Facts:

The case involves Adelfa Properties, Inc. as petitioner and Rosario Jimenez-Castaneda and Salud Jimenez as respondents, decided on January 25, 1995 under G.R. No. 111238. The respondents, together with their brothers Jose and Dominador Jimenez, were co-owners of a 17,710 square meter property covered by Transfer Certificate of Title (TCT) No. 309773 in Barrio Culasi, Las Pinas. Jose and Dominador sold their half of the parcel to petitioner on July 28, 1988. Subsequently, a partition agreement allocated the eastern half to Jose and Dominador and the western half to respondents. On November 25, 1989, petitioner and respondents executed an “Exclusive Option to Purchase” covering respondents’ western portion for ₱2,856,150, including a ₱50,000 option money creditable against the purchase price, with payment deadline on November 30, 1989. However, petitioner received a summons from a civil case involving respondents and their relatives over title disputes affecting the property owned

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Facts:

Ownership and Background

• The dispute arose from a parcel of land consisting of 17,710 square meters located in Barrio Culasi, Las Piñas, Metro Manila, originally registered under Transfer Certificate of Title (TCT) No. 309773.
• The private respondents—Rosario Jimenez-Castaneda, Salud Jimenez, and their brothers Jose and Dominador Jimenez—were co-owners of the property.
• On July 28, 1988, Jose and Dominador Jimenez sold their half-share, specifically the eastern portion of the property, to petitioner Adelfa Properties, Inc. via a Kasulatan sa Bilihan ng Lupa.
• Subsequent to the sale, a Confirmatory Extrajudicial Partition Agreement allocated the eastern portion (8,855 square meters) to the Jimenez brothers and the western portion to the private respondents.

The Exclusive Option and Contractual Arrangement

• On November 25, 1989, petitioner and the private respondents entered into an "Exclusive Option to Purchase" concerning the western portion (8,655 square meters) of the lot.
• Key terms of the contract included:

- The selling price was set at P2,856,150.00. - An option money of P50,000.00, which would be credited as part payment upon consummation of the sale. - The balance of P2,806,150.00 was to be paid on or before November 30, 1989. - In case of default by petitioner, cancellation of the option with forfeiture of 50% of the option money while refunding the remaining 50% upon sale to a third party. - The vendors (private respondents) were to shoulder expenses such as capital gains tax and documentary stamps, while petitioner was responsible for registration expenses.

Preceding Legal and Factual Developments

• A petition was filed for the re-issuance of the owner’s duplicate of the lost transfer certificate of title, eventually resulting in a new certificate being held by petitioner’s counsel (Atty. Bayani L. Bernardo) until delivered to petitioner.
• On November 29, 1989, petitioner received summons and a complaint filed by the nephews and nieces of the private respondents in a separate civil case (Civil Case No. 89-5541) seeking annulment of a deed of sale executed in favor of Household Corporation.
• In a letter on November 29, 1989, petitioner informed private respondents that payment of the balance of the purchase price would be suspended until the related case was settled, suggesting a meeting for conciliatory discussion.
• Respondent Salud Jimenez attributed the suspension of payment to petitioner’s lack of word of honor.

Subsequent Annotations, Offers, and Counteractions

• On December 7, 1989, petitioner annotated both the exclusive option to purchase and the deed of sale with the Jimenez brothers on the title.
• On December 14 and 22, 1989, private respondents attempted to cancel the transaction through their counsel, with an offer from Atty. Bernardo to adjust the overall purchase price by deducting an amount for settling the civil case; these offers were rejected by the private respondents.
• On February 23, 1990, the trial court dismissed Civil Case No. 89-5541; petitioner then re-annotated the exclusive option on February 28, 1990.
• Also on February 28, 1990, private respondents executed a Deed of Conditional Sale in favor of a third party, Emylene Chua, for a higher price of P3,029,250.00, paying an initial amount of P1,500,000.00.
• On April 16, 1990, petitioner again signaled willingness to complete the transaction by expressing readiness to pay the balance concurrently with the execution of the deed of absolute sale, but private respondents ignored this communication.
• On July 27, 1990, private respondents’ counsel sent a letter enclosing a check for refunding 50% of the option money and requested the return of the owner’s duplicate of the certificate of title; petitioner failed to return the document.
• Consequently, private respondents filed Civil Case No. 7532 for annulment of the contract and damages.

Judicial Proceedings and Final Developments Before Appeal

• The trial court, in its judgment on September 5, 1991, ruled that the agreement was merely an option contract and that petitioner’s suspension of payment amounted to a counter-offer, thereby rejecting the option.
• The trial court ordered cancellation of the exclusive option, declared the conditional sale to Emylene Chua valid, and awarded damages and attorney’s fees to the private respondents.
• On appeal, the Court of Appeals affirmed the trial court’s decision with similar reasoning on the nature of the agreement and the effects of petitioner's suspension of payment.
• Petitioner raised several assignments of error primarily contesting the characterization of the contract as an option contract and the application of Article 1590 in justifying the suspension of payment, as well as the awarding of damages.

Issue:

Nature of the Contract

• Whether the "Exclusive Option to Purchase" entered by petitioner and the private respondents is truly an option contract or rather a perfected contract to sell.
• What are the implications arising from such a characterization for the transfer of title and the parties’ obligations?

Suspension of Payment and Its Legal Effects

• Whether petitioner's suspension of payment of the balance of the purchase price was valid.
• Whether the cited provision in Article 1590 of the Civil Code was applicable given the true nature of the agreement.
• The legal consequences of failing to make a valid tender or consignation of the purchase price upon cessation of the disturbance.

Consequences of Petitioner's Default

• Whether the failure of petitioner to timely pay the balance of the purchase price, including the absence of a proper tender of payment or consignation, justified the rescission of the contract by the private respondents.
• The effect of petitioner’s inaction or inadequate response to the cancellation notice on its contractual rights.

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Doctrine:

• (Subscriber-Only)