VELASCO vs CA Lorenzo Velasco & Magdalena Estate, Inc.

entered into a contract of sale involving a lot in New Manila for 100K.The agreement was that Lorenzo would give a down payment of 10K(as evid enced b y a receipt ) to be follo wed b y 2 0K (tim e w/i n which to m ake full do wn pa ym ent was n ot specified) and th e bal ance of 70K would be paid in installm ents, the equal monthly amortization to be determined as soon as the 30K had been paid. Lorenzo paid the 10K but when he tendered payment for 2 0 K , M a g d a l e n a r e f u s e d t o a c c e p t & refused to execute a formal deed of sale. Velasco filed a complaint for damages. Magdalena denied having any dealings/contractual relations w/ Lorenzo. It contends that a portion of the property was being leased by Lorenzos sister-in-law, Socorro Velasco who went to their office & they agreed to the sale of the property (30K down payment, 70K oni n s t a l l m e n t s + 9 % i n t e r e s t ) . S i n c e S o c o r r o w a s only able to pay 10K, it was merely accepted as deposit & on her r e q u e s t , t h e r e c e i p t w a s m a d e i n t h e n a m e o f L o r e n z o . Socorro failed to complete the down payment & neither has she paid the 70K. It was only2 years after that she tende re d pa ym ent for 2 0K & by the n, Magd alena considered thei r offer to sell rescinded. According to Lorenzo, he had requested Socorro to make the necessary contracts & he had authorized her to make negotiations w/ Magdalena on her o w n n a m e , a s h e d o e s n t understand English. He also uses as evidence the receipt to prove that there already had been a perfected contract to sell as the annotations therein indicated that earnest money for 10K had been received & also the agreed price (100K, 30K dp & bal in 10 yrs) appears thereon. To further prove that it was w/ him & not w/ Socorro that Magdalena dealt with, he showed 5 checks drawn by him for payment of the lease of the property. W/N there was a consummated sale? NO The m inds of the p arties di d not m eet in re ga rd to the m atter of paym ent. It is adm itted that they still had to m eet and agree o n how & when the down paym ent & installm ents w e r e t o b e p a i d . T h e r e f o r e , i t c a n n o t b e s a i d t h a t a d e f i n i t e & f i r m s a l e s a g r e e m e n t between the parties had been perfected. The definit e agreem ent on the m anner of paym ent of the purchase price is an essential element in the formation of a binding & enforceable contract of sale. The fact that Velasco delivered to Magdalena the sum of 10K as part of the down payment that they had to be pa y cann ot b e conside red as sufficient proof of the perfection of any purchase & sale agreement between the parties under Art 1428, NCC. SAN MIGUEL PROPERTIES PHILIPPINES, INC., PETITIONER, VS. SPOUSES ALFREDO HUANG AND GRACE HUANG, RESPONDENTS. [GRN 137290 July 31, 2000] First Division Facts: Petitioner San Miguel Properties Philippines, Inc. is a domestic corporation engaged in the purchase and sale of real properties. Parts of its inventory are two parcels of land totaling to 1, 738 square meters at the corner of Meralco Avenue and Gen. Capinpin St., Barrio Oranbo, Pasig City. On February 21, 1994, the properties were offered for sale for 52,140,000 in cash. The offer was made to Atty. Helena Dauz who was acting for respondent spouses as undisclosed principals. In a letter dated March 24, 1994, Atty. Dauz signified her clients interest in purchasing the properties for the amount for which they were offered by petitioner, under the following terms: the sum of 500,000 would be given as earnest money and the balance would

be paid in 8 equal monthly installments from May to December 1994. However, petitioner refused the counter-offer. Atty. Dauz thus wrote San Miguel expressing the interest of respondent spouses, subject to the following conditions: 1. We will be given the exclusive option to purchase the property within 30 days from date of your acceptance of this offer; 2. During said period, we will negotiate on the terms and conditions of the purchase; SMPPI will secure the necessary management and board approvals; and we initiate the documentation if there is mutual agreement between us; 3. In the event that we do not come to an agreement on this transaction, the said amount of 1,000,000 shall be refundable to us in full upon demand. On July 7, 1994, San Miguel, through its president, Federico Gonzales, wrote Atty. Dauz informing her that because the parties failed to agree on the terms and conditions of the sale despite the extension granted by San Miguel, it is already returning the amount of 1 Million given as earnest-deposit. Respondent spouses, through their counsel, demanded the execution of the Deed of Sale and attempted to return the earnest-deposit but SMPPI refused to accept it on the ground that the option to purchase had already expired. Thus on August 16, 1994, respondent spouses filed a complaint for specific performance against SMPPI but the latter moved to dismiss said complaint alleging that: 1. the alleged exclusive option of respondent spouses lacked a consideration separate and distinct from the purchase price and was thus unenforceable; and 2. the complaint did not allege a cause of action because there was no meeting of the minds between the parties and therefore, no perfected contract of sale. This motion was opposed by respondent spouses. RTC granted the motion to dismiss but the CA reversed it on appeal and held that all the requisites of a perfected contract of sale had been complied with as the offer made in connection with which the earnest money in the amount of 1 Million was tendered by respondent spouses had already been accepted by SMPPI. The court cited Art. 1482 of the Civil Code which provides that whenever earnest money is given in a contract of sale, it shall be considered as part of the price and proof of the perfection of the contract. Issue: Whether or not the contract of sale was perfected. Ruling: The contract of sale was not perfected. In holding that there is perfected contract of sale, the CA relied on the following findings: (1) earnest money was allegedly given by respondents and accepted by SMPPI through its vice-president and operations manager, Isidro Sobrecarey; and (2) the documentary evidence in the records show that there was perfected contract of sale. With regard to the alleged payment and acceptance of the earnest money, the SC holds that respondents did not give the 1 Million as earnest money as contemplated in Art. 1482. Respondents presented the amount merely as deposit of what would eventually become earnest money or down payment should a contract of sale be made by them. The amount was thus given not as part of the purchase price and proof of the perfection of the contract of sale but only as guarantee that respondents would not back out of the sale. They even described it as earnest-deposit. All that respondents had was just an option to buy the properties which privilege was not exercised by them because there was a failure to agree on the terms of payment. No contract of sale may thus be enforced by respondents. AMADO VS. SALVADOR Petitioners are the heirs of the late Judge Amado, who was the owner of a parcel of land situated at Barangay Burgos, Rodriguez, Rizal. The property subject of the present controversy is a portion thereofin the name of Judge Amado. SALVADORS SIDE: cralawSalvador alleges that in or around September 1979, Judge Amado agreed to sell to him the subject property for P60.00 per square meter, or in the total sum of P66,360.00, payable in cash or construction materials which would be delivered to Judge Amado, or to whomsoever the latter wished during his lifetime.Salvador though failed to state the terms of payment, such as the period within which the payment was supposed to be completed, or how much of the payment should be made in cash. In view of the sale in his favor, Salvador undertook the transfer and relocation of about five squatter families residing on the subject property. Thereafter, Judge Amado allowed

Salvador to take possession of the subject property and to build thereon a residential structure, office, warehouse, perimeter fence and a deep well pump. Salvador claims that by October 1980, he had already given Judge Amado total cash advances of P30,310.93 and delivered construction materials amounting to P36,904.45, the total of which exceeded the agreed price for the subject property. PETITIONERS SIDE According to the petitioners, on the other hand, Judge Amado let Salvador use the subject property, upon the request of the latters father and grandfather, who were Judge Amados friends. Salvador used the subject property for his business of manufacturing hollow blocks. The petitioners maintain that the cash advances and the various construction materials were received by Judge Amado from Salvador in connection with a loan agreement, and not as payment for the sale of the subject property. Petitioners assert that when Salvadors business folded up, he failed to pay his share of the monthly amortization of the loan with the bank.Judge Amado paid the loan to prevent the foreclosure of his mortgaged property.Salvador also allowed his brother Lamberto Salvador to occupy the premises without the consent of Judge Amado. STORY CONTINUES... On 4 November 1983, Judge Amado sent a demand letter to Salvador directing the latter to vacate the subject property, which Salvador merely ignored. Judge Amado filed an ejectment suit against Salvador before the Municipal Trial Court (MTC) of Rodriguez cha During the hearing before the MTC, Salvador and his brother, Lamberto Salvador, defendants therein, stated in their Answer with Counterclaim that a balance of P4,040.62 from the purchase price of the subject property was left unpaid due to the failure of Judge Amado to execute and deliver a deed of sale. MTC and RTC dismissed the case for lack of jurisdiction. On 22 August 1996, Salvador filed before the RTC Civil Case No. 1252, an action for specific performance with damages against the petitioners.As evidence that the sale of the subject property was perfected between Judge Amado and himself, Salvador presented a note written by Judge Amado asking Salvador to give him P500.00 and stating that Judge Amado was considering to sign the letter given to him by Kapitan Maeng. To prove that he paid the purchase price, Salvador submitted documents including cash advances, statement of accounts considering construction materials, etc. showing he paid cash and delivered construction materials to Judge Amado. RTCs RULING The RTC dismissed Salvadors complaint. (1) The trial court observed that it was not indicated in the documentary evidence presented by Salvador that the money and construction materials were intended as payment for the subject property.It gave little probative value to tax declarations in the name of Salvadorsince they referred to the improvements on the land and not the land itself. (2) The testimonial evidence given by Ismael Angeles was considered insufficient to prove the fact of sale because the witness failed to categorically state that a sale transaction had taken place between Salvador and Judge Amado. (3) Salvador was disqualified under the Dead Mans Statute from testifying on any matter of fact involving a transaction between him and Judge Amado which occurred before the death of the latter. COURT OF APPEALS RULING (1)The Court of Appeals found that Salvador paid for the subject land with cash advances and construction materials, since petitioners failed to present any evidence showing that the construction materials Salvador delivered to Judge Amado had been paid for. (2)It construed as adequate proof of the sale the handwritten note of Judge Amado wherein the latter promised to sign an unidentified deed after the subdivision of an unnamed property, in light of Ismael Angeles testimony that Judge Amado had promised to sign a deed of sale over the subject property in favor of Salvador. (3) Salvadors testimony was not barred because of the Dead Mans Statute. RELEVANT ISSUE: Whether there was a perfected contract of sale or none SUPREME COURT: No contract of sale was perfected between Judge Amado and Salvador.

A contract of sale is perfected by mere consent, upon a meeting of the minds in the offer and the acceptance thereof based on subject matter, price and terms of payment.Until the contract of sale is perfected, it cannot, as an independent source of obligation, serve as a binding juridical relation between the parties. Consent is essential for the existence of a contract, and where it is absent, the contract is non-existent.Consent in contracts presupposes the following requisites: (1) it should be intelligent or with an exact notion of the matter to which it refers; (2) it should be free; and (3) it should be spontaneous. Moreover, a definite agreement on the manner of payment of the price is an essential element in the formation of a binding and enforceable contract of sale. This is so because the agreement as to the manner of payment goes into the price such that a disagreement on the manner of payment is tantamount to a failure to agree on the price or consideration. Salvador fails to allege the manner of payment of the purchase price on which the parties should have agreed. No period was set within which the payment must be made. Of the purchase price of P66,360.00, which the parties purportedly agreed upon, the amount which should be paid in cash and the amount for construction materials was not determined. This means that the parties had no exact notion of the consideration for the contract to which they supposedly gave their consent. Thus, such failure is fatal to Salvadors claim that a sale had been agreed upon by the parties. (1) First of all, the statements of accounts and the delivery receipts do not indicate that the construction materials or the cash advances were made in connection with the sale of the subject property. Any doubt as to the real meaning of the contract must be resolved against the person who drafted the instrument and is responsible for the ambiguity thereof. (2) Irregular statements (3) P67k vs.P69k This Court cannot presume the existence of a sale of land, absent any direct proof of it. The construction of the terms of a contract, which would amount to impairment or loss of rights, is not favored. Conservation and preservation, not waiver or abandonment or forfeiture of a right, is the rule. Absent any tangible connection with the sale of land, these transactions stand by themselves as loans and purchases of construction materials. Ismael Angeles testimony is not conclusive. At best, it only proves that judge Amado considered to sell the land. Even if Ismael Angeles testimony was given full credence, it would still be insufficient to establish that a sale agreement was perfected between Salvador and Judge Amado.His testimony that Judge Amado ordered the preparation of the deed of sale only proves that Judge Amado and Salvador were in the process of negotiating the sale of the subject property, not that they had already set and agreed to the terms and conditions of the sale.In fact, Ismael Angeles testimony that Judge Amado refused to sign the contract reinforces the fact that the latter had not consented to the sale of the subject property. From the evidence presented, an agreement of sale of the subject property between him and Judge Amado had not yet reached the stage of perfection: A contract undergoes various stages that include its negotiation or preparation, its perfection and, finally, its consummation. Negotiation covers the period from the time the prospective contracting parties indicate interest in the contract to the time the contract is concluded (perfected).The perfection of the contract takes place upon the concurrence of the essential elements thereof. A contract which is consensual as to perfection is so established upon a mere meeting of the minds, i.e. the concurrence of offer and acceptance, on the object and on the cause thereof. x x x. The stage of consummation begins when the parties perform their respective undertakings under the contract culminating in the extinguishment thereof. Until the contract is perfected, it cannot, as an independent source of obligation, serve as a binding juridical relation. In sales, particularly, to which the topic for discussion about the case at bench belongs, the contract is perfected when a person, called the seller, obligates himself, for a price certain, to deliver and to transfer ownership of a thing or right to another, called the buyer, over which the latter agrees.

cralawIn the present case, the terms of payment have not even been alleged. No positive proof was adduced that Judge Amado had fully accepted Salvadors sketchy proposal. Even if the handwritten note actually referred to the subject property, it merely points to the fact that the parties were, at best, negotiating a contract of sale.At the time it was written, on 1 October 1980, Judge Amado had not expressed his unconditional acceptance of Salvadors offer.He merely expressed that he was considering the sale of the subject property, but it was nevertheless clear that he still was unprepared to sign the contract. cralawAbsent the valid sale agreement between Salvador and Judge Amado, the formers possession of the subject property hinges on the permission and goodwill of Judge Amado and the petitioners, as his successors-in-interest. NAVARRA v PLANTERS DEV. BANK FACTS: Navarra spouses are the owners of 5 parcels of land in BF Homes, Paranque. In 1982, they obtained a loan of P1.2M from Planters Bank, secured by a mortgage over these parcels of land. Unfortunately, they defaulted to pay their obligation and thus, Planters Bank foreclosed the property. They were not able to redeem the property as well. On the other hand, RRRC Dev. Corp. is a real estate company owned by the parents of Carmelita Navarra. It obtained a loan from Planters Bank secured by a mortgage over another set of properties of RRRC. Likewise, it defaulted and the properties were foreclosed. However, RRRC was able to negotiate with the Bank for the redemption of the properties by was of a concession whereby the Bank allowed RRRC to refer to it would-be buyers of the properties who would remit their payments directly to the Bank, which would then be considered as redemption price for RRRC. Eventually, these were sold and payments made directly to the Bank were in excess by P300K for the redemption price. In the meantime, Jorge Navarra requested that they repurchase their house and lot for P300K, which the Bank agreed. Accordingly, Jorge Navarra requested further that the excess payment of RRRC be applied as down payment for their repurchase. For his failure to submit a board resolution from RRRC authorizing such, the Bank refused to apply the excess to his repurchase. In 1988, a portion of the lots was sold to Gatchalian Realty. Navarra spouses filed for specific performance against Planters Bank, alleging that there was a perfected contract of sale (P1.8M, with P300K downpayment). RTC ruled in favor of Navarra spouses. CA reversed. ISSUE: W/N there was a valid contract of sale (consider the repurchase as a sale) HELD: NO. While the letters indicate the amount of P300K as downpayment, they are completely silent as to how the succeeding installment payment shall be made. At most, the letters merely acknowledge that the downpayment was agreed upon by the parties. However, this fact cannot lead to the conclusion that a contract of sale had been perfected. Before a valid and binding contract of sale can exist, the manner of payment of the purchase price must first be established since the agreement on the manner of the payment goes into the price such that a disagreement on the manner of payment is tantamount to a failure to agree on the price. Moreover, the letter/offer failed to specify a definite amount of the purchase price for the sale/repurchase of the properties. It merely stated that it will be based on the redemption value plus accrued interest at the prevailing rate up to the date of the sales contract. Clearly, the lack of a definite offer on the part of the Navarra spouses could not possibly serve as the basis of their claim that the sale was perfected. JOSE RAMON CARCELLER, petitioner, vs. COURT OF APPEALS and STATE INVESTMENT HOUSES, INC., respondents. Blanco Law Firm for petitioner. De Borja Medialdea Bello Guevarra Serapio & Gerodias for private respondent. SYNOPSIS Private respondent State Investment House, Inc. (SIHI), the registered owner of two (2) parcels of land located at Bulacao, Cebu City, entered into a lease contract with option to purchase with petitioner for a period of eighteen (18) months, beginning on August 1, 1984 until January 30, 1986. On January 7, 1986, SIHI notified petitioner of the short period of time left within which he could still validly exercise the option. On January 15, 1986, petitioner requested for a six-month extension of the lease contract, alleging that he needs ample time to raise sufficient funds.

However, on February 14, 1986, SIHI notified petitioner that his request was disapproved. Consequently, on February 18, 1986, petitioner notified SIHI of his decision to exercise the option to purchase the property. Again, on February 20, 1986, SIHI reiterated its previous stand on the latter's offer, stressing that the period within which the option should have been exercised had already lapsed. Further, SIHI asked petitioner to vacate the property. Thus, on February 28, 1986, a complaint for specific performance and damages was filed by petitioner against SIHI before the Regional Trial Court of Cebu City. After trial, the court rendered judgment ordering SIHI to execute a deed of sale in favor of the plaintiff in accordance with the lease contract. On appeal, the Court of Appeals affirmed the trial court's judgment with a modification that the purchase price must be based on the prevailing market price of real property in Bulacao, Cebu City. Hence, this petition for review. DSAICa Petitioner could not insist on buying the said property based on the price agreed upon in the lease agreement, even if his option to purchase it is recognized. On the other hand, SIHI could not take advantage of the situation to increase the selling price of said property by nearly 90% of the original price. If the courts were to allow SIHI to take advantage of the situation, the result would have been an injustice to petitioner, because SIHI would be unjustly enriched at his expense. Courts of law, being also courts of equity, may not countenance such grossly unfair results without doing violence to its solemn obligation to administer fair and equal justice for all. The appealed decision of respondent court, insofar as it affirms the judgment of the trial court in granting petitioner the option to purchase the property was AFFIRMED. However the purchase price should be based on the fair market value of real property in Bulacao, Cebu City, as of February 1986, when the contract would have been consummated. aIETCA SYLLABUS 1.CIVIL LAW; CONTRACTS; OPTION; DEFINED. 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. 2.ID.; ID.; CONSTRUCTION; NOT LIMITED TO THE WORDS USED. Analysis and construction, however, should not be limited to the words used in the contract, as they may not accurately reflect the parties' true intent. The reasonableness of the result obtained, after said analysis, ought likewise to be carefully considered. . . . Further, it is well-settled that in construing a written agreement, the reason behind and the circumstances surrounding its execution are of paramount importance. Sound construction requires one to be placed mentally in the situation occupied by the parties concerned at the time the writing was executed. Thereby, the intention of the contracting parties could be made to prevail, because their agreement has the force of law between them. 3.ID.; ID.; CONSIDERED THE LAW BETWEEN THE CONTRACTING PARTIES. It is wellsettled in both law and jurisprudence, that contracts are the law between the contracting parties and should be fulfilled, if their terms are clear and leave no room for doubt as to the intention of the contracting parties. AIDcTE 4.ID.; ID.; VARIOUS STIPULATIONS MUST BE CONSTRUED TOGETHER. Moreover, to ascertain the intent of the parties in a contractual relationship, it is imperative that the various stipulations provided for in the contract be construed together, consistent with the parties' contemporaneous and subsequent acts as regards the execution of the contract. And once the intention of the parties has been ascertained, that element is deemed as an integral part of the contract as though it has been originally expressed in unequivocal terms. 5.REMEDIAL LAW; COURTS; MUST ADMINISTER FAIR AND EQUAL JUSTICE FOR ALL; CASE AT BAR. Petitioner herein could not insist on buying the said property based on the price agreed upon in the lease agreement, even if his option to purchase it is recognized. On the other hand, SIHI could not take advantage of the situation to increase the selling price of said property by nearly 90% of the original price. Such leap in the price quoted would show an opportunistic intent to exploit the situation as SIHI knew for a fact that petitioner badly needed the property for his business and that he could afford to pay such higher amount after having secured an P8 Million loan from the TRC. If the courts were to allow SIHI to take advantage of

the situation, the result would have been an injustice to petitioner, because SIHI would be unjustly enriched at his expense. Courts of law, being also courts of equity, may not countenance such grossly unfair results without doing violence to its solemn obligation to administer fair and equal justice for all. DaAIHC DECISION QUISUMBING, J p: Before us is a petition for review of the Decision 1 dated September 21, 1995 of the Court of Appeals 2 in CA-G.R. CV No. 37520, as well as its Resolution 3 dated April 25, 1996, denying both parties' motion for partial reconsideration or clarification. The assailed decision affirmed with modification the judgment 4 of the Regional Trial Court of Cebu City, Branch 5, in Civil Case No. CEB 4700, and disposed of the controversy as follows: "However, We do not find it just that the appellee, in exercising his option to buy, should pay appellant SIHI only P1,800,000.00. In fairness to appellant SIHI, the purchase price must be based on the prevailing market price of real property in Bulacao, Cebu City." (Emphasis supplied) The factual background of this case is quite simple. Private respondent State Investment Houses, Inc. (SIHI) is the registered owner of two (2) parcels of land with a total area of 9,774 square meters, including all the improvements thereon, located at Bulacao, Cebu City, covered by Transfer Certificate of Titles Nos. T-89152 and T89153 of the Registry of Deeds of Cebu City. On January 10, 1985, petitioner and SIHI entered into a lease contract with option to purchase 5 over said two parcels of land, at a monthly rental of Ten Thousand (P10,000.00) pesos for a period of eighteen (18) months, beginning on August 1, 1984 until January 30, 1986. The pertinent portion of the lease contract subject of the dispute reads in part: "4.As part of the consideration of this agreement, the LESSOR hereby grants unto the LESSEE the exclusive right, option and privilege to purchase, within the lease period, the leased premises thereon for the aggregate amount of P1,800,000.00 payable as follows: a.Upon the signing of the Deed of Sale, the LESSEE shall immediately pay P360,000.00. b.The balance of P 1,440,000.00 shall be paid in equal installments of P41,425.87 over sixty (60) consecutive months computed with interest at 24% per annum on the diminishing balance; Provided, that the LESSEE shall have the right to accelerate payments at anytime in which event the stipulated interest for the remaining installments shall no longer be imposed. x . . The option shall be exercised by a written notice to the LESSOR at anytime within the option period and the document of sale over the aforedescribed properties has to be consummated within the month immediately following the month when the LESSEE exercised his option under this contract." 6 On January 7, 1986, or approximately three (3) weeks before the expiration of the lease contract, SIHI notified petitioner of the impending termination of the lease agreement, and of the short period of time left within which he could still validly exercise the option. It likewise requested petitioner to advise them of his decision on the option, on or before January 20, 1986. 7 In a letter dated January 15, 1986, which was received by SIHI on January 29, 1986, petitioner requested for a six-month extension of the lease contract, alleging that he needs ample time to raise sufficient funds in order to exercise the option. To support his request, petitioner averred that he had already made a substantial investment on the property, and had been punctual in paying his monthly rentals. 8 On February 14, 1986, SIHI notified petitioner that his request was disapproved. Nevertheless, it offered to lease the same property to petitioner at the rate of Thirty Thousand (P30,000.00) pesos a month, for a period of one (1) year. It further informed the petitioner of its decision to offer for sale said leased property to the general public. 9

On February 18, 1986, petitioner notified SIHI of his decision to exercise the option to purchase the property and at the same time he made arrangements for the payment of the downpayment thereon in the amount of Three Hundred Sixty Thousand (P360,000.00) pesos. 10 On February 20, 1986, SIHI sent another letter to petitioner, reiterating its previous stand on the latter's offer, stressing that the period within which the option should have been exercised had already lapsed. SIHI asked petitioner to vacate the property within ten (10) days from notice, and to pay rental and penalty due. 11 Hence, on February 28, 1986, a complaint for specific performance and damages 12 was filed by petitioner against SIHI before the Regional Trial Court of Cebu City, to compel the latter to honor its commitment and execute the corresponding deed of sale. After trial, the court a quo promulgated its decision dated April 1, 1991, the dispositive portion of which reads: "In the light of the foregoing considerations, the Court hereby renders judgment in Civil Case No. CEB 4700, ordering the defendant to execute a deed of sale in favor of the plaintiff, covering the parcels of land together with all the improvements thereon, covered by Transfer Certificates of Title Nos. 89152 and 89153 of the Registry of Deeds of Cebu City, in accordance with the lease contract executed on January 10, 1984 between the plaintiff and the defendant, but the purchase price may be by "one shot payment" of P1,800,000.00; and the defendant to pay attorney's fee of P20,000.00. No damages awarded." 13 Not satisfied with the judgment, SIHI elevated the case to the Court of Appeals by way of a petition for review. On September 21, 1995, respondent court rendered its decision, affirming the trial court's judgment, but modified the basis for assessing the purchase price. While respondent court affirmed appellee's option to buy the property, it added that, "the purchase price must be based on the prevailing market price of real property in Bulacao, Cebu City." 14 Baffled by the modification made by respondent court, both parties filed a motion for reconsideration and/or clarification, with petitioner, on one hand, praying that the prevailing market price be the value of the property in February 1986, the time when the sale would have been consummated. SIHI, on the other hand, prayed that the market price of the property be based on the prevailing price index at least 10 years later, that is, 1996. Respondent court conducted further hearings to clarify the matter, but no agreement was reached by the parties. Thus, on April 25, 1996, respondent court promulgated the assailed resolution, which denied both parties' motions, and directed the trial court to conduct further hearings to ascertain the prevailing market value of real properties in Bulacao, Cebu City and fix the value of the property subject of the controversy. 14a Hence, the instant petition for review. The fundamental issue to be resolved is, should petitioner be allowed to exercise the option to purchase the leased property, despite the alleged delay in giving the required notice to private respondent? 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. 15 It is a separate agreement distinct from the contract which the parties may enter into upon the consummation of the option. 16 Considering the circumstances in this case, we find no reason to disturb the findings of respondent court, that petitioner's letter to SIHI, dated January 15, 1986, was fair notice to the latter of the former's intent to exercise the option, despite the request for the extension of the lease contract. As stated in said letter to SIHI, petitioner was requesting for an extension (of the contract) for six months "to allow us to generate sufficient funds in order to exercise our option to buy the subject property". 17 The analysis by the Court of Appeals of the evidence on record and the process by which it arrived at its findings on the basis thereof, impel this Court's assent

to said findings. They are consistent with the parties' primary intent, as hereafter discussed, when they executed the lease contract. As respondent court ruled: "We hold that the appellee [herein petitioner] acted with honesty and good faith. Verily, We are in accord with the trial court that he should be allowed to exercise his option to purchase the lease property. In fact, SIHI will not be prejudiced. A contrary ruling, however, will definitely cause damage to the appellee, it appearing that he has introduced considerable improvements on the property and has borrowed huge loan from the Technology Resources Center." 17a The contracting parties' primary intent in entering into said lease contract with option to purchase confirms, in our view, the correctness of respondent court's ruling. Analysis and construction, however, should not be limited to the words used in the contract, as they may not accurately reflect the parties' true intent. The reasonableness of the result obtained, after said analysis, ought likewise to be carefully considered. It is well-settled in both law and jurisprudence, that contracts are the law between the contracting parties and should be fulfilled, if their terms are clear and leave no room for doubt as to the intention of the contracting parties. 18 Further, it is well-settled that in construing a written agreement, the reason behind and the circumstances surrounding its execution are of paramount importance. Sound construction requires one to be placed mentally in the situation occupied by the parties concerned at the time the writing was executed. Thereby, the intention of the contracting parties could be made to prevail, because their agreement has the force of law between them. 19 Moreover, to ascertain the intent of the parties in a contractual relationship, it is imperative that the various stipulations provided for in the contract be construed together, consistent with the parties' contemporaneous and subsequent acts as regards the execution of the contract. 20 And once the intention of the parties has been ascertained, that element is deemed as an integral part of the contract as though it has been originally expressed in unequivocal terms. As sufficiently established during the trial, SIHI, prior to its negotiation with petitioner, was already beset with financial problems. SIHI was experiencing difficulty in meeting the claims of its creditors. Thus, in order to reprogram the company's financial investment plan and facilitate its rehabilitation and viability, SIHI, being a quasi-banking financial institution, had been placed under the supervision and control of the Central Bank (CB). It was in dire need of liquidating its assets, so to speak, in order to stay afloat financially. Thus, SIHI was compelled to dispose some of its assets, among which is the subject leased property, to generate sufficient funds to augment its badly-depleted financial resources. This then brought about the execution of the lease contract with option to purchase between SIHI and the petitioner. The lease contract provided that to exercise the option, petitioner had to send a letter to SIHI, manifesting his intent to exercise said option within the lease period ending January 30, 1986. However, what petitioner did was to request on January 15, 1986, for a six-month extension of the lease contract, for the alleged purpose of raising funds intended to purchase the property subject of the option. It was only after the request was denied on February 14, 1986, that petitioner notified SIHI of his desire to exercise the option formally. This was by letter dated February 18, 1986. In private respondent's view, there was already a delay of 18 days, fatal to petitioner's cause. But respondent court found the delay neither "substantial" nor "fundamental" and did not amount to a breach that would defeat the intention of the parties when they executed the lease contract with option to purchase. 20a In allowing petitioner to exercise the option, however, both lower courts are in accord in their decision, rationalizing that a contrary ruling would definitely cause damage to the petitioner, as he had the whole place renovated to make the same suitable and conducive for the business he established there. Moreover, judging from the subsequent acts of the parties, it is undeniable that SIHI really intended to dispose of said leased property, which petitioner indubitably intended to buy. SIHI's agreement to enter first into a lease contract with option to purchase with herein petitioner, is a clear proof of its intent to promptly dispose said property although the full financial returns may materialize only in a year's time. Furthermore, its letter dated January 7, 1986, reminding the petitioner of the short period of time left within which to consummate their agreement, clearly showed its desire to sell that property. Also, SIHI's letter dated February 14,

1986 supported the conclusion that it was bent on disposing said property. For this letter made mention of the fact that, "said property is now for sale to the general public". Petitioner's determination to purchase said property is equally indubitable. He introduced permanent improvements on the leased property, demonstrating his intent to acquire dominion in a year's time. To increase his chances of acquiring the property, he secured an P8 Million loan from the Technology Resources Center (TRC), thereby augmenting his capital. He averred that he applied for a loan since he planned to pay the purchase price in one single payment, instead of paying in installment, which would entail the payment of additional interest at the rate of 24% per annum, compared to 7 3/4% per annum interest for the TRC loan. His letter earlier requesting extension was premised, in fact, on his need for time to secure the needed financing through a TRC loan. In contractual relations, the law allows the parties reasonable leeway on the terms of their agreement, which is the law between them. 21 Note that by contract SIHI had given petitioner 4 periods: (a) the option to purchase the property for P1,800,000.00 within the lease period, that is, until January 30, 1986; (b) the option to be exercised within the option period by written notice at anytime; (c) the "document of sale . . . to be consummated within the month immediately following the month" when petitioner exercises the option; and (d) the payment in equal installments of the purchase price over a period of 60 months. In our view, petitioner's letter of January 15, 1986 and his formal exercise of the option on February 18, 1986 were within a reasonable time-frame consistent with periods given and the known intent of the parties to the agreement dated January 10, 1985. A contrary view would be harsh and inequituous indeed. In Tuason, Jr., etc. vs. De Asis, 22 this Court opined that "in a contract of lease, if the lessor makes an offer to the lessee to purchase the property on or before the termination of the lease, and the lessee fails to accept or make the purchase on time, the lessee losses the right to buy the property later on the terms and conditions set in the offer." Thus, on one hand, petitioner herein could not insist on buying the said property based on the price agreed upon in the lease agreement, even if his option to purchase it is recognized. On the other hand, SIHI could not take advantage of the situation to increase the selling price of said property by nearly 90% of the original price. Such leap in the price quoted would show an opportunistic intent to exploit the situation as SIHI knew for a fact that petitioner badly needed the property for his business and that he could afford to pay such higher amount after having secured an P8 Million loan from the TRC. If the courts were to allow SIHI to take advantage of the situation, the result would have been an injustice to petitioner, because SIHI would be unjustly enriched at his expense. Courts of law, being also courts of equity, may not countenance such grossly unfair results without doing violence to its solemn obligation to administer fair and equal justice for all. WHEREFORE, the appealed decision of respondent court, insofar as it affirms the judgment of the trial court in granting petitioner the opportunity to exercise the option to purchase the subject property, is hereby AFFIRMED. However the purchase price should be based on the fair market value of real property in Bulacao, Cebu City, as of February 1986, when the contract would have been consummated. Further, petitioner is hereby ordered to pay private respondent SIHI legal interest on the said purchase price beginning February 1986 up to the time it is actually paid, as well as the taxes due on said property, considering that petitioner has enjoyed the beneficial use of said property. The case is hereby remanded to Regional Trial Court of Cebu, Branch 5, for further proceedings to determine promptly the fair market value of said real property as of February 1986, in Bulacao, Cebu City. Costs against private respondent. SO ORDERED. RUPERTO SORIANO, ET AL., plaintiffs-appellees, vs. BASILIO BAUTISTA, ET AL., defendants. BASILIO BAUTISTA and SOFIA DE ROSAS, defendants-appellants. [G.R. No. L-17457. December 29, 1962.] BASILIO BAUTISTA, ET AL. , plaintiffs. BASILIO BAUTISTA and SOFIA DE ROSAS, plaintiffs-appellants, vs. RUPERTO SORIANO, ET AL., defendants-appellees. Amado T. Garrovillas and Ananias C. Ona, Norberto A. Ferrera and Pedro N. Belmi for appellants Basillo Bautista and Sofia de Rosas.

Javier & Javier for appellees Ruperto Soriano, et al. SYLLABUS 1.MORTGAGES; STIPULATION WHICH RENDERS MORTGAGOR'S RIGHT TO REDEEM DEFEASIBLE AT MORTGAGEE'S ELECTION; STIPULATION MERELY AN OPTION TO BUY SANCTIONED BY LAW. The stipulation in a deed of mortgage which renders the mortgagor's right to redeem defeasible at the election of the mortgagee is not illegal or immoral, being merely an option to buy sanctioned by Article 1479 of the Civil Code, when supported by a consideration distinct from the purchase price. DECISION MAKALINTAL, J p: The judgment appealed from, rendered on March 10, 1959 by the Court of First Instance of Rizal after a joint trial of both cases mentioned in the caption, orders "the spouses Basilio Bautista and Sofia de Rosas to execute a deed of sale covering the property in question in favor of Ruperto Soriano and Olimpia de Jesus upon payment by the latter of P1,650.00 which is the balance of the price agreed upon, that is P3,900.00, and the amount previously received by way of loan by the said spouses from the said Ruperto Soriano and Olimpia de Jesus, to pay the sum of P500.00 by way of attorney's fees, and to pay the costs." Appellants Basilio Bautista and Sofia de Rosas have adopted in their appeal brief the following factual findings of the trial court: "Spouses Basilio Bautista and Sofia de Rosas are the absolute and registered owners of a parcel of land, situated in the municipality of Teresa, province of Rizal, covered by Original Certificate of Title No. 3905, of the Register of Deeds of Rizal and particularly described as follows: "A parcel of land (Lot No. 4980 of the Cadastral Survey of Teresa; situated in the municipality of Teresa; bounded on the NE. by Lot No. 5004; on the SE. by Lots Nos. 5003 and 4958; on the SW. by Lot 4949; and on the W. and NW. by a creek . . . Containing the area of Thirty Thousand Two Hundred Twenty-Two(30,222) square meters, more or less. Date of Survey, December 1913-June, 1914. (Full technical description appears on Original Certificate of Title No. 3905). "That, on May 30, 1956, the said spouses for and in consideration on the sum of P1,800, signed a document entitled "Kasulatan Ng Sanglaan" in favor of Ruperto Soriano and Olimpia de Jesus, under the following terms and conditions: "1.Na ang Sanglaang ito ay magpapatuloy lamang hanggang dalawang (2) taon pasimula sa araw na lagdaan ang kasunduang ito, at magpapalampas ng dalawang panahon ani o ani agricola. "2.Na, ang aanihin ng bukid na isinangla ay mapupunta sa pinagsanglaan bilang pakinabang ng nabanggit na halagang inutang. "3.Na, ang buwis sa pamahalaan ng lupang ito ay ang magbabayad ay ang nagsangla o may-ari. "4.Na, ang lupang nasanglang ito ay hindi na maaaring isangla pang muli sa ibang tao ng walang pahintulot ang Unang Pinagsanglaan. "5.Na, pinagkasunduan din naman na sakaling magkaroon ng kakayahan ang Pinagsanglaan ay maaaring bilhin ng patuluyan ang lupang nasanglang ito kahit anong araw sa loob ng taning na dalawang taon ng sanglaan sa halagang Tatlong Libo at Siyam na Raan Piso (P3,900.00), salaping Pilipino na pinagkaisahan. "6.Na, sakaling ang pagkakataon na ipinagkaloob ng Nagsangla sa sinundang talata ay hindi maisagawa ng Pinagsanglaan sa Kawalan ng maibayad at gayon din naman ang Nagsangla na hindi maibalik ang halagang inutang sa taning na panahon, ang sanglaan ito ay lulutasin alinsunod sa

itinatagubilin ng batas sabagay-bagay ng sanglaan, na ito ay ang tinatawag na (FORECLOSURE OF MORTGAGES, JUDICIAL OR EXTRA JUDICIAL). Maaring makapili ng hakbang ang Pinagsanglaan, alinsunod sa batas o kaya naman ay pagusapan ng dalawang parte ang mabuting paraan ng paglutas ng bagay na ito." "That simultaneously with the signing of the aforementioned deed, the spouses Basilio Bautista and Sofia de Rosas transferred the possession of the said land to Ruperto Soriano and Olimpia de Jesus who have been and are still in possession of the said property and have since that date been and are cultivating the said land and have enjoyed and are still enjoying the produce thereof to the exclusion of all other persons. Sometimes after May 30, 1956, the spouses Basilio Bautista and Sofia de Rosas received from Ruperto Soriano and Olimpia de Jesus, the sum of P450.00 pursuant to the conditions agreed upon in the aforementioned document for which no receipt was issued and which was returned by the spouses sometime on May 31, 1958. On May 13, 1958, a certain Atty. Angel O. Ver wrote a letter to the spouses Bautista whose letter has been marked Annex "B" of the stipulation of facts informing the said spouses that his clients Ruperto Soriano and Olimpia de Jesus have decided to buy the parcel of land in question pursuant to paragraph 5 of the document in question, Annex "A". "The spouses in spite of the receipt of the letter refused to comply with the demand contained therein. On May 31, 1958, Ruperto Soriano and Olimpia de Jesus filed before this Court Civil Case No. 5023, praying that plaintiffs be allowed to consign or deposit with the Clerk of Court the sum of P1,650.00 as the balance of the purchase price of the parcel of land in question and that after due hearing, judgment be rendered ordering the defendants to execute an absolute deed of sale of the said property in their favor, plus damages. "On June 9, 1958, spouses Basilio Bautista and Sofia de Rosas filed a complaint against Ruperto Soriano and Olimpia de Jesus marked as Annex "B" of the Stipulation of Facts, which case after hearing was dismissed for lack of jurisdiction. On August 5, 1959, the spouses Bautista and de Rosas again filed a case in the Court of First Instance against Soriano and de Jesus asking this Court to order the defendants to accept the payment of the principal obligation and release the mortgage and to make an accounting of the harvest for the two harvest seasons (1956-1957). The two cases, were by agreement of the parties assigned to one branch so that they can be tried jointly." The principal issue in this case is whether, having seasonably advised appellants that they had decided to buy the land in question pursuant to paragraph 5 of the instrument of mortgage, appellees are entitled to specific performance consisting of the execution by appellants of the corresponding deed of sale. As translated, paragraph 5 states: "That it has likewise been agreed that if the financial condition of the mortgagees will permit, they may purchase said land absolutely on any date within the two-year term of this mortgage at the agreed price of P3,900.00." Appellants contend that, being mortgagors, they cannot be deprived of the right to redeem the mortgaged property, because such right is inherent in and inseparable from this kind of contract. The premise of the contention is not entirely accurate. While the transaction is undoubtedly a mortgage and contains the customary stipulation concerning redemption, it carries the added special provision aforequoted, which renders the mortgagors' right to redeem defeasible at the election of the mortgagees. There is nothing illegal or immoral in this. It is simply an option to buy, sanctioned by Article 1479 of the Civil Code, which states: "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 promisor if the promise is supported by a consideration distinct from the price."

In this case the mortgagors' promise to sell is supported by the same consideration as that of the mortgage itself, which is distinct from that which would support the sale, an additional amount having been agreed upon, to make up the entire price of P3,900.00, should the option be exercised. The mortgagors' promise was in the nature of a continuing offer, non-withdrawable during a period of two years, which upon acceptance by the mortgagees gave rise to a perfected contract of purchase and sale. Appellants cite the case of Iigo vs. Court of Appeals, 96 Phil., 37; 50 O.G. 11 5281, where we held that a stipulation in a contract of mortgage to sell the property to the mortgagee does not bind the same but creates only a personal obligation on the part of the mortgagor. The citation, instead of sustaining appellants' position, confirms that of appellees, who are not here enforcing any real right to the disputed land but are rather seeking to obtain specific performance of a personal obligation, namely, the execution of a deed of sale for the price agreed upon, the corresponding amount to cover which was duly deposited in court upon the filing of the complaint. Reference is made in appellants' brief to the fact that they tendered the sum of P1,800.00 to redeem the mortgage before they filed their complaint in civil case No. 99 in the Justice of the Peace court of Morong, Rizal. That tender was ineffective for other purpose intended. In the first place it must have been made after the option to purchase had been exercised by appellees (Civil Case No. 99 was filed on June 9, 1958, only to be dismissed for lack of jurisdiction); and secondly, appellants' offer to redeem could be defeated by appellees' preemptive right to purchase within the period of two years from May 30, 1956. As already noted, such right was availed of and appellants were accordingly notified by letter dated May 13, 1958, which was received by them on the following May 22. Offer and acceptance converged and gave rise to a perfected and binding contract of purchase and sale. Limson vs. CA April 20, 2011 Bellosillo, J. Ramirez, J. SUMMARY: Spouses de Vera offered to sell the property to Limson. She agreed to buy and paid 20k earnest money, the receipt issued for the said payment states that she has the option to buy within 10 days. The spouses executed a Deed of Sale over said property to SUNVAR. Limson assails the sale as violative of her right to purchase. Court said that there was only a option contract and not contract to sell bet. Limson and spouses. 20k was not earnest money but option money. DOCTRINE: "Earnest money" and "option money" are not the same but distinguished thus: (a) earnest money is part of the purchase price, while option money is the money given as a distinct consideration for an option contract; (b) earnest money is given only where there is already a sale, while option money applies to a sale not yet perfected; and, (c) when earnest money is given, the buyer is bound to pay the balance, while when the would-be buyer gives option money, he is not required to buy but may even forfeit it depending on the terms of the option. SELLER BUYER Spouses de Vera (Lorenzo and Asuncion) Option contract Limson Deed of Sale - SUNVAR SUBJECT PROPERTY: DOCUMENT: Parcel of Land in Paranaque Option contract embodied in the receipt for payment.

August 5,1978 she agreed to meet with respondents and Ramoses to consummate transaction but Asuncion and the Ramoses did not appear Aug. 11 she claimed that she was willing to pay but transaction did not materialize because of unpaid back taxes on the property Aug. 23- she gave respondents checks to pay the said taxes which was considered as part of the purchase price. Sept. 5. 1978 she learned that the property is subject to negotiation between the spouses and SUNVAR Realty Development Corp. Filed an Affidavit of Adverse Clain which was annotated to the title Sept. 15 Deed of Sale executed between spouses and SUNVAR Sept. 26- title issued to SUNVAR with the annotation of adverse claim

ACTION AND PRAYER: Annulment of Deed of Sale in favor of SANVAR and cancellation of title Execution of Deed of Sale between her and respondents Allegations Petitioner Respondents SUNVARs answer Respondents answer to Answer SUNVAR Property sold No cause of Did not know of the When they negotiated w/ in violation of action because adverse claim. SUNVAR, option period of her legal right option to buy Cross-claim against petitioner expired. to purchase. had long respondents for bad SUNVAR checked the title SUNVAR expired faith before the sale buyer in bad faith. RTC RULING: Favored the Petitioner 1) Annulment and cancellation of the deed of sale and title in favor of SUNVAR 2) Respondent spouses to execute deed of sale in favor of petitioner upon payment of the balance CA RULING: Completely reversed RTC 1) Ordered Register of Deeds to lift Adverse Claim annotation on the title 2) Petitioner to pay damages to SUNVAR and respondent spouses PETITION: Motion for Reco in CA denied Petition for Review on Certiorari seeking to reverse CA decision ARGUMENTS OF BUYER: Perfected contract to sell bet. Her and respondents ARGUMENTS OF SELLER: What was perfected was mere option ISSUE: WON there was a perfected contract to sell between petitioner and respondents HELD: The agreement was a contract of option not a contract to sell

FACTS:

Spouses offered to sell to Lourdes Limson the subject land through their agent Marcosa Sanchez July 31, 1978 she agreed to buy the property and gave them 20K as earnest money, respondent signed a receipt and gave her 10-day option period to buy the property Lorenzo de Vera informed her tha the property was mortgaged to the Ramoses and asked her to pay the balance of the purchase price to settle the obligation with the latter

RATIO: 1.) Contract option v. Contract to sell Contract Option - A continuing offer 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 time certain, 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. - Also sometimes called an "unaccepted offer."

- Not a sale of property but a sale of the right to purchase. -Until acceptance, it is not, properly speaking, a contract, and does not vest, transfer, or agree to transfer, any title to, or any interest or right in the subject matter, but is merely a contract by which the owner of the property gives the optionee the right or privilege of accepting the offer and buying the property on certain terms. Contract to sell - Involves the meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service. - Perfected by mere consent which is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute. 2.) The Receipt given by the spouses to the petitioner embodies the agreement between them and it shows that the agreement was a mere option, based on the ff.: The consideration of 20k paid being referred to as earnest money is not an earnest money but an option money. - "Earnest money" and "option money" are not the same but distinguished thus: (a) earnest money is part of the purchase price, while option money is the money given as a distinct consideration for an option contract; (b) earnest money is given only where there is already a sale, while option money applies to a sale not yet perfected; and, (c) when earnest money is given, the buyer is bound to pay the balance, while when the would-be buyer gives option money, he is not required to buy but may even forfeit it depending on the terms of the option. - Applying the said criteria to the 20k shows that it was not an earnest money. - Nothing in the Receipt which indicates that the P20,000.00 was part of the purchase price. - It was not shown that there was a perfected sale between the parties where earnest money was given. NICOLAS SANCHEZ, plaintiff-appellee, vs. SEVERINA RIGOS, defendant-appellant. Santiago F . Bautista for plaintiff-appellee. Jesus G. Villamar for defendant-appellee. SYLLABUS 1.CIVIL LAW; CONTRACTS; CONTRACT TO BUY AND SELL; OPTION WITHOUT CONSIDERATION; CASE AT BAR. Where both parties indicated in the instrument in the caption, as an "Option to Purchase," and under the provisions thereof, the defendant "agreed, promised and committed" herself to sell the land therein described to the plaintiff 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, it is not a "contract to buy and sell." It merely granted plaintiff an "option" to buy. 2.ID.; ID.; ID.; ID.; ARTICLES 1354 AND 1479, NEW CIVIL CODE; APPLICABILITY. It should be noted that: Article 1354 applies to contracts in general, whereas the second paragraph of Article 1479 refers to "sales" in particular, and, more specifically, to "an accepted unilateral promise to buy or to sell." 3.ID.; ID.; REQUISITE OF A UNILATERAL PROMISE IN ORDER TO BIND PROMISOR; BURDEN OF PROOF REST UPON PROMISEE. In order that a unilateral promise may be "binding" upon the promisor, Article 1479 requires the concurrence of a condition namely, that the promise be "supported by a consideration distinct from the price." Accordingly, the promisee can not compel the promisor to comply with the promise, unless the former establishes the existence of said distinct consideration. In other words, the promisee has the burden of proving such consideration. 4.ID.; ID.; WHERE A UNILATERAL PROMISE TO SELL GENERATED TO A BILATERAL CONTRACT OF PURCHASE AND SALE; ARTICLES 1324 AND 1479, NCC., NO DISTINCTION. This Court itself, in the case of Atkins, Kroll & Co., Inc. vs. Cua Hian Tek (102 Phil., 948), decided later than Southwestern Sugar & Molasses Co. vs. Atlantic & Pacific Co., 97 Phil., 249, saw no distinction between Articles 1324 and 1479 of the Civil Code and applied the former where a unilateral promise to sell similar to the one sued upon was involved, treating such promise as an option which, although not binding as a contract in itself for lack of a

- When petitioner gave the "earnest money," the Receipt did not reveal that she was bound to pay the balance of the purchase price. The provision therein that if the transaction did not materialize, the 20k will be returned to the petitioner w/ option to buy or forfeit the same. The provision that she will be notified in case the property is sold to a third person. The receipt provided a period (10 days) within which the option to buy was to be exercised. 3.) The rule is that except where a formal acceptance is not required, it may be made either in a formal or an informal manner, and may be shown by acts, conduct or words by the accepting party that clearly manifest a present intention or determination to accept the offer to buy or sell. Petitioner failed to do this within the 10-day period which expired on Aug. 10, 1978. The Aug. 5 meeting (which was within the period) does not clearly show acceptance (see facts). 4.) The option was not extended when the respondents extended the contract of their agent. Extension must not be implied but categorical. 5.) Respondents were not at fault for the non-consummation of the contract within the period. they were the ones who set the aug.5 meeting non-appearance of ramos on the meeting was beyond their control petitioner, even without ramos, could just have made the payment; no showing that she was already ready to pay at that time succeeding meetings are beyond the period DISPOSITIVE: Petition DENIED

separate consideration, nevertheless generated a bilateral contract of purchase and sale upon acceptance. In other words, since there may be no valid contract without a cause or consideration 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. 5.REMEDIAL LAW; PLEADINGS AND PRACTICE; JUDGMENT ON THE PLEADINGS; IMPLIED ADMISSION. Defendant explicitly averred in her answer, and pleaded as a special defense, the absence of said consideration for her promise to sell and, by joining in the petition for a judgment on the pleadings, plaintiff has impliedly admitted the truth of said averment in defendant's answer. 6.STATUTORY CONSTRUCTION; INTERPRETATION OF PROVISIONS OF SAME LAW; CARDINAL RULE. The view that an option to sell can still be withdrawn, even if accepted, if the same is not supported by any consideration, has the advantage of avoiding a conflict between Article 1324 on the general principles on contracts and 1479 on sales of the Civil Code, in line with the cardinal rule of statutory construction that, in construing different provisions of one and the same law or code, such interpretation should be favored as will reconcile or harmonize said provisions and avoid a conflict between the same. Indeed, the presumption is that, in the process of drafting the Code, its author has maintained a consistent philosophy or position. Moreover, the decision in Southwestern Sugar & Molasses Co. vs. Atlantic Gulf & Pacific Co., supra, holding that Article 1324 is modified by Article 1479 of the Civil Code, in effect, considers the latter as an exception to the former, and exceptions are not favored, unless the intention to the contrary is clear, and it is not so, insofar as said two (2) articles are concerned. What is more, the reference, in both the second paragraph of Article 1479 and Article 1324, to an option or promise supported by or founded upon a consideration, strongly suggests that the two (2) provisions intended to enforce or implement the same principle. ANTONIO, J., concurring opinion: 1.CIVIL LAW; CONTRACTS; OPTION TO SELL; EFFECT OF ACCEPTANCE. I fully agree with the abandonment of the view previously adhered to in Southwestern Sugar & Molasses Co. vs. Atlantic Gulf and Pacific Co. (97 Phil., 249), which holds that an option to sell can still be withdrawn, even if accepted if the same is not supported by any consideration, and the

reaffirmance of the doctrine in Atkins, Kroll & Co. Inc. vs. Cua Hian Tech (102 Phil., 948), holding that "an option implies . . . the legal obligation to keep the offer (to sell) open for the time specified"; that it could be withdrawn before acceptance, if there was no consideration for the option, but once the "offer to sell" is accepted, a bilateral promise to sell and to buy ensues, and the offeree ipso facto assumes the obligations of a purchaser. 2.ID.; ID.; ID.; OPTION WITHOUT CONSIDERATION IS A MERE OFFER TO SELL, NOT BINDING UNTIL ACCEPTED. If the option to sell is given without a consideration, it is a mere offer to sell, which is not binding until accepted. If, however, acceptance is made before a withdrawal, it constitutes a binding contract of sale. The concurrence of both acts the offer and the acceptance could in such event generate a contract. 3.ID.; ID.; ID.; WITHDRAWAL OF OFFER BEFORE ACCEPTANCE, OFFER IMPLIES AN OBLIGATION ON THE PART OF OFFEROR. While the law permits the offeror to withdraw the offer at any time before acceptance even before the period has expired, some writers hold the view, that the offeror can not exercise this right in an arbitrary or capricious manner. This is upon the principle that an offer implies an obligation on the part of the offeror to maintain it for such length of time as to permit the offeree to decide whether to accept or not, and therefore cannot arbitrarily revoke the offer without being liable for damages which the offeree may suffer. A contrary view would remove the stability and security of business transactions. 4.ID.; ID.; ID.; A BILATERAL RECIPROCAL CONTRACT; CASE AT BAR. Where, as in the present case, the trial court found that the "Plaintiff (Nicolas Sanchez) had offered the sum of P1,510.00 before any withdrawal from the contract has been made by the Defendant (Severina Rigos)," and Rigos' offer to sell was accepted by Sanchez, before she could withdraw her offer, a bilateral reciprocal contract to sell and to buy was generated. DECISION CONCEPCION, J p: Appeal from a decision of the Court of First Instance of Nueva Ecija to the Court of Appeals, which certified the case to Us, upon the ground that it involves a question purely of law. The record shows that, on April 3, 1961, plaintiff Nicolas Sanchez and defendant Severina Rigos executed an instrument, entitled "Option to Purchase," whereby Mrs. Rigos "agreed, promised and committed . . . to sell" to Sanchez, for the sum of P1,510.00, a parcel of land situated in the barrios of Abar and Sibot, municipality of San Jose, province of Nueva Ecija, and more particularly described in Transfer Certificate of Title No. NT-12528 of said province, within two (2) years from said date with the understanding 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. Inasmuch as several tenders of payment of the sum of P1,510.00, made by Sanchez within said period, were rejected by Mrs. Rigos, on March 12, 1963, the former deposited said amount with the Court of First Instance of Nueva Ecija and commenced against the latter the present action, for specific performance and damages. After the filing of defendant's answer admitting some allegations of the complaint, denying other allegations thereof, and alleging, as special defense, that the contract between the parties "is 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" on February 11, 1964, both parties, assisted by their respective counsel, jointly moved for a judgment on the pleadings. Accordingly, on February 28, 1964, the lower court rendered judgment for Sanchez, ordering Mrs. Rigos to accept the sum judicially consigned by him and to execute, in his favor, the requisite deed of conveyance. Mrs. Rigos was, likewise, sentenced to pay P200.00, as attorney's fees, and the costs. Hence, this appeal by Mrs. Rigos. This case admittedly hinges on the proper application of Article 1479 of our 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 promissor if the promise is supported by a consideration distinct from the price." In his complaint plaintiff alleges that, by virtue of the option under consideration, "defendant agreed and committed to sell" and "the plaintiff agreed and committed to buy" the land described in the option, copy of which was annexed to said pleading as Annex A thereof and is quoted on the margin. 1 Hence, plaintiff maintains that the promise contained in the contract is "reciprocally

demandable," pursuant to the first paragraph of said Article 1479. Although defendant had really "agreed, promised and committed" herself to sell the land to the plaintiff, it is not true that the latter had, in turn, "agreed and committed himself" to buy said property Said Annex A does not bear out plaintiff's allegation to this effect. What is more, since Annex A has bean made "an integral part" of his complaint, the provisions of said instrument form part "and parcel" 2 of said pleading. The option did not impose upon plaintiff the obligation to purchase defendant's property. Annex A is not a "contract to buy and sell." It merely granted plaintiff an "option" to buy. And both parties so understood it, as indicated by the caption, "Option to Purchase," given by them to said instrument. Under the provisions thereof, the defendant "agreed, promised and committed" herself to sell the land therein described to the plaintiff 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. Relying upon Article 1354 of our Civil Code, the lower court presumed the existence of said consideration, and this would seem to be the main factor that influenced its decision in plaintiff's favor. It should be noted, however, that: (1)Article 1354 applies to contracts in general, whereas the second paragraph of Article 1479 refers to "sales" in particular, and, more specifically, to "an accepted unilateral promise to buy or to sell." In other words, Article 1479 is controlling in the case at bar. (2)In order that said unilateral promise may be "binding" upon the promisor, Article 1479 requires the concurrence of a condition, namely, that the promise be "supported by a consideration distinct from the price." Accordingly, the promisee can not compel the promisor to comply with the promise, unless the former establishes the existence of said distinct consideration. In other words, the promisee has the burden of proving such consideration. Plaintiff herein hasnot even alleged the existence thereof in his complaint. (3)Upon the other hand, defendant explicitly averred in her answer, and pleaded as a special defense, the absence of said consideration for her promise to sell and, by joining in the petition for a judgment on the pleadings, plaintiff has impliedly admitted the truth of said averment in defendant's answer. Indeed, as early as March 14, 1908, it had been held, in Bauermann v. Casas, 3 that: "One who prays for judgment on the pleadings without offering proof as to the truth of hie own allegations, and without giving the opposing party an opportunity to introduce evidence, must be understood to admit the truth of all the material and relevant allegations of the opposing party, and to rest his motion for judgment on those allegations taken together with such of his own as are admitted in the pleading. (La Yebana Company vs. Sevilla, 9 Phil. 210)." (Emphasis supplied.). This view was reiterated in Evangelista V. De la Rosa 4 and Mercy's Incorporated v. Herminia Verde. 5 Squarely in point is Southwestern Sugar & Molasses Co. v. Atlantic Gulf & Pacific Co., 6 from which We quote: "The main contention of appellant is that the option granted to appellee to sell to it barge No. 10 for the sum of P30,000 under the terms stated above has no legal effect because it is not supported by any consideration and in support thereof it invokes article 1479 of the new Civil Code, The article 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 sell a determinate thing for a price certain is binding upon the promisor if the promise is supported by a consideration distinct from the price.' "On the other hand, appellee contends that, even granting that the 'offer of option' is not supported by any consideration, that option became binding on appellant when the appellee gave notice to it of its acceptance, and that having accepted it within the period of option, the offer can no longer be withdrawn and in any event such withdrawal is

ineffective. In support of this contention, appellee invokes article 1324 of the Civil Code which provides: 'ART. 1324.When the offerer has allowed the offeree 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 consideration, as something paid or promised.' "There is no question that under article 1479 of the new Civil Code 'an option to sell,' or 'a promise to buy or to sell,' as used in said article, to be valid must be 'supported by a consideration distinct from the price.' This is clearly inferred from the context of said article that a unilateral promise to buy or to sell, even if accepted, is only binding if supported by a consideration. In other words, '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. "It is true that under article 1324 of the new Civil Code, the general rule regarding offer and acceptance is that, when the offerer gives to the offeree a certain period to accept, 'the offer may be withdrawn at any time before acceptance' except when the option is founded upon consideration, but this general rule must be interpreted as modified by the provision of article 1479 above referred to, which applies to 'a promise to buy and sell'specifically. As already stated, this rule requires that a promise to sell to be valid must be supported by a consideration distinct from the price. "We are net oblivious of the existence of American authorities which hold that an offer, once accepted, cannot be withdrawn, regardless of whether it is supported or not by a consideration (12 Am. Jur. 528). These authorities, we note, uphold the general rule applicable to offer and acceptance as contained in our new Civil Code. But we are prevented from applying them in view of the specific provision embodied in article 1479. While under the 'offer of option' in question appellant has assumed a clear obligation to sell its barge to appellee and the option has been exercised in accordance with its terms, and there appears to be no valid or justifiable reason for appellant to withdraw its offer, this Court cannot adopt a different attitude because the law on the matter is clear . Our imperative duty is to apply it unless modified by Congress." 7 However, this Court itself, in the case of Atkins, Kroll and Co., Inc. v. Cua Hian Tek, 8 decided later than Southwestern Sugar & Molasses Co. v. Atlantic Gulf & Pacific Co., 9 saw no distinction between Articles 1324 and 1479 of the Civil Code and applied the former where a unilateral promise to sell similar to the one sued upon here was involved, treating such promise as an option which, although not binding as a contract in itself for lack of a 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.') 'It can be taken for granted, as contended by the defendant, that the option contract was not valid for lack of consideration. But it was, at least, an offer to sell, which was accepted by latter, and of the acceptance the offerer had knowledge before said offer was withdrawn. The concurrence of both acts the offer and the acceptance could at all events have generated a contract, if none there was before (arts. 1254 and 1262 of the Civil Code).' (Zayco vs. Serra, 44 Phil. 331.)" In other words, 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. This view has the advantage of avoiding a conflict between Articles 1324 on the general principles on contracts and 1479 on sales of the Civil Code, in line with the cardinal rule of statutory construction that, in construing different provisions of one and the same law or code, such interpretation should be favored as will reconcile or harmonize said provisions and avoid a conflict between the same. Indeed, the presumption is that, in the process of drafting the Code, its author has maintained a consistent philosophy or position. Moreover, the decision in Southwestern Sugar & Molasses Co. v. Atlantic Gulf & pacific Co., 10 holding that Art. 1324 is modified by Art. 1479 of the Civil Code, in effect, considers the latter as an exception to the former, and exceptions are not favored, unless the intention to the contrary is clear, and it is not so, insofar as said two (2) articles are concerned. What is more, the reference, in both the second paragraph of Art. 1479 and Art. 1324, to an option or promise supported by or founded upon a consideration, strongly suggests that the two (2) provisions intended to enforce or implement the same principle. Upon mature deliberation, the Court is of the considered opinion that it should, as it hereby reiterates the doctrine laid down in the Atkins, Kroll & Co. case, and that, insofar all inconsistent therewith, the view adhered to in the South western Sugar & Molasses Co. case should be deemed abandoned or modified. WHEREFORE, the decision appealed from is hereby affirmed, with costs against defendantappellant Severina Rigos. It is so ordered. SPOUSES CIPRIANO VASQUEZ and VALERIANA GAYANELO, petitioners, vs. HONORABLE COURT OF APPEALS and SPOUSES MARTIN VALLEJERA and APOLONIA OLEA, respondents. Dionisio C . Isidto for petitioners. Raymundo Lozada, Jr. for private respondents. SYLLABUS 1.CIVIL LAW; SPECIAL CONTRACTS; SALE; RIGHT TO REPURCHASE, MUST BE ACCEPTED BY THE BUYER; NOT PRESENT IN CASE AT BAR. The record 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." 2.ID.; ID.; ID.; ID.; NOT VALIDATED BY ANNOTATION AND REGISTRATION OF THE RIGHT AT THE BACK OF THE CERTIFICATE OF TITLE. 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. vs. Dionisio (174 SCRA 589 [1989]), citing Tanchoco vs. Aquino (154 SCRA 1 [1987]), and Constantino vs. Espiritu (45 SCRA 557 [1972]) that purchasers of a registered land are bound by the annotation 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. DECISION GUTIERREZ, JR., J p: This 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. "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 196667, 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. SGD. CIPRIANO VASQUEZ SGD. VALERIANA G. VASQUEZSGD. 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 promisor if the promise is supported by a consideration distinct from the price." and Article 1324 thereof which provides: "ART. 1324.When the offeror has allowed the offeree 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 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 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. LLjur 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 resale 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" 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. cdrep 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 ours)" 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: "'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. 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. cdrep 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. SO ORDERED.