FIRST DIVISION
JMA HOUSE INCORPORATED, G.R.
No. 154156
Petitioner,
Present:
PANGANIBAN, C.J.,
Chairperson,
- versus - YNARES-SANTIAGO,
AUSTRIA-MARTINEZ,
CALLEJO, SR., and
CHICO-NAZARIO,
JJ.
STA. MONICA
INDUSTRIAL
and DEVELOPMENT
CORPORATION and A. Promulgated:
GUERRERO DEVELOPMENT
CORPORATION,
Respondents.
x-----------------------------------------------------------------------------------------x
CALLEJO, SR., J.:
Before the
Court is a Petition for Review on Certiorari
of the Decision[1] of
the Court of Appeals (CA) in CA-G.R. CV No. 60085 affirming on appeal the Decision[2]
of the Regional Trial Court (RTC),
JMA House
Incorporated (JMA) applied for a P1,500,000.00 loan from the Pioneer
Savings and Loan Association, Inc. (Pioneer). To secure payment thereof, JMA executed a real
estate mortgage over a parcel of land identified as Lot No. 4, Block No. 13,
Subdivision Plan No. Psd-35337 covered by Transfer Certificate of Title (TCT) No.
268126. The lot, which was located in P2,000,000.00
during the sale at public auction held on
JMA decided
to redeem the property from Pioneer sometime in June 1986. It offered to borrow
from Sta. Monica Industrial and Development Corporation (Sta. Monica) the
amount of P2,300,000.00. During the negotiations between Rosita Alberto,
the General Manager of JMA, and Sta. Monica’s president Eugenio Trinidad, the parties
agreed that the latter would purchase the property for P3,021,000.00.[6]
P4,100,000.00.
Rosita Alberto suggested that instead of
a deed of absolute sale, a real estate mortgage be executed considering that
the property was worth much more than P4,100,000.00. P3,021,000.00 it received from Sta. Monica, JMA remitted P2,300,000.00
to Pioneer.
On P2,300,000.00, transferred to JMA all the rights
over the property, including the improvements thereon, which Pioneer acquired
under the Certificate of Sale.[9] The parties, likewise, declared therein that
it was their intention that, with the execution of said deed, the loan of JMA
amounting to P1,250,000.00, including all interests, penalties and
charges thereon, were considered fully paid and legally extinguished.[10]
On P4,100,000.00 as purchase price was
acknowledged by JMA from Sta. Monica.[11]
As agreed upon by the parties, the parties likewise executed a contract
denominated as Option to Buy, in which Sta. Monica gave JMA the option to buy
the property for P4,100,000.00 within one (1) year from the execution of
the Deed Of Absolute Sale on or before July 1, 1987, with a “grace period” of
one year immediately upon the expiration thereof (until July 1, 1988). The
parties agreed that, in case JMA availed of such extension, JMA would be
obligated to pay an additional amount equivalent to 3.5% a month as liquidated
damages, until the whole amount is fully paid and/or the option is finally
exercised.[12]
Alberto
turned over to
As agreed
upon between JMA and Sta. Monica, the latter thenceforth paid the realty taxes
on the property.[14] JMA continued collecting the rentals from the
tenants of the buildings with the knowledge and conformity of Sta. Monica. On P3,600,000.00 loan.[15]
In a letter
dated P5,700,000.00,
receipt of which was acknowledged by Sta. Monica.[17]
Part of the amount was used by Sta. Monica to redeem the property from PCI
Capital Corporation which executed a Release of Real Estate Mortgage on
Despite the
sale of the property to AGCOR, P3,000,000.00.
He likewise received P57,000.00 from Atty. Rosalie Alberto, Rosita’s
sister and a
member of the JMA Board of Directors “as partial payment of the account of JMA
for the property located at No. 335, P57,000.00 to JMA.
On P7,000,000.00
loan.[23]
Almost two
years thereafter, or on P3,021,000.00 loan and P1,079,000.00 as interest; however,
upon the insistence of Trinidad, in lieu of a real estate mortgage, a deed of
absolute sale was executed over the property for the price of P4,100,000.00;
an Option to Buy was also executed in its favor, giving it the option to buy
the property for P4,100,000.00 within a period of one (1) year from execution thereof, and in the meantime, it
retained dominion over the property; on January 26, 1988, it received notice
that beginning February 1, 1988, the tenants will pay their rentals to the new
owner of the property, defendant AGCOR, to which it protested; defendant Sta.
Monica assured the plaintiff that defendant AGCOR was aware of its option to
buy the property.
JMA further alleged that it informed defendant
Sta. Monica on June 30, 1988 that it was ready to repurchase the property for P5,822,000.00
with an initial payment of P3,057,000.00 to be immediately tendered on
said date, and the remaining balance of P2,765,000.00 after one month. Sta.
Monica assured JMA that the property would be delivered to it with AGCOR’s
conformity. JMA paid P3,057,000.00 on
JMA averred
that it had a right to
repurchase the property under the terms of the Option to Buy Agreement dated P3,057,000.00
as downpayment for the purchase price. Having sold the property to AGCOR, defendant
Sta. Monica must be made to pay the plaintiff the amount of P15,000,000.00
which is the actual market value of the property, as well as the rental
payments which it failed to collect.[24] The
plaintiff prayed that judgment be rendered in its favor, thus:
WHEREFORE, it is most respectfully prayed of this
Honorable Court that judgment be rendered in favor of the plaintiff ordering:
1) Defendants Sta. Monica and AGCOR to respect and
acknowledge the right of JMA to repurchase and consequently own and possess the
property free from liens and all encumbrances;
2) Defendants to solidarily pay the plaintiff the
accrued rentals of P2,362,500.00 as of October 1991, with an additional P52,500.00
every month thereafter until defendant AGCOR ceases to collect the mentioned
rentals from the tenants of the premises;
3) Ordering defendants to pay exemplary damages in the
amount of P100,000.00, nominal damages in the amount of P100,000.00,
attorney’s fees in the sum of P200,000.00 and the costs of suit;
Just and equitable reliefs are, likewise, prayed for
under the premises.[25]
For its
part, Sta. Monica alleged in its
Answer to the complaint the following special and affirmative defenses: (1) JMA has no cause of action against
it; (2) the complaint is unfounded and malicious; (3) it acted in good faith;
(4) the supposed “Option to Buy” is not supported by valuable consideration
and, therefore, is unenforceable; (5) assuming arguendo that there was an
extension to exercise the said “Option to Buy,” it was not in writing, without
consideration and, therefore, unenforceable; (6) the amount/s which JMA had
given to it had been offset by the value of the property and the resulting
damages sustained by it (Sta. Monica). Defendant claimed P1,000,000.00, P500,000.00,
P200,000.00 and P100,000.00 compulsory counterclaim representing actual,
moral and exemplary damages, including attorney’s fees and the litigation
expenses, respectively.
Defendant AGCOR alleged in its Answer
with Cross-claim and Counterclaims that the physical possession of the subject
property was voluntarily surrendered by Sta. Monica to it upon execution of the
Deed of Absolute Sale. It came to know of the alleged “Option to Buy” only on P3,000,000.00, the
balance to be paid on the following day. However,
As special and affirmative defenses,
it claimed that there was no cause of action against it, since even assuming that
an option to buy was duly executed, it was not a party thereto. It pointed out
that the option was not registered nor annotated in the title with the Register
of Deeds for the purpose of giving notice to the whole world; JMA was estopped from
claiming that its contract[26] with
Sta. Monica was a sale with right to repurchase, considering that there was no
pre-existing condition or limitation whatsoever to serve as notice to third
persons dealing with the said property; it was a purchaser in good faith
without knowledge of any agreement between JMA and Sta. Monica or any fact that
would vitiate consent in the acquisition of the property; it acquired legal
title thru sale and in fact, TCT No. 376746 was issued in its name; and JMA is
guilty of laches and it had not completely exercised its option to repurchase
by paying the total amount and there is no proof that the option was extended
by Sta. Monica for another year.
By way of cross-claim, AGCOR alleged
that JMA and Sta. Monica should be the only parties in this case, since they
executed the “Option to Buy,” to its exclusion.
Because of its inclusion as defendant, its goodwill was damaged and it
was deprived of its right of full ownership; thus, cross-defendant Sta. Monica should
be held liable for actual or compensatory damages in the amount of P1,000,000.00.
It likewise asserted compulsory counterclaims in the amount of P500,000.00
as moral damages, P300,000.00 as exemplary damages, and P200,000.00
as attorney’s fees.[27]
On
During
trial, JMA presented Rosita Alberto and her sister, Atty. Rosalie Alberto as
witnesses. Rosita testified that she graduated from the University of the P4,100,000.00 loan.[30]
She, in turn, requested that an option to buy be executed by the plaintiff to
supplement the deed of absolute sale to which P5,822,000.00 payable in two installments, to wit: (a) P3,057,000.00
on P2,768,000.00 within a
reasonable time. On P3,000,000.00 in checks and P57,000.00 cash was paid
by JMA, through Atty. Rosalie Alberto and Atty. Rellosa to P2,768,000.00)
but
On cross-examination, Rosita Alberto
admitted that her agreement with
Atty. Rosalie Alberto testified that JMA
is a family corporation. She learned of
the deed of absolute sale and option to buy only in February 1988.[38]
She represented JMA in the negotiations with P3,057,000.00. He, however, suggested that she personally
inform AGCOR of said tender. When she
did so, Guerrero informed her that AGCOR could no longer accept the offer.[39] She wanted to tell
Franco Marquez, President of the Philippine
Appraisal Co., Inc., testified that the property was appraised on P11,080,000.00.[41]
Defendant Sta. Monica presented its president,
Victor Trinidad, who testified on the damages sustained by it. On cross-examination,
he admitted that, despite the deed of absolute sale, it never took possession
of the property.[42] Neither
did defendant collect rentals from the tenants of the building because of the
option to buy.[43]
Alberto Guerrero, a doctor of
medicine and a lawyer, testified that he was the president of AGCOR, also a
family corporation. When the property
was offered for sale by Sta. Monica, he examined the title in the Register of
Deeds and discovered that it was mortgaged to PCI Capital Corporation.[44]
He agreed to buy the property and paid Sta. Monica’s loan on February 3 and 16,
1988, upon which a Release of Real Estate Mortgage was issued.[45] In
due course, defendants AGCOR and Sta. Monica executed a Deed of Absolute Sale
covering the property.[46] He further declared that AGCOR secured a P2,500,000.00
loan from Planter’s Bank and used the money to pay Sta. Monica. On P7,000,000.00
loan. The deed was annotated at the dorsal portion of TCT No. 376746 on
On
P11,080,000.00. The
report was admitted as part of the testimony of Marquez.[51]
On P50,000.00 to each of the defendants. The fallo
of the decision reads:
WHEREFORE, in light of the foregoing, the Court
renders judgment as follows:
1. Plaintiff’s complaint is dismissed and it is
ordered on the counterclaim, to pay the amount of P50,000.00 each to defendant Sta.
Monica Industrial & Development
Corporation and defendant A. Guerrero Development Corporation as attorney’s
fees; and to pay the costs of suit;
2. The cross-claim of A. Guerrero Development
Corporation against Sta. Monica Industrial and Development Corporation is
dismissed.
SO ORDERED.[52]
The
trial court disbelieved the testimony of Atty. Alberto, holding that to declare
the transaction between the plaintiff and defendant Sta. Monica as an equitable
mortgage would be unjust to the latter.[53]
The trial court noted that the plaintiff agreed to the execution of the deed of
absolute sale and the option to buy; Rosita Alberto was an Economics graduate and
was assisted by a lawyer. When the deed of absolute sale over the property was
executed, JMA even offered to repurchase/buy the property instead of redeeming
it, and waited up to P4,100,000.00
within a specific period of time. Moreover, considering that JMA failed to file
an action for reformation of deed, it was estopped from claiming that the deed
of absolute sale and option to buy failed to reflect the true intention of the
parties.
The RTC ruled that the Appraisal
Report had no probative weight because the property subject thereof was covered
by TCT No. 20416, not the property covered by TCT No. 268216 which was the subject
of the contract between the plaintiff and defendant Sta. Monica. Further, the remittances
made to P4,100,000.00. It was further pointed
out that the checks bounced.
The RTC also declared that before
AGCOR bought the property, it had no knowledge of the option to buy executed by
JMA and Sta. Monica; and even if it had, JMA had failed to exercise its option
and pay the purchase price of the property within the stipulated period. It was
further stated that there is no evidence to prove the supposed obligation of
Sta. Monica to return the amount of P57,000.00 received by
JMA
appealed the decision to the CA. On January 28, 2002, the appellate court dismissed
the appeal and affirmed the decision of the RTC, holding that the contracts
entered into by the parties are what they purport to be: a Deed of Absolute
Sale and Option to Buy; the deeds were notarized, hence, are public documents,
and have the presumption of regularity. Furthermore, there were no ambiguities
in the deeds. It was further held that JMA was barred by laches to enforce its
claim that the deed of absolute sale was in fact an equitable mortgage. It
pointed out that the property was not repurchased within the timeline fixed in
the Option to Buy.[55]
JMA filed a motion for the
reconsideration of the decision which the CA denied on
JMA,
now petitioner, filed the instant petition for review on certiorari, seeking to reverse the ruling of the CA on the
following grounds:
I
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT
APPLYING ARTICLE 1602 OF THE CIVIL CODE AND NOT HOLDING THAT THE CONTRACT
SUBJECT MATTER OF THE INSTANT PETITION IS THAT OF AN EQUITABLE MORTGAGE.
II
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN
HOLDING THAT PETITIONER IS GUILTY OF LACHES IN ASSERTING ITS RIGHT OVER ITS
PROPERTY.
III
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN
UPHOLDING THE FINDING OF THE
It maintains that the trial court and
the CA failed to consider the testimony of its General Manager Rosita Alberto, to
prove that the contract entered into between it and respondent Sta. Monica is, in
reality, a real estate mortgage. Petitioner maintains that the trial court and
the appellate court ignored the facts based on the following evidence: (1)
petitioner was in dire need of money when it executed the Deed of Absolute Sale
and Option to Buy on June 30, 1985; (2) it continued to possess the property
after the execution of the Deed of Sale and Option to Buy, and even collected
the rentals from the tenants of the commercial and residential buildings; (3)
the purchase price of P4,100,000.00 is grossly inadequate as purchase
price of the property compared to its market value (P11,080,000.00) as
found by the Philippine Appraisal Company.
On the other hand, respondents aver
that the issues raised by the petitioner are factual, which the Court is
proscribed from reviewing. Moreover, the
findings of facts of the trial court were affirmed by the CA; hence, such
findings are conclusive on this Court. They insist that the CA decision is in
accord with the law and the evidence on record.
Article 1602 of the New Civil Code does not apply in this case because
petitioner failed to exercise its option and pay the agreed upon repurchase
price; hence, the CA correctly ruled that it was barred by laches when it filed
its complaint below only on
The threshold issues are the
following: (1) whether the Court is proscribed from reviewing the factual
issues raised by petitioner; (2) whether the transaction between the parties is
an equitable mortgage; (3) whether the petitioner is barred by laches from
filing the action against the respondent; and (4) whether respondent AGCOR was
in good faith when it purchased the property from respondent Sta. Monica for P5,700,000.00.
The petition is denied for lack of
merit.
Section 1, Rule 45 of the Rules of
Court provides that only questions of law may be raised in this Court. Th e rationale for the rule is that the Court is
not a trier of facts; it is not to re-examine and calibrate the evidence on
record, as such task is assigned to the trial court. The trial court’s findings,
as affirmed by the CA, are conclusive on this Court unless there is
preponderant evidence that the lower court ignored, misconstrued or
misinterpreted cogent and substantial facts and circumstances which, if
considered, would modify or reverse the outcome of the case.[58] The
Court may look into and resolve factual issues in exceptional cases such as
when the findings and conclusions of the trial court are contrary to evidence
on record or tainted with grave abuse of discretion amounting to excess of
jurisdiction.
On the second issue, the law is that
if the terms of a contract are clear and leave no doubt upon the intention of
the contracting parties, the literal meaning of its stipulations shall control.[59]
When the language of the contract is explicit, leaving no doubt as to the
intention of the drafters, the courts may not read into it any other intention
that would contradict its plain import.[60] The clear terms of the contract should never
be the subject matter of interpretation. Neither abstract justice nor the rule
of liberal interpretation justifies the creation of a contract for the parties
which they did not make themselves or the imposition upon one party to a
contract or obligation not assumed simply or merely to avoid seeming hardships.[61] Their true meaning must be enforced, as it is
to be presumed that the contracting parties know their scope and effects.[62] If
the parties execute two or more separate writings covering a common transaction
and subject matter, the writings should be read and interpreted together to
render the parties’ intention effective.[63] On the other hand, if the contract is
ambiguous or the contracting parties offer conflicting claims on their intent,
the trial court, at the first instance, has to ascertain the true intent of the
parties, taking into account the contemporaneous and subsequent conduct, actions
and words of the parties material to the case,[64]
and pertinent facts having a tendency to fix and determine the real intent of
the parties and undertaking shall be considered. It is the parties’ intention which shall be
accorded primordial consideration. The reasonableness of the result obtained,
after analysis and construction of the contract/contracts, must also be
carefully considered.[65] The
ascertained intention of the parties is deemed an integral part of the
contract, as though it had been originally expressed in unequivocal terms. The Court will enforce the true agreement of
the parties even if the property in question has already been registered and a
new transfer certificate of title is issued in the name of the transferee.[66]
The rule is that he who alleges that
a contract does not reflect the true intention of the parties thereto may prove
the same by documentary or parol evidence.[67] In this case, petitioner alleges that the
Deed of Absolute Sale and Option to Buy do not reflect the true intention of
the parties, which according to it is a loan with mortgage or an equitable
mortgage. The petitioner is burdened to prove, by clear and convincing evidence,
the terms of the writings.[68] In the language of State Supreme Court of
North Carolina in O’briant v. Lee,[69] “the
intention must be established, not by simple declarations of the parties, but
by proof of facts and circumstances, inconsistent with the rule of absolute
purchase, otherwise, the solemnity of deeds would always be exposed to the
slippery memory of witnesses.” The
presumption is that the contract is what it purports to be; and, to establish
its character as a mortgage, the evidence must be clear, unequivocal and
convincing which reasons tending to show that the transaction was intended as a
security for debt; and thus to be a mortgage must be sufficient to satisfy
every reasonable mind without hesitation.[70] A
less rigorous rule would mean that no man is safe in taking a deed of property.
It would be only necessary for the grantor to bring witnesses to an agreement
that the deed was regarded as an equitable mortgage, to enable him, on payment
of the purchase price and interest, to redeem, particularly if the value of the
property had doubled or trebled in ratio.[71] Unless the testimony is entirely plain and
convincing beyond reasonable controversy, the writing will be held to express
correctly the intention of the parties.[72] If there is a doubt as to the fact whether
the transaction is in the nature of a mortgage, the presumption, in order to
avoid a forfeiture is always in favor of a position to redeem, to subserve
abstract justice and avert injurious consequences.[73]
An equitable mortgage is one which,
although lacking in some formality, or form or words or other requisites deemed
required by statutes nevertheless reveals the intention of the parties to
charge a real property as security for a debt and contains nothing impossible
or contrary to law. An equitable mortgage may be constituted by any writing
from which the intention to create such a lien may be patterned.
Under Article 1602 of the New Civil
Code, a contract shall be presumed to be an equitable mortgage in any of the
following cases:
(1) When the price of a sale with right to repurchase
is unusually inadequate;
(2) When the vendor remains in possession as lessee or
otherwise;
(3) When upon or after the expiration of the
right to repurchase another instrument
extending the period of redemption or granting a new period is executed;
(4) When the purchaser retains for himself a part of
the purchase price;
(5) When the vendor binds himself to pay the taxes on
the thing sold;
(6) In any other case where it may be fairly inferred
that the real intention of the parties is that the transaction shall secure the
payment of a debt or the performance of any other obligation.
For the presumptions under the
article to apply, two requisites must concur: (1) that the parties entered into
a contract denominated as a sale; and (2) that their intention was to secure an
existing debt by way of mortgage.[74] In
order for a deed to be declared a mortgage, the relation of debtor and creditor
must exist between the grantor in such a deed and one who seeks to have it
declared a mortgage.[75] There must be a continuing binding debt; a
debt in its fullest sense. Where there is
no debt, there can be no mortgage; for if there is nothing to secure, there can
be no security.[76] If
there is an indebtedness or liability between the parties, either a debt
existing prior to
the conveyance, or a debt arising from a loan made at the time of the
conveyance, or from any other cause, and this debt is still left subsistent,
not being discharged or satisfied by the conveyance, but the grantor is
regarded as still owing and bound to pay at some future time, so that the
payment stipulated for in the agreement to re-convey is in reality the payment
of this existing debt, then the whole transaction amounts to a mortgage, whatever
stipulation they may have inserted in the instruments. If there is no relation of debtor-creditor, but by the terms of the
contract one is merely given an option to buy real property for a fixed amount
and for a fixed price, there is no equitable mortgage; the optionee is not
bound to buy and to pay for said real property.[77]
In the present case, the trial and
appellate courts declared that based on the evidence on record, petitioner sold
the property to respondent Sta. Monica for P3,021,000.00; as stated in
the Option to Buy, petitioner may opt to repurchase the property for P4,100,000.00.
Respondent Sta. Monica agrees with the findings of the trial court and the
appellate court.[78]
The trial court failed to make any
finding why petitioner sold the property to respondent Sta. Monica for P3,021,000.00,
which is contrary to what appears on the face of the deed of absolute sale - P4,100,000.00-which
amount petitioner acknowledged to have received from said respondent. Although
petitioner claimed in its complaint that the true purchase price of the
property was P3,021,000.00 and that it borrowed from respondent Sta.
Monica P1,079,000.00 as mortgage for one year (from June 30, 1986 to
June 30, 1987), no testimonial and documentary evidence was adduced to prove the
same. Petitioner was burdened to prove its claim in its complaint that it
borrowed P3,021,000.00 from respondent Sta. Monica,[79] failing
which its claim will be defeated even if respondents failed to present any
evidence to prove their side.[80]
To reiterate, there is no evidence on
record that petitioner borrowed P3,021,000.00 from respondent Sta.
Monica in 1986 as alleged in its complaint. The only evidence on record is that
petitioner decided in June 1986 to redeem the property from Pioneer much
earlier than the one-year-period therefor and needed P2,300,000.00 for
the purpose. Petitioner received the amount from respondent Sta. Monica and was
able to redeem the property from Pioneer. The only evidence of petitioner that
it received money from respondent Sta. Monica is the Deed of Absolute Sale, in which
the petitioner acknowledged to have received P4,100,000.00.
The “Redemption Receipt” signed by
Trinidad on June 30, 1988 for P3,000,000.00 in the form of checks and P57,000.00
in cash “as partial payment of the account of JMA for the property x x x” does
not constitute evidence that petitioner secured a loan of P3,021,000.00
from respondent Sta. Monica in June 1986.
The said amount was part of the P5,822,000.00 which petitioner
was obliged to pay to respondent Sta. Monica, in case it opted to buy the
property under the Option to Buy, representing the repurchase price, inclusive
of liquidated damages. In fact, Rosita Alberto testified that petitioner
expected respondent Sta. Monica to execute a deed of sale over the property
upon its payment of P4,100,000.00.
This is gleaned from the testimony of Atty. Alberto:
Atty. Balbastro:
Q Let me
put it this way, under these documents, Exhibits B and C, more particularly
Exhibit C, the Option to Buy, JMA House Incorporated was given up to
A Yes,
Sir.
Q And as
of
A I
tendered a total amount of three million fifty-seven thousand pesos, Sir.
Q And how
much is the redemption price, if you know?
If you know the repurchase price?
A Based
on the papers that can be found on the deed of absolute sale, if JMA House
Incorporated was to redeem the property during the first year, we were supposed
to repurchase on time.
COURT:
Q You are
a lawyer, right?
A Yes,
Your Honor.
WITNESS:
A To repurchase the property within the first
year, a total amount of four million one hundred thousand pesos, inclusive of
interest, was supposed to be paid. If the repurchase was to be made on the
second year, interests of 3.5 per cent per month was to be added on the face
value which is one million one hundred thousand pesos.
x x x x
Atty. Balbastro:
Q Aside
from Exhibit G, you do not have any other document concerning the payment you
made to Sta. Monica Industrial Corporation?
A No
other.
Q Now, subsequent to the payments (sic) of
Exhibits B and C, no other written document was executed between JMA House
Incorporated and Sta. Monica Industrial and Development Corporation, is that
correct?
A No other because we were expecting that the
next document to be executed was a deed of absolute sale of Sta. Monica
Industrial Corporation back to JMA House Incorporated covering the property.[81]
If, as claimed by petitioner, the
transaction between it and respondent Sta. Monica was an equitable mortgage, the
latter would be obliged to execute a Cancellation of Real Estate Mortgage or
Release of Mortgage over the property in favor of the petitioner. But, as admitted by Rosita Alberto, petitioner
did not expect respondent Sta. Monica to execute any of these; petitioner
expected that a deed of sale would be executed in its favor.
It bears stressing that petitioner
and respondent Sta. Monica were assisted by their respective lawyers during the
negotiations held between Rosita Alberto and
compromise to execute two deeds: a deed of absolute sale for P4,100,000.00,
and a deed of option to enable petitioner to buy the property for the same
price. Rosita Alberto testified, thus:
Q Now, you also made mention that you had
mortgaged the property to Sta. Monica Industrial Corporation. Did you execute any
document to prove that mortgage?
A Yes. Through the negotiation we were talking
about a real estate mortgage but Mr. Trinidad insisted on a deed of sale in
their favor. However, I requested for another document an option to buy/option
to repurchase which is supplement to the deed of sale which would give us two
years from the date of signing, to repurchase the property.
ATTY. LAZARO:
Q Madam
Witness, do you still recall the exact date when this deed of absolute sale was
executed?
A It
was
Q And how
about the option to buy agreement that you are mentioning? When was it
executed?
A It was executed [simultaneously] on the same
day,
Q I am
going to show you now a deed of absolute sale between JMA House Incorporated
and Sta. Monica Industrial and Development Corporation which has been
previously marked as Exhibit B and Exhibit B-1. What is the relation of this
deed of absolute sale to the one that you are referring to?
A This is
the same deed of absolute sale that we signed.
Q And I
am calling your attention to Exhibit B-1 wherein the signature over and above
the name Rosita Alberto [appears], whose signature is that?
A My
signature, Sir.
Q And I
am also calling your attention to the signature over and above the name Eugenio
E. Trinidad, President and General Manager. Whose signature is that?
A Mr.
Trinidad[’s].[82]
The respective lawyers of petitioner
and respondent Sta. Monica thereafter prepared the deeds which were executed on
Q Alright,
I will read to you your Exh. “C,” under the second WHEREAS, and I quote:
Whereas, the parties in the aforementioned Deed mutually agreed that the VENDOR
JMA HOUSE INCORPORATED is given an option to buy back the properties subject
thereto…” Do you recall this provision?
A Yes.
This is the document.
Q And, in
this second WHEREAS, the aforementioned Deed referred to here is the Deed
referred to in the first WHEREAS, that is the Deed of Absolute Sale, marked as
Exhibit “B”, is that correct?
A Yes.
Q I am
going back to my first question. In other words, the basis of the option to buy
is the supposed mutual agreement between JMA House Incorporated and Sta. Monica
Industrial and Development Corporation to give JMA House Incorporated the [option]
to buy back the property as provided in the Deed of Absolute Sale marked here
as Exhibit “B,” is that correct?
A They were supplementing each other, the
option to buy and the deed of absolute sale.[83]
The fact that petitioner sold the
property to respondent Sta. Monica is evidenced by Rosita Alberto’s admission
that she delivered to respondent Sta. Monica the owner’s duplicate of TCT No.
268126, after which the latter had the property registered in its name, conformably
with their “pre-arrangement.” This can be gleaned from her testimony, in answer
to the questions of counsel of respondent AGCOR:
ATTY. LUCAS:
Q After
WITNESS:
A After
Although Rosita Alberto did not
specify the particulars of her “pre-arrangement” with Trinidad outside of the
Deed of Absolute Sale and Option to Buy, it can safely be presumed that they
agreed that petitioner would continue collecting rentals from the tenants, and
respondent may mortgage
the property as security for its P3,600,000.00 loan from the PCI Capital
Corporation. Petitioner would then be
able to generate funds for the purchase of the property on or before
While it is true that per Appraisal
Report of the Philippine Appraisal Corporation, the property of the petitioner
had a value, as of 1986, of P11,080,000.00, despite which, Alberto
agreed to sell the property for P4,100,000.00 under the Deed of Absolute
Sale, nevertheless, Alberto cannot be faulted.
After all, under the Option to Buy, petitioner was obliged to pay only P4,100,000.00.
It must be stressed that an option is
a continuing offer or contract by which an owner stipulates with another that
the latter shall have the right to buy the property at a fixed price with a
certain time, or under, or in compliance with, certain terms and conditions; or
which gives to the owner of the property the right to sell or demand a sale.[85] It
is, in fine, an unaccepted offer, governed by the second paragraph of Article
1479 of the New Civil Code which states that “a promise to buy and sell a determinate thing for a price certain is
reciprocally demandable.” An option is not of itself a purchase, but merely
secures the privilege to buy. An option is a privilege given by the owner of
the property to another to buy the property at his election, and the owner does
not sell the property but gives another the right to buy at his election.[86] It imposes no binding obligation on the
person holding the option, aside from the consideration for the offer. Without
acceptance, it is not, properly speaking, treated as a contract, and does not
vest, transfer or agree to transfer, any title to, or any interest or right in
the subject property, 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.[87]
Thus,
an option contract involves two distinct elements, that is: (1) the offer to
sell, which does not become a contract until accepted; (2) the completed
contract to lease the offer for a specified time.[88]
It is a separate and distinct
contract from that which the parties may enter into, upon the consummation of
the option.
It bears stressing that an option
must be supported by a consideration distinct and separate from the price. A consideration for an optional contract is
just as important as the consideration for any other kind of contract.[89] If there is no consideration for the optional
contract, then it cannot be enforced anymore than any other contract where no
consideration exists.[90] However,
case law is that although an option is not binding as a contract for want of
consideration, yet if the offer contained therein is not withdrawn, its
acceptance within the time limited gives rise to a contract of sale, binding on
the vendor, which cannot be affected by any subsequent attempt to withdraw the
offer.[91]
The optionee or promisee is burdened
to prove such consideration for the option.
The consideration for the option is not presumed. In Villamor
v. Court of Appeals,[92]
the Court ruled that consideration is “the why of the contract, the essential
reason which moves the contracting parties to enter into the contract.”[93] The
consideration for a contract, including an option, need not be money or
anything of monetary value but may consist of either a benefit or a detriment
to the promisor.[94] There
is sufficient consideration for
a promise if there is any benefit to the promisee or any detriment to the
promisor. A benefit should not necessarily accrue to the promisee if a
detriment to the promisor is present; and there is consideration if the promisee
does anything legal which he is not bound to do or refrain from doing anything
which he has a right to do, whether or not there is any actual loan or
detriment to him or actual benefit to the promisor.[95] It
is sufficient that something valuable flows from the person to whom it is made,
or that he suffers some prejudice or inconvenience, and that the promise is the
inducement to the transaction. Indeed, there is a consideration if the promisee,
in return for the promise, does anything legal which he is not bound to do, or
refrains from doing anything which he has a right to do, whether there is any
actual loss or detriment to him or actual benefit to the promisor or not.[96]
We agree with the rulings of the
trial court and the CA that the option granted to the petitioner has a
consideration distinct from the purchase price of the property for P4,100,000.00.
As gleaned from the Option to Buy
itself, the agreement was executed by the parties because of the Deed of
Absolute Sale they had executed on the same occasion. Instead of the parties executing a Real
Estate Mortgage as suggested by petitioner, the parties, by way of compromise,
agreed to execute a Deed of Absolute Sale, on the condition that they execute
an Option to Buy, giving petitioner the privilege to repurchase the property
within a period of one year, with a grace period of one year immediately upon
the expiration of the original one year period. As admitted by Rosita Alberto,
the two deeds complemented each other, the Option to Buy being a supplement to
the Deed of Absolute Sale. In fine,
petitioner would not have agreed to sell the property to respondent Sta. Monica
unless petitioner was given the option to repurchase the property for the same
amount.
However, we agree with the ruling of
the CA that petitioner failed to exercise its option and notify respondent Sta.
Monica of its acceptance of the latter’s offer within the timeline under the
Option to Buy. Under the said deed, petitioner had one year from June 30, 1986 or
up to June 30, 1987 to exercise its option, and in case of failure to do so, it
had a one year grace period (from July
1, 1987 to June 30, 1988), provided that, in the latter case, it would pay
equitable damages of 3.5% a month from July 1, 1987 to June 30, 1988 until full
payment of the purchase price or until the option is finally exercised. The
pertinent portion of the contract reads:
NOW, THEREFORE, for and in consideration of the
foregoing premises, stipulations and conditions, the JMA HOUSE INCORPORATED is
hereby given an option to buy back the subject properties mentioned in the
aforesaid Deed of Absolute Sale, and in like manner the STA. MONICA INDUSTRIAL
AND DEVELOPMENT CORPORATION hereby undertakes and binds itself to resell the
same unto the said JMA HOUSE INCORPORATED within a period of One (1) year from
and after date of execution of the said Deed for a fixed consideration of FOUR
MILLION ONE HUNDRED THOUSAND PESOS (P4,100,000.00) Philippine Currency;
PROVIDED, HOWEVER, should the said JMA HOUSE INCORPORATED failed (sic) to
exercise the herein option to buy back within the above-stated period, the JMA
HOUSE INCORPORATED be (sic) given a grace period of another One (1) year
immediately thereafter. In case of such
extension the JMA HOUSE INCORPORATED hereby undertakes and binds itself to pay
an amount equivalent to Three and one-half percent (sic) month for and as
liquidated damages until the whole amount is fully paid and/or the option is
finally exercised.
It is clear that petitioner failed to
exercise its option on or before
The Option to Buy provides that acceptance
must be accompanied by payment of liquidated damages; such payment is a
condition precedent to the exercise of the right to buy, and the money must be
tendered or offered. A mere notice of an
intention to accept, or of an acceptance without such payment or tender, does
not constitute a valid compliance.[97]
Respondent Sta. Monica’s acceptance of the five checks in the total amount of P3,000,000.00
and the cash amount of P57,000.00 on June 30, 1988, as partial payment
of petitioner’s account did not resuscitate the right which petitioner had by
then already lost, particularly since the property had already been sold and
titled to AGCOR. The said partial payment was an exercise in futility, made
worse by the fact that the five checks were dishonored by the drawee bank.
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED.
Costs against the petitioner.
SO ORDERED.
ROMEO J. CALLEJO, SR.
Associate Justice
WE
CONCUR:
Chief Justice
Chairperson
CONSUELO YNARES-SANTIAGO MA. ALICIA AUSTRIA-MARTINEZ
Associate Justice
Associate Justice
Associate Justice
Pursuant to Section 13, Article VIII of the
Constitution, it is hereby certified that the conclusions in the above decision
were reached in consultation before the case was assigned to the writer of the
opinion of the Court’s Division.
ARTEMIO
V. PANGANIBAN
Chief Justice
[1] Penned by Associate Justice Jose L. Sabio, Jr., with Associate Justices Oswaldo D. Agcaoili (retired) and Sergio L. Pestaño (deceased), concurring; rollo, pp. 51-66.
[2] Penned by Judge Benedicto B. Ulep (retired); id. at 70-80.
[3] Rollo, p. 81.
[4] Exhibits “H” to “H-10.”
[5] Exhibits “A” to “A-4.”
[6] CA rollo, p. 89.
[7] TSN,
[8] TSN,
[9] Exhibits “A,” “A-1” to “A-4.”
[10] Exhibit “A.”
[11] Exhibit “B.”
[12] Exhibit “C.”
[13] Exhibit “P.”
[14] TSN,
[15] Exhibit 4.
[16] Exhibits “D” and “E.”
[17] Exhibit “7.”
[18] Exhibits “4,” “4-D”; Exhibit “5.”
[19] Exhibit “2.”
[20] Exhibits “6” and “7.”
[21] Exhibit “G.”
[22] TSN,
[23] Records, p. 62.
[24]
[25]
[26] Exhibit “B,” id. at 17.
[27] Records, pp. 33-35.
[28] TSN, February 4. 1993, p. 8.
[29] TSN,
[30] TSN,
[31]
[32]
[33]
[34] TSN,
[35]
[36]
[37]
[38] TSN,
[39]
[40]
[41] Exhibit “J.”
[42] TSN,
[43]
[44] TSN,
[45] Exhibit “4”- AGCOR.
[46] Exhibit “E.”
[47] Exhibit “2-A”- AGCOR.
[48] Exhibits “9,” “10” & “11” – AGCOR.
[49] Records, pp. 243-263.
[50] Exhibits “J” to “J-18.”
[51] Records, p. 364.
[52]
[53]
[54]
[55]
[56]
[57] Rollo, p. 22.
[58] Batingal v. Court of Appeals, 403 Phil. 780, 788 (2001); Go v. Court of Appeals, 403 Phil. 883, 889 (2001); International Corporate Bank v. Gueco, G.R. No. 141968, February 12, 2001, 351 SCRA 516.
[59] Art. 1370, New Civil Code.
[60] German Marine Agencies, Inc. v. National
Labor Relations Commission, 403 Phil. 572, 589 (2001).
[61] The Insular Life Assurance Co., Ltd. v.
Court of Appeals, G.R. No. 126850, April 28, 2004, 428 SCRA 79, 92.
[62] Vicente v. Planters Development Bank,
444 Phil. 309, 318 (2003).
[63] Golden Diamond, Inc. v. Court of Appeals, 388
Phil. 404, 415 (2000).
[64] Gonzales v. Court of Appeals, G.R. No.
122611,
[65] Republic v. David, G.R. No. 155634,
[66] Lao v. Court of Appeals, G.R. No.
115307,
[67] Aquino v. Court of Appeals, 380 Phil.
736, 741 (2000); Olea v. Court of Appeals,
G.R. No. 109696,
[68]
[69] 200 S.E. 865.
[70]
[71] Rubenstine v. Powers, 184 N.W. 589.
[72] Howland v. Blaks, 97 U.A. 624, 626.
[73] Cornell v. Hale, 22 Mills 377.
[74] San Pedro v. Lee, G.R. No. 156522, May
28, 2004, 430 SCRA 338, 347; Molina v.
Court of Appeals, 446 Phil. 133, 141 (2003).
[75] Spicer v. Elmore, 166 S.W. 2d 276.
[76] Pollak v. Millsap, 122 So. 16.
[77] In re: Cohee, 178 B.R. 154 (1995); see In re: Pitman, 843 F.2d 235 (1988); Mann v. U.S., N.D. Ill. 1987).
[78] CA rollo, pp. 87-88.
[79] SECTION 1, RULE 131, REVISED RULES OF EVIDENCE.
[80] San Pedro v. Lee, supra note 73, at 348.
[81] TSN,
[82] TSN,
[83] TSN,
[84] TSN,
[85]
77 Corpus Juris Secundum, 65 I; Adelfa Properties, Inc. v. Court of Appeals,
G.R. No. 111238, January 25, 1995, 240 SCRA 565, 579.
[86] Western Union Telegraph Company v. Brown,
253
[87] Limson v. Court of Appeals, G.R. No.
135929, April 20, 2001, 357 SCRA 209, 215; 77 Corpus Juris Secundum, p.
652.
[88] Corpus Juris Secundum, p. 652.
[89] Cavada v. Diaz, 37 Phil. 982 (1917).
[90]
[91]
Pemeroy on Equity (2d Ed.) p. 4934; James on Option Contracts, p. 1217; Elliot
on Contracts, p. 395; Murphy, Thompson
& Co. v. Reed, 125 Ky. 585, 101 S. W. 964, 10 L. R. A. (N.S.) 195, 128
Am. St. Rep. 261; Frank v.
Statford-Handcock, 13 Wyo. 37, 77 P. 134, 67 L. R. A. 571, 110 Am. St. Rep.
963.
[92] G.R.
No. 97332,
[93]
[94] Wellistone
on Contracts, Volume I, Section 102, ruled in Dorman v. Public, 184 So. 886.
[95]
Contracts, 17 Corpus Juris Secundum,
p. 425.
[96]
13 C.J., Contracts, Sec. 150, pp.
315, 316. See, also, Henderson v. Kendrick, 82
[97] 77 C.J.S. Sales, p. 654, citing Floyd v. Morgan, 4 S.E.2d 91; Snead v. Wood, 100 S.E. 714.