G.R. No.

L-7382

June 29, 1955

SOUTHWESTERN SUGAR AND MOLASSES COMPANY, plaintiff-appellee,

vs.
ATLANTIC GULF & PACIFIC COMPANY, defendant-appellant.
Arturo A. Alafriz and A. B. Alcera for appellant.
Mariano Agoncillo for appellee.

Manila, Philippines
Gentlemen:
This is to confirm our conversion of today whereby we offer you our Barge No. 10, which is 120'
00" long by 44"-0 wide and 9'-0" deep, for the sum of of P30,000. Barge to cleaned of creosote and
fuel oil.
This option is to be good for ninety (90) days, or until June 30, 1953.

BAUTISTA ANGELO, J.:

This is an action for specific performance.

Yours very truly,

On March 24, 19 53, the Atlantic Gulf & Pacific Company of Manila, hereafter called Atlantic Gulf for short,
granted an option to Southwestern Sugar & Molasses Co. (Far East) Inc., hereafter called Southwestern
Company, to buy its barge No. 10 for the sum of P30,000 to be exercised within a period of ninety days.

ATLANTIC, GULF & PACIFIC CO. OF MANILA

(Sgd.) W. H. SCHOENING

On May 11, 1953, the Southwestern Company wrote to Atlantic Gulf advising the latter that it wanted "to
exercise our option at your earliest convenience" and requested that it be notified as soon as the barge was
available.
On May 12, 1953, the Atlantic Gulf replied stating that their understanding was that the "offer of option" is to be
a cash transaction and to be effected "at the time the lighter is available", and, on June 25, 1953, reiterating
the unavailability of the barge, it further advised the Southwestern Company that since there is still further
work for it, and as this situation still applies" the barge could not be turned over to the latter company.
On June 27, 1953, in view if such vacillating attitude, the Southwestern Company instituted the present action
to compel the Atlantic Gulf to sell the barge in line with the option, depositing with the court a check covering
the sum of P30,000. This check however was later withdrawn with the approval of the court.
On June 29, 1953, the Atlantic Gulf withdraw its "offer of option" with due notices to the Southwestern
Company stating as reason therefor that the option was granted merely as a favor. The Atlantic Gulf set up as
a defense the option to sell made by it to the Southwestern Company is null and void because it is not
supported by any consideration.
After due trial, the lower court rendered judgment granting plaintiff's prayer for specific performance. It further
ordered the defendant to pay damages in an amount equivalent to 6 per centum per annum on the sum of
P30,000 from the date of the filing of the complaint, and to pay the sum of P600 as attorney's fees, plus the
costs of action.
The case before us on the assertion that the only issue involved is one of law.
The option granted by appellant to appellee is contained in a letter dated March 24, 1953 which reads as
follows:

March 24, 1953

Southwestern Sugar & Molasses Co. Far East, Inc.

145 Muelle de Binondo

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. This 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 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 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 not 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.

Supplier:
Atkins, Kroll & Co., Sa Frasisco, Cal. U.S.A.
We are looking forward to receive your valued order and remain .

Wherefore, the decision appealed from is reversed, without pronouncement as to costs.

G.R. No. L-9871

January 31, 1958

ATKINS, KROLL and CO., INC., petitioner,

vs.
B. CUA HIAN TEK, respondent.
Ross Selph, Carrascoso and Janda for petitioner.
Ponciano T. Castro for respondent.
BENGZON, J.:
Review of a Court of Appeals' decision. For its failure to deliver one thousand cartons of sardines, which it had
sold to B. Cua Hian Tek, petitioner was sued, and after trial was ordered by the Manila court of first instance to
Pay damages, which on appeal was reduced by the Court of Appeals to P3,240.15 representing unrealized
profits.
There was no such contract of sale, says petitioner, but only an option to buy, which was not enforceable for
lack of consideration because in accordance with Art. 1479 of the New Civil Code "an accepted unilatateral
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.
Simple are the facts of this case: Dated September 13, 1951, petitioner sent to respondent a letter of the
following tenor:
Sir (s) /Madam:
We are pleased to make you herewith the following firm offer, subject to reply by September 23,
1951:
Quantity and Commodity:

Very truly yours,

The Court of first instance and the Court of Appeals 1 found that B. Cua Hian Tek accepted the offer
unconditionally and delivered his letter of acceptance Exh. B on September 21, 1951. However, due to
shortage of catch of sardines by the packers in California, Atkins Kroll & Co., failed to deliver the commodities
it had offered for sale. There are other details to which reference shall not be made, as they touch the question
whether the acceptance had been handed on time; and on that issue of Court of Appeals definitely found for
plaintiff.
Ayway, in presenting its case before this Court petitioner does not dispute such timely acceptance. It merely
raises the point that the acceptance only created an option, which, lacking consideration, had no obligatory
force.
The offer Exh. A, petitioner argues, "was a promise to sell a determinate thing for a price certain. Upon its
acceptance by respondent, the offer became an accepted unilateral promise to sell a determinate thing for
price certain. Inasmuch as there was no consideration to support the promise to sell distinct from the price, it
follows that under Art. 1479 aforequoted, the promise is not binding on the petitioner even if it was accepted by
respondent." (p. 12 brief of petitioner.).
The argument, maifestly assumes that only a unilateral promise arose when the offeree accepted. Such
assumption is a mistake, because a bilateral cotract to sell and to buy was created upon acceptance. So much
so that B. Cua Hian Tek could be sued, he had backed out after accepting, by refusing to get the sardines
and/or to pay for their price. Indeed, the word "option" is found neither in the offer nor in the acceptance. On
the copntrary Exh. B accepted "the firm offer for the sale" and adds, "the undersigned buyer has immediately
filed an application for import license . . ." (Emphasis Ours.).
Petitioner, however, insists the offer was a mere offer of option, because the "firm offer" Exh. A. was a
continuing offer to sell until September 23, "an option is nothing more than a continuing offer" for a specified
time. In our opinion implies more than that: it implies the legal obligation to keep open for the time
specified.2 Yet the letter Exh. A did not by itself produce the legal obligation of keeping the offer open up ot
Septmber 23. It could be withdrawn before acceptance, because it is admitted, there was no consideration for
it.

400 Ctns. Luneta brand Sardines in Tomato Sauce 48/15-oz. Ovals at $8.25 Ctn.
300 Ctns. Luntea brand Sardines Natural 48/15 oz. talls at $6.25 Ct.
300 Ctns. Luneta brand Sardines in Tomato Sauce 100/5-oz. talls at $7.48 Ct.
Price(s):

ART. 1324. When the offerer has showed 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 somnething paid or promissed. (n) (New Civil Code.).
Ordinarily an offer to buy or sell may be withdrawn or countermanded before accepatnce, even
though the offer provides that it will not be withdrawn or countermanded, or allows the offeree a
certain time within which to accept it, unless such provision or agreement is supported by an
independent consideration. . . (77 Corpus Juris Secundum p. 636.).

All prices C ad F Manila Cosular Fees of $6.00 to be added.

Shipmet:
Durig September/October from US Ports.

Furthermore, an option is unilateral: a promise to sell3 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 later. In this case, however, upon
accepeting herein petitioner's offer a bilateral promise to sell and to buy ensued, and the respondent ipso facto
assumed the obligations 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 bilalteral 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 defendants, that the option contract was not valid
for lack of consideration. But it was, at least, an offer to sell, which was accepted by letter, and of
this acceptance the offerer had knowledge before said offer was withdrawn. The concurrence of
both actsthe offer and the acceptancecould at all events have generated a contract, if none
there was before (atrs. 1254 and 1262 of the Civil Code). (Zayco vs. Serra, 44 Phil. 331.).
One additional observation should be made before the closing this opinion. The defense in the court of first
instance rested on the proposition or propositions that the offer had not been precedent had not been fulfilled.
This option-without-consideration idea was never mentioned in the answer. A Change of theory in the
appellate courts is not permitted.
In order that a question may be raised on appeal, it is essential that it be within the issues made by
the parties in their pleadings. Consequently, when a party deliberately adopts a certain theory, and
the case is tried and decided upon that theory in the court below, he will not be permitted to
change his theory on appeal because, to permit him to do so, would be unfair to the adverse party.
(Rules of Court by Moran1957 Ed. Vol. I p.715 citing Agoncillo vs. Javier, 38 Phil. 424; American
Express Company vs. Natividad, 46 Phil. 207; San Agustin vs. Barrios, 68 Phil. 465, 480; Toribio
vs. Dacasa, 55 Phil. 461.) .
We must therefore hold, as the lower courts have held that there was a contract of sale between the parties.
And as no legal excuse has been proven, the seller's failure to comply therewith gave around to an award for
damages, which has been fixed by the Court of Appeals at P3,240.15-amount which petitioner does not
dispute in this final instance.
Consequently, the decision under review should be, and it is hereby affirmed, with cost against petitioner.
G.R. No. L-12888

April 29, 1961

R. F. NAVARRO, doing business under the firm name of R.F. NAVARRO & COMPANY, plaintiff-appellant,
vs.
SUGAR PRODUCERS COOPERATIVE MARKETING ASSOCIATION INC., defendant-appellee.
Marquez, Quirino and Associates for plaintiff-appellant.
San Juan, Africa and Benedicto for defendant-appellee.

3. On September 21st, 1956, answering an inquiry made by the plaintiff, the defendant advised the
latter that the cost of pumping the molasses offered by it for sale is P1.20 per metric ton in San
Carlos district and P3.00 per metric ton in Bais district and that the date of delivery thereof shall
start from February on to March, April and May, 1957, as milling in the districts indicated (San
Carlos and Bais) starts during the month of January;
4. Promptly at five minutes before noon of September 24th, 1956, plaintiff formally accepted the
offer of sale tendered by the defendant by informing the latter in writing that he binds himself to
purchase from the preferred 20,000 metric tons of molasses in question for P50.00 per metric ton,
and the day after September 21st, 1956, plaintiff upon the request of defendant, made the
following clarifications of his agreement to purchase the said molasses, (1) 20,000 metric tons
of Philippine molasses, 185-degrees specific gravity, 60% sugar by invert; (2) Price P50.00
Philippine currency, per metric ton ex-warehouse; (3) shipments to be in quantities of 3,000 or
more metric tons every each shipment during the month of February, March, April and May until
the whole amount has been completely shipped; and (4)payment shall be by irrevocable, divisible
and assignable domestic letter of credit to be opened in a local bank in defendant's favor;
5. On the same day plaintiff made the foregoing clariffications of his acceptance of the sale, the
defendant hurried advised plaintiff that it committed a typographical error indicating the specific
gravity of the molasses at 185-degrees which should be only 85-degrees, the latter being the high
for molasses at 60% sugar by invert, and requesting plain that the "specific gravity" be amended
accordingly, which correction and amendment plaintiff readily agreed to and accepted:
6. That neither on September 24th, 1956 when plaintiff exercised his option nor on September 25th
when he request plaintiff to clarify his acceptance to indicate the manner payment, nor upon the
submittal of the clarification which presented by plaintiff himself and received by the defendant thru
its President, Amado Garcia, and for three days the after, there was no single word, effort or hint
that the defendant's offer, accepted by the plaintiff, was qualified in any way whatsoever;
7. That on September 24th, 1956, relying upon the consummation and perfection of the purchase
and sale of 20,000 metric tons of molasses in question as indicated above, plaintiff through his
business associate here in Manila (J.D. QUIRINO) continued negotiations for the resale of said
molasses to foreign buyers of said conunodity by immediately communicating the availability of
said commodity through letters, cablegrams a long-distance calls to the latter's business contacts
in U.S.A., a Japan, and ultimately disposing and reselling the said molasses for forward deliveries
in accordance with plaintiff's agreement with the defendant;
8. On September 28th, 1956, three days after an agreement had been consummated on the price,
quantity and quality of said molasses and the manner of payment thereof, the defendant, belatedly
and abruptly advised plaintiff of its desire add certain additional conditions to be incorporated in the
formal contract of purchase and sale then under preparation by it for signature, which were
never even mentioned nor hinted at in its original offer or proposal, on the untenable pretext that
they were 'standard conditions' on all contracts for the sale said commodity, the most onerous of
which were,

BARRERA, J.:
Plaintiff-appellant R. F. Navarro (doing business under the firm name R.F. Navarro & Company) appeals
directly to us from the order of the Court of First Instance of Rizal (in Civil Case No. 1733-P) dismissing his
complaint for lack of cause of action, on the assertion that only questions of law are involved herein.
The material and pertinent allegations of plaintiff's complaint are:
2. On September 19th, 1956, defendant formally offered to plaintiff the sale from 15,000 to 20,000
metric tons of molasses, 1st-degrees gravity, 60% sugar by invert, at P50.00 per metric ton, exwarehouse San Carlos and Bais, Negros Occidental, giving him up to noon of September 24th,
1956 within which to accept the offer, with the admonition that upon its failure to hear from him by
then, the defendant shall feel free to negotiate the sale with other possible buyers;

"(a) That upon the signing of the contract of purchased and sale; plaintiff shall pay defendant in
cash an amount equivalent to 50% of the purchase value Of the molasses;
"(b) that to cover the remaining and unpaid balance of the purchase price, plaintiff shall open with
the Philippine National Bank an irrevocable domestic letter of credit in favor of defendant, which
shall be assignable and divisible; and
"(c) that in negotiating the said letter of credit, plaintiff shall allow defendant immediately to
withdraw from the same the corresponding amount representing 50% of the value of the molasses
withdrawn from the central, upon presentation of the requisite certificate thereof (certainly a
condition which, taken with (a) above, is most one-sided in favor only of the seller);

9. On October 2nd, 1956, plaintiff personally conferred with the defendant's manager, Amado G.
Garcia, with a view of threshing out the difficulties necessarily evoked by the foregoing conditions
belatedly demanded by the defendant, but the latter remained adamant in the defendant, and the
day after (October 3rd, 1956), it peremptorily gave plaintiff up to noon again of October 26th, 1956,
within which to decide upon his acceptance of said additional conditions with the warning that if he
failed to do so, it would feel free to advise its planters concerned that they could negotiate their
molasses with other parties;
10. On October 5th, 1956, plaintiff, in a spirit of cooperation and in his desire to insure the success
of his purchase of the molasses in question, reiterated to the defendant his readiness and
willingness, already imparted to it during their conference on October 2nd , to assist
defendant in working out certain financing transactions with the bank whereby it may be possible
to provide in the letter of credit to be opened in favor of the defendant authority to draw cash
advances up to 50% of the contract value of the molasses, under certain conditions, and
alternatively, plaintiff expressed his willingness to satisfy defendant's desire to be paid in advance
an amount equivalent to 50% of the purchase value of the molasses, but provided, that their
original agreement of P50.00 for metric ton were to be converted into what is known as "equal
standard condition", under which the purchase value would be only P32.00 per metric ton;
11. On the very same day and evidently without even any attempt to consider the matter further,
defendant simply and rudely turned down the foregoing friendly gesture of the plaintiff caused by
the additional conditions demanded by the defendant in its letter of September 28, 1956 (indicated
in par. 7 above), and bluntly informed plaintiff that in view of his non-acceptance of said conditions
it would not continue with the sale of the molasses in question to plaintiff and that it felt free to offer
the same to any other interested buyer.
Claiming breach of contract, plaintiff prayed that judgment be rendered ordering defendant to comply with and
perform its contractual obligations, pursuant to its agreement with plaintiff of September 19 and 24, 1956 and
in case of failure to do so, to pay plaintiff any and all damages he may suffer by reason of such noncompliance, plus moral damages and to pay plaintiff reasonable attorney's fees and actual costs of the
litigation.
As heretofore stated, upon defendant's motion to dismiss on the ground that it (complaint) states no cause of
action for the reason that "there is no binding contract between" plaintiff and defendant, under Article 1479 of
the New Civil Code, the trial court dismissed the action in an order which in part reads:
ORDER
xxx

xxx

xxx

The defendant contends that the complaint states no cause of action because defendant's promise
to sell, although accepted by the plaintiff, is not supported by any consideration distinct from the
price and, under Article 1479 of the New Civil Code, is not binding. Article 1479 provides:
"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 determinable thing for a price certain is
binding upon the promissor if the promise is supported by a consideration distinct from
the price."
Although the existence of a lawful consideration or cause of support a contract is presumed, yet
from the allegations of the herein complaint, it is apparent that the defendant's promise to sell is
not supported by any consideration. In fact, the absence of any consideration of the option given to
the plaintiff was admitted by plaintiff's counsel in his oral argument opposing the defendant's
motion to dismiss. Plaintiff, however, contends that the option became binding on the defendant

when plaintiff gave notice of its acceptance and that having been accepted within the period of the
option, the offer can no longer be withdrawn and, in any event, such withdrawal is ineffective
because there had already arisen an existing bilateral contract which can be enforced.
The case of Southwestern Sugar & Molasses Co. v. Atlantic Gulf & Pacific Co. (51 O.G. 3447) is
practically on all fours with the case at bar. In said case, on March 24, 1953, defendant Atlantic
Gulf & Pacific Co. granted an option to plaintiff Southwestern Sugar & Molasses Co. to buy its
barge for P30,000.00 to be exercised within ninety days. On May 11, 1953, Atlantic Gulf wrote
Southwestern Sugar that it was exercising its option and that it be notified as soon as the barge
was available. On May 12, 1953, Atlantic Gulf replied that their understanding was that the "offer of
option" is to be cash transaction and to be effected at the time the barge was available. On June
25, 1953, Atlantic Gulf informed Southwestern Sugar that the damage action could not be turned
over to the latter. On June 27, 1953, Southwestern Sugar instituted an action for specific
performance in line with the accepted option, depositing with the Court the purchase price of
30,000.00. Atlantic Gulf, relying upon Article 1479 of the New Civil Code, contended that the option
was not valid because it was not supported by any consideration apart from the price.
Southwestern Sugar contended that the option became binding on Atlantic Gulf when plaintiff gave
notice of its acceptance during the option period citing as its authority Article 1324 of the New Civil
Code which provides that 'when the offer or 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." Upholding the
contention of Atlantic Gulf and holding that the promise to sell was not valid because it was not
supported by a consideration distinct from the price, the (Supreme) Court stated:
"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. 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 offer or 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 provision 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 premise to sell
to be valid must be supported by a consideration distinct from the price."
On the strength of the above ruling laid down in the above cited case of Southwestern Sugar &
Molasses Co. v. Atlantic Gulf & Pacific Co., supra, the facts of which are identical with those
alleged in the present complaint, this Court rules that since the herein defendant's promise to sell
is not supported by any consideration distinct from the price, said promise si invalid and
enforceable. Plaintiff's complaint does not, hence state a cause of action.
While under the allegations of the present complaint, here in defendant may have assumed a clear
obligation to sell it molasses to plaintiff at P50.00 per metric ton and, under the complaint, said
defendant may have no justifiable reason not to proceed with the sale, yet, this Court cannot do
otherwise that declare the option not binding and unenforceable in view of the clear provisions of
the law on the matter. Thus, said the Supreme Court in the above-mentioned case of
Southwestern Sugar v. Atlantic Gulf:

"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 the appellant to
withdraw its offer, this Court cannot adopt a different attitude because the la on the
matter is clear. Our imperative duty is to apply it unless modified by Congress."
WHEREFORE, the Court sustains, as it hereby sustain the defendant's motion to dismiss and
hereby declares plaintiff's complaint dismissed, without costs.
SO ORDERED.

Santiago F. Bautista for plaintiff-appellee.

Jesus G. Villamar for defendant-appellant.

CONCEPCION, C.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.

His motion for reconsideration having been denied, plain plaintiff interposed this appeal.
It is the contention of plaintiff-appellant that "the lower court erred in characterizing the transaction had
between plaintiff and the defendant as an accepted unilateral promise to buy or to sell, and in deciding that as
there was no consideration therefor, Article 1479, paragraph 2 of the Civil Code, and the ruling in
Southwestern Sugar & Molasses Co. v. Atlantic Gulf & Pacific Co., 51 Off. Gaz. 3447, are applicable thereto."
In support of his claim, appellant seeks in his brief to differentiate his case from that of Southwestern Sugar &
Molasses Company v. Atlantic Gulf & Pacific Company relied upon by the trial court by arguing that what was
involved in the Atlantic Gulf case was a mere option, while here the transaction is a bilateral promise to sell
and buy which requires no consideration distinct from the selling price.
This contention is not borne out by the facts alleged in the complaint. In the first place, as noted by the trial
court in its order denying plaintiff's motion for reconsideration, plaintiff himself, in paragraph 6 of his complaint,
referred to the transaction as an "option" which he exercised on September 24, 1956. Then again, in his
memorandum in lieu of oral argument, he expressly agreed that the offer made by defendant and described in
paragraph 2 of plaintiff's complaint is, In option, a unilateral promise to sell. (See page 4 of the memorandum.)
And, undoubtedly, this is the offer, the option, the unilateral promise to sell that was accepted by plaintiff five
minutes before the deadline noon of September 24, 1956.(See first part of paragraph 4 of the complaint.)
This acceptance, without consideration, did not create an enforceable obligation on the part of the defendant.
The offer as well as the acceptance, did not contemplate nor produce an immediately binding and enforceable
contract of sale. Both lack a most essential element the manner of payment of the purchase price. In fact, it
was only after the exercise of the option or acceptance of the unilateral promise to sell that the terms of
payment were first discussed. This was in connection with the clarification of plaintiff's acceptance which was
transmitted to defendant on September 25, 1956. (See last part of paragraph 6 of the complaint.) Plaintiff's
offer of a domestic letter of credit was not accepted by defendant who insisted on a cash payment of 50% of
the purchase value, upon signing of a contract. (See paragraphs 8 and 9 of the complaint.) Plaintiff, on the
other hand, agreed to accede to this provided the price is reduced from P50.00 per metric ton to 7132.00
Defendant rejected defendant's alternative counter-offer. In the circumstance, there was no complete meeting
of the minds of the parties necessary for the perfection of a contract of sale. Consequently, appellee was
justified in withdrawing its offer to sell the molasses in question.(See Zayco vs. Serra, 44 Phil. 326; Montinola
v. Victorias Milling Co., et al., 54 Phil. 782; and Batangan v. Cojuangco 78 Phil. 481.)
In view of the conclusion we have reached, it would not be necessary to pass upon appellee's motion to
dismiss the appeal.
WHEREFORE, finding no reversible error in the order appealed from, the same is hereby affirmed, with cost
against the plaintiff-appellant. So ordered.
G.R. No. L-25494 June 14, 1972
NICOLAS SANCHEZ, plaintiff-appellee,
vs.
SEVERINA RIGOS, defendant-appellant.

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 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 Pl,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 other 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
been 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 has not 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
his 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 pleadings. (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 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 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 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.
It is not disputed that the option is without consideration. It can therefore be withdrawn
notwithstanding the acceptance 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 not 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.
However, this Court itself, in the case of Atkins, Kroll and Co., Inc. v. Cua Hian Tek, 8 decided later
thatSouthwestern 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 a 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
letter, 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.

I fully agree with the abandonment of the view previously adhered to in Southwestern Sugar & Molasses Co.
vs. Atlantic Gulf and Pacific Co., 1 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 Tek, 2holding 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. In other words, if the option 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.
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 in
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. 3
In the present case the trial court found that the "Plaintiff (Nicolas Sanchez) had offered the sum of
Pl,510.00before any withdrawal from the contract has been made by the Defendant (Severina Rigos)." Since
Rigos' offer sell was accepted by Sanchez, before she could withdraw her offer, a bilateral reciprocal contract
to sell and to buy was generated.

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 as inconsistent therewith, the view adhered
to in theSouthwestern Sugar & Molasses Co. case should be deemed abandoned or modified.
WHEREFORE, the decision appealed from is hereby affirmed, with costs against defendant-appellant
Severina Rigos. It is so ordered.
Reyes, J.B.L., Makalintal, Zaldivar, Teehankee, Barredo and Makasiar, JJ., concur.
Castro, J., took no part.

G.R. No. L-62051 March 18, 1985

RURAL BANK OF PARARAQUE, INC., petitioner,
vs.
ISIDRA REMOLADO and COURT OF APPEALS, respondents.

AQUINO, J.:
Separate Opinions

ANTONIO, J., concurring:

I concur in the opinion of the Chief Justice.

This case is about the repurchase of mortgage property after the period of redemption and had expired. Isidra
Remolado, 64, a widow, and resident of Makati, Rizal, owned a lot with an area of 308 square meters, with a
bungalow thereon, which was leased to Beatriz Cabagnot (86-7, record on Appeal).
The lot is located at 41 Molave Street, United Paraaque, Rizal. In 1966 she mortgaged it to the Rural Bank of
Paraaque, Inc. as security for a loan of P15,000. She paid the loan.
On April 17, 1971 she mortgaged it again to the bank. She eventually secured loans totalling P18,000 (Exh. At
D). the loans become overdue. The bank foreclosed the mortagage on July 21, 1972 and bought the property
at the foreclosure sale for P22,192.70. The one-year period of redemption was to expire on August 21, 1973.

On August 8, 1973 the bank advised Remolado that she had until August 23 to redeem the property (Exh. U or
6; 53, Record on Appeal). On August 9, 1973 or 14 days before the expiration of the one-year redemption
period, the bank gave her a statement showing that she should pay P25,491.96 for the redemption of the
property on August 23 (Exh. F). No redemption was made on that date.
On September 3, 1973 the bank consolidated its ownership over the property (Exh. H). Remolado's title was
cancelled. A new title, TCT No. 418737, was issued to the bank on September 5 (Exh. 0).
On September 24, 1973, the bank gave Remolado up to ten o'clock in the morning of October 31, 1973, or 37
days, within which to repurchase (not redeem since the period of redemption had expired) the property (Exh. I1; 32, Record on Appeal). The bank did not specify the price.
On October 26, 1973 Remolado and her daughter, Patrocinio Gomez, promised to pay the bank P33,000 on
October 31 for the repurchase of the property (Exh. X or 9; 64, Record on Appeal).
Exhibits 1-1 and X do not evidence any perfected repurchase agreemi6nt. Even if it is assumed that the bank's
commitment to resell the property was accepted by Remolado, that option was not supported by a
consideration distinct from the price (Art. 1479, Civil Code). Lacking such consideration, the option is void
(Southwestern Sugar & Molasses Co. vs. Atlantic Gulf & Pacific Company, 97 Phil. 249).
Contrary to her promise, Remolado did not repurchase the property on October 31, Five days later, or on
November 5, Remolado and her daughter delivered P33,000 rash to the bank's assistant manager as
repurchase price. The amount was returned to them the next day, November 6, 1973 (Exh. V, W and 11). The
assistant manager had no intention of receiving the money. It was just left with her by Remolado (Exh. 10; 42,
Record on Appeal). At that time, the bank was no longer willing to allow the repurchase.
On that day, November 6, Remolado filed an action to compel the bank to reconvey the property to her for
P25,491.96 plus interest and other charges and to pay P35,000 as damages. The repurchase price was not
consigned. A notice of lis pendens was registered.
On November 15, the bank sold the property to Pilar Aysip for P50,000. A new title was issued to Aysip with an
annotation of lis pendens (Exh. P and 12; 649, Record on Appeal).
The trial court ordered the bank to return the property to Remolado upon payment of the redemption price of
P25,491.96 plus interest and other bank charges and to pay her P15,000 as damages. The Appellate Court
affirmed the judgment. The bank appealed to this Court. It contends that Remolado had no more right of
redemption and, therefore, no cause of action against the bank.
We hold that the trial court and the Appellate Court erred in ordering the reconveyance of the property, There
was no binding agreement for its repurchase. Even on the assumption that the bank should be bound by its
commitment to allow repurchase on or before October 31, 1973, still Remolado had no cause of action
because she did not repurchase the property on that date.
Justice is done according to law. As a rule, equity follows the law. There may be a moral obligation, often
regarded as an equitable consideration (meaning compassion), but if there is no enforceable legal duty, the
action must fail although the disadvantaged party deserves commiseration or sympathy.
The choice between what is legally just and what is morally just, when these two options do not coincide, is
explained by Justice Moreland in Vales vs. Villa, 35 Phfl. 769, 788 where he said:
Courts operate not because one person has been defeated or overcome by another,
but because he has been defeated or overcome illegally. Men may do foolish things,
make ridiculous contracts, use miserable judgment, and lose money by them-indeed,
all they have in the world; but not for that alone can the law intervene and restore.
There must be, in addition, a violation of law, the commission of what the law knows as

an actionable wrong before the courts are authorized to lay hold of the situation and
remedy it.
In the instant case, the bank acted within its legal rights when it refused to give Remolado any extension to
repurchase after October 31, 1973. It had given her about two years to liquidate her obligation. She failed to
do so.
WHEREFORE, the Appellate Court's judgment is reversed and set aside. The complaint and counterclaim are
dismissed. The notice of lis pendens is cancelled. No costs.
SO ORDERED.
G.R. No. 73573

May 23, 1991

SPOUSES TRINIDAD AND EPIFANIO NATINO, petitioners,

vs.
THE INTERMEDIATE APPELLATE COURT, THE RURAL BANK OF AGUILAR, INC. AND THE
PROVINCIAL SHERIFF EX-OFFICIO OF PANGASINAN, respondents.
Jose P. Villamor for petitioners.
Oscar A. Benzon for private respondents.
Bitty G. Viliran for Rural Bank of Aguilar, Inc.

DAVIDE, JR., J.:

Unsatisfied with the decision of 4 June 1985 and the resolution of 23 December 1985 of the then Intermediate
Appellate Court (IAC) in A.C.-G.R. CV No. 69539 1 which, respectively, reversed the decision of the then Court
of First Instance of Pangasinan, Branch II, of 1 December 1981 in Civil Case No. 15573, and denied the
motion for the reconsideration of the 4 June 1985 decision, petitioners filed with this Court the instant petition
to seek reversal thereof. They submit one principal issue: whether or not the conclusion drawn by the
Intermediate Appellate Court from proven facts is correct. 2
The following facts are not disputed:
On 12 October 1970 petitioners executed a real estate mortgage in favor of respondent bank as security for a
loan of P2,000.00. Petitioners failed to pay the loan on due date. The bank applied for the extrajudicial
foreclosure of the mortgage. At the foreclosure sale on 11 December 1974 the respondent bank was the
highest and winning bidder with a bid of P2,945.11. A certificate of sale was executed in its favor by the sheriff
and the same was registered with the Office of the Register of Deeds on 29 January 1975. The certificate of
sale, a copy of which was furnished the petitioners by registered mail, expressly provided that the redemption
period shall be two years from the registration thereof.
Since no redemption was made by petitioners within the two-year period, which expired on 29 January 1977,
the sheriff issued a Final Deed of Sale on 15 February 1977.
Petitioners, however, claimed that they were granted by respondent bank an extension of the redemption
period; but the latter denied it.
On 22 November 1979 respondent bank file a petition for a writ of possession, which petitioners later opposed
on the ground that they had consigned the redemption money of P4,000.00 on 12 December 1979. The court
rejected the opposition and issued the writ of possession. However, to prevent its execution, petitioners
instituted with the then Court of First Instance of Pangasinan a complaint against respondent bank and the Ex-

Officio Provincial Sheriff for the annulment of the aforementioned final deed of sale and for the issuance of a
writ of preliminary injunction. The case was docketed as Civil Case No. 15573 which was raffled to Branch II
thereof. In their complaint petitioners alleged that the final deed of sale was prematurely issued since they
were granted an extension of time to redeem the property.

This the parties may do, since the right of the mortgagee to demand compliance within the 2 year
period of redemption maybe waived, unless the waiver is contrary to the public order, public policy,
morals or good customs or prejudicial to a third person with a right recognized by law." None of the
inhibitions enumerated are present in this case.

In resolving the issue of extension of the redemption period, the trial court, in its Decision of 1 December 1981,
made the following findings and conclusion:

Hence, the action of the defendant bank in securing the Sheriffs Final Sale prior to the fixing of the
period within which the plaintiffs had to pay was not in order by reason of the extension of the
period of redemption without a term. Not being in order, the period for redemption by the plaintiffs
still exists but has to be set. 3

xxx

xxx

xxx

From the bank's evidence, it is difficult to believe that the plaintiffs who are personally known to the
president and manager herself, and from whom she had to hire trucks, would not have made any
move or offer to redeem the property within the redemption period. The presumption is that they
exercised ordinary care of their concerns (Sc. 5 (d), Rule 131, Rules of Court, Cabigao vs. Lim 50
Phil. 844). If indeed, the plaintiffs made no such offer during the redemption period, the defendant
bank should have presented evidence rebutting the plaintiffs' evidence. But it did not. While the
plaintiff testified that the tender was made to Mr. Salgado, loan clerk, and Mr. Madrid, Acting
Manager of the Bank and also board members Dr. Jing Zarate and Mr. Rosario, none of them were
presented to rebut plaintiffs' evidence. Hence, the presumption that if their testimony were
produced, it would be adverse to the defendant bank under Sec. 5(e) Rule 131 of the Rules of
Court, would apply.
Furthermore, the very evidence of the defendant bank shows that there was indeed an extension
of the period to redeem the property. The statutory period of redemption granted the mortgagor in
the certificate of sale registered on January 29, 1975 was 2 years. The period should have
terminated on January 29, 1977. However, the Sheriff's Certificate of Final sale was only executed
on February 15, 1977 and registered only on November 14, 1979 which registration date is the
effective date of the confirmation of the sale which cuts off redemption. Such extension of nearly 3
years strengthens the plaintiffs' claim that indeed, there was an agreement to extend the
redemption date.
The plaintiffs' evidence has shown that there was an agreement between them and the defendant
bank through its personnel and its president and manager, acting as its agents to extend the
period for redemption for the plaintiffs. However, the plaintiffs were not given a specific time to pay
and redeem but were given by the President and Manager of the bank such time when their
means permit them to do so. This created an obligation with a period under Art. 1180 of the Civil
Code of the Philippines, which provides:
Art. 1180. When the debtor binds himself to pay when his means permit him to do so,
the obligation shall be deemed to be one with a period, subject to the provisions of
Article 1197.
This does not mean that the condition was exclusively dependent of the will of the plaintiffs, for
they had already promised payment. If therefore became necessary, under Article 1197 for the
Court to fix the term in order that the condition may be fulfilled. Any action to recover before this is
done is considered premature (Patents vs. Omega, 93 Phil. 218).
That agreement or contract entered into between the President and Manager of the bank was not
in writing is of no moment since under Article 1315 of the Civil Code, "contracts are perfected by
mere consent, and from that moment the parties are bound not only to the fulfillment of what has
been expressly stipulated but also to all the consequences which according to their nature, may be
in keeping with good faith, usage and law." The defendant's claim that the agreement must be in
writing citing the ruling in the case of Pornellosa vs. Land Tenure Administration, 1 SCRA 375, only
applies to executory contracts, not to those either totally or partially performed, (Inigo vs. Estate of
Maloto, 21 SCRA 246). In this case, the bank had already partially performed its obligation
thereunder by extending the period redemption from January 29, 1977 to November 14, 1979.
The agreement does not novate the original contract of mortgage but only changes one of its
conditions, that which concerns the period of redemption. The period of redemption may be
extended by the parties under special circumstances (Lichauco vs. Olegario, 43 Phil. 540, 542).

and on the basis thereof, decreed to (a) annul the Sheriffs Final Deed of Sale, dated 15 February 1977 and its
registration of 17 March 1979, (b) fix the period of redemption to ninety (90) days from receipt of the decision
by petitioners, (c) order petitioners to pay the respondent bank, within ninety (90) days from receipt of the
decision the amount of P2,945.11, the purchase price, with 1% interest per month from 11 December 1974 to
14 December 1979, together with any amount representing assessment or taxes which the bank may have
paid after 11 December 1974, with interest thereon at 1% per month up to 14 December 1979, (d) order the
Bank to receive and credit the petitioners with such amounts, restore petitioners to the property and to deliver
to them a certificate of redemption, and to pay petitioners the sum of P2,000.00 as attorney's fees and the
costs. 4
Respondent bank appealed from said Decision to the then Intermediate Appellate Court which docketed the
appeal as C.A.-G.R. CV No. 69539.
In support of its appeal, respondent bank assigned the following errors:
-ITHE LOWER COURT ERRED IN NOT HOLDING THAT THE OFFERS BY THE APPELLEES TO
THE APPELLANTS WERE MADE AFTER THE PERIOD OF REDEMPTION HAD ALREADY
EXPIRED AND AS A MATTER OF FACT, WERE MADE ONLY AFTER THE EXECUTION OF THE
DEED OF FINAL SALE BY THE SHERIFF.
-IITHE LOWER COURT ERRED IN HOLDING THAT THE APPELLANTS GRANTED THE
APPELLEES AN EXTENSION OF THE PERIOD FOR THE REDEMPTION OF THE PROPERTY
WHICH WAS SOLD DURING THE FORECLOSURE SALE.
-IIITHE LOWER COURT ERRED IN HOLDING THAT THE PREPONDERANCE OF EVIDENCE
FAVORS THE APPELLEES DESPITE THE FACT THAT THE ONLY EVIDENCE PRESENTED BY
THEM IS THE SOLE TESTIMONY OF EPIFANIO NATINO, WHICH IS NOT ONLY
UNCORROBORATED, BUT IS EVEN CONTRARY TO THE IMPORT OF HIS DECLARATIONS
AND ADMISSIONS MADE IN OPEN COURT; AS AGAINST THE TESTIMONY OF THE
APPELLANTS' WITNESS WHICH IS CORROBORATED, NOT ONLY BY DOCUMENTARY
EVIDENCE, BUT EVEN BY THE IMPORT OF PLAINTIFF-APPELLEES' TESTIMONY.
-IVTHE LOWER COURT ERRED IN NOT REJECTING THE TESTIMONY OF PLAINTIFFAPPELLEE WHICH DID NOT PROVE AN OFFER TO REDEEM WITHIN THE REGLEMENTARY
PERIOD IN AN AUTHENTIC MANNER AS REQUIRED BY THE LAW, RULES AND
JURISPRUDENCE.
-V-

THE LOWER COURT ERRED IN NOT REJECTING THE TESTIMONY OF PLAINTIFFAPPELLEE ON THE ALLEGED EXTENSION OF THE REDEMPTION PERIOD INASMUCH AS IT
IS NOT IN A PUBLIC DOCUMENT OR AT LEAST IN AN AUTHENTIC WRITING.
-VITHE LOWER COURT ERRED IN APPLYING ARTICLES 1180 AND 1197 OF THE CIVIL CODE,
BOTH OF WHICH HAS NO RELEVANCE OR MATERIALITY TO THE CASE AT BAR.
-VIIASSUMING ARGUENDO THAT SOME OFFICERS OR EMPLOYEES OF THE APPELLANT
BANK MANIFESTED TO THE PLAINTIFF-APPELLEE THAT THEY CAN RECOVER THE LAND
IN QUESTION, AS TESTIFIED BY THE PLAINTIFF-APPELLEE, THE LOWER COURT ERRED IN
HOLDING THAT SUCH OFFICERS ACTED AS AGENTS OF THE APPELLANT-BANK.
CONSEQUENTLY, THE LOWER COURT ERRED IN NOT HOLDING THAT ONLY THE ACTION
BY THE BOARD OF DIRECTORS OF THE BANK CAN BIND THE LATTER.
-VIIITHE LOWER COURT ERRED IN HOLDING THAT THE EXECUTION OF THE DEED OF FINAL
SALE WAS NOT IN ORDER AND IN HOLDING THAT THE APPELLEES MAY STILL REDEEM
THE PROPERTY BY PAYING THE PURCHASE PRICE PLUS 1% INTEREST PER MONTH,
DESPITE THE LAPSE OF THE PERIOD OF REDEMPTION.
-IXTHE LOWER COURT ERRED IN NOT DECIDING THE CASE IN FAVOR OF THE APPELLANTS
AND CONSEQUENTLY ERRED IN NOT AWARDING DAMAGES TO THE APPELLANTS
HEREIN.5
Herein petitioners, as appellees, did not file their Brief.
In its Decision of 4 June 1985, the Intermediate Appellate Court disposed of the assigned errors as follows:
xxx

xxx

It will take better proofs than appellees' mere declaration for the Court to believe that they had
tendered the redemption money within the redemption period which was refused by the bank.
There would have been no valid reason for a refusal; it is an obligation imposed by law on every
purchaser at public auction that admits of redemption, to accept tender of redemption money. And
should there be refusal, the correlative duty of the mortgagor is clear: he must deposit the money
with the sheriff. The evidence does not show that appellees complied with this duty.
All that was shown by way of compliance was the deposit made with the Clerk of Court of the sum
of P4,000.00. This deposit is a belated and last ditch attempt to exercise a right that had long
expired. It was made only on December 12, 1979, or after the redemption period of two (2) years
from January 29, 1977 when the sheriffs certificate of sale was registered and after sheriff's final
sale which was registered on November 14, 1979. And, it is clear that the late deposit was utilized
to defeat the bank's vested right which it sought to enforce by its petition for a writ of possession.
The lower court correctly ruled against any validity to it.
The right to redeem becomes functus officio on the date of its expiry, and its exercise after the
period is not really one of redemption but a repurchase. Distinction must be made because
redemption is by force of law; the purchaser at public auction is bound to accept redemption.
Repurchase however of foreclosed property, after redemption period, imposes no such obligation.
After expiry, the purchaser may or may not re-sell the property but no law will compel him to do so,
And, he is not bound by the bid price; it is entirely within his discretion to set a higher price, for
after all, the property already belongs to him as owner.
This brings Us to the second error
THE LOWER COURT ERRED IN HOLDING THAT THE APPELLANTS GRANTED
THE APPELLEES AN EXTENSION OF THE PERIOD FOR THE REDEMPTION OF
THE PROPERTY WHICH WAS SOLD DURING THE FORECLOSURE SALE.
Appellees' main premise is the alleged assurances of the bank's officers that they could redeem
the property.1wphi1 From the testimony of Epifanio Natino, however, it is clear that these
assurances were given before expiry of redemption (tsn, pp. 15 & 16). Such assurances were not
at all necessary since the right to redeem was still in existence. Those assurances however could
not and did not extend beyond the redemption period.
It seems clear from testimony elicited on cross-examination of the president and manager of the
bank that the latter offered to re-sell the property for P30,000.00 but after the petition for a writ of
possession had already been filed, and well after expiry of the period to redeem. Appellants failed
to accept the offer; they deposited only P4,000.00. There was therefore no meeting of the minds,
and accordingly, appellants may no longer be heard. 6

xxx

The bank has assigned eight (8) errors in the decision but the determinants are the first and the
second. But before going into their merits We must take note of the failure of the appellees to file
their brief. Appellees did not file any motion for reconsideration. It has to be stated there that,
generally, appellee's failure to file brief is considered as equivalent to a confession of error,
warranting, although not necessarily requiring a reversal, but any doubt entertained by the
appellate court as to what disposition should be made of the case will be resolved against the
appellee (4 CJS 1832, cited in Francisco, the Revised Rules of Court Civil Procedure, Vol. III, p.
638)
Re the first error
THE LOWER COURT ERRED IN NOT HOLDING THAT THE OFFERS BY THE
APPELLEES TO THE APPELLANTS WERE MADE AFTER THE PERIOD OF
REDEMPTION HAD ALREADY EXPIRED AND AS A MATTER OF FACT, WERE
MADE ONLY AFTER THE EXECUTION OF THE DEED OF FINAL SALE BY THE
SHERIFF.

and in the light thereof, REVERSED and SET ASIDE the appealed decision.1wphi1 Their motion to
reconsider the same having been denied in the resolution of 23 December 1985, 7 petitioners have come to Us
on appeal by certiorariraising the sole issue stated in the beginning of this decision.
We find the petition to be devoid of merit. Petitioners have failed to demonstrate that the conclusion made by
the respondent Intermediate Appellate Court from the proven facts is wrong. We agree with said Court, and,
therefore, set aside the contrary conclusion of the trial court, that the attempts to redeem the property were
done after the expiration of the redemption period and that no extension of that period was granted to
petitioners.
The contrary conclusion made by the trial court is drawn from inferences which are not supported by adequate
or sufficient facts or is based on erroneous assumptions. We note that its decision is remarkably silent as to
the dates when petitioner Epifanio Natino went to the respondent bank to talk with a bank personnel to offer to
pay the loan. If indeed the offer was made within the redemption period, but the Bank refused to accept the
redemption money, petitioners should have made the tender to the sheriff who made the sale and who then
had the duty to accept the tender and execute the certificate of redemption. (Enage vs. Vda. de Hijos de
Escano, 38 Phil. 657, cited in II MORAN, Comments on the Rules of Court, 1979 Ed., pp. 326-327).

There was no such tender to the Sheriff.

Again, if indeed this occurred during the redemption period, then, as correctly pointed out by respondent IAC,
it was not necessary to ask for extension of the period to redeem.

Assailed, in this petition for review, is the decision of the Court of Appeals, dated 04 December 1991, in CAG.R. SP No. 26345 setting aside and declaring without force and effect the orders of execution of the trial
court, dated 30 August 1991 and 27 September 1991, in Civil Case No. 87-41058.
The antecedents are recited in good detail by the appellate court thusly:

In respect to the alleged assurance given by Mrs. Brodeth, the President and Manager of the Bank, sometime
in May of 1978 to the effect that petitioners can redeem the property as soon as they have the money, it is
obvious that this took place after the expiration of the redemption period. As correctly pointed out by the
respondent IAC, this could only relate to the matter of resale of the property, not redemption.
Furthermore, even assuming for the sake of argument that Mrs. Brodeth gave the assurance, the same could
bind the bank only if its Board of Directors approved or ratified it. No evidence was offered to prove such
action by the Board. Moreover, Mrs. Brodeth denied that during that meeting in May 1978 she made the
assurance; according to her petitioner Epifanio neither mentioned the loan nor offered to redeem, although
earlier he was told that to 'redeem" the property he should pay P30,000.00. The latter statement supports the
conclusion of respondent IAC that this was the Bank's offer for the re-sell (not redemption of the property),
which, logically took place after the expiration of the redemption period.
Even if Mrs. Brodeth is to be understood to have promised to allow the petitioners to buy the property at any
time they have the money, the Bank was not bound by the promise not only because it was not approved or
ratified by the Board of Directors but also because, and more decisively, it was a promise unsupported by a
consideration distinct from the re-purchase price.
The second paragraph of Article 1479 of the Civil Code expressly provides:
xxx

xxx

xxx

An accepted unilateral. promise to buy or to sell a determinate thing for a price certain is binding
upon the promissory if the promise is supported by a consideration distinct from the price.
Thus in Rural Bank of Paraaque Inc. vs. Remolado, et al., 8 a commitment by the bank to resell a property,
within a specified period, although accepted by the party in whose favor it was made, was considered an
option not supported by a consideration distinct from the price and, therefore, not binding upon the promissor.
Pursuant toSouthwestern Sugar and Molasses Co. vs. Atlantic Gulf and Pacific Company, 9 it was void.

On July 29, 1987 a Second Amended Complaint for Specific Performance was filed by
Ang Yu Asuncion and Keh Tiong, et al., against Bobby Cu Unjieng, Rose Cu Unjieng
and Jose Tan before the Regional Trial Court, Branch 31, Manila in Civil Case No. 8741058, alleging, among others, that plaintiffs are tenants or lessees of residential and
commercial spaces owned by defendants described as Nos. 630-638 Ongpin Street,
Binondo, Manila; that they have occupied said spaces since 1935 and have been
religiously paying the rental and complying with all the conditions of the lease contract;
that on several occasions before October 9, 1986, defendants informed plaintiffs that
they are offering to sell the premises and are giving them priority to acquire the same;
that during the negotiations, Bobby Cu Unjieng offered a price of P6-million while
plaintiffs made a counter offer of P5-million; that plaintiffs thereafter asked the
defendants to put their offer in writing to which request defendants acceded; that in
reply to defendant's letter, plaintiffs wrote them on October 24, 1986 asking that they
specify the terms and conditions of the offer to sell; that when plaintiffs did not receive
any reply, they sent another letter dated January 28, 1987 with the same request; that
since defendants failed to specify the terms and conditions of the offer to sell and
because of information received that defendants were about to sell the property,
plaintiffs were compelled to file the complaint to compel defendants to sell the property
to them.
Defendants filed their answer denying the material allegations of the complaint and
interposing a special defense of lack of cause of action.
After the issues were joined, defendants filed a motion for summary judgment which
was granted by the lower court. The trial court found that defendants' offer to sell was
never accepted by the plaintiffs for the reason that the parties did not agree upon the
terms and conditions of the proposed sale, hence, there was no contract of sale at all.
Nonetheless, the lower court ruled that should the defendants subsequently offer their
property for sale at a price of P11-million or below, plaintiffs will have the right of first
refusal. Thus the dispositive portion of the decision states:

WHEREFORE, the instant petition is DISMISSED, with costs against the Petitioners.

ANG YU ASUNCION, ARTHUR GO AND KEH TIONG, petitioners,

vs.
THE HON. COURT OF APPEALS and BUEN REALTY DEVELOPMENT CORPORATION, respondents.

WHEREFORE, judgment is hereby rendered in favor of the

defendants and against the plaintiffs summarily dismissing the
complaint subject to the aforementioned condition that if the
defendants subsequently decide to offer their property for sale
for a purchase price of Eleven Million Pesos or lower, then the
plaintiffs has the option to purchase the property or of first
refusal, otherwise, defendants need not offer the property to the
plaintiffs if the purchase price is higher than Eleven Million
Pesos.

Antonio M. Albano for petitioners.

SO ORDERED.

SO ORDERED.
G.R. No. 109125 December 2, 1994

Umali, Soriano & Associates for private respondent.

Aggrieved by the decision, plaintiffs appealed to this Court in

CA-G.R. CV No. 21123. In a decision promulgated on September 21, 1990 (penned by
Justice Segundino G. Chua and concurred in by Justices Vicente V. Mendoza and
Fernando A. Santiago), this Court affirmed with modification the lower court's
judgment, holding:

VITUG, J.:
In resume, there was no meeting of the minds between the
parties concerning the sale of the property. Absent such

requirement, the claim for specific performance will not lie.

Appellants' demand for actual, moral and exemplary damages
will likewise fail as there exists no justifiable ground for its
award. Summary judgment for defendants was properly
granted. Courts may render summary judgment when there is
no genuine issue as to any material fact and the moving party is
entitled to a judgment as a matter of law (Garcia vs. Court of
Appeals, 176 SCRA 815). All requisites obtaining, the decision
of the court a quo is legally justifiable.
WHEREFORE, finding the appeal unmeritorious, the judgment
appealed from is hereby AFFIRMED, but subject to the
following modification: The court a quo in the aforestated
decision gave the plaintiffs-appellants the right of first refusal
only if the property is sold for a purchase price of Eleven Million
pesos or lower; however, considering the mercurial and
uncertain forces in our market economy today. We find no
reason not to grant the same right of first refusal to herein
appellants in the event that the subject property is sold for a
price in excess of Eleven Million pesos. No pronouncement as
to costs.
SO ORDERED.
The decision of this Court was brought to the Supreme Court by petition for review
on certiorari. The Supreme Court denied the appeal on May 6, 1991 "for insufficiency in
form and substances" (Annex H, Petition).
On November 15, 1990, while CA-G.R. CV No. 21123 was pending consideration by
this Court, the Cu Unjieng spouses executed a Deed of Sale (Annex D, Petition)
transferring the property in question to herein petitioner Buen Realty and Development
Corporation, subject to the following terms and conditions:
1. That for and in consideration of the sum of FIFTEEN
MILLION PESOS (P15,000,000.00), receipt of which in full is
hereby acknowledged, the VENDORS hereby sells, transfers
and conveys for and in favor of the VENDEE, his heirs,
executors, administrators or assigns, the above-described
property with all the improvements found therein including all
the rights and interest in the said property free from all liens and
encumbrances of whatever nature, except the pending
ejectment proceeding;
2. That the VENDEE shall pay the Documentary Stamp Tax,
registration fees for the transfer of title in his favor and other
expenses incidental to the sale of above-described property
including capital gains tax and accrued real estate taxes.
As a consequence of the sale, TCT No. 105254/T-881 in the name of the Cu Unjieng
spouses was cancelled and, in lieu thereof, TCT No. 195816 was issued in the name of
petitioner on December 3, 1990.
On July 1, 1991, petitioner as the new owner of the subject property wrote a letter to
the lessees demanding that the latter vacate the premises.

On July 16, 1991, the lessees wrote a reply to petitioner stating that petitioner brought
the property subject to the notice of lis pendens regarding Civil Case No. 87-41058
annotated on TCT No. 105254/T-881 in the name of the Cu Unjiengs.
The lessees filed a Motion for Execution dated August 27, 1991 of the Decision in Civil
Case No. 87-41058 as modified by the Court of Appeals in CA-G.R. CV No. 21123.
On August 30, 1991, respondent Judge issued an order (Annex A, Petition) quoted as
follows:
Presented before the Court is a Motion for Execution filed by
plaintiff represented by Atty. Antonio Albano. Both defendants
Bobby Cu Unjieng and Rose Cu Unjieng represented by Atty.
Vicente Sison and Atty. Anacleto Magno respectively were duly
notified in today's consideration of the motion as evidenced by
the rubber stamp and signatures upon the copy of the Motion
for Execution.
The gist of the motion is that the Decision of the Court dated
September 21, 1990 as modified by the Court of Appeals in its
decision in CA G.R. CV-21123, and elevated to the Supreme
Court upon the petition for review and that the same was
denied by the highest tribunal in its resolution dated May 6,
1991 in G.R. No.
L-97276, had now become final and executory. As a
consequence, there was an Entry of Judgment by the Supreme
Court as of June 6, 1991, stating that the aforesaid modified
decision had already become final and executory.
It is the observation of the Court that this property in dispute
was the subject of theNotice of Lis Pendens and that the
modified decision of this Court promulgated by the Court of
Appeals which had become final to the effect that should the
defendants decide to offer the property for sale for a price of
P11 Million or lower, and considering the mercurial and
uncertain forces in our market economy today, the same right of
first refusal to herein plaintiffs/appellants in the event that the
subject property is sold for a price in excess of Eleven Million
pesos or more.
WHEREFORE, defendants are hereby ordered to execute the
necessary Deed of Sale of the property in litigation in favor of
plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go for the
consideration of P15 Million pesos in recognition of plaintiffs'
right of first refusal and that a new Transfer Certificate of Title
be issued in favor of the buyer.
All previous transactions involving the same property
notwithstanding the issuance of another title to Buen Realty
Corporation, is hereby set aside as having been executed in
bad faith.
SO ORDERED.
On September 22, 1991 respondent Judge issued another order, the dispositive portion
of which reads:

WHEREFORE, let there be Writ of Execution issue in the

above-entitled case directing the Deputy Sheriff Ramon
Enriquez of this Court to implement said Writ of Execution
ordering the defendants among others to comply with the
aforesaid Order of this Court within a period of one (1) week
from receipt of this Order and for defendants to execute the
necessary Deed of Sale of the property in litigation in favor of
the plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go for the
consideration of P15,000,000.00 and ordering the Register of
Deeds of the City of Manila, to cancel and set aside the title
already issued in favor of Buen Realty Corporation which was
previously executed between the latter and defendants and to
register the new title in favor of the aforesaid plaintiffs Ang Yu
Asuncion, Keh Tiong and Arthur Go.
SO ORDERED.
On the same day, September 27, 1991 the corresponding writ of execution (Annex C,
Petition) was issued. 1
On 04 December 1991, the appellate court, on appeal to it by private respondent, set aside and declared
without force and effect the above questioned orders of the court a quo.
In this petition for review on certiorari, petitioners contend that Buen Realty can be held bound by the writ of
execution by virtue of the notice of lis pendens, carried over on TCT No. 195816 issued in the name of Buen
Realty, at the time of the latter's purchase of the property on 15 November 1991 from the Cu Unjiengs.
We affirm the decision of the appellate court.
A not too recent development in real estate transactions is the adoption of such arrangements as the right of
first refusal, a purchase option and a contract to sell. For ready reference, we might point out some
fundamental precepts that may find some relevance to this discussion.
An obligation is a juridical necessity to give, to do or not to do (Art. 1156, Civil Code). The obligation is
constituted upon the concurrence of the essential elements thereof, viz: (a) The vinculum juris or juridical
tie which is the efficient cause established by the various sources of obligations (law, contracts, quasicontracts, delicts and quasi-delicts); (b) the object which is the prestation or conduct; required to be observed
(to give, to do or not to do); and (c) the subject-persons who, viewed from the demandability of the obligation,
are the active (obligee) and the passive (obligor) subjects.
Among the sources of an obligation is a contract (Art. 1157, Civil Code), which is a meeting of minds between
two persons whereby one binds himself, with respect to the other, to give something or to render some service
(Art. 1305, Civil Code). 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 minds, i.e., the concurrence of
offer and acceptance, on the object and on the cause thereof. A contract which requires, in addition to the
above, the delivery of the object of the agreement, as in a pledge or commodatum, is commonly referred to as
a real contract. In a solemn contract, compliance with certain formalities prescribed by law, such as in a
donation of real property, is essential in order to make the act valid, the prescribed form being thereby an
essential element thereof. The stage ofconsummation 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. Article 1458 of the Civil
Code provides:
Art. 1458. By the contract of sale one of the contracting parties obligates himself to
transfer the ownership of and to deliver a determinate thing, and the other to pay
therefor a price certain in money or its equivalent.
A contract of sale may be absolute or conditional.
When the sale is not absolute but conditional, such as in a "Contract to Sell" where invariably the ownership of
the thing sold is retained until the fulfillment of a positive suspensive condition (normally, the full payment of
the purchase price), the breach of the condition will prevent the obligation to convey title from acquiring an
obligatory force. 2 In Dignos vs. Court of Appeals (158 SCRA 375), we have said that, although denominated a
"Deed of Conditional Sale," a sale is still absolute where the contract is devoid of any proviso that title is
reserved or the right to unilaterally rescind is stipulated, e.g., until or unless the price is paid. Ownership will
then be transferred to the buyer upon actual or constructive delivery (e.g., by the execution of a public
document) of the property sold. Where the condition is imposed upon the perfection of the contract itself, the
failure of the condition would prevent such perfection. 3 If the condition is imposed on the obligation of a party
which is not fulfilled, the other party may either waive the condition or refuse to proceed with the sale (Art.
1545, Civil Code). 4
An unconditional mutual promise to buy and sell, as long as the object is made determinate and the price is
fixed, can be obligatory on the parties, and compliance therewith may accordingly be exacted. 5
An accepted unilateral promise which specifies the thing to be sold and the price to be paid, when coupled
with a valuable consideration distinct and separate from the price, is what may properly be termed a perfected
contract of option. This contract is legally binding, and in sales, it conforms with the second paragraph of
Article 1479 of the Civil Code, viz:
Art. 1479. . . .
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. (1451a) 6
Observe, however, that the option is not the contract of sale itself. 7 The optionee has the right, but not the
obligation, to buy. Once the option is exercised timely, i.e., the offer is accepted before a breach of the option,
a bilateral promise to sell and to buy ensues and both parties are then reciprocally bound to comply with their
respective undertakings. 8
Let us elucidate a little. A negotiation is formally initiated by an offer. An imperfect promise (policitacion) is
merely an offer. Public advertisements or solicitations and the like are ordinarily construed as mere invitations
to make offers or only as proposals. These relations, until a contract is perfected, are not considered binding
commitments. Thus, at any time prior to the perfection of the contract, either negotiating party may stop the
negotiation. The offer, at this stage, may be withdrawn; the withdrawal is effective immediately after its
manifestation, such as by its mailing and not necessarily when the offeree learns of the withdrawal (Laudico
vs. Arias, 43 Phil. 270). Where a period is given to the offeree within which to accept the offer, the following
rules generally govern:
(1) If the period is not itself founded upon or supported by a consideration, the offeror is still free and has the
right to withdraw the offer before its acceptance, or, if an acceptance has been made, before the offeror's
coming to know of such fact, by communicating that withdrawal to the offeree (see Art. 1324, Civil Code; see
also Atkins, Kroll & Co. vs. Cua, 102 Phil. 948, holding that this rule is applicable to a unilateral promise to sell
under Art. 1479, modifying the previous decision in South Western Sugar vs. Atlantic Gulf, 97 Phil. 249; see
also Art. 1319, Civil Code; Rural Bank of Paraaque, Inc., vs. Remolado, 135 SCRA 409; Sanchez vs. Rigos,

45 SCRA 368). The right to withdraw, however, must not be exercised whimsically or arbitrarily; otherwise, it
could give rise to a damage claim under Article 19 of the Civil Code which ordains that "every person must, in
the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and
observe honesty and good faith."

lessees, or the fixing of the price of the sale, or the cancellation of title in the name of
petitioner (Limpin vs. IAC, 147 SCRA 516; Pamantasan ng Lungsod ng Maynila vs.
IAC, 143 SCRA 311; De Guzman vs. CA, 137 SCRA 730; Pastor vs. CA, 122 SCRA
885).

(2) If the period has a separate consideration, a contract of "option" is deemed perfected, and it would be a
breach of that contract to withdraw the offer during the agreed period. The option, however, is an independent
contract by itself, and it is to be distinguished from the projected main agreement (subject matter of the option)
which is obviously yet to be concluded. If, in fact, the optioner-offeror withdraws the offer before its
acceptance(exercise of the option) by the optionee-offeree, the latter may not sue for specific performance on
the proposed contract ("object" of the option) since it has failed to reach its own stage of perfection. The
optioner-offeror, however, renders himself liable for damages for breach of the option. In these cases, care
should be taken of the real nature of the consideration given, for if, in fact, it has been intended to be part of
the consideration for the main contract with a right of withdrawal on the part of the optionee, the main contract
could be deemed perfected; a similar instance would be an "earnest money" in a contract of sale that can
evidence its perfection (Art. 1482, Civil Code).

It is likewise quite obvious to us that the decision in Civil Case No. 87-41058 could not have decreed at the
time the execution of any deed of sale between the Cu Unjiengs and petitioners.

In the law on sales, the so-called "right of first refusal" is an innovative juridical relation. Needless to point out,
it cannot be deemed a perfected contract of sale under Article 1458 of the Civil Code. Neither can the right of
first refusal, understood in its normal concept, per se be brought within the purview of an option under the
second paragraph of Article 1479, aforequoted, or possibly of an offer under Article 1319 9 of the same Code.
An option or an offer would require, among other things, 10 a clear certainty on both the object and the cause or
consideration of the envisioned contract. In a right of first refusal, while the object might be made determinate,
the exercise of the right, however, would be dependent not only on the grantor's eventual intention to enter
into a binding juridical relation with another but also on terms, including the price, that obviously are yet to be
later firmed up. Prior thereto, it can at best be so described as merely belonging to a class of preparatory
juridical relations governed not by contracts (since the essential elements to establish the vinculum juris would
still be indefinite and inconclusive) but by, among other laws of general application, the pertinent scattered
provisions of the Civil Code on human conduct.

AQUILINO NIETES, petitioner,

vs.
HON. COURT OF APPEALS & DR. PABLO C. GARCIA, respondents.

WHEREFORE, we UPHOLD the Court of Appeals in ultimately setting aside the questioned Orders, dated 30
August 1991 and 27 September 1991, of the court a quo. Costs against petitioners.
SO ORDERED.
G.R. No. L-32873 August 18, 1972

Conrado V. del Rosario for petitioner.

Romeo D. Magat for private respondent.

CONCEPCION, C.J.:p
Even on the premise that such right of first refusal has been decreed under a final judgment, like here, its
breach cannot justify correspondingly an issuance of a writ of execution under a judgment that merely
recognizes its existence, nor would it sanction an action for specific performance without thereby negating the
indispensable element of consensuality in the perfection of contracts. 11 It is not to say, however, that the right
of first refusal would be inconsequential for, such as already intimated above, an unjustified disregard thereof,
given, for instance, the circumstances expressed in Article 19 12 of the Civil Code, can warrant a recovery for
damages.
The final judgment in Civil Case No. 87-41058, it must be stressed, has merely accorded a "right of first
refusal" in favor of petitioners. The consequence of such a declaration entails no more than what has
heretofore been said. In fine, if, as it is here so conveyed to us, petitioners are aggrieved by the failure of
private respondents to honor the right of first refusal, the remedy is not a writ of execution on the judgment,
since there is none to execute, but an action for damages in a proper forum for the purpose.
Furthermore, whether private respondent Buen Realty Development Corporation, the alleged purchaser of the
property, has acted in good faith or bad faith and whether or not it should, in any case, be considered bound to
respect the registration of the lis pendens in Civil Case No. 87-41058 are matters that must be independently
addressed in appropriate proceedings. Buen Realty, not having been impleaded in Civil Case No. 87-41058,
cannot be held subject to the writ of execution issued by respondent Judge, let alone ousted from the
ownership and possession of the property, without first being duly afforded its day in court.
We are also unable to agree with petitioners that the Court of Appeals has erred in holding that the writ of
execution varies the terms of the judgment in Civil Case No. 87-41058, later affirmed in CA-G.R. CV-21123.
The Court of Appeals, in this regard, has observed:
Finally, the questioned writ of execution is in variance with the decision of the trial court
as modified by this Court. As already stated, there was nothing in said decision 13 that
decreed the execution of a deed of sale between the Cu Unjiengs and respondent

Petitioner Aquilino Nietes seeks a review on certiorari of a decision of the Court of Appeals.
It appears that, on October 19, 1959, said petitioner and respondent Dr. Pablo C. Garcia entered into a
"Contract of Lease with Option to Buy," pursuant to the terms and conditions set forth in the deed Exhibits A
and A-1, (also, marked as Exhibit 2) namely:
That the LESSOR is an owner of the ANGELES EDUCATIONAL INSTITUTE situated
at Angeles, Pampanga, a school which is duly recognized by the Government;
That the lessor agrees to lease the above stated school to the LESSEE under the
following terms and conditions:
1. That the term will be for a period of five (5) years;
2. That the price of the rent is FIVE THOUSAND PESOS (P5,000) per year payable in
the following manners:
a. That the amount of FIVE THOUSAND FIVE HUNDRED
PESOS (P5,500) will be paid upon the execution of this
Contract of Lease;
b. That the amount of FOUR THOUSAND FIVE HUNDRED
PESOS (P4,500) is payable on or before the 30th day of
October, 1959;

c. That the remaining balance of FIFTEEN THOUSAND

PESOS (P15,000) will be paid on or before March 30, 1960;
3. That all improvements made during the lease by the LESSEE will be owned by the
LESSOR after the expiration of the term of this Contract of Lease;

Received the amount of (P3,000.00) Three Thousand Pesos from Mrs. Nietes as per
advance pay for the school, the contract of lease being paid.
(Sgd.) PABLO GARCIA (Exh. B)
To Whom it May Concern:

4. That the LESSOR agrees to give the LESSEE an option to buy the land and the
school building, for a price of ONE HUNDRED THOUSAND PESOS (P100,000) within
the period of the Contract of Lease;
5. That should the LESSEE buy the lot, land and the school building within the
stipulated period, the unused payment for the Contract of Lease will be considered as
part payment for the sale of the land and school;
6. That an inventory of all properties in the school will be made on March 31, 1960;
6A. That the term of this Contract will commence in June 1960 and will terminate in
June 1965;
7. That the LESSEE will be given full control and responsibilities over all the properties
of the school and over all the supervisions and administrations of the school;
8. That the LESSEE agrees to help the LESSOR to collect the back accounts of
students incurred before the execution of this contract.
Instead of paying the lessor in the manner set forth in paragraph 2 of said contract, Nietes had, as of August 4,
1961, made payments as follows:
October 6,1960 ....................................... P18,957.00 (Exh. D)

This is to certify that I received the sum of Two Thousand Two Hundred Pesos,
Philippine Currency, from Mrs. Catherine R. Nietes as the partial payment on the
purchase of the property as specified on the original contract of "Contract of Lease with
the First Option to Buy" originally contracted and duly signed.
(Sgd.) DR. PABLO GARCIA (Exh. C)
On or about July 31, 1964, Dr. Garcia's counsel wrote to Nietes the letter Exhibit 1 (also Exhibit V) stating:
The Director
Philippine Institute of Electronics
Angeles, Pampanga
Sir:
I regret to inform you that our client, Dr. Pablo Garcia, desires to rescind your contract,
dated 19 October 1959 because of the following:
1. That you had not maintained the building, subject of the lease contract in good
condition.
2. That you had not been using the original name of the school Angeles Institute,
thereby extinguishing its existence in the eyes of the public and injuring its prestige.

November 23, 1960 ................................. 300.00 (Exh. E)

3. That through your fault, no inventory has been made of all properties of the school.
December 21, 1960 ................................. 200.00 (Exh. F)
January 14, 1961 ..................................... 500.00 (Exh. G)
February 16, 1961 ................................... 3,000.00 (Exh. H)
March 12, 1961 ....................................... 1,000.00 (Exh. I)
March 13, 1961 ....................................... 700.00 (Exh. J)
August 4, 1961 ........................................ 100.00 (Exh. K) _________
TOTAL ..................................... P24,757.00
Moreover, Nietes maintains that, on September 4, 1961, and December 13, 1962, he paid Garcia the
additional sums of P3,000 and P2,200, respectively, for which Garcia issued receipts Exhibit B and C, reading:

4. That up to this time, you had not collected or much less helped in the collection of
back accounts of former students.
This is to remind you that the foregoing obligations had been one, if not, the principal
moving factors which had induced the lessor in agreeing with the terms embodied in
your contract of lease, without which fulfillment, said contract could not have come into
existence. It is not simply one of those reminders that we make mention, that our client
under the circumstances, is not only entitled to a rescission of the contract. He is
likewise entitled to damages actual, compensatory and exemplary.
In view of the serious nature of the breach which warrant and sanction drastic legal
remedies against you, we earnestly request you to please see the undersigned at the
above-named address two days from receipt hereof. Otherwise, if we shall not hear
from you, the foregoing will serve notice on your part to vacate the premises within five
(5) days to be counted from date of notice.
Very truly yours,
(Sgd.) VICTOR T. LLAMAS, JR.

to which counsel for Nietes replied in the following language:

Atty. Victor T. Llamas, Jr.
Victor Llamas Law Office
Corner Rivera-Zamora Streets
Dagupan City
Dear Sir:
Your letter dated July 31, 1964 addressed to my client, the Director of the Philippine
Institute of Electronics, Angeles City, has been referred to me and in reply, please, be
informed that my client has not violated any provision of the CONTRACT OF LEASE
WITH OPTION TO BUY, executed by him as LESSEE and Dr. Pablo Garcia as
LESSOR. For this reason, there is no basis for rescission of the contract nor of the
demands contained in your letter.
In this connection, I am also serving this formal notice upon your client Dr. Pablo
Garcia, thru you, that my client Mr. AQUILINO T. NIETES will exercise his OPTION to
buy the land and building subject matter of the lease and that my said client is ready to
pay the balance of the purchase price in accordance with the contract. Please, inform
Dr. Pablo Garcia to make available the land title and execute the corresponding Deed
of Sale pursuant to this notice, and that if he fails to do so within fifteen (15) days from
the receipt of this letter, we shall take the corresponding action to enforce the
agreement.
Truly yours,
(Sgd.) CONRADO V. DEL ROSARIO
Counsel for Mr. Aquilino T. Nietes
Angeles City
On July 26, 1965, Nietes deposited with the branch office of the Agro-Industrial Bank in Angeles City checks
amounting to P84,860.50, as balance of the purchase price of the property, but he withdrew said sum of
P84,860.50 on August 12, 1965, after the checks had been cleared. On August 2, 1965, he commenced the
present action, in the Court of First Instance of Pampanga, for specific performance of Dr. Garcia's alleged
obligation to execute in his (Nietes') favor a deed of absolute sale of the leased property, free from any lien or
encumbrance whatsoever, he having meanwhile mortgaged it to the People's Bank and Trust Company, and
to compel him (Garcia) to accept whatever balance of the purchase price is due him, as well as to recover
from him the aggregate sum of P90,000 by way of damages, apart from attorney's fees and the costs.
Dr. Garcia filed an answer admitting some allegations of the complaint and denying other allegations thereof,
as well as setting up a counterclaim for damages in the sum of P150,000.
After due trial, said court rendered its decision, the dispositive part of which reads:
WHEREFORE, in view of the preponderance of evidence in favor of the plaintiff and
against the defendant, judgment is hereby rendered ordering the latter to execute the
Deed of Absolute Sale of property originally leased together with the school building
and other improvements thereon which are covered by the contract, Annex "A", upon
payment of the former of the balance (whatever be the amount) of the stipulated
purchase price; to free the said property from any mortgage or encumbrance and
deliver the title thereto to the plaintiff free from any lien or encumbrance, and should
said defendant fail to do so, the proceeds from the purchase price be applied to the
payment of the encumbrance so that the title may be conveyed to the plaintiff; to pay
the plaintiff the sum of P1,000.00 as attorney's fees, and the cost of this suit.

Both parties appealed to the Court of Appeals, Dr. Garcia insofar as the trial court had neither dismissed the
complaint nor upheld his counterclaim and failed to order Nietes to vacate the property in question, and Nietes
insofar as the trial court had granted him no more than nominal damages in the sum of P1,000, as attorney's
fees.
After appropriate proceedings, a special division of Court of Appeals rendered its decision, on October 18,
1969, affirming, in effect, that of the trial court, except as regards said attorney's fees, which were eliminated.
The dispositive part of said decision of the Court of Appeals reads:
WHEREFORE, with the modification that the attorney's fees awarded by the trial court in favor of the plaintiff is
eliminated, the appealed judgment is hereby affirmed in all other respects, and the defendant is ordered to
execute the corresponding deed of sale for the school building and lot in question in favor of the plaintiff upon
the latter's full payment of the balance of the purchase price. The costs of this proceedings shall be taxed
against the defendant-appellant.
On motion for reconsideration of defendant Garcia, said special division set aside its aforementioned decision
and rendered another one, promulgated on March 10, 1970 reversing the appealed decision of the court of
first instance, and dismissing the complaint of Nietes, with costs again him. Hence, the present petition of
Nietes for review certiorari of the second decision of the Court of Appeals, dated March 10, 1970, to which
petition We gave due course.
Said decision of the Court of Appeals, reversing that of the Court of First Instance, is mainly predicated upon
the theory that, under the contract between the parties, "the full purchase price must be paid before the option
counsel be exercised," because "there was no need nor sense providing that "the unused payment for the
Contract Lease will be considered as part payment for the sale the land and school'" inasmuch as "otherwise
there is substantial amount from which such unused rental could be deducted"; that the statement in the letter,
Exhibit L, of Nietes, dated August 7, 1964, to the effect that he "will exercise his OPTION to buy the land and
building," indication that he did not consider the receipts, Exhibits B and for P3,000 and P2,200, respectively,
"as an effective exercise of his option to buy"; that the checks for P84,860.50 deposited by Nietes with the
Agro-Industrial Development Bank, did not constitute a proper tender of payment, which, at any rate, was
"made beyond the stipulated 5-year period"; that such deposit "was not seriously made, because on August
12, 1965, the same was withdrawn from the Bank and ostensibly remains in the lessee's hand"; and that "the
fact that such deposit was made by the lessee shows that he himself believed that he should have paid the
entire amount of the purchase price before he could avail of the option to buy, otherwise, the deposit was a
senseless gesture ... ."
Dr. Garcia, in turn, maintained in his answer "that the sums paid" to him "were part of the price of the contract
of lease between the parties which were paid late and not within the periods and/or schedules fixed by the
contract (Annex A.)." What is more, on the witness stand, Garcia claimed that he did "not know" whether the
signatures on Exhibits B and C the receipt for P3,000 and P2,200, respectively were his, and even said
that he was "doubtful" about it.
This testimony is manifestly incredible, for a man of his intelligence a Doctor of Medicine and the owner of
an educational institution could not possibly "not know" or entertain doubts as to whether or not the
aforementioned signatures are his and the payments therein acknowledged had been received by him. His
dubious veracity becomes even more apparent when we consider the allegations in paragraph (4) of his
answer referring to paragraphs 5 and 6 of the complaint alleging, inter alia, the aforementioned partial
payments of P3,000 and P2,200, on account of the stipulated sale price to the effect that said sums
" paid to the herein defendant were part of the price of the contract of lease." In other words, payment of said
sums of P3,000 and P2,200 is admitted in said answer. Besides, the rentals for the whole period of the lease
aggregated P25,000 only, whereas said sums of P3,000 and P2,200, when added to the payments previously
made by Nietes, give a grand total of P29,957.00, or P4,957 in excess of the agreed rentals for the entire
period of five years. Thus, Dr. Garcia was less than truthful when he tried to cast doubt upon the fact of
payment of said sums of P3,000 and P2,200, as well as when he claimed that the same were part of the
rentals collectible by him.
We, likewise, find ourselves unable to share the view taken by the Court of Appeals. Neither the tenor of the
contract Exhibits A and A-1 (also Exhibit 2) nor the behaviour of Dr. Garcia as reflected in the receipts

Exhibits B and C justifies such view. The contract does not say that Nietes had to pay the stipulated price of
P100,000before exercising his option to buy the property in question. Accordingly, said option is governed by
the general principles on obligations, pursuants to which:
In reciprocal obligations, neither party incurs in delay if the other does not comply or is
not ready to comply in a proper manner with what is incumbent upon him. From the
moment one of the parties fulfills his obligation, delay by the other begins. 1
In the case of an option to buy, the creditor may validly and effectively exercise his right by merely advising the
debtor of the former's decision to buy and expressing his readiness to pay the stipulated price, provided that
the same is available and actually delivered to the debtor upon execution and delivery by him of the
corresponding deed of sale. Unless and until the debtor shall have done this the creditor is not and cannot be
in default in the discharge of his obligation to pay. 2 In other words, notice of the creditor's decision to exercise
his option to buy need not be coupled with actual payment of the price, so long as this is delivered to the
owner of the property upon performance of his part of the agreement. Nietes need not have deposited,
therefore, with the Agro-Industrial Bank checks amounting altogether to P84,860.50 on July 26, 1965, and the
withdrawal thereof soon after does not and cannot affect his cause of action in the present case. In making
such deposit, he may have had the intent to show his ability to pay the balance of the sum due to Dr. Garcia
as the sale price of his property. In short, said deposit and its subsequent withdrawal cannot affect the result of
the present case.
Nietes was entitled to exercise his option to buy "within the period of the Contract of Lease," which pursuant
to paragraph 6-A of said contract commenced "in June 1960" and was to "terminate in June 1965." As early
as September 4, 1961, or well "within the period of the Contract of Lease," Nietes had paid Dr. Garcia the
following sums:
October 6, 1960 ............................ P18,957.00 (Exh. D)
November 23, 1960 ....................... 300.00 (Exh E)
December 21, 1960 ....................... 200.00 (Exh. F)
January 14, 1961 ........................... 500.00 (Exh. G)
February 16, 1961 ......................... 3,000.00 (Exh. H)

Garcia seems to have either agreed thereto or not considered that Nietes had thereby violated the contract,
because the letter of the former, dated July 31, 1964, demanding rescission of the contract, did not mention
said acts or omissions of Nietes among his alleged violations thereof enumerated in said communication. In
fact, when, on September 4, 1961, Mrs. Nietes turned over the sum of P3,000 to Dr. Garcia, he issued the
receipt Exhibit B, stating that said payment had been made "as per advance pay for the school, the Contract
of Lease being paid" in other words, in accordance or conformity with said contract. Besides, when, on
December 13, 1962, Mrs. Nietes delivered the additional sum of P2,200, Dr. Garcia issued a receipt accepting
said amount "as the partial payment on the purchase price of the property as specified on the original
contract," thus further indicating that the payment, in his opinion, conformed with said contract, and that,
accordingly, the same was in full force and effect.
In any event, it is undisputed that, as of September 4, 1961, Dr. Garcia had received the total sum of P27,757,
or P2,757 in excess of the P25,000 representing the rentals for the entire period of the lease, and over
P21,200 in excess of the rentals for the unexpired portion of the lease, from September 4, 1961 to June 1965.
This circumstance indicates clearly that Nietes had, on September 4, 1961, chosen to exercise and did
exercise then his option to buy. What is more, this is borne out by the receipt issued by Dr. Garcia for the
payment of P2,200, on December 13, 1962, to which he referred therein as a "partial payment on the
purchase of the property as specified on the original contract of 'Contract of Lease with the First Option to Buy'
... ."
Further confirmation is furnished by the letter of Nietes, Exhibit L, of August 1964 also, within the period of
the lease stating that he "will exercise his OPTION to buy the land and building subject matter of the lease."
It is not correct to construe this expression as did the appealed decision as implying that the option had
not been or was not yet being exercised, or as a mere announcement of the intent to avail of it at
some future time. This interpretation takes said expression out of the context of Exhibit L, which positively
states, also, that Nietes "is ready to pay the balance of the purchase price in accordance with the contract,"
and requests counsel for Dr. Garcia to inform or advise him "to make available the land title and execute the
corresponding Deed of Sale pursuant to this notice, and that if he fails to do so within fifteen (15) days ... we
shall take the corresponding action to enforce the agreement." Such demand and said readiness to pay the
balance of the purchase price leave no room for doubt that, as stated in Exhibit L, the same is "a formal
notice" that Nietes had exercised his option, and expected Dr. Garcia to comply, within fifteen (15) days, with
his part of the bargain. Surely, there would have been no point for said demand and readiness to pay, if Nietes
had not yet exercised his option to buy.
The provision in paragraph 5 of the Contract, to the effect that "should the LESSEE" choose to make use of
his option to buy "the unused payment for the Contract of Lease will be considered as payment for the sale of
the land and school, "simply means that the rental paid for the unused portion of the lease shall be applied to
and deducted from the sale price of P100,000 to be paid by Nietes at the proper time in other
words,simultaneously with the delivery to him of the corresponding deed of sale, duly executed by Dr. Garcia.

March 12, 1961 ............................. 1,000.00 (Exh. I)

March 13, 1961 ............................. 700.00 (Exh. J)
August 4, 1961 ............................... 100.00 (Exh. K)
September 4, 1961 ......................... 3,000.00 (Exh. B)
________
TOTAL ............................... P27,757.00
It is true that Nietes was bound, under the contract, to pay P5,500 on October 19, 1959, P4,500 on or before
October 30, 1959, and P15,000 on or before March 30, 1960, or the total sum of P25,000, from October 19,
1959 to March 30, 1960, whereas his first payment was not made until October 10, 1960, when he delivered
the sum of P18,957 to Dr. Garcia, and the latter had by August 4, 1961, received from the former the
aggregate sum of P24,757. This is, however, P243.00 only less than the P25,000 due as of March 30, 1960,
so that Nietes may be considered as having complied substantially with the terms agreed upon. Indeed, Dr.

It is, consequently, Our considered opinion that Nietes had validly and effectively exercised his option to buy
the property of Dr. Garcia, at least, on December 13, 1962, when he acknowledged receipt from Mrs. Nietes of
the sum of P2,200 then delivered by her "in partial payment on the purchase of the property" described in the
"Contract of Lease with Option to Buy"; that from the aggregate sum of P29,957.00 paid to him up to that time,
the sum of P12,708.33 should be deducted as rental for the period from June 1960 to December 13, 1962, or
roughly thirty (30) months and a half, thereby leaving a balance of P17,248.67, consisting of P12,291.67,
representing the rentals for the unused period of the lease, plus P4,957.00 paid in excess of said rental and
advanced solely on account of the purchase price; that deducting said sum of P17,248.67 from the agreed
price of P100,000.00, there results a balance of P82,751.33 which should be paid by Nietes to Dr. Garcia,
upon execution by the latter of the corresponding deed of absolute sale of the property in question, free from
any lien or encumbrance whatsoever, in favor of Nietes, and the delivery to him of said deed of sale, as well as
of the owner's duplicate of the certificate of title to said property; and that Dr. Garcia should indemnify Nietes in
the sum of P2,500 as and for attorney's fees.
Thus modified, the decision of the Court of First Instance of Pampanga is hereby affirmed in all other respects,
and that of the Court of Appeals reversed, with costs against respondent herein, Dr. Pablo C. Garcia. It is so
ordered.

Reyes, J.B.L., Makalintal, Zaldivar, Fernando, Teehankee, Barredo, Makasiar Antonio and Esguerra, JJ.,
concur.
Castro, J., took no part.