VILLAMOR vs CA

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Tee

Bible Baptist Church vs CA

Subject: Sales
Doctrine: Option Contract

Facts:
On June 7, 1985, petitioner Bible Baptist Church entered into a contract of lease
with respondents Mr. & Mrs. Elmer Tito Medina Villanueva who own the subject
property located at No. 2436 Leon Guinto St., Malate, Manila. The pertinent
stipulations in the lease contract were:
2. That the lease shall take effect on June 7, 1985 and shall be for the period of
Fifteen (15)
years.
4. That upon signing of the LEASE AGREEMENT, the LESSEE shall pay the sum
of
Eighty Four Thousand Pesos (P84,000.00) Philippine Currency. Said sum is to be
paid directly to the Rural Bank, Valenzuela, Bulacan for the purpose of redemption
of
said property which is mortgaged by the LESSOR.
8. That the LESSEE has the option to buy the leased premises during the Fifteen
(15) years of the lease. If the LESSEE decides to purchase the premises the terms
will be:
A) A selling Price of One Million Eight Hundred Thousand Pesos (P1.8 million),
Philippine Currency. B) A down payment agreed upon by both parties. C) The
balance of the selling price may be paid at the rate of One Hundred Twenty
Thousand Pesos (P120,000.00), Philippine Currency, per year.

Petitioner seeks to buy the leased premises from the spouses Villanueva, under the
option given to them. Petitioners claim that they (Baptist Church) agreed to
advance the large amount needed for the rescue of the property but, in exchange, it
asked the Villanuevas to grant it a long term lease and an option to buy the
property for P1.8 million. However, the respondents did not agree saying that there
is no separate consideration.
In this hand, the petitioners argue that there is a consideration — the consideration
supporting the option was their agreement to pay off the Villanuevas P84,000 loan
with the bank, thereby freeing the subject property from the mortgage
encumbrance. That they would not have agreed to advance such a large amount as
it did to rescue the property from bank foreclosure had it not been given an
enforceable option to buy that went with the lease agreement.
The Baptist Church states that [t]rue, the Baptist Church did not pay a separate and
specific sum of money to cover the option alone. But the P84,000 it paid the
Villanuevas in advance should be deemed consideration for the one contract they
entered into the lease with option to buy. Petitioners further insist that a
consideration need not be a separate sum of money. They posit that their act of
advancing the money to rescue the property from mortgage and impending
foreclosure, should be enough consideration to support the option.
On the other hand, Respondents argue that the amount of P84,000 has been fully
exhausted and utilized by their occupation of the premises and there is no separate
consideration to speak of which could support the option.
The RTC and CA agree with the respondent.

ISSUE: WON there is a separate consideration that would render the option

contract valid and binding.
HELD:
An option contract, to be valid and binding, needs to be supported by a
separate consideration. The consideration need not be monetary but could consist
of other things or undertakings. However, if the consideration is not monetary,
these must be things or undertakings of value, in view of the onerous nature of the
contract of option. Furthermore, when a consideration for an option contract is not
monetary, said consideration must be clearly specified as such in the option
contract or clause.
Petitioners cannot insist that the P84,000 they paid in order to release the
Villanuevas property from the mortgage should be deemed the separate
consideration to support the contract of option. It must be pointed out that said
amount was in fact apportioned into monthly rentals spread over a period of one
year, at P7,000 per month. Thus, for the entire period of June 1985 to May 1986,
petitioner Baptist Churchs monthly rent had already been paid for, such that it only
again commenced paying the rentals in June 1986. This is shown by the testimony
of petitioner Pastor Belmonte where he states that the P84,000 was advance rental
equivalent to monthly rent of P7,000 for one year, such that for the entire year
from 1985 to 1986 the Baptist Church did not pay monthly rent.

First, this Court cannot find that petitioner Baptist Church parted with anything of
value, aside from the amount of P84,000 which was in fact eventually utilized as
rental payments. Second, there is no document that contains an agreement between
the parties that petitioner Baptist Churchs supposed rescue of the mortgaged
property was the consideration which the parties contemplated in support of the
option clause in the contract. As previously stated, the amount advanced had been
fully utilized as rental payments over a period of one year. While the Villanuevas
may have them to thank for extending the payment at a time of need, this is not the
separate consideration contemplated by law.
This Court also notes that in the present case both the Regional Trial Court and the
Court of Appeals agree that the option was not founded upon a separate and
distinct consideration and that, hence, respondents Villanuevas cannot be
compelled to sell their property to petitioner Baptist Church.
Having found that the option to buy granted to the petitioner Baptist Church was
not founded upon a separate consideration, and hence, not enforceable against
respondents, this Court finds no need to discuss whether a price certain had been
fixed as the purchase price.

WHEREFORE, the Decision and Resolution of the Court of Appeals subject of

the petition are hereby AFFIRMED.

ENRICO S. EULOGIO v. SPS. CLEMENTE APELES AND LUZ APELES,

GR No. 167884, 2009-01-20
Facts:
The real property in question... consists of a house and lot... at
Timog Avenue, Quezon City... names... of the spouses Apeles.
In 1979, the spouses Apeles leased the subject property to Arturo Eulogio (Arturo), Enrico's
father. Upon Arturo's death, his son Enrico succeeded as lessor of the subject property. Enrico
used the subject property as his residence and place of business.
On 6 January 1987, the spouses Apeles and Enrico allegedly entered into a Contract of Lease...
with Option to Purchase involving the subject property... purportedly afforded Enrico, before the
expiration of the three-year lease period, the option to purchase the subject... property for a price
not exceeding P1.5 Million
Before the expiration of the three-year lease period provided in the lease contract, Enrico
exercised his option to purchase the subject property by communicating verbally and in writing
to Luz his willingness to pay the agreed purchase price, but the spouses Apeles supposedly...
ignored Enrico's manifestation.
In a letter dated 26 January 1997 to Enrico, the spouses Apeles demanded that he pay his rental
arrears from January 1991 to December 1996 and he vacate the subject property since it would
be needed by the spouses Apeles themselves.
Without heeding the demand of the spouses Apeles, Enrico instituted on 23 February 1999 a
Complaint for Specific Performance with Damages against the spouses Apeles before the RTC
Accordingly, the RTC ordered the spouses Apeles to execute a Deed of Sale in favor of Enrico
upon the latter's payment of the agreed amount of consideration.
Court of Appeals rendered a Decision in CA-G.R. CV No. 76933 granting the appeal of the
spouses Apeles and overturning the judgment of the RTC.
he Court of Appeals chose not to accord the disputed Contract full faith and credence.
Issues:
I.
THE COURT OF APPEALS COMMITTED (sic) REVERSIBLE ERROR WHEN IT
BRUSHED ASIDE THE RULING OF THE COURT A QUO UPHOLDING THE VALIDITY
OF THE CONTRACT OF LEASE WITH OPTION TO PURCHASE AND IN LIEU THEREOF
RULED THAT THE SAID CONTRACT OF LEASE WAS A FORGERY AND THUS, NULL
AND
VOID.
Ruling:
We do not agree.
In the case at bar, the spouses Apeles were able to overcome the burden of proof and prove by
preponderant evidence in... disputing the authenticity and due execution of the Contract of Lease
with Option to Purchase. In contrast, Enrico seemed to rely only on his own self-serving
declarations, without asserting any proof of corroborating testimony or circumstantial evidence
to buttress his... claim
Even assuming for the sake of argument that we agree with Enrico that Luz voluntarily entered
into the Contract of Lease with Option to Purchase and personally affixed her signature to the
said document, the provision on the option to purchase the subject property incorporated... in
said Contract still remains unenforceable.
Enrico
He ultimately wants to... compel the spouses Apeles to already execute the Deed of Sale over the
subject property in his favor.
An option is a contract by which the owner of the property agrees with another person that the
latter shall have the right to buy the former's property at a fixed price within a certain time. It is a
condition offered or contract by which the owner stipulates with another that... the latter shall
have the right to buy the property at a fixed price within a certain time, or under, or in
compliance with certain terms and conditions; or which gives to the owner of the property the
right to sell or demand a sale.[22] An option is not of... itself a purchase, but merely secures the
privilege to buy. It is not a sale of property but a sale of the right to purchase. It is simply a
contract by which the owner of the property agrees with another person that he shall have the
right to buy his property at a fixed price... within a certain time. He does not sell his land; he
does not then agree to sell it; but he does sell something, i.e., the right or privilege to buy at the
election or option of the other party. Its distinguishing characteristic is that it imposes no binding
obligation on... the person holding the option, aside from the consideration for the offer
It is also sometimes called an "unaccepted offer" and is sanctioned by Article 1479 of the Civil
Code:
Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally
demandable.
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding
upon the promissor if the promise is supported by a consideration distinct from the price.
The second paragraph of Article 1479 provides for the definition and consequent rights and
obligations under an option contract. For an option contract to be valid and enforceable against
the promissor, there must be a separate and distinct consideration that supports... it.
Southwestern Sugar and Molasses Company v. Atlantic Gulf and Pacific Co.
"an accepted unilateral promise" can only have a binding effect if supported by a consideration,
which means that the option can still... be withdrawn, even if accepted, if the same is not
supported by any consideration. Here it is not disputed that the option is without consideration. It
can therefore be withdrawn notwithstanding the acceptance made of it by appellee.
The consideration is "the why of the contracts, the essential reason which moves the contracting
parties to enter into the contract." This definition illustrates that the consideration contemplated
to support an option contract need not be monetary. Actual cash need not be... exchanged for the
option. However, by the very nature of an option contract,as defined in Article 1479, the same is
an onerous contract for which the consideration must be something of value, although its kind
may vary.
The only consideration agreed upon by the parties in the said Contract is the supposed purchase
price for the subject property in the amount not exceeding P1.5 Million, which could not be
deemed to be the same consideration for the option... contract since the law and jurisprudence
explicitly dictate that for the option contract to be valid, it must be supported by a consideration
separate and distinct from the price.
Bible Baptist Church v. Court of Appeals... option contract needs to be supported by a separate
consideration. The consideration need not be monetary but could consist of other things or
undertakings. However, if the... consideration is not monetary, these must be things or
undertakings of value, in view of the onerous nature of the option contract. Furthermore, when a
consideration for an option contract is not monetary, said consideration must be clearly specified
as such in the option... contract or clause.
In the present case, it is indubitable that no consideration was given by Enrico to the spouses
Apeles for the option contract. The absence of monetary or any material consideration keeps this
Court from enforcing the rights of the parties under said option contract.
OCTOBER 3, 2020

Quiroga v. Parsons
G.R. No. L-11491; 23 August 1918
Avanceña, J.

FACTS:

A contract was entered into between Andres Quiroga and J. Parsons, who were both merchants,
which granted the exclusive right to sell his beds in the Visayan Islands to Parsons under the
following conditions: 1) There be a discount of 2.5% as commission for the sale; 2) Parsons shall
order the beds by the dozen, whether of the same or of different styles; 3) Expenses for
transportation and shipment shall be borne by Quiroga; 4) Parsons is bound to pay Quiroga for
the beds received within 60 days from the date of their shipment; 5) If Quiroga should request
payment before the invoice falls due, it shall be considered as prompt payment with 2%
deduction; 6) 15-day notice must at least be given by Quiroga before any alteration in price of
beds; and 7) Parsons binds himself to only sell Quiroga beds. Quiroga alleged that Parsons
breached its contract by selling the beds at a higher price, not having an open establishment in
Iloilo, not maintaining a public exhibition, and for not ordering the beds by the dozen. Only the
last imputation was provided for by the contract, the others were not stipulated. Quiroga argued
that since there was a contract of agency between them, such obligations were necessarily
implied.

ISSUE:
Is the contract between them one of agency, not of sale?

HELD:
No. The agreement between Quiroga and Parsons was that of a simple purchase and sale — not
an agency. Quiroga supplied the beds, while Parsons had the obligation to pay their purchase
price. These features exclude the legal conception of an agency or order to sell whereby the
mandatory or agent received the thing to sell it, and does not pay its price, but delivers to the
principal the price he obtains from the sale of the thing to a third person, and if he does not
succeed in selling it, he returns it. By virtue of the contract between the plaintiff and the
defendant, the latter, on receiving the beds, was necessarily obliged to pay their price within the
term fixed, without any other consideration and regardless as to whether he had or had not sold
the beds. There was mutual tolerance in the performance of the contract in disregard of its terms;
and it gives no right to have the contract considered, not as the parties stipulated it, but as they
performed it. Only the acts of the contracting parties, subsequent to, and in connection with, the
execution of the contract, must be considered for the purpose of interpreting the contract, when
such interpretation is necessary.

CIR v. CONSTANTINO
G.R. No. L-25926 February 27, 1970
Reyes, J.B.L., J.

Doctrine:
• The transfer of title or agreement to transfer it for a price paid or promised is the essence of
sale. If such transfer puts the transferee in the attitude or position of an owner and makes him
liable to the transferor as a debtor for the agreed price, and not merely as an agent who must
account for the proceeds of a resale, the transaction is a sale; while the essence of an agency to
sell is the delivery to an agent, not as his property, but as the property of the principal, who
remains the owner and has the right to control sales, fix the price, and terms, demand and receive
the proceeds less the agent’s commission upon sales made.

• That the dealer issues his own sales invoice to the customer is neither a means of acquiring
ownership nor is it proof of ownership.

Facts:
Petitioner Commissioner of Internal Revenue (CIR) assessed against and demanded from
respondent Constantino the commercial broker’s percentage tax of 6% on his gross
compensation for 1956, as dealer or distributor of the products of International Harvester,
Macleod, Inc. (IHM).

Respondent is designated as the exclusive dealer of the products IHM within a prescribed
territory. In classifying himself as an independent merchant instead of a commercial broker,
respondent Constantino cites that he may buy IHM products for Resale to his customers; that he
is granted trade discounts and a cash discount under certain conditions; that he may purchase
service parts on open credit account or on a 30-day term; and that he sold service parts to his
customers on cash basis. Constantino also cited the fact that his purchases are covered by IHM’s
sales invoices, and when he re-sells he issues his own sales invoice.

Constantino protested the assessment on the ground that he is not a commercial broker. On his
protest being overruled, he filed a petition for review with the Court of Tax Appeals, which, after
trial, found for him. Upon his reversal by the tax court, the CIR interposed the present appeal.

Issue:
Whether or not the relationship between the respondent and IHM is that of a vendor and a
vendee

Held:
No. A casual examination of respondent’s evidence may give the impression that this
relationship with the company is that of vendor and vendee, but a closer look into the actual legal
effect of the terms and conditions embodied, rather than the names of the contracts used or the
terminologies employed, in the chain of documents shows that the relation between the company
and the respondent is one of principal and agent.

Respondent failed to state or notice, however, the condition in his agreement with IHM, which is
in small print, that the title of the goods delivered under this order shall remain in IHM until the
full purchase price shall have been paid in cash or acceptable security. That the dealer should
issue his own sales invoice to the customer is neither a means of acquiring ownership nor is it
proof of ownership.

Since the company retained ownership of the goods, even as it delivered possession unto the
dealer for resale to customers, the price and terms of which were subject to the company’s
control, the relationship between the company and the dealer is one of agency, tested under the
following criterion:

The difficulty in distinguishing between contracts of sale and the creation of an agency to sell
has led to the establishment of rules by the application of which this difficulty may be solved.
The decisions say the transfer of title or agreement to transfer it for a price paid or promised is
the essence of sale. If such transfer puts the transferee in the attitude or position of an owner and
makes him liable to the transferor as a debtor for the agreed price, and not merely as an agent
who must account for the proceeds of a resale, the transaction is a sale; while the essence of an
agency to sell is the delivery to an agent, not as his property, but as the property of the principal,
who remains the owner and has the right to control sales, fix the price, and terms, demand and
receive the proceeds less the agent’s commission upon sales made (Salisbury v. Brooks, 94 SE
117, 118-119).

The control by the company of the resale made, or agreed upon to be made, by the dealer is so
pervasive as to exclude the idea of the latter being an independent merchant. As respondent is
not an independent merchant, but an agent, the discount of 16% that he receives is not a “trade
discount” but a compensation or profit for selling or bringing about sales or purchases of
merchandise for the company.

Commissioner on Internal Revenue vs Engineering Equipment G.R. No. L-

27044 June 30, 1975
Facts:
· Engineering Equipment and Supply Co. (Engineering for short), a domestic corporation, is
an engineering and machinery firm. As operator of an integrated engineering shop, it is engaged,
among others, in the design and installation of central type air conditioning system, pumping
plants and steel fabrications.
· On July 27, 1956, one Juan de la Cruz, wrote the then Collector, now Commissioner, of
Internal Revenue denouncing Engineering for tax evasion by misdeclaring its imported articles
and failing to pay the correct percentage taxes due thereon in connivance with its foreign
suppliers. Engineering was likewise denounced to the Central Bank (CB) for alleged fraud in
obtaining its dollar allocations. Acting on these denunciations, a raid and search was conducted
by a joint team of Central Bank, (CB), National Bureau of Investigation (NBI) and Bureau of
Internal Revenue (BIR) agents on September 27, 1956, on which occasion voluminous records of
the firm were seized and confiscated
· On September 30, 1957, revenue examiners Quesada and Catudan reported and
recommended to the then Collector, now Commissioner, of Internal Revenue that Engineering be
assessed for P480,912.01 as deficiency advance sales tax on the theory that it misdeclared its
importation of air conditioning units and parts and accessories thereof which are subject to tax
under Section 185(m) of the Tax Code,
· On March 3, 1959. the Commissioner assessed against, and demanded upon, Engineering
payment of the increased amount and suggested that P10,000 be paid as compromise in
extrajudicial settlement of Engineering's penal liability for violation of the Tax Code. The firm,
however, contested the tax assessment and requested that it be furnished with the details and
particulars of the Commissioner's assessment
· Engineering appealed to the Court of Tax Appeals. CTA rendered a decision in favor of
Engineering, declared exempt from the deficiency manufacturers sales tax covering the period
from June 1, 1948. to September 2, 1956. However, petitioner is ordered to pay respondent, or
his duly authorized collection agent, the sum of P174,141.62 as compensating tax and 25%
surcharge for the period from 1953 to September 1956. With costs against petitioner.
· Not satisfied, both appealed before the SC. Since the two cases are similar, both will be tried
together.

Issue: W/ON Engineering is a manufacturer of air conditioning units under Section 185(m),
supra, in relation to Sections 183(b) and 194 of the Code, or a contractor under Section 191 of
the same Code.

Held: Contractor. The distinction between a contract of sale and one for work, labor and
materials is tested by the inquiry whether the thing transferred is one not in existence and which
never would have existed but for the order of the party desiring to acquire it, or a thing which
would have existed and has been the subject of sale to some other persons even if the order had
not been given.
The word "contractor" has come to be used with special reference to a person who, in the pursuit
of the independent business, undertakes to do a specific job or piece of work for other persons,
using his own means and methods without submitting himself to control as to the petty details.
The true test of a contractor, would seem to be that he renders service in the course of an
independent occupation, representing the will of his employer only as to the result of his work,
and not as to the means by which it is accomplished.

Engineering, in a nutshell, fabricates, assembles, supplies and installs in the buildings of its
various customers the central type air conditioning system; prepares the plans and specifications
therefor which are distinct and different from each other; the air conditioning units and spare
parts or accessories thereof used by petitioner are not the window type of air conditioner which
are manufactured, assembled and produced locally for sale to the general market; and the
imported air conditioning units and spare parts or accessories thereof are supplied and installed
by petitioner upon previous orders of its customers conformably with their needs and
requirements.