DIGEST

Adelfa Properties vs. CA G.R. No. 111238. 1anuary 25, 1995.]

Second Division, Regalado (J): 3 concur
PARTIES: Roasrio and Salud 1imenez - 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 oI a parcel oI land consisting oI 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
oI 1/2 oI said parcel oI land, speciIically the eastern portion thereoI, to AdelIa Properties pursuant to a
'Kasulatan sa Bilihan ng Lupa. Subsequently, a 'ConIirmatory Extrajudicial Partition Agreement was
executed by the Jimenezes, wherein the eastern portion oI the subject lot, with an area oI 8,855 sq. ms. was
adjudicated to Jose and Dominador Jimenez, while the western portion was allocated to Rosario and Salud
Jimenez.
ThereaIter, AdelIa Properties expressed interest in buying the western portion oI the property Irom 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 oI P50,000
shall be credited as partial payment upon the consummation oI sale, that the balance is to be paid on or
beIore 30 November 1989, and that in case oI deIault by AdelIa Properties to pay the balance, the option is
cancelled and 50 oI the option money shall be IorIeited and the other 50 reIunded upon the sale oI the
property to a third party.
BeIore AdelIa Properties could make payment, it received summons on 29 November 1989, together with a
copy oI a complaint Iiled by the nephews and nieces oI Rosario and Salud against the latter, Jose and
Dominador Jimenez, and AdelIa Properties in the RTC Makati (Civil Case 89-5541), Ior annulment oI the
deed oI sale in Iavor oI Household Corporation and recovery oI ownership oI the property covered by TCT
309773.
As a consequence, in a letter dated 29 November 1989, AdelIa Properties inIormed Rosario and Salud that
it would hold payment oI the Iull purchase price and suggested that the latter settle the case with their
nephews and nieces. . Salud Jimenez reIused to heed the suggestion oI AdelIa Properties and attributed the
suspension oI payment oI the purchase price to 'lack oI word oI honor
. On 14 December 1989, Rosario and Salud sent Francisca Jimenez to see Atty. Bernardo, in his capacity as
AdelIa Properties` counsel, and to inIorm the latter that they were cancelling the transaction. In turn, Atty.
Bernardo oIIered to pay the purchase price provided that P500,000.00 be deducted thereIrom Ior the
settlement oI 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 Irom 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 inIorming the latter that in view oI the
dismissal oI the case against them, AdelIa Properties was willing to pay the purchase price, and he
requested that the corresponding deed oI absolute sale be executed. This was ignored by Rosario and Salud.
On 27 July 1990, Jimenez` counsel sent a letter to AdelIa Properties enclosing therein a check Ior
P25,000.00 representing the reIund oI 50 oI the option money paid under the exclusive option to
purchase. Rosario and Salud then requested AdelIa Properties to return the owner`s duplicate copy oI the
certiIicate oI title oI Salud Jimenez. AdelIa Properties Iailed to surrender the certiIicate oI title.
Rosario and Salud Jimenez Iiled Civil Case 7532 in the RTC Pasay City (Branch 113) Ior annulment oI
contract with damages, praying, among others, that the exclusive option to purchase be declared null and
void; that AdelIa Properties be ordered to return the owner`s duplicate certiIicate oI title; and that the
annotation oI 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 oI payment by AdelIa
Properties constituted a counter-oIIer which, thereIore, was tantamount to a rejection oI the option. It
likewise ruled that AdelIa Properties could not validly suspend payment in Iavor oI Rosario and Salud on
the ground that the vindicatory action Iiled by the latter`s kin did not involve the western portion oI the land
covered by the contract between the parties, but the eastern portion thereoI which was the subject oI the
sale between AdelIa Properties and the brothers Jose and Dominador Jimenez. The trial court then directed
the cancellation oI the exclusive option to purchase.
On appeal,
RTC: the Court oI appeals aIIirmed in toto the decision oI the court a quo. That Article 1590 oI the Civil
Code on suspension oI payments applies only to a contract oI sale or a contract to sell, but not to an option
contract which it opined was the nature oI the document subject oI the case at bar.
Hence, the petition Ior review on certiorari.
AdelIa properties posits that the contract is a Contract oI Sale and not an Option Contract or Contract to
Sell, making the suspension oI payment applicable in the case.
ISSUE: Whether or not the contract is a Contract oI Sale , Option Contract or Contract to Sell.
SC: The Supreme Court aIIirmed the assailed judgment oI the Court oI Appeals in CA-GR CV 34767, with
modiIicatory 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 oI sale. The distinction between the
two is important Ior in contract oI sale, the title passes to the vendee upon the delivery oI 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 Iull payment oI the price. In a contract oI 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 Iull payment oI the price Thus, a deed oI 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 Iull payment
oI the price, nor one giving the vendor the right to unilaterally resolve the contract the moment the buyer
Iails to pay within a Iixed period.
That the parties really intended to execute a contract to sell is bolstered by the Iact that the deed oI absolute
sale would have been issued only upon the payment oI the balance oI the purchase price, as may be gleaned
Irom AdelIa Properties` letter dated 16 April 1990 wherein it inIormed the vendors that it 'is now ready
and willing to pay you simultaneously with the execution oI the corresponding deed oI 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 oI the intention oI 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 Irom the subsequent acts oI the parties which will hereinaIter be discussed, it is
undeniable that the intention oI the parties was to enter into a contract to sell. In addition, the title oI a
contract does not necessarily determine its true nature. Hence, the Iact that the document under discussion
is entitled 'Exclusive Option to Purchase is not controlling where the text thereoI 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 oI sale or purchase or a mere 'option is whether
or not the agreement could be speciIically enIorced. There is no doubt that AdelIa`s obligation to pay the
purchase price is speciIic, deIinite and certain, and consequently binding and enIorceable. Had the
Jimenezes chosen to enIorce the contract, they could have speciIically compelled AdelIa to pay the balance
oI P2,806,150.00. This is distinctly made maniIest in the contract itselI as an integral stipulation,
compliance with which could legally and deIinitely be demanded Irom 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 Ior the annulment only oI
the contract oI sale executed between AdelIa Properties and the Jimenez brothers, the same likewise prayed
Ior the recovery oI therein Jimenez` share in that parcel oI land speciIically covered by TCT 309773. In
other words, the Jimenezes were claiming to be co-owners oI the entire parcel oI land described in TCT
309773, and not only oI a portion thereoI nor did their claim pertain exclusively to the eastern halI
adjudicated to the Jimenez brothers. ThereIore, AdelIa Properties was justiIied in suspending payment oI
the balance oI the purchase price by reason oI the aIoresaid vindicatory action Iiled against it. The
assurance made by the Jimenezes that AdelIa Properties did not have to worry about the case because it
was pure and simple harassment is not the kind oI guaranty contemplated under the exceptive clause in
Article 1590 wherein the vendor is bound to make payment even with the existence oI a vindicatory action
iI the vendee should give a security Ior the return oI the price.
1imenezes may no longer be compelled to sell and deliver subject property
Be that as it may, and the validity oI the suspension oI payment notwithstanding, the Jimenezes may no
longer be compelled to sell and deliver the subject property to AdelIa Properties Ior two reasons, that is,
AdelIa`s Iailure to duly eIIect the consignation oI the purchase price aIter the disturbance had ceased; and,
secondarily, the Iact that the contract to sell had been validly rescinded by the Jimenezes.
Rescission in a contract to sell
Article 1592 oI the Civil Code which requires rescission either by judicial action or notarial act is not
applicable to a contract to sell. Furthermore, judicial action Ior rescission oI a contract is not necessary
where the contract provides Ior automatic rescission in case oI breach, as in the contract involved in the
present controversy. By AdelIa`s Iailure to comply with its obligation, the Jimenezes elected to resort to
and did announce the rescission oI the contract through its letter to AdelIa dated 27 July 1990. That written
notice oI rescission is deemed suIIicient under the circumstances.
WHEREFORE, on the Ioregoing modiIicatory premises, and considering that the same result has been
reached by respondent Court oI Appeals with respect to the relieI awarded to private respondents by the
court a quo which we Iind to be correct, its assailed judgment in CA-G.R. CV No. 34767 is hereby
AFFIRMED.