Leopoldo Cotaco informing him that plaintiff is now

THIRD DIVISION ready to pay the remaining balance to complete the

sum of $100,000.00, the agreed amount as selling
price and on October 24, 1986, plaintiff filed the
instant complaint.[2]
[G.R. No. 112330. August 17, 1999]
The Regional Trial Court (RTC) ruled in favor of
private respondent Adoracion Custodio (CUSTODIO)
and ordered the petitioner spouses Henry and
SPS. HENRY CO AND ELIZABETH CO AND Elizabeth Co (COS) to refund the amount of
MELODY CO, petitioners, vs. COURT OF $30,000.00 in CUSTODIOs favor. The dispositive
APPEALS AND MRS. ADORACION portion of the RTCs decision reads:
CUSTODIO, represented by her
Attorney-in-fact, TRINIDAD WHEREFORE, the Court hereby orders:
KALAGAYAN, respondents.
1. that the earnest money of $1,000.00
DECISION and P40,000.00 is hereby forfeited in
favor of the defendants, and
GONZAGA-REYES, J.:
2. the defendants are ordered to remit to
Before us is a Petition for Review on Certiorari of plaintiff the peso equivalent of THIRTY
the decision of the Court of Appeals[1] in CA-G.R. CV THOUSAND ($30,000.00) U.S.
No. 32972 entitled MRS. ADORACION CUSTODIO, DOLLARS, at the prevailing rate of
represented by her Attorney-in-fact, TRINIDAD exchange at the time of payment.
KALAGAYAN vs. SPS. HENRY CO AND ELIZABETH CO
AND MELODY CO. Costs against plaintiff.
The following facts as found by the lower court
and adopted by the Court of Appeals are undisputed: SO ORDERED.[3]

xxx sometime on October 9, 1984, plaintiff entered Not satisfied with the decision, the COS
into a verbal contract with defendant for her purchase appealed to the Court of Appeals which affirmed the
of the latters house and lot located at 316 Beata St., decision of the RTC. Hence, this appeal where the
New Alabang Village, Muntinlupa, Metro Manila, for COS assign as sole error the following:
and in consideration of the sum of $100,000.00. One
week thereafter, and shortly before she left for the PETITIONER RESPECTFULLY SUBMITS THAT
United States, plaintiff paid to the defendants the RESPONDENT COURT OF APPEALS HAS
amounts of $1,000.00 and P40,000.00 as earnest DECIDED A QUESTION OF SUBSTANCE NOT IN
money, in order that the same may be reserved for ACCORD WITH LAW AND THE APPLICABLE
her purchase, said earnest money to be deducted DECISIONS OF THE SUPREME COURT.[4]
from the total purchase price. The purchase price of
$100,000.00 is payable in two payments $40,000.00
The COS argue that the Court of Appeals erred
on December 4, 1984 and the balance of $60,000.00
in ruling that CUSTODIO could still exercise her option
on January 5, 1985. On January 25, 1985, although
to pay the balance of the purchase price of the
the period of payment had already expired, plaintiff property. The COS claim that CUSTODIO was in
paid to the defendant Melody Co in the United States,
default since she failed to pay after a demand was
the sum of $30,000.00, as partial payment of the made by the petitioners in their March 15, 1985
purchase price. Defendants counsel, Atty. Leopoldo
letter[5]. The COS claim that they never granted
Cotaco, wrote a letter to the plaintiff dated March 15, CUSTODIO an extension of time to exercise the
1985, demanding that she pay the balance of
option contrary to the finding of the Court of Appeals
$70,000.00 and not receiving any response thereto, that a thirty (30) day period of time was granted to
said lawyer wrote another letter to plaintiff dated
her in their August 8, 1986 letter[6]. Said period refers
August 8, 1986, informing her that she has lost her to another option which the COS gave CUSTODIO to
option to purchase the property subject of this case
buy another piece of property and not the Beata
and offered to sell her another property.
property as they could no longer hold the Beata
property for CUSTODIO. In fact, said letter specifically
Under date of September 5 (1986), Atty. Estrella O. states that CUSTODIO lost her option to purchase the
Laysa, counsel for plaintiff, wrote a letter to Atty. subject property; that the COS were willing to apply
the payments already made to the payment of the However, the March 15, 1985 letter[11] sent by
second property; and that if CUSTODIO failed to the COS through their lawyer to the CUSTODIO
purchase the second property within thirty (30) days, reveals that the parties entered into a perfected
she would forfeit her previous payments. Since contract of sale and not an option contract.
CUSTODIO manifested her readiness to exercise her
option to pay the balance of the purchase price of the A contract of sale is a consensual contract and is
Beata property and not the second property, her perfected at the moment there is a meeting of the
manifestation was no longer of any legal effect as this minds upon the thing which is the object of the
option was no longer available to her. This being the contract and upon the price. From that moment the
case, the Court of Appeals should have ruled that the parties may reciprocally demand performance subject
COS properly rescinded their contract with CUSTODIO to the provisions of the law governing the form of
over the Beata property pursuant to Article 1191[7] of contracts.[12] The elements of a valid contract of sale
the Civil Code and should have further ordered her to under Article 1458 of the Civil Code are (1) consent or
pay them damages consequent to the meeting of the minds; (2) determinate subject
rescission. Moreover, even assuming that they waived matter; and (3) price certain in money or its
the deadline by accepting the payment of $30,000.00 equivalent.[13] As evidenced by the March 15, 1985
on January 26, 1986, CUSTODIO still failed to pay the letter, all three elements of a contract of sale are
remaining balance of $70,000.00. Her offer to pay the present in the transaction between the petitioners
remaining balance came too late as the option given and respondent. CUSTODIOs offer to purchase the
to her had already been lost. In addition, the Court of Beata property, subject of the sale at a price of
Appeals also erred in ordering the COS to return the $100,000.00 was accepted by the COS. Even the
$30,000.00 dollars since the August 8, 1986 letter manner of payment of the price was set forth in the
warned CUSTODIO that if the she did not exercise her letter. Earnest money in the amounts of US$1,000.00
option within thirty days, she would lose her option and P40,000.00 was already received by the
and other rights and any payments made shall be COS. Under Article 1482[14] of the Civil Code, earnest
forfeited. Finally, the COS claim that the Court of money given in a sale transaction is considered part
Appeals erred in not granting them attorneys fees of the purchase price and proof of the perfection of
when the law allows recovery therefor considering the sale.[15]
that by the defendants act or omission, the plaintiff is Despite the fact that CUSTODIOs failure to pay
compelled to litigate with third persons or to incur the amounts of US$ 40,000.00 and US$ 60,000.00 on
expenses to protect his rights.[8] or before December 4, 1984 and January 5, 1985
The core issue is whether or not the Court of respectively was a breach of her obligation under
Appeals erred in ordering the COS to return the Article 1191[16] of the Civil Code, the COS did not sue
$30,000.00 paid by CUSTODIO pursuant to the option for either specific performance or rescission of the
granted to her over the Beata property? contract. The COS were of the mistaken belief that
CUSTODIO had lost her option over the Beata
We rule in the negative. property when she failed to pay the remaining
balance of $70,000.00 pursuant to their August 8,
The COS main argument is that CUSTODIO lost 1986 letter. In the absence of an express stipulation
her option over the Beata property and her failure to authorizing the sellers to extrajudicially rescind the
exercise said option resulted in the forfeiture of any contract of sale, the COS cannot unilaterally and
amounts paid by her pursuant to the August letter. extrajudicially rescind the contract of
An option is a contract granting a privilege to sale.[17] Accordingly, CUSTODIO acted well within her
buy or sell within an agreed time and at a determined rights when she attempted to pay the remaining
price. It is a separate and distinct contract from that balance of $70,000.00 to complete the sum owed of
which the parties may enter into upon the $100,000.00 as the contract was still subsisting at
consummation of the option. It must be supported by that time. When the COS refused to accept said
consideration.[9] An option contract conforms with the payment and to deliver the Beata property,
second paragraph of Article 1479 of the Civil CUSTODIO immediately sued for the rescission of the
Code[10] which reads: contract of sale and prayed for the return of the
$30,000.00 she had initially paid.
Article 1479. xxx Under Article 1385[18] of the Civil Code,
rescission creates the obligation to return the things
An accepted unilateral promise to buy or to sell a which were the object of the contract but such
determinate thing for a price certain is binding upon rescission can only be carried out when the one who
the promissor if the promise is supported by a demands rescission can return whatever he may be
consideration distinct from the price. obliged to restore. This principle has been applied to
rescission of reciprocal obligations under Article 1191
of the Civil Code.[19] The Court of Appeals therefore
did not err in ordering the COS to return the amount
of $30,000.00 to CUSTODIO after ordering the
rescission of the contract of sale over the Beata
property. We quote with approval the Court of
Appeals decision to wit:

Since it has been shown that the appellee who was

not in default, was willing to perform part of the
contract while the appellants were not, rescission of
the contract is in order. The power to rescind
obligations is implied in reciprocal ones, in case one
of the obligors should not comply with what is
incumbent upon him, (Article 1191, same
Code). Rescission creates the obligation to return the
things which were the object of the contract, together
with their fruits, and the price with its interest x x x x
(Article 1385, same Code).

In the case at bar, the property involved has not been

delivered to the appellee. She has therefore nothing
to return to the appellants. The price received by the
appellants has to be returned to the appellee as aptly
ruled by the lower court, for such is a consequence of
rescission, which is to restore the parties in their
former situations.

No error was committed by the lower court when it

did not award attorneys fees to the appellants for as
has been shown, the appellees complaint is not
unfounded.[20]

We cannot uphold the forfeiture clause

contained in the petitioners August 8, 1986 letter. It
appears that such condition was unilaterally imposed
by the COS and was not agreed to by CUSTODIO. It
cannot therefore be considered as part of the contract
of sale as it lacks the consent of CUSTODIO.[21]

Finally, the Court of Appeals did not err in not

awarding the COS attorneys fees. Although attorneys
fees may be awarded if the claimant is compelled to
litigate with third persons or to incur expenses to
protect his interest by reason of an unjustified act or
omission of the party from whom it is sought[22], we
find that CUSTODIOs act clearly was not unjustified.

WHEREFORE, the instant petition is hereby

DENIED, and the appealed decision of the Court of
Appeals is AFFIRMED.

SO ORDERED.