G.R. No. 83759 July 12, 1991 amount of P9,000.00.

The Deed of Sale was duly

ratified and notarized. On the same day and
SPOUSES CIPRIANO VASQUEZ and VALERIANA along with the execution of the Deed of Sale, a
GAYANELO, petitioners, separate instrument, denominated as Right to
vs. Repurchase (Exh. E), was executed by the parties
HONORABLE COURT OF APPEALS and SPOUSES granting plaintiffs the right to repurchase the lot
MARTIN VALLEJERA and APOLONIA OLEA,respondents. for P12,000.00, said Exh. E likewise duly ratified
and notarized. By virtue of the sale, defendants
Dionisio C. Isidto for petitioners. secured TCT No. T-58898 in their name. On
January 2, 1969, plaintiffs sold the same lot to
Raymundo Lozada, Jr. for private respondents. 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
GUTIERREZ, JR., J.:p the payment of P12,000.00 by the defendants to
Derrama.
This petition seeks to reverse the decision of the Court
of Appeals which affirmed the earlier decision of the Defendants resisted this action for redemption
Regional Trial Court, 6th Judicial Region, Branch 56, on the premise that Exh. E is just an option to
Himamaylan, Negros Occidental in Civil Case No. 839 buy since it is not embodied in the same
(for specific performance and damages) ordering the document of sale but in a separate document,
petitioners (defendants in the civil case) to resell Lot No. and since such option is not supported by a
1860 of the Cadastral Survey of Himamaylan, Negros consideration distinct from the price, said deed
Occidental to the respondents (plaintiffs in the civil case) for right to repurchase is not binding upon them.
upon payment by the latter of the amount of P24,000.00
as well as the appellate court's resolution denying a After trial, the court below rendered judgment
motion for reconsideration. In addition, the appellate against the defendants, ordering them to resell
court ordered the petitioners to pay the amount of lot No. 1860 of the Himamaylan Cadastre to the
P5,000.00 as necessary and useful expenses in plaintiffs for the repurchase price of P24,000.00,
accordance with Article 1616 of the Civil Code. which amount combines the price paid for the
first sale and the price paid by defendants to
The facts of the case are not in dispute. They are Benito Derrama, Jr.
summarized by the appellate court as follows:
Defendants moved for, but were denied
On January 15, 1975, the plaintiffs-spouses reconsideration. Excepting thereto, defendants-
(respondents herein) filed this action against the appealed, . . . (Rollo, pp. 44-45)
defendants-spouses (petitioners herein) seeking
to redeem Lot No. 1860 of the Himamaylan The petition was given due course in a resolution dated
Cadastre which was previously sold by plaintiffs February 12, 1990.
to defendants on September 21, 1964.
The petitioners insist that they can not be compelled to
The said lot was registered in the name of resell Lot No. 1860 of the Himamaylan Cadastre. They
plaintiffs. On October 1959, the same was leased contend that the nature of the sale over the said lot
by plaintiffs to the defendants up to crop year between them and the private respondents was that of
1966-67, which was extended to crop year 1968- an absolute deed of sale and that the right thereafter
69. After the execution of the lease, defendants granted by them to the private respondents (Right to
took possession of the lot, up to now and Repurchase, Exhibit "E") can only be either an option to
devoted the same to the cultivation of sugar. buy or a mere promise on their part to resell the
property. They opine that since the "RIGHT TO
On September 21, 1964, the plaintiffs sold the lot REPURCHASE" was not supported by any consideration
to the defendants under a Deed of Sale for the distinct from the purchase price it is not valid and
binding on the petitioners pursuant to Article 1479 of After several tenders of payment of the agreed sum of
the Civil Code. P1,510.00 made by Sanchez within the stipulated period
were rejected by Rigos, the former deposited said
The document denominated as "RIGHT TO amount with the Court of First Instance of Nueva Ecija
REPURCHASE" (Exhibit E) provides: and filed an action for specific performance and
damages against Rigos.
RIGHT TO REPURCHASE
The lower court rendered judgment in favor of Sanchez
KNOW ALL MEN BY THESE PRESENTS: and ordered Rigos to accept the sum judicially consigned
and to execute in Sanchez' favor the requisite deed of
I, CIPRIANO VASQUEZ, . . ., do hereby grant the conveyance. Rigos appealed the case to the Court of
spouses Martin Vallejera and Apolonia Olea, Appeals which certified to this Court on the ground that
their heirs and assigns, the right to repurchase it involves a pure question of law.
said Lot No. 1860 for the sum of TWELVE
THOUSAND PESOS (P12,000.00), Philippine This Court after deliberating on two conflicting
Currency, within the period TEN (10) YEARS from principles laid down in the cases of Southwestern Sugar
the agricultural year 1969-1970 when my and Molasses Co. v. Atlantic Gulf and Pacific Co., (97
contract of lease over the property shall expire Phil. 249 [1955]) and Atkins, Kroll & Co., Inc. v. Cua Hian
and until the agricultural year 1979-1980. Tek, 102 Phil. 948 [1958]) arrived at the conclusion that
Article 1479 of the Civil Code which provides: ––
IN WITNESS WHEREOF, I have hereunto signed
my name at Binalbagan, Negros Occidental, this Art. 1479. A promise to buy and sell a
21st day of September, 1964. determinate thing for a price certain is
reciprocally demandable.
SGD. CIPRIANO VASQUEZ
An accepted unilateral promise to buy or to sell a
SGD. VALERIANA G. VASQUEZ SGD. FRANCISCO SANICAS determinate thing for a price certain is binding
upon the promissory if the promise is supported
(Rollo, p. 47) by a consideration distinct from the price.

The Court of Appeals, applying the principles laid down and Article 1324 thereof which provides:
in the case of Sanchez v. Rigos, 45 SCRA 368 [1972]
decided in favor of the private respondents. Art. 1324. When the offerer has allowed the
offerer a certain period to accept, the offer may
In the Sanchez case, plaintiff-appellee Nicolas Sanchez be withdrawn at any time before acceptance by
and defendant-appellant Severino Rigos executed a communicating such withdrawal, except when
document entitled "Option to Purchase," whereby Mrs. the option is founded upon a consideration, as
Rigos "agreed, promised and committed . . . to sell" to something paid or promised.
Sanchez for the sum of P1,510.00, a registered parcel of
land within 2 years from execution of the document should be reconciled and harmonized to avoid a conflict
with the condition that said option shall be deemed between the two provisions. In effect, the Court
"terminated and lapsed," if "Sanchez shall fail to abandoned the ruling in the Southwestern Sugar and
exercise his right to buy the property" within the Molasses Co. case and reiterated the ruling in the Atkins,
stipulated period. In the same document, Sanchez" . . Kroll and Co. case, to wit:
. hereby agree and conform with all the conditions set
forth in the option to purchase executed in my favor, However, this Court itself, in the case of Atkins, Kroll and
that I bind myself with all the terms and conditions." Co., Inc. v. Cua Hian Tek, (102 Phil. 948, 951-952)
(Emphasis supplied) The notarized document was signed decided later than Southwestern Sugar & Molasses Co.
both by Sanchez and Rigos. 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 In the instant case and contrary to the appellate court's
such promise as an option which, although not binding finding, it is clear that the right to repurchase was not
as a contract in itself for lack of separate consideration, supported by a consideration distinct from the price.
nevertheless generated a bilateral contract of purchase The rule is that the promisee has the burden of proving
and sale upon acceptance. Speaking through Associate such consideration. Unfortunately, the private
Justice, later Chief Justice, Cesar Bengzon, this Court respondents, promisees in the right to repurchase failed
said: to prove such consideration. They did not even allege
the existence thereof in their complaint. (See Sanchez v.
Furthermore, an option is unilateral: a Rigos supra)
promise to sell at the price fixed
whenever the offeree should decide to Therefore, in order that the Sanchez case can be
exercise his option within the specified applied, the evidence must show that the private
time. After accepting the promise and respondents accepted the right to repurchase.
before he exercises his option, the holder
of the option is not bound to buy. He is The record, however, does not show that the private
free either to buy or not to buy later. In respondents accepted the "Right to Repurchase" the
this case however, upon accepting herein land in question. We disagree with the appellate court's
petitioner's offer a bilateral promise to finding that the private respondents accepted the "right
sell and to buy ensued, and the to repurchase" under the following circumstances: . . as
respondent ipso facto assumed the evidenced by the annotation and registration of the
obligation of a purchaser. He did not just same on the back of the transfer of certificate of title in
get the right subsequently to buy or not the name of appellants. As vividly appearing therein, it
to buy. It was not a mere option then; it was signed by appellant himself and witnessed by his
was bilateral contract of sale. wife so that for all intents and purposes the Vasquez
spouses are estopped from disregarding its obvious
Lastly, even supposing that Exh. A purpose and intention."
granted an option which is not binding for
lack of consideration, the authorities hold The annotation and registration of the right to
that repurchase at the back of the certificate of title of the
petitioners can not be considered as acceptance of the
If the option is given without a right to repurchase. Annotation at the back of the
consideration, it is a mere offer of a certificate of title of registered land is for the purpose
contract of sale, which is not binding until of binding purchasers of such registered land. Thus, we
accepted. If, however, acceptance is ruled in the case of Bel Air Village Association,
made before a withdrawal, it constitutes Inc. v. Dionisio (174 SCRA 589 [1989]), citing Tanchoco
a binding contract of sale, even though v. Aquino (154 SCRA 1 [1987]), and Constantino
the option was not supported by a v. Espiritu (45 SCRA 557 [1972]) that purchasers of a
sufficient consideration . . . (77 Corpus registered land are bound by the annotations found at
Juris Secundum p. 652. See also 27 Ruling the back of the certificate of title covering the subject
Case Law 339 and cases cited.) parcel of land. In effect, the annotation of the right to
repurchase found at the back of the certificate of title
This Court affirmed the lower court's decision although over the subject parcel of land of the private
the promise to sell was not supported by a respondents only served as notice of the existence of
consideration distinct from the price. It was obvious that such unilateral promise of the petitioners to resell the
Sanchez, the promisee, accepted the option to buy same to the private respondents. This, however, can not
before Rigos, the promisor, withdrew the same. Under be equated with acceptance of such right to repurchase
such circumstances, the option to purchase was by the private respondent.
converted into a bilateral contract of sale which bound
both parties. 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 We agree with the petitioners that the case of Vda. de
the promisee, in this case, the private respondents and Zulueta v. Octaviano, (supra) is in point.
not the promisors, the petitioners herein. It would be
absurd to require the promisor of an option to buy to Stripped of non-essentials the facts of the Zulueta case
accept his own offer instead of the promisee to whom are as follows: On November 25, 1952 (Emphasis
the option to buy is given. supplied) Olimpia Fernandez Vda. de Zulueta, the
registered owner of a 5.5 hectare riceland sold the lot to
Furthermore, the actions of the private respondents –– private respondent Aurelio B. Octaviano for P8,600.00
(a) filing a complaint to compel re-sale and their subject to certain terms and conditions. The contract
demands for resale prior to filing of the complaint was an absolute and definite sale. On the same day,
cannot be considered acceptance. As stated in Vda. de November 25, 1952, (Emphasis supplied) the vendee,
Zulueta v. Octaviano (121 SCRA 314 [1983]): Aurelio signed another document giving the vendor
Zulueta the "option to repurchase" the property at
And even granting, arguendo that the sale was a pacto anytime after May 1958 but not later than May 1960.
de retro sale, the evidence shows that Olimpia, through When however, Zulueta tried to exercise her "option to
her lawyer, opted to repurchase the land only on 16 buy" the property, Aurelio resisted the same prompting
February 1962, approximately two years beyond the Zulueta to commence suit for recovery of ownership and
stipulated period, that is not later than May, 1960. possession of the property with the then Court of First
Instance of Iloilo.
If Olimpia could not locate Aurelio, as she contends, and
based on her allegation that the contract between her The trial court ruled in favor of Zulueta. Upon appeal,
was one of sale with right to repurchase, neither, however, the Court of Appeals reversed the trial court's
however, did she tender the redemption price to private decision.
respondent Isauro, but merely wrote him letters
expressing her readiness to repurchase the property. We affirmed the appellate court's decision and ruled:

It is clear that the mere sending of letters by the vendor The nature of the transaction between Olimpia and
expressing his desire to repurchase the property without Aurelio, from the context of Exhibit "E" is not a sale with
accompanying tender of the redemption price fell short right to repurchase. Conventional redemption takes
of the requirements of law. (Lee v. Court of Appeals, 68 place "when the vendor reserves the right to repurchase
SCRA 197 [1972]) the thing sold, with the obligation to comply with the
provisions of Article 1616 and other stipulations which
Neither did petitioner make a judicial consignation of may have been agreed upon. (Article 1601, Civil Code).
the repurchase price within the agreed period.
In this case, there was no reservation made by the
In a contract of sale with a right of repurchase, the vendor, Olimpia, in the document Exhibit "E" the "option
redemptioner who may offer to make the repurchase on to repurchase" was contained in a subsequent
the option date of redemption should deposit the full document and was made by the vendee, Aurelio. Thus, it
amount in court . . . (Rumbaoa v. Arzaga, 84 Phil. 812 was more of an option to buy or a mere promise on the
[1949]) part of the vendee, Aurelio, to resell the property to the
vendor, Olimpia. (10 Manresa, p. 311 cited in Padilla's
To effectively exercise the right to repurchase the Civil Code Annotated, Vol. V, 1974 ed., p. 467) As held in
vendor a retro must make an actual and simultaneous Villarica v. Court of Appeals (26 SCRA 189 [1968]):
tender of payment or consignation. (Catangcatang v.
Legayada, 84 SCRA 51 [1978]) The right of repurchase is not a right granted the
vendor by the vendee in a subsequent
The private respondents' ineffectual acceptance of the instrument, but is a right reserved by the vendor
option to buy validated the petitioner's refusal to sell in the same instrument of sale as one of the
the parcel which can be considered as a withdrawal of stipulations of the contract. Once the instrument
the option to buy. of absolute sale is executed, the vendor can no
longer reserve the right to repurchase, and any
 right thereafter granted the vendor by the While it is true that this Court in the Zulueta case found
vendee in a separate instrument cannot be a Zulueta guilty of laches, this, however, was not the
right of repurchase but some other right like the primary reason why this Court disallowed the
option to buy in the instant case. . . (Emphasis redemption of the property by Zulueta. It is clear from
supplied) the decision that the ruling in the Zulueta case was
based mainly on the finding that the transaction
The appellate court rejected the application of the between Zulueta and Octaviano was not a sale with right
Zulueta case by stating: to repurchase and that the "option to repurchase was
but an option to buy or a mere promise on the part of
. . . [A]s found by the trial court from which we quote Octaviano to resell the property to Zulueta.
with approval below, the said cases involve the lapse of
several days for the execution of separate instruments In the instant case, since the transaction between the
after the execution of the deed of sale, while the instant petitioners and private respondents was not a sale with
case involves the execution of an instrument, separate right to repurchase, the private respondents cannot
as it is, but executed on the same day, and notarized by avail of Article 1601 of the Civil Code which provides for
the same notary public, to wit: conventional redemption.

A close examination of Exh. "E" reveals that although it WHEREFORE, the petition is GRANTED. The questioned
is a separate document in itself, it is far different from decision and resolution of the Court of Appeals are
the document which was pronounced as an option by hereby REVERSED and SET ASIDE. The complaint in Civil
the Supreme Court in the Villarica case. The option in Case No. 839 of the then Court of First Instance of
the Villarica case was executed several days after the Negros Occidental 12th Judicial District Branch 6 is
execution of the deed of sale. In the present case, Exh. DISMISSED. No costs.
"E" was executed and ratified by the same notary public
and the Deed of Sale of Lot No. 1860 by the plaintiffs to SO ORDERED.
the defendants were notarized by the same notary
public and entered in the same page of the same G.R. No. 103338 January 4, 1994
notarial register . . .
FEDERICO SERRA, petitioner,
The latter case (Vda. de Zulueta v. Octaviano, supra), vs.
likewise involved the execution of the separate THE HON. COURT OF APPEALS AND RIZAL
document after an intervention of several days and the COMMERCIAL BANKING CORPORATION, respondents.
question of laches was decided therein, which is not
present in the instant case. That distinction is therefore Andres R. Amante, Jr. for petitioner.
crucial and We are of the opinion that the appellee's
right to repurchase has been adequately provided for R.C. Domingo, Jr. & Associates for private respondent.
and reserved in conformity with Article 1601 of the Civil
Code, which states:

Conventional redemption shall take place when the NOCON, J.:

vendor reserves the right to repurchase the thing sold,
with the obligation to comply with the provision of A promise to buy and sell a determinate thing for a price
Article 1616 and other stipulations which may have certain is reciprocally demandable. An accepted
been agreed upon. (Rollo, pp. 46-47) unilateral promise to buy and sell a determinate thing
for a price certain is binding upon the promisor if the
Obviously, the appellate court's findings are not promise is supported by a consideration distinct from
reflected in the cited decision. As in the instant case, the the price. (Article 1479, New Civil Code) The first is the
option to repurchase involved in the Zulueta case was mutual promise and each has the right to demand from
executed in a separate document but on the same the other the fulfillment of the obligation. While the
date that the deed of definite sale was executed. second is merely an offer of one to another, which if
accepted, would create an obligation to the offeror to
make good his promise, provided the acceptance is 2. During the period of the lease, the LESSEE
supported by a consideration distinct from the price. covenants to pay the LESSOR, at the latter's
residence, a monthly rental of SEVEN HUNDRED
Disputed in the present case is the efficacy of a PESOS (P700.00), Philippine Currency, payable in
"Contract of Lease with Option to Buy", entered into advance on or before the fifth (5th) day of every
between petitioner Federico Serra and private calendar month, provided that the rentals for the
respondent Rizal Commercial Banking Corporation. first four (4) months shall be paid by the LESSEE
(RCBC). in advance upon the signing of this Contract.

Petitioner is the owner of a 374 square meter parcel of 3. The LESSEE is hereby authorized to construct
land located at Quezon St., Masbate, Masbate. as its sole expense a building and such other
Sometime in 1975, respondent bank, in its desire to put improvements on said parcel of land, which it
up a branch in Masbate, Masbate, negotiated with may need in pursuance of its business and/or
petitioner for the purchase of the then unregistered operations; provided, that if for any reason the
property. On May 20, 1975, a contract of LEASE WITH LESSEE shall fail to exercise its option mentioned
OPTION TO BUY was instead forged by the parties, the in paragraph (1) above in case the parcel of land
pertinent portion of which reads: is registered under the TORRENS SYSTEM within
the ten-year period mentioned therein, said
1. The LESSOR leases unto the LESSEE, an the building and/or improvements, shall become the
LESSEE hereby accepts in lease, the parcel of land property of the LESSOR after the expiration of
described in the first WHEREAS clause, to have the 25-year lease period without the right of
and to hold the same for a period of twenty-five reimbursement on the part of the LESSEE. The
(25) years commencing from June 1, 1975 to authority herein granted does not, however,
June 1, 2000. The LESSEE, however, shall have extend to the making or allowing any unlawful,
the option to purchase said parcel of land within improper or offensive used of the leased
a period of ten (10) years from the date of the premises, or any use thereof, other than banking
signing of this Contract at a price not greater and office purposes. The maintenance and
than TWO HUNDRED TEN PESOS (P210.00) per upkeep of such building, structure and
square meter. For this purpose, the LESSOR improvements shall likewise be for the sole
undertakes, within such ten-year period, to account of the LESSEE. 1
register said parcel of land under the TORRENS
SYSTEM and all expenses appurtenant thereto The foregoing agreement was subscribed before Notary
shall be for his sole account. Public Romeo F. Natividad.

If, for any reason, said parcel of land is not Pursuant to said contract, a building and other
registered under the TORRENS SYSTEM within improvements were constructed on the land which
the aforementioned ten-year period, the LESSEE housed the branch office of RCBC in Masbate, Masbate.
shall have the right, upon termination of the Within three years from the signing of the contract,
lease to be paid by the LESSOR the market value petitioner complied with his part of the agreement by
of the building and improvements constructed having the property registered and
on said parcel of land. placed under the TORRENS SYSTEM, for which Original
Certificate of Title No. 0-232 was issued by the Register
The LESSEE is hereby appointed attorney-in-fact of Deeds of the Province of Masbate.
for the LESSOR to register said parcel of land
under the TORRENS SYSTEM in case the LESSOR, Petitioner alleges that as soon as he had the property
for any reason, fails to comply with his obligation registered, he kept on pursuing the manager of the
to effect said registration within reasonable time branch to effect the sale of the lot as per their
after the signing of this Agreement, and all agreement. It was not until September 4, 1984,
expenses appurtenant to such registration shall however, when the respondent bank decided to
be charged by the LESSEE against the rentals due exercise its option and informed petitioner, through a
to the LESSOR. letter, 2 of its intention to buy the property at the
agreed price of not greater than P210.00 per square Initially, after trial on the merits, the court dismissed the
meter or a total of P78,430.00. But much to the surprise complaint. Although it found the contract to be valid,
of the respondent, petitioner replied that he is no longer the court nonetheless ruled that the option to buy in
selling the property. 3 unenforceable because it lacked a consideration distinct
from the price and RCBC did not exercise its option
Hence, on March 14, 1985, a complaint for specific within reasonable time. The prayer for readjustment of
performance and damages were filed by respondent rental was denied, as well as that for moral and
against petitioner. In the complaint, respondent alleged exemplary damages. 7
that during the negotiations it made clear to petitioner
that it intends to stay permanently on property once its Nevertheless, upon motion for reconsideration of
branch office is opened unless the exigencies of the respondent, the court in the order of January 9, 1989,
business requires otherwise. Aside from its prayer for reversed itself, the dispositive portion reads:
specific performance, it likewise asked for an award of
P50,000.00 for attorney's fees P100,000.00 as WHEREFORE, the Court reconsiders its decision dated
exemplary damages and the cost of the suit. 4 June 6, 1988, and hereby renders judgment as follows:

A special and affirmative defenses, petitioner 1. The defendant is hereby ordered to execute and
contended: deliver the proper deed of sale in favor of plaintiff
selling, transferring and
1. That the contract having been prepared and drawn by conveying the property covered by and described in the
RCBC, it took undue advantage on him when it set in Original Certificate of Title 0-232 of the Registry of
lopsided terms. Deeds of Masbate for the sum of Seventy Eight
Thousand Five Hundred Forty Pesos (P78,540,00),
2. That the option was not supported by any Philippine Currency;
consideration distinct from the price and hence not
binding upon him. 2. Defendant is ordered to pay plaintiff the sum of Five
Thousand (P5,000.00) Pesos as attorney's fees;
3. That as a condition for the validity and/or efficacy of
the option, it should have been exercised within the 3. The counter claim of defendant is hereby dismissed;
reasonable time after the registration of the land under and
the Torrens System; that its delayed action on the
option have forfeited whatever its claim to the same. 4. Defendants shall pay the costs of suit. 8

4. That extraordinary inflation supervened resulting in In a decision promulgated on September 19, 1991, 9 the
the unusual decrease in the purchasing power of the Court of Appeals affirmed the findings of the trial court
currency that could not reasonably be forseen or was that:
manifestly beyond the contemplation of the parties at
the time of the establishment of the obligation, thus, 1. The contract is valid and that the parties perfectly
rendering the terms of the contract unenforceable, understood the contents thereof;
inequitable and to the undue enrichment of RCBC. 5
2. The option is supported by a distinct and separate
and as counterclaim petitioner alleged that: consideration as embodied in the agreement;

1. The rental of P700.00 has become unrealistic and 3. There is no basis in granting an adjustment in rental.
unreasonable, that justice and equity will require its
adjustment. Assailing the judgment of the appellate court, petitioner
would like us to consider mainly the following:
2. By the institution of the complaint he suffered moral
damages which may be assessed at P100,000.00 and 1. The disputed contract is a contract of adhesion.
award of attorney's fee of P25,000.00 and exemplary
damages at P100,000.00. 6
2. There was no consideration to support the option, 1479 of the Code provides that an accepted unilateral
distinct from the price, hence the option cannot be promise to buy and sell a determinate thing for a price
exercised. certain is binding upon the promisor if the promise
is supported by a consideration distinct from the price.
3. Respondent court gravely abused its discretion in not
granting currency adjustment on the already eroded In a unilateral promise to sell, where the debtor fails to
value of the stipulated rentals for twenty-five years. withdraw the promise before the acceptance by the
creditor, the transaction becomes a bilateral contract to
The petition is devoid of merit. sell and to buy, because upon acceptance by the
creditor of the offer to sell by the debtor, there is
There is no dispute that the contract is valid and existing already a meeting of the minds of the parties as to the
between the parties, as found by both the trial court thing which is determinate and the price which is
and the appellate court. Neither do we find the terms of certain. 14 In which case, the parties may then
the contract unfairly lopsided to have it ignored. reciprocally demand performance.

A contract of adhesion is one wherein a party, usually a Jurisprudence has taught us that an optional contract is
corporation, prepares the stipulations in the contract, a privilege existing only in one party — the buyer. For a
while the other party merely affixes his signature or his separate consideration paid, he is given the right to
"adhesion" thereto. These types of contracts are as decide to purchase or not, a certain merchandise or
binding as ordinary contracts. Because in reality, the property, at any time within the agreed period, at a
party who adheres to the contract is free to reject it fixed price. This being his prerogative, he may not be
entirely. Although, this Court will not hesitate to rule out compelled to exercise the option to buy before the time
blind adherence to terms where facts and circumstances expires. 15
will show that it is basically one-sided. 10
On the other hand, what may be regarded as a
We do not find the situation in the present case to be consideration separate from the price is discussed in the
inequitable. Petitioner is a highly educated man, who, at case ofVda. de Quirino v. Palarca 16 wherein the facts
the time of the trial was already a CPA-Lawyer, and are almost on all fours with the case at bar. The said
when he entered into the contract, was already a CPA, case also involved a lease contract with option to buy
holding a respectable position with the Metropolitan where we had occasion to say that "the consideration
Manila Commission. It is evident that a man of his for the lessor's obligation to sell the leased premises to
stature should have been more cautious in transactions the lessee, should he choose to exercise his option to
he enters into, particularly where it concerns valuable purchase the same, is the obligation of the lessee to sell
properties. He is amply equipped to drive a hard bargain to the lessor the building and/or improvements
if he would be so minded to. constructed and/or made by the former, if he fails to
exercise his option to buy leased premises." 17
Petitioner contends that the doctrines laid down in the
cases of Atkins Kroll v. Cua Hian Tek, 11 Sanchez In the present case, the consideration is even more
v. Rigos, 12 and Vda. de Quirino v. Palarca 13 were onerous on the part of the lessee since it entails
misapplied in the present case, because 1) the option transferring of the building and/or improvements on the
given to the respondent bank was not supported by a property to petitioner, should respondent bank fail to
consideration distinct from the price; and 2) that the exercise its option within the period stipulated. 18
stipulated price of "not greater than P210.00 per square
meter" is not certain or definite. The bugging question then is whether the price "not
greater than TWO HUNDRED PESOS" is certain or
Article 1324 of the Civil Code provides that when an definite. A price is considered certain if it is so with
offeror has allowed the offeree a certain period to reference to another thing certain or when the
accept, the offer maybe withdrawn at anytime before determination thereof is left to the judgment of a
acceptance by communicating such withdrawal, except specified person or persons. 19 And generally, gross
when the option is founded upon consideration, as inadequacy of price does not affect a contract of sale. 20
something paid or promised. On the other hand, Article
Contracts are to be construed according to the sense the parties at the time of the establishment of the
and meaning of the terms which the parties themselves obligation. 23
have used. In the present dispute, there is evidence to
show that the intention of the parties is to peg the price Premises considered, we find that the contract of
at P210 per square meter. This was confirmed by "LEASE WITH OPTION TO BUY" between petitioner and
petitioner himself in his testimony, as follows: respondent bank is valid, effective and enforceable, the
price being certain and that there was consideration
Q. Will you please tell this Court what was the offer? distinct from the price to support the option given to the
lessee.
A. It was an offer to buy the property that I have in
Quezon City (sic). WHEREFORE, this petition is hereby DISMISSED, and the
decision of the appellate court is hereby AFFIRMED.
Q. And did they give you a specific amount?
SO ORDERED.
xxx xxx xxx
G.R. No. 168325 December 8, 2010
A. Well, there was an offer to buy the property at P210
per square meters (sic). ROBERTO D. TUAZON, Petitioner,
vs.
Q. And that was in what year? LOURDES Q. DEL ROSARIO-SUAREZ, CATALINA R.
SUAREZ-DE LEON, WILFREDO DE LEON, MIGUEL LUIS S.
A . 1975, sir. DE LEON, ROMMEL LEE S. DE LEON, and GUILLERMA L.
SANDICO-SILVA, as attorney-in-fact of the defendants,
Q. And did you accept the offer? except Lourdes Q. Del Rosario-Suarez, Respondents.

A. Yes, sir. 21 DECISION

Moreover, by his subsequent acts of having the land DEL CASTILLO, J.:
titled under the Torrens System, and in pursuing the
bank manager to effect the sale immediately, means In a situation where the lessor makes an offer to sell to
that he understood perfectly the terms of the contract. the lessee a certain property at a fixed price within a
He even had the same property mortgaged to the certain period, and the lessee fails to accept the offer or
respondent bank sometime in 1979, without the to purchase on time, then the lessee loses his right to
slightest hint of wanting to abandon his offer to sell the buy the property and the owner can validly offer it to
property at the agreed price of P210 per square another.
meter. 22
This Petition for Review on Certiorari1 assails the
Finally, we agree with the courts a quo that there is no Decision2 dated May 30, 2005 of the Court of Appeals
basis, legal or factual, in adjusting the amount of the (CA) in CA-G.R. CV No. 78870, which affirmed the
rent. The contract is the law between the parties and if Decision3 dated November 18, 2002 of the Regional Trial
there is indeed reason to adjust the rent, the parties Court (RTC), Branch 101, Quezon City in Civil Case No. Q-
could by themselves negotiate for the amendment of 00-42338.
the contract. Neither could we consider the decline of
the purchasing power of the Philippine peso from 1983 Factual Antecedents
to the time of the commencement of the present case in
1985, to be so great as to result in an extraordinary Respondent Lourdes Q. Del Rosario-Suarez (Lourdes)
inflation. Extraordinary inflation exists when there in an was the owner of a parcel of land, containing more or
unimaginable increase or decrease of the purchasing less an area of 1,211 square meters located along
power of the Philippine currency, or fluctuation in the Tandang Sora Street, Barangay Old Balara, Quezon City
value of pesos manifestly beyond the contemplation of and previously covered by Transfer Certificate of Title
(TCT) No. RT-561184 issued by the Registry of Deeds of On September 17, 2001, the RTC issued an
Quezon City. Order13 declaring Lourdes and the De Leons in default
for their failure to appear before the court for the
On June 24, 1994, petitioner Roberto D. Tuazon second time despite notice. Upon a Motion for
(Roberto) and Lourdes executed a Contract of Reconsideration,14 the trial court in an Order15 dated
Lease5 over the abovementioned parcel of land for a October 19, 2001 set aside its Order of default.
period of three years. The lease commenced in March
1994 and ended in February 1997. During the effectivity After trial, the court a quo rendered a Decision declaring
of the lease, Lourdes sent a letter6 dated January 2, the Deed of Absolute Sale made by Lourdes in favor of
1995 to Roberto where she offered to sell to the latter the De Leons as valid and binding. The offer made by
subject parcel of land. She pegged the price Lourdes to Roberto did not ripen into a contract to sell
at P37,541,000.00 and gave him two years from January because the price offered by the former was not
2, 1995 to decide on the said offer. acceptable to the latter. The offer made by Lourdes is no
longer binding and effective at the time she decided to
On June 19, 1997, or more than four months after the sell the subject lot to the De Leons because the same
expiration of the Contract of Lease, Lourdes sold subject was not accepted by Roberto. Thus, in a Decision dated
parcel of land to her only child, Catalina Suarez-De Leon, November 18, 2002, the trial court dismissed the
her son-in-law Wilfredo De Leon, and her two complaint. Its dispositive portion reads:
grandsons, Miguel Luis S. De Leon and Rommel S. De
Leon (the De Leons), for a total consideration of WHEREFORE, premises considered, judgment is hereby
onlyP2,750,000.00 as evidenced by a Deed of Absolute rendered dismissing the above-entitled Complaint for
Sale7 executed by the parties. TCT No. 1779868 was then lack of merit, and ordering the Plaintiff to pay the
issued by the Registry of Deeds of Quezon City in the Defendants, the following:
name of the De Leons.
1. the amount of P30,000.00 as moral damages;
The new owners through their attorney-in-fact,
Guillerma S. Silva, notified Roberto to vacate the 2. the amount of P30,000.00 as exemplary
premises. Roberto refused hence, the De Leons filed a damages;
complaint for Unlawful Detainer before the
Metropolitan Trial Court (MeTC) of Quezon City against 3. the amount of P30,000.00 as attorney’s fees;
him. On August 30, 2000, the MeTC rendered a and
Decision9 ordering Roberto to vacate the property for
non-payment of rentals and expiration of the contract. 4. cost of the litigation.

Ruling of the Regional Trial Court SO ORDERED.16

On November 8, 2000, while the ejectment case was on Ruling of the Court of Appeals
appeal, Roberto filed with the RTC of Quezon City a
Complaint10 for Annulment of Deed of Absolute Sale, On May 30, 2005, the CA issued its Decision dismissing
Reconveyance, Damages and Application for Preliminary Roberto’s appeal and affirming the Decision of the RTC.
Injunction against Lourdes and the De Leons. On
November 13, 2000, Roberto filed a Notice of Lis Hence, this Petition for Review on Certiorari filed by
Pendens11with the Registry of Deeds of Quezon City. Roberto advancing the following arguments:

On January 8, 2001, respondents filed An Answer with I.

Counterclaim12 praying that the Complaint be dismissed
for lack of cause of action. They claimed that the filing of The Trial Court and the Court of Appeals had decided
such case was a mere leverage of Roberto against them that the "Right of First Refusal" exists only within the
because of the favorable Decision issued by the MeTC in parameters of an "Option to Buy", and did not exist
the ejectment case. when the property was sold later to a third person,
under favorable terms and conditions which the former ‘A contract by virtue of which A, in consideration of the
buyer can meet. payment of a certain sum to B, acquires the privilege of
buying from, or selling to, B certain securities or
II. properties within a limited time at a specified price.
(Story vs. Salamon, 71 N. Y., 420.)’
What is the status or sanctions of an appellee in the
Court of Appeals who has not filed or failed to file an From Vol. 6, page 5001, of the work "Words and
appellee’s brief?17 Phrases," citing the case of Ide vs. Leiser (24 Pac., 695;
10 Mont., 5; 24 Am. St. Rep., 17) the following quotation
Petitioner’s Arguments has been taken:

Roberto claims that Lourdes violated his right to buy ‘An agreement in writing to give a person the ‘option’ to
subject property under purchase lands within a given time at a named price is
neither a sale nor an agreement to sell. It is simply a
the principle of "right of first refusal" by not giving him contract by which the owner of property agrees with
"notice" and the opportunity to buy the property under another person that he shall have the right to buy his
the same terms and conditions or specifically based on property at a fixed price within a certain time. He does
the much lower price paid by the De Leons. not sell his land; he does not then agree to sell it; but he
does sell something; that is, the right or privilege to buy
Roberto further contends that he is enforcing his "right at the election or option of the other party. The second
of first refusal" based on Equatorial Realty Development, party gets in praesenti, not lands, nor an agreement that
Inc. v. Mayfair Theater, Inc.18 which is the leading case he shall have lands, but he does get something of value;
on the "right of first refusal." that is, the right to call for and receive lands if he elects.
The owner parts with his right to sell his lands, except to
Respondents’ Arguments the second party, for a limited period. The second party
receives this right, or rather, from his point of view, he
On the other hand, respondents posit that this case is receives the right to elect to buy.
not covered by the principle of "right of first refusal" but
an unaccepted unilateral promise to sell or, at best, a But the two definitions above cited refer to the contract
contract of option which was not perfected. The letter of option, or, what amounts to the same thing, to the
of Lourdes to Roberto clearly embodies an option case where there was cause or consideration for the
contract as it grants the latter only two years to exercise obligation x x x. (Emphasis supplied.)
the option to buy the subject property at a price certain
of P37,541,000.00. As an option contract, the said letter On the other hand, in Ang Yu Asuncion v. Court of
would have been binding upon Lourdes without need of Appeals,20 an elucidation on the "right of first refusal"
any consideration, had Roberto accepted the offer. But was made thus:
in this case there was no acceptance made neither was
there a distinct consideration for the option contract. In the law on sales, the so-called ‘right of first refusal’ is
an innovative juridical relation. Needless to point out, it
Our Ruling cannot be deemed a perfected contract of sale under
Article 1458 of the Civil Code. Neither can the right of
The petition is without merit. first refusal, understood in its normal concept, per se be
brought within the purview of an option under the
This case involves an option contract and not a contract second paragraph of Article 1479, aforequoted, or
of a right of first refusal possibly of an offer under Article 1319 of the same
Code. An option or an offer would require, among other
In Beaumont v. Prieto,19 the nature of an option contract things, a clear certainty on both the object and the cause
is explained thus: or consideration of the envisioned contract. In a right of
first refusal, while the object might be made
In his Law Dictionary, edition of 1897, Bouvier defines an determinate, the exercise of the right, however, would
option as a contract, in the following language: be dependent not only on the grantor's eventual
intention to enter into a binding juridical relation with I am getting very old (79 going 80 yrs. old) and wish to
another but also on terms, including the price, that live in the U.S.A. with my only family. I need money to
obviously are yet to be later firmed up. Prior thereto, it buy a house and lot and a farm with a little cash to start.
can at best be so described as merely belonging to a
class of preparatory juridical relations governed not by I am offering you to buy my 1211 square
contracts (since the essential elements to establish meter at P37,541,000.00 you can pay me in dollars in
the vinculum juris would still be indefinite and the name of my daughter. I never offered it to anyone.
inconclusive) but by, among other laws of general Please shoulder the expenses for the transfer. I wish the
application, the pertinent scattered provisions of the Lord God will help you buy my lot easily and you will be
Civil Code on human conduct. very lucky forever in this place. You have all the time to
decide when you can, but not for 2 years or more.
Even on the premise that such right of first refusal has
been decreed under a final judgment, like here, its I wish you long life, happiness, health, wealth and great
breach cannot justify correspondingly an issuance of a fortune always!
writ of execution under a judgment that merely
recognizes its existence, nor would it sanction an action I hope the Lord God will help you be the recipient of
for specific performance without thereby negating the multi-billion projects aid from other countries.
indispensable element of consensuality in the perfection
of contracts. It is not to say, however, that the right of Thank you,
first refusal would be inconsequential for, such as
already intimated above, an unjustified disregard Lourdes Q. del Rosario vda de Suarez
thereof, given, for instance, the circumstances
expressed in Article 19 of the Civil Code, can warrant a It is clear that the above letter embodies an option
recovery for damages. (Emphasis supplied.) contract as it grants Roberto a fixed period of only two
years to buy the subject property at a price certain
From the foregoing, it is thus clear that an option of P37,541,000.00. It being an option contract, the rules
contract is entirely different and distinct from a right of applicable are found in Articles 1324 and 1479 of the
first refusal in that in the former, the option granted to Civil Code which provide:
the offeree is for a fixed period and at a determined
price. Lacking these two essential requisites, what is Art. 1324. When the offerer has allowed the offeree a
involved is only a right of first refusal. certain period to accept, the offer may be withdrawn at
any time before acceptance by communicating such
In this case, the controversy is whether the letter of withdrawal, except when the option is founded upon a
Lourdes to Roberto dated January 2, 1995 involved an consideration, as something paid or promised.
option contract or a contract of a right of first refusal. In
its entirety, the said letter-offer reads: Art. 1479. A promise to buy and sell a determinate thing
for a price certain is reciprocally demandable.
206 Valdes Street
Josefa Subd. Balibago An accepted unilateral promise to buy or to sell a
Angeles City 2009 determinate thing for a price certain is binding upon the
promissor if the promise is supported by a consideration
January 2, 1995 distinct from the price.

Tuazon Const. Co. It is clear from the provision of Article 1324 that there is
986 Tandang Sora Quezon City a great difference between the effect of an option which
is without a consideration from one which is founded
Dear Mr. Tuazon, upon a consideration. If the option is without any
consideration, the offeror may withdraw his offer by
I received with great joy and happiness the big box of communicating such withdrawal to the offeree at
sweet grapes and ham, fit for a king’s party. Thanks very anytime before acceptance; if it is founded upon a
much.
consideration, the offeror cannot withdraw his offer offeror, on the other hand, would be liable for damages
before the lapse of the period agreed upon. if he fails to deliver the thing he had offered for sale.

The second paragraph of Article 1479 declares that "an xxxx

accepted unilateral promise to buy or to sell a
determinate thing for a price certain is binding upon the Even if the promise was accepted, private respondent
promissor if the promise is supported by a consideration was not bound thereby in the absence of a distinct
distinct from the price." Sanchez v. Rigos21 provided an consideration. (Emphasis ours.)
interpretation of the said second paragraph of Article
1479 in relation to Article 1324. Thus: In this case, it is undisputed that Roberto did not accept
the terms stated in the letter of Lourdes as he
There is no question that under Article 1479 of the new negotiated for a much lower price. Roberto’s act of
Civil Code "an option to sell," or "a promise to buy or to negotiating for a much lower price was a counter-offer
sell," as used in said article, to be valid must be and is therefore not an acceptance of the offer of
"supported by a consideration distinct from the price." Lourdes. Article 1319 of the Civil Code provides:
This is clearly inferred from the context of said article
that a unilateral promise to buy or to sell, even if Consent is manifested by the meeting of the offer and
accepted, is only binding if supported by consideration. the acceptance upon the thing and the cause which are
In other words, "an accepted unilateral promise can only to constitute the contract. The offer must be certain and
have a binding effect if supported by a consideration, the acceptance absolute. A qualified
which means that the option can still be acceptanceconstitutes a counter-offer. (Emphasis
withdrawn, even if accepted, if the same is not supplied.)
supported by any consideration. Hence, it is not
disputed that the option is without consideration. It can The counter-offer of Roberto for a much lower price was
therefore be withdrawn notwithstanding the acceptance not accepted by Lourdes. There is therefore no contract
made of it by appellee. that was perfected between them with regard to the
sale of subject property. Roberto, thus, does not have
It is true that under Article 1324 of the new Civil Code, any right to demand that the property be sold to him at
the general rule regarding offer and acceptance is that, the price for which it was sold to the De Leons neither
when the offerer gives to the offeree a certain period to does he have the right to demand that said sale to the
accept, "the offer may be withdrawn at any time before De Leons be annulled.
acceptance" except when the option is founded upon
consideration, but this general rule must be interpreted Equatorial Realty Development, Inc. v. Mayfair Theater,
asmodified by the provision of Article 1479 above Inc. is not applicable here
referred to, which applies to "a promise to buy and
sell"specifically. As already stated, this rule requires that It is the position of Roberto that the facts of this case
a promise to sell to be valid must be supported by a and that of Equatorial are similar in nearly all aspects.
consideration distinct from the price. Roberto is a lessee of the property like Mayfair Theater
in Equatorial. There was an offer made to Roberto by
In Diamante v. Court of Appeals,22 this Court further Lourdes during the effectivity of the contract of lease
declared that: which was also the case in Equatorial. There were
negotiations as to the price which did not bear fruit
A unilateral promise to buy or sell is a mere offer, which because Lourdes sold the property to the De Leons
is not converted into a contract except at the moment it which was also the case in Equatorial wherein Carmelo
is accepted. Acceptance is the act that gives life to a and Bauermann sold the property to Equatorial. The
juridical obligation, because, before the promise is existence of the lease of the property is known to the De
accepted, the promissor may withdraw it at any time. Leons as they are related to Lourdes while in Equatorial,
Upon acceptance, however, a bilateral contract to sell the lawyers of Equatorial studied the lease contract of
and to buy is created, and the offeree ipso Mayfair over the property. The property in this case was
facto assumes the obligations of a purchaser; the sold by Lourdes to the De Leons at a much lower price
which is also the case in Equatorial where Carmelo and
Bauerman sold to Equatorial at a lesser price. It is ofEquatorial. Therefore, there is no justification to annul
Roberto’s conclusion that as in the case the deed of sale validly entered into by Lourdes with the
of Equatorial, there was a violation of his right of first De Leons.
refusal and hence annulment or rescission of the Deed
of Absolute Sale is the proper remedy. What is the effect of the failure of Lourdes to file her
appellee’s brief at the CA?
Roberto’s reliance in Equatorial is misplaced. Despite his
claims, the facts in Equatorial radically differ from the Lastly, Roberto argues that Lourdes should be
facts of this case. Roberto overlooked the fact that sanctioned for her failure to file her appellee’s brief
in Equatorial, there was an express provision in the before the CA.
Contract of Lease that –
Certainly, the appellee’s failure to file her brief would
(i)f the LESSOR should desire to sell the leased not mean that the case would be automatically decided
properties, the LESSEE shall be given 30-days exclusive against her. Under the circumstances, the prudent
option to purchase the same. action on the part of the CA would be to deem Lourdes
to have waived her right to file her appellee’s brief. De
There is no such similar provision in the Contract of Leon v. Court of Appeals,23 is instructive when this Court
Lease between Roberto and Lourdes. What is involved decreed:
here is a separate and distinct offer made by Lourdes
through a letter dated January 2, 1995 wherein she is On the second issue, we hold that the Court of Appeals
selling the leased property to Roberto for a definite did not commit grave abuse of discretion in considering
price and which gave the latter a definite period for the appeal submitted for decision. The proper remedy in
acceptance. Roberto was not given a right of first case of denial of the motion to dismiss is to file the
refusal. The letter-offer of Lourdes did not form part of appellee’s brief and proceed with the appeal. Instead,
the Lease Contract because it was made more than six petitioner opted to file a motion for reconsideration
months after the commencement of the lease. which, unfortunately, was pro forma. All the grounds
raised therein have been discussed in the first resolution
It is also very clear that in Equatorial, the property was of the respondent Court of Appeals. There is no new
sold within the lease period. In this case, the subject ground raised that might warrant reversal of the
property was sold not only after the expiration of the resolution. A cursory perusal of the motion would
period provided in the letter-offer of Lourdes but also readily show that it was a near verbatim repetition of
after the effectivity of the Contract of Lease. the grounds stated in the motion to dismiss; hence, the
filing of the motion for reconsideration did not suspend
Moreover, even if the offer of Lourdes was accepted by the period for filing the appellee’s brief. Petitioner was
Roberto, still the former is not bound thereby because therefore properly deemed to have waived his right to
of the absence of a consideration distinct and separate file appellee’s brief.(Emphasis supplied.)lawphi1
from the price. The argument of Roberto that the
separate consideration was the liberality on the part of In the above cited case, De Leon was the plaintiff in a
Lourdes cannot stand. A perusal of the letter-offer of Complaint for a sum of money in the RTC. He obtained a
Lourdes would show that what drove her to offer the favorable judgment and so defendant went to the CA.
property to Roberto was her immediate need for funds The appeal of defendant-appellant was taken
as she was already very old. Offering the property to cognizance of by the CA but De Leon filed a Motion to
Roberto was not an act of liberality on the part of Dismiss the Appeal with Motion to Suspend Period to
Lourdes but was a simple matter of convenience and file Appellee’s Brief. The CA denied the Motion to
practicality as he was the one most likely to buy the Dismiss. De Leon filed a Motion for Reconsideration
property at that time as he was then leasing the same. which actually did not suspend the period to file the
appellee’s brief. De Leon therefore failed to file his brief
All told, the facts of the case, as found by the RTC and within the period specified by the rules and hence he
the CA, do not support Roberto’s claims that the letter was deemed by the CA to have waived his right to file
of Lourdes gave him a right of first refusal which is appellee’s brief.
similar to the one given to Mayfair Theater in the case
The failure of the appellee to file his brief would not On October 4, 1947, said petitioner — hereinafter
result to the rendition of a decision favorable to the referred to as the lessor — and respondent Jose Palarca
appellant. The former is considered only to have waived — hereinafter referred to as the lessee — entered into a
his right to file the Appellee’s Brief. The CA has the lease contract whereby the former leased to the latter a
jurisdiction to resolve the case based on the Appellant’s parcel of land known as Lot 30 of block 84 of the Sulucan
Brief and the records of the case forwarded by the RTC. Subdivision, located at Sampaloc, Manila, with an area
The appeal is therefore considered submitted for of about 150 square meters, and more particularly
decision and the CA properly acted on it. described in TCT No. 59442 of the Office of the Register
of Deeds of Manila. In their written contract of lease it
WHEREFORE, the instant petition for review was stipulated, inter alia, that the term thereof would
on certiorari is DENIED. The assailed Decision of the be ten (10) years, from November 1, 1947 to November
Court of Appeals in CA-G.R. CV No. 78870, which 1, 1957; that the monthly rental would be P250, payable
affirmed the Decision dated November 18, 2002 of the in advance; that the lessee could demolish the lessor's
Regional Trial Court, Branch 101, Quezon City in Civil old building on the leased premises and construct
Case No. Q-00-42338 is AFFIRMED. thereon any building and/or improvements suitable for
school purposes, which new building and/or
SO ORDERED. improvements shall belong to the lessee; that within
one (1) year after the expiration of the lease, the lessee
G.R. No. L-28269 August 15, 1969 would have "the right and option to buy the leased
premises" for P12,000; that, should the lessee fail to
CONSUELO VDA. DE QUIRINO, petitioner, exercise this option, said (new) building and/or
vs. improvements shall be evaluated by a committee
JOSE PALARCA, respondent. organized therefor, as set forth in the contract; that,
after such "valuation," the lessor shall "have the option
Rosendo J. Tansinsin for petitioner. to buy" said "building and/or improvements within ...
Jose Palarca in his own behalf. one (1) year, after the expiration of the contract"; and
that, should neither of the parties exercise their
CONCEPCION, C.J.: respective options, both "shall be free to look for a
buyer for his or her respective property."
Appeal by certiorari, taken by Consuelo Vda. de Quirino,
petitioner herein and defendant in the lower courts, By a letter, dated September 15, 1958, the lessee
from a decision of the Court of Appeals affirming that of informed the lessor that the former (lessee) was
the Court of First Instance of Manila, the dispositive part exercising "his right to buy the leased property for the
of which reads: agreed price of P12,000," and inquired "when" the latter
(lessor) would be "ready to execute the deed of sale," so
FOR THE FOREGOING CONSIDERATIONS, the that the agreed price could be delivered to her. Soon
Court hereby renders judgment ordering the thereafter, before the expiration of the term of his
defendant within fifteen (15) days from the date option, or on October 6, 1958, the lessee wrote a follow-
this judgment becomes final, to execute a deed up letter to the lessor, advising her that the former had
of conveyance in favor of the plaintiff Jose in his "possession the amount of P12,000 with which to
Palarca, of age, Filipino, married to Querubina purchase" the leased premises, and, asked her, once
Cristobal, over Lot 30, Block 84 of the Sulucan more, "when" she would be ready to execute the
Subdivision, covered by TCT 59442 of the Manila corresponding deed of sale, in order that he (lessee)
Registry, with his postal address at 544 Corner could pay said price. Through her counsel, the lessor
Quezon Blvd., Manila, and directing said replied, however, on October 10, 1958, that she "cannot
defendant to deliver the certificate of title, and accede" to the lessee's requests "because the ...
ordering the plaintiff to deliver to the defendant contract of October 4, 1947, has been novated by
at the time of receiving the aforesaid deed of another agreement, wherein the rent of P250 a month
sale and title, the amount of P12,000 in cash. was reduced to P100.00."
Costs is charged against the defendant.
Thereupon, that same month, the lessee instituted the introduced by the lessee, were, undoubtedly, part of the
present action to compel the lessor to comply with her consideration for his option to purchase the leased
obligation to execute the corresponding deed of sale in premises.
his (lessee's) favor, upon payment by him of said sum of
P12,000. The lessor filed her answer admitting some Then, again, the alleged lack of consideration therefor
allegations of the complaint and denying other was not set up as a defense or otherwise put in issue,
allegations thereof, as well as alleging, as special either in the trial court or in the Court of Appeals. The
defense, that the lease contract had been "modified" by appealed decisions of the Court of First Instance and the
a subsequent agreement of the parties, which had been Court of Appeals, and the records before us show that
observed and carried out by them, and that payment of the defenses mainly pressed in said courts were the
the stipulated price had not been properly tendered or alleged cancellation of the lessee's option and his failure
validly consigned. The lessor, likewise, set up a to make a valid tender and consignation of the
counterclaim for damages, attorney's fees and expenses stipulated price. The cancellation of the option was
of litigation. After appropriate proceedings, the Court of sought to be deduced from a novation made in 1952,
First Instance rendered the decision adverted to above, when, upon the lessee's request, the lessor agreed to
which was affirmed by the Court of Appeals. Hence, this reduce the monthly rental from P250 to P100. Neither
petition for review on certiorari, in which the lessor defense was, however, sustained by said courts, and, we
maintains: (1) that the lessee's option to purchase the think, correctly.
leased premises was null and void for want of
consideration; (2) that the lessee should have been Indeed, not being inconsistent with the lessee's option
sentenced to pay rentals, during the pendency of this to purchase the leased premises, said agreement to
case; and (3) that the lessee should have been reduce the rental did not necessarily cancel or
sentenced, also, to pay damages, attorney's fees and the extinguish the option. Although the lessor would have
costs of the suit. the Court believe that she consented to said reduction,
condition that the option be cancelled, this claim
The first contention is clearly without merit. To begin had not been proven. What is more, it was refuted by
with, it is based upon the premise that the option of the her letter to the lessee, Exhibit D, dated January 29,
lessee is devoid of consideration, which is false. Indeed, 1952, stating that "in view of the fact that you (lessee)
in reciprocal contracts, like the one in question, the find it very difficult to pay the rental of P250, I am willing
obligation or promise of each party is the consideration to reduce it to P100 from January 1952, on the condition
for that of the other. 1 In the language of Article 1350 of that the remaining balance (of the rental) will be
our Civil Code, "(i)n onerous contracts the cause is settled." The cancellation of the option was not,
understood to be, for each contracting party, the therefore, one of the conditions for the aforementioned
prestation or promise of a thing or service by the other reduction of the rental.
... ." As a consequence, "(t)he power to rescind
obligations is implied in reciprocal ones, in case one of Then, too, the consignation referred to in Article 1256 of
the obligors should not comply with what is incumbent our Civil Code is inapplicable to the present case,
upon him." 2 because said provision refers to consignation as one of
the means for the payment or discharge of a "debt,"
In the case at bar, the consideration for the lessor's whereas the lessee was not indebted to the lessor for
obligation to sell the leased premises to the lessee, the price of the leased premises. 3 The lessee merely
should he choose to exercise his option to purchase the exercised a right of option and had no obligation to pay
same, is the obligation of the lessee to sell to the lessor said price until the execution of the deed of sale in his
the building and/or improvements constructed and/or favor, which the lessor refused to do.
made by the former, if he fails to exercise his option to
buy said premises. Then, again, the amount of the Said want of consideration not having pleaded or
rentals agreed upon in the contract of October 4, 1947 otherwise alleged as one of her defenses in either one of
— which amount turned out to be so burdensome upon the lower courts, the lessor may not set it up, for the
the lessee, that the lessor agreed, five (5) years later, to first time, in her present second appeal. 4
reduce it —1 as well as the building and/or
improvements contemplated to be constructed and/or
As regards the rentals during the pendency of this case, by Transfer Certificate of Title No. (18431) 18938, of the
suffice it to note that, had the lessor readily complied Register of Deeds of Rizal.
with her obligation to execute the corresponding deed
of conveyance to the lessee, upon payment by him of In July 1971, Macaria sold a portion of 300 square
the agreed price of P12,000, which he tendered in meters of the lot to the Spouses Julio and Marina and
October, 1958, the premises in question would have Villamor for the total amount of P21,000.00. Earlier,
become his property on or before November 1, 1958, Macaria borrowed P2,000.00 from the spouses which
and since then he would have had no obligation to pay amount was deducted from the total purchase price of
rentals. As a consequence, it is neither just nor fair to the 300 square meter lot sold. The portion sold to the
impose such obligation upon him by reason of the Villamor spouses is now covered by TCT No. 39935 while
lessor's illegal breach of their contract. Otherwise, she the remaining portion which is still in the name of
would be rewarded therefor and we would jeopardize Macaria Labing-isa is covered by TCT No. 39934 (pars. 5
the sanctity of contractual obligations. and 7, Complaint). On November 11, 1971, Macaria
executed a "Deed of Option" in favor of Villamor in
The last point raised by the lessor is a mere corollary to which the remaining 300 square meter portion (TCT No.
those already disposed of. Hence, it needs no further 39934) of the lot would be sold to Villamor under the
discussion. conditions stated therein. The document reads:

WHEREFORE, the decision appealed from should be, as DEED OF OPTION

it is hereby affirmed, with costs against the lessor,
petitioner-appellant Consuelo Vda. de Quirino. This Deed of Option, entered into in the City of
Manila, Philippines, this 11th day of November,
G.R. No. 97332 October 10, 1991 1971, by and between Macaria Labing-isa, of age,
married to Roberto Reyes, likewise of age, and
SPOUSES JULIO D. VILLAMOR AND MARINA both resideing on Reparo St., Baesa, Caloocan
VILLAMOR, petitioners, City, on the one hand, and on the other hand the
vs. spouses Julio Villamor and Marina V. Villamor,
THE HON. COURT OF APPEALS AND SPOUSES MACARIA also of age and residing at No. 552 Reparo St.,
LABINGISA REYES AND ROBERTO REYES,respondents. corner Baesa Road, Baesa, Caloocan City.

Tranquilino F. Meris for petitioners. WITNESSETH

Agripino G. Morga for private respondents. 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
MEDIALDEA, J.:p of the Register of Deeds for the province of Rizal,
issued in may name, I having inherited the same
This is a petition for review on certiorari of the decision from my deceased parents, for which reason it is
of the Court of Appeals in CA-G.R. No. 24176 entitled, my paraphernal property;
"Spouses Julio Villamor and Marina Villamor, Plaintiffs-
Appellees, versus Spouses Macaria Labing-isa Reyes and That I, with the conformity of my husband,
Roberto Reyes, Defendants-Appellants," which reversed Roberto Reyes, have sold one-half thereof to the
the decision of the Regional Trial Court (Branch 121) at aforesaid spouses Julio Villamor and Marina V.
Caloocan City in Civil Case No. C-12942. Villamor at the price of P70.00 per sq. meter,
which was greatly higher than the actual
The facts of the case are as follows: reasonable prevailing value of lands in that place
at the time, which portion, after segregation, is
Macaria Labingisa Reyes was the owner of a 600-square now covered by TCT No. 39935 of the Register of
meter lot located at Baesa, Caloocan City, as evidenced Deeds for the City of Caloocan, issued on August
17, 1971 in the name of the aforementioned Roberto Reyes, Macaria Labingisa, Julio Villamor
spouses vendees; and Marina Ventura-Villamor, known to me as
the same persons who executed the foregoing
That the only reason why the Spouses-vendees Deed of Option, which consists of two (2) pages
Julio Villamor and Marina V. Villamor, agreed to including the page whereon this
buy the said one-half portion at the above-stated acknowledgement is written, and signed at the
price of about P70.00 per square meter, is left margin of the first page and at the bottom of
because I, and my husband Roberto Reyes, have the instrument by the parties and their
agreed to sell and convey to them the remaining witnesses, and sealed with my notarial seal, and
one-half portion still owned by me and now said parties acknowledged to me that the same is
covered by TCT No. 39935 of the Register of their free act and deed. The Residence
Deeds for the City of Caloocan, whenever the Certificates of the parties were exhibited to me
need of such sale arises, either on our part or on as follows: Roberto Reyes, A-22494, issued at
the part of the spouses (Julio) Villamor and Manila on Jan. 27, 1971, and B-502025, issued at
Marina V. Villamor, at the same price of P70.00 Makati, Rizal on Feb. 18, 1971; Macaria
per square meter, excluding whatever Labingisa, A-3339130 and B-1266104, both
improvement may be found the thereon; issued at Caloocan City on April 15, 1971, their
joint Tax Acct. Number being 3028-767-6; Julio
That I am willing to have this contract to sell Villamor, A-804, issued at Manila on Jan. 14,
inscribed on my aforesaid title as an 1971, and B-138, issued at Manila on March 1,
encumbrance upon the property covered 1971; and Marina Ventura-Villamor, A-803,
thereby, upon payment of the corresponding issued at Manila on Jan. 14, 1971, their joint Tax
fees; and Acct. Number being 608-202-6.

That we, Julio Villamor and Marina V. Villamor, ARTEMIO M. MALUBAY

hereby agree to, and accept, the above Notary Public
provisions of this Deed of Option. Until December 31, 1972
PTR No. 338203, Manila
IN WITNESS WHEREOF, this Deed of Option is January 15, 1971
signed in the City of Manila, Philippines, by all
the persons concerned, this 11th day of Doc. No. 1526;
November, 1971. Page No. 24;
Book No. 38;
JULIO VILLAMOR MACARIA LABINGISA Series of 1971. (pp. 25-29, Rollo)

With My Conformity: According to Macaria, when her husband, Roberto

Reyes, retired in 1984, they offered to repurchase the
MARINA VILLAMOR ROBERTO REYES lot sold by them to the Villamor spouses but Marina
Villamor refused and reminded them instead that the
Signed in the Presence Of: Deed of Option in fact gave them the option to purchase
the remaining portion of the lot.
MARIANO Z. SUNIGA
ROSALINDA S. EUGENIO The Villamors, on the other hand, claimed that they had
expressed their desire to purchase the remaining 300
ACKNOWLEDGMENT square meter portion of the lot but the Reyeses had
been ignoring them. Thus, on July 13, 1987, after
REPUBLIC OF THE PHILIPPINES) conciliation proceedings in the barangay level failed,
CITY OF MANILA ) S.S. they filed a complaint for specific performance against
the Reyeses.
At the City of Manila, on the 11th day of
November, 1971, personally appeared before me
On July 26, 1989, judgment was rendered by the trial 6. HOLDING DEFENDANT-APPELLANTS LIABLE TO PAY
court in favor of the Villamor spouses, the dispositive PLAINTIFF-APPELLEES THE AMOUNT OF P3,000.00 FOR
portion of which states: AND BY WAY OF ATTORNEY'S FEES. (pp. 31-32, Rollo)

WHEREFORE, and (sic) in view of the foregoing, On February 12, 1991, the Court of Appeals rendered a
judgment is hereby rendered in favor of the decision reversing the decision of the trial court and
plaintiffs and against the defendants ordering dismissing the complaint. The reversal of the trial court's
the defendant MACARIA LABING-ISA REYES and decision was premised on the finding of respondent
ROBERTO REYES, to sell unto the plaintiffs the court that the Deed of Option is void for lack of
land covered by T.C.T No. 39934 of the Register consideration.
of Deeds of Caloocan City, to pay the plaintiffs
the sum of P3,000.00 as and for attorney's fees The Villamor spouses brought the instant petition for
and to pay the cost of suit. review on certiorari on the following grounds:

The counterclaim is hereby DISMISSED, for LACK I. THE COURT OF APPEALS GRAVELY ERRED IN FINDING
OF MERIT. THAT THE PHRASE WHENEVER THE NEED FOR SUCH
SALE ARISES ON OUR (PRIVATE RESPONDENT) PART OR
SO ORDERED. (pp. 24-25, Rollo) ON THE PART OF THE SPOUSES JULIO D. VILLAMOR AND
MARINA V. VILLAMOR' CONTAINED IN THE DEED OF
Not satisfied with the decision of the trial court, the OPTION DENOTES A SUSPENSIVE CONDITION;
Reyes spouses appealed to the Court of Appeals on the
following assignment of errors: II. ASSUMING FOR THE SAKE OF ARGUMENT THAT THE
QUESTIONED PHRASE IS INDEED A CONDITION, THE
1. HOLDING THAT THE DEED OF OPTION EXECUTED ON COURT OF APPEALS ERRED IN NOT FINDING, THAT THE
NOVEMBER 11, 1971 BETWEEN THE PLAINTIFF- SAID CONDITION HAD ALREADY BEEN FULFILLED;
APPELLEES AND DEFENDANT-APPELLANTS IS STILL VALID
AND BINDING DESPITE THE LAPSE OF MORE THAN III. ASSUMING FOR THE SAKE OF ARGUMENT THAT THE
THIRTEEN (13) YEARS FROM THE EXECUTION OF THE QUESTIONED PHRASE IS INDEED A CONDITION, THE
CONTRACT; COURT OF APPEALS ERRED IN HOLDING THAT THE
IMPOSITION OF SAID CONDITION PREVENTED THE
2. FAILING TO CONSIDER THAT THE DEED OF OPTION PERFECTION OF THE CONTRACT OF SALE DESPITE THE
CONTAINS OBSCURE WORDS AND STIPULATIONS WHICH EXPRESS OFFER AND ACCEPTANCE CONTAINED IN THE
SHOULD BE RESOLVED AGAINST THE PLAINTIFF- DEED OF OPTION;
APPELLEES WHO UNILATERALLY DRAFTED AND
PREPARED THE SAME; IV. THE COURT OF APPEALS ERRED IN FINDING THAT
THE DEED OF OPTION IS VOID FOR LACK OF
3. HOLDING THAT THE DEED OF OPTION EXPRESSED THE CONSIDERATION;
TRUE INTENTION AND PURPOSE OF THE PARTIES
DESPITE ADVERSE, CONTEMPORANEOUS AND V. THE COURT OF APPEALS ERRED IN HOLDING THAT A
SUBSEQUENT ACTS OF THE PLAINTIFF-APPELLEES; DISTINCT CONSIDERATION IS NECESSARY TO SUPPORT
THE DEED OF OPTION DESPITE THE EXPRESS OFFER AND
4. FAILING TO PROTECT THE DEFENDANT-APPELLANTS ACCEPTANCE CONTAINED THEREIN. (p. 12, Rollo)
ON ACCOUNT OF THEIR IGNORANCE PLACING THEM AT
A DISADVANTAGE IN THE DEED OF OPTION; The pivotal issue to be resolved in this case is the
validity of the Deed of Option whereby the private
5. FAILING TO CONSIDER THAT EQUITABLE respondents agreed to sell their lot to petitioners
CONSIDERATION TILT IN FAVOR OF THE DEFENDANT- "whenever the need of such sale arises, either on our
APPELLANTS; and 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 of sale was never produced by them to prove
the following conclusions: their claim. Defendant-appellants testified that
no copy of the deed of sale had ever been given
xxx xxx xxx to them by the plaintiff-appellees. In the second
place, if this was really the condition of the prior
It is interesting to state that the agreement between the sale, we see no reason why it should be
parties are evidence by a writing, hence, the reiterated in the Deed of Option. On the
controverting oral testimonies of the herein defendants contrary, the alleged overprice paid by the
cannot be any better than the documentary evidence, plaintiff-appellees is given in the Deed as reason
which, in this case, is the Deed of Option (Exh. "A" and for the desire of the Villamors to acquire the land
"A-a") rather than as a consideration for the option
given to them, although one might wonder why
The law provides that when the terms of an agreement they took nearly 13 years to invoke their right if
have been reduced to writing it is to be considered as they really were in due need of the lot.
containing all such terms, and therefore, there can be,
between the parties and their successors in interest no At all events, the consideration needed to
evidence of their terms of the agreement, other than support a unilateral promise to sell is a dinstinct
the contents of the writing. ... (Section 7 Rule 130 one, not something that is as uncertain as P70.00
Revised Rules of Court) Likewise, it is a general and most per square meter which is allegedly 'greatly
inflexible rule that wherever written instruments are higher than the actual prevailing value of lands.'
appointed either by the requirements of law, or by the A sale must be for a price certain (Art. 1458). For
contract of the parties, to be the repositories and how much the portion conveyed to the plaintiff-
memorials of truth, any other evidence is excluded from appellees was sold so that the balance could be
being used, either as a substitute for such instruments, considered the consideration for the promise to
or to contradict or alter them. This is a matter both of sell has not been shown, beyond a mere
principle and of policy; of principle because such allegation that it was very much below P70.00
instruments are in their nature and origin entitled to a per square meter.
much higher degree of credit than evidence of policy,
because it would be attended with great mischief if The fact that plaintiff-appellees might have paid
those instruments upon which man's rights depended P18.00 per square meter for another land at the
were liable to be impeached by loose collateral time of the sale to them of a portion of
evidence. Where the terms of an agreement are reduced defendant-appellant's lot does not necessarily
to writing, the document itself, being constituted by the prove that the prevailing market price at the
parties as the expositor of their intentions, it is the only time of the sale was P18.00 per square meter. (In
instrument of evidence in respect of that fact they claim it was P25.00). It is improbable
agreement which the law will recognize so long as it that plaintiff-appellees should pay P52.00 per
exists for the purpose of evidence. (Starkie, EV, pp. 648, square meter for the privilege of buying when
655 cited in Kasheenath vs. Chundy, W.R. 68, cited in the value of the land itself was allegedly P18.00
Francisco's Rules of Court, Vol. VII Part I p. 153) per square meter. (pp. 34-35, Rollo)
(Emphasis supplied, pp. 126-127, Records).
As expressed in Gonzales v. Trinidad, 67 Phil. 682,
The respondent appellate court, however, ruled that the consideration is "the why of the contracts, the essential
said deed of option is void for lack of consideration. The reason which moves the contracting parties to enter
appellate court made the following disquisitions: into the contract." The cause or the impelling reason on
the part of private respondent executing the deed of
Plaintiff-appellees say they agreed to pay P70.00 option as appearing in the deed itself is the petitioner's
per square meter for the portion purchased by having agreed to buy the 300 square meter portion of
them although the prevailing price at that time private respondents' land at P70.00 per square meter
was only P25.00 in consideration of the option to "which was greatly higher than the actual reasonable
buy the remainder of the land. This does not prevailing price." This cause or consideration is clear
seem to be the case. In the first place, the deed from the deed which stated:
That the only reason why the spouses-vendees Julio "whenever the need of such sale arises, either on our
Villamor and Marina V. Villamor agreed to buy the said (Reyeses) part or on the part of the Spouses Julio
one-half portion at the above stated price of about Villamor and Marina V. Villamor. It appears that while
P70.00 per square meter, is because I, and my husband the option to buy was granted to the Villamors, the
Roberto Reyes, have agreed to sell and convey to them Reyeses were likewise granted an option to sell. In other
the remaining one-half portion still owned by me ... (p. words, it was not only the Villamors who were granted
26, Rollo) an option to buy for which they paid a consideration.
The Reyeses as well were granted an option to sell
The respondent appellate court failed to give due should the need for such sale on their part arise.
consideration to petitioners' evidence which shows that
in 1969 the Villamor spouses bough an adjacent lot from In the instant case, the option offered by private
the brother of Macaria Labing-isa for only P18.00 per respondents had been accepted by the petitioner, the
square meter which the private respondents did not promise, in the same document. The acceptance of an
rebut. Thus, expressed in terms of money, the offer to sell for a price certain created a bilateral
consideration for the deed of option is the difference contract to sell and buy and upon acceptance, the
between the purchase price of the 300 square meter offer, ipso facto assumes obligations of a vendee (See
portion of the lot in 1971 (P70.00 per sq.m.) and the Atkins, Kroll & Co. v. Cua Mian Tek, 102 Phil. 948).
prevailing reasonable price of the same lot in 1971. Demandabilitiy may be exercised at any time after the
Whatever it is, (P25.00 or P18.00) though not specifically execution of the deed. InSanchez v. Rigos, No. L-25494,
stated in the deed of option, was ascertainable. June 14, 1972, 45 SCRA 368, 376, We held:
Petitioner's allegedly paying P52.00 per square meter
for the option may, as opined by the appellate court, be In other words, since there may be no valid
improbable but improbabilities does not invalidate a contract without a cause of consideration, the
contract freely entered into by the parties. promisory is not bound by his promise and may,
accordingly withdraw it. Pending notice of its
The "deed of option" entered into by the parties in this withdrawal, his accepted promise partakes,
case had unique features. Ordinarily, an optional however, of the nature of an offer to sell which, if
contract is a privilege existing in one person, for which accepted, results in a perfected contract of sale.
he had paid a consideration and which gives him the
right to buy, for example, certain merchandise or certain A contract of sale is, under Article 1475 of the Civil Code,
specified property, from another person, if he chooses, "perfected at the moment there is a meeting of minds
at any time within the agreed period at a fixed price upon the thing which is the object of the contract and
(Enriquez de la Cavada v. Diaz, 37 Phil. 982). If We look upon the price. From that moment, the parties may
closely at the "deed of option" signed by the parties, We reciprocally demand perform of contracts." Since there
will notice that the first part covered the statement on was, between the parties, a meeting of minds upon the
the sale of the 300 square meter portion of the lot to object and the price, there was already a perfected
Spouses Villamor at the price of P70.00 per square contract of sale. What was, however, left to be done
meter "which was higher than the actual reasonable was for either party to demand from the other their
prevailing value of the lands in that place at that time (of respective undertakings under the contract. It may be
sale)." The second part stated that the only reason why demanded at any time either by the private
the Villamor spouses agreed to buy the said lot at a respondents, who may compel the petitioners to pay for
much higher price is because the vendor (Reyeses) also the property or the petitioners, who may compel the
agreed to sell to the Villamors the other half-portion of private respondents to deliver the property.
300 square meters of the land. Had the deed stopped
there, there would be no dispute that the deed is really However, the Deed of Option did not provide for the
an ordinary deed of option granting the Villamors the period within which the parties may demand the
option to buy the remaining 300 square meter-half performance of their respective undertakings in the
portion of the lot in consideration for their having instrument. The parties could not have contemplated
agreed to buy the other half of the land for a much that the delivery of the property and the payment
higher price. But, the "deed of option" went on and thereof could be made indefinitely and render uncertain
stated that the sale of the other half would be made the status of the land. The failure of either parties to
demand performance of the obligation of the other for the complaint in Civil Case No. C-12942 on the ground of
an unreasonable length of time renders the contract prescription and laches.
ineffective.
SO ORDERED.
Under Article 1144 (1) of the Civil Code, actions upon
written contract must be brought within ten (10) years. G.R. No. 113665 October 7, 2004
The Deed of Option was executed on November 11,
1971. The acceptance, as already mentioned, was also SPOUSES REMEDIOS DIJAMCO and TEODORO
accepted in the same instrument. The complaint in this DIJAMCO, petitioners,
case was filed by the petitioners on July 13, 1987, vs.
seventeen (17) years from the time of the execution of COURT OF APPEALS and PREMIERE DEVELOPMENT
the contract. Hence, the right of action had prescribed. BANK, respondents.
There were allegations by the petitioners that they
demanded from the private respondents as early as DECISION
1984 the enforcement of their rights under the contract.
Still, it was beyond the ten (10) years period prescribed CORONA, J.:
by the Civil Code. In the case of Santos v. Ganayo,
L-31854, September 9, 1982, 116 SCRA 431, this Court This is a petition for review1 of the January 7, 1994
affirming and subscribing to the observations of the resolution and March 30, 1993 decision2 of the Court of
courta quo held, thus: Appeals in CA G.R. CV No. 34125, affirming the February
27, 1991 decision3 of the Regional Trial Court, Branch
... Assuming that Rosa Ganayo, the oppositor 109, Pasay City in Civil Case No. 5795, which dismissed
herein, had the right based on the Agreement to petitioners’ complaint against private respondent
Convey and Transfer as contained in Exhibits '1' Premiere Development Bank for recovery of real
and '1-A', her failure or the abandonment of her property and damages.
right to file an action against Pulmano Molintas
when he was still a co-owner of the on-half (1/2) This dispute arose from the following facts, as
portion of the 10,000 square meters is now summarized by the RTC and the CA:
barred by laches and/or prescribed by law
because she failed to bring such action within ten It appears on record that plaintiffs were granted
(10) years from the date of the written four separate loans by defendant bank, as
agreement in 1941, pursuant to Art. 1144 of the follows: Industrial Loan No. 1833 in the amount
New Civil Code, so that when she filed the of P75,000.00 granted on April, 1976; Industrial
adverse claim through her counsel in 1959 she loan No. 2985 in the amount of P80,000.00
had absolutely no more right whatsoever on the granted on March, 1980; Real Estate Loan No.
same, having been barred by laches. 2084 in the amount ofP80,000.00 granted on
February, 1986 and Real Estate Loan No. 64 in
It is of judicial notice that the price of real estate in the amount of P210,000.00 granted on October,
Metro Manila is continuously on the rise. To allow the 1981. The subject of this complaint pertains to
petitioner to demand the delivery of the property the fourth loan or the Real Estate Loan No. 2084.
subject of this case thirteen (13) years or seventeen (17) To secure the payment of the fourth loan,
years after the execution of the deed at the price of only plaintiffs executed a real estate mortgage over a
P70.00 per square meter is inequitous. For reasons also parcel of land located in Pasay City covered by
of equity and in consideration of the fact that the TCT No. 34450 which according to plaintiffs has
private respondents have no other decent place to live, an improvement thereon a five-door apartment.
this Court, in the exercise of its equity jurisdiction is not
inclined to grant petitioners' prayer. Due to severe economic reverses, plaintiffs failed
to remit monthly amortizations regularly on the
ACCORDINGLY, the petition is DENIED. The decision of fourth loan. It appears that plaintiffs were not
respondent appellate court is AFFIRMED for reasons only in arrears on the fourth loan but also on the
cited in this decision. Judgement is rendered dismissing second and third loans, as well. At the time that
the plaintiffs were negotiating for the settlement On March 7, 1984, the Office of the Ex-
of the second and third loans, the fourth loan Officio Sheriff of Pasay City issued a Certificate of
was about ten (10) months in arrears. Because of Sale of even date (Exh. 11), stating therein that
this predicament, plaintiffs approached Atty. the mortgaged property covered by TCT 34450
Araos, Vice President of defendant bank and a was sold in public auction on said date, with
family friend of the Dijamcos. According to the defendant bank as the highest bidder for the
plaintiffs, Atty. Araos "advised them to first settle price of P359,881.80.
all the two smaller loans (the second and third
loans) and not to worry about the P210,000.00 xxx xxx xxx
loan" (par. 6, page 2, Amended Complaint). On
the other hand, defendant bank alleges that it ...plaintiffs failed to redeem the property within
was plaintiff’s (sic) scheme to pay off the second the redemption period.
and third loans first so that they (plaintiffs)
would then use the collateral of these loans in In a letter dated June 11, 1986 (Exh. 14)
securing a loan from another which proceeds addressed to Dr. Procopio C. Reyes, President of
they would then use to pay off the fourth loan, defendant bank, plaintiff Remedios Dijamco
but this plaintiffs failed to do despite the offered to repurchase the subject property, the
cooperation of defendant bank. pertinent and most important contents of which
is hereinbelow reproduced and underlined, as
xxx xxx xxx follows:

On March 6, 1983, defendant bank sought the " x x x.

assistance of the City Sheriff of Pasay City
regarding defendant bank’s Petition for We have sought ways and means to repurchase the
Extrajudicial Foreclosure of Mortgage under Act subject property from you up to this time we are unable
3135 against spouses Remedios R. Dijamco and to do so. However, we could pay interest monthly, just
Teodoro S. Dijamco (See Exh. 4), stating therein so the principal of P622,095.00 as of May 30, 1986 will
among other things that the mortgagors, herein no longer be increased. In connection therewith we
plaintiffs, have violated the provisions of the wish to repurchase our foreclosed properties within a
mortgage contract executed in favor of the year’s time and are submitting the following plan of
defendant bank and that the mortgagee bank is payment for your approval:
now entitled to foreclose the same. On
September 6, 1983, Deputy Sheriff Umberto Repurchase price as of May 30, 1986 -
Ramos for and in behalf of the Ex-Officio Sheriff P622,095.00
of Pasay City issued a Notice of Sheriffs’ sale
(Exh. 5) stating therein that a sheriff’s sale shall Interest of 26% PA to be paid monthly –
be conducted on October 6, 1983 by virtue of the P13,478.00
power of attorney inserted in the Deed of Real
Estate Mortgage and upon the verified petition Grace period requested to repurchase the subject
of the mortgagee in accordance with the properties is one (1) year from May 30, 1986 or until
provisions of Act 4118. However, the sheriff’s May 30, 1987.
sale was not held as previously scheduled due to
the request for postponement filed by herein CONDITIONS:
plaintiffs dated October 4, 1983 (Exh. 6).
Plaintiffs requested for five successive 1. Interest of P13,478.73 shall be paid on a
postponements in separate requests, to wit Nov. monthly basis starting June 30, 1986 and every
4, 1983 (Exh. 7); Dec. 7, 1983 (Exh. 8); Jan. 30th day of every month until May 30, 1987.
5,1984 (Exh. 9); and Feb. 4, 1984 (Exh.
10).1avvphi1.net 2. Failure to remit interest payment when the
same is due will render this proposal
automatically revoked without need of formal
 demand, and you may immediately enforce We hold that the RTC and the CA were correct in
your Writ of Possession. dismissing petitioners’ complaint. Thus, we deny this
petition.
3. That in case of failure to repurchase the
subject property within the period above Petitioners themselves admit the uniform factual
mentioned, all interest and other payment findings of the RTC and the CA that respondent bank
made by us shall be treated as rentals for the validly acquired the subject property at the auction sale,
use of the property. and that it was only after the title was consolidated and
transferred to the bank that petitioner Remedios
We shall appreciate your favorable action on the matter. Dijamco signed the June 11, 1986 agreement to
purchase the same property (not to repurchase it, as
Very truly yours, their right of redemption had long expired).5 Remedios
voluntarily entered into the June 11, 1986 agreement
Signed without fraud or undue advantage from respondent
bank. As such, the agreement was binding, valid and
REMEDIOS R. DIJAMCO enforceable between the parties, pursuant to Articles
13156 11597 and 13708of the Civil Code of the
CONFORME: Philippines.

Premiere Development Bank Contrary to petitioners’ assertion that the June 11, 1986
agreement was a contract of sale, we hold that it was a
By: contract of option to purchase and a contract to sell.

Signed Procopio C. Reyes We distinguish between a contract of sale in which title

Authorized Signatory" passes to the buyer upon delivery of the thing sold and a
contract to sell where, by agreement, the ownership is
xxx xxx xxx reserved by the seller till full payment of the purchase
price. Thus:
In compliance with the letter-agreement dated June 11,
1986 (Exh. 14), plaintiffs paid defendant bank six (6) a. In a contract of sale, non-payment of the price
monthly remittances in the amount of P13,478.73 or a is a negative resolutory condition.
total of P80,872.38. According to the plaintiffs, the
payment was discontinued by the plaintiffs when Atty. In a contract to sell, full payment is a positive
Araos informed plaintiffs that "none of the amount will suspensive condition.
be deducted from the purchase price x x x" (Par. 17,
Amended Complaint). ([RTC] Decision, pp. 1-7; Records, b. In a contract of sale, the vendor has lost and
pp. 446-452) (Emphasis and underscoring supplied).4 cannot recover the ownership of the thing sold
until and unless the contract of sale is itself
In accordance with the June 11, 1986 agreement, resolved and set aside.
petitioners remitted monthly interest for six months,
until January 1987, after which petitioners stopped In a contract to sell, the title remains in the vendor if the
paying and sued respondent Premiere Development vendee does not comply with the condition precedent
Bank on May 13, 1988. They claimed that the latter of making payment at the time specified in the contract.
employed fraud and undue advantage in depriving them If the vendor, because of non-compliance with the
of their property and prayed for recovery of said suspensive condition stipulated, seeks to eject the buyer
property for P350,000 and damages. The RTC dismissed form the land object of the agreement, said vendor is
the complaint for utter lack of merit and the CA affirmed enforcing the contract and is not resolving the same.9
such dismissal.1avvphi1.net
Indeed, the CA was correct in finding that the June 11,
Hence, this appeal. 1986 agreement was a contract to sell because:
 1. By its own terms, it [was] a contract whereby mistake or ignorance of the terms of the agreement
the appellants [were] granted the right to because, as observed by the CA, "plaintiff-appellant
repurchase the property involved at the fixed Dijamco testified that she had come to realize the
price of P622,095.00 within a year provided they alleged unfairness of having to pay P13,478.73 all for
[paid] monthly interest payments of P13,478.73; interest only after she paid the monthly
installment12 and everytime she paid she told them (the
2. No transfer or conveyance of ownership was bank people) ‘it is unfair’.13 Yet inexplicably, she kept on
effected by its terms; paying for six months even after she had come to know
about such unfairness."14
3. The interest payments [were] not even part of
the repurchase price because in case of failure to Although petitioners paid six months’ interest until
exercise the right to repurchase they would be January 1987, they did not exercise their right to
considered as rentals for the use of the property. purchase the property during that period. Neither did
They [were] not to be returned (Condition No. 3); they keep on paying the monthly interest as
consideration for the continuation of their option right
4. The interest payments were in a way a for the next six months. Hence, the automatic
consideration to preserve the right to revocation clause of the agreement took effect,
repurchase. In default of the interest payments, resulting in the rescission of the contract of option to
the right to repurchase terminate[d] (Condition purchase and the contract to sell by respondent bank. A
No. 2)10 judicial action for the rescission of a contract is not
necessary where the contract provides that it may be
The stipulation on interest payments was actually a revoked and cancelled for violation of any of its terms
consideration for the contract of option to purchase in and conditions.15 Furtheremore, inasmuch as the six
compliance with the second paragraph of Article 1479 of months’ interest was the consideration for petitioners’
the Civil Code, that is, "An accepted unilateral promise option to purchase the property during that period, the
to buy (in this case, by petitioners) or to sell a payments therefor could not possibly be credited as part
determinate thing (in this case, the subject real property of the purchase price of the contract to sell.
of respondent bank) for a price certain (in this
case, P622,095) is binding upon the promissor if the All told, petitioners have no right to demand
promise is supported by a consideration distinct from the reconveyance of the subject property for P350,000 and
price" (in this case, a monthly interest payment claim damages.
of P13,478.73).
WHEREFORE, the petition is hereby DENIED for lack of
The contract of option to purchase was separate from merit.
the contract to sell and both contracts needed separate
and distinct considerations for validity. Costs against petitioners.

The monthly interest payment of P13,478.73 as SO ORDERED.

consideration for petitioners’ option to purchase the lot
formerly owned by them and which they continued to G.R. No. 113665 October 7, 2004
occupy even after the filing of their complaint in 1988
until mid of 1989,11 was valid, fair and reasonable. First, SPOUSES REMEDIOS DIJAMCO and TEODORO
DIJAMCO, petitioners,
it was the petitioners themselves who proposed such vs.
consideration which was duly accepted by private COURT OF APPEALS and PREMIERE DEVELOPMENT
respondent bank in writing. Hence, it was a valid, BANK, respondents.
binding and enforceable contract between them.
Second, the consideration was fair and reasonable DECISION
because it preserved not only petitioners’ preferred
CORONA, J.:
right to purchase subject property at a fixed price for
one year but also their continued possession and This is a petition for review1 of the January 7, 1994
enjoyment of it. Third, petitioners could not feign resolution and March 30, 1993 decision2 of the Court of
Appeals in CA G.R. CV No. 34125, affirming the February the mortgagee bank is now entitled to foreclose the
27, 1991 decision3 of the Regional Trial Court, Branch 109, same. On September 6, 1983, Deputy Sheriff
Pasay City in Civil Case No. 5795, which dismissed Umberto Ramos for and in behalf of the Ex-
petitioners’ complaint against private respondent Premiere Officio Sheriff of Pasay City issued a Notice of
Development Bank for recovery of real property and Sheriffs’ sale (Exh. 5) stating therein that a sheriff’s
damages. sale shall be conducted on October 6, 1983 by
virtue of the power of attorney inserted in the Deed
This dispute arose from the following facts, as summarized of Real Estate Mortgage and upon the verified
by the RTC and the CA: petition of the mortgagee in accordance with the
provisions of Act 4118. However, the sheriff’s sale
It appears on record that plaintiffs were granted four was not held as previously scheduled due to the
separate loans by defendant bank, as follows: request for postponement filed by herein plaintiffs
Industrial Loan No. 1833 in the amount dated October 4, 1983 (Exh. 6). Plaintiffs requested
of P75,000.00 granted on April, 1976; Industrial for five successive postponements in separate
loan No. 2985 in the amount of P80,000.00 granted requests, to wit Nov. 4, 1983 (Exh. 7); Dec. 7, 1983
on March, 1980; Real Estate Loan No. 2084 in the (Exh. 8); Jan. 5,1984 (Exh. 9); and Feb. 4, 1984
amount ofP80,000.00 granted on February, 1986 (Exh. 10). 1avv phi 1.net

and Real Estate Loan No. 64 in the amount

of P210,000.00 granted on October, 1981. The On March 7, 1984, the Office of the Ex-
subject of this complaint pertains to the fourth loan Officio Sheriff of Pasay City issued a Certificate of
or the Real Estate Loan No. 2084. To secure the Sale of even date (Exh. 11), stating therein that the
payment of the fourth loan, plaintiffs executed a real mortgaged property covered by TCT 34450 was
estate mortgage over a parcel of land located in sold in public auction on said date, with defendant
Pasay City covered by TCT No. 34450 which bank as the highest bidder for the price
according to plaintiffs has an improvement thereon of P359,881.80.
a five-door apartment.
xxx xxx xxx
Due to severe economic reverses, plaintiffs failed to
remit monthly amortizations regularly on the fourth ...plaintiffs failed to redeem the property within the
loan. It appears that plaintiffs were not only in redemption period.
arrears on the fourth loan but also on the second
and third loans, as well. At the time that the In a letter dated June 11, 1986 (Exh. 14) addressed
plaintiffs were negotiating for the settlement of the to Dr. Procopio C. Reyes, President of defendant
second and third loans, the fourth loan was about bank, plaintiff Remedios Dijamco offered to
ten (10) months in arrears. Because of this repurchase the subject property, the pertinent and
predicament, plaintiffs approached Atty. Araos, Vice most important contents of which is hereinbelow
President of defendant bank and a family friend of reproduced and underlined, as follows:
the Dijamcos. According to the plaintiffs, Atty.
Araos "advised them to first settle all the two " x x x.
smaller loans (the second and third loans) and not
to worry about the P210,000.00 loan" (par. 6, page
We have sought ways and means to repurchase
2, Amended Complaint). On the other hand,
the subject property from you up to this time we are
defendant bank alleges that it was plaintiff’s
unable to do so. However, we could pay interest
(sic) scheme to pay off the second and third loans
monthly, just so the principal of P622,095.00 as
first so that they (plaintiffs) would then use the
of May 30, 1986 will no longer be increased. In
collateral of these loans in securing a loan from
connection therewith we wish to repurchase our
another which proceeds they would then use to pay
foreclosed properties within a year’s time and
off the fourth loan, but this plaintiffs failed to do
are submitting the following plan of payment for
despite the cooperation of defendant bank.
your approval:
xxx xxx xxx
Repurchase price as of May 30, 1986 -
P622,095.00
On March 6, 1983, defendant bank sought the
assistance of the City Sheriff of Pasay City
Interest of 26% PA to be paid monthly –
regarding defendant bank’s Petition for Extrajudicial
P13,478.00
Foreclosure of Mortgage under Act 3135 against
spouses Remedios R. Dijamco and Teodoro S.
Dijamco (See Exh. 4), stating therein among other Grace period requested to repurchase the subject
things that the mortgagors, herein plaintiffs, have properties is one (1) year from May 30, 1986 or
violated the provisions of the mortgage contract until May 30, 1987.
executed in favor of the defendant bank and that
 CONDITIONS: We hold that the RTC and the CA were correct in
dismissing petitioners’ complaint. Thus, we deny this
1. Interest of P13,478.73 shall be paid on a monthly petition.
basis starting June 30, 1986 and every 30th day of
every month until May 30, 1987. Petitioners themselves admit the uniform factual findings of
the RTC and the CA that respondent bank validly acquired
2. Failure to remit interest payment when the the subject property at the auction sale, and that it was only
same is due will render this proposal after the title was consolidated and transferred to the bank
automatically revoked without need of formal that petitioner Remedios Dijamco signed the June 11, 1986
demand, and you may immediately enforce your agreement to purchase the same property (not to
Writ of Possession. repurchase it, as their right of redemption had long
expired).5 Remedios voluntarily entered into the June 11,
3. That in case of failure to repurchase the subject 1986 agreement without fraud or undue advantage from
property within the period above mentioned, all respondent bank. As such, the agreement was binding,
interest and other payment made by us shall be valid and enforceable between the parties, pursuant to
treated as rentals for the use of the property. Articles 13156 11597 and 13708of the Civil Code of the
Philippines.
We shall appreciate your favorable action on the
matter. Contrary to petitioners’ assertion that the June 11, 1986
agreement was a contract of sale, we hold that it was a
contract of option to purchase and a contract to sell.
Very truly yours,
We distinguish between a contract of sale in which title
Signed
passes to the buyer upon delivery of the thing sold and a
contract to sell where, by agreement, the ownership is
REMEDIOS R. DIJAMCO reserved by the seller till full payment of the purchase price.
Thus:
CONFORME:
a. In a contract of sale, non-payment of the price is
Premiere Development Bank a negative resolutory condition.

By: In a contract to sell, full payment is a positive

suspensive condition.
Signed Procopio C. Reyes
Authorized Signatory" b. In a contract of sale, the vendor has lost and
cannot recover the ownership of the thing sold until
xxx xxx xxx and unless the contract of sale is itself resolved and
set aside.
In compliance with the letter-agreement dated June
11, 1986 (Exh. 14), plaintiffs paid defendant bank In a contract to sell, the title remains in the vendor if the
six (6) monthly remittances in the amount vendee does not comply with the condition precedent of
of P13,478.73 or a total of P80,872.38. According making payment at the time specified in the contract. If the
to the plaintiffs, the payment was discontinued by vendor, because of non-compliance with the suspensive
the plaintiffs when Atty. Araos informed plaintiffs condition stipulated, seeks to eject the buyer form the land
that "none of the amount will be deducted from the object of the agreement, said vendor is enforcing the
purchase price x x x" (Par. 17, Amended contract and is not resolving the same.9
Complaint). ([RTC] Decision, pp. 1-7; Records, pp.
446-452) (Emphasis and underscoring supplied).4 Indeed, the CA was correct in finding that the June 11,
1986 agreement was a contract to sell because:
In accordance with the June 11, 1986 agreement,
petitioners remitted monthly interest for six months, until 1. By its own terms, it [was] a contract whereby the
January 1987, after which petitioners stopped paying and appellants [were] granted the right to repurchase
sued respondent Premiere Development Bank on May 13, the property involved at the fixed price
1988. They claimed that the latter employed fraud and of P622,095.00 within a year provided they [paid]
undue advantage in depriving them of their property and monthly interest payments of P13,478.73;
prayed for recovery of said property for P350,000 and
damages. The RTC dismissed the complaint for utter lack 2. No transfer or conveyance of ownership was
of merit and the CA affirmed such dismissal.
1avvphi1.net

effected by its terms;

Hence, this appeal.

 3. The interest payments [were] not even part of the purchase the property during that period, the payments
repurchase price because in case of failure to therefor could not possibly be credited as part of the
exercise the right to repurchase they would be purchase price of the contract to sell.
considered as rentals for the use of the property.
They [were] not to be returned (Condition No. 3); All told, petitioners have no right to demand reconveyance
of the subject property for P350,000 and claim damages.
4. The interest payments were in a way a
consideration to preserve the right to repurchase. In WHEREFORE, the petition is hereby DENIED for lack of
default of the interest payments, the right to merit.
repurchase terminate[d] (Condition No. 2)10
Costs against petitioners.
The stipulation on interest payments was actually a
consideration for the contract of option to purchase in SO ORDERED
compliance with the second paragraph of Article 1479 of
the Civil Code, that is, "An accepted unilateral promise to
buy (in this case, by petitioners) or to sell a determinate
thing (in this case, the subject real property of respondent
bank) for a price certain (in this case, P622,095) is binding
upon the promissor if the promise is supported by a
consideration distinct from the price" (in this case, a
monthly interest payment of P13,478.73).

The contract of option to purchase was separate from the

contract to sell and both contracts needed separate and
distinct considerations for validity.

The monthly interest payment of P13,478.73 as

consideration for petitioners’ option to purchase the lot
formerly owned by them and which they continued to
occupy even after the filing of their complaint in 1988 until
mid of 1989,11 was valid, fair and reasonable. First, it was
the petitioners themselves who proposed such
consideration which was duly accepted by private
respondent bank in writing. Hence, it was a valid, binding
and enforceable contract between them. Second, the
consideration was fair and reasonable because it
preserved not only petitioners’ preferred right to purchase
subject property at a fixed price for one year but also their
continued possession and enjoyment of it. Third, petitioners
could not feign mistake or ignorance of the terms of the
agreement because, as observed by the CA, "plaintiff-
appellant Dijamco testified that she had come to realize the
alleged unfairness of having to pay P13,478.73 all for
interest only after she paid the monthly installment12 and
everytime she paid she told them (the bank people) ‘it is
unfair’.13 Yet inexplicably, she kept on paying for six months
even after she had come to know about such unfairness."14

Although petitioners paid six months’ interest until January

1987, they did not exercise their right to purchase the
property during that period. Neither did they keep on paying
the monthly interest as consideration for the continuation of
their option right for the next six months. Hence, the
automatic revocation clause of the agreement took effect,
resulting in the rescission of the contract of option to
purchase and the contract to sell by respondent bank. A
judicial action for the rescission of a contract is not
necessary where the contract provides that it may be
revoked and cancelled for violation of any of its terms and
conditions.15 Furtheremore, inasmuch as the six months’
interest was the consideration for petitioners’ option to