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Adelfa Properties vs. CA [G.R. No. 111238. January 25, 1995.]

Second Division, Regalado (J): 3 concur

PARTIES: Roasrio and Salud Jimenez Seller

Adelfa Properties Buyer

Subject:: western portion of a parcel of land 8855 sq. ms. Covered by TCT 309773
situated in Barrio Culasi, Las Pinas, Metro Manila

Facts: Rosario Jimenez-Castaneda, Salud Jimenez and their brothers, Jose and
Dominador Jimenez, were the registered co-owners of a parcel of land consisting of
17,710 sq. ms (TCT 309773) situated in Barrio Culasi, Las Pias, Metro Manila. On 28
July 1988, Jose and Dominador Jimenez sold their share consisting of 1/2 of said parcel
of land, specifically the eastern portion thereof, to Adelfa Properties pursuant to a
Kasulatan sa Bilihan ng Lupa. Subsequently, a Confirmatory Extrajudicial Partition
Agreement was executed by the Jimenezes, wherein the eastern portion of the subject
lot, with an area of 8,855 sq. ms. was adjudicated to Jose and Dominador Jimenez,
while the western portion was allocated to Rosario and Salud Jimenez.

Thereafter, Adelfa Properties expressed interest in buying the western portion of the
property from Rosario and Salud. Accordingly, on 25 November 1989, an Exclusive
Option to Purchase was executed between the parties, with the condition that the
selling price shall be P2,856,150, that the option money of P50,000 shall be credited as
partial payment upon the consummation of sale, that the balance is to be paid on or
before 30 November 1989, and that in case of default by Adelfa Properties to pay the
balance, the option is cancelled and 50% of the option money shall be forfeited and the
other 50% refunded upon the sale of the property to a third party.

Before Adelfa Properties could make payment, it received summons on 29 November

1989, together with a copy of a complaint filed by the nephews and nieces of Rosario
and Salud against the latter, Jose and Dominador Jimenez, and Adelfa Properties in the
RTC Makati (Civil Case 89-5541), for annulment of the deed of sale in favor of
Household Corporation and recovery of ownership of the property covered by TCT
309773.

As a consequence, in a letter dated 29 November 1989, Adelfa Properties informed

Rosario and Salud that it would hold payment of the full purchase price and suggested
that the latter settle the case with their nephews and nieces. . Salud Jimenez refused to
heed the suggestion of Adelfa Properties and attributed the suspension of payment of
the purchase price to lack of word of honor

. On 14 December 1989, Rosario and Salud sent Francisca Jimenez to see Atty.
Bernardo, in his capacity as Adelfa Properties counsel, and to inform the latter that they
were cancelling the transaction. In turn, Atty. Bernardo offered to pay the purchase price
provided that P500,000.00 be deducted therefrom for the settlement of the civil case.
This was rejected by Rosario and Salud. On 22 December 1989, Atty. Bernardo wrote
Rosario and Salud on the same matter but this time reducing the amount from
P500,000.00 to P300,000.00, and this was also rejected by the latter. On 23 February
1990, the RTC dismissed Civil Case 89-5541.

On 16 April 1990, Atty. Bernardo wrote Rosario and Salud informing the latter that in
view of the dismissal of the case against them, Adelfa Properties was willing to pay the
purchase price, and he requested that the corresponding deed of absolute sale be
executed. This was ignored by Rosario and Salud. On 27 July 1990, Jimenez counsel
sent a letter to Adelfa Properties enclosing therein a check for P25,000.00 representing
the refund of 50% of the option money paid under the exclusive option to purchase.
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Rosario and Salud then requested Adelfa Properties to return the owners duplicate
copy of the certificate of title of Salud Jimenez. Adelfa Properties failed to surrender the
certificate of title.

Rosario and Salud Jimenez filed Civil Case 7532 in the RTC Pasay City (Branch 113)
for annulment of contract with damages, praying, among others, that the exclusive
option to purchase be declared null and void; that Adelfa Properties be ordered to return
the owners duplicate certificate of title; and that the annotation of the option contract on
TCT 309773 be cancelled.

RTC: On 5 September 1991, the trial court rendered judgment holding that the
agreement entered into by the parties was merely an option contract, and declaring
that the suspension of payment by Adelfa Properties constituted a counter-offer which,
therefore, was tantamount to a rejection of the option. It likewise ruled that Adelfa
Properties could not validly suspend payment in favor of Rosario and Salud on the
ground that the vindicatory action filed by the latters kin did not involve the western
portion of the land covered by the contract between the parties, but the eastern portion
thereof which was the subject of the sale between Adelfa Properties and the brothers
Jose and Dominador Jimenez. The trial court then directed the cancellation of the
exclusive option to purchase.

On appeal,

RTC: the Court of appeals affirmed in toto the decision of the court a quo. That Article
1590 of the Civil Code on suspension of payments applies only to a contract of sale or a
contract to sell, but not to an option contract which it opined was the nature of the
document subject of the case at bar.

Hence, the petition for review on certiorari.

Adelfa properties posits that the contract is a Contract of Sale and not an Option
Contract or Contract to Sell, making the suspension of payment applicable in the case.

ISSUE: Whether or not the contract is a Contract of Sale , Option Contract or Contract
to Sell.

SC: The Supreme Court affirmed the assailed judgment of the Court of Appeals in CA-
GR CV 34767, with modificatory premises.

Agreement between parties a contract to sell and not an option contract or a

contract of sale

The alleged option contract is a contract to sell, rather than a contract of sale. The
distinction between the two is important for in contract of sale, the title passes to the
vendee upon the delivery of the thing sold; whereas in a contract to sell, by agreement
the ownership is reserved in the vendor and is not to pass until the full payment of the
price. In a contract of sale, the vendor has lost and cannot recover ownership until and
unless the contract is resolved or rescinded; whereas in a contract to sell, title is
retained by the vendor until the full payment of the price Thus, a deed of sale is
considered absolute in nature where there is neither a stipulation in the deed that title to
the property sold is reserved in the seller until the full payment of the price, nor one
giving the vendor the right to unilaterally resolve the contract the moment the buyer fails
to pay within a fixed period.

That the parties really intended to execute a contract to sell is bolstered by the fact that
the deed of absolute sale would have been issued only upon the payment of the
balance of the purchase price, as may be gleaned from Adelfa Properties letter dated
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16 April 1990 wherein it informed the vendors that it is now ready and willing to pay you
simultaneously with the execution of the corresponding deed of absolute sale.

Contract interpreted to ascertain intent of parties; Title not controlling if text

shows otherwise
The important task in contract interpretation is always the ascertainment of the intention
of the contracting parties and that task is to be discharged by looking to the words they
used to project that intention in their contract, all the words not just a particular word or
two, and words in context not words standing alone. Moreover, judging from the
subsequent acts of the parties which will hereinafter be discussed, it is undeniable that
the intention of the parties was to enter into a contract to sell. In addition, the title of a
contract does not necessarily determine its true nature. Hence, the fact that the
document under discussion is entitled Exclusive Option to Purchase is not controlling
where the text thereof shows that it is a contract to sell.

Test to determine contract as a contract of sale or purchase or mere option

The test in determining whether a contract is a contract of sale or purchase or a mere
option is whether or not the agreement could be specifically enforced. There is no
doubt that Adelfas obligation to pay the purchase price is specific, definite and certain,
and consequently binding and enforceable. Had the Jimenezes chosen to enforce the
contract, they could have specifically compelled Adelfa to pay the balance of
P2,806,150.00. This is distinctly made manifest in the contract itself as an integral
stipulation, compliance with which could legally and definitely be demanded from
petitioner as a consequence.

Adelfa Properties justified in suspending payment of balance by reason of

vindicatory action filed against it
In Civil Case 89-5541, it is easily discernible that, although the complaint prayed for the
annulment only of the contract of sale executed between Adelfa Properties and the
Jimenez brothers, the same likewise prayed for the recovery of therein Jimenez share
in that parcel of land specifically covered by TCT 309773. In other words, the
Jimenezes were claiming to be co-owners of the entire parcel of land described in TCT
309773, and not only of a portion thereof nor did their claim pertain exclusively to the
eastern half adjudicated to the Jimenez brothers. Therefore, Adelfa Properties was
justified in suspending payment of the balance of the purchase price by reason of the
aforesaid vindicatory action filed against it. The assurance made by the Jimenezes that
Adelfa Properties did not have to worry about the case because it was pure and simple
harassment is not the kind of guaranty contemplated under the exceptive clause in
Article 1590 wherein the vendor is bound to make payment even with the existence of a
vindicatory action if the vendee should give a security for the return of the price.

Jimenezes may no longer be compelled to sell and deliver subject property

Be that as it may, and the validity of the suspension of payment notwithstanding, the
Jimenezes may no longer be compelled to sell and deliver the subject property to Adelfa
Properties for two reasons, that is, Adelfas failure to duly effect the consignation of the
purchase price after the disturbance had ceased; and, secondarily, the fact that the
contract to sell had been validly rescinded by the Jimenezes.

Rescission in a contract to sell

Article 1592 of the Civil Code which requires rescission either by judicial action or
notarial act is not applicable to a contract to sell. Furthermore, judicial action for
rescission of a contract is not necessary where the contract provides for automatic
rescission in case of breach, as in the contract involved in the present controversy. By
Adelfas failure to comply with its obligation, the Jimenezes elected to resort to and did
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announce the rescission of the contract through its letter to Adelfa dated 27 July 1990.
That written notice of rescission is deemed sufficient under the circumstances.

WHEREFORE, on the foregoing modificatory premises, and considering that the same
result has been reached by respondent Court of Appeals with respect to the relief
awarded to private respondents by the court a quo which we find to be correct, its
assailed judgment in CA-G.R. CV No. 34767 is hereby AFFIRMED.

CARCELLER V. CA (February 10, 1999)

FACTS:
Respondent State Investment Houses Inc. has a parcel of land in Cebu City leased to
petitioner Jose Ramon Caceller with an option to purchase valid until the expiration of
the lease contract.

3weeks before the expiration of the contract, petitioner made a request to the
respondent for the extension of the lease contact so he can have an ample time to raise
enough funds to avail of the option of sale.

Respondent denied the request and a month after the expiration of the contract,
petitioner made known his intention to buy the property.

Respondent reiterated the provisions in the contract and asked the petitioner to leave
the property, which will now be offered to the general public for a higher price.

ISSUE:
WON can still exercise his option of sale even after the time to do such has already
lapsed.

HELD:
The contract must be interpreted together with the intention of the parties. The letter of
the plaintiff to the respondent requesting for an extension is sufficient proof of his intent
to avail of the option of sale.

In contractual relations, the law allows the parties reasonable leeway on the terms of
their agreement, which is the law between them. When petitioner made his intention to
buy known to the buyer one month after the expiration of contract is within a reasonable
time- frame.

Petitioner may buy the property but not anymore to the price stated in the contract. As
such, respondent may increase the price of the land but only to a reasonable and fair
market value.

An option is a preparatory contract in which one party grants to the other, for a fixed
period and under specified conditions, the power to decide, whether or not to enter into
a principal contract. It binds the party who has given the option, not to enter into the
principal contract with any other person during the period designated, and, within that
period, to enter into such contract with the one to whom the option was granted, if the
latter should decide to use the option. It is a separate agreement distinct from the
contract which the parties may enter into upon the consummation of the option.

Kilosbayan v morato

Facts:
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GR 113375 (KIlosbayan vs. Guingona) held invalidity of the contract between Philippine
Charity Sweepstakes Office (PCSO) and the privately owned Philippine Gaming
Management Corporation (PGMC) for the operation of a nationwide on-line lottery
system. The contract violated the provision in the PCSO Charter which prohibits PCSO
from holding and conducting lotteries through a collaboration, association, or joint
venture.

Both parties again signed an Equipment Lease Agreement (ELA) for online lottery
equipment and accessories on January 25, 1995. The agreement are as follow:

Rental is 4.3% of gross amount of ticket sales by PCSO at which in no case be less
than an annual rental computed at P35,000 per terminal in commercial operation.

Rent is computed bi-weekly.

Term is 8 years.

PCSO is to employ its own personnel and responsible for the facilities.

Upon expiration of term, PCSO can purchase the equipment at P25M.

Kilosbayan again filed a petition to declare amended ELA invalid because:

It is the same as the old contract of lease.

It is still violative of PCSOs charter.

It is violative of the law regarding public bidding. It has not been approved by the
President and it is not most advantageous to the government.

PCSO and PGMC filed separate comments

ELA is a different lease contract with none of the vestiges in the prior contract.

ELA is not subject to public bidding because it fell in the exception provided in EO No.
301.

Power to determine if ELA is advantageous vests in the Board of Directors of PCSO.

Lack of funds. PCSO cannot purchase its own online lottery equipment.

Petitioners seek to further their moral crusade.

Petitioners do not have a legal standing because they were not parties to the contract.

Issues:

Whether or not petitioner Kilosbayan, Incorporated has a legal standing to sue.

Whether or not the ELA between PCSO and PGMC in operating an online lottery is
valid.

Rulings:

In the resolution of the case, the Court held that:

Petitioners do not have a legal standing to sue.

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STARE DECISIS cannot apply. The previous ruling sustaining the standing of the
petitioners is a departure from the settled rulings on real parties in interest because no
constitutional issues were actually involved.

LAW OF THE CASE (opinion delivered on a former appeal) cannot also apply. Since
the present case is not the same one litigated by the parties before in Kilosbayan vs.
Guingona, Jr., the ruling cannot be in any sense be regarded as the law of this case.
The parties are the same but the cases are not.

RULE ON CONCLUSIVENESS OF JUDGMENT cannot still apply. An issue actually

and directly passed upon and determine in a former suit cannot again be drawn in
question in any future action between the same parties involving a different cause of
action. But the rule does not apply to issues of law at least when substantially unrelated
claims are involved. When the second proceeding involves an instrument or transaction
identical with, but in a form separable from the one dealt with in the first proceeding, the
Court is free in the second proceeding to make an independent examination of the legal
matters at issue.

Since ELA is a different contract, the previous decision does not preclude determination
of the petitioners standing.

Standing is a concept in constitutional law and here no constitutional question is actually

involved. The more appropriate issue is whether the petitioners are real parties of
interest.

Question of contract of law: The real parties are those who are parties to the agreement
or are bound either principally or are prejudiced in their rights with respect to one of the
contracting parties and can show the detriment which would positively result to them
from the contract.

Petitioners do not have such present substantial interest. Questions to the nature or
validity of public contracts maybe made before COA or before the Ombudsman.

Equipment Lease Agreement (ELA) is valid.

It is different with the prior lease agreement: PCSO now bears all losses because the
operation of the system is completely in its hands.

Fixing the rental rate to a minimum is a matter of business judgment and the Court is
not inclined to review.

Rental rate is within the 15% net receipts fixed by law as a maximum. (4.3% of gross
receipt is discussed in the dissenting opinion of Feliciano, J.)

In the contract, it stated that the parties can change their agreement. Petitioners state
that this would allow PGMC to control and operate the on-line lottery system. The Court
held that the claim is speculative. In any case, in the construction of statutes, the
resumption is that in making contracts, the government has acted in good faith. The
doctrine that the possibility of abuse is not a reason for denying power.

It was held in Kilosbayan Vs. Guingona that PCSO does not have the power to enter
into any contract which would involve it in any form of collaboration, association, or joint
venture for the holding of sweepstakes activities. This only mentions that PCSO is
prohibited from investing in any activities that would compete in their own activities.
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It is claimed that ELA is a joint venture agreement which does not compete with their
own activities. The Court held that is also based on speculation. Evidence is needed to
show that the transfer of technology would involve the PCSO and its personnel in
prohibited association with the PGMC.

O. 301 (on law of public bidding) applies only to contracts for the purchase of supplies,
materials and equipment and not on the contracts of lease. Public bidding for leases are
only for privately-owned buildings or spaces for government use or of government
owned buildings or spaces for private use.

Petitioners have no standing. ELA is a valid lease contract. The motion for
reconsideration of petitioners is DENIED with finality.

G.R. No. 97332 October 10, 1991

SPOUSES VILLAMOR, petitioners, vs. COURT OF APPEALS AND SPOUSES

MACARIA LABINGISA REYES AND ROBERTO REYES, respondents.

FACTS:

Reyes was the owner of a lot located at Caloocan City, as evidenced by TCT of the
Register of Deeds of Rizal. Reyes sold a portion of the lot (300sqm) to the Spouses
Villamor. Earlier, Reyes borrowed money from the spouses which amount was
deducted from the total purchase price of the lot sold. The portion sold to the Villamor
spouses is now covered by a different TCT while the remaining portion which is still in
the name of Reyes is covered by a different TCT. Reyes executed a "Deed of Option" in
favor of Villamor in which the remaining portion of the lot would be sold to Villamor
under the certain conditions.

According to Macaria Reyes, when her husband, Roberto Reyes, retired, they offered to
repurchase the lot sold by them to the Villamor spouses but Marina Villamor refused
and reminded them instead that the Deed of Option in fact gave them the option to
purchase the remaining portion of the lot.

The Villamors, on the other hand, claimed that they had expressed their desire to
purchase the remaining portion of the lot but the Reyes had been ignoring them. Thus,
after conciliation proceedings in the barangay level failed, they filed a complaint for
specific performance against the Reyes.

Judgment was rendered by the trial court in favor of the Villamor spouses.

The Court of Appeals rendered a decision reversing the decision of the trial court and
dismissing the complaint. The reversal of the trial court's decision was premised on the
finding of respondent court that the Deed of Option is void for lack of consideration.

The Villamor spouses brought the instant petition for review on certiorari.

ISSUE:

Whether the kind of Deed of Option in this case was valid

RATIO:
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The court a quo, rule that the Deed of Option was a valid written agreement between
the parties. The law provides that when the terms of an agreement have been reduced
to writing it is to be considered as containing all such terms, and therefore, there can be,
between the parties and their successors in interest no evidence of their terms of the
agreement, other than the contents of the writing. ... (Section 7 Rule 130 Revised Rules
of Court)

A sale must be for a price certain (Art. 1458). The respondent appellate court failed to
give due consideration to the evidence which shows that the Villamor spouses bough an
adjacent lot from the brother of Macaria Reyes for only P18.00 per square meter which
the respondents Reyes did not rebut. Thus, expressed in terms of money, the
consideration for the deed of option is the difference between the purchase price of the
portion of the lot in 1971 (P70.00 per sq.m.) and the prevailing reasonable price of the
same lot in 1971. Whatever it is, (P25.00 or P18.00) though not specifically stated in the
deed of option, was ascertainable. Villamors allegedly paying P52.00 per square meter
for the option may, as opined by the appellate court, be improbable but improbabilities
does not invalidate a contract freely entered into by the parties.

The "deed of option" entered into by the parties in this case had unique features.
Ordinarily, an optional contract is a privilege existing in one person, for which he had
paid a consideration and which gives him the right to buy, for example, certain
merchandise or certain specified property, from another person, if he chooses, at any
time within the agreed period at a fixed price. The first part of the deed covered the
statement on the sale of the 300 square meter portion of the lot to Spouses Villamor at
the price of P70.00 per square meter "which was higher than the actual reasonable
prevailing value of the lands in that place at that time (of sale)." The second part stated
that the only reason why the Villamor spouses agreed to buy the said lot at a much
higher price is because the vendor (Reyes) also agreed to sell to the Villamors the other
half-portion of 300 square meters of the land. Had the deed stopped there, there would
be no dispute that the deed is really an ordinary deed of option granting the Villamors
the option to buy the remaining 300 square meter-half portion of the lot in consideration
for their having agreed to buy the other half of the land for a much higher price. But, the
"deed of option" went on and stated that the sale of the other half would be made
"whenever the need of such sale arises, either on our (Reyes) part or on the part of the
Spouses Villamor. It appears that while the option to buy was granted to the Villamors,
the Reyes were likewise granted an option to sell. In other words, it was not only the
Villamors who were granted an option to buy for which they paid a consideration. The
Reyes as well were granted an option to sell should the need for such sale on their part
arise.

The option offered by Reyes had been accepted by the Villamors, the promise, in the
same document. The acceptance of an offer to sell for a price certain created a bilateral
contract to sell and buy and upon acceptance, the offer, ipso facto assumes obligations
of a vendee. Demandabilitiy may be exercised at any time after the execution of the
deed.

Since there may be no valid contract without a cause of consideration, the promisory is
not bound by his promise and may, accordingly withdraw it. Pending notice of its
withdrawal, his accepted promise partakes, however, of the nature of an offer to sell
which, if accepted, results in a perfected contract of sale.
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A contract of sale is, under Article 1475 of the Civil Code, "perfected at the moment
there is a meeting of minds upon the thing which is the object of the contract and upon
the price. From that moment, the parties may reciprocally demand perform of contracts."
Since there was, between the parties, a meeting of minds upon the object and the price,
there was already a perfected contract of sale. What was, however, left to be done was
for either party to demand from the other their respective undertakings under the
contract. It may be demanded at any time either by the private respondents, who may
compel the petitioners to pay for the property or the petitioners, who may compel the
private respondents to deliver the property.

However, the Deed of Option did not provide for the period within which the parties may
demand the performance of their respective undertakings in the instrument. The parties
could not have contemplated that the delivery of the property and the payment thereof
could be made indefinitely and render uncertain the status of the land. The failure of
either parties to demand performance of the obligation of the other for an unreasonable
length of time renders the contract ineffective.

Under Article 1144 (1) of the Civil Code, actions upon written contract must be brought
within ten (10) years. The Deed of Option was executed on November 11, 1971. The
acceptance, as already mentioned, was also accepted in the same instrument. The
complaint in this case was filed by the petitioners 17 years from the time of the
execution of the contract. Hence, the right of action had prescribed.

It is of judicial notice that the price of real estate in Metro Manila is continuously on the
rise. To allow the Villamors to demand the delivery of the property 17 years after the
execution of the deed at the price of only P70.00 per square meter is inequitous. For
reasons also of equity and in consideration of the fact that the Reyes have no other
decent place to live, the Court, in the exercise of its equity jurisdiction is not inclined to
grant petitioners' prayer.

Petition is DENIED. The decision of respondent appellate court is AFFIRMED.

Sanchez v rigos

FACTS:

In an instrument entitled "Option to Purchase," executed on April 3, 1961, defendant-

appellant Severina Rigos "agreed, promised and committed ... to sell" to plaintiff-
appellee Nicolas Sanchez for the sum of P1,510.00 within two (2) years from said date,
a parcel of land situated in the barrios of Abar and Sibot, San Jose, Nueva Ecija. It was
agreed that said option shall be deemed "terminated and elapsed," if Sanchez shall fail
to exercise his right to buy the property" within the stipulated period. On March 12,
1963, Sanchez deposited the sum of Pl,510.00 with the CFI of Nueva Ecija and filed an
action for specific performance and damages against Rigos for the latters refusal to
accept several tenders of payment that Sanchez made to purchase the subject land.

Defendant Rigos contended that the contract between them was only a unilateral
promise to sell, and the same being unsupported by any valuable consideration, by
force of the New Civil Code, is null and void." Plaintiff Sanchez, on the other hand,
alleged in his compliant that, by virtue of the option under consideration, "defendant
agreed and committed to sell" and "the plaintiff agreed and committed to buy" the land
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described in the option. The lower court rendered judgment in favor of Sanchez and
ordered Rigos to accept the sum Sanchez judicially consigned, and to execute in his
favor the requisite deed of conveyance. The Court of Appeals certified the case at bar to
the Supreme Court for it involves a question purely of law.

ISSUE:

Was there a contract to buy and sell between the parties or only a unilateral promise to
sell?

COURT RULING:

The Supreme Court affirmed the lower courts decision. The instrument executed in
1961 is not a "contract to buy and sell," but merely granted plaintiff an "option" to buy,
as indicated by its own title "Option to Purchase." The option did not impose upon
plaintiff Sanchez the obligation to purchase defendant Rigos' property. Rigos "agreed,
promised and committed" herself to sell the land to Sanchez for P1,510.00, but there is
nothing in the contract to indicate that her aforementioned agreement, promise and
undertaking is supported by a consideration "distinct from the price" stipulated for the
sale of the land. The lower court relied upon Article 1354 of the Civil Code when it
presumed the existence of said consideration, but the said Article only applies to
contracts in general. However, it is not Article 1354 but the Article 1479 of the same
Code which is controlling in the case at bar because the latters 2nd paragraph refers to
"sales" in particular, and, more specifically, to "an accepted unilateral promise to buy or
to sell." Since there may be no valid contract without a cause or consideration, the
promisor is not bound by his promise and may, accordingly, withdraw it. Pending notice
of its withdrawal, his accepted promise partakes, however, of the nature of an offer to
sell which, if accepted, results in a perfected contract of sale. Upon mature deliberation,
the Court reiterates the doctrine laid down in the Atkins case and deemed abandoned or
modified the view adhered to in the Southwestern Company case.

Vasquez v ca

his petition seeks to reverse the decision of the Court of Appeals which affirmed the
earlier decision of the Regional Trial Court, 6th Judicial Region, Branch 56,
Himamaylan, Negros Occidental in Civil Case No. 839 (for specific performance and
damages) ordering the petitioners (defendants in the civil case) to resell Lot No. 1860 of
the Cadastral Survey of Himamaylan, Negros Occidental to the respondents (plaintiffs in
the civil case) upon payment by the latter of the amount of P24,000.00 as well as the
appellate court's resolution denying a motion for reconsideration. In addition, the
appellate court ordered the petitioners to pay the amount of P5,000.00 as necessary
and useful expenses in accordance with Article 1616 of the Civil Code.

The facts of the case are not in dispute. They are summarized by the appellate court as
follows:

On January 15, 1975, the plaintiffs-spouses (respondents herein) filed this action
against the defendants-spouses (petitioners herein) seeking to redeem Lot No.
1860 of the Himamaylan Cadastre which was previously sold by plaintiffs to
defendants on September 21, 1964.
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The said lot was registered in the name of plaintiffs. On October 1959, the same
was leased by plaintiffs to the defendants up to crop year 1966-67, which was
extended to crop year 1968-69. After the execution of the lease, defendants took
possession of the lot, up to now and devoted the same to the cultivation of sugar.

On September 21, 1964, the plaintiffs sold the lot to the defendants under a
Deed of Sale for the amount of P9,000.00. The Deed of Sale was duly ratified
and notarized. On the same day and along with the execution of the Deed of
Sale, a separate instrument, denominated as Right to Repurchase (Exh. E), was
executed by the parties granting plaintiffs the right to repurchase the lot for
P12,000.00, said Exh. E likewise duly ratified and notarized. By virtue of the sale,
defendants secured TCT No. T-58898 in their name. On January 2, 1969,
plaintiffs sold the same lot to Benito Derrama, Jr., after securing the defendants'
title, for the sum of P12,000.00. Upon the protestations of defendant, assisted by
counsel, the said second sale was cancelled after the payment of P12,000.00 by
the defendants to Derrama.

Defendants resisted this action for redemption on the premise that Exh. E is just
an option to buy since it is not embodied in the same document of sale but in a
separate document, and since such option is not supported by a consideration
distinct from the price, said deed for right to repurchase is not binding upon them.

After trial, the court below rendered judgment against the defendants, ordering
them to resell lot No. 1860 of the Himamaylan Cadastre to the plaintiffs for the
repurchase price of P24,000.00, which amount combines the price paid for the
first sale and the price paid by defendants to Benito Derrama, Jr.

Defendants moved for, but were denied reconsideration. Excepting thereto,

defendants-appealed, . . . (Rollo, pp. 44-45)

The petition was given due course in a resolution dated February 12, 1990.

The petitioners insist that they can not be compelled to resell Lot No. 1860 of the
Himamaylan Cadastre. They contend that the nature of the sale over the said lot
between them and the private respondents was that of an absolute deed of sale and
that the right thereafter granted by them to the private respondents (Right to
Repurchase, Exhibit "E") can only be either an option to buy or a mere promise on their
part to resell the property. They opine that since the "RIGHT TO REPURCHASE" was
not supported by any consideration distinct from the purchase price it is not valid and
binding on the petitioners pursuant to Article 1479 of the Civil Code.

The document denominated as "RIGHT TO REPURCHASE" (Exhibit E) provides:

RIGHT TO REPURCHASE

KNOW ALL MEN BY THESE PRESENTS:

I, CIPRIANO VASQUEZ, . . ., do hereby grant the spouses Martin Vallejera and

Apolonia Olea, their heirs and assigns, the right to repurchase said Lot No. 1860
for the sum of TWELVE THOUSAND PESOS (P12,000.00), Philippine Currency,
within the period TEN (10) YEARS from the agricultural year 1969-1970 when my
contract of lease over the property shall expire and until the agricultural year
1979-1980.

IN WITNESS WHEREOF, I have hereunto signed my name at Binalbagan,

Negros Occidental, this 21st day of September, 1964.
 12

SGD. CIPRIANO VASQUEZ

SGD. VALERIANA G. VASQUEZ SGD. FRANCISCO SANICAS

(Rollo, p. 47)

The Court of Appeals, applying the principles laid down in the case of Sanchez v. Rigos,
45 SCRA 368 [1972] decided in favor of the private respondents.

In the Sanchez case, plaintiff-appellee Nicolas Sanchez and defendant-appellant

Severino Rigos executed a document entitled "Option to Purchase," whereby Mrs.
Rigos "agreed, promised and committed . . . to sell" to Sanchez for the sum of
P1,510.00, a registered parcel of land within 2 years from execution of the document
with the condition that said option shall be deemed "terminated and lapsed," if "Sanchez
shall fail to exercise his right to buy the property" within the stipulated period. In the
same document, Sanchez" . . . hereby agree and conform with all the conditions set
forth in the option to purchase executed in my favor, that I bind myself with all the terms
and conditions." (Emphasis supplied) The notarized document was signed both by
Sanchez and Rigos.

After several tenders of payment of the agreed sum of P1,510.00 made by Sanchez
within the stipulated period were rejected by Rigos, the former deposited said amount
with the Court of First Instance of Nueva Ecija and filed an action for specific
performance and damages against Rigos.

The lower court rendered judgment in favor of Sanchez and ordered Rigos to accept the
sum judicially consigned and to execute in Sanchez' favor the requisite deed of
conveyance. Rigos appealed the case to the Court of Appeals which certified to this
Court on the ground that it involves a pure question of law.

This Court after deliberating on two conflicting principles laid down in the cases of
Southwestern Sugar and Molasses Co. v. Atlantic Gulf and Pacific Co., (97 Phil. 249
[1955]) and Atkins, Kroll & Co., Inc. v. Cua Hian Tek, 102 Phil. 948 [1958]) arrived at the
conclusion that Article 1479 of the Civil Code which provides:

Art. 1479. A promise to buy and sell a determinate thing for a price certain is
reciprocally demandable.

An accepted unilateral promise to buy or to sell a determinate thing for a price

certain is binding upon the promissory if the promise is supported by a
consideration distinct from the price.

and Article 1324 thereof which provides:

Art. 1324. When the offerer has allowed the offerer a certain period to accept, the
offer may be withdrawn at any time before acceptance by communicating such
withdrawal, except when the option is founded upon a consideration, as
something paid or promised.

should be reconciled and harmonized to avoid a conflict between the two provisions. In
effect, the Court abandoned the ruling in the Southwestern Sugar and Molasses Co.
case and reiterated the ruling in the Atkins, Kroll and Co. case, to wit:

However, this Court itself, in the case of Atkins, Kroll and Co., Inc. v. Cua Hian
Tek, (102 Phil. 948, 951-952) decided later than Southwestern Sugar & Molasses
Co. v. Atlantic Gulf & Pacific Co., (supra) saw no distinction between Articles
1324 and 1479 of the Civil Code and applied the former where a unilateral
 13

promise to sell similar to the one sued upon here was involved, treating such
promise as an option which, although not binding as a contract in itself for lack of
separate consideration, nevertheless generated a bilateral contract of purchase
and sale upon acceptance. Speaking through Associate Justice, later Chief
Justice, Cesar Bengzon, this Court said:

Furthermore, an option is unilateral: a promise to sell at the price fixed

whenever the offeree should decide to exercise his option within the
specified time. After accepting the promise and before he exercises his
option, the holder of the option is not bound to buy. He is free either to buy
or not to buy later. In this case however, upon accepting herein petitioner's
offer a bilateral promise to sell and to buy ensued, and the
respondent ipso facto assumed the obligation of a purchaser. He did not
just get the right subsequently to buy or not to buy. It was not a mere
option then; it was bilateral contract of sale.

Lastly, even supposing that Exh. A granted an option which is not binding
for lack of consideration, the authorities hold that

If the option is given without a consideration, it is a mere offer of a contract

of sale, which is not binding until accepted. If, however, acceptance is
made before a withdrawal, it constitutes a binding contract of sale, even
though the option was not supported by a sufficient consideration . . . (77
Corpus Juris Secundum p. 652. See also 27 Ruling Case Law 339 and
cases cited.)

This Court affirmed the lower court's decision although the promise to sell was not
supported by a consideration distinct from the price. It was obvious that Sanchez, the
promisee, accepted the option to buy before Rigos, the promisor, withdrew the same.
Under such circumstances, the option to purchase was converted into a bilateral
contract of sale which bound both parties.

In the instant case and contrary to the appellate court's finding, it is clear that the right to
repurchase was not supported by a consideration distinct from the price. The rule is that
the promisee has the burden of proving such consideration. Unfortunately, the private
respondents, promisees in the right to repurchase failed to prove such consideration.
They did not even allege the existence thereof in their complaint. (See Sanchez v.
Rigos supra)

Therefore, in order that the Sanchez case can be applied, the evidence must show that
the private respondents accepted the right to repurchase.

The record, however, does not show that the private respondents accepted the "Right to
Repurchase" the land in question. We disagree with the appellate court's finding that the
private respondents accepted the "right to repurchase" under the following
circumstances: . . as evidenced by the annotation and registration of the same on the
back of the transfer of certificate of title in the name of appellants. As vividly appearing
therein, it was signed by appellant himself and witnessed by his wife so that for all
intents and purposes the Vasquez spouses are estopped from disregarding its obvious
purpose and intention."

The annotation and registration of the right to repurchase at the back of the certificate of
title of the petitioners can not be considered as acceptance of the right to repurchase.
Annotation at the back of the certificate of title of registered land is for the purpose
of binding purchasers of such registered land. Thus, we ruled in the case of Bel Air
Village Association, Inc. v. Dionisio (174 SCRA 589 [1989]), citing Tanchoco v.
Aquino (154 SCRA 1 [1987]), and Constantino v. Espiritu (45 SCRA 557 [1972]) that
 14

purchasers of a registered land are bound by the annotations found at the back of the
certificate of title covering the subject parcel of land. In effect, the annotation of the right
to repurchase found at the back of the certificate of title over the subject parcel of land
of the private respondents only served as notice of the existence of such unilateral
promise of the petitioners to resell the same to the private respondents. This, however,
can not be equated with acceptance of such right to repurchase by the private
respondent.

Neither can the signature of the petitioners in the document called "right to repurchase"
signify acceptance of the right to repurchase. The respondents did not sign the offer.
Acceptance should be made by the promisee, in this case, the private respondents and
not the promisors, the petitioners herein. It would be absurd to require the promisor of
an option to buy to accept his own offer instead of the promisee to whom the option to
buy is given.

Furthermore, the actions of the private respondents (a) filing a complaint to compel
re-sale and their demands for resale prior to filing of the complaint cannot be considered
acceptance. As stated in Vda. de Zulueta v. Octaviano (121 SCRA 314 [1983]):

And even granting, arguendo that the sale was a pacto de retro sale, the
evidence shows that Olimpia, through her lawyer, opted to repurchase the land
only on 16 February 1962, approximately two years beyond the stipulated period,
that is not later than May, 1960.

If Olimpia could not locate Aurelio, as she contends, and based on her allegation
that the contract between her was one of sale with right to repurchase, neither,
however, did she tender the redemption price to private respondent Isauro, but
merely wrote him letters expressing her readiness to repurchase the property.

It is clear that the mere sending of letters by the vendor expressing his desire to
repurchase the property without accompanying tender of the redemption price fell
short of the requirements of law. (Lee v. Court of Appeals, 68 SCRA 197 [1972])

Neither did petitioner make a judicial consignation of the repurchase price within
the agreed period.

In a contract of sale with a right of repurchase, the redemptioner who may offer
to make the repurchase on the option date of redemption should deposit the full
amount in court . . . (Rumbaoa v. Arzaga, 84 Phil. 812 [1949])

To effectively exercise the right to repurchase the vendor a retro must make an
actual and simultaneous tender of payment or consignation. (Catangcatang v.
Legayada, 84 SCRA 51 [1978])

The private respondents' ineffectual acceptance of the option to buy validated the
petitioner's refusal to sell the parcel which can be considered as a withdrawal of the
option to buy.

We agree with the petitioners that the case of Vda. de Zulueta v. Octaviano, (supra) is
in point.

Stripped of non-essentials the facts of the Zulueta case are as follows: On November
25, 1952 (Emphasis supplied) Olimpia Fernandez Vda. de Zulueta, the registered owner
of a 5.5 hectare riceland sold the lot to private respondent Aurelio B. Octaviano for
P8,600.00 subject to certain terms and conditions. The contract was an absolute and
definite sale. On the same day, November 25, 1952, (Emphasis supplied) the vendee,
Aurelio signed another document giving the vendor Zulueta the "option to repurchase"
 15

the property at anytime after May 1958 but not later than May 1960. When however,
Zulueta tried to exercise her "option to buy" the property, Aurelio resisted the same
prompting Zulueta to commence suit for recovery of ownership and possession of the
property with the then Court of First Instance of Iloilo.

The trial court ruled in favor of Zulueta. Upon appeal, however, the Court of Appeals
reversed the trial court's decision.

We affirmed the appellate court's decision and ruled:

The nature of the transaction between Olimpia and Aurelio, from the context of
Exhibit "E" is not a sale with right to repurchase. Conventional redemption takes
place "when the vendor reserves the right to repurchase the thing sold, with the
obligation to comply with the provisions of Article 1616 and other stipulations
which may have been agreed upon. (Article 1601, Civil Code).

In this case, there was no reservation made by the vendor, Olimpia, in the
document Exhibit "E" the "option to repurchase" was contained in a subsequent
document and was made by the vendee, Aurelio. Thus, it was more of an option
to buy or a mere promise on the part of the vendee, Aurelio, to resell the property
to the vendor, Olimpia. (10 Manresa, p. 311 cited in Padilla's Civil Code
Annotated, Vol. V, 1974 ed., p. 467) As held in Villarica v. Court of Appeals (26
SCRA 189 [1968]):

The right of repurchase is not a right granted the vendor by the vendee in
a subsequent instrument, but is a right reserved by the vendor in the same
instrument of sale as one of the stipulations of the contract. Once the
instrument of absolute sale is executed, the vendor can no longer reserve
the right to repurchase, and any right thereafter granted the vendor by the
vendee in a separate instrument cannot be a right of repurchase but some
other right like the option to buy in the instant case. . . (Emphasis
supplied)

The appellate court rejected the application of the Zulueta case by stating:

. . . [A]s found by the trial court from which we quote with approval below, the
said cases involve the lapse of several days for the execution of separate
instruments after the execution of the deed of sale, while the instant case
involves the execution of an instrument, separate as it is, but executed on the
same day, and notarized by the same notary public, to wit:

A close examination of Exh. "E" reveals that although it is a separate document

in itself, it is far different from the document which was pronounced as an option
by the Supreme Court in the Villarica case. The option in the Villarica case was
executed several days after the execution of the deed of sale. In the present
case, Exh. "E" was executed and ratified by the same notary public and the Deed
of Sale of Lot No. 1860 by the plaintiffs to the defendants were notarized by the
same notary public and entered in the same page of the same notarial register . .
.

The latter case (Vda. de Zulueta v. Octaviano, supra), likewise involved the
execution of the separate document after an intervention of several days and the
question of laches was decided therein, which is not present in the instant case.
That distinction is therefore crucial and We are of the opinion that the appellee's
right to repurchase has been adequately provided for and reserved in conformity
with Article 1601 of the Civil Code, which states:
 16

Conventional redemption shall take place when the vendor reserves the right to
repurchase the thing sold, with the obligation to comply with the provision of
Article 1616 and other stipulations which may have been agreed upon. (Rollo,
pp. 46-47)

Obviously, the appellate court's findings are not reflected in the cited
decision.1wphi1 As in the instant case, the option to repurchase involved in the
Zulueta case was executed in a separate document but on the same date that the deed
of definite sale was executed.

While it is true that this Court in the Zulueta case found Zulueta guilty of laches, this,
however, was not the primary reason why this Court disallowed the redemption of the
property by Zulueta. It is clear from the decision that the ruling in the Zulueta case was
based mainly on the finding that the transaction between Zulueta and Octaviano was
not a sale with right to repurchase and that the "option to repurchase was but an option
to buy or a mere promise on the part of Octaviano to resell the property to Zulueta.

In the instant case, since the transaction between the petitioners and private
respondents was not a sale with right to repurchase, the private respondents cannot
avail of Article 1601 of the Civil Code which provides for conventional redemption.

WHEREFORE, the petition is GRANTED. The questioned decision and resolution of the
Court of Appeals are hereby REVERSED and SET ASIDE. The complaint in Civil Case
No. 839 of the then Court of First Instance of Negros Occidental 12th Judicial District
Branch 6 is DISMISSED. No costs.

Dizon v ca

On May 23, 1974, private respondent Overland Express Lines, Inc. (lessee) entered
into a Contract of Lease with Option to Buy with petitioners[1] (lessors) involving a
1,755.80 square meter parcel of land situated at corner MacArthur Highway and South
"H" Street, Diliman, Quezon City. The term of the lease was for one (1) year
commencing from May 16, 1974 up to May 15, 1975. During this period, private
respondent was granted an option to purchase for the amount of P3,000.00 per square
meter. Thereafter, the lease shall be on a per month basis with a monthly rental
of P3,000.00.
For failure of private respondent to pay the increased rental of P8,000.00 per month
effective June 1976, petitioners filed an action for ejectment (Civil Case No. VIII-29155)
on November 10, 1976 before the then City Court (now Metropolitan Trial Court) of
Quezon City, Branch VIII. On November 22, 1982, the City Court rendered
judgment[2] ordering private respondent to vacate the leased premises and to pay the
sum of P624,000.00 representing rentals in arrears and/or as damages in the form of
reasonable compensation for the use and occupation of the premises during the period
of illegal detainer from June 1976 to November 1982 at the monthly rental of P8,000.00,
less payments made, plus 12% interest per annum from November 18, 1976, the date
of filing of the complaint, until fully paid, the sum of P8,000.00 a month starting
December 1982, until private respondent fully vacates the premises, and to
pay P20,000.00 as and by way of attorney's fees.
Private respondent filed a certiorari petition praying for the issuance of a restraining
order enjoining the enforcement of said judgment and dismissal of the case for lack of
jurisdiction of the City Court.
On September 26, 1984, the then Intermediate Appellate Court[3] (now Court of
Appeals) rendered a decision[4] stating that:
 17

"x x x, the alleged question of whether petitioner was granted an extension of

the option to buy the property; whether such option, if any, extended the lease or
whether petitioner actually paid the alleged P300,000.00 to Fidela Dizon, as
representative of private respondents in consideration of the option and, whether
petitioner thereafter offered to pay the balance of the supposed purchase price,
are all merely incidental and do not remove the unlawful detainer case from the
jurisdiction of respondent court. In consonance with the ruling in the case of
Teodoro, Jr. vs. Mirasol (supra), the above matters may be raised and decided in
the unlawful detainer suit as, to rule otherwise, would be a violation of the
principle prohibiting multiplicity of suits. (Original Records, pp. 38-39)."

The motion for reconsideration was denied. On review, this Court dismissed the
petition in a resolution dated June 19, 1985 and likewise denied private respondent's
subsequent motion for reconsideration in a resolution dated September 9, 1985.[5]
On October 7, 1985, private respondent filed before the Regional Trial Court (RTC)
of Quezon City (Civil Case No. Q-45541) an action for Specific Performance and Fixing
of Period for Obligation with prayer for the issuance of a restraining order pending
hearing on the prayer for a writ of preliminary injunction. It sought to compel the
execution of a deed of sale pursuant to the option to purchase and the receipt of the
partial payment, and to fix the period to pay the balance. In an Order dated October 25,
1985, the trial court denied the issuance of a writ of preliminary injunction on the ground
that the decision of the then City Court for the ejectment of the private respondent,
having been affirmed by the then Intermediate Appellate Court and the Supreme Court,
has become final and executory.
Unable to secure an injunction, private respondent also filed before the RTC of
Quezon City, Branch 102 (Civil Case No. Q-46487) on November 15, 1985 a complaint
for Annulment of and Relief from Judgment with injunction and damages. In its
decision[6] dated May 12, 1986, the trial court dismissed the complaint for annulment on
the ground of res judicata, and the writ of preliminary injunction previously issued was
dissolved. It also ordered private respondent to pay P3,000.00 as attorney's fees. As a
consequence of private respondent's motion for reconsideration, the preliminary
injunction was reinstated, thereby restraining the execution of the City Court's judgment
on the ejectment case.
The two cases were thereafter consolidated before the RTC of Quezon City, Branch
77. On April 28, 1989, a decision[7] was rendered dismissing private respondent's
complaint in Civil Case No. Q-45541 (specific performance case) and denying its motion
for reconsideration in Civil Case No. 46487 (annulment of the ejectment case). The
motion for reconsideration of said decision was likewise denied.
On appeal,[8] respondent Court of Appeals rendered a decision [9] upholding the
jurisdiction of the City Court of Quezon City in the ejectment case. It also concluded that
there was a perfected contract of sale between the parties on the leased premises and
that pursuant to the option to buy agreement, private respondent had acquired the rights
of a vendee in a contract of sale.It opined that the payment by private respondent
of P300,000.00 on June 20, 1975 as partial payment for the leased property, which
petitioners accepted (through Alice A. Dizon) and for which an official receipt was
issued, was the operative act that gave rise to a perfected contract of sale, and that for
failure of petitioners to deny receipt thereof, private respondent can therefore assume
that Alice A. Dizon, acting as agent of petitioners, was authorized by them to receive the
money in their behalf. The Court of Appeals went further by stating that in fact, what
was entered into was a "conditional contract of sale" wherein ownership over the leased
property shall not pass to the private respondent until it has fully paid the purchase
price. Since private respondent did not consign to the court the balance of the purchase
price and continued to occupy the subject premises, it had the obligation to pay the
amount of P1,700.00 in monthly rentals until full payment of the purchase price. The
dispositive portion of said decision reads:
 18

"WHEREFORE, the appealed decision in Case No. 46487 is AFFIRMED. The

appealed decision in Case No. 45541 is, on the other hand, ANNULLED and
SET ASIDE. The defendants-appellees are ordered to execute the deed of
absolute sale of the property in question, free from any lien or encumbrance
whatsoever, in favor of the plaintiff-appellant, and to deliver to the latter the said
deed of sale, as well as the owner's duplicate of the certificate of title to said
property upon payment of the balance of the purchase price by the plaintiff-
appellant. The plaintiff-appellant is ordered to pay P1,700.00 per month from
June 1976, plus 6% interest per annum, until payment of the balance of the
purchase price, as previously agreed upon by the parties.

SO ORDERED."

Upon denial of the motion for partial reconsideration (Civil Case No. Q-45541) by
respondent Court of Appeals,[10] petitioners elevated the case via petition
for certiorari questioning the authority of Alice A. Dizon as agent of petitioners in
receiving private respondent's partial payment amounting to P300,000.00 pursuant to
the Contract of Lease with Option to Buy. Petitioners also assail the propriety of private
respondent's exercise of the option when it tendered the said amount on June 20, 1975
which purportedly resulted in a perfected contract of sale.

G. R. NO. 124741:

Petitioners filed with respondent Court of Appeals a motion to remand the records of
Civil Case No. 38-29155 (ejectment case) to the Metropolitan Trial Court (MTC), then
City Court of Quezon City, Branch 38, for execution of the judgment [11] dated November
22, 1982 which was granted in a resolution dated June 29, 1992. Private respondent
filed a motion to reconsider said resolution which was denied.
Aggrieved, private respondent filed a petition for certiorari, prohibition with
preliminary injunction and/or restraining order with this Court (G.R. Nos. 106750-51)
which was dismissed in a resolution dated September 16, 1992 on the ground that the
same was a refiled case previously dismissed for lack of merit. On November 26, 1992,
entry of judgment was issued by this Court.
On July 14, 1993, petitioners filed an urgent ex-parte motion for execution of the
decision in Civil Case No. 38-29155 with the MTC of Quezon City, Branch 38. On
September 13, 1993, the trial court ordered the issuance of a third alias writ of
execution. In denying private respondent's motion for reconsideration, it ordered the
immediate implementation of the third writ of execution without delay.
On December 22, 1993, private respondent filed with the Regional Trial Court
(RTC) of Quezon City, Branch 104 a petition for certiorari and prohibition with
preliminary injunction/restraining order (SP. PROC. No. 93-18722) challenging the
enforceability and validity of the MTC judgment as well as the order for its execution.
On January 11, 1994, RTC of Quezon City, Branch 104 issued an order [12] granting
the issuance of a writ of preliminary injunction upon private respondent's posting of an
injunction bond of P50,000.00.
Assailing the aforequoted order after denial of their motion for partial
reconsideration, petitioners filed a petition[13] for certiorari and prohibition with a prayer
for a temporary restraining order and/or preliminary injunction with the Court of
Appeals. In its decision,[14] the Court of Appeals dismissed the petition and ruled that:

"The avowed purpose of this petition is to enjoin the public respondent

from restraining the ejectment of the private respondent. To grant the petition
would be to allow the ejectment of the private respondent. We cannot do that
 19

now in view of the decision of this Court in CA-G.R. CV Nos. 25153-

54. Petitioners' alleged right to eject private respondent has been
demonstrated to be without basis in the said civil case. The petitioners have
been shown, after all, to have no right to eject private respondents.

WHEREFORE, the petition is DENIED due course and is accordingly

DISMISSED.

SO ORDERED."[15]

Petitioners' motion for reconsideration was denied in a resolution [16] by the Court of
Appeals stating that:

"This court in its decision in CA-G.R. CV Nos. 25153-54 declared that the
plaintiff-appellant (private respondent herein) acquired the rights of a vendee in a
contract of sale, in effect, recognizing the right of the private respondent to
possess the subject premises. Considering said decision, we should not allow
ejectment; to do so would disturb the status quo of the parties since the
petitioners are not in possession of the subject property. It would be unfair and
unjust to deprive the private respondent of its possession of the subject property
after its rights have been established in a subsequent ruling.

WHEREFORE, the motion for reconsideration is DENIED for lack of merit.

SO ORDERED."[17]

Hence, this instant petition.

We find both petitions impressed with merit.
First. Petitioners have established a right to evict private respondent from the
subject premises for non-payment of rentals. The term of the Contract of Lease with
Option to Buy was for a period of one (1) year (May 16, 1974 to May 15, 1975) during
which the private respondent was given an option to purchase said property
at P3,000.00 per square meter. After the expiration thereof, the lease was for P3,000.00
per month.
Admittedly, no definite period beyond the one-year term of lease was agreed upon
by petitioners and private respondent. However, since the rent was paid on a monthly
basis, the period of lease is considered to be from month to month in accordance with
Article 1687 of the New Civil Code.[18] Where the rentals are paid monthly, the lease,
even if verbal may be deemed to be on a monthly basis, expiring at the end of every
month pursuant to Article 1687, in relation to Article 1673 of the Civil Code.[19] In such
case, a demand to vacate is not even necessary for judicial action after the expiration of
every month.[20]
When private respondent failed to pay the increased rental of P8,000.00 per month
in June 1976, the petitioners had a cause of action to institute an ejectment suit against
the former with the then City Court. In this regard, the City Court (now MTC) had
exclusive jurisdiction over the ejectment suit. The filing by private respondent of a suit
with the Regional Trial Court for specific performance to enforce the option to purchase
did not divest the then City Court of its jurisdiction to take cognizance over the
ejectment case. Of note is the fact that the decision of the City Court was affirmed by
both the Intermediate Appellate Court and this Court.
Second. Having failed to exercise the option within the stipulated one-year period,
private respondent cannot enforce its option to purchase anymore. Moreover, even
assuming arguendo that the right to exercise the option still subsists at the time private
respondent tendered the amount on June 20, 1975, the suit for specific performance to
 20

enforce the option to purchase was filed only on October 7, 1985 or more than ten (10)
years after accrual of the cause of action as provided under Article 1144 of the New
Civil Code.[21]
In this case, there was a contract of lease for one (1) year with option to
purchase. The contract of lease expired without the private respondent, as lessee,
purchasing the property but remained in possession thereof. Hence, there was an
implicit renewal of the contract of lease on a monthly basis. The other terms of the
original contract of lease which are revived in the implied new lease under Article
1670 of the New Civil Code[22] are only those terms which are germane to the lessees
right of continued enjoyment of the property leased. [23] Therefore, an implied new lease
does not ipso facto carry with it any implied revival of private respondent's option to
purchase (as lessee thereof) the leased premises. The provision entitling the lessee the
option to purchase the leased premises is not deemed incorporated in the impliedly
renewed contract because it is alien to the possession of the lessee. Private
respondents right to exercise the option to purchase expired with the termination of the
original contract of lease for one year. The rationale of this Court is that:

This is a reasonable construction of the provision, which is based on the presumption

that when the lessor allows the lessee to continue enjoying possession of the property
for fifteen days after the expiration of the contract he is willing that such enjoyment shall
be for the entire period corresponding to the rent which is customarily paid in this case
up to the end of the month because the rent was paid monthly. Necessarily, if the
presumed will of the parties refers to the enjoyment of possession the presumption
covers the other terms of the contract related to such possession, such as the amount
of rental, the date when it must be paid, the care of the property, the responsibility for
repairs, etc. But no such presumption may be indulged in with respect to special
agreements which by nature are foreign to the right of occupancy or enjoyment inherent
in a contract of lease.[24]

Third. There was no perfected contract of sale between petitioners and private
respondent. Private respondent argued that it delivered the check of P300,000.00 to
Alice A. Dizon who acted as agent of petitioners pursuant to the supposed authority
given by petitioner Fidela Dizon, the payee thereof. Private respondent further
contended that petitioners filing of the ejectment case against it based on the contract of
lease with option to buy holds petitioners in estoppel to question the authority of
petitioner Fidela Dizon. It insisted that the payment of P300,000.00 as partial payment
of the purchase price constituted a valid exercise of the option to buy.
Under Article 1475 of the New Civil Code, the contract of sale is perfected at the
moment there is a meeting of minds upon the thing which is the object of the contract
and upon the price.From that moment, the parties may reciprocally demand
performance, subject to the provisions of the law governing the form of contracts. Thus,
the elements of a contract of sale are consent, object, and price in money or its
equivalent. It bears stressing that the absence of any of these essential elements
negates the existence of a perfected contract of sale. Sale is a consensual contract and
he who alleges it must show its existence by competent proof.[25]
In an attempt to resurrect the lapsed option, private respondent gave P300,000.00
to petitioners (thru Alice A. Dizon) on the erroneous presumption that the said amount
tendered would constitute a perfected contract of sale pursuant to the contract of lease
with option to buy. There was no valid consent by the petitioners (as co-owners of the
leased premises) on the supposed sale entered into by Alice A. Dizon, as petitioners
alleged agent, and private respondent. The basis for agency is representation and a
person dealing with an agent is put upon inquiry and must discover upon his peril the
authority of the agent.[26] As provided in Article 1868 of the New Civil Code,[27] there was
no showing that petitioners consented to the act of Alice A. Dizon nor authorized her to
act on their behalf with regard to her transaction with private respondent. The most
 21

prudent thing private respondent should have done was to ascertain the extent of the
authority of Alice A. Dizon. Being negligent in this regard, private respondent cannot
seek relief on the basis of a supposed agency.
In Bacaltos Coal Mines vs. Court of Appeals,[28] we explained the rule in dealing
with an agent:

Every person dealing with an agent is put upon inquiry and must discover upon his peril
the authority of the agent. If he does not make such inquiry, he is chargeable with
knowledge of the agents authority, and his ignorance of that authority will not be any
excuse. Persons dealing with an assumed agent, whether the assumed agency be a
general or special one, are bound at their peril, if they would hold the principal, to
ascertain not only the fact of the agency but also the nature and extent of the authority,
and in case either is controverted, the burden of proof is upon them to establish it.

For the long years that private respondent was able to thwart the execution of the
ejectment suit rendered in favor of petitioners, we now write finis to this controversy and
shun further delay so as to ensure that this case would really attain finality.
WHEREFORE, in view of the foregoing, both petitions are GRANTED. The decision
dated March 29, 1994 and the resolution dated October 19, 1995 in CA-G.R. CV No.
25153-54, as well as the decision dated December 11, 1995 and the resolution dated
April 23, 1997 in CA-G.R. SP No. 33113 of the Court of Appeals are hereby
REVERSED and SET ASIDE.
Let the records of this case be remanded to the trial court for immediate execution
of the judgment dated November 22, 1982 in Civil Case No. VIII-29155 of the then City
Court (now Metropolitan Trial Court) of Quezon City, Branch VIII as affirmed in the
decision dated September 26, 1984 of the then Intermediate Appellate Court (now Court
of Appeals) and in the resolution dated June 19, 1985 of this Court.
However, petitioners are ordered to REFUND to private respondent the amount
of P300,000.00 which they received through Alice A. Dizon on June 20, 1975.
SO ORDERED.