appellate court.
A not too recent development in real estate transactions is the adoption of such arrangements as the right of first refusal, a
purchase option and a contract to sell. For ready reference, we might point out some fundamental precepts that may find some
relevance to this discussion.
An obligation is a juridical necessity to give, to do or not to do (Art. 1156, Civil Code). The obligation is constituted upon the
concurrence of the essential elements thereof, viz: (a) The vinculum juris or juridical tie which is the efficient cause established by
the various sources of obligations (law, contracts, quasi-contracts, delicts and quasi-delicts); (b) the object which is the prestation
or conduct; required to be observed (to give, to do or not to do); and (c) the subject-persons who, viewed from the demandability
of the obligation, are the active (obligee) and the passive (obligor) subjects.
Among the sources of an obligation is a contract (Art. 1157, Civil Code), which is a meeting of minds between two persons
whereby one binds himself, with respect to the other, to give something or to render some service (Art. 1305, Civil Code). A
contract undergoes various stages that include its negotiation or preparation, its perfection and, finally, its
consummation. Negotiation covers the period from the time the prospective contracting parties indicate interest in the
contract to the time the contract is concluded (perfected). The perfection of the contract takes place upon the concurrence of the
essential elements thereof. A contract which is consensual as to perfection is so established upon a mere meeting of minds, i.e.,
the concurrence of offer and acceptance, on the object and on the cause thereof. A contract which requires, in addition to the
above, the delivery of the object of the agreement, as in a pledge or commodatum, is commonly referred to as a real contract. In
a solemn contract, compliance with certain formalities prescribed by law, such as in a donation of real property, is essential in

order to make the act valid, the prescribed form being thereby an essential element thereof. The stage of consummation begins
when the parties perform their respective undertakings under the contract culminating in the extinguishment thereof.
Until the contract is perfected, it cannot, as an independent source of obligation, serve as a binding juridical relation. In sales,
particularly, to which the topic for discussion about the case at bench belongs, the contract is perfected when a person, called the
seller, obligates himself, for a price certain, to deliver and to transfer ownership of a thing or right to another, called the buyer,
over which the latter agrees. Article 1458 of the Civil Code provides:
Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of
and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent.
A contract of sale may be absolute or conditional.
When the sale is not absolute but conditional, such as in a "Contract to Sell" where invariably the ownership of the thing sold is
retained until the fulfillment of a positive suspensive condition (normally, the full payment of the purchase price), the breach of the
condition will prevent the obligation to convey title from acquiring an obligatory force. 2 In Dignos vs. Court of Appeals (158 SCRA
375), we have said that, although denominated a "Deed of Conditional Sale," a sale is still absolute where the contract is devoid
of any proviso that title is reserved or the right to unilaterally rescind is stipulated, e.g., until or unless the price is paid. Ownership
will then be transferred to the buyer upon actual or constructive delivery (e.g., by the execution of a public document) of the
property sold. Where the condition is imposed upon the perfection of the contract itself, the failure of the condition would prevent
such perfection. 3 If the condition is imposed on the obligation of a party which is not fulfilled, the other party may either waive the
condition or refuse to proceed with the sale (Art. 1545, Civil Code). 4
An unconditional mutual promise to buy and sell, as long as the object is made determinate and the price is fixed, can be
obligatory on the parties, and compliance therewith may accordingly be exacted. 5
An accepted unilateral promise which specifies the thing to be sold and the price to be paid, when coupled with a valuable
consideration distinct and separate from the price, is what may properly be termed a perfected contract ofoption. This contract is
legally binding, and in sales, it conforms with the second paragraph of Article 1479 of the Civil Code, viz:
Art. 1479. . . .
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the
promissor if the promise is supported by a consideration distinct from the price. (1451a) 6
Observe, however, that the option is not the contract of sale itself. 7 The optionee has the right, but not the obligation, to buy.
Once the option is exercised timely, i.e., the offer is accepted before a breach of the option, a bilateral promise to sell and to buy
ensues and both parties are then reciprocally bound to comply with their respective undertakings. 8
Let us elucidate a little. A negotiation is formally initiated by an offer. An imperfect promise (policitacion) is merely an offer. Public
advertisements or solicitations and the like are ordinarily construed as mere invitations to make offers or only as proposals. These
relations, until a contract is perfected, are not considered binding commitments. Thus, at any time prior to the perfection of the
contract, either negotiating party may stop the negotiation. The offer, at this stage, may be withdrawn; the withdrawal is effective
immediately after its manifestation, such as by its mailing and not necessarily when the offeree learns of the withdrawal (Laudico
vs. Arias, 43 Phil. 270). Where a period is given to the offeree within which to accept the offer, the following rules generally
govern:
(1) If the period is not itself founded upon or supported by a consideration, the offeror is still free and has the right to withdraw the
offer before its acceptance, or, if an acceptance has been made, before the offeror's coming to know of such fact, by
communicating that withdrawal to the offeree (see Art. 1324, Civil Code; see also Atkins, Kroll & Co. vs. Cua, 102 Phil. 948,
holding that this rule is applicable to a unilateral promise to sell under Art. 1479, modifying the previous decision in South
Western Sugar vs. Atlantic Gulf, 97 Phil. 249; see also Art. 1319, Civil Code; Rural Bank of Paraaque, Inc., vs. Remolado, 135
SCRA 409; Sanchez vs. Rigos, 45 SCRA 368). The right to withdraw, however, must not be exercised whimsically or arbitrarily;
otherwise, it could give rise to a damage claim under Article 19 of the Civil Code which ordains that "every person must, in the
exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good
faith."
(2) If the period has a separate consideration, a contract of "option" is deemed perfected, and it would be a breach of that
contract to withdraw the offer during the agreed period. The option, however, is an independent contract by itself, and it is to be
distinguished from the projected main agreement (subject matter of the option) which is obviously yet to be concluded. If, in fact,
the optioner-offeror withdraws the offer before its acceptance (exercise of the option) by the optionee-offeree, the latter may not
sue for specific performance on the proposed contract ("object" of the option) since it has failed to reach its own stage of
perfection. The optioner-offeror, however, renders himself liable for damages for breach of the option. In these cases, care should
be taken of the real nature of theconsideration given, for if, in fact, it has been intended to be part of the consideration for the
main contract with a right of withdrawal on the part of the optionee, the main contract could be deemed perfected; a similar
instance would be an "earnest money" in a contract of sale that can evidence its perfection (Art. 1482, Civil Code).
In the law on sales, the so-called "right of first refusal" is an innovative juridical relation. Needless to point out, it cannot be
deemed a perfected contract of sale under Article 1458 of the Civil Code. Neither can the right of first refusal, understood in its
normal concept, per se be brought within the purview of an option under the second paragraph of Article 1479, aforequoted, or
possibly of an offer under Article 1319 9 of the same Code. An option or an offer would require, among other things, 10 a clear
certainty on both the object and the cause or consideration of the envisioned contract. In a right of first refusal, while the object
might be made determinate, the exercise of the right, however, would be dependent not only on the grantor's eventual intention to
enter into a binding juridical relation with another but also on terms, including the price, that obviously are yet to be later firmed

up. Prior thereto, it can at best be so described as merely belonging to a class of preparatory juridical relations governed not by
contracts (since the essential elements to establish the vinculum juris would still be indefinite and inconclusive) but by, among
other laws of general application, the pertinent scattered provisions of the Civil Code on human conduct.
Even on the premise that such right of first refusal has been decreed under a final judgment, like here, its breach cannot justify
correspondingly an issuance of a writ of execution under a judgment that merely recognizes its existence, nor would it sanction
an action for specific performance without thereby negating the indispensable element of consensuality in the perfection of
contracts. 11 It is not to say, however, that the right of first refusal would be inconsequential for, such as already intimated above,
an unjustified disregard thereof, given, for instance, the circumstances expressed in Article 19 12 of the Civil Code, can warrant a
recovery for damages.
The final judgment in Civil Case No. 87-41058, it must be stressed, has merely accorded a "right of first refusal" in favor of
petitioners. The consequence of such a declaration entails no more than what has heretofore been said. In fine, if, as it is here so
conveyed to us, petitioners are aggrieved by the failure of private respondents to honor the right of first refusal, the remedy is not
a writ of execution on the judgment, since there is none to execute, but an action for damages in a proper forum for the purpose.
Furthermore, whether private respondent Buen Realty Development Corporation, the alleged purchaser of the property, has acted
in good faith or bad faith and whether or not it should, in any case, be considered bound to respect the registration of the lis
pendens in Civil Case No. 87-41058 are matters that must be independently addressed in appropriate proceedings. Buen Realty,
not having been impleaded in Civil Case No. 87-41058, cannot be held subject to the writ of execution issued by respondent
Judge, let alone ousted from the ownership and possession of the property, without first being duly afforded its day in court.
We are also unable to agree with petitioners that the Court of Appeals has erred in holding that the writ of execution varies the
terms of the judgment in Civil Case No. 87-41058, later affirmed in CA-G.R. CV-21123. The Court of Appeals, in this regard, has
observed:
Finally, the questioned writ of execution is in variance with the decision of the trial court as modified by this
Court. As already stated, there was nothing in said decision 13 that decreed the execution of a deed of sale
between the Cu Unjiengs and respondent lessees, or the fixing of the price of the sale, or the cancellation of
title in the name of petitioner (Limpin vs. IAC, 147 SCRA 516; Pamantasan ng Lungsod ng Maynila vs. IAC, 143
SCRA 311; De Guzman vs. CA, 137 SCRA 730; Pastor vs. CA, 122 SCRA 885).
It is likewise quite obvious to us that the decision in Civil Case No. 87-41058 could not have decreed at the time the execution of
any deed of sale between the Cu Unjiengs and petitioners.
WHEREFORE, we UPHOLD the Court of Appeals in ultimately setting aside the questioned Orders, dated 30 August 1991 and
27 September 1991, of the court a quo. Costs against petitioners.
SO ORDERED.
G.R. No. L-11668
April 1, 1918
ANTONIO ENRIQUEZ DE LA CAVADA, plaintiff-appellee,
vs.
ANTONIO DIAZ, defendant-appellant.
Ramon Diokno for appellant.
Alfredo Chicote and Jose Arnaiz for appellee.
JOHNSON, J.:
This action was instituted by the plaintiff for the purpose of requiring the defendant to comply with a certain "contract of option" to
purchase a certain piece or parcel of land described in said contract and for damages for a noncompliance with said contract.
After the close of the trial the Honorable James A. Ostrand, judge, rendered a judgment the dispositive part of which is as follows:
Wherefore, it is hereby ordered and adjudged that the defendant, within the period of thirty days from the date upon
which this decision becomes final, convey to the plaintiff a good and sufficient title in fee simple to the land described in
decrees Nos. 13909 and 13919 of the Court of Land Registration, upon payment or legal tender of payment by said
plaintiff of the sum of thirty thousand pesos (P30,000) in cash, and upon said plaintiff giving security approved by this
court for the payment within the term of 6 years from the date of the conveyance for the additional sum of forty thousand
pesos (P40,000) with interest at the rate of 6 per cent per annum.
It is further ordered and adjudged that in the event of the failure of the defendant to execute the conveyance as
aforesaid, the plaintiff have and recover judgment against him, the said defendant, for the sum of twenty thousand pesos
(P20,000), with interest at the rate of six per cent (6 per cent per annum from the date upon which the conveyance
should have been made). It is so ordered.
From that judgment the defendant appealed and made several assignment of error.
It appears from the record that on the 15th day of November, 1912, the defendant and the plaintiff entered into the following
"contract of option:"
(EXHIBIT A.)
CONTRACT OF OPTION.
I, the undersigned, Antonio Diaz, of legal age, with personal registration certificate Number F-855949, issued at Pitogo,
Tayabas, January 16, 1912, and temporarily residing in Manila, P. I., do hereby grant an option to Antonio Enriquez to
purchase my hacienda at Pitogo consisting of 100 and odd hectares, within the period necessary for the approval and
issuance of a Torrens title thereto by the Government for which he may pay me either the sum of thirty thousand pesos
(P30,000), Philippine currency, in cash, or within the period of six (6) years, beginning with the date of the purchase, the

sum of forty thousand pesos (P40,000), Philippine currency, at six per cent interest per annum, with due security for the
payment of the said P40,000 in consideration of the sale to him of my property described as follows, to wit:
About one hundred hectares of land in Pitogo, Tayabas, containing about 20,000 coconut trees and 10,000 nipa-palm
trees, all belonging to me, which I hereby sell to Antonio Enriquez de la Cavada for seventy thousand pesos, under the
conditions herein specified.
I declare that Antonio Enriquez is the sole person who has, and shall have, during the period of this option, the right to
purchase the property above-mentioned.
I likewise declare that Antonio Enriquez shall be free to resell the said property at whatever price he may desire,
provided that he should comply with the stipulations covenanted with me.
In witness of my entire conformity with the foregoing, I hereunto affix my signature, in Manila, P. I., this 15th day of
November, 1912.
(Sgd.) Antonio Diaz.
Signed in the presence of:
(Sgd.) J. VALDS DIAZ.
(EXHIBIT B.)
P. I., November 15, 1912.
Sr. Don ANTONIO DIAZ,
Calle Victoria, No. 125, W. C., Manila, P. I.
DEAR SIR: I have the honor to inform you that, in conformity with the letter of option in my favor of even date, I will buy
your coconut plantation in Pitogo, containing one hundred hectares, together with all the coconut and nipa-palm trees
planted thereon, under the following conditions:
1. I shall send a surveyor to survey the said property, and to apply to the Government for a Torrens title therefore, and, if
the expenses incurred for the same should not exceed P1,000, I shall pay the P500 and you the other P500; Provided,
however, that you shall give the surveyor all necessary assistance during his stay at the hacienda.
2. I shall pay the purchase price to you in conformity with our letter of option of this date, and after the Torrens title shall
have been officially approved.
Yours respectfully,
(Sgd.) A. ENRIQUEZ
I acknowledge receipt of, and conform with, the foregoing.
(Sgd.) ANTONIO DIAZ
It appears from the record that soon after the execution of said contract, and in part compliance with the terms thereof, the
defendant presented two petitions in the Court of Land Registration (Nos. 13909 and 13919), each for the purpose of obtaining
the registration of a part of the "Hacienda de Pitogo." Said petitions were granted, and each parcel as registered and a certificate
of title was issued for each part under the Torrens system to the defendant herein. Later, and pretending to comply with the terms
of said contract, the defendant offered to transfer to the plaintiff one of said parcels only, which was a part of said "hacienda." The
plaintiff refused to accept said certificate for a part only of said "hacienda" upon the ground (a) that it was only a part of the
"Hacienda de Pitogo," and (b) under the contract (Exhibits A and B) he was entitled to a transfer to him all said "hacienda."
The theory of the defendant is that the contract of sale of said "Hacienda de Pitogo" included only 100 hectares, more or less, of
said "hacienda," and that by offering to convey to the plaintiff a portion of said "hacienda" composed of "100 hectares, more or
less," he thereby complied with the terms of the contract. The theory of the plaintiff is that he had purchased all of said
"hacienda," and that the same contained, at least, 100 hectares, more or less. The lower court sustained the contention of the
plaintiff, to wit, that the sale was a sale of the "Hacienda de Pitogo" and not a sale of a part of it, and rendered a judgment
requiring the defendant to comply with the terms of the contract by transferring to the plaintiff, by proper deeds of conveyance, all
said "hacienda," or to pay in lieu thereof the sum of P20,000 damages, together with 6 per cent interest from the date upon which
said conveyance should have been made.
After issue had been joined between the plaintiff and defendant upon their pleadings, they entered into the following agreement
with reference to the method of presenting their proof:
The attorneys for the parties in this case make the following stipulations:
1. Each of the litigating parties shall present his evidence before Don Felipe Canillas, assistant clerk of the Court of First
Instance of Manila, who, for such purpose, should be appointed commissioner.
2. Said commissioner shall set a day and hour for the presentation of the evidence above-mentioned, both oral and
documentary, and in the stenographic notes shall have record entered of all objections made to the evidence by either
party, in order that they may afterwards be decided by the court.
3. The transcription of the stenographic notes, containing the record of the evidence taken, shall be paid for in equal
shares by both parties.
4. At the close of the taking of the evidence, each of the parties shall file his brief in respect to such evidence,
whereupon the case as it then stands shall be submitted to the decision of the court.
The parties request the court to approve this agreement in the part thereof which refers to the proceedings in this case.
Manila, P. I., December 21, 1914.
(Sgd.) ANTONIO V. HERRERO.
(Sgd.) ALFREDO CHICOTE.

Approved:
(Sgd.) GEO. R. HARVEY,
Judge.
Said agreement was approved by the lower court, and proof was taken in accordance therewith. The defendant-appellant now
alleges, giving several reasons therefor, that the proof was improperly practiced, and that the judge was without authority o
decide the cause upon proof taken in the manner agreed upon by the respective parties. The defendant-appellant makes no
contention that he was not permitted to present all the proof he desired to present. He makes no contention that he has been
prejudiced in any manner whatsoever by virtue of the method agreed upon for taking the testimony.
There is nothing in the law nor in public policy which prohibits the parties in a civil litigation from making the agreement above
quoted. While the law concedes to parties litigant, generally, the right to have their proof taken in the presence of the judge, such
right is a renounceable one. In a civil action the parties litigant have a right to agree, outside of the court, upon the facts in
litigation. Under certain conditions the parties litigant have a right to take the depositions of witnesses and submit the sworn
statements in that form to the court. The proof, as it was submitted to the court in the present case, by virtue of said agreement,
was, in effect, in the form of a deposition of the various witnesses presented. Having agreed to the method of taking the proof,
and the same having been taking in compliance with said agreement, it is now too late, there being no law to the contrary, for
them to deny and repudiate the effect of their agreement. (Biunas vs. Mora, R. G. No. 11464, March 11, 1918; Behr vs. Levy
Hermanos, R. G. No 12211, March 19, 1918.1)
Not only is there no law prohibiting the parties from entering into an agreement to submit their proof to the court in civil actions as
was done in the present case, but it may be a method highly convenient, not only to the parties, but to busy courts. The judgment
of the lower court, therefore, should not be modified or reversed on account of the first assignment of error.
In the second assignment of error, the appellant alleges (a) that the lower court committed an error in declaring the contract
(Exhibits A and B) a valid obligation, for the reason that it not been admitted in evidence, and (b) that the same was null for a
failure of consideration. Upon the first question, an examination of the proof shows that said contract (Exhibits A and B) was
offered in evidence and admitted as proof without objection. Said contract was, therefore, properly presented to the court as
proof. Not only was the contract before the court by reason of its having been presented in evidence, but the defendant himself
made said contract an integral part of his pleadings. The defendant admitted the execution and delivery of the contract, and
alleged that he made an effort to comply with its terms. His only defense is that he sold to the plaintiff a part of the "hacienda" only
and that he offered, in compliance with the terms of the contract, to convey to the plaintiff all of the land which he had promised to
sell.
With reference to the second objection, to wit, that there was no consideration for said contract it may be said (a) that the contract
was for the sale of a definite parcel of land; (b) that it was reduced to writing; (c) that the defendant promised to convey to the
plaintiff said parcel of land; (d) that the plaintiff promised to pay therefor the sum of P70,000 in the manner prescribed in said
contract; (e) that the defendant admitted the execution and delivery of the contract and alleged that he made an effort to comply
with the same (par. 3 of defendant's answer) and requested the plaintiff to comply with his part of the contract; and (f) that no
defense or pretension was made in the lower court that there was no consideration for his contract. Having admitted the
execution and delivery of the contract, having admitted an attempt to comply with its terms, and having failed in the court below to
raise any question whatsoever concerning the inadequacy of consideration, it is rather late, in the face of said admissions, to
raise that question for the first time in this court. The only dispute between the parties in the lower court was whether or not the
defendant was obliged to convey to the plaintiff all of said "hacienda." The plaintiff insisted that his contract entitled him to a
conveyance of all of said "hacienda." The defendant contended that he had complied with the terms of his contract by offering to
convey to the plaintiff a part of the said "hacienda" only. That was the only question presented to the lower court and that was the
only question decided.
A promise made by one party, if made in accordance with the forms required by the law, may be a good consideration (causa) for
a promise made by another party. (Art. 1274, Civil Code.) In other words, the consideration (causa) need not pass from one to the
other at the time the contract is entered into. For example, A promises to sell a certain parcel of land to B for the sum of P70,000.
A, by virtue of the promise of B to pay P70,000, promises to sell said parcel of land to B for said sum, then the contract is
complete, provided they have complied with the forms required by the law. The consideration need not be paid at the time of the
promise. The one promise is a consideration for the other. Of course, A cannot enforce a compliance with the contract and require
B to pay said sum until he has complied with his part of the contract. In the present case, the defendant promised to convey the
land in question to the plaintiff as soon as the same could be registered. The plaintiff promised to pay to the defendant P70,000
therefor in accordance with the terms of their contract. The plaintiff stood ready to comply with his part of the contract. The
defendant, even though he had obtained a registered title to said parcel of land, refused to comply with his promise. All of the
conditions of the contract on the part of the defendant had been concluded, except delivering the deeds of transfer. Of course, if
the defendant had been unable to obtain a registration of his title, or if he had violated the terms of the alleged optional contract
by selling the same to some other person than the plaintiff, then he might have raised the objection that he had received nothing
from the plaintiff for the option which he had conceded. That condition, of course, would have presented a different question from
the one which we have before us. The said contract (Exhibits A and B) was not, in fact, an "optional contract" as that phrase is
generally used. Reading the said contract from its four corners it is clearly as absolute promise to sell a definite parcel of land for
a fixed price upon definite conditions. The defendant promised to convey to the plaintiff the land in question as soon as the same
was registered under the Torrens system, and the plaintiff promised to pay to the defendant the sum of P70,000, under the
conditions named, upon the happening of that event. The contract was not, in fact, what is generally known as a "contract of

option." It differs very essentially from a contract of option. An optional contract is a privilege existing in one person, for which he
had paid a consideration, which gives him the right to buy, for example, certain merchandise of certain specified property, from
another person, if he chooses, at any time within the agreed period, at a fixed price. The contract of option is a separate and
distinct contract from the contract which the parties may enter into upon the consummation of the option. A consideration for an
optional contract is just as important as the consideration for any other kind of contract. If there was no consideration for the
contract of option, then it cannot be entered any more than any other contract where no consideration exists. To illustrate, A offers
B the sum of P100,000 for the option of buying his property within the period of 30 days. While it is true that the conditions upon
which A promises to buy the property at the end of the period mentioned are usually fixed in the option, the consideration for the
option is an entirely different consideration from the consideration of the contract with reference to which the option exists. A
contract of option is a contract by virtue of the terms of which the parties thereto promise and obligate themselves to enter into
contract at a future time, upon the happening of certain events, or the fulfillment of certain conditions.
Upon the other hand, suppose that the defendant had complied with his part of the contract and had tendered the deeds of
transfer of the "Hacienda de Pitogo" in accordance with its terms and had demanded the payments specified in the contract, and
the plaintiff refused to comply what then would have been the rights of the defendant? Might he not have successfully
maintained an action for the specific performance of the contract, or for the damages resulting from the breach of said contract?
When the defendant alleged that he had complied with his part of the contract (par. 3 of defendant's answer) and demanded that
the plaintiff should immediately comply with his part of the same, he evidently was laying the foundation for an action for
damages, the nullification or a specific compliance with the contract.
The appellant contends that the contract which he made was not with the plaintiff but with Rosenstock, Elser and Co. That
question was not presented in the court below. The contract in question shows, upon its face, that the defendant made the same
with the plaintiff, Not having raised the question in the court below, and having admitted the execution and delivery of the contract
in question with the plaintiff, we are of the opinion that his admission is conclusive upon that question (par. 1 of special defense of
defendant's answer) and need not be further discussed.
The appellant further contends that the action was premature, for the reason that the plaintiff had not paid nor offered to pay the
price agreed upon, under the conditions named, for the land in question. That question was not raised in the court below, which
fact, ordinarily, would be a sufficient answer to the contention of the appellant. It may be added, however, that the defendant
could not demand the payment until he had offered the deeds of conveyance, in accordance with the terms of his contract. He did
not offer to comply with the terms of his contract. True it is that he offered to comply partially with the terms of the contract, but not
fully. While the payment must be simultaneous with the delivery of the deeds of conveyance, the payment need not be made until
the deed of conveyance is offered. The plaintiff stood ready and willing to perform his part of the contract immediately upon the
performance on the part of the defendant. (Arts. 1258 and 1451 of Civil Code.)
In the fifth assignment of error the appellant contends that the lower court committed an error in not declaring that the defendant
was not obligated to sell the "Hacienda de Pitogo" to the plaintiff "por incumplimiento, renuncia abandono y negligencia del
mismo demandante, etc." (For nonfulfillment, renunciation, abandonment and negligence of plaintiff himself, etc.) That question
was not presented to the court below. But even though it had been the record shows that the plaintiff, at all times, insisted upon a
compliance with the terms of the contract on the part of the defendant, standing ready to comply with his part of the same.
The appellant contends in his sixth assignment of error that the plaintiff had not suffered the damages complained of, to wit, in the
sum of P20,000. The only proof upon the question of damages suffered by the plaintiff for the noncompliance with the terms of
the contract in question on the part of the defendant is that the plaintiff, in contemplation of the compliance with the terms of the
contract on the part of the defendant, entered into a contract with a third party to sell the said "hacienda" at a profit of P30,000.
That proof is not disputed. No attempt was made in the lower court to deny that fact. The proof shows that the person with whom
the plaintiff had entered into a conditional sale of the land in question had made a deposit for the purpose of guaranteeing the
final consummation of that contract. By reason of the failure of the defendant to comply with the contract here in question, the
plaintiff was obliged to return the sum deposited by said third party with a promise to pay damages. The record does not show
why the plaintiff did not ask for damages in the sum of P30,000. He asked for a judgment only in the sum of P20,000. He now
asks that the judgment of the lower court be modified and that he be given a judgment for P30,000. Considering the fact that he
neither asked for a judgment for more than P20,000 nor appealed from the judgment of the lower court, his request now cannot
be granted. We find no reason for modifying the judgment of the lower court by virtue of the sixth assignment of error.
In the seventh assignment of error the appellant contends that the contract of sale was not in effect a contract of sale. He alleges
that the contract was, in fact, a contract by virtue of which the plaintiff promised to find a buyer for the parcel of land in question;
that the plaintiff was not in fact the purchaser; that the only obligation that the plaintiff assumed was to find some third person who
would purchase the land from the defendant. Again, it would be sufficient to say, in answer to that assignment of error, that no
contention of that nature was presented in the court below, and for that reason it is improperly presented now for the first time. In
addition, however, it may be added that the defendant, in his answer, admitted that he not only sold the land in question, but
offered to transfer the same to the plaintiff, in compliance with the contract. (See answer of defendant.)
In the eighth assignment of error the appellant contends that the lower court committed an error in its order requiring him to
convey to the plaintiff the "Hacienda de Pitogo," for the reason that the plaintiff had not demanded a transfer of said property, and
for the additional reason that a portion of said "hacienda" had already been sold to a third person. With reference to the first
contention, the record clearly shows that the plaintiff was constantly insisting upon a compliance with the terms of the contract, to
wit, a conveyance to him of the "Hacienda de Pitogo" by the defendant. Naturally, he refused, under the contract, to accept a
conveyance of a part only of said "hacienda." With reference to the second contention, it may be said that the mere fact that the

defendant had sold a part of the "hacienda" to other persons, is no sufficient reason for not requiring a strict compliance with the
terms of his contract with the plaintiff, or to answer in damages for his failure. (Arts. 1101 and 1252 of the Civil Code.)
In view of the foregoing, and after a consideration of the facts and the law applicable thereto, we are persuaded that there is no
reason given in the record justifying a modification or reversal of the judgment of the lower court. The same is, however, hereby
affirmed, with costs. So ordered.
G.R. No. 124791 February 10, 1999
JOSE RAMON CARCELLER, petitioner,
vs.
COURT OF APPEALS and STATE INVESTMENT HOUSES, INC., respondents.
QUISUMBING, J.:
Before us is a petition for review of the Decision 1 dated September 21, 1995 of the Court of Appeals2 in CA G. R. CV No.
37520, as well as its Resolution 3 dated April 25, 1996, denying both parties' motion for partial reconsideration or clarification. The
assailed decision affirmed with modification the judgment 4 of the Regional Trial Court of Cebu City, Branch 5, in Civil Case No.
CEB 4700, and disposed of the controversy as follows:
However, We do not find it just that the appellee, in exercising his option to buy, should pay appellant SIHI only
P1,800,000.00. In fairness to appellant SIHI, the purchase price must be based on the prevailing market price
of real property in Bulacao, Cebu City. (Emphasis supplied)
The factual background of this case is quite simple.
Private respondent State Investment Houses, Inc. (SIHI) is the registered owner of two (2) parcels of land with a total area of
9,774 square meters, including all the improvements thereon, located at Bulacao, Cebu City, covered by Transfer Certificate of
Titles Nos. T-89152 and T-89153 of the Registry of Deeds of Cebu City.
On January 10, 1985, petitioner and SIHI entered into a lease contract with option to purchase 5 over said two parcels of land, at
a monthly rental of Ten Thousand (P10,000.00) pesos for a period of eighteen (18) months, beginning on August 1, 1984 until
January 30, 1986. The pertinent portion of the lease contract subject of the dispute reads in part:
4. As part of the consideration of this agreement, the LESSOR hereby grants unto the LESSEE the exclusive
right, option and privilege to purchase, within the lease period, the leased premises thereon for the aggregate
amount of P1,800,000.00 payable as follows:
a. Upon the signing of the Deed of Sale, the LESSEE shall immediately pay P360,000.00.
b. The balance of P1,440,000.00 shall be paid in equal installments of P41,425.87 over sixty
(60) consecutive months computed with interest at 24% per annum on the diminishing
balance; Provided, that the LESSEE shall have the right to accelerate payments at anytime in
which event the stipulated interest for the remaining installments shall no longer be imposed.
x . . The option shall be exercised by a written notice to the LESSOR at anytime within the option period and
the document of sale over the afore-described properties has to be consummated within the month immediately
following the month when the LESSEE exercised his option under this contract. 6
On January 7, 1986, or approximately three (3) weeks before the expiration of the lease contract, SIHI notified petitioner of the
impending termination of the lease agreement, and of the short period of time left within which he could still validly exercise the
option. It likewise requested petitioner to advise them of his decision on the option, on or before January 20, 1986. 7
In a letter dated January 15, 1986, which was received by SIHI on January 29, 1986, petitioner requested for a six-month
extension of the lease contract, alleging that he needs ample time to raise sufficient funds in order to exercise the option. To
support his request, petitioner averred that he had already made a substantial investment on the property, and had been punctual
in paying his monthly rentals. 8
On February 14, 1986, SIHI notified petitioner that his request was disapproved. Nevertheless, it offered to lease the same
property to petitioner at the rate of Thirty Thousand (P30,000.00) pesos a month, for a period of one (1) year. It further informed
the petitioner of its decision to offer for sale said leased property to the general public. 9
On February 18, 1986, petitioner notified SIHI of his decision to exercise the option to purchase the property and at the same time
he made arrangements for the payment of the downpayment thereon in the amount of Three Hundred Sixty Thousand
(P360,000.00) pesos. 10
On February 20, 1986, SIHI sent another letter to petitioner, reiterating its previous stand on the latter's offer, stressing that the
period within which the option should have been exercised had already lapsed. SIHI asked petitioner to vacate the property within
ten (10) days from notice, and to pay rental and penalty due. 11
Hence, on February 28, 1986, a complaint for specific performance and damages 12 was filed by petitioner against SIHI before the
Regional Trial Court of Cebu City, to compel the latter to honor its commitment and execute the corresponding deed of sale.
After trial, the court a quo promulgated its decision dated April 1, 1991, the dispositive portion of which reads:
In the light of the foregoing considerations, the Court hereby renders judgment in Civil Case No. CEB 4700,
ordering the defendant to execute a deed of sale in favor of the plaintiff, covering the parcels of land together
with all the improvements thereon, covered by Transfer Certificates of Title Nos. 89152 and 89153 of the
Registry of Deeds of Cebu City, in accordance with the lease contract executed on January 10, 1984 between
the plaintiff and the defendant, but the purchase price may be by "one shot payment" of P1,800,000.00; and the
defendant to pay attorney's fee of P20,000.00.

No damages awarded. 13
Not satisfied with the judgment, SIHI elevated the case to the Court of Appeals by way of a petition for review.
On September 21, 1995, respondent court rendered its decision, affirming the trial court's judgment, but modified the basis for
assessing the purchase price. While respondent court affirmed appellee's option to buy the property, it added that, "the purchase
price must be based on the prevailing market price of real property in Bulacao, Cebu City." 14
Baffled by the modification made by respondent court, both parties filed a motion for reconsideration and/or clarification, with
petitioner, on one hand, praying that the prevailing market price be the value of the property in February 1986, the time when the
sale would have been consummated. SIHI, on the other hand, prayed that the market price of the property be based on the
prevailing price index at least 10 years later, that is, 1996.
Respondent court conducted further hearing to clarify the matter, but no agreement was reached by the parties. Thus, on April 25,
1996, respondent court promulgated the assailed resolution, which denied both parties' motions, and directed the trial court to
conduct further hearings to ascertain the prevailing market value of real properties in Bulacao, Cebu City and fix the value of the
property subject of the controversy. 14a
Hence, the instant petition for review.
The fundamental issue to be resolved is, should petitioner be allowed to exercise the option to purchase the leased property,
despite the alleged delay in giving the required notice to private respondent?
An option is a preparatory contract in which one party grants to the other, for a fixed period and under specified conditions, the
power to decide, whether or not to enter into a principal contract. It binds the party who has given the option, not to enter into the
principal contract with any other person during the period designated, and, within that period, to enter into such contract with the
one to whom the option was granted, if the latter should decide to use the option. 15 It is a separate agreement distinct from the
contract which the parties may enter into upon the consummation of the option. 16
Considering the circumstances in this case, we find no reason to disturb the findings of respondent court, that petitioner's letter to
SIHI, dated January 15, 1986, was fair notice to the latter of the former's intent to exercise the option, despite the request for the
extension of the lease contract. As stated in said letter to SIHI, petitioner was requesting for an extension (of the contract) for six
months "to allow us to generate sufficient funds in order to exercise our option to buy the subject property". 17 The analysis by
the Court of Appeals of the evidence on record and the process by which it arrived at its findings on the basis thereof, impel this
Court's assent to said findings. They are consistent with the parties' primary intent, as hereafter discussed, when they executed
the lease contract. As respondent court ruled:
We hold that the appellee [herein petitioner] acted with honesty and good faith. Verily, We are in accord with the
trial court that he should be allowed to exercise his option to purchase the lease property. In fact, SIHI will not
be prejudiced. A contrary ruling, however, will definitely cause damage to the appellee, it appearing that he has
introduced considerable improvements on the property and has borrowed huge loan from the Technology
Resources Center. 17a
The contracting parties' primary intent in entering into said lease contract with option to purchase confirms, in our view, the
correctness of respondent court's ruling. Analysis and construction, however, should not be limited to the words used in the
contract, as they may not accurately reflect the parties' true intent. The reasonableness of the result obtained, after said analysis,
ought likewise to be carefully considered.
It is well-settled in both law and jurisprudence, that contracts are the law between the contracting parties and should be fulfilled, if
their terms are clear and leave no room for doubt as to the intention of the contracting parties. 18Further, it is well-settled that in
construing a written agreement, the reason behind and the circumstances surrounding its execution are of paramount
importance. Sound construction requires one to be placed mentally in the situation occupied by the parties concerned at the time
the writing was executed. Thereby, the intention of the contracting parties could be made to prevail, because their agreement has
the force of law between them. 19
Moreover, to ascertain the intent of the parties in a contractual relationship, it is imperative that the various stipulations provided
for in the contract be construed together, consistent with the parties' contemporaneous and subsequent acts as regards the
execution of the contract. 20 And once the intention of the parties has been ascertained, that element is deemed as an integral
part of the contract as though it has been originally expressed in unequivocal terms.
As sufficiently established during the trial, SIHI, prior to its negotiation with petitioner, was already beset with financial problems.
SIHI was experiencing difficulty in meeting the claims of its creditors. Thus, in order to reprogram the company's financial
investment plan and facilitate its rehabilitation and viability, SIHI, being a quasi-banking financial institution, had been placed
under the supervision and control of the Central Bank (CB). It was in dire need of liquidating its assets, so to speak, in order to
stay afloat financially.
Thus, SIHI was compelled to dispose some of its assets, among which is the subject leased property, to generate sufficient funds
to augment its badly-depleted financial resources. This then brought about the execution of the lease contract with option to
purchase between SIHI and the petitioner.
The lease contract provided that to exercise the option, petitioner had to send a letter to SIHI, manifesting his intent to exercise
said option within the lease period ending January 30, 1986. However, what petitioner did was to request on January 15, 1986,
for a six-month extension of the lease contract, for the alleged purpose of raising funds intended to purchase the property subject
of the option. It was only after the request was denied on February 14, 1986, that petitioner notified SIHI of his desire to exercise
the option formally. This was by letter dated February 18, 1986. In private respondent's view, there was already a delay of 18

days, fatal to petitioner's cause. But respondent court found the delay neither "substantial" nor "fundamental" and did not amount
to a breach that would defeat the intention of the parties when they executed the lease contract with option to purchase. 20a
In allowing petitioner to exercise the option, however, both lower courts are in accord in their decision, rationalizing that a contrary
ruling would definitely cause damage to the petitioner, as he had the whole place renovated to make the same suitable and
conducive for the business he established there. Moreover, judging from the subsequent acts of the parties, it is undeniable that
SIHI really intended to dispose of said leased property, which petitioner indubitably intended to buy.
SIHI's agreement to enter first into a lease contract with option to purchase with herein petitioner, is a clear proof of its intent to
promptly dispose said property although the full financial returns may materialize only in a year's time. Furthermore, its letter
dated January 7, 1986, reminding the petitioner of the short period of time left within which to consummate their agreement,
clearly showed its desire to sell that property. Also, SIHI's letter dated February 14, 1986 supported the conclusion that it was
bent on disposing said property. For this letter made mention of the fact that, "said property is now for sale to the general public".
Petitioner's determination to purchase said property is equally indubitable. He introduced permanent improvements on the leased
property, demonstrating his intent to acquire dominion in a year's time. To increase his chances of acquiring the property, he
secured an P8 Million loan from the Technology Resources Center (TRC), thereby augmenting his capital. He averred that he
applied for a loan since he planned to pay the purchase price in one single payment, instead of paying in installment, which would
entail the payment of additional interest at the rate of 24% per annum, compared to 73/4% per annum interest for the TRC loan.
His letter earlier requesting extension was premised, in fact, on his need for time to secure the needed financing through a TRC
loan.
In contractual relations, the law allows the parties reasonable leeway on the terms of their agreement, which is the law between
them. 21 Note that by contract SIHI had given petitioner 4 periods: (a) the option to purchase the property for P1,800,000.00
within the lease period, that is, until January 30, 1986; (b) the option to be exercised within the option period by written notice at
anytime; (c) the "document of sale . . . to be consummated within the month immediately following the month" when petitioner
exercises the option; and (d) the payment in equal installments of the purchase price over a period of 60 months. In our view,
petitioner's letter of January 15, 1986 and his formal exercise of the option on February 18, 1986 were within a reasonable timeframe consistent with periods given and the known intent of the parties to the agreement dated January 10, 1985. A contrary view
would be harsh and inequituous indeed.
In Tuason, Jr., etc. vs. De Asis, 22 this Court opined that "in a contract of lease, if the lessor makes an offer to the lessee to
purchase the property on or before the termination of the lease, and the lessee fails to accept or make the purchase on time, the
lessee losses the right to buy the property later on the terms and conditions set in the offer." Thus, on one hand, petitioner herein
could not insist on buying the said property based on the price agreed upon in the lease agreement, even if his option to
purchase it is recognized. On the other hand, SIHI could not take advantage of the situation to increase the selling price of said
property by nearly 90% of the original price. Such leap in the price quoted would show an opportunistic intent to exploit the
situation as SIHI knew for a fact that petitioner badly needed the property for his business and that he could afford to pay such
higher amount after having secured an P8 Million loan from the TRC. If the courts were to allow SIHI to take advantage of the
situation, the result would have been an injustice to petitioner, because SIHI would be unjustly enriched at his expense. Courts of
law, being also courts of equity, may not countenance such grossly unfair results without doing violence to its solemn obligation to
administer fair and equal justice for all.
WHEREFORE, the appealed decision of respondent court, insofar as it affirms the judgment of the trial court in granting petitioner
the opportunity to exercise the option to purchase the subject property, is hereby AFFIRMED. However the purchase price should
be based on the fair market value of real property in Bulacao, Cebu City, as of February 1986, when the contract would have
been consummated. Further, petitioner is hereby ordered to pay private respondent SIHI legal interest on the said purchase price
beginning February 1986 up to the time it is actually paid, as well as the taxes due on said property, considering that petitioner
have enjoyed the beneficial use of said property. The case is hereby remanded to Regional Trial Court of Cebu, Branch 5, for
further proceedings to determine promptly the fair market value of said real property as of February 1986, in Bulacao, Cebu City.
Costs against private respondent.
SO ORDERED.
G.R. No. 111238 January 25, 1995
ADELFA PROPERTIES, INC., petitioner,
vs.
COURT OF APPEALS, ROSARIO JIMENEZ-CASTAEDA and SALUD JIMENEZ, respondents.
REGALADO, J.:
The main issues presented for resolution in this petition for review on certiorari of the judgment of respondent Court of appeals,
dated April 6, 1993, in CA-G.R. CV No. 34767 1 are (1) whether of not the "Exclusive Option to Purchase" executed between
petitioner Adelfa Properties, Inc. and private respondents Rosario Jimenez-Castaeda and Salud Jimenez is an option contract;
and (2) whether or not there was a valid suspension of payment of the purchase price by said petitioner, and the legal effects
thereof on the contractual relations of the parties.
The records disclose the following antecedent facts which culminated in the present appellate review, to wit:
1. Herein private respondents and their brothers, Jose and Dominador Jimenez, were the registered co-owners of a parcel of land
consisting of 17,710 square meters, covered by Transfer Certificate of Title (TCT) No. 309773, 2situated in Barrio Culasi, Las
Pias, Metro Manila.

2. On July 28, 1988, Jose and Dominador Jimenez sold their share consisting of one-half of said parcel of land, specifically the
eastern portion thereof, to herein petitioner pursuant to a "Kasulatan sa Bilihan ng Lupa." 3Subsequently, a "Confirmatory
Extrajudicial Partition Agreement" 4 was executed by the Jimenezes, wherein the eastern portion of the subject lot, with an area of
8,855 square meters was adjudicated to Jose and Dominador Jimenez, while the western portion was allocated to herein private
respondents.
3. Thereafter, herein petitioner expressed interest in buying the western portion of the property from private respondents.
Accordingly, on November 25, 1989, an "Exclusive Option to Purchase" 5 was executed between petitioner and private
respondents, under the following terms and conditions:
1. The selling price of said 8,655 square meters of the subject property is TWO MILLION EIGHT HUNDRED
FIFTY SIX THOUSAND ONE HUNDRED FIFTY PESOS ONLY (P2,856,150.00)
2. The sum of P50,000.00 which we received from ADELFA PROPERTIES, INC. as an option money shall be
credited as partial payment upon the consummation of the sale and the balance in the sum of TWO MILLION
EIGHT HUNDRED SIX THOUSAND ONE HUNDRED FIFTY PESOS (P2,806,150.00) to be paid on or before
November 30, 1989;
3. In case of default on the part of ADELFA PROPERTIES, INC. to pay said balance in accordance with
paragraph 2 hereof, this option shall be cancelled and 50% of the option money to be forfeited in our favor and
we will refund the remaining 50% of said money upon the sale of said property to a third party;
4. All expenses including the corresponding capital gains tax, cost of documentary stamps are for the account
of the VENDORS, and expenses for the registration of the deed of sale in the Registry of Deeds are for the
account of ADELFA PROPERTIES, INC.
Considering, however, that the owner's copy of the certificate of title issued to respondent Salud Jimenez had been lost, a petition
for the re-issuance of a new owner's copy of said certificate of title was filed in court through Atty. Bayani L. Bernardo, who acted
as private respondents' counsel. Eventually, a new owner's copy of the certificate of title was issued but it remained in the
possession of Atty. Bernardo until he turned it over to petitioner Adelfa Properties, Inc.
4. Before petitioner could make payment, it received summons 6 on November 29, 1989, together with a copy of a complaint filed
by the nephews and nieces of private respondents against the latter, Jose and Dominador Jimenez, and herein petitioner in the
Regional Trial Court of Makati, docketed as Civil Case No. 89-5541, for annulment of the deed of sale in favor of Household
Corporation and recovery of ownership of the property covered by TCT No. 309773. 7
5. As a consequence, in a letter dated November 29, 1989, petitioner informed private respondents that it would hold payment of
the full purchase price and suggested that private respondents settle the case with their nephews and nieces, adding that ". . . if
possible, although November 30, 1989 is a holiday, we will be waiting for you and said plaintiffs at our office up to 7:00
p.m." 8 Another letter of the same tenor and of even date was sent by petitioner to Jose and Dominador Jimenez. 9 Respondent
Salud Jimenez refused to heed the suggestion of petitioner and attributed the suspension of payment of the purchase price to
"lack of word of honor."
6. On December 7, 1989, petitioner caused to be annotated on the title of the lot its option contract with private respondents, and
its contract of sale with Jose and Dominador Jimenez, as Entry No. 1437-4 and entry No. 1438-4, respectively.
7. On December 14, 1989, private respondents sent Francisca Jimenez to see Atty. Bernardo, in his capacity as petitioner's
counsel, and to inform the latter that they were cancelling the transaction. In turn, Atty. Bernardo offered to pay the purchase price
provided that P500,000.00 be deducted therefrom for the settlement of the civil case. This was rejected by private respondents.
On December 22, 1989, Atty. Bernardo wrote private respondents on the same matter but this time reducing the amount from
P500,000.00 to P300,000.00, and this was also rejected by the latter.
8. On February 23, 1990, the Regional Trial Court of Makati dismissed Civil Case No. 89-5541. Thus, on February 28, 1990,
petitioner caused to be annotated anew on TCT No. 309773 the exclusive option to purchase as Entry No. 4442-4.
9. On the same day, February 28, 1990, private respondents executed a Deed of Conditional Sale 10 in favor of Emylene Chua
over the same parcel of land for P3,029,250, of which P1,500,000.00 was paid to private respondents on said date, with the
balance to be paid upon the transfer of title to the specified one-half portion.
10. On April 16, 1990, Atty. Bernardo wrote private respondents informing the latter that in view of the dismissal of the case
against them, petitioner was willing to pay the purchase price, and he requested that the corresponding deed of absolute sale be
executed. 11 This was ignored by private respondents.
11. On July 27, 1990, private respondents' counsel sent a letter to petitioner enclosing therein a check for P25,000.00
representing the refund of fifty percent of the option money paid under the exclusive option to purchase. Private respondents then
requested petitioner to return the owner's duplicate copy of the certificate of title of respondent Salud Jimenez. 12 Petitioner failed
to surrender the certificate of title, hence private respondents filed Civil Case No. 7532 in the Regional Trial Court of Pasay City,
Branch 113, for annulment of contract with damages, praying, among others, that the exclusive option to purchase be declared
null and void; that defendant, herein petitioner, be ordered to return the owner's duplicate certificate of title; and that the
annotation of the option contract on TCT No. 309773 be cancelled. Emylene Chua, the subsequent purchaser of the lot, filed a
complaint in intervention.
12. The trial court rendered judgment 13 therein on September 5, 1991 holding that the agreement entered into by the parties was
merely an option contract, and declaring that the suspension of payment by herein petitioner constituted a counter-offer which,
therefore, was tantamount to a rejection of the option. It likewise ruled that herein petitioner could not validly suspend payment in
favor of private respondents on the ground that the vindicatory action filed by the latter's kin did not involve the western portion of

the land covered by the contract between petitioner and private respondents, but the eastern portion thereof which was the
subject of the sale between petitioner and the brothers Jose and Dominador Jimenez. The trial court then directed the
cancellation of the exclusive option to purchase, declared the sale to intervenor Emylene Chua as valid and binding, and ordered
petitioner to pay damages and attorney's fees to private respondents, with costs.
13. On appeal, respondent Court of appeals affirmed in toto the decision of the court a quo and held that the failure of petitioner
to pay the purchase price within the period agreed upon was tantamount to an election by petitioner not to buy the property; that
the suspension of payment constituted an imposition of a condition which was actually a counter-offer amounting to a rejection of
the option; and that Article 1590 of the Civil Code on suspension of payments applies only to a contract of sale or a contract to
sell, but not to an option contract which it opined was the nature of the document subject of the case at bar. Said appellate court
similarly upheld the validity of the deed of conditional sale executed by private respondents in favor of intervenor Emylene Chua.
In the present petition, the following assignment of errors are raised:
1. Respondent court of appeals acted with grave abuse of discretion in making its finding that the agreement entered into by
petitioner and private respondents was strictly an option contract;
2. Granting arguendo that the agreement was an option contract, respondent court of Appeals acted with grave abuse of
discretion in grievously failing to consider that while the option period had not lapsed, private respondents could not unilaterally
and prematurely terminate the option period;
3. Respondent Court of Appeals acted with grave abuse of discretion in failing to appreciate fully the attendant facts and
circumstances when it made the conclusion of law that Article 1590 does not apply; and
4. Respondent Court of Appeals acted with grave abuse of discretion in conforming with the sale in favor of appellee Ma.
Emylene Chua and the award of damages and attorney's fees which are not only excessive, but also without in fact and in law. 14
An analysis of the facts obtaining in this case, as well as the evidence presented by the parties, irresistibly leads to the conclusion
that the agreement between the parties is a contract to sell, and not an option contract or a contract of sale.
I
1. In view of the extended disquisition thereon by respondent court, it would be worthwhile at this juncture to briefly discourse on
the rationale behind our treatment of the alleged option contract as a contract to sell, rather than a contract of sale. The distinction
between the two is important for in contract of sale, the title passes to the vendee upon the delivery of the thing sold; whereas in a
contract to sell, by agreement the ownership is reserved in the vendor and is not to pass until the full payment of the price. In a
contract of sale, the vendor has lost and cannot recover ownership until and unless the contract is resolved or rescinded;
whereas in a contract to sell, title is retained by the vendor until the full payment of the price, such payment being a positive
suspensive condition and failure of which is not a breach but an event that prevents the obligation of the vendor to convey title
from becoming effective. Thus, a deed of sale is considered absolute in nature where there is neither a stipulation in the deed that
title to the property sold is reserved in the seller until the full payment of the price, nor one giving the vendor the right to
unilaterally resolve the contract the moment the buyer fails to pay within a fixed period. 15
There are two features which convince us that the parties never intended to transfer ownership to petitioner except upon the full
payment of the purchase price. Firstly, the exclusive option to purchase, although it provided for automatic rescission of the
contract and partial forfeiture of the amount already paid in case of default, does not mention that petitioner is obliged to return
possession or ownership of the property as a consequence of non-payment. There is no stipulation anent reversion or
reconveyance of the property to herein private respondents in the event that petitioner does not comply with its obligation. With
the absence of such a stipulation, although there is a provision on the remedies available to the parties in case of breach, it may
legally be inferred that the parties never intended to transfer ownership to the petitioner to completion of payment of the purchase
price.
In effect, there was an implied agreement that ownership shall not pass to the purchaser until he had fully paid the price. Article
1478 of the civil code does not require that such a stipulation be expressly made. Consequently, an implied stipulation to that
effect is considered valid and, therefore, binding and enforceable between the parties. It should be noted that under the law and
jurisprudence, a contract which contains this kind of stipulation is considered a contract to sell.
Moreover, that the parties really intended to execute a contract to sell, and not a contract of sale, is bolstered by the fact that the
deed of absolute sale would have been issued only upon the payment of the balance of the purchase price, as may be gleaned
from petitioner's letter dated April 16, 1990 16 wherein it informed private respondents that it "is now ready and willing to pay you
simultaneously with the execution of the corresponding deed of absolute sale."
Secondly, it has not been shown there was delivery of the property, actual or constructive, made to herein petitioner. The
exclusive option to purchase is not contained in a public instrument the execution of which would have been considered
equivalent to delivery. 17 Neither did petitioner take actual, physical possession of the property at any given time. It is true that
after the reconstitution of private respondents' certificate of title, it remained in the possession of petitioner's counsel, Atty. Bayani
L. Bernardo, who thereafter delivered the same to herein petitioner. Normally, under the law, such possession by the vendee is to
be understood as a delivery. 18 However, private respondents explained that there was really no intention on their part to deliver
the title to herein petitioner with the purpose of transferring ownership to it. They claim that Atty. Bernardo had possession of the
title only because he was their counsel in the petition for reconstitution. We have no reason not to believe this explanation of
private respondents, aside from the fact that such contention was never refuted or contradicted by petitioner.
2. Irrefragably, the controverted document should legally be considered as a perfected contract to sell. On this particular point,
therefore, we reject the position and ratiocination of respondent Court of Appeals which, while awarding the correct relief to
private respondents, categorized the instrument as "strictly an option contract."

The important task in contract interpretation is always the ascertainment of the intention of the contracting parties and that task is,
of course, to be discharged by looking to the words they used to project that intention in their contract, all the words not just a
particular word or two, and words in context not words standing alone. 19Moreover, judging from the subsequent acts of the
parties which will hereinafter be discussed, it is undeniable that the intention of the parties was to enter into a contract to sell. 20 In
addition, the title of a contract does not necessarily determine its true nature. 21Hence, the fact that the document under
discussion is entitled "Exclusive Option to Purchase" is not controlling where the text thereof shows that it is a contract to sell.
An option, as used in the law on sales, is a continuing offer or contract by which the owner stipulates with another that the latter
shall have the right to buy the property at a fixed price within a certain time, or under, or in compliance with, certain terms and
conditions, or which gives to the owner of the property the right to sell or demand a sale. It is also sometimes called an
"unaccepted offer." An option is not of itself a purchase, but merely secures the privilege to buy. 22 It is not a sale of property but a
sale of property but a sale of the right to purchase.23 It is simply a contract by which the owner of property agrees with another
person that he shall have the right to buy his property at a fixed price within a certain time. He does not sell his land; he does not
then agree to sell it; but he does sell something, that it is, the right or privilege to buy at the election or option of the other
party. 24 Its distinguishing characteristic is that it imposes no binding obligation on the person holding the option, aside from the
consideration for the offer. Until acceptance, it is not, properly speaking, a contract, and does not vest, transfer, or agree to
transfer, any title to, or any interest or right in the subject matter, but is merely a contract by which the owner of property gives the
optionee the right or privilege of accepting the offer and buying the property on certain terms. 25
On the other hand, a contract, like a contract to sell, involves a meeting of minds two persons whereby one binds himself, with
respect to the other, to give something or to render some service. 26 Contracts, in general, are perfected by mere
consent, 27 which is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to
constitute the contract. The offer must be certain and the acceptance absolute. 28
The distinction between an "option" and a contract of sale is that an option is an unaccepted offer. It states the terms and
conditions on which the owner is willing to sell the land, if the holder elects to accept them within the time limited. If the holder
does so elect, he must give notice to the other party, and the accepted offer thereupon becomes a valid and binding contract. If
an acceptance is not made within the time fixed, the owner is no longer bound by his offer, and the option is at an end. A contract
of sale, on the other hand, fixes definitely the relative rights and obligations of both parties at the time of its execution. The offer
and the acceptance are concurrent, since the minds of the contracting parties meet in the terms of the agreement. 29
A perusal of the contract in this case, as well as the oral and documentary evidence presented by the parties, readily shows that
there is indeed a concurrence of petitioner's offer to buy and private respondents' acceptance thereof. The rule is that except
where a formal acceptance is so required, although the acceptance must be affirmatively and clearly made and must be
evidenced by some acts or conduct communicated to the offeror, it may be made either in a formal or an informal manner, and
may be shown by acts, conduct, or words of the accepting party that clearly manifest a present intention or determination to
accept the offer to buy or sell. Thus, acceptance may be shown by the acts, conduct, or words of a party recognizing the
existence of the contract of sale. 30
The records also show that private respondents accepted the offer of petitioner to buy their property under the terms of their
contract. At the time petitioner made its offer, private respondents suggested that their transfer certificate of title be first
reconstituted, to which petitioner agreed. As a matter of fact, it was petitioner's counsel, Atty. Bayani L. Bernardo, who assisted
private respondents in filing a petition for reconstitution. After the title was reconstituted, the parties agreed that petitioner would
pay either in cash or manager's check the amount of P2,856,150.00 for the lot. Petitioner was supposed to pay the same on
November 25, 1989, but it later offered to make a down payment of P50,000.00, with the balance of P2,806,150.00 to be paid on
or before November 30, 1989. Private respondents agreed to the counter-offer made by petitioner. 31 As a result, the so-called
exclusive option to purchase was prepared by petitioner and was subsequently signed by private respondents, thereby creating a
perfected contract to sell between them.
It cannot be gainsaid that the offer to buy a specific piece of land was definite and certain, while the acceptance thereof was
absolute and without any condition or qualification. The agreement as to the object, the price of the property, and the terms of
payment was clear and well-defined. No other significance could be given to such acts that than they were meant to finalize and
perfect the transaction. The parties even went beyond the basic requirements of the law by stipulating that "all expenses including
the corresponding capital gains tax, cost of documentary stamps are for the account of the vendors, and expenses for the
registration of the deed of sale in the Registry of Deeds are for the account of Adelfa properties, Inc." Hence, there was nothing
left to be done except the performance of the respective obligations of the parties.
We do not subscribe to private respondents' submission, which was upheld by both the trial court and respondent court of
appeals, that the offer of petitioner to deduct P500,000.00, (later reduced to P300,000.00) from the purchase price for the
settlement of the civil case was tantamount to a counter-offer. It must be stressed that there already existed a perfected contract
between the parties at the time the alleged counter-offer was made. Thus, any new offer by a party becomes binding only when it
is accepted by the other. In the case of private respondents, they actually refused to concur in said offer of petitioner, by reason of
which the original terms of the contract continued to be enforceable.
At any rate, the same cannot be considered a counter-offer for the simple reason that petitioner's sole purpose was to settle the
civil case in order that it could already comply with its obligation. In fact, it was even indicative of a desire by petitioner to
immediately comply therewith, except that it was being prevented from doing so because of the filing of the civil case which, it
believed in good faith, rendered compliance improbable at that time. In addition, no inference can be drawn from that suggestion
given by petitioner that it was totally abandoning the original contract.

More importantly, it will be noted that the failure of petitioner to pay the balance of the purchase price within the agreed period
was attributed by private respondents to "lack of word of honor" on the part of the former. The reason of "lack of word of honor" is
to us a clear indication that private respondents considered petitioner already bound by its obligation to pay the balance of the
consideration. In effect, private respondents were demanding or exacting fulfillment of the obligation from herein petitioner. with
the arrival of the period agreed upon by the parties, petitioner was supposed to comply with the obligation incumbent upon it to
perform, not merely to exercise an option or a right to buy the property.
The obligation of petitioner on November 30, 1993 consisted of an obligation to give something, that is, the payment of the
purchase price. The contract did not simply give petitioner the discretion to pay for the property. 32 It will be noted that there is
nothing in the said contract to show that petitioner was merely given a certain period within which to exercise its privilege to buy.
The agreed period was intended to give time to herein petitioner within which to fulfill and comply with its obligation, that is, to pay
the balance of the purchase price. No evidence was presented by private respondents to prove otherwise.
The test in determining whether a contract is a "contract of sale or purchase" or a mere "option" is whether or not the agreement
could be specifically enforced. 33 There is no doubt that the obligation of petitioner to pay the purchase price is specific, definite
and certain, and consequently binding and enforceable. Had private respondents chosen to enforce the contract, they could have
specifically compelled petitioner to pay the balance of P2,806,150.00. This is distinctly made manifest in the contract itself as an
integral stipulation, compliance with which could legally and definitely be demanded from petitioner as a consequence.
This is not a case where no right is as yet created nor an obligation declared, as where something further remains to be done
before the buyer and seller obligate themselves. 34 An agreement is only an "option" when no obligation rests on the party to
make any payment except such as may be agreed on between the parties as consideration to support the option until he has
made up his mind within the time specified. 35 An option, and not a contract to purchase, is effected by an agreement to sell real
estate for payments to be made within specified time and providing forfeiture of money paid upon failure to make payment, where
the purchaser does not agree to purchase, to make payment, or to bind himself in any way other than the forfeiture of the
payments made. 36 As hereinbefore discussed, this is not the situation obtaining in the case at bar.
While there is jurisprudence to the effect that a contract which provides that the initial payment shall be totally forfeited in case of
default in payment is to be considered as an option contract, 37 still we are not inclined to conform with the findings of respondent
court and the court a quo that the contract executed between the parties is an option contract, for the reason that the parties were
already contemplating the payment of the balance of the purchase price, and were not merely quoting an agreed value for the
property. The term "balance," connotes a remainder or something remaining from the original total sum already agreed upon.
In other words, the alleged option money of P50,000.00 was actually earnest money which was intended to form part of the
purchase price. The amount of P50,000.00 was not distinct from the cause or consideration for the sale of the property, but was
itself a part thereof. It is a statutory rule that whenever earnest money is given in a contract of sale, it shall be considered as part
of the price and as proof of the perfection of the contract. 38 It constitutes an advance payment and must, therefore, be deducted
from the total price. Also, earnest money is given by the buyer to the seller to bind the bargain.
There are clear distinctions between earnest money and option money, viz.: (a) earnest money is part of the purchase price, while
option money ids the money given as a distinct consideration for an option contract; (b) earnest money is given only where there
is already a sale, while option money applies to a sale not yet perfected; and (c) when earnest money is given, the buyer is bound
to pay the balance, while when the would-be buyer gives option money, he is not required to buy. 39
The aforequoted characteristics of earnest money are apparent in the so-called option contract under review, even though it was
called "option money" by the parties. In addition, private respondents failed to show that the payment of the balance of the
purchase price was only a condition precedent to the acceptance of the offer or to the exercise of the right to buy. On the contrary,
it has been sufficiently established that such payment was but an element of the performance of petitioner's obligation under the
contract to sell. 40
II
1. This brings us to the second issue as to whether or not there was valid suspension of payment of the purchase price by
petitioner and the legal consequences thereof. To justify its failure to pay the purchase price within the agreed period, petitioner
invokes Article 1590 of the civil Code which provides:
Art. 1590. Should the vendee be disturbed in the possession or ownership of the thing acquired, or should he
have reasonable grounds to fear such disturbance, by a vindicatory action or a foreclosure of mortgage, he
may suspend the payment of the price until the vendor has caused the disturbance or danger to cease, unless
the latter gives security for the return of the price in a proper case, or it has been stipulated that,
notwithstanding any such contingency, the vendee shall be bound to make the payment. A mere act of trespass
shall not authorize the suspension of the payment of the price.
Respondent court refused to apply the aforequoted provision of law on the erroneous assumption that the true agreement
between the parties was a contract of option. As we have hereinbefore discussed, it was not an option contract but a perfected
contract to sell. Verily, therefore, Article 1590 would properly apply.
Both lower courts, however, are in accord that since Civil Case No. 89-5541 filed against the parties herein involved only the
eastern half of the land subject of the deed of sale between petitioner and the Jimenez brothers, it did not, therefore, have any
adverse effect on private respondents' title and ownership over the western half of the land which is covered by the contract
subject of the present case. We have gone over the complaint for recovery of ownership filed in said case 41 and we are not
persuaded by the factual findings made by said courts. At a glance, it is easily discernible that, although the complaint prayed for
the annulment only of the contract of sale executed between petitioner and the Jimenez brothers, the same likewise prayed for

the recovery of therein plaintiffs' share in that parcel of land specifically covered by TCT No. 309773. In other words, the plaintiffs
therein were claiming to be co-owners of the entire parcel of land described in TCT No. 309773, and not only of a portion thereof
nor, as incorrectly interpreted by the lower courts, did their claim pertain exclusively to the eastern half adjudicated to the Jimenez
brothers.
Such being the case, petitioner was justified in suspending payment of the balance of the purchase price by reason of the
aforesaid vindicatory action filed against it. The assurance made by private respondents that petitioner did not have to worry
about the case because it was pure and simple harassment 42 is not the kind of guaranty contemplated under the exceptive
clause in Article 1590 wherein the vendor is bound to make payment even with the existence of a vindicatory action if the vendee
should give a security for the return of the price.
2. Be that as it may, and the validity of the suspension of payment notwithstanding, we find and hold that private respondents may
no longer be compelled to sell and deliver the subject property to petitioner for two reasons, that is, petitioner's failure to duly
effect the consignation of the purchase price after the disturbance had ceased; and, secondarily, the fact that the contract to sell
had been validly rescinded by private respondents.
The records of this case reveal that as early as February 28, 1990 when petitioner caused its exclusive option to be annotated
anew on the certificate of title, it already knew of the dismissal of civil Case No. 89-5541. However, it was only on April 16, 1990
that petitioner, through its counsel, wrote private respondents expressing its willingness to pay the balance of the purchase price
upon the execution of the corresponding deed of absolute sale. At most, that was merely a notice to pay. There was no proper
tender of payment nor consignation in this case as required by law.
The mere sending of a letter by the vendee expressing the intention to
pay, without the accompanying payment, is not considered a valid tender of payment. 43 Besides, a mere tender of payment is not
sufficient to compel private respondents to deliver the property and execute the deed of absolute sale. It is consignation which is
essential in order to extinguish petitioner's obligation to pay the balance of the purchase price. 44 The rule is different in case of an
option contract 45 or in legal redemption or in a sale with right to repurchase, 46 wherein consignation is not necessary because
these cases involve an exercise of a right or privilege (to buy, redeem or repurchase) rather than the discharge of an obligation,
hence tender of payment would be sufficient to preserve the right or privilege. This is because the provisions on consignation are
not applicable when there is no obligation to pay. 47 A contract to sell, as in the case before us, involves the performance of an
obligation, not merely the exercise of a privilege of a right. consequently, performance or payment may be effected not by tender
of payment alone but by both tender and consignation.
Furthermore, petitioner no longer had the right to suspend payment after the disturbance ceased with the dismissal of the civil
case filed against it. Necessarily, therefore, its obligation to pay the balance again arose and resumed after it received notice of
such dismissal. Unfortunately, petitioner failed to seasonably make payment, as in fact it has deposit the money with the trial
court when this case was originally filed therein.
By reason of petitioner's failure to comply with its obligation, private respondents elected to resort to and did announce the
rescission of the contract through its letter to petitioner dated July 27, 1990. That written notice of rescission is deemed sufficient
under the circumstances. Article 1592 of the Civil Code which requires rescission either by judicial action or notarial act is not
applicable to a contract to sell. 48 Furthermore, judicial action for rescission of a contract is not necessary where the contract
provides for automatic rescission in case of breach, 49 as in the contract involved in the present controversy.
We are not unaware of the ruling in University of the Philippines vs. De los Angeles, etc. 50 that the right to rescind is not absolute,
being ever subject to scrutiny and review by the proper court. It is our considered view, however, that this rule applies to a
situation where the extrajudicial rescission is contested by the defaulting party. In other words, resolution of reciprocal contracts
may be made extrajudicially unless successfully impugned in court. If the debtor impugns the declaration, it shall be subject to
judicial determination 51 otherwise, if said party does not oppose it, the extrajudicial rescission shall have legal effect. 52
In the case at bar, it has been shown that although petitioner was duly furnished and did receive a written notice of rescission
which specified the grounds therefore, it failed to reply thereto or protest against it. Its silence thereon suggests an admission of
the veracity and validity of private respondents' claim. 53 Furthermore, the initiative of instituting suit was transferred from the
rescinder to the defaulter by virtue of the automatic rescission clause in the contract. 54 But then, the records bear out the fact that
aside from the lackadaisical manner with which petitioner treated private respondents' latter of cancellation, it utterly failed to
seriously seek redress from the court for the enforcement of its alleged rights under the contract. If private respondents had not
taken the initiative of filing Civil Case No. 7532, evidently petitioner had no intention to take any legal action to compel specific
performance from the former. By such cavalier disregard, it has been effectively estopped from seeking the affirmative relief it
now desires but which it had theretofore disdained.
WHEREFORE, on the foregoing modificatory premises, and considering that the same result has been reached by respondent
Court of Appeals with respect to the relief awarded to private respondents by the court a quo which we find to be correct, its
assailed judgment in CA-G.R. CV No. 34767 is hereby AFFIRMED.
SO ORDERED.
G.R. No. 97332 October 10, 1991
SPOUSES JULIO D. VILLAMOR AND MARINA VILLAMOR, petitioners,
vs.
THE HON. COURT OF APPEALS AND SPOUSES MACARIA LABINGISA REYES AND ROBERTO REYES,respondents.
Tranquilino F. Meris for petitioners.
Agripino G. Morga for private respondents.

MEDIALDEA, J.:p
This is a petition for review on certiorari of the decision of the Court of Appeals in CA-G.R. No. 24176 entitled, "Spouses Julio
Villamor and Marina Villamor, Plaintiffs-Appellees, versus Spouses Macaria Labing-isa Reyes and Roberto Reyes, DefendantsAppellants," which reversed the decision of the Regional Trial Court (Branch 121) at Caloocan City in Civil Case No. C-12942.
The facts of the case are as follows:
Macaria Labingisa Reyes was the owner of a 600-square meter lot located at Baesa, Caloocan City, as evidenced by Transfer
Certificate of Title No. (18431) 18938, of the Register of Deeds of Rizal.
In July 1971, Macaria sold a portion of 300 square meters of the lot to the Spouses Julio and Marina and Villamor for the total
amount of P21,000.00. Earlier, Macaria borrowed P2,000.00 from the spouses which amount was deducted from the total
purchase price of the 300 square meter lot sold. The portion sold to the Villamor spouses is now covered by TCT No. 39935 while
the remaining portion which is still in the name of Macaria Labing-isa is covered by TCT No. 39934 (pars. 5 and 7, Complaint). On
November 11, 1971, Macaria executed a "Deed of Option" in favor of Villamor in which the remaining 300 square meter portion
(TCT No. 39934) of the lot would be sold to Villamor under the conditions stated therein. The document reads:
DEED OF OPTION
This Deed of Option, entered into in the City of Manila, Philippines, this 11th day of November, 1971, by and
between Macaria Labing-isa, of age, married to Roberto Reyes, likewise of age, and both resideing on Reparo
St., Baesa, Caloocan City, on the one hand, and on the other hand the spouses Julio Villamor and Marina V.
Villamor, also of age and residing at No. 552 Reparo St., corner Baesa Road, Baesa, Caloocan City.
WITNESSETH
That, I Macaria Labingisa, am the owner in fee simple of a parcel of land with an area of 600 square meters,
more or less, more particularly described in TCT No. (18431) 18938 of the Office of the Register of Deeds for
the province of Rizal, issued in may name, I having inherited the same from my deceased parents, for which
reason it is my paraphernal property;
That I, with the conformity of my husband, Roberto Reyes, have sold one-half thereof to the aforesaid spouses
Julio Villamor and Marina V. Villamor at the price of P70.00 per sq. meter, which was greatly higher than the
actual reasonable prevailing value of lands in that place at the time, which portion, after segregation, is now
covered by TCT No. 39935 of the Register of Deeds for the City of Caloocan, issued on August 17, 1971 in the
name of the aforementioned spouses vendees;
That the only reason why the Spouses-vendees Julio Villamor and Marina V. Villamor, agreed to buy the said
one-half portion at the above-stated price of about P70.00 per square meter, is because I, and my husband
Roberto Reyes, have agreed to sell and convey to them the remaining one-half portion still owned by me and
now covered by TCT No. 39935 of the Register of Deeds for the City of Caloocan, whenever the need of such
sale arises, either on our part or on the part of the spouses (Julio) Villamor and Marina V. Villamor, at the same
price of P70.00 per square meter, excluding whatever improvement may be found the thereon;
That I am willing to have this contract to sell inscribed on my aforesaid title as an encumbrance upon the
property covered thereby, upon payment of the corresponding fees; and
That we, Julio Villamor and Marina V. Villamor, hereby agree to, and accept, the above provisions of this Deed
of Option.
IN WITNESS WHEREOF, this Deed of Option is signed in the City of Manila, Philippines, by all the persons
concerned, this 11th day of November, 1971.
JULIO VILLAMOR MACARIA LABINGISA
With My Conformity:
MARINA VILLAMOR ROBERTO REYES
Signed in the Presence Of:
MARIANO Z. SUNIGA
ROSALINDA S. EUGENIO
ACKNOWLEDGMENT
REPUBLIC OF THE PHILIPPINES)
CITY OF MANILA ) S.S.
At the City of Manila, on the 11th day of November, 1971, personally appeared before me Roberto Reyes,
Macaria Labingisa, Julio Villamor and Marina Ventura-Villamor, known to me as the same persons who
executed the foregoing Deed of Option, which consists of two (2) pages including the page whereon this
acknowledgement is written, and signed at the left margin of the first page and at the bottom of the instrument
by the parties and their witnesses, and sealed with my notarial seal, and said parties acknowledged to me that
the same is their free act and deed. The Residence Certificates of the parties were exhibited to me as follows:
Roberto Reyes, A-22494, issued at Manila on Jan. 27, 1971, and B-502025, issued at Makati, Rizal on Feb. 18,
1971; Macaria Labingisa, A-3339130 and B-1266104, both issued at Caloocan City on April 15, 1971, their joint
Tax Acct. Number being 3028-767-6; Julio Villamor, A-804, issued at Manila on Jan. 14, 1971, and B-138,
issued at Manila on March 1, 1971; and Marina Ventura-Villamor, A-803, issued at Manila on Jan. 14, 1971,
their joint Tax Acct. Number being 608-202-6.

ARTEMIO M.
MALUBAY
Notary Public
Until December 31,
1972
PTR No. 338203,
Manila
January 15, 1971
Doc. No. 1526;
Page No. 24;
Book No. 38;
Series of 1971. (pp. 25-29, Rollo)
According to Macaria, when her husband, Roberto Reyes, retired in 1984, they offered to repurchase the lot sold by them to the
Villamor spouses but Marina Villamor refused and reminded them instead that the Deed of Option in fact gave them the option to
purchase the remaining portion of the lot.
The Villamors, on the other hand, claimed that they had expressed their desire to purchase the remaining 300 square meter
portion of the lot but the Reyeses had been ignoring them. Thus, on July 13, 1987, after conciliation proceedings in the barangay
level failed, they filed a complaint for specific performance against the Reyeses.
On July 26, 1989, judgment was rendered by the trial court in favor of the Villamor spouses, the dispositive portion of which
states:
WHEREFORE, and (sic) in view of the foregoing, judgment is hereby rendered in favor of the plaintiffs and
against the defendants ordering the defendant MACARIA LABING-ISA REYES and ROBERTO REYES, to sell
unto the plaintiffs the land covered by T.C.T No. 39934 of the Register of Deeds of Caloocan City, to pay the
plaintiffs the sum of P3,000.00 as and for attorney's fees and to pay the cost of suit.
The counterclaim is hereby DISMISSED, for LACK OF MERIT.
SO ORDERED. (pp. 24-25, Rollo)
Not satisfied with the decision of the trial court, the Reyes spouses appealed to the Court of Appeals on the following assignment
of errors:
1. HOLDING THAT THE DEED OF OPTION EXECUTED ON NOVEMBER 11, 1971 BETWEEN THE
PLAINTIFF-APPELLEES AND DEFENDANT-APPELLANTS IS STILL VALID AND BINDING DESPITE THE
LAPSE OF MORE THAN THIRTEEN (13) YEARS FROM THE EXECUTION OF THE CONTRACT;
2. FAILING TO CONSIDER THAT THE DEED OF OPTION CONTAINS OBSCURE WORDS AND
STIPULATIONS WHICH SHOULD BE RESOLVED AGAINST THE PLAINTIFF-APPELLEES WHO
UNILATERALLY DRAFTED AND PREPARED THE SAME;
3. HOLDING THAT THE DEED OF OPTION EXPRESSED THE TRUE INTENTION AND PURPOSE OF THE
PARTIES DESPITE ADVERSE, CONTEMPORANEOUS AND SUBSEQUENT ACTS OF THE PLAINTIFFAPPELLEES;
4. FAILING TO PROTECT THE DEFENDANT-APPELLANTS ON ACCOUNT OF THEIR IGNORANCE
PLACING THEM AT A DISADVANTAGE IN THE DEED OF OPTION;
5. FAILING TO CONSIDER THAT EQUITABLE CONSIDERATION TILT IN FAVOR OF THE DEFENDANTAPPELLANTS; and
6. HOLDING DEFENDANT-APPELLANTS LIABLE TO PAY PLAINTIFF-APPELLEES THE AMOUNT OF
P3,000.00 FOR AND BY WAY OF ATTORNEY'S FEES. (pp. 31-32, Rollo)
On February 12, 1991, the Court of Appeals rendered a decision reversing the decision of the trial court and dismissing the
complaint. The reversal of the trial court's decision was premised on the finding of respondent court that the Deed of Option is
void for lack of consideration.
The Villamor spouses brought the instant petition for review on certiorari on the following grounds:
I. THE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT THE PHRASE WHENEVER THE NEED
FOR SUCH SALE ARISES ON OUR (PRIVATE RESPONDENT) PART OR ON THE PART OF THE SPOUSES
JULIO D. VILLAMOR AND MARINA V. VILLAMOR' CONTAINED IN THE DEED OF OPTION DENOTES A
SUSPENSIVE CONDITION;
II. ASSUMING FOR THE SAKE OF ARGUMENT THAT THE QUESTIONED PHRASE IS INDEED A
CONDITION, THE COURT OF APPEALS ERRED IN NOT FINDING, THAT THE SAID CONDITION HAD
ALREADY BEEN FULFILLED;
III. ASSUMING FOR THE SAKE OF ARGUMENT THAT THE QUESTIONED PHRASE IS INDEED A
CONDITION, THE COURT OF APPEALS ERRED IN HOLDING THAT THE IMPOSITION OF SAID
CONDITION PREVENTED THE PERFECTION OF THE CONTRACT OF SALE DESPITE THE EXPRESS
OFFER AND ACCEPTANCE CONTAINED IN THE DEED OF OPTION;
IV. THE COURT OF APPEALS ERRED IN FINDING THAT THE DEED OF OPTION IS VOID FOR LACK OF
CONSIDERATION;

V. THE COURT OF APPEALS ERRED IN HOLDING THAT A DISTINCT CONSIDERATION IS NECESSARY

TO SUPPORT THE DEED OF OPTION DESPITE THE EXPRESS OFFER AND ACCEPTANCE CONTAINED
THEREIN. (p. 12, Rollo)
The pivotal issue to be resolved in this case is the validity of the Deed of Option whereby the private respondents agreed to sell
their lot to petitioners "whenever the need of such sale arises, either on our part (private respondents) or on the part of Julio
Villamor and Marina Villamor (petitioners)." The court a quo, rule that the Deed of Option was a valid written agreement between
the parties and made the following conclusions:
xxx xxx xxx
It is interesting to state that the agreement between the parties are evidence by a writing, hence, the
controverting oral testimonies of the herein defendants cannot be any better than the documentary evidence,
which, in this case, is the Deed of Option (Exh. "A" and "A-a")
The law provides that when the terms of an agreement have been reduced to writing it is to be considered as
containing all such terms, and therefore, there can be, between the parties and their successors in interest no
evidence of their terms of the agreement, other than the contents of the writing. ... (Section 7 Rule 130 Revised
Rules of Court) Likewise, it is a general and most inflexible rule that wherever written instruments are appointed
either by the requirements of law, or by the contract of the parties, to be the repositories and memorials of truth,
any other evidence is excluded from being used, either as a substitute for such instruments, or to contradict or
alter them. This is a matter both of principle and of policy; of principle because such instruments are in their
nature and origin entitled to a much higher degree of credit than evidence of policy, because it would be
attended with great mischief if those instruments upon which man's rights depended were liable to be
impeached by loose collateral evidence. Where the terms of an agreement are reduced to writing, the
document itself, being constituted by the parties as the expositor of their intentions, it is the only instrument of
evidence in respect of that agreement which the law will recognize so long as it exists for the purpose of
evidence. (Starkie, EV, pp. 648, 655 cited in Kasheenath vs. Chundy, W.R. 68, cited in Francisco's Rules of
Court, Vol. VII Part I p. 153) (Emphasis supplied, pp. 126-127, Records).
The respondent appellate court, however, ruled that the said deed of option is void for lack of consideration. The appellate court
made the following disquisitions:
Plaintiff-appellees say they agreed to pay P70.00 per square meter for the portion purchased by them although
the prevailing price at that time was only P25.00 in consideration of the option to buy the remainder of the land.
This does not seem to be the case. In the first place, the deed of sale was never produced by them to prove
their claim. Defendant-appellants testified that no copy of the deed of sale had ever been given to them by the
plaintiff-appellees. In the second place, if this was really the condition of the prior sale, we see no reason why it
should be reiterated in the Deed of Option. On the contrary, the alleged overprice paid by the plaintiff-appellees
is given in the Deed as reason for the desire of the Villamors to acquire the land rather than as a consideration
for the option given to them, although one might wonder why they took nearly 13 years to invoke their right if
they really were in due need of the lot.
At all events, the consideration needed to support a unilateral promise to sell is a dinstinct one, not something
that is as uncertain as P70.00 per square meter which is allegedly 'greatly higher than the actual prevailing
value of lands.' A sale must be for a price certain (Art. 1458). For how much the portion conveyed to the
plaintiff-appellees was sold so that the balance could be considered the consideration for the promise to sell
has not been shown, beyond a mere allegation that it was very much below P70.00 per square meter.
The fact that plaintiff-appellees might have paid P18.00 per square meter for another land at the time of the
sale to them of a portion of defendant-appellant's lot does not necessarily prove that the prevailing market price
at the time of the sale was P18.00 per square meter. (In fact they claim it was P25.00). It is improbable that
plaintiff-appellees should pay P52.00 per square meter for the privilege of buying when the value of the land
itself was allegedly P18.00 per square meter. (pp. 34-35, Rollo)
As expressed in Gonzales v. Trinidad, 67 Phil. 682, consideration is "the why of the contracts, the essential reason which moves
the contracting parties to enter into the contract." The cause or the impelling reason on the part of private respondent executing
the deed of option as appearing in the deed itself is the petitioner's having agreed to buy the 300 square meter portion of private
respondents' land at P70.00 per square meter "which was greatly higher than the actual reasonable prevailing price." This cause
or consideration is clear from the deed which stated:
That the only reason why the spouses-vendees Julio Villamor and Marina V. Villamor agreed to buy the said
one-half portion at the above stated price of about P70.00 per square meter, is because I, and my husband
Roberto Reyes, have agreed to sell and convey to them the remaining one-half portion still owned by me ... (p.
26, Rollo)
The respondent appellate court failed to give due consideration to petitioners' evidence which shows that in 1969 the Villamor
spouses bough an adjacent lot from the brother of Macaria Labing-isa for only P18.00 per square meter which the private
respondents did not rebut. Thus, expressed in terms of money, the consideration for the deed of option is the difference between
the purchase price of the 300 square meter portion of the lot in 1971 (P70.00 per sq.m.) and the prevailing reasonable price of the
same lot in 1971. Whatever it is, (P25.00 or P18.00) though not specifically stated in the deed of option, was ascertainable.

Petitioner's allegedly paying P52.00 per square meter for the option may, as opined by the appellate court, be improbable but
improbabilities does not invalidate a contract freely entered into by the parties.
The "deed of option" entered into by the parties in this case had unique features. Ordinarily, an optional contract is a privilege
existing in one person, for which he had paid a consideration and which gives him the right to buy, for example, certain
merchandise or certain specified property, from another person, if he chooses, at any time within the agreed period at a fixed
price (Enriquez de la Cavada v. Diaz, 37 Phil. 982). If We look closely at the "deed of option" signed by the parties, We will notice
that the first part covered the statement on the sale of the 300 square meter portion of the lot to Spouses Villamor at the price of
P70.00 per square meter "which was higher than the actual reasonable prevailing value of the lands in that place at that time (of
sale)." The second part stated that the only reason why the Villamor spouses agreed to buy the said lot at a much higher price is
because the vendor (Reyeses) also agreed to sell to the Villamors the other half-portion of 300 square meters of the land. Had
the deed stopped there, there would be no dispute that the deed is really an ordinary deed of option granting the Villamors the
option to buy the remaining 300 square meter-half portion of the lot in consideration for their having agreed to buy the other half
of the land for a much higher price. But, the "deed of option" went on and stated that the sale of the other half would be made
"whenever the need of such sale arises, either on our (Reyeses) part or on the part of the Spouses Julio Villamor and Marina V.
Villamor. It appears that while the option to buy was granted to the Villamors, the Reyeses were likewise granted an option to sell.
In other words, it was not only the Villamors who were granted an option to buy for which they paid a consideration. The Reyeses
as well were granted an option to sell should the need for such sale on their part arise.
In the instant case, the option offered by private respondents had been accepted by the petitioner, the promise, in the same
document. The acceptance of an offer to sell for a price certain created a bilateral contract to sell and buy and upon acceptance,
the offer, ipso facto assumes obligations of a vendee (See Atkins, Kroll & Co. v. Cua Mian Tek, 102 Phil. 948). Demandabilitiy may
be exercised at any time after the execution of the deed. In Sanchez v. Rigos, No. L-25494, June 14, 1972, 45 SCRA 368, 376,
We held:
In other words, since there may be no valid contract without a cause of consideration, the promisory is not
bound by his promise and may, accordingly withdraw it. Pending notice of its withdrawal, his accepted promise
partakes, however, of the nature of an offer to sell which, if accepted, results in a perfected contract of sale.
A contract of sale is, under Article 1475 of the Civil Code, "perfected at the moment there is a meeting of minds upon the thing
which is the object of the contract and upon the price. From that moment, the parties may reciprocally demand perform of
contracts." Since there was, between the parties, a meeting of minds upon the object and the price, there was already a perfected
contract of sale. What was, however, left to be done was for either party to demand from the other their respective undertakings
under the contract. It may be demanded at any time either by the private respondents, who may compel the petitioners to pay for
the property or the petitioners, who may compel the private respondents to deliver the property.
However, the Deed of Option did not provide for the period within which the parties may demand the performance of their
respective undertakings in the instrument. The parties could not have contemplated that the delivery of the property and the
payment thereof could be made indefinitely and render uncertain the status of the land. The failure of either parties to demand
performance of the obligation of the other for an unreasonable length of time renders the contract ineffective.
Under Article 1144 (1) of the Civil Code, actions upon written contract must be brought within ten (10) years. The Deed of Option
was executed on November 11, 1971. The acceptance, as already mentioned, was also accepted in the same instrument. The
complaint in this case was filed by the petitioners on July 13, 1987, seventeen (17) years from the time of the execution of the
contract. Hence, the right of action had prescribed. There were allegations by the petitioners that they demanded from the private
respondents as early as 1984 the enforcement of their rights under the contract. Still, it was beyond the ten (10) years period
prescribed by the Civil Code. In the case of Santos v. Ganayo,
L-31854, September 9, 1982, 116 SCRA 431, this Court affirming and subscribing to the observations of the court a quo held,
thus:
... Assuming that Rosa Ganayo, the oppositor herein, had the right based on the Agreement to Convey and
Transfer as contained in Exhibits '1' and '1-A', her failure or the abandonment of her right to file an action
against Pulmano Molintas when he was still a co-owner of the on-half (1/2) portion of the 10,000 square meters
is now barred by laches and/or prescribed by law because she failed to bring such action within ten (10) years
from the date of the written agreement in 1941, pursuant to Art. 1144 of the New Civil Code, so that when she
filed the adverse claim through her counsel in 1959 she had absolutely no more right whatsoever on the same,
having been barred by laches.
It is of judicial notice that the price of real estate in Metro Manila is continuously on the rise. To allow the petitioner to demand the
delivery of the property subject of this case thirteen (13) years or seventeen (17) years after the execution of the deed at the price
of only P70.00 per square meter is inequitous. For reasons also of equity and in consideration of the fact that the private
respondents have no other decent place to live, this Court, in the exercise of its equity jurisdiction is not inclined to grant
petitioners' prayer.
ACCORDINGLY, the petition is DENIED. The decision of respondent appellate court is AFFIRMED for reasons cited in this
decision. Judgement is rendered dismissing the complaint in Civil Case No. C-12942 on the ground of prescription and laches.
SO ORDERED.
G.R. No. L-15752

December 29, 1962

RUPERTO SORIANO, ET AL., plaintiffs-appellees,

vs.
BASILIO BAUTISTA, ET AL., defendants.
BASILIO BAUTISTA and SOFIA DE ROSAS, defendants-appellants.
--------------------------------G.R. No. L-17457
December 29, 1962
BASILIO BAUTISTA, ET AL., plaintiffs,
BASILIO BAUTISTA and SOFIA DE ROSAS, plaintiffs-appellants,
vs.
RUPERTO SORIANO, ET AL., defendants appellees.
Amado T. Garrovillas, Ananias C. Ona, Norberto A. Ferrera and Pedro N. Belmi for appellants Basilio Bautista and Sofia de
Rosas.
Javier and Javier for appellees Ruperto Soriano, et al.
MAKALINTAL, J.:
The judgment appealed from, rendered on March 10, 1959 by the Court of First Instance of Rizal, after a joint trial of both cases
mentioned in the caption, orders "the spouses Basilio Bautista and Sofia de Rosas to execute a deed of sale covering the
property in question in favor of Ruperto Soriano and Olimpia de Jesus upon payment by the latter of P1,650.00 which is the
balance of the price agreed upon, that is P3,900.00, and the amount previously received by way of loan by the said spouses from
the said Ruperto Soriano and Olimpia de Jesus, to pay the sum of P500.00 by way of attorney's fees, and to pay the costs.
Appellants Basilio Bautista and Sofia de Rosas have adopted in their appeal brief the following factual findings of the trial court:
Spouses Basilio Bautista and Sofia de Rosas are the absolute and registered owners of a parcel of land, situated in the
municipality of Teresa, province of Rizal, covered by Original Certificate of Title No. 3905, of the Register of Deeds of
Rizal and particularly described as follow:
A parcel of land (lot No. 4980) of the Cadastral Survey of Teresa; situated in the municipality of Teresa;
bounded on the NE. by Lot No. 5004; on the SE. by Lots Nos. 5003 and 4958; on the SW. by Lot 4949; and the
W. and NW by a creek .... Containing the area of THIRTY THOUSAND TWO HUNDRED TWENTY TWO
(30,222) square meters, more or less. Date of Survey, December 1913-June, 1914. (Full technical description
appears on Original Certificate of Title No. 3905.)lawphil.net
That, on May 30, 1956, the said spouses for and in consideration of the sum of P1,800, signed a document entitled
"Kasulatan Ng Sanglaan" in favor of Ruperto Soriano and Olimpia de Jesus, under the following terms and conditions:
1. Na ang sanglaang ito ay magpapatuloy lamang hanggang dalawang (2) taon pasimula sa araw na lagdaan
ang kasunduang ito, at magpapalampas ng dalawang panahong ani o ani agricola.
2. Na ang aanihin ng bukid na isinangla ay mapupunta sa pinagsanglaan bilang pakinabang ng nabanggit na
halagang inutang.
3. Na ang buwis sa pamahalaan ng lupang ito ay ang magbabayad ay ang Nagsangla o mayari.
4. Na ang lupang nasanglang ito ay hindi na maaaring isangla pang muli sa ibang tao ng walang pahintulot ang
Unang Pinagsanglaan.
5. Na pinagkasunduan din dinatnan na sakaling magkaroon ng kakayahan ang Pinagsanglaan ay maaaring
bilhin ng patuluyan ng lupang nasanglang ito kahit anong araw sa loob ng taning na dalawang taon ng
sanglaan sa halagang Tatlong Libo at Siam na Raan Piso (P3,900.00), salaping Pilipino na pinagkaisahan.
6. Na sakaling ang pagkakataon na ipinagkaloob ng Nagsangla sa sinundang talata ay hindi maisagawa ng
Pinagsanglaan sa Kawalan ng maibayad at gayon din naman ang Nagsangla na hindi magbalik ang halagang
inutang sa taning na panahon, ang sanglaan ito ay lulutasin alinsunod sa itinatagubilin ng batas sa bagaybagay ng sanglaan, na ito ay ang tinatawag na (FORECLOSURE OF MORTGAGES, JUDICIAL OR EXTRA
JUDICIAL). Maaring makapili ng hakbang ang Pinagsanglaan, alinsunod sa batas o kaya naman ay pagusapan
ng dalawang parte ang mabuting paraan ng paglutas ng bagay na ito.
That simultaneously with the signing of the aforementioned deed, the spouses Basilio Bautista and Sofia de Rosas
transferred the possession of the said land to Ruperto Soriano and Olimpia de Jesus who have been and are still in
possess of the said property and have since that date been and cultivating the said land and have enjoyed and are still
enjoying the produce thereof to the exclusion of all other persons. Sometimes after May 30, 1956, the spouses Basilio
Bautista and Sofia de Rosas received from Ruperto Soriano and Olimpia de Jesus, the sum of P450.00 pursuant to the
condition agreed upon in the aforementioned document for which no receipt issued and which was returned by the
spouses sometime on May 31, 1958. On May 13, 1958, a certain Atty. Angel O. Ver wrote a letter to the spouses
Bautista whose letter has been marked Annex 'B' of the stipulation of facts informing the said spouses that his clients
Ruperto Soriano and Olimpia de Jesus have decided to buy the parcel of land in question pursuant to paragraph 5 of the
document in question, Annex "A".
The spouses inspite of the receipt of the letter refused comply with the demand contained therein. On May 31, 1958,
Ruperto Soriano and Olimpia de Jesus filed before this Court Civil Case No. 5023, praying that plaintiffs be allowed to
consign or deposit with the Clerk of Court the sum of P1,650 as the balance of the purchase price of the parcel of land
question and that after due hearing, judgment be rendered considering the defendants to execute an absolute deed of
sale of said property in their favor, plus damages.

On June 9, 1958, spouses Basilio Bautista and Sofia Rosas filed a complaint against Ruperto Soriano and Olimpia de
Jesus marked as Annexed 'B' of the Stipulation of Facys, which case after hearing was dismissed for lack of jurisdiction
On August 5, 1959, the spouses Bautista and De Rosas again filed a case in the Court of First Instance against Soriano
and De Jesus asking this Court to order the defendants to accept the payment of the principal obligation and release the
mortgage and to make an accounting of the harvest for the harvest seasons (1956-1957). The two cases, were by
agreement of the parties assigned to one branch so that they can be tried jointly.
The principal issue in this case is whether, having seasonably advised appellants that they had decided to be the land in question
pursuant to paragraph 5 of the instrument of mortgage, appellees are entitled to special performance consisting of the execution
by appellants the corresponding deed of sale. As translated, paragraph 5 states: "That it has likewise been agreed that if the
financial condition of the mortgagees will permit, they may purchase said land absolutely on any date within the two-year term of
this mortgage at the agreed price of P3,900.00."
Appellants contend that, being mortgagors, they can not be deprived of the right to redeem the mortgaged property, because
such right is inherent in and inseparable from this kind of contract. The premise of the contention is not entirely accurate. While
the transaction is undoubtedly a mortgage and contains the customary stipulation concerning redemption, it carries the added
special provision aforequoted, which renders the mortgagors' right to redeem defeasible at the election of the mortgagees. There
is nothing illegal or immoral in this. It is simply an option to buy, sanctioned by Article 1479 of the Civil Code, which states: "A
promise to buy and sell a determinate thing for a price certain is reciprocally demandable. An accepted unilateral promise to buy
or to sell a determinate thing for a price certain is binding upon the promissor if the promise is supported by a consideration
distinct from the price."
In this case the mortgagor's promise to sell is supported by the same consideration as that of the mortgage itself, which is distinct
from that which would support the sale, an additional amount having been agreed upon to make up the entire price of P3,900.00,
should the option be exercised. The mortgagors' promise was in the nature of a continuing offer, non-withdrawable during a
period of two years, which upon acceptance by the mortgagees gave rise to a perfected contract of purchase and sale. Appellants
cite the case of Iigo vs. Court of Appeals, L-5572, O.G. No. 11, 5281, where we held that a stipulation in a contract of mortgage
to sell the property to the mortgagee does not bind the same but creates only a personal obligation on the part of the mortgagor.
The citation instead of sustaining appellant's position, confirms that of appellees, who are not here enforcing any real right to the
disputed land but are rather seeking to obtain specific performance of a personal obligation, namely, the execution of a deed of
sale for the price agreed upon, the corresponding amount to cover which was duly deposited in court upon the filing of the
complaint.
Reference is made in appellants' brief to the fact that they tendered the sum of P1,800.00 to redeem mortgage before they filed
their complaint in civil case No. 99 in the Justice of the Peace Court of Morong, Rizal. That tender was ineffective for the purpose
intended. In the first place it must have been made after the option to purchase had been exercised by appellees (Civil Case No.
99 was filed on June 9, 1958, only to be dismissed for lack of jurisdiction); and secondly, appellants' to redeem could be defeated
by appellees' preemptive right to purchase within the period of two years from May 30, 1956. As already noted, such right was
availed of appellants were accordingly notified by letter dated May 13, 1958, which was received by them on the following May
22. Offer and acceptance converged and gave to a perfected and binding contract of purchase and sale.
The judgment appealed from is affirmed, with costs.
G.R. No. 122544 January 28, 1999
REGINA P. DIZON, AMPARO D. BARTOLOME, FIDELINA D. BLAZA, ESTER ABAD DIZON and JOSEPH ANTHONY DIZON,
RAYMUND A. DIZON, GERARD A. DIZON, and JOSE A. DIZON, JR., petitioners,
vs.
COURT OF APPEALS and OVERLAND EXPRESS LINES, INC., respondents.
G.R. No. 124741 January 28, 1999
REGINA P. DIZON, AMPARO D. BARTOLOME, FIDELINA D. BALZA, ESTER ABAD DIZON and JOSEPH ANTHONY DIZON,
RAYMUND A. DIZON, GERARD A. DIZON, and Jose A. DIZON, JR., petitioners,
vs.
COURT OF APPEALS, HON. MAXIMIANO C. ASUNCION, and OVERLAND EXPRESS LINES, INC.,respondents.
MARTINEZ, J.:
Two consolidated petitions were filed before us seeking to set aside and annul the decisions and resolutions of respondent Court
of Appeals. What seemed to be a simple ejectment suit was juxtaposed with procedural intricacies which finally found its way to
this Court.
G.R. No. 122544:
On May 23, 1974, private respondent Overland Express Lines, Inc. (lessee) entered into a Contract of Lease with Option to Buy
with petitioners 1 (lessors) involving a 1,755.80 square meter parcel of land situated at corner MacArthur Highway and South "H"
Street, Diliman, Quezon City. The term of the lease was for one (1) year commencing from May 16, 1974 up to May 15, 1975.
During this period, private respondent was granted an option to purchase for the amount of P3,000.00 per square meter.
Thereafter, the lease shall be on a per month basis with a monthly rental of P3,000.00.
For failure of private respondent to pay the increased rental of P8,000.00 per month effective June 1976, petitioners filed an
action for ejectment (Civil Case No. VIII-29155) on November 10, 1976 before the then City Court (now Metropolitan Trial Court)
of Quezon City, Branch VIII. On November 22, 1982, the City Court rendered judgment 2ordering private respondent to vacate the

leased premises and to pay the sum of P624,000.00 representing rentals in arrears and/or as damages in the form of reasonable
compensation for the use and occupation of the premises during the period of illegal detainer from June 1976 to November 1982
at the monthly rental of P8,000.00, less payments made, plus 12% interest per annum from November 18, 1976, the date of filing
of the complaint, until fully paid, the sum of P8,000.00 a month starting December 1982, until private respondent fully vacates the
premises, and to pay P20,000.00 as and by way of attorney's fees.
Private respondent filed a certiorari petition praying for the issuance of a restraining order enjoining the enforcement of said
judgment and dismissal of the case for lack of jurisdiction of the City Court.
On September 26, 1984, the then Intermidiate Appellate Court 3 (now Court of Appeals) rendered a decision 4 stating that:
. . ., the alleged question of whether petitioner was granted an extension of the option to buy the property;
whether such option, if any, extended the lease or whether petitioner actually paid the alleged P300,000.00 to
Fidela Dizon, as representative of private respondents in consideration of the option and, whether petitioner
thereafter offered to pay the balance of the supposed purchase price, are all merely incidental and do not
remove the unlawful detainer case from the jurisdiction or respondent court. In consonance with the ruling in
the case of Teodoro, Jr. vs. Mirasol (supra), the above matters may be raised and decided in the unlawful
detainer suit as, to rule otherwise, would be a violation of the principle prohibiting multiplicity of suits. (Original
Records, pp. 38-39).
The motion for reconsideration was denied. On review, this Court dismissed the petition in a resolution dated June 19, 1985 and
likewise denied private respondent's subsequent motion for reconsideration in a resolution dated September 9, 1985. 5
On October 7, 1985, private respondent filed before the Regional Trial Court (RTC) of Quezon City (Civil Case No. Q-45541) an
action for Specific Performance and Fixing of Period for Obligation with prayer for the issuance of a restraining order pending
hearing on the prayer for a writ of preliminary injunction. It sought to compel the execution of a deed of sale pursuant to the option
to purchase and the receipt of the partial payment, and to fix the period to pay the balance. In an Order dated October 25, 1985,
the trial court denied the issuance of a writ of preliminary injunction on the ground that the decision of the then City Court for the
ejectment of the private respondent, having been affirmed by the then Intermediate Appellate Court and the Supreme Court, has
become final and executory.
Unable to secure an injunction, private respondent also filed before the RTC of Quezon City, Branch 102 (Civil Case No. Q46487) on November 15, 1985 a complaint for Annulment of and Relief from Judgment with injunction and damages. In its
decision 6 dated May 12, 1986, the trial court dismissed the complaint for annulment on the ground of res judicata, and the writ of
preliminary injunction previously issued was dissolved. It also ordered private respondent to pay P3,000.00 as attorney's fees. As
a consequence of private respondent's motion for reconsideration, the preliminary injunction was reinstated, thereby restraining
the execution of the City Court's judgment on the ejectment case.
The two cases were the after consolidated before the RTC of Quezon City, Branch 77. On April 28, 1989, a decision 7 was
rendered dismissing private respondent's complaint in Civil Case No. Q-45541 (specific performance case) and denying its
motion for reconsideration in Civil Case No. 46487 (annulment of the ejectment case). The motion for reconsideration of said
decision was likewise denied.
On appeal, 8 respondent Court of Appeals rendered a decision 9 upholding the jurisdiction of the City Court of Quezon City in the
ejectment case. It also concluded that there was a perfected contract of sale between the parties on the leased premises and that
pursuant to the option to buy agreement, private respondent had acquired the rights of a vendee in a contract of sale. It opined
that the payment by private respondent of P300,000.00 on June 20, 1975 as partial payment for the leased property, which
petitioners accepted (through Alice A. Dizon) and for which an official receipt was issued, was the operative act that gave rise to a
perfected contract of sale, and that for failure of petitioners to deny receipt thereof, private respondent can therefore assume that
Alice A. Dizon, acting as agent of petitioners, was authorized by them to receive the money in their behalf. The Court of Appeals
went further by stating that in fact, what was entered into was a "conditional contract of sale" wherein ownership over the leased
property shall not pass to the private respondent until it has fully paid the purchase price. Since private respondent did not
consign to the court the balance of the purchase price and continued to occupy the subject premises, it had the obligation to pay
the amount of P1,700.00 in monthly rentals until full payment of the purchase price. The dispositive portion of said decision reads:
WHEREFORE, the appealed decision in Case No. 46387 is AFFIRMED. The appealed decision in Case No.
45541 is, on the other hand, ANNULLED and SET ASIDE. The defendants-appellees are ordered to execute
the deed of absolute sale of the property in question, free from any lien or encumbrance whatsoever, in favor of
the plaintiff-appellant, and to deliver to the latter the said deed of sale, as well as the owner's duplicate of the
certificate of title to said property upon payment of the balance of the purchase price by the plaintiff-appellant.
The plaintiff-appellant is ordered to pay P1,700.00 per month from June 1976, plus 6% interest per annum, until
payment of the balance of the purchase price, as previously agreed upon by the parties.
SO ORDERED.
Upon denial of the motion for partil reconsideration (Civil Case No. Q-45541) by respondent Court of Appeals, 10petitioners
elevated the case via petition for certiorari questioning the authority of Alice A. Dizon as agent of petitioners in receiving private
respondent's partial payment amounting to P300,000.00 pursuant to the Contract of Lease with Option to Buy. Petitioner also
assail the propriety of private respondent's exercise of the option when it tendered the said amount on June 20, 1975 which
purportedly resulted in a perfected contract of sale.
G.R. No. 124741:

Petitioners filed with respondent Court of Appeals a motion to remand the records of Civil Case No. 38-29155 (ejectment case) to
the Metropolitan Trial Court (MTC), then City Court of Quezon City, Branch 38, for execution of the judgment 11 dated November
22, 1982 which was granted in a resolution dated June 29, 1992. Private respondent filed a motion to reconsider said resolution
which was denied.
Aggrieved, private respondent filed a petition for certiorari, prohibition with preliminary injunction and/or restraining order with this
Court (G.R. Nos. 106750-51) which was dismissed in a resolution dated September 16, 1992 on the ground that the same was a
refiled case previously dismissed for lack of merit. On November 26, 1992, entry of judgment was issued by this Court.
On July 14, 1993, petitioners filed an urgent ex-parte motion for execution of the decision in Civil Case No. 38-29155 with the
MTC of Quezon City, Branch 38. On September 13, 1993, the trial court ordered the issuance of a third alias writ of execution. In
denying private respondent's motion for reconsideration, it ordered the immediate implementation of the third writ of execution
without delay.
On December 22, 1993, private respondent filed with the Regional Trial Court (RTC) of Quezon City, Branch 104 a petition
for certiorari and prohibition with preliminary injunction/restraining order (SP. PROC. No. 93-18722) challenging the enforceability
and validity of the MTC judgment as well as the order for its execution.
On January 11, 1994, RTC of Quezon City, Branch 104 issued an
order 12 granting the issuance of a writ of preliminary injunction upon private respondent's' posting of an injunction bond of
P50,000.00.
Assailing the aforequoted order after denial of their motion for partial reconsideration, petitioners filed a petition 13for certiorari and
prohibition with a prayer for a temporary restraining order and/or preliminary injunction with the Court of Appeals. In its
decision, 14 the Court of Appeals dismissed the petition and ruled that:
The avowed purpose of this petition is to enjoin the public respondent from restraining the ejectment of the
private respondent. To grant the petition would be to allow the ejectment of the private respondent. We cannot
do that now in view of the decision of this Court in CA-G.R. CV Nos. 25153-54. Petitioners' alleged right to eject
private respondent has been demonstrated to be without basis in the said civil case. The petitioners have been
shown, after all, to have no right to eject private respondents.
WHEREFORE, the petition is DENIED due course and is accordingly DISMISSED.
SO ORDERED. 15
Petitioners' motion for reconsideration was denied in a resolution 16 by the Court of Appeals stating that:
This court in its decision in CA-G.R. CV Nos. 25153-54 declared that the plaintiff-appellant (private respondent
herein) acquired the rights of a vendee in a contract of sale, in effect, recognizing the right of the private
respondent to possess the subject premises. Considering said decision, we should not allow ejectment; to do
so would disturb the status quo of the parties since the petitioners are not in possession of the subject property.
It would be unfair and unjust to deprive the private respondent of its possession of the subject property after its
rights have been established in a subsequent ruling.
WHEREFORE, the motion for reconsideration is DENIED for lack of merit.
SO ORDERED. 17
Hence, this instant petition.
We find both petitions impressed with merit.
First. Petitioners have established a right to evict private respondent from the subject premises for non-payment of rentals. The
term of the Contract of Lease with Option to Buy was for a period of one (1) year (May 16, 1974 to May 15, 1975) during which
the private respondent was given an option to purchase said property at P3,000.00 square meter. After the expiration thereof, the
lease was for P3,000.00 per month.
Admittedly, no definite period beyond the one-year term of lease was agreed upon by petitioners and private respondent.
However, since the rent was paid on a monthly basis, the period of lease is considered to be from month to month in accordance
with Article 1687 of the New Civil Code. 18 Where the rentals are paid monthly, the lease, even if verbal may be deemed to be on a
monthly basis, expiring at the end of every month pursuant to Article 1687, in relation to Article 1673 of the Civil Code. 19In such
case, a demand to vacate is not even necessary for judicial action after the expiration of every month. 20
When private respondent failed to pay the increased rental of P8,000.00 per month in June 1976, the petitioners had a cause of
action to institute an ejectment suit against the former with the then City Court. In this regard, the City Court (now MTC) had
exclusive jurisdiction over the ejectment suit. The filing by private respondent of a suit with the Regional Trial Court for specific
performance to enforce the option to purchase did not divest the then City Court of its jurisdiction to take cognizance over the
ejectment case. Of note is the fact that the decision of the City Court was affirmed by both the Intermediate Appellate Court and
this Court.
Second. Having failed to exercise the option within the stipulated one-year period, private respondent cannot enforce its option to
purchase anymore. Moreover, even assuming arguendo that the right to exercise the option still subsists at the time private
respondent tendered the amount on June 20, 1975, the suit for specific performance to enforce the option to purchase was filed
only on October 7, 1985 or more than ten (10) years after accrual of the cause of action as provided under Article 1144 of the
New Civil Code. 21
In this case, there was a contract of lease for one (1) year with option to purchase. The contract of lease expired without the
private respondent, as lessee, purchasing the property but remained in possession thereof. Hence, there was an implicit renewal
of the contract of lease on a monthly basis. The other terms of the original contract of lease which are revived in the implied new

lease under Article 1670 of the New Civil Code 22 are only those terms which are germane to the lessee's right of continued
enjoyment of the property leased. 23Therefore, an implied new lease does not ipso facto carry with it any implied revival of private
respondent's option to purchase (as lessee thereof) the leased premises. The provision entitling the lessee the option to purchase
the leased premises is not deemed incorporated in the impliedly renewed contract because it is alien to the possession of the
lessee. Private respondent's right to exercise the option to purchase expired with the termination of the original contract of lease
for one year. The rationale of this Court is that:
This is a reasonable construction of the provision, which is based on the presumption that when the lessor
allows the lessee to continue enjoying possession of the property for fifteen days after the expiration of the
contract he is willing that such enjoyment shall be for the entire period corresponding to the rent which is
customarily paid in this case up to the end of the month because the rent was paid monthly. Necessarily, if
the presumed will of the parties refers to the enjoyment of possession the presumption covers the other terms
of the contract related to such possession, such as the amount of rental, the date when it must be paid, the
care of the property, the responsibility for repairs, etc. But no such presumption may be indulged in with respect
to special agreements which by nature are foreign to the right of occupancy or enjoyment inherent in a contract
of lease. 24
Third. There was no perfected contract of sale between petitioners and private respondent. Private respondent argued that it
delivered the check of P300,000.00 to Alice A. Dizon who acted as agent of petitioners pursuant to the supposed authority given
by petitioner Fidela Dizon, the payee thereof. Private respondent further contended that petitioners' filing of the ejectment case
against it based on the contract of lease with option to buy holds petitioners in estoppel to question the authority of petitioner
Fidela Dizon. It insisted that the payment of P300,000.00 as partial payment of the purchase price constituted a valid exercise of
the option to buy.
Under Article 1475 of the New Civil Code, "the contract of sale is perfected at the moment there is a meeting of minds upon the
thing which is the object of the contract and upon the price. From that moment, the parties may reciprocally demand performance,
subject to the provisions of the law governing the form of contracts." Thus, the elements of a contract of sale are consent, object,
and price in money or its equivalent. It bears stressing that the absence of any of these essential elements negates the existence
of a perfected contract of sale. Sale is a consensual contract and he who alleges it must show its existence by competent proof. 25
In an attempt to resurrect the lapsed option, private respondent gave P300,000.00 to petitioners (thru Alice A. Dizon) on the
erroneous presumption that the said amount tendered would constitute a perfected contract of sale pursuant to the contract of
lease with option to buy. There was no valid consent by the petitioners (as co-owners of the leased premises) on the supposed
sale entered into by Alice A. Dizon, as petitioners' alleged agent, and private respondent. The basis for agency is representation
and a person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the agent. 26 As provided
in Article 1868 of the New Civil Code,27 there was no showing that petitioners consented to the act of Alice A. Dizon nor
authorized her to act on their behalf with regard to her transaction with private respondent. The most prudent thing private
respondent should have done was to ascertain the extent of the authority of Alice A. Dizon. Being negligent in this regard, private
respondent cannot seek relief on the basis of a supposed agency.
In Bacaltos Coal Mines vs. Court of Appeals, 28 we explained the rule in dealing with an agent:
Every person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the
agent. If he does not make such inquiry, he is chargeable with knowledge of the agent's authority, and his
ignorance of that authority will not be any excuse. Persons dealing with an assumed agency, whether the
assumed agency be a general or special one, are bound at their peril, if they would hold the principal, to
ascertain not only the fact of the agency but also the nature and extent of the authority, and in case either is
controverted, the burden of proof is upon them to establish it.
For the long years that private respondent was able to thwart the execution of the ejectment suit rendered in favor of petitioners,
we now write finis to this controversy and shun further delay so as to ensure that this case would really attain finality.
WHEREFORE, in view of the foregoing, both petitions are GRANTED. The decision dated March 29, 1994 and the resolution
dated October 19, 1995 in CA-G.R. CV No. 25153-54, as well as the decision dated December 11, 1995 and the resolution dated
April 23, 1997 in CA-G.R. SP No. 33113 of the Court of Appeals are hereby REVERSED and SET ASIDE.
Let the records of this case be remanded to the trial court for immediate execution of the judgment dated November 22, 1982 in
Civil Case No. VIII-29155 of the then City Court (now Metropolitan Trial Court) of Quezon City, Branch VIII as affirmed in the
decision dated September 26, 1984 of the then Intermediate Appellate Court (now Court of Appeals) and in the resolution dated
June 19, 1985 of this Court.
However, petitioners are ordered to REFUND to private respondent the amount of P300,000.00 which they received through Alice
A. Dizon on June 20, 1975.1wphi1.nt
SO ORDERED.
G.R. No. L-25494 June 14, 1972
NICOLAS SANCHEZ, plaintiff-appellee,
vs.
SEVERINA RIGOS, defendant-appellant.
Santiago F. Bautista for plaintiff-appellee.
Jesus G. Villamar for defendant-appellant.

CONCEPCION, C.J.:p
Appeal from a decision of the Court of First Instance of Nueva Ecija to the Court of Appeals, which certified the case to Us, upon
the ground that it involves a question purely of law.
The record shows that, on April 3, 1961, plaintiff Nicolas Sanchez and defendant Severina Rigos executed an instrument entitled
"Option to Purchase," whereby Mrs. Rigos "agreed, promised and committed ... to sell" to Sanchez the sum of P1,510.00, a
parcel of land situated in the barrios of Abar and Sibot, municipality of San Jose, province of Nueva Ecija, and more particularly
described in Transfer Certificate of Title No. NT-12528 of said province, within two (2) years from said date with the understanding
that said option shall be deemed "terminated and elapsed," if "Sanchez shall fail to exercise his right to buy the property" within
the stipulated period. Inasmuch as several tenders of payment of the sum of Pl,510.00, made by Sanchez within said period,
were rejected by Mrs. Rigos, on March 12, 1963, the former deposited said amount with the Court of First Instance of Nueva Ecija
and commenced against the latter the present action, for specific performance and damages.
After the filing of defendant's answer admitting some allegations of the complaint, denying other allegations thereof, and
alleging, as special defense, that the contract between the parties "is a unilateral promise to sell, and the same being
unsupported by any valuable consideration, by force of the New Civil Code, is null and void" on February 11, 1964, both
parties, assisted by their respective counsel, jointly moved for a judgment on the pleadings. Accordingly, on February 28, 1964,
the lower court rendered judgment for Sanchez, ordering Mrs. Rigos to accept the sum judicially consigned by him and to
execute, in his favor, the requisite deed of conveyance. Mrs. Rigos was, likewise, sentenced to pay P200.00, as attorney's fees,
and other costs. Hence, this appeal by Mrs. Rigos.
This case admittedly hinges on the proper application of Article 1479 of our Civil Code, which provides:
ART. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the
promissor if the promise is supported by a consideration distinct from the price.
In his complaint, plaintiff alleges that, by virtue of the option under consideration, "defendant agreed and committed to sell" and
"the plaintiff agreed and committed to buy" the land described in the option, copy of which was annexed to said pleading as
Annex A thereof and is quoted on the margin. 1 Hence, plaintiff maintains that the promise contained in the contract is "reciprocally
demandable," pursuant to the first paragraph of said Article 1479. Although defendant had really "agreed, promised and
committed" herself to sell the land to the plaintiff, it is not true that the latter had, in turn, "agreed and committed himself " to buy
said property. Said Annex A does not bear out plaintiff's allegation to this effect. What is more, since Annex A has been made "an
integral part" of his complaint, the provisions of said instrument form part "and parcel" 2 of said pleading.
The option did not impose upon plaintiff the obligation to purchase defendant's property. Annex A is not a "contract to buy and
sell." It merely granted plaintiff an "option" to buy. And both parties so understood it, as indicated by the caption, "Option to
Purchase," given by them to said instrument. Under the provisions thereof, the defendant "agreed, promised and committed"
herself to sell the land therein described to the plaintiff for P1,510.00, but there is nothing in the contract to indicate that her
aforementioned agreement, promise and undertaking is supported by a consideration "distinct from the price" stipulated for
the sale of the land.
Relying upon Article 1354 of our Civil Code, the lower court presumed the existence of said consideration, and this would seem to
be the main factor that influenced its decision in plaintiff's favor. It should be noted, however, that:
(1) Article 1354 applies to contracts in general, whereas the second paragraph of Article 1479 refers to "sales" in particular, and,
more specifically, to "an accepted unilateral promise to buy or to sell." In other words, Article 1479 is controlling in the case at bar.
(2) In order that said unilateral promise may be "binding upon the promisor, Article 1479 requires the concurrence of a condition,
namely, that the promise be "supported by a consideration distinct from the price." Accordingly, the promisee can not compel the
promisor to comply with the promise, unless the former establishes the existence of said distinct consideration. In other words,
the promisee has the burden of proving such consideration. Plaintiff herein has not even alleged the existence thereof in his
complaint.
(3) Upon the other hand, defendant explicitly averred in her answer, and pleaded as a special defense, the absence of said
consideration for her promise to sell and, by joining in the petition for a judgment on the pleadings, plaintiff has impliedly admitted
the truth of said averment in defendant's answer. Indeed as early as March 14, 1908, it had been held, in Bauermann v.
Casas, 3 that:
One who prays for judgment on the pleadings without offering proof as to the truth of his own allegations, and
without giving the opposing party an opportunity to introduce evidence, must be understood to admit the truth
of all the material and relevant allegations of the opposing party, and to rest his motion for judgment on those
allegations taken together with such of his own as are admitted in the pleadings. (La Yebana Company vs.
Sevilla, 9 Phil. 210). (Emphasis supplied.)
This view was reiterated in Evangelista v. De la Rosa 4 and Mercy's Incorporated v. Herminia Verde. 5
Squarely in point is Southwestern Sugar & Molasses Co. v. Atlantic Gulf & Pacific Co., 6 from which We quote:
The main contention of appellant is that the option granted to appellee to sell to it barge No. 10 for the sum of
P30,000 under the terms stated above has no legal effect because it is not supported by any consideration and
in support thereof it invokes article 1479 of the new Civil Code. The article provides:
"ART. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally
demandable.

An accepted unilateral promise to buy or sell a determinate thing for a price certain is binding
upon the promisor if the promise is supported by a consideration distinct from the price."
On the other hand, Appellee contends that, even granting that the "offer of option" is not supported by any
consideration, that option became binding on appellant when the appellee gave notice to it of its acceptance,
and that having accepted it within the period of option, the offer can no longer be withdrawn and in any event
such withdrawal is ineffective. In support this contention, appellee invokes article 1324 of the Civil Code which
provides:
"ART. 1324. When the offerer has allowed the offeree a certain period to accept, the offer
may be withdrawn any time before acceptance by communicating such withdrawal, except
when the option is founded upon consideration as something paid or promised."
There is no question that under article 1479 of the new Civil Code "an option to sell," or "a promise to buy or to
sell," as used in said article, to be valid must be "supported by a consideration distinct from the price." This is
clearly inferred from the context of said article that a unilateral promise to buy or to sell, even if accepted, is
only binding if supported by consideration. In other words, "an accepted unilateral promise can only have a
binding effect if supported by a consideration which means that the option can still be withdrawn, even if
accepted, if the same is not supported by any consideration. It is not disputed that the option is without
consideration. It can therefore be withdrawn notwithstanding the acceptance of it by appellee.
It is true that under article 1324 of the new Civil Code, the general rule regarding offer and acceptance is that,
when the offerer gives to the offeree a certain period to accept, "the offer may be withdrawn at any time before
acceptance" except when the option is founded upon consideration, but this general rule must be interpreted
as modified by the provision of article 1479 above referred to, which applies to "a promise to buy and
sell" specifically. As already stated, this rule requires that a promise to sell to be valid must be supported by a
consideration distinct from the price.
We are not oblivious of the existence of American authorities which hold that an offer, once accepted, cannot be
withdrawn, regardless of whether it is supported or not by a consideration (12 Am. Jur. 528). These authorities,
we note, uphold the general rule applicable to offer and acceptance as contained in our new Civil Code. But we
are prevented from applying them in view of the specific provision embodied in article 1479. While under the
"offer of option" in question appellant has assumed a clear obligation to sell its barge to appellee and the option
has been exercised in accordance with its terms, and there appears to be no valid or justifiable reason for
appellant to withdraw its offer, this Court cannot adopt a different attitude because the law on the matter is
clear. Our imperative duty is to apply it unless modified by Congress.
However, this Court itself, in the case of Atkins, Kroll and Co., Inc. v. Cua Hian Tek, 8 decided later thatSouthwestern Sugar &
Molasses Co. v. Atlantic Gulf & Pacific Co., 9 saw no distinction between Articles 1324 and 1479 of the Civil Code and applied the
former where a unilateral promise to sell similar to the one sued upon here was involved, treating such promise as an option
which, although not binding as a contract in itself for lack of a separate consideration, nevertheless generated a bilateral contract
of purchase and sale upon acceptance. Speaking through Associate Justice, later Chief Justice, Cesar Bengzon, this Court said:
Furthermore, an option is unilateral: a promise to sell at the price fixed whenever the offeree should decide to
exercise his option within the specified time. After accepting the promise and before he exercises his option, the
holder of the option is not bound to buy. He is free either to buy or not to buy later. In this case, however, upon
accepting herein petitioner's offer a bilateral promise to sell and to buy ensued, and the respondent ipso
facto assumed the obligation of a purchaser. He did not just get the right subsequently to buy or not to buy. It
was not a mere option then; it was a bilateral contract of sale.
Lastly, even supposing that Exh. A granted an option which is not binding for lack of consideration, the
authorities hold that:
"If the option is given without a consideration, it is a mere offer of a contract of sale, which is
not binding until accepted. If, however, acceptance is made before a withdrawal, it constitutes
a binding contract of sale, even though the option was not supported by a sufficient
consideration. ... . (77 Corpus Juris Secundum, p. 652. See also 27 Ruling Case Law 339
and cases cited.)
"It can be taken for granted, as contended by the defendant, that the option contract was not
valid for lack of consideration. But it was, at least, an offer to sell, which was accepted by
letter, and of the acceptance the offerer had knowledge before said offer was withdrawn. The
concurrence of both acts the offer and the acceptance could at all events have
generated a contract, if none there was before (arts. 1254 and 1262 of the Civil Code)."
(Zayco vs. Serra, 44 Phil. 331.)
In other words, since there may be no valid contract without a cause or consideration, the promisor is not bound by his promise
and may, accordingly, withdraw it. Pending notice of its withdrawal, his accepted promise partakes, however, of the nature of an
offer to sell which, if accepted, results in a perfected contract of sale.
This view has the advantage of avoiding a conflict between Articles 1324 on the general principles on contracts and 1479
on sales of the Civil Code, in line with the cardinal rule of statutory construction that, in construing different provisions of one
and the same law or code, such interpretation should be favored as will reconcile or harmonize said provisions and avoid a

conflict between the same. Indeed, the presumption is that, in the process of drafting the Code, its author has maintained a
consistent philosophy or position. Moreover, the decision inSouthwestern Sugar & Molasses Co. v. Atlantic Gulf & Pacific
Co., 10 holding that Art. 1324 is modified by Art. 1479 of the Civil Code, in effect, considers the latter as an exception to the former,
and exceptions are not favored, unless the intention to the contrary is clear, and it is not so, insofar as said two (2) articles are
concerned. What is more, the reference, in both the second paragraph of Art. 1479 and Art. 1324, to an option or promise
supported by or founded upon a consideration, strongly suggests that the two (2) provisions intended to enforce or implement the
same principle.
Upon mature deliberation, the Court is of the considered opinion that it should, as it hereby reiterates the doctrine laid down in
the Atkins, Kroll & Co. case, and that, insofar as inconsistent therewith, the view adhered to in theSouthwestern Sugar &
Molasses Co. case should be deemed abandoned or modified.
WHEREFORE, the decision appealed from is hereby affirmed, with costs against defendant-appellant Severina Rigos. It is so
ordered.
G.R. No. L-47968 May 9, 1988
LINA MONTILLA, petitioner,
vs.
COURT OF APPEALS and EMILIO ARAGON, JR., respondents.
Ozaeta, Romulo, De Leon, Mabanta, Buenaventura, Sayoc & De los Angeles for petitioner.
Felix Bautista Angelo for private respondent.
NARVASA, J.:
Errors in the application of elementary legal principles as regards admissions in the pleadings, the Statute of Frauds, promises to
sell, and interlocutory orders in relation to res adjudicata as well as palpable mistakes in factual conclusions-because contrary
to or in unaccountable disregard of facts of record, impel reversal of the judgment of the Court of Appeals 1 which affirmed that of
the Trial Court. 2
The proceeding at bar traces its origin to an action initiated in the Court of First Instance of Iloilo on April 27, 1972 by Emilio
Aragon, Jr., to compel Lina Montilla to comply with a verbal contract to sell to him a piece of land situated atPoblacion, Iloilo City,
known as Lot No. 4 of the Consolidated Subdivision plan (LRC) Psc-11605. In his complaint, Aragon claimed that in the last week
of June, 1969, Montilla had orally offered to sell the lot to him at a price of P57,650.00 (at the rate of P50.00 per square meter),
the price being payable at any time within a three-year period from June, 1969 provided that Aragon constructed on the lot a
house of strong materials and paid a nominal monthly rental in the meantime; but despite Aragon's acceptance of the offer,
fulfillment by him of the specified conditions, and his seasonable tender of the purchase price, Montilla had refused to comply with
her obligation.
In her answer Montilla categorically denied ever having entered into such an agreement, and set up the affirmative defenses of
(1) unenforceability of the alleged agreement under the Statute of Frauds; and (2) failure of the complaint to state a cause of
action, no allegation having been made therein of any consideration for the promise to sell distinct and separate from the price, as
required by Article 1479 of the Civil Code.
At Montilla's instance, a preliminary hearing was had on her affirmative defenses in accordance with Section 5, Rule 16 of the
Rules of Court, 3 "as if a motion to dismiss had been filed." Thereafter, by Order dated December 5, 1972, the Court denied the
implicit motion to dismiss, opining that since Montilla's answer "shows that .. (she had) admitted the offer to sell, and plaintiffs
desire to buy the land in question," that admission amounted to a ratification of the oral contract to sell and operated to place the
case beyond the scope of the Statute of Frauds.
After trial, the Court rendered judgment under date of August 22, 1974 sentencing Montilla "(a) to execute the requisite deed of
conveyance of Lot No. 4, covered by Transfer Certificate of Title No. T-29976 in favor of the plaintiff upon full payment by plaintiff
to defendant of the total consideration thereof in the aggregate sum of Fifty Seven Thousand Six Hundred Fifty Pesos
(P57,650.00); (b) to pay to plaintiff P2,000.00 as attorney's fees, and (c) to pay the costs." This decision, as aforestated, was
affirmed by the Court of Appeals. The latter's adjudgment has, in turn, been duly brought up to this Court by Montilla, on appeal
by certiorari under Rule 45 of the Rules of Court. And to the Appellate Court, Montilla ascribes the following errors:
1) .. holding as correct the trial court's finding that petitioner's answer admitted the existence of the alleged
verbal contract to sell the land to respondent Aragon;
2) .. holding as correct the .. conclusion that for petitioner's failure to file demurrer to or motion for
reconsideration of its order of December 5, 1972, the alleged verbal contract became an established fact; and
3) failing to consider and appreciate significant evidences which were deliberately overlooked, misapplied, or
misunderstood by the trial court.
The record discloses that the imputed errors have indeed been committed, and they are of sufficient gravity to warrant reversal of
the judgments in question.
It is, in the first place, difficult to see by what process of ratiocination the Trial Court arrived at the conclusion that Montilla's
answer had "admitted the offer to sell." Any such admission is absolutely precluded by the specific and unequivocal denial by
Montilla of the claimed verbal contract to sell. She in fact branded the allegations to that effect in the complaint as "outrageously
false, fantastically ridiculous and despicable fabrications of plaintiff." Nor may any admission be inferred from the circumstance
that Montilla, apart from unqualifiedly denying the contract to sell, had also asserted in her responsive pleading that the contract
was unenforceable because violative of the Statute of Frauds and because not supported by any consideration distinct from the

price. For while those defenses imply an acceptance by the pleader of the truth of the agreement at which the defenses are
directed, the acceptance is at best hypothetical, assumed only for purposes of determining the validity of the defenses, but cannot
in any sense be taken as an unconditional and irretrievably binding factual admission. The import of the answer, couched in
language that could not be made any plainer is that there was no verbal contract to sell ever agreed to by Montilla, but that, even
assuming hypothetically, or for the sake of argument that there was, the agreement was unenforceable because in breach of the
Statute of Frauds. It was therefore reversible error for the Trial Court to have burdened Montilla with an admission of the verbal
contract to sell sued upon.
Also tainted by serious error is the ruling that after rendition of the Order of December 5, 1972, denying the motion to dismiss
because of Montilla's "admission" of the verbal contract, the inaction by the defendant in not taking any exception or demurrer
thereto by filing a motion for reconsideration or amending her answer for the purpose had the legal effect of making such order
binding and conclusive upon her, in contemplation of rule 131, Section 3 (c), in relation to Rule 39, Section 49 (b) of the Rules of
Court."
What the Court is saying is that its interlocutory order of December 5, 1972 had become conclusive, 4 i.e., conclusive on Montilla
"with respect to the matter directly adjudged or as to any other matter that could have been raised in relation thereto." 5 Obviously,
it escaped His Honor's attention, or, what would be more regrettable, it was not within his knowledge, that the doctrine of res
judicata or bar by prior judgment 6(or, for that matter, conclusiveness of judgment or estoppel by judgment 7) has relevance to,
and will become operative only on the basis of a final judgment or final order, the qualifying term "final" being used in the sense of
"final and executory," i.e., not only final because finally disposing of the case and leaving nothing more to be done by the
adjudging court relative to its merits, but alsoexecutory because the period for appeal has expired without an appeal having
been taken, or an appeal having been perfected, the judgment or order has otherwise attained finality. 8 Quite elementary is that
an order such as that rendered on December 5, 1972, being interlocutory, cannot become final and executory in the sense just
described, 9 and cannot bring the doctrine of res adjudicata into play at all. Indeed, the correctness of such an interlocutory order
may subsequently be impugned on appeal by any party adversely affected thereby, regardless of whether or not he had
presented a motion for the reconsideration thereof, if he has otherwise made of record his position thereon. 10
Also quite inexplicable is the Trial Court's glossing over the failure of Aragon to Identify Montilla during the trial. Aragon's recorded
testimony contains the claim that he had "personally met .. Montilla .. sometime in the last week of June, 1969," and that he could
Identify her. He had thereupon been asked to make the Identification, and he had pointed to "a woman .. (in a) brown dress" in
the courtroom, stoutly declaring thereafter that he was "quite sure" of his Identification, that he was very certain that he was "not
mistaken." As it turned out, the person pointed to by him was not Montilla at all, but a lady named Rosario Mendoza
Valdez. 11 The Trial Judge however dismissed this embarrassing inability of Aragon to Identify Montilla as "innocuous." According
to him, "the fact of her being the very person who offered to sell Lot No. 4 to the plaintiff is corroborated not only by the
testimonies of Asst. City Fiscal Jose Jacela, Jr. and Enrique Castelo but by the very testimony in court of defendant herself who,
when asked by her counsel, admitted she is the defendant in this case." The lack of logic in the Court's reasoning is evident.
Montilla's acknowledgment of being the defendant in the case can not in any manner whatsoever be considered an admission
that she had gone to see Aragon to offer her property for sale. Non sequitur Aragon's disconcerting failure to Identify Montilla is
cogent confutation of his allegation that he personally knew Montilla and had negotiated with her for his purchase of the property
in question, and strongly indicative of the inaccuracy of the testimony of the witnesses who corroborated his dubious tale.
There being therefore no admission whatever on Montilla's part of the existence or ratification of the claimed contract to sell, and
taking account of her disavowal in her pleadings and in her evidence of that contract, and necessarily of any fulfillment of the
terms thereof, it is clear that the action for its enforcement should have been dismissed pursuant to the Statute of Frauds, 12 in
relation to Rule 16 of the Rules of Court. 13
The action is also dismissible upon another legal ground. Assuming arguendo veritability of the oral promise to sell by Montilla,
the promise was nevertheless not binding upon her in view of the absence of any consideration therefor distinct from the
stipulated price. This is the principle laid down by the second paragraph of Article 1479: "An accepted unilateral promise to .. sell
a determinate thing for a price certain is binding upon the promissor if the promise is supported by a consideration distinct from
the price."
There is another item of proof which the Trial Court completely failed to consider. This is a document marked Exhibit 1, executed
by Aragon on July 9, 1969 some 9 or 10 days after Montilla had supposedly promised to sell the lot in question to him. It reads
as follows:
TO WHOM IT MAY CONCERN:
This is to certify that I promise to abide by the decision of the owners of the Montilla Estate upon which my
house is being constructed, in any eventuality.
This is in connection with the kind permission granted me by 'their authorized representative, Leodegario
Manaloto, which I am exceedingly grateful inasmuch as my children could live near their school, the Colegio
Sagrado Corazon Mafincode Jesus, I am therefore imploring the consideration of the owners and Mr. Manaloto
to give my children ample time to finish their schooling there.
For the duration, I am willing to meet the prescribed rental obligations of said lot.
The document reveals several things. For one, the lot on which Aragon's house was being built was obviously part of the "Montilla
estate," and did not as yet belong to any particular heir or person entitled thereto. For another, Aragon had been given permission
by the representative of the estate, Mr. Manaloto, to stay on the lot in consideration of a prescribed rental, and he was imploring
said Mr. Manaloto and the owners for leave to stay in the premises until his children could finish their schooling, promising to

meet the prescribed rental obligations." Again, and this is quite significant as regards his claim of a promise to sell by one of the
Montillas, since that promise is not referred to or even hinted at in any manner whatsoever, the genuineness of the claim is
strongly suspect; for surely, Aragon would never have "implored" for "consideration of the owners and Mr. Manaloto"to stay in the
premises until his children could finish their schooling, as lessee, if it be true that he had accepted a promise for the sale thereof
to him. The document cannot therefore be interpreted otherwise than as denoting the concession to him of the privilege to build a
house on a lot belonging to the Montillas, and a solicitation by him of the owners' permission to lease the lot to him for a longer,
and more or less determinable term, and as an implied, though nonetheless clear, negation of any right on his part to purchase
the property.
Another document, marked Exhibit 5, further underscores the improbability of Aragon's story. It is a Court Order issued on June
17, 1971 in the judicial proceedings for the settlement of the Montilla Estate obviously the same "Montilla estate" referred to by
Aragon in his certification of July 9, 1969 just described. That Order approved the project of partition of said estate, presented on
May 5, 1971; and it states that Lot 4, subject of the case at bar, was adjudicated to Lina Montilla on June 17,1971, more than two
(2) years after she had supposedly offered to sell the property to Aragon. Thus, as already intimated, at the time of the alleged
promise to sell, avowedly made in June, 1969, Lot 4 still formed part of the amorphous mass of property constituting the "Montilla
estate;" at any rate, that particular lot had not been allotted to Lina Montilla yet.The uncertainty of the eventual ownership of said
Lot 4, considered conjointly with the ostensible status of Aragon as a mere supplicant of favors from "the owners of the Montilla
estate," make it very improbable indeed that Montilla would personally go to him and promise to sell the lot to him. Incredibly,
however, the trial Court interpreted the document, Exhibit 5 proof that Lina Montilla, had not only offered to sell to Aragon that
particular Lot 4 at a time when it could not yet be known to which heir it would ultimately be allotted, but also made an additional
promise that she would make certain that the property would at all events eventually "pertain to her as her share and the
corresponding certificate of title issued in her name." A more extreme case of leaning over backwards in stubborn advocacy of a
pre-conceived theory can scarcely be found.
On the whole, the evidence adequately demonstrates the falsity of Aragon's claim of an oral promise to sell said Lot No. 4 in his
favor, and consequently the unfounded character of his action against Montilla.
WHEREFORE, the Decision of the Court of Appeals dated January 18, 1978 and that of the Court of First Instance dated August
22, 1974 thereby affirmed, are REVERSED AND SET ASIDE, and a new one entered DISMISSING Aragon's complaint, with
costs against him.
G.R. No. L-32873 August 18, 1972
AQUILINO NIETES, petitioner,
vs.
HON. COURT OF APPEALS & DR. PABLO C. GARCIA, respondents.
Conrado V. del Rosario for petitioner.
Romeo D. Magat for private respondent.
CONCEPCION, C.J.:p
Petitioner Aquilino Nietes seeks a review on certiorari of a decision of the Court of Appeals.
It appears that, on October 19, 1959, said petitioner and respondent Dr. Pablo C. Garcia entered into a "Contract of Lease with
Option to Buy," pursuant to the terms and conditions set forth in the deed Exhibits A and A-1, (also, marked as Exhibit 2) namely:
That the LESSOR is an owner of the ANGELES EDUCATIONAL INSTITUTE situated at Angeles, Pampanga, a
school which is duly recognized by the Government;
That the lessor agrees to lease the above stated school to the LESSEE under the following terms and
conditions:
1. That the term will be for a period of five (5) years;
2. That the price of the rent is FIVE THOUSAND PESOS (P5,000) per year payable in the following manners:
a. That the amount of FIVE THOUSAND FIVE HUNDRED PESOS (P5,500) will be paid upon
the execution of this Contract of Lease;
b. That the amount of FOUR THOUSAND FIVE HUNDRED PESOS (P4,500) is payable on
or before the 30th day of October, 1959;
c. That the remaining balance of FIFTEEN THOUSAND PESOS (P15,000) will be paid on or
before March 30, 1960;
3. That all improvements made during the lease by the LESSEE will be owned by the LESSOR after the
expiration of the term of this Contract of Lease;
4. That the LESSOR agrees to give the LESSEE an option to buy the land and the school building, for a price
of ONE HUNDRED THOUSAND PESOS (P100,000) within the period of the Contract of Lease;
5. That should the LESSEE buy the lot, land and the school building within the stipulated period, the unused
payment for the Contract of Lease will be considered as part payment for the sale of the land and school;
6. That an inventory of all properties in the school will be made on March 31, 1960;
6A. That the term of this Contract will commence in June 1960 and will terminate in June 1965;
7. That the LESSEE will be given full control and responsibilities over all the properties of the school and over
all the supervisions and administrations of the school;

8. That the LESSEE agrees to help the LESSOR to collect the back accounts of students incurred before the
execution of this contract.
Instead of paying the lessor in the manner set forth in paragraph 2 of said contract, Nietes had, as of August 4, 1961, made
payments as follows:
October 6,1960 ....................................... P18,957.00 (Exh. D)
November 23, 1960 ................................. 300.00 (Exh. E)
December 21, 1960 ................................. 200.00 (Exh. F)
January 14, 1961 ..................................... 500.00 (Exh. G)
February 16, 1961 ................................... 3,000.00 (Exh. H)
March 12, 1961 ....................................... 1,000.00 (Exh. I)
March 13, 1961 ....................................... 700.00 (Exh. J)
August 4, 1961 ........................................ 100.00 (Exh. K) _________
TOTAL ..................................... P24,757.00
Moreover, Nietes maintains that, on September 4, 1961, and December 13, 1962, he paid Garcia the additional sums of P3,000
and P2,200, respectively, for which Garcia issued receipts Exhibit B and C, reading:
Received the amount of (P3,000.00) Three Thousand Pesos from Mrs. Nietes as per advance pay for the
school, the contract of lease being paid.
(Sgd.) PABLO GARCIA (Exh. B)
To Whom it May Concern:
This is to certify that I received the sum of Two Thousand Two Hundred Pesos, Philippine Currency, from Mrs.
Catherine R. Nietes as the partial payment on the purchase of the property as specified on the original contract
of "Contract of Lease with the First Option to Buy" originally contracted and duly signed.
(Sgd.) DR. PABLO GARCIA (Exh. C)
On or about July 31, 1964, Dr. Garcia's counsel wrote to Nietes the letter Exhibit 1 (also Exhibit V) stating:
The Director
Philippine Institute of Electronics
Angeles, Pampanga
Sir:
I regret to inform you that our client, Dr. Pablo Garcia, desires to rescind your contract, dated 19 October 1959
because of the following:
1. That you had not maintained the building, subject of the lease contract in good condition.
2. That you had not been using the original name of the school Angeles Institute, thereby extinguishing its
existence in the eyes of the public and injuring its prestige.
3. That through your fault, no inventory has been made of all properties of the school.
4. That up to this time, you had not collected or much less helped in the collection of back accounts of former
students.
This is to remind you that the foregoing obligations had been one, if not, the principal moving factors which had
induced the lessor in agreeing with the terms embodied in your contract of lease, without which fulfillment, said
contract could not have come into existence. It is not simply one of those reminders that we make mention, that
our client under the circumstances, is not only entitled to a rescission of the contract. He is likewise entitled to
damages actual, compensatory and exemplary.
In view of the serious nature of the breach which warrant and sanction drastic legal remedies against you, we
earnestly request you to please see the undersigned at the above-named address two days from receipt
hereof. Otherwise, if we shall not hear from you, the foregoing will serve notice on your part to vacate the
premises within five (5) days to be counted from date of notice.
Very truly yours,
(Sgd.) VICTOR T. LLAMAS, JR.
to which counsel for Nietes replied in the following language:
Atty. Victor T. Llamas, Jr.
Victor Llamas Law Office
Corner Rivera-Zamora Streets
Dagupan City
Dear Sir:
Your letter dated July 31, 1964 addressed to my client, the Director of the Philippine Institute of Electronics,
Angeles City, has been referred to me and in reply, please, be informed that my client has not violated any
provision of the CONTRACT OF LEASE WITH OPTION TO BUY, executed by him as LESSEE and Dr. Pablo
Garcia as LESSOR. For this reason, there is no basis for rescission of the contract nor of the demands
contained in your letter.
In this connection, I am also serving this formal notice upon your client Dr. Pablo Garcia, thru you, that my client
Mr. AQUILINO T. NIETES will exercise his OPTION to buy the land and building subject matter of the lease and
that my said client is ready to pay the balance of the purchase price in accordance with the contract. Please,

inform Dr. Pablo Garcia to make available the land title and execute the corresponding Deed of Sale pursuant
to this notice, and that if he fails to do so within fifteen (15) days from the receipt of this letter, we shall take the
corresponding action to enforce the agreement.
Truly yours,
(Sgd.) CONRADO V. DEL ROSARIO
Counsel for Mr. Aquilino T. Nietes
Angeles City
On July 26, 1965, Nietes deposited with the branch office of the Agro-Industrial Bank in Angeles City checks amounting to
P84,860.50, as balance of the purchase price of the property, but he withdrew said sum of P84,860.50 on August 12, 1965, after
the checks had been cleared. On August 2, 1965, he commenced the present action, in the Court of First Instance of Pampanga,
for specific performance of Dr. Garcia's alleged obligation to execute in his (Nietes') favor a deed of absolute sale of the leased
property, free from any lien or encumbrance whatsoever, he having meanwhile mortgaged it to the People's Bank and Trust
Company, and to compel him (Garcia) to accept whatever balance of the purchase price is due him, as well as to recover from
him the aggregate sum of P90,000 by way of damages, apart from attorney's fees and the costs.
Dr. Garcia filed an answer admitting some allegations of the complaint and denying other allegations thereof, as well as setting up
a counterclaim for damages in the sum of P150,000.
After due trial, said court rendered its decision, the dispositive part of which reads:
WHEREFORE, in view of the preponderance of evidence in favor of the plaintiff and against the defendant,
judgment is hereby rendered ordering the latter to execute the Deed of Absolute Sale of property originally
leased together with the school building and other improvements thereon which are covered by the contract,
Annex "A", upon payment of the former of the balance (whatever be the amount) of the stipulated purchase
price; to free the said property from any mortgage or encumbrance and deliver the title thereto to the plaintiff
free from any lien or encumbrance, and should said defendant fail to do so, the proceeds from the purchase
price be applied to the payment of the encumbrance so that the title may be conveyed to the plaintiff; to pay the
plaintiff the sum of P1,000.00 as attorney's fees, and the cost of this suit.
Both parties appealed to the Court of Appeals, Dr. Garcia insofar as the trial court had neither dismissed the complaint nor upheld
his counterclaim and failed to order Nietes to vacate the property in question, and Nietes insofar as the trial court had granted him
no more than nominal damages in the sum of P1,000, as attorney's fees.
After appropriate proceedings, a special division of Court of Appeals rendered its decision, on October 18, 1969, affirming, in
effect, that of the trial court, except as regards said attorney's fees, which were eliminated. The dispositive part of said decision of
the Court of Appeals reads:
WHEREFORE, with the modification that the attorney's fees awarded by the trial court in favor of the plaintiff is eliminated, the
appealed judgment is hereby affirmed in all other respects, and the defendant is ordered to execute the corresponding deed of
sale for the school building and lot in question in favor of the plaintiff upon the latter's full payment of the balance of the purchase
price. The costs of this proceedings shall be taxed against the defendant-appellant.
On motion for reconsideration of defendant Garcia, said special division set aside its aforementioned decision and rendered
another one, promulgated on March 10, 1970 reversing the appealed decision of the court of first instance, and dismissing the
complaint of Nietes, with costs again him. Hence, the present petition of Nietes for review certiorari of the second decision of the
Court of Appeals, dated March 10, 1970, to which petition We gave due course.
Said decision of the Court of Appeals, reversing that of the Court of First Instance, is mainly predicated upon the theory that,
under the contract between the parties, "the full purchase price must be paid before the option counsel be exercised," because
"there was no need nor sense providing that "the unused payment for the Contract Lease will be considered as part payment for
the sale the land and school'" inasmuch as "otherwise there is substantial amount from which such unused rental could be
deducted"; that the statement in the letter, Exhibit L, of Nietes, dated August 7, 1964, to the effect that he "will exercise his
OPTION to buy the land and building," indication that he did not consider the receipts, Exhibits B and for P3,000 and P2,200,
respectively, "as an effective exercise of his option to buy"; that the checks for P84,860.50 deposited by Nietes with the AgroIndustrial Development Bank, did not constitute a proper tender of payment, which, at any rate, was "made beyond the stipulated
5-year period"; that such deposit "was not seriously made, because on August 12, 1965, the same was withdrawn from the Bank
and ostensibly remains in the lessee's hand"; and that "the fact that such deposit was made by the lessee shows that he himself
believed that he should have paid the entire amount of the purchase price before he could avail of the option to buy, otherwise,
the deposit was a senseless gesture ... ."
Dr. Garcia, in turn, maintained in his answer "that the sums paid" to him "were part of the price of the contract of lease between
the parties which were paid late and not within the periods and/or schedules fixed by the contract (Annex A.)." What is more, on
the witness stand, Garcia claimed that he did "not know" whether the signatures on Exhibits B and C the receipt for P3,000
and P2,200, respectively were his, and even said that he was "doubtful" about it.
This testimony is manifestly incredible, for a man of his intelligence a Doctor of Medicine and the owner of an educational
institution could not possibly "not know" or entertain doubts as to whether or not the aforementioned signatures are his and the
payments therein acknowledged had been received by him. His dubious veracity becomes even more apparent when we
consider the allegations in paragraph (4) of his answer referring to paragraphs 5 and 6 of the complaint alleging, inter alia, the
aforementioned partial payments of P3,000 and P2,200, on account of the stipulated sale price to the effect that said sums
" paid to the herein defendant were part of the price of the contract of lease." In other words, payment of said sums of P3,000 and

P2,200 is admitted in said answer. Besides, the rentals for the whole period of the lease aggregated P25,000 only, whereas said
sums of P3,000 and P2,200, when added to the payments previously made by Nietes, give a grand total of P29,957.00, or
P4,957 in excess of the agreed rentals for the entire period of five years. Thus, Dr. Garcia was less than truthful when he tried to
cast doubt upon the fact of payment of said sums of P3,000 and P2,200, as well as when he claimed that the same were part of
the rentals collectible by him.
We, likewise, find ourselves unable to share the view taken by the Court of Appeals. Neither the tenor of the contract Exhibits A
and A-1 (also Exhibit 2) nor the behaviour of Dr. Garcia as reflected in the receipts Exhibits B and C justifies such view. The
contract does not say that Nietes had to pay the stipulated price of P100,000before exercising his option to buy the property in
question. Accordingly, said option is governed by the general principles on obligations, pursuants to which:
In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a
proper manner with what is incumbent upon him. From the moment one of the parties fulfills his obligation,
delay by the other begins. 1
In the case of an option to buy, the creditor may validly and effectively exercise his right by merely advising the debtor of the
former's decision to buy and expressing his readiness to pay the stipulated price, provided that the same is available and actually
delivered to the debtor upon execution and delivery by him of the corresponding deed of sale. Unless and until the debtor shall
have done this the creditor is not and cannot be in default in the discharge of his obligation to pay. 2 In other words, notice of the
creditor's decision to exercise his option to buy need not be coupled with actual payment of the price, so long as this is delivered
to the owner of the property upon performance of his part of the agreement. Nietes need not have deposited, therefore, with the
Agro-Industrial Bank checks amounting altogether to P84,860.50 on July 26, 1965, and the withdrawal thereof soon after does
not and cannot affect his cause of action in the present case. In making such deposit, he may have had the intent to show his
ability to pay the balance of the sum due to Dr. Garcia as the sale price of his property. In short, said deposit and its subsequent
withdrawal cannot affect the result of the present case.
Nietes was entitled to exercise his option to buy "within the period of the Contract of Lease," which pursuant to paragraph 6-A
of said contract commenced "in June 1960" and was to "terminate in June 1965." As early as September 4, 1961, or well
"within the period of the Contract of Lease," Nietes had paid Dr. Garcia the following sums:
October 6, 1960 ............................ P18,957.00 (Exh. D)
November 23, 1960 ....................... 300.00 (Exh E)
December 21, 1960 ....................... 200.00 (Exh. F)
January 14, 1961 ........................... 500.00 (Exh. G)
February 16, 1961 ......................... 3,000.00 (Exh. H)
March 12, 1961 ............................. 1,000.00 (Exh. I)
March 13, 1961 ............................. 700.00 (Exh. J)
August 4, 1961 ............................... 100.00 (Exh. K)
September 4, 1961 ......................... 3,000.00 (Exh. B)
________
TOTAL ............................... P27,757.00
It is true that Nietes was bound, under the contract, to pay P5,500 on October 19, 1959, P4,500 on or before October 30, 1959,
and P15,000 on or before March 30, 1960, or the total sum of P25,000, from October 19, 1959 to March 30, 1960, whereas his
first payment was not made until October 10, 1960, when he delivered the sum of P18,957 to Dr. Garcia, and the latter had by
August 4, 1961, received from the former the aggregate sum of P24,757. This is, however, P243.00 only less than the P25,000
due as of March 30, 1960, so that Nietes may be considered as having complied substantially with the terms agreed upon.
Indeed, Dr. Garcia seems to have either agreed thereto or not considered that Nietes had thereby violated the contract, because
the letter of the former, dated July 31, 1964, demanding rescission of the contract, did not mention said acts or omissions of
Nietes among his alleged violations thereof enumerated in said communication. In fact, when, on September 4, 1961, Mrs. Nietes
turned over the sum of P3,000 to Dr. Garcia, he issued the receipt Exhibit B, stating that said payment had been made "as
per advance pay for the school, the Contract of Lease being paid" in other words, in accordance or conformity with said
contract. Besides, when, on December 13, 1962, Mrs. Nietes delivered the additional sum of P2,200, Dr. Garcia issued a receipt
accepting said amount "as the partial payment on the purchase price of the property as specified on the original contract," thus
further indicating that the payment, in his opinion, conformedwith said contract, and that, accordingly, the same was in full force
and effect.
In any event, it is undisputed that, as of September 4, 1961, Dr. Garcia had received the total sum of P27,757, or P2,757 in
excess of the P25,000 representing the rentals for the entire period of the lease, and over P21,200 in excess of the rentals for the
unexpired portion of the lease, from September 4, 1961 to June 1965. This circumstance indicates clearly that Nietes had, on
September 4, 1961, chosen to exercise and did exercise then his option to buy. What is more, this is borne out by the receipt
issued by Dr. Garcia for the payment of P2,200, on December 13, 1962, to which he referred therein as a "partial payment on the
purchase of the property as specified on the original contract of 'Contract of Lease with the First Option to Buy' ... ."
Further confirmation is furnished by the letter of Nietes, Exhibit L, of August 1964 also, within the period of the lease stating
that he "will exercise his OPTION to buy the land and building subject matter of the lease." It is not correct to construe this
expression as did the appealed decision as implying that the option had not been or was not yet being exercised, or as a
mere announcement of the intent to avail of it at some future time. This interpretation takes said expression out of the context of
Exhibit L, which positively states, also, that Nietes "is ready to pay the balance of the purchase price in accordance with the

contract," and requests counsel for Dr. Garcia to inform or advise him "to make available the land title and execute the
corresponding Deed of Sale pursuant to this notice, and that if he fails to do so within fifteen (15) days ... we shall take the
corresponding action to enforce the agreement." Such demand and said readiness to pay the balance of the purchase price leave
no room for doubt that, as stated in Exhibit L, the same is "a formal notice" that Nietes had exercised his option, and expected Dr.
Garcia to comply, within fifteen (15) days, with his part of the bargain. Surely, there would have been no point for said demand
and readiness to pay, if Nietes had not yet exercised his option to buy.
The provision in paragraph 5 of the Contract, to the effect that "should the LESSEE" choose to make use of his option to buy "the
unused payment for the Contract of Lease will be considered as payment for the sale of the land and school, "simply means that
the rental paid for the unused portion of the lease shall be applied to and deducted from the sale price of P100,000 to be paid by
Nietes at the proper time in other words, simultaneously with the delivery to him of the corresponding deed of sale, duly
executed by Dr. Garcia.
It is, consequently, Our considered opinion that Nietes had validly and effectively exercised his option to buy the property of Dr.
Garcia, at least, on December 13, 1962, when he acknowledged receipt from Mrs. Nietes of the sum of P2,200 then delivered by
her "in partial payment on the purchase of the property" described in the "Contract of Lease with Option to Buy"; that from the
aggregate sum of P29,957.00 paid to him up to that time, the sum of P12,708.33 should be deducted as rental for the period from
June 1960 to December 13, 1962, or roughly thirty (30) months and a half, thereby leaving a balance of P17,248.67, consisting of
P12,291.67, representing the rentals for the unused period of the lease, plus P4,957.00 paid in excess of said rental and
advanced solely on account of the purchase price; that deducting said sum of P17,248.67 from the agreed price of P100,000.00,
there results a balance of P82,751.33 which should be paid by Nietes to Dr. Garcia, upon execution by the latter of the
corresponding deed of absolute sale of the property in question, free from any lien or encumbrance whatsoever, in favor of
Nietes, and the delivery to him of said deed of sale, as well as of the owner's duplicate of the certificate of title to said property;
and that Dr. Garcia should indemnify Nietes in the sum of P2,500 as and for attorney's fees.
Thus modified, the decision of the Court of First Instance of Pampanga is hereby affirmed in all other respects, and that of the
Court of Appeals reversed, with costs against respondent herein, Dr. Pablo C. Garcia. It is so ordered.
G.R. No. 83759 July 12, 1991
SPOUSES CIPRIANO VASQUEZ and VALERIANA GAYANELO, petitioners,
vs.
HONORABLE COURT OF APPEALS and SPOUSES MARTIN VALLEJERA and APOLONIA OLEA,respondents.
Dionisio C. Isidto for petitioners.
Raymundo Lozada, Jr. for private respondents.
GUTIERREZ, JR., J.:p
This petition seeks to reverse the decision of the Court of Appeals which affirmed the earlier decision of the Regional Trial Court,
6th Judicial Region, Branch 56, Himamaylan, Negros Occidental in Civil Case No. 839 (for specific performance and damages)
ordering the petitioners (defendants in the civil case) to resell Lot No. 1860 of the Cadastral Survey of Himamaylan, Negros
Occidental to the respondents (plaintiffs in the civil case) upon payment by the latter of the amount of P24,000.00 as well as the
appellate court's resolution denying a motion for reconsideration. In addition, the appellate court ordered the petitioners to pay the
amount of P5,000.00 as necessary and useful expenses in accordance with Article 1616 of the Civil Code.
The facts of the case are not in dispute. They are summarized by the appellate court as follows:
On January 15, 1975, the plaintiffs-spouses (respondents herein) filed this action against the defendantsspouses (petitioners herein) seeking to redeem Lot No. 1860 of the Himamaylan Cadastre which was
previously sold by plaintiffs to defendants on September 21, 1964.
The said lot was registered in the name of plaintiffs. On October 1959, the same was leased by plaintiffs to the
defendants up to crop year 1966-67, which was extended to crop year 1968-69. After the execution of the
lease, defendants took possession of the lot, up to now and devoted the same to the cultivation of sugar.
On September 21, 1964, the plaintiffs sold the lot to the defendants under a Deed of Sale for the amount of
P9,000.00. The Deed of Sale was duly ratified and notarized. On the same day and along with the execution of
the Deed of Sale, a separate instrument, denominated as Right to Repurchase (Exh. E), was executed by the
parties granting plaintiffs the right to repurchase the lot for P12,000.00, said Exh. E likewise duly ratified and
notarized. By virtue of the sale, defendants secured TCT No. T-58898 in their name. On January 2, 1969,
plaintiffs sold the same lot to Benito Derrama, Jr., after securing the defendants' title, for the sum of
P12,000.00. Upon the protestations of defendant, assisted by counsel, the said second sale was cancelled
after the payment of P12,000.00 by the defendants to Derrama.
Defendants resisted this action for redemption on the premise that Exh. E is just an option to buy since it is not
embodied in the same document of sale but in a separate document, and since such option is not supported by
a consideration distinct from the price, said deed for right to repurchase is not binding upon them.
After trial, the court below rendered judgment against the defendants, ordering them to resell lot No. 1860 of
the Himamaylan Cadastre to the plaintiffs for the repurchase price of P24,000.00, which amount combines the
price paid for the first sale and the price paid by defendants to Benito Derrama, Jr.
Defendants moved for, but were denied reconsideration. Excepting thereto, defendants-appealed, . . . (Rollo,
pp. 44-45)

The petition was given due course in a resolution dated February 12, 1990.
The petitioners insist that they can not be compelled to resell Lot No. 1860 of the Himamaylan Cadastre. They contend that the
nature of the sale over the said lot between them and the private respondents was that of an absolute deed of sale and that the
right thereafter granted by them to the private respondents (Right to Repurchase, Exhibit "E") can only be either an option to buy
or a mere promise on their part to resell the property. They opine that since the "RIGHT TO REPURCHASE" was not supported
by any consideration distinct from the purchase price it is not valid and binding on the petitioners pursuant to Article 1479 of the
Civil Code.
The document denominated as "RIGHT TO REPURCHASE" (Exhibit E) provides:
RIGHT TO REPURCHASE
KNOW ALL MEN BY THESE PRESENTS:
I, CIPRIANO VASQUEZ, . . ., do hereby grant the spouses Martin Vallejera and Apolonia Olea, their heirs and
assigns, the right to repurchase said Lot No. 1860 for the sum of TWELVE THOUSAND PESOS (P12,000.00),
Philippine Currency, within the period TEN (10) YEARS from the agricultural year 1969-1970 when my contract
of lease over the property shall expire and until the agricultural year 1979-1980.
IN WITNESS WHEREOF, I have hereunto signed my name at Binalbagan, Negros Occidental, this 21st day of
September, 1964.
SGD. CIPRIANO VASQUEZ
SGD. VALERIANA G. VASQUEZ SGD. FRANCISCO SANICAS
(Rollo, p. 47)
The Court of Appeals, applying the principles laid down in the case of Sanchez v. Rigos, 45 SCRA 368 [1972] decided in favor of
the private respondents.
In the Sanchez case, plaintiff-appellee Nicolas Sanchez and defendant-appellant Severino Rigos executed a document entitled
"Option to Purchase," whereby Mrs. Rigos "agreed, promised and committed . . . to sell" to Sanchez for the sum of P1,510.00, a
registered parcel of land within 2 years from execution of the document with the condition that said option shall be deemed
"terminated and lapsed," if "Sanchez shall fail to exercise his right to buy the property" within the stipulated period. In the same
document, Sanchez" . . . hereby agree and conform with all the conditions set forth in the option to purchase executed in my
favor, that I bind myself with all the terms and conditions." (Emphasis supplied) The notarized document was signed both by
Sanchez and Rigos.
After several tenders of payment of the agreed sum of P1,510.00 made by Sanchez within the stipulated period were rejected by
Rigos, the former deposited said amount with the Court of First Instance of Nueva Ecija and filed an action for specific
performance and damages against Rigos.
The lower court rendered judgment in favor of Sanchez and ordered Rigos to accept the sum judicially consigned and to execute
in Sanchez' favor the requisite deed of conveyance. Rigos appealed the case to the Court of Appeals which certified to this Court
on the ground that it involves a pure question of law.
This Court after deliberating on two conflicting principles laid down in the cases of Southwestern Sugar and Molasses Co. v.
Atlantic Gulf and Pacific Co., (97 Phil. 249 [1955]) and Atkins, Kroll & Co., Inc. v. Cua Hian Tek, 102 Phil. 948 [1958]) arrived at
the conclusion that Article 1479 of the Civil Code which provides:
Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the
promissory if the promise is supported by a consideration distinct from the price.
and Article 1324 thereof which provides:
Art. 1324. When the offerer has allowed the offerer a certain period to accept, the offer may be withdrawn at
any time before acceptance by communicating such withdrawal, except when the option is founded upon a
consideration, as something paid or promised.
should be reconciled and harmonized to avoid a conflict between the two provisions. In effect, the Court abandoned the ruling in
the Southwestern Sugar and Molasses Co. case and reiterated the ruling in the Atkins, Kroll and Co. case, to wit:
However, this Court itself, in the case of Atkins, Kroll and Co., Inc. v. Cua Hian Tek, (102 Phil. 948, 951-952)
decided later than Southwestern Sugar & Molasses Co. v. Atlantic Gulf & Pacific Co., (supra) saw no distinction
between Articles 1324 and 1479 of the Civil Code and applied the former where a unilateral promise to sell
similar to the one sued upon here was involved, treating such promise as an option which, although not binding
as a contract in itself for lack of separate consideration, nevertheless generated a bilateral contract of purchase
and sale upon acceptance. Speaking through Associate Justice, later Chief Justice, Cesar Bengzon, this Court
said:
Furthermore, an option is unilateral: a promise to sell at the price fixed whenever the offeree
should decide to exercise his option within the specified time. After accepting the promise
and before he exercises his option, the holder of the option is not bound to buy. He is free
either to buy or not to buy later. In this case however, upon accepting herein petitioner's offer
a bilateral promise to sell and to buy ensued, and the respondent ipso facto assumed the
obligation of a purchaser. He did not just get the right subsequently to buy or not to buy. It
was not a mere option then; it was bilateral contract of sale.

Lastly, even supposing that Exh. A granted an option which is not binding for lack of
consideration, the authorities hold that
If the option is given without a consideration, it is a mere offer of a contract of sale, which is
not binding until accepted. If, however, acceptance is made before a withdrawal, it constitutes
a binding contract of sale, even though the option was not supported by a sufficient
consideration . . . (77 Corpus Juris Secundum p. 652. See also 27 Ruling Case Law 339 and
cases cited.)
This Court affirmed the lower court's decision although the promise to sell was not supported by a consideration distinct from the
price. It was obvious that Sanchez, the promisee, accepted the option to buy before Rigos, the promisor, withdrew the same.
Under such circumstances, the option to purchase was converted into a bilateral contract of sale which bound both parties.
In the instant case and contrary to the appellate court's finding, it is clear that the right to repurchase was not supported by a
consideration distinct from the price. The rule is that the promisee has the burden of proving such consideration. Unfortunately,
the private respondents, promisees in the right to repurchase failed to prove such consideration. They did not even allege the
existence thereof in their complaint. (See Sanchez v. Rigos supra)
Therefore, in order that the Sanchez case can be applied, the evidence must show that the private respondents accepted the
right to repurchase.
The record, however, does not show that the private respondents accepted the "Right to Repurchase" the land in question. We
disagree with the appellate court's finding that the private respondents accepted the "right to repurchase" under the following
circumstances: . . as evidenced by the annotation and registration of the same on the back of the transfer of certificate of title in
the name of appellants. As vividly appearing therein, it was signed by appellant himself and witnessed by his wife so that for all
intents and purposes the Vasquez spouses are estopped from disregarding its obvious purpose and intention."
The annotation and registration of the right to repurchase at the back of the certificate of title of the petitioners can not be
considered as acceptance of the right to repurchase. Annotation at the back of the certificate of title of registered land is for the
purpose of binding purchasers of such registered land. Thus, we ruled in the case of Bel Air Village Association,
Inc. v. Dionisio (174 SCRA 589 [1989]), citing Tanchoco v. Aquino (154 SCRA 1 [1987]), andConstantino v. Espiritu (45 SCRA
557 [1972]) that purchasers of a registered land are bound by the annotations found at the back of the certificate of title covering
the subject parcel of land. In effect, the annotation of the right to repurchase found at the back of the certificate of title over the
subject parcel of land of the private respondents only served as notice of the existence of such unilateral promise of the
petitioners to resell the same to the private respondents. This, however, can not be equated with acceptance of such right to
repurchase by the private respondent.
Neither can the signature of the petitioners in the document called "right to repurchase" signify acceptance of the right to
repurchase. The respondents did not sign the offer. Acceptance should be made by the promisee, in this case, the private
respondents and not the promisors, the petitioners herein. It would be absurd to require the promisor of an option to buy to accept
his own offer instead of the promisee to whom the option to buy is given.
Furthermore, the actions of the private respondents (a) filing a complaint to compel re-sale and their demands for resale prior
to filing of the complaint cannot be considered acceptance. As stated in Vda. de Zulueta v. Octaviano (121 SCRA 314 [1983]):
And even granting, arguendo that the sale was a pacto de retro sale, the evidence shows that Olimpia, through
her lawyer, opted to repurchase the land only on 16 February 1962, approximately two years beyond the
stipulated period, that is not later than May, 1960.
If Olimpia could not locate Aurelio, as she contends, and based on her allegation that the contract between her
was one of sale with right to repurchase, neither, however, did she tender the redemption price to private
respondent Isauro, but merely wrote him letters expressing her readiness to repurchase the property.
It is clear that the mere sending of letters by the vendor expressing his desire to repurchase the property
without accompanying tender of the redemption price fell short of the requirements of law. (Lee v. Court of
Appeals, 68 SCRA 197 [1972])
Neither did petitioner make a judicial consignation of the repurchase price within the agreed period.
In a contract of sale with a right of repurchase, the redemptioner who may offer to make the repurchase on the
option date of redemption should deposit the full amount in court . . . (Rumbaoa v. Arzaga, 84 Phil. 812 [1949])
To effectively exercise the right to repurchase the vendor a retro must make an actual and simultaneous tender
of payment or consignation. (Catangcatang v. Legayada, 84 SCRA 51 [1978])
The private respondents' ineffectual acceptance of the option to buy validated the petitioner's refusal to sell the parcel which can
be considered as a withdrawal of the option to buy.
We agree with the petitioners that the case of Vda. de Zulueta v. Octaviano, (supra) is in point.
Stripped of non-essentials the facts of the Zulueta case are as follows: On November 25, 1952 (Emphasis supplied) Olimpia
Fernandez Vda. de Zulueta, the registered owner of a 5.5 hectare riceland sold the lot to private respondent Aurelio B. Octaviano
for P8,600.00 subject to certain terms and conditions. The contract was an absolute and definite sale. On the same day,
November 25, 1952, (Emphasis supplied) the vendee, Aurelio signed another document giving the vendor Zulueta the "option to
repurchase" the property at anytime after May 1958 but not later than May 1960. When however, Zulueta tried to exercise her
"option to buy" the property, Aurelio resisted the same prompting Zulueta to commence suit for recovery of ownership and
possession of the property with the then Court of First Instance of Iloilo.
The trial court ruled in favor of Zulueta. Upon appeal, however, the Court of Appeals reversed the trial court's decision.

We affirmed the appellate court's decision and ruled:

The nature of the transaction between Olimpia and Aurelio, from the context of Exhibit "E" is not a sale with
right to repurchase. Conventional redemption takes place "when the vendor reserves the right to repurchase
the thing sold, with the obligation to comply with the provisions of Article 1616 and other stipulations which may
have been agreed upon. (Article 1601, Civil Code).
In this case, there was no reservation made by the vendor, Olimpia, in the document Exhibit "E" the "option to
repurchase" was contained in a subsequent document and was made by the vendee, Aurelio. Thus, it was
more of an option to buy or a mere promise on the part of the vendee, Aurelio, to resell the property to the
vendor, Olimpia. (10 Manresa, p. 311 cited in Padilla's Civil Code Annotated, Vol. V, 1974 ed., p. 467) As held in
Villarica v. Court of Appeals (26 SCRA 189 [1968]):
The right of repurchase is not a right granted the vendor by the vendee in a subsequent
instrument, but is a right reserved by the vendor in the same instrument of sale as one of the
stipulations of the contract. Once the instrument of absolute sale is executed, the vendor can
no longer reserve the right to repurchase, and any right thereafter granted the vendor by the
vendee in a separate instrument cannot be a right of repurchase but some other right like the
option to buy in the instant case. . . (Emphasis supplied)
The appellate court rejected the application of the Zulueta case by stating:
. . . [A]s found by the trial court from which we quote with approval below, the said cases involve the lapse of
several days for the execution of separate instruments after the execution of the deed of sale, while the instant
case involves the execution of an instrument, separate as it is, but executed on the same day, and notarized by
the same notary public, to wit:
A close examination of Exh. "E" reveals that although it is a separate document in itself, it is far different from
the document which was pronounced as an option by the Supreme Court in the Villarica case. The option in the
Villarica case was executed several days after the execution of the deed of sale. In the present case, Exh. "E"
was executed and ratified by the same notary public and the Deed of Sale of Lot No. 1860 by the plaintiffs to
the defendants were notarized by the same notary public and entered in the same page of the same notarial
register . . .
The latter case (Vda. de Zulueta v. Octaviano, supra), likewise involved the execution of the separate document
after an intervention of several days and the question of laches was decided therein, which is not present in the
instant case. That distinction is therefore crucial and We are of the opinion that the appellee's right to
repurchase has been adequately provided for and reserved in conformity with Article 1601 of the Civil Code,
which states:
Conventional redemption shall take place when the vendor reserves the right to repurchase the thing sold, with
the obligation to comply with the provision of Article 1616 and other stipulations which may have been agreed
upon. (Rollo, pp. 46-47)
Obviously, the appellate court's findings are not reflected in the cited decision. As in the instant case, the option to repurchase
involved in the Zulueta case was executed in a separate document but on the same date that the deed of definite sale was
executed.
While it is true that this Court in the Zulueta case found Zulueta guilty of laches, this, however, was not the primary reason why
this Court disallowed the redemption of the property by Zulueta. It is clear from the decision that the ruling in the Zulueta case
was based mainly on the finding that the transaction between Zulueta and Octaviano was not a sale with right to repurchase and
that the "option to repurchase was but an option to buy or a mere promise on the part of Octaviano to resell the property to
Zulueta.
In the instant case, since the transaction between the petitioners and private respondents was not a sale with right to repurchase,
the private respondents cannot avail of Article 1601 of the Civil Code which provides for conventional redemption.
WHEREFORE, the petition is GRANTED. The questioned decision and resolution of the Court of Appeals are hereby
REVERSED and SET ASIDE. The complaint in Civil Case No. 839 of the then Court of First Instance of Negros Occidental 12th
Judicial District Branch 6 is DISMISSED. No costs.
SO ORDERED.